An investor is evaluating the distinct structural and regulatory features of variable annuities compared to traditional fixed annuities. Which of the following statements regarding variable annuities are correct?
- AThe insurance company bears the primary investment risk associated with the performance of the subaccount assets.
- Assets supporting contract value growth are held in a separate account distinct from the insurance company's general account.Answer
- The separate account funding the contract is generally registered as an investment company under the Investment Company Act of 1940.Answer
- DContract owners are guaranteed a fixed rate of return on their subaccount allocations during the accumulation phase.
Answer
Variable annuity assets are held in a segregated separate account, and the separate account is regulated under the Investment Company Act of 1940.
Variable annuities pass investment risk to the purchaser by investing premiums in subaccounts maintained within a separate account. Because these subaccounts hold portfolios of securities, the separate account is registered and regulated under the Investment Company Act of 1940.
Step-by-Step Solution
Key Concept
Variable Annuity Separate Account Structure and Investment Risk