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California Banishes Variable Annuity Product Known As GMIB
California has banned sales in one of the most popular variable annuity products, known as Guaranteed Minimum Income Benefit Contracts, or GMIBs. Iowa is following in California's footsteps and other states may follow as well.
Regulators are concerned as to whether there is legal authority to authorize these products, and whether companies have set aside adequate reserves to guarantee living benefits. They also think that policyholders who manage their own investments in the plans will have no incentive to invest cautiously (given the guaranteed minimum income benefit), which may increase the risk that the policies will lose money.
Source: Investment News, July 19, 2000
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