Title 31 — Subtitle 09. Life Insurance and Annuities

“Wholesale life insurance” means life insurance distributed on a mass merchandising basis and administered by group methods provided, with or without evidence of insurability, by individual policies and made available to employees or members under a program sponsored by:

The program may also cover dependents of the employees or members.

As used in this chapter, the term “wholesale life insurance policy” does not include policies issued in connection with:

An arrangement for premium payment such as salary deduction, salary savings, or payroll allotment may not in and of itself cause a policy to be classified as wholesale life insurance. Except where the context indicates otherwise, references to policy in this chapter shall refer to a wholesale life insurance policy.

Premium rates for wholesale life insurance policies may be less than rates customarily charged by the insurer for ordinary policies issued under the same policy plan of insurance for the same class of risk.

Policies Issued on the Yearly or More Frequently Renewable Term Plan. The policy shall contain a table of renewable premiums for all ages up to the limiting age for renewal. Ages may be grouped for the purpose of premium rates either by one group for ages under 40 or by decennial (10-year) or smaller age groupings for ages under 40, and by quinquennial (5-year) or smaller age groupings for ages 40 to 75. The insurer may reserve the right to change the table of rates upon 30 days prior written notice to the sponsor and to the insured employee or member, the change to become effective on a premium due date or on a policy renewal date specified in the notice, but an increase in rates may not become effective within 1 year after issue of the policy or after the effective date of any prior change in the table of rates.

Policies Issued on Other Than the Yearly or More Frequently Renewable Term Plan. A policy issued on other than the yearly or more frequently renewable term plan shall have premium rates guaranteed in the policy. These rates may not be changed while the policy is continued as a wholesale life insurance policy. However, the insurer may make a change in its schedule of premium rates to be effective for policies issued after the effective date of the change to employees or members of the same sponsor.

Nondiscrimination. Premium rates shall be self-supporting on reasonable assumptions as to mortality, interest, and expense and may not unfairly discriminate between any class or classes of persons insured.

Experience Refund. An insurer may grant experience refunds to a case either retrospectively or prospectively, if all wholesale life insurance cases of the same class are experience rated by the insurer on a equitable basis taking into consideration size, credibility, and other relevant factors.

Evidence of Insurability. The insurer may require evidence of insurability on individual lives.

Contributory and Noncontributory. Premiums for the policies may be paid by the sponsor or by the employee or member insured, or partly by the sponsor and partly by the employee or member insured.

Employer Sponsored Case.

Other Sponsors. If a sponsor is other than an employer, the case may be written only if the persons, excluding dependents, to be initially insured shall number at least five, and if the number of persons, excluding dependents, initially eligible exceeds 32, only if the case does not qualify for a group life insurance policy under Insurance Article, Title 17, Annotated Code of Maryland, as amended to date.

The insurer may reserve the right to nonrenew a policy in the wholesale life insurance category only for one or more of the following reasons as may be specified in the policy:

Written notice under §A of this regulation may be given by timely mailing of the notice to the employee or member insured at his most recent address known to the insurer or to the sponsor.

Effective Date of Nonrenewal. Termination or nonrenewal of a wholesale life insurance policy for a reason other than nonpayment of premium may not be made effective on a date other than a premium due date or a policy renewal date.

With respect to each insured employee or member, an individual policy which identifies the insured employee or member by name shall be issued covering himself or his dependents, or both. The policy shall contain all of the provisions required by §§B—M of this regulation, except that any provision or portion thereof which in the opinion of the Commissioner is not applicable to the plan of insurance shall, to the extent inapplicable, not be incorporated in the policy. In lieu of any of the provisions required by this chapter, the Commissioner may approve any provision which he deems more favorable to the policyholder.

Grace Period. A grace period of not less than 30 days shall be allowed within which the payment of any premium payable under the policy (except the first premium) may be made, during which grace period the policy shall continue in full force. If a claim arises under the policy during the grace period, the insurer may deduct the amount of any premium due from the policy proceeds.

Incontestability. The policy shall be incontestable as to life insurance benefits (exclusive of additional benefits relating to disability or accidental death), except for nonpayment of premium, after it has been in force during the lifetime of the insured for a period of 2 years from its date of issue.

Entire Contract. The policy shall provide that it, or it together with any application for a policy if a copy of the application is endorsed upon or attached to the policy when issued, shall constitute the entire contract between the insurer and the policyholder, and if the application is so made a part of the policy, that all statements contained in the application shall, in the absence of fraud, be deemed representations and not warranties.

Misstatement of Age. The policy shall provide that if the age of the insured or any other person whose age is considered in determining the premium or benefit has been misstated, any amount payable or benefit accruing under the policy shall be such as the premium would have purchased at the correct age or ages.

Payment of Claims. The policy shall provide that any benefits becoming payable by reason of the death of the insured shall be made to the person entitled to them upon receipt of due proof of death.

Beneficiary. The policy shall have endorsed on it, or on an application attached to it, the name of the beneficiary and reserve to the policy owner the right to change the beneficiary unless the owner elects to designate a beneficiary irrevocably. The policy may also provide that if the beneficiary designated in the policy does not make a claim under the policy or does not surrender the policy with due proof of death within the period stated in the policy, which may not be less than 30 days after the death of the insured, or if the beneficiary is the estate of the insured, or is a minor, or dies before the insured, or is not legally competent to give a valid release, then the insurer may make any payment under the policy to the estate of the insured, or to any relative of the insured by blood or legal adoption or connection by marriage, or to any person appearing to the insurer to be equitably entitled to payment by reason of having been named beneficiary, or by reason of having incurred expense for the maintenance, medical attention, or burial of the insured. The policy may also include a similar provision applicable to any other payment due under the policy. At the option of the insurer, the policy may also provide that no designation or change of beneficiary shall be binding on the insurer until endorsed on the policy by the insurer, or otherwise accepted by the insurer, and that the insurer may refuse to endorse the name of any proposed beneficiary who does not appear to the insurer to have an insurable interest in the life of the insured. If the policy provides that the proceeds may be payable in installments or as an annuity, the policy shall include a table showing the amount and period of the installment or annuity if determinable at issue.

Reinstatement. The policy shall provide that unless it has been surrendered for its cash surrender value, or its cash surrender value has been exhausted by reason of policy indebtedness, or the paid-up term insurance, if any, has expired, the policy may be reinstated at any time within 3 years from the due date of the first premium in default upon written application to the insurer and the production of evidence of insurability satisfactory to the insurer, and the payment of all premiums in arrears and payment or reinstatement of any other indebtedness to the insurer upon the policy and the payment of interest at a specified rate not exceeding an effective rate of 6 percent per annum compounded annually on all premiums in arrears and indebtedness.

Nonforfeiture Values. The policy shall contain nonforfeiture provisions not less favorable to the policyholder in every respect than those required under Insurance Article, Title 16, Subtitle 3, Annotated Code of Maryland, for a policy of ordinary life insurance issued on the same plan of insurance and containing the same benefits.

