On February 24, 2026, the National Association of Insurance Commissioners’ Life Insurance and Annuities Illustrations Working Group made its debut appearance. As a prelude, Ben Slutsker, director of life actuarial valuation at the Minnesota Department of Commerce and the chair of the working group, explained that based on their review of annuity illustrations, regulators are concerned that consumers may have overly optimistic and unrealistic expectations about an annuity’s return. He previewed the chair’s exposure draft, which seeks “high-level concepts and approaches to ensure consumers are receiving reasonable expectations for index annuity returns at point-of-sale.”
Discoveries Made by Regulators
A group of regulators informally asked 25 insurers to provide their annuity illustrations and found:
- One-third of the illustrations used a highest illustrated rate of 10% or lower.
- For two-thirds of the illustrations, roughly half used highest illustrated rates ranging between 11% and 15% and the remaining half used highest illustrated rates ranging between 16% and 27%.
- Only one-quarter of the illustrations with the highest illustrated rates were for registered indexed-linked annuities (RILAs), which included illustrations using illustrated rates greater than 20%.
- The highest illustrated rates involved recently created indexes with volatility control, many of which are “proprietary.” The illustrated rates were based on backcasted data.
- Consistent with Model Regulation No. 245, the fixed indexed annuity (FIA) illustrations included a table of guaranteed illustrated values, which appears first in the illustration, as well as a table of illustrated values based on the worst 10 years of the past 20 years.
Regulator and Stakeholder Comments
Many questioned how FIAs, as non-securities products, could be using illustrated rates that are higher than RILAs, which are securities products. Commenters discussed that this arises due to FIAs’ use of proprietary indexes to credit interest. Birny Birnbaum of the Center for Economic Justice suggested that the backcasted data should be measured against the actual proprietary indexes’ performance. Illustration disclosure that the values were based on backcasted data was inconsistent. One commentator suggested that there has been an initial study of proprietary indexes showing that actual performance has been substantially less than the backcasted performance. Regulators also discussed the lack of uniformity in the illustrations’ disclosure about the backcasted nature of the data — some illustrations disclosed this “up front,” others buried the disclosure in the back with all the other index disclosures, while others had no disclosure.
Birnbaum also questioned the caps and other factors used in the illustrations and whether insurers had a practice of lowering these factors for in-force policies. He suggested that companies must be more transparent about the caps and other factors.
In considering how to prevent unrealistic consumer expectations, regulators questioned whether there should be a cap on the illustrated rate. Some posited that FINRA regulations for variable products impose a cap on illustrated rates. Many discussed looking at FINRA and any other federal requirements as a guidepost in developing additional regulations for annuity illustrations.
Next Steps
The working group exposed the following for a 30-day comment period ending March 24:
Regulators have observed index annuity disclosures that suggest annual returns can range from 10%-25% for several years. This has brought up potential concerns around whether consumers are receiving reasonable expectations regarding future performance upon purchasing an annuity. What are both short-term and long-term approaches to ensure consumers receive reasonable expectations for index annuity returns at the point-of-sale?
- Please keep any comments at a high -level regarding potential direction for the Working Group and types of proposals, rather than providing specific proposals themselves
- In addition, please feel free to include any comments related to disclosures around newly -developed indices and any other elements related to the concerns described above.
Slutsker explained that based on the responses received, the working group will select a direction and there will be future exposures on the selected direction.
