Administrative Code

Virginia Administrative Code
Title 14. Insurance
Agency 5. State Corporation Commission, Bureau of Insurance
4/1/2020

Chapter 80. Rules Governing Variable Life Insurance

Article I
Scope

14VAC5-80-10. Scope.

All life insurance, as defined in § 38.2-102 of the Code of Virginia, payable in variable dollar amounts shall be subject to the provisions of this chapter. In the event of conflict between the provisions of this regulation and the provisions of any other regulation issued by the Commission, the provisions of this chapter shall be controlling as to variable life insurance.

Nothing contained in this chapter (14VAC5-80-10 et seq.), shall be construed to relieve an insurer of complying with the statutory requirements set forth in Title 38.2 of the Code of Virginia to the extent such statutory requirements may be deemed by the Commission to be applicable to variable life insurance.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article II, § 1, eff. June 15, 1992.

Article II
Definitions

14VAC5-80-20. Definitions.

As used in this chapter (14VAC5-80-10 et seq.):

"Affiliate" of an insurer means any person, directly or indirectly, controlling, controlled by, or under common control with such insurer; any person who regularly furnishes investment advice to such insurer with respect to its separate accounts for which a specific fee or commission is charged; or any director, officer, partner or employee of any such insurer, controlling or controlled person, or person providing investment advice or any member of the immediate family of such person.

"Agent" means any person, corporation, partnership, or other legal entity which is licensed by this Commonwealth as a life and health insurance agent.

"Assumed investment rate" means the rate of investment return which would be required to be credited to a variable life insurance policy, after deduction of charges for taxes, investment expenses, and mortality and expense guarantees to maintain the variable death benefit equal at all times to the amount of death benefit, other than incidental insurance benefits, which would be payable under the plan of insurance if the death benefit did not vary according to the investment experience of the separate account.

"Benefit base" means the amount to which the net investment return is applied.

"Commission" means the State Corporation Commission.

"Control" (including the terms "controlling", "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing more than 10% of the voting securities of any other person. This presumption may be rebutted by a showing made to the satisfaction of the Commission that control does not exist in fact. The Commission may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.

"Flexible premium policy" means any variable life insurance policy other than a scheduled premium policy as specified in the definition of that item in this section.

"General Account" means all assets of the insurer other than assets in separate accounts established pursuant to § 38.2-3113 of the Code of Virginia or pursuant to the corresponding section of the insurance laws of the state of domicile of a foreign or alien insurer, whether or not for variable life insurance.

"Incidental insurance benefit" means all insurance benefits in a variable life insurance policy, other than the variable death benefit and the minimum death benefit, including but not limited to accidental death and dismemberment benefits, disability benefits, guaranteed insurability options, family income, or term riders.

"Minimum death benefit" means the amount of the guaranteed death benefit, other than incidental insurance benefits, payable under a variable life insurance policy regardless of the investment performance of the separate account.

"Net investment return" means the rate of investment return in a separate account to be applied to the benefit base.

"Person" means any association, aggregate of individuals, business, company, corporation, individual, joint stock company, organization, partnership, receiver, reciprocal, or interinsurance exchange, trustee or society.

"Policy processing day" means the day on which charges authorized in the policy are deducted from the policy's cash value.

"Scheduled premium policy" means any variable life insurance policy under which both the amount and timing of premium payments are fixed by the insurer.

"Separate account" means a separate account established pursuant to § 38.2-3113 of the Code of Virginia or pursuant to the corresponding section of the insurance laws of the state of domicile of a foreign or alien insurer.

"Variable death benefit" means the amount of the death benefit, other than incidental insurance benefits, payable under a variable life insurance policy dependent on the investment performance of the separate account, which the insurer would have to pay in the absence of any minimum death benefit.

"Variable life insurance policy" means any policy or contract that provides for a form of life insurance as defined in § 38.2-102 of the Code of Virginia, the amount or duration of which varies according to the investment experience of any separate account or accounts established and maintained by the insurer as to such policy, pursuant to §§ 38.2-3114 and 38.2-3113 of the Code of Virginia or pursuant to the corresponding section of the insurance laws of the state of domicile of a foreign or alien insurer.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article III, §§ 1-17, eff. June 15, 1992.

Article III
Qualification of Insurer to Issue Variable Life Insurance

14VAC5-80-30. Licensing and approval to do business in the Commonwealth.

The following requirements are applicable to all insurers either seeking authority to issue variable life insurance in this Commonwealth or having authority to issue variable life insurance in this Commonwealth.

