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.
Recommended For You
According to the model bulletin, producers and investors often target STOA participants by taking out "advertisements in papers, as well as solicit[ing] individuals residing in nursing homes or hospice."
The model bulletin offers a series of recommendations on what insurance companies should do to safeguard against STOAs, including contacting their state insurance commissioner's office.
Gary A. Sanders spoke at the STOA hearing on behalf of the National Association of Insurance and Financial Advisors (NAIFA). NAIFA previously adopted an organizational policy against STOAs.
"Much like with a STOLI transaction, it appears that an [STOA] is not being initiated for a typical or historically legitimate insurance purpose, which revolves around protecting the long-term interests of the insured and parties associated with the insured," Sanders said in his testimony. "Rather, an [STOA] is initiated by investors with no relationship to the annuitant for the purpose of turning a profit on their investment."
Several other organizations, including the American Council of Life Insurers (ACLI), also gave testimony.
"This simply cannot be good public policy," the ACLI said of STOA transactions. "Chronically or terminally ill individuals, or seniors in search of additional income, are being duped into participating."
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
