NEW YORK, July 31 (Reuters) - Guggenheim Partners has agreed to “enhanced” protections in its purchase of Sun Life Insurance and Annuity Company to safeguard policy holders, paving the way for state approval of the deal, New York’s top financial regulator said in a statement on Wednesday.
The protections could serve as a model for private equity firms buying annuity companies in the future, adding layers of scrutiny in a bid to shield retirees and other long-term investors who typically buy annuities.
Benjamin Lawsky, Superintendent of Financial Services, has previously pointed to worries about the recent trend of private equity firms acquiring annuity businesses.
As recently as Tuesday, Lawsky said he was concerned about private equity firms’ “short-term focus” in these purchases.
A fixed annuity is an insurance contract that guarantees an investor a minimum monthly payment.
The added protections by Guggenheim include heightened capital standards, a separate backstop trust account, enhanced regulatory scrutiny of operations, dividends, investments, reinsurance and stronger disclosure and transparency requirements, the state Department of Financial Services said on Wednesday.
“These policyholder protections can and should serve as a model set of guardrails for addressing the emerging trend of private equity firms seeking to enter the annuity business,” Lawsky said in a statement.
“Other non-traditional insurance industry investors asking us to approve similar transactions are going to have to step up and clear a high bar for protecting policyholders,” he added.
The regulator is also weighing a $1.55 billion purchase by Athene Holdings Ltd, which is funded by an affiliate of Apollo Global Management LLC, of the U.S. annuity business of Britain’s Aviva Plc.