Current through Supplement No. 394, October, 2024
The following requirements apply to the establishment and
administration of variable life insurance separate accounts by any domestic
insurer
1.
Establishment and
administration of separate accounts. Any domestic insurer issuing
variable life insurance shall establish one or more separate accounts pursuant
to North Dakota Century Code sections 26.1-33-13 and 26.1-34-11.
a. If no law or other regulation provides for
the custody of separate account assets and if such insurer is not the custodian
of such separate account assets, all contracts for custody of such assets must
be in writing and the commissioner may review and approve of both the terms of
any such contract and the proposed custodian prior to the transfer of custody.
b. The insurer may not without the
prior written approval of the commissioner employ in any material connection
with the handling of separate account assets any person who:
(1) Within the last ten years has been
convicted of any felony or misdemeanor arising out of such person's conduct
involving embezzlement, fraudulent, conversion, or misappropriation
offundsorsecuritiesor involving violation of
18 U.S.C.
1341,
1342, or
1343;
(2) Within the last ten years has been found
by any state regulatory authority to have violated or has acknowledged
violation of any provision of any state insurance law involving fraud, deceit,
or knowing misrepresentation; or
(3) Within the last ten years has been found
by federal or state regulatory authorities to have violated or has acknowledged
violation of any provision of federal or state securities laws involving fraud,
deceit, or knowing misrepresentation.
c. All persons with access to the cash,
securities, or other assets of the separate account must be under bond in the
amount of not less than a value indexed to the fidelity bonding recommendations
stated in the financial condition examiners handbook published by the national
association of insurance commissioners, 2009 edition, regarding personnel
handling general account assets.
d. The assets of such separate accounts must
be valued at least as often as variable benefits are determined but in any
event at least monthly.
2.
Amounts in the separate account.
The insurer shall maintain in each separate account assets with a value
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 such
policies.
3.
Investments by
the separate account.
a. No sale,
exchange, or other transfer of assets may be made by an insurer or any of its
affiliates between any of its separate accounts or between any other investment
account and one or more of its separate accounts unless:
(1) 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 policies with respect to the separate account to which the
transfer is made; and
(2) The
transfer, whether into or from a separate account, is made by a transfer of
cash; but other assets may be transferred if approved by the commissioner in
advance.
b. The
separate account must have sufficient net investment income and readily
marketable assets to meet anticipated withdrawals under policies funded by the
account.
4.
Limitations on ownership.
a. A
separate account may not purchase or otherwise acquire the securities of any
issuer, other than securities issued or guaranteed as to principal and interest
by the United States, if immediately after such purchase or acquisition the
value of such investment, together with prior investments of such account in
such security valued as required by these regulations, would exceed ten percent
of the value of the assets of the separate account. The commissioner may waive
this limitation in writing if the commissioner believes waiver will not render
the operation of the separate account hazardous to the public or the
policyholders in this state.
b. No
separate account may purchase or otherwise acquire the voting securities of an
issuer if as a result of such acquisition the insurer and its separate
accounts, in the aggregate, will own more than ten percent of the total issued
and outstanding voting securities of the issuer The commissioner may waive this
limitation in writing if the commissioner believes waiver will not render the
operation of the separate account hazardous to the public or the policyholders
in this state or jeopardize the independent operation of the issuer of such
securities.
c. The percentage
limitation specified in subdivision a may not be construed to preclude the
investment of the assets of separate accounts in shares of investment companies
registered pursuant to the Investment Company Act of 1940 or other pools of
investment assets if the investments and investment policies of such investment
companies or assets pools comply substantially with subsection 3 and the other
applicable portions of this chapter.
5.
Valuation of separate account
assets. Investments of the separate account must be valued at their
market value on the date of valuation, or at amortized cost if it approximates
market value.
6.
Separate
account investment policy. The investment policy of a separate account
operated by a domestic insurer filed under subdivision c of subsection 2 of
section 45-04-04-02 may not be changed
without first filing the change with the commissioner.
a. Any change filed pursuant to this
subsection is effective sixty days after the date it was filed with the
commissioner, unless the commissioner notifies the insurer before the end of
such sixty-day period of approval of the proposed change. At any time the
commissioner may, after notice and public hearing, disapprove any change that
has become effective pursuant to this subsection.
b. The commissioner may disapprove the change
if the commissioner determines that the change would be detrimental to the
interests of the policyholders participating in such separate account.
