20-2601 Definitions
In this chapter, unless the context otherwise requires:
1. "Affiliate" means a person who directly or indirectly controls, is controlled by
or is under common control with an insurer, a person who for a specific fee or commission
regularly furnishes investment advice to an insurer with respect to the insurer's
separate accounts or a director, officer, partner or employee or a member of the
immediate family of a director, officer, partner or employee of an insurer, controlling
or controlled person or person providing investment advice.
2. "Assumed investment rate" means the rate of investment return that is required
to be credited to a variable life insurance policy, after the deduction of charges for
taxes, investment expenses and mortality and expense guarantees, to maintain the variable
death benefit in an amount that is equal at all times to the amount of the death benefit,
other than incidental insurance benefits, that would be payable under the plan of
insurance if the death benefit did not vary according to the investment experience of the
separate account.
3. "Benefit base" means the amount to which the net investment return is applied.
4. "Control" or "controlling" has the same meaning prescribed in section 20-481 and
includes the terms "controlled by" and "under common control with".
5. "Flexible premium policy" means a variable life insurance policy other than a
scheduled premium policy.
6. "General account" means all of the assets of an insurer other than assets in
separate accounts established pursuant to section 20-651 or the insurance laws of the
insurer's state of domicile if the insurer is a foreign or alien insurer.
7. "Incidental insurance benefit" means all of the insurance benefits in a variable
life insurance policy except the variable death benefit and the minimum death
benefit. Incidental insurance benefit includes accidental death and dismemberment
benefits, disability benefits, guaranteed insurability options, family income or term
riders.
8. "Insurance producer" means any person, corporation, partnership, or other legal
entity that is licensed by this state as a life insurance producer.
9. "Minimum death benefit" means the amount of the guaranteed death benefit, except
incidental insurance benefits, that is payable under a variable life insurance policy
regardless of the investment performance of the separate account.
10. "Net investment return" means the rate of investment return in a separate
account that is applied to the benefit base.
11. "Policy processing day" means the day on which the charges that are authorized
in a policy are deducted from the policy's cash value.
12. "Scheduled premium policy" means a variable life insurance policy under which
both the amount and timing of premium payments are fixed by the insurer.
13. "Separate account" means a separate account established pursuant to section
20-651 or the insurance laws of the insurer's state of domicile if the insurer is a
foreign or alien insurer.
14. "Variable death benefit" means the amount of the death benefit, except
incidental insurance benefits, that is payable under a variable life insurance policy,
that is dependent on the investment performance of the separate account and that the
insurer must pay in the absence of any minimum death benefit.
15. "Variable life insurance policy" means an individual policy that provides for
life insurance, the amount or duration of which varies according to the investment
experience of any separate account or accounts that are established and maintained by the
insurer pursuant to section 20-651 or the insurance laws of the insurer's state of
domicile if the insurer is a foreign or alien insurer.
20-2602 Requirements applicable to insurers issuing variable life insurance
A. An insurer shall not deliver or issue for delivery in this state a variable life
insurance policy unless all of the following apply:
1. The insurer is licensed to transact life insurance business in this state.
2. The director gives written approval to the insurer for the issuance of variable
life insurance policies in this state. The director shall grant the written approval
only after finding that:
(a) The plan of operation for the issuance of variable life insurance policies is
not unsound.
(b) The general character, reputation and experience of the management and those
persons or firms that the insurer proposes to supply consulting, investment,
administrative or custodial services to the insurer will reasonably result in the
competent operation of the variable life insurance business of the insurer in this state.
(c) The financial condition of the insurer and its method of operation in
connection with the issuance of variable life policies is not likely to harm the public
or its policyholders in this state. The director shall consider at least the following:
(i) The insurer's history of operation and financial condition.
(ii) The qualifications, fitness, character, responsibility, reputation and
experience of the officers, directors and other management personnel of the insurer and
of those persons or firms that the insurer proposes to supply consulting, investment,
administrative or custodial services to the insurer.
(iii) The applicable law under which the insurer is authorized in its state of
domicile to issue variable life insurance policies. The state of entry of an alien
insurer is deemed to be its state of domicile.
(iv) If the insurer is a subsidiary of or is affiliated by common management or
ownership with another company, the insurer's relationship to the other company and the
degree to which the requesting insurer and the other company meet these standards.
B. Before delivering or issuing for delivery in this state a variable life
insurance policy, an insurer shall file the following information with the director:
1. Copies and a general description of the variable life insurance policies the
insurer intends to issue.
2. A general description of the insurer's methods of operation of the variable life
insurance business, including the methods of policy distribution and the names of those
persons or firms that the insurer proposes to supply consulting, investment,
administrative, custodial or distribution services to the insurer.
3. With respect to a separate account that the insurer maintains for any variable
life insurance policy, a statement of the investment policy that the issuer intends to
follow for the investment of the assets that are held in the separate account and a
statement of the procedures for changing the investment policy. The statement of
investment policy shall include a description of the investment objectives that are
intended for the separate account.
4. A description of any contemplated investment advisory services that satisfies
section 20-2606, subsection L.
5. A copy of the statutes and rules of the insurer's state of domicile under which
the insurer is authorized to issue variable life insurance policies, unless the insurer
is domiciled in this state.
6. A completed national association of insurance commissioners' uniform
biographical data form for the officers and directors of the insurer.
7. A statement that is completed by the insurer's actuary and that describes the
mortality and expense risks that the insurer will bear under the policy.
8. A statement that describes the method of computation of cash values and other
nonforfeiture benefits if not described in the policy.
C. Each insurer that seeks to enter into the variable life insurance business in
this state shall establish and maintain a written statement and shall specify in the
statement the standards of suitability the insurer will use. The standards of
suitability shall specify the following:
1. That an insurer shall not make a recommendation to an applicant to purchase a
variable life insurance policy.
2. That a variable life insurance policy shall not be issued if after the insurance
producer making the recommendation or the insurer considers the applicant's insurance and
investment objectives, financial situation and needs and any other information known to
the insurer or the insurance producer, the insurer or insurance producer determines that
the purchase of the policy is unsuitable for the applicant.
D. An insurer authorized to transact variable life insurance business in this state
shall not use any sales material, advertising material, descriptive literature or other
material of any kind in connection with its variable life insurance business in this
state that is false, misleading, deceptive or inaccurate. Variable life insurance sales
material, advertising material and descriptive literature are subject to section 20-1110,
subsection E.
E. A material contract that is entered into between an insurer and a supplier of
consulting, investment, administrative, sales, marketing, custodial or other services
with respect to variable life insurance operations shall be in writing and shall state
that on the director's request the supplier of the services shall furnish to the director
any information or reports in connection with the services that would allow the director
to determine if the variable life insurance operations of the insurer are being conducted
in a manner that is consistent with this article.
20-2603 Reports
A. In addition to any other materials an insurer is required to submit to the
director pursuant to this article, an insurer authorized to transact variable life
insurance business in this state shall submit the following to the director:
1. An annual statement of the business of its separate account or accounts in a
form that the national association of insurance commissioners prescribes.
2. Before its use in this state, any information that the insurer furnishes to
applicants pursuant to section 20-2607.
