CHAPTER 700b
LIFE INSURANCE, ANNUITIES, BURIAL CONTRACTS
AND LIFE SETTLEMENTS

Table of Contents

Sec. 38a-430. (Formerly Sec. 38-135a). Approval of form of life insurance and annuity policies. Optional health insurance riders.
Sec. 38a-431. (Formerly Sec. 38-153). Group insurance.
Sec. 38a-432. (Formerly Sec. 38-154). Annuities.
Sec. 38a-432a. Regulations concerning consumer annuity transactions.
Sec. 38a-432b. Regulations concerning solicitation and sale of life insurance and annuities to senior citizens. Disciplinary action.
Sec. 38a-433. (Formerly Sec. 38-154a). Life insurance or annuities payable in fixed or variable amounts. Accumulation of funds pursuant to funding agreements.
Sec. 38a-434. (Formerly Sec. 38-155). Insurance against accident and disease.
Sec. 38a-435. (Formerly Sec. 38-147a). Regulations re replacement of or borrowing on life insurance products, policies or contracts.
Sec. 38a-436. (Formerly Sec. 38-157a). Notice of voidability of individual insurance contracts. Procedure. Time limit.
Sec. 38a-437. (Formerly Sec. 38-158). Copy of application to be furnished.
Sec. 38a-438. (Formerly Sec. 38-130b). Short title: Standard Nonforfeiture Law.
Sec. 38a-439. (Formerly Sec. 38-130c). Minimum nonforfeiture benefits for life insurance policyholders who default in premium payments. Cash surrender value.
Sec. 38a-440. (Formerly Sec. 38-130d). Minimum nonforfeiture benefits for annuity contract holders upon cessation of payment of considerations under a contract.
Sec. 38a-441. (Formerly Sec. 38-159c). Notice to insured when life insurance policy paid up.
Sec. 38a-442. (Formerly Sec. 38-156). Dating back of policies prohibited.
Sec. 38a-443. (Formerly Sec. 38-147). Premium notes.
Sec. 38a-444. (Formerly Sec. 38-147b). Life insurance policy loans. Interest rate allowable.
Sec. 38a-445. (Formerly Sec. 38-160). Deferring the granting of loans and surrender values.
Sec. 38a-446. (Formerly Sec. 38-149). Discrimination in favor of individuals prohibited.
Sec. 38a-447. (Formerly Sec. 38-150). Discrimination against persons on the basis of race prohibited.
Secs. 38a-448 and 38a-449. (Formerly Secs. 38-151 and 38-152). Affidavit of examining physician.
Sec. 38a-450. (Formerly Sec. 38-159). Certain corporations and associations may be made beneficiaries.
Sec. 38a-451. (Formerly Sec. 38-159a). Trustee as beneficiary of policy.
Sec. 38a-452. (Formerly Sec. 38-159b). Payment of interest on life insurance death benefits.
Sec. 38a-453. (Formerly Sec. 38-161). Rights of creditors of insured against beneficiary.
Sec. 38a-454. (Formerly Sec. 38-162). Proceeds of insurance policies and annuities may be held in trust.
Sec. 38a-455. Assignment of incidents of ownership under group life policy.
Sec. 38a-456. Notice of cancellation or discontinuation of group life insurance coverage. Penalty.
Sec. 38a-457. Accelerated benefits of life insurance policies.
Sec. 38a-458. Life insurance policies providing long-term care benefits. Regulations.
Sec. 38a-458a. Option for certain insurers to combine long-term care coverage with certain life, endowment or annuity coverages.
Sec. 38a-459. (Formerly Sec. 38-33a). Funding agreements by domestic life insurance companies. Establishment of companies' obligations. Segregation of moneys.
Sec. 38a-460. Accumulation fund arrangements. Definition.
Secs. 38a-461 to 38a-463.
Sec. 38a-464. (Formerly Sec. 38-32). Burial contracts; license from Insurance Commissioner.
Sec. 38a-465. Definitions.
Sec. 38a-465a. Licensing of life settlement providers and brokers.
Sec. 38a-465b. Denial, suspension or revocation of license. Refusal to renew license. Appeals.
Sec. 38a-465c. Contract form and disclosure statements. Filing and approval requirements. Disclosure of life settlement contract availability and lawful assignment not to be prohibited.
Sec. 38a-465d. Annual statements. Penalty. Confidentiality of insured's information. Reasons for disclosure of insured's identity.
Sec. 38a-465e. Examination of licensees and applicants. Commissioner's access to records. Retention of records. Expenses of examination. Confidentiality of examination workpapers and reports.
Sec. 38a-465f. Required disclosures.
Sec. 38a-465g. Prerequisites to a life settlement contract wherein insured is terminally or chronically ill. Medical release and confidentiality of medical information. Verification of coverage. Notice to insurer. Change of ownership or beneficiary. Rescission. Escrow agent or trustee. Broker fee calculation and disclosure of compensation. Prohibitions. Exemptions.
Sec. 38a-465h. Premium finance loans. Disclosures and certifications.
Sec. 38a-465i. Violations.
Sec. 38a-465j. Fraudulent life settlement acts prohibited. Confidentiality of documents and evidence. Antifraud plans.
Sec. 38a-465k. Injunctions. Cease and desist orders. Damages.
Sec. 38a-465l. Penalties.
Sec. 38a-465m. Regulations. Imposition of bond or other mechanism as proof of financial accountability. Conflict of laws.
Sec. 38a-465n. Life settlement advertisements.
Sec. 38a-465o. Life settlement broker deemed to represent only the owner. Fiduciary duty to owner.
Sec. 38a-465p. Provider or broker lawfully transacting business in the state or person lawfully negotiating life settlement contracts prior to October 1, 2008.
Sec. 38a-465q. Related provider trusts.
Secs. 38a-466 to 38a-468.

PART I*
LIFE INSURANCE AND ANNUITIES

      *See Sec. 19a-7j re assessment of health and welfare fee on domestic insurers and health care centers doing life or health insurance business in state.

      Sec. 38a-430. (Formerly Sec. 38-135a). Approval of form of life insurance and annuity policies. Optional health insurance riders. (a) No life insurance or annuity policy or contract shall be delivered or issued for delivery to any person in this state, nor shall any application, rider or endorsement be used in connection therewith, until a copy of the form thereof shall have been filed with and approved by the commissioner. The commissioner shall adopt regulations in accordance with the provisions of chapter 54, establishing a procedure for review of such policies. The commissioner shall issue an order disapproving the use of any such form at any time if it does not comply with the requirements of law, or if it contains a provision or provisions which are unfair or deceptive or which encourage misrepresentation of the policy. The commissioner shall specify the reason for his disapproval. The provisions of section 38a-19 shall apply to any such order issued by the commissioner.

      (b) Nothing in this chapter shall preclude the issuance of a life insurance contract, including but not limited to a long-term care policy as provided in section 38a-458, which includes an optional health insurance rider, provided, the optional health insurance rider must be filed with and approved by the Insurance Commissioner pursuant to section 38a-481. Any company offering such policies for sale in this state shall be licensed to sell health insurance in this state pursuant to the provisions of section 38a-41.

      (1967, P.A. 528; P.A. 88-326, S. 3; P.A. 96-51, S. 1.)

      History: P.A. 88-326 required the commissioner to adopt regulations establishing a procedure for policy review and rephrased existing provisions; Sec. 38-135a transferred to Sec. 38a-430 in 1991; P.A. 96-51 added Subsec. (b) to permit optional health insurance riders.

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      Sec. 38a-431. (Formerly Sec. 38-153). Group insurance. Any life insurance company may issue life or endowment insurance, with or without annuities, upon the group plan, as defined by the commissioner, with special rates of premiums less than the usual rates of premiums for such policies. All policies of group insurance shall be segregated by the company into a separate class and the mortality experience kept separate. The number of policies, amount of insurance, reserves, premiums and payments to policyholders thereunder, together with the mortality table and interest assumption adopted by the company, shall be reported separately in the company's annual financial statement.

      (1949 Rev., S. 6143; 1951, S. 2828d; P.A. 78-312, S. 6.)

      History: P.A. 78-312 deleted provision which had allowed companies to value policies "on such tables of mortality and interest assumptions as may be approved by the commissioner"; Sec. 38-153 transferred to Sec. 38a-431 in 1991.

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      Sec. 38a-432. (Formerly Sec. 38-154). Annuities. Any domestic insurance company empowered to make contracts contingent upon life may grant and issue annuities either in connection with or separate from contracts of insurance predicated upon life risks.

      (1949 Rev., S. 6144.)

      History: Sec. 38-154 transferred to Sec. 38a-432 in 1991.

      Annotation to former section 38-154:

      Amount of benefit implies amount in dollars. 144 C. 346.


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      Sec. 38a-432a. Regulations concerning consumer annuity transactions. The Insurance Commissioner shall adopt regulations, in accordance with chapter 54, to establish (1) standards for the sale or exchange of annuities, as defined in section 38a-1, to consumers, and (2) procedures for making recommendations to consumers regarding the sale or exchange of an annuity.

      (P.A. 05-57, S. 1; P.A. 08-147, S. 13.)

      History: P.A. 05-57 effective June 2, 2005; P.A. 08-147 made a technical change and deleted provisions re senior consumers, effective June 12, 2008.

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      Sec. 38a-432b. Regulations concerning solicitation and sale of life insurance and annuities to senior citizens. Disciplinary action. (a) The Insurance Commissioner shall adopt regulations, in accordance with the provisions of chapter 54, to (1) prevent misleading and fraudulent marketing practices with respect to the solicitation and sale of life insurance or annuities sold to senior citizens, and (2) set standards for the use of senior-specific certification and professional designations used in the solicitation and sale of such life insurance and annuities.

      (b) Any person who violates the regulations adopted pursuant to subsection (a) of this section shall be subject to disciplinary action in accordance with the provisions of section 38a-774.

      (P.A. 09-174, S. 2.)

      History: P.A. 09-174 effective July 1, 2009.

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      Sec. 38a-433. (Formerly Sec. 38-154a). Life insurance or annuities payable in fixed or variable amounts. Accumulation of funds pursuant to funding agreements. (a) A domestic life insurance company, including for the purposes of this section all domestic fraternal benefit societies which operate on a legal reserve basis, may establish one or more separate accounts and may allocate thereto amounts, including without limitation proceeds applied under optional modes of settlement or under dividend options, to provide for life insurance or life or period-certain annuities, and benefits incidental thereto, payable in fixed or variable amounts or both, or to accumulate funds which are paid to or held by such company pursuant to section 38a-459, subject to the following: (1) The income, gains and losses, realized or unrealized, from assets allocated to a separate account shall be credited to or charged against the account, without regard to other income, gains or losses of the company; (2) except as may be provided with respect to reserves for guaranteed benefits and funds referred to in subdivision (3) of this subsection, amounts allocated to any separate account and accumulations thereon may be invested and reinvested in any class of loans and investments, and such loans and investments shall not be included in applying the limitations provided in sections 38a-102 to 38a-102h, inclusive; (3) except with the approval of the commissioner and under such conditions as to investments and other matters as he may prescribe, which shall recognize the guaranteed nature of the benefits provided, reserves for (A) benefits guaranteed as to dollar amount and duration, and (B) funds guaranteed as to principal amount or stated rate of interest shall not be maintained in a separate account; (4) unless otherwise approved by the commissioner, assets allocated to a separate account shall be valued at their market value on the date of valuation, or if there is no readily available market, then as provided under the terms of the contract or the rules or other written agreement applicable to such separate account, provided, that unless otherwise approved by the commissioner, the portion, if any, of the assets of such separate account equal to the company's reserve liability with regard to the guaranteed benefits and funds referred to in subdivision (3) of this subsection, shall be valued in accordance with the rules otherwise applicable to the company's assets; (5) amounts allocated to a separate account in the exercise of the power granted by this section shall be owned by the company, and the company shall not be, nor hold itself out to be, a trustee with respect to such amounts. If, and to the extent so provided under the applicable contracts, that portion of the assets of any such separate account equal to the reserves and other contract liabilities with respect to such account shall not be chargeable with liabilities arising out of any other business the company may conduct; (6) no sale, exchange or other transfer of assets may be made by a company between any of its separate accounts or between any other investment account and one or more of its separate accounts unless, in case of a transfer into a separate account, such transfer is made solely to establish the account or to support the operation of the contracts with respect to the separate account to which the transfer is made, and unless such transfer, whether into or from a separate account, is made (A) by a transfer of cash, or (B) by a transfer of securities having a readily determinable market value, provided that such transfer of securities is approved by the commissioner. The commissioner may approve other transfers among such accounts if, in his opinion, such transfers would not be inequitable; (7) to the extent such company deems it necessary to comply with any applicable federal or state laws, such company, with respect to any separate account, including without limitation any separate account which is a management investment account or a unit investment trust, may provide for persons having an interest therein appropriate voting and other rights and special procedures for the conduct or the business of such account, including without limitation special rights and procedures relating to investment policy, investment advisory services, selection of independent public accountants, and the selection of a committee, the members of which need not be otherwise affiliated with such company, to manage the business of such account. The provisions of this subsection shall apply notwithstanding any inconsistent provision in the charter of any such domestic life insurance company or in the general statutes.

      (b) Any contract providing benefits payable in variable amounts delivered or issued for delivery in this state shall contain a statement of the essential features of the procedures to be followed by the insurance company in determining the dollar amount of such variable benefits. Any such contract under which the benefits vary to reflect investment experience, including a group contract and any certificate in evidence of variable benefits issued thereunder, shall state that such dollar amount will so vary and shall contain on its first page a statement to the effect that the benefits thereunder are on a variable basis.

      (c) Except to the extent permitted under section 38a-459, no domestic, foreign or alien insurance company or fraternal benefit society shall deliver or issue for delivery in this state any such contracts or annuities until the Insurance Commissioner licenses it to do so. Such annuities or other contracts and the sale thereof, and such insurance companies, shall be subject to the exclusive regulatory authority of the Insurance Commissioner and shall not be subject to The Connecticut Securities Act.

      (d) Except for sections 38a-78 and 38a-440 in the case of a variable annuity contract and section 38a-78 in the case of a variable life insurance policy and except as otherwise provided herein, all pertinent provisions of sections 38a-61, 38a-77, 38a-78, 38a-81, 38a-82, 38a-284, 38a-287, 38a-430 to 38a-454, inclusive, and 38a-458 and, with respect to fraternal benefit societies, sections 38a-595 to 38a-626, inclusive, 38a-631 to 38a-640, inclusive, and 38a-800, shall apply to separate accounts and contracts relating thereto. The reserve liability for variable contracts shall be established in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees.

      (e) The commissioner shall have power to enforce the provisions of this section, and may adopt, in accordance with the provisions of chapter 54, such regulations as he deems necessary for that purpose, covering, but not limited to, the form of life insurance or annuity contracts providing for benefits payable in fixed or variable amounts by domestic life insurance companies or domestic fraternal benefit societies operating on a legal reserve basis; separation of the assets of contract accounts; accounting of the income, gains and losses of contract accounts; distribution of the proceeds of accounts; sale, exchange or transfer of assets between accounts; guaranteed benefits; investment and reinvestment of contract or account assets, loans or investments; reserve liabilities; valuation of account assets; voting and other rights and special procedures affecting accounts, including investment policy, advisory services and the management, generally, of accounts.

      (1967, P.A. 529, S. 1; 1971, P.A. 509; P.A. 75-25, S. 1, 2; P.A. 77-614, S. 163, 610; P.A. 78-312, S. 7; P.A. 80-482, S. 297, 348; P.A. 83-208, S. 2, 3; P.A. 93-239, S. 13; P.A. 96-227, S. 8; P.A. 10-5, S. 11.)

      History: 1971 act rewrote provisions in greater detail, clearly distinguishing between insurance, annuities, etc. payable in fixed amounts and those paid in variable amounts; P.A. 75-25 added Subsec. (e); P.A. 77-614 placed insurance commissioner within the department of business regulation and made insurance department a division within that department, effective January 1, 1979; P.A. 78-312 expanded exception to limit applicability with respect to Secs. 38-130d and 38-130e in Subsec. (d); P.A. 80-482 restored insurance commissioner and division to prior independent status and abolished the department of business regulation; P.A. 83-208 amended Subsec. (a) to specifically provide that a domestic life insurance company may provide life or period-certain annuities, or may accumulate funds pursuant to any funding agreement under Sec. 38-33a; Sec. 38-154a transferred to Sec. 38a-433 in 1991; (Revisor's note: In 1993 obsolete references in Subsec. (d) to repealed Secs. 38a-94 to 38a-101, inclusive, and 38a-966 to 38a-970, inclusive, were deleted editorially by the Revisors); P.A. 93-239 made technical corrections for statutory consistency and substituted "sections 38a-102 to 38a-102h, inclusive" for "section 38a-95"; P.A. 96-227 amended Subsec. (c) to replace "other insurance company" with "foreign or alien insurance company or fraternal benefit society"; P.A. 10-5 made technical changes in Subsec. (a), effective May 5, 2010.

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      Sec. 38a-434. (Formerly Sec. 38-155). Insurance against accident and disease. Any domestic insurance company empowered to make contracts contingent upon life may issue policies or certificates insuring persons against loss of life or personal injury resulting from any cause and against loss of time resulting from disease, which policies or certificates shall state on their face the agreement with the persons receiving the same, and, when executed in accordance with the charter and bylaws of such company, shall be binding upon the company.

      (1949 Rev., S. 6145.)

      History: Sec. 38-155 transferred to Sec. 38a-434 in 1991.

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      Sec. 38a-435. (Formerly Sec. 38-147a). Regulations re replacement of or borrowing on life insurance products, policies or contracts. The Insurance Commissioner may make regulations governing the sale or offer of sale of life insurance products, including annuities, when such sale or offer involves the replacement of existing policies or contracts or the borrowing on or lapsing of such existing policies or contracts. Such regulations may prescribe (a) the form in which such offer or proposal should be made; (b) the form of notice to the insurance companies involved; (c) the questions to be contained in application forms for life insurance products pertaining to existing insurance; and (d) the form of notice to the purchaser. The commissioner may suspend or revoke the license of any insurance producer violating any such regulation.

      (1963, P.A. 554; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 296, 348; P.A. 94-39, S. 3; P.A. 96-193, S. 12, 36.)

      History: P.A. 77-614 placed insurance commissioner within the department of business regulation and made insurance department a division within that department, effective January 1, 1979; P.A. 80-482 restored insurance commissioner and division to prior independent status and abolished the department of business regulation; Sec. 38-147a transferred to Sec. 38a-435 in 1991; P.A. 94-39 made references to life insurance products including annuities and added reference to "life insurance contracts"; P.A. 96-193 substituted "producer" for "agent or broker", effective June 3, 1996.

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      Sec. 38a-436. (Formerly Sec. 38-157a). Notice of voidability of individual insurance contracts. Procedure. Time limit. Every individual life insurance policy delivered or issued for delivery to any person in this state shall have printed thereon or attached thereto a notice stating, in substance, that the policy may be returned by the applicant for cancellation by delivering or mailing the policy to the insurer or to the insurance agent through whom it was effected, at any time within ten days after receipt of the policy by the applicant, and that upon the delivery or mailing the policy shall be void ab initio.

      (P.A. 75-546; P.A. 90-243, S. 62.)

      History: P.A. 90-243 made technical changes for statutory consistency; Sec. 38-157a transferred to Sec. 38a-436 in 1991.

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      Sec. 38a-437. (Formerly Sec. 38-158). Copy of application to be furnished. (a) Each person within this state holding a policy of insurance issued by a life insurance company doing business in this state shall be furnished by the company with a copy of the application upon which the policy was issued, upon demand made for such copy by the policyholder, or by any person upon whose life the policy was issued.

      (b) If the company fails for thirty days from the time of the demand to furnish to the person making the demand a copy of the application, the company shall be forever barred from setting up, by way of defense to any suit on the policy of insurance, any error, incorrectness, fraud or misrepresentation of that person, or any mistake therein; and the application shall thereafter be taken and held, so far as the application may affect any claim under the policy, or any fund secured thereby, to be in all respects true and correct.

      (1949 Rev., S. 6148; P.A. 90-243, S. 63.)

      History: P.A. 90-243 divided the section into Subsecs. and made technical changes for statutory consistency; Sec. 38-158 transferred to Sec. 38a-437 in 1991.

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      Sec. 38a-438. (Formerly Sec. 38-130b). Short title: Standard Nonforfeiture Law. Sections 38a-438 to 38a-440, inclusive, shall be known as the "Standard Nonforfeiture Law".

