TITLE 50: INSURANCE
CHAPTER I: DEPARTMENT OF INSURANCE
SUBCHAPTER t: SEPARATE ACCOUNTS
PART 1551
VARIABLE CONTRACTS
SECTION 1551.10 AUTHORITY (REPEALED)
Section 1551.10 Authority
(Repealed)
(Source: Repealed at 44 Ill. Reg. 3896, effective March 2, 2020)
 | TITLE 50: INSURANCE
CHAPTER I: DEPARTMENT OF INSURANCE
SUBCHAPTER t: SEPARATE ACCOUNTS
PART 1551
VARIABLE CONTRACTS
SECTION 1551.20 DEFINITIONS
Section 1551.20 Definitions
"Annuity
2000 Mortality Table" means the mortality table developed by the Society
of Actuaries Committee on Life Insurance Research and adopted as a recognized
mortality table for annuities in December 1996 by the National Association of
Insurance Commissioners (NAIC), as published in the Transactions of the Society
of Actuaries, Vol. XLVII, p. 240.
"Code"
means the Illinois Insurance Code [215 ILCS 5].
"Company"
means a stock or mutual legal reserve life insurance company or a fraternal
benefit company that operates on a legal reserve basis. It does not include an
assessment legal reserve company, or any other company as that term is defined
in Section 2(e) of the Code.
"Department"
means the Department of Insurance.
"Director"
means the Director of the Illinois Department of Insurance.
"Producer"
means any person who is licensed as a life insurance producer under the Code.
The term producer also includes any person who represents a fraternal benefit
company, operating on a legal reserve basis, and who solicits, negotiates or
effects, for or on behalf of the fraternal benefit company, policies or
contracts for insurance covering risks in this State.
"Securities
Examination" means the Financial Industry Regulatory Authority (FINRA)
Series 6 or Series 7 Qualification Examinations or any superseding FINRA
examination that grants a person authority to sell variable contracts.
"Variable
Contract" means any policy or contract that provides for life insurance or
annuity benefits that vary according to the investment experience of any
separate account or accounts maintained by the insurer as to that policy or
contract, as provided for in Section 245.21 of the Code; or any policy or
contract that is registered under the Securities Act of 1933, as amended (15
USC 77a et seq.), and that provides for benefits that vary according to the
performance of an index, when the funds are not guaranteed as to principal or a
stated rate of interest and in which the supporting assets are held and
reported in a noninsulated separate account in which changes in asset values
substantially match changes in contractual benefits from inception of the
contract.
"Variable
Contract Producer" means a producer who sells or offers to sell any
variable contract.
(Source: Amended at 44 Ill. Reg. 3896, effective March 2, 2020)
| TITLE 50: INSURANCE
CHAPTER I: DEPARTMENT OF INSURANCE
SUBCHAPTER t: SEPARATE ACCOUNTS
PART 1551
VARIABLE CONTRACTS
SECTION 1551.30 QUALIFICATION OF INSURANCE COMPANIES TO ISSUE VARIABLE CONTRACTS
Section 1551.30
Qualification of Insurance Companies to Issue Variable Contracts
a) Before any company shall deliver or issue for delivery
variable contracts within this State it shall submit to the Director:
1) A general description of the kinds of variable contracts it
intends to issue in this State;
2) If requested by the Director, a copy of the statutes and
regulations of its state of domicile under which it is authorized to issue
variable contracts; and
3) If requested by the Director, biographical affidavits with
respect to officers and directors of the company. The biographical affidavits
shall include, but not be limited to, the following information: identifying and
contact information; educational, residential and employment history; professional,
business and technical licenses and memberships; a complete history of fidelity
bonding; criminal charges and convictions; civil, regulatory, administrative
and disciplinary actions; a complete history of bankruptcy, insolvency, liens
and foreclosures; affiant's consent to release background reports to the
Department and consent for third parties to cooperate in the gathering of
background information and confirmation; and the individual's, and his or her
immediate family's, equity holdings in any entity subject to insurance
regulation. The Department will accept the biographical affidavit, and any
supplement to that affidavit. The affidavit is available on the website of the
NAIC or the Department.
b) The Director may require additional information to be filed
prior to authorizing a company to transact a variable contract business.
c) The Director shall notify the company, in writing, that it is
authorized to transact a variable contract business in this State.