3. Before its use in this state, the form of the reports to policyholders that are
prescribed by section 20-2609.
4. Any additional information concerning the insurer's variable life insurance
operations or separate accounts as the director deems necessary.
B. The director shall disapprove any material that is submitted under this section
that the director finds to be false, misleading, deceptive or inaccurate in any material
respect. If the material was previously distributed, the director shall require that the
insurer distribute amended material.
C. The director may disapprove any material that is filed with the director if at
any time the director finds that the material does not comply with the standards
established pursuant to the laws of this state.
20-2604 Variable life insurance policy and filing requirements
A. Except pursuant to chapter 5, article 1 of this title, the director shall not
approve a variable life insurance form unless the insurer files with the director its
variable life insurance policies, and all riders, endorsements, applications and other
documents that are attached to the policy and that relate to the variable nature of the
policy, and the director approves each policy before the policy is delivered or issued
for delivery in this state. For the purposes of this subsection the procedures and
requirements for the filing and approval of variable life insurance policies shall be the
same as the filing and approval procedures that apply to other life insurance policies,
to the extent those procedures are not inconsistent with this article.
B. A variable life insurance policy that is delivered or issued for delivery in
this state shall comply with the following minimum requirements:
1. The insurer shall bear mortality and expense risks. The mortality and expense
charges are subject to the maximums stated in the policy.
2. For scheduled premium policies, the insurer shall provide a minimum death
benefit in an amount that equals or exceeds the initial face amount of the policy as long
as the insured pays the premiums.
3. The policy shall reflect the investment experience of one or more separate
accounts that are established and maintained by the insurer. The insurer shall
demonstrate that the reflection of investment experience in the variable life insurance
policy is actuarially sound.
4. Each variable life insurance policy shall be credited with the full amount of
the net investment return that is applied to the benefit base.
5. At least annually the insurer shall determine any changes in the variable death
benefits of each variable life insurance policy.
6. At least monthly the insurer shall determine the cash value of each variable
life insurance policy. The method of computation of cash values and other nonforfeiture
benefits shall be in accordance with actuarial procedures that recognize the variable
nature of the policy. If the net investment return that is credited to the policy at all
times from the date of issue is equal to the assumed investment rate with premiums and
benefits determined accordingly under the terms of the policy, the resulting cash values
shall not be less than the minimum values that are required by section 20-1231 for a
general account policy with these premiums and benefits. The assumed investment rate
shall not exceed the maximum interest rate permitted under section 20-1231. If the
policy does not contain an assumed investment rate the method of computation shall be
based on the maximum interest rate permitted under section 20-1231. The method of
computation may disregard incidental minimum guarantees as to the dollar amounts
payable. For the purposes of this paragraph incidental minimum guarantees include a
guarantee that the amount payable at death or maturity shall equal or exceed the amount
that otherwise would have been payable if the net investment return credited to the
policy at all times from the date of issue had been equal to the assumed investment rate.
C. The insurer may base the computation of values that are required for each
variable life insurance policy on any reasonable and necessary approximations that the
director accepts.
D. Each variable life insurance policy that is filed for approval in this state
shall contain at least the following:
1. The cover page or a page that corresponds to the cover page of each policy that:
(a) Prominently states in either a contrasting color or bold-faced type that the
amount or duration of the death benefit may be variable or fixed under specified
conditions.
(b) Prominently states in either a contrasting color or bold-faced type that cash
values may increase or decrease according to the experience of the separate account,
subject to any specified minimum guarantees.
(c) Describes any minimum death benefit that is required pursuant to subsection B,
paragraph 2 of this section.
(d) Describes the method or refers to the policy provision that describes the
method for determining the amount of insurance payable at death.
(e) Informs the policyholder that the policyholder may return the variable life
insurance policy within ten days after receiving the policy and receive a refund that
equals the sum of:
(i) The difference between the premiums paid and the amounts allocated to any
separate accounts under the policy.
(ii) The value of the amounts that are allocated to any separate accounts under the
policy on the date the returned policy is received by the insurer or the insurer's
insurance producer.
(f) Identifies the owner of the contract.
(g) Includes items that are required for fixed benefit life insurance policies and
that are not inconsistent with this article.
2. For scheduled premium policies, a grace period provision of not less than
thirty-one days from the premium due date. The grace period shall provide that if the
premium is paid within the grace period, the policy values will be the same as if the
premium had been paid on or before the due date, except for the deduction of any overdue
premium.
3. For flexible premium policies, a grace period provision that begins on the
policy processing day on which the total charges that are authorized by the policy and
that are necessary to keep the policy in force until the next policy processing day
exceed the amounts available under the policy to pay the charges according to the terms
of the policy. The grace period shall end on a date not less than sixty-one days after
the report to policyholders is mailed pursuant to section 20-2609, paragraph 1. The
death benefit that is payable during the grace period shall equal the death benefit that
was in effect immediately before the grace period less any overdue charges. If the
policy processing days occur monthly, the insurer may require the payment of not more
than three times the charges that were due on the policy processing day on which the
amounts available under the policy were insufficient to pay all of the charges that are
authorized by the policy and that are necessary to keep the policy in force until the
next policy processing day.
4. For scheduled premium policies, a reinstatement provision that states that the
policy shall be reinstated at any time within two years from the date of default on the
occurrence of all of the following:
(a) The written application of the insured and on the presentation of evidence of
insurability, including good health, that is satisfactory to the insurer, unless the
cash surrender value has been paid or the period of extended insurance has expired.
(b) The payment of any outstanding indebtedness that arose after the end of the
grace period following the date of default together with accrued interest on the
indebtedness to the date of reinstatement.
(c) Payment of an amount not exceeding the greater of:
(i) All overdue premiums with interest at a rate of not more than six per cent per
annum compounded annually and any indebtedness in effect at the end of the grace period
following the date of default with interest at a rate of not more than six per cent per
annum compounded annually.
(ii) One hundred ten per cent of the increase in cash value resulting from
reinstatement plus all overdue premiums for incidental insurance benefits with interest
at a rate of not more than six per cent per annum compounded annually.
5. A full description of the benefit base, the method of calculation and the
application of any factors that are used to adjust variable benefits under the policy.
6. A provision that designates the separate account to be used and that states both
of the following:
(a) The assets of the separate account are available to cover the liabilities of
the insurer's general account only to the extent that the assets of the separate account
exceed the liabilities of the separate account arising under the variable life insurance
policies supported by the separate account.
(b) The assets of the separate account will be valued monthly or more frequently if
any policy benefits vary.
7. A provision that specifies what documents constitute the entire insurance
contract.
8. The names of the officers who are empowered to make an agreement or
representation on behalf of the insurer.
9. The conditions or requirements for the designation or change of designation of a
beneficiary and for the disbursement of benefits if a beneficiary is not designated.
10. The conditions of or requirements for the assignment of the policy.
11. A description of policy value adjustments that will be made if the insured
misstates the insured's age or sex.
12. A provision that after a policy has been in force for two years the insurer may
not contest the policy during the lifetime of the insured. If an increase in the amount
of the policy's death benefits occurs after the policy issue date, if the owner applied
for or requested the increase and if the increase was subject to satisfactory proof of
the insured's insurability, after the increase has been in force for two years, the
insurer may not contest the increase during the lifetime of the insured.
