Separate accounts are funds held by life insurance companies that are maintained separately from the insurer’s general assets. According to the National Association of Insurance Commissioners (NAIC), the use of separate accounts by insurers was originally established in response to federal securities laws concerning investment linked variable annuities, products with earnings that vary from investment in many different vehicles. Variable annuities operate like mutual funds because their earnings vary as they invest in many different vehicles. Separate accounts have evolved rapidly over the years and now support an array of hybrid investment products.
Separate accounts contribute to the revenue of life/annuity insurers. (See the Life/Annuity Insurance Income Statement chart, for separate accounts revenue.)