Missouri Code of State Regulations
Title 20 - DEPARTMENT OF COMMERCE AND INSURANCE
Division 400 - Life, Annuities and Health
Chapter 1 - Life Insurance and Annuity Standards
Section 20 CSR 400-1.020 - Variable Contracts Other Than Life
Universal Citation: 20 MO Code of State Regs 400-1.020
Current through Register Vol. 48, No. 18, September 15, 2023
PURPOSE: This rule establishes some requirements for variable contracts other than life including establishment of separate accounts, contents of presentation and agent qualification. This rule was adopted pursuant to the provisions of sections 374.045(4) and (5), 376.309, 376.590, 376.670 and 376.675, RSMo.
(1) Definitions.
(A) The term variable contract, when used in
this rule, shall mean any group or individual contract or policy issued by a
life insurance company providing for the dollar amount of benefits or other
contractual payments or values thereunder to vary so as to reflect the
investment results of any designated separate account(s), as defined in section
376.309,
RSMo in which amounts received in connection with any such contracts shall have
been placed. This shall not include variable life contracts subject to
20 CSR
400-1.030.
(B) Insurance producer, when used in this
rule, shall mean any person who under the laws of this state is required to be
and is licensed as a life insurance producer.
(C) Variable contract insurance producer,
when used in this rule, shall mean an insurance producer who shall sell or
offer to sell any variable contract.
(D) A satisfactory alternative examination to
Part I of the written examination called for by paragraph (8)(G)1. shall
include any securities examination which is declared by the director to be an
equivalent examination on the basis of content and administration. The
following examinations are deemed to be a satisfactory alternative examination:
1. Any state securities sales examination
accepted by the Securities and Exchange Commission;
2. The National Association of Securities
Dealers, Inc., Examination for Principals or Examination for Qualification as a
Registered Representative;
3. The
various securities examinations required by the New York Stock Exchange, the
American Stock Exchange, Pacific Stock Exchange or any other registered
national exchange;
4. The
Securities and Exchange Commission test given pursuant to section 15(b)(8) of
the Securities Exchange Act of 1934; and
5. The examination recommended for the
testing of variable contract insurance producers by the National Association of
Insurance Commissioners (NAIC), when adopted by the insurance department of any
state or territory of the United States and approved for use by the department
by the Securities and Exchange Commission.
(2) Qualification of Insurance Companies to Issue Variable Contracts.
(A) No company
shall deliver or issue for delivery variable contracts within this state
unless-
1. It is licensed or organized to do
a life insurance business in this state, and the director is satisfied that its
condition or method of operation in connection with the issuance of these
contracts will not render its operation hazardous to the public or its
policyholders in this state. In this connection, the director will consider
among other things-
A. The history and
financial condition of the company;
B. The character, responsibility and fitness
of the officers and directors of the company; and
C. The law and rules under which the company
is authorized in the state of domicile to issue variable contracts.
(B) The company shall
have an amount of capital and surplus, if a stock company or an amount of
surplus, if a mutual company, of at least $2,500,000 and shall maintain at
least that amount; provided, that the director may make exceptions to this
provision if in his/her opinion a company's capital structure and surplus
otherwise afford adequate protection to contract holders.
(C) If the company is a subsidiary of an
admitted life insurance company or affiliated with the company by common
management or ownership, it may be deemed by the director to have satisfied the
provisions of sub-paragraphs (2)(A)1.A. and B. if either it or the admitted
life company is acceptable thereunder.
(D) Before any company shall deliver, or
issue for delivery, variable contracts within this state, it shall submit to
the director-
1. An application for an amended
certificate of authority to include variable contracts on the proper form
furnished by this department;
2. A
copy of a resolution adopted by its board of directors which authorizes the
establishment of one (1) or more separate accounts;
3. With respect to a foreign life insurance
company, a copy of the statutes and regulations of its state of domicile
permitting the issuance of variable contracts and a certification of
authorization from the director or commissioner of insurance of its state of
domicile or equivalent evidence that the company is authorized to issue
variable contracts in that state;
4. A general description of the kinds of
variable contracts it intends to issue;
5. Duplicate John Doe specimen copies of the
variable contract and certificate forms which it proposes to issue in this
state;
6. Biographical data with
respect to officers and directors of the company on the NAIC uniform
biographical data forms which are attached to
20 CSR
400-1.150;
7. Any prospectus or registration statement
covering the offering of these variable contracts;
8. A certified copy of the last separate
account blank filed in its domiciliary state; and
9. Any other information the director might
deem necessary.
