U.S. Retail Annuity Sales Surge in 2025: An Analysis
U.S. retail annuity sales skyrocketed to a historic $461 billion in 2025, according to a Morningstar DBRS report highlighting the growing complexity of supporting business models. The report focuses on multiyear guaranteed annuities (MYGAs) and fixed indexed annuities (FIAs), noting their low-risk profiles. These products increasingly rely on capital efficiency, investment execution, and regulatory considerations.
FIAs achieved $127.9 billion in sales in 2025, maintaining their status as the fastest-growing annuity category for the third consecutive year. A March 2026 analysis revealed that some insurers affiliated with Alternative Asset Managers (AAMs) have about 20% of their investments in loans to related funds, raising transparency concerns among regulators regarding underlying assets.
AAM-backed platforms represented over 40% of FIA sales among the top 20 carriers by the end of 2025. According to Athene's study, the average private credit allocation among its top 10 peers was approximately 26%. In response, many traditional carriers formed strategic alliances or expanded their in-house alternative investment platforms to adapt to market dynamics.
The pursuit of yield intensified due to spread compression and persistent low interest rates in 2025, pressuring insurers to increase allocations to private credit and structured securities. Outstanding Federal Home Loan Bank (FHLB) advances to U.S. insurers reached $177.9 billion, with insurance companies' contribution to total FHLB borrowing jumping to 26% from 17% in 2022. Morningstar DBRS cautions that this growing reliance could limit liquidity flexibility during financial stress.
Concerns about opaque structures in partnerships between life insurers and asset managers were echoed by a Federal Reserve staff note, signaling a need for greater clarity on leverage. Industry capital and surplus rose to $538.8 billion by Q3 2025, with AM Best forecasting an increase to $564.3 billion in 2026.
While the AAM-integrated model benefits from high-yielding private and structured assets under stable conditions, these assets often present challenges such as reduced liquidity, opaque valuations, and structural complexity, which become critical during market downturns. Moody’s reported that private illiquid bond holdings in the U.S. life insurance sector reached $807 billion at the end of 2025, a $122 billion increase from the previous year.
Proskauer noted a rise in the private credit default rate to 2.73% in Q1 2026, up from 1.84% two quarters earlier. The National Association of Insurance Commissioners (NAIC) has focused on issues like balance sheet transparency and capital requirements since 2025. They proposed higher capital charges for collateralized loan obligations (CLOs) with ratings of BBB and lower, with the NAIC's CLO modeling project revisions set for December 31, 2026.