N.Y. ISC Law § 4240 — New York Code / Act ISC / Article 42 / Section 4240
Separate accounts; fixed and variable life insurance and annuities and funding agreements
Status: in_force

§ 4240. Separate accounts; fixed and variable life insurance and\nannuities and funding agreements. (a) In accordance with paragraphs one,\ntwo and three of subsection (a) of section one thousand one hundred\nthirteen and section three thousand two hundred twenty-two of this\nchapter, a domestic life insurance company may establish one or more\nseparate accounts and allocate thereto, pursuant to agreements for\nseparate accounts, amounts paid to it (i) to provide for annuities which\nare payable in fixed amounts guaranteed by it, or variable amounts, or\nboth, including any amounts paid to it which are subject to annuity\noptions; or (ii) to provide life insurance with benefits, premiums or\nboth payable on a variable basis and the reserves for which vary\naccording to the investment experience of such separate account; or\n(iii) to accumulate in such separate account funds to be applied to\nprovide life insurance, whether fixed or variable, or both; or (iv) to\naccumulate or hold in such separate account funds to be applied to\nprovide health insurance; or (v) to accumulate or hold in such separate\naccount proceeds applied under settlement or dividend options; or (vi)\nto accumulate or hold in such separate account funds credited under\nfunding agreements delivered pursuant to section three thousand two\nhundred twenty-two of this chapter; provided that any such separate\naccount shall be maintained in accordance with the following:\n  (1) Income, gains and losses, whether or not realized, from assets\nallocated to a separate account shall, in accordance with the applicable\nagreement or agreements, be credited to or charged against such account\nwithout regard to other income, gains or losses of the insurer.\n  (2) With respect to investments allocated to a separate account:\n  (A) except as provided in paragraphs three and five of this\nsubsection, the insurer may invest in any investments contractually\npermitted for such separate account, the restrictions, limitations and\nother provisions relating to investments specified in this chapter shall\nnot apply to such investments, and such investments shall be\ndisregarded, and shall be excluded from admitted assets, in applying the\nquantitative investment limitations contained in this chapter to other\ninvestments;\n  (B) no stock, bond, note or other security of a subsidiary or\naffiliate of the insurer, or of any company controlling or under common\ncontrol with the insurer, shall be allocated to any separate account if,\nafter giving effect to such allocation, any security of a different\nclass issued by such subsidiary or affiliate would be held in any other\naccount of the insurer, or by any company controlling or under common\ncontrol with the insurer or by any other subsidiary or affiliate of the\ninsurer; and\n  (C) The insurer shall invest and reinvest for such separate account in\ngood faith and with that degree of care that an ordinarily prudent\nperson in a like position would use under similar circumstances.\n  (3) The insurer may allocate amounts to a separate account to\nfacilitate its initial operations and amounts so allocated shall be\ndeemed to be invested under section one thousand four hundred four (in\nthe case of insurers making investments under the authority of section\none thousand four hundred four) of this chapter or under section one\nthousand four hundred five (in the case of insurers making investments\nunder the authority of section one thousand four hundred five) of this\nchapter and shall be subject to the qualitative standards and\nquantitative limitations provided in section one thousand four hundred\nfour or one thousand four hundred five of this chapter, as the case may\nbe.\n  (4) Amounts received by the insurer pursuant to one or more such\nagreements may be maintained in one or more separate accounts.\n  (5) No guarantee of the value of the assets allocated to a separate\naccount, or any interest therein, or the investment results thereof, or\nthe income thereon, shall be made to a contractholder by the insurer,\nwithout limitation of liability under all such guarantees to the extent\nof the interest of the contractholder in assets allocated to said\nseparate account (i) unless the investments allocated to such separate\naccount are deemed part of the general assets of the insurer and are\nsubject to the qualitative standards and quantitative limitations\ncontained in section one thousand four hundred four or section one\nthousand four hundred five of this chapter or (ii) if the applicable\nagreements provide that the assets in such separate account shall not be\nchargeable with liabilities arising out of any other business of the\ninsurer, unless such investments are subject to the requirements and\nlimitations on investments imposed by articles thirteen and fourteen\n(except