Take for example an investment contract with an annuitisation option where the annuity factor is the same as new annuities offered by the insurer at the time the option is executed. Since the insurer is free to determine the annuity factor, the annuitisation is in substance the formation of a new contract, the terms of which are agreed at the date the option is exercised. The contract cannot therefore be classified as an insurance contract at inception. However, if the terms of the annuity are agreed at the start of the contract or severe constraints are imposed on the insurer in determining the annuity factor at the date the.