An insurer shall not deliver or issue for delivery any variable life insurance policy in this Commonwealth unless:

1. The insurer is licensed to transact a life insurance business in this Commonwealth;

2. The insurer has obtained the necessary written approvals of the Commission for the conduct of a variable life insurance business in this Commonwealth. The Commission shall grant such written approval only after it has found that:

a. The plan of operation for the issuance of variable life insurance policies is not unsound;

b. The general character, reputation, and experience of the management and those persons or firms proposed to supply consulting, investment, administrative, or custodial services to the insurer are such as to reasonably assure competent operation of the variable life insurance business of the insurer in this Commonwealth; and

c. The present and foreseeable future financial condition of the insurer and its method of operation in connection with the issuance of such policies is not likely to render its operation hazardous to the public or its policyholders in this Commonwealth. The Commission shall consider, among other things:

(1) The history of operation and financial condition of the insurer.

(2) The qualifications, fitness, character, responsibility, reputation, and experience of the officers and directors and other management of the insurer and those persons or firms proposed to supply consulting, investment, administrative, or custodial services to the insurer;

(3) The applicable law and regulations under which the insurer is authorized in its state of domicile to issue variable life insurance policies. The state of entry of an alien insurer shall be deemed its state of domicile for this purpose; and

(4) If the insurer is a subsidiary of, or is affiliated by common management or ownership with another company, its relationship to such other company and the degree to which the requesting insurer, as well as the other company, meet these standards.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article IV, § 1, eff. June 15, 1992.

14VAC5-80-40. Filing for approval to do business in the Commonwealth.

The Commission may, at its discretion, require that an insurer, before it delivers or issues for delivery any variable life insurance policy in this Commonwealth, file the following information for the consideration of the Commission in making the determination required by subdivision 2 of 14VAC5-80-30 of this article:

1. Copies of and a general description of the variable life insurance policies it intends to issue; however, approval of the insurer pursuant to this Article shall not be construed as approval of the forms pursuant to Article IV of this chapter;

2. A general description of the methods of operation of the variable life insurance business of the insurer; including methods of distribution of policies and the names of those persons or firms proposed to supply consulting, investment, administrative, custodial or distribution services to the insurer;

3. With respect to any separate account maintained by an insurer for any variable life insurance policy, a statement of the investment policy the issuer intends to follow for the investment of the assets held in such separate account, and a statement of procedures for changing such investment policy. The statement of investment policy shall include a description of the investment objectives intended for the separate account;

4. A description of any investment advisory services contemplated as required by 14VAC5-80-290 of Article VI.

5. A copy of the statutes and regulations of the state of domicile of the insurer under which it is authorized to issue variable life insurance policies; and

6. Biographical data with respect to officers and directors of the insurer on the National Association of Insurance Commissioners Uniform Biographical Data Form; and

7. A statement of the insurer's actuary describing the mortality and expense risks which the insurer will bear under the policy.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article IV, § 2, eff. June 15, 1992.

14VAC5-80-50. Standards of suitability.

Every insurer seeking approval to enter into the variable life insurance business in this Commonwealth shall establish and maintain a written statement specifying the Standards of Suitability to be used by the insurer. Such Standards of Suitability shall specify that no recommendations shall be made to an applicant to purchase a variable life insurance policy and that no variable life insurance policy or certificate shall be issued in the absence of reasonable grounds to believe that the purchase of such policy or certificate is not unsuitable for such applicant on the basis of information furnished after reasonable inquiry of such applicant concerning the applicant's insurance and investment objectives, financial situation and needs, and any other information known to the insurer or to the agent making the recommendation.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article IV, § 3, eff. June 15, 1992.

14VAC5-80-60. Use of sales materials.

An insurer authorized to transact variable life insurance business in this Commonwealth shall not use any sales material, advertising material, or descriptive literature or other materials of any kind in connection with its variable life insurance business in this Commonwealth which is false, misleading, deceptive, or inaccurate.

Variable life insurance marketing communications shall be subject to the additional requirements of Rules Governing Life Insurance and Annuity Marketing Practices adopted, Chapter 40 (14VAC5-40-10 et seq.) of this Title by the Commission in Case No. INS810107.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article IV, § 4, eff. June 15, 1992.

14VAC5-80-70. Requirements applicable to contractual services.

Any material contract between an insurer and suppliers of consulting, investment, administrative, sales, marketing, custodial, or other services with respect to variable life insurance operations shall be in writing and provide that the supplier of such services shall furnish the Commission with any information or reports in connection with such services which the Commission may request in order to ascertain whether the variable life insurance operations of the insurer are being conducted in a manner consistent with this chapter and any other applicable law or regulations.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article IV, § 5, eff. June 15, 1992.

