Hybrid Annuities Continue to Gain Momentum

The hybrid annuity market has been on fire recently, and experts agree that it’s only going to get hotter. Eric Steigerwalt, president and CEO of Brighthouse Financial, is a big believer of the products and an even bigger seller of them. Steigerwalt claims that the hybrid annuity “is a great product for manufacturers, it’s a great product for distributors, it’s a great product for our clients – so growing that business, I think, would be great.” He added, in a recent InsuranceNewsNet article,  that competition in the market is expected and welcome. “We now there’s going to be some in 2018.”

Hybrid annuities are often referred to as buffer or structured annuities. They combine the elements of an indexed annuity and a variable annuity, offering protection from market downturns to a limited extent in exchange for higher caps on interest credited. Insurers like them because they don’t come with lifetime income riders and ease the capital requirements on the underwriter. They are also compatible with a low interest rate environment, such as the one we’re in.

The picture isn’t all rosy though. As hybrids become more and more popular, regulators are taking a closer look at them. Critics often claim they carry high fees and suffer from other drawbacks.

According to the LIMRA Secure Retirement Institute, sales of hybrid variable annuities rose 36% in the second quarter to $1.8 billion when compared to the same time last year. Hybrid sales make up about 7% of the entire variable annuity market. Still LIMRA forecasts a drop by as much as 15%  in overall variable annuity sales compared with last year’s $105 billion.

Allianz Life, Axa, Brighthouse Financial and Member Life Insurance Company’s CUNA Members Horizon already sell hybrid annuities, and others are expected to follow suit. Just last Wednesday, Voya announced it would launch its first hybrid annuity in early 2018, marking what some are calling the beginning of a stampede into the market.

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