§431:10D-118  Variable contracts.  (a) A domestic life insurance company may, by or pursuant to resolution of itsboard of directors, establish one or more separate accounts, and may allocatethereto amounts, including without limitation proceeds applied under optionalmodes of settlement or under dividend options, to provide for life insurance orannuities (and benefits incidental thereto), payable in fixed or variableamounts or both, subject to the following:

(1)  The income, gains and losses, realized orunrealized, from assets allocated to a separate account shall be credited to orcharged against the account, without regard to other income, gains or losses ofthe company.

(2)  Except as hereinafter provided, amounts allocatedto any separate account and accumulations thereon may be invested andreinvested without regard to any requirements or limitations prescribed by thelaws of this State governing the investments of life insurance companies;provided that to the extent that the company's reserve liability with regard to(A) benefits guaranteed as to amount and duration, and (B) funds guaranteed asto principal amount or stated rate of interest is maintained in any separateaccount, a portion of the assets of such separate account at least equal to suchreserve liability shall be, except as the commissioner may otherwise approve,invested, in accordance with the laws of this State governing the investmentsof life insurance companies.  The investments in such separate account oraccounts shall not be taken into account in applying the investment limitationsotherwise applicable to the investments of the company.

(3)  Unless otherwise approved by the commissioner,assets allocated to a separate account shall be valued at their market value onthe date of valuation, or if there is no readily available market, then asprovided under the terms of the contract or the rules or other writtenagreement applicable to such separate account; provided that unless otherwiseapproved by the commissioner, a portion of the assets of such separate accountequal to the company's reserve liability with regard to the guaranteed benefitsand funds referred to in [subparagraphs] (A) and (B) of subsection (a)(2), ifany, shall be valued in accordance with the rules otherwise applicable to thecompany's assets.

(4)  Amounts allocated to a separate account in theexercise of the power granted by this section shall be owned by the company,and the company shall not be, nor hold itself out to be, a trustee with respectto such amounts.  That portion of the assets of any such separate account equalto the reserves and other contract liabilities with respect to such accountshall not be chargeable with liabilities arising out of any other business thecompany may conduct.

(5)  No sale, exchange or other transfer of assets maybe made by a company between any of its separate accounts or between any otherinvestment account and one or more of its separate accounts unless, in case ofa transfer into a separate account, such transfer is made solely to establishthe account or to support the operation of the contracts with respect to theseparate account to which the transfer is made, and unless such transfer,whether into or from a separate account, is made (A) by a transfer of cash, or(B) by a transfer of securities having a readily determinable market value,provided that such transfer of securities is approved by the commissioner.  Thecommissioner may approve other transfers among such accounts, if in thecommissioner's opinion, such transfers would not be inequitable.

(6)  To the extent such company deems it necessary tocomply with any applicable federal or state laws, such company, with respect toany separate account, including without limitation any separate account whichis a management investment company or a unit investment trust, may provide forpersons having an interest therein appropriate voting and other rights andspecial procedures for the conduct of the business of such account, includingwithout limitation special rights and procedures relating to investment policy,investment advisory services, selection of independent public accountants, andthe selection of a committee, the members of which need not be otherwiseaffiliated with such company, to manage the business of such account.

(b)  (1)  Any variable contract providing benefitspayable in variable amounts delivered or issued for delivery in this Stateshall contain a statement of the essential features of the procedures to befollowed by the insurance company in determining the dollar amount of suchvariable benefits.  Any such contract, including a group contract and anycertificate in evidence of variable benefits issued thereunder, shall statethat such dollar amount will vary to reflect investment experience and shallcontain on its first page a statement to the effect that the benefitsthereunder are on a variable basis.

(2)  Variable contracts delivered or issued fordelivery in this State may include as an incidental benefit provision forpayment on death during the deferred period of an amount not in excess of thegreater of the sum of the premiums or stipulated payments paid under thecontract or the value of the contract at time of death.  Any such provisionshall not be deemed to be life insurance and therefore not subject to theprovisions of this code governing life insurance carriers.  A provision for anyother benefit on death during the deferred period shall be subject to suchinsurance provisions.

(c)  No company shall deliver or issue fordelivery within this State contracts under this section unless it is licensedor organized to do a life insurance or annuity business in this State, and thecommissioner is satisfied that its condition or method of operation inconnection with the issuance of such contracts will not render its operationhazardous to the public or its policyholders in this State.  In thisconnection, the commissioner shall consider among other things:

(1)  The history and financial condition of thecompany;

(2)  The character, responsibility and fitness of theofficers and directors of the company; and

(3)  The law and regulation under which the company isauthorized in the state of domicile to issue variable contracts.

A company which issues variable contracts and whichis a subsidiary of, or affiliated through common management or ownership with,another life insurance company authorized to do business in this State shall bedeemed to have met the provisions of this subsection if either it or the parentor affiliated company meets the requirements of this subsection.

(d)  Notwithstanding any other provision oflaw, the commissioner shall have sole and exclusive authority to regulate theissuance and sale of variable contracts and to provide for licensing of personsselling such contracts, and to issue such reasonable rules and regulations asmay be appropriate to carry out the purposes and provisions of this section.

(e)  The provisions of section 431:10D-101through section 431:10D-106 and section 431:10D-109 shall be inapplicable tovariable contracts, nor shall any provision in this code requiring contracts tobe participating be deemed applicable to variable contracts.  The commissioner,by regulation, may require that any individual variable contract, delivered orissued for delivery in this State, contain provisions as to grace period,reinstatement or nonforfeiture which are appropriate to a variable contract. Except as otherwise provided in this section, all pertinent provisions of thiscode shall apply to separate accounts and contracts relating thereto.  Thereserve liability for variable contracts shall be established in accordancewith actuarial procedures that recognize the variable nature of the benefitsprovided and any mortality guarantees. [L 1987, c 347, pt of §2]