20-2606

20-2606. Separate accounts

A. A domestic insurer issuing variable life insurance contracts shall establish one
or more separate accounts pursuant to section 20-651. The following apply to the
establishment of separate accounts:

1. If no law governs the custody of separate account assets and if the insurer is
not the custodian of the separate account assets, all contracts for the custody of the
assets shall be in writing and the director may review and approve both the terms of a
contract and the proposed custodian before the transfer of custody.

2. Without the director's prior written approval, the insurer shall not employ any
person in connection with the handling of separate account assets who within the last ten
years either:

(a) Was convicted of a felony or a misdemeanor offense involving embezzlement,
fraudulent conversion, the misappropriation of funds or securities or a violation of 18
United States Code section 1341, 1342 or 1343.

(b) Was found to have violated or has acknowledged violating any law involving
fraud, deceit or knowing misrepresentation.

3. All persons who have access to the cash, securities or other assets of any
separate account established pursuant to this chapter shall be under bond in an amount of
not less than the following amounts based on the combined assets of the insurer's
separate accounts:


 Combined assets Minimum amount of bond
 Equal to or more than:  But less than:
 $ 0 $ 100,000 $10,000
 100,000 600,000 $10,000 plus 4% of assets

over $100,000


 600,000 1,200,000 $30,000 plus 3 1/3% of

assets over $600,000


 1,200,000 3,200,000 $50,000 plus 2 1/2% of

assets over $1,200,000


 3,200,000 4,450,000 $100,000 plus 2% of assets
 over $3,200,000
 4,450,000 6,450,000 $125,000 plus 1 1/4% of

assets over $4,450,000


 6,450,000 90,450,000 $150,000 plus 5/8% of

assets over $6,450,000


 90,450,000 350,450,000 $675,000 plus 3/8% of

assets over $90,450,000


 350,450,000 1,070,450,000 $1,650,000 plus 3/16% of

assets over $350,450,000


 1,070,450,000 $3,000,000 plus 3/32% of
 assets over $1,070,450,000
 until the total of the
 bonds equals $5,000,000

4. The insurer shall value the assets of the separate accounts at least monthly.

B. The insurer shall maintain in each separate account assets with a value that is
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 the variable life insurance
policies.

C. The following apply to investments by the separate account:

1. An insurer or any of its affiliates may not make any sale, exchange or other
transfer of assets between any of its separate accounts or between any other investment
account and one or more of its separate accounts unless both:

(a) If assets are transferred 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.

(b) The transfer, whether into or from a separate account, is made by a transfer of
cash. The director may approve the transfer of other assets in advance of the transfer.

2. The separate account shall have sufficient net investment income and readily
marketable assets to meet anticipated withdrawals under the policies that are funded by
the account.

D. Except for securities issued or guaranteed as to principal and interest by the
United States, a separate account shall not purchase or otherwise acquire the securities
of any issuer if immediately after the purchase or acquisition the value of the
investment, together with any prior investments of the account in the security that is
valued pursuant to this article, exceeds ten per cent of the value of the assets of the
separate account. The director may waive this limitation in writing if the director
believes that the waiver will not render the operation of the separate account hazardous
to the public or to the policyholders in this state.

E. A separate account shall not purchase or otherwise acquire the voting securities
of any issuer if as a result of the purchase or acquisition the insurer and its
aggregated separate accounts will own more than ten per cent of the issuer's total issued
and outstanding voting securities. The director may waive this limitation in writing if
the director believes that the waiver will not render the operation of the separate
account hazardous to the public or to the policyholders in this state or jeopardize the
independent operation of the issuer of the securities.

F. The ten per cent limitation under subsection D of this section does not preclude
the investment of separate account assets in shares of investment companies that are
registered pursuant to the investment company act of 1940 (15 United States Code sections
80a-1 through 80a-64) or in other pools of investment assets if the investments and
investment policies of the investment companies or asset pools comply substantially with
subsection C of this section and with any other applicable provisions under this article.

G. The insurer shall value investments of the separate account at their market
value on the date of valuation or at amortized cost if it approximates market value.

