Additional Standards for Private Placement Plans for Individual Variable Adjustable Life Insurance Policies
Table of Contents
1. Date Adopted: December 15, 2022
2. Purpose and Scope: The Additional Standards for Private Placement Plans for Individual Variable Adjustable Life Insurance Policies (the “Proposed Standards”) specify additional submission requirements for benefits that are built into individual variable adjustable life insurance policies, that are issued exclusively to an accredited investor or qualified purchaser, and that vary in relation to the performance of an underlying separate account where the investment funds in the private placement separate account may be exempt from registration with the Securities and Exchange Commission (SEC).
3. Rules Repealed, Amended or Suspended by the Rule: This rule amends the Additional Standards for Private Placement Plans for Individual Variable Adjustable Life Insurance Policies (for use with Individual Variable Adjustable Life Insurance Policies) originally adopted by the IIPRC on March 25, 2011; and amended on August 5, 2017 and December 15, 2022.
The rule was amended pertaining to the length of the maximum suicide exclusion period found in §3.I.2.(b). The amendments maintain a maximum suicide exclusion period of up to two years and include an exception requiring a shorter maximum suicide exclusion period where required by state law.
The addition of the requirement for an exception for a shorter maximum suicide exclusion period where required by state law reflects a substantive change in demonstrating compliance with the Uniform Standards. Therefore, the Commission determined the amendments will be effective for compliance purposes for new products and for new issues of previously approved Compact products
4. Statutory Authority: Among the IIPRC’s primary purposes and powers is to establish reasonable uniform standards for the insurance products covered in the Interstate Insurance Product Regulation Compact (‘Compact”), specifically pursuant to Article I §2, Article IV §2 and Article VII §1 of the Compact, as enacted into law by each IIPRC member state.
5. Required Findings: None.
6. Effective Date: April 3, 2023, for new product submissions and October 3, 2023, for new issues of previously approved Compact products.1
1 In adopting the Uniform Standards amendments, the Commission set an effective date of April 3, 2023, for new product submissions. In recognition of the complexity involved in updating previously approved products to demonstrate compliance with the amendments for new issues, the Commission set an effective date of October 3, 2023, for new issues of previously approved Compact products. As of October 3, new issues of all Compact approved products in the current Compacting States must comply with the amendments.
(For use with Individual Variable Adjustable Life Insurance Policies)
Scope: These standards apply to private placement plans that are built in to individual variable adjustable life insurance policies. Private placement plans are variable policies that are issued exclusively to qualified owners and provide for benefits that vary in relation to the performance of an underlying separate account where the separate account invests in one or more funds that are exempt from registration with the Securities and Exchange Commission (SEC) under the Investment Company Act of 1940, as amended. Private placement plans may also offer non-exempt funds.
Mix and Match: These standards are available to be used in combination with State Product Components as described in § 111(b) of the Operating Procedure for the Filing and Approval of Product Filings.
Self-Certification: These standards are not available to be filed using the Rule for the Self-Certification of Product Components Filed with the Interstate Insurance Product Regulation Commission.
As used in these standards the following definitions apply:
“Contribution” is an investment into an exempt fund resulting from an allocation of net premiums, repayment of loans or transfers into an exempt fund. A contribution may be subject to a specified minimum amount.
“Contribution date” is the date established for the purpose of allowing contributions into an exempt fund. Contribution dates may vary for each exempt fund.
“Contribution notice period” is the minimum number of days of advance notice required before a contribution date if a qualified owner intends to make a contribution. Contribution notice periods may vary for each exempt fund.
“Exempt Fund” is an investment fund (including managed separate accounts) that is exempt from registration with the SEC under the Investment Company Act of 1940, as amended.
“Liquidity date” is a date that redemptions from an exempt fund are received by the company. Liquidity dates may vary for each exempt fund or type of redemption. Each liquidity date has a corresponding redemption date. There are situations where a single redemption date may result in multiple liquidity dates.
“Redemption” is a distribution from an exempt fund for death benefits, surrenders, partial withdrawals, policy charges, loans, or transfers from an exempt fund. A redemption of a portion of the exempt fund may be subject to a specified minimum amount.
“Redemption date” is the effective date for processing a redemption. After that date, the value of a redemption is no longer subject to exempt fund performance and the value of the redemption will instead be calculated as of that date. There are situations where there are multiple redemption dates for a requested redemption.
“Redemption notice period” is the minimum number of days of advance notice required before a redemption date if a qualified owner intends to request a redemption. Redemption notice periods may vary for each exempt fund or type of redemption.
“Qualified owner” is an owner who is an accredited investor or qualified purchaser, or both, as those terms are defined by the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, or the regulations promulgated under either of those acts.
Drafting Note: Certain exempt funds may be available only to qualified owners who are also “qualified clients” as defined by the Investment Advisors Act of 1940 or “qualified eligible purchasers” as defined by the Commodities Futures Act.
