Life's perilous journey
Guaranteed variable annuity products generate huge profits for US life insurers, but have left firms massively exposed to exotic equity risk. Some companies are now laying off risk via long-dated, highly structured hedges. Not everyone is convinced this is the best approach
Next time you talk to your life insurance agent, ask if they have sold any quanto Asian put options lately. The blank stare and pregnant pause that is likely to follow may suggest the answer is no, but any such inference would probably be wrong. Variable annuity products that include guarantees - often referred to as riders - have been a significant source of profits for US life insurance firms over the past few years. And although they are not referred to as such, the various
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