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WASHINGTON, D.C. – The U.S. Securities and Exchange Commission (SEC) is a step closer to delivering a long-awaited improvement to the process for registering a popular type of annuity that combines growth potential with protection against market volatility. In comments filed today, the Insured Retirement Institute (IRI) said it generally supports the proposed SEC rule while providing recommendations to help the SEC refine the proposal.

Last year, IRI led a legislative effort that resulted in Congress passing a law directing the SEC to create a registration form specifically tailored to fit these products.

Registered index-linked annuities (RILA) are among the fastest-growing insured retirement products of the past several years. RILAs can balance retirement portfolios by allowing participation in market growth while reducing exposure to market loss, helping savers reach retirement goals.

“A RILA-specific registration form is both timely and essential, considering the growing prominence of RILAs in the marketplace,” said Jason Berkowitz, Chief Legal and Regulatory Affairs Officer at IRI. “The proposal would substantially improve the effectiveness of the disclosures provided by RILA issuers to prospective purchasers in conveying essential information to help them better understand RILAs and their risks and benefits.”

IRI sought this change because, under current SEC rules, RILAs and other innovative new products must be registered using forms designed primarily for equity offerings and, therefore, require extensive information irrelevant to prospective annuity purchasers. These forms also require disclosure of financial information prepared in accordance with generally accepted accounting principles (GAAP), which many insurers are not otherwise required to produce.

The SEC’s proposal would amend Form N-4, which is currently used by most variable annuity separate accounts, to require issuers to register RILAs and contracts that offer a combination of index-linked options and variable options on the same form.

The proposed rule would allow issuers to file RILA registration statements using financial statements prepared in accordance with statutory accounting principles (SAP) rather than GAAP to the same extent and under the same circumstances and conditions as issuers of variable products registered on Form N-4.

Under state law, every insurance company must produce SAP financial statements to provide state regulators with information to assess and oversee its solvency and ability to meet its financial obligations to contract owners.

“By allowing the use of SAP financials for RILA issuers on the same terms as variable product issuers, the proposal would facilitate new entrants to, and enhance competition in, the RILA marketplace,” Berkowitz said.

In its comment letter on the proposal, IRI also encouraged the SEC to consider allowing the use of Form N-4 for registrations registered market-value adjustment annuities and future annuity product innovations.

“The proposal represents thoughtful work by the SEC in adapting to recent advances in the insurance industry, and we believe there would be value in seeking to leverage this effort to avoid the need for additional rulemaking as new products are developed to meet the evolving needs and objectives of retirement savers,” Berkowitz said.

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Contact: Dan Zielinski


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