ERM-416-19: Responding to the Variable Annuity Crisis

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Reading Source: https://www.mckinsey.com/~/media/McKinsey/dotcom/client_service/Risk/Working%20papers/10_Responding_to_the_Variable_Annuity_Crisis.ashx

Topics Covered in this Reading:

  • Introduction
  • Prelude to the Crisis
    • “Arms Race” on Living Benefits
    • Aggressive Asset Allocation
    • Continued Shift Toward Third-Party Distribution
    • Broad Adoption of Dynamic Hedging and Self-Insurance as Re-Insurance Capacity Dried Up
  • The Variable Annuity Industry Faces the Crisis
    • Risk Hedging Programs Work… But Only to a Certain Extent
    • Unmitigated Risks are Exposed
    • Not All Carriers are Created Equal
  • The Future of the Variable Annuity Market
  • Winning in the Tail
    • Assess Risk Exposures
    • Develop a Short-Term Risk Mitigation Plan