13. A statement that the investment policy of the separate account shall not be
changed without the approval of the insurance regulatory authority of the insurer's state
of domicile and that the approval is on file with the director.
14. A provision that except if variable death benefits are used to pay premiums the
payment of variable death benefits in excess of any minimum death benefits, cash values,
policy loans or partial withdrawals or the payment of variable death benefits in excess
of any partial surrenders may be deferred either:
(a) For up to six months from the date of the request, if the payments are based on
policy values that do not depend on the investment performance of the separate account.
(b) For any period during which the New York stock exchange is closed for trading,
except for normal holiday closing, or for any period during which the securities and
exchange commission determines that a state of emergency exists.
15. If settlement options are provided, that at least one option is provided on a
fixed basis only.
16. A description of the basis for computing the cash value and the surrender value
under the policy.
17. A statement of the premiums or other charges for incidental insurance benefits.
18. Any other items that are currently required for fixed benefit life insurance
policies and that are not inconsistent with this article.
19. A provision for nonforfeiture insurance benefits. The insurer may establish a
reasonable minimum cash value below which any nonforfeiture insurance options will not be
available.
20. That statements that are made by the insured or on behalf of the insured are
representations and not warranties.
E. Except for term insurance policies and pure endowment policies that are
delivered or issued for delivery in this state, each variable life insurance policy shall
contain loan provisions for policies that have been in force for two full years that are
not less favorable to the policyholder than the following:
1. At least seventy-five per cent of the policy's cash surrender value may be
borrowed.
2. The amount borrowed bears interest at a rate that does not exceed the rate
permitted by this title.
3. Any indebtedness shall be deducted from the proceeds payable on death.
4. Any indebtedness shall be deducted from the cash surrender value on surrender or
in determining any nonforfeiture benefit.
5. For scheduled premium policies, if the indebtedness exceeds the cash surrender
value, the insurer shall give notice of its intent to cancel the policy if the excess
indebtedness is not repaid within thirty-one days after the date on which the notice was
mailed. For flexible premium policies, if the total charges that are authorized by the
policy and that are necessary to keep the policy in force until the next following policy
processing day exceed the amounts available under the policy to pay the charges, the
insurer must send the policyholder a report containing the information specified by
section 20-2609, paragraph 3.
F. The policy may provide that, as long as the premiums are paid, if, at any time,
the variable death benefit is less than it would have been if a loan or withdrawal had
not been made, the policyholder may increase the variable death benefit up to the amount
it would have been if a loan or withdrawal had not been made. The insured may increase
the variable death benefit by paying an amount that does not exceed one hundred ten per
cent of the corresponding increase in cash value and by furnishing any evidence of
insurability that the insurer requests.
G. The policy may specify a reasonable minimum amount that may be borrowed at any
time. The minimum does not apply to any automatic premium loan provision.
H. If the policy is under an extended insurance nonforfeiture option, a policy loan
provision is not required.
I. Variable life insurance policyholders who exercise their rights under policy
loan provisions shall not be disadvantaged by the exercise of those rights.
J. On the exercise of any policy loan provision, the amounts paid to the
policyholder shall be withdrawn from the separate account and shall be returned to the
separate account on repayment, except that a stock insurer may provide the amounts for
policy loans from the general account.
K. A variable life insurance policy or related form that is delivered or issued for
delivery in this state may:
1. Include an exclusion for suicide that occurs within two years of the issue date
of the policy. If the owner applies for an increase in death benefits after the policy
issue date, the policy may provide an exclusion for suicide that occurs within two years
of any increase in death benefits to the extent of the increased death benefits only.
2. Offer incidental insurance benefits on a fixed or variable basis.
3. Offer to pay dividend amounts in cash. In addition, the policies may offer the
following dividend options:
(a) The amount of the dividend may be credited against premium payments.
(b) The amount of the dividend may be applied to provide amounts of additional
fixed or variable benefit life insurance.
(c) The amount of the dividend may be deposited in the general account at a
specified minimum rate of interest.
(d) The amount of the dividend may be applied to provide paid-up amounts of fixed
benefit one year term insurance.
(e) The amount of the dividend may be deposited as a variable deposit in a separate
account.
4. Allow the policyholder to elect in writing an automatic premium loan on a basis
that is not less favorable than that required of policy loans under subsection E of this
section. The policy may impose a restriction that no more than two consecutive premiums
can be paid under the requirements of this paragraph.
5. Allow the policyholder to make partial withdrawals.
6. Include any other policy provision that the director approves.
20-2605 Reserve liabilities for variable life insurance
A. Reserve liabilities for variable life insurance policies shall be established
under section 20-510 according to actuarial procedures that recognize the variable nature
of the benefits provided and any mortality guarantees.
B. Reserve liabilities for the guaranteed minimum death benefit shall be the
reserve amount that is needed to provide for the contingency of death occurring when the
guaranteed minimum death benefit exceeds the death benefit that would otherwise be paid
in the absence of the guarantee. The insurer shall maintain reserve liabilities in the
general account. Reserve liabilities shall not be less than the greater of any of the
following minimum reserves:
1. Assuming an immediate one-third depreciation in the current value of the assets
in the separate account followed by a net investment return equal to the assumed
investment rate, the aggregate total of the term costs on each variable life insurance
contract, if any, covering either:
(a) A period of one full year from the valuation date.
(b) If less than the amount under subdivision (a) of this paragraph, the period
that is provided for in the guarantee and that is not otherwise provided for by the
reserves held in the separate account.
2. The aggregate total of the attained age level reserves on each variable life
insurance contract. The attained age level reserve on each variable life insurance
contract shall not be less than zero and shall equal the residue of the prior year's
attained age level reserve on the contract. Any residue shall be increased or decreased
by a payment that is computed on an attained age basis pursuant to subdivision (b) of
this paragraph. For the purposes of this paragraph:
(a) The residue of the prior year's attained age level reserve on each variable
life insurance contract shall not be less than zero and shall be determined by adding
interest at the valuation interest rate to the prior year's reserve, by deducting the
tabular claims based on any excess, if any, of the guaranteed minimum death benefit over
the death benefit that would be payable in the absence of the guarantee and by dividing
the net result by the tabular probability of survival. The excess shall be based on the
actual level of death benefits that would have been in effect during the preceding year
in the absence of the guarantee and shall take account of the reserve assumptions
regarding the distribution of death claim payments over the year.
(b) The payment shall be computed so that the present value of a level payment of
that amount each year over the future period for which charges for this risk will be
collected under the contract or if no future charges for this risk will be collected
under the contract, the payment shall equal (A) minus (B) minus (C). For the purposes of
this subdivision:
(i) (A) means the present value of the future guaranteed minimum death benefits.
(ii) (B) means the present value of the future death benefits that would be payable
in the absence of the guarantee and that is computed by assuming a net investment return
of the separate account that may differ from the assumed investment rate or the valuation
interest rate, or both, but that may not exceed the maximum interest rate that is
permitted for the valuation of life contracts.