(Source: Amended at 44 Ill. Reg. 3896, effective March 2, 2020)
| TITLE 50: INSURANCE
CHAPTER I: DEPARTMENT OF INSURANCE
SUBCHAPTER t: SEPARATE ACCOUNTS
PART 1551
VARIABLE CONTRACTS
SECTION 1551.40 SEPARATE ACCOUNTS
Section 1551.40 Separate
Accounts
A domestic company issuing
variable contracts shall establish one or more separate accounts pursuant to
Section 245.21 of the Code, subject to the following provisions of this
Section:
a) Reserves for:
1) benefits guaranteed as to dollar amount and duration, and
2) funds guaranteed as to principal amount or stated rate of
interest, which may be maintained in a separate account if a portion of the
assets of such separate account at least equal to such reserve liability is
invested in accordance with the laws and regulations of this State governing
the investments of life insurance companies. Such portion of the assets also
shall not be taken into account in applying the investment limitations
otherwise applicable to the investments of the company. If a variable contract
includes incidental minimum guarantees as referred to in Section 1551.60(c)(3)(B)
of this Part, this subsection (a)(2) shall apply only to the reserves for any
excess of such minimum guarantees over the reserves for the benefits that would
be payable under the contract if there were no such minimum guarantees.
b) The company shall maintain in each separate account assets
with a value at least equal to the reserves and other contract liabilities with
respect to such account, except as may otherwise be approved by the Director.
c) All provisions of the Illinois Insurance Code and any
administrative regulations issued thereunder applicable to the officers and
directors of insurance companies with respect to conflicts of interest shall also
apply to members of any separate account's committee, board or other similar
body. No officer or director of such company nor any member of the committee,
board or body of a separate account shall receive directly or indirectly any
commission or any other compensation with respect to the purchase or sale of
assets of such separate account.
d) Any insurance company which issues or delivers variable
contracts shall establish such administrative and accounting procedures as are
necessary to properly identify the one or more separate accounts of the company
derived from or in relation to contributions, premiums or considerations
received by it under such contracts and which meet the standards specified in
Section 133(1) of the Illinois Insurance Code [215 ILCS 5/133(1)].
(Source: Amended at 25 Ill. Reg. 4208, effective March 5, 2001)
| TITLE 50: INSURANCE
CHAPTER I: DEPARTMENT OF INSURANCE
SUBCHAPTER t: SEPARATE ACCOUNTS
PART 1551
VARIABLE CONTRACTS
SECTION 1551.50 FILING OF CONTRACTS
Section 1551.50 Filing of
Contracts
a) The filing requirements applicable to variable contracts shall
be those filing requirements otherwise applicable under existing statutes and
regulations of this State with respect to individual and group life insurance
and annuity contract form filings, to the extent appropriate as determined by
the Director.
b) Individual contracts which provide for both fixed and variable
benefits (which are specified at the time of the sale of such contracts) shall
show, separately, the consideration to be paid for the fixed benefits and for
the variable benefits.
c) In the sale of an individual variable contract, made in
correlation with the sale of either a fixed life insurance policy or a fixed
annuity contract, there shall be a disclosure to the prospective purchaser
which shows the consideration to be paid for the variable contract separately
from the other charges. If any benefits or nonforfeiture values which may
accrue prior to the death of the insured are involved in the presentation of
such a correlated sale, the value of such fixed life insurance policy or such
fixed annuity must be shown separately from any other values.
d) Companies filing variable contracts shall include a
certification by an officer of the company affirming that they will not sell
the product subsequent to the Director's approval unless the Securities and
Exchange Commission has provided an effective date for any securities
registration required by federal law.
