Hammered by onerous guarantee commitments on variable annuities,
US insurers have acted to significantly reduce risk exposure on new
products. This is highlighted by a study conducted by Symetra Life,
which included products from 10 of the largest VA providers.

In its study, Symetra found widespread increases in the fees
charged to customers, reductions in guarantees and benefits offered
under many riders and, in several cases, elimination of an entire
guaranteed living benefit offering.

“We are clearly witnessing a significant trend towards less
flexibility and higher fees within some of the most common VA
riders,” commented Pat McCormick, senior vice president for sales
and distribution at Symetra.

Specifically, Symetra’s study which covered product prospectuses
active from 1 May 2008 to 1 May 2009 revealed that nine of the 10
largest providers raised fees on multiple living benefit riders
within their VA product suite over the 12-month time span. In
addition, eight of the 10 carriers have discontinued at least one
guaranteed living benefit rider from their VA lineup.

Notably, Symetra has not reduced guaranteed benefits or fees on its
VA riders. Symetra, which is owned by an investor group led by
White Mountains Insurance Group and Berkshire Hathaway, has total
assets of $19 billion.

Symetra findings are confirmed by a study conducted by consultancy

“The arms race has been put to an abrupt halt since the fourth
quarter of 2008,” said Peter Sun, a consulting actuary with

“Instead most VA writers have been busy scaling back on their
product designs and increasing their fees

Sun added that until the change in strategy competition had pushed
VA writers to offer increasing attractive benefits to a point where
the VA guarantees were no longer the floor, but the actual expected

“It is extremely encouraging to note that the current trend is to
revert to the original fundamentals of the VA guarantee,” said

Milliman found that as at 16 May, 33 insurers had modified their VA
products, 29 planned a fee increase and 19 planned to scale back
product designs.