W. Va. Code R. § 114-11D-6

Current through Register Vol. XLI, No. 50, December 13, 2024

Section 114-11D-6 - Separate Accounts

6.1. The requirements of this section apply to the establishment and administration of variable life insurance separate accounts by a domestic insurer.

6.2. Establishment and Administration of Separate Accounts. A domestic insurer issuing variable life insurance shall establish one or more separate accounts pursuant to W. Va. Code § 33-13A-1.

6.2.a. The insurer may not without prior written approval of the Commissioner employ in any material connection with the handling of separate account assets any person who:

6.2.a.1. Within the last ten (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 Sections 1341, 1342 or 1343 of Title 18, United States Code; or

6.2.a.2. Within the last ten (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

6.2.a.3. Within the last ten (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.

6.2.b. All persons with access to the cash, securities, or other assets of the separate account shall be under bond in the amount of not less than $25,000.

6.2.c. The assets of separate accounts shall be valued at least as often as variable benefits are determined but in any event at least monthly.

6.3. Amounts in the Separate Account. The insurer shall maintain in each separate account assets with a value at least equal to the greater of the valuation reserves for the variable portion of the variable life insurance policies or the benefit base for these policies.

6.4. Investments by the Separate Account.

6.4.a. No sale, exchange, or other transfer of assets may be made by an insurer or any of its affiliates between any of its separate accounts or between any other investment account and one or more of its separate accounts unless:

6.4.a.1. In case of transfer into a separate account, the transfer is made solely to establish the account or to support the operation of the policies with respect to the separate account to which the transfer is made; and

6.4.a.2. The transfer, whether into or from a separate account, is made by a transfer of cash; but other assets may be transferred if approved by the Commissioner in advance.

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

6.5. Limitations on Ownership.

6.5.a. A separate account may not purchase or otherwise acquire the securities of an issuer, other than securities issued or guaranteed as to principal and interest by the United States, if immediately after the purchase or acquisition the value of the investment, together with prior investments of the account in the security valued as required by these rules, would exceed ten percent (10%) of the value of the assets of the separate account. The Commissioner may waive this limitation in writing if the Commissioner believes the waiver will not render the operation of the separate account hazardous to the public or the policyholders in this state.

6.5.b. No separate account shall purchase or otherwise acquire the voting securities of any issuer if as a result of the acquisition the insurer and its separate accounts in the aggregate, will own more than ten percent (10%) of the total issued and outstanding voting securities of the issuer. The Commissioner may waive this limitation in writing if he or she believes the waiver will not render the operation of the separate account hazardous to the public or the policyholders in this state or jeopardize the independent operation of the issuer of these securities.

6.5.c. The percentage limitation specified in subdivision a of this subsection may not be construed to preclude the investment of the assets of separate accounts in shares of investment companies registered pursuant to the Investment Company Act of 1940 or other pools of investment assets if the investments and investment policies of such investment companies or asset pools comply substantially with the provisions of subsection 6.4 of this section and other applicable portions of this rule.

6.6. Valuation of Separate Account Assets. Investments of the separate account shall be valued at their market value on the date of valuation, or at amortized cost if it approximates market value.

6.7. Separate Account Investment Policy. The investment policy of a separate account operated by a domestic insurer filed under subdivision c, subsection 3.3 of this rule may not be changed without first filing the change with the Commissioner.

6.7.a. Any change filed pursuant to this section shall be effective sixty (60) days after the date it was filed with the Commissioner, unless the Commissioner notifies the insurer before the end of the sixty-day period of his or her disapproval of the proposed change. At any time the Commissioner may, after notice and public hearing, disapprove any change that has become effective pursuant to this section.

6.7.b. The Commissioner may disapprove the change if he or she determines that the change would be detrimental to the interests of the policyholders participating in the separate accounts.

