Introduction of a Groundbreaking Annuity
In a groundbreaking development for the insurance industry, Delaware Life Insurance Company has introduced what it claims is the first fixed indexed annuity (FIA) connected to a Bitcoin-inclusive index. This innovative product incorporates the BlackRock U.S. Equity Bitcoin Balanced Risk 12% Index, allowing policyholders to benefit from Bitcoin’s price movements indirectly through an exchange-traded fund (ETF) contained within the index.
Understanding Fixed Indexed Annuities
Fixed indexed annuities serve as a safeguard for principal, ensuring that policyholders are protected from market downturns while still having potential for moderate growth. Essentially, the contributions made to the annuity become the principal that the insurer vows to shield from losses in the market. Returns, however, are usually capped. In instances where the underlying index declines, policyholders typically receive no returns rather than negative ones.
Insights from Delaware Life
Colin Lake, the president and CEO of Delaware Life Marketing, stated in a press release, “As the landscape of retirement planning continues to evolve, we are committed to innovating thoughtfully to address the needs of financial professionals and their clients.”
The BlackRock Index
The BlackRock U.S. Equity Bitcoin Balanced Risk 12% Index aims for a target volatility of 12% by blending U.S. stocks with Bitcoin. It becomes less susceptible to Bitcoin’s notorious price fluctuations through cash adjustments. Notably, the index incorporates the iShares Bitcoin Trust (IBIT), which boasted an impressive $74.5 billion in managed assets as of last week.
Product Integration
Delaware Life will incorporate this new index option into three of its products: Momentum Growth, Momentum Growth Plus, and DualTrack Income.
Wall Street’s Interest in Bitcoin
Since the launch of Bitcoin ETFs in the U.S. two years ago, Wall Street has actively sought ways to integrate these digital assets into various financial products. For instance, Jefferies rolled out the first U.S. structured note linked to a Bitcoin ETF last July, while investment giants such as Goldman Sachs, Morgan Stanley, and JPMorgan have collectively sold over $530 million of structured notes tied to IBIT.
Historical Caution and Current Trends
Historically, life insurance companies have been cautious about venturing into Bitcoin and Bitcoin ETFs, primarily due to the asset’s volatility. Previously, they focused on utilizing blockchain technology to enhance back-office operations; the Bank of China, for example, recorded 4 million insurance records on a private blockchain back in 2019.
Despite some hesitance, investment in cryptocurrency products by insurers is on the rise. By 2021, U.S. insurance companies had allocated merely $3 million into Grayscale’s Bitcoin and Ethereum trusts prior to their conversion into spot ETFs. Recently, Morgan Stanley has augmented its crypto offerings for wealth clients, including those managing retirement funds.