(3) Separate Account(s).
(A) A domestic company issuing variable
contracts shall establish one (1) or more separate accounts pursuant to section
376.309,
RSMo, subject to the following provisions:
1.
Except as provided, amounts allocated to any separate account and accumulation
may be invested and reinvested in any kind or type of investment authorized for
life insurance companies by the statutes of this state, but the investments in
the account(s) shall not be included or taken into account in applying the
investment limitations applicable to investments in the general investment
account of any company; provided, that to the extent the company's reserve
liability with regard to-1) benefits guaranteed as to dollar amount and
duration and 2) funds guaranteed as to principal amount or stated return of
interest, is maintained in any separate account, a portion of the assets of the
separate account at least equal to the reserve liability shall be invested in
accordance with the laws of this state governing the general investment account
of the company except as the director might otherwise approve, invested in
accordance with the laws of this state governing the general investment account
of the company;
2. With respect to
seventy-five percent (75%) of the market value of the total assets in a
separate account, no company shall purchase or otherwise acquire the securities
of any issuer, other than securities 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 such security taken at market, would exceed ten percent
(10%) of the market value of the assets of the separate account; provided, that
the director may waive the limitation if, in his/her opinion, the waiver will
not render the operation of the separate account hazardous to the public or the
policyholders in this state;
3.
Unless otherwise permitted by law or approved by the director, no company shall
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 percent (10%) of
the total issued and outstanding voting securities of the issuer; provided,
that this shall not apply with respect to securities held in separate accounts,
the voting rights which are exercisable only in accordance with instructions
from persons having interests in these accounts; and
4. The percentage limitations in paragraphs
(3)(A)2. and 3. shall not apply to the investments of a separate account in the
securities of an investment company registered under the Investment Company Act
of 1940.
A. Unless otherwise approved by the
director, assets allocated to a separate account shall be valued at their
market value on the date of valuation or if there is no readily available
market, then as provided under the terms of the contract or the rules or other
written agreement applicable to the separate account; provided, that unless
otherwise approved by the director, the portion of the assets of the separate
account equal to the company's reserve liability with regard to the benefits
and funds referred to in clauses 1) and 2) of paragraph (3)(A)1., if any, shall
be valued in accordance with the rules otherwise applicable to the company's
assets.
B. If and to the extent so
provided under the applicable contracts, that portion of the assets of any such
separate account equal to the reserves and other contract liabilities with
respect to that account shall not be chargeable with liabilities arising out of
any other business the company may conduct.
C. Notwithstanding any other provisions, a
company may-
(I) Exercise with respect to any
separate account 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 in accordance with instructions from
persons having interests in the accounts ratably as determined by the company;
or
(II) Establish with respect to
any separate account registered with the Securities and Exchange Commission as
a management investment company, establish for the account a committee, board
or other body, the members of which may or may not be otherwise affiliated with
the company and may be elected to the membership by the vote of persons having
interest in the account rat-ably as determined by the company. The committee,
board or other body may have the power, exercisable alone or in conjunction
with others, to manage the separate account and the investment of its
assets.
D. A company,
committee, board or other body may make other provisions in respect to any such
separate account as may be deemed appropriate to facilitate compliance with
requirements of any federal or state law in effect; provided, that the director
approves the provisions as not hazardous to the public or the company's
policyholders in the state.
(I) No investment
in the separate account or in the general investment account of a life
insurance company shall be transferred by sale, exchange, substitution or
otherwise from one (1) account to another unless, in case of a transfer 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 or unless the transfer, whether into or from a
separate account, is made-1) by a transfer of cash or 2) by a transfer of other
assets having a readily determinable market value; provided, that the transfer
of other assets is approved by the director of insurance and is for assets of
equivalent value. The transfer shall be deemed approved to the extent the
assets of a separate account so transferred have been paid to or are being held
by the company in connection with a pension, retirement or profit sharing plan
subject to the provisions of the Internal Revenue Code and the
Employee Retirement Income Security Act of 1974. The director of insurance may
withdraw the deemed approval by providing written notice to the company that
its financial condition or past practices requires this withdrawal. The
director of insurance may approve other transfers among the accounts if the
director concludes that the transfers would be equitable.