      (P.A. 78-312, S. 1 P.A. 91-175, S. 3.)

      History: Sec. 38-130b transferred to Sec. 38a-438 in 1991; P.A. 91-175 deleted the reference to the Standard Valuation Law.

      See Secs. 38a-77 and 38a-78 re Standard Valuation Law.

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      Sec. 38a-439. (Formerly Sec. 38-130c). Minimum nonforfeiture benefits for life insurance policyholders who default in premium payments. Cash surrender value. (a) In the case of policies issued on and after the effective date specified in accordance with the provisions of subsection (g) of section 38-130c of the general statutes, revision of 1958, revised to 1981, no policy of life insurance, except as stated in subsection (i) of this section, shall be delivered or issued for delivery in this state unless it contains in substance the following provisions, or corresponding provisions which in the opinion of the commissioner are at least as favorable to the defaulting or surrendering policyholder as are the minimum requirements hereinafter specified and are substantially in compliance with subsection (h) of this section: (1) A statement that, in the event of default in any premium payment, the company will grant, upon request by the policyholder made in accordance with the policy not later than sixty days after the due date of the premium in default, a paid-up nonforfeiture benefit on a plan stipulated in the policy, effective as of the due date, of such amount as may be hereinafter specified. In lieu of the stipulated paid-up nonforfeiture benefit, the company may substitute, upon request by the policyholder made in accordance with the policy not later than sixty 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; (2) a statement that, upon surrender of the policy within sixty days after the due date of any premium payment in default after premiums have been paid for at least three full years in the case of ordinary insurance or five full years in the case of industrial insurance, the company will pay, in lieu of any paid-up nonforfeiture benefit, a cash surrender value of such amount as may be hereinafter specified; (3) a statement that a specified paid-up nonforfeiture benefit shall become effective as specified in the policy unless the person entitled to make such election elects another available option not later than sixty days after the due date of the premium in default; (4) a statement that, if the policy shall have become paid-up by completion of all premium payments or if it is continued under any paid-up nonforfeiture benefit which became effective on or after the third policy anniversary in the case of ordinary insurance or the fifth policy anniversary in the case of industrial insurance, the company will pay, upon surrender of the policy within thirty days after any policy anniversary, a cash surrender value of such amount as may be hereinafter specified; (5) in the case of policies which, on a basis guaranteed in the policy, provide for unscheduled changes in benefits or premiums, or which provide an option for changes in benefits or premiums other than a change to a new policy, a statement of the mortality table, interest rate, and method used in calculating the cash surrender values and the paid-up nonforfeiture benefits available under the policy; in the case of all other policies, a statement of the mortality table and interest rate used in calculating the cash surrender values and the mortality table and interest rate used in calculating the paid-up nonforfeiture benefits available under the policy, together with a table showing the cash surrender value, if any, and paid-up nonforfeiture benefit, if any, available under the policy on each policy anniversary either during the first twenty policy years or during the term of the policy, whichever is shorter, such values and benefits to be calculated upon the assumption that there are no dividends or paid-up additions credited to the policy and that there is no indebtedness to the company on the policy; (6) a statement that the cash surrender values and the paid-up nonforfeiture benefits available under the policy are not less than the minimum values and benefits required by or pursuant to the insurance law of the state in which the policy is delivered; an explanation of the manner in which the cash surrender values and the paid-up nonforfeiture benefits are altered by the existence of any paid-up additions credited to the policy or any indebtedness to the company on the policy; if a detailed statement of the method of computation of the values and benefits shown in the policy is not stated therein, a statement that such method of computation has been filed with the supervisory official of the state in which the policy is delivered; and a statement of the method to be used in calculating the cash surrender value and paid-up nonforfeiture benefit available under the policy on any policy anniversary beyond the last anniversary for which such values and benefits are consecutively shown in the policy. Any of the foregoing provisions or portions thereof not applicable by reason of the plan of insurance may, to the extent inapplicable, be omitted from the policy. The company shall reserve the right to defer the payment of any cash surrender value for a period of six months after demand therefor with surrender of the policy.

      (b) Any cash surrender value available under the policy in the event of default in a premium payment due on any policy anniversary, whether or not required by subsection (a) of this section, shall be an amount not less than the excess, if any, of the present value, on such anniversary, of the future guaranteed benefits which would have been provided for by the policy, including any existing paid-up additions, if there had been no default, over the sum of: (1) The then present value of the adjusted premiums as defined in subsections (d) and (e) of this section, corresponding to premiums which would have become due on and after such anniversary, and (2) the amount of any indebtedness to the company on the policy; provided that for any policy issued on or after the compliance date established by subdivision (11) of subsection (e) of this section, which provides supplemental life insurance or annuity benefits at the option of the insured and for an identifiable additional premium by rider or supplemental policy provision, the cash surrender value shall be an amount not less than the sum of such value for an otherwise similar policy issued at the same age without such rider or supplemental policy provision and for a policy which provides only the benefits otherwise provided by such rider or supplemental policy provision; provided, further, that for any family policy issued on or after the compliance date established by subdivision (11) of subsection (e) of this section, which defines a primary insured and provides term insurance on the life of the spouse of the primary insured expiring before the spouse attains the age of seventy-one, the cash surrender value shall be an amount not less than the sum of such value for an otherwise similar policy issued at the same age without such term insurance on the life of the spouse and for a policy which provides only the benefits otherwise provided by such term insurance on the life of the spouse. Any cash surrender value available within thirty days after any policy anniversary under any policy paid-up by completion of all premium payments or any policy continued under any paid-up nonforfeiture benefit, whether or not required by subsection (a) of this section, shall be an amount not less than the present value, on such anniversary, of the future guaranteed benefits provided for by the policy, including any existing paid-up additions, decreased by any indebtedness to the company on the policy.

      (c) 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 cash surrender value then provided for by the policy or, if none is provided for, that cash surrender value which would have been required by this section in the absence of the condition that premiums shall have been paid for at least a specified period.

      (d) (1) Except as provided in subdivision (3) of this subsection, the adjusted premiums for any policy shall be calculated on an annual basis and shall be such uniform percentage of the respective premiums specified in the policy for each policy year, excluding any extra premiums charged because of impairments or special hazards, that the present value, at the date of issue of the policy, of all such adjusted premiums shall be equal to the sum of: (A) The then present value of the future guaranteed benefits provided for by the policy; (B) two per cent of the amount of insurance, if the insurance be uniform in amount, or of the equivalent uniform amount, as hereinafter defined, if the amount of insurance varies with duration of the policy; (C) forty per cent of the adjusted premium for the first policy year; (D) twenty-five per cent of either the adjusted premium for the first policy year or the adjusted premium for a whole life policy of the same uniform or equivalent uniform amount with uniform premiums for the whole of life issued at the same age for the same amount of insurance, whichever is less. In applying the percentages specified in subparagraphs (C) and (D) above, no adjusted premium shall be deemed to exceed four per cent of the amount of insurance or uniform amount equivalent thereto. The date of issue of a policy for the purpose of this subsection shall be the date on which the rated age of the insured is determined; (2) in the case of a policy providing an amount of insurance varying with duration of the policy, the equivalent uniform amount thereof for the purpose of this subsection shall be deemed to be the uniform amount of insurance provided by an otherwise similar policy, containing the same endowment benefit or benefits, if any, issued at the same age and for the same term, the amount of which does not vary with duration and the benefits under which have the same present value at the date of issue as the benefits under the policy, provided in the case of a policy providing a varying amount of insurance issued on the life of a child under age ten, the equivalent uniform amount may be computed as though the amount of insurance provided by the policy prior to the attainment of age ten was the amount provided by such policy at age ten; (3) the adjusted premiums for any policy providing term insurance benefits by rider or supplemental policy provision shall be equal to: (A) The adjusted premiums for an otherwise similar policy issued at the same age without such term insurance benefits, increased, during the period for which premiums for such term insurance benefits are payable, by (B) the adjusted premiums for such term insurance, the foregoing items (A) and (B) being calculated separately and as specified in subdivisions (1) and (2) of this subsection except that, for the purposes of subparagraphs (B), (C) and (D) of subdivision (1) of this subsection, the amount of insurance or equivalent uniform amount of insurance used in the calculation of the adjusted premiums referred to in subparagraph (B) of this subdivision shall be equal to the excess of the corresponding amount determined for the entire policy over the amount used in the calculation of the adjusted premiums in subparagraph (A) of this subdivision; (4) in the case of ordinary policies, all adjusted premiums and present values referred to in this section shall be calculated on the bases of the Commissioners' 1958 Standard Ordinary Mortality Table and the rate of interest specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits provided such rate of interest shall not exceed five and one-half per cent per annum and provided, for any category of ordinary insurance issued on female risks, adjusted premiums and present values may be calculated according to an age not more than six years younger than the actual age of the insured; provided in calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the Commissioners' 1958 Extended Term Insurance Table; and provided further, for insurance issued on a substandard basis, the calculation of any such adjusted premiums and present values may be based on such other table of mortality as may be specified by the company and approved by the commissioner; (5) in the case of industrial policies, all adjusted premiums and present values referred to in this section shall be calculated on the basis of the Commissioners' 1961 Standard Industrial Mortality Table and the rate of interest specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits provided such rate of interest shall not exceed five and one-half per cent per annum; provided, in calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the Commissioners' 1961 Industrial Extended Term Insurance Table; and provided further, for insurance issued on a substandard basis, the calculations of any such adjusted premiums and present values may be based on such other table of mortality as may be specified by the company and approved by the commissioner; and (6) the provisions of this subsection shall not apply to any policy issued on or after the compliance date applicable to the issuing company as determined by subdivision (11) of subsection (e) of this section.

      (e) The provisions of this subsection shall apply to all policies issued on or after the compliance date established by subdivision (11) of this subsection. (1) Except as provided in subdivision (7) of this subsection, the adjusted premiums for any policy shall be calculated on an annual basis and shall be such uniform percentage of the respective premiums specified in the policy for each policy year, excluding amounts payable as extra premiums to cover impairments or special hazards and also excluding any uniform annual contract charge or policy fee specified in the policy in a statement of the method used in calculating the cash surrender values and paid-up nonforfeiture benefits, that the present value, at the date of issue of the policy, of all adjusted premiums shall be equal to the sum of: (A) The then present value of the future guaranteed benefits provided for by the policy; (B) one per cent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first ten policy years; and (C) one hundred twenty-five per cent of the nonforfeiture net level premium as hereinafter defined, provided that in applying the percentage specified in this subparagraph, no nonforfeiture net level premium shall be deemed to exceed four per cent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first ten policy years. The date of issue of a policy for the purpose of this subsection shall be the date as of which the rated age of the insured is determined; (2) the nonforfeiture net level premium shall be equal to the present value, at the date of issue of the policy, of the guaranteed benefits divided by the present value, at such date of issue, of an annuity of one per annum payable on the date of issue of the policy and on each anniversary of such policy on which a premium becomes due; (3) in the case of policies that, on a basis guaranteed in the policy, provide for unscheduled changes in benefits or premiums, or that provide an option for changes in benefits or premiums other than a change to a new policy, the adjusted premiums and present values shall initially be calculated on the assumption that future benefits and premiums do not change from those stipulated at the date of issue of the policy. At the time of any such change in the benefits or premiums the future adjusted premiums, nonforfeiture net level premiums and present values shall be recalculated on the assumption that future benefits and premiums do not change from those stipulated by the policy immediately after the change; (4) except as otherwise provided in subdivision (7) of this subsection, the recalculated future adjusted premiums for any such policy shall be the uniform percentage of the respective future premiums specified in the policy for each policy year, excluding amounts payable as extra premiums to cover impairments and special hazards, and also excluding any uniform annual contract charge or policy fee specified in the policy in a statement of the method used in calculating the cash surrender values and paid-up nonforfeiture benefits, that the present value, at the time of change to the newly defined benefits or premiums, of all such future adjusted premiums shall be equal to the excess of (A) the sum of: (i) The then present value of the future guaranteed benefits provided for by the policy and (ii) the additional expense allowance, if any, over (B) the then cash surrender value, if any, or present value of any paid-up nonforfeiture benefit under the policy; (5) the additional expense allowance, at the time of the change to the newly defined benefits or premiums, shall be the sum of (A) one per cent of the excess, if positive, of the average amount of insurance at the beginning of each of the first ten policy years subsequent to the change over the average amount of insurance prior to the change at the beginning of each of the first ten policy years subsequent to the time of the most recent previous change, or, if there has been no previous change, the date of issue of the policy; and (B) one hundred twenty-five per cent of the increase, if positive, in the nonforfeiture net level premium; (6) the recalculated nonforfeiture net level premium shall be equal to the amount obtained by dividing (A) by (B) where (A) equals the sum of (i) the nonforfeiture net level premium applicable prior to the change, multiplied by the present value of an annuity of one per annum payable on each anniversary of the policy on or subsequent to the date of change on which a premium would have become due had the change not occurred, and (ii) the present value of the increase in future guaranteed benefits provided for by the policy, and (B) equals the present value of an annuity of one per annum payable on each anniversary of the policy on or subsequent to the date of change on which a premium becomes due; (7) notwithstanding any other provisions of this subsection, in the case of a policy issued on a substandard basis that provides reduced graded amounts of insurance so that, in each policy year, such policy has the same tabular mortality cost as an otherwise similar policy issued on the standard basis that provides higher uniform amounts of insurance, adjusted premiums and present values for such substandard policy may be calculated as if it were issued to provide such higher uniform amounts of insurance on the standard basis; (8) all adjusted premiums and present values referred to in this section shall be calculated: (A) (i) For all policies of ordinary insurance on the basis of the Commissioners' 1980 Standard Ordinary Mortality Table or at the election of the company, for any one or more specified plans of life insurance, on the basis of the Commissioners' 1980 Standard Ordinary Mortality Table with ten-year select mortality factors, or (ii) on or after January 1, 2005, until January 1, 2009, at the election of the company for any one or more specified plans of life insurance issued on or after January 1, 2004, on the basis of the Commissioners' 2001 Standard Ordinary Mortality Table, except that with respect to such plans issued before April 1, 2005, such mortality table shall be used solely for the basis of valuation and nonforfeiture and shall not be used to increase the previously agreed required premium; or (iii) for all policies issued on or after January 1, 2009, on the basis of the Commissioners' 2001 Standard Ordinary Mortality Table; (B) for all policies of industrial insurance, on the basis of the Commissioners' 1961 Standard Industrial Mortality Table; (C) for all policies issued in a particular calendar year, on the basis of a rate of interest not exceeding the nonforfeiture interest rate as defined in this subsection, for policies issued in that calendar year, provided, that: (i) At the option of the company, calculations for all policies issued in a particular calendar year may be made on the basis of a rate of interest not exceeding the nonforfeiture interest rate, as defined in this subsection, for policies issued in the immediately preceding calendar year; (ii) under any paid-up nonforfeiture benefit, including any paid-up dividend additions, any cash surrender value available, whether or not required by subsection (a) of this section, shall be calculated on the basis of the mortality table and rate of interest used in determining the amount of such paid-up nonforfeiture benefit and paid-up dividend additions, if any; (iii) a company may calculate the amount of any guaranteed paid-up nonforfeiture benefit including any paid-up additions under the policy on the basis of an interest rate no lower than that specified in the policy for calculating cash surrender values; (iv) in calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the Commissioners' 1980 Extended Term Insurance Table for policies of ordinary insurance and not more than the Commissioners' 1961 Industrial Extended Term Insurance Table for policies of industrial insurance; (v) for insurance issued on a substandard basis, the calculation of any such adjusted premiums and present values may be based on appropriate modifications of the aforementioned tables; (vi) any ordinary mortality tables, adopted after 1980 by the National Association of Insurance Commissioners that are approved by regulations adopted by the commissioner, in accordance with the provisions of chapter 54, for use in determining the minimum nonforfeiture standard may be substituted for the Commissioners' 1980 Standard Ordinary Mortality Table with or without ten-year select mortality factors or the Commissioners' 1980 Extended Term Insurance Table; (vii) any industrial mortality tables, adopted after 1980 by the National Association of Insurance Commissioners that are approved by regulations adopted by the commissioner, in accordance with the provisions of chapter 54, for use in determining the minimum nonforfeiture standard may be substituted for the Commissioners' 1961 Standard Industrial Mortality Table or the Commissioners' 1961 Industrial Extended Term Insurance Table; (9) the nonforfeiture interest rate per annum for any policy issued in a particular calendar year shall be equal to one hundred twenty-five per cent of the calendar year statutory valuation interest rate for such policy as defined in the standard valuation law, rounded to the nearest one quarter of one per cent; (10) notwithstanding any provision of the general statutes, any refiling of nonforfeiture values or their methods of computation for any previously approved policy form that involves only a change in the interest rate or mortality table used to compute nonforfeiture values shall not require refiling of any other provisions of such policy form; (11) on or after October 1, 1981, but prior to January 1, 1989, any company may file with the commissioner a written notice of its election to comply with the provisions of this subsection on or after a specified date and the provisions of this subsection shall apply to such company on or after such specified date, except that on or after January 1, 2005, but prior to January 1, 2009, any company may file with the commissioner a written notice of its election to comply with the provisions of this subsection on or after a specified date with respect to the Commissioners' 2001 Standard Ordinary Mortality Table and the provisions of this subsection shall apply to such company. The provisions of this subsection shall apply to policies issued by any company on or after January 1, 1989, except that the provisions of this subsection with respect to the Commissioners' 2001 Standard Ordinary Mortality Table shall apply to policies issued by any company on or after January 1, 2009.

      (f) In the case of any plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurance company based on then estimates of future experience, or in the case of any plan of life insurance which is of such nature that minimum values cannot be determined by the methods described in subsections (a) to (e), inclusive, then: (1) The commissioner must be satisfied that the benefits provided under the plan are substantially as favorable to policyholders and insureds as are the minimum benefits otherwise required by subsections (a) to (e), inclusive; (2) the commissioner must be satisfied that the benefits and the pattern of premiums of that plan are not such as to mislead prospective policyholders or insureds; (3) the cash surrender values and paid-up nonforfeiture benefits provided by such plan must not be less than the minimum values and benefits required for the plan computed by a method consistent with the principles of this section, as determined by regulations adopted by the commissioner in accordance with the provisions of chapter 54.

      (g) Any cash surrender value and any paid-up nonforfeiture benefit, available under the policy in the event of default in a premium payment due at any time other than on the policy anniversary, shall be calculated with allowance for the lapse of time and the payment of fractional premiums beyond the last preceding policy anniversary. All values referred to in subsections (b), (c), (d), and (e) of this section may be calculated upon the assumption that any death benefit is payable at the end of the policy year of death. The net value of any paid-up additions, other than paid-up term additions, shall be not less than the amounts used to provide such additions. Notwithstanding the provisions of subsection (b) of this section, additional benefits payable: (1) In the event of death or dismemberment by accident or accidental means; (2) in the event of total and permanent disability; (3) as reversionary annuity or deferred reversionary annuity benefits; (4) as term insurance benefits provided by a rider or supplemental policy provision to which, if issued as a separate policy, this section would not apply; (5) as term insurance on the life of a child or on the lives of children provided in a policy on the life of a parent of the child, if such term insurance expires before the child's age is twenty-six, is uniform in amount after the child's age is one, and has not become paid-up by reason of the death of a parent of the child; and (6) as other policy benefits additional to life insurance and endowment benefits, and premiums for all such additional benefits, shall be disregarded in ascertaining cash surrender values and nonforfeiture benefits required by this section and no such additional benefits shall be required to be included in any paid-up nonforfeiture benefits.

