Variable Annuity in Asia post-2008

Hugo Choi

The 2008 global financial crisis, more commonly referred to in the region as the “Lehman shock”, was a watershed for variable annuities (VA) in Asia. Massive negative results forced companies to become run-off or at least to rethink their variable annuity strategy. Development of VA also slowed down in many countries as players realised the problems caused by running improper risk management. However, after a few years of consolidation, a new generation of variable annuities has developed in Japan, products that can be managed much more efficiently by insurance companies while at the same time do not reduce product attractiveness.

This chapter will focus on the development of the VA markets in Asia post-2008. In particular, the focus will be on Japan, not only because it is the biggest variable annuity market in Asia, but also due to the evolution of product features, the interaction between VA and other saving products in sales channels and how the risk management of insurance companies can serve as an interesting case study concerning how variable annuities can be turned around and regain volume after a financial crisis without compromising risk management.

In this chapter