General Account and Separate Account Products
General account and separate account products.
General Account Products:
The general account of an insurance company refers to the investment portfolio of the overall company. Products “written by the company itself” generally carry a “general account guarantee,” that is they are a liability of the insurance company. When the rating agencies provide a credit rating, they do so on products written by or guaranteed by the general account. Such ratings are on the “claims paying ability” of the company.
Typical products written by and guaranteed by the general account are whole life, universal life, and fixed annuities (including GI Cs). Insurance companies must support the guaranteed performance of their general account products to the extent of their solvency.
Separate Account Products:
The insurance products receive no guarantee from the insurance company’s general account, and their performance is not based on the performance of the insurance company’s general account, but solely on the performance of an account separate from the general account of the insurance company, often an account selected by the policyholder. These products are called separate account products. Variable life insurance and variable annuities are separate account products. The policyholder chooses specific portfolios o support these products. The performance of the insurance product depends almost solely on performance of the portfolio selected, adjusted for the fees or expenses of the insuring company.
