How does the investment risk differ between fixed annuities and variable annuities according to the chapter?

The investment risk in fixed annuities is assumed by the insurance company, which guarantees a fixed payment to the annuitant. In contrast, variable annuities carry investment risk for the annuitant, as the payments can fluctuate based on the performance of the underlying investments.

Fixed annuities provide a guaranteed income for the life of the annuitant, with the insurance company bearing the investment risk. The annuitant faces purchasing power risk due to inflation. On the other hand, variable annuities are considered securities, and the annuitant assumes the investment risk, as the payments depend on the performance of the investment portfolio. This means that while variable annuities offer potential for growth, they also come with the risk of lower payments compared to the guaranteed income from fixed annuities.