Extract from. Études et Dossiers No th Meeting of The Geneva Association s Amsterdam Circle of Chief Economists

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1 International Association for the Study of Insurance Economics Études et Dossiers Extract from Études et Dossiers No th Meeting of The Geneva Association s Amsterdam Circle of Chief Economists February 2011, Amsterdam & 7.5 th International Liability Regimes Conference of The Geneva Association 17 June 2011, Beijing This document is free to download from The Geneva Association website, August 2011 Working Paper Series of The Geneva Association Association Internationale pour l'etude de l'economie de l'assurance The Geneva Association - General Secretariat - 53, route de Malagnou - CH-1208 Geneva Tel.: Fax: secretariat@genevaassociation.org -

5 th International Liability Regimes Conference of The Geneva Association 17 June 2011, Beijing This document is free to download from The Geneva Association website, August

2 The Geneva Association Working Paper Series Études et Dossiers appear at irregular intervals about times per year. Distribution is limited. The Études et Dossiers are the working paper series of The Geneva Association. These documents present intermediary or final results of conference proceedings, special reports and research done by The Geneva Association. Where they contain work in progress or summaries of conference presentations, the material must not be cited without the express consent of the author in question. The opinions expressed in Geneva Association newsletters and publications are the responsibility of the authors. We therefore disclaim all liability and responsibility arising from such materials by any third parties. This document is free to download from The Geneva Association website, please visit:. Layout & Distribution: Valéria Kozakova The Geneva Association Association Internationale pour l'etude de l'economie de l'assurance

These documents present intermediary or final results of conference proceedings, special reports and research done by The Geneva Association.

3 Future of Guaranteed Products in Life Insurance & Annuities Brian K. Atchinson Personal Financial Security U.S. 4 million Baby boomers will retire each year for next 20 years US Social Security is 50% of income for 64% of people 65 yrs & older st year SS trusts paid more than received in tax (27 yrs until inadequate) 7-1

4 Recent Developments Employer Defined Benefits Plans 17% of workers: Most Plans provide Lifetime Income Guaranty Individual/Employee Voluntary Defined Contribution Plans 41% of workers: 58 Million participants & $3 Trillion assets with 55% in Mutual funds; Less than 7% offer Annuity options The U.S. Retirement System Private Pensions Historically focused on asset accumulation, not retirement planning Primary Individual Savings plans 401K, 403-B, 457 (b) & Individual Retirement Account Plans Unique problems of outdated structures & public policy (ie, spousal rights & gender pricing) 7-2

5 Current Regulatory & Legal Framework = Annuity DISincentives ERISA fiduciary i standards d require significant ifi monitoring by Employers for 401K Plans and significant liability Concerns re: Private Insurers Insolvency States guaranty only $100,000 - $300,000 present value No Federal Government Safety net Inconsistent Regulation & Compliance requirements Bank products & employer pensions have Federal guarantees Regulators that Oversee Annuities 7-3

States guaranty only $100,000 - $300,000 present value No Federal Government Safety net Inconsistent Regulation &

6 New Reality Need for Longevity Protection 30% of women & 20% of men age 65 today will reach 90 Decumulation Challenge Managing spend down over uncertain time frame AARP (consumer group) supports annuitization options Product Evolution 2008 Sales: Immediate fixed annuities - $8 billion Variable deferred annuities - $155.5 billion Post Crash Environment Balancing risk & insurance Lifetime Income Products Guaranteed Living benefits & Industry innovation Asset Management with Guarantees 7-4

Sales: Immediate fixed annuities - $8 billion Variable deferred annuities - $155.

7 Future Prospects Compelling public policy need to encourage Annuitization in Defined Contribution Plans Must address issues of Federalism & Regulation to gain confidence of Individuals & Employers Will require consistent National safety net or Federal guarantees : New US Departments of Treasury & Labour Initiative to address these issues 7-5

Individuals & Employers Will require consistent National safety net or Federal

Extract from. Études et Dossiers No. 377. 13 th Meeting of The Geneva Association s Amsterdam Circle of Chief Economists

Extract from. Études et Dossiers No. 377. 13 th Meeting of The Geneva Association s Amsterdam Circle of Chief Economists International Association for the Study of Insurance Economics Études et Dossiers Extract from Études et Dossiers No. 377 13 th Meeting of The Geneva Association s Amsterdam Circle of Chief Economists