Life insurers could start using a new language to build "index-linked variable annuities," or ILVAs, as early as April 1, 2023.
The Index-Linked Variable Annuity Subgroup, an arm of the National Association of Insurance Commissioners, has been working on an Actuarial Guideline ILVA draft for more than a year.
Insurer groups seem to like what they're seeing in the latest draft, including part of a provision that calls for the guideline to take effect this spring.
Representatives from the American Council of Life Insurers and the Committee of Annuity Insurers told the ILVA Subgroup in a recent comment letter that insurers will need more time to apply the new framework to existing annuity products.
But "we believe the April 1, 2023, effective date to be manageable for new filings initially submitted for approval on or after this effective date," industry reps said.
What It Means
For clients and their advisors, the most visible effect of the new guideline could be that insurers start to move toward using the same terms for the same ILVA contract provisions and defining those terms in the same way.
In the long run, the guidelines could help clients understand how specific ILVA products might perform if they die early or simply take cash out early.
Products With Many Names
ILVAs are also known as buffer annuities, structured annuities and registered index-linked annuities. Life insurers have been selling the products since 2010.
The contracts have crediting rates tied to the performance of investment market indexes or ETFs.
Because issuers register the products as securities with the U.S. Securities and Exchange Commission the issuers can expose the buyers to the risk of loss of account value due to investment market performance.