section one thousand four hundred two) of this chapter applied\nas though the aggregate assets allocated to such separate account were\nthe insurer's total admitted assets or (iii) unless the insurer shall\nsubmit annually to the superintendent an opinion, in form and substance\nsatisfactory to the superintendent, of a qualified actuary (as defined\nin item (vi) of subparagraph (B) of paragraph four of subsection (c) of\nsection four thousand two hundred seventeen of this article) that, after\ntaking into account any risk charge payable from the assets of such\nseparate account with respect to such guarantee, the assets in such\nseparate account make good and sufficient provision for the liabilities\nof the insurer with respect thereto, such opinion to be accompanied by a\nmemorandum, also in form and substance satisfactory to the\nsuperintendent, of the qualified actuary describing the calculations\nmade in support of such opinion and the assumptions used in the\ncalculations, provided that, notwithstanding any other provision of this\nparagraph, reserve liabilities for guaranteed minimum death benefits and\nfixed incidental insurance benefits with respect to variable life\ninsurance policies shall be maintained in the general account of the\ninsurer.\n  (6) The insurer shall not, in connection with the allocation of\ninvestments or expenses, or in any other respect, discriminate unfairly\nbetween separate accounts or between separate and other accounts, but\nthis provision shall not require the insurer to follow uniform\ninvestment policies for its accounts.\n  (7) Except as otherwise provided in paragraph ten hereof, assets\nallocated to separate accounts shall, for the purpose of any valuation\nrequired by this chapter, be valued at their market value at the date as\nof which valued in accordance with the terms of the applicable\nagreements, or if there is no readily available market, then in\naccordance with the terms of such agreements, and no special reserve\nunder subsection (b) of section one thousand four hundred fourteen of\nthis chapter shall be required in respect thereof.\n  (8) Unless otherwise provided in approvals given by the superintendent\nand under such conditions as he may prescribe, the insurer shall\nmaintain in each separate account assets with a value at least equal to\nthe amounts accumulated in accordance with the terms of the applicable\nagreements with respect to such separate account and the reserves for\nannuities in the course of payment that vary with the investment\nexperience of such separate account.\n  (9) Except as may be required by subsection (b) hereof, the insurer\nshall not transfer any investment, or asset held for investment, between\nseparate accounts or between separate and other accounts, provided that\nthe superintendent may authorize transfers in circumstances where such\ntransfers would not be inequitable.\n  (10) Except with respect to separate accounts qualifying under item\n(iii) of paragraph five of this subsection, assets supporting reserves\nwhich do not vary with the investment experience of the separate account\nshall be maintained in the separate account at their value determined in\naccordance with section one thousand four hundred fourteen of this\nchapter.\n  (11) Any contract providing for benefits, premiums or both, payable on\na variable basis, delivered or issued for delivery in this state, and\nany certificate or other writing furnished by the insurer to the\nemployee under such a group contract in evidence of either benefits or\ncontributions, or both, payable on a variable basis, shall\n  (A) contain a statement of the essential features of the procedure to\nbe followed by the insurer in determining the dollar amount of such\nvariable elements thereunder,\n  (B) state in clear terms that such amount may decrease or increase\naccording to such procedure, and\n  (C) contain on its first page a statement that such elements\nthereunder are on a variable basis.\n  (12) Amounts allocated by the insurer to separate accounts shall be\nowned by the insurer, the assets therein shall be the property of the\ninsurer, and no insurer by reason of such accounts shall be or hold\nitself out to be a trustee. If and to the extent so provided in the\napplicable agreements, the assets in a separate account shall not be\nchargeable with liabilities arising out of any other business of the\ninsurer.