A key group of insurance commissioners has voted unanimously to endorse 2 proposals that could change annuity disclosure requirements and the reserving rules for variable annuities with guarantees.
Members of the Life Insurance and Annuities Committee at the National Association of Insurance Commissioners, Kansas City, Mo., cast the votes during a committee session.
The annuity proposals, Actuarial Guideline VA-CARVM, which would establish reserving guidelines for variable annuities with guarantees, and an annuity disclosure model revision, must be endorsed by the NAIC’s executive committee and by the NAIC’s plenary, the body that represents all voting NAIC members, before the NAIC can adopt the proposals.
The NAIC executive committee and plenary will meet in Washington later this month, at the NAIC’s fall meeting.
In addition to voting on the annuity proposals, committee members talked about U.S. Securities and Exchange efforts to adopt the proposed Rule 151A, which would classify indexed annuities as securities that could be regulated by the SEC, rather than as insurance products.
Actuarial Guideline VA-CARVM has been under development for the last 10 years.
The Connecticut Insurance Department did not vote to oppose the proposal while it was moving through the Life & Health Actuarial Task Force, where it was developed, and the department did not vote against the proposal today.
But, after the motion to advance Actuarial Guideline VA-CARVM passed, a representative for Connecticut read a statement from Connecticut Insurance Commissioner Thomas Sullivan expressing his concerns about the proposed guideline and the process used to draft it.
In spite of concerns expressed by Connecticut about the risks of dynamic hedging and the lack of limits on the aggregation of different product types when evaluating reserves, rather than requiring insurers to look at individual business lines separately, the model was presented as “a take it or leave it package,” Sullivan says in the statement.
A number of Connecticut’s domestic companies sell variable annuities with guarantees, and New York regulators and the insurance industry worked on the final language without input from Connecticut, Sullivan says.
Connecticut will evaluate domestic insurers closely if the regulation is fully adopted, Sullivan says.
New York Insurance Superintendent Eric Dinallo, chairman of the life committee, said he had met with Sullivan in August, had heard no complaint and had received no telephone call expressing any concern.
Dinallo said he is always open to participation by all regulators.
Kelly Ireland, a representative of the American Council of Life Insurers, Washington, spoke when the life committee discussed the annuity disclosure model revision.
Although the ACLI supports disclosure and uniformity of disclosure, a new model would slow up disclosure requirements, Ireland said.
Currently, she said, 16 states have put annuity disclosure laws in place.
The disclosure rule adoption process could stop if states wait for a new model to be developed, Ireland said.
Susan Voss, Iowa insurance commissioner and NAIC secretary-treasurer, said outside regulators, including officials at the U.S. Securities and Exchange Commission, are complaining about the current state of annuity disclosures.
“We think that we need to do some more work on this,” Voss said.
During the discussion about the SEC indexed annuities classification proposal, Voss and Sean Dilweg, the Wisconsin commissioner and vice chair of the life committee, said insurance regulators are doing a good job of regulating indexed annuities.
Gary Sanders, a senior counsel at the National Association of Insurance and Financial Advisors, Falls Church, Va., said NAIFA plans to have hundreds of its members write to the SEC to oppose the proposal.