The New York Department of Insurance has disapproved a proposed contingent annuity contract.
The contingent annuity contract proposal, submitted by a group of life insurance companies, was declined by the department’s Office of General Counsel.
The contract would constitute an illegal form of financial guaranty insurance, office officials say.
The insurers that submitted the proposal wanted to sell an annuity that would start paying benefits at a time selected by the account investor.
The amount paid would be a fixed amount, equal to a percentage of the initial account, officials write in an opinion.
Even if the value of the annuity account dropped below a certain level, whether due to bad investments or other values, the account balance would be shifted to the account holder and the payments to the annuitant would still be made.
Office of General Counsel officials objected to the provision that guaranteed that payments would be made even if the account value dropped below a certain level.
That section of the proposed annuity contract would make the product financial guaranty insurance, the officials write.