Current through Reg. 50, No. 13; March 28, 2025
The following requirements are applicable to all insurers
either seeking authority to issue variable life insurance in this state or
having the authority to issue variable life insurance in this state.
(1) Licensing and approval to do business in
this state. An insurer may not deliver or issue for delivery in this state any
variable life insurance contracts unless:
(A)
the insurer is licensed or organized to do a life insurance business in this
state; and
(B) after having
complied with the provisions of Insurance Code Chapter 1152, concerning notice
and hearing, the commissioner has authorized, either as part of the insurer's
original certificate of authority or by charter amendment, the insurer to
issue, deliver, and use variable life contracts, and only after the
commissioner has considered among other things the following:
(i) whether the plan of operation for the
issuance of variable life contracts is sound;
(ii) whether 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 business of the insurer in this state; and
(iii) whether the present and foreseeable
future financial condition of the insurer and its method of operation in
connection with the issuance of such contracts is not likely to render its
operation hazardous to the public or its contractholders in this state. The
commissioner will consider, among other things:
(I) the history of operation and financial
condition of the insurer;
(II) 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;
(III) the applicable law and regulations
under which the insurer is authorized in its state of domicile to issue
variable life contracts. The state of entry of an alien insurer will be deemed
its state of domicile for this purpose; and
(IV) 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, meets these standards.
(2) Filing
for approval to do business in this state. Before any insurer may deliver or
issue for delivery any variable life contract in this state, it must file with
the Texas Department of Insurance the following information, and any other
information specifically requested, for the consideration of the commissioner,
on making the determination required by paragraph (1)(B) of this section:
(A) copies of and a general description of
the variable life contracts it intends to issue;
(B) a general description of the methods of
operation of the variable life insurance business of the insurer, including
methods of distribution of contracts and the names of those persons or firms
proposed to supply consulting, investment, administrative, custodial, or
distributive services to the insurer;
(C) with respect to any separate account
maintained by an insurer for any variable life contract, a statement of the
investment policy the insurer intends to follow for the investment of the
assets held in such separate account, and a statement of procedures for
changing such investment policy. The statement of investment policy must
include a description of the investment objectives intended for the separate
account;
(D) a description of any
investment advisory services contemplated as required by §
3.806 of this title (relating to
Separate Accounts);
(E) a copy of
the statutes and regulations of the state of domicile of a foreign or alien
insurer under which it is authorized to issue variable life
contracts;
(F) biographical data
not previously filed with the commissioner with respect to officers and
directors of the insurer on the appropriate biographical form used in
Texas;
(G) a statement of the
insurer's actuary describing the mortality and expense risks which the insurer
will bear under the contract; and
(H) the provisions of subparagraphs (A) - (G)
of this paragraph will be deemed to have been satisfied to the extent that the
information required by the commissioner is provided in form identical to the
insurer's registration statement filed under
15
United States Code §
77a, et
seq.
(3) Standards of
suitability. Every insurer seeking approval to enter into the variable life
insurance business in this state must establish and maintain a written
statement specifying the standards of suitability to be used by the insurer.
Such standards of suitability must specify that no recommendation will be made
to an applicant to purchase a variable life contract and that no variable life
contract will be issued in the absence of reasonable grounds to believe that
the purchase of such contract 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 the agent making the
recommendation.
(4) Use of sales
material. An insurer authorized to transact variable life insurance business in
this state may 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 unless it complies with §§
21.101-
21.122 of this title (relating to
Insurance Advertising, Certain Trade Practices, and Solicitation). An insurer
issuing flexible premium variable life contracts must provide, to all
prospective purchasers, an illustration of cash surrender values prior to or at
the time of delivery of the contract. Any illustration of cash surrender values
delivered to an applicant or prospective applicant pursuant to this subsection
must :
(A) include a hypothetical gross
investment return of 0.0%, and when other hypothetical gross investment returns
are included, the current gross investment return must, to the extent permitted
by federal law, be included;
(B)
give equal prominence to both guaranteed and non-guaranteed aspects of the
contract if guarantees are included in the contract;
(C) prominently display, by way of written
statement, the hypothetical nature of the illustration as it relates to
investment returns;
(D) prominently
state that a contract may terminate due to insufficient premiums and/or poor
investment performance; and
(E)
prominently show, by way of written statement, that excessive loans or
withdrawals may cause the contract to lapse due to insufficient cash surrender
value and, at the option of the insurer, prominently display the effects of
loans or withdrawals on contract values.
(5) Requirements applicable to contractual
services. Any material contract between an insurer and suppliers of consulting,
investment, administrative, sales, marketing, custodial, or other services with
respect to variable life insurance operations must be in writing and provide
that the supplier of such services 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 these
regulations, and any other applicable law or regulations.
(6) Reports to the commissioner. Any insurer
authorized to transact the business of variable life insurance in this state
must submit to the commissioner, in addition to any other materials which may
be required by this subchapter or any other applicable laws or rules:
(A) an annual statement of the business of
its separate account or accounts in such forms as may be prescribed by the
National Association of Insurance Commissioners;
(B) prior to use in this state, any
information furnished to applicants as provided for in §
3.807 of this title (relating to
Information Furnished to Applicants);
(C) prior to use in this state, the form of
any of the reports to contractholders as provided for in §
3.809 of this title (relating to
Reports to Contractholders); and
(D) such additional information concerning
its variable life insurance operations or its separate accounts as the
commissioner deems necessary.
(7) Treatment of material reported under
paragraph (6) of this section. Receipt of the material specified in paragraph
(6) of this section does not imply approval or acceptance of the material. The
commissioner will require the redistribution of any previously distributed
material which is found to be false, misleading, deceptive, or inaccurate in
any material respect.
(8) Authority
of the commissioner to disapprove. Any material required to be filed with the
commissioner, or approved by the commissioner, will be subject to disapproval
if at any time it is found by the commissioner not to comply with the standards
established by these rules.
