A senior executive with the top-selling fixed indexed annuity (FIA) insurer in the U.S. said the Department of Labor might pull FIAs out of the most restrictive exemption when sold in retirement accounts.
Regulators added FIAs to the Best Interest Contract Exemption in the final version of a fiduciary rule, or “Conflict of Interest” rule, published April 6, because they are considered complex. The BICE requires hefty disclosures and a signed contract with clients.
The change caught the industry by surprise since FIAs were not included in the BICE in the draft rule issued last year.
In a conference call with analysts, Dieter Wemmer, chief financial officer of Allianz, suggested that FIAs might be dropped from the BICE just as quickly as they had appeared.
“It could happen that the fixed index annuity business is dropping off this list again, because it came also at the last moment,” Wemmer said in response to a question from an analyst.
Allianz Life Insurance of North America has its headquarters in Minneapolis. It is a subsidiary of the Munich-based financial services giant Allianz SE.
Last year, its FIA sales soared 33 percent to $53 billion, a record, according to Wink’s Sales & Market Report.
They were the best-selling fixed annuity product category last year in an otherwise flat annuity market, according to LIMRA Secure Retirement Institute.
Allianz was the No. 1 seller of FIAs with 14.5 percent market share last year and in the fourth quarter of 2015, the company’s Allianz 222 annuity was the best-selling indexed annuity for the fourth consecutive quarter, Wink’s also reported.
Allianz develops and distributes a variety of FIAs.
In addition to its Allianz 222 blockbuster, it sells Allianz 360, 365i, Essential Income 7, Core Income 7, Signature 7, Master Dex X and Endurance Plus fixed indexed annuities.
Rule Could Foster 'Opportunity'
How the rule will affect future sales of FIAs is anyone’s guess, but Wemmer put a positive spin on the far-reaching regulatory framework issued by the DOL April 6.
Proprietary sales channels in which insurance agents are under contract to sell Allianz products “should help us to drive actually the volume, and we feel that overall the fixed-index annuity market will not get smaller,” Wemmer said.
Sales of FIAs “could still grow with the current version of the DOL rule and we see ourselves not as disadvantaged to participate in this market,” he also said.
Many executives with insurance companies have told analysts over the past three weeks that in the world of insurance distribution independent agents who are going to have the most difficult time selling products under the DOL’s restrictions.
The restrictions require a financial institution to certify on behalf of agents that insurance and annuity contracts the agents sell are in the best interest of a client.
Some insurance company executives, however, have raised questions as to whether the certifying financial institution referred to in the DOL rule is a manufacturer or a distributor of an insurance contract.
In the insurance world, independent agents sometimes report directly to the insurance company. At other times, the agents report to a wholesaler or marketing organization, which then reports to the insurance company.
Insurance companies with proprietary distribution networks, over which insurers have more control, are likely to find it easier to acknowledge than an agent has conducted a sale in the best interest of a client.
“So the whole story about what is the final rule is not yet over and it is still under discussion,” Wemmer said.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].