California Code of Regulations › Title 10 - Investment › Chapter 5 - Insurance Commissioner › Subchapter 3 - Insurers › Article 10.1 - Investment Annuities › Section 2522.4 - General Requirements

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a)
				  An investment annuity policy is an individual policy or a group policy
				  providing annuity payments to the annuitant(s) covered thereunder beginning
				  immediately, or at some time in the future, based upon the value of a
				  segregated custodian account, the assets of which are not managed by the
				  insurer and which are irrevocably committed to the insurer as specified in the
				  following subsection of this Article.
(b) Under investment annuity policies annuity
				  purchase contributions consisting of cash, securities, or other assets, are the
				  financial consideration for the investment annuity, and must be made to a
				  segregated custodian account or accounts established pursuant to a written
				  agreement with a fiduciary bank or trust company unaffiliated with the insurer
				  or any affiliates of the insurer. The assets of the account must be irrevocably
				  committed to the insurer and must be used, according to the provisions of the
				  policy, to pay all current and deferred premiums, as due, to the insurer, taxes
				  as applicable to the account, investment expenses relating to the account such
				  as brokerage commissions and the charges of the custodian. Policies, other than
				  when annuity benefit payments have commenced, shall provide for a cash
				  surrender.
(c) Such investment
				  annuity policies may provide benefits based on a single contribution (single
				  purchase policies), or a series of contributions, reasonably anticipated to be
				  made in predetermined specified amounts at predetermined specified times
				  (recurring purchase policies), either of which may permit additional
				  contributions at any time.
(d) The
				  insurer must establish an Accepted Assets List, in accordance with Section
				  2522.10 of this Article, which is
				  extensive in nature and expressed generally as to the kinds of investments
				  acceptable to the insurer. The selection of investments within the account may
				  be made by the annuitant in accordance with the Accepted Assets List of the
				  insurer; provided, however, if the policyowner is other than the annuitant, and
				  the policyowner has the investment discretion of the account, the policy may
				  provide that the policyowner, rather than the annuitant, will select the
				  investments. The selection of investments may be delegated to an appointed
				  investment manager of the policyowner. The insurer shall not, directly or
				  indirectly, manage the investment or reinvestment of assets in the
				  account.
(e) The assets in the
				  account shall be valued by the custodian at the end of each calendar year at
				  fair market value on the date of valuation. "Account Market Value," as used in
				  this Article, means the value, net of due or accrued taxes, custodian charges,
				  investment expenses, and account market value premiums. The assets of any such
				  account are not chargeable with liabilities arising out of any other business
				  the insurer may conduct. Neither policyowners nor annuitants shall share in any
				  of the profits or the losses of the insurer. There shall be no sharing of
				  profits or losses among accounts. All policies shall be non-participating. If
				  the insurer reduces premiums on larger annuity purchase contributions for a
				  specified class of annuitants, such reduction shall be applicable to all
				  members of the class.
(f) Premiums
				  from the account may become due and payable to the insurer upon the receipts of
				  annuity purchase contributions by the custodian, upon stated intervals based on
				  the account market value, upon the death of the annuitant, upon the annuitant
				  reaching a predetermined age, upon cash withdrawals or surrender of the policy
				  or group certificate, upon such dates that immediately precede any benefit
				  interval, or upon such other due date as specified in the policy. If after
				  payment of premiums on a due date, obligations to an annuitant or a beneficiary
				  continue which are not funded by the premium payments, the proper amount of
				  assets to fulfill such continuing benefit obligations shall remain in the
				  account.
(g) All premiums, current
				  or deferred, prescribed by the policy shall be actuarially determined to
				  provide benefits for annuitants with allowance to the insurer for expenses,
				  contingencies, and profits. Premiums reflect the fact that the account market
				  value on which benefits are based may change at stated intervals. Premiums may
				  be expressed either as percentages or stated dollar amounts, or a combination
				  thereof.
(h) The schedule of
				  premium rates and annuity rates applicable during the annuity payout period
				  shall be constructed to provide a level fixed dollar annuity for a benefit
				  interval and such benefit amounts will remain the same for successive benefit
				  intervals so long as the account market value increases at a rate equal to the
				  net assumed investment increment rate stated in the policy. If the account
				  market value increases at a higher rate, the annuity payments in the succeeding
				  benefit interval will be increased. If the account market value increases at a
				  lower rate, the annuity payments in the succeeding benefit interval will be
				  decreased.
(i) The insurer shall
				  establish reserves for its benefit obligations, and the premiums received by
				  the insurer for such obligations shall be invested by the insurer in the manner
				  specified by statute for fixed dollar annuity reserves.