New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on December 23, 2004 representing the position of the New York State Insurance Department.

Re: Maximum Guarantee Per Individual Variable Annuity Contract

Question Presented

What is the maximum amount of protection New York Insurance Law, Article 77 (McKinney 2000 & Supp. 2004) will guarantee an insured on a variable annuity contract?

Conclusion

Provided the insurer and insured meet the requirements of New York Insurance Law, Article 77 (McKinney 2000), The Life Insurance Company Guaranty Corporation of New York ("Corporation") is limited to an aggregate liability of $500,000 on all covered policies issued on the life of an insured from the same insurer. Therefore, the maximum guarantee available for an individual variable annuity contract is $500,000 provided the insured does not have other policies with the insurer that are subject to the protections provided by N.Y. Ins. Law § 7708 (McKinney 2000).

Facts

No facts were provided. This was a general inquiry.

Analysis

N.Y. Ins. Law § 7702 (McKinney 2000) states in the relevant part that "[t]he purpose of this article is to provide funds to protect resident . . . beneficiaries, annuitants, payees and assignees of life insurance policies, . . . issued by life insurance companies, subject to certain limitations, against failure in the performance of contractual obligations due to the impairment or insolvency of the insurer issuing such . . . contracts." N.Y. Ins. Law § 7703 (McKinney 2000) states in the relevant part that "[t]his article shall apply to direct life insurance policies, 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 . . . ."

N.Y. Ins. Law § 7708(a) (McKinney 2000) provides in pertinent part:

If a domestic insurer is an impaired or insolvent insurer, the corporation shall with the approval of the superintendent: (3) provide such moneys, pledges, notes, guarantees or other means as are reasonably necessary to discharge such duties. The aggregate liability of the corporation under this subsection shall not exceed five hundred thousand dollars for all benefits, including cash values, with respect to any one life or, to the extent benefits are not allocated pursuant to a covered policy to any one life, to any one covered policy; provided, however, (i) that the foregoing limitation shall not apply to any group or blanket accident or health insurance or accident and health insurance policy and (ii) that the corporation shall be liable under this subsection in an amount not to exceed one million dollars for all benefits, including cash values, with respect to any group annuity contract (or portion of any such contract) that does not guarantee annuity benefits with respect to any specific individual identified in the contract and with respect to any funding agreement issued to fund benefits under any employee benefit plan.

N.Y. Ins. Law § 7703(b) (McKinney 2000) provides that New York Insurance Law, Article 77 shall not apply to:

(1) That portion or part of a variable life insurance policy, variable annuity contract or variable funding agreement not guaranteed by an insurer;

If the insured and insurer meet the requirements of New York Insurance Law, Article 77, then, pursuant to N.Y. Ins. Law § 7708(a), the Corporation is limited to an aggregate liability of $500,000 on all covered policies issued on the life of an insured from the same insurer. Therefore, the maximum guarantee available for an individual variable annuity contract is $500,000 provided the insured does not have other policies with the insurer subject to the protections of N.Y. Ins. Law § 7708(a).

Please be aware that N.Y. Ins. Law § 7703 sets forth restrictions as to the scope of protection provided by Article 77. Of particular relevance may be N.Y. Ins. Law § 7703(b)(1), which provides that the Article 77 guarantee does not extend to the portion of a variable annuity contract not guaranteed by an insurer.

Additionally, please note that the Corporation is a separate entity from the Department and is not bound by the opinions of the Department.

For further information one may contact Principal Attorney Alan Rachlin at the New York City Office.