Who assumes the investment risk with a fixed annuity contract?

• A. The annuitant
• B. The insurer
• C. The agent
• D. The insured

Answer: (B)

With a fixed annuity, the investment risk is borne by the insurer. The insurer promises a guaranteed interest rate and fixed future payments, so it must invest the funds in a way that covers those guarantees. If actual investment returns fall short, the insurer absorbs the shortfall to honor the guaranteed rate and payments. If returns are higher, the benefit of that excess doesn’t change the guaranteed amounts. The annuitant simply receives stable, guaranteed payments and isn’t exposed to market risk. The agent is just the producer, and the insured isn’t taking on the investment risk in this type of contract.