(Source: Amended at 25 Ill. Reg. 4208, effective March 5, 2001)
| TITLE 50: INSURANCE
CHAPTER I: DEPARTMENT OF INSURANCE
SUBCHAPTER t: SEPARATE ACCOUNTS
PART 1551
VARIABLE CONTRACTS
SECTION 1551.60 CONTRACTS PROVIDING FOR VARIABLE BENEFITS
Section 1551.60 Contracts
Providing for Variable Benefits
a) Illustrations of benefits payable under any variable contract
shall not include projections of past investment experience into the future or
attempted predictions of future investment experience; provided, however, that
the form of illustration found in Appendix A of this Part may be utilized by
companies in the sale of immediate variable annuities only.
b) No individual variable annuity contract calling for the
payment of periodic stipulated payments shall be delivered or issued for
delivery in this State unless it contains in substance the following provisions
or provisions which in the opinion of the Director are more favorable to the
holders of such contracts:
1) A provision that there shall be a period of grace of 30 days
or of one month, within which any stipulated payment to the insurer falling due
after the first may be made, during which period of grace the contract shall
continue in force. The contract may include a statement of the basis for
determining the date as of which any such payment received during the period of
grace shall be applied to produce the values under the contract arising
therefrom;
2) A provision that, at any time within 1 year from the date of
default, in making periodic stipulated payments to the insurer during the life of
the annuitant and unless the cash surrender value has been paid, the contract
may be reinstated upon payment to the insurer of such overdue payments as
required by the contract, and of all indebtedness to the insurer on the
contract, including interest. The contract may include a statement of the
basis for determining the date as of which the amount to cover such overdue
payments and indebtedness shall be applied to produce the values under the
contract arising therefrom;
3) A provision specifying the options available in the event of
default in a periodic stipulated payment. Those options may include an option
to surrender the contract for a cash value as determined by the contract, and
shall include an option to receive a paid-up annuity if the contract is not
surrendered for cash, the amount of the paid-up annuity being determined by
applying the value of the contract at the annuity commencement date in
accordance with the terms of the contract.
c) No individual variable life insurance policy shall be
delivered or issued for delivery in this State unless it contains in substance
the following provisions or provisions that, in the opinion of the Director,
are more favorable to the holders of those policies:
1) A provision that there shall be a period of grace of 30 days
or of one month, within which payment of any premium after the first may be
made, during which period of grace the policy shall continue in force, but if a
claim arises under the policy during the period of grace before the overdue premiums
or the deferred premiums of the current policy year, if any, are paid, the
amount of those premiums, together with interest not in excess of 6% per annum,
may be deducted from any amount payable under the policy in settlement. The
policy may contain a statement of the basis for determining any variation in
benefits that may occur as a result of the payment of premium during the period
of grace.
2) A provision that the policy will be reinstated at any time
within 3 years from the date of default, unless the cash surrender value has
been paid or unless the period of extended insurance has expired, upon the
application of the insured and the production of evidence of insurability,
including good health, satisfactory to the insurer and the payment of an amount
not exceeding the greater of:
A) all overdue premiums and the payment of any other indebtedness
to the insurer upon said policy with interest at a rate not exceeding 6% per
annum compounded annually; or
B) 110% of the increase in cash surrender value resulting from
reinstatement.
3) A provision for cash surrender values and paid-up insurance
benefits available as non-forfeiture options under the policy in the event of
default in a premium payment after premiums have been paid for a specified
period.
A) If the policy does not include a table of figures for the
options so available, the policy shall provide that the company will furnish at
least once in each policy year a statement showing the cash value as of a date
no earlier than the prior policy anniversary.
