2023 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.