ProductsQuestion 28 of 110
Assets supporting a variable annuity's investment performance are held in:
a.The insurer's general account, where they are backed by the insurer's claims-paying ability
b.A custodial bank account owned directly by the contract holder
c.A separate account, which is registered as an investment company and holds the underlying subaccounts
d.The broker-dealer's proprietary trading account
Explanation
Variable annuity assets sit in a separate account that is legally insulated from the insurer's creditors and registered under the Investment Company Act of 1940, usually as a unit investment trust. The general account backs fixed products, where the insurer bears the investment risk. Contract holders own an interest in the separate account, not the securities themselves, and no broker-dealer account is involved.
Law Reference: Investment Company Act of 1940Practice all 110 questions free — no signup required.
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