The New York Insurance Department has issued guidance for insurers filing policy forms for equity-indexed products.
Empire State officials say they are starting to get a “number of policy form submissions” for equity-indexed annuities and life insurance policies.
One general rule is that “the product must comply with all the usual nonforfeiture requirements associated with the particular product,” New York department officials write in the guidance. “There may be no loss of value in the product solely based on changes in the equity index.”
The contract must include a clear description of any limits–such as 50% of the change in the S&P 500 stock index–on how much product owners can share in any index gains, officials write.
If there are caps on the product owners’ ability to share in index gains, then the limitations must either be guaranteed for the entire period that the equity index is in effect or occur no more frequently than annually.
Changes in the equity index itself “may not be considered more frequently than monthly and must be reflected in the product’s value at least annually,” officials write.
If the product includes a fixed account, and the fixed account happens to be paying more than the equity-indexed account when the equity-index limitation is set, there should be an automatic mechanism for transferring account value to the fixed account, officials write.
Officials note that the requirement that account value flow into the fixed account is applicable only if the contract permits owners to transfer account value to the fixed account.