U.S. variable annuity (VA) and fixed-index annuity (FIA)
sales are expected to decline by at least 10% through 2018 as
the industry struggles to adapt to upcoming fiduciary reform regulations put forth by the
Department of Labor (DOL), according to data shared by
There can be little doubt that annuity providers, many of
them at least, would like to see the significant reforms halted or dialed back under
the pending Trump administration. They argue they will never be able to
make the new fiduciary standard's “best-interest contract exemption” or “BIC” provisions
workable, given the commission-based distribution arrangements traditionally used
for fixed-index annuities.
Annuity providers would much prefer to be allowed to use the
distinct “84-24 exemption” to continue to use commission-based sales structures—which
had been initially proposed by the DOL but subsequently reversed in the final
version of the rulemaking published last year and slated to start taking effect
in April 2017. Utilizing this exemption would still likely require some changes that are in the best interest of the end investors purchasing annuity products, but many insurers believe 84-24 is an easier compliance hurdle to jump over.
Polling conducted in this evolving environment by Cerulli
Associates suggests that insurers feel the biggest challenge they are facing
for the foreseeable future is the DOL rule—even as concerns about lasting low
rates and stagnant global economic growth add additional headwinds.
“Insurers' responses to new the regulatory landscape will
significantly impact the future of VA and FIA sales,” argues Donnie Ethier,
associate director at Cerulli. “In order to ensure future relevance, insurers
must examine both the pricing and positioning of their products.”
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