By Clara Ferreira-Marques

LONDON (Reuters) - French insurer AXA is set to tap UK appetite for investments with guarantees, hoping to cash in on a segment that could make up 40 percent of the growing annuity market within a decade, its UK head said.

Speaking as AXA launched its first variable annuity in Britain on Tuesday, Nicolas Moreau, chief executive of AXA UK, said the driving force for consumer demand was likely to be the longer-term shift away from traditional "defined benefit" pensions, which guaranteed an income in retirement.

"I don't think it's a fear-factor sell, it's really a long-term structure," he told Reuters, adding current financial market volatility was unlikely to be critical. "It's something missing in the pension market today. People want security."

The term "variable annuities" covers a range of products that provide guarantees as people save for retirement, covering the minimum income that can be drawn from the saving fund, the growth rate, or the minimum sum receivable if the customer dies. The products are typically flexible and allow consumers to retain their assets -- unlike in a traditional annuity, where pensioners essentially buy an insurance policy.

Hugely popular in the United States and Japan, variable annuities have so far made few inroads in Britain. Analysts, however, say there is appetite for a product that can provide a solution between riskier income drawdown that can "run out" and conservative annuities, as the UK retirement market quadruples to 49 billion pounds in the next decade.

"Defined benefit (pensions) provided security and certainty. Now people are in defined contribution and they want to make sure they have enough revenue for their pension," Moreau said.

AXA, whose first Estate Planning Account product will guarantee income protection from poor market performance, plans to launch three other guaranteed products by the end of 2009.

Dutch provider Aegon launched the first UK product in 2006 and since then U.S. providers have dipped their toes, but Moreau welcomed news that big-name UK providers including Standard Life were also planning to test the market.