NAIC Working Group Paints a Picture of Insurer Oversight Expectations

On August 7, 2025, the National Association of Insurance Commissioners’ Annuity Suitability (A) Working Group released draft safe harbor regulatory guidance that paints a clearer picture of how insurers should oversee third parties responsible for supervising annuity sales, in compliance with Suitability in Annuity Transactions Model Regulation (No. 275-1). Read our prior article, “NAIC Annuity Suitability Working Group Issues Guidance on Insurers’ Oversight of Third-Party Supervising Entities,” to get the full picture on the draft guidance and open questions.

The guidance focuses on two key areas of Model Regulation No. 275-1: the safe harbor under section 6(E) and reliance on third-party supervision under section 6(C)(3)(a). For both, the working group emphasizes that insurers must:

• Verify that the applicable safe harbor conditions are satisfied.
• Actively monitor the supervising entity.
• Provide the supervising entity with necessary data to support effective oversight.

The draft guidance illustrates what “active” monitoring looks like using three complementary strokes:

• Contractual clarity: Agreements must clearly assign compliance obligations and communicate the insurer’s expectations.
• Onboarding diligence: Insurers should review policies, procedures, and regulatory actions to ensure they adequately address both registered and unregistered annuities.
• Ongoing oversight: This may include questionnaires, engagement on compliance issues, transaction reviews (e.g., replacements, early surrenders), audits, and annual certifications that are “detailed and active.”

The guidance also underscores the need for insurers to provide supervising entities with periodic reports, including customer demographics, annuity features, and sales activity. While the draft adds helpful structure, it also raises questions — such as what qualifies as “periodic engagement,” whether audits can be skipped based on risk, and how to determine certification adequacy.

The working group is accepting comments through September 22, 2025.

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