SEC Director Cites Trends Affecting Investment Products Offered by Insurance Companies

SEC Division of Investment Management Director David W. Grim cited trends affecting investment products offered by life insurance companies. In remarks before the ALI CLE 2016 Conference on Life Insurance Products, Mr. Grim described recent regulatory developments and offered several observations on the current environment of investment products offered by insurance companies:

  • Buyout Offers. Mr. Grim stated that “insurers continue to move away from the offering of variable insurance contracts that feature the significant types of guaranteed income benefits and death benefits previously offered and sold.” He urged insurers to carefully monitor sales practices associated with these offers and emphasized that they will continue to be under scrutiny by SEC staff.
  • Risk Disclosure. Director Grim pointed out that the Division’s March 2016 guidance on basic practices outlines, among other things, what funds should do to address changing conditions, how to relay updates to investors, and how to react to market developments.
  • Filing Process/Rate Sheet Supplements. Mr. Grim stated that the Division intends to “be flexible and responsive in the filing review process” through the increased use of rate sheet supplements used by issuers of variable insurance products. He urged issuers to confirm that a prospectus clearly discloses, among other things, how the rate sheet works; how the fees and rates may change; how to obtain the current rates; and how existing contract owners can obtain the rate that is applicable to them. Moreover, he noted that the Division staff “believes that historic rates should be disclosed in an appendix to the issuer’s prospectus or statement of additional information.”

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