House Panel to Consider Bill That Might Make Hot Annuities Hotter

The issuer of a RILA contract puts derivatives tied to the performance of an investment index, such as the S&P 500 stock index, rather than investment funds, inside the annuity package. For the issuer, using derivatives to power the crediting rate is usually cheaper than using investment funds, and arranging to hedge against derivatives volatility risk is usually cheaper and easier than hedging against investment fund volatility risk.

Regulators and trade groups are still discussing how to name RILA products. Many issuers and the Secure Retirement Institute, an industry research organization, have adopted the term "RILA."

A National Association of Insurance Commissioners panel has been using the term "index-linked variable annuity."

H.R. 4865 and S. 3198 Details

Today, a life insurer that sells RILA contracts must register the product with the SEC using the same S-1 and S-3 forms used to register big, publicly traded companies.

That means that registering a RILA product might require almost as much time and money as registering for the initial public offering of the insurance company writing the contracts.

The RILA bills call for the SEC to create a new, relatively simple registration form designed for RILAs.

The bills would also establish a federal definition of "registered index-linked annuity" and classify a RILA as a security.

Legislative Mechanics

Rep. Alma Adams, D-N.C., has introduced H.R. 4865 and lined up 29 co-sponsors: 15 Republicans and 14 Democrats.

Sen. Tina Smith, D-Minn., has introduced S. 3198, the H.R. 4865 companion bill. That bill has one co-sponsor — Sen. Thomas Tillis, R-N.C.

The bill could move through Congress on its own, get packaged together soon with the RISE Act bill or get packaged with a "must-pass" bill — a budget bill, for example — later.

SEC headquarters in Washington (Photo: Diego M. Radzinschi/ALM)