Nac: Chapter 688A - Life Insurance And Annuity Contracts

Link to law: http://www.leg.state.nv.us/nac/NAC-688A.html
Published: 2015

[Rev. 11/22/2013 10:29:04

AM--2013]



[NAC-688A Revised Date: 3-12]

CHAPTER 688A - LIFE INSURANCE AND ANNUITY

CONTRACTS

ANNUITY CONTRACTS AND DEPOSIT FUNDS

688A.110         Purpose and scope of provisions.

688A.115         Applicability of provisions.

688A.120         Contract summary: Provision to

prospective purchasers.

688A.130         Contract summary: Preparation.

688A.135         Contract summary: Contents.

688A.140         Disclosure of agency and identity of

insurance company.

688A.150         Use of certain professional

designations; restriction on fees.

688A.160         Restrictions on presentations,

literature and contract forms.

688A.170         Maintenance of records.

688A.180         Effect of failure to provide

contract summary.

MINIMUM NONFORFEITURE AMOUNTS FOR DEFERRED ANNUITIES

688A.200         Rate of interest for determination.

688A.210         Actuarial certification for certain

forms.

MULTIPLE POLICIES OF LIFE INSURANCE

688A.250         Written standards for processing

claims; records substantiating compliance.

688A.260         Processing of claims: Search for and

action on additional policies issued by insurer on life of decedent.

POLICIES OF SMALL FACE AMOUNT

688A.300         Requirements for disclosure.

STANDARDS OF VALUATION

Determination of Minimum Reserve Liabilities

688A.320         Definitions.

688A.325         “2001 CSO Mortality Table”

defined.

688A.327         “2001 CSO Preferred Class

Structure Mortality Table” defined.

688A.330         “CSO” defined.

688A.350         Adoption by reference of Recognition

of the 2001 CSO Mortality Table for Use in Determining Minimum Reserve

Liabilities and Nonforfeiture Benefits Model Regulation.

688A.353         Policies issued on or after January

1, 2008.

688A.355         Plans with separate rates for

preferred and standard nonsmoker lives; certification by appointed actuary.

688A.357         Plans with separate rates for

preferred and standard smoker lives; certification by appointed actuary.

688A.360         Notice to Commissioner.

688A.363         Communications and disclosures.

Preneed Insurance

688A.370         Definitions.

688A.373         “2001 CSO Mortality Table”

defined.

688A.375         “CSO” defined.

688A.380         “Preneed insurance” defined.

688A.383         “Prepaid contract” defined.

688A.385         “Ultimate 1980 CSO Mortality

Table” defined.

688A.387         Calculation of reserve liabilities

and nonforfeiture values.

688A.390         Policies issued on or after January

1, 2009, but before January 1, 2012.

PURCHASE OR EXCHANGE OF ANNUITIES

688A.400         Definitions.

688A.405         “Annuity” defined.

688A.410         “Buyer’s guide” defined.

688A.415         “Determinable elements” defined.

688A.420         “Generic name” defined.

688A.425         “Guaranteed elements” defined.

688A.430         “Insurer” defined.

688A.435         “Nonguaranteed elements” defined.

688A.440         “Producer of insurance” defined.

688A.445         “Recommendation” defined.

688A.450         Applicability of provisions.

688A.455         Recommendations: Responsibilities of

insurer or producer of insurance; corrective action.

688A.460         Establishment and maintenance of

system to supervise recommendations.

688A.465         Maintenance and availability of

records or information regarding purchaser of recommended annuity.

688A.470         Provision of buyer’s guide and

disclosure statement to applicant for annuity.

688A.475         Provision of annual report to owner

of annuity.

PROHIBITED ACTS AND PRACTICES

688A.500         Engaging in certain acts or

practices regarding sales to active duty service members.

 

 

 

ANNUITY CONTRACTS AND DEPOSIT FUNDS

      NAC 688A.110  Purpose and scope of provisions.

(NRS 679B.130)

     1.  NAC 688A.110

to 688A.180, inclusive, require insurers to

deliver to prospects for annuity contracts, or for deposit funds accepted in

conjunction with life insurance policies or annuity contracts, information

which:

     (a) Helps the prospect select an annuity, a deposit

fund, or both, appropriate to the prospect’s needs;

     (b) Improves the prospect’s understanding of the

basic features of the plan under consideration; and

     (c) Improves the prospect’s ability to evaluate the

relative benefits of similar plans.