(II) The company shall maintain in each
separate account assets with a value at least equal to the reserves and other
contract liabilities with respect to the account, except as may otherwise be
approved by the director.
(III)
Rules under any provisions of the insurance laws of this state or any rules
applicable to the officers and directors of insurance companies with respect to
conflicts of interest shall also apply to members of any separate account's
committee, board or other similar body. No officer or director of the company
nor any member of committee, board or body of a separate account shall receive
other compensation with respect to any purchase or sale of assets of the
separate account.
(4) Filing of Contracts. The filing requirements applicable to variable contracts shall be those filing requirements otherwise applicable under existing statutes and rules of this state with respect to individual and group life insurance and annuity contract form filings, to the extent appropriate.
(5) Contracts Providing for Variable Benefits.
(A) Any variable contract providing
benefits payable in variable amounts delivered or issued for delivery in this
state shall contain a statement of the essential features of the procedures to
be followed by the insurance company in determining the dollar amount of the
variable benefits. Any such contract, including a group contract and any
certificate in evidence of variable benefits issued thereunder, shall state
that the dollar amount will vary to reflect investment experience and shall
contain on its page a conspicuously located statement reading "ALL PAYMENTS AND
VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A
SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR
AMOUNT" or other statement of similar substance.
(B) Illustrations of benefits payable under
any variable contract providing benefits payable in variable amounts shall not
include projections of past investment experience into the future or attempted
predictions of future investment experience; provided, that nothing contained
in this rule is intended to prohibit use of hypothetical assumed rates of
return to illustrate possible levels of annuity benefits.
(C) No individual variable annuity contract
calling for the payment of periodic stipulated payments shall be delivered or
issued for delivery in Missouri unless it contains the following provision(s)
which are more favorable to the holders of the contracts:
1. A provision that there shall be a period
of grace of thirty (30) days, within which any stipulated payment to the
insurer falling due after the first one (1) may be made, during which period of
grace the contract shall continue in force. The contract may include a
statement of the basis for determining the date as of which the payment
received during the period of grace shall be applied to produce the values
under the contract arising from that payment;
2. A provision that, at any time within five
(5) years from the date of default in making periodic stipulated payments to
the insurer, during the life of the annuitant and unless the cash surrender
value has been paid, the contract may be reinstated upon payment to the insurer
of the overdue payments as required by the contract and of all indebtedness to
the insurer on the contract, including interest. The contract may include a
statement of the basis for determining the date as to which the amount to cover
the overdue payments and indebtedness shall be applied to produce the values
under the contract arising from that amount; and
3. A provision specifying the options
available in the event of default in a periodic stipulated payment. These
options may include an option to surrender the contract for a cash value as
determined by the contract and shall include an option to receive a paid-up
annuity; if the contract is not surrendered for cash, the amount of the paid-up
annuity shall be determined by applying the value of the contract at the
annuity commencement date in accordance with the terms of the
contract.
(D) Any
individual variable annuity contract delivered or issued for delivery in this
state shall stipulate the investment increment factor to be used in computing
the dollar amount of variable benefits or other contractual payments or values,
and may guarantee that expense, mortality results or both shall not adversely
affect the dollar amounts. If not guaranteed, the expense and mortality factors
shall also be stipulated in the contract.
1.
In computing the dollar amount of the variable benefits or other contractual
payments or values under an individual annuity contract-
A. The annual net investment increment
assumption shall not exceed five percent (5%), except with the approval of the
director; and
B. To the extent that
the level of benefits may be affected by future mortality results, 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 or if approved by the director, from another table.
2. Expense as used in subsection
(5)(D) may exclude some or all taxes, as stipulated in the contract.
(E) Variable annuity contracts may
include as an incidental benefit provision for payment on death during the
deferred period of an amount not in excess of the greater of the sum of the
premiums or stipulated payments paid under the contract or the value of the
contract at time of death. This provision shall not be subject to the
provisions of the insurance law governing life insurance contracts. A variable
annuity contract also may include provisions for other benefits on death or
disability during the deferred period, which benefits shall be subject to the
insurance law provisions governing the benefits. Any disability benefit or
supplemental death benefit included in the contract shall not be subject to the
requirements of paragraph (5)(C)2., unless consented to by the company after
receiving satisfactory evidence of insurability.
