Declining annuity premiums mean insurers may have to rethink their annuities products in order to survive, according to a report by Scott Hawkins, vice president and insurance analyst at Conning Research & Consulting in Hartford, Conn.

Annuity premium inflows have been steadily dropping since 2000. From the mid-1990s up until the dot-com bubble burst, insurers flooded the market with then-innovative variable annuities, but when the market crashed in 2001, many players quit the market as annuity owners held tight to what they had, Hawkins said. The infamous arms race between annuity providers was, in part, an effort to get those holders of old annuities to move their premiums to new, more exciting products via 1035 exchanges. While this strategy worked, it also meant that recycled premiums often took the place of new ones as advisers scrambled to sell the attractively commissioned products.

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