     2.  NAC 688A.110

to 688A.180, inclusive, do not prohibit the use of

additional material which is not in violation of this regulation or of law.

     [Comm’r of Insurance, LH-7 § 2, eff. 2-6-80]

      NAC 688A.115  Applicability of provisions. (NRS 679B.130)

     1.  NAC 688A.110

to 688A.180, inclusive, apply to:

     (a) Any solicitation, negotiation or procurement

of:

          (1) Annuity contracts; or

          (2) Deposit funds accepted in conjunction with

individual life insurance policies or with annuity contracts which are subject

to NAC 688A.110 to 688A.180,

inclusive, within this State;

     (b) Any issuer of life insurance policies or

annuity contracts, including fraternal benefit societies;

     (c) Individual deferred annuities other than

variable annuities, investment annuities and contracts registered with the

Federal Securities and Exchange Commission; and

     (d) Deposit fund arrangements under which amounts

to accumulate at interest are paid in addition to life insurance premiums or

annuity considerations under provisions of individual life insurance policies

or annuity contracts.

     2.  NAC 688A.110

to 688A.180, inclusive, do not apply to:

     (a) Group annuity contracts whose costs are borne

in whole or in part by the annuitant’s employer or by an association of which

the annuitant is a member. The cost of a contract must not be deemed to be

borne by an annuitant’s employer to the extent the annuitant’s salary is

reduced or the annuitant foregoes a salary increase;

     (b) Immediate annuity contracts;

     (c) Policies or contracts issued in connection with

employee benefit plans as defined by Section 3 (3) of the Federal Employee

Retirement Income Security Act of 1974, as amended;

     (d) Individual retirement accounts and individual

retirement annuities as described in Section 408 of the Federal Internal

Revenue Code;

     (e) A single advance payment of specific premiums

equal to the discounted value of the premiums; or

     (f) A policyholder’s deposit account established

primarily to facilitate payment of regular premiums, and where the anticipated

balance of the account does not exceed twice the sum of the premiums payable in

1 year on all policies for which premiums are being paid from the account.

     3.  NAC 688A.110

to 688A.180, inclusive, apply to all solicitations

which commence on or after April 1, 1980.

     [Comm’r of Insurance, LH-7 § 3, eff. 2-6-80]

      NAC 688A.120  Contract summary: Provision to prospective purchasers. (NRS 679B.130)

     1.  The insurer shall provide to all

prospective purchasers a contract summary before accepting the applicant’s

initial consideration for the annuity contract or, in the case of a deposit

fund, before accepting the applicant’s initial consideration for the associated

life insurance policy or annuity contract, unless:

     (a) The annuity contract or associated life

insurance policy for which application is made provides for an unconditional

refund period of at least 10 days; or

     (b) Unless the contract summary contains an

unconditional refund offer of at least 10 days, in which case the contract

summary must be delivered with or before delivery of the annuity contract or

associated life insurance policy.

     2.  The insurer shall provide a contract

summary to any prospective purchaser upon request.

     [Comm’r of Insurance, LH-7 § 4, eff. 2-6-80]

      NAC 688A.130  Contract summary: Preparation. (NRS 679B.130)

     1.  The contract summary must be a separate

document.

     2.  All information required to be disclosed

must be set out in a manner which will not minimize or render any portion of

the summary obscure.

     3.  Any amounts which remain level for 2 or

more contract years may be represented by a single number if it is clearly

indicated what amounts are applicable for each contract year.

     4.  Amounts in subsections 4, 6, 7 and 9 of NAC 688A.135 must, in the case of flexible premium

annuity contracts, be determined either according to an anticipated pattern of

consideration payments or on the assumption that annual considerations payable

will be $1,000.

     5.  If not specified in the contract, annuity

payments must be assumed to commence at age 65 or 10 years from issue,

whichever is later.

     6.  Zero amounts must be displayed as zero

and not as blank spaces.

     [Comm’r of Insurance, LH-7 § 6, eff. 2-6-80]

      NAC 688A.135  Contract summary: Contents. (NRS 679B.130)  A

contract summary must be a written statement describing the elements of the

annuity contract and deposit fund and including as a minimum:

     1.  A prominently placed title, to be

followed by an identification of the annuity contract, deposit fund, or both,

to which the statement applies.

