Who assumes the investment risk in a fixed annuity?

In a fixed annuity, the insurer assumes the investment risk. This means that the insurance company guarantees a fixed rate of return on the premium payments made by the policyholder. Regardless of how well the insurer's investment portfolio performs, the policyholder will receive the agreed-upon return, which provides a level of security and predictability in income.

The insurer manages the investments and bears the risk of investment performance, ensuring that they can meet their future obligations to the annuity holder. This structure allows individuals to benefit from the stability of a defined income stream without the responsibility and potential volatility associated with managing investments themselves.

In contrast, other parties mentioned do not carry the investment risk in this scenario. The policyholder participates in receiving benefits from the fixed annuity but does not face the risks of investment management. Similarly, beneficiaries receive whatever benefits may be left at the policyholder's passing but do not assume any risks associated with the annuity itself, and the state typically does not involve itself in the risk of an individual's private annuity contracts.