How Much Risk Do Variable Annuity Guarantees Pose to Life Insurers

Abstract

Over the past two decades, guarantees that protect variable annuities? balances when their underlying investments perform poorly have become quite popular. Collectively, these guarantees can pose a sizable risk to life insurers. This article explores the different types of variable annuity guarantees, the extent of the risk they pose to insurers, and the practices used by insurers to mitigate against such risk.