B) The method of computation of cash values and other
non-forfeiture benefits, as described either in the policy or in a statement
filed with the Commissioner, Director or Superintendent of the jurisdiction in
which the policy is delivered, shall be in accordance with actuarial procedures
that recognize the variable nature of the policy. The method of computation
must be such that, if the net investment return credited to the contract at all
times from the date of issue should be equal to the assumed investment
increment factor if the contract provides for such a factor, or 3½% if not,
with premiums and benefits determined accordingly under the terms of the
policy, the resulting cash values and other non-forfeiture benefits would be at
least equal to the minimum values required by Section 229.2 of the Code for a
fixed dollar policy with those premiums and benefits. The method of
computation may disregard incidental minimum guarantees as to the dollar
amounts payable. Incidental minimum guarantees include, for example, but are
not to be limited to, a guarantee under a policy that provides for an assumed
investment increment factor that the amount payable at death or maturity shall
be at least equal to the amount that otherwise would have been payable if the
net investment return credited to the contract at all times from the date of
issue had been equal to that factor.
d) Any variable annuity contract delivered or issued for delivery
in this State shall stipulate the investment increment factors to be used in
computing the dollar amount of variable benefits or other variable contractual
payments or values thereunder, and may guarantee that expense and/or mortality
results shall not adversely affect those dollar amounts. In the case of an
individual variable annuity contract under which the expense and mortality
results may adversely affect the dollar amount of benefits, the expense and
mortality factors shall be stipulated in the contract.
1) In computing the dollar amount of variable benefits or other
contractual payments or values under an individual variable annuity contract:
A) The annual net investment increment assumption shall not exceed
5%, except with the approval of the Director;
B) To the extent that the level of benefits may be affected by
future mortality results, the mortality factor shall be determined from the Annuity
2000 Mortality Table, or any modification of that table not having a lower life
expectancy at any age, or any annuity mortality table adopted after 1996 by
NAIC that is approved by the Director.
2) "Expense", as used in subsection (d), may exclude
some or all taxes, as stipulated in the contract.
e) Any individual variable life insurance policy delivered or
issued for delivery in this State shall stipulate the investment increment
factor to be used in computing the dollar amount of variable benefits or other
variable contractual payments or cash values thereunder and shall guarantee
that expense and mortality results shall not adversely affect those dollar
amounts.
f) The reserve liability for variable contracts shall be
established pursuant to the requirements of Section 223 of the Code in
accordance with actuarial procedures that recognize the variable nature of the
benefits provided and any mortality guarantees, provided those actuarial
procedures meet the approval of the Director.
(Source: Amended at 44 Ill. Reg. 3896, effective March 2, 2020)
| TITLE 50: INSURANCE
CHAPTER I: DEPARTMENT OF INSURANCE
SUBCHAPTER t: SEPARATE ACCOUNTS
PART 1551
VARIABLE CONTRACTS
SECTION 1551.70 REQUIRED REPORTS
Section 1551.70 Required
Reports
a) Any company issuing individual variable contracts shall mail
to the contractholder at least once in each contract year after the first at
his last address known to the company, a statement or statements reporting the
investments held in the separate account. The company shall submit annually to
the Director a statement of the business of its separate account or accounts in
such form as may be prescribed by the National Association of Insurance
Commissioners.
b) Any company issuing individual variable contracts shall mail
to the contractholder at least once in each contract year after the first at
his last address known to the company, a statement reporting as of a date not
more than four months previous to the date of mailing:
1) in the case of an annuity contract under which payments have
not yet commenced,
A) the number of accumulation units credited to such contract and
the dollar value of a unit, or
B) the value of the contractholder's account; and
2) in the case of a life insurance policy, the dollar amount of
the death benefit.
| TITLE 50: INSURANCE
CHAPTER I: DEPARTMENT OF INSURANCE
SUBCHAPTER t: SEPARATE ACCOUNTS
PART 1551
VARIABLE CONTRACTS
SECTION 1551.80 FOREIGN OR ALIEN COMPANIES
Section 1551.80 Foreign or
Alien Companies
If the law or regulation in the
place of domicile of a foreign or alien company provides a degree of protection
to the policyholder and the public which is substantially equal to that
provided by applicable provisions of the Illinois Insurance Code and this Part,
the Director, to the extent deemed appropriate, may consider compliance with
such law or regulation as compliance with applicable provisions of the Illinois
Insurance Code and this Part. The state of entry of an alien company shall be
deemed its place of domicile for the purposes of this Part.
