Aside from the fact that any claims related to guaranteed insurance accounts are pari-passu with policyholders and ahead of general creditors, insurance companies are highly regulated with rigorous risk management and oversight processes and subject to periodic examinations by the state insurance departments. Insurance firms have long histories in the guarantee business and a strong time tested commitment to the market. Guaranteed insurance accounts performed well though the credit crisis with no closings, and reserves prescribed by insurance laws are held against the liabilities to protect against losses. These accounts are often flagship structures offered through the insurance company’s retirement and other full service platforms and the company has a vested interest to preserve them. Another plus is that these single-insurer accounts have avoided the dependency on multiple wrap providers for capacity or terms that may affect other structures.
Plan fiduciaries perform their due diligence by learning about the financial health and longevity of the company both initially and on an ongoing basis to monitor developments. Selecting the stable value solution that is best for a plan requires analysis of the different types of stable value investments available, and while all stable value investments seek to preserve capital and provide competitive returns, there are differences between the various types offered today. Considering and understanding these differences is fundamental to the selection, monitoring, and ongoing due diligence for stable value investments.
For guaranteed insurance accounts, analyzing and understanding the financial strength of an insurer is important, as is evaluating the risks that these products address. Further, the Department of Labor’s regulation on the selection of annuity providers safe harbor for individual plansvi as well as Interpretive Bulletin 95-1, although intended for defined benefit plans’ selection of annuity providers, offer frameworks for the analysis, selection, and monitoring of insurance company general accounts.