Yet another life insurer, Sun Life, seems to have answered that question in the affirmative, announcing the sale of its U.S. annuity business to Guggenheim Partners’ Delaware Life Holdings division on Dec. 18. Sun Life’s decision to unload its annuity business likely reflects a shared concern among insurers about the risk that comes with trying to hedge a guaranteed product like variable annuities. They’re forced to do so because with annuities they don’t have the option of pooling risk as they do with insurance products.
The number and size of insurance companies fleeing the variable annuity market over the last five years is both stunning and swift. Investors are looking for guaranteed return and income for life in an era of low return and uncertainty. But providers are pulling out of the market at a time when it is becoming harder to find good returns on stable value and other types of capital preservation investments. Who will step up and fill that void?