Policy Loans. The policy shall contain a provision that after 3 full years premiums have been paid and after the policy has a cash surrender value and while no premium is in default beyond the grace period for payment, the insurer will advance, on proper assignment or pledge of the policy and on the sole security of the policy, at a specified rate of interest not exceeding an effective rate of 6 percent per annum, an amount equal to or, at the option of the person entitled to payment, less than the loan value of the policy. The loan value of the policy shall be at least equal to the cash surrender value at the end of the then current policy year, provided that the insurer may deduct, either from the loan value or from the proceeds of the loan, any existing indebtedness not already deducted in determining the cash surrender value including any interest then accrued but not due, any unpaid balance of the premium for the current policy year, and interest on the loan to the end of the current policy year. The policy may also provide that if interest on any indebtedness is not paid when due, it shall then be added to the existing indebtedness and shall bear interest at the same rate, and that if and when the total indebtedness on the policy, including interest due or accrued, equals or exceeds the amount of the loan value of the policy, then the policy shall terminate and become void, but not until at least 30 days notice has been mailed by the insurer to the last known address of the insured or policy owner and of any assignee of record at the home office of the insurer. The policy shall reserve to the insurer the right to defer the granting of a loan, other than for the payment of any premium to the insurer, for 6 months after application therefor. The policy, at the insurer's option, may provide for automatic premium loan, subject to an election of the person entitled to elect. At the option of the insurer, this provision may be omitted in a policy of term life insurance.

Dividends.

Conversion on Termination of Eligibility. A yearly or more frequently renewable term wholesale life insurance policy shall contain a provision that if the coverage is not continued as a wholesale life insurance policy because the employee or dependent has attained the limiting age or because of termination of employment with the sponsor or termination in an eligible class of employees, or termination of membership in the sponsor, or termination of membership in an eligible class of membership of the sponsor or where a member ceases to practice the profession or occupation with respect to which the policy was issued, the persons covered under the policy shall be entitled to have issued to them by the insurer, without evidence of insurability, individual policies of life insurance without disability or accidental death benefits, provided:

Conversion on Termination or Nonrenewal of Case. A yearly or more frequently renewable term wholesale life insurance policy shall contain a provision that if the policy is not continued as a wholesale life insurance policy because of nonrenewal of the case by the insurer or by the sponsor, every employee, member, or dependent insured at the date of discontinuance who has been so insured for at least 5 years before discontinuance shall be entitled to have issued to him by the insurer an individual policy of life insurance subject to the same conditions provided in §L of this regulation, except that the amount of insurance on that person under the converted policy may not exceed the smaller of:

Prohibited Provisions. A wholesale life insurance policy may not contain any provision which is prohibited under Insurance Article, §12-209 or 16-216, Annotated Code of Maryland.

Limitations of Liability. A wholesale life insurance policy may not contain any limitation of liability which is less favorable to the policyholder than limitations permitted under Insurance Article, §16-215, Annotated Code of Maryland.

Separate Agreements. A separate agreement may not be entered into between the insurer and the sponsor which would purport to change the terms and conditions of any wholesale life insurance policy delivered to an employee or member.

In this chapter, the following words have the meanings indicated.

Terms Defined.

The requirements of this regulation are applicable to all insurers either seeking authority to issue variable life insurance in this State or which have authority to issue variable life insurance in this State.

Licensing and Approval to Do Business in This State. An insurer may not deliver or issue for delivery in this State any variable life insurance policy, unless the insurer is authorized to engage in the life insurance business in this State, and either:

Filing for Approval to Do Business in This State. Before an insurer shall deliver or issue for delivery a variable life insurance policy in this State, it shall file with the Commissioner the following information for the consideration of the Commissioner in making the determination required by §B of this regulation:

Standards of Suitability. An insurer seeking approval to enter into the variable life insurance business in this State shall adopt by formal action of its board of directors and file with the Commissioner a written statement specifying the standards of suitability to be used by the insurer and applicable to its officers, directors, employees, affiliates, and agents with respect to the suitability of variable life insurance for the applicant. These standards of suitability shall be binding on the insurer and those to whom it refers, and shall specify that no recommendations shall be made to an applicant to purchase a variable life insurance policy and that no variable life insurance policy may be issued in the absence of reasonable grounds to believe that the purchase of the policy is suitable for the applicant on the basis of information furnished after reasonable inquiry of the applicant concerning the applicant's insurance and investment objectives, financial situation and needs, and any other information known to the insurer or to the agent making the recommendation. Lapse rates for variable life insurance within the first 2 policy years which are significantly higher than both those encountered by the insurer, or an affiliate of the insurer, for corresponding fixed benefit life insurance policies and lapse rates of other insurers issuing variable life insurance policies shall be considered by the Commissioner in determining whether the guidelines adopted by the insurer are reasonable and also whether the insurer and its agents are engaging, as a general business practice, in the sale of variable life insurance to persons for whom it is unsuitable. For purposes of this section, conversions from variable life insurance to fixed benefit life insurance policies pursuant to this chapter will not be considered lapses.

Use of Sales Materials.

Requirements Applicable to Contractual Services.

Reports to the Commissioner.

Authority of Commissioner to Disapprove. Material required to be filed with the Commissioner, or approved by him, shall be subject to disapproval if at any time it is found by him not to comply with the standards established by this chapter.

The Commissioner may not approve a variable life insurance form filed pursuant to this chapter unless it conforms to the requirements of this regulation.

Filing of Variable Life Insurance Policies.

Mandatory Policy Benefit and Design Requirements. Variable life insurance policies delivered or issued for delivery in this State shall comply with the following minimum requirements:

Mandatory Policy Provisions.

Nonforfeiture, Partial Withdrawal, Policy Loan, and Partial Surrender Provisions. A variable life insurance policy delivered or issued for delivery in this State shall contain provisions which are not less favorable to the policyholder than the following:

Other Policy Provisions. The following provisions may in substance be included in a variable life insurance policy or related form delivered or issued for delivery in this State:

Reserve liabilities for variable life insurance policies shall be established under Insurance Article, Title 5, Subtitle 3, Annotated Code of Maryland, in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees.

Reserve liabilities for the guaranteed minimum death benefit shall be the reserve needed to provide for the contingency of death occurring when the guaranteed minimum death benefit exceeds the death benefit that would be paid in the absence of the guarantee, and shall be maintained in the general account of the insurer, and shall be not less than the greater of the following minimum reserves:

Reserve liabilities for all fixed incidental insurance benefits shall be maintained in the general account in amounts determined in accordance with the actuarial procedures appropriate to these benefits.

Establishment and Administration of Separate Accounts.

Amounts in the Separate Account.

Investments by the Separate Account.

Limitations on Ownership.

Valuation of Assets of a Variable Life Insurance Separate Account.

Separate Account Investment Policy.

Charges Against a Variable Life Insurance Separate Account. The insurer shall disclose in writing, before or contemporaneously with delivery of the policy, each charge that may be made against the separate account, including:

Standards of Conduct. An insurer seeking approval to enter into the variable life insurance business in this State shall adopt by formal action of its Board of Directors and file with the Commissioner a written statement specifying the standards of conduct of the insurer, its officers, directors, employees, and affiliates with respect to investments of variable life insurance separate accounts and variable life insurance operations. These standards of conduct shall be binding on the insurer and those to whom it refers and shall contain at a minimum the items contained in §I(2) of this regulation.

Conflicts of Interest.

Investment Advisory Services to a Separate Account.

An insurer delivering or issuing for delivery in this State a variable life insurance policy shall deliver to the applicant for the policy, and obtain a written acknowledgement of receipt from the applicant coincident with or before the execution of the application, the following information:

The requirements of this regulation shall be deemed to have been satisfied to the extent that a disclosure containing information required by this regulation is delivered, either in the form of:

A prominent statement that the death benefit may be variable or fixed under specified conditions;

A prominent statement that cash values may increase or decrease in accordance with the experience of the separate account (subject to any specified minimum guarantees);

Questions designed to elicit information which enables the insurer to determine the suitability of variable life insurance for the applicant.

