A. Yes, the new regulation on IUL illustration is also called NAIC AG49 as it's new actuarial guidelines imposed by the National Association of Insurance Commissioners (NAIC).
What is NAIC AG 49?
NAIC Actuarial Guideline 49 (AG 49) went effect on Sept. 1, 2015. It stipulates the benchmark-crediting rate for IUL policy illustrations, establishes a ceiling for index values used in policy illustrations, limits loan crediting rates to 100 basis points over a charged rate, and requires additional disclosures.
Impact on IUL Illustration Rate
Prior to NAIC AG 49, the maximum illustrative rate was set by the insurance carrier and was normally based on an average look-back of 20 to 30 years. Under NAIC AG 49, the maximum illustrative rate will be set to the average rate based on stochastic modeling of 25-year holding period going back to 1950.
Why the Change is Significant?
This change on allowed IUL illustrative rate is significant because going back to 1950 means the look-back period will now include some of the big bear markets since 1950, and not just to cover the largely bull market that goes back to the 1980's.
The Bottom Line
The bottom line for consumer is now the IUL illustration rate cannot be as rosy as previously shown, which could mean more realistic and conservative, that is a good news for consumers who will hold a large amount of money on such a complicated product for a long time!