US provider adds Libor play to annuities range

Security Benefit Life Insurance Company (SBL), a US retirement savings provider, has launched the the RateTrack Plus Annuity (RTP), a floating rate annuity that includes an income benefit and is designed to help clients participate in a rising interest rate environment.

The new RTP features an interest-crediting method, an income benefit that guarantees income for life and a 4% bonus on the purchase payment. Interest on the account value is calculated by combining a fixed interest rate with a floating rate, the three-month ICE London Interbank Offered Rate (Libor) USD Rate, an interest rate that has historically closely tracked the Federal Funds Rate.

SRP data shows that the USD 3M Libor remains a popular structure in the structured products market with 240 such products issued across markets in 2017 of which 56 products were sold in the US mainly in the form of fixed to floating rate notes.

Doug Wolff, president of Security Benefit Life, said the product is targeted at 'financial representatives and their clients who believe interest rates will increase over the next several years', but also want the security of guaranteed lifetime income.

The crediting method carries over to the income benefit, in addition to a guaranteed annual roll-up to the benefit base, to allow contract holders to automatically benefit of any rising rates for their retirement income.

The launch of RTP follows the success of Security Benefit's RateTrack Annuity, which has been a top selling fixed annuity since it debuted in March 2016, according to data from Beacon Research, selling more than US$1bn in its first year. RTP adds an income component to RateTrack's innovative interest-crediting method that increases the income benefit roll-up as interest rates rise.

SBL added four new index accounts to its Total Value Annuity in Q4 2017 including one and two year accounts based on the S&P 500 Low Volatility Daily Risk Control 5% Index (S&P 500 Low Vol RC 5%), and one and two year accounts based on the S&P Multi-Asset Risk Control (Marc) 5% Index (S&P Marc 5%).

The S&P 500 Low Vol RC 5% Index represents a portfolio that combines the S&P 500 Low Volatility Index with an interest-accruing cash component. Stocks in the index are weighted according to their volatility, with the least volatile stocks receiving the highest weights. This was the first time the S&P 500 Low Vol RC 5% has been featured in an indexed annuity but the index appears in five live products in the US market including four market-linked certificates of deposit and one structured note.

This new product comes at a time when the issuance of Libor-linked products has dramatically fallen compared to previous years, according to SRP data. Issuance of Libor products peaked in 2013, when 702 structures were released across 15 jurisdictions, but since then the number of new issues has fallen sharply: in 2017, only 61 products linked to Libor have been issued. Year to date, no Libor-linked products have been recorded.

The most dramatic change is issuance behaviour has come in the US, one of the leading structured product markets for interest linked products, which, in 2013, saw a total of 325 Libor products worth US$3.1bn. Four years on and the number of Libor products issued in the US has fallen to 11 products, with a combined sales volume of $44m.

Libor-linked issuance falls as risk-free benchmark Sonia looms

BNP Paribas prop indices get traction as demand for risk control increases in the US FIA market

Demand for new underlyings is increasing as the FIA market grows, SRP Indexed Insurance Forum