NAIC To Begin Debate On IUL Illustrations

A National Association of Insurance Commissioners’ subgroup will hold its first conference call Tuesday on indexed universal life illustrations.

The IUL illustration subgroup has a 2019 charge to “provide recommendations for modifications to AG 49 to the Life Actuarial (A) Task Force,” which was assigned at the NAIC’s Fall Meeting in November.

The group is expected to discuss how to illustrate products with different attributes, and whether to consider capping the credited rate. In 2015, during discussions over Actuarial Guideline 49, the group opted against a hard ceiling on the credited rate. Members will revisit that decision.

AG 49 was developed to provide insurance carriers a more uniform method for calculating maximum illustrated rates on IUL products and to help consumers better understand index life insurance product illustrations.

AG 49 requires insurers to illustrate using a benchmark rate which averages all 25-year loopback periods since 1949. They will have to assume the S&P 500, with a zero floor, and some form of cap.

There were other components of the regulation, but the goal was to rein in the illustrations, which varied widely and enabled some insurers to show double-digit returns that many considered unrealistic.

Since AG 49 took effect in September 2015, new IUL wrinkles, such as multipliers, have again caused illustrations to tilt unfavorably, regulators say. Factoring multipliers into illustrations is sure to be discussed by the group.

“I think there are issues with products in the market that are seeking to circumvent AG 49,” said James Regalbuto, deputy superintendent for life insurance at the New York Department of Financial Services, during a fall conference call.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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