Insurers Quiet On Trading Practices Alarm Bells

By

Insurers are tight-lipped over their early detection compliance systems that sound alarm bells if there are inappropriate trading practices within variable annuity and life products or their own mutual fund complexes.

Of calls to 7 major life insurers by National Underwriter, only Lincoln Financial Group, Philadelphia, offered insight into its compliance program.

Practices are in place to address issues such as after-hours trading, says Rob Fleener, a Lincoln spokesman, adding the insurer takes market conduct issues seriously.

The compliance programs in place vary according to business unit and product, Fleener continues. “We are monitoring trading activity and establishing market timing restrictions as appropriate.”

Lincoln uses “a fair value pricing technique for those mutual funds with foreign securities in order to minimize opportunities of market timers to inappropriately benefit from such activities,” he adds.

The Insurance Marketplace Standards Association, Washington, an industry organization whose members agree to meet certain ethical criteria, looks at how compliance programs for variable products meet its standards, says Don Walters, IMSA deputy director.

To the extent a member company has an infrastructure to prevent after-hours and other illegal types of trading, IMSA would act as a double check to ensure those systems are working well, he adds.

At this point, IMSA standards do not specifically address mutual funds although that is a possibility in the future, he says.


Reproduced from National Underwriter Life & Health/Financial Services Edition, December 12, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.