NU Online News Service, June 11, 12:03 p.m. – The California Senate Insurance Committee is debating a bill, A.B. 2169, that would reduce the minimum interest rate insurers must pay on nonforfeiture amounts under annuity contracts.
The bill, sponsored by state Sen. Edward Chavez, D-Industry, Calif., has only a “fair” prospect of being passed by the Senate, says Brad Winger, lobbyist for the Association of California Life and Health Insurance Companies, Sacramento. The state Assembly approved the bill last month.
ACLAHIC asked Chavez to sponsor the bill because its 40 members insist they can’t make money on a 3% interest rate, considering that the federal discount rate is at a 40-year-low of 1.75%, Winger notes.
“No one imagined when the 3% rate was set decades ago that we would ever approach this situation,” Winger says. “We want 1.5% only for two years, by which time we expect [the National Association of Insurance Commissioners] to propose a more durable solution.”