     2.  The name and address of the insurance

agent or, if no agent is involved, a statement of the procedure to be followed

in order to receive responses to inquiries regarding the contract summary.

     3.  The full name and home office or

administrative office address of the insurer which will issue the annuity

contract or administer the deposit fund.

     4.  The death benefits for the deposit fund

and for the annuity contract during the deferred period, and the form of

payment of the annuity. Where a choice of form of payment of the annuity is

provided, this item must show the options guaranteed and the form of payment of

the annuity selected for subsections 6, 7 and 9.

     5.  If the contract does not provide cash

surrender values, a prominent statement to that effect.

     6.  The amount of the guaranteed annuity

payments at the scheduled commencement of the annuity, based on the assumption

that all scheduled considerations are paid and no prior withdrawals from or

partial surrenders of the contract are made and no indebtedness to the insurer

on the contract is incurred.

     7.  An amount of annuity payments as in

subsection 6 other than guaranteed payments, in amounts not greater than those

based on:

     (a) The current dividend scale and the interest

rate currently used to accumulate dividends under such contracts, or the

current excess interest rate credited by the insurer; and

     (b) Current annuity purchase rates.

     8.  For annuity contracts or deposit funds

for which guaranteed cash surrender values at any duration are less than the

total considerations paid, a prominent statement that the contract or fund may

result in a loss if kept for only a few years, together with a reference to the

schedule of guaranteed cash surrender values required by paragraph (c) of

subsection 9.

     9.  The following amounts, where applicable,

for the first 5 contract years and representative contract years thereafter

sufficient to clearly illustrate the patterns of considerations and benefits,

including, but not limited to, the 10th and 20th contract years and at least

one age between 60 and 65, inclusive, or the scheduled commencement of annuity

payments, if any, whichever is earlier:

     (a) The gross annual or single consideration for

the annuity contract;

     (b) Scheduled annual or single deposit for the

deposit fund, if any;

     (c) The total guaranteed cash surrender value at

the end of the year or, if no guaranteed cash surrender values are provided,

the total guaranteed paid-up annuity at the end of the year. Values for a

deposit fund must be shown separately from those for a basic contract; and

     (d) The total illustrative cash value or paid-up

annuity at the end of the year, not greater in amount than that based on:

          (1) The current dividend scale and the

interest rate currently used to accumulate dividends under such contracts or

the current excess interest rate credited by the insurer; and

          (2) Current annuity purchase rates.

     10.  For a contract summary which includes

values based on the current dividend scale or the current dividend accumulation

or excess interest rate, a statement that the values are illustrative and are

not guaranteed.

     11.  The date on which the contract summary

is prepared. A dividend scale or excess interest rate which has been publicly

declared by the insurer with an effective date not more than 2 months after the

date of the declaration must be considered a current dividend scale or current

excess interest rate.

     [Comm’r of Insurance, LH-7 § 5, eff. 2-6-80]

      NAC 688A.140  Disclosure of agency and identity of insurance company. (NRS 679B.130)

     1.  Before beginning a sales presentation,

the agent shall inform the prospective purchaser:

     (a) That the agent is acting as a life insurance

agent; and

     (b) Of the full name of the insurance company which

the agent is representing.

     2.  In sales situations in which an agent is

not involved, the insurer shall identify its full name.

     [Comm’r of Insurance, LH-7 § 7 subsec. B, eff. 2-6-80]

      NAC 688A.150  Use of certain professional designations; restriction on fees. (NRS 679B.130)  Terms

such as “financial planner,” “investment adviser,” “financial consultant” or

“financial counselor” must not be used in such a way as to imply that the

insurance agent is generally engaged in an advisory business in which

compensation is unrelated to sales, unless that is actually the case. This

section is not intended to preclude a person who is a financial planner, an

investment adviser, a financial consultant, a financial counselor or a member

of a recognized trade or professional organization from using such a

designation when selling an annuity, but a person who is a financial planner,

an investment adviser, a financial consultant, a financial counselor or a

member of a recognized trade or professional organization may not charge any

fees for his or her services that are in addition to those fees customarily

associated with the solicitation, negotiation or servicing of annuities.

