Updated ADI 2018-05 - Use of Rate Sheet Supplements in Connection with Registered Insurance Products
Annuity contracts registered on Forms N-3 and N-4 and life insurance policies registered on Form N-6 (“Registered Insurance Products”) often provide various insurance features, such as death benefits and living benefits. The level of benefits provided and the fees for those benefits may need to change frequently in response to changing market conditions. Similarly, current limits on index losses may need to change frequently for Registered Insurance Products that offer index-linked options.[1] Material changes to these features, like other material changes, are required to be disclosed in post-effective amendments filed pursuant to rule 485(a) under the Securities Act of 1933 (“Securities Act”). These filings are subject to staff review and comment. However, the staff will not object if, instead of making a filing under rule 485(a) to change disclosure regarding certain terms of these features, the insurance company instead makes use of a rate sheet supplement.
A rate sheet supplement is a prospectus supplement used to update disclosure regarding items such as current fees,[2] withdrawal rates, and crediting rates associated with living benefits or death benefits, as well as current limits on index losses[3] for index-linked options, that change so frequently as to make filing of post-effective amendments with each change impractical (current fees, withdrawal rates, crediting rates, and limits on index losses are referred to collectively herein as “rates”). Instead, disclosure of changes solely to the numeric value of these rates can also be accomplished by filing a rate sheet supplement pursuant to rule 497 under the Securities Act.
The staff will not object to the use of a rate sheet supplement that uses one of two approaches:
- Under alternative one, a rate sheet supplement establishes a rate for a set period (by disclosing a start date and an end date), the end date for which is not superseded by a subsequent filing.
- Under alternative two, an insurance company specifies a rate that applies beginning on a specified date without specifying an end date. Under this second approach, the supplement prominently discloses that the rate can be superseded at any time and identifies how and when (i.e., how far in advance of the change) investors will be notified of the change in current rates.[4] An insurance company would then file any superseding rate sheet supplement a reasonable time prior to its effective date.
For Registered Insurance Products using rate sheet supplements, the prospectus should describe how the rate sheet supplement works, that the rates may change, how to obtain the current rates, and how existing investors can obtain the rate applicable to them if their rate sheet supplement has been superseded (e.g., non-EDGAR website or phone number). Historic rates should be disclosed in an appendix to the prospectus.
The rate sheet supplement should identify its purpose (i.e., to update a rate), the date of applicability, and whether it can be superseded. It also should clearly disclose the rates as if they were included in the body of the prospectus. The rate sheet supplement should also describe how a current investor can obtain the rate applicable to him or her.
For Registered Insurance Products using rate sheet supplements to change current limits on index losses, the rate sheet supplement also should:
- Include the index-linked option table required by Item 17(b) of Form N-4 as it relates to all index-linked options as well as the two-paragraph legend that precedes the table required by Item 17(b)(1) and the disclosure required by Item 17(b)(2) that follows the table.
- Highlight the new current limits on index losses in the table (e.g., bold), with disclosure preceding the table indicating that such numbers have been highlighted.
- Prominently: (1) disclose that the purpose of the rate sheet supplement is to disclose the current limits on index loss for the index-linked options; (2) state that no other index-linked option features shown in the table have changed; and (3) refer investors to the prospectus appendix for any other currently available investment options not shown in the rate sheet supplement (i.e., fixed account options, variable options).
The rate sheet supplement itself should be on top of the prospectus, initial summary prospectus, or updating summary prospectus, as applicable, and delivered to investors with the prospectus. Because a rate sheet supplement could become lost or otherwise separated from the prospectus, the body of the prospectus should not identify the rates applicable on the date of the prospectus; instead, it should make clear that the rate sheet supplement discloses the current rates.
Finally, an insurance company could also identify current rates on the insurance company’s website after including them in a rate sheet supplement. In that case, the prospectus and rate sheet supplement should state that information about current rates is also available on the insurance company’s website at a specified internet address.
Registered Insurance Products using a rate sheet supplement should initially make a rule 485(a) filing, so that the staff can review and comment on the form of the rate sheet supplement and the way it is described in the body of the prospectus.[5] A filing under rule 485(a) should also be made for any material changes to the prospectus disclosure relating to the rate sheet supplement, or the rate sheet supplement itself other than to change the applicable date and the numeric values of the rates disclosed in the rate sheet supplement.[6]
The staff believes that highlighting disclosure of Registered Insurance Product features that are both material and subject to frequent change by use of a rate sheet supplement can ease administrative burdens for insurance companies, and can also allow investors to more easily find this information and make more informed investment decisions.
The delivery obligation with respect to a rate sheet supplement is the same as the delivery obligation associated with any other change to a Registered Insurance Product’s prospectus.
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ADIs are recurring publications that summarize the staff’s views regarding various requirements of the federal securities laws.
The statements in this ADI represent the views of the staff of the Division of Investment Management. This ADI is not a rule, regulation, or statement of the Securities and Exchange Commission. Further, the Commission has neither approved nor disapproved its content. This ADI, like all staff statements, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person. Future changes in rules, regulations, and/or staff no-action and interpretive positions may supersede some or all of the information in a particular ADI.
We hope that this ADI will assist insurance companies in complying with their disclosure requirements. We also welcome feedback on this ADI and on any disclosure matters. If you have any questions or feedback, please contact:
Disclosure Review and Accounting Office
Phone: 202.551.6921
Email: IMDRAO@sec.gov
[1] Current limits on index gains may be posted on a website and incorporated by reference into the prospectus. See Instruction 1 to Item 6(d)(2)(ii)(B) of Form N-4. Insurance companies who choose to instead disclose current limits on index gains in the prospectus are permitted to update these limits using a prospectus supplement filed pursuant to rule 497 under the Securities Act. See Registration for Index-Linked Annuities and Registered Market Value Adjustment Annuities; Amendments to Form N-4 for Index-Linked Annuities, Registered Market Value Adjustment Annuities, and Variable Annuities; Other Technical Amendments, Securities Act Rel. 11294 at pp. 101-103 (July 1, 2024). In the staff's view, an insurance company that updates current limits on index gains pursuant to rule 497 could use a rate sheet supplement.
[2] A rate sheet supplement cannot be used to change the maximum fee to be charged for a living benefit or a death benefit under the contract. If an insurance company changes a maximum fee for new investors, it would need to file a post-effective amendment under rule 485(a).
[3] While a rate sheet supplement may be used to change current limits on index losses, any changes to guaranteed minimum limits on index losses that will always be available under the contract or for a particular index-linked option would require the filing of a post-effective amendment under rule 485(a).
[4] Any date range specified in a rate sheet supplement should relate to the date the contract application or benefit election form is signed by the investor, the index-linked option crediting period begins, or other relevant date.
[5] A rule 485(a) filing is not needed if the rate sheet supplement procedure is established through an initial registration statement.
[6] For example, a rate sheet supplement cannot be used to change current limits on index losses if this will change disclosure of the maximum amount of loss an investor could experience from negative index performance. See, e.g., Item 1(a)(6)(a), Instruction 3(a) to Item 3, and Item 5(a) of Form N-4. If a change to current limits on index losses would change related maximum loss disclosure, an insurance company would need to file a post-effective amendment under rule 485(a).
Last Reviewed or Updated: Aug. 4, 2025