The recession has certainly had a major and well-documented impact on annuity providers; however, the economic pressures being felt by reinsurers have gone mostly under the radar. Insurers generally use reinsurance to back guaranteed income features on annuity products. With capital drying up due to low interest rates and plummeting equity values, insurance companies and reinsurers are in a similar bind in terms of keeping financial commitments to their clients.

Guaranteed Minimum Income Benefit riders (GMIB) are the most popular income riders offered by annuity providers. These riders may be on their way toward a slow, quiet extinction. With the markets continuing to struggle and uncertainty running rampant on Wall Street, the risks of committing to future retirement income floors have grown dramatically for firms. Many GMIBs guarantee the income streams regardless of investment performance, a claim that seems naive and/or reckless given the implosion of the market since last September.

Jackson National isn’t taking any chances on the GMIB front. Citing their historic commitment to a conservative investing approach (a popular claim among financial services firms these days), the firm has announced that as of April 6th, they will no longer offer GMIBs for newly issued annuity contracts. After May 16, Jackson will also no longer accept additional payments on existing GMIB contracts purchased before April 6. If the economy and financial markets continue their downward trend for much longer, there’s a good chance that other firms will soon follow suit.