(F) The reserve liability for variable
annuities shall be established pursuant to the requirements of the standard
valuation law in accordance with actuarial procedures that recognize the
variable nature of the benefits provided and any mortality
guarantees.
(6) Required Reports.
(A) Any company issuing individual
variable contracts providing benefits in variable amounts shall mail to the
contract holder at least once in each contract year, after the first, at
his/her last address known to the company, a statement(s) reporting the
investments held in the separate account and, in the case of contracts under
which payments have not yet commenced, a statement reporting as of a date
within four (4) months of the date of mailing, the number of accumulation units
credited to those contracts and the dollar value of a unit or the value of the
contract holder's account.
(B) The
company annually shall submit to the director a statement of the business of
its separate account(s) in the form as s/he may prescribe.
(7) Foreign Companies. If the law or regulation in the place of domicile of a foreign company provides a degree of protection to the policyholders and the public which is substantially equal to that provided by these rules, the director may consider compliance with that law or regulation as compliance with these rules, if followed within Missouri.
(8) Examination of Insurance Producers and Other Persons.
(A) No
insurance producer shall be eligible to sell or offer for sale a variable
contract unless prior to making any solicitation or sale of this contract, s/he
is also licensed as a variable contract insurance producer.
(B) Any insurance producer who participates
only in the sale or offering for sale of variable contracts that are not
registered under the Federal Securities Act of 1933 need not be licensed as a
variable contract insurance producer.
(C) Any insurance producer applying for a
license as a variable contract insurance producer shall do so by filing with
this department an application designated by the director of
insurance.
(D) The licensing as a
variable contract insurance producer of any insurance producer complying with
subsection (8)(C) shall not become effective until the insurance producer shall
have satisfactorily passed a written examination upon securities and variable
contracts. The examination shall be divided into two (2) parts. Part I shall be
on securities generally. Part II will deal with variable contracts and will be
composed of at least fifteen (15) questions concerning the history, purpose,
regulation and sale of contracts on a variable basis. A passing grade of
seventy percent (70%) shall be required on both Parts I and II of the
examination.
(E) The examination
will be given in such places and at times the director from time-to-time shall
designate.
(F) The examination
recommended for the testing of variable contract insurance producers by the
NAIC is adopted for use in this state and it shall be used in all tests given
pursuant to this rule.
(G) Any
applicant for license as a variable contract insurance producer shall not be
required to take Part I of the NAIC examination if, at the time of application,
evidence is presented that the applicant-
1.
Has previously passed a satisfactory alternative examination as defined in
subsection (7)(D) of this rule; or
2. Is currently registered with the federal
Securities and Exchange Commission as a broker-dealer or is currently
associated with a broker-dealer and has met qualification requirements with
respect to the association.
(H) Every applicant applying for license as a
variable contract insurance producer shall satisfactorily complete Part II of
the examination required by subsection (8)(D) or shall present evidence of
successful completion of either a variable contract examination given under the
supervision of an insurance department of any state or territory of the United
States which had adopted Part II of the examination recommended for the testing
of variable contract insurance producers by the NAIC or has been examined and
licensed by any insurance department prior to its adoption of the NAIC model
regulation.
(I) If any applicant
fails to pass Part I of the examination required by subsection (8)(D), s/he may
retake Part I of the examination by submitting another Request for Examination
seven (7) days prior to the examination date selected.
(J) If any applicant fails to pass Part II of
the examination, s/he may retake Part II of the examination by submitting
another Request for Examination seven (7) days prior to the examination date
selected.
(K) Every application for
a license as a variable contract insurance producer shall be accompanied by a
Request for Examination form, an examination fee of ten dollars ($10) and a
license fee of three dollars ($3). A fee of ten dollars ($10) will be charged
for each reexamination administered to an applicant.
(L) Report of the results of any examination
given pursuant to this rule shall be made by the department on "Director's
Report of Examination" (see Exhibit A, included herein).
(M) Except as modified, the regulations
governing the licensing of life insurance producers including examinations
shall apply.
