Regulatory Landscape

In 2026, the NAIC Life Insurance and Annuities (A) Committee, chaired by Iowa and vice chaired by Michigan, is largely focusing on annuity sales practices, including annuity buyers guides, suitability, and annuity illustrations. Of particular interest to the life and annuity industry is the formation of the Life Insurance and Annuities Illustrations (A) Working Group (Working Group) chaired by Minnesota. The Working Group’s current charge is to “evaluate concepts for improving life insurance and annuity illustrations and disclosures, and consider revisions to relevant NAIC models or develop other guidance where feasible and appropriate.” The Working Group has asked for input on how to ensure that indexed annuity illustrations give consumers reasonable expectations, after regulators observed materials suggesting annual returns of 10–25% for multiple years. The comment record — including responses from industry trades, actuarial bodies, consumer advocates, and vendors — strongly suggests that current practices around indexed annuity illustrations and disclosures will be revisited. The Working Group is considering short-term and long-term approaches designed to ensure consumers receive reasonable expectations for indexed annuity returns at the point of sale.

A central theme is the role of the NAIC Annuity Disclosure Model Regulation (Model 245). Industry commenters urge the NAIC to leverage Model 245, emphasizing broader state adoption and coordinated updates rather than building entirely new frameworks. The industry trades (i.e., American Council of Life Insurers (ACLI), the Committee of Annuity Insurers (CAI), and the Insured Retirement Institute (IRI)) agree that the Working Group should explore the product’s operation and performance under various market conditions.  Actuarial commenters similarly point to Model 245 and stress that illustrations should not be treated as performance forecasts or used as retirement projections. In contrast, consumer advocates argue that illustrations have functioned in practice as de facto projections and call for more structural reforms, including prohibiting hypothetical future return projections, eliminating “loan arbitrage” illustrations, and tightening controls on backcast performance for proprietary or engineered indices.

Several possible regulatory directions emerge from these published comments. First, insurers should expect renewed focus on Model 245, including potential clarifications of how it applies to indexed annuity illustrations versus more general disclosures and a push for more uniform state adoption. Second, there is strong momentum toward drawing a clearer line between illustrations and projections: regulators and actuaries are signaling that illustrations should explain how a product works, not predict performance, and consumer advocates are pressing to remove forward‑looking return projections from illustrations altogether. Third, the Working Group is interested in the use of hypothetical “lookback” performance and bespoke engineered indices, particularly where such constructs support double‑digit illustrated returns that may not reflect typical experience.

What Life and Annuity Insurers Might Consider Doing Now

In anticipation of these developments, life and annuity insurers may be well‑served to consider tightening illustration practices proactively. A good starting point is a focused audit of current annuity illustrations and related marketing materials, with particular attention to any product or strategy that displays annual returns above roughly 10%–25% over extended periods or that relies heavily on backcast performance of proprietary indices. That review should examine not only technical compliance with Model 245 where adopted, but also how a reasonable consumer — and a regulator — might perceive the materials: do they read as explanations of mechanics as intended, or as implied predictions of future returns?

Insurers also may want to revisit their internal governance around index design and selection, renewal assumptions, and the methodology used to determine illustrated rates. Many of the comment letters imply that regulators will be increasingly skeptical of illustration practices that depend on indices with little or no live history or on assumptions that systematically produce optimistic “base-case” outcomes. It appears from the published comments that an internal standard that limits illustration of indices without a minimum period of live performance, or that builds in more conservative or alternative scenarios, may position the life and annuity industry more favorably if the NAIC moves in that direction.

Finally, the discussion on how to improve consumer understanding of indexed annuities will continue during the Working Group’s deliberations. It is possible that the NAIC, through Model 245, may seek more uniform national standards for indexed annuity illustrations. Mapping the current state of Model 245 adoption across an insurer’s footprint, identifying any internal deviations from that framework, and assessing the operational impact of potential updates will make it easier to implement changes if and when they come.