Annuity sales are in for a rough few months, triggered by low interest rates, market volatility and record high employment, according to forecast by the Secure Retirement Institute.

Overall total annuity sales are expected to drop between eight percent and 15% in 2020, SRI said. But the outlook for 2021 and 2022 is brighter, as equity markets and interest rates slowly rise over the next two years and the number of people age 65 and over expands to comprise 18% of the U.S. population, SRI said.

“Most annuity products will face headwinds under the current economic conditions,” said Todd Giesing, senior research director, SRI Annuity Research. But he noted that one bright spot will be registered index-linked annuities (RILAs), which offer investment growth opportunity with limited downside risk. RILAs, a subset of the variable annuities market, are uniquely positioned to thrive in this environment and successfully compete for clients who may have looked to indexed annuities in the past, Giesing said. “We expect RILAs to expand their VA market share over the next few years,” he said.

SRI is projecting that RILAs will reach nearly $20 billion this year, as consumers look for the balance of protection, safety, and growth potential. It said 2021, RILA sales will represent nearly a quarter of all VA sales and will continue to expand in 2022.

Variable annuities, on the other hand, is forecasted to drop as much as 15% in 2020, similar to the decline experienced in 2009. SRI said as market volatility subsides and consumer confidence improves in 2021, VA sales are expected to recover the losses experienced in 2020 and continue to grow in 2022.

SRI expects a 25% drop in sales of fixed indexed annuities due to the low interest rate environment and continued market volatility. It is expected to rebound in 2021 as economic conditions improve — allowing carriers to raise cap level. FIA sales will rebound in 2021 and reach record-level sales in 2022, surpassing that of record sales set in 2019, SRI predicts.

SRI said sales of fixed-rate deferred annuities in 2020 are expected to remain level with 2019 sales results because those products will attract buyers seeking protection from market volatility. “As equity markets stabilize but interest rates remain low in 2021, consumers are expected to seek products that will provide greater investment growth causing fixed-rate deferred sales to drop by as much as a third,” SRI said. It expects fixed-rate deferred sales will grow slightly in 2022, as economic conditions improve, and short duration fixed-rate deferred contracts sold in 2018 and 2019 lose their surcharges.

And as for income annuities, SRI said with interest rates well below 1%, they will struggle to find a market. Sales of income annuities — both immediate annuities and deferred income annuities — are forecasted to tumble 40% or more in 2020, SRI said, adding that rising interest rates will help improve sales in 2021 and 2022, but not the  record sales levels reached in 2019.