20-2635. Variable annuity contracts

A. A variable annuity that provides benefits payable in variable amounts and that is delivered or issued for delivery in this state shall contain a statement of the essential features of the procedures the insurance company must follow in determining the dollar amount of the variable benefits. The contract, including a group contract and any certificate in evidence of variable benefits that is issued under the contract, shall state that the dollar amount will vary to reflect investment experience and shall contain on its first page a clear statement that the benefits under the contract are on a variable basis.

B. Illustrations of benefits that are payable under a variable annuity shall not include projections of past investment experience into the future or attempted predictions of future investment experience. This subsection does not prohibit the use of hypothetical assumed rates of return to illustrate possible benefit levels.

C. An insurer shall not deliver or issue for delivery in this state an individual variable annuity contract that calls for the payment of periodic stipulated payments unless the contract contains in substance the following provision or provisions:

1. A grace period provision of thirty days or of one month, within which any stipulated payment to the insurer that falls due after the first day may be made and during which the contract shall continue in force. The contract may state the basis for determining the date as of which any payment that is received during the grace period shall be applied to produce the values under the contract arising from the contract.

2. A reinstatement provision that unless the cash surrender value has been paid the contract may be reinstated on the payment to the insurer of the overdue payments as required by contract and all indebtedness on the contract, including interest, at any time after the date of the default in making periodic stipulated payments to the insurer during the life of the annuitant. The contract may state the basis for determining the date as of which the amount to cover the overdue payments and indebtedness shall be applied to produce the values under the contract arising from the contract.

D. A variable annuity contract that is delivered or issued for delivery in this state shall stipulate the investment increment factors the insurer will use in computing the dollar amount of variable benefits or other variable contractual payments or values under the variable annuity contract. The contract may guarantee that expense or mortality results, or both, do not adversely affect the dollar amounts. If the expense and mortality results may adversely affect the dollar amount of benefits, the insurer shall stipulate the expense and mortality factors in the contract. For the purposes of this subsection, the contract may stipulate that expense excludes some or all taxes.

E. In computing the dollar amount of variable benefits or other contractual payments or values under an individual variable annuity contract:

1. Unless the director otherwise approves, the annual net investment increment assumption shall not exceed five per cent.

2. To the extent that the level of benefits may be affected by future mortality results, unless the director approves the use of another table the mortality factor shall be determined from the annuity mortality table for 1949, ultimate, or any modification of that table not having a lower life expectancy at any age.

F. The reserve liability for variable annuities shall be established pursuant to the requirements of section 20-510 in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees.