10506. (a) Any domestic life insurance company may, after adoption
of a resolution by its board of directors, allocate to one or more
separate accounts, in accordance with the terms of a written
agreement, any amounts which are paid to the company in connection
with a pension, retirement, retirement medical benefits, or
profit-sharing plan, or program for one or more persons, or with an
individual or group variable life insurance policy, and which are to
be, or may be, applied in payment or in making provision for payment
of proceeds or benefits under the company's policies, contracts, or
agreements of retirement benefits, and other benefits incidental
thereto, in fixed or variable dollar amounts, or both. The income, if
any, and gains or losses, realized or unrealized, on each account
shall be credited to or charged against the amount allocated to the
account in accordance with the agreement, without regard to the other
income, gains or losses of the company. The amounts allocated to the
accounts and accumulations thereon, by any life insurance company
shall be invested and reinvested as specified in the policy,
contract, or agreement without regard to any requirements or
limitations prescribed by the laws of this state governing the
investments of insurance companies, provided that the amounts
allocated to separate accounts for which the insurer has issued
guarantees of benefits as to dollar amount and duration or of funds
as to all or part of the principal amount thereof or stated rate of
interest, and the accumulations thereon pursuant to Section 10506.4,
shall be invested in the types of investments permitted to life
insurance companies for investments held in the insurer's general
account as described in Article 3 (commencing with Section 1170),
Article 4 (commencing with Section 1190), and Article 4.6 (commencing
with Section 1211) of Chapter 2 of Part 2 of Division 1 (excluding
Section 1212 thereof), except that the approved method of operations
and applicable policy, contract, or agreement provisions shall govern
the amount of these investments held in the separate account.
However, with regard to variable life insurance separate accounts and
accumulations thereon, the separate accounts shall have sufficient
net investment income and readily marketable assets to meet
anticipated obligations under policies funded by the account. The
limitations contained in Sections 1192.4 and 1198 are not applicable
to these investments. These investments shall not be included in
determining the propriety of other investments of the company. The
liability of the company with respect thereto, but only to the extent
prescribed in the agreement, shall be shown on the statement of the
company in the manner prescribed by the commissioner. Amounts
allocated by an insurance company to separate accounts in the
exercise of the power granted by this section shall be owned by the
company, but shall not be chargeable with liabilities arising out of
any other business the company may conduct except and to the extent
provided in the policy, contract, or agreement. The company shall not
hold itself out to be a trustee in respect to these amounts.
(b) In addition to amounts otherwise allocated to separate
accounts, a domestic life insurer may allocate to the account or
accounts amounts which otherwise would be subject to investment in
accordance with Article 4 (commencing with Section 1190) of Chapter 2
of Part 2 of Division 1. The aggregate of these additional amounts
shall not, however, exceed 1 percent of its admitted assets as of the
preceding December 31, or 5 percent of the excess of its admitted
assets over its liabilities and required reserves as of the preceding
December 31, whichever is the smaller. The company shall be entitled
to withdraw at any time, in whole or in part, its participation in
any separate account to which funds have been allocated as provided
in this subdivision and to receive, upon withdrawal, its
proportionate share of the value of the assets of the separate
account at the time of withdrawal.
(c) In addition to the allocations to separate accounts provided
for in subdivision (a), a domestic insurer may, at the request of a
policyholder or contractholder or the beneficiary of a policy or
contract, allocate to any separate account or accounts, death
payments, proceeds of matured endowments, dividends, or surrender
values.
(d) Except as otherwise provided in Section 10506.4, or with the
approval of the commissioner, and under conditions as to investments
and other matters as he or she may prescribe, which shall recognize
the guaranteed nature of the benefits provided, reserves for (1)
benefits guaranteed as to dollar amount and duration and (2) funds
guaranteed as to principal amount or stated rate of interest shall
not be maintained in a separate account that, as provided under
applicable policy, contract, or agreement, is or is not chargeable
with liabilities arising out of any other business the company may
conduct.
(e) Unless otherwise approved by the commissioner, assets
allocated to a separate account shall be valued at their market
value, or at amortized cost if it approximates market value within
the limits and constraints imposed by the United States Securities
and Exchange Commission, on the date of valuation, or, if there is no
readily available market, then as provided under the terms of the
contract or the rules or other written agreement applicable to the
separate account. Unless otherwise approved by the commissioner, the
portion of any of the assets of the separate account equal to the
company's reserve liability, with regard to the guaranteed benefits
and funds referred to in subdivision (d), shall be valued in
accordance with the rules otherwise applicable to the company's
assets.
(f) (1) Except as provided in paragraph (2) of subdivision (f), a
sale, exchange, or other transfer of assets may not be made by a
company between any of its separate accounts, or between any other of
its investment accounts and one or more of its separate accounts
unless, in case of a transfer into a separate account, the transfer
is made solely to establish the account or to support the operation
of the contracts with respect to the separate account to which the
transfer is made, and unless the transfer, whether into or from a
separate account is made (1) by a transfer of cash, or (2) by a
transfer of securities having a readily determinable market value,
and the transfer of securities is approved by the commissioner. The
commissioner may approve other transfers among the accounts if, in
his or her opinion, the transfer would not be inequitable.
(2) Transfers from an insurer's general account to one or more of
its separate accounts to establish and maintain reserves for the
guarantees authorized by Section 10506.4 shall only be made in cash
in accordance with methods of operations approved pursuant to
subdivision (c) of Section 10506.4. A transfer shall not operate to
increase the amounts permitted to be allocated by an insurer to the
separate accounts pursuant to this subdivision or by subdivision (b)
of Section 10506, and the provisions of that subdivision shall not
limit these transfers.
(g) Any domestic life insurance company which establishes one or
more separate accounts pursuant to this section may provide for
special voting rights and procedures for participants in the separate
account relating to investment policy, investment advisory services,
and selection of certified public accountants in relation to the
administration of the assets in any separate account. The voting
rights shall be in addition to, and shall not affect, voting rights
of mutual insurers.
(h) The purpose and intent of this section is to permit the
issuance and delivery of policies or contracts, in connection with a
pension, retirement, retirement medical benefits, or profit-sharing
plan, or program for one or more persons, or policies of variable
life insurance, providing for the payment of benefits in fixed or
variable amounts, or both, and the establishment of separate accounts
by domestic companies for the administration of and investments
under these agreements. To protect the public and policyholders
located in this state from hazardous operation by domestic and
foreign companies, and to further the purpose and provision of this
section, no domestic or foreign life insurance company shall
undertake the issuance of any contract providing for variable
benefits until the company has satisfied the commissioner that its
condition or method of operation in connection with the issuance of
these contracts shall not be such as would render its operation
hazardous to the public or its policyholders in this state and, in
the case of a foreign or alien insurer, that it meets the conditions
prescribed in Section 716, for the issuance of a certificate of
authority. In determining the qualification of a company requesting
authority to issue contracts providing for variable benefits within
this state, the commissioner shall consider among other things, (1)
the history of the company; (2) the character, responsibility, and
general fitness of the officers and directors of the company; (3) the
regulation of a foreign company by its state of domicile; (4) the
adequacy of the investment management which the company is providing;
and (5) the company's arrangements for the supervision of the
marketing of the contracts. Subsequent to an insurer initially
satisfying the commissioner that its condition or method of operation
would not render its operation hazardous to the public or its
policyholders, the insurer shall notify the commissioner at any time
it implements a material change respecting the mutual funds
underlying the variable contract separate account available or to be
available with a policy or contract providing variable benefits. The
notification shall prominently disclose the sales charges, management
and other fees payable to the insurer under the contract, and
whether one or more of the mutual funds underlying the variable
contract separate account are issued by an affiliated company and the
names of those mutual funds. The notification shall be accompanied
by a certification signed by an executive officer having
responsibility for contracts providing variable benefits stating that
the change complies with relevant statutes and regulations. The
commissioner may review the notification to ensure the continued
qualification of the insurer to issue and deliver those policies and
contracts. The commissioner may make reasonable rules and regulations
as he or she considers necessary, proper, and advisable concerning
the issuance and delivery of these policies and contracts and the
payment of benefits thereunder and the manner in which the separate
accounts shall be administered and which types of policies and
contracts, if any, shall be subject to his or her approval prior to
issue. Notification of any material change shall not be subject to
the commissioner's approval or acknowledgment prior to
implementation. The commissioner shall promulgate on an emergency
basis, and in accordance with the rulemaking provisions of the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code), a
regulation superseding Insurance Department Bulletin 97-2 that shall
become effective January 1, 2003. Until promulgation of the
regulation, the commissioner and insurers may continue to rely upon
Insurance Department Bulletin 97-2, except that the commissioner's
approval or acknowledgment prior to implementation of a change to a
mutual fund underlying a variable contract separate account shall not
be required on or after January 1, 2003.
However, no company may provide variable benefits in its contracts
unless it is an admitted insurer having and maintaining a combined
capital and surplus of at least ten million dollars ($10,000,000).
For purposes of this section, "affiliated company" has the same
meaning given in paragraph (1) of subsection (g) of Section 6701 of
Title 15 of the United States Code.
(i) (1) Any contract providing benefits payable in variable
amounts delivered or issued for delivery in this state on or after
the effective date of the amendments to this section enacted at the
1971 Regular Session of the Legislature shall contain a statement of
the essential features of the procedures to be followed by an
insurance company in determining the dollar amount of these variable
benefits. Any contract under which the benefits vary to reflect
investment experience, including a group contract and any certificate
in evidence of variable benefits issued thereunder, shall state that
the dollar amount shall so vary, and shall contain on its first page
a statement to the effect that the benefits thereunder are on a
variable basis. Except for Article 3a (commencing with Section
10159.1) of Chapter 1 of Part 2 of Division 2, in the case of a
variable life insurance policy, and except as otherwise provided in
this section, all pertinent provisions of this code shall apply to
separate accounts and contracts relating thereto. Any variable life
insurance contract, delivered or issued for delivery in this state on
or after the effective date of the amendments to this section
enacted at the 1992 Regular Session of the Legislature, shall contain
such nonforfeiture provisions as are appropriate to such a contract.
(2) The reserve liability for variable contracts shall be
established in accordance with actuarial procedures that recognize
the variable nature of the benefits provided and any mortality
guarantees.
(j) No insurer shall issue anywhere any group variable life
insurance policy for which the master contractholder or any covered
party is an individual residing in this state or is a corporation,
association, trust, or other legal entity that is either domiciled in
or has its principal place of business in this state, unless the
insurer has become qualified to issue variable life insurance
policies and its group master policy form together with all forms of
certificates or notices thereunder have been approved by the
commissioner. Group variable life insurance policies shall be issued
only to groups referred to in Chapter 2 (commencing with Section
10200) of Part 2 of Division 2.
10506.1. The commissioner shall require the payment of three
hundred fifty-four dollars ($354) in lawful money of the United
States as a fee for the determination of qualification required by
Section 10506. Upon completion of the determination of qualification,
and, whether authorization to issue contracts providing variable
benefits is granted or denied, the commissioner shall require the
payment by domestic insurers of such additional amounts from the
requesting domestic insurer as may be necessary to defray all
administrative costs in excess of three hundred fifty-four dollars
($354) incurred by the commissioner in making such determination.
10506.2. (a) The commissioner shall require the payment in advance
of one thousand one hundred eighty dollars ($1,180) as a fee for the
examination and analysis of documents required by law to be filed
with the commissioner by domestic or foreign insurers in connection
with changes to an application and qualification to write variable
contracts.
(b) The commissioner shall require the payment in advance of three
hundred fifty-four dollars ($354) as a fee for the review,
examination, and analysis of documents required to be filed by
insurers issuing variable life insurance policies.
(c) The commissioner shall require the payment in advance of one
thousand seven hundred seventy dollars ($1,770) as a fee for the
examination and analysis involved in approving transfers of assets
pursuant to subdivision (f) of Section 10506.
10506.3. (a) The commissioner shall adopt appropriate
administrative regulations governing modified guaranteed annuities.
Modified guaranteed annuities shall be subject to Article 3b
(commencing with Section 10168) of Chapter 1 of Part 2 of Division 2
with regard to nonforfeiture values computed under the terms of the
annuity but excluding from the computation the effect of market-value
adjustment factors.
(b) Group annuities exempted under Section 10168 are also exempted
from any modified guaranteed annuity regulations.
(c) Subdivision (b) shall be retroactive to January 1, 1987, to
the extent the assets underlying such group contracts have not been
maintained in a separate account.
(d) The commissioner shall issue a bulletin, on or before July 1,
1987, setting forth conditions under which variable life insurance
may be issued, or issued for delivery, in this state as permitted by
Chapter 731 of the Statutes of 1984.
