NAIC Task Force Adopts Index-Linked Variable Annuity Guidelines

A panel of regulators at the National Association of Insurance Commissioners has adopted a set of standards for a popular, relatively new type of annuity — the registered index-linked annuity, or index-linked variable annuity.

Members of the Life Actuarial Task Force, part of the NAIC’s Life Insurance and Annuities Committee, approved Actuarial Guideline ILVA last week, in Tampa, Florida, during the NAIC’s fall national meeting. The guideline will apply to contracts issued on or after July 1, 2024, according to a draft of the guideline included in a task force document packet.

For regulators and annuity issues’ actuaries, the guideline will make it clear that the annuities are variable annuities and that, when the contracts are canceled early, the contracts provide benefits similar to those that might be provided by an ordinary variable annuity contract that was canceled early.

Because an ILVA contract (or RILA contract) ties returns to the performance of an investment index, rather than a basket of funds resembling mutual funds, the guideline talks about how to handle “interim values” tied to the value of a “hypothetical portfolio over the index strategy term,” rather than to the performance of a basket of mutual funds.

What It Means

For financial professionals and clients, the main impact of Actuarial Guideline ILVA may have to do with language.

Insurers have called the products everything from buffer annuities to structured annuities, to RILA contracts.