SEC CREATES TAILORED REGISTRATION FORM FOR POPULAR ANNUITY

WASHINGTON, D.C. – The U.S. Securities and Exchange Commission (SEC) delivered a long-awaited rule change that will help consumers understand and evaluate whether to purchase a popular type of annuity that combines growth potential with protection against market volatility.

The SEC issued the final rule to implement Congress’ directive to the SEC in the Registration for Index-Linked Annuities Act, enacted in 2022 as part of an omnibus appropriations measure. The Insured Retirement Institute (IRI) strongly advocated for this legislation. IRI also had urged the SEC to improve the effectiveness of the disclosures provided to prospective purchasers of registered index-linked annuities (RILA).

“This rule will ensure that prospective purchasers can readily find the essential information they need to understand RILAs and their risks and benefits,” said Wayne Chopus, President and CEO at IRI. “The changes made by this rule change should also eliminate barriers to entry and encourage more competition and innovation in this critical market segment.”

RILAs are among the fastest-growing insured retirement products. RILAs can balance retirement portfolios by allowing participation in market growth while reducing exposure to market loss, helping savers reach retirement goals.

Until now, RILAs and other innovative, new insured retirement products had to be registered with the SEC using forms designed primarily for equity offerings, which require extensive information that is irrelevant to prospective annuity purchasers. Those 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 rule amends 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 rule will 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.

Links to previous IRI statement and comments.

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Contact: Dan Zielinski