The current regulatory forecast for the U.S. individual annuity market may now be for a little sunshine, with a chance of helpful breezes.
Ryan Krueger, a securities analyst at Keefe, Bruyette & Woods Inc., gave a glimpse of how helpfully calm the annuity regulatory climate might be in a report on the life insurance and annuity issuer presentations at his firm’s recent insurance conference.
In recent years, both life and annuity issuers have faced storms caused by low interest rates, and by the sales and marketing regulation writers at the U.S. Department of Labor.
Now, Krueger writes, the skies may be clearing.
(Related: Q2 Annuity Sales Look Better: IRI)
Krueger says he had a hard time finding anything to write about other than life insurers’ solid first-half earnings.
“There weren’t that many hot-button topical issues this year,” Krueger writes.
Here’s how Krueger sizes up the potential sources of drama:
Interest rates: Rates are still low, but insurers have been reacting to them for years. An increase in the 10-year Treasury yield to just 3% would help the insurers, but continuing low rates would simply hold down earnings growth and lead to gradual balance sheet charges occurring over time, Krueger writes.
DOL fiduciary rule: Officials at the DOL now seem to be less rigid about commission-based compensation arrangements for the financial professionals who sell annuities, and they also seem to be moving away from the idea of encouraging angry investors to file lawsuits against their advisors, Krueger writes.
State regulation: State regulators are working on variable annuity-related projects at the National Association of Insurance Commissioners, but “it didn’t sound like there was much new at this point,” Krueger writes.
— Read Keefe, Bruyette to Seek Buyer for Scottish Annuity & Life on ThinkAdvisor.