Upon issuance of the bulletin, regulations regarding variable life
insurance contained in Article 11.1 (commencing with Section 2534)
of Title 10 of the California Code of Regulations shall be of no
force and effect as long as the bulletin is effective. The bulletin
authorized by this section shall have the same force and effect, and
may be enforced by the commissioner to the same extent and degree, as
the regulations superseded by it until the time that the
commissioner may make additional or amended regulations as provided
by subdivision (h) of Section 10506.
On or before July 1, 1993, the commissioner may amend the existing
bulletin to include reasonable provisions relating to requirements
for group variable life insurance. Notwithstanding the foregoing
authority to issue a bulletin and prior to its issuance, the
commissioner shall approve group master policy forms and certificates
and notices related thereto that reasonably comply with the general
provisions set forth in Sections 10506 to 10506.2, inclusive, and any
other applicable statutes or regulations.
10506.4. (a) An admitted life insurer that is financially qualified
pursuant to subdivision (b) and complies with the provisions of this
section and those of Section 10506 that expressly refer to this
section or are not inconsistent with it, may guarantee, pursuant to
an approved policy, contract, or agreement, the value of the assets
allocated to a separate account, which as provided under the
applicable policy, contract, or agreement is not chargeable with
liabilities arising out of any other business the company may
conduct, or the investment results thereof, or the income thereon, or
the benefits payable pursuant to the approved policy, contract, or
agreement, and may transfer to the separate account cash to maintain
its reserves for those guarantees pursuant to paragraph (2) of
subdivision (f) of Section 10506. The general account of the insurer
shall be paid reasonable and sufficient compensation not less
frequently than quarterly, for risks and other expenses incurred,
from any separate account that receives a guarantee authorized by
this section.
(b) For the purposes of this section "approved policy, contract,
or agreement" means a policy, contract, or agreement, the form of
which has been approved by the commissioner, for issue or marketing
in this state, and which in addition to meeting the requirements of
all pertinent provisions of this code, meets the requirements of one
of the following paragraphs:
(1) A policy, contract, or agreement meets the requirements of
this paragraph if it satisfies and is expected to satisfy over the
full life of the policy, contract, or agreement all of the following
conditions:
(A) The weighted asset valuation reserve factor for the assets
held in the separate account pursuant to the terms of the policy,
contract, or agreement shall not exceed 2 percent.
(B) Guarantees of interest that extend beyond 14 months at any
time shall be no greater than 3 percent per annum.
(C) Any reserves required because the contract value is less than
the reserves required for the policy, contract, or agreement shall be
maintained in a separate identified segment of the insurer's general
account or otherwise segregated within the general account, or be
held in a separate account all of the assets of which shall also be
chargeable with liabilities arising out of other business of the
insurer.
(D) In the event the policy, contract, or agreement provides for
withdrawals (other than those resulting from an election by a
participant under a pension, retirement, retirement medical benefit,
or profit-sharing plan) of amounts other than on the conversion date
or guarantee effective date, if any, the withdrawals shall be made in
either of the following manners:
(i) In a lump sum in an amount not to exceed the market value.
(ii) In one or more contract value installments the present value
of which is equal to or less than the market value of the aggregate
withdrawal.
(2) A policy, contract, or agreement meets the requirements of
this paragraph if it satisfies and is expected to satisfy over the
full life of the policy, contract, or agreement all of the following
conditions:
(A) The weighted asset valuation reserve factor for the assets
held in the separate account pursuant to the terms of the policy,
contract, or agreement shall not exceed 4 percent.
(B) The market value of the assets held in the separate account
plus any reserves described in subparagraph (C) shall exceed the
current aggregate liabilities determined by discounting the
guaranteed benefit liability cashflows at the rate of 105 percent of
the then current yields as quoted on United States Government issued
securities having substantially similar maturities by at least the
following applicable amount:
(i) For assets consisting of debt instruments, an amount equal to
the asset valuation reserve "maximum reserve factor," provided,
however, that the factor shall be reduced by 50 percent for the
purpose of this calculation if the difference in durations of the
assets and liabilities (as confirmed in the actuarial statement
referred to in subparagraph (B) of paragraph (1) of subdivision (d))
are one year or less.
(ii) For assets that are not debt instruments, 20 percent.
(C) Any reserves required because the contract value is less than
the reserves required for the policy, contract, or agreement shall be
maintained in a separate identified segment of the insurer's general
account or otherwise segregated within the general account, or be
held in a separate account all of the assets of which shall also be
chargeable with liabilities arising out of other business of the
insurer.
(D) In the event the policy, contract, or agreement provides for
withdrawals (other than those resulting from an election by a
participant under a pension, retirement, retirement medical benefit,
or profit-sharing plan) of amounts other than on the conversion date
or guarantee effective date, if any, the withdrawals shall be made in
either of the following manners:
(i) In a lump sum in an amount not to exceed the market value.
(ii) In one or more contract value installments the present value
of which is equal to or less than the market value of the aggregate
withdrawal.
(3) A policy, contract, or agreement meets the requirements of
this paragraph if it satisfies and is expected to satisfy over the
full life of the policy, contract, or agreement all of the following
conditions:
(A) The guarantees contained in the policy, contract, or agreement
applicable to the value of the assets held in the separate account
by the insurer shall be based upon a publicly available interest rate
series or an index of the aggregate market value of a group of
publicly traded financial instruments, the interest rate series or
index to be specified in the policy, contract, or agreement.
(B) Assets held in the separate account and the accumulations
thereon shall be invested in accordance with the requirements of
subdivision (a) of Section 10506 applicable to policies, contracts,
or agreements governed by this section and shall comply with all of
the following:
(i) Interest-bearing bonds, notes, or other obligations shall be
publicly traded or meet applicable requirements of the United States
Securities and Exchange Commission enabling the securities to be
publicly traded.
(ii) Investments in capital stock shall be traded on an exchange
regulated by the United States Securities and Exchange Commission,
and investments in any futures contracts with respect thereto shall
be traded on an exchange regulated under the Commodities Exchange Act
(Title 7, United States Code).
(iii) Issuers of interest-bearing obligations held in the separate
account must be rated by an independent nationally recognized
financial rating agency approved by the commissioner or by the
Securities Valuation Office of the National Association of Insurance
Commissioners.
(iv) With respect to any investments in shares of investment
companies registered under the federal Investment Company Act of 1940
(15 U.S.C. Sec. 80a-1 et seq.) the assets of the entity must qualify
as investments directly allowed for separate accounts pursuant to
the requirements of subdivision (a) of Section 10506 applicable to
policies, contracts, or agreements governed by this section.
(v) The type, quality, industry diversification, prepayment
characteristics, expected duration, and other factors pertaining to
investments shall be set forth in the approved method of operations
which shall contain a demonstration satisfactory to the commissioner
that the investments are likely to achieve the performance of the
applicable index or interest rate series.
(C) The period between the commencement date of the guaranty of
the value of the assets held in the separate account and the
conversion date, if any, shall not exceed five years.
(D) Any reserves required because the contract value is less than
the reserves required for the policy, contract, or agreement shall be
maintained in a separate identified segment of the insurer's general
account or otherwise segregated within the general account, or be
held in a separate account all of the assets of which shall also be
chargeable with liabilities arising out of other business of the
insurer.
(E) In the event the policy, contract, or agreement provides for
withdrawals (other than those resulting from an election by a
participant under a pension, retirement, retirement medical benefit,
or profit-sharing plan) of amounts other than on the conversion date
or guarantee effective date, if any, the withdrawals shall be made in
either of the following manners:
(i) In a lump sum in an amount not to exceed the market value.
(ii) In one or more contract value installments the present value
of which is equal to or less than the market value of the aggregate
withdrawal.
(4) For the purposes of this section, "conversion date" means the
date, if any, specified in the policy, contract, or agreement upon
which the assets held pursuant to it shall be converted or applied to
the purchase of annuities or returned to the owner of the policy,
contract, or agreement, or its designee.
(5) For the purposes of this section, the "asset valuation reserve
factor" for each asset will be determined by the application of the
asset valuation reserve factor, "maximum reserve factor," as
contained in the National Association of Insurance Commissioners
(NAIC) Life, Accident and Health Annual Statement Instructions
(Instructions) and Valuation of Securities Manual, or if not
contained therein, an asset valuation reserve factor of 20 percent
shall be assigned. To determine the weighted asset valuation reserve
factor, the asset valuation reserve factor shall be applied to the
market value of each asset.
(6) For the purposes of this section, "market value" means the
policy, contract, or agreement's proportionate share of the actual
market value of the separate account at the time of withdrawal or if
the determination of market value is by formula, the formula shall be
set forth in the policy, contract, or agreement and shall be
designed to closely match actual market value.
(7) For the purposes of this section, "guarantee effective date"
means the date guarantees authorized by this section may result in
payments from the general account to the separate account.
(c) No admitted life insurer may issue or market in this state,
nor may any domestic life insurer issue or market anywhere, a policy,
contract, or agreement, or coverage thereunder by certificate or
otherwise, which contains the guarantees referred to in subdivision
(a) unless both of the following apply:
(1) It has received from the commissioner authority to issue
policies or contracts providing for the payment of variable benefits
pursuant to subdivision (h) of Section 10506.
(2) The commissioner has determined after application by the
insurer in the form and content as the commissioner may require,
review of the insurer's applicable proposed method of operations
relating to policies, contracts, or agreements containing the
guarantees authorized by subdivision (a), payment of fees specified
in Section 736 and consideration of the matters set forth in
subdivision (h) of Section 10506, that the insurer is financially
qualified to issue policies, contracts, or agreements that contain
the guarantees referred to in subdivision (a) including by meeting or
exceeding the financial standards in subdivision (d).
(d) (1) No admitted life insurer that has been financially
qualified pursuant to subdivision (c) may issue or market or continue
to issue or market in this state, nor may any domestic life insurer
issue or market anywhere or continue to issue or market anywhere,
policies, contracts, or agreements, or coverage thereunder by
certificate or otherwise, providing the guarantees referred to in
subdivision (a) unless all of the following apply:
(A) It has at least one billion dollars ($1,000,000,000) of
admitted assets or at least one hundred million dollars
($100,000,000) of aggregate capital and surplus.
(B) It annually complies with the requirement to furnish an
actuarial statement as a part of or in addition to the statement
required by Section 10489.15, provided the actuarial statement is in
form and substance satisfactory to the commissioner. This actuarial
statement shall meet all the following requirements:
(i) The statement shall state that, after taking into account risk
charges payable from the assets of the separate account with respect
to the guarantee, the assets of the separate account, together with
any reserves in excess of the account value, make good and sufficient
provision for the liabilities of the insurer with respect thereto.
(ii) The statement shall provide an opinion of the reasonableness
and sufficiency of the pricing of any general account guarantees and
any other fees for administration paid to the general account from
the separate account.
(iii) The statement shall be supported by a memorandum by a
qualified actuary, also in form and substance satisfactory to the
commissioner, that describes the calculations made in support of the
actuarial statement and includes the assumptions used in the
calculations.
(C) Its ratio of aggregate capital and surplus to its aggregate
liabilities is not lower than 75 percent of that ratio as of the
December 31 prior to its receiving financial qualification from the
commissioner except as allowed under paragraph (4) of subdivision
(d).
For the purposes of this section, "capital and surplus" includes
capital and surplus plus the asset valuation reserve and one-half of
the liability for dividends, all as reflected on the most recent
financial statement on file with the commissioner. "Liabilities"
means the total liabilities as reflected on the financial statement
excluding therefrom liabilities for policies, contracts, and
agreements issued in connection with separate accounts, liabilities
in connection with contracts issued pursuant to this section and
excluding both of the following:
(i) The liability for any asset valuation reserve.
(ii) One-half the liability for dividends.
(2) If the commissioner, following notice to the insurer and a
hearing, determines that an insurer that has received financial
qualification pursuant to subdivision (c) no longer maintains the
financial strength needed to initially receive the qualification, the
commissioner may issue an order requiring the insurer to cease
issuing new policies, contracts, or agreements providing for
guarantees contemplated by subdivision (a).
(3) In the event an insurer that has received financial
qualification pursuant to subdivision (c) determines that it does not
meet the requirements of subdivision (d), it shall promptly comply
with paragraph (2) as if an order had been issued by the commissioner
after notice and hearing, and within 45 days, notify the
commissioner in writing at the place designated by the commissioner
that it has ceased to meet the requirements specified in the written
notice.
