The Office of General Counsel issued the following opinion on February 20, 2003, representing the position of the New York State Insurance Department.

Re: Guaranteed annuities

Question Presented

Does New York Insurance Law, Article 77 (McKinney 2002) protect payments to a New York State resident who is the named payee on an annuity that is issued by a New York State licensed life insurance company to the owner, a Massachusetts corporation.


Yes, pursuant to New York Insurance Law § 7703 (McKinney 2002), because the payee is a New York State resident, payments to such payee will be protected.


The inquirer represents a client who was a plaintiff in a personal injury matter that the inquirer settled on behalf of this plaintiff. The defendant’s insurer agreed to pay the plaintiff $500,000 in a structured settlement that requires it to purchase an annuity on which the plaintiff will be listed as the payee. The owner of the annuity will be an affiliate of the defendant’s insurer, a Massachusetts corporation. The life insurance company issuing the annuity is a licensed life insurance company in New York State.


N.Y. Ins. Law § 7702 (McKinney 2002) 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 . . . annuity contracts, . . . issued by life insurance companies, subject to certain limitations, against failure in the performance of contractual obligations due to the impairment of insolvency of the insurer issuing such . . . contracts." N.Y. Ins. Law § 7703 (McKinney 2002) states in the relevant part that "[t]his article shall apply to . . . annuity contracts, . . . 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 § 7704 (McKinney 2002) states in the relevant part that "[t]his article shall be liberally construed to effect the purpose under section seven thousand seven hundred two of this article . . . . "

The Department has reasoned that an annuitant is the possessor of the fundamental right granted under an annuity contract and stated that ". . . [i]t is that right which is most entitled to protection in the event of the impairment or insolvency of the insurer. . . ." NY General Counsel Opinion 5-1-96; NY General Counsel Opinion 6-2-95. In this case, the company issuing the annuity is licensed in New York State. Although the owner of the annuity is a Massachusetts corporation, the intended beneficiary and payee is a resident of New York State. Since the above stated purpose of Article 77, which is to be liberally construed, is to protect payees of annuity contracts, the payee would be protected by The Life Insurance Company Guaranty Corporation of New York.

For further information one may contact Senior Attorney Susan Dess at the New York City Office.