Sustainable Manufacturing of Variable Annuities

The variable annuity (VA) industry is undergoing a transformation in response to the global financial crisis. VA products with their associated guaranteed living benefits are in high demand as the Baby Boomers transition into retirement. VAs provide customers with the ability to participate in a diversified portfolio of investments with protection against severe, sustained declines in the market. However, it is not clear that the life insurance industry can continue to offer VAs without fundamentally changing the manufacturing process for the creation and management of variable annuities. This article highlights the need for a new approach to VAs, the Sustainable Manufacturing Model, and illustrates the basic components of the process. Milliman is actively working with life insurers, asset managers, and distributors to implement this new model.

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