The office of General Counsel issued the following informal opinion on June 26, 2002, representing the position of the New York State Insurance Department.

Re: Replacement of a Variable Annuity as defined under N.Y. Comp. Codes R. & Regs. tit. 11, §51.2(a) (1998) (Regulation 60)

Question Presented:

Would the exchange of a current annuity for a new variable annuity that is not available in New York and, is wholly purchased and delivered or issued for delivery in New Jersey meet the definition of "replacement of an annuity contract" under N.Y. Comp. Codes R. & Regs. tit. 11, §51.2(a) (1998) (Regulation 60)?

Conclusion:

No. The exchange of a current annuity for a new variable annuity that is not available in New York and, is wholly purchased and delivered or issued for delivery in New Jersey would not meet the definition of "replacement of an annuity contract" under N.Y. Comp. Codes R. & Regs. tit. 11, §51.2(a)(1998) (Regulation 60).

Facts:

An annuitant lives in the State of New York and owns a variable annuity contract previously purchased and issued in the State of New York. The annuitant wishes to exchange the current annuity for a new variable annuity with a different insurer. The new variable annuity is not available for issue in New York but is available in New Jersey. The annuitant will travel to New Jersey to sign the application for the new annuity and to receive it when it is issued. The insurance agent involved is licensed in both New Jersey and New York.

Analysis:

An exchange of a current annuity for a new variable annuity that is wholly purchased and delivered or issued for delivery in New Jersey would not meet the definition of "replacement of an annuity contract" under N.Y. Comp. Codes R. & Regs. tit. 11, §51.2(a)(1998) (Regulation 60) which states in pertinent part that:

The term replacement of a life insurance policy or annuity contract as used in this part means, ... that new life insurance or new annuities are to be purchased and delivered or issued for delivery in New York ...

Assuming, that the insurer is licensed1 in New York and, the reason the new variable annuity is being recommended by the agent is based solely on the merits of the product2 and, not as a means of evading the provisions of the Department Regulations then, since the annuity is not available in New York and the issuance and delivery of the annuity contract will occur outside the State of New York, the transaction would not meet the definition of a "replacement of an annuity contract" under N.Y. Comp. Codes R. & Regs. tit. 11, §51.2(a) (Regulation 60).

For further information you may contact Senior Attorney Adiza Mohammed at the New York City Office.

1 If the insurer is not licensed in New York then, the agent’s actions in recommending the purchase from the unauthorized insurer may violate N.Y. Ins. Law §2117 (a) (McKinney and Supp 2001).

2 If the new variable annuity was available in New York and the agent was seeking to avoid New York law, the Department could find the agent’s actions to be untrustworthy and not in the best interest of the insured/annuitant.