NU Online News Service, Feb. 11, 2:52 p.m. – The National Association of Insurance Commissioners, Kansas City, Mo., adopted a recommendation that minimum guarantee rates in fixed insurance contracts be lowered to 1.5% from the current 3% minimum.

The NAIC executive committee and plenary approved the recommendation Feb. 9, during the annual commissioners’ weekend in San Antonio.

The recommendation applies largely to fixed insurance contracts and the fixed options in variable insurance contracts.

Insurers are warning that 2001 interest rate reductions have compressed the difference between the guaranteed rates and the rates they can earn on investments in the short term, which they define as a period of one to three years.

If rates stay low, there could also be a problem with spreads on long-term investments, insurers say.

Representatives from the American Council of Life Insurers, Washington, have told regulators that they need NAIC support when they approach state legislators, and that getting the cuts they want through the legislatures will take two years. They asked the NAIC to give them “expedited relief” while it tackles the issue through the regular NAIC working group process.