(iii) (C) means any residue as prescribed by subdivision (a) of this paragraph of
the prior year's attained age level reserve on the variable life insurance contract.
3. The valuation interest rate and mortality table that are used to compute the
guaranteed minimum death benefit and the future death benefit that would be payable in
the absence of the guarantee shall conform to permissible standards for the valuation of
life insurance contracts. In determining the minimum reserves, the insurer may employ
suitable approximations and estimates, including groupings and averages.
C. According to the actuarial procedures appropriate to the benefit, the insurer
shall maintain reserve liabilities for all fixed incidental insurance benefits and any
guarantees that are associated with variable accidental insurance benefits in the general
account and shall maintain reserve liabilities for all variable aspects of the variable
incidental insurance benefits in a separate account.
20-2606 Separate accounts
A. A domestic insurer issuing variable life insurance contracts shall establish one
or more separate accounts pursuant to section 20-651. The following apply to the
establishment of separate accounts:
1. If no law governs the custody of separate account assets and if the insurer is
not the custodian of the separate account assets, all contracts for the custody of the
assets shall be in writing and the director may review and approve both the terms of a
contract and the proposed custodian before the transfer of custody.
2. Without the director's prior written approval, the insurer shall not employ any
person in connection with the handling of separate account assets who within the last ten
years either:
(a) Was convicted of a felony or a misdemeanor offense involving embezzlement,
fraudulent conversion, the misappropriation of funds or securities or a violation of 18
United States Code section 1341, 1342 or 1343.
(b) Was found to have violated or has acknowledged violating any law involving
fraud, deceit or knowing misrepresentation.
3. All persons who have access to the cash, securities or other assets of any
separate account established pursuant to this chapter shall be under bond in an amount of
not less than the following amounts based on the combined assets of the insurer's
separate accounts:
Combined assets Minimum amount of bond
Equal to or more than: But less than:
$ 0 $ 100,000 $10,000
100,000 600,000 $10,000 plus 4% of assets
over $100,000
600,000 1,200,000 $30,000 plus 3 1/3% of
assets over $600,000
1,200,000 3,200,000 $50,000 plus 2 1/2% of
assets over $1,200,000 3,200,000 4,450,000 $100,000 plus 2% of assets over $3,200,000 4,450,000 6,450,000 $125,000 plus 1 1/4% of
assets over $4,450,000 6,450,000 90,450,000 $150,000 plus 5/8% of
assets over $6,450,000 90,450,000 350,450,000 $675,000 plus 3/8% of
assets over $90,450,000 350,450,000 1,070,450,000 $1,650,000 plus 3/16% of
assets over $350,450,000 1,070,450,000 $3,000,000 plus 3/32% of assets over $1,070,450,000 until the total of the bonds equals $5,000,000
4. The insurer shall value the assets of the separate accounts at least monthly.
B. The insurer shall maintain in each separate account assets with a value that is
at least equal to the greater of the valuation reserves for the variable portion of the
variable life insurance policies or the benefit base for the variable life insurance
policies.
C. The following apply to investments by the separate account:
1. An insurer or any of its affiliates may not make any sale, exchange or other
transfer of assets between any of its separate accounts or between any other investment
account and one or more of its separate accounts unless both:
(a) If assets are transferred into a separate account, the transfer is made solely
to establish the account or to support the operation of the policies with respect to the
separate account to which the transfer is made.
(b) The transfer, whether into or from a separate account, is made by a transfer of
cash. The director may approve the transfer of other assets in advance of the transfer.
2. The separate account shall have sufficient net investment income and readily
marketable assets to meet anticipated withdrawals under the policies that are funded by
the account.
D. Except for securities issued or guaranteed as to principal and interest by the
United States, a separate account shall not purchase or otherwise acquire the securities
of any issuer if immediately after the purchase or acquisition the value of the
investment, together with any prior investments of the account in the security that is
valued pursuant to this article, exceeds ten per cent of the value of the assets of the
separate account. The director may waive this limitation in writing if the director
believes that the waiver will not render the operation of the separate account hazardous
to the public or to the policyholders in this state.
E. A separate account shall not purchase or otherwise acquire the voting securities
of any issuer if as a result of the purchase or acquisition the insurer and its
aggregated separate accounts will own more than ten per cent of the issuer's total issued
and outstanding voting securities. The director may waive this limitation in writing if
the director believes that the waiver will not render the operation of the separate
account hazardous to the public or to the policyholders in this state or jeopardize the
independent operation of the issuer of the securities.
F. The ten per cent limitation under subsection D of this section does not preclude
the investment of separate account assets in shares of investment companies that are
registered pursuant to the investment company act of 1940 (15 United States Code sections
80a-1 through 80a-64) or in other pools of investment assets if the investments and
investment policies of the investment companies or asset pools comply substantially with
subsection C of this section and with any other applicable provisions under this article.
G. The insurer shall value investments of the separate account at their market
value on the date of valuation or at amortized cost if it approximates market value.
H. A domestic insurer shall not change its investment policy of a separate account
without first filing the change with the director. A change that is filed pursuant to
this subsection is effective sixty days after the date on which it was filed with the
director, unless the director notifies the insurer before the end of the sixty day period
of the director's disapproval of the proposed change. At any time, after notice and a
public hearing, the director may disapprove any change that has become effective. The
director may disapprove the change if the director determines that the change would be
detrimental to the interests of the policyholders who participate in the separate
accounts.
I. Before or contemporaneously with the delivery of the policy, the insurer shall
disclose to the insured in writing all charges that may be made against the separate
account, including the following:
1. Taxes or reserves for taxes that are attributable to investment gains and income
of the separate account.
2. Actual cost of reasonable brokerage fees and similar direct acquisition and sale
costs that are incurred in the purchase or sale of separate account assets.
3. Actuarially determined tabular costs of insurance and the release of separate
account liabilities.
4. Charges for administrative expenses and investment management expenses,
including internal costs that are attributable to the investment management of assets of
the separate account.
5. A charge for mortality and expense guarantees at a rate specified in the policy.
6. Any amounts in excess of the amounts that are required to be held in the
separate accounts.
7. Charges for incidental insurance benefits.
J. The board of directors of each insurer that seeks approval to enter into the
variable life insurance business in this state shall adopt written standards of conduct
relating to the purchase or sale of investments of separate accounts. The standards of
conduct are binding on the insurer and its officers, directors, employees and affiliates.
The adoption of a code of ethics that meets the requirements of section 17j of the
investment company act of 1940 satisfies this section.
K. A law that applies to the officers and directors of insurance companies with
respect to conflicts of interest also applies to the members of a committee or any other
similar body of a separate account.
L. An insurer shall not enter into a contract under which a person for a fee
undertakes to regularly furnish investment advice to the insurer with respect to its
separate accounts that are maintained for variable life insurance policies unless the
contract is in writing, the contract states that the insurer may terminate the contract
without penalty to the insurer or the separate account on sixty days' written notice to
the investment advisor and one of the following applies:
1. The person who provides the advice is registered as an investment adviser under
the investment advisers act of 1940 (15 United States Code sections 80b-1 through
80b-21).
