NAIC Separate Account Risk Working Group Listens to Commenters

By Helen Napoli


On June 5th, the National Association of Insurance Commissioners’ (NAIC) Separate Account Risk (E) Working Group heard from four out of the nine commenters who submitted written comments on the NAIC’s evaluation criteria, assessments and proposed recommendations regarding the insulation of separate accounts.

The NAIC asked interested parties to comment on all aspects of their exposure document, which included product groupings and their associated attributes; the NAIC’s assessment of the various products, and the proposed recommendations for the various product groupings. The NAIC’s Separate Account Risk (E) Working Group (SAREWG) addressed all products, including stable value that used separate accounts. 

Only the American Council of Life Insurers (ACLI), the Committee of Annuity Issuers (Committee), the American Academy of Actuaries (Academy) and the SVIA, as well as Great West Life & Annuity Company supplemented their filed comments with oral presentations. The views from the four industry organizations (the first four entities referenced above) were remarkably similar in both their oral remarks and comment letter filings. All supported upholding and preserving the insulation status of stable value separate account contracts. They also stressed that the integrity of the general account and its relationship to insulated separate accounts should be preserved and evaluated using three principles. These principles are:

  • Ensuring that adequate compensation is provided to the general account for any guarantees by the general account that serve as a backstop after all separate account assets are exhausted;
  • Maintaining adequate reserves outside of the insulated separate account to support such guarantees; and
  • Maintaining a comprehensive state regulatory regime for insulated separate accounts.

The four industry groups only diverged in the array of products they addressed in comments, with all but the SVIA covering products in addition to stable value. SVIA’s comments were limited to insulated separate accounts used by stable value in defined contribution plans and were supportive of comments from the Committee, ACLI and the Academy. SVIA’s latest Annual Stable Value Funds Investment and Policy Survey found that $67.5 billion was held in insulated separate accounts across all surveyed management segments. Gina Mitchell, SVIA’s President, emphasized that stable value is uniquely positioned to fulfill the Employee Retirement Income Security Act (ERISA) and state fiduciary mandates of offering investments that both minimize the risk of loss as well as provide diversification of investments. She noted that studies have concluded that stable value investments for moderately and highly risk adverse investors under reasonable yield curve assumptions, should be a major component of an optimum portfolio to the exclusion of money market funds and the near exclusion of intermediate-term bonds. “Stable value grows more important to defined contribution plan participants as our population ages and becomes more risk adverse, which several recent studies have concluded has happened across almost all ages of investors,” noted Mitchell. These trends help explain the increased use of stable value by defined contribution plan participants in both industry and SVIA surveys, said Mitchell.

The SAREWG thanked all commenters for their remarks and submissions and said they will be considering all the comments to determine their next steps over the coming months.

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