The U.S. Department of Labor (DOL) proposal to introduce a new fiduciary duty for retirement advice in the U.S. could impact the insurance industry’s annuities businesses, Fitch Ratings says in a new report.
The new regulations could have “a material negative impact” on the sales of certain annuity products, the Fitch report says. As well they could drive changes in products, distribution strategies and compensation structures, which may lead to increased operational costs.
In particular, the new rules could limit the sales of variable annuities, and favour fixed annuities, the report says.
Additionally, insurance companies would need to alter their compensation structures to comply with the new regime, and it may increase the risk of litigation to insurance agents and companies which may, in turn, increase compliance costs.
Overall, the rating agency says that it views the proposal as credit neutral to U.S. life insurers. Although, in the longer term, it says that the adoption of fiduciary standards for “a broader set of products sold by U.S. life insurers would be a credit negative.”
Fitch expects the proposed new fiduciary standard to be finalized “imminently,” and that the final regulations will remain largely as proposed.