(4) In the event the insurer thereafter meets or exceeds all of
the requirements of subdivision (d), it may notify the commissioner
at the place designated by the commissioner, in writing, and upon the
passage of 45 days following receipt by the commissioner of the
notice, may resume issuing policies, contracts, or agreements that
provide for guarantees contemplated by subdivision (a) as long as it
meets the requirements of subdivision (d). However, if the insurer
believes that the resumption of the issuance of the policies,
contracts, or agreements that provide for the guarantees contemplated
by subdivision (a) would not be hazardous to its policyholders or
the citizens of California, even though it does not meet the
requirements specified in subparagraph (C) of paragraph (1), the
insurer shall include in the notice a demonstration that the issuance
of policies, contracts, or agreements containing the guarantees
referred to in subdivision (a) is not hazardous to its policyholders
or the citizens of California. Within the 45-day period, the
commissioner may issue an order containing the requirements of
paragraph (2) if, in the commissioner's opinion, any of the
requirements of subdivision (d) are not met, or resumption would
violate any provision of this code or, resumption may be hazardous to
the insurer, policyholders, creditors, or the public. The failure to
issue an order within 45 days shall not be deemed an approval of the
activities. The order shall specify the grounds upon which the
commissioner is basing the order. The insurer may, within 10 days of
the order, request a hearing. The hearing shall be a private hearing
and shall commence not less than 10 days, nor more than 20 days,
after the request for hearing is served on the commissioner.
(e) Policies, contracts, and agreements referred to in subdivision
(a), that are not otherwise subject to filing under applicable law
and regulation, shall be filed, before being marketed or issued in
this state, by the insurer with the commissioner. If the commissioner
finds that the policies, contracts, or agreements submitted pursuant
to subdivision (a) contemplate practices that are unfair or
unreasonable or otherwise inconsistent with the provisions of this
code, he or she may disapprove of the forms of policies, contracts,
or agreements specifying in what regard the policies, contracts, or
agreements are unfair or unreasonable or otherwise inconsistent with
the provisions of this code.
(f) As an alternative to the filing and approval procedure set
forth in subdivision (e), an insurer that satisfies eligibility
criteria specified in the bulletin authorized by subdivision (g) may
file with the commissioner the proposed form of the policy, contract,
or agreement, together with an officer's certificate, accompanied by
an actuarial certification and demonstration, and other supporting
material, all in accordance with procedures set forth in the bulletin
authorized by subdivision (g). An insurer may issue and deliver a
policy, contract, or agreement the day following approval by the
commissioner of a filing under this subdivision. Absent explicit
approval, an insurer may, no sooner than 30 working days after the
filing of the policy, contract, or agreement and all required
supporting documentation, issue and deliver any policy, contract, or
agreement that has been filed pursuant to this subdivision if the
commissioner has not notified the insurer in writing that the filing
lacks the required documentation or that he or she objects to the
filing upon grounds sufficient to disapprove the policy, contract, or
agreement. The bulletin shall set forth procedures providing the
insurer an opportunity to respond to any objections. If the
commissioner finds that the officer's certificate or the actuarial
certification or demonstration filed in support of the policy,
contract, or agreement is false or incorrect, the commissioner may,
in addition to taking any other lawful measures, including suspension
of authority to use the policy, contract, or agreement, declare the
insurer ineligible to utilize the alternative procedure authorized by
this subdivision for a period not to exceed three years from the
date of the filing of the policy, contract, or agreement. The
commissioner may summarily suspend the use of any policy, contract,
or agreement used by the insurer pursuant to this subdivision on any
grounds sufficient to disapprove the policy, contract, or agreement,
or if the filing fails to include the required documents. This
suspension may be prospective only. Suspension of use of a policy,
contract, or agreement shall be in writing and shall specify the
reasons for the suspension. Unless the commissioner in the suspension
order or subsequent thereto specifies a later effective date for the
suspension, any suspension shall be effective on the day following
the receipt of the suspension order by the insurer. An insurer
affected by any suspension, issued pursuant to this subdivision, of a
policy, contract or agreement may refile the policy, contract, or
agreement with the commissioner pursuant to subdivision (e). The
commissioner may suspend or discontinue filings of policies,
contracts, or agreements under this subdivision at any time upon
notice to affected insurers. Any filing by an insurer of a policy,
contract, or agreement under this subdivision that is not accepted by
the commissioner may be filed by the insurer pursuant to subdivision
(e).
(g) The commissioner may issue, and amend from time to time
thereafter, as he or she deems appropriate, a bulletin setting forth
reasonable requirements for insurers that issue policies, contracts,
or agreements referred to in subdivision (a) relating to all of the
following:
(1) The reserves to be maintained by insurers for those policies,
contracts, or agreements.
(2) The accounting and reporting of funds credited under, assets
held with respect to, and transfers to and from the insurer's general
account and separate accounts pertaining to, those policies,
contracts, or agreements.
(3) The disclosure of information to be given to holders and
prospective holders of those policies, contracts, or agreements.
(4) The qualification of persons selling those policies,
contracts, or agreements on behalf of the insurers.
(5) The filing of those policies, contracts, or agreements with
the commissioner.
(6) The filing with the commissioner of specified sales and
financial information pertaining to those policies, contracts and
agreements.
(7) The eligibility criteria and procedure for filing under
subdivision (f).
(8) Other matters relating to those policies, contracts, and
agreements as the commissioner considers necessary, proper, and
advisable that are not inconsistent with this section. This bulletin
shall have the same force and effect, and may be enforced by the
commissioner to the same extent and degree, as regulations issued by
the commissioner until the time that the commissioner issues
additional or amended regulations.
(h) The authority granted in this section is in addition to the
authority granted to life insurers by other provisions of this code
and the requirements of this section shall not contravene that
authority. No policy, contract, or agreement that constitutes
investment return assurance pursuant to Section 10203.10 or Section
10507 may be issued pursuant to this section.
(i) Guarantees authorized by this section may only be made in
connection with policies, contracts, or agreements issued to an owner
that is not a natural person, and is an "accredited investor" as
defined in Regulation D-Rules Governing the Limited Offer and Sale of
Securities Without Registration Under the Securities Act of 1933, 17
Code of Federal Regulations Section 230.501 et seq., as promulgated
by the United States Securities and Exchange Commission, in
transactions where the aggregate single premium or deposit for all
policies, contracts, or agreements (excluding certificates issued
under a group or master policy) issued to the owner containing
guarantees authorized by this section is at least one million dollars
($1,000,000). Notwithstanding the foregoing, an insurer may issue
policies, contracts, or agreements qualifying under paragraph (1) of
subdivision (b) above, to a pension, retirement, or retirement
medical benefit or profit-sharing plan reasonably expected to receive
contributions in excess of two hundred fifty thousand dollars
($250,000) within the first 12 months following issuance of the
policy, contract, or agreement and that has more than 10
participants. Policies, contracts, or agreements providing coverage
in this state, by certificate or otherwise, that contain guarantees
authorized by this section issued on a group basis shall be issued
only to groups referred to in Chapter 2 (commencing with Section
10200) of Part 2 of Division 2.
10506.5. (a) For the purposes of this section, "guaranteed living
benefit" means a benefit in a variable annuity or a variable life
insurance contract providing that one or more benefit amounts
available to a living contractholder, under specified conditions,
will be enhanced should it fall below a given level, in the absence
of the guaranteed living benefit.
(b) An insurer may deliver or issue for delivery contracts
containing, or riders to variable contracts providing, guaranteed
living benefits if all the following requirements are met:
(1) The insurer is authorized to deliver, or issue for delivery,
variable insurance products in this state.
(2) The insurer meets the requirements of paragraph (1) of
subdivision (d) of Section 10506.4.
(3) The commissioner has issued a bulletin setting forth the terms
and conditions under which variable contracts containing, or riders
to variable contracts providing, guaranteed living benefits may be
issued or delivered in this state.
(4) The variable contract or rider meets the terms and conditions
for guaranteed living benefits established by the commissioner and
set forth in the bulletin described in paragraph (3) and the insurer
desiring to issue the variable contract or rider has satisfied the
requirements set forth in Section 2529 of Title 10 of the California
Code of Regulations.
(c) The bulletin described in paragraph (3) of subdivision (b) may
include provisions covering requirements similar to those included
in subdivision (f) of Section 10506.4. The bulletin shall have the
same force and effect, and may be enforced by the commissioner to the
same extent and degree as regulations issued by the commissioner
until the time that the commissioner issues additional or amended
regulations pertaining to guaranteed living benefits.
(d) An insurer may not deliver or issue for delivery variable
contracts containing, or riders to variable contracts providing,
guaranteed living benefits except pursuant to this section. No
policy, contract, rider, or agreement that constitutes investment
return assurance pursuant to Section 10203.10 or 10507, or guarantee
pursuant to Section 10506.4, may be issued pursuant to this section.
10506. (a) Any domestic life insurance company may, after adoption
of a resolution by its board of directors, allocate to one or more
separate accounts, in accordance with the terms of a written
agreement, any amounts which are paid to the company in connection
with a pension, retirement, retirement medical benefits, or
profit-sharing plan, or program for one or more persons, or with an
individual or group variable life insurance policy, and which are to
be, or may be, applied in payment or in making provision for payment
of proceeds or benefits under the company's policies, contracts, or
agreements of retirement benefits, and other benefits incidental
thereto, in fixed or variable dollar amounts, or both. The income, if
any, and gains or losses, realized or unrealized, on each account
shall be credited to or charged against the amount allocated to the
account in accordance with the agreement, without regard to the other
income, gains or losses of the company. The amounts allocated to the
accounts and accumulations thereon, by any life insurance company
shall be invested and reinvested as specified in the policy,
contract, or agreement without regard to any requirements or
limitations prescribed by the laws of this state governing the
investments of insurance companies, provided that the amounts
allocated to separate accounts for which the insurer has issued
guarantees of benefits as to dollar amount and duration or of funds
as to all or part of the principal amount thereof or stated rate of
interest, and the accumulations thereon pursuant to Section 10506.4,
shall be invested in the types of investments permitted to life
insurance companies for investments held in the insurer's general
account as described in Article 3 (commencing with Section 1170),
Article 4 (commencing with Section 1190), and Article 4.6 (commencing
with Section 1211) of Chapter 2 of Part 2 of Division 1 (excluding
Section 1212 thereof), except that the approved method of operations
and applicable policy, contract, or agreement provisions shall govern
the amount of these investments held in the separate account.
However, with regard to variable life insurance separate accounts and
accumulations thereon, the separate accounts shall have sufficient
net investment income and readily marketable assets to meet
anticipated obligations under policies funded by the account. The
limitations contained in Sections 1192.4 and 1198 are not applicable
to these investments. These investments shall not be included in
determining the propriety of other investments of the company. The
liability of the company with respect thereto, but only to the extent
prescribed in the agreement, shall be shown on the statement of the
company in the manner prescribed by the commissioner. Amounts
allocated by an insurance company to separate accounts in the
exercise of the power granted by this section shall be owned by the
company, but shall not be chargeable with liabilities arising out of
any other business the company may conduct except and to the extent
provided in the policy, contract, or agreement. The company shall not
hold itself out to be a trustee in respect to these amounts.
(b) In addition to amounts otherwise allocated to separate
accounts, a domestic life insurer may allocate to the account or
accounts amounts which otherwise would be subject to investment in
accordance with Article 4 (commencing with Section 1190) of Chapter 2
of Part 2 of Division 1. The aggregate of these additional amounts
shall not, however, exceed 1 percent of its admitted assets as of the
preceding December 31, or 5 percent of the excess of its admitted
assets over its liabilities and required reserves as of the preceding
December 31, whichever is the smaller. The company shall be entitled
to withdraw at any time, in whole or in part, its participation in
any separate account to which funds have been allocated as provided
in this subdivision and to receive, upon withdrawal, its
proportionate share of the value of the assets of the separate
account at the time of withdrawal.
(c) In addition to the allocations to separate accounts provided
for in subdivision (a), a domestic insurer may, at the request of a
policyholder or contractholder or the beneficiary of a policy or
contract, allocate to any separate account or accounts, death
payments, proceeds of matured endowments, dividends, or surrender
values.
(d) Except as otherwise provided in Section 10506.4, or with the
approval of the commissioner, and under conditions as to investments
and other matters as he or she may prescribe, which shall recognize
the guaranteed nature of the benefits provided, reserves for (1)
benefits guaranteed as to dollar amount and duration and (2) funds
guaranteed as to principal amount or stated rate of interest shall
not be maintained in a separate account that, as provided under
applicable policy, contract, or agreement, is or is not chargeable
with liabilities arising out of any other business the company may
conduct.
(e) Unless otherwise approved by the commissioner, assets
allocated to a separate account shall be valued at their market
value, or at amortized cost if it approximates market value within
the limits and constraints imposed by the United States Securities
and Exchange Commission, on the date of valuation, or, if there is no
readily available market, then as provided under the terms of the
contract or the rules or other written agreement applicable to the
separate account. Unless otherwise approved by the commissioner, the
portion of any of the assets of the separate account equal to the
company's reserve liability, with regard to the guaranteed benefits
and funds referred to in subdivision (d), shall be valued in
accordance with the rules otherwise applicable to the company's
assets.
