Insurance Regulators Oppose SEC Grab for Control

Although wounded by its inept bumbling of the Bernard Madoff affair, the SEC charged ahead last week with a plan to control a big chunk of the $123 billion equity-indexed annuities industry, cutting insurance regulators out of the picture and giving big companies like AXA-Equitable a new sheriff.

The SEC couched its approval of Rule 151A on Dec. 17 as an effort to keep seniors from being victimized by these products. That didn’t impress the National Association of Insurance Commissioners, the state regulators who see themselves as the rightful overseers of the insurance industry and resent any attempt by the federal government to encroach on their turf.

“We are extremely disappointed,” NAIC Vice President Susan Voss fired back. “State insurance commissioners have taken active steps to protect consumers of equity-indexed annuities - and will continue to do so.”

Equity-indexed annuities are insurance policies tied to the stock market. An investor typically puts in a certain amount; what he or she gets back at the end of seven years or so depends on how a market index such as the S&P 500 performs.

These products had a bad rep in the 1990s, but insurers have since fixed most of the problems and are — or, at least, were until the market crashed — selling them liberally, often with bells and whistles that put a floor under the investment. Sales increased more than 23 percent in a single year, according to the SEC.

Whether the mammoth insurance industry wants federal or state regulation is an open question. But earlier this week outgoing SEC Chairman Chris Cox raised the white flag on himself, admitting to “multiple failures over at least a decade” to investigate Madoff’s $50 billion scheme.  State insurance regulators have no such black mark on their record.