\n  (13) Every individual variable annuity contract and every certificate\nsubject to this section and subsection (a) of section three thousand two\nhundred nineteen of this chapter shall contain a provision, or a notice\nattached to the contract or certificate, to the effect that during a\nperiod, specified in such provision or notice, it may be surrendered to\nthe insurer together with a written request for cancellation of the\ncontract or certificate, and in such event, the insurer will pay an\namount equal to the sum of (i) and (ii), where (i) is the difference\nbetween the premiums paid, including any fees or other charges, and the\namounts, if any, allocated to any separate accounts under the contract\nor certificate, and (ii) is the cash value of the contract or\ncertificate, or, if the contract or certificate does not have a cash\nvalue, the reserve for the contract or certificate, on the date of\nsurrender attributable to the amounts so allocated. The period specified\nin such provision or notice for a contract or certificate sold other\nthan by mail order shall not be less than ten nor more than thirty days,\nand for a contract or certificate sold by mail order shall be thirty\ndays, from the date the contract or certificate is received by the\nowner.\n  (14) The superintendent may, from time to time, promulgate reasonable\nregulations setting forth:\n  (A) standards to be followed in the approval of forms for use in\nconnection with separate accounts; such standards may relate to, but\nneed not be limited to, any one or more of the following: guaranteed\nface amounts, termination of contract, withdrawal of funds by the\ncontract holder, commitments with respect to future price of guaranteed\nannuities, valuation of assets, and other elements required to effect\ncompliance with section three thousand two hundred one of this chapter;\n  (B) rules with respect to accounting and reporting of funds allocated\nto separate accounts, identification of assets allocated to any separate\naccounts, and the application of expenses to agreements relating to\nseparate accounts;\n  (C) rules with respect to adequate disclosure of information relating\nto separate accounts; and\n  (D) rules with respect to required and prohibited contract provisions\nfor variable life insurance and variable annuity contracts delivered or\nissued for delivery in this state by an authorized fraternal benefit\nsociety.\n  (c) This section shall have no application to a charitable annuity\nsociety.\n  (d) Except as otherwise provided in this section, all pertinent\nprovisions of this chapter shall apply to separate accounts and\nagreements relating thereto.\n  (1) The following provisions of this chapter shall not apply to\nannuity contracts or to certificates subject to this section and\nsubsection (a) of section three thousand two hundred nineteen of this\nchapter:  paragraphs one, seven, eight, and nine of subsection (a) of\nsection three thousand two hundred nineteen of this chapter, subsections\n(a) and (d) of section three thousand two hundred twenty-three of this\nchapter, sections four thousand two hundred seventeen, four thousand two\nhundred twenty-one and four thousand two hundred twenty-three and\nsubsection (e) of section four thousand two hundred thirty-one of this\narticle, provided, however, that this paragraph shall not apply to any\ncontract or certificate providing benefits with respect to amounts\nallocated to a separate account, if such benefits are guaranteed at any\ntime to be not less than an amount equal to or greater than such\nallocated amounts accumulated to such time at three percent per annum.\n  (2) Individual variable annuity contracts and group variable annuity\ncertificates delivered or issued for delivery in this state shall\ncontain grace, reinstatement, and nonforfeiture provisions appropriate\nto such variable contracts and certificates. Payment of death benefits\nunder such contracts and certificates shall be made within seven\ncalendar days following receipt of the beneficiary's completed election\nform with all information required by such form for the payment of\nproceeds. If such death benefits are not paid within seven calendar days\nfollowing receipt of such completed election form, interest shall be\ncomputed daily from the end of such seven day period at the rate of\ninterest currently paid by the insurer on proceeds left under the\ninterest settlement option and such contracts or certificates shall not\nbe subject to the payment of interest under subsection (c) of section\nthree thousand two hundred fourteen of this chapter. For amounts\nreceived under actions commenced to recover proceeds pursuant to\nsubsections (a) and (b) of section three thousand two hundred fourteen\nof this chapter, interest shall be computed daily at the rate of\ninterest currently paid by the insurer on proceeds left under the\ninterest settlement option from the earlier of the date the action is\ncommenced or the insurer's receipt of the beneficiary's completed\nelection form to: (A) the date the verdict is rendered or the report or\ndecision is made and thereafter in accordance with the provisions of\nsections five thousand two and five thousand three of the civil practice\nlaw and rules, for amounts received under subsection (a) of section\nthree thousand two hundred fourteen of this chapter; or (B) the date the\nsettlement is reached, for amounts received under subsection (b) of such\nsection.