2. The person who provides the advice is an investment manager under the employee
retirement income security act of 1974 (29 United States Code sections 1001 through 1461)
with respect to the assets of each employee benefit plan that are allocated to the
separate account.
3. The insurer has filed with the director and continues to file annually the
following information and statements concerning the proposed advisor:
(a) The name and form of the organization, the state of organization and the
proposed advisor's principal place of business.
(b) The names and addresses of the proposed advisor's partners, officers and
directors and of persons who perform similar functions if the investment advisor is an
individual.
(c) A written standard of conduct that complies in substance with subsection J of
this section.
(d) A statement that is submitted by the proposed advisor to the insurer and that
states with respect to each of the following that the proposed advisor or a person
associated with the proposed advisor has not:
(i) Within the last ten years been convicted of a felony or misdemeanor offense
arising out of such person's conduct as an employee, salesman, officer or director of an
insurance company, a banker, an insurance producer, a securities broker or an investment
advisor involving embezzlement, fraudulent conversion, the misappropriation of funds or
securities or a violation of 18 United States Code section 1341, 1342 or 1343, and
arising out of the person's conduct as an employee, salesperson, officer or director of
an insurance company or as a banker, insurance producer, securities broker or investment
advisor.
(ii) Been permanently or temporarily enjoined by a court order, judgment or decree
from acting as an investment advisor, underwriter, broker or dealer, acting as an
affiliated person or an employee of an investment company, bank or insurance company or
engaging in or continuing any conduct or practice in connection with any enjoined
activity.
(iii) Been found by a federal or state regulatory authority to have wilfully
violated or acknowledged a wilful violation of a federal or state securities law or the
insurance laws of this state.
(iv) Been censured, been denied an investment advisor registration, had a
registration as an investment advisor revoked or suspended or been barred or suspended
from associating with an investment advisor by a federal or state regulatory authority.
M. After notice and an opportunity for a hearing, the director may require that the
investment advisory contract be terminated if the director deems that continued operation
under the contract would be hazardous to the public or the insurer's policyholders.
20-2607 Information to applicants
A. An insurer that delivers or issues for delivery in this state a variable life
insurance policy shall deliver the following information to the applicant for the policy:
1. A summary explanation of the principal features of the policy. The summary
explanation shall be in nontechnical terms and shall include a description of the manner
in which the variable benefits will reflect the investment experience of the separate
account and the factors that affect the variation. The explanation shall include notice
of the requirements of section 20-2604, subsection D, paragraph 1, subdivision (e) and
paragraph 7.
2. A statement of the investment policy of the separate account, including a
description of both:
(a) The investment objectives of the separate account and the principal types of
investments that will be made.
(b) The restrictions or limitations on the manner in which the operations of the
separate account will be conducted.
3. A statement of the net investment return of the separate account for each of the
last ten years, or if the separate account has been in existence for less than ten years,
a statement of the net investment return of the separate account for each of the years
that the separate account has been in existence.
4. A statement of the charges that were levied against the separate account during
the previous year.
5. A summary of the method the insurer will use in valuing the assets that are held
by the separate account.
6. A summary of the federal income tax aspects of the policy that apply to the
insured, the policyholder and the beneficiary.
7. Illustrations of benefits that are payable under the variable life insurance
contract. The insurer shall prepare the illustrations. The illustrations shall not
include projections of past investment experience into the future or attempted
predictions of future investment experience. This paragraph does not prohibit the use of
hypothetical assumed rates of return to illustrate possible levels of benefits if the
illustration makes it clear that the assumed rates are hypothetical only.
B. This section is satisfied if a disclosure that contains the information required
by this section is delivered to the applicant. The disclosure shall either:
1. Be a prospectus that satisfies the requirements of the securities act of 1933
(15 United States Code sections 77a through 77aa) and that the securities and exchange
commission declares effective.
2. Contain the information and reports that are required by the employee retirement
income security act of 1974 (29 United States Code sections 1001 through 1461) if the
policies are exempt from the registration requirements of the securities act of 1933.
20-2608 Variable life insurance policy application requirements
A variable life insurance policy application shall contain all of the following:
1. A prominent statement that the death benefit may be variable or fixed under
specified conditions.
2. A prominent statement that cash values may increase or decrease according to the
investment experience of the separate account.
3. Questions that enable the insurer to determine the suitability of variable life
insurance for the applicant.
20-2609 Policyholder reports
An insurer that delivers or issues for delivery in this state a variable life
insurance policy shall mail the following reports to each variable life insurance
policyholder at the policyholder's last known address:
1. Within thirty days after each anniversary of the policy, a statement or
statements of the cash surrender value, the death benefit, any partial withdrawal or
policy loan, any interest charge and any optional payments that are allowed under the
policy and that are computed as of the policy anniversary date. The statement may be
furnished within thirty days after a specified date in each policy year if the
information contained in the statement is computed not more than sixty days before the
notice is mailed. This statement shall state that the cash values and the variable death
benefit may increase or decrease according to the investment experience of the separate
account and shall prominently identify any value that the statement describes and that
may be recomputed before the next statement required by this section. If the policy
guarantees that the variable death benefit on the next policy anniversary date will not
be less than the variable death benefit specified in the statement, the statement shall
be modified to indicate this policy guarantee. In addition, the report must show the
projected cash value and cash surrender value, if different, as of one year from the end
of the period covered by the report. In determining the projected value, the insurer
shall assume that the planned periodic premiums, if any, are paid as scheduled, that the
guaranteed costs of insurance are deducted and that the net return is equal to the
guaranteed rate, or if there is no guaranteed rate, is not greater than zero. If the
projected value is less than zero, the statement shall include a warning message that the
policy may be in danger of terminating without value in the next twelve months unless
additional premium is paid. For flexible premium policies, the report shall contain a
reconciliation of the change since the previous report in cash value and cash surrender
value, if different, because of payments made, less deductions for expense charges,
withdrawals, investment experience, insurance charges and any other charges made against
the cash value.
2. An annual statement or statements, including:
(a) A summary of the financial statement of the separate account that is based on
the annual statement last filed with the director.
(b) The net investment return of the separate account for the last year and, for
each year after the first, a comparison of the investment rate of the separate account
during the last year with the investment rate during prior years, up to a total of not
less than five years if available.
(c) A list of investments that are held by the separate account as of a date not
earlier than the end of the last year for which an annual statement was filed with the
director.
(d) Any charges that were levied against the separate account during the previous
year.
(e) A statement of any change in the investment objective and orientation of the
separate account, in any investment restriction or material quantitative or qualitative
investment requirement that applies to the separate account or in the investment advisor
of the separate account.
3. For flexible premium policies, if the amounts that are available under the
policy on any policy processing day to pay the charges that are authorized by the policy
are less than the amount necessary to keep the policy in force until the next following
policy processing day, a report that indicates the minimum payment that is required under
the terms of the policy to keep the policy in force and the length of the grace period
for the payment of that amount.
20-2610 Foreign companies; compliance with laws of domiciliary state
If the laws of a foreign company's domiciliary state provide a degree of protection
to the policyholders and the public that is substantially similar to the degree of
protection that is provided by this article, the director may determine that the foreign
company has complied with this article.
