The Office of General Counsel of the New York Insurance Department released Opinion Number 09-06-11 holding that a "synthetic annuity" is an impermissible form of financial guaranty insurance.
The Opinion states that:
The Contract comes within [the definition of financial guaranty insurance] because it purports to provide indemnification for "financial loss" resulting from "changes in the value of specific assets." Indeed, the Companies here are promising to continue making regular payments only in the event that the value of the covered Account declines before the annuitant dies. The Contract essentially holds the Investor harmless from declines in the value of the Account, whether such declines result from market losses or insufficient market growth relative to the amounts withdrawn.
The Opinion states that not only does the Contract constitute financial guaranty insurance, it also constitutes an impermissible form of financial guaranty insurance because it is not written by an insurer licensed for that specific purpose and it is an impermissible form of financial guaranty insurance under the New York Insurance law.
The impact of this Opinion on the Insurance Departments of other states, particularly such states as California and Florida with specific financial guaranty statutes, is unclear at this point.