The office of the General Counsel issued the following informal opinion on January 7, 2002 representing the position of the New York State Insurance Department.
Re: Life Insurance Company Guaranty Corporation of New York N.Y. Ins. Art. 77 (McKinney 2000)
1. What statutorily created financial protection is available for a New York resident who purchases a single premium immediate annuity contract in the sum of $175,000 from a domestic life insurer, if such insurer becomes insolvent?
2. Does the Insurance Department have any available fact sheet for consumers about annuities?
1. N.Y. Ins. Article 77 (McKinney 2000) provides that such an annuity contract would be guaranteed up to $500,000 in benefits by the Life Insurance Company Guaranty Corporation of New York (the "LICGC") in the event the New York domestic life insurer became insolvent. N.Y. Ins. Law
§ 7708(a) (McKinney 2000).
2. Yes. The Insurance Department website at www.ins.state.ny.us provides information for consumers about annuities.
A New York resident was considering purchasing a fixed rate single premium immediate annuity contract for a lump sum of $175,000 from two domestic insurers.
The LICGC was established as a not-for-profit membership corporation by Chapter 802 of the Laws of 1985 and is governed by Article 77 of the N.Y. Ins. Law (McKinney 2000), known as "The Life Insurance Company Guaranty Corporation of New York Act." The Act applies to covered policies that were issued on or after August 2, 1985. The scope of Article 77 is set forth in N.Y. Ins. Law § 7703(a) and it provides as follows:
(a) This article shall apply to direct life insurance policies, health insurance policies, annuity contracts, funding agreements and contracts supplemental to life and health insurance policies, annuity contracts or funding agreements issued to a resident by a life insurance company licensed to transact life or health insurance or annuities in this state at the time the policy, contract or agreement was issued or at the time it became an impaired or insolvent insurer, as the case may be.
All life insurance companies licensed to transact life or health insurance or an annuity business in the State of New York are members of the LICGC. N.Y. Ins. Law § 7705(h) (McKinney 2000). This includes the two life insurers mentioned in the above facts. The LICGC is funded by assessments made against its members after a member insurer is declared insolvent by a court of law. N.Y. Ins. Law § 7709 (McKinney 2000).
Accordingly, the fixed rate single premium immediate annuity contract contemplated for purchase by a New York resident from either of the two insurers in question would be guaranteed by the LICGC up to $500,000 in benefits. N.Y. Ins. Law § 7708(a) (McKinney 2000).
The Insurance Department provides information on its website at www.ins.state.ny.us for consumers about annuities. At the Departments website, click on "Consumers," then click on "Life." Scroll down and click on "Annuities" where there is a discussion about various types of annuities.
For further information, you may contact Associate Attorney Jeffrey A. Stonehill at the New York City office.