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 400-1.150 - Modified Guaranty Annuity
Universal Citation: 20 MO Code of State Regs 400-1.150
Current through Register Vol. 48, No. 18, September 15, 2023
PURPOSE: This rule provides guidelines for Modified Guaranteed Annuities, a variable annuity whose assets are placed in a separate account.
(1) Applicability and Scope. This rule shall apply to-
(A) The
qualifications of insurance producers who sell Modified Guaranteed Annuity
contracts in this state;
(B) The
qualification of insurers who issue these contracts;
(C) The required contract form and
provisions; and
(D) The manner in
which separate account assets, supporting these issued contracts, are to be
maintained and reported.
(2) Definitions. As used in this rule, the following terms and phrases shall mean:
(A)
Modified guaranteed annuity means a deferred annuity contract, the underlying
assets of which are held in a separate account, and the values of which are
guaranteed if held for specified periods. It contains nonforfeiture values that
are based upon a market-value adjustment formula if held for shorter periods.
This formula may or may not reflect the value of assets held in the separate
account. The assets underlying the contract must be in a separate account
during the period(s) when the contract holder can surrender the
contract;
(B) Interest credits
means all interest that is credited to the contract;
(C) Separate account means a separate account
established pursuant to section
376.309,
RSMo or pursuant to the corresponding section of the insurance laws of the
state of domicile of a foreign or alien insurer; and
(D) Director means the director of the
Missouri Department of Commerce and Insurance.
(3) Authority of Insurers. The following requirements apply to all insurers who are either seeking authority to issue Modified Guaranteed Annuities in Missouri or who currently have authority to issue Modified Guaranteed Annuities in Missouri:
(A) Licensing and Approval to Do Business.
1. No company shall deliver or issue for
delivery Modified Guaranteed Annuities within Missouri unless it has a
certificate of authority to do life insurance or annuity business in the state.
The director must be satisfied that the company's condition or method of
operation in connection with the issuance of these contracts will not render
its operation hazardous to either the public or to its Missouri policyholders.
The director shall consider, among other things, the history and financial
condition of the company; the character, responsibility and fitness of the
officers and directors of the company; and the law(s) and rule(s) under which
the company is authorized in its state of domicile to issue Modified Guaranteed
Annuities.
2. Companies licensed
and having a satisfactory record of doing business in Missouri for a period of
at least three (3) years may be deemed to have satisfied the director with
respect to paragraph (3)(A)1.
3.
Before any company delivers or issues for delivery Modified Guaranteed
Annuities within Missouri, it shall submit to the director the following:
A. A general description of the kinds of
annuities it intends to issue;
B. A
copy of the statutes and rules of its state of domicile under which it is
authorized to issue Modified Guaranteed Annuities; and
C. Biographical data of the officers and
directors of the company on the National Association of Insurance Commissioners
(NAIC) uniform biographical data forms, included herein;
(B) Use of Sales Materials.
1. An insurer authorized to sell Modified
Guaranteed Annuities in Missouri shall not use any sales material, advertising
material, descriptive literature or other materials of any kind, in connection
with the solicitation of its Modified Guaranteed Annuities in Missouri which is
false, misleading, deceptive or inaccurate.
2. Illustrations of benefits payable under
any Modified Guaranteed Annuity shall not include projections of past
investment experience into the future or attempted predictions of future
investment experience. Hypothetical assumed interest credits may be used to
illustrate possible levels of benefits.
3. Before any insurer shall deliver or issue
for delivery any Modified Guaranteed Annuity contract in Missouri, the director
may require the filing of a copy of any prospectus or other sales material to
be used in connection with the marketing of the insurer's Modified Guaranteed
Annuity contract. The sales material must clearly illustrate that there can be
both upward and downward adjustments due to the application of the market value
adjustment formula in determining nonforfeiture benefits;
(C) Reports. Any insurer authorized to
transact the business of Modified Guaranteed Annuities in Missouri shall submit
to the director-
1. A separate account annual
statement which shall include the business of its Modified Guaranteed
Annuities; and
2. This additional
information concerning its Modified Guaranteed Annuity operations or separate
accounts as the director shall deem necessary; and
(D) Authority of Director to Disapprove. Any
material required to be filed with and approved by the director shall be
subject to disapproval if, at any time, it is found by the director not to
comply with the standards established by this rule.
(4) Filing of Contracts. The filing requirements applicable to Modified Guaranteed Annuities shall be those set out in 20 CSR 400-8.200, to the extent appropriate. Filings shall include a demonstration, in a form satisfactory to the director, that the nonforfeiture provisions of the contract(s) comply with section 376.671, RSMo.
(5) Modified Guaranteed Annuity Contract Requirements.
(A) Mandatory
Contract Benefit and Design Requirements.
1.
