Caption: 2016 Legislative and Regulatory Roundup • Image rights reserved by Annuity Outlook.
Major Regulatory Changes Shaping the Fixed Annuity Industry
The fixed annuity industry witnessed significant legislative and regulatory developments throughout 2016 and early 2017. State insurance departments and lawmakers continued adopting National Association of Insurance Commissioners (NAIC) model laws and regulations aimed at strengthening consumer protection, improving reserving standards, and enhancing oversight of annuity products.
These changes have important implications for insurance carriers, financial professionals, annuity providers, and consumers across the United States.
Adoption of the 2012 Individual Annuity Reserving (IAR) Table
Several states moved forward with updated annuity valuation standards by adopting the 2012 Individual Annuity Reserving (IAR) Table, as outlined in NAIC Model Regulation #821.
During 2016, the following states implemented the updated mortality table requirements:
Colorado
Kansas
New Hampshire
Montana
Pennsylvania
In January 2017, Michigan also adopted the revised 2012 IAR Table, bringing these jurisdictions into alignment with the majority of states already utilizing the current NAIC reserving standards.
The adoption of the updated mortality table helps ensure more accurate reserve calculations and strengthens the financial stability of annuity providers.
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The Interstate Insurance Product Regulation Compact (IIPRC) continued to gain momentum in 2016, simplifying insurance product approval processes across participating states.
Connecticut Joins the Compact
Connecticut officially became a member of the IIPRC after House Bill 5051 was enacted, with the law taking effect on July 1, 2016.
South Carolina Rejoins
South Carolina reenacted its participation through HB 4662, restoring its membership retroactively to June 1, 2014, after the previous authorization had expired.
Tennessee Seeks Extension
Tennessee lawmakers introduced legislation to extend the state's participation in the Compact through June 30, 2022.
States Yet to Join the IIPRC
Despite continued growth, several jurisdictions remain outside the Compact, including:
California
Delaware
Florida
New York
North Dakota
South Dakota
District of Columbia
The District of Columbia renewed efforts in February 2017 by introducing legislation to join the Compact after previous attempts were unsuccessful.
The continued expansion of the IIPRC is expected to improve regulatory efficiency and accelerate insurance product approvals nationwide.
Principle-Based Reserving Becomes Reality
One of the most significant developments in the insurance industry was the widespread adoption of the 2009 NAIC Standard Valuation Law (SVL), introducing Principle-Based Reserving (PBR).
States adopting the revised standards during 2016 included:
Alabama
Idaho
Minnesota
Pennsylvania
South Carolina
Utah
NAIC Confirms PBR Implementation Threshold
On June 10, 2016, the NAIC unanimously confirmed that the required threshold for Principle-Based Reserving implementation had been achieved.
At that time:
45 states had enacted substantially similar legislation.
More than 79% of applicable U.S. premium volume was covered.
The required threshold of 42 states and 75% premium volume had been exceeded.
As a result, Principle-Based Reserving and the new NAIC Valuation Manual officially became effective on January 1, 2017.
Remaining States Yet to Adopt Current Standards
Only a small number of jurisdictions had not adopted the revised Standard Valuation Law:
Alaska
District of Columbia
Massachusetts
New York
Wyoming
Wyoming subsequently introduced legislation in 2017 to move toward compliance with current PBR standards.
Increased Adoption of Annuity Suitability Standards
Consumer protection remained a major focus during 2016 as more states adopted the updated NAIC Suitability in Annuity Transactions Model Regulation.
New Adoptions
The following states adopted revised suitability regulations:
Alabama
Delaware
Massachusetts
These regulations establish stronger requirements for insurance producers and insurers to ensure annuity recommendations are appropriate based on a consumer’s financial objectives, risk tolerance, and personal circumstances.
States Reviewing Adoption
Several states were actively considering implementation, including:
Arizona
Missouri
Montana
Virginia
As adoption continues, only a limited number of states remain outside the framework established by the 2010 NAIC model.
California Strengthens Consumer Protection Requirements
California expanded its already robust annuity suitability requirements by amending Section 10509.913 of the California Insurance Code.
Under the updated law, insurers and producers must now consider whether a consumer intends to apply for government assistance programs when evaluating the suitability of an annuity recommendation.
California's enhanced standards exceed current NAIC model requirements and may influence future revisions to national suitability regulations.
Growing Focus on Unclaimed Life Insurance and Annuity Benefits
State regulators continued addressing concerns surrounding unclaimed life insurance and annuity benefits.
While the NAIC works toward a nationwide model law, many states have implemented their own legislative solutions.
Florida Leads New Initiatives
Florida enacted two major laws:
Creation of the Division of Unclaimed Property within the Florida Department of Financial Services.
Adoption of the Unclaimed Life Insurance and Annuity Benefits Act.
The legislation requires insurers to annually compare policyholder records against the Social Security Administration's Death Master File to identify unpaid benefits.
Additional States Taking Action
Several states adopted similar legislation during 2016, including:
Illinois
Missouri
Pennsylvania
By early 2017, additional proposals had emerged in:
Nebraska
Oklahoma
Texas
These laws aim to ensure beneficiaries receive life insurance and annuity proceeds that might otherwise remain unpaid.
Looking Ahead: Continued Evolution of Insurance Regulation
The regulatory activity seen throughout 2016 and early 2017 demonstrates a clear industry-wide trend toward stronger consumer protections, modernized reserve requirements, enhanced suitability standards, and improved oversight of insurance products.
As more states adopt NAIC model laws and harmonize regulatory frameworks, insurers, annuity providers, and financial professionals must remain vigilant and adaptable to changing compliance requirements.
For the fixed annuity industry, these developments mark an important step toward greater consistency, transparency, and long-term financial stability across the U.S. insurance marketplace.
