NU Online News Service, Dec. 29, 2003, 5:48 p.m. EST – New York insurance regulators have given life insurers instructions on procedures for restricting access to the fixed accounts within variable annuity contracts.[@@]
Life insurers have been asking about the topic in recent months because a long slump in bond rates has hurt earnings on the assets that insurers use to back fixed account rate guarantees.
A life insurer can protect itself against further drops in rates by including VA contract provisions that permit it to discontinue fixed account guarantees once the initial guarantee period expires, according to a discussion of fixed account access restrictions posted on the Web site of the New York State Insurance Department.
A life insurer also can limit the share of a customer’s contract funds that go into fixed accounts, officials write.
New York regulators want an insurer to give holders at least 30 days of advance written notice before using contract provisions that let it shut off access to the fixed VA accounts.
“Prior notice would give contract and certificate holders time to decide where to invest new deposits and transfers,” the regulators write.