(f) (1) Except as provided in paragraph (2) of subdivision (f), a
sale, exchange, or other transfer of assets may not be made by a
company between any of its separate accounts, or between any other of
its investment accounts and one or more of its separate accounts
unless, in case of a transfer into a separate account, the transfer
is made solely to establish the account or to support the operation
of the contracts with respect to the separate account to which the
transfer is made, and unless the transfer, whether into or from a
separate account is made (1) by a transfer of cash, or (2) by a
transfer of securities having a readily determinable market value,
and the transfer of securities is approved by the commissioner. The
commissioner may approve other transfers among the accounts if, in
his or her opinion, the transfer would not be inequitable.
(2) Transfers from an insurer's general account to one or more of
its separate accounts to establish and maintain reserves for the
guarantees authorized by Section 10506.4 shall only be made in cash
in accordance with methods of operations approved pursuant to
subdivision (c) of Section 10506.4. A transfer shall not operate to
increase the amounts permitted to be allocated by an insurer to the
separate accounts pursuant to this subdivision or by subdivision (b)
of Section 10506, and the provisions of that subdivision shall not
limit these transfers.
(g) Any domestic life insurance company which establishes one or
more separate accounts pursuant to this section may provide for
special voting rights and procedures for participants in the separate
account relating to investment policy, investment advisory services,
and selection of certified public accountants in relation to the
administration of the assets in any separate account. The voting
rights shall be in addition to, and shall not affect, voting rights
of mutual insurers.
(h) The purpose and intent of this section is to permit the
issuance and delivery of policies or contracts, in connection with a
pension, retirement, retirement medical benefits, or profit-sharing
plan, or program for one or more persons, or policies of variable
life insurance, providing for the payment of benefits in fixed or
variable amounts, or both, and the establishment of separate accounts
by domestic companies for the administration of and investments
under these agreements. To protect the public and policyholders
located in this state from hazardous operation by domestic and
foreign companies, and to further the purpose and provision of this
section, no domestic or foreign life insurance company shall
undertake the issuance of any contract providing for variable
benefits until the company has satisfied the commissioner that its
condition or method of operation in connection with the issuance of
these contracts shall not be such as would render its operation
hazardous to the public or its policyholders in this state and, in
the case of a foreign or alien insurer, that it meets the conditions
prescribed in Section 716, for the issuance of a certificate of
authority. In determining the qualification of a company requesting
authority to issue contracts providing for variable benefits within
this state, the commissioner shall consider among other things, (1)
the history of the company; (2) the character, responsibility, and
general fitness of the officers and directors of the company; (3) the
regulation of a foreign company by its state of domicile; (4) the
adequacy of the investment management which the company is providing;
and (5) the company's arrangements for the supervision of the
marketing of the contracts. Subsequent to an insurer initially
satisfying the commissioner that its condition or method of operation
would not render its operation hazardous to the public or its
policyholders, the insurer shall notify the commissioner at any time
it implements a material change respecting the mutual funds
underlying the variable contract separate account available or to be
available with a policy or contract providing variable benefits. The
notification shall prominently disclose the sales charges, management
and other fees payable to the insurer under the contract, and
whether one or more of the mutual funds underlying the variable
contract separate account are issued by an affiliated company and the
names of those mutual funds. The notification shall be accompanied
by a certification signed by an executive officer having
responsibility for contracts providing variable benefits stating that
the change complies with relevant statutes and regulations. The
commissioner may review the notification to ensure the continued
qualification of the insurer to issue and deliver those policies and
contracts. The commissioner may make reasonable rules and regulations
as he or she considers necessary, proper, and advisable concerning
the issuance and delivery of these policies and contracts and the
payment of benefits thereunder and the manner in which the separate
accounts shall be administered and which types of policies and
contracts, if any, shall be subject to his or her approval prior to
issue. Notification of any material change shall not be subject to
the commissioner's approval or acknowledgment prior to
implementation. The commissioner shall promulgate on an emergency
basis, and in accordance with the rulemaking provisions of the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code), a
regulation superseding Insurance Department Bulletin 97-2 that shall
become effective January 1, 2003. Until promulgation of the
regulation, the commissioner and insurers may continue to rely upon
Insurance Department Bulletin 97-2, except that the commissioner's
approval or acknowledgment prior to implementation of a change to a
mutual fund underlying a variable contract separate account shall not
be required on or after January 1, 2003.
However, no company may provide variable benefits in its contracts
unless it is an admitted insurer having and maintaining a combined
capital and surplus of at least ten million dollars ($10,000,000).
For purposes of this section, "affiliated company" has the same
meaning given in paragraph (1) of subsection (g) of Section 6701 of
Title 15 of the United States Code.
(i) (1) Any contract providing benefits payable in variable
amounts delivered or issued for delivery in this state on or after
the effective date of the amendments to this section enacted at the
1971 Regular Session of the Legislature shall contain a statement of
the essential features of the procedures to be followed by an
insurance company in determining the dollar amount of these variable
benefits. Any contract under which the benefits vary to reflect
investment experience, including a group contract and any certificate
in evidence of variable benefits issued thereunder, shall state that
the dollar amount shall so vary, and shall contain on its first page
a statement to the effect that the benefits thereunder are on a
variable basis. Except for Article 3a (commencing with Section
10159.1) of Chapter 1 of Part 2 of Division 2, in the case of a
variable life insurance policy, and except as otherwise provided in
this section, all pertinent provisions of this code shall apply to
separate accounts and contracts relating thereto. Any variable life
insurance contract, delivered or issued for delivery in this state on
or after the effective date of the amendments to this section
enacted at the 1992 Regular Session of the Legislature, shall contain
such nonforfeiture provisions as are appropriate to such a contract.
(2) The reserve liability for variable contracts shall be
established in accordance with actuarial procedures that recognize
the variable nature of the benefits provided and any mortality
guarantees.
(j) No insurer shall issue anywhere any group variable life
insurance policy for which the master contractholder or any covered
party is an individual residing in this state or is a corporation,
association, trust, or other legal entity that is either domiciled in
or has its principal place of business in this state, unless the
insurer has become qualified to issue variable life insurance
policies and its group master policy form together with all forms of
certificates or notices thereunder have been approved by the
commissioner. Group variable life insurance policies shall be issued
only to groups referred to in Chapter 2 (commencing with Section
10200) of Part 2 of Division 2.
10506.1. The commissioner shall require the payment of three
hundred fifty-four dollars ($354) in lawful money of the United
States as a fee for the determination of qualification required by
Section 10506. Upon completion of the determination of qualification,
and, whether authorization to issue contracts providing variable
benefits is granted or denied, the commissioner shall require the
payment by domestic insurers of such additional amounts from the
requesting domestic insurer as may be necessary to defray all
administrative costs in excess of three hundred fifty-four dollars
($354) incurred by the commissioner in making such determination.
10506.2. (a) The commissioner shall require the payment in advance
of one thousand one hundred eighty dollars ($1,180) as a fee for the
examination and analysis of documents required by law to be filed
with the commissioner by domestic or foreign insurers in connection
with changes to an application and qualification to write variable
contracts.
(b) The commissioner shall require the payment in advance of three
hundred fifty-four dollars ($354) as a fee for the review,
examination, and analysis of documents required to be filed by
insurers issuing variable life insurance policies.
(c) The commissioner shall require the payment in advance of one
thousand seven hundred seventy dollars ($1,770) as a fee for the
examination and analysis involved in approving transfers of assets
pursuant to subdivision (f) of Section 10506.
10506.3. (a) The commissioner shall adopt appropriate
administrative regulations governing modified guaranteed annuities.
Modified guaranteed annuities shall be subject to Article 3b
(commencing with Section 10168) of Chapter 1 of Part 2 of Division 2
with regard to nonforfeiture values computed under the terms of the
annuity but excluding from the computation the effect of market-value
adjustment factors.
(b) Group annuities exempted under Section 10168 are also exempted
from any modified guaranteed annuity regulations.
(c) Subdivision (b) shall be retroactive to January 1, 1987, to
the extent the assets underlying such group contracts have not been
maintained in a separate account.
(d) The commissioner shall issue a bulletin, on or before July 1,
1987, setting forth conditions under which variable life insurance
may be issued, or issued for delivery, in this state as permitted by
Chapter 731 of the Statutes of 1984.
Upon issuance of the bulletin, regulations regarding variable life
insurance contained in Article 11.1 (commencing with Section 2534)
of Title 10 of the California Code of Regulations shall be of no
force and effect as long as the bulletin is effective. The bulletin
authorized by this section shall have the same force and effect, and
may be enforced by the commissioner to the same extent and degree, as
the regulations superseded by it until the time that the
commissioner may make additional or amended regulations as provided
by subdivision (h) of Section 10506.
On or before July 1, 1993, the commissioner may amend the existing
bulletin to include reasonable provisions relating to requirements
for group variable life insurance. Notwithstanding the foregoing
authority to issue a bulletin and prior to its issuance, the
commissioner shall approve group master policy forms and certificates
and notices related thereto that reasonably comply with the general
provisions set forth in Sections 10506 to 10506.2, inclusive, and any
other applicable statutes or regulations.
10506.4. (a) An admitted life insurer that is financially qualified
pursuant to subdivision (b) and complies with the provisions of this
section and those of Section 10506 that expressly refer to this
section or are not inconsistent with it, may guarantee, pursuant to
an approved policy, contract, or agreement, the value of the assets
allocated to a separate account, which as provided under the
applicable policy, contract, or agreement is not chargeable with
liabilities arising out of any other business the company may
conduct, or the investment results thereof, or the income thereon, or
the benefits payable pursuant to the approved policy, contract, or
agreement, and may transfer to the separate account cash to maintain
its reserves for those guarantees pursuant to paragraph (2) of
subdivision (f) of Section 10506. The general account of the insurer
shall be paid reasonable and sufficient compensation not less
frequently than quarterly, for risks and other expenses incurred,
from any separate account that receives a guarantee authorized by
this section.
(b) For the purposes of this section "approved policy, contract,
or agreement" means a policy, contract, or agreement, the form of
which has been approved by the commissioner, for issue or marketing
in this state, and which in addition to meeting the requirements of
all pertinent provisions of this code, meets the requirements of one
of the following paragraphs:
(1) A policy, contract, or agreement meets the requirements of
this paragraph if it satisfies and is expected to satisfy over the
full life of the policy, contract, or agreement all of the following
conditions:
(A) The weighted asset valuation reserve factor for the assets
held in the separate account pursuant to the terms of the policy,
contract, or agreement shall not exceed 2 percent.
(B) Guarantees of interest that extend beyond 14 months at any
time shall be no greater than 3 percent per annum.
(C) Any reserves required because the contract value is less than
the reserves required for the policy, contract, or agreement shall be
maintained in a separate identified segment of the insurer's general
account or otherwise segregated within the general account, or be
held in a separate account all of the assets of which shall also be
chargeable with liabilities arising out of other business of the
insurer.
(D) In the event the policy, contract, or agreement provides for
withdrawals (other than those resulting from an election by a
participant under a pension, retirement, retirement medical benefit,
or profit-sharing plan) of amounts other than on the conversion date
or guarantee effective date, if any, the withdrawals shall be made in
either of the following manners:
(i) In a lump sum in an amount not to exceed the market value.
(ii) In one or more contract value installments the present value
of which is equal to or less than the market value of the aggregate
withdrawal.
(2) A policy, contract, or agreement meets the requirements of
this paragraph if it satisfies and is expected to satisfy over the
full life of the policy, contract, or agreement all of the following
conditions:
(A) The weighted asset valuation reserve factor for the assets
held in the separate account pursuant to the terms of the policy,
contract, or agreement shall not exceed 4 percent.
(B) The market value of the assets held in the separate account
plus any reserves described in subparagraph (C) shall exceed the
current aggregate liabilities determined by discounting the
guaranteed benefit liability cashflows at the rate of 105 percent of
the then current yields as quoted on United States Government issued
securities having substantially similar maturities by at least the
following applicable amount:
(i) For assets consisting of debt instruments, an amount equal to
the asset valuation reserve "maximum reserve factor," provided,
however, that the factor shall be reduced by 50 percent for the
purpose of this calculation if the difference in durations of the
assets and liabilities (as confirmed in the actuarial statement
referred to in subparagraph (B) of paragraph (1) of subdivision (d))
are one year or less.
(ii) For assets that are not debt instruments, 20 percent.
