Regulators Expedite Proposal To Trim Guarantee Rate
Regulators are moving quickly to expedite a request from life insurers for regulatory support for the reduction of the 3% guaranteed minimum rate in fixed insurance products to 1.5%.
The full backing of the National Association of Insurance Commissioners to reduce the guarantee for fixed annuities and fixed rate subaccounts in variable annuity products could occur on Feb. 9 during the commissioners’ annual retreat.
That vote would follow the unanimous support the proposal received in a vote by the NAIC’s Life Insurance & Annuities “A” Committee.
The support assumes work on a longer-term solution such as an index that would be used to adjust rates as the interest rate environment changed. It also assumes a sunset provision in any bills introduced in legislatures.
The American Council of Life Insurers, Washington, says its members are feeling the effects of rate compression that have resulted from the drop of interest rates over the past year (see NU, Feb. 4.)
Insurers are arguing that they can only afford to guarantee 1.5% and that immediate relief is needed. They say they need regulatory support so they can approach legislatures for changes in the law, a process they say will take two years.
The Iowa insurance department is scheduled to introduce a department bill to its legislature this week that includes language to reduce the guarantee to 1.5% with a sunset provision of July 1, 2003.