(N) Part I of the
written examination provided for in subsection (8)(D) also shall be
administered to other persons who are not required to be licensed to sell life
insurance in this state upon their submission of Application for Securities
Salesmen, Variable Contract Salesmen and Other Associated Persons and payment
of the examination fee.
(O) Results
of the examination administered pursuant to subsection (8)(D) will be reported
by this department to the applicant's company. In addition, examination results
will be reported by this department to any other state insurance department
requesting confirmation of the examination grade, either upon request of the
department or upon request of the applicant or his/her company and payment of
costs.
(P) Records of the
examination grade of each applicant upon an examination administered by this
department or upon an examination deemed to be a satisfactory alternative
examination and administered by another agency or authority and reported to
this department, will be retained in the file pertaining to the
applicant.
(Q) Any person licensed
in this state as a variable contract insurance producer immediately shall
report to the director-
1. Any suspension or
revocation of his/her variable contract insurance producer's license or life
insurance producer's license in any other state or territory of the United
States;
2. The imposition of any
disciplinary sanction (including suspension or expulsion from membership,
suspension or revocation of or denial of registration) imposed upon him/her by
any national securities exchange or national securities association or any
federal or state or territorial agency with jurisdiction over securities or
contracts on a variable basis; and
3. Any judgment or injunction entered against
him/her on the basis of conduct deemed to have involved fraud, deceit,
misrepresentation or violation of any insurance or securities law or
regulation.
(R) The
director may reject any application or suspend or revoke or refuse to renew any
variable contract insurance producer's license upon any ground that would bar
the applicant or the insurance producer from being licensed to sell life
insurance contracts in this state. The rules governing any proceeding relating
to the suspension or revocation of a life insurance producer's license shall
also govern any proceeding for suspension or revocation of a variable contract
insurance producer's license.
(S)
Renewal of a variable contract insurance producer's license shall follow the
same procedure established for renewal of an insurance producer's license to
sell life insurance contracts in this state.
Exhibit A
DIRECTOR'S REPORT OF
EXAMINATION NO.
STATE OF MISSOURI
DEPARTMENT OF COMMERCE AND INSURANCE
APPROVAL OF LICENSE AS A VARIABLE CONTRACT INSURANCE PRODUCER
Name of Applicant
Address
Enter name and address of broker-dealer and of the company to which approval of application for Variable Contract Insurance Producer's License should be directed.
Broker-Dealer
Address
Company
Address
When validated by the Department of Commerce and Insurance, this will be your notice of approval of your qualification for a Variable Contract Insurance Producer's License.
LICENSE APPROVED
Date
Director
TEST SCORE: NAIC EXAMINATION
SECURITIES Part I
Variable Contracts Part II
(If test waived, indicate variable contract regulation section conferring exemption)
If NAIC examination not taken, then name of general securities examination acceptable to the SEC.
TEST SCORE:
AUTHORITY: sections 374.045, 375.936, 376.309, 376.590, 376.670 and 376.675, RSMo 2000.* This rule was previously filed as 4 CSR 190-13.080. Original rule filed Dec. 5, 1969, effective Dec. 15, 1969. Amended: Filed Aug. 5, 1974, effective Aug. 15, 1974. Amended: Filed Dec. 23, 1975, effective Jan. 2, 1976. Amended: Filed Sept. 12, 1984, effective March 11 , 1985. Amended: Filed July 12, 2002, effective Jan. 30, 2003. Non-substantive change filed Sept. 11 , 2019, published Oct. 31, 2019.
*Original authority: 374.045, RSMo 1967 amended 1993, 1995; 375.936, RSMo 1959, amended 1967, 1969, 1971, 1976, 1978, 1983, 1991; 376.309, RSMo 1963, amended 1969, 1983, 1992, 1993; 376.590, RSMo 1939; 376.670, RSMo 1943, amended 1959, 1961, 1965, 1975, 1979, 1982; and 376.675, RSMo 1963, amended 1984.
Survivors Ben. Ins. Co. v. Farmer, 514 SW2d 565 (Mo. 1974). Superintendent of insurance has the duty to approve or disapprove life insurance contracts and forms and no contract or form may be used in Missouri without the approval of the superintendent.
Disclaimer: These regulations may not be the most recent version. Missouri may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
