SRP expands coverage to Japan's variable annuities

日本語

SRP has expanded its coverage of the Japanese structured products market with the addition of variable annuity products in response to the mounting interest among our subscribers in this growing sector.

In recent years, the registered note has been the most popular wrapper in the Japanese retail market followed by mutual funds and deposits, however structured life insurance products have been increasing in popularity over the last few years.

Variable annuity products were introduced in the Japanese retail market in 1999 initially adopted from the US where these products were already popular among the retail investors. Variable annuities became a big success since late 2002 when the regulator in Japan removed the rules that prohibited banks from selling annuity products, effectively opening up a distribution channel. Those life insurance products with a portfolio insurance/CPPI payoff do not fall under the definition of variable annuity.

In total, there are 250 continuous products added to the database under the wrapper life Insurance combining portfolio insurance and variable annuity payoffs. Portfolio insurance products linked to managed funds have an investment tenor of over 10 years, and are designed to ensure that a fixed minimum return is achieved either at all times or more typically, at a set date in the future by continuously re-balancing the portfolio of investments during the term of the product between so-called risky assets (usually shares) and non-risky assets (usually bonds or cash); whereas variable annuity products are linked to a range of actively-managed funds and offers various guarantees such as a minimum guarantee on the portfolio value at a future date, guaranteed annual growth or the minimum income available at retirement.

The new coverage opens with 154 portfolio insurance products and 96 variable annuity products going back as far as 2002 for an estimated volume of ¥99.4tr ($1.3tr) and ¥45.2tr ($581.3bn) respectively, and is fully searchable, including downloadable product documentation and marketing literature. There are 15 issuers in the market led by Hartford Life Insurance Japan (34%), Mitsui Sumitomo Primary Life Insurance (13%) and Dai-ichi Frontier Life Insurance (12%). The products are distributed through over 50 local banks and securities companies such as Kirayaka Bank, Momiji Bank, and IO Shinkin Bank among others.

As with previous products launches, SRP will continue to complete the coverage with the addition of older products as we find them, while ensuring the current offers list remains as comprehensive and up-to-date as possible.