State insurance commissioners unanimously adopted 2 proposals that will significantly change annuity disclosure and reserving for variable annuities with guarantees.
Commissioners also discussed proposed rule 151A of the U.S. Securities and Exchange Commission.
The discussions took place during a conference call of the Life & Annuities “A” Committee of the National Association of Insurance Commissioners, Kansas City, Mo.
The adoption by the “A” Committee of Actuarial Guideline VA-CARVM clears the way for the major change to reserving for annuities with guarantees to become NAIC policy if it adopts the guideline at its fall meeting in Washington later this month.
The proposed guideline has been under development for the last 10 years. Following passage of the motion to advance the guideline, Connecticut read a statement for the record from its commissioner, Thomas Sullivan, which expressed concern about both the process and substance of the proposed guideline.
The statement said that in spite of concerns expressed by Connecticut over the risks of dynamic hedging and the lack of limitations on the aggregation of different product types in considering reserves rather than looking at individual business lines, the model was presented as “a take it or leave it package.” Sullivan’s statement noted that a number of Connecticut’s domestic companies sell VAs with guarantees and said that New York regulators and industry worked on the final language without input from Connecticut.
It concluded that although it did not oppose the vote during the Life & Health Actuarial Task Force, where the proposal was developed, it would monitor its domestics closely if the regulation is fully adopted. During the “A” Committee vote Connecticut did not vote against the motion.
In response, New York Superintendent Eric Dinallo, chairman of the “A” Committee, said he was always open to participation of all regulators and was unaware of Connecticut’s concern. He said he had met with Sullivan in August and had heard no complaint and had not received a phone call expressing concern.
Separately, the “A” Committee voted to pursue development of a revised annuity disclosure model regulation.
Kelly Ireland, a representative of the American Council of Life Insurers, Washington, said that while ACLI supports disclosure and uniformity of disclosure, a new model would slow up disclosure requirements. Currently, she said, 16 states have put annuity disclosure laws in place and that process could stop if states wait for a new model to be developed.
Susan Voss, Iowa insurance commissioner and NAIC Secretary-Treasurer, asked if disclosures were “accurate and appropriate” and noted that “we think we need to do some more work on this.”
Voss said one of the big complaints of outside regulators and the SEC is that better disclosure is needed and she said insurance regulators have to move forward on the issue.
On the issue of the SEC proposal which would categorize index annuities as securities, Voss and Wisconsin Insurance Commissioner and “A” Committee vice chair, Sean Dilweg, said insurance regulators are doing a good job of regulating the product. Voss noted how Iowa was working with its domestic companies in activities such as issuing a company survey to make sure that there were no problems.
During the discussion, Gary Sanders, NAIFA’s senior counsel for law and government relations, said that on Sept. 10, NAIFA planned to file a detailed letter with the SEC and that hundreds of its members would be doing the same.
On Sept. 4, the National Governors Association, Washington, filed a letter noting the complexity and importance of the issue and urging additional time to consider the issue.
In closing the “A” Committee discussion, Dinallo noted the potential disruption that the proposed rule could have on the industry.