Harkin amendment keeps index annuity authority with states
June 24, 2010 by Karen Mracek
Blog post by Karen Mracek • kmracek@dmreg.com • June 23, 2010
Senators in the conference committee trying to finalize financial reform legislation voted in favor of an amendment that would keep regulation of indexed annuities with the states.
The amendment, proposed by Iowa Sen. Tom Harkin, was approved 8-4 and House negotiators could respond as early as today.
Iowa-domiciled insurer’s brought in more than one-third of all indexed annuity sales in the fourth quarter of 2009, according to AnnuitySpecs.com’s Indexed Sales & Market Report.
Major insurers have annuity operations in Iowa, including ING USA Annuity and Life Insurance Co., Transamerica Life Insurance Co., EquiTrust Life Insurance Co., CUNA Mutual Life, Midland National Life Insurance Co. and Aviva USA Life and Annuity Co.
The SEC announced in December 2008 it would begin regulating indexed annuities in 2011, a move Iowa insurers and regulators opposed. A federal appeals court ruled last summer that the Securities and Exchange Commission needed to make a more compelling argument for taking over regulation .
The U.S. Court of Appeals for the District of Columbia Circuit ruled in favor of American Equity Investment Life Holding Co. of West Des Moines and six other petitioners, saying the SEC had “failed to properly consider the effect of the rule upon efficiency, competition and capital formation.”
The amendment in the financial reform legislation would prohibit the SEC from taking over regulation of the annuities, and leaves that authority with states which regulate insurance.
Consumer groups, such as the consumer Federation of America, argue against the amendment, saying brokers who sell indexed annuities should have the fiduciary responsibility as investment advisors.
In a letter to conferencees, Barbara Roper, director of investor protection at the Consumer Federation of America, writes: “If adopted, this amendment would open a gaping hole in investor protections without any assurance that the insurance regulation relied on in its place is adequate or effective.”