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SPONSOR: |
SFC |
DATE TYPED: |
03/03/03 |
HB |
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SHORT TITLE: |
Nonforfeiture Interest on Deferred Annuities |
SB |
658/SFCS |
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ANALYST: |
Geisler |
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APPROPRIATION
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Appropriation
Contained |
Estimated
Additional Impact |
Recurring or
Non-Rec |
Fund Affected |
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FY03 |
FY04 |
FY03 |
FY04 |
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See Narrative |
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Responses
Received From
Public
Regulation Commission (PRC)
SUMMARY
Synopsis
of Bill
The Senate Finance
Committee Substitute for Senate Bill 658 amends the Standard Nonforfeiture
Law--Individual Deferred Annuities to reflect model language of the National
Association of Insurance Commissioners (NAIC).
The bill also provides flexibility to lower the
interest rate (currently at 3%) used to determine minimum nonforfeiture values.
Significant Issues
Interest rates are
lower today in the United States than they have been in a long time. In particular, driven by the market and
monetary policy, short- term interest rates have plunged. Insurers have
requested relief from the requirements of the standard nonforfeiture law for
deferred annuities.
SB 658 incorporates
an interest rate index approach which allows the rate to be the lesser of 3% or
the adjusted index, with the interest rate not to fall below 1%. Without revisions proposed by the bill, the
NAIC believes annuity products may be withdrawn from the market and not be
available to New Mexicans. The ultimate
solution of an indexed approach has a substantial affect on insurer solvency.
FISCAL IMPLICATIONS
Annuity insurers will file new policy forms with
the insurance division. The PRC
considers the fiscal impact of SB 658 to be minimal.
ADMINISTRATIVE IMPLICATIONS
Annuity
insurers will file new policy forms with the insurance division.