CANNEX Research Provides Guidance to NAIC on Short-Term Illustration Solutions

Toronto, ON – March 31, 2026: CANNEX Research has submitted a response to the NAIC Life Insurance and Annuities Illustrations Working Group regarding the following question:

Regulators have observed index annuity disclosures that suggest annual returns can range from 10%-25% for several years. This has brought up potential concerns around whether consumers are receiving reasonable expectations regarding future performance upon purchasing an annuity. What are both short-term and long-term approaches to ensure consumers receive reasonable expectations for index annuity returns at the point-of-sale?

Read the full response here; the executive summary is provided below.

The current illustration framework, as established in the NAIC Annuity Disclosure Model Regulation, provides a structured approach to presenting product performance to consumers. However, the interaction of three factors — (1) the renewal rate assumption, amplified by premium bonus designs; (2) the historical scenario selection methodology; and (3) the inconsistency between current strategy rates and the economic environment of the illustrated scenario—produces illustrated returns that can materially exceed reasonable consumer expectations.

In the short term, enhanced disclosures and supplemental reduced-rate scenarios can improve transparency within the existing framework. In the long term, modernizing the scenario selection methodology toward standardized, forward looking representative scenarios, requiring economic consistency between strategy rates and illustrated scenarios, and strengthening standards for newly developed indices will be necessary to ensure the illustration framework keeps pace with evolving product designs and index innovations.