Officials at the New York State Insurance Department discuss use of separate accounts and credit default swaps (CDS) in a recent life company examination report.
Those topics come up in a department report on a market conduct examination of Genworth Life Insurance Company of New York, a unit of Genworth Financial Inc., Richmond, Va. (NYSE:GNW). The report covers the period from Jan. 1, 2005, through Dec. 31. 2007.
Genworth Life is licensed to do business in a total of 9 states, but it collected 94% of the life premiums, accident and health premiums, annuity considerations, and deposit-type funds it received in 2007 in New York state. The company’s current focus is on the sale of deferred, immediate and variable annuities.
Examiners have included some remarks about advertisements and correspondence in the exam report.
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The examiners found that 21 agents distributed 162,900 copies of an advertisement for the New York State Partnership for Long Term Care through the mail. “The advertisement, which was provided to the agents by an outside marketing firm, failed to display the partnership logo, failed to identify the company as the actual insurer, and failed to identify the policy form number associated with the policy that was being offered,” officials say in the report.
But examiners noted “no significant findings” when they reviewed underwriting files for issued and declined cases, and they noted no significant findings when they reviewed a sample of claims, surrenders, changes and lapses.
The New York department also looked at four separate accounts Genworth Life set up for the purpose of issuing four funding agreements.
If a separate account guarantee is equal to or less than the contractholder’s interest in the assets allocated to the account, then a relatively loose investment rule, Section 42040(a)(5)(iii), applies, officials say.
If a separate account guarantee exceeds the contractholder’s interest in the separate account, then New York Insurance Law Section 1409(a) “mini general account” diversification rules apply, and the insurer should invest no more than 10% of the separate account’s assets in any one investment.
Because of a miscommunication between Genworth Life departments, the investments team mistakenly thought Section 4240(a)(5)(iii) applied, when Section 1409(a) actually applied, officials say.