Within 30 days after each anniversary of the policy, a statement or statements of the cash surrender value, death benefit, any partial withdrawal or policy loan, any interest charge, and any optional payments allowed pursuant to Regulation .04E of this chapter under the policy computed as of the policy anniversary date. This statement may be furnished within 30 days after a specified date in each policy year as long as the information contained in it is computed as of a date not more than 45 days before the mailing of the notice. This statement shall state in contrasting color or distinctive type that, in accordance with the investment experience of the separate account, the cash values and the variable death benefit may increase or decrease, and shall prominently identify any value described which may be recomputed before the next statement required by this section. If the policy guarantees that the variable death benefit on the next policy anniversary date will not be less than the variable death benefit specified in the statement, the statement shall be modified to indicate this. For flexible premium policies, the report required by this paragraph shall:

Annually, a statement or statements including:

For flexible premium policies, if the amounts available under the policy on any processing day to pay the charges authorized by the policy are less than the amount necessary to keep the policy in force, until the next processing day, a report indicating the minimum payment required under the terms of the policy to keep it in force and the length of the grace period for payment of the amount.

Qualification to Sell Variable Life Insurance.

Reports of Disciplinary Actions and Criminal Prosecution. A person qualified in this State under this regulation to act as a producer of variable life insurance policies shall report to the Commissioner in accordance with Insurance Article, §§10-126(f) and (g), Annotated Code of Maryland:

Refusal to Qualify Producer to Sell Variable Life Insurance — Suspension, Revocation, or Nonrenewal of Qualification. The Commissioner may reject an application or suspend, revoke, or refuse to renew a producer’s qualification under this regulation to solicit, sell, or negotiate variable life insurance policies upon any ground that would bar the applicant or producer from being licensed to solicit, sell, or negotiate life insurance policies in this State. The rules governing proceedings relating to the rejection of a producer’s application, suspension or revocation of a producer’s license or refusal to renew a producer’s license shall also govern proceedings under this regulation.

If any provision of this chapter or its application to any person or circumstance is held to be invalid, the remainder of the chapter and the application of the provision to other persons or circumstances is not affected.

The provisions of COMAR 31.09.04 and any other regulations promulgated by the Commissioner with reference to contracts on a variable basis or with reference to life insurance or the conduct of the business of life insurance shall apply to variable life insurance to the extent that the provisions of the other regulations are not in conflict with the requirements of this chapter.

Applied to provide paid-up additions to the policy;

Paid in cash;

Left to accumulate at a rate of interest not less than 2-1/2 percent, the accumulated dividends and interest to be payable on termination of the insurance if not previously credited to increase an operative nonforfeiture benefit under the policy; or

Applied to the payment of any premium payable under the policy or, if no further premiums are payable, the dividends shall be credited in accordance with one of the aforementioned methods.

In this chapter the following terms have the meanings indicated.

Terms Defined.

A participating annuity contract providing for payment by the insurer of dividends or participation in the divisible surplus accruing under the contract in addition to fixed dollar payments guaranteed in the contract shall be deemed a fixed annuity contract and not a contract on a variable basis if, according to assumptions made by the insurer at the time the contract is issued, at least 50 percent of the consideration for the contract is required to support the fixed dollar guarantees.

Qualification to Sell Variable Annuity Contracts.

Reports of Disciplinary Actions and Criminal Prosecution. A person qualified in this State under this regulation to act as a producer of variable annuity contracts shall report to the Commissioner in accordance with Insurance Article, §§10-126(f) and (g), Annotated Code of Maryland:

Refusal to Qualify Producer to Sell Variable Annuity Contracts—Suspension, Revocation, or Nonrenewal of Qualification. The Commissioner may reject an application or suspend, revoke, or refuse to renew producer’s qualification under this regulation to solicit, sell, or negotiate variable annuity contracts upon any ground that would bar the applicant or producer from being licensed to solicit, sell, or negotiate life insurance policies in this State. The rules governing proceedings relating to the rejection of a producer’s application, suspension or revocation of a producer’s license, or refusal to renew a producer’s license shall also govern proceedings under this regulation.

An insurer may issue the contracts provided it:

In determining the qualifications of the insurer, the Commissioner shall consider, among other things:

A contract on a variable basis may not be issued or delivered in this State unless the form of the contract has been filed with and approved by the Commissioner and unless the form of application for the contract, and of any certificate to be used with the contract issued on a group basis, have been filed with and approved by the Commissioner.

The Commissioner shall disapprove or withdraw previous approval of the form of contract, application, or certificate for any of the reasons specified in Insurance Article, §12-205, Annotated Code of Maryland, or if:

Before the issuance of any individual contract on a variable basis, the insurer shall reasonably satisfy itself that the total amounts being applied and proposed to be applied to provide the prospective annuitant with income on a variable basis will not substantially exceed the amount which would be required to purchase the income in a predetermined dollar amount which the annuitant can reasonably expect to receive.

In determining the reasonably expectable fixed dollar income, the insurer may consider, alone or in combination, any direct source, such as a pension, annuity, Social Security benefit, or trust fund, as well as any indirect source, such as an asset having a principal amount expressed in fixed dollars and capable of being used to produce a fixed dollar income, as, for example bonds, mortgages or life insurance policies.

Any contract on a variable basis issued or delivered in this State shall contain a statement of the essential features of the procedure to be followed by the insurer in determining the dollar amount of variable benefits or other contractual payments or values under the contract and shall state in clear terms that this amount may decrease or increase according to this procedure. A contract, and any certificate evidencing variable benefits issued pursuant to the contract on a group basis, and any application for the contract or certificate shall have prominently printed on its first page in boldface type not less than 10 point, a clear statement that payments and termination values provided by the contract are variable and not guaranteed as to dollar amount.

A contract issued or delivered in this State shall stipulate the expense, mortality, and investment increment factors to be used in computing the dollar amount of variable benefits or other contractual payments or values under the contract, and shall guarantee that expense and mortality experience will not adversely affect the dollar amount.

A contract shall contain all of the standard or uniform provisions required by Insurance Article, Annotated Code of Maryland, except that the Commissioner will give consideration to waiving the requirements of former Article 48A, §408A, Annotated Code of Maryland (transferred to the Session Laws by §6, Ch. 57, Acts of 1997), upon a showing by the insurer satisfactory to the Commissioner that the requirements are inconsistent with the purposes of the contract.

An individual contract on a variable basis may not be issued or delivered in this State unless it contains in substance the following provisions:

Any domestic life insurer specifically authorized by the Commissioner to issue contracts on a variable basis and any foreign or alien life insurer specifically authorized by the Commissioner to deliver these contracts in Maryland may establish and operate one or, upon express approval by the Commissioner, more than one, segregated asset accounts to be known as variable contract accounts. An insurer which has established a separate investment account as defined in Insurance Article, §5-512, Annotated Code of Maryland, may, upon express approval by the Commissioner, use the same segregated asset account as both a separate investment account and a variable contract account.

Except as may be otherwise specifically provided by the contract, all amounts received in connection with any contract on a variable basis shall be placed in the appropriate variable contract account, and all the liabilities of the contract shall be set up in that account.