      (h) This subsection shall apply to all policies issued on or after January 1, 1985. Any cash surrender value available under the policy in the event of default in a premium payment due on any policy anniversary shall be in an amount which does not differ by more than two-tenths of one per cent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first ten policy years, from the sum of the greater of zero and the basic cash value hereinafter specified and the present value of any existing paid-up additions less the amount of any indebtedness to the company under the policy. The basic cash value shall be equal to the present value, on such anniversary, of the future guaranteed benefits which would have been provided for by the policy, excluding any existing paid-up additions and before deduction of any indebtedness to the company, if there had been no default, less the then present value of the nonforfeiture factors, as hereinafter defined, corresponding to premiums which would have become due on and after such anniversary; provided, that the effects on the basic cash value of supplemental life insurance or annuity benefits or of family coverage, as described in subsection (b) or (d) of this section, whichever is applicable, shall be the same as are the effects specified in subsection (b) or (d) of this section, whichever is applicable, on the cash surrender values defined in the applicable subsection. The nonforfeiture factor for each policy year shall be an amount equal to a percentage of the adjusted premium for the policy year, as defined in subsection (e) of this section. Except as is required by this subsection, such percentage shall be the same percentage for each policy year between the second policy anniversary and the later of (1) the fifth policy anniversary and (2) the first policy anniversary at which there is available under the policy, a cash surrender value in an amount, before including any paid-up additions and before deducting any indebtedness, of at least two-tenths of one per cent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first ten policy years; and shall be such that no percentage after the later of the two policy anniversaries specified in this subsection may apply to fewer than five consecutive policy years; provided, that no basic cash value may be less than the value which would be obtained if the adjusted premiums for the policy, as defined in subsection (d) or (e) of this section, whichever is applicable, were substituted for the nonforfeiture factors in the calculation of the basic cash value. All adjusted premiums and present values referred to in this subsection shall, for a particular policy, be calculated on the same mortality and interest bases as are used in demonstrating the policy's compliance with the subsections of this section. The cash surrender values referred to in this subsection shall include any endowment benefits provided for by the policy. Any cash surrender value available other than in the event of default in a premium payment due on a policy anniversary, and the amount of any paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment shall be determined in a manner consistent with those specified for determining the analogous minimum amounts in subsections (a), (b), (c), (e) and (g) of this section. The amount of any cash surrender values and of any paid-up nonforfeiture benefits granted in connection with additional benefits such as those enumerated in subdivisions (1) to (6), inclusive, of subsection (g) of this section, shall conform with the principles of this subsection.

      (i) This section shall not apply to any reinsurance, group insurance, pure endowment, annuity or reversionary annuity contract, or to any term policy of uniform amount which provides for no guaranteed nonforfeiture or endowment benefits, or renewal thereof, of twenty years or less expiring before age seventy-one, for which uniform premiums are payable during the entire term of the policy, or to any term policy of decreasing amount, which provides for no guaranteed nonforfeiture or endowment benefits, on which each adjusted premium, calculated as specified in subsections (d) and (e) of this section, is less than the adjusted premium so calculated, on a term policy of uniform amount, or renewal thereof, which provides for no guaranteed nonforfeiture or endowment benefits issued at the same age and for the same initial amount of insurance and for a term of twenty years or less expiring before age seventy-one, for which uniform premiums are payable during the entire term of the policy, or to any policy, which provides no guaranteed nonforfeiture or endowment benefits, for which no cash surrender value, if any, or present value of any paid-up nonforfeiture benefit, at the beginning of any policy year, calculated as specified in subsections (b), (c), (d) and (e) of this section, exceeds two and one-half per cent of the amount of insurance at the beginning of the same policy year or to any policy which shall be delivered outside this state through an agent or other representative of the company issuing the policy. For purposes of determining the applicability of this section, the age at expiration for a joint term life insurance policy shall be the age at expiration of the oldest life.

      (j) The provisions of sections 38a-77 and 38a-433 shall apply to ordinary and industrial policies issued by a company before the date of its election to comply with section 38a-130c of the general statutes, revision of 1958, revised to 1981, or January 1, 1981, whichever occurred first. The provisions of section 38-130c of the general statutes, revision of 1958, revised to 1981, shall apply to policies issued by a company on and after the date of such election or on and after January 1, 1981, whichever occurred first, and before October 1, 1981.

      (P.A. 78-312, S. 2; P.A. 81-170, S. 1; P.A. 90-243, S. 55; P.A. 05-162, S. 3; P.A. 10-5, S. 12.)

      History: P.A. 81-170 permitted a life insurance company to substitute an actuarially equivalent alternative nonforfeiture benefit upon request of a defaulting policyholder, provided that certain life insurance policies shall contain a statement of the mortality table, interest rate and method used in determining cash surrender values and nonforfeiture benefits, established a new formula for calculating cash surrender values and specified the interest rate and mortality tables used in calculating adjusted premiums and present value for various policies; P.A. 90-243 made technical changes in Subsec. (a); Sec. 38-130c transferred to Sec. 38a-439 in 1991; P.A. 05-162 amended Subsec. (e) by adding provisions re use of the Commissioners' 2001 Standard Ordinary Mortality Table, effective July 1, 2005; P.A. 10-5 made technical changes in Subsec. (e), effective May 5, 2010.

      See Secs. 38a-77 and 38a-78 re Standard Valuation Law.

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      Sec. 38a-440. (Formerly Sec. 38-130d). Minimum nonforfeiture benefits for annuity contract holders upon cessation of payment of considerations under a contract. (a) This section shall not apply to any reinsurance, group annuity purchased under a retirement plan or plan of deferred compensation established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, premium deposit fund, variable annuity, investment annuity, immediate annuity, any deferred annuity contract after annuity payments have commenced, or reversionary annuity, nor to any contract which shall be delivered outside this state through an agent or other representative of the company issuing the contract.

      (b) In the case of contracts issued on or after the effective date specified in accordance with the provisions of subsections (k) and (l) of this section, no contract of annuity, except as stated in subsection (a) of this section, shall be delivered or issued for delivery in this state unless it contains in substance the following provisions, or corresponding provisions which in the opinion of the commissioner are at least as favorable to the contractholder, upon cessation of payment of considerations under the contract: (1) That upon cessation of payment of considerations under a contract, or upon the written request of the contract owner, the company shall grant a paid-up annuity benefit on a plan stipulated in the contract of such value as is specified in subsections (d), (e), (f), (g) and (i) of this section; (2) if a contract provides for a lump sum settlement at maturity, or at any other time, that upon surrender of the contract at or prior to the commencement of any annuity payments, the company shall pay in lieu of any paid-up annuity benefit a cash surrender benefit of such amount as is specified in subsections (d), (e), (g) and (i) of this section. The company may reserve the right to defer the payment of such cash surrender benefit for a period not to exceed six months after demand therefor with surrender of the contract after making written request and receiving written approval of the commissioner, provided such request addresses the deferral's necessity and equitability with respect to all policyholders; (3) a statement of the mortality table, if any, and interest rates used in calculating any minimum paid-up annuity, cash surrender or death benefits that are guaranteed under the contract, together with sufficient information to determine the amounts of such benefits; and (4) a statement that any paid-up annuity, cash surrender or death benefits which may be available under the contract are not less than the minimum benefits required by the statutes of the state in which the contract is delivered and an explanation of the manner in which such benefits are altered by the existence of any additional amounts credited by the company to the contract, any indebtedness to the company on the contract or any prior withdrawals from or partial surrenders of the contract. Notwithstanding the requirements of this subsection, any deferred annuity contract may provide that if no considerations have been received under a contract for a period of two full years and the portion of the paid-up annuity benefit at maturity on the plan stipulated in the contract arising from considerations paid prior to such period would be less than twenty dollars monthly, the company may at its option terminate such contract by payment in cash of the then present value of such portion of the paid-up annuity benefit, calculated on the basis of the mortality table, if any, and interest rate specified in the contract for determining the paid-up annuity benefit, and by such payment shall be relieved of any further obligation under such contract.

      (c) The minimum values as specified in subsections (d), (e), (f), (g) and (i) of this section of any paid-up annuity, cash surrender or death benefits available under an annuity contract shall be based upon minimum nonforfeiture amounts as defined in this subsection: (1) The minimum nonforfeiture amount at any time at or prior to the commencement of any annuity payments shall be equal to an accumulation up to such time at rates of interest, as indicated in subdivision (3) of this subsection, of the net considerations, as defined in this subsection, paid prior to such time, decreased by the sum of (A) any prior withdrawals from or partial surrenders of the contract accumulated at rates of interest as indicated in subdivision (3) of this subsection; (B) an annual contract charge of fifty dollars, accumulated at rates of interest as indicated in subdivision (3) of this subsection; and (C) the amount of any indebtedness to the company on the contract, including interest due and accrued. (2) The net considerations for a given contract year used to define the minimum nonforfeiture amount shall be an amount equal to eighty-seven and one-half per cent of the gross considerations credited to the contract during that contract year. (3) The interest rate used in determining minimum nonforfeiture amounts shall be an annual rate of interest determined as the lesser of three per cent per annum or the rate calculated pursuant to subparagraphs (A) to (D), inclusive, of this subdivision, which shall be specified in the contract if the interest rate will be reset: (A) The five-year Constant Maturity Treasury Rate reported by the Federal Reserve as of a date, or average over a period of time, rounded to the nearest one-twentieth of one per cent, specified in the contract no later than fifteen months prior to the contract issue date or redetermination date under subparagraph (D) of this subdivision; (B) reduced by one hundred twenty-five basis points; (C) where the resulting interest rate is not less than one per cent; and (D) where such interest rate applies for an initial period of time and may be redetermined for additional periods of time. The redetermination date, basis and period, if any, shall be stated in the contract. The basis is the date or average over a specified period of time that produces the value of the five-year Constant Maturity Treasury Rate to be used at each redetermination date. (4) During the period of time or term that a contract provides substantive participation in an equity indexed benefit, the contract may increase the reduction described in subparagraph (B) of subdivision (3) of this subsection by an amount up to an additional one hundred basis points to reflect the value of the equity index benefit. The present value at the contract issue date, and at each redetermination date thereafter, of the additional reduction shall not exceed the market value of the benefit. The commissioner may require a demonstration that the present value of the additional reduction does not exceed the market value of the benefit. If there is no such demonstration that is acceptable to the commissioner, the commissioner may disallow or limit the additional reduction. (5) The commissioner may adopt regulations, in accordance with chapter 54, to implement the provisions of subdivision (4) of this subsection and to provide for further adjustments to the calculation of minimum nonforfeiture amounts for contracts that provide substantive participation in an equity index benefit and for other contracts for which the commissioner determines adjustments are justified.

      (d) Any paid-up annuity benefit available under a contract shall be such that its present value on the date annuity payments are to commence is at least equal to the minimum nonforfeiture amount on that date. Such present value shall be computed using the mortality table, if any, and the interest rates specified in the contract for determining the minimum paid-up annuity benefits guaranteed in the contract.

      (e) For contracts which provide cash surrender benefits, such cash surrender benefits available prior to maturity shall not be less than the present value as of the date of surrender of that portion of the maturity value of the paid-up annuity benefit which would be provided under the contract at maturity arising from considerations paid prior to the time of cash surrender reduced by the amount appropriate to reflect any prior withdrawals from or partial surrenders of the contract, such present value being calculated on the basis of an interest rate not more than one per cent higher than the interest rate specified in the contract for accumulating the net considerations to determine such maturity value, decreased by the amount of any indebtedness to the company on the contract, including interest due and accrued, and increased by any existing additional amounts credited by the company to the contract. In no event shall any cash surrender benefit be less than the minimum nonforfeiture amount at that time. The death benefit under such contracts shall be at least equal to the cash surrender benefit.

      (f) For contracts which do not provide cash surrender benefits, the present value of any paid-up annuity benefit available as a nonforfeiture option at any time prior to maturity shall not be less than the present value of that portion of the maturity value of the paid-up annuity benefit, provided under the contract arising from consideration paid prior to the time the contract is surrendered in exchange for, or changed to, a deferred paid-up annuity, such present value being calculated for the period prior to the maturity date on the basis of the interest rate specified in the contract for accumulating the net considerations to determine such maturity value, and increased by any existing additional amounts credited by the company to the contract. For contracts which do not provide any death benefits prior to the commencement of any annuity payments, such present values shall be calculated on the basis of such interest rate and the mortality table specified in the contract for determining the maturity value of the paid-up annuity benefit. In no event shall the present value of a paid-up annuity benefit be less than the minimum nonforfeiture amount at that time.

      (g) For the purpose of determining the benefits calculated under subsections (e) and (f) of this section, in the case of annuity contracts under which an election may be made to have annuity payments commence at optional maturity dates, the maturity date shall be deemed to be the latest date for which election shall be permitted by the contract, but shall not be deemed to be later than the anniversary of the contract next following the annuitant's seventieth birthday or the tenth anniversary of the contract, whichever is later.

      (h) Any contract which does not provide cash surrender benefits or does not provide death benefits at least equal to the minimum nonforfeiture amount prior to the commencement of any annuity payments shall include a statement in a prominent place in the contract that such benefits are not provided.

      (i) Any paid-up annuity, cash surrender or death benefits available at any time, other than on the contract anniversary under any contract with fixed scheduled considerations, shall be calculated with allowance for the lapse of time and the payment of any scheduled considerations beyond the beginning of the contract year in which cessation of payment of considerations under the contract occurs.

      (j) For any contract which provides, within the same contract by rider or supplemental contract provision, both annuity benefits and life insurance benefits that are in excess of the greater of cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits shall be equal to the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a separate contract. Notwithstanding the provisions of subsections (d), (e), (f), (g) and (i) of this section, additional benefits payable (1) in the event of total and permanent disability, (2) as reversionary annuity or deferred reversionary annuity benefits, or (3) as other policy benefits additional to life insurance, endowment and annuity benefits, and considerations for all such additional benefits, shall be disregarded in ascertaining the minimum nonforfeiture amounts, paid-up annuity, cash surrender and death benefits that may be required by this section. The inclusion of such additional benefits shall not be required in any paid-up benefits, unless such additional benefits separately would require minimum nonforfeiture amounts, paid-up annuity, cash surrender and death benefits.

      (k) On or after October 1, 1978, but prior to January 1, 1981, any company may file with the commissioner a written notice of its election to comply with the provisions of this section after a specified date and the provisions of this section shall apply to annuity contracts issued by such company on or after such specified date. On or after January 1, 1981, the provisions of this section shall apply to annuity contracts issued by any company.

      (l) On or after May 23, 2003, but prior to July 1, 2005, any company may file with the commissioner a written notice of its election to comply with the provisions of this section with respect to contract forms specified in the notice and issued on and after May 23, 2003, except that (1) no such notice shall be required for a company that elects to comply with the provisions of this section as set forth in the general statutes, revision of 1958, revised to January 1, 2003, and (2) on and after July 1, 2005, the provisions of this section shall apply to all annuity contracts issued by any company on and after July 1, 2005.

      (m) The commissioner may adopt regulations, in accordance with chapter 54, to implement the provisions of this section.

      (P.A. 78-312, S. 3; P.A. 03-53, S. 1.)

      History: Sec. 38-130d transferred to Sec. 38a-440 in 1991; P.A. 03-53 amended Subsec. (b) to reference Subsec. (l) and rewrite Subdivs. (1) and (2) to reference written requests, substitute "shall" for "will", "may" for "shall" and "not to exceed" for "of", amended Subsec. (c) to rewrite Subdivs. (1) and (2), delete former Subdiv. (3) and add new Subdivs. (3), (4) and (5) re interest calculation, reduction and regulations, amended Subsec. (d) to substitute "rates" for "rate", added new Subsec. (l) re effective date of provisions, and added new Subsec. (m) re regulations, effective May 23, 2003.

      See Secs. 38a-77 and 38a-78 re Standard Valuation Law.

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      Sec. 38a-441. (Formerly Sec. 38-159c). Notice to insured when life insurance policy paid up. Any insurance company doing the business of life insurance in this state which writes an individual life insurance policy delivered or issued for delivery in this state shall provide notice when such policy is fully paid up. Such notice shall be in writing and shall be sent or delivered by the insurer to the owner of the policy at the last-known address of the owner during the year in which the date such final payment is received by the insurer occurs, or within thirty-one days of such date if later. Each five years thereafter, written notice shall be so sent or delivered to the owner of the policy providing notice of the current status of such policy. The provisions of this section shall not apply to the purchase of a single premium life insurance policy, a universal life insurance policy, or to the purchase of paid-up additions under a participating life insurance policy.

      (P.A. 87-164.)

      History: Sec. 38-159c transferred to Sec. 38a-441 in 1991.

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      Sec. 38a-442. (Formerly Sec. 38-156). Dating back of policies prohibited. No policy of life insurance shall be issued or delivered in this state if it purports to be issued or to take effect as of a date more than six months before the application for the insurance was made if thereby the applicant would rate at an age younger than at the date when the application was made according to his age at nearest birthday.

      (1949 Rev., S. 6146; 1951, S. 2829d.)

      History: Sec. 38-156 transferred to Sec. 38a-442 in 1991.

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      Sec. 38a-443. (Formerly Sec. 38-147). Premium notes. A company may take premium notes, or give credit for part of its premiums, in accordance with its usual course of business.

      (1949 Rev., S. 6173.)

      History: Sec. 38-147 transferred to Sec. 38a-443 in 1991.

      Annotation to former section 38-147:

      Cited. 74 C. 353.


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      Sec. 38a-444. (Formerly Sec. 38-147b). Life insurance policy loans. Interest rate allowable. (a) For purposes of this section: (1) "Policy" means all contracts of life insurance which provide for policy loans, certificates insuring persons against loss of life issued by a fraternal benefit society and annuity contracts which provide for such loans; (2) "policy loan" means a loan to a policyholder, under the provisions of an insurance contract, that is secured by the cash surrender value or collateral assignment of the related policy or contract. "Policy loan" includes: (A) Cash loans, including loans resulting from early payment benefits or accelerated payment benefits, on contracts when the terms of the contract specify that such payments are policy loans secured by the policy, and (B) automatic premium loans, which are loans made in accordance with policy provisions whereby delinquent premium payments are automatically paid from the cash value at the end of the established grace period for premium payments; (3) "policyholder" includes the owner of the policy or the person designated to pay premiums as shown in the records of the life insurer; (4) "published monthly average" means: (A) Moody's Corporate Bond Yield Average-Monthly Average Corporates as published by Moody's Investors Service, Inc. or any successor thereto; or (B) in the event that Moody's Corporate Bond Yield Average-Monthly Average Corporates is no longer published, a substantially similar average, established by the Insurance Commissioner in regulations the commissioner may adopt in accordance with the provisions of chapter 54; (5) the rate of interest permitted under this section on policy loans includes the rate of interest charged on reinstatement of policy loans for the period during and after any lapse of a policy.

      (b) Policies issued on or after October 1, 1981, shall provide for loan interest rates as follows: (1) A provision permitting a maximum interest rate of not more than eight per cent per annum; or (2) a provision permitting an adjustable maximum interest rate established from time to time by the life insurer as permitted by this section.

      (c) The rate of interest charged on a policy loan made under subdivision (2) of subsection (b) of this section shall not exceed the higher of the following: (1) The published monthly average for the calendar month ending two months before the date on which the rate is determined; or (2) the rate used to compute the cash surrender values under the policy during the applicable period plus one per cent per annum.

      (d) If the maximum rate of interest is determined pursuant to subdivision (2) of subsection (b) of this section, the policy shall contain a provision specifying the frequency at which the rate is to be determined.

      (e) The maximum rate for each policy shall be determined at regular intervals at least once every twelve months, but not more frequently than once every three months. At the intervals specified in the policy: (1) The rate charged may be increased whenever the rate is one-half of one per cent or more per annum less than the maximum rate determined under subsection (c) of this section; (2) the rate charged shall be reduced whenever the rate is one-half of one per cent or more per annum greater than the maximum rate determined under subsection (c) of this section.

      (f) The life insurer shall: (1) Notify the policyholder at the time a cash loan is made of the initial rate of interest on the loan; (2) notify the policyholder with respect to premium loans of the initial rate of interest on the loan as soon as is reasonably practicable after making the initial loan. Notice of the rate of interest need not be given to the policyholder when a further premium loan is added, except as provided in subdivision (3) of this subsection; (3) forward to the policyholder with an outstanding loan, reasonable advance notice of any increase in the rate; and (4) include in the notices required by this subsection, the substance of the provisions of subsections (b) and (d) of this section.

      (g) No policy shall terminate in a policy year as the sole result of a change in the interest rate during that policy year. The life insurer shall maintain coverage during that policy year until the time at which it would otherwise have terminated if there had been no change.

      (h) The provisions of this section shall not apply to any insurance contract issued before October 1, 1981, unless the policyholder agrees in writing to the applicability of such provisions.

      (i) The provisions of sections 37-4, 37-5 and 37-6 shall not affect any loan made under subdivision (2) of subsection (b) of this section.

      (P.A. 81-51; P.A. 00-30, S. 12, 14.)

      History: Sec. 38-147b transferred to Sec. 38a-444 in 1991; P.A. 00-30 amended Subdiv. (a)(2) to redefine "policy loan", and made technical changes in Subdiv. (a)(3) for purposes of gender neutrality, effective January 1, 2001.

