NAIC: CDAs are Annuities to be Sold by Insurers

Contingent Deferred Annuities are annuities, best written by life insurance companies, but the adequacy of laws and regulations protecting consumers and insurers’ solvency must be examined, according to an NAIC group.

The NAIC’s CDA Subgroup had suggested also revisiting reserves and capital rules of not only CDAs but variable annuity riders with guaranteed lifetime withdrawal benefits (GLWB), but Connecticut Insurance Commissioner Tom Leonardi said a new group charged with examining the adequacy of solvency and consumer protection laws is confined only to CDAs.

The Life and Annuities (A) Committee of the NAIC adopted the recommendation of the CDA Subgroup determination that CDAs are life insurance products subject to existing state laws and regulations applicable to annuities, but created a new working group to explore these products’ risk further.

It appears the subgroup exploration just carves out CDAs for its work, not GLWB, although there was uncertainty at the meetings as to the scope, with one person saying it is yet to be determined.

The A Committee designated Wisconsin Insurance Commissioner Ted Nickel to establish and charge a new CDA Working Group to evaluate the adequacy of existing laws and regulations applicable to the solvency and consumer protections of annuities as such laws are applied to CDA.

MetLife has been a staunch opponent of CDAs as insurance products, and call the products very risky, warning regulators about other insurers who might underwrite them. New York, where MetLife is domiciled, views the products as financial guaranty products under a 2009 opinion. Other insurers, including Prudential (which is headquartered in New Jersey), support classifying CDAs as annuities.