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197 Don’t Make Me Say I Told You So
How Annuity-Issuers Cover Their Risk
A Four-Pronged Approach to Risk Management
Product
Design
Reinsurance
through other Hedging
insurance companies
Retained Risk
(Using reserves and
capital adequacy)
What If a Company Fails?
Variable annuity-owners’ fund holdings are segregated from the
insurer’s assets. If the insurer fails, the owners receive the money
that is in their own fund accounts, but the guarantees are lost. For
the guaranteed portion of the funds, there are some safeguards.
Each state, the District of Columbia, and Puerto Rico have
guaranty funds to help pay the claims of financially-impaired
insurance companies and provide at least $100,000 in coverage per
customer for guaranteed portions of annuity contracts, according
to the National Organization of Life & Health Insurance Guaranty
Chapter 4: Annuities
Don't Make Me Say I Told You So_6.27x9.46.indd 197 09-07-2016 00:22:14