Drafting Note: Other terms may be used in the policy provided they are used consistently.
In addition to the Core Standards requirements for the applicable variable adjustable life policy, the following standards, as appropriate, apply:
§ 1. ADDITIONAL SUBMISSION REQUIREMENTS
(1) The company may identify product specifications that may be changed without prior approval, as long as the Statement of Variability presents reasonable and realistic ranges for the item. These items include categories of qualified owners.
§ 2. GENERAL FORM REQUIREMENTS
(1) The policy shall contain a brief description that shall appear in prominent print on the cover page of the policy or is visible without opening the policy. The brief description shall contain at least the following information:
(a) A caption of the type of coverage provided; for example, private placement flexible premium variable adjustable life policy.
(1) The policy shall contain an assignment provision. The policy shall not include any restrictions on the availability of policy assignments, except in situations where restrictions are required for purposes of satisfying applicable laws or regulations, or the requirement that the assignee be a qualified owner.
(1) For that portion of the death benefit equal to the value of an exempt fund, interest shall not begin to accrue until the liquidity date(s) of the applicable exempt fund following the receipt of due proof of death, as specified in the policy.
(2) The additional 10% interest rate on death benefits shall not apply any earlier than 31 calendar days after the liquidity date of the applicable exempt fund.
C. DEFERRAL AND VALUATION OF PAYMENTS
(1) The policy may provide that the company reserves the right, at its discretion, to defer the determination of any redemption, except for a death benefit, attributable to an exempt fund until the next redemption date, subject to a specified redemption notice period, as specified in the policy. The policy may also provide that the company reserves the right, at its discretion, to defer payment of any redemption until the liquidity date(s) associated with the next redemption date.
(2) The policy may provide that the company reserves the right, at its discretion, to defer the determination and payment of the portion of the death benefit whose value is dependent on the amounts invested in an exempt fund until the valuation corresponding to the redemption date for the death benefit has been completed. The policy may also provide that the company may estimate the value of the exempt fund in making the determination of the portion of the death benefit that is not deferred. The policy may also provide that the company reserves the right, at its discretion, to defer payment of such portion of the death benefit equal to the value of such exempt fund until the next liquidity date(s) following receipt of due proof of death, subject to a specified redemption notice period.
(3) If the company chooses to defer surrender payments as in Paragraph (1) of this section, the policy may provide that all insurance coverage ends on the date the surrender request is received (or some later date as requested by the owner and agreed to by the company). Such provision shall state that on such surrender date all cost of insurance charges will be discontinued and the death of the insured after that date will not trigger a death benefit payment, even if the cash value has not been fully paid out.
(1) The policy may limit to qualified owners the availability of loans.
(2) The policy may defer loans from an exempt fund until the next liquidity date(s).
(3) The policy may require that the repayment of loans be allocated to a non-exempt fund or the general account until the next contribution date of the exempt fund. The repayment allocated to the exempt fund will then be the value in effect as of the applicable contribution date.
(1) The policy shall contain an ownership provision. The provision shall describe the procedures for designating or changing the owner and indicating when the designation is effective. The policy shall not include any restrictions on change of owner other than for purposes of satisfying applicable laws or regulations, or the requirement that the new owner be a qualified owner.
(2) The policy shall only be sold or transferred in a transaction that is exempt from registration under the Securities Act of 1933, as amended.
(3) The policy shall state that the owner must be a qualified owner to make payments into the policy or to make transfers among the investment divisions, but if the owner ceases to be a qualified owner, the owner is eligible to exchange the policy for a plan of life insurance currently being offered by the company that does not require qualified owner status, as described in the POLICY EXCHANGE section below, or to transfer funds from an exempt fund to a non-exempt fund or the general account as described in the TRANSFERS section. If the owner takes no action, the owner may be required to surrender the policy for cash, all subject to the liquidity date(s) and specified redemption notice periods.
(4) If the policy has multiple owners, they shall all be qualified owners at the time they become owners.
(1) The policy may limit to qualified owners the ability to make partial withdrawals.
(2) The policy may defer partial withdrawals from an exempt fund until the next liquidity date(s).
(1) The policy shall limit to qualified owners the ability to pay additional premiums.
(2) The policy may require that the net premium be allocated to a non-exempt fund or the general account until the next contribution date of an exempt fund. The net premium allocated to the exempt fund will then be the value in effect as of the applicable contribution date.
(1) The policy may require that only qualified owners be permitted to make policy adjustments (increase or decrease the specified amount, or change in death benefit options).