      See Secs. 38a-595 to 38a-626, inclusive, 38a-631 to 38a-640, inclusive, and 38a-800 re fraternal benefit societies.

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      Sec. 38a-445. (Formerly Sec. 38-160). Deferring the granting of loans and surrender values. No policy of life or endowment insurance shall be issued or delivered in this state unless it contains a provision that the company may, at its option, defer the granting of any loan other than to pay premiums on policies in the company, and may, at its option, defer the granting of any surrender value for a period which shall be stated in such provision and which shall be not less than sixty days from the date of the application for such loan or surrender value; provided a foreign or alien insurance company may issue in this state any policy containing provisions required by the laws of its own state or country respecting the deferring of loans or granting surrender values, and a domestic insurance company may issue in other states policies which contain provisions relating to the deferring of loans or granting surrender values required by the laws of such states.

      (1949 Rev., S. 6169; P.A. 90-243, S. 64.)

      History: P.A. 90-243 substituted "foreign" for "nonresident" insurance companies and "alien" for "foreign" insurance companies; Sec. 38-160 transferred to Sec. 38a-445 in 1991.

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      Sec. 38a-446. (Formerly Sec. 38-149). Discrimination in favor of individuals prohibited. No life insurance company doing business in this state shall make or permit any distinction or discrimination in favor of individuals between insurants of the same class and expectation of life in the amount or payment of premiums or rates charged for policies of life or endowment insurance, or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of the contracts it makes; nor shall any such company or any producer or other person make any contract of insurance or agreement as to such contract other than is plainly expressed in the policy issued thereon.

      (1949 Rev., S. 6139; P.A. 96-193, S. 13, 36.)

      History: Sec. 38-149 transferred to Sec. 38a-446 in 1991; P.A. 96-193 substituted "producer" for "agent, subagent, broker", effective June 3, 1996.

      See Sec. 38a-488 re prohibition against discrimination between individuals of same class with respect to premiums or rates charged.

      See Sec. 38a-816 re unfair practices.

      See Sec. 38a-825 re prohibition against premium rebate or other special favor.


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      Sec. 38a-447. (Formerly Sec. 38-150). Discrimination against persons on the basis of race prohibited. No life insurance company doing business in this state may: (1) Make any distinction or discrimination between persons on the basis of race, as to the premiums or rates charged for policies upon the lives of such persons; (2) demand or require greater premiums from persons of one race than such as are at that time required by that company from persons of another race of the same age, sex, general condition of health and hope of longevity; or (3) make or require any rebate, diminution or discount on the basis of race upon the sum to be paid on any policy in case of the death of any person insured, nor insert in the policy any condition, nor make any stipulation whereby such person insured shall bind himself, his heirs, executors, administrators or assigns to accept any sum less than the full value or amount of such policy, in case of a claim accruing thereon by reason of the death of such person insured, other than such as are imposed upon all persons in similar cases; and each such stipulation or condition so made or inserted shall be void.

      (1949 Rev., S. 6140; P.A. 90-243, S. 170.)

      History: P.A. 90-243 divided the section into Subsecs., substituted "may" for "shall" and deleted references to specific groups and inserted a general prohibition against discrimination; Sec. 38-150 transferred to Sec. 38a-447 in 1991.

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      Secs. 38a-448 and 38a-449. (Formerly Secs. 38-151 and 38-152). Affidavit of examining physician. Sections 38a-448 and 38a-449 are repealed.

      (1949 Rev., S. 6141, 6142; P.A. 92-60, S. 28.)

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      Sec. 38a-450. (Formerly Sec. 38-159). Certain corporations and associations may be made beneficiaries. Any life insurance company doing business within the state may issue policies of insurance predicated upon the life or lives of any person or persons, payable at maturity to any educational, ecclesiastical, benevolent, charitable or eleemosynary corporation which can legally take and receive testamentary legacies, irrespective of a financial interest on the part of such corporation in the life of the person or persons insured.

      (1949 Rev., S. 6149.)

      History: Sec. 38-159 transferred to Sec. 38a-450 in 1991.

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      Sec. 38a-451. (Formerly Sec. 38-159a). Trustee as beneficiary of policy. (a) Unless prohibited by the policy there may be designated, as beneficiary of any policy issued by any life insurance company, the trustee of a trust to be created in and by the last will of the insured or in and by an inter vivos trust. Such designation may direct payment to such trustee as may qualify and be appointed for such trust. Upon the death of the insured and the qualification of the trustee of such testamentary or inter vivos trust, such life insurance company shall pay to such trustee the proceeds of the policy and other sums, if any, due the beneficiary thereunder. If (1) the insured dies intestate, or (2) no inter vivos trust is created or no such trust is created in the will of the insured duly admitted to probate, or (3) if such trust is so created but no trustee thereof qualifies as such within one year after the death of the insured or if the inter vivos trust has been terminated, such life insurance company shall pay such proceeds and other sums, if any, to such contingent beneficiary, if any, as may have been designated for that one of such contingencies (1), (2) or (3) as has occurred, and, if none was so designated, to the executors or administrators of the insured.

      (b) This section shall apply to all such designations of beneficiary by an insured dying after June 15, 1965, whether or not a trustee shall be identified by name in the policy.

      (February, 1965, P.A. 230, S. 1, 2.)

      History: Sec. 38-159a transferred to Sec. 38a-451 in 1991.

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      Sec. 38a-452. (Formerly Sec. 38-159b). Payment of interest on life insurance death benefits. (a) In the event an action to recover the proceeds due under a life insurance policy or annuity contract is commenced and results in a judgment against the insurer, interest thereon shall be paid from the date of the death of an insured or annuitant in connection with a death claim on a life insurance policy or annuity contract and from the date of maturity of an endowment contract to the date the verdict is rendered or the report or decision is made, computed under the provisions of subsection (b) of this section.

      (b) In the event no action has been commenced, interest upon the principal sum paid to the beneficiary or policyholder respectively shall be computed daily at the rate of interest currently paid by the insurer on proceeds left under the interest settlement option, commencing no later than ten days after the date of the death of an insured or annuitant in connection with a death claim on a life insurance policy or annuity contract and commencing no later than ten days after the date of maturity of an endowment contract to the date of payment and shall be added to and be a part of the total sum paid.

      (c) The provisions of this section shall not apply to policies or contracts issued prior to October 1, 1976, which contain specific provisions to the contrary.

      (P.A. 76-60, S. 1-3.)

      History: Sec. 38-159b transferred to Sec. 38a-452 in 1991.

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      Sec. 38a-453. (Formerly Sec. 38-161). Rights of creditors of insured against beneficiary. (a) The beneficiary of any life insurance policy, being a person other than the insured, whether named as beneficiary in the original policy or subsequently named as beneficiary in accordance with the terms of the policy, shall be entitled to the proceeds of the policy as against the representatives or creditors of the insured, unless the policy was procured or the designation of a beneficiary was made with intent, express or implied, to defraud creditors.

      (b) If any such policy was procured or any such designation made with the intent, express or implied, to defraud creditors, the proceeds thereof shall become a part of the estate of the insured, and the executor or administrator of the estate shall collect the insurance and use the proceeds thereof so far as it is required for the expenses of administration and the payment of debts and pay over the balance, if any, to the beneficiary of the policy. If any premiums paid on the insurance policy were paid with the intent, express or implied, to defraud creditors, the amount of the premiums so paid, with interest thereon, shall become a part of the estate and shall be dealt with as above provided.

      (c) The company issuing the policy shall be discharged of all liability thereunder by payment of the proceeds in accordance with the terms of the policy unless, before such payment, the company has received written notice, from a creditor, executor or administrator of the insured, that the policy was procured or premiums were paid thereon with intent to defraud creditors. That notice may be disregarded by the company unless proper legal proceedings to enforce the claim are begun within three months from the giving of the notice.

      (d) This section shall apply to any policy of insurance issued before July 1, 1933, but not to policies which matured by the death of the insured before July 1, 1933.

      (1949 Rev., S. 6150; P.A. 90-243, S. 65.)

      History: P.A. 90-243 divided the section into Subsecs. and made technical changes for statutory consistency; Sec. 38-161 transferred to Sec. 38a-453 in 1991.

      Annotations to former section 38-161:

      Where husband assigned insurance on his life as security for bank loan, joinder by wife in assignment did not defeat her right as beneficiary to excess of proceeds above debt to bank. 120 C. 306.

      Cited. 39 CS 470.

      Annotations to present section:

      Cited. 229 C. 459.


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      Sec. 38a-454. (Formerly Sec. 38-162). Proceeds of insurance policies and annuities may be held in trust. Any domestic life insurance company shall have power to hold the proceeds of any policy issued by it under a trust or other agreement upon such terms and restrictions as to revocation by the policyholder and control by beneficiaries and with such exemptions from the claims of creditors of beneficiaries other than the policyholder as have been agreed to in writing by such company and the policyholder. Such insurance company shall not be required to segregate funds so held but may hold them as a part of its general corporate assets. Similar terms, restrictions and exemptions, for the benefit of any payee other than the purchaser, may be included by any such company in any annuity contract or any agreement issued in connection therewith or supplemental thereto. When any foreign or alien life insurance company doing business in Connecticut holds the proceeds of a life insurance policy or annuity contract under any trust or other agreement consistent with its charter or the laws of its domicile, beneficiaries of such trust or other agreement shall be entitled to exemptions from claims of creditors as hereinbefore provided to the same extent as if the trust or other agreement were entered into with a domestic life insurance company.

      (1949 Rev., S. 6151; P.A. 90-243, S. 66.)

      History: P.A. 90-243 substituted "foreign" for "nonresident" and "alien" for "foreign" insurance companies; Sec. 38-162 transferred to Sec. 38a-454 in 1991.

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      Sec. 38a-455. Assignment of incidents of ownership under group life policy. Any person whose life is insured under any policy of group life insurance is permitted to make an assignment of all or any part of his incidents of ownership in such insurance, including, without limitation, any right to designate a beneficiary or beneficiaries thereunder and any right to have an individual policy issued upon termination either of employment or of said policy of group insurance, if applicable, provided the insurer or group policyholder may prohibit or restrict such assignment by appropriate policy provisions. Such an assignment, subject to the terms of the policy or agreement between the group policyholder and the insurer, is valid for the purpose of vesting in the assignee, in accordance with any provisions included therein as to the time at which it is to be effective, all rights, benefits and incidents of ownership conferred under the policy and shall entitle the insurer to deal with the assignee as the owner of such rights, benefits and incidents of ownership, provided the insurer shall not be affected by any assignment until he has received written notice thereof.

      (P.A. 90-243, S. 147.)

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      Sec. 38a-456. Notice of cancellation or discontinuation of group life insurance coverage. Penalty. (a) Any individual, partnership, corporation or unincorporated association providing group life insurance coverage for its employees shall furnish each insured employee, upon cancellation or discontinuation of such life insurance, notice of the cancellation or discontinuation of such insurance. The notice shall be mailed or delivered to the insured employee not less than fifteen days next preceding the effective date of cancellation or discontinuation. Any individual or any such entity that fails to provide timely notice shall be fined not more than two thousand dollars for each violation. The Labor Commissioner shall have the authority to assess all such fines. This section shall apply to any such individual, partnership, corporation or unincorporated association that substitutes one policy providing such group life insurance coverage for another such policy with no interruption in coverage.

      (b) If any individual or any such entity fails to furnish notice pursuant to subsection (a) of this section, the individual or entity shall be liable for benefits to the same extent as the insurer would have been liable if coverage had not been cancelled or discontinued.

      (P.A. 90-243, S. 148; May 25 Sp. Sess. P.A. 94-1, S. 104, 130; P.A. 08-178, S. 14.)

      History: May 25 Sp. Sess. P.A. 94-1 amended Subsec. (a) by making technical change, effective July 1, 1994; P.A. 08-178 amended Subsec. (a) by making technical changes and increasing maximum fine from $1,000 to $2,000 per violation.

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      Sec. 38a-457. Accelerated benefits of life insurance policies. (a) As used in this section:

      (1) "Accelerated benefits" means benefits payable under a life insurance policy sold in this state: (A) During the lifetime of the insured, in a lump sum or in periodic payments, as specified in the policy, (B) upon the occurrence of a qualifying event, as defined in the policy, and certified by a physician who is licensed under the laws of a state or territory of the United States, or such other foreign or domestic jurisdiction as the Insurance Commissioner may approve, and (C) which reduce the death benefits otherwise payable under the life insurance policy.

      (2) "Insurance policy" or "policy" means an insurance policy or certificate or rider or endorsement thereto.

      (3) "Qualifying event" means (A) a medically determinable condition suffered by the insured that can be expected to result in death in a relatively short period of time, such as twelve months and may include, but is not limited to, coronary artery disease, myocardial infarction, stroke, kidney failure or liver disease, (B) a medical condition that would, in the absence of extensive or extraordinary medical treatment, result in death in a relatively short period of time, such as twelve months, or (C) a medically determinable condition suffered by the insured, which has resulted in the insured being considered a chronically ill individual for the purposes of Section 101(g) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time, and which has caused the insured to be confined for at least six months in such insured's place of residence or in an institution that provides necessary care or treatment of an injury, illness or loss of functional capacity, and for which it has been medically determined that such insured is expected to remain confined in such place of residence or institution until death.

      (b) On and after October 1, 1990, any life insurance company or fraternal benefits society doing business in this state may issue accelerated benefits life insurance policies, as described in this section, and certificates, riders or endorsements to existing life insurance policies that provide accelerated benefits, as described in this section.

      (c) An accelerated benefits life insurance policy shall not include a policy providing for disability income protection coverage or long-term care coverage, as defined in sections 38a-501 and 38a-528.

      (d) (1) Death benefits may not be reduced more than the amount of the accelerated benefits paid plus any applicable actuarial discount appropriate to the policy design for policies without additional premium payments. When an accelerated benefit is paid, the amount paid may be considered as (A) a pro rata reduction in cash value or death benefits, or both, or (B) a lien against the death benefit of the contract and the access to the cash value shall be restricted to any excess of the cash value over the sum of other outstanding loans and the lien.

      (2) The accidental death benefit, if any, in the policy shall not be affected by the payment of the accelerated benefit.

      (e) All accelerated benefits policies shall comply with the following disclosure requirements:

      (1) The face of every accelerated benefits policy shall contain: (A) A description of coverage which uses the terminology "accelerated" and (B) the following statement: "Benefits as specified under this policy will be reduced upon receipt of an accelerated benefit."

      (2) Disclosure is required, at the time of application and at the time the accelerated benefits payment request is submitted, of the potential tax implications of receiving this payout. The disclosure statement shall indicate that the receipt of accelerated benefits may be taxable and that the insured should seek assistance from their personal tax advisor. Such disclosure shall be prominently displayed on the first page of the policy.

      (3) Prior to or concurrent with the application, the applicant shall be given a written disclosure including, but not limited to, a brief description of the accelerated benefit, the effect of the payment of an accelerated benefit on the policy's cash value, death benefit, premium, policy loans and policy liens, and definitions of the conditions or occurrences triggering payment of the accelerated benefits. In the event of direct mail solicitation, the disclosure shall be made upon acceptance of the application.

      (4) The insurer shall disclose in its solicitation any separate identifiable premium for the accelerated benefit. Those insurers indicating that this accelerated benefit is offered without additional premium shall furnish a written explanation to the Insurance Commissioner when filing the product.

      (5) Prior to or concurrent with the request for accelerated death benefits, the applicant shall be given an illustration demonstrating the effect of the payment of an accelerated benefit on the policy's cash value, death benefit, premium, policy loans and policy liens.

      (f) The insurer shall file with the Insurance Department the information concerning the manner by which the actuarial discount and mortality charge, if any, is calculated for the accelerated benefit. The commissioner, if he determines that such discount or mortality charge is excessive, shall hold a hearing to determine such reasonable charges.

      (g) Any life insurance policy or any certificate, rider or endorsement thereto, which provides accelerated benefits pursuant to the occurrence of a qualifying event, as defined in subparagraph (C) of subdivision (3) of subsection (a) of this section, shall contain the following statement printed in a conspicuous and readily discernible manner: "This policy is not a long-term care policy as defined in sections 38a-501 and 38a-528 of the Connecticut General Statutes."

      (h) The Insurance Commissioner may adopt, in accordance with chapter 54, such regulations as the commissioner deems necessary for the purpose of this section, including the medically determinable conditions that are considered to be qualifying events as set forth in subdivision (3) of subsection (a) of this section, and the authority to establish the minimum or maximum benefit, if any, payable under an accelerated benefit policy. Prior to the effective date of any such regulations, any such policy may be filed with the commissioner and, at the commissioner's discretion, may be approved.

      (P.A. 90-200, S. 1; P.A. 92-60, S. 18; P.A. 09-216, S. 1.)

      History: P.A. 92-60 made technical corrections for statutory consistency; P.A. 09-216 amended Susec. (a) by redefining "accelerated benefits" in Subdiv. (1) and "qualifying event" in Subdiv. (3), made a technical change in Subsec. (b), and amended Subsec. (h) by authorizing commissioner to adopt regulations re medically determinable conditions considered to be qualifying events and making technical changes, effective January 1, 2010.

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      Sec. 38a-458. Life insurance policies providing long-term care benefits. Regulations. (a) On and after June 16, 1989, any life insurance company doing business in this state may issue life insurance policies or certificates, or riders or endorsements thereto, which provide, within the terms and conditions of the policy or certificate, long-term care benefits as described in section 38a-501, provided such company is licensed for both life and health insurance in this state. The Insurance Commissioner may adopt regulations, in accordance with chapter 54, to implement the provisions of this section. Prior to the effective date of such regulations, any such policy, certificate, rider or endorsement may be filed with the commissioner and may be approved at the commissioner's discretion.

      (b) Long-term care benefits provided pursuant to subsection (a) of this section shall not be subject to the requirements of subsection (b) of section 38a-501 or subsection (b) of section 38a-528.

      (c) No insurance producer shall sell any such policy, certificate, rider or endorsement unless the producer is licensed to sell both life and health insurance in this state.

      (d) A life insurance policy with long-term care benefits issued pursuant to this section may include a rider that provides long-term care benefits that become payable upon exhaustion of benefits under the life insurance policy. The elimination period limitations shall apply only to the life insurance policy to which the rider is attached. Such rider shall not contain an additional elimination period and may calculate the waiver of premium from the time benefits are payable under such rider.

      (P.A. 89-236, S. 2, 3; P.A. 92-60, S. 19; P.A. 00-34, S. 1; P.A. 01-113, S. 30, 42; P.A. 04-174, S. 4.)

      History: P.A. 92-60 made technical corrections for statutory consistency; P.A. 00-34 made technical changes in Subsecs. (a) and (c), and added Subsec. (d) re optional rider that may be added to life insurance policy with long-term care benefits that provides such benefits that become payable upon exhaustion of benefits under the life insurance policy, and that elimination period limitations shall apply only to the life insurance policy to which the rider is attached, and that such rider contain no additional elimination period and may calculate the waiver of premium from time benefits are payable under the rider; P.A. 01-113 amended Subsec. (c) to substitute "producer" for "agent", effective September 1, 2002; P.A. 04-174 amended Subsec. (b) to insert reference to "subsection (a)" (Revisor's note: In 2005, a reference to "agent" in Subsec. (c) in said public act was changed editorially to "producer" to conform with P.A. 01-113 as published in the 2003 general statutes).

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      Sec. 38a-458a. Option for certain insurers to combine long-term care coverage with certain life, endowment or annuity coverages. Notwithstanding the provisions of sections 38a-430, 38a-481 and 38a-501, or any regulation adopted pursuant to said sections, an insurer licensed for both life and health insurance in this state may combine the following coverages, by rider or otherwise, within a single-premium policy or contract: (1) Life or endowment insurance or annuity, survivorship annuity or pure endowment insurance; and (2) long-term care insurance.

      (P.A. 00-34, S. 2.)

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      Sec. 38a-459. (Formerly Sec. 38-33a). Funding agreements by domestic life insurance companies. Establishment of companies' obligations. Segregation of moneys. (a) Notwithstanding any inconsistent provision in its charter, any domestic life insurance company may enter into written agreements (1) to fund benefits under any employee benefit plan as defined in the Employee Retirement Income Security Act of 1974, as amended from time to time, or any similar plan maintained in a foreign country, (2) to fund the activities of any organization exempt from taxation under Section 501(c) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, or of any similar organization in any foreign country, (3) to fund any program of the government of the United States, the government of any state, foreign country or political subdivision thereof, or any agency or instrumentality thereof, (4) to fund any agreement providing for periodic payments in satisfaction of a claim, or (5) to fund any program of an institution which has assets in excess of twenty-five million dollars. Under such agreements, the company's obligations may be established by reference to (A) amounts deposited with the company and allocated to such company's general account or to one or more separate accounts in accordance with subsection (b) or (c) of this section or pursuant to section 38a-433, or (B) an asset portfolio that is not owned or possessed by such company. The issuance or delivery of a funding agreement in this state shall constitute doing an insurance business in this state.

