US individual annuity writers saw highest premium growth in decade in 2023

Written by Adam Cadle

03/06/2024

Individual annuity premium in the US grew by 22% in 2023 and reached $348bn, representing the highest growth seen in a decade for US providers, according to AM Best.

AM Best stated that annuity products have been attractive for consumers in the last few years, propelled by the rising interest rate environment and crediting rates that generally have been higher than competing products offered by larger national banks.

“Older annuity policies with lower rates were outside of the surrender charge protection, and so with the favorable crediting rates, insurers have been able to sell new annuity products with the higher rates to these customers while also locking them into policies with surrender charges,” said Jason Hopper, associate director, industry research and analytics, AM Best.

As insurers look to capitalise on the favorable environment, newer market entrants have added much-needed capacity to the market, particularly through multiyear guaranteed annuities (MYGA) with their attractive interest rate spreads and shorter durations. With the overall 2023 premium growth, annuity writers posted a 68% year-over-year increase in indexed annuity net premium income to $28.9bn; 48% growth in fixed deferred annuities; and a 33% increase in premium for variable annuities without guarantees.

“Growth in the annuity market has heightened competition, as many new companies have entered the space, including several new private equity and asset management-backed insurers looking to capitalise on the difference between the cost of liabilities and potential favorable investment returns,” said Erik Miller, director, AM Best.

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