(1) The policy may state that if at any time the owner ceases to be a qualified owner, the owner shall be permitted or required to exchange the policy for a plan of life insurance currently being offered by the company that does not require qualified owner status, subject to the following conditions described in the policy:
(a) The new policy will have a specified amount equal to the specified amount of the private placement policy;
(b) Evidence of insurability shall not be required unless the net amount at risk is increased; and
(c) Any other conditions.
(2) With respect to the new policy, the following applies:
(a) A policy exchange shall not trigger a new contestable period, unless the net amount at risk is increased. If the net amount at risk is increased, contestability may apply to the increased amount for up to two years beginning with the date of issue of the new policy. The new policy may include an exception to the incontestability provision for fraud in the procurement of the new policy when permitted by applicable law in the state where the policy is delivered or issued for delivery.
(b) A policy exchange shall not trigger a new suicide exclusion period, unless the net amount at risk is increased. If the net amount at risk is increased, a suicide exclusion may apply to the increased amount for up to two years, or any shorter period as may be required by applicable law in the state where the policy is delivered or issued for delivery, beginning with the date of issue of the new policy.
(c) If a policy contains a reinstatement provision or other policy provision that references the subject matter of Paragraph (2)(a) and/or (2)(b) of this section, the policy references shall be consistent with such Paragraphs.
(1) The policy may provide that contributions occur only on a specified contribution date and after the qualified owner satisfies the specified contribution notice period.
(2) The policy may provide that redemptions occur only as of a specified redemption date and after the qualified owner satisfies the specified redemption notice period.
(1) The policy may require that only qualified owners be permitted to reinstate the policy.
(2) If the owner ceases to be a qualified owner, the policy may allow reinstatement of the policy’s insurance coverage under a plan of life insurance currently being offered by the company that does not require qualified owner status, subject to the same reinstatement conditions as in the Individual Flexible Premium Variable Adjustable Life Insurance Policy Standards.
(1) The policy shall state that the annual report will include at least the following:
(a) An indication, if applicable, that payment of the cash value and death benefit shown in the report may be deferred.
(1) If the owner ceases to be a qualified owner, and the owner does not elect a remedy available under the policy, the policy may require that the policy be surrendered. The policy shall describe any surrender charges which may apply if the owner is required to surrender the policy.
(2) The policy may defer a redemption for a surrender request as described in §3C. DEFERRAL AND VALUATION OF PAYMENTS. If the determination and payment of a redemption attributable to an exempt fund is deferred for cash surrender, any required interest on the deferred payment shall not begin to accrue until the liquidity date(s) of the applicable exempt fund(s) for that portion of the cash value that is attributable to an exempt fund(s).
(1) The policy shall require that only qualified owners are permitted to transfer funds into an exempt fund.
(2) The policy may require that any transfers to an exempt fund be allocated to a non-exempt fund or the general account until the next contribution date of the exempt fund. The transfer allocated to the exempt fund will then be the value in effect as of the applicable contribution date.
(3) If the owner ceases to be a qualified owner, the policy may provide that the company reserves the right, at its discretion, to require a transfer from an exempt fund to a non-exempt fund or the general account.
Effective on 04/3/2023
The purpose of these amendments is to address a specific conflict between a Colorado statute and the Uniform Standards with respect to the length of the suicide exclusion. The Product Standards Committee identified two sections in the individual and group life insurance Uniform Standards—the Reinstatement and Suicide provisions—and suggested amendments to maintain a maximum suicide exclusion period of up to two years and to include an exception for a shorter maximum suicide exclusion period where required by state law. See the link for Transmittal memo for a more detailed description of the proposed amendments. This rule would amend the following Uniform Standards:
INDIVIDUAL TERM LIFE PRODUCT LINE
- Individual Term Life Insurance Policy Standards
- Individual Single Premium Term Life Insurance Policy Standards
- Individual Joint Last to Die Survivorship Term Life Insurance Policy Standards
- Individual Single Premium Joint Last to Die Survivorship Term Life Insurance Policy Standards
INDIVIDUAL WHOLE LIFE PRODUCT LINE
- Individual Whole Life Insurance Policy Standards
- Individual Single Premium Whole Life Insurance Policy Standards
- Individual Joint Last to Die Survivorship Whole Life Insurance Policy Standards
- Individual Single Premium Joint Last to Die Survivorship Whole Life Insurance Policy Standards
- Individual Current Assumption Whole Life Insurance Policy Standards
