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Iowa Insurance Commissioner Susan Voss says she recently had a “good meeting” concerning indexed annuities with U.S. Securities and Exchange Commission Chairman Christopher Cox.
But Voss has not indicated whether Cox showed any flexibility on the topic of jurisdiction over indexed annuity regulation. She says she continues to be a firm supporter of treating indexed annuities as insurance products.
In June, the SEC released a proposal calling for it to take control over indexed annuity regulation, by defining indexed annuities as securities.
Supporters of the SEC proposal argue that indexed annuities expose holders to fluctuations in anticipated investment earnings, just as products already defined as securities, such as mutual funds and variable annuities, do.
Voss, whose state is home to major indexed annuity manufacturers, and other state insurance regulators have contended that indexed annuities clearly are insurance products and outside the scope of SEC oversight.
During the meeting with Cox, “I was pleased to finally be able to list and explain the extensive changes to regulation of indexed products that have occurred over the last 3 years,” Voss says in a statement about the meeting.
“Securities products put the risk on the purchaser,” Voss says. “Indexed annuities put the risk on the insurance company to provide a guarantee for the consumer.”
Voss says securities regulators often contend that the fact that a portion of indexed annuity income is tied to the performance of an investment index is a reason to give them jurisdiction over the annuities.
“That’s like saying that, if your ham sandwich contains a slice of lettuce, it’s a salad,” Voss says.
Voss acknowledges that insurers and marketers have committed abuses when selling unsuitable indexed annuities to older consumers.
“Some of these transactions clearly were not in the best interest of the consumer,” Voss says. But “we believe we have addressed those problems with our revisions.”
Insurers also are taking action to prevent abuses, Voss says.
Voss reports that she and other members of the National Association of Insurance Commissioners, Kansas City, Mo., hope to meet with Cox in September, when they go to Washington for the NAIC’s fall national meeting.
A SEC spokesman says the SEC does not comment on views on a proposal presented to the commission during a public comment period.