Current through Register 2024 Notice Reg. No. 38, September 20, 2024
The following requirements are applicable to all insurers either
seeking authority to issue variable life insurance in this State or which have
authority to issue variable life insurance in this State.
(a) Licensing and Approval to Do Business in This
State. An insurer shall not deliver or issue for delivery in this State any variable
life insurance policy unless:
(1) The insurer is
licensed or organized to do a life insurance business in this State;
(2) The state of domicile of such insurer requires
that permissible investments be substantially the same as provided in Section
2534.5(c) and that
changes in the investment policy of the variable life insurance separate account be
regulated in a manner substantially similar to that required under Section
2534.5 for such separate accounts
operated by insurers domiciled in this State, and
(3) The insurer has obtained the written approval
of the Commissioner for the issuance of variable life insurance policies in this
State. The Commissioner shall grant such written approval only after he has found
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 proposed to supply
consulting, investment, administrative or custodial services to the insurer are such
as to reasonably assure competent operation of the variable life insurance business
of the insurer in this State, and
(C)
The present and foreseeable future financial condition of the insurer and its method
of operation in connection with the issuance of such policies is not likely to
render its operation hazardous to the public or its policyholders in this State. The
Commissioner shall consider, among other things:
1.
The history of operation and financial condition of the insurer;
2. The qualifications, fitness, character,
responsibility, reputation and experience of the officers and directors and other
management of the insurer and those persons or firms proposed to supply consulting,
investment, administrative, or custodial services to the insurer;
3. The applicable law and regulations 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 shall be deemed its state of
domicile for this purpose, and
4. If the
insurer is a subsidiary of, or is affiliated by common management or ownership with
another company, its relationship to such other company and the degree to which the
requesting insurer, as well as the other company, meet these
standards.
(b) Filing for Approval to Do Business in This
State. Before any insurer shall deliver or issue for delivery any variable life
insurance policy in this State it must file with this Department the following
information for the consideration of the Commissioner in making the determination
required by subsection (a) (3) of this Section:
(1) Copies of and a general description of the
variable life insurance policies it intends to issue;
(2) A general description of the methods of
operation of the variable life insurance business of the insurer, including the
names of those persons or firms proposed to supply consulting, investment,
administrative or custodial services to the insurer;
(3) With respect to any separate account
maintained by an insurer for any variable life insurance policy, a statement of the
investment policy the insurer intends to follow for the investment of the assets
held in such separate account. The statement shall include a description of the
investment objective and orientation intended for the separate account;
(4) A description of any investment advisory
services contemplated as required by Section
2534.5(j);
(5) If requested by the Commissioner, a copy of
the statutes and regulations of the state of domicile of the insurer under which it
is authorized to issue variable life insurance policies, and
(6) If requested by the Commissioner, biographical
data with respect to officers and directors of the insurer on the National
Association of Insurance Commissioners Uniform Biographical Data
Form.
(c) Standards of
Suitability. Every insurer seeking approval to enter into the variable life
insurance business in this State shall adopt by formal action of its Board of
Directors and file with the Commissioner a written statement specifying the
Standards of Suitability to be used by the insurer, and applicable to its officers,
directors, employees, affiliates, and agents with respect to the suitability of
variable life insurance for the applicant. Such Standards of Suitability shall be
binding on the insurer and those to whom it refers, and shall specify that no
recommendation shall be made to an applicant to purchase a variable life insurance
policy and that no variable life insurance policy shall be issued in the absence of
reasonable grounds to believe that the purchase of such policy is not unsuitable for
such applicant on the basis of information furnished after reasonable inquiry of
such applicant concerning the applicant's insurance and investment objectives,
financial situation and needs, and any other information known to the insurer or to
the agent making the recommendation.
Lapse rates for variable life insurance within the first two
policy years, which are significantly higher than both those encountered by the
insurer or any affiliate thereof for corresponding fixed benefit life insurance
policies and lapse rates of other insurers issuing variable life insurance policies
shall be considered in determining whether the guidelines adopted by the insurer are
reasonable and also whether the insurer and its agents are engaging, as a general
business practice, in the sale of variable life insurance to persons for whom it is
unsuitable. For purposes of this subsection, conversions from variable life
insurance to fixed benefit life insurance policies pursuant to this regulation,
shall not be considered lapses.
(d) Use of Sales Materials. An insurer authorized
to transact variable life insurance business in this State shall not use any sales
material, advertising material or descriptive literature or other materials of any
kind in connection with its variable life insurance business in this State which is
false, misleading, deceptive or inaccurate.
(1) All
variable life insurance sales material, advertising material and descriptive
literature shall be filed 30 business days prior to use with the Commissioner who
shall require an insurer to cease the use of any such materials upon finding that
any such materials are false, misleading or inaccurate. Revised versions of such
materials containing changes of substantial import from versions on file with the
Commissioner shall be filed with the Commissioner.
(2) For purposes of this regulation, variable life
insurance sales material, advertising material, or descriptive literature shall
include but is not limited to:
(A) Printed and
published material, audio-visual material, and descriptive literature of an insurer
used in direct mail, newspapers, magazines, radio scripts, TV and film scripts,
billboards, and similar displays for variable life insurance;
(B) Descriptive literature and sales aids of all
kinds used to sell variable life insurance by or on behalf of an insurer or any
person authorized to sell variable life insurance for presentation to members of the
insurance buying public, including but not limited to circulars, leaflets, booklets,
depictions, illustrations, and form letters, and
(C) Prepared sales talks, presentations, and
material for use in the sale of variable life insurance by any person authorized to
sell variable life insurance.
(e) Requirements Applicable to Contractual
Services:
(1) Any contract between an insurer and
suppliers of consulting, investment, administrative, sales, marketing, custodial, or
other services which are material with respect to variable life insurance operations
shall be in writing and provide that the supplier of such services shall furnish the
Commissioner with any information or reports in connection with such services which
the Commissioner may request in order to ascertain whether the variable life
insurance operations of the insurer are being conducted in a manner consistent with
this regulation and any other applicable law or regulations.
(2) Such contract shall be fair and equitable to
all parties and not endanger any policyholders of the insurer in this
State.
(3) Such contract shall not
relieve the insurer from any responsibilities or obligations imposed upon the
operations of its variable life insurance business by this regulation or any other
law or regulation.
(f) Reports
to the Commissioner. Any insurer authorized to transact the business of variable
life insurance in this State shall submit to the Commissioner, in addition to any
other materials which may be required by this regulation or any other applicable
laws or regulations:
(1) An Annual Statement of
the business of its variable life insurance separate account or accounts in such
form as may be prescribed by the National Association of Insurance Commissioners,
and
(2) Prior to the use in this State
any Information Furnished to Applicants as provided for in Section
2534.6, and
(3) Prior to the use in this State the form of any
of the Reports to Policyholders as provided for in Section
2534.8, and
(4) Such additional information concerning its
variable life insurance operations or its variable life insurance separate accounts
as the Commissioner shall deem necessary.
Any material submitted to the Commissioner under this Section
shall be disapproved if it is found to be false, misleading, deceptive or inaccurate
in any material respect and, if previously distributed, the Commissioner shall
require the distribution of an amended report.
(g) Authority of Commissioner to Disapprove. Any
material required to be filed with the Commissioner, or approved by him, shall be
subject to disapproval if at any time it is found by him not to comply with the
standards established by this regulation.