14VAC5-80-80. Reports to the Commission.

Any insurer authorized to transact the business of variable life insurance in this Commonwealth shall submit to the Commission, in addition to any other materials which may be required by this chapter or any other applicable laws or regulations;

a. an annual statement of the business of its separate account or accounts in such form as may be prescribed by the Commission; and

b. prior to its use in this Commonwealth any information furnished to applicants as provided for in Article VII (14VAC5-80-300) and

c. prior to its use in this Commonwealth the form of any of the Reports to Policyholders as provided for in Article IX (14VAC5-80-320); and

d. such additional information concerning its variable life insurance operations or its separate accounts as the Commission shall deem necessary.

Any material submitted to the Commission under this section shall be disapproved if it is found to be false, misleading, deceptive, or inaccurate in any material respect and, if previously distributed, the Commission may require the distribution of amended material.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article IV, § 6, eff. June 15, 1992.

14VAC5-80-90. Authority of Commission to disapprove.

Any material required to be filed with and approved by the Commission shall be subject to disapproval or withdrawal of approval if at any time such material is found by the Commission not to comply with the standards established by this chapter, or any other applicable statute or regulation.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article IV, § 7, eff. June 15, 1992.

Article IV
Variable Life Insurance Form

14VAC5-80-100. Variable life insurance form approval; in general.

The Commission shall not approve any variable life insurance form filed pursuant to this regulation unless it conforms to the requirements of this Article and all other statutory and regulatory requirements deemed applicable by the Commission. No policy or certificate approved prior to June 15, 1992 shall be delivered or issued for delivery in this Commonwealth until it has been approved by the Commission under the requirements established by this section.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article V, eff. June 15, 1992.

14VAC5-80-110. Filing of variable life insurance policies.

All variable life insurance policies or certificates, and all riders, endorsements, applications and other documents which are to be attached to and made a part of the policy or certificate and which relate to the variable nature of the policy, shall be filed with and approved by the Commission prior to such forms being put in force, issued for delivery, or delivered in this Commonwealth.

1. The procedures and requirements for such filing and approval shall be, to the extent appropriate and not inconsistent with this regulation, the same as those otherwise applicable to other life insurance forms.

2. The Commission may approve variable life insurance policies and related forms with provisions the Commission deems to be not less favorable to the policyholder and the beneficiary than those required by this regulation.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article V, § 1, eff. June 15, 1992.

14VAC5-80-120. Mandatory policy benefit and design requirements.

Variable life insurance policies delivered or issued for delivery in this Commonwealth shall comply with the following minimum requirements.

1. Mortality and expense risks shall be borne by the insurer. The mortality and expense charges shall be subject to the maximums stated in the contract.

2. For scheduled premium policies, a minimum death benefit shall be provided in an amount at least equal to the initial face amount of the policy less any indebtedness so long as premiums are duly paid.

3. The policy shall reflect the investment experience of one or more separate accounts established and maintained by the insurer which shall be set forth in the policy. The insurer must demonstrate that the reflection of the investment experience in variable life insurance policy is actuarially sound.

4. Each variable life insurance policy shall be credited with the full amount of the net investment return applied to the benefit base.

5. Any changes in variable death benefits of each variable life insurance policy shall be determined at least annually.

6. The cash value of each variable life insurance policy shall be determined at least monthly. The method of computation of cash values and other nonforfeiture benefits, as described either in the policy or in a statement filed with the insurance supervisory official of the state in which the policy is delivered, or issued for delivery, shall be in accordance with actuarial procedures that recognize the variable nature of the policy. The method of computation must be such that, if the net investment return credited to the policy at all times from the date of issue should be equal to the assumed investment rate with premiums and benefits determined accordingly under the terms of the policy, then the resulting cash values and other nonforfeiture benefits must be at least equal to the minimum values required by § 38.2-3200 through § 38.2-3229 (Standard Nonforfeiture Law) of the Code of Virginia for a general account policy with such premiums and benefits. The assumed investment rate shall not exceed the maximum interest rate permitted under the standard nonforfeiture law of this Commonwealth. If the policy does not contain an assumed investment rate this demonstration shall be based on the maximum interest rate permitted under the standard nonforfeiture law. The method of computation may disregard incidental minimum guarantees as to the dollar amounts payable. Incidental minimum guarantees include, for example, but are not to be limited to, a guarantee that the amount payable at death or maturity shall be at least equal to the amount that otherwise would have been payable if the net investment return credited to the policy at all times from the date of issue had been equal to the assumed investment rate.