      (b) After adoption of a resolution by its board of directors and certification thereof to the Insurance Commissioner, any amounts which are paid to or held by such company in accordance with the terms of such written agreements may be allocated to one or more separate accounts. In connection with such separate accounts any such company may issue, subject to the terms of such written agreement, individual or group policies or contracts with benefits payable in fixed or variable amounts. The income, if any, and gains or losses, realized or unrealized, on each such account may be credited to or charged against the amount allocated to such account in accordance with such agreement, without regard to the other income, gains or losses of the company. Notwithstanding any inconsistent provision in its charter or in any section of the general statutes, the amounts allocated to such accounts and accumulations thereon may be invested and reinvested in any class of loans and investments specified in such agreement, and such loans and investments shall not be included in applying the limitations provided in sections 38a-102 to 38a-102h, inclusive. Amounts allocated by an insurance company to separate accounts in the exercise of the power granted by this section shall be owned by the company, and the company shall not be, or hold itself out to be, a trustee in respect to such amounts, except that such amounts shall not be chargeable with liabilities arising out of any other business the company may conduct.

      (c) Reserves for fixed retirement benefits, or other benefits incidental thereto, in the course of payment, may be maintained in a separate account with the approval of the Insurance Commissioner and under such conditions as he may prescribe, except that any such reserves which are attributable to contributions by a self-employed individual on his own behalf, or to contributions subject to Section 403(b) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, shall not be maintained in a separate account.

      (1959, P.A. 317, S. 1; February, 1965, P.A. 515, S. 1; 1967, P.A. 530, S. 1; 1969, P.A. 465; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 273, 348; P.A. 83-208, S. 1, 3; P.A. 85-125; P.A. 89-211, S. 43; P.A. 93-239, S. 14; P.A. 97-108, S. 2.)

      History: 1965 act authorized issuance of policies with benefits payable in both fixed and variable amounts and amended provisions where necessary to distinguish between the two types; 1967 act deleted exemption to provisions for "amounts contributed by a participant who is entitled to retirement benefits, or benefits incidental thereto, under such a pension, retirement or profit-sharing plan" in Subsec. (b); 1969 act deleted proviso in Subsec. (a) which required that plan must cover twenty-five or more individuals at time of agreement if benefits are to be payable in variable amounts and specified that separate accounts are not chargeable with liabilities arising from company's other business and entirely replaced Subsec. (b) which had exempted amounts applied to purchase of fixed retirement benefits and other incidental benefits from provisions of section; P.A. 77-614 placed insurance commissioner within the department of business regulation and made insurance department a division within that department, effective January 1, 1979; P.A. 80-482 restored insurance commissioner and division to prior independent status and abolished the department of business regulation; P.A. 83-208 amended Subsec. (a) to provide that any domestic life insurance company may enter into written agreements to fund benefits under any employee benefit plan, fund the activities of tax-exempt organizations, or fund any governmental program, deleting less specific provisions; P.A. 85-125 divided former Subsec. (a) into Subsecs. (a) and (b), relettering Subsec. (c) accordingly, authorized insurance companies to fund agreements providing for periodic payments in satisfying a claim and to fund programs of institutions having assets of more than $25,000,000, allowed companies to allocate funds from agreements to their general accounts and stated that issuance or delivery of agreements in this state constitutes doing an insurance business; P.A. 89-211 clarified references to the Internal Revenue Code of 1986; Sec. 38-33a transferred to Sec. 38a-459 in 1991; P.A. 93-239 made technical corrections for statutory consistency and substituted "sections 38a-102 to 38a-102h, inclusive" for "section 38a-95"; P.A. 97-108 amended Subsec. (a) to add Subparas. (A) and (B) re establishing a company's obligations and to make technical changes.

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      Sec. 38a-460. Accumulation fund arrangements. Definition. (a) Any domestic life insurance company may provide accumulation fund arrangements in connection with the making of any life insurance contract or annuity contract, including any contract that makes life insurance or annuities available on an optional basis, and such company may insure the balance accumulated under such accumulation fund arrangements by promising a rate of return on such arrangements in fixed or variable amounts or in any combination of fixed and variable amounts. As used in this section and in section 38a-92a, "accumulation fund arrangement" means an arrangement under which amounts are allowed to accumulate at the rate or rates credited by a life insurance company and under which accumulated amounts may be applied in the future to the purchase of life insurance coverage or annuitized benefits or may be distributed through one or more cash payments.

      (b) Under such accumulation fund arrangements, the company's obligations may be established by reference to (1) amounts deposited with the company and allocated to its general account or one or more of its separate accounts pursuant to section 38a-433, or (2) an asset portfolio that is not owned or possessed by the insurance company.

      (P.A. 97-108, S. 1.)

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      Secs. 38a-461 to 38a-463. Reserved for future use.

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PART II
BURIAL CONTRACTS

      Sec. 38a-464. (Formerly Sec. 38-32). Burial contracts; license from Insurance Commissioner. A "burial contract" or "burial certificate", within the meaning of this section, is any instrument in writing whereby any person, firm, corporation or association, in consideration of the payment of a specified sum of money or for any other valuable consideration, promises or agrees to embalm or inter or otherwise dispose of, or to procure the embalmment or interment or other disposal of, the remains of any person who is living at the time of the execution of such instrument. No person, firm, corporation or association shall transact the business of issuing burial contracts or burial certificates until such person, firm, corporation or association has procured from the commissioner a license to conduct such business under such regulations as the commissioner may prescribe in accordance with chapter 54. All the applicable provisions of the general statutes which pertain to and govern the issuance of policies of life insurance are made applicable to and shall govern the issuance of burial contracts or burial certificates. Any person who violates any provision of this section shall be fined not more than six thousand dollars or imprisoned not more than one year, or both.

      (1949 Rev., S. 6091; P.A. 08-178, S. 15.)

      History: Sec. 38-32 transferred to Sec. 38a-464 in 1991; P.A. 08-178 made technical changes and increased maximum fine from $500 to $6,000.

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PART III
LIFE SETTLEMENTS

      Sec. 38a-465. Definitions. As used in sections 38a-465 to 38a-465q, inclusive, and subdivision (20) of section 38a-816:

      (1) "Advertisement" means any written, electronic or printed communication or any communication by means of recorded telephone messages or transmitted on radio, television, the Internet or similar communications media, including, but not limited to, film strips, motion pictures and videos, published, disseminated, circulated or placed before the public, directly or indirectly, for the purpose of creating an interest in or inducing a person to purchase or sell, assign, devise, bequest or transfer the death benefit or ownership of a life insurance policy or an interest in a life insurance policy pursuant to a life settlement contract.

      (2) "Broker" means a person who, on behalf of an owner and for a fee, commission or other valuable consideration, offers or attempts to negotiate life settlement contracts between an owner and one or more providers. "Broker" does not include an attorney, certified public accountant or financial planner accredited by a nationally recognized accreditation agency retained to represent the owner, whose compensation is not paid directly or indirectly by a provider or any other person except the owner.

      (3) "Business of life settlements" means an activity involved in, but not limited to, offering to enter into, soliciting, negotiating, procuring, effectuating, monitoring or tracking of life settlement contracts.

      (4) "Chronically ill" means: (A) Being unable to perform at least two activities of daily living, including, but not limited to, eating, toileting, transferring, bathing, dressing or continence; (B) requiring substantial supervision to protect from threats to health and safety due to severe cognitive impairment; or (C) having a level of disability similar to that described in subparagraph (A) of this subdivision as determined by the federal Secretary of Health and Human Services.

      (5) "Commissioner" means the Insurance Commissioner.

      (6) (A) "Financing entity" means an underwriter, placement agent, lender, purchaser of securities, purchaser of a policy or certificate from a provider, credit enhancer, or any entity that has a direct ownership in a policy or certificate that is the subject of a life settlement contract:

      (i) Whose principal activity related to the transaction is providing funds to effect the life settlement contract or purchase of one or more policies; and

      (ii) Who has an agreement in writing with one or more providers to finance the acquisition of life settlement contracts.

      (B) "Financing entity" does not include a nonaccredited investor or a purchaser.

      (7) "Financing transaction" means any transaction in which a provider obtains financing from a financing entity, including, but not limited to, any secured or unsecured financing, any securitization transaction or any securities offering which is registered or exempt from registration under federal or state securities law.

      (8) "Insured" means the person covered under the policy being considered for sale in a life settlement contract.

      (9) "Life expectancy" means the arithmetic mean of the number of months the insured under the life insurance policy to be settled can be expected to live as determined by a life expectancy company, life settlement company or investor considering medical records and experiential data.

      (10) "Life insurance producer" means any person licensed in this state as a resident or nonresident insurance producer who has received qualification or authority for life insurance coverage or a life line coverage pursuant to chapter 702.

      (11) (A) "Life settlement contract" means:

      (i) A written agreement entered into between a provider and an owner, establishing the terms under which compensation or anything of value will be paid, which compensation or thing of value is less than the expected death benefit of the insurance policy or certificate, in return for the owner's assignment, transfer, sale, devise or bequest of the death benefit or any portion of an insurance policy or certificate of insurance for compensation, provided the minimum value for a life settlement contract shall be greater than a cash surrender value or accelerated death benefit available at the time of an application for a life settlement contract;

      (ii) The transfer for compensation or value of ownership or beneficial interest in a trust, or other entity that owns such policy, if the trust or other entity was formed or availed of for the principal purpose of acquiring one or more life insurance contracts, which life insurance contract insures the life of a person residing in this state;

      (iii) A written agreement for a loan or other lending transaction, secured primarily by an individual or group life insurance policy; or

      (iv) A premium finance loan made for a policy on or before the date of issuance of the policy where (I) the loan proceeds are not used solely to pay premiums for the policy and any costs or expenses incurred by the lender or the borrower in connection with the financing, (II) the owner receives, on the date of the premium finance loan, a guarantee of the future life settlement value of the policy, or (III) the owner agrees on the date of the premium finance loan to sell the policy, or any portion of its death benefit, on any date following the issuance of the policy.

      (B) "Life settlement contract" does not include:

      (i) A policy loan by a life insurance company pursuant to the terms of the life insurance policy or accelerated death provisions contained in the life insurance policy, whether issued with the original policy or as a rider;

      (ii) A premium finance loan, as defined in subparagraph (A)(iv) of this subdivision, or any loan made by a bank or other licensed financial institution, provided neither default on such loan or the transfer of the policy, in connection with such default, is pursuant to an agreement or understanding with any other person for the purpose of evading regulation under this part;

      (iii) A collateral assignment of a life insurance policy by an owner;

      (iv) A loan made by a lender that does not violate sections 38a-162 to 38a-170, inclusive, provided such loan is not described in subparagraph (A) of this subdivision and is not otherwise within the definition of life settlement contract;

      (v) An agreement where all the parties are closely related to the insured by blood or law or have a lawful substantial economic interest in the continued life, health and bodily safety of the person insured, or are trusts established primarily for the benefit of such parties;

      (vi) Any designation, consent or agreement by an insured who is an employee of an employer in connection with the purchase by the employer, or trust established by the employer, of life insurance on the life of the employee;

      (vii) A bona fide business succession planning arrangement: (I) Between one or more shareholders in a corporation or between a corporation and one or more of its shareholders or one or more trusts established by its shareholders; (II) between one or more partners in a partnership or between a partnership and one or more of its partners or one or more trusts established by its partners; or (III) between one or more members in a limited liability company or between a limited liability company and one or more of its members or one or more trusts established by its members;

      (viii) An agreement entered into by a service recipient or a trust established by the service recipient, and a service provider or a trust established by the service provider, that performs significant services for the service recipient's trade or business; or

      (ix) Any other contract, transaction or arrangement from the definition of life settlement contract that the commissioner determines is not of the type intended to be regulated by this part.

      (12) "Net death benefit" means the amount of the life insurance policy or certificate to be settled less any outstanding debts or liens.

      (13) "Owner" means the owner of a life insurance policy or a certificate holder under a group policy, with or without a terminal illness, who enters or seeks to enter into a life settlement contract. For the purposes of this part, an owner shall not be limited to an owner of a life insurance policy or a certificate holder under a group policy that insures the life of an individual with a terminal or chronic illness or condition, except where specifically addressed. "Owner" does not include: (A) Any provider or other licensee under this part; (B) a qualified institutional buyer, as defined in Rule 144A of the federal Securities Act of 1933, as amended from time to time; (C) a financing entity; (D) a special purpose entity; or (E) a related provider trust.

      (14) "Patient identifying information" means an insured's address, telephone number, facsimile number, electronic mail address, photograph or likeness, employer, employment status, Social Security number or any other information that is likely to lead to the identification of the insured.

      (15) "Person" means a natural person or a legal entity, including, but not limited to, an individual, partnership, limited liability company, association, trust or corporation.

      (16) "Policy" means an individual or group policy, group certificate, contract or arrangement of life insurance owned by a resident of this state, regardless of whether delivered or issued for delivery in this state.

      (17) "Premium finance loan" means a loan made primarily for the purposes of making premium payments on a life insurance policy, which loan is secured by an interest in such life insurance policy.

      (18) "Provider" means a person, other than an owner, who enters into or effectuates a life settlement contract with an owner. "Provider" does not include:

      (A) Any bank, savings bank, savings and loan association or credit union;

      (B) A licensed lending institution, creditor or secured party pursuant to a premium finance loan agreement that takes an assignment of a life insurance policy or certificate issued pursuant to a group life insurance policy as collateral for a loan;

      (C) The insurer of a life insurance policy or rider providing accelerated death benefits or riders pursuant to section 38a-457 or cash surrender value;

      (D) A natural person who enters into or effectuates no more than one agreement in a calendar year for the transfer of a life insurance policy or certificate issued pursuant to a group life insurance policy, for compensation or any value less than the expected death benefit payable under the policy;

      (E) A purchaser;

      (F) An authorized or eligible insurer that provides stop loss coverage to a provider, purchaser, financing entity, special purpose entity or related provider trust;

      (G) A financing entity;

      (H) A special purpose entity;

      (I) A related provider trust;

      (J) A broker; or

      (K) An accredited investor or a qualified institutional buyer, as defined in Rule 501 of Regulation D or Rule 144A, respectively, of the federal Securities Act of 1933, as amended from time to time, who purchases a life settlement policy from a provider.

      (19) "Purchased policy" means a policy or group certificate that has been acquired by a provider pursuant to a life settlement contract.

      (20) "Purchaser" means a person who pays compensation or anything of value as consideration for a beneficial interest in a trust that is vested with, or for the assignment, transfer or sale of, an ownership or other interest in a life insurance policy or a certificate issued pursuant to a group life insurance policy that is the subject of a life settlement contract.

      (21) "Related provider trust" means a titling trust or other trust established by a licensed provider or a financing entity for the sole purpose of holding the ownership or beneficial interest in purchased policies in connection with a financing transaction.

      (22) "Settled policy" means a life insurance policy or certificate that has been acquired by a provider pursuant to a life settlement contract.

      (23) "Special purpose entity" means a corporation, partnership, trust, limited liability company or other similar entity formed solely to provide, either directly or indirectly, access to institutional capital markets (A) for a financing entity or provider, (B) in connection with a transaction in which the securities in the special purpose entity are acquired by the owner or by a qualified institutional buyer, as defined in Rule 144A of the federal Securities Act of 1933, as amended from time to time, or (C) the securities pay a fixed rate of return commensurate with established asset-backed institutional capital markets.

      (24) "Stranger-originated life insurance" means an act, practice or arrangement to initiate a life insurance policy for the benefit of a third-party investor who, at the time of policy origination, has no insurable interest in the insured. Such practices include, but are not limited to, cases in which life insurance is purchased with resources or guarantees from or through a person or entity, who, at the time of policy inception, could not lawfully initiate the policy himself or itself, and where, at the time of inception, there is an arrangement or agreement, whether verbal or written, to directly or indirectly transfer the ownership of the policy or the policy benefits to a third-party. Trusts created to give the appearance of insurable interest and used to initiate policies for investors violate insurable interest laws and the prohibition against wagering on life. Stranger-originated life insurance arrangements do not include those practices set forth in subparagraph (B) of subdivision (11) of this section.

      (25) "Terminally ill" means having an illness or sickness that can reasonably be expected to result in death in twenty-four months or less.

      (P.A. 97-202, S. 1, 18; P.A. 99-104, S. 1, 2; 99-145, S. 4, 23; P.A. 03-152, S. 1; P.A. 08-175, S. 1.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 99-104 redefined "viatical settlement contract" and "viatical settlement provider"; P.A. 99-145 amended introductory language to substitute "subdivision (20) of section 38a-816" for "subdivision (19) of section 38a-816", effective June 8, 1999; P.A. 03-152 replaced former Subdivs. (1) to (13) with new Subdivs. (1) to (22) re definitions, and deleted "subsection (a) of section 38a-11" and replaced "38a-465 to 38-465m" with "38a-465 to 38a-465q" re applicability of definitions; P.A. 08-175 substituted "life settlements" for "viatical settlements" throughout and substantially revised definitions by deleting terms "accredited investor", "qualified institutional buyer", "viatical settlement", "viatical steelement broker", "viatical settlement contract", "viatical settlement investment agent", "viatical settlement provider", "viatical settlement purchase agreement", "viatical settlement purchaser", "viaticated policy" and "viator", and defining "broker", "business of life settlements", "insured", "life expectancy", "life insurance producer", "life settlement contract", "net death benefit", "owner", "patient identifying information", "premium finance loan", "provider", "purchased policy", "purchaser", "settled policy" and "stranger-originated life insurance".

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      Sec. 38a-465a. Licensing of life settlement providers and brokers. (a) Except as otherwise provided in this part, no person shall act as a provider or broker until the person is licensed by the commissioner pursuant to this section.

      (b) Any applicant for a license as a provider or broker shall submit written application to the commissioner. Such applicants shall provide such information as the commissioner requires. All initial applications shall be accompanied by a filing fee specified in section 38a-11.

      (c) A life insurance producer, who has been duly licensed as a resident insurance producer with a life line of authority in this state or in such producer's home state for not less than one year and is licensed as a nonresident producer pursuant to section 38a-702g, shall be deemed to meet the licensing requirements of this section and shall be permitted to operate as a broker.

      (d) Not later than thirty days after the first day of operating as a broker, a life insurance producer shall notify the commissioner that such producer is acting as a broker on a form prescribed by the commissioner, and shall pay a filing fee as specified in section 38a-11. Such notification shall include an acknowledgement by the life insurance producer that such producer shall operate as a broker in accordance with this part.

      (e) The insurer that issued the policy that is the subject of a life settlement contract shall not be responsible for any act or omission of a broker, provider or purchaser arising out of or in connection with the life settlement transaction, unless the insurer receives compensation for the placement of a life settlement contract from the broker, provider or purchaser in connection with such life settlement contract.

      (f) A person licensed as an attorney, certified public accountant or financial planner accredited by a nationally recognized accreditation agency, who is retained to represent the owner and whose compensation is not paid directly or indirectly by the provider or purchaser, may negotiate life settlement contracts on behalf of the owner without being required to obtain a license as a broker.

      (g) Any license issued for a provider or broker shall be in force only until the last day of March in each year, but may be renewed by the commissioner without formality other than proper application. The fees for such licenses shall be assessed annually, as provided in section 38a-11. If such provider or broker fails to timely pay the renewal fee, such license shall be automatically revoked if the license fee is not received by the commissioner not later than the fifth day after the commissioner sends, by first class mail, a written notice of nonrenewal to the principal office of the provider or broker, provided such notice shall only be mailed after said last day of March.

