Defined terms for the annuity market and lifetime income landscape.
An insurance company is a state-chartered corporation licensed to underwrite insurance contracts — including annuities — that collects premiums, holds capital and reserves against the promises it makes, and is regulated by the insurance department of each state in which it operates.
A financial strength rating is an opinion issued by a specialized rating agency about an insurance company's ability to meet its ongoing insurance policy and contract obligations, expressed on a letter-grade scale that ranks insurers from strongest to weakest on a forward-looking assessment.
Insurance department examination is the periodic on-site financial review conducted by a state insurance department of a carrier domiciled in that state, evaluating solvency, reserves, capital adequacy, and compliance with statutory accounting rules.
An insurance guarantee fund is the pooled assessment mechanism through which a state guaranty association funds its coverage obligations to contract owners of insolvent insurers, capitalized on a post-assessment basis by mandatory contributions from the solvent insurers licensed in the state.
Insurance guarantee fund coverage limits are the state-set maximum amounts a state guaranty association will pay to any one contract owner of an insolvent insurance carrier, typically expressed as a per-contract-owner-per-carrier limit that varies by state and by line of insurance.