7. The computation of values required for each variable life insurance policy may be based upon such reasonable and necessary approximations as are acceptable to the Commission.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article V, § 2, eff. June 15, 1992.

14VAC5-80-130. Mandatory policy provisions.

Each variable life insurance policy filed for approval in this Commonwealth shall in addition to other applicable statutory requirements, contain the following:

1. The first page of each policy shall contain:

a. A prominent statement in boldface type at least two points larger than the type used for policy provisions, printed in all capital letters, that the amount or duration of death benefits may be variable or fixed under specified conditions;

b. A prominent statement in boldface type at least two points larger than the type used for policy provisions, printed in all capital letters, that cash values may increase or decrease in accordance with the experience of the separate account subject to any specified minimum guarantees;

c. A prominent statement in contrasting color and in boldface type at least two points larger than the type used for policy provisions, printed in all capital letters, describing any minimum death benefit required pursuant to subdivision 2 of 14VAC5-80-120;

d. A statement describing the method, or a reference to the policy provision which describes the method, for determining the amount of insurance payable at death;

e. When appropriate a prominent statement in boldface type at least two points larger than the type used for policy provisions, printed in all capital letters, that the policy loan value is less than 100% of the policy's cash value surrender value;

2.a. For scheduled premium policies, a provision for a grace period of not less than 31 days from the premium due date which shall provide that where the premium is paid within the grace period, policy values will be the same, except for the deduction of any overdue premium, as if the premium were paid on or before the due date.

b. For flexible premium policies, a provision for a grace period beginning on the policy processing day when the total charges authorized by the policy that are necessary to keep the policy in force until the next policy processing day exceed the amounts available under the policy to pay such charges in accordance with the terms of the policy. Such grace period shall end on a date not less than 61 days after the mailing date of the report to policyholders required by subdivision 3 of Article IX (14VAC5-80-320).

The death benefit payable during the grace period will equal the death benefit less any outstanding indebtedness and less any overdue charges at the time of the last valuation of the policy preceding the beginning of the grace period.

3.a. For scheduled premium policies, a provision that the policy will be reinstated at any time within three years from the date of default upon the written application of the insured, and evidence of insurability, including good health, satisfactory to the insurer, unless the cash surrender value has been paid or the period of extended insurance has expired, upon the payment of any outstanding indebtedness arising subsequent to the end of the grace period following the date of default together with accrued interest thereon to the date of reinstatement and payment of an amount not exceeding the greater of:

(1) All overdue premiums with interest at a rate not exceeding 6.0% per year compounded annually and any indebtedness in effect at the end of the grace period following the date of default with interest at a rate as provided in § 38.2-3308 of the Code of Virginia; or

(2) 110% of the increase in cash value resulting from reinstatement plus all overdue premiums for incidental insurance benefits with interest at a rate not exceeding 6.0% per annum compounded annually.

b. For flexible premium policies a provision that the policy will be reinstated at any time within three years from the date of default upon the written application of the insured and evidence of insurability, including good health, satisfactory to the insurer, unless the cash surrender value has been paid or the period of extended insurance has expired, upon the payment of any outstanding indebtedness arising subsequent to the end of the grace period following the date of default together with accrued interest thereon to the date of reinstatement and payment of an amount not exceeding the greater of:

(1) A charge not to exceed three months cost of insurance; or

(2) 110% of the increase in cash value resulting from reinstatement plus all overdue premiums for incidental insurance benefits with interest at a rate not exceeding 6.0% per annum compounded annually.

4. A full description of the benefit base and of the method of calculation and application of any factors used to adjust variable benefits under the policy;

5. A provision designating the separate account to be used and stating that:

a. The assets of such separate account shall be available to cover the liabilities of the general account of the insurer only to the extent that the assets of the separate account exceed the liabilities of the separate account arising under the variable life insurance policies supported by the separate account;

b. The assets of such separate account shall be valued at least as often as any policy benefits vary but at least monthly.

