|[March 15, 2017]
A.M. Best Briefing: Future of Department of Labor's Fiduciary Rule Remains Uncertain
Based upon discussions with insurers expected to be impacted by the U.S.
Department of Labor's fiduciary rule, A.M. Best notes that the
vast majority of these companies are moving ahead with implementation,
despite the ongoing uncertainty given President Donald Trump's lack of
support for the guidelines.
A Best's Briefing, titled, "Future of the Department of Labor's
Fiduciary Rule Remains Uncertain," states that to date, the final
deadline of Jan. 1, 2018, which is when all requirements of the rule
must be met, should not be affected by a current delay of the initial
compliance deadline to June 9, 2017, from April 10, 2017-a result of a
recent directive from the Trump administration. The DOL's fiduciary rule
essentially expands the responsibilities of financial professionals to
that of a fiduciary and impact levels of compensation, mainly
commissions. Given the relatively short duration of the delay, it is
possible that the ruling might be further extended beyond the 60-day
timeline, particularly since a new Labor Secretary has not yet been
Given that qualified fixed-indexed and variable annuities are the retail
products likely to be impacted the most by the rule, A.M. Best
anticipates that a limited number of companies will de-emphasize these
product lines or the distribution channels that sell them. Some
companies are likely to experience a drag on earnings due to initial
set-up costs of regulatory compliance as well as the cost of ongoig
oversight. However, A.M. Best anticipates that sales would likely
stabilize after an initial adjustment period, with a soft landing the
year following implementation.
The briefing also notes that the U.S. Securities and Exchange Commission
may still weigh in on its own interpretation of the fiduciary rule soon,
which could extend the guidelines beyond retirement accounts and impose
similar fiduciary standards on broker/dealers. As a result, many
companies are being proactive in applying the same policies and
procedures developed to address the DOL fiduciary rule to non-qualified
annuity sales as well.
A.M. Best believes its ratings on certain life/annuity companies could
potentially be negatively impacted by reduced sales volume affecting the
operating performance of companies with business profile concentrations
in the fixed-indexed and variable annuities markets. However, rating
pressures could be mitigated should sales levels meaningfully recover
shortly after the markets absorb the proposed changes.
To access the full copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=259597.
For a video interview with A.M. Best Director Thomas Rosendale on the
DOL's fiduciary rule, please visit http://www.ambest.com/v.asp?v=fiduciary317.
A.M. Best is the world's oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its
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