House Bill No. 6888
House Bill No. 6888
PUBLIC ACT NO. 97-108
AN ACT CLARIFYING THE APPLICATION OF THE INSURANCE
LAWS TO CERTAIN LIFE INSURANCE COMPANY PRODUCTS.
Be it enacted by the Senate and House of
Representatives in General Assembly convened:
Section 1. (NEW) (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 of the general
statutes, as amended by section 3 of this act,
"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 of the general
statutes, or (2) an asset portfolio that is not
owned or possessed by the insurance company.
Sec. 2. Subsection (a) of section 38a-459 of
the general statutes is repealed and the following
is substituted in lieu thereof:
(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. [Any amounts which
are paid to or held by such company in accordance
with the terms of such agreements may be] 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 [may be allocated] 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 [herein] IN THIS STATE.
Sec. 3. Subparagraph (B) of subdivision (1)
of section 38a-92a of the general statutes is
repealed and the following is substituted in lieu
thereof:
(B) "Financial guaranty insurance" shall not
include:
(i) Insurance of any loss resulting from any
event described in [subdivision] SUBPARAGRAPH (A)
of this [subsection] SUBDIVISION if the loss is
payable only upon the occurrence of any of the
following, as specified in a surety bond,
insurance policy or indemnity contract: A
fortuitous physical event; a failure of or
deficiency in the operation of equipment; or an
inability to extract or recover a natural
resource;
(ii) Surety insurance, defined as insurance:
Guaranteeing the fidelity of persons holding
positions of public or private trusts;
indemnifying financial institutions against loss
of moneys, securities, negotiable instruments and
other tangible items of personal property caused
by larceny, misplacement, destruction or other
stated perils; insuring against loss caused by
forgery of signatures on, or alterations of
specified documents, instruments and papers;
guaranteeing the performance of contracts for
services, including a bid, payment or performance
bond where the bond is guaranteeing the execution
of any contract other than a contract of
indebtedness or other monetary obligation; and
guaranteeing or otherwise becoming surety for the
performance of any lawful contract, not
specifically provided for in this subdivision,
except any insurance contract which constitutes
either mortgage guaranty insurance or financial
guaranty insurance, as defined in [subdivision]
SUBPARAGRAPH (A) of this subsection;
(iii) Credit unemployment insurance, defined
as insurance on a debtor in connection with a
specific loan or other credit transaction, to
provide payments to a creditor in the event of
unemployment of the debtor for the instalments or
other periodic payments becoming due while a
debtor is unemployed;
(iv) Credit insurance indemnifying a
manufacturer, merchant or educational institution
which extends credit against loss or damage
resulting from nonpayment of debts owed to such
entity for goods or services provided in the
normal course of business;
(v) Guaranteed investment contracts issued by
a life insurance company which provides that the
life insurer will make specified payments in
exchange for specific premiums or contributions;
(vi) Mortgage guaranty insurance, defined as
insurance against financial loss by reason of the
nonpayment of principal, interest and other sums
agreed to be paid under the terms of any note or
bond or other evidence of indebtedness secured by
a mortgage, deed of trust or other instrument
constituting a first lien or charge on residential
real estate consisting of less than five units;
(vii) Indemnity contracts or similar
guaranties, to the extent that they are not
otherwise limited or proscribed by sections 38a-92
to 38a-92n, inclusive, in which a life insurer
does any of the following: Guarantees its
obligations or indebtedness or the obligations or
indebtedness of a subsidiary, as defined in
section 38a-1, other than a financial guaranty
insurance corporation, provided: To the extent
that any such obligations or indebtedness are
backed by specific assets, those assets shall be
at all times owned by the life insurer or the
subsidiary, and in the case of the guaranty of the
obligations or indebtedness of the subsidiary that
are not backed by specific assets of the life
insurer, the guaranty terminates once the
subsidiary ceases to be a subsidiary; guarantees
obligations or indebtedness, including the
obligation to substitute assets where appropriate,
with respect to specific assets acquired by a life
insurer in the course of normal investment
activities and not for the purpose of resale with
credit enhancement or guarantees obligations or
indebtedness acquired by a subsidiary, provided
the assets acquired pursuant to this subparagraph
have been either acquired by a special purpose
entity, whose sole purpose is to acquire specific
assets of the life insurer or the subsidiary and
issue securities or participation certificates
backed by the assets, or sold to an independent
third party, or guarantees obligations or
indebtedness of an employee or agent of the life
insurer;
(viii) Any cramdown bond or mortgage
repurchase bond, as those phrases are used by
nationally recognized rating agencies in respect
to mortgage-backed securities;
(ix) Residual value insurance, defined as
insurance issued in connection with a lease or
contract which sets forth a specific termination
value at the end of the term of the lease or
contract for the property covered by the lease or
contract and which insures against loss of
economic value, other than loss due to physical
damage, of tangible personal property, real
property and improvements thereto;
(x) Any letter of credit or similar
transaction effected by a bank, trust company or
savings association; [or]
(xi) ACCUMULATION FUND ARRANGEMENTS OF ANY
LIFE INSURANCE CONTRACT OR ANNUITY CONTRACT MADE
PURSUANT TO SECTION 1 OF THIS ACT, OR ANY FUNDING
AGREEMENTS MADE PURSUANT TO SECTION 38a-459, AS
AMENDED BY SECTION 2 OF THIS ACT; OR
[(xi)] (xii) Any other form of insurance
covering risks that the commissioner determines to
be substantially similar to any of the foregoing.
