Among the actions taken by regulators at the National Association of Insurance Commissioners’ winter meeting were the adoption of the annuity nonforfeiture model regulation, a resolution on limited line term life insurance and the extension of the sunset provision of Actuarial Guideline 39, which establishes reserves for variable annuities with guaranteed living benefits.
The annuity nonforfeiture model and the limited line term life insurance resolution were adopted by the executive committee and plenary during the meeting here.
The annuity nonforfeiture model regulation was developed to implement changes to the Standard Nonforfeiture Law for Individual Deferred Annuities. These changes were adopted in early 2003. The model revised the 3% nonforfeiture rate to allow for a five-year constant maturity Treasury rate. The rate is subject to a 3% ceiling and a 1% floor, and permits a lower minimum nonforfeiture interest rate for equity-indexed annuities subject to the same ceiling and floor.
The change to the SNL was made in response to the continued decline in interest rates. Since that time, the Fed has started raising interest rates. According to some predictions, a key Fed rate could rise to 4.75% by early next year.