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Indexed Annuity Battle Lost By SEC, For Now


A year and a half long battle between the SEC and insurers is over, at least for now.  According to Arthur Postal’s “Appeals Court Vacates Rule 151A” in the National Underwriter, the SEC will have to go back to square one if they want to propose another Rule regarding the indexed annuity.  The SEC hoped to use Rule 151A to classify indexed annuities as securities rather than insurance products.  This would allow them to have jurisdiction over the products along with insurance regulators in each state.  But a panel of three judges in the appeals court has sided with insurers who want them to remain insurance products since they are backed by the insurance companies and there is no risk of losing investors’ principal.

If the SEC decides to propose a new Rule, they will have to show what effect such a rule would have on efficiency, capital formation, and competition in the industry.  Currently, the SEC says that they will do more research and wait to decide if they will begin another battle with insurers over indexed annuities.  Insurance companies believe that these are some of the best annuities for their clients and are relieved that Rule 151A has been dropped.  They think that agents and companies will be much better suited to handle indexed annuity products than the SEC and that they are far from being the equivalent of securities.  We’ll have to wait and see if the SEC decides to bring this issue up again.

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