The National Association of Insurance Commissioners (NAIC) has adopted an updated model bulletin for stranger-originated annuity transactions (STOAs).
The bulletin, created by the NAIC's Life Insurance and Annuities Committee and approved at the association's spring meeting in Austin, TX, provides insurance companies with guidance on how to guard against STOAs.
In an STOA, a producer or investor sells an individual with a short life expectancy an annuity with a guaranteed minimum death benefit. The STOA arranger pays the individual a small amount of money, then collects the death benefit when the individual dies. The NAIC said this is dangerous to consumers because it is against insurable interest laws.
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