20-2635

20-2635. Variable annuity contracts

A. A variable annuity that provides benefits payable in variable amounts and that
is delivered or issued for delivery in this state shall contain a statement of the
essential features of the procedures the insurance company must follow in determining the
dollar amount of the variable benefits. The contract, including a group contract and any
certificate in evidence of variable benefits that is issued under the contract, shall
state that the dollar amount will vary to reflect investment experience and shall contain
on its first page a clear statement that the benefits under the contract are on a
variable basis.

B. Illustrations of benefits that are payable under a variable annuity shall not
include projections of past investment experience into the future or attempted
predictions of future investment experience. This subsection does not prohibit the use
of hypothetical assumed rates of return to illustrate possible benefit levels.

C. An insurer shall not deliver or issue for delivery in this state an individual
variable annuity contract that calls for the payment of periodic stipulated payments
unless the contract contains in substance the following provision or provisions:

1. A grace period provision of thirty days or of one month, within which any
stipulated payment to the insurer that falls due after the first day may be made and
during which the contract shall continue in force. The contract may state the basis for
determining the date as of which any payment that is received during the grace period
shall be applied to produce the values under the contract arising from the contract.

2. A reinstatement provision that unless the cash surrender value has been paid the
contract may be reinstated on the payment to the insurer of the overdue payments as
required by contract and all indebtedness on the contract, including interest, at any
time after the date of the default in making periodic stipulated payments to the insurer
during the life of the annuitant. The contract may state the basis for determining the
date as of which the amount to cover the overdue payments and indebtedness shall be
applied to produce the values under the contract arising from the contract.

D. A variable annuity contract that is delivered or issued for delivery in this
state shall stipulate the investment increment factors the insurer will use in computing
the dollar amount of variable benefits or other variable contractual payments or values
under the variable annuity contract. The contract may guarantee that expense or
mortality results, or both, do not adversely affect the dollar amounts. If the expense
and mortality results may adversely affect the dollar amount of benefits, the insurer
shall stipulate the expense and mortality factors in the contract. For the purposes of
this subsection, the contract may stipulate that expense excludes some or all taxes.

E. In computing the dollar amount of variable benefits or other contractual
payments or values under an individual variable annuity contract:

1. Unless the director otherwise approves, the annual net investment increment
assumption shall not exceed five per cent.

2. To the extent that the level of benefits may be affected by future mortality
results, unless the director approves the use of another table the mortality factor shall
be determined from the annuity mortality table for 1949, ultimate, or any modification of
that table not having a lower life expectancy at any age.

F. The reserve liability for variable annuities shall be established pursuant to
the requirements of section 20-510 in accordance with actuarial procedures that recognize
the variable nature of the benefits provided and any mortality guarantees.