The first insurance carrier to offer a crypto index, Delaware Life and BlackRock

Key Points

• Delaware Life links a fixed index annuity to BlackRock IBIT for bitcoin exposure.
• The structure targets growth while keeping principal protected, useful for retirement planning needs.
• A rules-based index mixes broad equities with measured bitcoin exposure inside a fixed index annuity.
• Institutional demand for a bitcoin ETF structure keeps growing across wealth and insurance channels.

The first insurance carrier to offer a crypto index, Delaware Life links annuities and bitcoin.

The fixed index annuity is a type of product designed to meet the new growth demands of investors in the current environment, but one that does not disrupt their need for peace of mind in volatile markets. By allowing an investor to allocate to a measured index, this fixed index annuity provides a practical solution. The index itself includes the exposure of the BlackRock IBIT as well as a broad-based equity fund at a low cost.

Rules are applied on a daily basis to measure the amount of risk taken; once the daily risk measurement is made, the index weights are adjusted to provide a stable level of volatility. In addition to providing the types of policy features that most retirees find attractive (such as principal protection and defined crediting mechanisms), this fixed index annuity also provides an opportunity for investors to have a new source of growth.

Why insurers now support bitcoin exposure

Index design across various forms of annuity products has been guided by risk budgets for many years. This newest form of annuity combines a basket of equities with a bitcoin ETF sleeve using very basic rules. The volatility of the overall index increases when there is higher volatility in the underlying markets; it reduces its exposure to these markets in order to reduce the impact of swings on the value of the policy. Conversely, the volatility of the overall index decreases when markets become less volatile, resulting in the ability to take greater risks in the hopes of earning a steady rate of return on investments during better times. This form of indexing makes sense for those engaged in long-term retirement planning, particularly those concerned about sequence risk and whose cash flow requirements remain constant.

Delaware Life offers this product to advisors who would like to offer their clients exposure to cryptocurrencies through a vehicle they are already comfortable with — the paperwork associated with a fixed index annuity. Because an allocation within a fixed index annuity completely eliminates the use of wallets, private keys, and exchange logistics, advisors can provide their clients with the benefits of cryptocurrency exposure in a way that is easily understood.

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How does this work inside the context of an annuity contract?

Interest credited in a fixed index annuity is determined by a formula based on the outcome of the index selected. The principal remains protected from losses in the markets, subject to the financial strength of the issuing company and the terms of the contract. The crediting method may be determined by caps, participation rates, or spreads, all of which are clearly identified to the client prior to making an investment decision. As such, advisors can match the client’s risk tolerance, the timing of their income needs, and other long-term retirement planning objectives across multiple accounts.

Here, the BlackRock U.S. Equity Balanced Risk 12% Index serves as the “engine” for determining the crediting interest paid on the fixed index annuity. The index is comprised of a broad equity fund combined with BlackRock IBIT exposure, which is included in a defined risk budget. Daily rebalancing of the index prevents large swings in the value of the client’s portfolio and strives to achieve steady growth without prolonged downturns in the markets.

Many retirees appreciate this balance, since the timing of their income needs may be more important than maximizing total return.

Rules-Based Index + Principal Protection

Growing institutional interest exists because the bitcoin ETF wrapper eliminates the custodial issues associated with investing in a commodity like bitcoin. BlackRock IBIT provides a traditional fund experience for everyday advisors who wish to invest in spot bitcoin. Delaware Life then embeds the exposure to bitcoin into a product category that many consumers already understand and recognize. Policy-holders have a familiarity with how the growth in their account is aligned with the same statement format and annual disclosure of crediting details that they currently enjoy. To me, embedding measured exposure to bitcoin into a capital protection product represents a simple means of fulfilling a retiree’s brief for growth in their portfolio. Advisors view this product as a means to bridge the gap between digital assets and regulated insurance products that are subject to the same regulatory framework. The structure represents a compliance-friendly route with suitability reviews and clear disclosure of the nature of the product already being done.

Advisors are now able to discuss exposure to crypto in the same manner that they discuss exposure to an index annuity. The discussion has shifted away from the complexities associated with custody and storing/ trading digital assets toward the simplicity associated with caps, participation rates, and index mechanics. This improved client understanding is achieved through the fact that existing policy statements already detail index-linked crediting results. Clients can then focus on a simple story, principal protection, documentation of crediting terms, and measured exposure to growth. The bitcoin ETF sleeve embedded in the rules-based index delivers the same exposure to both equities and crypto consistently across cycles. While advisors still tailor the allocation of their clients, they place the weight of the index within a larger multi-asset plan, thereby enabling them to support the needs of their clients’ retirement plans without introducing the complexity of storage/trading workflows associated with digital assets.

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First Insurance Carrier to Offer Crypto Index

Pricing and crediting will vary depending upon the specific contract version, issue age, and applicable state regulations regarding the availability of the contracts. Advisors will review the disclosure documents related to the available contracts and then compare caps or participation rates among the available crediting strategies. Many households will begin by allocating a small percentage of their portfolio, maintaining relatively conservative allocations, and reviewing the results of their allocations at the end of each anniversary period. This measured approach respects the risk aversion of their clients while providing them with a new growth engine with principal protection. The exposure to equities and bitcoin ETF is spread across two distinct return engines. As such, the rule-based adjustments to the index over time assist in smoothing out the ride, thereby supporting the planning of a steady income during retirement. This combination is intended to provide clarity, simplicity, and consistent communication between advisors and their clients.

What to Watch Next Among Insurers and Asset Managers

Asset managers will continue to develop indexes that include digital assets and define parameters for managing the associated risk. Insurers will select indexes, agree to the crediting budgets, and present the options to their customers through various channels nationally. There will be additional partnerships developed as advisors now understand the blueprint behind this link. Innovation in the development of new products will likely focus on providing clearer disclosures, educating clients more thoroughly, and presenting clients with simpler selection menus for selecting their preferred allocation. Advisors will request transparent daily data, including the methodology of the index and past stress test results. Clients will expect to view their policies via a mobile device and receive timely notifications near anniversary dates for updating their allocations.

With growing demand for exposure to bitcoin ETFs, this playbook appears to be ready for widespread adoption shortly.

Checklist for Advisor Due Diligence

Verify the strength and ratings of the issuer across the major rating agencies, and then compare caps or participation rates. Review the methodology of the index and the fees associated with the crediting terms, including spreads and/or possible fees. Determine if the allocations are suitable for your client’s retirement planning goals, income timing, liquidity requirements, and tax implications. Track the performance of the client’s portfolio against the agreed-upon goals, adjust the weights of the allocations at the anniversary dates of the contract, and properly document each adjustment.