\n  (3) The following provisions of this chapter shall not apply to life\ninsurance policies to the extent that they provide for allocation of\namounts to separate accounts: paragraphs one, seven, eight, nine and ten\nof subsection (a) of section three thousand two hundred three of this\nchapter, section four thousand two hundred twenty-one and subsection (b)\nof section four thousand two hundred thirty-two of this article,\nprovided, however, that this paragraph shall not apply to any policy\nproviding benefits with respect to the amounts so allocated, if such\nbenefits are guaranteed at any time to be not less than an amount equal\nto or greater than such allocated amounts accumulated to such time at\nthree percent per annum.\n  (4) Contracts delivered or issued for delivery in this state for\nindividual variable life insurance policies shall contain loan, grace,\nreinstatement and nonforfeiture provisions, and may provide for\nsettlement options, under conditions acceptable to the superintendent.\n  (5) Individual variable contracts shall be included in determining the\naggregate limits prescribed in section four thousand two hundred\ntwenty-eight of this article, with appropriate modification of expense\nlimits for such contracts, as required by the superintendent, to\nrecognize the variable nature of the contracts.\n  (6) The reserve liability for variable contracts shall be established\nin accordance with actuarial procedures that recognize the variable\nnature of the benefits provided and any mortality guarantees provided in\nthe contract.\n  (7) Notwithstanding any other provision of law, the superintendent\nshall have the sole authority to regulate the issuance and sale of such\nagreements; and, in addition to the powers expressly given by this\nsection, the superintendent shall have the power to promulgate, from\ntime to time, such regulations, not inconsistent with the provisions of\nthis chapter, as may be appropriate to carry out the provisions of this\nsection and, insofar as applicable to this section, other provisions of\nthis chapter.\n  (e) No authorized insurer shall make any such agreement in this state\nproviding for the allocation of amounts to a separate account until such\ninsurer has filed with the superintendent a statement as to its methods\nof operation of such separate account and the superintendent has\napproved such statement. Subject to the approval of the superintendent,\nany such statement may apply to one or more groups of separate accounts\nclassified by investment policy, number or kinds of separate account\nparticipants, methods of distribution of such agreements or otherwise.\nIn determining whether or not to approve any such statement, the\nsuperintendent shall consider, among other things, the history,\nreputation and financial stability of the insurer and the character,\nexperience, responsibility, competence and general fitness of the\nofficers and directors of the insurer. If the insurer files an amendment\nof any such statement with the superintendent that does not change the\ninvestment policy of a separate account and the superintendent does not\napprove or disapprove such amendment within a period of thirty days\nafter such filing, such amendment shall be deemed to be approved as of\nthe end of such thirty day period, except that if the superintendent\nrequests further information on the statement during such period from\nthe insurer, such period shall be extended until thirty days after the\nday on which the superintendent receives such information. An amendment\nof any such statement that changes the investment policy of a separate\naccount shall be treated as an original filing.\n  (f) Notwithstanding the restrictions and limitations herein or\notherwise imposed by law, the insurer may with respect to any separate\naccount, (i) exercise any voting rights of any securities allocated\nthereto in accordance with instructions from persons having interests in\nsuch account ratably as determined by the insurer, or (ii) establish a\ncommittee for such account, the members of which may be directors or\nofficers or other employees of the insurer or persons having no such\nrelationship to the insurer, or any combination thereof, who may be\nelected to such membership by vote of the persons having interests in\nsuch account ratably as determined by the insurer. Such committee may\nhave the power, which may be exercisable alone or in conjunction with\nothers, or which may be delegated to the insurer or any other person, as\ninvestment manager or investment adviser, to authorize, approve or\nreview the acquisition and disposition of investments for such account.\nIn addition, the insurer may make such other provisions in respect to\nthe separate account, including but not limited to voting, investments,\naudits and otherwise regarding management and administration, as the\ninsurer may deem appropriate to facilitate compliance with any\nrequirements of or pursuant to any federal or state law now or hereafter\nin effect; provided that the superintendent approve such provisions as\nnot hazardous to the public or its policyholders in this state.\n