SEC Proposes New Rules for RILA Annuity Providers

The Securities and Exchange Commission proposed amendments Friday that would permit registered index-linked annuities to register on Form N-4, a specialized form for variable annuities.

Under current rules, RILAs must register on more general forms not designed for them and containing information not relevant for investors interested in RILAs.

RILAs are an annuity product tied to the performance of an investment index, and their performance is “bounded,” meaning returns are restrained in a growing market, but losses are also mitigated in a declining market to provide a predictable stream of income.

According to the SEC, it will allow RILAs to use a “tailored form” for registration and disclosure that will “highlight key information” about them. Specifically, the amendments would alter the Key Information Table on Form N-4 so that the RILA features are more effectively communicated to investors.

The Insured Retirement Institute has backed the proposal and came out with commentary today in support of the suggestions.

Jason Berkowitz, the IRI’s chief legal and regulatory affairs officer, highlighted an exception in the proposal that would permit RILAs to use simplified financial statements: “Notably, we are encouraged that under the proposal, RILA issuers would appear to be eligible for a limited exception, which is already available to variable annuity issuers, to use statutory financial statements rather than GAAP financials only if the insurer does not otherwise prepare GAAP financial statements. This is a particularly critical element of the proposal.”

The comment period will remain open for 60 days from today or 30 days following the proposal’s publication in the Federal Register, whichever is longer.