The National Association of Insurance Commissioners, or the NAIC, recently implemented a new subgroup to address registered index-linked annuity regulation. These annuities, commonly referred to as RILAs or buffered annuities, grew in popularity in the first half of 2021.
The NAIC subgroup is called the Index-Linked Variable Annuity (A) Subgroup and connects to the Life Actuarial (A) Task Force. According to the NAIC, “The Index-Linked Variable Annuity (A) Subgroup will provide recommendations and changes, as appropriate, to nonforfeiture, or interim value requirements related to index-linked variable annuities.”
As these products are funded through decentralized accounts, existing NAIC regulation does not closely align. The new subgroup will address this with the expertise of twelve members, including a chair, vice chair and NAIC support staff.
2021 Membership: NAIC Index-Linked Variable Annuity (A) Subgroup
- Peter Weber, Chair: Ohio
- Tomasz Serbinowski, Vice Chair: Utah
- Sarvjit Samra: California
- Rhonda Ahrens: Nebraska
- David Wolf: New Jersey
- Bill Carmello: New York
- Michael Cebula: New York
- John Carter: Texas
- Rachel Hemphill: Texas
- Mengting Kim: Texas
- Craig Chupp: Virginia
- Reggie Mazyck, NAIC Support Staff
Chief life actuary at the Ohio Department of Insurance, Pete Weber, will serve as chair of the new subgroup. He stated in his notice to the task force, “The task force has discussed developing a draft standard for minimum interim values for these products and providing direction for implementing the standard.”
The need for additional oversight accompanies the rising popularity of RILAs in the U.S. annuity market.
Registered Index-Linked Annuities Set Record Sales In Early 2021
According to the U.S. Individual Annuity Sales Survey by the LIMRA Secure Retirement Institute® (SRI®), preliminary sales figures of 2021 show the dramatic growth of RILAs when compared to last year.
In that survey, RILA sales reached $19.3 billion in the first six months of 2021, which is 105 percent higher than the first half of 2020.
In the second quarter of 2021 alone, RILA sales surpassed record level sales totaling $10.1 billion, increasing 122 percent from the same quarter in 2020.
Comparatively, total annuity sales for the second quarter of 2021 were $67.9 billion — which is 39 percent higher than in 2020.
A registered index-linked annuity (RILA) is a deferred annuity that connects to the performance of a stock market index. These products allow consumers to set a maximum loss or protection against a market downturn — all while still enjoying gains. The current economic climate has likely driven the demand for these annuities as consumers nearing retirement seek financial stability.
While total annuity sales may continue to rise, SRI anticipates RILA sales may stabilize in the coming months — and potentially grow through 2025.
“While the current market continues to favor RILA products, we expect RILA sales growth to level off in the second half of the year,” said Todd Giesing, assistant vice president of SRI Annuity Research. “If interest rates improve, fixed indexed annuities may become more attractive to investors who want greater principal protection.”
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- Hilton, J. (2021, June 17). NAIC Forms Work Group To Better Regulate Index-Linked Annuities. Retrieved from https://insurancenewsnet.com/innarticle/naic-to-form-work-group-to-oversee-index-linked-annuities
- LIMRA. (n.d.). About Us: Secure Retirement Institute. Retrieved from https://www.limra.com/en/about/secure-retirement-institute/
- LIMRA. (2021, July 27). Secure Retirement Institute: Second Quarter U.S. Annuity Sales Jump Nearly 40%, Marking the Highest Sales in More than a Decade. Retrieved from https://www.limra.com/en/newsroom/news-releases/2021/secure-retirement-institute-second-quarter-u.s.-annuity-sales-jump-nearly-40-marking-the-highest-sales-in-more-than-a-decade/
- National Association of Insurance Commissioners. (2021). 2021 Membership: Index-Linked Variable Annuity (A) Subgroup. Retrieved from https://content.naic.org/sites/default/files/inline-files/2021%20A-Index-Linked%20Variable%20Annuity%20SG_new%20logo.pdf
- National Association of Insurance Commissioners. (2021). Index-Linked Variable Annuity (A) Subgroup. Retrieved from https://content.naic.org/cmte_a_ilva.htm