      (h) Upon the filing of an application and full payment of the license fee, the commissioner shall investigate the applicant and shall issue a license if the commissioner determines that:

      (1) The applicant, if a provider, has provided a detailed plan of operation;

      (2) The applicant is competent and trustworthy, and intends to act in good faith pursuant to the license applied for;

      (3) The applicant has a good business reputation and adequate experience, training or education so as to be qualified in the business for which the license is applied;

      (4) If the applicant is a corporation, partnership, limited liability company or other legal entity, the applicant is formed or organized pursuant to the laws of this state or is a foreign legal entity authorized to do business in this state, or provides a certificate of good standing from its state of domicile; and

      (5) The applicant has provided to the commissioner an antifraud plan that meets the requirements of subsection (i) of section 38a-465j and includes:

      (A) A description of the procedures for detecting and investigating possible fraudulent acts and procedures for resolving material inconsistencies between medical records and insurance applications;

      (B) A description of the procedures for reporting fraudulent insurance acts to the commissioner;

      (C) A description of the plan for antifraud education and training of its underwriters and other personnel; and

      (D) A written description or chart outlining the arrangement of the antifraud personnel responsible for the investigation and reporting of possible fraudulent insurance acts and investigating unresolved material inconsistencies between medical records and insurance applications.

      (i) The applicant shall provide to the commissioner such information as the commissioner may require, on forms approved by the commissioner. The commissioner may, at any time, require the applicant to fully disclose the identity of its stockholders, except stockholders owning less than ten per cent of the shares of an applicant whose shares are publicly traded, partners, officers and employees, and the commissioner may deny any application for a license if the commissioner determines that any partner, officer, employee or stockholder thereof who may materially influence the applicant's conduct fails to meet any of the standards set forth in sections 38a-465 to 38a-465q, inclusive.

      (j) A license issued to a corporation, partnership, limited liability company or other legal entity authorizes all of such legal entity's members, officers and designated employees named in the application for such license, and any supplements to the application, to act as a licensee under such license.

      (k) The commissioner shall not issue any license to any nonresident applicant unless a written designation of an agent for service of process is filed and maintained with the commissioner or unless the applicant has filed with the commissioner the applicant's written irrevocable consent that any action against the applicant may be commenced against the applicant by service of process on the commissioner.

      (l) Each licensee shall file with the commissioner on or before the first day of March of each year an annual statement containing such information as the commissioner may prescribe by regulation.

      (m) A provider shall not use any person to perform the functions of a broker, as defined in this part, unless such person holds a current, valid license as a broker and as provided in this section.

      (n) A broker shall not use any person to perform the functions of a provider, as defined in this part, unless such person holds a current, valid license as a provider and as provided in this section.

      (o) A provider or broker shall provide to the commissioner new or revised information about officers, stockholders holding ten per cent or more of the company's stock, partners, directors, members or designated employees not later than thirty days after the change in information.

      (p) An individual licensed as a broker shall complete, on a biennial basis, fifteen hours of training related to life settlements and life settlement transactions, except that a life insurance producer operating as a broker pursuant to this section shall not be subject to the requirements of this subsection. Any person failing to meet the requirements of this subsection shall be subject to the penalties imposed by the commissioner.

      (P.A. 97-202, S. 2, 18; P.A. 99-104, S. 3; 99-145, S. 5, 23; P.A. 03-152, S. 2; P.A. 08-175, S. 2; P.A. 09-74, S. 17; P.A. 10-5, S. 13.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 99-104 amended Subsec. (d) to include "members" among those whose identity may be disclosed, and to substitute "stockholder or member thereof who may materially influence the applicant's conduct fails to meet any of the standards set forth in sections 38a-465 to 38a-465m, inclusive" for "majority stockholder fails to meet any of the criteria set forth in subsection (f) of this section" re grounds for denial of license; P.A. 99-145 amended Subsec. (a) to substitute "Except as otherwise provided in this part" for "Except as provided in subsection (a) of section 38a-11, sections 38a-465 to 38a-465m, inclusive, and subdivision (19) of section 38a-816", and substituted "subdivision (20) of section 38a-816" for "subdivision (19) of section 38a-816", effective June 8, 1999; P.A. 03-152 added references to "viatical settlement investment agents", made licensees subject to provisions of Secs. 38a-465n to 38a-465q, repositioned provisions of former Subsec. (f) to new Subsec. (c), revising therein Subdiv. (2) to substitute "license applied for" for "license" and Subdiv. (3) re qualification in the business for which the license is applied for, added new Subsec. (f) re new or revised information about officers, stockholders holding 10% or more of stock, partners, directors, members or designated employees, redesignated existing Subsecs. (c), (d), (e) and (g) as new Subsecs. (d), (e), (g) and (h), and made technical changes; P.A. 08-175 deleted provisions re viatical settlement throughout, made technical and conforming changes, deleted former Subsecs. (d), (f) and (h), redesignated existing Subsecs. (c), (e) and (g) as Subsecs. (i), (j) and (k), respectively, added new Subsecs. (c) and (d) re life insurance producer operating as a life settlement broker, added new Subsec. (e) re liability of an insurer for acts or omissions committed by a broker, provider or purchaser, added new Subsec. (f) re exemption of certain attorneys, certified public accountants or financial planners from licensing requirement, added new Subsecs. (g) and (h) re license renewals and payment of fees and added Subsecs. (l) to (q) re licensing, filing and training requirements; P.A. 09-74 made technical changes in Subsecs. (c) and (d), effective May 27, 2009; P.A. 10-5 deleted former Subsec. (h) re term and renewal of licenses and redesignated existing Subsecs. (i) to (q) as Subsecs. (h) to (p), effective May 5, 2010.

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      Sec. 38a-465b. Denial, suspension or revocation of license. Refusal to renew license. Appeals. (a) The commissioner may deny a license application, or suspend, revoke or refuse to renew the license of any licensee if the commissioner determines that:

      (1) There was a material misrepresentation in the license application or in other information submitted to the commissioner;

      (2) The licensee or any partner, member, director or officer of the licensee has been convicted of a felony or of any misdemeanor of which criminal fraud is an element, has been found guilty of fraudulent or dishonest practices, is subject to a final administrative action or is otherwise shown to be untrustworthy or incompetent to act as a licensee;

      (3) The licensee, or any partner, member, officer or key management personnel has violated any of the provisions of this part;

      (4) The provider demonstrates a pattern of unreasonably withholding payments to policy owners;

      (5) The licensee has pleaded guilty or nolo contendere to any felony or any misdemeanor involving criminal fraud or moral turpitude, regardless of whether a judgment or conviction has been entered by the court;

      (6) The provider has entered into any life settlement contract using a form that has not been approved pursuant to sections 38a-465 to 38a-465q, inclusive;

      (7) The provider has failed to honor contractual obligations set out in a life settlement contract;

      (8) The licensee no longer meets the requirements for initial licensure; or

      (9) The provider has assigned, transferred or pledged a settled policy to a person other than a provider licensed in this state, a purchaser, an accredited investor or a qualified institutional buyer, as defined in Rule 501 of Regulation D or Rule 144A, respectively, of the federal Securities Act of 1933, as amended from time to time, a financing entity, special purpose entity or related provider trust.

      (b) If the commissioner denies a license application, or suspends, revokes or refuses to renew the license of a licensee, the applicant or licensee aggrieved by such denial, suspension, revocation or refusal to renew a license may appeal such action in accordance with chapter 54. Hearings may be held by the commissioner or by any person designated by the commissioner. Whenever an individual other than the commissioner acts as the hearing officer, the individual shall submit to the commissioner a memorandum of findings and recommendations upon which the commissioner may base a decision.

      (P.A. 97-202, S. 4, 18; P.A. 99-104, S. 4; 99-145, S. 6, 23; P.A. 03-152, S. 3; P.A. 08-175, S. 3.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 99-104 added Subsec. (a)(4) to (9), inclusive, amended Subsec. (b) to substitute the right of the applicant or licensee to appeal the denial, suspension, revocation or refusal to renew a license for the prior requirement that the commissioner hold a hearing before taking such action, and amended section to delete references to "subsection (a) of section 38a-11" and "subdivision (19) of section 38a-816"; P.A. 99-145 amended Subsecs. (a)(3) and (c) to substitute "this part" for "subsection (a) of section 38a-11, sections 38a-465 to 38a-465m, inclusive, and subdivision (19) of section 38a-816", and amended Subsec. (d)(3) to delete reference to "subsection (a) of section 38a-11", and "subdivision (19) of section 38a-816", effective June 8, 1999; P.A. 03-152 added references to "viatical settlement investment agents", made persons subject to Secs. 38a-465n to 38a-465q, amended Subsec. (a)(9) to substitute "a viatical settlement purchaser, an accredited investor, a qualified institutional buyer, a financing entity, special purpose entity or related provider trust" for "a financing entity", deleted "the provisions of" re chapter 54 and substituted "an individual" for "a person" in Subsec. (b), and made technical changes; P.A. 08-175 deleted provisions re viatical settlement and made conforming changes in Subsecs. (a) and (b), amended Subsec. (a)(2) by adding criminal fraud and fraudulent or dishonest practices as reasons for denial, suspension, revocation or refusal to renew license, amended Subsec. (a)(3) by adding to list of specified persons whose violation may result in denial, suspension, revocation or refusal to renew license and deleting requirement that violation be wilful, amended Subsec. (a)(5) by adding "criminal" re fraud, and deleted former Subsecs. (c) and (d) re assessment of fines.

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      Sec. 38a-465c. Contract form and disclosure statements. Filing and approval requirements. Disclosure of life settlement contract availability and lawful assignment not to be prohibited. (a) No person shall use any form of life settlement contract or disclosure statement in this state unless such form has been filed with and approved by the commissioner. The commissioner shall disapprove a life settlement contract form or disclosure statement form if the commissioner finds any provision in such form is unreasonable, contrary to the interests of the public, fails to comply with the provisions of sections 38a-465f, 38a-465g and 38a-465n and subsection (b) of section 38a-465k, or is otherwise misleading or unfair to the owner. The commissioner may require the submission of advertising materials.

      (b) No insurer shall, as a condition of responding to a request for verification of coverage or in connection with the transfer of a policy pursuant to a life settlement contract, require the owner, insured, provider or broker to sign any form, disclosure, consent, waiver or acknowledgment that has not been expressly approved by the commissioner for use in connection with life settlement contracts in this state.

      (c) No insurer shall (1) prohibit a life insurance producer or broker from disclosing to a client the availability of a life settlement contract, or (2) include any provision in a life insurance policy that prohibits the lawful assignment of such policy.

      (P.A. 97-202, S. 5, 18; P.A. 99-145, S. 7, 23; P.A. 03-152, S. 4; P.A. 08-175, S. 4; P.A. 09-74, S. 18; P.A. 10-5, S. 14.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 99-145 deleted reference to "subsection (a) of section 38a-11", and "subdivision (19) of section 38a-816", effective June 8, 1999; P.A. 03-152 substituted "person" for viatical settlement provider, broker or agent re prohibitions on use of unapproved forms, deleted provision re contract or disclosure statements deemed approved 60 days after filing, added "contrary to the interests of the public" and failure to comply with Secs. 38a-465n to 38a-465q re grounds for disapproval of contracts or statements and made a technical change; P.A. 08-175 replaced "viatical settlement" with "life settlement" and made technical and conforming changes, designated existing provisions as Subsec. (a) and added Subsec. (b) re additional form requirements and Subsec. (c) re prohibition on certain insurer provisions; P.A. 09-74 made a technical change in Subsec. (a), effective May 27, 2009; P.A. 10-5 made a technical change in Subsec. (a), effective May 5, 2010.

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      Sec. 38a-465d. Annual statements. Penalty. Confidentiality of insured's information. Reasons for disclosure of insured's identity. (a) On or before March first of each year, each provider shall file with the commissioner an annual statement containing such information as the commissioner may prescribe. The commissioner shall adopt regulations, in accordance with chapter 54, to prescribe the contents of such annual statement, which shall include, but not be limited to, for any policy settled within five years of policy issuance, the total number, aggregate face amount and life settlement proceeds of policies settled during the immediately preceding calendar year, a breakdown of the information by policy issue year, the names of the insurance companies whose policies have been settled and the brokers that have settled said policies. Such information shall be limited to only those transactions where the insured is a resident of this state and shall not include individual transaction data regarding the business of life settlements or information where there is a reasonable basis to conclude such data or information could be used to identify the owner or the insured.

      (b) Each provider that wilfully fails to file an annual statement as required in this section or wilfully fails to reply not later than thirty days to a written inquiry by the commissioner in connection therewith, shall, in addition to other penalties provided by this part, be subject upon due notice and opportunity to be heard to a penalty of up to two hundred fifty dollars per day of delay, not to exceed twenty-five thousand dollars in the aggregate, for each such failure.

      (c) Except as otherwise required or permitted by law, no person, including, but not limited to, a provider, broker, insurance company, insurance producer, information bureau, rating agency or company, or any other person with actual knowledge of an insured's identity, shall disclose such identity or information where there is a reasonable basis to conclude such information could be used to identify the insured or the insured's financial or medical information to any other person unless such disclosure: (1) Is necessary to effect a life settlement contract between the owner and a provider and the owner and insured have provided prior written consent to such disclosure; (2) is provided in response to an investigation or examination by the commissioner or any other governmental office or agency or pursuant to the requirements of section 38a-465i; (3) is necessary to effectuate the sale of life settlement contracts or interests therein as investments, provided the sale is conducted in accordance with applicable state and federal securities laws, and provided further the owner and the insured have both provided prior written consent to the disclosure; (4) is a term of or condition to the transfer of a policy by one provider to another provider, in which case the provider receiving such information shall comply with the confidentiality requirements specified in this subsection; (5) is necessary to allow the provider or broker or their authorized representatives to make contacts for the purpose of determining health status. For the purpose of this section, "authorized representative" does not include any person who has or may have a financial interest in the settlement contract other than a provider, licensed broker, financing entity, related provider trust or special purpose entity. Each provider or broker shall require its authorized representative to agree in writing to comply with the privacy provisions of this part; or (6) is required to purchase stop loss coverage.

      (d) Nonpublic personal information solicited or obtained in connection with a proposed or actual life settlement contract shall be subject to the provisions applicable to financial institutions under the federal Gramm-Leach-Bliley Act of 1999, P.L. 106-102, as amended from time to time, and all other applicable state and federal laws relating to confidentiality of nonpublic personal information.

      (P.A. 97-202, S. 6, 18; P.A. 03-152, S. 5; P.A. 08-175, S. 5.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 03-152 amended Subsec. (a) to delete "the provisions of" re chapter 54, and amended Subsec. (c) to substitute "viatical settlement investment agent" for "viatical settlement agent" and "knowledge of an insured's identity" for "knowledge of a viator's identity", reposition certain provisions of former Subdiv. (3) re term of or condition to a transaction or transfer to new Subdiv. (4) and add new Subdivs. (3) and (5) to (7), inclusive, re permitted reasons for disclosure; P.A. 08-175 deleted provisions re viatical settlement and made technical and conforming changes, amended Subsec. (a) and added new Subsec. (b) re contents of annual statement and penalties re failure to provide statement, deleted former Subsec. (b) re identifying information, amended Subsec. (c) by deleting former Subdiv. (5) and renumbering existing Subdivs. (6) and (7) as new Subdivs. (5) and (6), and amended Subsecs. (c) and (d) by revising confidentiality requirements.

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      Sec. 38a-465e. Examination of licensees and applicants. Commissioner's access to records. Retention of records. Expenses of examination. Confidentiality of examination workpapers and reports. (a) When the commissioner deems it reasonably necessary to protect the interests of the public, the commissioner may examine the business and affairs of any licensee or applicant for a license. The commissioner may order any licensee or applicant to produce any records, books, files or other information reasonably necessary to ascertain whether such licensee or applicant is acting or acted in violation of the law or is otherwise contrary to the interests of the public. The licensee or applicant shall pay all expenses incurred by the commissioner in conducting any examination.

      (b) Providers shall maintain records of each consummated transaction and life settlement contracts and, subject to the provisions of section 38a-465d, such records shall be available, during reasonable business hours, to the commissioner for inspection for the three-year period following the insured's death.

      (c) In lieu of an examination under this part of any foreign or alien licensee licensed in this state, the commissioner may accept an examination report on the licensee as prepared by the commissioner for the licensee's state of domicile or port-of-entry state.

      (d) Names and individual identification data of owners and insureds shall be considered private and confidential information and shall not be disclosed by the commissioner unless required by law.

      (e) (1) Upon determining that an examination should be conducted, the commissioner shall issue an examination warrant appointing one or more examiners to perform such examination and instructing them as to its scope. In conducting the examination, the examiner shall use methods common to the examination of any life settlement licensee and shall use guidelines and procedures set forth in an examiners' handbook adopted by a national organization.

      (2) Each licensee or person from whom information is sought, its officers, directors and agents shall provide to the examiners timely, convenient and free access at all reasonable hours at its offices to all books, records, accounts, papers, documents, assets and computer or other recordings relating to the property, assets, business and affairs of the licensee being examined. The officers, directors, employees and agents of the licensee or person shall facilitate the examination and aid in the examination so far as it is in their power to do so. The refusal by a licensee or its officers, directors, employees or agents to submit to an examination or to comply with any reasonable written request of the commissioner shall be grounds for suspension, refusal or nonrenewal of any license or authority held by the licensee to engage in the life settlement business or other business subject to the commissioner's jurisdiction. Any proceedings for suspension, revocation or refusal of any license or authority shall be conducted pursuant to sections 38a-17 to 38a-19, inclusive.

      (3) The commissioner shall have the power to issue subpoenas, administer oaths and examine under oath any person as to any matter pertinent to the examination. Upon the failure or refusal of a person to obey a subpoena, the commissioner may petition a court of competent jurisdiction, and upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence.

      (4) When making an examination under this part, the commissioner may retain attorneys, appraisers, independent actuaries, independent certified public accountants or other professionals and specialists as examiners, the reasonable cost of which shall be borne by the licensee that is the subject of the examination.

      (5) Nothing contained in this section shall be construed to limit the commissioner's authority to terminate or suspend an examination in order to pursue other legal or regulatory action pursuant to the insurance laws of this state. Findings of fact and conclusions made pursuant to any examination shall be prima facie evidence in any legal or regulatory action.

      (6) All final or preliminary examination reports, examiner or licensee work papers or other documents, or any other information discovered or developed during the course of an examination shall be kept confidential, pursuant to section 38a-69a.

      (f) (1) Examination reports shall be comprised of only facts appearing upon the books, from the testimony of the licensee, its officers or agents or other persons examined concerning its affairs, and such conclusions and recommendations as the examiners find reasonably warranted from the facts.

      (2) Not later than sixty days following completion of the examination, the examiner in charge shall file with the commissioner a verified written report of examination under oath. Upon receipt of the verified report, the commissioner shall transmit the report to the licensee examined, together with a notice that shall afford the licensee examined a reasonable opportunity of not more than thirty days to make a written submission or rebuttal with respect to any matters contained in the examination report and which shall become part of the report, or to request a hearing on any matter in dispute.

      (3) In the event the commissioner determines that regulatory action is appropriate as a result of an examination, the commissioner may initiate any proceedings or actions provided by law.

      (g) Except as otherwise provided in this section, all examination reports, working papers, recorded information, documents and copies thereof produced by, obtained by or disclosed to the commissioner or any other person in the course of an examination made under this section, or in the course of analysis or investigation by the commissioner of the financial condition or market conduct of a licensee, shall be confidential by law and privileged and shall not be subject to section 1-210, subject to subpoena, or subject to discovery or be admissible in evidence in any private civil action. The commissioner is authorized to use the documents, materials or other information in the furtherance of any regulatory or legal action brought as part of the commissioner's official duties. The licensee being examined shall have access to all documents used to make the report.

      (h) (1) An examiner shall not be appointed by the commissioner if the examiner, directly or indirectly, has a conflict of interest, is affiliated with the management of or owns a pecuniary interest in any person subject to examination under this section. This section shall not be construed to automatically preclude an examiner from being (A) an owner, (B) an insured in a life settlement contract or insurance policy, or (C) a beneficiary in an insurance policy that is proposed for a life settlement contract.

      (2) Notwithstanding the requirements of this subsection, the commissioner may retain from time to time, on an individual basis, qualified actuaries, certified public accountants or other similar individuals who are independently practicing their professions, even though these persons may from time to time be similarly employed or retained by persons subject to examination under this section.

      (i) (1) No cause of action shall arise or any liability be imposed against the commissioner, the commissioner's authorized representatives or any examiner appointed by the commissioner for any statements made or conduct performed in good faith while carrying out the provisions of this section.

      (2) No cause of action shall arise or any liability be imposed against any person for communicating or delivering information or data to the commissioner or the commissioner's authorized representative or examiner pursuant to an examination made under this section, if such communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive. This subdivision shall not abrogate or modify any common law or statutory privilege or immunity heretofore enjoyed by any person identified in subdivision (1) of this subsection.

