“One part of the final rule that surprised many in the insurance industry,” the report said, “was the decision by the DOL to subject fixed indexed annuities to the provisions of the Best Interest Contract Exemption rather than a streamlined exemption for guaranteed lifetime income products (under Prohibited Transaction Exemption 84-24).”

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Also causing uncertainty, it said, were the eventual requirements of the Systemically Important Financial Institution designation.

In addition, the report said continued low rates and equity volatility impacted the marketability of traditional life/annuity products — although Best pointed out that the Federal Reserve has hinted at the possibility of rate hikes later in the year. Declining returns on equity would likely continue to fall “amid a modest increase in rates and the reinvestment of portfolios into lower-yielding investments.”

Legacy lines of business, particularly long-term care and variable annuity segments (with living benefits), faced other headwinds, including continued drag and subpar performance. High valuations relative to premium growth and returns on equity would also play a role. And because interest-sensitive liabilities such as fixed annuities “are pretty much at guaranteed minimum crediting rates, … there is less flexibility in adjusting crediting rates downward as had been in the past,” the report said, adding that because some interest rate guarantees, or floors, are still in the 3–4 percent range, that business would face additional pressure.