Inclusion of a "market value adjustment" remains a sticking point as state insurance regulators close in on a new actuarial guideline to fit trendy indexed-linked annuities into variable annuity nonforfeiture rules.
The Index-Linked Variable Annuity Subgroup was created last year by a National Association of Insurance Commissioners task force to focus solely on the index-linked annuity products -- known variously as structured, buffered or registered indexed-linked annuities.
While classified as variable annuities, the indexed-linked products do not fit into Model 250, which includes the nonforfeiture rules that determine how much money a contract holder can get back if they give up the annuity.
With the indexed-linked products, daily values are not based on the value of units of a separate account. Rather, the daily values are based on formulas set forth in the contract. So the subgroup developed an actuarial guideline for technical changes to values that would bring the indexed-linked products in line with traditional VAs.
And therein lies the sticking point for regulators, many of whom see the market-value adjustment [MVA] as a important tool to protect consumers. Industry representatives are resisting the MVA requirement.
An MVA is an amount by which a full or partial withdrawal is adjusted, resulting in a positive or negative impact on the withdrawal.
Adam Brown is senior vice president, actuarial product development for Allianz Life Insurance Company of North America. He told subgroup members this week that options are important for insurers.
"There are some companies that have been offering these index-linked variable annuity products for a number of years, some with an MVA that's tied to the term period of the crediting period," he explained. Others are "tied to a surrender charge period, and others don't have an MVA at all. I think from our perspective each provides a unique value to the consumer, while also staying true to the purpose of why consumers are buying the contracts themselves."
Steve Wolfrath, vice president, annuity product development and management at Ameriprise Financial, said most companies, including Ameriprise, provide daily account values to consumers in the interest of transparency.
'Too much manipulation'
Peter Weber is a life actuary for the Ohio Department of Insurance, and chairman of the subgroup. After an extended discussion about different language and aspects of the MVA, Weber defended the guideline.
"I think we've got something that accomplishes the goal of making these products variable," he said. "And as we try to undo elements of this, it just seems like we're just leaving it opened up to too much manipulation and potential discretion."
The latest iteration of the actuarial guideline is the fifth exposure of the effort over many months. Weber noted the need to wrap things up and send a final effort to the subgroup's parent group, the Life Actuarial Task Force.
The subgroup signaled support for the guideline as is, although at least one more call is anticipated.
"Clearly, what we're trying to do is get something that can work," Weber said. "It may not accommodate everything that's currently in the market. I don't think that was ever our goal with this. We were just trying to get something that was going to introduce some fairness to the consumer and some consistency across the market state to state for some products that didn't have a good regulation in place."
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected] Follow him on Twitter @INNJohnH.