Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Friday, January 9, 2009

SEC Publishes Text of Indexed Annuity Rule

The SEC issued the text of its recently adopted rule that defines the terms “annuity contract” and “optional annuity contract” under the Securities Act of 1933. The controversial rule, which was almost universally opposed by the insurance industry, is intended to clarify the status under the federal securities laws of indexed annuities, under which payments to the purchaser are dependent on the performance of a securities index. The new rule prospectively defines certain indexed annuities as not being “annuity contracts” or “optional annuity contracts” under this exemption if the amounts payable by the insurer under the contract are more likely than not to exceed the amounts guaranteed under the contract.  The rule applies on a prospective basis to contracts issued on or after the effective date of the rule.

The SEC also adopted a new rule that exempts insurance companies from filing reports under the Securities Exchange Act of 1934 with respect to indexed annuities and other securities that are registered under the Securities Act, provided that certain conditions are satisfied, including that the securities are regulated under state insurance law, the issuing insurance company and its financial condition are subject to supervision and examination by a state insurance regulator, and the securities are not publicly traded.

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