Annuity Sales Will Continue to Soar through 2027!

Annuity sales have been soaring for the last few months!

According to LIMRA analysts, the record-breaking annuity sales trend is expected to continue in the coming years. After two decades of sales around $200 billion to $250 billion, 2022 saw a surge to $312.8 billion. LIMRA predicts that this record could be surpassed depending on how 2023 unfolds.

LIMRA’s forecast suggests that protection products will drive growth in the annuity market for the next few years, with sales unlikely to return to previous lower levels. The combination of favorable demographics, such as the increasing number of baby boomers reaching retirement age, and improving equity markets will contribute to positive sales growth until 2027.

Several factors will drive the annuity market, including the momentum experienced in 2022, the demand for products with protection features, and the growing need for guaranteed income. However, declining interest rates may pose a challenge, although economic conditions are expected to improve.

When it comes to specific annuity product categories, LIMRA provides the following breakdown:

1. Traditional variable annuities (VAs): Volatility in equity markets may deter investors from traditional VAs. Growth potential and guaranteed income solutions will be the drivers of growth in 2027, indicating upward momentum for traditional VAs.
2. Registered index-linked annuities (RILAs): The RILA market has experienced significant growth and is projected to continue growing as equity markets shift towards growth. More carriers are expected to enter this market, and RILA sales are estimated to be in the $66-$70 billion range by 2027.
3. Fixed indexed annuities (FIAs): FIAs are anticipated to reach new record levels as investors seek protection and growth. The majority of growth in the FIA market will come from products without a guaranteed living benefit, and sales are expected to grow up to 10% in 2023.
4. Fixed-rate deferred annuities (FRDs): As interest rates decline, the demand for protection-based solutions like FRDs may decrease. However, sales are predicted to remain stronger than historical averages, rebounding in 2024 as contracts come out of surrender periods. The FRD market will then stabilize through 2027.
5. Income annuities: Income annuities experienced a surge in sales at the end of 2022. If the Federal Reserve signals a shift to holding rates, investors may rush to lock in favorable payout rates. Sales are expected to have a modest increase in 2025 before stabilizing through 2027 as interest rates retreat.

Overall, LIMRA’s research indicates that the individual annuity market will continue to gain momentum. The industry should focus on technological and process improvements to meet the growing demand for annuities and enhance experiences for advisors and customers.

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