6. A designation of the officers who are empowered to make an agreement or representation on behalf of the insurer;

7. A provision setting forth conditions or requirements as to the designation, or change of designation, of a beneficiary and a provision for disbursement of benefits in the absence of a beneficiary designation;

8. A statement of any conditions or requirements concerning the assignment of the policy;

9. A description of any adjustments in policy values to be made in the event of misstatement of age or sex of the insured;

10. A provision stating that the investment policy of the separate account shall not be changed without the approval of the insurance supervisory official of the state of domicile of the insurer, and that the approval process is on file with the Commission;

11. A provision that payments of variable death benefits in excess of any minimum death benefits, cash values, policy loans, or partial withdrawals (except when used to pay premiums) or partial surrenders may be deferred;

a. For up to six months from the date of request, if such payments are based on policy values which do not depend on the investment performance of the separate account, or

b. Otherwise, for any period during which the New York Stock Exchange is closed for trading (except for normal holiday closing) or when the Securities and Exchange Commission has determined that a state of emergency exists which may make such payment impractical;

12. If settlement options are provided, at least one such option shall be provided on a fixed basis only;

13. A description of the basis for computing the cash value and the surrender value under the policy shall be included;

14. Premiums or charges for incidental insurance benefits shall be stated separately; and

15. The insurer may establish a reasonable minimum cash value below which any nonforfeiture insurance options will not be available. Upon termination of any policy if there is any cash value, the cash value shall be returned to the owner of the policy.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article V, § 3, eff. June 15, 1992.

14VAC5-80-140. Policy loan provisions.

Every variable life insurance policy, other than term insurance policies and pure endowment policies, delivered or issued for delivery in this Commonwealth shall contain, in addition to other applicable statutory requirements, provisions which are not less favorable to the policyholder than the following:

A provision for policy loans after the policy has been in force for two full years which provides the following:

1. For scheduled premium policies, whenever the indebtedness exceeds the cash surrender value, the insurer shall give notice of any intent to cancel the policy if the excess indebtedness is not repaid within 31 days after the date of mailing of such notice.

2. The policy may provide that if, at any time, so long as premiums are duly paid, the variable death benefit is less than it would have been if no loan or withdrawal had ever been made, the policyowner may increase such variable death benefit up to what it would have been if there had been no loan or withdrawal by paying an amount not exceeding 110% of the corresponding increase in cash value and by furnishing such evidence of insurability as the insurer may request.

3. The policy may specify a reasonable minimum amount which may be borrowed at any time but such minimum shall not apply to any automatic premium loan provision.

4. The policy loan provisions shall be constructed so that variable life insurance policyholders who have not exercised such provisions are not disadvantaged by the exercise thereof.

5. Any amount paid to the policyholders upon the exercise of any policy loan provision shall be withdrawn from the separate account and shall be returned to the separate account upon repayment except that a stock insurer may provide the amount for policy loans from the general account.

6. At least 90% of the policy's cash surrender value may be borrowed.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article V, § 4, eff. June 15, 1992.

14VAC5-80-150. Other policy provisions.

The following provisions may in substance be included in a variable life insurance policy or related form delivered or issued for delivery in this Commonwealth:

1. For any increase in death benefits which results from an application of the owner subsequent to the policy issue date, the policy may provide an exclusion for suicide within two years of such increase as to the increased amount of death benefits. Any refund due under a suicide exclusion may be adjusted to reflect the investment activity of the variable account;

2. Incidental insurance benefits may be offered on a fixed or variable basis;

3. A provision allowing the policyholder to elect in writing in the application for the policy or thereafter an automatic premium loan on a basis not less favorable than that required of policy loans under 14VAC5-80-140, except that a restriction that no more than two consecutive premiums can be paid under this provision may be imposed;

4. A provision allowing the policyholder to make partial withdrawals;

5. Any other policy provision approved by the Commission.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article V, § 5, eff. June 15, 1992.

Article V
Reserve Liabilities for Variable Life Insurance [Repealed]

14VAC5-80-160 to 14VAC5-80-190. [Repealed]

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article VI, §§ 1 to 4, eff. June 15, 1992; repealed, Virginia Register Volume 18, Issue 14, eff. March 31, 2002.

Article VI
Separate Accounts

14VAC5-80-200. Establishment and administration of separate accounts.

The following requirements apply to the establishment and administration of variable life insurance separate accounts by any domestic insurer.

Any domestic insurer issuing variable life insurance shall establish one or more separate accounts pursuant to § 38.2-3113 of the Code of Virginia.

1. If no law or other regulation provides for the custody of separate account assets and if such insurer is not the custodian of such separate account assets, all contracts for custody of such assets shall be in writing and the Commission shall have authority to review and approve or disapprove of both the terms of any such contract and the proposed custodian prior to the transfer of custody.

2. Such insurer shall not without the prior written approval of the Commission employ in any material capacity in connection with the handling of separate account assets any person who:

a. 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 Sections 1341, 1342, or 1343 of Title 18, United States Code; or

b. 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

c. 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.

3. 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 a value indexed to the National Association of Insurance Commissioners fidelity bonding recommendations regarding personnel handling general account assets or as determined by the Commission.

