First, let’s look back for a minute:
Disclosure and filing issues
Among the issues encountered since RILA issuers were permitted to convert to Form N-4 on September 23, 2024, were:
- Staff requests to spread risk disclosure more liberally across the prospectus than what was mandated by the form, including the following:
- Contract Adjustment related risk disclosures, such as the effect of periodic deductions on Contract Adjustments
- RILA related risk disclosures, such as minimum loss limits for each type of downside limit
- Describing risks when only one option is guaranteed to be available
- Noting loss limits can result in higher losses of multiple periods
- Disclosing risks if substituted indices not substantially similar
- Providing other RILA related disclosures, such as factors to consider in choosing among crediting strategies
- Having to obtain a new CIK for RILA filings in certain circumstances
- Understanding the limits on the use of and the representations required for template relief requests
- Other challenges:
- Form N-VPFS
- During the May 2025 filing cycle, RILA-only filers experienced issues with the EDGAR system. Technical updates that were supposed to be completed months prior to the “season” were never performed causing filing suspensions. SEC staff then had to intervene to manually have the filings accept and disseminate
- It was confirmed by the SEC the EDGAR system has been updated, so N-VPFS filings for RILA filers who previously filed the form type, will not experience the same issue and the filings will be accepted automatically
- There is still a concern that first time RILA 485BPOS filers may experience the same issue
- Form 24F-2
- It’s important to note that combination contract filers, i.e., those contracts containing both variable and non-variable options, will be required to submit a Form 24F-2 filings for the variable options separate from the Form 24F-2 that would have to be filed for the non-variable options
- Form N-VPFS
Dealing with disparate sources of annuity data
The data challenge intensified when issuers attempted to enter new markets, such as the RILA space, due to RILAs representing distribution channels with unique complexities that differentiate them from traditional annuities. Although early entrants into the RILA market were showing promising results and attracting increased interest from other issuers, the path to entry was not without obstacles.
A theme that continually arose was the concern of annuity leaders around the fragmented nature of annuity data, which is often scattered across different systems such as policy administration, CRM, and actuarial platforms. The data continued within differing systems creates significant challenges in achieving a unified and accurate view of annuitant information.
Issuers attempted to tackle the difficulty of connecting their existing systems and adapting to the different standards and contractual nuances inherent to RILAs. The intricacies of these contracts required an adaptable data infrastructure, a challenge many current systems were not equipped to handle.
Next, what lies ahead:
Conversion to Form N-4
Although issuers have had the option to convert to Form N-4 since since the effective date in September 2024 for the amended form, RILAs and MVAs as well as variable annuities must now use new Form N-4.
Specifically, in addition to the requirement above that May 1st is the latest effective date by which all post-effective amendments to registration statements for RILAs, MVAs and variable annuities must comply with amended Form N-4, all initial registration statements for these products filed on or after May 1st must comply with amended Form N-4. This delayed compliance period was designed to give all insurance companies sufficient time to comply with the changes, including to update their registration statements, prepare to use final rules 485 and 497 to update their registration statements and file prospectuses, and begin paying securities registration fees on final Form 24F-2.
Requiring insurance companies to rely on rules 485 and 497 in connection with non-variable annuities will provide a uniform post-effective amendment and prospectus filing framework for all issuers using Form N-4 and provide insurance companies that may offer one or more related insurance products – including RILAs or MVA options offered as part of combination annuity contracts – consistent filing requirements across related products. That said, registration statements for contingent deferred annuities will still have to be registered on Form S-1 or Form S-3, as applicable.
Further, May 1st is also the compliance date for registration statements on Form N-4 to include more specific disclosures on intermediary specific variations, i.e., identification of the specific package of features, benefits and terms offered by each intermediary. This is likely presenting challenges to issuers in coordinating with their intermediaries in obtaining the necessary information, but SEC staff has to date been unwilling to postpone the compliance date for this requirement past May 1st.
Welcome to XBRL
Under the final amendments, Form N-4 RILA filers will be required to tag in Inline XBRL certain specified disclosures. Specifically, these issuers will be required to tag selected information in Inline XBRL in accordance with Rule 405 of Regulation S-T and the EDGAR Filer Manual.
