Ins 2.13(7)(c)3.
3. The insurer shall deduct any indebtedness from the cash surrender value upon surrender or in determining any nonforfeiture benefit.
Ins 2.13(7)(c)4.
4. 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 the notice is mailed. For flexible premium policies, whenever the total charges authorized by the policy that are necessary to keep the policy in force until the next policy processing day exceed the amount available under the policy to pay those charges, the insurer shall mail the policyholder a report containing the information specified in par.
(g) 2. Ins 2.13(7)(c)5.
5. If the policy specifies a minimum amount which may be borrowed, the minimum may not apply to any automatic premium loan provision.
Ins 2.13(7)(c)6.
6. The policy loan provision does not apply if the policy is under an extended insurance nonforfeiture option.
Ins 2.13(7)(c)7.
7. A policyholder who has not exercised the policy loan provision may not be disadvantaged by exercising it.
Ins 2.13(7)(c)8.
8. Upon the exercise of any policy loan provision, the insurer shall withdraw from the separate account the amount paid to the policyholder and shall return that amount to the separate account upon repayment, except that a stock insurer may provide the amount for a policy loan from the general account.
Ins 2.13(7)(d)
(d) A modified guaranteed life insurance policy or related form issued in this state may, in substance, include one or more of the following provisions:
Ins 2.13(7)(d)1.
1. An exclusion for suicide within 2 years after the date the policy takes effect, except that, if the policy includes an increased death benefit as a result of the policyholder's application after the date the policy takes effect, the exclusion applies only to the amount of the increased benefit.
Ins 2.13(7)(d)3.
3. If the policy is issued on a participating basis, an offer to pay dividends in cash and other dividend options.
Ins 2.13(7)(d)4.
4. A provision allowing a policyholder to elect in writing, either in the application or after issuance of the policy, an automatic premium loan on a basis not less favorable than the requirements under par.
(c), except that the insurer may restrict this provision to the payment of not more than 2 consecutive premiums.
Ins 2.13(7)(d)5.
5. A provision allowing the policyholder to make partial withdrawals.
Ins 2.13(7)(e)1.1. An insurer issuing any modified guaranteed life insurance policy in this state shall, before or at the time the application is taken, deliver to the applicant and obtain from the applicant a written acknowledgment of receipt of all of the following information:
Ins 2.13(7)(e)1.a.
a. A non-technical summary of the principal features of the policy, including a description of the manner in which the nonforfeiture benefits will be affected by the market-value adjustment formula and the factors which affect the variation. The summary shall include the notice required by par.
(b) 1. b. Ins 2.13(7)(e)1.b.
b. A summary of the federal income tax aspects of the policy applicable to the insured, the policyholder and the beneficiary.
Ins 2.13(7)(e)1.c.
c. Illustrations, prepared by the insurer, of benefits payable under the policy. No illustration may include a projection of past investment experience into the future or a prediction of future investment experience. This subparagraph does not prohibit the use of hypothetical assumed rates of return to illustrate possible levels of benefits if the insurer makes it clear that such assumed rates are hypothetical only.
Ins 2.13(7)(e)2.
2. An insurer may satisfy the requirements of subd.
1. by delivering to the policyholder a disclosure containing the information required by subd.
1., either in the form of a prospectus which is part of an effective registration statement under the securities act of 1933,
15 USC 77a to
77aa or, if the policies are exempt from the registration requirements of the securities act of 1933, all information and reports required by the federal employee retirement income security act of 1974,
29 USC 1001 to
1461.
Ins 2.13(7)(f)
(f) The application for a modified guaranteed life insurance policy shall contain all of the following:
Ins 2.13(7)(f)1.
1. Immediately before the signature line, a statement that amounts payable under the policy are subject to a market-value adjustment before a date or dates specified in the policy.
Ins 2.13(7)(f)2.
2. A request for information which will enable the insurer to determine the suitability of modified guaranteed life insurance for the applicant.
Ins 2.13(7)(g)1.1. In this paragraph, “
unadjusted cash value" means the cash value before applying any surrender charge or market-value adjustment formula.
Ins 2.13(7)(g)2.
2. An insurer shall mail to each holder of a modified guaranteed life insurance policy, at his or her last known address, an annual report showing the unadjusted cash value, the cash surrender value, death benefit, any partial withdrawal or policy loan, any interest charge and any optional payments allowed under the policy. The report shall also specify the surrender charge and market-value adjustment formula used to determine the cash surrender value. Each report shall state that the cash values may increase or decrease in accordance with the market-value adjustment formula. The report shall prominently identify any stated value that may be recomputed before the next annual report.
