Wyoming Comment Letter Requesting Specific Reference to NAIC Disclosure Language

Submitted via email to doi.rules@wyo.com 

Honorable Jeffrey P. Rude
Insurance Commissioner
Wyoming Department of Insurance 
106 E 6th Ave 
Cheyenne, WY 82001 

RE: In the Matter of the Amendment of Chapter 64 of the Wyoming DOI Regulation Governing Suitability in Annuity Transactions 

Dear Commissioner Rude: 

FACC, the Federation of Americans for Consumer Choice, appreciates the opportunity to comment on the proposed revisions to Chapter 64 governing suitability in annuity transactions. 

FACC commends the Wyoming Department for moving forward to adopt the updated National Association of Insurance Commissioners (NAIC) Model Regulation #275. In particular, we applaud efforts by the Department to adopt the updated model regulation in its entirety as drafted by the NAIC, thereby promoting uniformity and consistency across over thirty states that have now adopted the NAIC model regulation. 

FACC and its members, consisting of independent distributors selling mostly fixed annuity products, believe the NAIC Model Regulation provides strong consumer protection while at the same time preserving consumer choice through well-balanced thoughtful regulatory requirements consistent with different delivery systems in the marketplace. We have long held that it is important for states to uniformly adopt the model requirements without deviations so that companies and agencies operating across state boundaries can efficiently comply with the regulation and utilize uniform practices that most effectively serve consumer interests. 

With that in mind, we would like to suggest one modification to the proposed Wyoming amendments to help with further alignment with the NAIC model regulation, and also suggest a couple subtle clarifications to the preamble explaining the purpose of adopting the updated NAIC model regulation: 

1. We urge Wyoming to specify the content of Disclosures A, B, and C as done in the Model Regulation. This could be done either by incorporating the full forms into the regulation or making specific reference to the NAIC model regulation exhibit forms. The NAIC model regulation identifies these exhibit forms as Appendices A, B, and C. The proposed Wyoming regulation merely states that these disclosure forms will be located on the Department website, which likely is intended to be the same as the NAIC forms, but we believe it is strongly preferable to promulgate these forms within the regulation itself. Such promulgation, or incorporation of the NAIC forms by reference, would ensure that Wyoming is consistent with the NAIC model regulation in regard to disclosure requirements and provide certainty to regulated parties both now and into the future.
2. FACC believes the Statement of Principal Reasons for amending the regulation, as contained in the preamble, is well stated overall but should be clarified in certain respects to avoid any misunderstanding with regard to future intent and interpretation. In our view, the statement implies that adoption of the updated NAIC model regulation is needed under the so-called Harkin Amendment to “preserve state authority to regulate annuities.” While this is true in a general sense, the Harkin Amendment operates to preclude the U.S. Securities and Exchange Commissioner (SEC) from regulating fixed annuities under certain conditions which include among other things state adoption of applicable NAIC Model Regulation #275 updates. Thus, adopting the NAIC model regulation amendments is not necessary to preserve state regulation of annuities as such, but is necessary to preserve exclusive state jurisdiction over fixed annuity products. Additionally, elsewhere in the Statement it is suggested that the “best interests standards adopted by the SEC” are “included in the NAIC’s version” of the updated model regulation. This too is true in a general sense but the NAIC Model Regulation does not actually “include” SEC standards as such which are unique to securities products. Rather the NAIC Model Regulation contains its own standards and procedures that are similar to and compatible with SEC requirements but different because the NAIC model regulation is molded around unique attributes of the insurance industry. We appreciate these are subtle points of clarification likely consistent already with the intent of the write-up and thus should not detract from the well-reasoned justification in the preamble for adoption of these amendments. We mention them here primarily to ensure common understanding of the pertinent background to the extent it could affect future intent or interpretation. 

In closing, FACC wishes to emphasize on behalf of our members and our industry that we are very thankful for the Commissioner’s leadership and pleased to see Wyoming moving forward with adoption of this important regulatory update. Thank you again for the opportunity to comment. 

Sincerely, 

Kim O’Brien, CEO