Years ago I researched the question of fixed annuity losses because I had heard unsupported claims that annuity owners had either lost principal due to carrier failures, or, conversely, that no annuity owner had ever lost money, and I wanted to see what the truth was. Since then I have been able to document four times when a fixed annuity carrier failed and every annuity owner did not get back all of their money.
Inter-American Insurance Company of Illinois got into trouble in the ’80s and was totally liquidated by 1991. At the time, the state did not have a guaranty fund and the company’s few annuity owners (the company had less than $500,000 in annuities) did not get back all of their money, but I was never able to determine how much was lost.
It appears annuity owners of failed National American Life and Summit National Life Insurance were 100 percent covered up to limits of their state guaranty fund and received a little over 90 cents on the dollar on account values in excess of these limits. Owners of London Pacific annuities are 100 percent covered up to state guaranty fund limits, but my interpretation is amounts over state guaranty fund limits will take a hit.
What about Executive Life? Everyone who did not surrender their Executive Life annuity eventually got back at least their principal and contractually guaranteed interest.