Deloitte experts discuss Labor fiduciary proposal, principle-based reserving for life insurers

The Labor Department’s proposed fiduciary rule has reached the White House’s Office of Management and Budget, and professionals who provide retirement advice are now awaiting the final version. Meanwhile, states are considering legislation to allow reserve calculations that could benefit life insurers’ solvency. Deloitte experts explores these issues’ effects on the life insurance and annuity industries in a report and in a recent interview with SmartBrief.
Uncertainty exists around the effective date and implementation schedule of the Labor Department’s proposed rule, although major provisions are expected to take effect this year, says George Hanley, leader of Deloitte Advisory’s U.S. regulatory and compliance group.
“Companies will need to develop a ‘playbook’ for all affected areas and be prepared to implement [that] playbook when the rule becomes effective,” he says.
Insurers need to thoroughly understand the proposal and its likely effects on annuities, retirement plans, mutual funds and other products, as well as distribution, operations and IT, Hanley says. They also need to have the proper legal and compliance policies, procedures and training in place, he says.
The proposed rule would require professionals offering retirement advice to act in clients’ best interest, and it could have a strong impact on variable annuities, which are commonly included in individual retirement accounts, says Andrew Mais, a senior manager with the Deloitte Center for Financial Services.
“The impartial conduct standards will carry an obligation that the compensation paid …