State insurance regulators are deciding now how the new annuity sales standards states have been rushing to adopt will really work.
Members of the Annuity Suitability Working Group plan to discuss one key point — how the update affects annuity recommenders who are under the jurisdiction of the U.S. Securities and Exchange Commission — in Denver at the fall national meeting of the National Association of Insurance Commissioners.
All states but New York have adopted or are preparing to adopt the Suitability in Annuity Transactions Model Regulation update, and Donald Trump's imminent return to the White House suggests that states, not the federal government, will take the lead in overseeing annuity sales.
One issue that may indicate what the new annuity sales world will be like is the debate over how the Annuity Suitability Working Group should interpret a "safe harbor" provision in the update that's supposed to keep SEC-regulated securities agents and investment advisers from having to comply with both Reg BI requirements and suitability requirements.
States want flexibility.
Groups for annuity issuers, distributors and sellers want the safe harbor to give them real protection against double oversight.
What it means: The focus of annuity sales regulation fights may now be moving away from whether regulators should apply a fiduciary standard and toward reconciling state suitability requirements with Reg BI requirements.
The backdrop: Federal law leaves regulation of the business of insurance to the states.
The NAIC is a group that represents state insurance regulators and helps them draft bills and regulations, but it does not have the direct ability to change states' laws and regulations.
States decided on their own whether to adopt the suitability update, and states will decide on their own whether to use any suitability guidance the NAIC develops.
In October, the NAIC Annuity Suitability Working Group looked as if its work might not matter all that much.
