Much like brat summer, Registered Index-Linked Annuities (RILAs) got their moment in the limelight this summer. RILAs, which provide retirement savers with growth potential and downside market protection, are growing in popularity and may soon become the “it girl” of annuities.
In the first half of 2024, RILA sales jumped 41% to $30.7 billion. In July, the Securities and Exchange Commission (SEC) released a final rule that will give consumers more information to help them make knowledgeable decisions about RILAs and annuities featuring market value adjustments.
Rewind to RILA Act
Let’s rewind to the passage of the RILA Act in December 2022, which was strongly supported by ACLI and a coalition of financial services groups. The RILA Act directed the SEC to design a new tailored registration form specific to RILAs. This new form provides consumers with clear, relevant information about RILAs designed to address the specific features of the products.
SEC RILA Rule
The new rule allows insurers to note changes to limits on index gains on a webpage link in RILA prospectuses. Also, insurers must publicly file a form with the SEC showing 365 days of historical changes to that webpage. This change in the final rule aids consumer access to important information about their product.
Another change allows insurers to report financial information using insurers’ specific Statutory Accounting Principles (SAP) rules rather than requiring insurers to obtain case-by-case exemptive relief from the SEC.
Unfortunately, the rule requires insurers to attach a summary prospectus when they distribute any advertisement of RILAs which impedes broad marketing of the products. With the new rule, the SEC split the type of product registration ‘down symmetrical lines’ and did not offer this tailored approach to Registered Index-linked Universal life products and Contingent Deferred Annuities.
Overall, RILA summer was marked by positive developments that will meet consumer demands and ease insurers’ unique regulatory burdens at the SEC. ACLI supports continued efforts by the SEC to enhance financial disclosures that make sense for consumers and reduce unnecessary barriers to financial protection products.
Madison Ward is Counsel at the American Council of Life Insurers (ACLI). Madison primarily assists with regulatory matters associated with registered securities and professionals as well as members’ prudent risk hedging practices using derivatives products. Prior to joining ACLI, Madison was Government Affairs Manager and Policy Counsel at the North American Securities Administrators Association and previously worked at the Kansas Insurance Department.