Any Modified Guaranteed Annuity contract delivered or issued for delivery in
Missouri shall contain a statement of the essential features of the procedures
to be followed by the insurance company in determining the dollar amount of
nonforfeiture benefits.
2. No
Modified Guaranteed Annuity contract calling for the payment of periodic
stipulated payments shall be delivered or issued for delivery in Missouri
unless it contains, in substance, the following provisions:
A. A provision that there shall be a grace
period of thirty (30) days or one (1) month within which any payment due the
insurer, other than the first payment, may be made. The contract shall continue
in force during the grace period. The contract may include a statement of the
basis for determining the date as of which any payment received during the
grace period shall be applied to produce the values under the
contract;
B. A provision that at
any time within one (1) year from the date of default in making periodic
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 the
following conditions: Payment to the insurer of overdue payments as required by
contract and payment 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 of which the amount to cover overdue payments and
indebtedness shall be applied to produce the values under the contract;
and
C. A provision that, to the
extent set out in any contract, the portion of the assets of any separate
account which equals the reserves and other contract liabilities of the account
shall not be chargeable with any other liabilities arising out of the business
of the company.
3. The
market value adjustment formula used in determining nonforfeiture benefits must
be stated in the contract and must be applicable for both upward and downward
adjustments. When a contract is filed, it must be accompanied by an actuarial
statement indicating the basis for the market value adjustment formula and
stating that the formula provides reasonable equity to both the contract holder
and the insurance company.
(B) Nonforfeiture Benefits.
1. This subsection shall not apply to any of
the following:
A. Reinsurance;
B. Group annuity contracts purchased in
connection with one (1) or more retirement plans or plans of deferred
compensation established or maintained by or for one (1) or more employers
(including partnerships or sole proprietorships), employee organizations or any
combination of them, other than plans providing individual retirement accounts
or individual retirement annuities under Section 408 of the Internal
Revenue Code;
C. Premium
deposit fund;
D. Investment
annuity;
E. Immediate
annuity;
F. Deferred annuity
contract after annuity payments have commenced;
G. Reversionary annuity; or
H. Contract which is to be delivered outside
Missouri by an insurance producer or other representative of the company
issuing the contract.
2.
No Modified Guaranteed Annuity contract shall be delivered or issued for
delivery in Missouri unless it contains, in substance, the following
provisions:
A. That upon cessation of payment
of considerations under a contract, the insurer will grant a paid-up annuity
benefit on a plan described in the contract that complies with paragraph
(5)(B)4. The description will include a statement of the mortality table, if
any, and guaranteed or assumed interest rates used in calculating annuity
payments; and
B. That if a contract
provides for a lump sum settlement at maturity, or at any other time, upon
surrender of the contract at or prior to the commencement of any annuity
payments, the insurer will pay, in lieu of any paid-up annuity benefit, a cash
surrender benefit as described in the contract that complies with paragraph
(5)(B)5. The contract may provide that the insurer may defer payment of the
cash surrender benefit for a period of six (6) months after demand.
3. The minimum values, as
specified in subsection (5)(B), of any paid-up annuity, cash surrender or death
benefits, available under a Modified Guaranteed Annuity contract shall be based
upon nonforfeiture amounts meeting the requirements of paragraph (5)(B)3. The
Unadjusted Minimum Nonforfeiture Amount on any date prior to the annuity
commencement date shall be an amount not less than that required by section
376.671,
RSMo. The minimum nonforfeiture amount shall be the unadjusted minimum
nonforfeiture amount adjusted by the market-value adjustment formula contained
in the contract.
4. Any paid-up
annuity benefit available under a Modified Guaranteed Annuity contract shall be
such that its present value on the annuity commencement date is at least equal
to the Minimum Nonforfeiture Amount on that date. This present value shall be
computed using the mortality table, if any, and the guaranteed or assumed
interest rates used in calculating the annuity payments.
5. For Modified Guaranteed Annuity contracts
which provide cash surrender benefits, the cash surrender benefit at any time
prior to the annuity commencement date shall not be less than the Minimum
Nonforfeiture Amount next computed after the request for surrender is received
by the insurer. The death benefit under these contracts shall be at least equal
to the cash surrender benefit.
6.
Any Modified Guaranteed Annuity Contract which does not provide cash surrender
benefits or does not provide death benefits at least equal to the Minimum
Nonforfeiture Amount prior to the annuity commencement date shall include a
statement in a prominent place in the contract that these benefits are not
provided.
