NY Ins L § 4240 (2021)
2021 New York Laws ISC - Insurance Article 42 - Life Insurance Companies and Accident and Health Insurance Companies and Legal Services Insurance Companies 4240 - Separate Accounts; Fixed and Variable Life Insurance and Annuities and Funding Agreements.

§  4240.  Separate  accounts;  fixed  and  variable life insurance and annuities and funding agreements. (a) In accordance with paragraphs one, two and three of subsection (a) of  section  one  thousand  one  hundred thirteen  and  section  three  thousand  two  hundred twenty-two of this chapter, a domestic life insurance company may  establish  one  or  more separate  accounts  and  allocate  thereto,  pursuant  to agreements for separate accounts, amounts paid to it (i) to provide for annuities which are payable in fixed amounts guaranteed by it, or variable  amounts,  or both,  including  any  amounts  paid  to it which are subject to annuity options; or (ii) to provide life insurance with  benefits,  premiums  or both  payable  on  a  variable  basis  and  the  reserves for which vary according to the investment experience  of  such  separate  account;  or (iii)  to  accumulate  in  such  separate account funds to be applied to provide life insurance, whether fixed or variable, or both; or  (iv)  to accumulate  or  hold  in  such  separate  account funds to be applied to provide health insurance; or (v) to accumulate or hold in such  separate account  proceeds  applied under settlement or dividend options; or (vi) to accumulate or hold in such  separate  account  funds  credited  under funding  agreements  delivered  pursuant  to  section three thousand two hundred twenty-two of this chapter;  provided  that  any  such  separate account shall be maintained in accordance with the following:  (1)  Income,  gains  and  losses, whether or not realized, from assets allocated to a separate account shall, in accordance with the applicable agreement or agreements, be credited to or charged against such  account without regard to other income, gains or losses of the insurer.  (2) With respect to investments allocated to a separate account:  (A)   except  as  provided  in  paragraphs  three  and  five  of  this subsection, the insurer may  invest  in  any  investments  contractually permitted  for  such separate account, the restrictions, limitations and other provisions relating to investments specified in this chapter shall not  apply  to  such  investments,  and  such   investments   shall   be disregarded, and shall be excluded from admitted assets, in applying the quantitative  investment  limitations contained in this chapter to other investments;  (B) no stock,  bond,  note  or  other  security  of  a  subsidiary  or affiliate  of the insurer, or of any company controlling or under common control with the insurer, shall be allocated to any separate account if, after giving effect to such allocation,  any  security  of  a  different class  issued by such subsidiary or affiliate would be held in any other account of the insurer, or by any company controlling  or  under  common control  with the insurer or by any other subsidiary or affiliate of the insurer; and  (C) The insurer shall invest and reinvest for such separate account in good faith and with that degree  of  care  that  an  ordinarily  prudent person in a like position would use under similar circumstances.  (3)  The  insurer  may  allocate  amounts  to  a  separate  account to facilitate its initial operations and  amounts  so  allocated  shall  be deemed  to  be invested under section one thousand four hundred four (in the case of insurers making investments under the authority  of  section one  thousand  four  hundred  four) of this chapter or under section one thousand four hundred five (in the case of insurers  making  investments under  the  authority of section one thousand four hundred five) of this chapter  and  shall  be  subject  to  the  qualitative   standards   and quantitative  limitations  provided in section one thousand four hundred four or one thousand four hundred five of this chapter, as the case  may be.  (4)  Amounts  received  by  the  insurer  pursuant to one or more such agreements may be maintained in one or more separate accounts.  (5) No guarantee of the value of the assets allocated  to  a  separate account,  or any interest therein, or the investment results thereof, or the income thereon, shall be made to a contractholder  by  the  insurer, without  limitation of liability under all such guarantees to the extent of  the  interest  of  the  contractholder  in  assets allocated to said separate account (i) unless the investments allocated to  such  separate account  are  deemed  part  of the general assets of the insurer and are subject  to  the  qualitative  standards  and  quantitative  limitations contained  in  section  one  thousand  four  hundred four or section one thousand four hundred five of this chapter or  (ii)  if  the  applicable agreements provide that the assets in such separate account shall not be chargeable  with  liabilities  arising  out of any other business of the insurer, unless such investments are subject  to  the  requirements  