Rethinking and revaluing

Many US insurance companies have reported massive losses on the hedging of variable annuity products. European variable annuity providers, however, have faced problems of their own. Matt Cameron reports

The variable annuity market has been hit hard by the financial crisis. With equity markets tumbling and volatility hitting unprecedented highs, a succession of insurance companies have reported colossal losses on their hedging of variable annuity guarantees. Most attention has so far been on US providers - by far the most active in this space (Risk November 2008, pages 47-49). But European insurers have not escaped, with several posting outsized losses of their own.

The problems stem from the