20-2631 Definitions
In this article, unless the context otherwise requires:
1. "Company" means an insurer licensed pursuant to this title to transact life
insurance or annuities in this state.
2. "Variable annuity" means a policy or contract that provides for annuity benefits
that vary according to the investment experience of a separate account or accounts that
the insurer maintains pursuant to section 20-651 or the corresponding insurance laws of a
foreign insurer's domiciliary state.
20-2632 Qualifications to issue variable annuities
A. A company shall not issue or issue for delivery in this state variable annuities
unless the director is satisfied that the company's condition or method of operation in
connection with the issuance of variable annuity contracts will not be hazardous to the
public or the company's policyholders in this state. The director shall consider the
following:
1. The history and financial condition of the company.
2. The character, responsibility and fitness of the company's officers and
directors.
3. If the company is a foreign company, the law under which the company is
authorized in its domiciliary state to issue variable annuities.
B. If the company is a subsidiary of an authorized life insurance company or is
affiliated with an authorized life insurance company by common management or ownership,
the director may determine that the subsidiary has complied with subsection A, paragraph
2, if either:
1. The authorized life insurance company has satisfied the requirements under
subsection A.
2. The authorized life insurance company or the company is authorized to and has a
satisfactory record of doing business in this state for at least three years.
C. Before a company issues or issues for delivery variable annuities in this state,
the company shall submit all of the following to the director:
1. A general description of the kinds of variable annuities the company intends to
issue.
2. If requested by the director, a copy of the laws of the company's state of
domicile under which the company is authorized to issue variable annuities.
3. If requested by the director, biographical data on the company's officers and
directors. The biographical data shall be submitted on the national association of
insurance commissioners' biographical data forms.
20-2633 Separate account; annuities
A. A domestic company that issues variable annuities shall establish one or more
separate accounts pursuant to section 20-651.
B. Except pursuant to subsection C of this section:
1. The company may invest and reinvest amounts that are allocated to a separate
account and accumulations on the allocated amounts without regard to any requirements or
limitations that are prescribed by the laws of this state governing the investments of
life insurance companies.
2. The company shall not consider the investments in the separate account or
accounts in applying the investment limitations that otherwise apply to the investments
of the company.
C. The company may retain its reserves for benefits that are guaranteed as to the
dollar amount and duration and for funds that are guaranteed as to the principal amount
or stated rate of interest in a separate account if a portion of the assets of the
separate account in an amount that is at least equal to the reserve liability is invested
according to the laws of this state governing the investments of life insurance
companies. The company shall not consider the portion of the assets in applying the
investment limitations that otherwise apply to the investments of the company.
D. With respect to seventy-five per cent of the market value of the total assets in
a separate account, a company shall not, unless otherwise approved by the director on a
showing that the approval will not be hazardous to the public or policyholders in this
state, purchase or otherwise acquire the securities of any issuer, other than securities
that are issued or guaranteed as to principal or interest by the United States, if
immediately after the purchase or acquisition the market value of the investment,
together with prior investments of the separate account in the security taken at market,
would exceed ten per cent of the market value of the assets of the separate account.
E. Unless otherwise permitted by law or approved by the director, a company shall
not purchase or otherwise acquire for its separate accounts the voting securities of any
issuer if as a result of the acquisition the insurance company and its separate accounts,
in the aggregate, will own more than ten per cent of the total issued and outstanding
voting securities of the issuer. This limitation does not apply to securities that are
held in separate accounts, the voting rights in which are exercisable only according to
instructions from those persons who have an interest in the accounts.
F. The limitations under subsections D and E of this section do not apply to the
investment with respect to a separate account in the securities of an investment company
that is registered under the investment company act of 1940 (15 United States Code
sections 80a-1 through 80a-64) if the investments of the investment company substantially
comply with subsections D and E of this section.
G. Unless the director otherwise approves, assets that are allocated to a separate
account shall be valued at their market value on the date of valuation. If there is no
readily available market, the assets shall be valued under the terms of the contract or
the rules or other written agreement that applies to the separate account. Unless the
director otherwise approves, the portion, if any, of the assets of the separate account
that is equal to the company's reserve liability with regard to the benefits and funds
under subsection C of this section shall be valued according to the rules that otherwise
apply to the company's assets.
H. Except as provided under the applicable contracts, that portion of the assets of
any separate account that is equal to the reserves and other contract liabilities with
respect to the account shall not be charged with liabilities arising out of any other
business the company may conduct.
I. Notwithstanding any law to the contrary, a company may either:
1. With respect to a separate account that is registered with the securities and
exchange commission as a unit investment trust, exercise voting rights in connection with
any securities of a regulated investment company registered under the investment company
act of 1940 and held in the separate accounts according to instructions from those
persons who have an interest in the accounts ratably as determined by the company.
2. With respect to a separate account that is registered with the securities and
exchange commission as a management investment company, establish for the account a
committee, a board or any other body. The members of the committee, board or other body
may or may not be affiliated with the company and may be elected to the membership by the
vote of those persons who have an interest in the accounts ratably as determined by the
company. This committee, board or other body, alone or in conjunction with others, may
manage the separate account and the investment of its assets. Subject to approval of the
director on a showing that the approval will not be hazardous to the public or
policyholders of this state any company, committee, board or other body may make such
other provisions in respect to any such separate account as may be deemed appropriate to
facilitate compliance with the requirements of any federal or state law.
J. A company may not sell, exchange or otherwise transfer assets between any of its
separate accounts or between any other investment account and one or more of its separate
accounts unless either:
1. The director approves the sale, transfer or exchange based on a showing that the
sale, transfer or exchange is equitable to current policyholders.
2. Both of the following occur:
(a) If the transfer is into a separate account, the transfer is made solely to
establish the account or to support the operation of the contracts with respect to the
separate account to which the transfer is made.
(b) If the transfer is into or from a separate account, the transfer is made
either:
(i) By a transfer of cash.
(ii) By a transfer of securities having a valuation that can be readily determined
in the marketplace, if the director approves the transfer of the securities.
K. Except as otherwise approved by the director, the company shall maintain in each
separate account assets with a value in an amount that is at least equal to the reserves
and other contract liabilities with respect to the account.
L. Any law that relates to conflicts of interest and that applies to the officers
and directors of insurance companies also applies to the members of any separate accounts
committee, board or other body that is established pursuant to subsection I of this
section. An officer or director of the company or a member of the committee, board or
body of a separate account shall not receive, directly or indirectly, any commission or
other compensation with respect to the purchase or sale of any assets of the separate
account.
20-2634 Filing of contracts; approval
Unless exempt pursuant to chapter 5, article 1 of this title, each insurer shall
file with the director all variable annuity contracts and all riders, endorsements,
applications and other documents that are attached to and made part of the contract and
that relate to the variable nature of the contract. The director shall approve all
variable annuity contracts before they are delivered or issued for delivery in this
state.
20-2635 Variable annuity contracts
A. A variable annuity that provides benefits payable in variable amounts and that
is delivered or issued for delivery in this state shall contain a statement of the
essential features of the procedures the insurance company must follow in determining the
dollar amount of the variable benefits. The contract, including a group contract and any
certificate in evidence of variable benefits that is issued under the contract, shall
state that the dollar amount will vary to reflect investment experience and shall contain
on its first page a clear statement that the benefits under the contract are on a
variable basis.
