How do rising interest rates typically affect fixed annuities?

When interest rates rise, new fixed annuity products are likely to offer more attractive rates to potential buyers compared to existing fixed annuities. This situation leads to a decrease in demand for the older contracts, because consumers will be more inclined to invest in new annuity products that provide higher returns. As a result, financial institutions may experience a decline in sales of fixed annuities due to this preference for newer, higher-yielding options.

This phenomenon underscores the sensitivity of fixed annuities to interest rate changes, as higher rates can create a competitive landscape that diminishes the appeal of existing products. In summary, the impact of rising interest rates on sales and market dynamics for fixed annuities is a critical aspect for both insurers and investors to understand.