Actuarial Notes

It's RILA Time: An Introduction to Registered Index-Linked Annuities

By Thorsten Moenig · The American Risk and Insurance Association · 2022 · INV201-107-25

Study guide: Exam INV-201

A paper by Thorsten Moenig, published in the Journal of Risk and Insurance in 2022, that introduces registered index-linked annuities (RILAs) to the academic literature. It describes the products' key features, develops a general pricing model and derives the providers' hedging strategy by decomposing their liabilities into short-term European options. The SOA supplies it as study note INV201-107-25.

On the syllabus

  • Exam INV-201 — the whole article excluding its appendices; outcome 3g.

1 Introduction

2 Product Description

  • 2.1 RILA Product Characteristics
  • 2.2 RILA vs. TVA and FIA
  • 2.3 Institutional Background
  • 2.4 RILAs in Qualified Retirement Plans

3 A General Pricing Model for RILAs

  • 3.1 Description of RILA Contract
  • 3.2 Insurer's Loss
  • 3.3 Hedging RILA Guarantees
  • 3.4 Pricing the RILA Guarantee
  • 3.5 Pricing Multi-Term RILA Guarantees

4 Numerical Analysis: RILA Pricing & Profitability

  • 4.1 Pricing Analysis
  • 4.2 Profitability Analysis
  • 4.3 Discussion

5 Numerical Analysis: Long-Term Payout Profiles

6 Conclusion

Appendix A Proofs

  • A.1 Proof of Equation (4B)
  • A.2 Proof of Equations (4F) and (4F')
  • A.3 Proof of Equation (4P)

Appendix B RILA Payout Profiles: Implementational Details

Sources