‘Leading Way’

Iowa already treats counterparties as first in line. So Symetra decided to move its domicile to the state. It plans to keep 900 employees in its Bellevue, Washington, headquarters and hire about 40 in Des Moines, about 3 percent of its workforce of 1,230, the company has said.

Iowa is “leading the way” on many important rules, Symetra’s McSweeney said by e-mail.

Fidelity & Guaranty, which is controlled by Philip Falcone’s Harbinger Group Inc., made the switch to Des Moines in November, after Maryland regulators rejected as too risky the company’s proposal to transfer some liabilities to an affiliate. The company said at the time that the ruling wasn’t the reason for the switch. Maryland later approved a smaller, revised transaction.

In its most recent quarterly filing, Fidelity & Guaranty said one of its affiliates, reinsurer Raven Re, benefits from Iowa’s rules on such transfers. Without Iowa’s dispensation, the unit’s capital levels would fall below regulatory requirements, according to the filing.

‘Shadow Insurance’

The use of captives has drawn scrutiny from regulators including the New York Department of Financial Services, which dubbed the practice “shadow insurance.” Captives have contributed to increasing risk in the life insurance industry since their use accelerated after 2000, according to a paper by Ralph Koijen and Motohiro Yogo published this month by the Federal Reserve Bank of Minneapolis.

Rules tied to those vehicles are among the main areas where state regulations lack uniformity, according to a report by the Federal Insurance Office, which was created as part of the Dodd- Frank Act, the 2010 law designed to avoid bailouts of financial firms. The inconsistency across states can undermine the main measure of solvency used by regulators and put some insurers at a disadvantage, the report said.

“What they want is an easy playing field,” Joseph Belth, professor emeritus of insurance at Indiana University, said in an interview. “You go where the companies are having the least resistance from the regulator.”

Indexed Annuities