A subgroup at the National Association of Insurance Commissioners (NAIC) is asking whether the current regulatory framework for separate accounts makes sense, and whether guarantees have a legitimate place in a separate account.
Members of the separate accounts subgroup at the NAIC’s Life Actuarial Task Force have included those questions in a response to a request from Joseph Torti III, the Rhode Island insurance superintendent and chair of the Financial Condition Committee at the NAIC, Kansas City, Mo.
Torti and his committee asked the actuarial task force to look into concerns “regarding a growing trend by life insurers to include non-unit linked products within the separate accounts,” according to Leslie Jones, the South Carolina insurance regulator and chair of the task force.
The analysis could come up for discussion Saturday during an actuarial task force meeting at the NAIC’s summer meeting in Philadelphia.
About 50 years ago, regulators say in the response, the U.S. Supreme Court told the Variable Annuity Life Insurance Company that it had to set up separate accounts for investment-linked variable annuities. The NAIC developed models that helped insurance regulators share oversight over the variable products with the U.S. Securities and Exchange Commission (SEC).
Holders of the unit-linked policies were insulated against problems in the insurer’s general account but also risked loss of principal, the regulators say.
Since then, insurers have used separate accounts in many other types of products, regulators say.
Non-unit-linked products that use separate accounts include a number of products that contain modified guaranteed annuities, such as bank-owned life insurance (BOLI), corporate-owned life insurance, group annuities, guaranteed investment contracts and funding agreements, the regulators say.