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

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article VII, § 1, eff. June 15, 1992.

14VAC5-80-210. 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 such policies.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article VII, § 2, eff. June 15, 1992.

14VAC5-80-220. Investment by the separate account.

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:

1. In case of a transfer into a separate account, such 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

2. Such 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 Commission in advance.

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

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article VII, § 3, eff. June 15, 1992.

14VAC5-80-230. Limitations on ownership.

A. A separate account shall not purchase or otherwise acquire the securities of any issuer, other than securities issued or guaranteed as to principal and interest by the United States government, if immediately after such purchase or acquisition the value of such investment, together with prior investments of such account in such security valued as required by this chapter, would exceed 10% of the value of the assets of the separate account. The Commission may waive this limitation in writing if it believes such waiver will not render the operation of the separate account hazardous to the public or the policyholders in this Commonwealth.

B. No separate account shall purchase or otherwise acquire the voting securities of any issuer if as a result of such acquisition the insurer and its separate accounts in the aggregate will own more than 10% of the total issued and outstanding voting securities of such issuer. The Commission may waive this limitation in writing if it believes such waiver will not render the operation of the separate account hazardous to the public or the policyholders in this Commonwealth or jeopardize the independent operation of the issuer of such securities.

C. The percentage limitation specified in subsection A of this section shall 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 (15 USC § 80a-1 et seq.) 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 14VAC5-80-220 of this chapter and other applicable portions of this chapter.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article VII, § 4, eff. June 15, 1992.

14VAC5-80-240. 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.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article VII, § 5, eff. June 15, 1992.

14VAC5-80-250. Separate account investment policy.

The investment policy of a separate account operated by a domestic insurer filed under subdivision 3 of 14VAC5-80-40 of Article III shall not be changed without first filing such change with the Commission.

1. Any change filed pursuant to this section shall be effective 60 days after the date it was filed with the Commission, unless the Commission notifies the insurer before the end of such 60 day period of its disapproval of the proposed change. At any time the Commission may, after notice and opportunity to be heard, disapprove any change that has become effective pursuant to this section.

2. The Commission may disapprove the change if it determines that the change would be detrimental to the interests of the policyholders participating in such separate account.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article VII, § 6, eff. June 15, 1992.

14VAC5-80-260. Charges against separate account.

The insurer must disclose to the policyholder and/or certificateholder in writing, prior to or at the time of delivery of the policy or certificate, all charges that may be made against the separate account, including, but not limited to, the following:

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

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

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

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

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

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

7. Charges for incidental insurance benefits.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article VI, § 7, eff. June 15, 1992.

14VAC5-80-270. Standards of conduct.

Every insurer seeking approval to enter into the variable life insurance business in this Commonwealth 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. Such 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 (15 USC § 80a-1 et seq.) and applicable rules and regulations thereunder shall satisfy the provisions of this section.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article VI, § 8, eff. June 15, 1992.

14VAC5-80-280. Conflicts of interest.

Rules under any provision of the insurance laws of this Commonwealth 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 accounts committee or other similar body.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article VI, § 9, eff. June 15, 1992.

14VAC5-80-290. Investment advisory services to a separate account.

An insurer shall 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:

1. The person providing such advice is registered as an investment advisor under the Investment Advisers Act of 1940 (15 USC § 80a-1 et seq.); or

2. The person providing such advice is an investment manager under the Employee Retirement Income Security Act of 1974 (29 USC § 1001 et seq.) with respect to the assets of each employee benefit plan allocated to the separate account; or

3. The insurer has filed with the Commission and continues to file annually the following information and statements concerning the proposed advisor;

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

b. The names and addresses of its partners, officers, directors, and persons performing similar functions, or if such an investment advisor be an individual, of such individual;

c. A written Standard of Conduct complying in substance with the requirements of 14VAC5-80-270 of this Article which has been adopted by the investment advisor and is applicable to the investment advisor, its officers, directors, and affiliates;

d. A statement provided by the proposed advisor as to whether the advisor or any person associated therewith;

(1) Has been convicted within 10 years of any felony or misdemeanor arising out of such person's conduct as an employee, salesman, officer or director or an insurance company, a banker, an insurance agent, 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;

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

(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 any such laws; or

(4) has been censured, denied an investment advisor registration, had a registration as an investment advisor revoked or suspended, or has been barred or suspended from being associated with an investment advisor by order of federal or state regulatory authorities; and

e. Such 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 60 days' written notice to the investment advisor.

