SECTIONS 10507-10507.4 - California Statutes

INSURANCE CODE

SECTION 10507-10507.4

10507. (a) Any life insurance company authorized to do business in
this state shall be permitted to issue and deliver individual
policies in connection with the payment of benefits against the risk
of loss in the value of redeemable securities of the insured investor
issued by investment companies regulated by the federal Investment
Company Act of 1940, as amended, and whose redeemable securities are
registered under the federal Securities Act of 1933, as amended. For
purposes of this article, such benefits shall be referred to as
"investment return assurance."
(b) Policies providing such investment return assurance shall
provide a benefit equal to the difference between the amount paid for
such redeemable securities and the value of such redeemable
securities at the earlier of either (1) the end of the policy period,
or (2) the date of death of the insured.
(c) To protect the public and policyholders located in this state
from hazardous operation by domestic, foreign, or alien companies,
and to further the purpose and provision of this part, no domestic,
foreign, or alien insurance company shall undertake the issuance of
any policy providing for investment return assurance until such
company has satisfied the commissioner that its condition or method
of operation in connection with the issuance of such policies shall
not be such as to render its operation hazardous to the public, or
its policyholders in this state, and, whether domestic, foreign, or
alien, that it meets the conditions prescribed in Section 717 for the
issuance of a certificate of authority. In the determination of the
qualification of a company requesting authority to issue policies
providing for investment return assurance within this state, the
commissioner shall consider, in addition to the requirements of
Section 717, (1) the history of the company, (2) the character,
responsibility, and general fitness of the officers and directors of
the company, (3) the regulation of a foreign or alien company by its
state of domicile, (4) the adequacy of the investment management
which the company is providing, and (5) the company's arrangements
for the supervision of the marketing of such policies. No company may
provide investment return assurance in its policies unless it is an
admitted insurer having and maintaining a combined capital and
surplus of at least two million dollars ($2,000,000).
(d) In addition to the requirements of subdivision (c), no
admitted insurer may provide investment return assurance in its
policies unless it establishes a special contingency fund of not less
than one million dollars ($1,000,000). This fund shall be deemed to
constitute a reserve liability in addition to other reserves of such
insurer. In the event such insurer writes investment return assurance
both on an individual and a group basis, the special contingency
fund shall be one million dollars ($1,000,000) for both.

10507.1. The commissioner shall require the payment of two hundred
fifty dollars ($250) as a fee for the determination of qualification
required by Section 10507. Upon completion of the determination of
qualification, and whether authorization to issue policies providing
investment return benefits is granted or denied, the commissioner
shall require the payment of such additional amounts from the
requesting insurer as may be necessary to defray all administrative
costs in excess of two hundred fifty dollars ($250) incurred by the
commissioner in making such determination.

10507.2. An investment return assurance policy evidencing such
insurance, shall not be issued or delivered in this state until a
copy of the form thereof is filed with the commissioner, the fees
required by Section 12973.9 are paid, and the commissioner has given
written approval of the form.

10507.3. No policy of investment return assurance shall be
delivered or issued for delivery to any person in this state unless
each such policy does all of the following:
(a) Includes a statement on the first page thereof in boldface
type that, in the event that the investment covered by the policy
exceeds the benefit provided under the policy, there shall be no
benefit.
(b) Provides for both of the following:
(1) The reserves for all investment return assurance policies
shall be computed and maintained on a basis which shall place an
actuarially sound value on the liabilities under such policies. To
provide a basis for the determination of such actuarially sound
values, the commissioner, from time to time, shall adopt rules
requiring the use of appropriate tables of morbidity, mortality,
interest rates, and valuation methods for such reserves.
(2) Any paid-up nonforfeiture benefit available under the policy
in the event of default in a premium payment due on any policy
anniversary shall be such that its present value as of such
anniversary shall be at least equal to the ratio of the number of
years the policy has been in force to the total premium-paying period
times the present value of benefits payable had the policy been kept
in full force and effect for the total premium-paying period.

10507.4. In furtherance of the purpose of this article, the
commissioner may make reasonable rules and regulations. The rules and
regulations shall be adopted, amended, or repealed in accordance
with the procedure provided in Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code.