Elizabeth Festa of National Underwriter had an article in the January 2012 edition entitled “Policyholders Getting Smarter, Leading to Charges for VA Products, Says Moody’s”. An excerpt from this article is:
In pricing and hedging the risks of their VA contracts, companies must also make assumptions about how many customers will hold on to their policies long enough to be eligible for benefit, how many of them will exercise guaranteed benefit options when they become available and how many more of them may exercise those options, the report explains.
Jack Marrion’s Index Compendium for February 2012 includes a reference to Ruark Consulting’s recently completed Fixed Indexed Annuity Surrender Study, as follows:
Index Annuity Surrenders Sharply Down
Based on data from carriers representing 80% of industry sales, a new study published by Ruark Consulting (www.ruarkonline.com) finds that surrenders of index annuity contracts declined significantly from 2006 to 2010. Ruark believes this to be due to less competitive alternatives, use of GLWB’s and greater suitability standards. The Ruark study confirms predictions made by Advantage Compendium in 2008 that annuity exchanges would decline due to annuity lifetime benefits and tightened compliance.
Maria Wood has published an article in LifeHealthPro (which I still think of as National Underwriter) entitled “Fixed Indexed Annuity Holders Keep Holding On”. It is another article based on Ruark Consulting’s Fixed Indexed Annuity Surrender Study. It can be viewed at:
Fixed Indexed Annuity Holders Keep Holding On
Linda Koco has published an article in AnnuityNews.com entitled “More Policyholders Keeping Their Indexed Annuities”. It is based on the results from Ruark Consulting’s Fixed Indexed Annuity Surrender Study. It can be viewed at:
More Policyholders Keeping Their Indexed Annuities
SIMSBURY, CT/January 5, 2012 – Ruark Consulting LLC, a Connecticut-based actuarial consulting firm, has completed its 2011 Fixed Indexed Annuity Surrender Study. This ground-breaking study includes unprecedented detail on the impact of various product features on policy persistency, which is invaluable for insurance companies to manage risk and design appropriate products.
Key findings include:
- Persistency rates improved significantly over the timeframe of the study, which was 2006 through 2010.
- Policies with guaranteed living benefits exhibit better persistency than those without such benefits. Living benefits are popular with consumers, with the majority of new purchases including them.
Rich Tucker, Tim Paris and Steve Wright will be attending the 2011 SOA Annual Meeting in Chicago on October 17, 18, and 19. Let us know if you will also be there.
Tim Paris will be a presenter at session 73 – Managing Longevity and Mortality Risks and Their Global Activities. The SOA website does not show Tim’s participation, but we know better.
The Executive Summary of Ruark Consulting’s 2010 variable annuity experience studies is now available. Highlights are presented for the 2010 Variable Annuity Surrender Study and the 2010 Variable Annuity Benefit Utilization Study.
Executive Summary 2010 Variable Annuity Surrender Study and 2010 Variable Annuity Benefit Utilization Study
Reinsurance programs in the annuity and life insurance market are common and are intended to provide value to both the Ceding Company and the Reinsurer. The negotiation and placement of reinsurance programs receive significant and high level staff commitments. Thereafter, ongoing administration will affect the coverage and value of the reinsurance program. There are common administrative pitfalls that will impact the value of a reinsurance program if not tended to with proper care. Ruark Consulting has the experience and capabilities to avoid these administrative pitfalls.
Superior reinsurance administration should address the following:
Insurance companies have always performed experience studies, but the needs for these studies have increased dramatically and will continue to do so. Product designs have become more complicated. Principle based reserves and required capital require significant knowledge of historical experience in order to establish appropriate assumptions.
Experience studies must satisfy the following criteria to be of maximum value:
- Reliable data
- Sufficient volume of data
- Retain value of business information
- Detailed breakdowns to see trends
- Analysis and understanding
- Availability of internal staff
- Timeliness
Fixed annuity and indexed annuity reinsurance is a market where Ruark Insurance Advisors has significant experience, along with variable annuities and life insurance. This article reviews the basic parameters that a direct writer should understand in order to evaluate the applicability of fixed and indexed annuity reinsurance to their situation.
Annuity reinsurance is a tool to manage required capital, surplus strain and a company’s balance between asset risks and insurance risks. Limiting sales volumes can achieve similar results but may conflict with strategic needs to maintain or grow sales volumes and to enhance relationships with distributors.
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