Ins 2.13(7)(g)3.
3. For flexible premium policies, if the unadjusted cash value and cash surrender value are different, the annual report shall contain a reconciliation of these values based on payments made less deductions for expense charges, withdrawals, investment experience, insurance charges and any other charges made against the cash value. The annual report shall also show the projected unadjusted cash value and cash surrender value, if different, as of one year from the end of the period covered by the report assuming all of the following:
Ins 2.13(7)(g)3.c.
c. Interest is credited at the guaranteed rate or, in the absence of a guaranteed rate, at a rate not greater than zero. If the projected unadjusted cash value is less than zero, the report shall include a warning stating that the policy may be in danger of terminating without value in the next 12 months unless additional premium is paid.
Ins 2.13(7)(g)4.
4. The insurer shall mail each annual report within 30 days after one of the following dates:
Ins 2.13(7)(g)4.a.
a. The policy anniversary date, in which case the amounts reported shall be computed as of the policy anniversary date.
Ins 2.13(7)(g)4.b.
b. Another date specified in the policy, in which case the amounts reported shall be computed as of a date no earlier than 60 days before the mailing date.
Ins 2.13(7)(h)
(h) For flexible premium policies, the insurer shall also send a report to the policyholder whenever the amount 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 policy processing day. The report shall state the minimum payment required under the terms of the policy to keep it in force and the length of the grace period for payment.
Ins 2.13(8)(a)(a) Each insurer issuing modified guaranteed annuities in this state shall provide each contract holder with an annual report showing both the account value and the cash surrender value. The report shall clearly state that the account value does not include the application of any surrender charge or market-value adjustment formula. The annual report shall also specify the surrender charge and market-value adjustment formula used to determine the cash surrender value.
Ins 2.13(8)(b)1.1. Each modified guaranteed annuity contract issued in this state shall describe the essential features of the procedures the insurer uses in determining the amount of nonforfeiture benefits.
Ins 2.13(8)(b)2.
2. No insurer may issue in this state a modified guaranteed annuity contract calling for periodic stipulated payments unless it contains in substance all of the following provisions:
Ins 2.13(8)(b)2.a.
a. A grace period of 30 days or one month within which the policyholder may make any stipulated payment, other than the first payment, due the insurer. During the grace period the contract shall continue in force. The contract may include a statement of the basis on which the insurer determines the date that it will apply any stipulated payment received during the grace period to produce the values under the contract arising from the application of the payment.
Ins 2.13(8)(b)2.b.
b. A right to reinstatement of the contract at any time within one year from the date of default in making periodic stipulated payments to the insurer during the life of the annuitant, upon payment to the insurer of the overdue payments as required by the contract, and of all indebtedness, including interest, on the contract. The right to reinstatement does not apply if the insurer has paid the cash surrender value of the contract. The contract may include a statement of the basis on which the insurer determines the date that it will apply the amount to cover the overdue payments and indebtedness to produce the values under the contract arising from the application of the payment.
Ins 2.13(8)(b)3.
3. Each modified guaranteed annuity contract shall state the market-value adjustment formula the insurer uses to determine nonforfeiture benefits. The formula shall apply to both upward and downward adjustments. With each policy form filed under s.
631.20, Stats., the insurer shall submit an actuarial statement of the basis for the market-value adjustment formula which states that the formula provides reasonable equity to both the contract holder and the insurer.
Ins 2.13(8)(b)4.
4. Unless provided under any applicable contract, the portion of the assets of any separate account equal to the reserves and other applicable contract liabilities of the account are not chargeable with liabilities arising out of any other business of the insurer.
Ins 2.13(8)(c)1.b.
b. A group annuity contract purchased in connection with a retirement plan or deferred compensation plan established or maintained by or for one or more employers, including partnerships, sole proprietorships, employee organizations or any combination thereof, other than plans providing individual retirement accounts or individual retirement annuities under
26 USC 408, as amended.
Ins 2.13(8)(c)1.h.
h. A contract which will be issued outside this state through an agent or other representative of the insurer.
Ins 2.13(8)(c)2.
2. No insurer may issue a modified guaranteed annuity contract in this state unless it contains in substance all of the following provisions:
Ins 2.13(8)(c)2.a.
a. A plan that complies with subd.
