Linea Mercati Interview 2/4/25
February 5, 2025Linea Mercati Interview 2/5/25
February 6, 2025
Stock market whiplash could affect different index-sensitive products in various ways.
By Aaron Smith|February 5, 2025
Market volatility resulting from President Trump‘s trade war with America’s closest partners could sendripples through the annuity industry.
Trump threatened Mexico and Canada with 25% tariffs, then paused for negotiations while slapping a 10%tariffagainst China, which is retaliating against U.S. companies including Google and Nvidia. This hasroiled the stock markets, including the S&P 500, upon which many of the insurance industry’s variousindexes are based.
The S&P 500, the Dow Jones Industrial Average and Nasdaq Composite are all higher, so far this year, butthe future is unclear. Christian Scherrmann, U.S. economist for asset management firm DWS, said thatimpact of tariffs depends on how long they remain in place, “as well as the final scope and retaliation.”Scherrmann said long-lasting tariffs could potentially shave 1% to 1.5% from U.S. GDP growth in 2025 andadd up to 1% to core inflation.
Peter Cardillo, chief market economist for Spartan Capital Securities, said the uncertainty from the threatof tariffthreats could take a toll on the markets. “Volatility will last until the uncertainties fade,” saidCardillo. “It could cause a 7% to 10% pullback along the way.”
No one knows for sure how long the tariffs will last, how they will affect markets, or what impact theymight have on index-linked annuities. But one thing is known: the threat of tariffs adds volatility anduncertainty to a booming industry.
Annuity sales totaled $432.4 billion in the U.S. in 2024, an increase of 12% from the year before and thethird consecutive year of record-breaking sales, according to Limra.
“Typically, market volatility causes declines in variable annuity sales,” said Sheryl Moore, CEO of Wink,which tracks the life and annuity industry, in an email. “However, indexed annuities and structuredannuities (also known as ‘RILAs’) are relatively insulated from sales declines due to market volatility.”
RILAs contain buffers to protect against market downturns, which is key to their success. According toLimra, RILA sales totaled $65.2 billion in 2024, an increase of 37% from the prior year. Limra said RILAsales have steadily increased for 11 consecutive years. The booming RILA market is dominated by Equitable,Allianz, Brighthouse, Prudential, Lincoln and Jackson.
Sales for traditional variable annuities also increased last year, for the first time in three years, with salestotaling $61.2 billion in 2024, an increase of 19% from the year before. But variable annuities, lacking theprotection of RILAs, are more vulnerable to the uncertainty in the stock market.
2/5/25, 10:50 AM Life Annuity Specialist – Print Content Page https://www.