The Commission may, after notice and opportunity for hearing, by order require such investment advisory contract to be terminated if it deems continued operation thereunder to be hazardous to the public or the insurer's policyholders.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article VI, § 10, eff. June 15, 1992.

Article VII
Information Furnished to Applicants

14VAC5-80-300. Information furnished to applicants.

An insurer delivering or issuing for delivery in this Commonwealth variable life insurance policies shall deliver to the applicant for the policy or certificate, and obtain a written acknowledgement of receipt from such applicant coincident with or prior to the execution of the application, the following information. The requirements of this Article shall be deemed to have been satisfied to the extent that a disclosure containing information required by this Article is delivered, either in the form of (i) a prospectus included in the requirements of the Securities Act of 1933 (15 USC § 77a et seq.) and which was declared effective by the Securities and Exchange Commission; or (ii) all information and reports required by the Employee Retirement Income Security Act of 1974 (29 USC § 1001 et seq.) if the policies are exempted from the registration requirements of the Securities Act of 1933 pursuant to Section 3(a)(2) thereof.

1. A summary explanation, in non-technical terms, of the principal features of the policy, including a description of the manner in which the variable benefits will reflect the investment experience of the separate account and the factors which affect such variation. Such explanation must include notices of the provisions required by § 38.2-3301 and § 38.2-3304 of the Code of Virginia regarding the 10 day free look and entire contract provisions of the policy or certificate.

2. A statement of the investment policy of the separate account, including:

a. A description of the investment objectives intended for the separate account and the principal types of investments intended to be made; and

b. any restriction or limitations on the manner in which the operations of the separate account are intended to be conducted.

3. A statement of the net investment return of the separate account for each of the last 10 years or such lesser period as the separate account has been in existence.

4. A statement of the charges levied against the separate account during the previous year.

5. A summary of the method to be used in valuing assets held by the separate account.

6. A summary of the federal income tax aspects of the policy applicable to the insured, the policyholder and the beneficiary.

7. Illustrations of benefits payable under the variable life insurance contract. Such illustrations shall be prepared by the insurer and shall not include projections of past investment experience into the future or attempted predictions of future investment experience, provided that nothing contained herein prohibits use of hypothetical assumed rates of return to illustrate possible level of benefits if it is made clear that such assumed rates are hypothetical only.

8. If there are any guaranteed elements to the accumulation of cash values, an illustration or proposal must separately display:

a. The guaranteed cash values and

b. The guaranteed loan values if the loan values are less than 100% of the cash values.

9. If the loan value is less than 100% of the cash surrender value such fact must be shown as a percentage of cash surrender value and such fact must be prominently displayed on any proposal or in any illustration.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article VIII, § 1, eff. June 15, 1992.

Article VIII
Applications

14VAC5-80-310. Applications.

The application for a variable life insurance policy shall contain:

1. A prominent statement in boldface capital letters that the death benefit may be variable or fixed under specified conditions;

2. A prominent statement in boldface capital letters that cash values may increase or decrease in accordance with the experience of the separate account (subject to any specified minimum guarantees);

3. Questions based on the insurer's standards of suitability so that in view of the applicant's other insurance, investment objectives, age, earnings, marital status, number and age of dependents, current life insurance program, the value of savings and other assets, net worth, and any other pertinent information, the insurer may determine that variable life insurance is suitable for the applicant.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article IX, § 1, eff. June 15, 1992.

Article IX
Reports to Policyholders

14VAC5-80-320. Reports to policyholders.

Any insurer delivering or issuing for delivery in this Commonwealth any variable life insurance policies or certificates shall mail to each variable life insurance policyholder and certificateholder at his or her last known address the following reports:

1. Within 30 days after each anniversary of the policy, a statement or statements with serialized pages of the cash surrender value, loan value if less than 100% of the cash surrender value, death benefit, any partial withdrawal or policy loan, any interest charge, and any optional payments allowed pursuant to 15VAC5-80-140 of Article IV under the policy computed as of the policy anniversary date. Provided, however, that such statement may be furnished within 30 days after a specified date in each policy year so long as the information contained therein is computed as of a date not more than 60 days prior to the mailing of such notice. This statement shall state that, in accordance with the investment experience of the separate account, the cash values and the variable death benefit may increase or decrease, and shall prominently identify any value described therein which may be recomputed prior to the next statement required by this section. If the policy guarantees that the variable death benefit on the next policy anniversary date will not be less than the variable death benefit specified in such statement, the statement shall be modified to so indicate. For flexible premium policies, the report must contain a reconciliation of the change since the previous report in cash value and cash surrender value, if different, because of payments made (less deductions for expense charges), withdrawals, investment experience, insurance charges and any other charges made against the cash value. The report must show the loan value separately if the loan value is less than 100% of the policy's cash surrender value. In addition, the report must show the projected cash value, and cash surrender value if different from the projected cash value, and projected loan value if less than 100% of the policy's projected cash surrender value, as of one year from the end of the period covered by the report assuming that: (i) planned periodic premiums, if any, are paid as scheduled; (ii) guaranteed costs of insurance are deducted; and (iii) the net investment return is equal to the guaranteed rate or, in the absence of a guaranteed rate, is not greater than zero. If the projected value is less than zero, a warning message must be included that states that the policy may be in danger of terminating without value in the next 12 months unless additional premium is paid.