B. Illustrations of benefits that are payable under a variable annuity shall not
include projections of past investment experience into the future or attempted
predictions of future investment experience. This subsection does not prohibit the use
of hypothetical assumed rates of return to illustrate possible benefit levels.
C. An insurer shall not deliver or issue for delivery in this state an individual
variable annuity contract that calls for the payment of periodic stipulated payments
unless the contract contains in substance the following provision or provisions:
1. A grace period provision of thirty days or of one month, within which any
stipulated payment to the insurer that falls due after the first day may be made and
during which the contract shall continue in force. The contract may state the basis for
determining the date as of which any payment that is received during the grace period
shall be applied to produce the values under the contract arising from the contract.
2. A reinstatement provision that unless the cash surrender value has been paid the
contract may be reinstated on the payment to the insurer of the overdue payments as
required by contract and all indebtedness on the contract, including interest, at any
time after the date of the default in making periodic stipulated payments to the insurer
during the life of the annuitant. The contract may state the basis for determining the
date as of which the amount to cover the overdue payments and indebtedness shall be
applied to produce the values under the contract arising from the contract.
D. A variable annuity contract that is delivered or issued for delivery in this
state shall stipulate the investment increment factors the insurer will use in computing
the dollar amount of variable benefits or other variable contractual payments or values
under the variable annuity contract. The contract may guarantee that expense or
mortality results, or both, do not adversely affect the dollar amounts. If the expense
and mortality results may adversely affect the dollar amount of benefits, the insurer
shall stipulate the expense and mortality factors in the contract. For the purposes of
this subsection, the contract may stipulate that expense excludes some or all taxes.
E. In computing the dollar amount of variable benefits or other contractual
payments or values under an individual variable annuity contract:
1. Unless the director otherwise approves, the annual net investment increment
assumption shall not exceed five per cent.
2. To the extent that the level of benefits may be affected by future mortality
results, unless the director approves the use of another table the mortality factor shall
be determined from the annuity mortality table for 1949, ultimate, or any modification of
that table not having a lower life expectancy at any age.
F. The reserve liability for variable annuities shall be established pursuant to
the requirements of section 20-510 in accordance with actuarial procedures that recognize
the variable nature of the benefits provided and any mortality guarantees.
20-2636 Nonforfeiture benefits; exceptions; definition
A. This section does not apply to the following:
1. Reinsurance.
2. Group annuity contract purchases that are made in connection with one or more
retirement or deferred compensation plans that are established or maintained by or for
one or more employers, including partnerships or sole proprietorships, employee
organizations or any combination of partnerships, proprietorships and employee
organizations. This exception does not apply to group annuity contract purchases that
are made in connection with plans that provide individual retirement accounts or
individual retirement annuities under section 408 of the internal revenue code.
3. A premium deposit fund.
4. An investment annuity.
5. An immediate annuity.
6. A deferred annuity contract after annuity payments begin.
7. A reversionary annuity.
8. A contract that is delivered outside this state through any insurance producer
or other representative of the company issuing the contract.
B. To the extent that a variable annuity contract provides benefits that do not
vary according to the investment performance of a separate account before the annuity
commencement date, the contract shall contain provisions that satisfy the requirements of
section 20-1232 and the contract is not subject to this section.
C. Except pursuant to subsections A and B of this section, if a contract is issued
on or after January 1, 1998, a variable annuity contract shall not be delivered or issued
for delivery in this state unless it contains in substance the following provisions or
corresponding provisions that the director determines are at least as favorable to the
contract holder:
1. That, on cessation of the payment of considerations under a contract, the
company will grant a paid-up annuity benefit on a plan that is described in the contract
and that complies with subsection G of this section. The description shall include a
statement of the mortality table, if any, and the guaranteed or assumed interest rates
that are used in calculating annuity payments.
2. If a contract provides for a lump sum settlement at maturity or at any other
time, that, on the surrender of the contract at or before the commencement of any annuity
payments, the company will pay in lieu of any paid-up annuity benefit a cash surrender
benefit that is described in the contract and that complies with subsection H of this
section. The contract may provide that the company reserves the right to defer the
determination and payment of any cash surrender benefit for any period during which the
New York stock exchange is closed for trading except for normal holidays or in which the
securities and exchange commission determines that a state of emergency exists.
3. A statement that any paid-up annuity, cash surrender or death benefits that may
be available under the contract are not less than the minimum benefits that are required
by the laws of the state in which the contract is delivered and an explanation of the
manner in which the benefits are altered by any of the following:
(a) The existence of any additional amounts the company credited to the contract.
(b) Any indebtedness to the company on the contract.
(c) Any prior withdrawals from or partial surrenders of the contract.
D. The minimum values under this section of any paid-up annuity, cash surrender or
death benefits that are available under a variable annuity contract shall be based on
nonforfeiture amounts that meet the following requirements:
1. The minimum nonforfeiture amount on any date before the annuity commencement
date shall be an amount that is equal to the percentages of net considerations under
subsection E of this section, and increased or decreased by the net investment return
that is allocated to the percentages of net considerations. This amount shall be reduced
to reflect the effect of:
(a) Any partial withdrawals from or partial surrenders of the contract.
(b) The amount of any indebtedness on the contract, including interest due and
accrued.
(c) An annual contract charge that is not less than zero and that is equal to the
lesser of thirty dollars or two per cent of the end of year contract value, less the
amount of any annual contract charge that is deducted from any gross considerations
credited to the contract during the contract year.
(d) A transaction charge of ten dollars for each transfer to another separate
account or to another investment division within the same separate account.
2. The net investment return to be credited to a contract shall be determined at
least monthly.
3. The annual thirty dollar contract charge and the ten dollar transaction charge
under paragraph 1 of this subsection will be adjusted to reflect changes in the consumer
price index pursuant to subsection F of this section.
For the purposes of this subsection, "net investment return" means the rate of investment
return that is in an amount that does not exceed the actual expense not offset by other
deductions and that is credited to the variable annuity contract according to the terms
of the contract after deductions for tax charges, if any, for asset charges either at a
rate that does not exceed the rate stated in the contract, or if the contract is issued
by a nonprofit corporation under which the contract holder participates fully in the
investment, for mortality and expense experience of the account.
E. The percentages of net considerations that are used to define the minimum
nonforfeiture amount under subsection D of this section shall meet one of the following
requirements:
1. For contracts that provide for periodic considerations, the net considerations
for a given contract year that are used to define the minimum nonforfeiture amount shall
be an amount not less than zero and shall be equal to the corresponding gross
considerations that are credited to the contract during that contract year less an annual
contract charge of thirty dollars, less a collection charge of one dollar twenty-five
cents for each periodic consideration credited to the contract during that contract year,
and less any charges for premium taxes. The percentages used to calculate the minimum
nonforfeiture amount shall be as follows:
(a) For the first contract year, sixty-five per cent of the net considerations.
(b) For each renewal contract year, eighty-seven and one-half per cent of the net
considerations, except that for any portion of the total net consideration for a renewal
contract year that exceeds by not more than two times the sum of those portions of the
net considerations in all prior contract years for which the percentage was sixty-five
per cent, the percentage to be applied to this amount shall be sixty-five per cent.
