Life insurers are asking state insurance regulators to make it easier for issuers of indexed annuities to show how product returns linked to the performance of a young investment index have performed.
The issue has come up at the Annuity Disclosure Working Group, an arm of the National Association of Insurance Commissioners.
The NAIC is a group for state insurance regulators. It does not set state insurance laws or write state insurance regulations directly, but state legislators and regulators often start with NAIC models when drafting their own proposals.
The NAIC’s Annuity Disclosure Model Regulation, Model Number 245, lets an issuer illustrate the historical performance of an annuity index only if the index is at least 10 years old.
In January, the American Council of Life Insurers (ACLI) asked the working group to add a drafting note to the regulation that would let an issuer illustrate the historical performance of indexed returns for a young index, if the index meets certain conditions. The ACLI suggested that an issuer could be allowed to provide an illustration for a young index if the index were made up of components that have been in existence for at least 10 years, the weighting algorithm used a formula without discretion for the issuer, and the index was calculated by an entity that was separate from the insurer using the index in the annuity.
Sarah Neil, an official at the Rhode Island Insurance Division, has written in opposition to the idea of adding the drafting note,.