With about two dozen insurance companies downgraded by one or two notches to a negative outlook during the first quarter, brokers who sell variable annuities are beginning to wonder if those insurers will be able to honor the annuities’ guarantees.

Merrill Lynch, which is one of the biggest distributors of annuities, found in a survey that 71% of its brokers think insurers are offering too many guarantees and, on top of it, 32% said they fear the insurers don’t even understand those risks, The Wall Street Journal reports. In 2007, only 68% of the brokers were wary of insurers’ risks and 17% were wary of their understanding of those risks.

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