Subject: File No. S7-03-13
From: John Sklar

July 9, 2013

Chairman and Commissioners:

I am a state compliance analyst for a consulting firm that supports insurance companies that issue variable annuity contracts and variable life insurance policies. I wanted to raise two concerns regarding the money market fund proposal.

First, most insurance products have a free-look provision, which provides that an owner can return their contract for full value if they are not satisfied with its terms. This period can extend from 10 to 60 days depending on the contract. To protect themselves, insurers offering variable annuities and variable life insurance often keep initial premium payments in a money market account for the duration of the free look period and then allocate the premium payments as prescribed by the owner. I am concerned that placing redemption fees or gates on money market funds might be incompatible with this practice.

Second, many variable annuities and variable life insurance contracts contain contract provisions relating to when an insurer must return funds to a contract owners upon their request (i.e., within a given number of business days). It is unclear how a fee or gate might impact this requirement found in contracts.

I realize that money markets fund would not be required to impose fees or gates, but insurance companies, especially those that are minority owners of funds, may find themselves at the mercy of fund boards. One option might be to treat insurance product funds as institutional funds and require that they float their NAV.

I hope the SEC can address these concerns.

Thank you.

John Sklar