Actuarial Notes

Registered Index-Linked Annuities

By Nicholas Carbo, David Elliott and Reilly McGarr · Society of Actuaries Research Institute · 2022

Study guide: Exam ILA-101

An August 2022 Society of Actuaries Research Institute report, sponsored by the SOA's Individual Life and Annuity Curriculum Committee, on registered index-linked annuities (RILAs), a type of deferred annuity first introduced in 2010. It sets RILAs against fixed, fixed indexed and variable annuities, and covers rate setting and hedging, product mechanics, risk management, and reserves and regulation.

On the syllabus

1 Deferred Annuity Market and RILA Introduction

  • 1.1 Caps and floors
  • 1.2 Illustrations

2 Deferred Annuity Comparison

  • 2.1 Fixed Annuities
    • 2.1.1 Contract holder perspective
    • 2.1.2 Insurance company perspective
  • 2.2 Fixed Indexed Annuities
    • 2.2.1 Contract holder perspective
    • 2.2.2 Insurance company perspective
  • 2.3 Registered index-linked annuities
    • 2.3.1 Contract holder perspective
    • 2.3.2 Insurance company perspective
  • 2.4 Variable annuities
    • 2.4.1 Contract holder perspective
    • 2.4.2 Insurance company perspective

3 RILA rate setting and hedging

  • 3.1 Rate setting process
  • 3.2 Key drivers of rates
  • 3.3 Example rate sheet
  • 3.4 Comparison to fixed indexed annuity rate setting
  • 3.5 RILA crediting and hedging examples
    • 3.5.1 Buffer with cap
    • 3.5.2 Floor with cap

4 RILA product mechanics

  • 4.1 Interim value and lock features
  • 4.2 Lock features
  • 4.3 Riders

5 Risk management

  • 5.1 Hedging risk
    • 5.1.1 Hedging with options
    • 5.1.2 Hedge offset against variable annuities with guarantees
  • 5.2 Rate setting risk
  • 5.3 Investment risk
  • 5.4 Liquidity risk
  • 5.5 Operational risk

6 Additional considerations

  • Structure
  • Reserves and regulations

7 Acknowledgments

Appendix A Hypothetical RILA performance with 15% cap and 10% buffer

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