ING plans to launch a registered indexed annuity next month, and will voluntarily register it with the Securities and Exchange Commission in anticipation of Rule 151A.

Regulators have found indexed annuities hard to define, since they sit squarely between fixed annuities and variable annuities in terms of design.

Currently, anyone with an insurance license can sell an indexed annuity, just as that person could also sell a fixed annuity — but not a variable annuity, which is considered a securities sale by regulators.

In issuing Rule 151A, the SEC is making it clear that it views indexed annuities, whose selection of index funds rise and fall with the markets, as closer to the variable-annuity model than a fixed annuity. Rule 151A won't kick in until Jan. 12, 2011, but when it does, advisers will need at least a Series 6 license and an insurance license to sell any indexed annuity. That requirement will apply to ING's new product, Select Multi-Index, when it debuts in a few weeks.

Lynne Ford, ING Financial Solutions' new chief executive, said the other reason to register this indexed annuity is to expand its popularity particularly with wire-house advisers, who have been loath to sell unregistered indexed annuities in the past.

Bill Lowe, ING Financial Solutions' president and head of distribution, said that with a choice of four indexes within the policy — the Russell 2000, the S&P 400, the S&P 500 and the Dow Jones Euro Stoxx 50 — ING considers the product more like a variable annuity, too.

The Select Multi-Index carries no fee, but it caps out at 7%, no matter what an underlying index earns. It also sets a floor at zero, so a policyholder will not lose money on the downside.

This story has been reprinted with permission from American Banker.

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