Section R. 500.854 - Separate accounts generallyRule 14. The following apply to separate accounts for variable life insurance:
(a) An insurer issuing variable life insurance in this state shall establish 1 or more separate accounts pursuant to section 925 of the insurance code of 1956, as amended, being S500.925 of the Michigan Compiled Laws.(b) An insurer shall not, without the prior written approval of the commissioner, employ, in any material connection with the handling of separate account assets, any person, who: (i) Within the last 10 years, has been convicted of any felony or a misdemeanor arising out of such person's conduct involving embezzlement, fraudulent conversion, or misappropriation of funds or securities or involving violation of 18 U.S.C. SS1341, 1342, or 1343; or(ii) Within the last 10 years, has been found by any state regulatory authority to have violated, or has acknowledged violation of, any provision of any state insurance law involving fraud, deceit, or knowing misrepresentation; or(iii) Within the last 10 years, has been found by federal or state regulatory authorities to have violated, or has acknowledged violation of, any provision of federal or state securities laws involving fraud, deceit, or knowing misrepresentation.(c) If the commissioner determines not to grant prior written approval to any person described in subdivisions (b)(i), (ii), and (iii), that decision may be considered a decision not to license an individual, and a person so affected may exercise his right for an appropriate hearing pursuant to Act No. 306 of the Public Acts of 1969, as amended, being S24.201 et seq. of the Michigan Compiled Laws.(d) All persons with access to the cash, securities, or other assets of the separate account shall be under bond in an amount of not less than $250,000.00 or 1/2 of 1% of assets, whichever is greater, but in any event not more than 100% of assets.(e) If an insurer establishes more than 1 separate account for variable life insurance, justification for the establishment of each additional separate account shall also be filed with the commissioner and shall be subject to his approval. The creation of additional separate accounts to avoid lower maximum charges against the separate account is prohibited.(f) The assets of separate accounts established for variable life insurance policies shall be valued as often as variable benefits are determined, but in any event at least monthly.(g) A separate account exempt pursuant to section 3(c)(11) of the investment company act of 1940 because of the tax qualified status of the policies funded thereby shall not be used to fund other variable life insurance policies.(h) Except for separate accounts exempt pursuant to section 3(c)(11) of the investment company act of 1940, variable life insurance separate accounts shall not be used for variable annuities or for the investment of funds corresponding to dividend accumulations or other policyholder liabilities not involving life contingencies.Mich. Admin. Code R. 500.854