An investor is evaluating the structural and regulatory differences between fixed annuities and variable annuities. Which of the following statements are correct?
- Fixed annuity premiums are deposited into the insurer's general account, placing the investment risk on the insurance company.Cevap
- Variable annuity premiums are invested in subaccounts within a separate account, which is registered as an investment company under federal securities laws.Cevap
- CVariable annuity contracts guarantee a fixed minimum rate of return regardless of underlying subaccount market performance.
- DFixed annuity contracts are classified as securities by the SEC and require delivery of a prospectus prior to purchase.
Cevap
Fixed annuity premiums are held in the insurer's general account with the insurance company bearing the investment risk, whereas variable annuity assets are held in separate account subaccounts registered under federal investment company laws with the investor bearing investment risk.
Fixed annuities allocate investment risk to the insurance company through general account guarantees, whereas variable annuities pass market risk to the contract owner through separate account subaccounts registered as securities.
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General Account vs. Separate Account Risk Allocation and Regulatory Classification