Life Bureau Filing Guidance Note

Guidance Date: 06/01/2022

Supplemental Guidance on Equity Index Products

This guidance supplements the Guidance on Equity Index Products dated October 31, 2007.  In response to recent questions regarding the permissible range of variability for certain features of fixed equity index annuities, we offer the following guidance as to what the Department has approved.  Variability that is inconsistent with this guidance would be reviewed on a case-by-case basis and should be discussed with the Department prior to making a policy form filing.

The product features addressed in this guidance are:

  1. Minimum Cap Rate
  2. Minimum Participation Rate
  3. Maximum Spread Rate (i.e., the threshold below which there is no participation in the equity index)
  4. Minimum Step Rate (i.e., the predetermined rate credited when the index return for the period is ≥0).

Minimum Cap Rate

The cap rate should not be less than the sum of (i) 0.50% and (ii) the greater of (a) and (b) where:

(a) equals the rate declared for the contract’s fixed account at the time the equity index segment is renewing; and

(b)  equals the rate used in the calculation of the “minimum accumulation value”, as defined in Insurance Law § 4223, for the equity index account under the contract.

For contracts that do not have a fixed account option, the minimum would be (b) plus 0.50%.

Minimum Participation Rate

The participation rate should not be less than 25%.

Maximum Spread

The spread rate should not be greater than 10%.

Minimum Step Rate Credit

The step rate credit should not be less than the sum of (i) 0.25% and (ii) the greater of (a) and (b) where:

(a)  equals the rate declared for the contract’s fixed account at the time the equity index segment is renewing; and

(b)  equals the rate used in the calculation of the “minimum accumulation value”, as defined in Insurance Law § 4223, for the equity index account under the contract.

For contracts that do not have a fixed account option, the minimum would be (b) plus 0.25%.

Note:  The rates described above are annual rates.  For contracts with equity index crediting structures that impose limits or minimums over a different time period (e.g., monthly), those amounts should be adjusted in a manner consistent with the annual amounts above.

For questions about this guidance, please contact Richard Bernardi, Supervising Actuary.