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Regulators Consider Young Annuity Index Rules

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State insurance regulators are moving ahead with a project that could affect the indexed annuity community: revising the rules for use of relatively new investment indexes.

Members of the Annuity Disclosure Working Group plan to meet Thursday, through a conference call, to talk about the project.

The working group is part of the National Association of Insurance Commissioners. The working group has been developing an update of the NAIC’s Annuity Disclosure Model Regulation.

(Related: Index Proposal Could Make Some Annuities Look Too Good: Consumer Group)

A discussion draft released in February would set the following rules:

  • An annuity issuer using an investment index in existence for less than 20 years could illustrate the performance of that index only if the index was a combination of other indexes that had all been around for at least 20 years.
  • An issuer illustrating the performance of an index that is younger than 20 years old would have to warn that some of the values of the index shown in the illustration were hypothetical.


The NAIC is a Kansas City, Missouri-based group for state insurance regulators.

States often use its models when starting to develop their insurance laws and regulations.

The Index Issue

Traditionally, most issuers of indexed annuities and indexed life insurance products offered indexing options based mainly on the S&P 500 stock index.

Over the past 10 years, issuers have started offering many other index options. The shift gives the purchasers new ways to diversify their portfolios, and it gives the annuity issuers ways to diversify the types of hedging arrangements they use.

The 2007-2009 Great Recession hit stock prices hard.

Some regulators fear that use of new investment indexes could give purchasers of indexed products based on those indexes unrealistic ideas about the products’ likely performance. Those regulators worry that issuers will show consumers illustrations with index values starting at a low level around 2009, right after the stock market crash, and rising steadily to a high level in 2019.

Those regulators would prefer to see any illustrations extend for at least 20 years, to show how an index performed as the stock market moved from a peak in the mid 2000s, down to the Great Recession trough, and up again, as the stock market recovered.

The Current Rules

The NAIC’s disclosure model now keeps annuity issuers from illustrating the performance of an investment index that’s younger than 10 years old.

The Annuity Disclosures Working Group has been discussing the possibility of easing that restriction since 2017.


A link to the new index revisions draft is available here.

— Read Insurers Ask NAIC to Ease Annuity Index Illustration Age Ruleon ThinkAdvisor.

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