Who bears the investment risk in a fixed annuity?

In a fixed annuity, the insurer bears the investment risk. This is because the insurance company is responsible for managing the invested funds and is obligated to provide a guaranteed return, which does not fluctuate with market performance. The owner of the annuity receives predetermined payouts or interest rates, ensuring stability and predictability in their income, regardless of any changes in the financial markets.

This arrangement is a fundamental feature of fixed annuities, making them a popular choice for individuals seeking a secure income stream during retirement, as they can rely on the insurer to manage investment risks. Other parties, such as investment brokers or government entities, do not bear this risk in the context of fixed annuities, as their roles are either advisory or regulatory, rather than directly involved in the investment performance of the annuity.