2. For contracts that provide for a single consideration, the net consideration
that is used to define the minimum nonforfeiture amount shall be the gross consideration
less a seventy-five dollar contract charge and less any charges for premium taxes. The
percentage of the net consideration shall be ninety per cent. The annual thirty dollar
contract charge, the collection charge of one dollar twenty-five cents per collection and
the seventy-five dollar single consideration contract charge will be adjusted to reflect
changes in the consumer price index pursuant to subsection F of this section.
F. A demonstration that a contract's nonforfeiture amounts comply with this section
shall be based on the following assumptions, unless the company demonstrates the
suitability of alternative assumptions:
1. The testing of values shall occur at the end of each of the first twenty
contract years.
2. A net investment return of seven per cent per year.
3. If the contract provides for transfers to another separate account or to another
investment division within the same separate account, one transfer per contract year.
4. In determining the state premium tax that applies to the contract, the state of
residence is the state of delivery.
5. With respect to contracts that provide for periodic considerations, monthly
considerations of one hundred dollars for each of the first two hundred forty months.
6. With respect to contracts that provide for a single consideration, a ten
thousand dollar single consideration.
7. The following contract charges:
(a) For contracts that are filed in 1980 or earlier, the annual thirty dollar
contract charge, the charge of ten dollars per transfer, the collection charge of one
dollar twenty-five cents per consideration and the seventy-five dollar contract charge.
(b) For contracts that are filed in 1981 or after, the contract charges listed in
subdivision (a) of this paragraph multiplied by the ratio of the consumer price index
for June of the calendar year preceding the date of filing to the consumer price index
for June, 1979.
8. If the contract provides for the allocation of considerations to both fixed and
variable accounts, allocate one hundred per cent of the considerations to the variable
account.
G. A paid-up annuity benefit that is available under a variable annuity contract
shall be in an amount so that its present value on the annuity commencement date is at
least equal to the minimum nonforfeiture amount on the annuity commencement date. The
insurer shall compute the present value by using the mortality table, if any, and the
guaranteed or assumed interest rates that are used in calculating the annuity payments.
H. For variable annuity contracts that provide cash surrender benefits, at any time
before the annuity commencement date the cash surrender benefit shall not be less than
the minimum nonforfeiture amount next computed after the company receives the request for
surrender. The death benefit under the contracts shall be at least equal to the cash
surrender benefit.
I. A variable annuity contract that does not provide cash surrender benefits or
that does not provide death benefits that are at least equal to the minimum nonforfeiture
amount before the annuity commencement date shall prominently state in the contract that
these benefits are not provided.
J. Notwithstanding the requirements of this section, a variable annuity contract
may provide that the company may cancel the annuity and pay the contract holder its
accumulated value and that on the payment of its accumulated value the company is
released from any further obligation under the contract if either:
1. At the time the annuity becomes payable the accumulated value is less than two
thousand dollars, or would provide an income the initial amount of which is less than
twenty dollars per month.
2. Before the annuity becomes payable under a periodic payment variable annuity
contract, considerations have not been received under the contract for the two full years
preceding the cancellation and both:
(a) The considerations were paid before the annuity became payable and were reduced
to reflect any partial withdrawals from or partial surrenders of the contract.
(b) The accumulated value amounted to less than two thousand dollars.
K. For a variable annuity contract that provides within the same contract by rider
or supplemental contract provision both annuity benefits and life insurance benefits that
are in excess of the greater of the cash surrender benefits or a return of the gross
considerations with interest, the minimum nonforfeiture benefits shall be equal to the
sum of the minimum nonforfeiture benefits for the annuity portion and the minimum
nonforfeiture benefits, if any, for the life insurance portion computed as if each
portion were a separate contract. Notwithstanding subsection D of this section, in
ascertaining the minimum nonforfeiture amounts and paid-up annuity, cash surrender and
death benefits that may be required by this section, the insurer shall disregard any
additional benefits that are payable in the event of a total and permanent disability, as
reversionary annuity or deferred reversionary annuity benefits or as other policy
benefits in addition to life insurance, endowment and annuity benefits, and the
considerations for all of the additional benefits. The inclusion of the additional
benefits is not required in any paid-up benefits, unless the additional benefits
separately would require minimum nonforfeiture amounts and paid-up annuity, cash
surrender and death benefits.
L. For the purposes of this section, "consumer price index" means the index for all
urban consumers for all items that is published by the bureau of labor statistics of the
United States department of labor or its successor.
20-2637 Reports
A. At least once in each contract year after the first contract year, a company
that issues individual variable annuities shall mail to the contract holder at the
contract holder's last known address a statement reporting the investments that are held
in the separate account as of a date not more than four months before the date of
mailing. The company shall submit annually to the director on a form prescribed by the
national association of insurance commissioners a statement of the business of its
separate account or accounts.
B. If payments under an annuity contract have not yet commenced the statement shall
contain either:
1. The number of accumulation units that are credited to the contract and the
dollar value of a unit.
2. The value of the contract holder's account.
20-2638 Foreign companies
If the law in a foreign company's domiciliary state provides a degree of protection
to the policyholders and the public that is substantially equal to the degree of
protection that is provided by this article, the director may determine that the foreign
company has complied with this article.
20-2661 Scope of article; definition
A. This article applies to all agents as defined in section 20-2601 seeking
qualification to sell or offer for sale variable contracts in this state.
B. "Variable contracts" means "variable life insurance" and "variable annuity" as
defined in sections 20-2601 and 20-2631 respectively.
20-2662 Insurance producer qualifications; reports
A. A person may not sell or offer for sale in this state any variable contracts
unless the person is licensed as a life insurance producer by the department and files
with the director evidence that the person is licensed by the national association of
securities dealers as a principal or a registered representative and that the person is
authorized to solicit or sell variable contracts by an insurer admitted to transact
variable contract business in this state.
B. Any examination that is administered by the department to determine if a person
is eligible for licensing as an insurance producer may include any questions that the
director deems appropriate and that concern the history, purpose, regulation and sale of
variable contracts.
C. Any person who is qualified to sell or offer to sell variable contracts under
this article shall immediately report to the director:
1. The suspension or revocation of the insurance producer's license in any other
state or territory of the United States.
2. The imposition of any disciplinary sanction, including the suspension or
expulsion of the insurance producer from membership, or suspension, revocation or denial
of the insurance producer's registration by any national securities exchange, national
securities association or federal, state or territorial agency that has jurisdiction over
securities or variable contracts.
3. The entry of a judgment or injunction against the insurance producer for conduct
involving fraud, deceit or misrepresentation or a violation of any insurance or
securities law.
D. The director may reject an application or suspend, revoke or refuse to renew an
insurance producer's qualification to sell or offer to sell variable contracts on any
ground that would bar the applicant or insurance producer from being licensed to sell
other life insurance contracts in this state. The rules that apply to a proceeding
relating to the suspension or revocation of an insurance producer's license also apply to
a proceeding for the suspension or revocation of a producer's qualification to sell or
offer to sell variable contracts.
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