      (3) A person identified in subdivision (1) or (2) of this subsection shall be entitled to an award of attorney's fees and costs if such person is the prevailing party in a civil cause of action for libel, slander or any other relevant tort arising out of activities in carrying out the provisions of this section and the party bringing the action was not substantially justified in doing so. For the purpose of this section, a proceeding is "substantially justified" if it had a reasonable basis in law or fact at the time that it was initiated.

      (j) The commissioner may investigate suspected fraudulent life settlement acts, as specified in section 38a-465j, and persons engaged in the business of life settlements.

      (P.A. 97-202, S. 7, 18; P.A. 99-104, S. 5; 99-145, S. 8, 23; P.A. 08-175, S. 6; P.A. 09-74, S. 19, 20.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 99-104 amended Subsec. (a) to substitute "When the commissioner deems it reasonably necessary to protect the interests of the public" for "In response to a complaint concerning a license or in connection with the review of an application for a license ..." re the commissioner's examination authority, amended Subsec. (b) to substitute "five-year period" for "three-year period" re inspection period following the insured's death, and deleted reference to "subsection (a) of section 38a-11" and "subdivision (19) of section 38a-816"; P.A. 99-145 deleted reference to "subsection (a) of section 38a-11" and "subdivision (19) of section 38a-816", effective June 8, 1999; P.A. 08-175 deleted provision re viatical settlement, amended Subsecs. (a) and (b) by making conforming and technical changes and reducing maintenance period for records from 5 years to 3 years, and added Subsecs. (c) to (j) re examinations and confidentiality requirements (Revisor's note: In 2009, a reference to "licensee of applicant" in Subsec. (a) was changed editorially by the Revisors to "licensee or applicant" for accuracy and consistency); P.A. 09-74 made technical changes in Subsecs. (a) and (e)(1), effective May 27, 2009.

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      Sec. 38a-465f. Required disclosures. (a) The provider or broker shall provide, in writing, in a separate document that is signed by the owner and provider, the following disclosures to the owner not later than the date the life settlement contract is signed by all parties. The disclosure document shall contain the following language: "All medical, financial or personal information solicited or obtained by a provider or broker about an insured, including the insured's identity or the identity of family members, a spouse or a significant other may be disclosed as necessary to effect the life settlement contract between the owner and the provider. If you are asked to provide this information, you will be asked to consent to the disclosure. The information may be provided to someone who buys the policy or provides funds for the purchase. You may be asked to renew your permission to share information every two years." The written disclosures shall be provided in a separate document that is signed by the owner and the provider and shall provide at least the following disclosures:

      (1) That there are possible alternatives to life settlement contracts including, but not limited to, accelerated death benefits offered by the issuer of the life insurance policy;

      (2) That some or all of the proceeds of a life settlement contract may be taxable, and assistance should be sought from a professional tax advisor;

      (3) That receipt of the life settlement contract proceeds may adversely affect the recipient's eligibility for public assistance or other government benefits or entitlements, and advice should be obtained from the appropriate agencies;

      (4) That the owner has the right to rescind a life settlement contract for fifteen calendar days after the date such contract is executed by all parties and the owner has received the disclosures specified herein. Such rescission exercised by the owner shall be effective only if both notice of rescission is given to the provider and the owner repays all proceeds and any premiums, loans and loan interest paid by the provider within the rescission period. If the insured dies during the rescission period, the settlement contract shall be deemed to have been rescinded, subject to repayment by the owner or the owner's estate of all proceeds and any premiums, loans and loan interest to the provider;

      (5) That proceeds from the life settlement contract may be subject to the claims of creditors;

      (6) That proceeds will be sent to the owner within three business days after the provider has received the insurer or group administrator's acknowledgment that ownership of the policy or interest in the certificate has been transferred and the beneficiary has been designated in accordance with the terms of the life settlement contract;

      (7) That entering into a life settlement contract may cause other rights or benefits, including conversion rights and waiver of premium benefits that may exist under the policy or certificate, to be forfeited by the owner, and assistance should be sought from a financial advisor;

      (8) That the insured may be contacted by either the provider or broker or its authorized representative for the purpose of determining the insured's health status or to verify the insured's address. This contact is limited to once every three months if the insured has a life expectancy of more than one year, and no more than once per month if the insured has a life expectancy of one year or less;

      (9) The amount and method of calculating the compensation paid or to be paid to the broker or to any other person acting for the owner in connection with the transaction, wherein the term compensation includes anything of value paid or given;

      (10) The date by which the funds will be available to the owner and the transmitter of the funds;

      (11) That the commissioner shall require delivery of a buyer's guide or a similar consumer advisory package in the form prescribed by the commissioner to owners during the solicitation process;

      (12) That the commissioner shall require providers and brokers to print separate, signed fraud warnings on their applications and on their life settlement contracts as follows: "Any person who knowingly presents false information in an application for insurance or life settlement contract is guilty of a crime and may be subject to fines and confinement in prison.";

      (13) The affiliation, if any, between the provider and the issuer of the insurance policy to be settled;

      (14) That a broker represents the owner exclusively, and not the insurer, the provider or any other person, and owes a fiduciary duty to the owner, including a duty to act according to the owner's instructions and in the best interest of the owner;

      (15) The name, address and telephone number of the provider;

      (16) The name, business address and telephone number of the independent third-party escrow agent, and the fact that the owner may inspect or receive copies of the relevant escrow or trust agreements or documents; and

      (17) That a change of ownership could limit the insured's ability to purchase future insurance on the insured's life because there is a limit to how much coverage insurers will issue on one life.

      (b) The written disclosures shall be conspicuously displayed in any life settlement contract furnished to an owner by a provider, including any affiliations or contractual arrangements between the provider and the broker. Failure to provide the disclosures or rights set forth in this section shall be deemed an unfair practice pursuant to section 38a-816.

      (c) A broker shall provide the owner and the provider with at least the following disclosures not later than the date the life settlement contract is signed by all parties. The disclosures shall be conspicuously displayed in the life settlement contract or in a separate document signed by the owner and provide the following information:

      (1) The name, business address and telephone number of the broker;

      (2) A full, complete and accurate description of all the offers, counter-offers, acceptances and rejections relating to the proposed life settlement contract;

      (3) A written disclosure of any affiliations or contractual arrangements between the broker and any person making an offer in connection with the proposed life settlement contract;

      (4) The name of each broker who receives compensation and the amount of compensation received by said broker, which compensation includes anything of value paid or given to the broker in connection with the life settlement contract;

      (5) A complete reconciliation of the gross offer or bid by the provider to the net amount of proceeds or value to be received by the owner. For the purpose of this section, "gross offer" or "bid" means the total amount or value offered by the provider for the purchase of one or more life insurance policies, inclusive of commissions and fees; and

      (6) That the failure to provide the disclosures or rights described in this section shall be deemed an unfair practice in violation of section 38a-815.

      (P.A. 97-202, S. 8, 18; P.A. 98-27, S. 13; P.A. 99-104, S. 6; P.A. 03-152, S. 6; P.A. 08-175, S. 7.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 98-27 inserted "That" at the beginning of Subdivs. (2) to (6), inclusive; P.A. 99-104 added Subdiv. (7) re disclosure that funds will be sent to viator within two business days after settlement, and added Subdiv. (8) re disclosure that entering into viatical settlement contract may effect other rights or benefits and that assistance should be sought from a financial advisor; P.A. 03-152 substantially revised existing provisions and designated same as Subsec. (a), and added Subsecs. (b) to (f), inclusive, re required disclosures; P.A. 08-175 amended Subsec. (a) by deleting provisions re viatical settlement and adding provisions re life settlement, making conforming changes, specifying disclosures be provided in a separate document signed by owner and provider, extending period during which proceeds must be sent to owner from two days to three days, deleting former Subdiv. (4) and renumbering existing Subdivs. (5) to (9) as new Subdivs. (4) to (8), and adding Subdivs. (9) to (17) re additional required disclosures, deleted former Subsecs. (b) to (f) and added new Subsec. (b) re conspicuous display of disclosure and new Subsec. (c) re required disclosures by broker to owner and provider.

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      Sec. 38a-465g. Prerequisites to a life settlement contract wherein insured is terminally or chronically ill. Medical release and confidentiality of medical information. Verification of coverage. Notice to insurer. Change of ownership or beneficiary. Rescission. Escrow agent or trustee. Broker fee calculation and disclosure of compensation. Prohibitions. Exemptions. (a) Before entering into a life settlement contract with any owner of a policy wherein the insured is terminally ill or chronically ill, a provider shall obtain:

      (1) If the owner is the insured, a written statement from a licensed attending physician that the owner is of sound mind and under no constraint or undue influence to enter into the settlement contract; and

      (2) A document in which the insured consents to the release of the insured's medical records to a provider, broker or insurance producer, and, if the policy was issued less than two years from the date of application for a settlement contract, to the insurance company that issued the policy.

      (b) The insurer shall respond to a request for verification of coverage submitted by a provider, broker or life insurance producer on a form approved by the commissioner not later than thirty calendar days after the date the request was received. The insurer shall complete and issue the verification of coverage or indicate in which respects it is unable to respond. In its response, the insurer shall indicate whether, based on the medical evidence and documents provided, the insurer intends to pursue an investigation regarding the validity of the policy.

      (c) Prior to or at the time of execution of the settlement contract, the provider shall obtain a witnessed document in which the owner consents to the settlement contract, represents that the owner has a full and complete understanding of the settlement contract, that the owner has a full and complete understanding of the benefits of the policy, acknowledges that the owner is entering into the settlement contract freely and voluntarily and, for persons with a terminal or chronic illness or condition, acknowledges that the insured has a terminal or chronic illness or condition and that the terminal or chronic illness or condition was diagnosed after the life insurance policy was issued.

      (d) If a broker or life insurance producer performs any of the activities required of the provider under this section, the provider shall be deemed to have fulfilled the requirements of this section.

      (e) The insurer shall not unreasonably delay effecting change of ownership or beneficiary with any life settlement contract lawfully entered into in this state or with a resident of this state.

      (f) Not later than twenty days after an owner executes the life settlement contract, the provider shall give written notice to the insurer that issued the policy that the policy has become subject to a life settlement contract. The notice shall be accompanied by a copy of the medical records release required under subdivision (2) of subsection (a) of this section and a copy of the insured's application for the life settlement contract.

      (g) All medical information solicited or obtained by any person licensed pursuant to this part shall be subject to applicable provisions of law relating to the confidentiality of medical information.

      (h) Each life settlement contract entered into in this state shall provide that the owner may rescind the contract not later than fifteen days from the date it is executed by all parties thereto. Such rescission exercised by the owner shall be effective only if both notice of rescission is given to the provider and the owner repays all proceeds and any premiums, loans and loan interest paid by the provider within the rescission period. A failure to provide written notice of the right of rescission shall toll the period of such right until thirty days after the written notice of the right of rescission has been given. If the insured dies during the rescission period, the contract shall be deemed to have been rescinded, subject to repayment by the owner or the owner's estate of all proceeds and any premiums, loans and loan interest to the provider.

      (i) Not later than three business days after the date the provider receives the documents from the owner to effect the transfer of the insurance policy, the provider shall pay or transfer the proceeds of the settlement into an escrow or trust account managed by a trustee or escrow agent in a state or federally-chartered financial institution whose deposits are insured by the Federal Deposit Insurance Corporation. Not later than three business days after receiving acknowledgment of the transfer of the insurance policy from the issuer of the policy, said trustee or escrow agent shall pay the settlement proceeds to the owner.

      (j) Failure to tender the life settlement contract proceeds to the owner within the time set forth in section 38a-465f shall render the viatical settlement contract voidable by the owner for lack of consideration until the time such consideration is tendered to, and accepted by, the owner.

      (k) Any fee paid by a provider, party, individual or an owner to a broker in exchange for services provided to the owner pertaining to a life settlement contract shall be computed as a percentage of the offer obtained and not as a percentage of the face value of the policy. Nothing in this section shall be construed to prohibit a broker from reducing such broker's fee below such percentage.

      (l) Each broker shall disclose to the owner anything of value paid or given to such broker in connection with a life settlement contract concerning the owner.

      (m) No person at any time prior to, or at the time of, the application for or issuance of a policy, or during a two-year period commencing with the date of issuance of the policy, shall enter into a life settlement contract regardless of the date the compensation is to be provided and regardless of the date the assignment, transfer, sale, devise, bequest or surrender of the policy is to occur. This prohibition shall not apply if the owner certifies to the provider that:

      (1) The policy was issued upon the owner's exercise of conversion rights arising out of a group or individual policy, provided the total of the time covered under the conversion policy plus the time covered under the prior policy is not less than twenty-four months. The time covered under a group policy must be calculated without regard to a change in insurance carriers, provided the coverage has been continuous and under the same group sponsorship; or

      (2) The owner submits independent evidence to the provider that one or more of the following conditions have been met within said two-year period: (A) The owner or insured is terminally ill or chronically ill; (B) the owner or insured disposes of the owner or insured's ownership interests in a closely held corporation, pursuant to the terms of a buyout or other similar agreement in effect at the time the insurance policy was initially issued; (C) the owner's spouse dies; (D) the owner divorces his or her spouse; (E) the owner retires from full-time employment; (F) the owner becomes physically or mentally disabled and a physician determines that the disability prevents the owner from maintaining full-time employment; or (G) a final order, judgment or decree is entered by a court of competent jurisdiction on the application of a creditor of the owner, adjudicating the owner bankrupt or insolvent, or approving a petition seeking reorganization of the owner or appointing a receiver, trustee or liquidator to all or a substantial part of the owner's assets.

      (n) Copies of the independent evidence required by subdivision (2) of subsection (m) of this section shall be submitted to the insurer when the provider submits a request to the insurer for verification of coverage. The copies shall be accompanied by a letter of attestation from the provider that the copies are true and correct copies of the documents received by the provider. Nothing in this section shall prohibit an insurer from exercising its right to contest the validity of any policy.

      (o) If, at the time the provider submits a request to the insurer to effect the transfer of the policy to the provider, the provider submits a copy of independent evidence of subparagraph (A) of subdivision (2) of subsection (m) of this section, such copy shall be deemed to establish that the settlement contract satisfies the requirements of this section.

      (P.A. 97-202, S. 9, 18; P.A. 99-145, S. 9, 10, 23; P.A. 03-152, S. 7; P.A. 08-175, S. 8; P.A. 10-5, S. 15.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 99-145 amended Subsecs. (d) and (h) to delete references to Secs. 38a-11(a) and 38a-816(19), effective June 8, 1999; P.A. 03-152 amended Subsec. (a) by redesignating existing Subdivs. (1) and (2) as Subdiv. (1)(A) and (B), rewriting Subdiv. (1)(B) re required consent forms, deleting former Subdiv. (3) re witnessed document and adding new Subdivs. (2) to (6) re notice, copies of documents, verification of coverage, witnessed documents, and deemed fulfillment of requirements of section, added new Subsec. (b) re confidentiality of medical information, redesignated existing Subsec. (b) as new Subsec. (c) and added provision therein re death of the insured during the rescission period, added new Subsec. (d) re purchaser's right to rescind, added new Subsec. (e) re sending executed documents to independent escrow agent, added new Subsec. (f) re voidability of contract for failure to tender consideration, deleted former Subsecs. (c), (d) and (h) re deposit of documents, voiding of contract if proceeds not received and limit on commissioner's authority to determine the amount paid re contract, redesignated existing Subsecs. (e), (f), (g), (i) and (j) as new Subsecs. (g), (h), (i), (j) and (k), respectively, amended new Subsec. (g) to delete "or viatical settlement agent", amended new Subsec. (i) to reference Sec. 38a-465f and provide that viatical settlement providers and brokers be responsible for the actions of their authorized representatives, and made technical changes; P.A. 08-175 replaced provisions re viatical settlement with provisions re life settlement and made technical and conforming changes, amended Subsec. (a) by redesignating existing Subdivs. (1)(A) and (1)(B) as Subdivs. (1) and (2), deleting existing Subdivs. (2) and (3), and redesignating existing Subdivs. (4) to (6) as new Subsecs. (b) to (d), redesignated existing Subsecs. (b) and (c) as new Subsecs. (h) and (i), inserted new Subsec. (e) re verification of coverage activities performed by a broker on behalf of a provider, inserted new Subsec. (f) re delay in effecting change of ownership or beneficiary, inserted new Subsec. (g) re notice of change of policy to life settlement contract given to insurer by provider, deleted former Subsec. (d) re right to rescind, redesignated existing Subsec. (e) as new Subsec. (j) and amended same by deleting provision directing provider to instruct viator to send executed documents to independent escrow agent and extending period in which proceeds must be paid from two days to three days, redesignated existing Subsec. (f) as new Subsec. (k), deleted former Subsecs. (g) to (k), added Subsec. (l) re computation of broker fees, added Subsec. (m) re disclosure of broker to owner of anything of value given or paid to broker, and added Subsecs. (n) to (p) re two-year prohibition on entering into life settlement contract and exemptions from prohibition; P.A. 10-5 deleted former Subsec. (e) re verification of coverage activities, redesignated existing Subsecs. (f) to (p) as Subsecs. (e) to (o), amended redesignated Subsec. (f) to specify that notice shall be accompanied by copy of insured's medical records release and application, and made technical changes in redesignated Subsecs. (m), (n) and (o), effective May 5, 2010.

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      Sec. 38a-465h. Premium finance loans. Disclosures and certifications. (a) Without limiting the ability of an insurer to assess the insurability of a policy applicant and in addition to other questions an insurance company may lawfully pose to a life insurance applicant, an insurance company may inquire in the application for life insurance whether the proposed owner intends to pay premiums with the assistance of financing from a lender that will use the policy as collateral to support the financing.

      (b) If, as described in subdivision (11) of section 38a-465, the loan provides funds that can be used for a purpose other than paying for the premiums, costs and expenses associated with obtaining and maintaining the life insurance policy and loan, the application shall be rejected as a violation of section 38a-465i.

      (c) If the financing does not violate section 38a-465i in this manner, the insurance company:

      (1) May make disclosures including, but not limited to, the following, to the applicant and the insured, in the application or an amendment to the application completed not later than the delivery of the policy: "If you have entered into a loan arrangement where the policy is used as collateral and the policy does change ownership at some point in the future in satisfaction of the loan, the following may be true: (A) A change of ownership could lead to a stranger owning an interest in the insured's life; (B) a change of ownership could limit your ability to purchase future insurance on the insured's life because there is a limit to how much coverage insurers will issue on one life; (C) should there be a change of ownership and you wish to obtain more insurance coverage on the insured's life in the future, the insured's higher issue age, a change in health status or other factors may reduce the ability to obtain coverage or may result in significantly higher premiums; and (D) you should consult a professional advisor, since a change in ownership in satisfaction of the loan may result in tax consequences to the owner, depending on the structure of the loan."; and

      (2) May require the applicant or the insured to certify that:

      (A) Such applicant or insured has not entered into any agreement or arrangement providing for the future sale of such life insurance policy;

      (B) The loan arrangement for this policy provides funds sufficient to pay for partial or full payment of the premiums, costs and expenses associated with obtaining and maintaining such life insurance policy, and that such applicant or insured has not entered into any agreement by which such applicant or insured will receive consideration in exchange for procuring such policy; and

      (C) The borrower has an insurable interest in the insured.

      (P.A. 97-202, S. 10, 18; P.A. 08-175, S. 9; P.A. 09-74, S. 21.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 08-175 replaced former Subsecs. (a) to (e) with new Subsecs. (a) to (c) re disclosures and certifications concerning premium finance loans; P.A. 09-74 made a technical change in Subsec. (c)(2)(B), effective May 27, 2009.

