7.7.2 Variable Annuity Regulation and Licensing
The company that actually issues the variable annuity in Florida may be chartered as a life insurance company or a variable annuity company, but they must be authorized to do business in the State of Florida. Any company that sells variable annuities comes under the supervision of the state insurance department.
No one may sell variable annuities in Florida unless duly licensed and appointed as a life including variable annuity agent. Insurers are subject to dual regulation by the SEC and the state insurance department. The agent is regulated by the state department, but the annuity is regulated by the SEC; hence, dual regulation. All states require salespeople to hold a valid life insurance license to sell any type of annuity.
What has been the role of the SEC in the development of both variable annuity contracts and separate account contracts?
The SEC has been a major influence in the historical development of these contracts. In 1956 the SEC asserted jurisdiction over variable annuity contracts and its jurisdiction was upheld in several court decisions. Accordingly, the SEC has jurisdiction over all variable annuity contracts issued by life insurance companies.
Florida law also specifies that every applicant form for an individual contract on a variable basis contain a specific question as to any amount of fixed dollar income receivable by the prospective annuitant as well as whether the variable annuity in question would replace any fixed dollar annuity or any other life insurance policy.
Does Florida law specify what an insurer must do if an applicant indicates that a variable annuity would be the sole source of retirement income for the applicant?
No. The requirement regarding the inquiry on the application is apparently designed only to bring this to the attention of the applicant.
A fixed dollar annuity guarantees a fixed minimum dollar amount for each annuity payment and it guarantees the principal and minimum interest rate. Despite these guarantees, a risk is still assumed by the annuity buyer.
- What is this risk?
