Code of Maryland Regulations › Title 31 - MARYLAND INSURANCE ADMINISTRATION › Subtitle 09 - LIFE INSURANCE AND ANNUITIES › Chapter 31.09.02 - Variable Life Insurance › Section 31.09.02.06 - Separate Accounts

Current through Register Vol. 51, No. 14, July 12, 2024
The following requirements apply to establishment and administration of variable life insurance separate accounts:
A. Establishment and Administration of Separate Accounts.
(1) An insurer issuing variable life insurance in this State shall establish one or more separate accounts pursuant to Insurance Article, §§
										16-601 -16-603, Annotated Code of Maryland.
(2) Assets in the separate account shall be owned by the insurer and the insurer may not be, or hold itself out to be, a trustee with respect to these assets. If and to the extent so provided under the applicable contracts, that portion of the assets of the separate account equal to the reserves and other contract liabilities with respect to the account may not be chargeable with liabilities arising out of any other business the insurer may conduct.
(3) If no law or other regulation provides for the custody of separate account assets and if the insurer itself is not the custodian of these assets, all contracts for custody shall be in writing and the Commissioner of the insurer's state of domicile shall approve of both the terms of the contract and the proposed custodian before the transfer of custody.
(4) Without the prior written approval of the Commissioner, an insurer may not employ in any material connection with the handling of separate account assets any person who:
(a) Within the last 10 years has been convicted of any felony, or of a misdemeanor arising out of this person's conduct involving embezzlement, fraudulent conversion, or misappropriation of funds or securities or involving violation of 18 U.S.C. §
												1341, 1342, or 1343;
(b) Within the last 10 years has been found by any state regulatory authority to have violated or has acknowledged violation of any provision of any state insurance law involving fraud, deceit, or knowing misrepresentation;
(c) Within the last 10 years has been found by federal or state regulatory authorities to have violated, or has acknowledged violation of, any provision of federal or state securities laws involving fraud, deceit, or knowing misrepresentation; or
(d) Within the past 10 years has signed a consent order with any federal or state regulatory authority that it will not in the future engage in any of the aforementioned violations.
(5) A person with access to the cash, securities, or other assets of the separate account shall be under bond in an amount of not less than the greater of $500,000 or 25 percent of the assets to which the person has access, but the bond need not exceed 5 million dollars.
(6) If an insurer establishes more than one separate account for variable life insurance, justification for the establishment of each additional separate account shall also be filed with the Commissioner and shall be subject to the Commissioner's approval. The creation of additional separate accounts to avoid lower maximum charges against the separate account is prohibited.
(7) The assets of the separate accounts established for variable life insurance policies shall be valued at least as often as variable benefits are determined but in any event at least monthly.
(8) A separate account exempt pursuant to the federal Investment Company Act of 1940, § 3(c)(11), because of the tax qualified status of the policies funded thereby, may not be used to fund other variable life insurance policies.
(9) Except for separate accounts exempt pursuant to the federal Investment Company Act of 1940, § 3(c)(11), variable life insurance separate accounts may not be used for variable annuities or for the investment of funds corresponding to dividend accumulations or other policyholder liabilities not involving life contingencies.