2. Annually, a statement or statements including:

a. A summary of the financial statement of the separate account based on the annual statement last filed with the Commission;

b. The net investment return of the separate account for the last year and, for each year after the first, a comparison of the investment rate of the separate account during the last year with the investment rate during prior years, up to a total of not less than five years when available;

c. A list of investments held by the separate account as of a date not earlier than the end of the last year for which an annual statement was filed with the Commission;

d. Any charges levied against the separate account during the previous year;

e. A statement of any change, since the last report, in the investment objective and orientation of the separate account, in any investment restriction or material quantitative or qualitative investment requirement applicable to the separate account or in the investment advisor of the separate account.

3. For flexible premium policies, a report must be sent to the policyholder if the amounts available under the policy on any policy processing day to pay the charges authorized by the policy are less than the amount necessary to keep the policy in force until the next following policy processing day. The report must indicate the minimum payment required under the terms of the policy to keep it in force and the length of the grace period for the payment of such amount.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article X, § 1, eff. June 15, 1992.

Article X
Foreign Companies

14VAC5-80-330. Foreign companies.

If the law or regulation in the place of domicile of a foreign company provides a degree of protection to the policyholders and the public which is substantially similar to that provided by this chapter, the Commission to the extent deemed appropriate by it in its discretion, may consider compliance with such law or regulation as compliance with these regulations.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article XI, § 1, eff. June 15, 1992.

Article XI
Qualifications of Agents for the Sale of Variable Life Insurance

14VAC5-80-340. Qualification to sell variable life insurance.

A. No person may sell or offer for sale in this Commonwealth any variable life insurance policy unless such person is currently licensed by the Commission as a life and health insurance agent, is authorized to represent the insurer through which the policy is offered and evidence has been filed with the Commission, in a form satisfactory to the Commission, that such person also holds any license or authorization which may be required by this Commonwealth or the federal government for the solicitation or sale of variable life insurance.

B. Any examination administered by the Commission for the purpose of determining the eligibility of any person for licensing as an agent shall, after June 15, 1992, include such questions concerning the history, purpose, regulation, and sale of variable life insurance as the Commission deems appropriate.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article XII, § 1, eff. June 15, 1992.

14VAC5-80-350. Reports of disciplinary actions.

Any person qualified in this Commonwealth under this article to sell or offer to sell variable life insurance shall immediately report to the Commission:

1. Any suspension or revocation of his agent's license in any other state or territory of the United States;

2. The imposition of any disciplinary sanction, including suspension or expulsion from membership, suspension, or revocation of or denial of registration, imposed upon him by any national securities exchange, or national securities association, or any federal, state, or territorial agency with jurisdiction over securities or variable life insurance; and

3. Any judgment or injunction entered against him on the basis of conduct deemed to have involved fraud, deceit, misrepresentation, or violation of any insurance or securities law or regulation.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article XII, § 2, eff. June 15, 1992.

14VAC5-80-360. Refusal to qualify agent to sell variable life insurance: suspension, revocation, or nonrenewal of qualification.

The Commission may reject any application or suspend or revoke or refuse to renew any agent's qualification under this article to sell or offer to sell variable life insurance upon any ground that would bar such applicant or such agent from being licensed to sell other life insurance contracts in this Commonwealth. The rules governing any proceeding relating to the suspension or revocation of any agent's license shall also govern any preceeding for suspension or revocation of an agent's qualification to sell or to offer to sell variable life insurance.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article XII, § 3, eff. June 15, 1992.

Article XII
Severability

14VAC5-80-370. Severability.

If any provision of this chapter or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the chapter and the application of such provision to other persons or circumstances shall be not affected thereby.

Statutory Authority

§§ 12.1-13 and 38.2-3313 of the Code of Virginia.

Historical Notes

Derived from Regulation 26, Case No. INS920077, Article XIII, § 1, eff. June 15, 1992.



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