The investments and liabilities of a variable contract account at all times shall be clearly identifiable and distinguishable in the books or other records of the insurer from the other investments and liabilities of the insurer. An insurer may not hypothecate any of the assets of any variable contract account or borrow on the security of these assets. An investment, other than cash, in any variable contract account, in any separate account, or in the insurer's general investment account may not be transferred by sale, exchange, substitution, or otherwise from one account to another except with the Commissioner's approval.

Assets allocated to a variable contract 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.

An insurer issuing a contract on a variable basis shall, annually on or before March first, submit to the Commissioner a true statement for the business of its variable contract accounts. This statement shall be in such form and content as is approved or adopted for current use by the National Association of Insurance Commissioners or its successor organization and as supplemented for additional information required by the Commissioner and shall include details as to all of the income, disbursements, assets, and liability items associated with the variable contract accounts.

The valuation of variable contract account assets for all purposes, including annual statements of the insurer to the Commissioner, shall be determined in accordance with the market value of the assets notwithstanding the application of other valuation methods to assets of the insurer other than the assets of the variable contract accounts. The valuation may be made as of such valuation dates as the insurer shall establish from time to time, except as otherwise required for the annual statements to the Commissioner. To accomplish the valuation at market value any equity security purchased for variable contract account shall be a security:

The reserve liability for contracts on a variable basis shall be established by the Commissioner pursuant to the requirements of Insurance Article, Title 5, Subtitle 3, Annotated Code of Maryland, and in accordance with actuarial procedures that recognize the variable nature of the benefits provided.

Investments.

With the express approval of the Commissioner, an insurer may invest all or any portion of the assets of a variable contract account which does not serve as a separate investment account in the shares of an affiliated open-end diversified management investment company registered with the Securities and Exchange Commission under the federal Investment Company Act of 1940, as amended, if the insurer, the affiliated management company, and the sponsor and/or holding company, as the case may be, of the insurer and the affiliated management company agree that:

While serving as an elected or appointed officer or as a director or trustee of an insurer authorized to issue contracts on a variable basis, a person may not receive directly or indirectly any commission on the business transactions of the insurer.

In connection with the allocation of investment expenses, or in any other respect, an insurer may not discriminate unfairly between variable contract accounts, separate accounts, and the insurer's general investment account, but this provision does not require the insurer to follow uniform investment policies for all its accounts.

Maximum Asset Deduction Charge.

For each contract on a variable basis, the insurer shall maintain a history record card, a ledger sheet or a comparable record, showing in addition to the usual stipulated payment or contract consideration information, each net annuity consideration applied and the increment and accumulated balance on either a unit or dollar value basis.

Right to Vote.

A contract issued to an employer providing a plan of retirement annuities for covered employees on the date of issue, the stipulated payments on the contract to be remitted by the employer and to be paid either wholly by the employer or jointly by the employer and the employees. The employees eligible under the contract shall be all of the employees of the employer, or all of any class or classes of employees determined by conditions pertaining to employment, but the contract may exclude classes of employees determined by age. The contract may provide that the term “employees” shall include the employees of one or more subsidiary corporations, and the employees, individual proprietors, and partners of one or more affiliated corporations, proprietors, or partnerships if the business of the employer and of the affiliated corporations, proprietors, or partnerships is under common control. The contract may provide that the term “employees” shall include the individual proprietor or partners if the employer is an individual proprietor or a partnership. A director of a corporate employer may not be eligible under the contract unless the person is otherwise eligible as a bona fide employee of the corporation by performing services other than the usual duties of a director. An individual proprietor or partner may not be eligible under the contract unless he is actively engaged in and devotes a substantial part of his time to the conduct of the business of the proprietor or partnership.

A contract issued to a labor union providing a plan of retirement annuities for at least 25 covered members on the date of issue, the stipulated payments under the contract to be remitted by the union and to be paid wholly from funds contributed by the union, or by the employer or employers of the persons covered, or by both, or partly from these funds and partly from funds contributed by members covered under the contract, but this contract may not require that the entire cost be derived from funds contributed by the insured members specifically for the stipulated payments under it. The members eligible under the contract shall be all of the members of the union or all of any specified class or classes of members determined by conditions pertaining to their employment, or to membership in the union, or to both, but the contract may exclude classes of members determined by age.

A contract issued to the trustees of a fund established by an employer or by two or more employers, or by an association of employers which has been in existence for at least 5 years (or with express approval of the Commissioner if less than 5 years), or by one or more labor unions, or by one or more employers and one or more labor unions, providing a plan of retirement annuities for all of the employees of the employer or employers, or all of the employees of the member employers of the association, or all of any class or classes of the employees determined by conditions pertaining to their employment, or all of the members of the union or unions, or all of any class or classes of members determined by conditions pertaining to their employment or to membership in the union, or to both, but the contract may exclude classes of employees or members determined by age. The contract may provide that the term “employees” shall include the individual proprietor or partners if an employer is an individual proprietor or a partnership. A director of a corporate employer may not be eligible under the contract unless the person is otherwise eligible as a bona fide employee of the corporation by performing services other than the usual duties of a director. An individual proprietor or partner may not be eligible under the contract unless he is actively engaged in and devotes a substantial part of his time to the conduct of the business of the proprietor or partnership. The contract may provide that the term “employees” shall include the trustees or their employees, or both, if their duties are principally connected with the trusteeship. The contract shall cover at least 100 persons at date of issue. The contract shall provide that the stipulated payments shall be remitted by the trustees and shall be paid wholly from funds contributed by the employer or employers of the persons covered, or by the union or unions, or by both, or partly from these funds and partly from funds contributed by the persons covered under the contract, but this contract may not require that the entire cost be derived from funds contributed by the covered persons specifically for the stipulated payments under it.

A contract issued to an association of persons having a common calling, occupation, or profession, which association was organized and maintained in good faith for purposes other than obtaining annuities and has been in existence for at least 5 years, or with express approval of the Commissioner if less than 5 years, or to the trustees of a fund established by the association, providing a plan of retirement annuities for all the members and employees of the association or all of any specified class or classes of the members and employees. The contract may provide that the terms “employees” or “members” shall include the trustees or their employees, or both, if their duties are principally connected with the trusteeship. The contract shall cover at least 100 persons at date of issue. The contract shall provide that the stipulated payments shall be remitted by the association or by the trustees and shall be paid wholly from funds contributed by the association, or partly from these funds and partly from funds contributed by the persons covered under the contract, or wholly from funds contributed specifically for that purpose by the persons covered under the contract.

A contract issued to one or more departments of any federal or state government, or their subdivisions, or of any state college or university, or to an association of persons employed in any such department, which association was organized and maintained in good faith for purposes other than obtaining annuities and has been in existence for at least 5 years, or with express approval of the Commissioner if less than 5 years, or to the trustees of a fund established by a department or association, providing a plan of retirement annuities for all of the employees of the department or all of the members of the association or all of any specified class or classes of employees or members. The contract may provide that the terms “employees” or “members” shall include the trustees or their employees, or both, if their duties are principally connected with the trusteeship. The contract shall cover at least 100 persons at date of issue. The contract shall provide that the stipulated payments shall be remitted by the department, association, or trustees and shall be paid wholly from funds contributed by the department or association, or partly from these funds and partly from funds contributed by the persons covered under the contract, or wholly from funds contributed specifically for that purpose by the persons covered under the contract.

