SEC Releases Rule Proposal on Variable Annuities and Variable Life Insurance Contracts

On 30 October 2018, the U.S. Securities and Exchange Commission (SEC) released a rule proposal regarding variable annuities and variable life insurance contracts. The new rule proposal is designed to improve the quality of disclosure for investors in a number of different ways, including helping investors make more informed investment decisions.

Part of the rule proposal includes a new rule 498A, which “would permit the use of two distinct types of contract summary prospectuses:

  • initial summary prospectuses covering variable contracts currently offered to new investors; and
  • updating summary prospectuses for existing investors.”

Other amendments, such as to the registration forms for variable contracts N-3, N-4, and N-6, would also be required under the changes.

Significantly, the SEC also mentioned the role that Inline XBRL (iXBRL) will play as part of the new rule proposal. In particular, Inline XBRL will be required to submit “certain required disclosures in the variable contract statutory prospectus.” By using Inline XBRL, investors, analysts, and other stakeholders will be better able to analyze and compare information about these variable contracts, as data in Inline XBRL format can be easily read by humans using an internet browser while also remaining machine-readable.

The SEC notes that “this aspect of our proposal is in keeping with our ongoing efforts to implement reporting and disclosure reforms that take advantage of the benefits of advanced technology to modernize the investment company reporting regime and to, among other things, help investors and other market participants better assess different products.”

Comments will be accepted by interested parties and stakeholders until 15 February 2019 as part of the public consultation period.

The SEC’s website has the full press release and accompanying proposed rule available to view.

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