A long disputed rule issued by the U.S. Securities and Exchange Commission, Rule 151A to regulated indexed annuities (IAs), was withdrawn this week, attendees were told during the fall meeting of the National Association of Insurance Commissioners, here.
The details were provided by Jim Mumford, Iowa’s first deputy commissioner of insurance, during the Life Insurance and Annuities “A” Committee. Iowa was one of the states that was leading the effort for states to retain the right to regulate IAs. He explained to members of “A” Committee that on July 21, President Barack Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act, which contains a Section 989J, known as the Harkin/Meeks amendment. That amendment voided 151A and its interpretation that IAs and potentially other insurance products were securities and thus under SEC purview.
Mumford then went on to explain the progress made on the Annuity Disclosure Model Regulation which provides standards for the disclosure of information about annuity contracts and includes guidelines for illustrating these products. Mumford detailed for Connecticut Commissioner Tom Sullivan, “A” Committee chair and members of the committee the progress that had been made since the summer meeting in August.
Sullivan had made it clear that the project needed to be completed and the Annuity Disclosure working group’s charge met. The working group has been working on the model since 2008.
Toward that end, the working group, the American Academy of Actuaries and the American Council of Life Insurers, both based in Washington, and consumer representatives including NAIC funded consumer rep Brenda Cude, a professor at the University of Georgia, met weekly. On October 17, the group met to put final technical touches on the draft before voting it up to “A” Committee. It was agreed to separate a Buyer’s Guide from the model so that it could be updated in the future without having to reopen the whole model.
Steve Ostlund, an Alabama regulator on the working group noted how fast the project had moved to advance it to “A” Committee and recommended that the model be exposed for 30 days. Mumford recommended that the exposure be limited to new items in order to prevent the same issues from being raised again. The “A” Committee agreed to the exposure and to charge the working group with the development of a Buyer’s Guide.
Following the meeting, ACLI representative Kelly Ireland said that any comments
submitted to the ACLI would be technical in nature. She noted that the ACLI supports illustrating annuities and actually advanced the idea. Kelly said that usually Buyer’s Guides are general information documents and not designed to be overly technical.
Lee Covington, representing the Insured Retirement Institute, Washington, noted how important it is to focus disclosure on features of the contract being purchased and not to have a document that includes broad disclosures on all features in an annuity contract. He maintained that with the advent of summary prospectuses from the SEC, that there was not really a need to duplicate the effort with a Buyer’s Guide.
During the weeks of conference calls, industry had raised this point and regulators had pointed out that the prospectuses had not yet been developed and that it did not seem to be a priority for the SEC. Regulators said that there was a need to have information in place at least until a summary prospectus was developed.