Regulate the activities of insurers and insurance producers with respect to the replacement of existing life insurance and annuities; and

Protect the interests of life insurance and annuity purchasers by establishing minimum standards of conduct to be observed in replacement or financed purchase transactions by:

“Direct Solicitation” Defined. In this regulation, the term “direct solicitation” does not include any group meeting:

Exempted Transactions. Unless specifically included, this chapter does not apply to transactions involving the following:

Plan or Arrangement Funded Solely by Elective Employee Contributions. Notwithstanding §B(5) of this regulation, this chapter applies to a life insurance policy or annuity contract used to fund a plan or arrangement funded solely by contributions an employee elects to make, whether on a pretax or aftertax basis, if:

Section B(8) of this regulation does not exclude from this chapter an immediate annuity purchased with proceeds from an existing life insurance policy.

In this chapter, the following terms have the meanings indicated.

Terms Defined.

Signed Statement. An insurance producer who initiates an application for a life insurance policy or annuity contract shall submit to the insurer, with or as part of the application, a statement signed by both the applicant and the insurance producer as to whether the applicant has any existing life insurance policy or existing annuity contract.

Applicant Without Existing Life Insurance Policy or Existing Annuity Contract. If the applicant does not have an existing life insurance policy or existing annuity contract, the insurance producer's duties with respect to replacement are complete upon the fulfillment of the requirement in §A of this regulation.

Applicant With Existing Life Insurance Policy or Existing Annuity Contract.

Contents of Notice.

Sales Material.

Provision of Information to the Insurer. Except as provided in Regulation .06D of this chapter, in connection with a replacement transaction, the insurance producer shall submit to the insurer to which an application for a life insurance policy or annuity contract is presented:

System of Supervision and Control.

Capacity to Monitor Replacements.

Signed Statement and Notice. An insurer shall require with or as a part of each application for life insurance or an annuity:

Production of Information. If an applicant has an existing life insurance policy or existing annuity contract, an insurer shall be able to produce copies of the following items for at least 5 years after the termination or expiration of the proposed life insurance policy or annuity contract:

Sales Material and Illustrations. An insurer shall ascertain and ensure that the sales material and illustrations required by Regulation .04F of this chapter:

Application That Does Not Meet Requirements. If an application does not meet the requirements of this regulation, an insurer shall:

Record Keeping. An insurer shall maintain records in paper, photograph, microprocess, magnetic, mechanical, or electronic media, or by any process that accurately reproduces the actual document.

In General. If a replacement is involved in a transaction, the replacing insurer shall:

Registered Contract. With respect to a registered contract, an insurer need not comply with §A(3) of this regulation if the insurer provides to the existing insurer, within 5 business days after a request from the existing insurer:

Replacing Insurer and Existing Insurer Are the Same. If the replacing insurer and the existing insurer in a transaction are the same, or subsidiaries or affiliates under common ownership or control, the replacing insurer:

Insurer that Requires Use of Approved Sales Material. If an insurer prohibits the use of sales material other than materials approved by the insurer, as an alternative to the requirements made of an insurer under Regulation .04F of this chapter, the insurer may:

In General. For replacement transactions, the existing insurer shall:

Registered Contract. With respect to a registered contract, an insurer need not comply with §A(2) of this regulation if the insurer provides to the owner of the life insurance policy or annuity contract, within 5 business days after receipt of a request from the owner:

Request to Borrow, Surrender, or Withdraw Life Insurance Policy Values.

Inquiry Regarding Intent. For an application initiated as a result of a direct response solicitation, the insurer shall require, with or as part of each completed application for a life insurance policy or annuity contract, a statement asking whether the applicant, by applying for the proposed life insurance policy or annuity contract, intends to replace, discontinue, or change an existing life insurance policy or existing annuity contract.

Duties of Insurer if Replacement or Change Is Not Intended. If the applicant indicates a replacement or change is not intended or if the applicant fails to respond to the statement, the insurer shall send the applicant, with the life insurance policy or annuity contract, the notice regarding replacement in Regulation .11 of this chapter, or other substantially similar notice approved by the Commissioner.

Duties of Insurer if Insurer Proposes Replacement or if Replacement Intended.

Prohibition on Twisting. A failure to comply with this chapter is a violation of Insurance Article, §27-213, Annotated Code of Maryland, including:

Intent to Finance New Policy With Existing Policy Value—Individual Transaction—Prima Facie Case.

Replacement After Indication That Replacement Not Intended—Pattern of Action—Prima Facie Case.

Provision of Information. If it is determined that the requirements of this regulation have not been met, the replacing insurer shall provide to the owner of the life insurance policy or annuity contract:

Penalties.

Are you considering discontinuing making premium payments, surrendering, forfeiting, assigning to the insurer, or otherwise terminating your existing life insurance policy or annuity contract?

Are you considering using funds from your existing policies or annuity contracts to pay premiums due on the new life insurance policy or annuity contract?

Are you considering discontinuing making premium payments, surrendering, forfeiting, assigning to the insurer, or otherwise terminating your existing life insurance policy or annuity contract?

Are you considering using funds from your existing policies or annuity contracts to pay premiums due on the new life insurance policy or annuity contract?

This chapter is applicable to annuity agreements issued to donors who are Maryland residents, under a special permit in accordance with Insurance Article, §16-114, Annotated Code of Maryland.

This chapter is applicable to any charitable gift annuity issued to a Maryland resident after the effective date of these regulations.

This chapter is applicable to organizations in or outside Maryland if the organization solicits annuity agreements in Maryland.

In this chapter, the following terms have the meanings indicated.

Terms Defined.

The organization shall maintain assets at least equal to the sum of the reserves on its outstanding annuity agreements.

The reserves on the outstanding annuity agreements shall be consistent with the assumptions underlying the rates adopted by the American Council on Gift Annuities which are in effect at the time of issuance of the gift annuity.

In determining the appropriate reserves, a deduction shall be made for all or any portion of an annuity risk which is reinsured by an authorized insurer or accredited reinsurer.

As part of the organization’s annual audit report, the organization shall submit a statement by a certified public accountant or qualified actuary verifying the existence of adequate reserves among the organization’s assets.

The statement required under §D of this regulation may be incorporated into a certified public accountant's annual audit report.

The reserve assets shall be segregated.

The segregated reserve assets shall be invested in the same manner and subject to the same standards as are applicable under Estates and Trust Article, §15-402, Annotated Code of Maryland.

The general assets of the organization shall be liable for annuity agreements to the extent that the segregated fund is inadequate.

Before accepting consideration for an annuity agreement the organization shall obtain separate signed statements from a prospective donor acknowledging that the prospective donor has been informed that:

The requirement under §A of this regulation may be satisfied by having the acknowledgement be part of the annuity agreement which is signed by the donor.

The organization shall retain the annuity agreement or, if applicable, the separate signed statement for so long as the obligation to pay annuity benefits continues.

Proof of exemption under §501 of the Internal Revenue Code;

Description of the organization's activities and number of years of active operation in this State;

Copy of the most recent independently audited financial statement;

Payout rates proposed to be provided under the charitable immediate and deferred gift annuity agreements;

Description of the proposed investment of contributed funds;

Copy of the organization's bylaws;

Copy of the statement required by Regulation .05A of this chapter;

Copy of the organization's forms used as charitable gift annuity contracts;

Copies of any solicitation material or descriptive literature proposed to be used with charitable gift annuities; and

Other material requested by the Commissioner in order to determine that the applicant is an organization which is eligible for the special permit in accordance with Insurance Article, §16-114(b), Annotated Code of Maryland.

