Insurance company default risk and state guaranty associations Annuity (American)

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an investor should consider financial strength of insurance company writes annuity contracts. major insolvencies have occurred @ least 62 times since conspicuous collapse of executive life insurance company in 1991.[1]


insurance company defaults governed state law. laws are, however, broadly similar in states. annuity contracts protected against insurance company insolvency specific dollar limit, $100,000, high $500,000 in new york [2], new jersey [3], , state of washington [4]. california state has limit less 100%; limit 80% $300,000. protection not insurance , not provided government agency. provided entity called state guaranty association. when insolvency occurs, guaranty association steps in protect annuity holders, , decides on case-by-case basis. contracts taken on , fulfilled solvent insurance company.


the state guaranty association not government agency, states require insurance companies belong condition of being licensed business. guaranty associations of fifty states members of national umbrella association, national organization of life , health insurance guaranty associations (nolhga). nolhga website provides description of organization, links websites individual state organizations, , links actual text of governing state laws.


a difference between guaranty association protection , protection of bank accounts fdic, credit union accounts ncua, , brokerage accounts sipc, is difficult consumers learn protection. usually, state law prohibits insurance agents , companies using guaranty association in advertising , agents prohibited statute using web site or existence of guaranty association inducement purchase insurance(e.g., [5]). presumably, response concerns stronger insurance companies moral hazard.








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