Federal Proposal to Regulate Indexed Annuities: The Impact on Insurers, Agents, and Consumers

Published by: TowerGroup

Published: Jul. 21, 2008 - 5 Pages

Table of Contents

Report Coverage

Indexed Annuities Uncovered

The SEC Proposal's Impact

What Does the Future Hold?

Summary

Abstract

TowerGroup Take-Aways

• TowerGroup believes that, with strong federal and consumer support, the Securities and Exchange Commission's proposal to reclassify indexed annuity products as securities will be enacted, forcing broad change in the insurance industry.
• Insurance companies issuing indexed annuities will see a drastic decline in sales immediately following the enactment of the SEC rule: New licensing requirements will force many insurance agents and marketing organizations out of business.
• New opportunities for broker-dealer firms and insurance companies to issue and sell indexed annuities will emerge as the products lose their ambiguous regulatory status.
• Federal regulation of annuity products improves protection for consumers but doesn't ensure that the products are suitable for investors.

Report Coverage

In June 2008, the U.S. Securities and Exchange Commission (SEC) released a proposal to reclassify the annuity products referred to as fixed indexed annuities or equity indexed annuities (indexed annuities) from insurance contracts to securities products. This proposal has far-reaching implications for the insurance companies and agents selling the products as well as for consumers, whom the proposal is primarily intended to protect. This TowerGroup ViewPoint discusses the ramifications of the proposal and the industry change needed to make the rule effective in continuing to protect investors and foster growth in the annuity industry.

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