The following requirements apply to the establishment and
administration of variable life insurance separate accounts by any domestic
insurer.
A. Establishment and
Administration of Separate Accounts.
Any domestic insurer issuing variable life insurance shall
establish one or more separate accounts pursuant to Section
83-7-27.
1. 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 shall
be in writing and the Commissioner shall have authority to review and approve
of both the terms of any such contract and the proposed custodian prior to the
transfer of custody.
2. Such
insurer shall not without the prior written approval of the Commissioner employ
in any material connection with the handling of separate account assets any
person who:
a. within the last ten 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
1241,
1342, or
1343 of
Title 18, United States Code; or
b. 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
c. 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.
3. 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 $10,000.
4.
The assets of such separate accounts shall be valued at least as often as
variable benefits are determined but in any event at least monthly.
B. 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.
C.
Investments by the Separate Account.
1. 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:
a. in case of a transfer into a separate
account, such 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
b. such
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 of
Insurance.
2. The
separate account shall have sufficient net investment income and readily
marketable assets to meet anticipated withdrawals under policies funded by the
account.
D. Limitations
on Ownership.
1. A separate account shall 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 10% of the value of the
assets of the separate account. The Commissioner may waive this limitation in
writing if he believes such waiver will not render the operation of the
separate account hazardous to the public or thepolicyholders in this
State.
2. No separate account shall
purchase or otherwise acquire the voting securities of any issuer if as a
result of such acquisition the insurer and its separate accounts, in the
aggregate, will own more than 10% of the total issued and outstanding voting
securities of such issuer. The Commissioner may waive this limitation in
writing if he believes such 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.
3. The percentage
limitation specified in subsection (a) of this Section shall 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 (c) of this Section and other applicable portions of
this regulation.
E.
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.
F. Separate
Account Investment Policy.
The investment policy of a separate account operated by a
domestic insurer filed under Subsection (b)(3) of Section 3 shall not be
changed without first filing such change with the Insurance
Commissioner.
1. Any change filed
pursuant to this section shall be 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 his 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.
2. The Commissioner may
disapprove the change if he determines that the change would be detrimental to
the interests of the policyholders participating in such separate
account.
G. 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, but not limited to, the
following:
1. taxes or reserves for
taxes attributable to investment gains and income of the separate
account;
2. actual cost of
reasonable brokerage fees and similar direct acquisition and sale costs
incurred in the purchase or sale of separate account assets;
3. actuarially determined costs of insurance
(tabular costs) and the release of separate account liabilities;
4. charges for administrative expenses and
investment management expenses, including internal costs attributable to the
investment management of assets of the separate account;
5. a charge, at a rate specified in the
policy, for mortality and expense guarantees;
6. any amounts in excess of those required to
be held in the separate accounts;
7. charges for incidental insurance
benefits.
H. 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. Such 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 applicable rules and regulations thereunder shall satisfy the
provisions of this Section.
I. 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.
J. Investment Advisory Services to a Separate
Account.
An insurer shall 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:
1. the
person providing such advice is registered as an investment adviser under the
Investment Advisers Act of 1940; or
2. 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
3. the insurer
has filed with the Commissioner and continues to file annually the following
information and statements concerning the proposed adviser;
a. the name and form of organization, state
of organization, and its principal place of business;
b. the names and addresses of its partners,
officers, directors, and persons performing similar functions or, if such an
investment advisor be an individual, of such individual;
c. a written Standard of Conduct complying in
substance with the requirements of Subsection 8 of this Section which has been
adopted by the investment adviser and is applicable to the investment adviser,
its officers, directors, and affiliates;
d. a statement provided by the proposed
adviser as to whether the adviser or any person associated therewith:
i. 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 or 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 Sections 1341, 1342, or 1343 of Title 18 of United States
Code;
ii. 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 in or continuing any conduct or
practice in connection with any such activity;
iii. has been found by federal or state
regulatory authorities to have willfully violated or have acknowledged willful
violation of any provision offederal or state securities laws or state
insurance laws or of any rule or regulation under any such laws; or
iv. 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; and
4. such investment
advisory contract shall be in writing and provide that it may be terminated by
the insurer without penalty to the insurer or separate account upon no more
than sixty days' written notice to the investment adviser.
The Commissioner may, after notice and opportunity for
hearing, by order require such investment advisory contract to be terminated if
he deems continued operation thereunder to be hazardous to the public or the
insurer's policyholders.
