State insurance regulators are thinking about starting an annuity regulatory project that could remind everyone how hard it is for life insurers to offer great guarantees at a time when safe “single A” corporate bonds are offering an effective yield of less than 1.8%, and slightly edgy BBB bonds are paying 1.97%.
The National Association of Insurance Commissioners (NAIC) is deciding whether to start model law development project to reduce the standard minimum nonforfeiture interest rate for individual deferred annuities to 0%, from 1%.
- Links to NAIC Life Insurance and Annuities Committee documents are available here.
- An earlier article about annuity income guarantees is available here.
A top NAIC committee, the Life Insurance and Annuities Committee, has included the model law development request in a packet of materials for use at an upcoming conference call meeting.
The committee is planning to meet Friday.
Here are three things to know about the proposed project.
1. The People
The Life Actuarial Task Force, a part of the Life Insurance and Annuities Committee, would be in charge of the project.
Mike Boerner, director of the actuarial office at the Texas Department of Insurance is proposing the project.
Kent Sullivan of Texas is the chair of the Life Actuarial Task Force.
Jill Froment is the chair of the Life Insurance and Annuities Committee.
Reggie Mazyck is the NAIC staff support contact person.
The regulators proposing the project need approval from the NAIC’s Executive Committee before they can go ahead with the project.
2. The Meat
The task force would be updating the Standard Nonforfeiture Law for Individual Deferred Annuities (Model Number 805.)
The guaranteed nonforfeiture benefits law affects the minimum interest rate guarantee an insurer can use when determining the cash value of an individual fixed annuity.
Nonforfeiture provisions affect what a contract holder who qualifies for nonforfeiture benefits gets when the contract holder stops making contract payments.