(C) Any reserves required because the contract value is less than
the reserves required for the policy, contract, or agreement shall be
maintained in a separate identified segment of the insurer's general
account or otherwise segregated within the general account, or be
held in a separate account all of the assets of which shall also be
chargeable with liabilities arising out of other business of the
insurer.
(D) In the event the policy, contract, or agreement provides for
withdrawals (other than those resulting from an election by a
participant under a pension, retirement, retirement medical benefit,
or profit-sharing plan) of amounts other than on the conversion date
or guarantee effective date, if any, the withdrawals shall be made in
either of the following manners:
(i) In a lump sum in an amount not to exceed the market value.
(ii) In one or more contract value installments the present value
of which is equal to or less than the market value of the aggregate
withdrawal.
(3) A policy, contract, or agreement meets the requirements of
this paragraph if it satisfies and is expected to satisfy over the
full life of the policy, contract, or agreement all of the following
conditions:
(A) The guarantees contained in the policy, contract, or agreement
applicable to the value of the assets held in the separate account
by the insurer shall be based upon a publicly available interest rate
series or an index of the aggregate market value of a group of
publicly traded financial instruments, the interest rate series or
index to be specified in the policy, contract, or agreement.
(B) Assets held in the separate account and the accumulations
thereon shall be invested in accordance with the requirements of
subdivision (a) of Section 10506 applicable to policies, contracts,
or agreements governed by this section and shall comply with all of
the following:
(i) Interest-bearing bonds, notes, or other obligations shall be
publicly traded or meet applicable requirements of the United States
Securities and Exchange Commission enabling the securities to be
publicly traded.
(ii) Investments in capital stock shall be traded on an exchange
regulated by the United States Securities and Exchange Commission,
and investments in any futures contracts with respect thereto shall
be traded on an exchange regulated under the Commodities Exchange Act
(Title 7, United States Code).
(iii) Issuers of interest-bearing obligations held in the separate
account must be rated by an independent nationally recognized
financial rating agency approved by the commissioner or by the
Securities Valuation Office of the National Association of Insurance
Commissioners.
(iv) With respect to any investments in shares of investment
companies registered under the federal Investment Company Act of 1940
(15 U.S.C. Sec. 80a-1 et seq.) the assets of the entity must qualify
as investments directly allowed for separate accounts pursuant to
the requirements of subdivision (a) of Section 10506 applicable to
policies, contracts, or agreements governed by this section.
(v) The type, quality, industry diversification, prepayment
characteristics, expected duration, and other factors pertaining to
investments shall be set forth in the approved method of operations
which shall contain a demonstration satisfactory to the commissioner
that the investments are likely to achieve the performance of the
applicable index or interest rate series.
(C) The period between the commencement date of the guaranty of
the value of the assets held in the separate account and the
conversion date, if any, shall not exceed five years.
(D) Any reserves required because the contract value is less than
the reserves required for the policy, contract, or agreement shall be
maintained in a separate identified segment of the insurer's general
account or otherwise segregated within the general account, or be
held in a separate account all of the assets of which shall also be
chargeable with liabilities arising out of other business of the
insurer.
(E) In the event the policy, contract, or agreement provides for
withdrawals (other than those resulting from an election by a
participant under a pension, retirement, retirement medical benefit,
or profit-sharing plan) of amounts other than on the conversion date
or guarantee effective date, if any, the withdrawals shall be made in
either of the following manners:
(i) In a lump sum in an amount not to exceed the market value.
(ii) In one or more contract value installments the present value
of which is equal to or less than the market value of the aggregate
withdrawal.
(4) For the purposes of this section, "conversion date" means the
date, if any, specified in the policy, contract, or agreement upon
which the assets held pursuant to it shall be converted or applied to
the purchase of annuities or returned to the owner of the policy,
contract, or agreement, or its designee.
(5) For the purposes of this section, the "asset valuation reserve
factor" for each asset will be determined by the application of the
asset valuation reserve factor, "maximum reserve factor," as
contained in the National Association of Insurance Commissioners
(NAIC) Life, Accident and Health Annual Statement Instructions
(Instructions) and Valuation of Securities Manual, or if not
contained therein, an asset valuation reserve factor of 20 percent
shall be assigned. To determine the weighted asset valuation reserve
factor, the asset valuation reserve factor shall be applied to the
market value of each asset.
(6) For the purposes of this section, "market value" means the
policy, contract, or agreement's proportionate share of the actual
market value of the separate account at the time of withdrawal or if
the determination of market value is by formula, the formula shall be
set forth in the policy, contract, or agreement and shall be
designed to closely match actual market value.
(7) For the purposes of this section, "guarantee effective date"
means the date guarantees authorized by this section may result in
payments from the general account to the separate account.
(c) No admitted life insurer may issue or market in this state,
nor may any domestic life insurer issue or market anywhere, a policy,
contract, or agreement, or coverage thereunder by certificate or
otherwise, which contains the guarantees referred to in subdivision
(a) unless both of the following apply:
(1) It has received from the commissioner authority to issue
policies or contracts providing for the payment of variable benefits
pursuant to subdivision (h) of Section 10506.
(2) The commissioner has determined after application by the
insurer in the form and content as the commissioner may require,
review of the insurer's applicable proposed method of operations
relating to policies, contracts, or agreements containing the
guarantees authorized by subdivision (a), payment of fees specified
in Section 736 and consideration of the matters set forth in
subdivision (h) of Section 10506, that the insurer is financially
qualified to issue policies, contracts, or agreements that contain
the guarantees referred to in subdivision (a) including by meeting or
exceeding the financial standards in subdivision (d).
(d) (1) No admitted life insurer that has been financially
qualified pursuant to subdivision (c) may issue or market or continue
to issue or market in this state, nor may any domestic life insurer
issue or market anywhere or continue to issue or market anywhere,
policies, contracts, or agreements, or coverage thereunder by
certificate or otherwise, providing the guarantees referred to in
subdivision (a) unless all of the following apply:
(A) It has at least one billion dollars ($1,000,000,000) of
admitted assets or at least one hundred million dollars
($100,000,000) of aggregate capital and surplus.
(B) It annually complies with the requirement to furnish an
actuarial statement as a part of or in addition to the statement
required by Section 10489.15, provided the actuarial statement is in
form and substance satisfactory to the commissioner. This actuarial
statement shall meet all the following requirements:
(i) The statement shall state that, after taking into account risk
charges payable from the assets of the separate account with respect
to the guarantee, the assets of the separate account, together with
any reserves in excess of the account value, make good and sufficient
provision for the liabilities of the insurer with respect thereto.
(ii) The statement shall provide an opinion of the reasonableness
and sufficiency of the pricing of any general account guarantees and
any other fees for administration paid to the general account from
the separate account.
(iii) The statement shall be supported by a memorandum by a
qualified actuary, also in form and substance satisfactory to the
commissioner, that describes the calculations made in support of the
actuarial statement and includes the assumptions used in the
calculations.
(C) Its ratio of aggregate capital and surplus to its aggregate
liabilities is not lower than 75 percent of that ratio as of the
December 31 prior to its receiving financial qualification from the
commissioner except as allowed under paragraph (4) of subdivision
(d).
For the purposes of this section, "capital and surplus" includes
capital and surplus plus the asset valuation reserve and one-half of
the liability for dividends, all as reflected on the most recent
financial statement on file with the commissioner. "Liabilities"
means the total liabilities as reflected on the financial statement
excluding therefrom liabilities for policies, contracts, and
agreements issued in connection with separate accounts, liabilities
in connection with contracts issued pursuant to this section and
excluding both of the following:
(i) The liability for any asset valuation reserve.
(ii) One-half the liability for dividends.
(2) If the commissioner, following notice to the insurer and a
hearing, determines that an insurer that has received financial
qualification pursuant to subdivision (c) no longer maintains the
financial strength needed to initially receive the qualification, the
commissioner may issue an order requiring the insurer to cease
issuing new policies, contracts, or agreements providing for
guarantees contemplated by subdivision (a).
(3) In the event an insurer that has received financial
qualification pursuant to subdivision (c) determines that it does not
meet the requirements of subdivision (d), it shall promptly comply
with paragraph (2) as if an order had been issued by the commissioner
after notice and hearing, and within 45 days, notify the
commissioner in writing at the place designated by the commissioner
that it has ceased to meet the requirements specified in the written
notice.
(4) In the event the insurer thereafter meets or exceeds all of
the requirements of subdivision (d), it may notify the commissioner
at the place designated by the commissioner, in writing, and upon the
passage of 45 days following receipt by the commissioner of the
notice, may resume issuing policies, contracts, or agreements that
provide for guarantees contemplated by subdivision (a) as long as it
meets the requirements of subdivision (d). However, if the insurer
believes that the resumption of the issuance of the policies,
contracts, or agreements that provide for the guarantees contemplated
by subdivision (a) would not be hazardous to its policyholders or
the citizens of California, even though it does not meet the
requirements specified in subparagraph (C) of paragraph (1), the
insurer shall include in the notice a demonstration that the issuance
of policies, contracts, or agreements containing the guarantees
referred to in subdivision (a) is not hazardous to its policyholders
or the citizens of California. Within the 45-day period, the
commissioner may issue an order containing the requirements of
paragraph (2) if, in the commissioner's opinion, any of the
requirements of subdivision (d) are not met, or resumption would
violate any provision of this code or, resumption may be hazardous to
the insurer, policyholders, creditors, or the public. The failure to
issue an order within 45 days shall not be deemed an approval of the
activities. The order shall specify the grounds upon which the
commissioner is basing the order. The insurer may, within 10 days of
the order, request a hearing. The hearing shall be a private hearing
and shall commence not less than 10 days, nor more than 20 days,
after the request for hearing is served on the commissioner.
(e) Policies, contracts, and agreements referred to in subdivision
(a), that are not otherwise subject to filing under applicable law
and regulation, shall be filed, before being marketed or issued in
this state, by the insurer with the commissioner. If the commissioner
finds that the policies, contracts, or agreements submitted pursuant
to subdivision (a) contemplate practices that are unfair or
unreasonable or otherwise inconsistent with the provisions of this
code, he or she may disapprove of the forms of policies, contracts,
or agreements specifying in what regard the policies, contracts, or
agreements are unfair or unreasonable or otherwise inconsistent with
the provisions of this code.
(f) As an alternative to the filing and approval procedure set
forth in subdivision (e), an insurer that satisfies eligibility
criteria specified in the bulletin authorized by subdivision (g) may
file with the commissioner the proposed form of the policy, contract,
or agreement, together with an officer's certificate, accompanied by
an actuarial certification and demonstration, and other supporting
material, all in accordance with procedures set forth in the bulletin
authorized by subdivision (g). An insurer may issue and deliver a
policy, contract, or agreement the day following approval by the
commissioner of a filing under this subdivision. Absent explicit
approval, an insurer may, no sooner than 30 working days after the
filing of the policy, contract, or agreement and all required
supporting documentation, issue and deliver any policy, contract, or
agreement that has been filed pursuant to this subdivision if the
commissioner has not notified the insurer in writing that the filing
lacks the required documentation or that he or she objects to the
filing upon grounds sufficient to disapprove the policy, contract, or
agreement. The bulletin shall set forth procedures providing the
insurer an opportunity to respond to any objections. If the
commissioner finds that the officer's certificate or the actuarial
certification or demonstration filed in support of the policy,
contract, or agreement is false or incorrect, the commissioner may,
in addition to taking any other lawful measures, including suspension
of authority to use the policy, contract, or agreement, declare the
insurer ineligible to utilize the alternative procedure authorized by
this subdivision for a period not to exceed three years from the
date of the filing of the policy, contract, or agreement. The
commissioner may summarily suspend the use of any policy, contract,
or agreement used by the insurer pursuant to this subdivision on any
grounds sufficient to disapprove the policy, contract, or agreement,
or if the filing fails to include the required documents. This
suspension may be prospective only. Suspension of use of a policy,
contract, or agreement shall be in writing and shall specify the
reasons for the suspension. Unless the commissioner in the suspension
order or subsequent thereto specifies a later effective date for the
suspension, any suspension shall be effective on the day following
the receipt of the suspension order by the insurer. An insurer
affected by any suspension, issued pursuant to this subdivision, of a
policy, contract or agreement may refile the policy, contract, or
agreement with the commissioner pursuant to subdivision (e). The
commissioner may suspend or discontinue filings of policies,
contracts, or agreements under this subdivision at any time upon
notice to affected insurers. Any filing by an insurer of a policy,
contract, or agreement under this subdivision that is not accepted by
the commissioner may be filed by the insurer pursuant to subdivision
(e).
(g) The commissioner may issue, and amend from time to time
thereafter, as he or she deems appropriate, a bulletin setting forth
reasonable requirements for insurers that issue policies, contracts,
or agreements referred to in subdivision (a) relating to all of the
following:
(1) The reserves to be maintained by insurers for those policies,
contracts, or agreements.
