Filed Under:Annuities, Sales Strategies

CDAs Under Scrutiny: What Happens if They Fail, Regulators Wonder

A product that shines, for some (AP)
A product that shines, for some (AP)

Contingent Deferred Annuities (CDAs) can present significant risks to insurance if they are unmanaged, the actuary overseeing the Contingent Deferred Annuity (CDA) Subgroup of the NAIC noted, recounting overarching messages he heard on a regulator-industry conference call Thursday, Jan. 26, to discuss the controversial products.

Although demand for the product continues to be emphasized by insurance groups, regulators and some interested parties kept returning to the issue of risk and whether the products would be covered if they failed by the state guaranty fund. 

We believe there are appropriate protections, in terms of managing the risks around externally held assets, Prudential’s representative said. 

He echoed the firm’s letter, which argues that “Prudential firmly believes that the risk can be managed through rigorous diligence on asset management programs prior to making the contingent annuity available...”

"At the January 19 meeting of the NAIC Contingent Annuity Subgroup, the Contingent Annuity Work Group (CAWG) of the American Academy of Actuaries presented a comparative analysis of the potential value of a typical contingent annuity and a self-directed investment arrangement (self- insurance) at your request," the AAA wrote to the Schirripa Jan. 26. 

"The discussion that ensued after the presentation left us with the impression that you believed our analysis was not focused on the issues that were initially requested. In addition, during the call, questions were raised on whether our original October 28 report appropriately addressed the legal ramifications of contingent annuities, and on whether the Academy had an unbiased focus on the issue."

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Nichole Morford

Nichole Morford
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