On June 4, 2009, Representatives Gregory Meeks (D-NY) and Tom Price (R-GA) introduced H.R. 2733, the Indexed Annuities and Insurance Products Classification Act of 2009 (the “Bill”), in the U.S. House of Representatives. If adopted, the Bill would nullify Securities and Exchange Commission Rule 151A which sought to classify indexed annuities as securities and subject them to federal regulation. See our July 8, 2008 and December 22, 2008 blog posts for a description of Rule 151A.
The Bill sets forth the following findings:
- Primary jurisdiction for regulating life insurance and annuities is vested with the States and Territories of the United States and the District of Columbia.
- Indexed insurance and annuity products offered by insurance companies are subject to a wide array of laws and regulations enforced by States and applicable jurisdictions, including nonforfeiture requirements that provide for minimum guaranteed values, thereby protecting consumers against market related losses.
- Adoption of Rule 151A by the Securities and Exchange Commission, entitled “Indexed Annuities and Certain Other Insurance Products”, 74 Fed. Reg. 3138 (January 16, 2009), interferes with State insurance regulation, harms the insurance industry, reduces competition, restricts consumer choice, creates unnecessary and excessive regulatory burdens, and diverts Commission resources, all of which outweighs any perceived benefits.
The Bill also amends Section 3(a)(8) of the Securities Act of 1933 (15 U.S.C. 77c (a)(8)) (the “1933 Act”) to clarify the scope of the exemption for annuities and insurance contracts from regulation under the 1933 Act.
The National Association of Insurance Commissioners (NAIC) has conveyed its support for the Bill in a letter to Representatives Meeks and Price, noting that “indexed annuities are fundamentally insurance products and should be regulated by state insurance regulators who can approve annuities contracts before they can be introduced to the market, monitor individuals involved with the sales and marketing of the annuities, and regulate the investments and financial strength of the issuing company.”