Louisiana Adopts NAIC's Annuity Suitability Update

Louisiana has joined the race to implement state-backed annuity sales standards, raising questions about whether the race will really help states ward off federal regulation of non-variable annuity sales.

The Louisiana Department of Insurance recently adopted a regulation that implements the National Association of Insurance Commissioners’ Suitability in Annuity Transactions Model Regulation, according to the American Council of Life Insurers and the National Association of Insurance and Financial Advisors, which have backed the adoption effort.

Louisiana is now the 46th state to adopt the update, and the 47th to adopt either the update or a stronger alternative.

Originally, states had hoped that getting all states to adopt the update quickly could keep the U.S. Securities and Exchange Commission from overseeing sales of non-variable annuities. But now the U.S. Labor Department is implementing new sales standards that could lead to federal oversight anyway.

What it means: Louisiana’s move to adopt the NAIC’s suitability update may not protect the state’s annuity sellers from federal regulation.

The backdrop: The SEC already classifies variable annuities and variable life insurance as securities.

Current federal laws leave regulation of non-variable products to the states, but a Dodd-Frank Act provision could let the SEC regulate non-variable indexed annuities if states fail to adopt tough, uniform sales standards for those products promptly.