In a significant move signaling the growing adoption of cryptocurrencies in institutional finance, Delaware Life Insurance Company has launched the first fixed indexed annuity (FIA) featuring Bitcoin exposure through the BlackRock U.S. Equity Bitcoin Balanced Risk 12% Index. This innovative product offers policyholders indirect access to Bitcoin through the iShares Bitcoin Trust (IBIT), all within a principal-protected insurance framework.
The FIA is designed primarily to provide principal protection while allowing potential for limited upside growth. Typically, returns from these annuities are tied to market indices, like the S&P 500, without direct investments in the underlying assets. This structure means that while returns can grow, they are often capped. If the chosen index experiences a downturn, policyholders usually see returns at zero rather than incurring losses.
Colin Lake, President and CEO of Delaware Life Marketing, emphasized the company’s commitment to innovation in response to the evolving retirement-planning landscape. “As the retirement-planning landscape evolves, we’re continuously and thoughtfully innovating to meet the needs of financial professionals and their clients,” he stated in a recent release.
The BlackRock U.S. Equity Bitcoin Balanced Risk 12% Index aims for 12% volatility by combining U.S. stocks with Bitcoin, utilizing cash adjustments to mitigate the cryptocurrency’s notorious price fluctuations. At the end of the prior week, the IBIT had garnered significant investor interest, amassing $74.5 billion in assets under its management.
This new Bitcoin-inclusive index option will be available across three of Delaware Life’s product lines: Momentum Growth, Momentum Growth Plus, and DualTrack Income. The introduction of this FIA reflects broader trends on Wall Street, where established financial institutions have increasingly incorporated Bitcoin and its related products. Notably, Jefferies was the first to issue a structured note linked to a Bitcoin ETF last July, with major firms like Goldman Sachs, Morgan Stanley, and JPMorgan having collectively sold over $530 million in structured notes tied to the IBIT.
Historically, life insurance companies have hesitated to embrace Bitcoin and its associated ETFs, primarily due to concerns over market volatility. Instead, their prior focus has been on leveraging blockchain technology to enhance operational efficiencies. For instance, in 2019, the Bank of China successfully migrated 4 million insurance records to a private blockchain.
However, the momentum for investment in cryptocurrency products among insurance companies is starting to shift. By 2021, investments from U.S. insurers in Grayscale’s Bitcoin and Ethereum trusts were minimal, totaling only $3 million prior to the transition of these trusts into spot ETFs. The trend appears to be gaining traction, as Morgan Stanley expanded its crypto offerings to include retirement account clients late last year.
As the landscape continues to evolve, this shift signifies a potential turning point for the integration of cryptocurrencies within traditional financial products, paving the way for more innovation and offerings aimed at meeting investor demand.