These regulations do not apply to:

These regulations are not applicable to annuity agreements with donors issued under a special permit in accordance with Insurance Article, §16-114, Annotated Code of Maryland.

Purporting to provide annuity benefits to more than one individual;

Issued to:

Issued for the purpose of providing annuity benefits to:

If the employer is an individual proprietor or partnership, the proprietor or the partner;

If the employer is a corporation, the directors of the corporation;

If the business of the employer and any affiliated corporations, proprietorships, or partnerships is under common control, the employees of one or more affiliated corporations, proprietorships, or partnerships;

Independent contractors under contract to the employer and employees of the independent contractor;

Retired and terminated employees; and

Employees of a trustee under a trust referred to in Regulation .04B(12) of this chapter if their principal duties are connected with the trusteeship.

Employees of a union or association;

Members of a union or association who have retired;

Employees of the members of an eligible association; or

Employees of a trustee under a trust referred to in Regulation .04B(12) of this chapter if their principal duties are connected with the trusteeship.

An insurer may not deliver in this State a contract purporting to provide annuity benefits to more than one individual unless the contract conforms to the definition of a group annuity contract contained in Regulation .04 of this chapter.

If a contract providing annuity benefits to more than one individual is delivered in this State before the effective date of these regulations, an insurer may not include additional annuitants under the contract if the contract does not conform to the definition of a group annuity contract contained in Regulation .04 of this chapter.

Except as provided under §D of this regulation, an insurer may not include any resident of Maryland under any contract delivered in another jurisdiction which purports to provide annuity benefits to more than one individual if the contract does not conform to the definition of a group annuity contract contained in Regulation .04 of this chapter.

An insurer may include a resident of Maryland under a contract delivered in another jurisdiction which purports to provide annuity benefits to more than one individual if both of the following requirements are satisfied:

Variable life insurance;

Individual and group annuity contracts;

Credit life insurance; or

Life insurance policies with no illustrated death benefits on any individual exceeding $10,000.

In this chapter, the following terms have the meanings indicated.

Terms Defined.

Each insurer marketing policies to which this chapter is applicable shall notify the Commissioner whether a policy form is to be marketed with or without an illustration. For all policy forms being actively marketed on the effective date of this chapter, the insurer shall identify in writing those forms and whether or not an illustration will be used with the forms. For policy forms filed after the effective date of this chapter, the identification shall be made at the time of filing. Any previous identification may be changed by notice to the Commissioner.

Except as required by COMAR 31.09.05.07B(2) and .09A, if the insurer identifies a policy form as one to be marketed without an illustration, any use of an illustration for a policy using that form before the first policy anniversary is prohibited.

If a policy form is identified by the insurer as one to be marketed with an illustration, a basic illustration prepared and delivered in accordance with this chapter is required, except that a basic illustration need not be provided to individual members of a group or to individuals insured under multiple lives coverage issued to a single applicant unless the coverage is marketed to these individuals. The illustration furnished to an applicant for a group life insurance policy or policies issued to a single applicant on multiple lives may be either an individual or composite illustration representative of the coverage on the lives of members of the group or the multiple lives covered.

Potential enrollees of non-term group life subject to this chapter shall be furnished a quotation with the enrollment materials. The quotation shall show potential policy values for sample ages and policy years on a guaranteed and nonguaranteed basis appropriate to the group and the coverage. This quotation is not considered an illustration for purposes of this chapter, but all information provided shall be consistent with the illustrated scale. A basic illustration shall be provided at delivery of the certificate to enrollees for non-term group life who enroll for more than the minimum premium necessary to provide pure death benefit protection. In addition, the insurer shall make a basic illustration available to any non-term group life enrollee who requests it.

An illustration used in the sale of a life insurance policy shall:

When using an illustration in the sale of a life insurance policy, an insurer or its producers, or other authorized representatives may not:

If an interest rate used to determine the illustrated nonguaranteed elements is shown, it may not be greater than the earned interest rate underlying the disciplined current scale.

The insurer may choose to designate each year the method of determining assumed expenses for all policy forms from the following:

Marginal expenses may be used only if greater than a generally recognized expense table. If no generally recognized expense table is approved, fully allocated expenses shall be used.

Format.

Narrative Summary. A brief illustration shall include the following:

Numeric Summary.

Statements. Statements substantially similar to the following shall be included on the same page as the numeric summary and signed by the applicant, or the policy owner in the case of an illustration provided at time of delivery, as required in this chapter:

Tabular Detail.

For a policy that does not require payment of a specific contract premium, the illustration required in §B(2) of this regulation shall show the premium outlay that must be paid to guarantee coverage for the term of the contract, subject to maximum premiums allowable to qualify as a life insurance policy under the applicable provisions of the Internal Revenue Code.

A supplemental illustration may be provided if:

The supplemental illustration shall include a notice referring to the basic illustration for guaranteed elements and other important information.

If a basic illustration is used by an insurance producer or other authorized representative of the insurer in the sale of a life insurance policy and the policy is applied for as illustrated, a copy of that illustration, signed in accordance with this chapter, shall be:

If the policy is issued other than as applied for, a revised basic illustration conforming to the policy as issued shall be sent with the policy. The revised illustration shall conform to the requirements of this chapter, shall be labeled “revised illustration”, and shall be signed and dated by the applicant or policy owner and producer or other authorized representative of the insurer not later than the time the policy is delivered. A copy shall be provided to the insurer and the policy owner.

If no illustration is used by an insurance producer or other authorized representative in the sale of a life insurance policy or if the policy is applied for other than as illustrated, the producer or representative shall certify to that effect in writing on a form provided by the insurer. On the same form, the applicant shall acknowledge that no illustration conforming to the policy applied for was provided and shall further acknowledge an understanding that an illustration conforming to the policy as issued will be provided not later than at the time of the policy delivery. This form shall be submitted to the insurer at the time of policy application.

If the policy is issued, a basic illustration conforming to the policy as issued shall be sent with the policy and signed not later than the time the policy is delivered. A copy shall be provided to the insurer and the policy owner.

If the basic illustration or revised illustration is sent to the applicant or policy owner by mail from the insurer, it shall include instructions for the applicant or policy owner to sign the duplicate copy of the numeric summary page of the illustration for the policy issued and return the signed copy to the insurer. The insurer's obligation under this section is satisfied if the insurer can demonstrate that it has made a diligent effort to secure a signed copy of the numeric summary page. The requirement to make a diligent effort is deemed satisfied if the insurer includes in the mailing a self-addressed postage prepaid envelope with instructions for the return of the signed numeric summary page.

A copy of the basic illustration and a revised basic illustration, if any, signed as applicable, along with any certification that either an illustration was not used or that the policy was applied for other than as illustrated, shall be retained by the insurer until 3 years after the policy is no longer in force. A copy need not be retained if a policy is not issued.

In the case of a policy designated as one for which illustrations will be used, the insurer shall provide each policy owner with an annual report on the status of the policy that shall contain at least the following information:

Insurers writing life insurance policies that do not build nonforfeiture values shall only be required to provide an annual report with respect to these policies for those years when a change has been made to nonguaranteed policy elements by the insurer.

