通过综合对冲和风险管理探索RILA和VA的协同作用

February 2025 1 Exploring RILA and VA synergies throughintegrated hedging and risk managementBackgroundRILAshave shown significant growth in recent years and are projected to continue this trend. In 2023, RILA salesreached $44.46 billion, which wasanover 10% increase from the previous year and marked a new all-time high forthis product line. This upward trend is expected to persist, with LIMRAdocumentingRILA salesabove$65billion in2024 andstrongsalesagainin 2025.FIGURE 1: RILA SALES BY YEARSource: LIMRA.RILAs often use underlying indices such as the S&P 500, MSCI EAFE, MSCI EEM, Russell2000, NASDAQ-100, andDow Jones Industrial Average, offering diverse market exposure. The use of customized multi-asset volatility controlindices is also on the rise.RILAs offer various crediting strategies that appeal to investors seeking growth potential with some downsideprotection. These strategies include cap and participation rates for the upside, as well as buffers and floors fordownside protection, and can varyinlength of time.The tablein Figure 2showscommon RILA crediting strategies:FIGURE 2: RILA CREDITING STRATEGIESCREDITING STRATEGYUpside: Cap RateUpside: Participation RateDownside: Buffer StrategyDownside: Floor StrategyAs the competition increases in the RILA space,new crediting strategies are emerging over the years.The “vanilla”crediting strategy remains a point-to-pointapproach that tracks the index return over a specifiedtimewith the strategyfeaturesdescribed above.The emerging crediting strategies tend to enhance the upside potential, strengthen thedownside potential,or lockin performance gains more frequently.$1.94$0$5$10$15$20$25$30$35$40$45$502014Sales ($ Billions) February 2025DESCRIPTIONCredits interest up to a maximum limit (cap), paired with buffers or floors to limit losses.Credits a percentage of the index’s return, oftencombined with downside protectionfeatures like buffers or floors.Absorbs a certainproportionof losses (e.g., a 10% buffer means the insurer absorbsthe first 10% of losses).Provides aguaranteed minimum return or limits the loss to a certain percentage.$3.68$7.30$9.16$11.23$17.43$24.06$38.15$39.59$44.4689.7%98.4%25.5%22.6%55.2%38.1%58.5%3.8%12.3%0%10%20%30%40%50%60%70%80%90%100%201520162017201820192020202120222023Annual Sales Growth Rate 2 Exploring RILA and VA synergies throughintegrated hedging and risk managementRILAHEDGINGSTRATEGIESMost RILA carriers use static hedging strategies forthe risk management ofRILAs. This involves purchasing optionpackages designed to match the specific payoff profile of the RILAsegment offerings. These options are typicallyheld to maturity. The most common instruments used in static hedging are over-the-counter (OTC) options andflexibleexchange (FLEX) options.1Consequently, the static hedging strategycan be beneficial for its ease ofimplementation and itsability to maintain a predictable cost of hedging.For avanilla point-to-pointRILAproduct withcap andbufferon the S&P 500 index (SPX), the company typically needs to buy a call spread and short a put to adealer.The most common approach involves:Long SPX ATM-120%callspread: Buy an at-the-money (ATM) call option and sell a call option at 120% of thecurrent SPX level to cap the upside.Short SPX 90%strikeput: Sell a put option at 90% of the current SPX level to provide downside protection(buffer) and offset the cost of the call spread.Thechartin Figure 3represents the payoff for theRILA hedgepositions. This shows how the strategy caps the gainsand buffers against the losses.FIGURE 3: HEDGING STRATEGY PAYOFFHowever, static hedging comes with some drawbacks. Transaction costs and volatility premiums can be significant,especially for longer-dated products.Long-dated options, such as those used for hedgingsix-year RILA products,tend to have higher volatility premiums for several reasons. The market for long-dated options typically hasmuchlower liquidity compared to short-term options, resulting in wider bid-ask spreads. Additionally, the longer timeframeincreases the volatility risk premium, as sellers demand more compensation for holding risk over an extended period.Collateral requirements and liquidity concerns associated with short puts or put spreads on the downside can posechallenges.For example, during the COVID-19 market crash, the S&P 500 (SPX) tumbled over 30%, causing shortputs to become in-the-money. This situation forced RILA carriers to post substantial collateral to meet marginrequirements, straining liquidity resources.Maintaining sufficient collateral can have a significant impact on acompany's asset allocation strategy. To meet margin requirements,especially during periods of market stress,companies must hold a substantial portion of their portfoliosin liquid, low-yielding assets like cash or high-quality1.OTC options are bilateral, customizable contracts traded privately between parties, whileFLEX options are customizable but traded on exchangeswith centralized clearing.-1500-1000-50005