Connecticut Administrative Code › Title 38a - Insurance Department › 459 - Synthetic Guaranteed Investment Contracts › Section 38a-459-3 - Financial requirements and plan of operation for synthetic guaranteed investment contracts

Current through July 10, 2024
(a) A contract
			 shall not be delivered or issued for delivery in this state unless the issuing
			 insurance company is licensed to do life insurance business in this state
			 pursuant to section 38a-41 of the Connecticut General Statutes and is
			 financially qualified under the provisions of subsection (b) of this section.
			 In addition, a domestic insurance company shall not deliver or issue for
			 delivery, either in this state or outside this state, a contract belonging to a
			 specific class of contracts unless the insurance company has satisfied the
			 requirements of subsection (c) of this section with respect to that
			 class.
(b) An insurance company is
			 financially qualified under this section if its most recent statutory financial
			 statements reflect at least $1 billion in admitted assets or $100 million in
			 capital and surplus, and its risk-based capital results do not trigger a
			 regulatory action level event as set forth in section
			 38a-72-4
			 of the Regulations of Connecticut State Agencies. In lieu of the requirements
			 in the preceding sentence, the insurance company may be required to satisfy
			 such other financial qualification requirements set forth by the insurance
			 commissioner as necessary or appropriate in a particular case to protect the
			 insurance company's policyholders or the public.
(c) A domestic insurance company satisfies
			 the requirements of this section with respect to a class of contracts if the
			 insurance company has filed a plan of operation pertaining to the class of
			 contracts, together with copies of the forms of contract in the class, with the
			 insurance commissioner and the filing of the plan of operation has been
			 approved or has not been disapproved within the sixty-day period following the
			 date of filing, in which event the plan of operation shall be deemed approved.
			 The plan of operation for a class of contracts shall describe the financial
			 implications for the insurance company of the issuance of contracts in the
			 class, and shall include at least the following:
(1) A statement that the plan of operation
			 will be administered in accordance with the requirements prescribed by the
			 insurance commissioner pursuant to sections
			 38a-459-1
			 to
			 38a-459-9,
			 inclusive, of the Regulations of Connecticut State Agencies, along with a
			 statement that the insurance company shall comply with the plan of operation in
			 its administration of the contract;
(2) A statement describing the methods and
			 procedures used to value statutory liabilities for purposes of section
			 38a-459-8
			 of the Regulations of Connecticut State Agencies;
(3) A description of the criteria used by the
			 insurance company in approving the investment manager for the segregated
			 portfolio of assets associated with a contract in the class, if the investment
			 manager is an entity other than the insurance company or its wholly owned
			 subsidiary;
(4) A description of
			 the insurance company's requirement for reports concerning the assets in each
			 segregated portfolio and transactions involving the assets, and a description
			 of how the insurance company can use the information in a report to determine
			 that the segregated portfolio is being managed in accordance with its
			 investment guidelines. The insurance company shall require that the report be
			 prepared no less frequently than quarterly, and include a complete statement of
			 segregated portfolio holdings and their fair market value;
(5) A statement of the anticipated financial
			 results for one or more sample contracts from the class of contracts, showing
			 at a minimum the projected contract value records, the applicable fixed rate or
			 rates of return, and the projected market value records, describing how the
			 investments in the segregated portfolio reflect provision for benefits insured
			 by the contract and how the contract value and market values and the rates of
			 return may be affected by changes in the investment returns of the segregated
			 portfolio and reasonably anticipated deposits to and withdrawals from the
			 segregated portfolio by the contract holder, as well as any advances made by
			 the insurance company to the contract holder. The sample contracts shall be
			 chosen to reasonably represent the range of results that could be expected from
			 possible combinations of contract provisions of all contracts within the class.
			 The statement shall include at least three hypothetical return scenarios
			 (level, increasing, and decreasing) and for each of these scenarios, at least
			 three withdrawal scenarios (zero, moderate, and high) shall be modeled. The
			 insurance commissioner may require additional scenarios to fully understand the
			 risks under the class of contracts. The period covered by the statement shall
			 be the greater of five years or the minimum period the insurance company has to
			 underwrite the risk;
(6) A
			 statement that all contracts in the class of contracts satisfy the requirements
			 regarding unilateral contract terminations of section
			 38a-459-7
			 of the Regulations of Connecticut State Agencies, together with a description
			 of all termination events, discontinuation triggers and options, notice
			 requirements, corrective action procedures, all other contract safeguards, and
			 the procedures to be followed when a unilateral contract termination event
			 occurs;
(7) A description of the
			 allowable investment parameters (e.g., objectives, derivative strategies, asset
			 classes, quality, duration, and diversification requirements applied to the
			 assets held within the segregated portfolio) to be reflected in the investment
			 guidelines applicable to each contract issued in the class to which the
			 submitted plan of operation applies; and a description of the procedures that
			 shall be followed by the insurance company in evaluating the appropriateness of
			 any specific investment guidelines submitted by the contract holder. If the
			 insurance company chooses to operate a contract in accordance with investment
			 guidelines not meeting the criteria established pursuant to this subdivision,
			 the non-conforming set of investment guidelines shall be filed with the
			 insurance commissioner in accordance with the filing requirements of this
			 subsection;
(8) A description of
			 the criteria used by the insurance company in approving issuance of a contract
			 to a pooled fund representing multiple employer-sponsored plans and in
			 approving the investment manager for the segregated portfolio of assets
			 associated with such pooled fund contract;
(9) A description of the risk-mitigation
			 techniques used by the insurance company in connection with contracts issued to
			 pooled funds representing multiple employer-sponsored plans;
(10) An unqualified opinion by a qualified
			 actuary with expertise in such matters as to the adequacy of the consideration
			 charged by the insurance company for the risks it has assumed with respect to
			 the contracts in the class to which the plan of operation applies. A statement
			 that the actuarial opinion and memorandum required pursuant to section
			 38a-459-8
			 of the Regulations of Connecticut State Agencies, with respect to the class of
			 contracts to which the plan of operation applies, includes:
(A) If a payment has been made by the
			 insurance company in the prior reporting period under a contract in the class,
			 the amount of aggregate risk charges, i.e., the consideration charged by the
			 insurance company for the risks it has assumed under the contract (net of
			 administrative expenses, i.e., the amount of insurance company overhead or
			 expense that is directly or indirectly allocable to a contract) for contracts
			 in the class, and the aggregate amount of any losses incurred; and
(B) An inventory of all material unilateral
			 contract termination events in the class that have not been cured within the
			 time period specified and that have occurred during the prior reporting period
			 but where the insurance company decided not to terminate the
			 contract;
(11) A
			 description of the withdrawal hierarchy, if any.