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We write regarding your recent online articles “RAAs: Birny Birnbaum Weighs In” (posted August 10, 2010) and “RAAs: Regulatory Status May be Unclear” (posted August 11, 2010).

We’ll leave it to today’s insurance regulators to opine on the odd and novel theory that regulators have no authority over the performance by insurers of the fundamental promise under a life insurance contract.

On the question of guaranty association protection, however, there is simply no doubt that guaranty associations will cover retained-asset accounts (RAAs) funded with life policy death benefits like those recently discussed in the National Underwriter and elsewhere. They are covered because guaranty associations have a statutory obligation to pay contractual death benefits of an insolvent insurer, whether these benefits are payable as death benefits under the policy itself or as “supplemental contracts” that discharge an insurer’s policy obligation to pay death benefits. Either way, RAAs clearly fall under this statutory obligation.

This has been the policy of the guaranty associations since 1993, when NOLHGA and the guaranty associations stated it publicly to an NAIC group then reviewing the use of RAAs. That position was acknowledged and agreed to by the NAIC and the ACLI. The guaranty associations have covered RAAs consistently in past insolvencies, dating back even before 1993, and it’s worth noting that there has never been a challenge to guaranty association coverage of an RAA by a receiver, regulator, insurance company, or creditor.

To recap, in the nearly 20 years since the guaranty system, regulators, and the life industry all agreed that death benefits in these accounts are covered by guaranty associations, the only suggestion to the contrary now arises from one or two consumer advocates advocating against consumers receiving guaranty association protection. Fortunately for those consumers, that peculiar opinion is manifestly contradicted by clear statutory language and by 20 years of real consumer protection delivered by guaranty associations.


Peter G. Gallanis, President

Rocket’s Red Glare

In my 55 years in the business, I can count on the fingers of one hand how many times I’ve written to an editor of anything. Now I am writing to you.

I just read your latest editorial and I think it is brilliant and I agree with you completely about taking care of our brave men and women who are defending our liberties. I was eleven years old when WWII broke out. As a result, I was too young to get into the WWII service. I had three older brothers who immediately entered the armed forces. One was killed as a pilot returning home from a bombing mission over Germany in 1943. Fortunately, my other two brothers returned home safely after the war even though they, too, served in war zones. Neither of them suffered from PTSD even though they witnessed some shocking experiences. The closest I came to serving my country was in ROTC in high school and college and then seven years in the National Guard. I wanted to be like my brothers but never really had the chance. I missed the Korean conflict because of my service in the National Guard but I was ready to go if our intelligence unit was ever activated. I finished college at the University of Utah and then went to UCLA for a MBA degree. I guess if I was really patriotic, I could have enlisted in the service but in my final year at UCLA I was recruited into the life insurance business and I’ve stayed in it ever since.

Back to your editorial, your final paragraph is “right on!” This IS a “new life and health crisis in the making.” How great it would be if we didn’t have to send our valiant youth into conflicts like Afghanistan and the other battle zones that will develop around the globe. But, we are sending them out and we really do owe it to them to help them get back into a normal lifestyle once they return and be willing to pay for the extra medical care some of them will require. Unfortunately, the predictions of “wars and rumors of wars” found in the scriptures tell us that the future is going to be more and more of what is going on right now. All I can say is “God bless our troops” and God bless the rulers of the nations in successfully working out peaceful solutions to the problems embracing the countries of the world.

Thanks for your thoughtful editorial comments.

Robert H. Harmon, CLU, ChFC

All You Can Eat

Why would the industry want to lower the incidence of loss as long as everything is driven by premium? More premium means more commission, more profit, more of everything! The Credit Life people got it right when they deal with the loss ratio regulation. If the loss ratio is going to be too low, just lower the underwriting standard and bingo up go the losses and we meet our loss ratio required to maintain our premium level.

The only reason to lower premium is to gain market share and then we are faced with tightening the claims paying in order to maintain profitability. Insurance is about distribution of premium dollars and skimming.


Great perspective!!! One more thing, when traveling around Europe, Spain, Italy, France, Germany, Austria, absent are the feeder tubes echoing “ALL YOU CAN EAT” Just XXX Euros, Come On In.

Henry Cuenca


In the article, Q1 Variable Annuity Sales Down, on p. 14 of the August 9 National Underwriter, the first sentence should have referred to a drop in annuity sales for the first quarter of 2010–not in the first quarter of 2009. We regret the error.


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