(Source: Amended at 25 Ill. Reg. 4208, effective March 5, 2001)
| TITLE 50: INSURANCE
CHAPTER I: DEPARTMENT OF INSURANCE
SUBCHAPTER t: SEPARATE ACCOUNTS
PART 1551
VARIABLE CONTRACTS
SECTION 1551.90 LICENSING OF PRODUCERS FOR VARIABLE CONTRACTS
Section 1551.90 Licensing of
Producers for Variable Contracts
a) No producer shall be eligible to sell or offer for sale a
variable contract unless, prior to making any solicitation or sale of such a
contract, the producer also is licensed as a variable contract producer. No
agent of a fraternal benefit company that operates on a legal reserve basis
shall be eligible to be licensed as a variable contract producer unless the
producer also is licensed as a life insurance producer.
b) Any producer who participates only in the sale or offering for
sale of variable contracts that are not registered under the Federal Securities
Act of 1933 (15 USC 77(a) et seq.) need not be licensed as a variable contract
producer.
c) Any producer applying for a license as a variable contract
producer shall do so by obtaining a life insurance producer license pursuant to
50 Ill. Adm. Code 3119 and filing with this Department proof of passing the Securities
Examination. Upon completion of these requirements, the Director shall issue a
variable contract license to the individual.
d) Any person licensed in this State as a variable contract
producer shall immediately report to the Director:
1) any suspension or revocation of the variable contract
producer's license or life insurance producer's license in any other State or
Territory of the United States;
2) the imposition of any disciplinary sanction (including
suspension or expulsion from membership, suspension or revocation of or denial
of registration) imposed by any national securities exchange, or national
securities association, or any federal, or state or territorial agency with
jurisdiction over securities or variable contracts;
3) any judgement or injunction entered against the producer on
the basis of conduct deemed to have involved fraud, deceit, misrepresentation,
or violation of any insurance or securities law or regulation.
e) The Director may reject any application or suspend or revoke
or refuse to renew any variable contract producer's license upon any ground
that would bar the applicant or producer from being licensed to sell life
insurance contracts in this State. The rules governing any proceeding relating
to the suspension or revocation of a life insurance producer's license shall
also govern any proceeding for suspension or revocation of a variable contract
producer's license.
f) Renewal of a variable contract producer's license shall follow
the same procedure established for renewal of a producer's license to sell life
insurance contracts in this State.
g) No recommendation shall be made by an insurance producer, or insurer
when no producer is involved, to an applicant to purchase a variable life
insurance policy, on an individual basis, in the absence of reasonable grounds
to believe that the purchase of the policy is not unsuitable for the applicant
on the basis of information furnished after reasonable inquiry of the applicant
concerning the applicant's age, insurance and investment objectives, financial
situation, needs and tax status, and any other information known to the insurer
or producer making the recommendation.
1) For purposes of this subsection (g), "recommendation"
means advice provided by an insurance producer, or an insurer when no producer
is involved, to an individual consumer that results in a purchase or exchange
of a variable life insurance contract in accordance with that advice.
2) Compliance with the Financial Industry Regulatory Authority
rules pertaining to suitability (1735 K Street, N.W., Washington DC 20006) (amended
by SR-FINRA-2014-016, effective May 2, 2014; no later editions or amendments
are included) shall satisfy the requirements under this Section for the
recommendation of variable life insurance policies. However, nothing in this
Section shall limit the Director's ability to enforce this requirement.
