Jack Nachtrab Life Insurance Consultant

On May 1, 2023, there will be an expansion of AG-49 specifically regarding illustrations of IUL products. This new regulation will limit the maximum illustrated rate of some indexes used by insurance carriers. The main objective of this regulation is to ensure indexes more closely mirror the S&P 500. S&P 500 indexes will be unaffected by this regulatory change. It’s important to note- these changes will have no impact on the actual returns credited to the indexes, their upside, performance, or any other features. The regulation is only limiting the way they’re illustrated.

There are currently two main characteristics that differentiate how indexes are currently illustrated: Historical Average Return and the cost for the carrier to hedge. The lower the cost to hedge, the more room for bonuses. A metric known as Option Profits is calculated by dividing the historical rate of return by the cost to hedge. Prior to May 1st, indexes with higher Option Profits will illustrate better rates of return. After the new regulation, Option Profits cannot be higher than the S&P 500 on any of volatility index illustrations.

As we move towards the May 1st deadline, it’s recommended that any IUL cases not yet submitted are submitted as soon as possible to avoid needing to be re-illustrated after the regulation takes effect.

Give the experts at Wholehan Marketing a call with any questions on the new regulations and IUL illustrations.