Market conditions, combined with the looming threat of the Department of Labor's fiduciary rule, are driving up demand for fixed indexed annuities, a panel of insurance executives said Monday.
FIAs registered a record $14.4 billion in sales in the third quarter of 2015. Sales are expected to remain hot as investors look away from variable annuities, said Bill Lowe, president of Sammons Retirement Solutions.
Lowe was part of the panel of executive who spoke during the Insured Retirement Institute's Marketing Summit 2016 in West Palm Beach, Fla.
UBS Financial Services ignored FIAs for many years due to product concerns, said Phil Pellegrino, executive director and head of annuities for the company. About three years ago, UBS started selling FIAs and the product represented 10 percent of sales last year, he said.
So far this year, FIAs account for about 25 percent of his company's annuity sales, Pellegrino said.
"People got whipped around by the market a little bit," he said. "There's definitely a trend there."
Market volatility is one reason FIAs are proving to be popular. The DOL fiduciary rule is another. While FIAs will not escape tougher regulations, they are not included in the restrictive Best Interest Contract Exemption required to sell VAs.
The panel sees such a hot future for FIAs, debate focused on whether there are enough manufacturers to serve demand. Several manufacturers have entered the FIA business over the past few years, Lowe said.
Crediting strategies remain a concern for some, however.
"The simpler (FIAs) are and more straightforward they are, the better off we're going to be," Pellegrino said. "We don't take every crediting strategy that comes our way."
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].
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