(2) The accounting and reporting of funds credited under, assets
held with respect to, and transfers to and from the insurer's general
account and separate accounts pertaining to, those policies,
contracts, or agreements.
(3) The disclosure of information to be given to holders and
prospective holders of those policies, contracts, or agreements.
(4) The qualification of persons selling those policies,
contracts, or agreements on behalf of the insurers.
(5) The filing of those policies, contracts, or agreements with
the commissioner.
(6) The filing with the commissioner of specified sales and
financial information pertaining to those policies, contracts and
agreements.
(7) The eligibility criteria and procedure for filing under
subdivision (f).
(8) Other matters relating to those policies, contracts, and
agreements as the commissioner considers necessary, proper, and
advisable that are not inconsistent with this section. This bulletin
shall have the same force and effect, and may be enforced by the
commissioner to the same extent and degree, as regulations issued by
the commissioner until the time that the commissioner issues
additional or amended regulations.
(h) The authority granted in this section is in addition to the
authority granted to life insurers by other provisions of this code
and the requirements of this section shall not contravene that
authority. No policy, contract, or agreement that constitutes
investment return assurance pursuant to Section 10203.10 or Section
10507 may be issued pursuant to this section.
(i) Guarantees authorized by this section may only be made in
connection with policies, contracts, or agreements issued to an owner
that is not a natural person, and is an "accredited investor" as
defined in Regulation D-Rules Governing the Limited Offer and Sale of
Securities Without Registration Under the Securities Act of 1933, 17
Code of Federal Regulations Section 230.501 et seq., as promulgated
by the United States Securities and Exchange Commission, in
transactions where the aggregate single premium or deposit for all
policies, contracts, or agreements (excluding certificates issued
under a group or master policy) issued to the owner containing
guarantees authorized by this section is at least one million dollars
($1,000,000). Notwithstanding the foregoing, an insurer may issue
policies, contracts, or agreements qualifying under paragraph (1) of
subdivision (b) above, to a pension, retirement, or retirement
medical benefit or profit-sharing plan reasonably expected to receive
contributions in excess of two hundred fifty thousand dollars
($250,000) within the first 12 months following issuance of the
policy, contract, or agreement and that has more than 10
participants. Policies, contracts, or agreements providing coverage
in this state, by certificate or otherwise, that contain guarantees
authorized by this section issued on a group basis shall be issued
only to groups referred to in Chapter 2 (commencing with Section
10200) of Part 2 of Division 2.
10506.5. (a) For the purposes of this section, "guaranteed living
benefit" means a benefit in a variable annuity or a variable life
insurance contract providing that one or more benefit amounts
available to a living contractholder, under specified conditions,
will be enhanced should it fall below a given level, in the absence
of the guaranteed living benefit.
(b) An insurer may deliver or issue for delivery contracts
containing, or riders to variable contracts providing, guaranteed
living benefits if all the following requirements are met:
(1) The insurer is authorized to deliver, or issue for delivery,
variable insurance products in this state.
(2) The insurer meets the requirements of paragraph (1) of
subdivision (d) of Section 10506.4.
(3) The commissioner has issued a bulletin setting forth the terms
and conditions under which variable contracts containing, or riders
to variable contracts providing, guaranteed living benefits may be
issued or delivered in this state.
(4) The variable contract or rider meets the terms and conditions
for guaranteed living benefits established by the commissioner and
set forth in the bulletin described in paragraph (3) and the insurer
desiring to issue the variable contract or rider has satisfied the
requirements set forth in Section 2529 of Title 10 of the California
Code of Regulations.
(c) The bulletin described in paragraph (3) of subdivision (b) may
include provisions covering requirements similar to those included
in subdivision (f) of Section 10506.4. The bulletin shall have the
same force and effect, and may be enforced by the commissioner to the
same extent and degree as regulations issued by the commissioner
until the time that the commissioner issues additional or amended
regulations pertaining to guaranteed living benefits.
(d) An insurer may not deliver or issue for delivery variable
contracts containing, or riders to variable contracts providing,
guaranteed living benefits except pursuant to this section. No
policy, contract, rider, or agreement that constitutes investment
return assurance pursuant to Section 10203.10 or 10507, or guarantee
pursuant to Section 10506.4, may be issued pursuant to this section.
10506. (a) Any domestic life insurance company may, after adoption
of a resolution by its board of directors, allocate to one or more
separate accounts, in accordance with the terms of a written
agreement, any amounts which are paid to the company in connection
with a pension, retirement, retirement medical benefits, or
profit-sharing plan, or program for one or more persons, or with an
individual or group variable life insurance policy, and which are to
be, or may be, applied in payment or in making provision for payment
of proceeds or benefits under the company's policies, contracts, or
agreements of retirement benefits, and other benefits incidental
thereto, in fixed or variable dollar amounts, or both. The income, if
any, and gains or losses, realized or unrealized, on each account
shall be credited to or charged against the amount allocated to the
account in accordance with the agreement, without regard to the other
income, gains or losses of the company. The amounts allocated to the
accounts and accumulations thereon, by any life insurance company
shall be invested and reinvested as specified in the policy,
contract, or agreement without regard to any requirements or
limitations prescribed by the laws of this state governing the
investments of insurance companies, provided that the amounts
allocated to separate accounts for which the insurer has issued
guarantees of benefits as to dollar amount and duration or of funds
as to all or part of the principal amount thereof or stated rate of
interest, and the accumulations thereon pursuant to Section 10506.4,
shall be invested in the types of investments permitted to life
insurance companies for investments held in the insurer's general
account as described in Article 3 (commencing with Section 1170),
Article 4 (commencing with Section 1190), and Article 4.6 (commencing
with Section 1211) of Chapter 2 of Part 2 of Division 1 (excluding
Section 1212 thereof), except that the approved method of operations
and applicable policy, contract, or agreement provisions shall govern
the amount of these investments held in the separate account.
However, with regard to variable life insurance separate accounts and
accumulations thereon, the separate accounts shall have sufficient
net investment income and readily marketable assets to meet
anticipated obligations under policies funded by the account. The
limitations contained in Sections 1192.4 and 1198 are not applicable
to these investments. These investments shall not be included in
determining the propriety of other investments of the company. The
liability of the company with respect thereto, but only to the extent
prescribed in the agreement, shall be shown on the statement of the
company in the manner prescribed by the commissioner. Amounts
allocated by an insurance company to separate accounts in the
exercise of the power granted by this section shall be owned by the
company, but shall not be chargeable with liabilities arising out of
any other business the company may conduct except and to the extent
provided in the policy, contract, or agreement. The company shall not
hold itself out to be a trustee in respect to these amounts.
(b) In addition to amounts otherwise allocated to separate
accounts, a domestic life insurer may allocate to the account or
accounts amounts which otherwise would be subject to investment in
accordance with Article 4 (commencing with Section 1190) of Chapter 2
of Part 2 of Division 1. The aggregate of these additional amounts
shall not, however, exceed 1 percent of its admitted assets as of the
preceding December 31, or 5 percent of the excess of its admitted
assets over its liabilities and required reserves as of the preceding
December 31, whichever is the smaller. The company shall be entitled
to withdraw at any time, in whole or in part, its participation in
any separate account to which funds have been allocated as provided
in this subdivision and to receive, upon withdrawal, its
proportionate share of the value of the assets of the separate
account at the time of withdrawal.
(c) In addition to the allocations to separate accounts provided
for in subdivision (a), a domestic insurer may, at the request of a
policyholder or contractholder or the beneficiary of a policy or
contract, allocate to any separate account or accounts, death
payments, proceeds of matured endowments, dividends, or surrender
values.
(d) Except as otherwise provided in Section 10506.4, or with the
approval of the commissioner, and under conditions as to investments
and other matters as he or she may prescribe, which shall recognize
the guaranteed nature of the benefits provided, reserves for (1)
benefits guaranteed as to dollar amount and duration and (2) funds
guaranteed as to principal amount or stated rate of interest shall
not be maintained in a separate account that, as provided under
applicable policy, contract, or agreement, is or is not chargeable
with liabilities arising out of any other business the company may
conduct.
(e) Unless otherwise approved by the commissioner, assets
allocated to a separate account shall be valued at their market
value, or at amortized cost if it approximates market value within
the limits and constraints imposed by the United States Securities
and Exchange Commission, on the date of valuation, or, if there is no
readily available market, then as provided under the terms of the
contract or the rules or other written agreement applicable to the
separate account. Unless otherwise approved by the commissioner, the
portion of any of the assets of the separate account equal to the
company's reserve liability, with regard to the guaranteed benefits
and funds referred to in subdivision (d), shall be valued in
accordance with the rules otherwise applicable to the company's
assets.
(f) (1) Except as provided in paragraph (2) of subdivision (f), a
sale, exchange, or other transfer of assets may not be made by a
company between any of its separate accounts, or between any other of
its investment accounts and one or more of its separate accounts
unless, in case of a transfer into a separate account, the transfer
is made solely to establish the account or to support the operation
of the contracts with respect to the separate account to which the
transfer is made, and unless the transfer, whether into or from a
separate account is made (1) by a transfer of cash, or (2) by a
transfer of securities having a readily determinable market value,
and the transfer of securities is approved by the commissioner. The
commissioner may approve other transfers among the accounts if, in
his or her opinion, the transfer would not be inequitable.
(2) Transfers from an insurer's general account to one or more of
its separate accounts to establish and maintain reserves for the
guarantees authorized by Section 10506.4 shall only be made in cash
in accordance with methods of operations approved pursuant to
subdivision (c) of Section 10506.4. A transfer shall not operate to
increase the amounts permitted to be allocated by an insurer to the
separate accounts pursuant to this subdivision or by subdivision (b)
of Section 10506, and the provisions of that subdivision shall not
limit these transfers.
(g) Any domestic life insurance company which establishes one or
more separate accounts pursuant to this section may provide for
special voting rights and procedures for participants in the separate
account relating to investment policy, investment advisory services,
and selection of certified public accountants in relation to the
administration of the assets in any separate account. The voting
rights shall be in addition to, and shall not affect, voting rights
of mutual insurers.
(h) The purpose and intent of this section is to permit the
issuance and delivery of policies or contracts, in connection with a
pension, retirement, retirement medical benefits, or profit-sharing
plan, or program for one or more persons, or policies of variable
life insurance, providing for the payment of benefits in fixed or
variable amounts, or both, and the establishment of separate accounts
by domestic companies for the administration of and investments
under these agreements. To protect the public and policyholders
located in this state from hazardous operation by domestic and
foreign companies, and to further the purpose and provision of this
section, no domestic or foreign life insurance company shall
undertake the issuance of any contract providing for variable
benefits until the company has satisfied the commissioner that its
condition or method of operation in connection with the issuance of
these contracts shall not be such as would render its operation
hazardous to the public or its policyholders in this state and, in
the case of a foreign or alien insurer, that it meets the conditions
prescribed in Section 716, for the issuance of a certificate of
authority. In determining the qualification of a company requesting
authority to issue contracts providing for variable benefits within
this state, the commissioner shall consider among other things, (1)
the history of the company; (2) the character, responsibility, and
general fitness of the officers and directors of the company; (3) the
regulation of a foreign company by its state of domicile; (4) the
adequacy of the investment management which the company is providing;
and (5) the company's arrangements for the supervision of the
marketing of the contracts. Subsequent to an insurer initially
satisfying the commissioner that its condition or method of operation
would not render its operation hazardous to the public or its
policyholders, the insurer shall notify the commissioner at any time
it implements a material change respecting the mutual funds
underlying the variable contract separate account available or to be
available with a policy or contract providing variable benefits. The
notification shall prominently disclose the sales charges, management
and other fees payable to the insurer under the contract, and
whether one or more of the mutual funds underlying the variable
contract separate account are issued by an affiliated company and the
names of those mutual funds. The notification shall be accompanied
by a certification signed by an executive officer having
responsibility for contracts providing variable benefits stating that
the change complies with relevant statutes and regulations. The
commissioner may review the notification to ensure the continued
qualification of the insurer to issue and deliver those policies and
contracts. The commissioner may make reasonable rules and regulations
as he or she considers necessary, proper, and advisable concerning
the issuance and delivery of these policies and contracts and the
payment of benefits thereunder and the manner in which the separate
accounts shall be administered and which types of policies and
contracts, if any, shall be subject to his or her approval prior to
issue. Notification of any material change shall not be subject to
the commissioner's approval or acknowledgment prior to
implementation. The commissioner shall promulgate on an emergency
basis, and in accordance with the rulemaking provisions of the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code), a
regulation superseding Insurance Department Bulletin 97-2 that shall
become effective January 1, 2003. Until promulgation of the
regulation, the commissioner and insurers may continue to rely upon
Insurance Department Bulletin 97-2, except that the commissioner's
approval or acknowledgment prior to implementation of a change to a
mutual fund underlying a variable contract separate account shall not
be required on or after January 1, 2003.