3) Violation of the requirements of this Part shall be an unfair
trade practice and evidence of incompetence or untrustworthiness in the conduct
of business under Section 500-70(a)(7) and (8) of the Code.
(Source: Amended at 44 Ill. Reg. 3896, effective March 2, 2020)
| TITLE 50: INSURANCE
CHAPTER I: DEPARTMENT OF INSURANCE
SUBCHAPTER t: SEPARATE ACCOUNTS
PART 1551
VARIABLE CONTRACTS
SECTION 1551.100 DISCLOSURE
Section 1551.100 Disclosure
a) The following information shall be furnished to an applicant
for a contract of variable life insurance prior to execution of the
application:
1) A summary description of the insurance company and its
principal activities.
2) A summary explanation in non-technical terms of the principal
variable features of the contract and of the manner in which any variable
benefits reflect the investment experience of a separate account.
3) A brief description of the investment policy for the separate
account with respect to such contract.
4) A list of investments in the separate account as of a date not
earlier than the end of the last year for which an annual statement has been
filed with the Director of the state of domicile.
5) Summary financial statements of the insurance company and the
separate account based upon the last annual statement filed with such Director,
except that for a period of 4 months after the filing of any annual statement
the summary required by this subsection (a)(5) may be based upon the annual
statement, immediately preceding such last annual statement, filed with the
Director.
b) The insurance company may include such additional information
as it deems appropriate.
c) A copy of the statement containing the information required by
subsection (a) shall be filed with the Director prior to any use of the
statement and shall be subject to disapproval if found to be inaccurate or
misleading.
(Source: Amended at 25 Ill. Reg. 4208, effective March 5, 2001)
Section 1551.APPENDIX A Variable Annuities Only
| TITLE 50: INSURANCE
CHAPTER I: DEPARTMENT OF INSURANCE
SUBCHAPTER t: SEPARATE ACCOUNTS
PART 1551
VARIABLE CONTRACTS
SECTION 1551.APPENDIX A VARIABLE ANNUITIES ONLY
Section 1551.APPENDIX A
Variable Annuities Only
[Name
of Company]
Hypothetical
Illustration of Benefits
From
An Immediate Variable Annuity
|
Prepared for
|
John Doe
|
|
Age & Sex
|
65 Male
|
|
Annuity Form
|
Life Annuity with 120
|
|
|
Months Certain
|
|
Single Purchase Payment
|
$15,000
|
|
|
|
Annuity payments will vary as
described in the prospectus, and in accordance with the actual investment
results.
An interest rate of 3½% is used
in calculating the initial payment. If the investment result after charges and
taxes, as described in the prospectus, is equal to the interest rate assumed
for the annuity, the annuity payment for that period will be unchanged. If the
investment result is greater, the annuity payment will increase; if less, the
payment will decrease.
The table below illustrates the
effect of three hypothetical annual rates of investment return. The
hypothetical rates of investment return shown are after provision for any taxes
chargeable to the account, but before deduction of other charges.
|
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MONTHLY
ANNUITY PAYMENT
|
|
|
AT
AGE
|
|
Hypothetical
Investment Result
|
|
First
Payment
|
|
70
|
|
75
|
|
80
|
|
85
|
|
8%
|
|
$92.64
|
|
$109.40
|
|
$129.19
|
|
$152.56
|
|
$180.16
|
|
4%
|
|
92.64
|
|
90.42
|
|
88.26
|
|
86.15
|
|
84.09
|
|
0%
|
|
92.64
|
|
74.18
|
|
59.39
|
|
47.56
|
|
38.08
|
The investment results bear no
relationship to past or future investment results. Actual investment results
will vary from month to month and actual payments may be more or less than
shown above.
Use of this material is
prohibited unless preceded or accompanied by a current prospectus which sets
forth the sales expenses and other material information.
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