7. Despite the
requirements of this section, a Modified Guaranteed Annuity contract may
provide under the situations specified in subparagraph (5)(B)7.A. or B., that
the insurer, at its option, may cancel the annuity and pay the contract holder
the larger of the Unadjusted Minimum Nonforfeiture Amount and the Minimum
Nonforfeiture Amount and by this payment be released of any further obligation
under this contract-
A. If at the time the
annuity becomes payable, the larger of the Unadjusted Minimum Nonforfeiture
Amount and the Minimum Nonforfeiture Amount is less than two thousand dollars
($2,000) or would provide an income, the initial amount of which is less than
twenty dollars ($20) per month; or
B. If prior to the time the annuity becomes
payable under a periodic payment contract, no considerations have been received
under the contract for a period of two (2) full years and both-I) the total
considerations paid prior to this period, reduced to reflect any partial
withdrawals from or partial surrenders of the contract and II) the larger of
the Unadjusted Minimum Nonforfeiture Amount and the Minimum Nonforfeiture
Amount is less than two thousand dollars ($2,000).
8. For any Modified Guaranteed Annuity
contract which provided, 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 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. Despite the provisions of
paragraph (5)(B)2., additional benefits payable-
A. In the event of total and permanent
disability;
B. As reversionary
annuity or deferred reversionary annuity benefits; or
C. As other policy benefits additional to
life insurance, endowment and annuity benefits, and considerations for all
these additional benefits, shall be disregarded in ascertaining the minimum
nonforfeiture amounts, paid-up annuity, cash surrender and death benefits that
may be required by subsection (5)(B). The inclusion of the additional benefits
shall not be required in any paid-up benefits, unless the additional benefits
separately would require Minimum Nonforfeiture Amounts, paid-up annuity, cash
surrender and death benefits.
(C) The Application. The application for a
Modified Guaranteed Annuity shall contain language in substance as follows:
Amounts payable under the contract are subject to a market value adjustment
prior (to a date(s) specified in the contract). The statement shall be placed
immediately above the signature line.
(6) Reserve Liabilities. Reserve liabilities for Modified Guaranteed Annuities shall be established in accordance with actuarial procedures that recognize-
(A) That
assets of the separate account are based on market values;
(B) The variable nature of benefits provided;
and
(C) Any Mortality Guarantees.
As a minimum, the separate account liability will equal the surrender value
based upon the market-value adjustment formula contained in the contract. If
that liability is greater than the market value of the assets, a transfer of
assets will be made into the separate account so that the market value of the
assets at least equals that of the liabilities. Also, any additional reserve
that is needed to cover future guaranteed benefits will also be set up by the
valuation actuary. The market-value adjustment formula, the interest guarantees
and the degree to which projected cash flow of assets and liabilities are
matched also must be considered. Each year, the valuation actuary must provide
an opinion on whether the assets in the separate account are adequate to
provide all future benefits that are guaranteed.
(7) Separate Accounts. The following requirements apply to the establishment and administration of Modified Guaranteed Annuity separate accounts by any domestic insurer:
(A) Establishment and Administration of
Separate Accounts. Any domestic insurer issuing Modified Guaranteed Annuities
shall establish one (1) or more separate accounts pursuant to section
376.309,
RSMo;
(B) Amounts in the Separate
Account. The insurer shall maintain in each separate account assets with a
market or other value, comporting to standards set out in section
376.380,
RSMo at least equal to the valuation reserves and other contract liabilities
respecting this account;
(C)
Valuation of Separate Account Assets. Investments of the separate account shall
be valued at their market value on the date of valuation or as allowed in
376.309.5., RSMo; and
(D)
Investment Laws. Unless otherwise approved by the director, separate accounts
relating to Modified Guaranteed Annuities will be subject to the investment
requirements of section 376.309.4., RSMo.
(8) Reports to Policyholders. Companies annually will provide their contract holders with a report showing both the account value and the cash surrender value. The report clearly should indicate that the account value is prior to the application of any surrender charges or market-value adjustment formula. It should also specify the surrender charge and market value adjustment used to determine the cash surrender value.
(9) 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 similar to that provided by these rules, the director, to the extent deemed appropriate by him/her, may consider compliance with law or rule as compliance with this rule.
(10) Authorization of Insurance Producers. No person, corporation, partnership or other legal entity may sell or offer for sale in this state any Modified Guaranteed Annuity contract unless licensed to sell variable annuities under the insurance laws of this state.
(11) Separability. If any provision of this regulation is found to be invalid, the remainder of the regulation shall not be affected.
BIOGRAPHICAL AFFIDAVIT
(Print or Type)
AUTHORITY: sections 374.045 and 376.309 RSMo 2000, and 376.671, RSMo Supp. 2002.* This rule was previously filed as 4 CSR 190-13.300. Original rule filed Dec. 1, 1989, effective Aug. 1, 1990. Amended: Filed April 23, 1999, effective Nov. 30, 1999. 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; 376.309, RSMo 1963, amended 1969, 1983, 1992, 1993; and 376.671, RSMo 1979, amended 2002.
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.
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