Registered index-linked annuity risk refers to the unique combination of market, credit, liquidity, and complexity risks associated with RILAs. While these contracts provide downside buffers or floors, they still allow for partial loss of principal when index returns are negative beyond the protection level. Caps and participation rates limit upside, and terms can be reset at the insurer's discretion for future periods. As with other annuities, surrender charges, market value adjustments, and rider fees can reduce flexibility and net returns. Clients also face insurer credit risk, since benefits are backed by the issuing company's claims-paying ability and state guaranty association protections are limited. The layered structure of RILA crediting methods can make it difficult for some investors to fully understand potential outcomes.

When recommending RILAs, advisors and compliance teams emphasize registered index-linked annuity risk in disclosures, point-of-sale materials, and suitability documentation. They explain that while buffers mitigate some losses, significant drawdowns are still possible and that caps or participation limits can meaningfully reduce gains in strong markets. Firms often require specialized training and approval lists before advisors can sell RILAs. In client meetings, advisors walk through scenario charts and stress the importance of holding the contract for the intended time horizon. Ongoing reviews may address changes in caps, credited rates, or strategy options. Careful communication around RILA risks helps ensure that clients' expectations align with the product's actual risk-return profile.