The NAIC Suitability in Annuity Transactions Model Regulation

In 2020, the National Association of Insurance Commissioners (“NAIC”) adopted revisions to the
Suitability In Annuity Transactions Model Regulation (the “Suitability Model”) which require producers to
“act in the best interest of the consumer when making a recommendation of an annuity and require
insurers to establish, and maintain, a system to supervise recommendations of annuities.”

The revisions to the Suitability Model are intended to bring state insurance regulations into alignment
with Securities and Exchange Commission’s (“SEC”) Regulation Best Interest (“Reg BI”). The
revisions to the Suitability Model explicitly do not create a fiduciary obligation or fiduciary relationship
for producers, and as with previous versions of the suitability model, the revised version applies to any
sale or recommendation of an annuity, with the exception of, amongst others, transactions involving
contracts used to fund certain plans under the Employee Retirement and Income Security Act
(“ERISA”), certain contracts under Sections 401(k), 403(b), and 457 of the Internal Revenue Code
(“IRC”), and certain nonqualified deferred compensation arrangements. The revisions to the Suitability
Model add several “best interest obligations” which require producers, when making a recommendation
of an annuity, to act in the best interest of the consumer.

Several states have taken steps to adopt the revisions to the Suitability Model, and National Life
Group (“NLGroup”) anticipates many, if not most, states will follow suit. NLGroup will take a state-bystate
implementation approach, implementing the requirements in states one-by-one as states adopt
the revisions to the Suitability Model; however, NLGroup will explore implementing the revisions to the
Suitability Model nationally in the future, regardless of regulatory action.

Click Below for Full Details

Best Interest Obligations and Producer Training Requirements