H. A domestic insurer shall not change its investment policy of a separate account
without first filing the change with the director. A change that is filed pursuant to
this subsection is effective sixty days after the date on which it was filed with the
director, unless the director notifies the insurer before the end of the sixty day period
of the director's disapproval of the proposed change. At any time, after notice and a
public hearing, the director may disapprove any change that has become effective. The
director may disapprove the change if the director determines that the change would be
detrimental to the interests of the policyholders who participate in the separate
accounts.

I. Before or contemporaneously with the delivery of the policy, the insurer shall
disclose to the insured in writing all charges that may be made against the separate
account, including the following:

1. Taxes or reserves for taxes that are attributable to investment gains and income
of the separate account.

2. Actual cost of reasonable brokerage fees and similar direct acquisition and sale
costs that are incurred in the purchase or sale of separate account assets.

3. Actuarially determined tabular costs of insurance and the release of separate
account liabilities.

4. Charges for administrative expenses and investment management expenses,
including internal costs that are attributable to the investment management of assets of
the separate account.

5. A charge for mortality and expense guarantees at a rate specified in the policy.

6. Any amounts in excess of the amounts that are required to be held in the
separate accounts.

7. Charges for incidental insurance benefits.

J. The board of directors of each insurer that seeks approval to enter into the
variable life insurance business in this state shall adopt written standards of conduct
relating to the purchase or sale of investments of separate accounts. The standards of
conduct are binding on the insurer and its officers, directors, employees and affiliates.
The adoption of a code of ethics that meets the requirements of section 17j of the
investment company act of 1940 satisfies this section.

K. A law that applies to the officers and directors of insurance companies with
respect to conflicts of interest also applies to the members of a committee or any other
similar body of a separate account.

L. An insurer shall not enter into a contract under which a person for a fee
undertakes to regularly furnish investment advice to the insurer with respect to its
separate accounts that are maintained for variable life insurance policies unless the
contract is in writing, the contract states that the insurer may terminate the contract
without penalty to the insurer or the separate account on sixty days' written notice to
the investment advisor and one of the following applies:

1. The person who provides the advice is registered as an investment adviser under
the investment advisers act of 1940 (15 United States Code sections 80b-1 through
80b-21).

2. The person who provides the advice is an investment manager under the employee
retirement income security act of 1974 (29 United States Code sections 1001 through 1461)
with respect to the assets of each employee benefit plan that are allocated to the
separate account.

3. The insurer has filed with the director and continues to file annually the
following information and statements concerning the proposed advisor:

(a) The name and form of the organization, the state of organization and the
proposed advisor's principal place of business.

(b) The names and addresses of the proposed advisor's partners, officers and
directors and of persons who perform similar functions if the investment advisor is an
individual.

(d) A statement that is submitted by the proposed advisor to the insurer and that
states with respect to each of the following that the proposed advisor or a person
associated with the proposed advisor has not:

(i) Within the last ten years been convicted of a felony or misdemeanor offense
arising out of such 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, the misappropriation of funds or
securities or a violation of 18 United States Code section 1341, 1342 or 1343, and
arising out of the person's conduct as an employee, salesperson, officer or director of
an insurance company or as a banker, insurance producer, securities broker or investment
advisor.

(ii) Been permanently or temporarily enjoined by a court order, judgment or decree
from acting as an investment advisor, underwriter, broker or dealer, acting as an
affiliated person or an employee of an investment company, bank or insurance company or
engaging in or continuing any conduct or practice in connection with any enjoined
activity.

(iii) Been found by a federal or state regulatory authority to have wilfully
violated or acknowledged a wilful violation of a federal or state securities law or the
insurance laws of this state.

(iv) Been censured, been denied an investment advisor registration, had a
registration as an investment advisor revoked or suspended or been barred or suspended
from associating with an investment advisor by a federal or state regulatory authority.

M. After notice and an opportunity for a hearing, the director may require that the
investment advisory contract be terminated if the director deems that continued operation
under the contract would be hazardous to the public or the insurer's policyholders.