If the annual report does not include an in force illustration, it shall contain the following notice displayed prominently: “IMPORTANT POLICY OWNER NOTICE: You should consider requesting more detailed information about your policy to understand how it may perform in the future. You should not consider replacement of your policy or make changes in your coverage without requesting a current illustration. You may annually request, without charge, such an illustration by calling (insurer's phone number), writing to (insurer's name) at (insurer's address) or contacting your agent. If you do not receive a current illustration of your policy within 30 days from your request, you should contact your state insurance department.” The insurer may vary the sequential order of the methods for obtaining an in force illustration.

Upon the request of the policy owner, the insurer shall furnish an in force illustration of current and future benefits and values based on the insurer's present illustrated scale. This illustration shall comply with the requirements of Regulations .06A and B and .07A and E of this chapter. A signature or other acknowledgment of receipt of this illustration is not required.

If an adverse change in nonguaranteed elements that could affect the policy has been made by the insurer since the last annual report, the annual report shall contain a notice of that fact and the nature of the change prominently displayed.

The board of directors of each insurer shall appoint one or more illustration actuaries.

The illustration actuary shall certify that the disciplined current scale used in illustrations is in conformity with the Actuarial Standard of Practice No. 24 Compliance with the NAIC Life Insurance Illustrations Model Regulations, promulgated by the Actuarial Standards Board, and that the illustrated scales used in insurer-authorized illustrations meet the requirements of this chapter.

The illustration actuary:

Filing of Certification.

If an illustration actuary is unable to certify the scale for any policy form illustration the insurer intends to use, the actuary shall notify the board of directors of the insurer and the Commissioner promptly of this inability to certify.

A responsible officer of the insurer, other than the illustration actuary, shall certify annually that the:

The annual certifications shall be provided to the Commissioner before each year by a date determined by the insurer.

If an insurer changes the illustration actuary responsible for all or a portion of the company's policy forms, the insurer shall notify the Commissioner of that fact promptly and disclose the reason for the change.

The following shall be disclosed in the annual certification:

In this chapter, the following terms have the meanings indicated.

Terms Defined.

A Maryland-domiciled insurer may not issue a funding agreement for which a separate account will be used unless prior to delivery or issuance for delivery in the State, the form of the contract and the plan of operation have been filed with and approved by the Commissioner.

A Maryland-domiciled insurer shall include in its plan of operation for a funding agreement for which a separate account will be used a statement of investment policy for the separate account and any supplemental account, including:

Application of Insurance Article, §5-511, Annotated Code of Maryland.

Notwithstanding §A of this regulation, amounts allocated to a separate account and any resulting accumulations are not subject to the requirements and limitations set forth in Insurance Article, §5-511, Annotated Code of Maryland if the insurer obtains:

An insurer shall respond to a request for verification of coverage submitted by a viatical settlement provider or a viatical settlement broker within 30 days after the request is received.

The request by the viatical settlement provider or viatical settlement broker shall include all items required by Insurance Article, §8-610.1(a), Annotated Code of Maryland.

An insurer may charge a fee as set forth in Insurance Article, §8-610.1(b), Annotated Code of Maryland.

The “Verification of Coverage for Life Insurance Policies” form adopted by the Commissioner under §B of this regulation shall be used.

The form required in §A of this regulation shall read as follows:

The purpose of this chapter is to require producers to act in the best interest of the consumer when making a recommendation of an annuity and to require insurers to establish and maintain a system to supervise recommendations so that the insurance needs and financial objectives of consumers, at the time of the transaction, are effectively addressed.

Nothing provided in this chapter shall be construed to create or imply a private cause of action for a violation of this chapter or to subject a producer to civil liability under the best interest standard of care outlined in Regulation .04 of this chapter or under standards governing the conduct of a fiduciary or a fiduciary relationship.

In General. This chapter applies to any sale or recommendation of an annuity.

Exceptions. Unless otherwise specifically included, this chapter does not apply to transactions involving:

In this chapter, the following terms have the meanings indicated.

Terms Defined:

The requirements under this regulation do not create a fiduciary obligation or relationship and only create a regulatory obligation as established in this chapter.

A producer, when making a recommendation of an annuity, shall act in the best interest of the consumer under the circumstances known by the producer at the time the recommendation is made, without placing the producer’s or the insurer’s financial interest ahead of the consumer’s interest.

A producer is considered to be acting in the best interest of the consumer if the producer satisfies the obligations described in §§D—G of this regulation.

Care Obligation.

Disclosure Obligation.

Conflict of Interest Obligation. A producer shall identify and avoid or reasonably manage and disclose material conflicts of interest, including material conflicts of interest related to an ownership interest.

Documentation Obligation.

Application of the Best Interest Obligation.

Transactions Not Based on a Recommendation.

Except as permitted under Regulation .04I of this chapter, an insurer may not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity would effectively address the particular consumer’s financial situation, insurance needs, and financial objectives based on the consumer’s consumer profile information.

An insurer shall establish and maintain a supervision system that is reasonably designed to achieve the insurer’s and its producers’ compliance with this regulation, including, but not limited to, the following:

Nothing in this regulation restricts an insurer from contracting for performance of a function, including maintenance of procedures, required under this regulation.

An insurer is responsible for taking appropriate corrective action and may be subject to sanctions and penalties pursuant to Regulation .09 of this chapter, regardless of whether the insurer contracts for performance of a function and regardless of the insurer’s compliance with this section. An insurer’s supervision system under this regulation shall include supervision of contractual performance under this regulation, including, but not limited to:

An insurer is not required to include in its system of supervision:

Truthfully responding to an insurer’s request for confirmation of the consumer profile information;

Filing a complaint; or

Cooperating with the investigation of a complaint.

Recommendations and sales of annuities made in compliance with comparable standards shall satisfy the requirements under this chapter.

This regulation applies to all recommendations and sales of annuities made by financial professionals in compliance with business rules, controls, and procedures that satisfy a comparable standard even if such standard would not otherwise apply to the product or recommendation at issue.

Nothing in this regulation shall limit the Commissioner’s ability to investigate and enforce the provisions of this chapter.

Nothing in §A of this regulation shall limit the insurer’s obligation to comply with Regulation .05A of this chapter, although the insurer may base its analysis on information received from either the financial professional or the entity supervising the financial professional.

For §A of this regulation to apply, an insurer shall:

A financial professional who is not explicitly acting in compliance with the relevant comparable standards is not eligible for the safe harbor under §A of this regulation and is subject to compliance with the requirements of this chapter.

A producer may not solicit the sale of an annuity product unless the producer has adequate knowledge of the product to recommend the annuity and the producer is in compliance with the insurer’s standards for product training.

A producer may rely on insurer-provided product-specific training standards and materials to comply with §A of this regulation.

Training Requirements.

An insurer is responsible for compliance with this chapter.

If a violation of this chapter occurs, because of either the action or the inaction of the insurer or its producer, the Commissioner may order:

Penalties.

Insurers, general agents, independent agencies, and producers shall maintain or be able to make available to the Commissioner records of the information collected from the consumer and other information used in making the recommendations that were the basis for insurance transactions for 7 years after the insurance transaction is completed by the insurer.

An insurer is permitted, but is not required, to maintain documentation on behalf of a producer.

Records required to be maintained by this regulation may be maintained in paper, photographic, micro processed, magnetic, mechanical, or electronic media, or by any process that accurately reproduces the actual document, if the copy of the record is maintained in a manner that:

The purpose of this chapter is to set forth standards to protect active duty service members of the United States Armed Forces from dishonest and predatory insurance sales practices by declaring certain identified practices to be false, misleading, deceptive, or unfair.

