Code of Vermont Rules › Agency 21 - DEPARTMENT OF FINANCIAL REGULATION › Sub-Agency 000 - GENERAL › Chapter 003 - TERM AND UNIVERSAL LIFE INSURANCE RESERVE FINANCING › Section 21 000 003 - TERM AND UNIVERSAL LIFE INSURANCE RESERVE FINANCING

Current through June,
				2024
Section 1
				Authority.
This regulation is adopted and promulgated by the Department
				  of Financial Regulation pursuant to
				  8 V.S.A. §
											3634a(e), as well as
				  8 V.S.A. §
											15(a).
Section 2 Purpose and Intent.
The purpose and intent of this regulation is to establish
				  uniform, national standards governing reserve financing arrangements pertaining
				  to life insurance policies containing guaranteed nonlevel gross premiums,
				  guaranteed nonlevel benefits and universal life insurance policies with
				  secondary guarantees; and to ensure that, with respect to each such financing
				  arrangement, funds consisting of Primary Security and Other Security, as
				  defined in Section
				  5 of this
				  Regulation, are held by or on behalf of ceding insurers in the forms and
				  amounts required herein. In general, reinsurance ceded for reserve financing
				  purposes has one or more of the following characteristics: some or all of the
				  assets used to secure the reinsurance treaty or to capitalize the reinsurer (1)
				  are issued by the ceding insurer or its affiliates; or (2) are not
				  unconditionally available to satisfy the general account obligations of the
				  ceding insurer; or (3) create a reimbursement, indemnification or other similar
				  obligation on the part of the ceding insurer or any if its affiliates (other
				  than a payment obligation under a derivative contract acquired in the normal
				  course and used to support and hedge liabilities pertaining to the actual risks
				  in the policies ceded pursuant to the reinsurance treaty).
Section 3 Applicability.
This regulation shall apply to reinsurance treaties that cede
				  liabilities pertaining to Covered Policies, as that term is defined in Section
				  5B, issued by any life insurance company domiciled in this state. This
				  regulation and DFR Insurance Regulation No. 97-3 (Credit for Reinsurance) shall
				  both apply to such reinsurance treaties; provided, that in the event of a
				  direct conflict between the provisions of this regulation and DFR Insurance
				  Regulation No. 97-3 (Credit for Reinsurance), the provisions of this regulation
				  shall apply, but only to the extent of the conflict.
Section 4 Exemptions from this Regulation.
This regulation does not apply to the situations described in
				  Subsections A through F.
A.
				Reinsurance of:
(1) Policies that satisfy the
				criteria for exemption set forth in DFR Insurance Regulation No. 99-3(6)(F) or
				No. 99-3(6)(G) (Valuation of Life Insurance Policies) that are issued before
				the effective date of this regulation.
(2) Portions of policies that satisfy the
				criteria for exemption set forth in DFR Insurance Regulation No. 99-3(6)(E)
				(Valuation of Life Insurance Policies) that are issued before the effective
				date of this regulation.
(3) Any
				universal life policy that meets all of the following requirements:
(a) Secondary guarantee period, if any, is
				five (5) years or less;
(b)
				Specified premium for the secondary guarantee period is not less than the net
				level reserve premium for the secondary guarantee period based on the
				Commissioners Standard Ordinary (CSO) valuation tables and valuation interest
				rate applicable to the issue year of the policy; and
(c) The initial surrender charge is not less
				than one hundred percent (100%) of the first year annualized specified premium
				for the secondary guarantee period;
(4) Credit life insurance;
(5) Any variable life insurance policy that
				provides for life insurance, the amount or duration of which varies according
				to the investment experience of any separate account or accounts; or
(6) Any group life insurance certificate
				unless the certificate provides for a stated or implied schedule of maximum
				gross premiums required in order to continue coverage in force for a period in
				excess of one year.