The Equity Index Annuity: an examination of performance and regulatory concerns

Abstract

The Equity Index Annuity (EIA) is a recent product development in the insurance industry. This paper details EIA design and interest crediting techniques, examines expected performance, and discusses possible regulatory concerns. Results indicate that the EIA is generally expected to perform better than a traditional fixed annuity for contract periods of at least five years, but is substantially below that of a similar direct equity purchase. EIA contracts are not appropriate for shorter-term investors when factors of risk and efficient markets are considered. The SEC is not currently regulating the EIA product, which should raise industry concern.