Nothing in this chapter may be construed to create or imply a private cause of action for a violation of this chapter.

38 U.S.C. §1965 et seq. (2007);

Internal Revenue Code, 26 U.S.C. §501(c)(23) (2007);

Department of Defense DoD Instruction 1344.07—Personal Commercial Solicitation on DoD Installations (March 30, 2006);

Truth in Savings Act, 12 U.S.C. §4301 et seq. (2007), and the regulations promulgated under it; and

§10 of the “Military Personnel Financial Services Protection Act,” Pub. L. No. 109-290, p.16.

In this chapter, the following terms have the meanings indicated.

Terms Defined.

This chapter does not apply to solicitations or sales involving:

Nothing in this chapter may be construed to abrogate the ability of nonprofit organizations to educate members of the United States Armed Forces in accordance with Department of Defense DoD Instruction 1344.07—Personal Commercial Solicitation on DoD Installations.

For purposes of this chapter, general advertisements, direct mail, and internet marketing do not constitute solicitation.

Telephone Marketing.

The following acts or practices when committed on a military installation by an insurer or insurance producer with respect to the in-person, face-to-face solicitation of life insurance or annuity are prohibited as false, misleading, deceptive, or unfair:

The following acts or practices when committed on a military installation by an insurer or insurance producer constitute corrupt practices, improper influences, or inducements and therefore prohibited as false, misleading, deceptive or unfair:

Personal Commercial Solicitation Evaluation Form.

The following acts or practices by an insurer or insurance producer constitute corrupt practices, improper influences, or inducements, regardless of location, and therefore, are prohibited as false, misleading, deceptive, or unfair:

Section A(1) of this regulation does not prohibit:

For purposes of §B(2) of this regulation, a formal banking relationship is established when the depository institution:

Prohibited Practices—Source.

Prohibited Practices—Costs and Returns. The following acts or practices by an insurer or insurance producer regarding premiums, costs, or investment returns are prohibited as false, misleading, deceptive, or unfair:

The following acts or practices by an insurer or insurance producer regarding SGLI or VGLI are false, misleading, deceptive, or unfair:

The following acts or practices by an insurer or insurance producer regarding disclosure are prohibited as false, misleading, deceptive, or unfair:

Definitions.

As used in this chapter, the following terms have the meanings indicted.

Terms Defined.

The minimum valuation standard for universal life insurance policies shall be

Commissioner's Reserve Valuation Method.

If, in any policy year, the guaranteed maturity premium on a universal life insurance policy is less than the valuation net premium for the same universal life insurance policy, calculated by the valuation method actually used in calculating the reserve on the universal life insurance policy, but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for the universal life insurance policy shall be the greater of:

Reserves.

Minimum cash surrender values for flexible premium universal life insurance policies shall be determined separately for the basic policy and for any benefits and riders for which premiums are paid separately.

The requirements in this regulation pertain to a basic policy and any benefits and riders for which premiums are not paid separately.

The minimum cash surrender value, before adjustment for indebtedness and dividend credits, available on a date as of which interest is credited to the policy shall be equal to:

All accumulations in §C(1) and (2) of this regulation shall be at the actual rate or rates of interest at which interest credits have been made unconditionally to the policy, or have been made conditionally, but for which the conditions have since been met.

Interest on the premiums and on all charges referred to in §C(1)-(2) of this regulation shall be accumulated from and to such dates as are consistent with the manner in which interest is credited in determining the policy value.

Benefit Changes.

Calculation of Administrative Expense Charges.

Calculation of Initial Acquisition Expense Charges.

Calculation of Initial Expense Allowance.

For fixed premium universal life insurance policies, the minimum cash surrender values shall be determined separately for the basic policy and any benefits and riders for which premiums are paid separately.

The requirements in this regulation pertain to a basic policy and to any benefits and riders for which premiums are not paid separately.

The minimum cash surrender value, before adjustment for indebtedness and dividend credits, available on a date as of which interest is credited to the policy shall be equal to [(A)-(B)-(C)-(D)], where:

The adjusted premiums described in §C(2) of this regulation are calculated as described in Insurance Article, §16-309(b)(2), Annotated Code of Maryland.

The nonforfeiture net level premium is equal to the quantity PVFB/ä_x where:

The quantity ä_x shall be replaced by an annuity beginning on the date as of which the declaration described in §C(3) of this regulation became effective and payable until the end of the period covered by the declaration.

Future guaranteed benefits are determined by:

All present values shall be determined using:

If a universal life insurance policy provides for the optional election of a paid-up nonforfeiture benefit, it shall be such that its present value shall be at least equal to the cash surrender value provided for by the policy on the effective date of the election.

The present value in §A of this regulation shall be based on mortality and interest standards at least as favorable to the policyowner as:

In lieu of the paid-up nonforfeiture benefit described in §§A and B of this regulation, the insurer may substitute, upon proper request not later than 60 days after the due date of the premium in default, an actuarially equivalent alternative paid-up nonforfeiture benefit which provides a greater amount or longer period of death benefits, or, if applicable, a greater amount or earlier payment of endowment benefits.

In addition to the applicable provisions of Insurance Article, Title 16, Annotated Code of Maryland, each universal life insurance policy shall include the provisions described in §§B-H of this regulation.

Periodic Disclosure to Policyowner.

Policy Guarantees.

Calculation of Cash Surrender Values.

Changes in Basic Coverage.

Grace Period and Lapse.

Misstatement of Age or Sex.

Maturity Date. If a policy provides for a maturity date, end date, or date after which the policy will no longer be in force, then the policy shall also contain a statement, in close proximity to that date, that it is possible that coverage may not continue to the maturity date even if scheduled premiums are paid in a timely manner, if such is the case.

Annual Report.

The annual report required by §A of this regulation shall include the following:

Initial Filing Requirements.

Additional Filing Requirements.

In this chapter, the following terms have the meanings indicted.

Terms Defined.

Accelerated benefit riders and life insurance policies with accelerated benefit provisions are primarily mortality risks rather than morbidity risks.

The inclusion of terminal illness as a qualifying event shall be included in all accelerated benefit policies and riders.

Lump Sum Settlement Option.

No restrictions are permitted on the use of the proceeds.

If any death benefit remains after payment of an accelerated benefit, the accidental death benefit provision, if any, in the policy or rider may not be affected by the payment of the accelerated benefit.

Descriptive Title.

Disclosure of Tax Consequences.

Solicitations.

Effect of the Benefit Payment.

The accelerated benefit provision shall be effective for accidents on the effective date of the policy or rider.

The accelerated benefit provision shall be effective for illness no more than 30 days following the effective date of the policy or rider.

The insurer may offer a waiver of premium for the accelerated benefit provision in the absence of a waiver of premium provision for the policy being in effect.

At the time the benefit is claimed, the insurer shall explain to the policy holder or certificate holder any continuing premium requirements to keep the policy in force.

Unfairly discriminate among insureds with differing qualifying events covered under the policy or among insureds with similar qualifying events covered under the policy;

Apply further conditions on the payment of the accelerated benefits other than those conditions specified in the policy or rider.

Financing Options.

Effect on Cash Value.

Effect of Any Outstanding Policy Loans on Accelerated Death Benefit Payment. When payment of an accelerated benefit results in a pro rata reduction in the cash value, the payment may not be applied toward repaying an amount greater than a pro rata portion of any outstanding policy loans.

Actuarial Memorandum.

Reserves.