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August 16, 2022 at 01:09 PM
What You Need to Know
- New York state has adopted its own approach to regulating variable annuity reserve that some critics say is overly strict.
- The agreement between Equitable and Holdings and Global Atlantic would increase reserves for group annuity contracts with guaranteed crediting rates of 3%.
- In October 2020, Equitable announced a $12 billion variable annuity reinsurance deal with Venerable, which has ties to Apollo and Athene.
Equitable Holdings is working with Global Atlantic to meet tough new New York state variable annuity reserving requirements.
Equitable Holdings has agreed to use a Global Atlantic subsidiary to reinsure group variable annuities with a total of $10 billion in general account and separate account value.
The annuities were written by Equitable Holdings’ Equitable Financial Life Insurance Company subsidiary. The proposed deal should free up $1.1 billion in cash at Equitable Financial Life Insurance Company, and Equitable Financial will use that cash to increase its variable annuity reserves, according to Equitable Holdings.
Equitable Holdings hopes to complete the deal by the end of the year.
During a conference call earlier this month to go over second-quarter earnings with securities analysts, Equitable Holdings’ chief financial officer Robin Raju hinted several times that the deal was coming.
“Reg 213 will be behind as of year-end,” Raju promised the analysts.
What It Means
Many life insurers believe that New York state is requiring variable annuity issuers to hold more reserves than is necessary.
Cautious advisors with cautious clients might prefer to look for annuities from issuers that meet the extra-strict New York standards.
More aggressive advisors, with aggressive clients who live in New York state, might want to look for ways to avoid paying for products subject to the extra-tough New York annuity reserving requirements.
The Reserving Requirements
Most states have adopted annuity reserving requirements based on the National Association of Insurance Commissioners’ principles-based reserving approach, which lets life insurers set reserves based on sophisticated risk modeling efforts and the judgment of experienced, skilled actuaries.