7.
Charges
against separate account. The insurer must disclose in writing, prior to
or contemporaneously with delivery of the policy, all charges that may be made
against the separate account, including the following:
a. Taxes or reserves for taxes attributable
to investment gains and income of the separate account.
b. Actual cost of reasonable brokerage fees
and similar direct acquisition and sale costs incurred in the purchase or sale
of separate account assets.
c.
Actuarially determined costs of insurance (tabular costs) and the release of
separate account liabilities.
d.
Charges for administrative expenses and investment management expenses,
including internal costs attributable to the investment management of assets of
the separate account.
e. A charge,
at a rate specified in the policy, for mortality and expense guarantees.
f. Any amounts in excess of those
required to be held in the separate accounts.
g. Charges for incidental insurance benefits.
8.
Standards of
conduct. 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 a written statement specifying the standards of conduct of the
insurer, its officers, directors, employees, and affiliates with respect to the
purchase or sale of investments of separate accounts. The standards of conduct
must be binding on the insurer and those to whom it refers. A code or codes of
ethics meeting the requirements of section 17j under the Investment Company Act
of 1940 and applicable rules and regulations thereunder satisfies the
provisions of this subsection.
9.
Conflicts of interest. Rules under any provision of the insurance
laws of this state or any rule applicable to the officers and directors of
insurance companies with respect to conflicts of interest also apply to members
of any separate account's committee or other similar body.
10.
Investment advisory services to a
separate account. An insurer may not enter into a contract under which
any person undertakes, for a fee, to regularly furnish investment advice to the
insurer with respect to its separate accounts maintained for variable life
insurance policies unless the investment advisory contract is in writing and
provides that it may be terminated by the insurer without penalty to the
insurer or the separate account upon no more than sixty clays' written notice
to the investment adviser and unless:
a. The
person providing such advice is registered as an investment adviser under the
Investment Advisers Act of 1940;
b. The person providing such advice is an
investment manager under the Employee Retirement Income Security Act of 1974
with respect to the assets of each employee benefit plan allocated to the
separate account; or
c. The
insurer has filed with the commissioner and continues to file annually the
following information and statements concerning the proposed adviser:
(1) The name and form of organization, state
of organization, and its principal place of business;
(2) The names and addresses of its partners,
officers, directors, and persons performing similar functions or, if such an
investment adviser be an individual, of such individual;
(3) A written standard of conduct complying
in substance with the requirements of subsection 8 which has been adopted by
the investment adviser and is applicable to the investment adviser, its
officers, directors, and affiliates;
(4) A statement provided by the proposed
adviser as to whether the adviser or any person associated therewith:
(a) Has been convicted within ten years of
any felony, or misdemeanor arising out of such person's conduct as an employee,
salesman, officer or director of an insurance company, a banker, an insurance
agent, a securities broker, or an investment adviser involving embezzlement,
fraudulent conversion, or misappropriation of funds or securities, or involving
the violation of 18 U.S.C.
1341,
1342, or
1343;
(b) Has been permanently or temporarily
enjoined by order, judgment, or decree of any court of competent jurisdiction
from acting as an investment adviser, underwriter, broker, or dealer, or as an
affiliated person or as an employee of any investment company, bank, or
insurance company, or from engaging or in continuing any conduct or practice in
connection with any such activity;
(c) Has been found by federal or state
regulatory authorities to have willfully violated or have acknowledged willful
violation of any provision of federal or state securities laws or state
insurance laws or of any rule or regulation under any such laws; or
(d) Has been censured, denied an investment
adviser registration, had a registration as an investment adviser revoked or
suspended, or been barred or suspended from being associated with an investment
adviser by order of federal or state regulatory authorities.
The commissioner may, after notice and opportunity for
hearing, by order require such investment advisory contract to be terminated if
the commissioner deems continued operation thereunder to be hazardous to the
public or the insurer's policyholders.
General Authority: NDCC 26.1-33-17, 26.1-34-11
Law Implemented: NDCC 26.1-33,
26.1-34
