Current through Register Vol. XLI, No. 38, September 20, 2024
6.1. The
requirements of this section apply to the establishment and administration of
variable life insurance separate accounts by a domestic insurer.
6.2. Establishment and Administration of Separate
Accounts. A domestic insurer issuing variable life insurance shall establish one or
more separate accounts pursuant to W. Va. Code §
33-13A-1.
6.2.a. The insurer may not without prior written
approval of the Commissioner employ in any material connection with the handling of
separate account assets any person who:
6.2.a.1.
Within the last ten (10) years has been convicted of any felony or a misdemeanor
arising out of such person's conduct involving embezzlement, fraudulent conversion,
or misappropriation of funds or securities or involving violation of Sections 1341,
1342 or 1343 of Title 18, United States Code; or
6.2.a.2. Within the last ten (10) 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
6.2.a.3.
Within the last ten (10) 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.
6.2.b. All
persons with access to the cash, securities, or other assets of the separate account
shall be under bond in the amount of not less than $25,000.
6.2.c. The assets of separate accounts shall be
valued at least as often as variable benefits are determined but in any event at
least monthly.
6.3. 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
these policies.
6.4. Investments by the
Separate Account.
6.4.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:
6.4.a.1. In case
of 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
6.4.a.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.
6.4.b. The separate account shall have sufficient
net investment income and readily marketable assets to meet anticipated withdrawals
under policies funded by the account.
6.5. Limitations on Ownership.
6.5.a. A separate account may not purchase or
otherwise acquire the securities of an issuer, other than securities issued or
guaranteed as to principal and interest by the United States, if immediately after
the purchase or acquisition the value of the investment, together with prior
investments of the account in the security valued as required by these rules, would
exceed ten percent (10%) of the value of the assets of the separate account. The
Commissioner may waive this limitation in writing if the Commissioner believes the
waiver will not render the operation of the separate account hazardous to the public
or the policyholders in this state.
6.5.b. No separate account shall purchase or
otherwise acquire the voting securities of any issuer if as a result of the
acquisition the insurer 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. The Commissioner may waive this limitation in writing if he or she believes
the 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 these securities.
6.5.c.
The percentage limitation specified in subdivision a of this subsection 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 asset pools comply substantially with the provisions of
subsection 6.4 of this section and other applicable portions of this rule.
6.6. Valuation of Separate Account
Assets. Investments of the separate account shall be valued at their market value on
the date of valuation, or at amortized cost if it approximates market
value.
6.7. Separate Account Investment
Policy. The investment policy of a separate account operated by a domestic insurer
filed under subdivision c, subsection 3.3 of this rule may not be changed without
first filing the change with the Commissioner.
6.7.a. Any change filed pursuant to this section
shall be effective sixty (60) days after the date it was filed with the
Commissioner, unless the Commissioner notifies the insurer before the end of the
sixty-day period of his or her disapproval 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 section.
6.7.b. The Commissioner may disapprove the change
if he or she determines that the change would be detrimental to the interests of the
policyholders participating in the separate accounts.
6.8. Charges Against Separate Account. The insurer
shall disclose in writing, prior to or contemporaneously with delivery of the
policy, all charges that may be made against the separate account, including, but
not limited to, the following:
6.8.a. Taxes or
reserves for taxes attributable to investment gains and income of the separate
account;
6.8.b. Actual cost of
reasonable brokerage fees and similar direct acquisition and sale costs incurred in
the purchase or sale of separate account assets;
6.8.c. Actuarially determined costs of insurance
(tabular costs) and the release of separate account liabilities;
6.8.d. Charges for administrative expenses and
investment management expenses, including internal costs attributable to the
investment management of assets of the separate account;
6.8.e. A charge, at a rate specified in the
policy, for mortality and expense guarantees;
6.8.f. Any amounts in excess of those required to
be held in the separate accounts; and
6.8.g. Charges for incidental insurance
benefits.
6.9. 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 shall 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 its
applicable rules and regulations shall satisfy the provisions of this section.
6.10. Conflicts of Interest. Rules under
any provision of the insurance laws of this state or any regulation 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 or other
similar body.
6.11. Investment Advisory
Services to a Separate Account.
6.11.a. An insurer
may not enter into a contract under which any person undertakes, for a fee, to
regularly furnish investment advice to such insurer with respect to its separate
accounts maintained for variable life insurance policies unless:
6.11.a.1. The person providing advice is
registered as an investment adviser under the Investment Advice Act of 1940;
or
6.11.a.2. The person providing 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
6.11.a.3. The insurer has
filed with the Commissioner and continues to file annually the following information
and statements concerning the proposed advisor:
6.11.a.3.A. The name and form of organization,
state of organization, and its principal place of business;
6.11.a.3.B. The names and addresses of its
partners, officers, directors and persons performing similar functions or, if the
investment advisory is an individual, of the individual;
6.11.a.3.C. A written standard of conduct
complying in substance with the requirements of subsection 6.7 of this section which
has been adopted by the investment advisor and is applicable to the investment
advisor, its officers, directors, and affiliates;
6.11.a.3.D. A statement provided by the proposed
advisor as to whether the advisor or any person associated therewith:
6.11.a.3.D.1. Has been convicted within ten (10)
years of a felony or misdemeanor arising out of the person's conduct as an employee,
salesman, officer or director of an insurance company, a banker, an insurance
producer, a securities broker or an investment advisor involving embezzlement,
fraudulent conversion or misappropriation of funds or securities, or involving the
violation of Sections 1341, 1342, or 1343 of Title 18 of United States
Code;
6.11.a.3.D.2. Has been permanently
or temporarily enjoined by an order, judgment or decree of a court of competent
jurisdiction from acting as an investment advisor, underwriter, broker or dealer, or
as an affiliated person or as an employee of an investment company, bank or
insurance company, or from engaging in or continuing any conduct or practice in
connection with any such activity;
6.11.a.3.D.3. 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 these laws; or
6.11.a.3.D.4. Has been censured, denied an
investment advisor registration, had a registration as an investment advisor revoked
or suspended, or been barred or suspended from being associated with an investment
advisor by order of federal or state regulatory authorities; and
6.11.a.4. The investment
advisory contract shall be in writing and provide that it may be terminated by the
insurer without penalty to the insurer or the separate account upon no more than
sixty (60) days' written notice to the investment advisor.
6.11.b. The Commissioner may, after notice and
opportunity for hearing, by order require the investment advisory contract to be
terminated if the Commissioner deems continued operation under the contract to be
hazardous to the public or the insurer's policyholders.
