Investing - Theory, News & General • Re: Risk in buying MYGA rated less than A

I am cautious and dipping toes in with insurers rated A+ or higher. I am curious about buying MYGAs from lower-rated carriers (B++ or lower) and want to understand the risks. I'm looking to understand the range of scenarios when an issuing insurance company experiences financial issues.

In the best case, how quickly will payment be received?

Is the current Utah/NC an example of the the worst case with years of uncertainty before payment? In fact will payment eventually be made?

Beyond the standard $250k state protection limit, what hidden risks exist regarding crediting rates or delayed interest payments during a state takeover?

If a life insurance company goes into receivership (which has been threatened for Atlantic Coast), and then into liquidation (where the guaranty associations step in), there are three primary impacts on policyholders of the insurance company -

--- As you note, surrender values in excess of the guaranty association limit (which is $250k in most states) are not covered by the guaranty association.

--- There will likely be court-ordered moratoriums placed on withdrawals from policies while the company is in receivership. The purpose of the moratoriums is to preserve cash and to prevent a "run on the bank" during the receivership. There may be limited exceptions to the moratorium, such as for death benefits, IRA RMDs, and severe hardship situations, but voluntary surrenders, including surrenders at the end of the surrender charge period, will typically not be permitted. In a best case, I would think that the moratorium on withdrawals would last 18 to 24 months, as it will take that amount of time for the receiver to assess the situation of the company and prepare a plan for rehabilitation or liquidation. However, if the insurance company's owner is litigious, it can go far longer. The recent Colorado Bankers insolvency tied up policyholder money for more than 5 years. And, from this outsider's perspective, it looks like the A-CAP team is just as litigious as the Colorado Bankers' team was.

--- If the company is ultimately liquidated and the guaranty associations get involved, the model guaranty association law allows the receiver to retroactively reduce the interest rate paid for up to 4 years prior to the date of the receivership, and to maintain a reduced interest rate through the receivership until the guaranty associations pay out. The "permitted" interest rate is based is based on a Moody's Corporate bond index minus 2-3%, so it's much lower than the interest rates commonly paid on MYGAs. The purpose of the interest rate reduction is to reduce the financial impact on the guaranty associations.

All in all, being a policyholder of an insurance company that goes into receivership and liquidation is a pretty ugly experience.

Statistics: Posted by Stinky — Sat Sep 19, 2026 8:35 pm