BMO Insurance has unveiled a new investment option for its universal life insurance clients looking for the upside potential of equity-linked returns without the risk of negative returns.
Called the North American Equity Enhanced Market Indexed Account (EMIA), the strategy will provide some market-linked performance from both the Canadian and U.S. stock markets.
“We have been hearing from many of our customers that what they want is a ‘safe’ equity option and this is what we are providing,” said Steven Cooney, senior vice president, Head of Individual Life and Annuities, BMO Insurance.
Cooney said the new product builds on BMO Insurance’s Guaranteed Market Indexed Accounts (GMIA) which the insurer has had for more than eight years. Currently, one of the GMIA products is tied to the Canadian stock market, the second to the U.S. stock market. The new option brings the two GMIA products together into an enhanced market index account and is the only product of its kind in Canada, he said.
The investment strategy backing up the EMIA is managed by BMO Insurance in partnership with BMO Capital Markets. Using a combination of long-term bonds and enhanced equity investments, they can mitigate investment risk during market downturns.
The credited rate is indexed to the S&P/TSX Composite Low Volatility Index and S&P500 Low Volatility Index (SP5LVI). BMO Insurance applies a smoothing formula to provide its policy owners with a more stable credited rate on their universal life insurance policies.
Cooney said the EMIA idea is popular in the U.S. and research shows it will resonate in the Canadian market, particularly because of the guarantee that the return will never be negative.
