The Life Insurance and Annuities Committee is considering a task force referral on annuities set up in such a way that benefits payments start only when a specified event occurs.
The Life Committee, an arm of the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., may end up discussing matters such as whether there is a real need for the product – a “contingent annuity,” or “synthetic annuity” – and whether the product poses any risks to consumers.
A typical contingent annuity guarantees access to a stream of withdrawals, then, at a certain point, produces a stream of income when annuity assets fall to a designated level.
The New York State Insurance Department disapproved of a contingent annuity concept proposal in 2009, saying a contingent annuity contract would be a financial guaranty insurance that cannot be sold in New York state.
The NAIC’s Life Actuarial Task Force has been talking about the products for months.
Leslie Jones, the task force chair, told the Life Committee that task force members believe the full committee should address the topic because many of the issues raised by the product are not necessarily actuarial in nature.
At the Life Committee level, “there could be more robust discussion of whether the product is an annuity or a financial guaranty product,” Jones says.
Life Committee members also could talk about contingent annuity reserving and capital considerations, Jones says.
Originally, the Life Committee was going to talk about the topic at the NAIC’s summer meeting in Philadelphia, which was canceled as a result of Hurricane Irene. The committee could bring up the topic during a conference call or at the NAIC’s fall meeting.