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Subcommittee approves SB857 to clarify rules for contingent deferred annuities
Summary
The Banking and Insurance Subcommittee voted to refer SB857 to the full committee after testimony from Prudential that the bill aligns South Carolina law with the NAIC model and lets the insurance director set tailored nonforfeiture protections for contingent deferred annuities (CDAs).
The Banking and Insurance Subcommittee voted to send SB857 to the full committee after testimony that the bill would update state nonforfeiture law to address contingent deferred annuities, a different form of annuity where assets are managed outside the insurer.
Skip Brazil, vice president of state government affairs at Prudential Financial, told the subcommittee the bill is a "targeted technical amendment" that "aligns state law with the NAIC model" and that CDAs are "fundamentally different from a traditional deferred annuity" because they do not create internal cash value. Brazil said the change would exempt CDAs from traditional nonforfeiture formulas and give the insurance director authority to craft protections "tailored specifically to CDAs." He argued the bill would preserve consumer safeguards while enabling regulatory clarity and product availability.
Members pressed witnesses on the product's mechanics and consumer protections. Committee questioning established that CDAs commonly guarantee lifetime income if a customer's externally managed investment account becomes depleted and that, according to testimony, customers typically wrap about 50% of a managed account; a typical policyholder profile cited was age 55–75 with roughly $50,000 in assets. Witnesses said the Department of Insurance would retain authority to adopt nonforfeiture rules and that coverage by the state guarantee association would be considered under existing statutory frameworks.
After discussion, a motion to refer SB857 to the full committee was made and seconded. Members indicated assent by voice/raised hands and the chair announced there was no opposition; the subcommittee did not record individual named votes on the voice motion.
The bill as described would amend provisions of the South Carolina Code relating to standard nonforfeiture and align certain statutory definitions with the managing general agents act. The subcommittee sent the measure to the full committee for further consideration.