4. for granting a paid-up annuity benefit upon cessation of payment of considerations under the contract. The contract shall describe the plan and shall include a statement of the mortality table, if any, and guaranteed or assumed interest rates used in calculating annuity payments.
Ins 2.13(8)(c)2.b.
b. If the contract provides for a lump sum settlement at maturity or at any other time, a provision for the payment of a cash surrender benefit that complies with subd.
5. instead of a paid-up annuity benefit, upon surrender of the contract at or before the commencement of annuity payments. The contract shall describe the cash surrender benefit and may provide that the insurer may defer payment of the cash surrender benefit for a period of 6 months after demand.
Ins 2.13(8)(c)3.
3. In establishing the minimum value of a paid-up annuity, cash surrender or death benefit available under a modified guaranteed annuity contract, the insurer shall base the value on nonforfeiture amounts meeting the requirements of this subdivision and subd.
4. The unadjusted minimum nonforfeiture amount on any date before the annuity commencement date shall equal the percentages of net considerations, as specified in subd.
4., increased by the interest credits allocated to the percentage of net considerations. The insurer shall reduce this amount to reflect the effect of all of the following:
Ins 2.13(8)(c)3.b.
b. The amount of any indebtedness on the contract, including interest due and accrued.
Ins 2.13(8)(c)3.c.
c. An annual contract charge which shall equal the lesser of $30 or 2% of the end-of-year contract value less the amount of any annual contract charge deducted from any gross considerations credited to the contract during the contract years. The contract charge may not be less than $0.00.
Ins 2.13(8)(c)3.d.
d. A transaction charge of $10 for each transfer to another investment division with the same contract.
Ins 2.13(8)(c)4.a.
a. Guaranteed interest credits in each year for any period of time for which interest credits are guaranteed shall be reasonably related to the average guaranteed interest credits over that period of time.
Ins 2.13(8)(c)4.b.
b. The minimum nonforfeiture amount shall be the unadjusted minimum nonforfeiture amount adjusted by the market-value adjustment formula contained in the contract.
Ins 2.13(8)(c)4.c.
c. The annual contract charge of $30 and the transaction charge of $10 shall be adjusted to reflect changes in the consumer price index as provided in subd.
5. c. Ins 2.13(8)(c)5.
5. The percentages of net considerations used to define the minimum nonforfeiture amount under subd.
3. shall meet all of the following requirements:
Ins 2.13(8)(c)5.a.
a. If the contract provides for periodic considerations, the net considerations for a given contract year used to define the minimum nonforfeiture amount shall not be less than $0.00 and shall equal the corresponding gross considerations credited to the contract during that contract year less an annual contract charge of $30 and less a collection charge of $1.25 per consideration credited to the contract during that contract year and less any charge for premium taxes. The percentages of net considerations shall be 65% for the first contract year and 87
1⁄
2% for the 2nd and subsequent contract years except that the percentage shall be 65% of the portion of the total net consideration for any renewal contract year which exceeds, by not more than 2 times, the sum of those portions of the net considerations in all prior contract years for which the percentage was 65%.
Ins 2.13(8)(c)5.b.
b. With respect to contracts providing for a single consideration, the net consideration used to define the minimum nonforfeiture amount shall be the gross consideration less a contract charge of $75 and less any charge for premium taxes. The percentage of the net consideration shall be 90%.
Ins 2.13(8)(c)5.c.
c. The annual contract charge of $30 and the collection charge of $1.25 under subd.
5. a. and the single consideration contract charge of $75 under subd.
5. b., shall be adjusted annually to reflect changes in the consumer price index by multiplying each charge by the ratio of the consumer price index for June of the year preceding the date of filing to the consumer price index for June, 1979. “Consumer price index" means the index for all urban consumers for all items as published by the bureau of labor statistics of the United States department of labor or any successor agency. If publication of the consumer price index ceases, or if the index otherwise becomes unavailable or is altered so as to be unusable for purposes of this paragraph, the commissioner may substitute another suitable index.
Ins 2.13(8)(c)6.
6. An insurer shall use any paid-up annuity benefit available under a modified guaranteed annuity contract that has a present value on the annuity commencement date that is at least equal to the minimum nonforfeiture amount on the date. The insurer shall compute the present value using the mortality table, if any, and the guaranteed or assumed interest rates used in calculating the annuity payments.
Ins 2.13(8)(c)7.