Sec. 4. Subsection (b) of section 38a-860 of
the general statutes is repealed and the following
is substituted in lieu thereof:
(b) (1) Sections 38a-858 to 38a-875,
inclusive, shall provide coverage to the persons
specified in subsection (a) for direct, nongroup
life, health, annuity and supplemental policies or
contracts, for certificates under direct group
policies and contracts, and for unallocated
annuity contracts issued by member insurers,
except as limited by said sections. Annuity
contracts and certificates under group annuity
contracts include but are not limited to
guaranteed investment contracts, deposit
administration contracts, unallocated funding
agreements, structured settlement agreements,
lottery contracts and any immediate or deferred
annuity contracts. (2) Said sections shall not
provide coverage for: (A) Any portion of a policy
or contract not guaranteed by the insurer, or
under which the risk is borne by the policy or
contract holder; (B) any policy or contract of
reinsurance, unless assumption certificates have
been issued; (C) any portion of a policy or
contract to the extent that the rate of interest
on which it is based (i) averaged over the period
of four years prior to the date on which the
association becomes obligated with respect to such
policy or contract, exceeds a rate of interest
determined by subtracting two percentage points
from Moody's corporate bond yield average averaged
for that same four-year period or for such lesser
period if the policy or contract was issued less
than four years before the association became
obligated; and (ii) on and after the date on which
the association becomes obligated with respect to
such policy or contract, exceeds the rate of
interest determined by subtracting three
percentage points from Moody's corporate bond
yield average as most recently available; (D) any
plan or program of an employer, association or
similar entity to provide life, health or annuity
benefits to its employees or members to the extent
that such plan or program is self-funded or
uninsured, including but not limited to benefits
payable by an employer, association or similar
entity under (i) a multiple employer welfare
arrangement as defined in Section 514 of the
Employee Retirement Income Security Act of 1974,
as amended; (ii) a minimum premium group insurance
plan; (iii) a stop-loss group insurance plan; or
(iv) an administrative services only contract; (E)
any portion of a policy or contract to the extent
that it provides dividends or experience rating
credits, or provides that any fees or allowances
be paid to any person, including the policy or
contract holder, in connection with the service to
or administration of such policy or contract; (F)
any policy or contract issued in this state by a
member insurer at a time when it was not licensed
or did not have a certificate of authority to
issue such policy or contract in this state; (G)
any unallocated annuity contract issued to an
employee benefit plan protected under the federal
Pension Benefit Guaranty Corporation; (H) any
portion of any unallocated annuity contract which
is not issued to or in connection with a specific
employee, union or association of natural persons
benefit plan or a government lottery; [and] (I)
any subscriber contract issued by a health care
center; AND (J) A CONTRACTUAL AGREEMENT THAT
ESTABLISHES THE INSURER'S OBLIGATION BY REFERENCE
TO A PORTFOLIO OF ASSETS THAT IS NOT OWNED OR
POSSESSED BY THE INSURANCE COMPANY.
Approved June 6, 1997