INDIVIDUAL ENDOWMENT INSURANCE PRODUCT LINE
- Individual Endowment Insurance Policy Standards
- Individual Single Premium Endowment Insurance Policy Standards
- Individual Joint Last to Die Survivorship Endowment Insurance Policy Standards
- Individual Single Premium Joint Last to Die Survivorship Endowment Insurance Policy Standards
INDIVIDUAL NON-VARIABLE ADJUSTABLE LIFE INSURANCE PRODUCT LINE
- Individual Flexible Premium Adjustable Life Insurance Policy Standards (Universal Life)
- Individual Joint Last to Die Survivorship Flexible Premium Adjustable Life Insurance Policy Standards
- Individual Modified Single Premium Adjustable Life Insurance Policy Standards
- Additional Standards for Private Placement Plans for Individual Variable Adjustable Life Insurance Policies
INDIVIDUAL VARIABLE ADJUSTABLE LIFE INSURANCE PRODUCT LINE
- Individual Modified Single Premium Variable Life Insurance Policy Standards
- Individual Modified Single Premium Joint First to Die Variable Life Insurance Policy Standards
- Individual Flexible Premium Variable Adjustable Life Insurance Policy Standards
- Individual Joint Last to Die Survivorship Flexible Premium Variable Adjustable Life Insurance Policy Standards
GROUP TERM LIFE PRODUCT LINE
- Group Term Life Insurance Policy and Certificate Standards for Employer Groups
Effective 4/3/2023
Active
The purpose of these amendments is to address a specific conflict between a Colorado statute and the Uniform Standards with respect to the length of the suicide exclusion. The Product Standards Committee identified two sections in the individual and group life insurance Uniform Standards—the Reinstatement and Suicide provisions—and suggested amendments to maintain a maximum suicide exclusion period of up to two years and to include an exception for a shorter maximum suicide exclusion period where required by state law. See the link for Transmittal memo for a more detailed description of the proposed amendments. This rule would amend the following Uniform Standards:
INDIVIDUAL TERM LIFE PRODUCT LINE
- Individual Term Life Insurance Policy Standards
- Individual Single Premium Term Life Insurance Policy Standards
- Individual Joint Last to Die Survivorship Term Life Insurance Policy Standards
- Individual Single Premium Joint Last to Die Survivorship Term Life Insurance Policy Standards
INDIVIDUAL WHOLE LIFE PRODUCT LINE
- Individual Whole Life Insurance Policy Standards
- Individual Single Premium Whole Life Insurance Policy Standards
- Individual Joint Last to Die Survivorship Whole Life Insurance Policy Standards
- Individual Single Premium Joint Last to Die Survivorship Whole Life Insurance Policy Standards
- Individual Current Assumption Whole Life Insurance Policy Standards
INDIVIDUAL ENDOWMENT INSURANCE PRODUCT LINE
- Individual Endowment Insurance Policy Standards
- Individual Single Premium Endowment Insurance Policy Standards
- Individual Joint Last to Die Survivorship Endowment Insurance Policy Standards
- Individual Single Premium Joint Last to Die Survivorship Endowment Insurance Policy Standards
INDIVIDUAL NON-VARIABLE ADJUSTABLE LIFE INSURANCE PRODUCT LINE
- Individual Flexible Premium Adjustable Life Insurance Policy Standards (Universal Life)
- Individual Joint Last to Die Survivorship Flexible Premium Adjustable Life Insurance Policy Standards
- Individual Modified Single Premium Adjustable Life Insurance Policy Standards
- Additional Standards for Private Placement Plans for Individual Variable Adjustable Life Insurance Policies
INDIVIDUAL VARIABLE ADJUSTABLE LIFE INSURANCE PRODUCT LINE
- Individual Modified Single Premium Variable Life Insurance Policy Standards
- Individual Modified Single Premium Joint First to Die Variable Life Insurance Policy Standards
- Individual Flexible Premium Variable Adjustable Life Insurance Policy Standards
- Individual Joint Last to Die Survivorship Flexible Premium Variable Adjustable Life Insurance Policy Standards
GROUP TERM LIFE PRODUCT LINE
- Group Term Life Insurance Policy and Certificate Standards for Employer Groups
Effective 11/20/2017
to 4/2/2023
Inactive
The purpose of these amendments is to revise the Operating Procedures and Uniform Standards effective between January 1, 2011 and July 1, 2011 in accordance with the Five-Year Commission Review of Rules required by §119 of the Rule for the Adoption, Amendment and Repeal of Rules for the Interstate Insurance Product Regulation Commission. The procedures adopted by the Management Committee in March 2012 for implementing the Five-Year Review process limit the scope of review under §119 to identifying "the need for continuation, repeal or amendment of the rule based primarily on whether circumstances or underlying assumptions have changed since the last time the rule was adopted, amended or reviewed." See the Transmittal Memo for a more detailed description of the proposed amendments.
Effective 7/3/2011
to 11/19/2017
Inactive
The Additional Standards for Private Placement Plans for Individual Variable Adjustable Life Insurance Policies (the "Proposed Standards") specify additional submission requirements for benefits that are built into individual variable adjustable life insurance policies, that are issued exclusively to an accredited investor or qualified purchaser, and that vary in relation to the performance of an underlying separate account where the investment funds in the private placement separate account may be exempt from registration with the SEC.