7. For modified guaranteed annuity contracts which provide cash surrender benefits, the cash surrender benefit at any time before the annuity commencement date shall be equal to or greater than the minimum nonforfeiture amount next computed after the insurer receives a request for surrender. The death benefit under the contract shall be at least equal to the cash surrender benefit.
Ins 2.13(8)(c)8.
8. Any modified guaranteed annuity contract which does not provide either a cash surrender benefit or a death benefit at least equal to the minimum nonforfeiture amount before the annuity commencement date shall include, in a prominent place in the contract, a statement that these benefits are not provided.
Ins 2.13(8)(c)9.
9. Notwithstanding any other requirement of this paragraph, a modified guaranteed annuity contract may provide that the insurer, at its option, may cancel the annuity and pay the contract holder the larger of the unadjusted minimum nonforfeiture amount or the minimum nonforfeiture amount, and that the payment shall release the insurer from any further obligation under the contract. This option shall apply only under one of the following conditions:
Ins 2.13(8)(c)9.a.
a. At the time the annuity becomes payable, the larger of the unadjusted minimum nonforfeiture amount or the minimum nonforfeiture amount is less than $2,000, or would provide an income the initial amount of which is less than $20 per month.
Ins 2.13(8)(c)9.b.
b. Before the annuity becomes payable under a periodic payment contract, the insurer has not received any considerations under the contract for a period of 2 years and the total consideration paid before the 2-year period, reduced to reflect any partial withdrawals from or partial surrenders of the contract, plus the larger of the unadjusted minimum nonforfeiture amount or the minimum nonforfeiture amount is less than $2,000.
Ins 2.13(8)(c)10.
10. For any modified guaranteed annuity contract which provides in the same contract, by rider or supplemental contract provision, both annuity benefits and life insurance benefits that exceed the greater of cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits shall equal the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if any, for the insurance portion computed as if each portion were a separate contract. Notwithstanding subd.
2., in determining the minimum nonforfeiture amounts and paid-up annuity, cash surrender and death benefits required by this paragraph, the insurer shall disregard additional benefits payable in the event of the total and permanent disability of the contract holder, as reversionary annuity or deferred reversionary annuity benefits or as other policy benefits additional to life insurance, endowment and annuity benefits and considerations for all such additional benefits. The inclusion of such additional benefits is not required in any paid-up benefits unless the additional benefits would, if provided separately, require minimum nonforfeiture amounts and paid-up annuity, cash surrender and death benefits.
Ins 2.13(8)(d)
(d) The application for a modified guaranteed annuity shall contain, immediately before the signature line, a prominent statement that amounts payable under the contract are subject to a market-value adjustment before a date or dates specified in the contract.
Ins 2.13(9)
(9) Provisions applicable to modified guaranteed life insurance and annuities. Ins 2.13(9)(a)
(a) Before any insurer issues any modified guaranteed life insurance policy or modified guaranteed annuity contract in this state, the commissioner may require the insurer to file a copy of any prospectus or other sales material to be used in connection with the marketing of the modified guaranteed life insurance policy or modified guaranteed annuity contract. The sales material shall clearly illustrate that there can be both upward and downward adjustments due to the application of the market-value adjustment formula in determining nonforfeiture benefits.
Ins 2.13(9)(b)
(b) An insurer issuing a modified guaranteed life insurance policy or a modified guaranteed annuity in this state shall submit to the commissioner all of the following:
Ins 2.13(9)(b)1.
1. A separate account annual statement which shall include the business of these policies or contracts.
Ins 2.13(9)(c)
(c) The commissioner may disapprove any material required to be filed if the commissioner finds that the material does not comply with this section.
Ins 2.13(9)(d)
(d) The statutes and administrative rules governing individual life insurance and individual annuity form filings also apply to modified guaranteed life insurance policies and modified guaranteed annuity contracts. Each filing shall demonstrate in a form satisfactory to the commissioner that the nonforfeiture provisions of the policy or contract comply with this section.
Ins 2.13(9)(e)1.1. An insurer shall establish reserve liabilities in accordance with actuarial procedures that recognize all of the following:
Ins 2.13(9)(e)2.
2. The separate account liability shall equal the surrender value based on the market-value adjustment formula contained in the modified guaranteed life insurance policy or modified guaranteed annuity contract. If that liability is greater than the market value of the assets, the insurer shall transfer assets into the separate account so that the market value of the assets at least equals that of the liabilities. The insurer shall establish any additional reserve that is needed to cover future guaranteed benefits.
