IDEAS home Printed from
   My bibliography  Save this paper

Life Insurance Firms in the Retirement Market: Is the News All Bad?


  • Paul Hoffman
  • Anthony M. Santomero


The role of the insurance industry in the retirement assets market is examined. The popular image of the industry as one in decline is scrutinized by drawing upon various governmental and industry data sources. Our examination begins with the traditional area of corporate pensions, specifically, Defined Benefit and Defined Contribution Plans. It is demonstrated that this segment has remained relatively flat as proportion of wealth, but has declined in relation to the retirement market as a whole. This slow relative change masks a dramatic shift away from Defined Benefit Plans to Defined Contribution Plans. The primary driver of this change is the rapid growth of 401(k) plans. The shift from large corporate plans to individual retirement planning is most strongly demonstrated by the increase of IRA assets, such that they now comprise nearly a quarter share of the market. This trend is surprising in light of the fact that contributions have been low since a tightening of the tax code in 1986. More germane to our examination is the annuities market. With 55 million contracts in force, and total assets of $1.2 trillion, the insurance industry's domination of this area would seem to speak well of their present and future prospects. Indeed, annuities have grown as a percentage of wealth, but within the retirement sector, they have been outpaced by other instruments. This fact should be worrisome to insurance companies, as they have grown increasingly dependent upon annuities as a proportion of premium income. In summary, the picture for insurance companies is not as dire as the press has portrayed. But, comfort should not be taken in this fact. Individual retirement planning is driving the rapid growth of retirement assets. Annuities are, by and large, insurance companies' sole entry in this competition and, as of late, their record has not been exemplary. The low loads associated with mutual funds and their flexibility set a difficult paradigm for insurance companies to emulate. But, a lack of a successful effort will relegate insurance companies to the role of bit players in the retirement market.

Suggested Citation

  • Paul Hoffman & Anthony M. Santomero, 1998. "Life Insurance Firms in the Retirement Market: Is the News All Bad?," Center for Financial Institutions Working Papers 98-04, Wharton School Center for Financial Institutions, University of Pennsylvania.
  • Handle: RePEc:wop:pennin:98-04

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Nathalie Oriol & Fabrice Pansard, 2013. "La directive Solvency II : quels impacts pour les march├ęs et le financement de l'├ęconomie ?," Post-Print halshs-01066373, HAL.
    2. Richard J. Herring & Anthony M. Santomero, 2000. "What Is Optimal Financial Regulation?," Center for Financial Institutions Working Papers 00-34, Wharton School Center for Financial Institutions, University of Pennsylvania.
    3. Allen, Franklin & Santomero, Anthony M., 2001. "What do financial intermediaries do?," Journal of Banking & Finance, Elsevier, vol. 25(2), pages 271-294, February.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wop:pennin:98-04. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.