However, no company may provide variable benefits in its contracts
unless it is an admitted insurer having and maintaining a combined
capital and surplus of at least ten million dollars ($10,000,000).
For purposes of this section, "affiliated company" has the same
meaning given in paragraph (1) of subsection (g) of Section 6701 of
Title 15 of the United States Code.
(i) (1) Any contract providing benefits payable in variable
amounts delivered or issued for delivery in this state on or after
the effective date of the amendments to this section enacted at the
1971 Regular Session of the Legislature shall contain a statement of
the essential features of the procedures to be followed by an
insurance company in determining the dollar amount of these variable
benefits. Any contract under which the benefits vary to reflect
investment experience, including a group contract and any certificate
in evidence of variable benefits issued thereunder, shall state that
the dollar amount shall so vary, and shall contain on its first page
a statement to the effect that the benefits thereunder are on a
variable basis. Except for Article 3a (commencing with Section
10159.1) of Chapter 1 of Part 2 of Division 2, in the case of a
variable life insurance policy, and except as otherwise provided in
this section, all pertinent provisions of this code shall apply to
separate accounts and contracts relating thereto. Any variable life
insurance contract, delivered or issued for delivery in this state on
or after the effective date of the amendments to this section
enacted at the 1992 Regular Session of the Legislature, shall contain
such nonforfeiture provisions as are appropriate to such a contract.
(2) The reserve liability for variable contracts shall be
established in accordance with actuarial procedures that recognize
the variable nature of the benefits provided and any mortality
guarantees.
(j) No insurer shall issue anywhere any group variable life
insurance policy for which the master contractholder or any covered
party is an individual residing in this state or is a corporation,
association, trust, or other legal entity that is either domiciled in
or has its principal place of business in this state, unless the
insurer has become qualified to issue variable life insurance
policies and its group master policy form together with all forms of
certificates or notices thereunder have been approved by the
commissioner. Group variable life insurance policies shall be issued
only to groups referred to in Chapter 2 (commencing with Section
10200) of Part 2 of Division 2.
10506.1. The commissioner shall require the payment of three
hundred fifty-four dollars ($354) in lawful money of the United
States as a fee for the determination of qualification required by
Section 10506. Upon completion of the determination of qualification,
and, whether authorization to issue contracts providing variable
benefits is granted or denied, the commissioner shall require the
payment by domestic insurers of such additional amounts from the
requesting domestic insurer as may be necessary to defray all
administrative costs in excess of three hundred fifty-four dollars
($354) incurred by the commissioner in making such determination.
10506.2. (a) The commissioner shall require the payment in advance
of one thousand one hundred eighty dollars ($1,180) as a fee for the
examination and analysis of documents required by law to be filed
with the commissioner by domestic or foreign insurers in connection
with changes to an application and qualification to write variable
contracts.
(b) The commissioner shall require the payment in advance of three
hundred fifty-four dollars ($354) as a fee for the review,
examination, and analysis of documents required to be filed by
insurers issuing variable life insurance policies.
(c) The commissioner shall require the payment in advance of one
thousand seven hundred seventy dollars ($1,770) as a fee for the
examination and analysis involved in approving transfers of assets
pursuant to subdivision (f) of Section 10506.
10506.3. (a) The commissioner shall adopt appropriate
administrative regulations governing modified guaranteed annuities.
Modified guaranteed annuities shall be subject to Article 3b
(commencing with Section 10168) of Chapter 1 of Part 2 of Division 2
with regard to nonforfeiture values computed under the terms of the
annuity but excluding from the computation the effect of market-value
adjustment factors.
(b) Group annuities exempted under Section 10168 are also exempted
from any modified guaranteed annuity regulations.
(c) Subdivision (b) shall be retroactive to January 1, 1987, to
the extent the assets underlying such group contracts have not been
maintained in a separate account.
(d) The commissioner shall issue a bulletin, on or before July 1,
1987, setting forth conditions under which variable life insurance
may be issued, or issued for delivery, in this state as permitted by
Chapter 731 of the Statutes of 1984.
Upon issuance of the bulletin, regulations regarding variable life
insurance contained in Article 11.1 (commencing with Section 2534)
of Title 10 of the California Code of Regulations shall be of no
force and effect as long as the bulletin is effective. The bulletin
authorized by this section shall have the same force and effect, and
may be enforced by the commissioner to the same extent and degree, as
the regulations superseded by it until the time that the
commissioner may make additional or amended regulations as provided
by subdivision (h) of Section 10506.
On or before July 1, 1993, the commissioner may amend the existing
bulletin to include reasonable provisions relating to requirements
for group variable life insurance. Notwithstanding the foregoing
authority to issue a bulletin and prior to its issuance, the
commissioner shall approve group master policy forms and certificates
and notices related thereto that reasonably comply with the general
provisions set forth in Sections 10506 to 10506.2, inclusive, and any
other applicable statutes or regulations.
10506.4. (a) An admitted life insurer that is financially qualified
pursuant to subdivision (b) and complies with the provisions of this
section and those of Section 10506 that expressly refer to this
section or are not inconsistent with it, may guarantee, pursuant to
an approved policy, contract, or agreement, the value of the assets
allocated to a separate account, which as provided under the
applicable policy, contract, or agreement is not chargeable with
liabilities arising out of any other business the company may
conduct, or the investment results thereof, or the income thereon, or
the benefits payable pursuant to the approved policy, contract, or
agreement, and may transfer to the separate account cash to maintain
its reserves for those guarantees pursuant to paragraph (2) of
subdivision (f) of Section 10506. The general account of the insurer
shall be paid reasonable and sufficient compensation not less
frequently than quarterly, for risks and other expenses incurred,
from any separate account that receives a guarantee authorized by
this section.
(b) For the purposes of this section "approved policy, contract,
or agreement" means a policy, contract, or agreement, the form of
which has been approved by the commissioner, for issue or marketing
in this state, and which in addition to meeting the requirements of
all pertinent provisions of this code, meets the requirements of one
of the following paragraphs:
(1) A policy, contract, or agreement meets the requirements of
this paragraph if it satisfies and is expected to satisfy over the
full life of the policy, contract, or agreement all of the following
conditions:
(A) The weighted asset valuation reserve factor for the assets
held in the separate account pursuant to the terms of the policy,
contract, or agreement shall not exceed 2 percent.
(B) Guarantees of interest that extend beyond 14 months at any
time shall be no greater than 3 percent per annum.
(C) Any reserves required because the contract value is less than
the reserves required for the policy, contract, or agreement shall be
maintained in a separate identified segment of the insurer's general
account or otherwise segregated within the general account, or be
held in a separate account all of the assets of which shall also be
chargeable with liabilities arising out of other business of the
insurer.
(D) In the event the policy, contract, or agreement provides for
withdrawals (other than those resulting from an election by a
participant under a pension, retirement, retirement medical benefit,
or profit-sharing plan) of amounts other than on the conversion date
or guarantee effective date, if any, the withdrawals shall be made in
either of the following manners:
(i) In a lump sum in an amount not to exceed the market value.
(ii) In one or more contract value installments the present value
of which is equal to or less than the market value of the aggregate
withdrawal.
(2) A policy, contract, or agreement meets the requirements of
this paragraph if it satisfies and is expected to satisfy over the
full life of the policy, contract, or agreement all of the following
conditions:
(A) The weighted asset valuation reserve factor for the assets
held in the separate account pursuant to the terms of the policy,
contract, or agreement shall not exceed 4 percent.
(B) The market value of the assets held in the separate account
plus any reserves described in subparagraph (C) shall exceed the
current aggregate liabilities determined by discounting the
guaranteed benefit liability cashflows at the rate of 105 percent of
the then current yields as quoted on United States Government issued
securities having substantially similar maturities by at least the
following applicable amount:
(i) For assets consisting of debt instruments, an amount equal to
the asset valuation reserve "maximum reserve factor," provided,
however, that the factor shall be reduced by 50 percent for the
purpose of this calculation if the difference in durations of the
assets and liabilities (as confirmed in the actuarial statement
referred to in subparagraph (B) of paragraph (1) of subdivision (d))
are one year or less.
(ii) For assets that are not debt instruments, 20 percent.
(C) Any reserves required because the contract value is less than
the reserves required for the policy, contract, or agreement shall be
maintained in a separate identified segment of the insurer's general
account or otherwise segregated within the general account, or be
held in a separate account all of the assets of which shall also be
chargeable with liabilities arising out of other business of the
insurer.
(D) In the event the policy, contract, or agreement provides for
withdrawals (other than those resulting from an election by a
participant under a pension, retirement, retirement medical benefit,
or profit-sharing plan) of amounts other than on the conversion date
or guarantee effective date, if any, the withdrawals shall be made in
either of the following manners:
(i) In a lump sum in an amount not to exceed the market value.
(ii) In one or more contract value installments the present value
of which is equal to or less than the market value of the aggregate
withdrawal.
(3) A policy, contract, or agreement meets the requirements of
this paragraph if it satisfies and is expected to satisfy over the
full life of the policy, contract, or agreement all of the following
conditions:
(A) The guarantees contained in the policy, contract, or agreement
applicable to the value of the assets held in the separate account
by the insurer shall be based upon a publicly available interest rate
series or an index of the aggregate market value of a group of
publicly traded financial instruments, the interest rate series or
index to be specified in the policy, contract, or agreement.
(B) Assets held in the separate account and the accumulations
thereon shall be invested in accordance with the requirements of
subdivision (a) of Section 10506 applicable to policies, contracts,
or agreements governed by this section and shall comply with all of
the following:
(i) Interest-bearing bonds, notes, or other obligations shall be
publicly traded or meet applicable requirements of the United States
Securities and Exchange Commission enabling the securities to be
publicly traded.
(ii) Investments in capital stock shall be traded on an exchange
regulated by the United States Securities and Exchange Commission,
and investments in any futures contracts with respect thereto shall
be traded on an exchange regulated under the Commodities Exchange Act
(Title 7, United States Code).
(iii) Issuers of interest-bearing obligations held in the separate
account must be rated by an independent nationally recognized
financial rating agency approved by the commissioner or by the
Securities Valuation Office of the National Association of Insurance
Commissioners.
(iv) With respect to any investments in shares of investment
companies registered under the federal Investment Company Act of 1940
(15 U.S.C. Sec. 80a-1 et seq.) the assets of the entity must qualify
as investments directly allowed for separate accounts pursuant to
the requirements of subdivision (a) of Section 10506 applicable to
policies, contracts, or agreements governed by this section.
(v) The type, quality, industry diversification, prepayment
characteristics, expected duration, and other factors pertaining to
investments shall be set forth in the approved method of operations
which shall contain a demonstration satisfactory to the commissioner
that the investments are likely to achieve the performance of the
applicable index or interest rate series.
(C) The period between the commencement date of the guaranty of
the value of the assets held in the separate account and the
conversion date, if any, shall not exceed five years.
(D) Any reserves required because the contract value is less than
the reserves required for the policy, contract, or agreement shall be
maintained in a separate identified segment of the insurer's general
account or otherwise segregated within the general account, or be
held in a separate account all of the assets of which shall also be
chargeable with liabilities arising out of other business of the
insurer.
(E) In the event the policy, contract, or agreement provides for
withdrawals (other than those resulting from an election by a
participant under a pension, retirement, retirement medical benefit,
or profit-sharing plan) of amounts other than on the conversion date
or guarantee effective date, if any, the withdrawals shall be made in
either of the following manners:
(i) In a lump sum in an amount not to exceed the market value.
(ii) In one or more contract value installments the present value
of which is equal to or less than the market value of the aggregate
withdrawal.
(4) For the purposes of this section, "conversion date" means the
date, if any, specified in the policy, contract, or agreement upon
which the assets held pursuant to it shall be converted or applied to
the purchase of annuities or returned to the owner of the policy,
contract, or agreement, or its designee.
(5) For the purposes of this section, the "asset valuation reserve
factor" for each asset will be determined by the application of the
asset valuation reserve factor, "maximum reserve factor," as
contained in the National Association of Insurance Commissioners
(NAIC) Life, Accident and Health Annual Statement Instructions
(Instructions) and Valuation of Securities Manual, or if not
contained therein, an asset valuation reserve factor of 20 percent
shall be assigned. To determine the weighted asset valuation reserve
factor, the asset valuation reserve factor shall be applied to the
market value of each asset.