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      Sec. 38a-465i. Violations. (a) It shall be a violation of this part for any person to:

      (1) Enter into a life settlement contract if such person knows or reasonably should have known that the life insurance policy was obtained by means of a false, deceptive or misleading application for such policy;

      (2) Engage in any transaction, practice or course of business if such person knows or reasonably should have known that the intent was to avoid the notice requirements of this section;

      (3) Engage in any fraudulent act or practice in connection with any transaction relating to any settlement involving an owner who is a resident of this state;

      (4) Issue, solicit, market or otherwise promote the purchase of an insurance policy for the purpose of or with the emphasis on settling the policy;

      (5) Receive, if providing premium financing, any proceeds, fees or other consideration from the policy or policy owner that are in addition to the amounts required to pay principal, interest or any costs or expenses, which are reasonable in type and amount, incurred by the lender or borrower in connection with such premium finance agreement, except in the event of a default, provided neither default on such loan nor the transfer of the policy, in connection with such default, is pursuant to an agreement or understanding with any other person for the purpose of evading regulation under this part. Any payments, charges, fees or other amounts received by a person or entity providing premium financing in violation of this subdivision shall be remitted to the original owner of the policy or to such owner's estate if said original owner is not living at the time of the determination of the overpayment;

      (6) With respect to any settlement contract or insurance policy and a broker, to knowingly solicit an offer from, effectuate a life settlement contract with or make a sale to any provider, financing entity or related provider trust that is controlling, controlled by or under common control with such broker, unless such relationship is disclosed to the owner;

      (7) With respect to any life settlement contract or insurance policy and a provider, to knowingly enter into a life settlement contract with an owner if, in connection with such life settlement contract, anything of value will be paid to a broker that is controlling, controlled by or under common control with such provider, financing entity or related provider trust that is involved in such settlement contract, unless such relationship is disclosed to the owner;

      (8) With respect to a provider, to enter into a life settlement contract unless the life settlement promotional, advertising and marketing materials, as may be prescribed by regulation, have been filed with the commissioner. In no event shall any marketing materials expressly reference that the insurance is free for any period of time. The inclusion of any reference in the marketing materials that would cause an owner to reasonably believe the insurance is free for any period of time shall be considered a violation of this part; or

      (9) With respect to any life insurance producer, insurance company, broker or provider, to make any statement or representation to the applicant or policyholder in connection with the sale or financing of a life insurance policy to the effect that the insurance is free or without cost to the policyholder for any period of time unless so provided in the policy.

      (b) A violation of this section shall be deemed a fraudulent life settlement act, as specified in section 38a-465j.

      (P.A. 97-202, S. 11, 18; P.A. 03-152, S. 8; P.A. 08-175, S. 10; P.A. 09-74, S. 22.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 03-152 deleted references to "viatical settlement agent" in Subsec. (a)(1) and (2), deleted "the provisions of" re chapter 54 in Subsec. (b), made technical changes in Subsecs. (b) and (d), added Subsec. (e) re contracts entered into within two-year period from date of issuance of policy, and added Subsec. (f) re satisfaction of requirements of section and the insurer's timely response to a request to transfer policy or certificate (Revisor's note: A semicolon at the end of Subsec. (e) was replaced editorially by the Revisors with a period for proper form); P.A. 08-175 replaced former Subsecs. (a) to (f) with new Subsecs. (a) and (b) re violations; P.A. 09-74 made a technical change in Subsec. (a)(5), effective May 27, 2009.

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      Sec. 38a-465j. Fraudulent life settlement acts prohibited. Confidentiality of documents and evidence. Antifraud plans. (a)(1) A person shall not commit a fraudulent life settlement act.

      (2) "Fraudulent life settlement act" includes, but is not limited to:

      (A) Acts or omissions committed by any person who, knowingly and with intent to defraud, for the purpose of depriving another of property or for pecuniary gain, commits or permits its employees or its agents to engage in acts including, but not limited to:

      (i) Presenting, causing to be presented or preparing with knowledge and belief that it will be presented to or by a provider, premium finance lender, broker, insurer, insurance producer or any other person, false material information, or concealing material information, as part of, in support of, or concerning a fact material to one or more of the following: (I) An application for the issuance of a life settlement contract or insurance policy; (II) the underwriting of a life settlement contract or insurance policy; (III) a claim for payment or benefit pursuant to a life settlement contract or insurance policy; (IV) premiums paid on an insurance policy; (V) payments and changes in ownership or beneficiary made in accordance with the terms of a life settlement contract or insurance policy; (VI) the reinstatement or conversion of an insurance policy; (VII) the solicitation, offer to enter into, or effectuation of a life settlement contract or insurance policy; (VIII) the issuance of written evidence of a life settlement contract or insurance policy; (IX) any application for or the existence of or any payments related to a loan secured directly or indirectly by any interest in a life insurance policy; or (X) the entry into any practice or plan that involves stranger-originated life insurance;

      (ii) Where the request for disclosure has been asked for by the insurer, failing to disclose to the insurer that the prospective insured has undergone a life expectancy evaluation by any person or entity other than the insurer or its authorized representative in connection with the issuance of the policy;

      (iii) Employing any device, scheme or artifice to defraud in the business of life settlements; or

      (iv) In the solicitation, application or issuance of a policy, employing any device, scheme or artifice in violation of state insurable interest laws;

      (B) In the furtherance of a fraud or to prevent the detection of a fraud any person commits or permits its employees or its agents to:

      (i) Remove, conceal, alter, destroy or sequester from the commissioner the assets or records of a licensee or other person engaged in the business of life settlements;

      (ii) Misrepresent or conceal the financial condition of a licensee, financing entity, insurer or other person;

      (iii) Transact the business of life settlements in violation of laws requiring a license, certificate of authority or other legal authority for the transaction of the business of life settlements;

      (iv) File with the commissioner a document containing false information or otherwise concealing information about a material fact from the commissioner;

      (v) Engage in embezzlement, theft, misappropriation or conversion of moneys, funds, premiums, credits or other property of a provider, insurer, insured, owner, insurance, policy owner or any other person engaged in the business of life settlements or insurance;

      (vi) Knowingly and with intent to defraud, enter into, broker or otherwise deal in a life settlement contract, the subject of which is a life insurance policy that was obtained by presenting false information concerning any fact material to the policy or by concealing, for the purpose of misleading another, information concerning any fact material to the policy, where the owner or the owner's agent intended to defraud the policy's issuer;

      (vii) Attempt to commit, assist, aid or abet in the commission of, or conspiracy to commit the acts or omissions specified in this subsection; or

      (viii) Misrepresent the state of residence of an owner to be a state or jurisdiction that does not have a law substantially similar to this part for the purpose of evading or avoiding the provisions of this part.

      (b) A person shall not knowingly or intentionally interfere with the enforcement of the provisions of this part or investigations or suspected or actual violations of this part.

      (c) A person in the business of life settlements shall not knowingly or intentionally permit any person convicted of a felony involving dishonesty or breach of trust to participate in the business of life settlements.

      (d) (1) Life settlement contracts and applications for life settlement contracts shall contain the following statement or a substantially similar statement, regardless of the form of transmission: "Any person who knowingly presents false information in an application for insurance or life settlement contract is guilty of a crime and may be subject to fines and confinement in prison."

      (2) The lack of a statement as required in subdivision (1) of this subsection shall not constitute a defense in any prosecution for a fraudulent life settlement act.

      (e) (1) Any person engaged in the business of life settlements having knowledge or a reasonable belief that a fraudulent life settlement act is being, will be or has been committed shall provide to the commissioner the information required by, and in a manner prescribed by, the commissioner.

      (2) Any other person having knowledge or a reasonable belief that a fraudulent life settlement act is being, will be or has been committed shall provide to the commissioner the information required by, and in a manner prescribed by, the commissioner.

      (f) (1) No civil liability shall be imposed on and no cause of action shall arise from a person's furnishing information concerning suspected, anticipated or completed fraudulent life settlement acts or suspected or completed fraudulent insurance acts, if the information is provided to or received from: (A) The commissioner or the commissioner's employees, agents or representatives; (B) federal, state or local law enforcement or regulatory officials or their employees, agents or representatives; (C) a person involved in the prevention and detection of fraudulent life settlement acts or that person's agents, employees or representatives; (D) any regulatory body or their employees, agents or representatives, overseeing life insurance, life settlements, securities or investment fraud; (E) the life insurer that issued the life insurance policy covering the life of the insured; or (F) the licensee or its agents, employees or representatives.

      (2) Subdivision (1) of this subsection shall not apply to statements made with actual malice. In an action brought against a person for filing a report or furnishing other information concerning a fraudulent life settlement act or a fraudulent insurance act, the party bringing the action shall plead specifically any allegation that subdivision (1) of this subsection does not apply because the person filing the report or furnishing the information did so with actual malice.

      (3) A person identified in subdivision (1) of this subsection shall be entitled to an award of attorney's fees and costs if such person is the prevailing party in a civil cause of action for libel, slander or any other relevant tort arising out of activities in carrying out the provisions of this part and the party bringing the action was not substantially justified in doing so. For the purpose of this section, a proceeding is "substantially justified" if it had a reasonable basis in law or fact at the time that it was initiated.

      (4) This section does not abrogate or modify common law or statutory privileges or immunities enjoyed by a person described in subdivision (1) of this subsection.

      (g) (1) The documents and evidence provided pursuant to subsection (f) of this section or obtained by the commissioner in an investigation of suspected or actual fraudulent life settlement acts shall be privileged and confidential and shall not be a public record or subject to discovery or subpoena in a civil or criminal action.

      (2) Subdivision (1) of this subsection does not prohibit release by the commissioner of documents and evidence obtained in an investigation of suspected or actual fraudulent life settlement acts: (A) In administrative or judicial proceedings to enforce laws administered by the commissioner; (B) to federal, state or local law enforcement or regulatory agencies, to an organization established for the purpose of detecting and preventing fraudulent life settlement acts or to the National Association of Insurance Commissioners; or (C) at the discretion of the commissioner, to a person in the business of life settlements that is aggrieved by a fraudulent life settlement act.

      (3) Release of documents and evidence under subdivision (2) of this subsection does not abrogate or modify the privilege granted in subdivision (1) of this subsection.

      (h) Nothing in this part shall be construed to:

      (1) Preempt the authority or relieve the duty of other law enforcement or regulatory agencies to investigate, examine and prosecute suspected violations of law;

      (2) Preempt, supersede, or limit any provision of any state securities law or any rule, order or notice issued thereunder;

      (3) Prevent or prohibit a person from voluntarily disclosing information concerning life settlement fraud to a law enforcement or regulatory agency other than the Insurance Department; or

      (4) Limit the powers granted elsewhere by the laws of this state to the commissioner or an insurance fraud unit to investigate and examine possible violations of law and to take appropriate action against wrongdoers.

      (i) (1) Providers and brokers shall have in place antifraud initiatives reasonably calculated to detect, prosecute and prevent fraudulent life settlement acts. The commissioner may order, or a licensee may request and the commissioner may grant, such modifications of the following required initiatives as necessary to ensure an effective antifraud program. The modifications may be more or less restrictive than the required initiatives as long as the modifications may reasonably be expected to accomplish the purpose of this section. Antifraud initiatives shall include: (A) Fraud investigators, who may be provider or broker employees or independent contractors; and (B) an antifraud plan that shall be submitted to the commissioner.

      (2) The antifraud plan specified in subparagraph (B) of subdivision (1) of this subsection shall include, but not be limited to:

      (A) A description of the procedures for detecting and investigating possible fraudulent life settlement acts and procedures for resolving material inconsistencies between medical records and insurance applications;

      (B) A description of the procedures for reporting possible fraudulent life settlement acts to the commissioner;

      (C) A description of the plan for antifraud education and training of underwriters and other personnel; and

      (D) A description or chart outlining the organizational arrangement of the antifraud personnel responsible for the investigation and reporting of possible fraudulent life settlement acts and investigating unresolved material inconsistencies between medical records and insurance applications.

      (3) Antifraud plans submitted to the commissioner shall be privileged and confidential and shall not be a public record or subject to discovery or subpoena in a civil or criminal action.

      (P.A. 97-202, S. 12, 18; P.A. 99-145, S. 11, 23; P.A. 08-175, S. 11; P.A. 09-74, S. 23.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 99-145 deleted references to Secs. 38a-11(a) and 38a-816(19), effective June 8, 1999; P.A. 08-175 replaced former Subsecs. (a) to (c) with new Subsecs. (a) to (h) re fraudulent life settlement acts and new Subsec. (i) re antifraud initiatives and plans; P.A. 09-74 made technical changes in Subsec. (a)(2)(A)(i), effective May 27, 2009.

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      Sec. 38a-465k. Injunctions. Cease and desist orders. Damages. (a) In addition to the penalties and other enforcement provisions of this part, if any person violates this part or any regulation implementing this part, the commissioner may seek an injunction in a court of competent jurisdiction and may apply for temporary and permanent orders that the commissioner determines are necessary to restrain the person from further committing the violation.

      (b) Any person damaged by the acts of a person in violation of this part or any regulation implementing this part may bring a civil action for damages in a court of competent jurisdiction against the person committing the violation.

      (c) The commissioner may issue, in accordance with the provisions of chapter 54, a cease and desist order upon a person that violates any provision of this part, any regulation or order adopted by the commissioner or any written agreement entered into with the commissioner.

      (d) When the commissioner finds that an activity in violation of this part presents an immediate danger to the public that requires an immediate final order, the commissioner may issue an emergency cease and desist order reciting with particularity the facts underlying the findings. The emergency cease and desist order is effective immediately upon service of a copy of the order on the respondent and shall remain effective for ninety days from the date of service. If the commissioner begins nonemergency cease and desist proceedings, the emergency cease and desist order shall remain effective, absent an order by a court of competent jurisdiction.

      (e) In the event of a wilful violation of this part, the trial court may award statutory damages in addition to actual damages in an amount up to three times the actual damage award.

      (f) The provisions of this part shall not be waived by agreement.

      (g) No choice of law provision shall be utilized to prevent the application of this part to any settlement in which a party to the settlement is a resident of this state.

      (P.A. 97-202, S. 14, 18; P.A. 99-145, S. 12, 23; P.A. 08-175, S. 12.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 99-145 deleted references to Secs. 38a-11(a) and 38a-816(19), effective June 8, 1999; P.A. 08-175 replaced former provisions with Subsecs. (a) to (g) re injunctions, civil actions and orders.

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      Sec. 38a-465l. Penalties. (a) It shall be a violation of this part for any person, provider, broker or any other party related to the business of life settlements to commit a fraudulent life settlement act.

      (b) A person that commits a fraudulent life settlement act is guilty of committing insurance fraud and shall be subject to additional penalties under section 53a-215.

      (c) The commissioner shall be authorized to levy a civil penalty not to exceed one hundred thousand dollars and the amount of the claim for each violation upon any person, including those persons and their employees licensed pursuant to this part, found to have committed a fraudulent life settlement act or violated any other provision of this part.

      (d) The license of a person licensed under this part who commits a fraudulent life settlement act shall be revoked for a period of not less than one year.

      (P.A. 97-202, S. 15, 18; P.A. 08-175, S. 13.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 08-175 replaced former provisions with Subsecs. (a) to (d) re penalties.

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      Sec. 38a-465m. Regulations. Imposition of bond or other mechanism as proof of financial accountability. Conflict of laws. (a) The commissioner may adopt regulations, in accordance with the provisions of chapter 54, to implement the provisions of sections 38a-465 to 38a-465l, inclusive, and sections 38a-465n to 38a-465q, inclusive.

      (b) Such regulations may establish standards for evaluating reasonableness of payments under life settlement contracts. Such regulations may include, but are not limited to, the regulation of discount rates used to determine the amount paid in exchange for assignment, transfer, sale, devise or bequest of a benefit under a life insurance policy.

      (c) Such regulations may establish appropriate licensing requirements and standards for continued licensure for providers and brokers.

      (d) The commissioner may require a bond or other mechanism for financial accountability for providers and brokers.

      (e) Such regulations may adopt rules governing the relationship and responsibilities of providers, brokers, insurers and their agents, pursuant to the requirements of this part.

      (f) If there is more than one owner on a single policy and the owners are residents of different states, the life settlement contract shall be governed by the law of the state in which the owner having the largest percentage ownership resides or, if the owners hold equal ownership, the state of residence of one owner agreed upon in writing by all of the owners. In the event that equal owners fail to agree in writing upon a state of residence for jurisdictional purposes, the law of the state of the insured shall govern.

      (g) A provider in this state that enters into a life settlement contract with an owner who is a resident of another state that has enacted statutes or adopted regulations governing life settlement contracts shall be governed in the effectuation of such life settlement contract by the statutes and regulations of the owner's state of residence. If the state in which the owner is a resident has not enacted statutes or regulations governing life settlement contracts, the provider shall provide notice to the owner that neither state regulates the transaction upon which the owner is entering, except that for transactions in such states, the provider shall maintain all records required if the transactions were executed in the owner's state of residence. The forms used in such states need not be approved by the commissioner.

      (h) If there is a conflict in the laws that apply to an owner and a provider in any individual transaction, the laws of the state that apply to the owner shall take precedence and the provider shall comply with those laws.

      (P.A. 97-202, S. 16, 18; P.A. 99-145, S. 13, 23; P.A. 03-152, S. 9; P.A. 08-175, S. 14.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 99-145 deleted references to Secs. 38a-11(a) and 38a-816(19), effective June 8, 1999; P.A. 03-152 designated existing provisions as Subsec. (a), added reference therein to Secs. 38a-465n to 38a-465q re regulations, and added Subsecs. (b) to (e), inclusive, re scope of regulations and re bond or other mechanism for financial accountability; P.A. 08-175 deleted provisions re viatical settlement and made conforming changes in Subsecs. (b) to (e) and added Subsecs. (f) to (h) re conflict of laws.

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      Sec. 38a-465n. Life settlement advertisements. (a) Each person licensed pursuant to this part may conduct or participate in advertisements within this state. Such advertisements shall be accurate, truthful and not misleading in fact or by implication.

      (b) No person or trust shall:

      (1) Directly or indirectly market, advertise, solicit or otherwise promote the purchase of a policy for the sole purpose of or with an emphasis on settling the policy; or

      (2) Use the words "free", "no cost" or words of similar import in the marketing, advertising, soliciting or otherwise promoting of the purchase of a policy.

      (P.A. 03-152, S. 12; P.A. 08-175, S. 15.)

      History: P.A. 08-175 deleted former Subsecs. (a) and (c) to (p) re viatical settlement advertising, redesignated existing Subsec. (b) as new Subsec. (a) and amended same by replacing former provisions with new language re advertisements, and added new Subsec. (b) re restrictions on advertising.

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      Sec. 38a-465o. Life settlement broker deemed to represent only the owner. Fiduciary duty to owner. Notwithstanding the manner in which the life settlement broker is compensated, a life settlement broker is deemed to represent only the owner and owes a fiduciary duty to the owner to act according to the owner's instructions and in the best interest of the owner.

      (P.A. 03-152, S. 13; P.A. 08-175, S. 16.)

      History: P.A. 08-175 replaced "viatical settlement" with "life settlement" and made conforming changes.

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      Sec. 38a-465p. Provider or broker lawfully transacting business in the state or person lawfully negotiating life settlement contracts prior to October 1, 2008. (a) Any provider or broker lawfully transacting business in this state prior to October 1, 2008, may continue to do so pending approval or disapproval of such provider's or broker's application for a license, provided such application is filed with the commissioner not later than thirty days after October 1, 2008. During the time that such application is pending with the commissioner, the applicant may use any form of life settlement contract that has been filed with the commissioner pending approval thereof, provided that such form is otherwise in compliance with the provisions of this part. Any person transacting business in this state under this provision shall be obligated to comply with all other requirements of this part.

      (b) Any person who has lawfully negotiated life settlement contracts between any owner residing in this state and one or more providers for not less than one year immediately prior to October 1, 2008, may continue to do so pending approval or disapproval of that person's application for a license, provided such application is filed with the commissioner not later than thirty days after October 1, 2008. Any person transacting business in this state under this provision shall be obligated to comply with all other requirements of this part.

      (P.A. 03-152, S. 14; P.A. 08-175, S. 17; P.A. 09-74, S. 24.)

      History: P.A. 08-175 replaced former Subsecs. (a) and (b) re viatical settlement investment agents with new Subsecs. (a) and (b) re 30-day licensing grace period for providers and brokers lawfully transacting business and persons lawfully negotiating life settlement contracts in the state prior to October 1, 2008; P.A. 09-74 made a technical change in Subsec. (a), effective May 27, 2009.

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      Sec. 38a-465q. Related provider trusts. A related provider trust shall have a written agreement with the licensed provider under which the licensed provider is responsible for ensuring compliance with all statutory and regulatory requirements and under which the trust agrees to make all records and files related to life settlement transactions available to the commissioner as if those records and files were maintained directly by the licensed provider.

      (P.A. 03-152, S. 15; P.A. 08-175, S. 18.)

      History: P.A. 08-175 deleted "viatical settlement" and made a conforming change.

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      Secs. 38a-466 to 38a-468. Reserved for future use.

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