National Harbor, Md.— The development of recommendations for the treatment of contingent deferred annuities (CDAs) will continue into the new year with possible conclusions by the time of the spring meeting in Houston, even as federal interest in the product has been piqued.
Currently, the U.S. Government Accounting Office (GAO) is working on a report on the product, and federal agency representatives are monitoring the product, as part of their statutory power to do so, according to reports from the NAIC National Meeting in Washington.
Birnbaum has also expressed concern on the issue to members of the Federal Insurance Office (FIO) and others in federal regulatory positions on the risks involved in insurers hedging techniques and how they might play out with CDAs. He raised the question that if hundreds of thousands or millions of retirees suddenly are eligible for CDA benefits because of precipitous declines in the stock market and other investments, what position will the counter parties be in to pay the losing end of the hedge, and pointed to the situation with credit default swaps.
Birnbaum is also concerned about the impact of these products on the U.S. solvency regime.