NAIC Issues Bulletin Against Stranger-Originated Annuities
October 13, 2011 by Elizabeth Festa
October 12, 2011
The National Association of Insurance Commissioners (NAIC) adopted several items at its met via conference call Tuesday evening, held to replace the cancelled Summer National Meeting in Philadelphia, one of which is a bulletin on stranger-originated annuity transactions (STOAs).
The bulletin encourages insurance companies to establish safeguards to prevent or limit exposure to STOA transactions. Created by the NAIC Life Insurance and Annuities Committee, the bulletin encourages insurers to put safeguards in place to prevent or limit their exposure to STOAs.
STOAs have been a concern for awhile, even now that the overall market for them has quieted down.
The battle over stranger-originated annuities is part of a larger battle over the insurance product resale market, representatives from an insurer group and a life settlement group agreed when they appeared at a STOA hearing in May 2010 organized by the Life and Annuities Comittee at the NAIC in Kansas City, Mo. Witnesses from the American Council of Life Insurers, Washington, and the Life Insurance Settlement Association, Orlando, Fla., appeared Thursday at a STOA hearing have joined with other groups in condemning STOAs.
Like stranger-originated life insurance transactions (STOLI), STOAS involve a producer and/or investor approaching an individual, who is usually a “stranger” to the producer and/or investor, and offering a nominal fee for the use of the individual’s identity as the annuitant in an investment-oriented annuity, the bulletin explains. Typically, individuals targeted to serve as annuitants are in extremely poor health and are not expected to live beyond the first year of the policy.
