Industry trade groups are urging the National Association of Insurance Commissioners (NAIC) to maintain flexibility in insurer oversight as the regulator extended its comment deadline to October 24 on draft safe harbor guidance tied to the Suitability in Annuity Transactions model regulation.
The NAIC adopted its Suitability in Annuity Transactions model in 2020. The regulation requires insurance producers to act in the best interest of consumers when recommending annuities and assigns supervisory responsibilities to insurers. The draft guidance, now under review, clarifies how insurers may rely on comparable federal or industry conduct standards to meet the model regulation under safe harbor provisions.
The safe harbor applies when producers operate under standards determined to be comparable to the NAIC model, such as rules enforced by the Securities and Exchange Commission under Regulation Best Interest and requirements from the Financial Industry Regulatory Authority. In these cases, the draft states that insurers would monitor producer conduct using information available during normal business operations and provide supervising entities with the data necessary for oversight.
The guidance also states that safe harbor provisions may apply when an insurance producer is registered as a representative under securities broker-dealer rules. The current draft, released October 7, includes revisions requested by industry organizations that distribute annuities through broker-dealers and registered investment advisers.
In a letter to the NAIC committee, the American Council of Life Insurers (ACLI) and the Financial Services Institute said the updated language clarifies that monitoring includes supervising entities. They said this aligns with the model regulation and directly addresses insurer oversight responsibilities in distribution systems that rely on third-party supervision.
Independent agent group the Federation of Americans for Consumer Choice also submitted comments on the draft. The group stated that revisions to remove any requirement for insurers to verify that comparable standards used by distribution firms are equivalent to those recognized under the model regulation reduced concerns regarding duplicative compliance reviews.
The NAIC stated that the extension of the public comment period allows additional time for stakeholders to provide feedback on the draft text. The proposal remains under review by the NAIC Annuity Suitability Working Group.
Earlier this year, New Jersey became the 50th state to adopt the NAIC’s Suitability in Annuity Transactions model regulation. ACLI president and chief executive officer David Chavern said that development represented a milestone for insurers and consumers.
Do you think the NAIC’s safe harbor guidance should allow more flexibility for insurers or impose stricter oversight standards? Share your thoughts in the comments.
