With their downside limits and upside crediting formula, registered index-linked annuities are already the fastest-growing variable annuity in the industry. And the legislation that passed the Senate unanimously last night is designed to make it easier for the industry to register new products.

The bill directs the Securities and Exchange Commission to issue a new form that replaces the initial public offering paperwork annuity issuers are currently required to use for these annuities, also known as RILAs. That type of IPO form is largely inappropriate for this kind of product, according to the Insured Retirement Institute, which has been the chief lobbyist for the bill.

In the future, insurers filing for the products would be able to forgo the requirement that they disclose financial information using generally accepted accounting principles (GAAP), something they typically don’t use.

“With the Senate passage … we urge the House to act expeditiously to pass the Senate bill,” said Paul Richman, IRI’s chief government and political affairs officer, in a statement.

“Consumer demand for RILAs continues to accelerate because they can bring balance to retirement portfolios by allowing participation in market growth while reducing exposure to market loss, helping savers reach retirement goals,” Richman added.

Sales of the product for the first half of the year clocked in at $20.4 billion, 6% higher than 2021, and now make up 40% of overall variable annuity sales, according to Limra, an insurance industry trade group.

Both market volatility and inflation have made the contracts especially attractive to investors because of the product’s loss protection features and its potential for upside growth. The most popular protection feature is called a buffer, which prevents market losses unless the market index the annuity is tracking loses more than the buffer.

For example, if the S&P 500 loses 12% and the annuity has a buffer of 10%, the account value would experience a decrease of only 2%.

There are also limits on the upside in these products, which use a formula for crediting based on a one-year or multiyear term.