An Overview of Regulatory Requirements

Sam Gutterman

This chapter will provide an overview of the regulation and regulatory issues associated with the sales and management of variable annuities (VAs). Due to their long-term nature, the fiduciary responsibility involved, the investment risks and guarantees included, their complexity and their similarity to certain other investment products (such as, in Europe, unitised with profit products), the regulation of VAs has played a crucial role in their development and evolution.

The fundamental concerns of regulators (in some cases referred to as supervisors, especially with respect to insurance companies) about these products are quite similar to their concerns regarding other products offered by life insurers, including:

• • assurance that promises made are kept and obligations are upheld;
• • their coverage and product features are suitable for the needs of their purchasers; and
• • due to their long-term nature and complexity, communication with clients, especially through insurers’ sales and service activities, is appropriate and clear.

To satisfy these concerns, regulators need adequate information to assess appropriately the performance of the