Certain of the final amendments’ new structured data requirements will apply, as proposed, to issuers of non-variable annuities. Specifically, these include where applicable, requirements to tag specified portions of the overview and the more in-depth descriptions of index-linked options and contract adjustments included in the prospectuses, the disclosure of census-type information regarding contracts with index-linked options and MVA options, and information disclosed about changes in and disagreements with accountants.
Non-variable annuity issuers must tag statutory prospectus disclosures that Form N-4 currently requires variable annuity issuers to be tagged in Inline XBRL, including:
- Key Information Table
- Fee Table
- Principal Risks of Investing in the Contract
- Benefits Available Under the Contract
- Investment Options Available Under the Contract
In addition to these items, the SEC will require Inline XBRL tagging of new, non-variable annuity-specific disclosures RILA and MVA issuers disclose in their prospectuses and SAIs, including:
- That part of the Overview dealing with RILAs and MVAs, as well as the more in-depth descriptions of RILAs, MVAs, and Contract Adjustments in new Items 6(d), 6(e), and 7(e)
- Census-type information regarding contracts with index-linked options
- Information disclosed about changes in and disagreements with accountants (Form N-4; Item 26(c))
- In-depth description in the prospectus of any fixed options
- Disclosure indicating that the insurance company is relying on the exemption from Exchange Act reporting requirements provided by rule 12h-7, if applicable
- Information about Contracts with Index-Linked Options and Fixed Options Subject to a Contract Adjustment (Form N-4; Item 31A)
According to the SEC, these items were chosen because they are well-suited to being tagged in a structured format and are of significant utility and benefit for investors and other data users that seek structured data to analyze and compare contracts.
For example, this tagging enables automated extraction and analysis of descriptions of:
- Index-linked options available under a contract
- Information regarding the features of each currently offered index-linked option
- Information regarding contract adjustments
Consistent with the existing approach for variable annuity issuers, the new Inline XBRL tagging requirements will only apply to contracts being sold to new investors. Prospectus disclosure for contracts no longer being sold to new investors do not need to be tagged.
In addition, consistent with the approach for issuers of variable annuities registered on Form N-4, the amendments require non-variable annuity issuers to submit Interactive Data Files as follows:
- For most post-effective amendments, Interactive Data Files must be filed either concurrently with the filing, or in a subsequent amendment that is filed on or before the date that the post-effective amendment that contains the related information becomes effective
- For initial registration statements (and post-effective amendments other than as described in the bullet immediately above), Interactive Data Files must be filed in a subsequent amendment on or before the date the registration statement or post-effective amendment that contains the related information becomes effective
- For any form of prospectus filed pursuant to rule 497(c) or (e), Interactive Data Files must be submitted concurrently with the filing
Post rule making guidance and potential future developments
Since Form N-4 was amended, SEC staff also updated guidance to allow the use of rate sheet supplements to notify investors of changes to current limits on index losses in RILAs, instead of having to file a post-effective amendment. In the future, we hope the Commission and its staff will consider other actions to facilitate product innovation in this important space.
Examples include:
- Relief to allow written communications without prospectus delivery
- Allowing e-Delivery of prospectuses
- Amending FINRA Rule 2210 to allow hypothetical return disclosures
- Amending Form N-6 for Registered Indexed Universal Life
- Updates to EDGAR system to avoid filing errors experienced in 2025
- Providing more flexibility in notifying investors of changes to terms in indexed investment options
In this regard, we note that the Senate has taken up a bill passed by the House that, among other things, would require that the SEC allow the use of e-delivery of prospectuses for certain issuers. Although the set of these issuers covered by the bill in its current form does not include non-variable product issuers, hopefully this will change.
In addition, we note that FINRA recently proposed an amendment to its Rule 2210 that would provide broker-dealers with more flexibility in depicting projected performance and targeted returns in communications with the public. Although not the same flexibility as afforded to investment advisers by Rule 206(4)-1 under the Investment Advisers Act of 1940, hopefully these recent developments are indicative of future changes to come.
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