Nick Gerhart, the Iowa insurance commissioner, said his state takes a “balanced and measured” approach to regulation.

Consumers First

“We take our steps to protect consumers first, but we’re also open to discussions with industry,” Gerhart said in a phone interview. Letting insurers choose regulators isn’t problematic, Gerhart said, because every state meets standards set by the National Association of Insurance Commissioners.

Symetra Chief Executive Officer Tom Marra and Fidelity & Guaranty CEO Lee Launer have lauded Iowa’s approach to indexed insurance products, which some consumer groups have criticized as potentially risky retirement vehicles. The contracts, which include life insurance and annuities, tie increases in a client’s account balance to changes in a benchmark such as the Standard & Poor’s 500 Index.

Insurers also have said that Iowa places fewer restrictions than other states on firms that seek to transfer liabilities to affiliates known as captives.

Derivatives Bill

For Symetra, derivatives were another reason to move. The firm, formerly the life insurance unit of Safeco Corp., wanted Washington state to change its laws so that in the event of an insolvency, counterparties in derivative transactions would be in front of other creditors. That would have enabled firms like Symetra to invest in the instruments at lower cost, in line with rules adopted by more than 20 states, according to an estimate from the American Council of Life Insurers, an industry group.

The company said in its 2012 annual filing that the absence of such a law could force it to switch domiciles.

Symetra “had to put up a lot of collateral whenever they did a derivative hedging trade, and so that collateral made it a real pain in the butt,” said State Senator Mark Mullet, a Democrat, who co-sponsored the bill backed by the firm. “It really reduced the amount of people who would accept them as a counterparty.”

The reasoning failed to move state lawmakers. “A lot of the elected officials heard the word ‘derivatives’ and just panicked,” Mullet said.