6.8. Charges Against Separate Account. The insurer shall disclose in writing, prior to or contemporaneously with delivery of the policy, all charges that may be made against the separate account, including, but not limited to, the following:

6.8.a. Taxes or reserves for taxes attributable to investment gains and income of the separate account;

6.8.b. Actual cost of reasonable brokerage fees and similar direct acquisition and sale costs incurred in the purchase or sale of separate account assets;

6.8.c. Actuarially determined costs of insurance (tabular costs) and the release of separate account liabilities;

6.8.d. Charges for administrative expenses and investment management expenses, including internal costs attributable to the investment management of assets of the separate account;

6.8.e. A charge, at a rate specified in the policy, for mortality and expense guarantees;

6.8.f. Any amounts in excess of those required to be held in the separate accounts; and

6.8.g. Charges for incidental insurance benefits.

6.9. Standards of Conduct. Every insurer seeking approval to enter into the variable life insurance business in this state shall adopt by formal action of its board of directors a written statement specifying the standards of conduct of the insurer, its officers, directors, employees and affiliates with respect to the purchase or sale of investments of separate accounts. The standards of conduct shall be binding on the insurer and those to whom it refers. A code or codes of ethics meeting the requirements of Section 17j under the Investment Company Act of 1940 and its applicable rules and regulations shall satisfy the provisions of this section.

6.10. Conflicts of Interest. Rules under any provision of the insurance laws of this state or any regulation applicable to the officers and directors of insurance companies with respect to conflicts of interest shall also apply to members of any separate account's committee or other similar body.

6.11. Investment Advisory Services to a Separate Account.

6.11.a. An insurer may not enter into a contract under which any person undertakes, for a fee, to regularly furnish investment advice to such insurer with respect to its separate accounts maintained for variable life insurance policies unless:

6.11.a.1. The person providing advice is registered as an investment adviser under the Investment Advice Act of 1940; or

6.11.a.2. The person providing advice is an investment manager under the Employee Retirement Income Security Act of 1974 with respect to the assets of each employee benefit plan allocated to the separate account; or

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

6.11.a.3.A. The name and form of organization, state of organization, and its principal place of business;

6.11.a.3.B. The names and addresses of its partners, officers, directors and persons performing similar functions or, if the investment advisory is an individual, of the individual;

6.11.a.3.C. A written standard of conduct complying in substance with the requirements of subsection 6.7 of this section which has been adopted by the investment advisor and is applicable to the investment advisor, its officers, directors, and affiliates;

6.11.a.3.D. A statement provided by the proposed advisor as to whether the advisor or any person associated therewith:

6.11.a.3.D.1. Has been convicted within ten (10) years of a felony or misdemeanor arising out of the person's conduct as an employee, salesman, officer or director of an insurance company, a banker, an insurance producer, a securities broker or an investment advisor involving embezzlement, fraudulent conversion or misappropriation of funds or securities, or involving the violation of Sections 1341, 1342, or 1343 of Title 18 of United States Code;

6.11.a.3.D.2. Has been permanently or temporarily enjoined by an order, judgment or decree of a court of competent jurisdiction from acting as an investment advisor, underwriter, broker or dealer, or as an affiliated person or as an employee of an investment company, bank or insurance company, or from engaging in or continuing any conduct or practice in connection with any such activity;

6.11.a.3.D.3. Has been found by federal or state regulatory authorities to have willfully violated or have acknowledged willful violation of any provision of federal or state securities laws or state insurance laws or of any rule or regulation under these laws; or

6.11.a.3.D.4. Has been censured, denied an investment advisor registration, had a registration as an investment advisor revoked or suspended, or been barred or suspended from being associated with an investment advisor by order of federal or state regulatory authorities; and

6.11.a.4. The investment advisory contract shall be in writing and provide that it may be terminated by the insurer without penalty to the insurer or the separate account upon no more than sixty (60) days' written notice to the investment advisor.

6.11.b. The Commissioner may, after notice and opportunity for hearing, by order require the investment advisory contract to be terminated if the Commissioner deems continued operation under the contract to be hazardous to the public or the insurer's policyholders.

W. Va. Code R. § 114-11D-6