(6) For the purposes of this section, "market value" means the
policy, contract, or agreement's proportionate share of the actual
market value of the separate account at the time of withdrawal or if
the determination of market value is by formula, the formula shall be
set forth in the policy, contract, or agreement and shall be
designed to closely match actual market value.
(7) For the purposes of this section, "guarantee effective date"
means the date guarantees authorized by this section may result in
payments from the general account to the separate account.
(c) No admitted life insurer may issue or market in this state,
nor may any domestic life insurer issue or market anywhere, a policy,
contract, or agreement, or coverage thereunder by certificate or
otherwise, which contains the guarantees referred to in subdivision
(a) unless both of the following apply:
(1) It has received from the commissioner authority to issue
policies or contracts providing for the payment of variable benefits
pursuant to subdivision (h) of Section 10506.
(2) The commissioner has determined after application by the
insurer in the form and content as the commissioner may require,
review of the insurer's applicable proposed method of operations
relating to policies, contracts, or agreements containing the
guarantees authorized by subdivision (a), payment of fees specified
in Section 736 and consideration of the matters set forth in
subdivision (h) of Section 10506, that the insurer is financially
qualified to issue policies, contracts, or agreements that contain
the guarantees referred to in subdivision (a) including by meeting or
exceeding the financial standards in subdivision (d).
(d) (1) No admitted life insurer that has been financially
qualified pursuant to subdivision (c) may issue or market or continue
to issue or market in this state, nor may any domestic life insurer
issue or market anywhere or continue to issue or market anywhere,
policies, contracts, or agreements, or coverage thereunder by
certificate or otherwise, providing the guarantees referred to in
subdivision (a) unless all of the following apply:
(A) It has at least one billion dollars ($1,000,000,000) of
admitted assets or at least one hundred million dollars
($100,000,000) of aggregate capital and surplus.
(B) It annually complies with the requirement to furnish an
actuarial statement as a part of or in addition to the statement
required by Section 10489.15, provided the actuarial statement is in
form and substance satisfactory to the commissioner. This actuarial
statement shall meet all the following requirements:
(i) The statement shall state that, after taking into account risk
charges payable from the assets of the separate account with respect
to the guarantee, the assets of the separate account, together with
any reserves in excess of the account value, make good and sufficient
provision for the liabilities of the insurer with respect thereto.
(ii) The statement shall provide an opinion of the reasonableness
and sufficiency of the pricing of any general account guarantees and
any other fees for administration paid to the general account from
the separate account.
(iii) The statement shall be supported by a memorandum by a
qualified actuary, also in form and substance satisfactory to the
commissioner, that describes the calculations made in support of the
actuarial statement and includes the assumptions used in the
calculations.
(C) Its ratio of aggregate capital and surplus to its aggregate
liabilities is not lower than 75 percent of that ratio as of the
December 31 prior to its receiving financial qualification from the
commissioner except as allowed under paragraph (4) of subdivision
(d).
For the purposes of this section, "capital and surplus" includes
capital and surplus plus the asset valuation reserve and one-half of
the liability for dividends, all as reflected on the most recent
financial statement on file with the commissioner. "Liabilities"
means the total liabilities as reflected on the financial statement
excluding therefrom liabilities for policies, contracts, and
agreements issued in connection with separate accounts, liabilities
in connection with contracts issued pursuant to this section and
excluding both of the following:
(i) The liability for any asset valuation reserve.
(ii) One-half the liability for dividends.
(2) If the commissioner, following notice to the insurer and a
hearing, determines that an insurer that has received financial
qualification pursuant to subdivision (c) no longer maintains the
financial strength needed to initially receive the qualification, the
commissioner may issue an order requiring the insurer to cease
issuing new policies, contracts, or agreements providing for
guarantees contemplated by subdivision (a).
(3) In the event an insurer that has received financial
qualification pursuant to subdivision (c) determines that it does not
meet the requirements of subdivision (d), it shall promptly comply
with paragraph (2) as if an order had been issued by the commissioner
after notice and hearing, and within 45 days, notify the
commissioner in writing at the place designated by the commissioner
that it has ceased to meet the requirements specified in the written
notice.
(4) In the event the insurer thereafter meets or exceeds all of
the requirements of subdivision (d), it may notify the commissioner
at the place designated by the commissioner, in writing, and upon the
passage of 45 days following receipt by the commissioner of the
notice, may resume issuing policies, contracts, or agreements that
provide for guarantees contemplated by subdivision (a) as long as it
meets the requirements of subdivision (d). However, if the insurer
believes that the resumption of the issuance of the policies,
contracts, or agreements that provide for the guarantees contemplated
by subdivision (a) would not be hazardous to its policyholders or
the citizens of California, even though it does not meet the
requirements specified in subparagraph (C) of paragraph (1), the
insurer shall include in the notice a demonstration that the issuance
of policies, contracts, or agreements containing the guarantees
referred to in subdivision (a) is not hazardous to its policyholders
or the citizens of California. Within the 45-day period, the
commissioner may issue an order containing the requirements of
paragraph (2) if, in the commissioner's opinion, any of the
requirements of subdivision (d) are not met, or resumption would
violate any provision of this code or, resumption may be hazardous to
the insurer, policyholders, creditors, or the public. The failure to
issue an order within 45 days shall not be deemed an approval of the
activities. The order shall specify the grounds upon which the
commissioner is basing the order. The insurer may, within 10 days of
the order, request a hearing. The hearing shall be a private hearing
and shall commence not less than 10 days, nor more than 20 days,
after the request for hearing is served on the commissioner.
(e) Policies, contracts, and agreements referred to in subdivision
(a), that are not otherwise subject to filing under applicable law
and regulation, shall be filed, before being marketed or issued in
this state, by the insurer with the commissioner. If the commissioner
finds that the policies, contracts, or agreements submitted pursuant
to subdivision (a) contemplate practices that are unfair or
unreasonable or otherwise inconsistent with the provisions of this
code, he or she may disapprove of the forms of policies, contracts,
or agreements specifying in what regard the policies, contracts, or
agreements are unfair or unreasonable or otherwise inconsistent with
the provisions of this code.
(f) As an alternative to the filing and approval procedure set
forth in subdivision (e), an insurer that satisfies eligibility
criteria specified in the bulletin authorized by subdivision (g) may
file with the commissioner the proposed form of the policy, contract,
or agreement, together with an officer's certificate, accompanied by
an actuarial certification and demonstration, and other supporting
material, all in accordance with procedures set forth in the bulletin
authorized by subdivision (g). An insurer may issue and deliver a
policy, contract, or agreement the day following approval by the
commissioner of a filing under this subdivision. Absent explicit
approval, an insurer may, no sooner than 30 working days after the
filing of the policy, contract, or agreement and all required
supporting documentation, issue and deliver any policy, contract, or
agreement that has been filed pursuant to this subdivision if the
commissioner has not notified the insurer in writing that the filing
lacks the required documentation or that he or she objects to the
filing upon grounds sufficient to disapprove the policy, contract, or
agreement. The bulletin shall set forth procedures providing the
insurer an opportunity to respond to any objections. If the
commissioner finds that the officer's certificate or the actuarial
certification or demonstration filed in support of the policy,
contract, or agreement is false or incorrect, the commissioner may,
in addition to taking any other lawful measures, including suspension
of authority to use the policy, contract, or agreement, declare the
insurer ineligible to utilize the alternative procedure authorized by
this subdivision for a period not to exceed three years from the
date of the filing of the policy, contract, or agreement. The
commissioner may summarily suspend the use of any policy, contract,
or agreement used by the insurer pursuant to this subdivision on any
grounds sufficient to disapprove the policy, contract, or agreement,
or if the filing fails to include the required documents. This
suspension may be prospective only. Suspension of use of a policy,
contract, or agreement shall be in writing and shall specify the
reasons for the suspension. Unless the commissioner in the suspension
order or subsequent thereto specifies a later effective date for the
suspension, any suspension shall be effective on the day following
the receipt of the suspension order by the insurer. An insurer
affected by any suspension, issued pursuant to this subdivision, of a
policy, contract or agreement may refile the policy, contract, or
agreement with the commissioner pursuant to subdivision (e). The
commissioner may suspend or discontinue filings of policies,
contracts, or agreements under this subdivision at any time upon
notice to affected insurers. Any filing by an insurer of a policy,
contract, or agreement under this subdivision that is not accepted by
the commissioner may be filed by the insurer pursuant to subdivision
(e).
(g) The commissioner may issue, and amend from time to time
thereafter, as he or she deems appropriate, a bulletin setting forth
reasonable requirements for insurers that issue policies, contracts,
or agreements referred to in subdivision (a) relating to all of the
following:
(1) The reserves to be maintained by insurers for those policies,
contracts, or agreements.
(2) The accounting and reporting of funds credited under, assets
held with respect to, and transfers to and from the insurer's general
account and separate accounts pertaining to, those policies,
contracts, or agreements.
(3) The disclosure of information to be given to holders and
prospective holders of those policies, contracts, or agreements.
(4) The qualification of persons selling those policies,
contracts, or agreements on behalf of the insurers.
(5) The filing of those policies, contracts, or agreements with
the commissioner.
(6) The filing with the commissioner of specified sales and
financial information pertaining to those policies, contracts and
agreements.
(7) The eligibility criteria and procedure for filing under
subdivision (f).
(8) Other matters relating to those policies, contracts, and
agreements as the commissioner considers necessary, proper, and
advisable that are not inconsistent with this section. This bulletin
shall have the same force and effect, and may be enforced by the
commissioner to the same extent and degree, as regulations issued by
the commissioner until the time that the commissioner issues
additional or amended regulations.
(h) The authority granted in this section is in addition to the
authority granted to life insurers by other provisions of this code
and the requirements of this section shall not contravene that
authority. No policy, contract, or agreement that constitutes
investment return assurance pursuant to Section 10203.10 or Section
10507 may be issued pursuant to this section.
(i) Guarantees authorized by this section may only be made in
connection with policies, contracts, or agreements issued to an owner
that is not a natural person, and is an "accredited investor" as
defined in Regulation D-Rules Governing the Limited Offer and Sale of
Securities Without Registration Under the Securities Act of 1933, 17
Code of Federal Regulations Section 230.501 et seq., as promulgated
by the United States Securities and Exchange Commission, in
transactions where the aggregate single premium or deposit for all
policies, contracts, or agreements (excluding certificates issued
under a group or master policy) issued to the owner containing
guarantees authorized by this section is at least one million dollars
($1,000,000). Notwithstanding the foregoing, an insurer may issue
policies, contracts, or agreements qualifying under paragraph (1) of
subdivision (b) above, to a pension, retirement, or retirement
medical benefit or profit-sharing plan reasonably expected to receive
contributions in excess of two hundred fifty thousand dollars
($250,000) within the first 12 months following issuance of the
policy, contract, or agreement and that has more than 10
participants. Policies, contracts, or agreements providing coverage
in this state, by certificate or otherwise, that contain guarantees
authorized by this section issued on a group basis shall be issued
only to groups referred to in Chapter 2 (commencing with Section
10200) of Part 2 of Division 2.
10506.5. (a) For the purposes of this section, "guaranteed living
benefit" means a benefit in a variable annuity or a variable life
insurance contract providing that one or more benefit amounts
available to a living contractholder, under specified conditions,
will be enhanced should it fall below a given level, in the absence
of the guaranteed living benefit.
(b) An insurer may deliver or issue for delivery contracts
containing, or riders to variable contracts providing, guaranteed
living benefits if all the following requirements are met:
(1) The insurer is authorized to deliver, or issue for delivery,
variable insurance products in this state.
(2) The insurer meets the requirements of paragraph (1) of
subdivision (d) of Section 10506.4.
(3) The commissioner has issued a bulletin setting forth the terms
and conditions under which variable contracts containing, or riders
to variable contracts providing, guaranteed living benefits may be
issued or delivered in this state.
(4) The variable contract or rider meets the terms and conditions
for guaranteed living benefits established by the commissioner and
set forth in the bulletin described in paragraph (3) and the insurer
desiring to issue the variable contract or rider has satisfied the
requirements set forth in Section 2529 of Title 10 of the California
Code of Regulations.
(c) The bulletin described in paragraph (3) of subdivision (b) may
include provisions covering requirements similar to those included
in subdivision (f) of Section 10506.4. The bulletin shall have the
same force and effect, and may be enforced by the commissioner to the
same extent and degree as regulations issued by the commissioner
until the time that the commissioner issues additional or amended
regulations pertaining to guaranteed living benefits.
(d) An insurer may not deliver or issue for delivery variable
contracts containing, or riders to variable contracts providing,
guaranteed living benefits except pursuant to this section. No
policy, contract, rider, or agreement that constitutes investment
return assurance pursuant to Section 10203.10 or 10507, or guarantee
pursuant to Section 10506.4, may be issued pursuant to this section.
