Sec. 38a-459-4 - Required contract provisions and filing requirements for synthetic guaranteed investment contracts

ยง 38a-459-4. Required contract provisions and filing requirements for synthetic guaranteed investment contracts

(a) A contract may not be delivered or issued for delivery in this state unless the contract satisfies the requirements of this subsection and the issuing insurance company has satisfied the requirements of subsection (b) of this section with respect to the contract. The contract shall:

(1) Provide that the assets to which the contract pertains and for which a contract value record is established will be maintained in a segregated portfolio of a permitted custodial institution;

(2) Grant the insurance company the right to perform audits and inspections of assets held in the segregated portfolio from time to time upon reasonable notice to the permitted custodial institution;

(3) Provide that the insurance company will receive prior notice of and the right to approve any appointment or change of investment managers;

(4) Give a description of how the contract value record will be determined, and, where applicable, adjusted by a crediting rate formula;

(5) State the maximum rate period between crediting rate formula recalculations that shall be permitted, if any;

(6) Provide the insurance company with the right to refuse to recognize any new deposits to the segregated portfolio unless there is a written agreement between the insurance company and the contract holder as to the permissible levels and timing of new deposits;

(7) Clearly identify all circumstances under which insurance company payments or advances to the contract holder are to be made;

(8) Clearly identify the types of withdrawals made on a market value basis;

(9) Provide either a fixed maturity schedule or a settlement option that permits the contract holder to receive the contract value record over time, provided that no unilateral contract termination event has occurred; and

(10) Include a provision stating, or substantially similar to, the following:

"No waiver of remedies by the insurance company that is a party to this agreement, following the breach of any contractual provision of the agreement or of the investment guidelines applicable to it, or failure to enforce the provisions or guidelines, which constitutes grounds for termination of this agreement for cause by the insurance company, and is not cured within 30 days following the insurance company's discovery of it, shall be effective against the insurance commissioner in any future rehabilitation or insolvency proceedings against the insurance company unless approved in advance in writing by the insurance commissioner."

(b) An insurance company satisfies the filing and approval requirements of this section with respect to a contract if the insurance company has filed the form of the contract with the insurance commissioner and it is accompanied by the items specified in subdivisions (1) to (3), inclusive, of this subsection, and the form has been approved or has not been disapproved within the thirty-day period following the date of filing, in which event the form of contract shall be deemed approved. Notwithstanding the provisions of this section, the requirement for filing and approval of the form of contract may be waived at the discretion of the insurance commissioner.

(1) The form of contract filed for approval shall be accompanied by a statement that the contract meets the conditions of subsection (a) of this section.

(2) The form of contract filed for approval shall be accompanied by a statement:

(A) Specifying the range of variation of variable contract provisions, if any, that could have a material effect on the risk assumed by the insurance company under the contract, including withdrawal methodology, crediting rate formula, and termination events;

(B) Describing how the fair market value shall be determined, including a description of the rules for valuing securities and other assets that are not publicly traded;

(C) Describing the crediting rate formula, if any, and how it shall operate to take into account the difference between the market value record and the contract value record over time; and

(D) Listing events that give the insurance company the right to terminate the contract immediately.

(3)

(A) In the case where the plan of operation pertaining to the class of contracts to which the contract belongs has been affirmatively approved by the insurance commissioner of the state in which the issuing insurance company is domiciled, the form of contract filed for approval shall be accompanied by a statement indicating the receipt of approval, and that the approval was an affirmative approval.

(B) In the case where the plan of operation pertaining to the class of contracts to which the contract belongs has been deemed approved in the state in which the issuing insurance company is domiciled, the form of contract filed for approval shall be accompanied by a statement indicating that the issuing insurance company has met the requirements for deemed approval.

(C) In the case where the plan of operation pertaining to the class of contracts to which the contract belongs has not been approved in the state in which the issuing insurance company is domiciled, the form of contract filed for approval shall be accompanied by a statement of this fact, together with a plan of operation pertaining to the contract.

(Adopted effective June 1, 2002)

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