RILA Act clears Senate, one step closer to law

By John Hilton

The Senate passed legislation Tuesday night to reduce market barriers for the sale of registered index linked annuities.

Industry lobbyists are now pushing for the Registered Index-Linked Annuities Act to get to President Joe Biden's desk. To do that, it needs to go back to the House for a concurrence vote.

The bill would lower barriers to retirement income products by requiring the Securities and Exchange Commission to revise rules regarding developing and offering certain annuity products, including RILAs.

The RILA Act is one of the industry's higher priority items.

"Consumer demand for RILAs continues to accelerate because they can bring balance to retirement portfolios by allowing participation in market growth while reducing exposure to market loss, helping savers reach retirement goals,” said Paul Richman, chief government and political affairs officer for the Insured Retirement Institute.

The House Finance Committee approved the RILA Act in July, but little has happened since.

RILAs promise growth beyond a simple fixed rate of return while providing guaranteed protection from losses in market downturns. They are a hybrid of popular fixed indexed annuities that tie performance to major market indexes.

But RILAs offer a broad selection of financial options to deliver specific investment growth with greater protection. With a RILA, investors can set the maximum loss they are willing to tolerate, unlike traditional index annuities.

"By reducing unnecessary regulatory barriers that hinder product development, the bill will help bring new and innovative options for consumers preparing for retirement," said Paul Kangas, vice president, financial services, the American Council of Life Insurers.

Big sales

In 2021, RILA sales were $38.7 billion, 61% higher than in 2020 and current growth remains strong and seemingly pinned to Fed interest rate moves. Sales growth has leveled off significantly in 2022, but analysts say RILA products should continue to sell well.

LIMRA is forecasting modest growth in 2022, compared with the 30% plus annual growth experienced over the past three years. In 2022, LIMRA projects RILA sales to be between $38 and $42 billion.

The bill would direct the SEC to create a new form to replace the largely inapplicable forms annuity issuers currently are required to use when filing RILAs with the commission, IRI said in a news release.

The current forms used to file RILAs are ones designed for use in connection with Initial Public Offerings or other “catch-all” forms not germane to insurance products. These forms require the disclosure of financial information in line with GAAP, as well as other extensive information that is irrelevant for prospective annuity purchasers.

The extensive information provided through such disclosures "adds unnecessary complexity that blurs a consumer’s understanding of the product," the IRI release said.

The RILA Act "would make it easier for companies to provide investors with more options without reducing consumer protections,” said Diane Boyle, senior vice president for government relations of the National Association of Insurance and Financial Advisors. “RILAs are innovative products that allow those preparing for retirement to benefit from market gains while reducing the risks of market downturns. The RILA Act would reduce regulatory burdens but would ensure consumers have the information they need to make informed investment decisions."

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.

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.