Policymakers need to clear up the regulatory confusion over U.S. annuity sales quickly, for the sake of the consumers who are trying to prepare for retirement, Eric Steigerwalt, president of Brighthouse Financial, said today.
Steigerwalt made that plea during a panel discussion in New York, at an insurance conference organized by S&P Global Ratings.
Insurers are major investors in bonds and other fixed income securities, and S&P is a major rater of both insurers and fixed income securities. S&P holds an insurance conference every year, to give industry players a chance to share information about the industry, and to promote use of its rating services. For institutional money managers, the conference luncheons represent a chance to market their services to insurers.
Brighthouse is a Charlotte, North Carolina-based unit of MetLife Inc. that runs MetLife’s retail life and annuity operations. MetLife is trying to spin Brighthouse off as a separate company, in part because of federal regulators’ move to designate the company as a systemically important financial institution under the Dodd-Frank Act. Now, the unit is facing the effects of the U.S. Department of Labor fiduciary rule on annuity sales, as well as worries about how SIFI oversight will work and the effects of prolonged low interest rates on insurers’ fixed income investments.
The Federal Reserve Board may raise the benchmark rates it controls twice this year, three or four times in 2018, and a few more times in 2019, but, even if the Fed does that, rates could still end 2019 at a relatively low level, according to Deep Banerjee, an S&P Global Ratings analyst.
“Spread compression is not going away,” Banerjee said.
The DOL developed the fiduciary rule and rule guidelines, including a Best Interest Contract Exemption, which requires sellers of retirement products to work in the best interests of retirement savers, in an effort to protect retirement savers from buying high-priced products from high-pressure sales representatives with hidden conflicts of interest.
In the real world, Steigerwalt said, all of the uncertainty may be working against the best interests of savers who want to insure their assets against market downturns and insure their ability to use some of their savings to generate a lifetime stream of income.
Steigerwalt said everyone has to work together to come up with rules that work.
We kind of have to figure this out for the country,” he said.
Steigerwalt also talked about soft annuity sales.
(Related: Q1 Annuity Sales Fell 18%: IRI)
“Nobody knows, obviously, whether we’re at the bottom,” Steigerwalt said.