and limitations  on  investments  imposed  by articles thirteen and fourteen (except section one thousand four hundred two) of this  chapter  applied as  though  the aggregate assets allocated to such separate account were the insurer's total admitted assets or (iii) unless  the  insurer  shall submit  annually to the superintendent an opinion, in form and substance satisfactory to the superintendent, of a qualified actuary  (as  defined in  item (vi) of subparagraph (B) of paragraph four of subsection (c) of section four thousand two hundred seventeen of this article) that, after taking into account any risk charge payable  from  the  assets  of  such separate  account  with  respect  to  such guarantee, the assets in such separate account make good and sufficient provision for the  liabilities of the insurer with respect thereto, such opinion to be accompanied by a memorandum,   also   in   form   and   substance   satisfactory  to  the superintendent, of the qualified  actuary  describing  the  calculations made  in  support  of  such  opinion  and  the  assumptions  used in the calculations, provided that, notwithstanding any other provision of this paragraph, reserve liabilities for guaranteed minimum death benefits and fixed incidental  insurance  benefits  with  respect  to  variable  life insurance  policies  shall  be  maintained in the general account of the insurer.  (6) The insurer shall  not,  in  connection  with  the  allocation  of investments  or expenses, or in any other respect, discriminate unfairly between separate accounts or between separate and  other  accounts,  but this   provision  shall  not  require  the  insurer  to  follow  uniform investment policies for its accounts.  (7) Except as otherwise  provided  in  paragraph  ten  hereof,  assets allocated  to  separate accounts shall, for the purpose of any valuation required by this chapter, be valued at their market value at the date as of  which  valued  in  accordance  with  the  terms  of  the  applicable agreements,  or  if  there  is  no  readily  available  market,  then in accordance with the terms of such agreements,  and  no  special  reserve under  subsection  (b)  of section one thousand four hundred fourteen of this chapter shall be required in respect thereof.  (8) Unless otherwise provided in approvals given by the superintendent and under such  conditions  as  he  may  prescribe,  the  insurer  shall maintain  in each separate account assets with a value at least equal to the amounts accumulated in accordance with the terms of  the  applicable agreements  with  respect  to such separate account and the reserves for annuities in the  course  of  payment  that  vary  with  the  investment experience of such separate account.  (9)  Except  as  may be required by subsection (b) hereof, the insurer shall not transfer any investment, or asset held for investment, between separate accounts or between separate and other accounts, provided  that the  superintendent  may authorize transfers in circumstances where such transfers would not be inequitable.  (10) Except with respect to separate accounts  qualifying  under  item (iii)  of  paragraph five of this subsection, assets supporting reserves which do not vary with the investment experience of the separate account shall be maintained in the separate account at their value determined in accordance  with  section  one  thousand  four  hundred fourteen of this chapter.  (11) Any contract providing for benefits, premiums or both, payable on a variable basis, delivered or issued for delivery in  this  state,  and any  certificate  or  other  writing  furnished  by  the  insurer to the employee under such a group contract in evidence of either  benefits  or contributions, or both, payable on a variable basis, shall  (A)  contain a statement of the essential features of the procedure to be followed by the insurer in determining  the  dollar  amount  of  such variable elements thereunder,  (B)  state  in  clear  terms that such amount may decrease or increase according to such procedure, and  (C)  contain  on  its  first  page  a  statement  that  such  elements thereunder are on a variable basis.  (12)  Amounts  allocated  by the insurer to separate accounts shall be owned by the insurer, the assets therein shall be the  property  of  the insurer,  and  no  insurer  by  reason of such accounts shall be or hold itself out to be a trustee. If and to the  extent  so  provided  in  the applicable  agreements,  the  assets  in a separate account shall not be chargeable with liabilities arising out of any  other  business  of  the insurer.  (13)  Every individual variable annuity contract and every certificate subject to this section and subsection (a) of section three thousand two hundred nineteen of this chapter shall contain a provision, or a  notice attached  to  the  contract  or certificate, to the effect that during a period, specified in such provision or notice, it may be surrendered  to the  insurer  together  with  a  written request for cancellation of the contract or certificate, and in such event,  the  insurer  will  pay  an amount  equal  to  the  sum of (i) and (ii), where (i) is the difference between the premiums paid, including any fees or other charges, and  the amounts,  if  any, allocated to any separate accounts under the contract or  certificate,  and  (ii)  is  the  cash  value  of  the  contract  or certificate,  or,  if  the  contract or certificate does not have a cash value, the reserve for the contract  or  certificate,  on  the  date  of surrender attributable to the amounts so allocated. The period specified in  such  provision  or  notice for a contract or certificate sold other than by mail order shall not be less than ten nor more than thirty days, and for a contract or certificate sold by mail  order  shall  be  thirty days,  from  the  date  the  contract  or certificate is received by the owner.  (14) The superintendent may, from time to time, promulgate  reasonable regulations setting forth:  (A)  standards  to  be  followed  in  the approval of forms for use in connection with separate accounts; such standards  may  relate  to,  but need  not  be  limited  to, any one or more of the following: guaranteed face amounts, termination  of  contract,  withdrawal  of  funds  by  the contract  holder, commitments with respect to future price of guaranteed annuities, valuation of assets, and other elements  required  to  effect compliance with section three thousand two hundred one of this chapter;  (B)  rules with respect to accounting and reporting of funds allocated to separate accounts, identification of assets allocated to any separate accounts, and the application of  expenses  to  agreements  relating  to separate accounts;  (C)  rules with respect to adequate disclosure of information relating to separate accounts; and  (D)  rules with respect to required and prohibited contract provisions for variable life insurance and variable annuity contracts delivered  or issued  for  delivery  in  this state by an authorized fraternal benefit society.  (c) This section shall have no application  to  a  charitable  annuity society.  (d)  Except  as  otherwise  provided  in  this  section, all pertinent provisions  of  this  chapter  shall  apply  to  separate  accounts  and agreements relating thereto.  (1)  The  following  provisions  of  this  chapter  shall not apply to annuity contracts  or  to  certificates  subject  to  this  section  and subsection  (a)  of  section three thousand two hundred nineteen of this chapter:  paragraphs one, seven, eight, and nine of  subsection  (a)  of section three thousand two hundred nineteen of this chapter, subsections (a)  and  (d) of section three thousand two hundred twenty-three of this chapter, sections four thousand two hundred seventeen, four thousand two hundred twenty-one  and  four  thousand  two  hundred  twenty-three  and subsection  (e)  of section four thousand two hundred thirty-one of this article, provided, however, that this paragraph shall not apply  to  any contract  or  certificate  providing  benefits  with  respect to amounts allocated to a separate account, if such benefits are guaranteed at  any time  to  be  not  less  than  an  amount  equal to or greater than such allocated amounts accumulated to such time at three percent per annum.  (2) Individual variable annuity contracts and group  variable  annuity certificates  delivered  or  issued  for  delivery  in  this state shall contain grace, reinstatement, and nonforfeiture  provisions  appropriate to  such  variable contracts and certificates. Payment of death benefits under such  contracts  and  certificates  shall  be  made  within  seven calendar  days following receipt of the beneficiary's completed election form with all information required by  such  form  for  the  payment  of proceeds. If such death benefits are not paid within seven calendar days following  receipt  of  such  completed election form, interest shall be computed daily from the end of such seven day  period  at  the  rate  of interest  currently  paid  by  the  insurer  on  proceeds left under the interest settlement option and such contracts or certificates shall  not be  subject  to  the payment of interest under subsection (c) of section three thousand  two  hundred  fourteen  of  this  chapter.  For  amounts received  under  actions  commenced  to  recover  proceeds  pursuant  to subsections (a) and (b) of section three thousand two  hundred  fourteen of  this  chapter,  interest  shall  be  computed  daily  at the rate of interest currently paid by  the  insurer  on  proceeds  left  under  the interest  settlement  option  from the earlier of the date the action is commenced or  the  insurer's  receipt  of  the  beneficiary's  completed election  form to: (A) the date the verdict is rendered or the report or decision is made and thereafter in accordance  with  the  provisions  of sections five thousand two and five thousand three of the civil practice law  and  rules,  for  amounts  received under subsection (a) of section three thousand two hundred fourteen of this chapter; or (B) the date the settlement is reached, for amounts received under subsection (b) of such section.  (3) The following provisions of this chapter shall not apply  to  life insurance  policies  to  the  extent that they provide for allocation of amounts to separate accounts: paragraphs one, seven, eight, nine and ten of subsection (a) of section three thousand two hundred  three  of  this chapter, section four thousand two hundred twenty-one and subsection (b) of  section  four  thousand  two  hundred  thirty-two  of  this article,  provided, however, that this paragraph shall not  apply  to  any  policy providing  benefits  with  respect  to the amounts so allocated, if such benefits are guaranteed at any time to be not less than an amount  equal to  or  greater  than such allocated amounts accumulated to such time at three percent per annum.  (4) Contracts delivered or issued  for  delivery  in  this  state  for individual  variable  life insurance policies shall contain loan, grace, reinstatement  and  nonforfeiture  provisions,  and  may   provide   for settlement options, under conditions acceptable to the superintendent.  (5) Individual variable contracts shall be included in determining the aggregate  limits  prescribed  in  section  four  thousand  two  hundred twenty-eight of this article, with appropriate modification  of  expense limits  for  such  contracts,  as  required  by  the  superintendent, to recognize the variable nature of the contracts.  (6) The reserve liability for variable contracts shall be  established in  accordance  with  actuarial  procedures  that recognize the variable nature of the benefits provided and any mortality guarantees provided in the contract.  (7) Notwithstanding any other provision  of  law,  the  superintendent shall  have the sole authority to regulate the issuance and sale of such agreements; and, in addition to  the  powers  expressly  given  by  this section,  the  superintendent  shall  have the power to promulgate, from time to time, such regulations, not inconsistent with the provisions  of this  chapter, as may be appropriate to carry out the provisions of this section and, insofar as applicable to this section, other provisions  of this chapter.  (e)  No authorized insurer shall make any such agreement in this state providing for the allocation of amounts to a separate account until such insurer has filed with the superintendent a statement as to its  methods of  operation  of  such  separate  account  and  the  superintendent has approved such statement. Subject to the approval of the  superintendent, any  such statement may apply to one or more groups of separate accounts classified by investment policy, number or  kinds  of  separate  account participants,  methods  of distribution of such agreements or otherwise. In determining whether  or  not  to  approve  any  such  statement,  the superintendent   shall   consider,  among  other  things,  the  history, reputation and financial stability of the  insurer  and  the  character, experience,  responsibility,  competence  and  general  fitness  of  the officers and directors of the insurer. If the insurer files an amendment of any such statement with the superintendent that does not  change  the investment  policy of a separate account and the superintendent does not approve or disapprove such amendment within  a  period  of  thirty  days after  such  filing, such amendment shall be deemed to be approved as of the end of such thirty day period, except  that  if  the  superintendent requests  further  information  on the statement during such period from the insurer, such period shall be extended until thirty days  after  the day  on which the superintendent receives such information. An amendment of any such statement that changes the investment policy of  a  separate account shall be treated as an original filing.  (f)   Notwithstanding  the  restrictions  and  limitations  herein  or otherwise imposed by law, the insurer may with respect to  any  separate account,  (i)  exercise  any  voting  rights of any securities allocated thereto in accordance with instructions from persons having interests in such account ratably as determined by the insurer, or (ii)  establish  a committee  for  such  account,  the members of which may be directors or officers or other employees of the insurer or  persons  having  no  such relationship  to  the  insurer,  or  any combination thereof, who may be elected to such membership by vote of the persons  having  interests  in  such  account  ratably  as determined by the insurer. Such committee may have the power, which may be exercisable alone or  in  conjunction  with others, or which may be delegated to the insurer or any other person, as investment  manager  or  investment  adviser,  to  authorize, approve or review the acquisition and disposition of investments for such  account. In  addition,  the  insurer may make such other provisions in respect to the separate account, including but not limited to voting,  investments, audits  and  otherwise  regarding  management and administration, as the insurer  may  deem  appropriate  to  facilitate  compliance   with   any requirements of or pursuant to any federal or state law now or hereafter in  effect;  provided that the superintendent approve such provisions as not hazardous to the public or its policyholders in this state.