     [Comm’r of Insurance, LH-7 § 7 subsec. C, eff. 2-6-80]—(NAC

A by R076-05, 2-23-2006)

      NAC 688A.160  Restrictions on presentations, literature and contract forms. (NRS 679B.130)

     1.  A presentation of benefits must not

display guaranteed and nonguaranteed benefits as a single sum unless guaranteed

benefits are shown separately in close proximity thereto and with equal

prominence.

     2.  Sales promotion literature and contract

forms must not state or imply that annuity contracts or deposit funds are the

same as savings accounts or deposits in banking or savings institutions. The

use of passbooks which resemble savings bank passbooks is prohibited.

     3.  Any reference to dividends or to excess

interest credits must include a statement that the dividends or credits are not

guaranteed.

     [Comm’r of Insurance, LH-7 § 7 subsecs. D, E & F,

eff. 2-6-80]

      NAC 688A.170  Maintenance of records. (NRS 679B.130)  Each

insurer shall maintain, at its home office or principal office, a complete file

containing one copy of each document authorized by the insurer for use pursuant

to NAC 688A.110 to 688A.180,

inclusive. The file must contain one copy of each authorized form for at least

3 years after its last authorized use.

     [Comm’r of Insurance, LH-7 § 7 subsec. A, eff. 2-6-80]

      NAC 688A.180  Effect of failure to provide contract summary. (NRS 679B.130)  Failure

of an insurer to provide or deliver a contract summary as provided in NAC 688A.120 is an omission which misrepresents the

benefits, advantages, conditions or terms of an annuity contract or of an

insurance policy.

     [Comm’r of Insurance, LH-7 § 8, eff. 2-6-80]

MINIMUM NONFORFEITURE AMOUNTS FOR DEFERRED ANNUITIES

      NAC 688A.200  Rate of interest for determination. (NRS 679B.130, 688A.363)

     1.  Except as otherwise provided in subsection

2, for the purposes of NRS

688A.363, the rate of interest used to determine the minimum nonforfeiture

amount must be an annual rate of interest determined as the lesser of:

     (a) The statutorily provided rate of 3 percent per

annum; or

     (b) A rate equal to 125 basis points less than the

5-Year Treasury Constant Maturity Rate as reported by the Federal Reserve

rounded to the nearest 0.05 of a percent:

          (1) If a date is specified in a contract for

the determination of the interest rate, on the date specified in the contract;

or

          (2) If a period is specified in a contract for

the determination of the interest rate, the average rate for the period

specified in the contract.

     2.  A deferred annuity contract that provides

for the substantive participation in an equity indexed benefit may provide that

the rate calculated pursuant to paragraph (b) of subsection 1 may be reduced by

up to an additional 100 basis points. The amount of an additional reduction to

the interest rate must not exceed the value of the equity indexed benefit. The

Commissioner may require an insurer to substantiate that the additional

reduction to the interest rate does not exceed the value of the equity indexed

benefit. If the Commissioner finds that the additional reduction to the

interest rate exceeds the value of the equity indexed benefit, the Commissioner

may disallow or limit the amount of the additional reduction.

     3.  If the rate calculated pursuant to

paragraph (b) of subsection 1 or subsection 2 is less than 1 percent per annum,

the interest rate used to determine the minimum nonforfeiture amount must be 1

percent per annum.

     4.  For the purposes of subparagraphs (1) and

(2) of paragraph (b) of subsection 1, the date or period specified in a

contract for the determination of the 5-Year Treasury Constant Maturity Rate

shall be a date or period between the effective date of the interest rate and

15 months prior to the effective date of the interest rate.

     5.  Except as otherwise provided in

subsection 4, the interest rate calculated pursuant to NRS 688A.363 and this section

must apply for the term of the deferred annuity contract.

     6.  A deferred annuity contract may provide

for a redetermination of the interest rate used to determine the minimum

nonforfeiture amount. Any redetermination of the interest rate must be made

pursuant to subsections 1 and 2. If the deferred annuity contract provides that

the interest rate used to determine the minimum nonforfeiture amount will be

redetermined, the contract shall set forth:

     (a) The dates upon which a redetermination will be

made;

     (b) The periods for which a redetermined rate will

apply; and

     (c) The method that will be used for a

redetermination.

     7.  As used in this section, “basis point”

means one-hundredth of 1 percent of yield.

     (Added to NAC by Comm’r of Insurance by R130-03, eff.

11-24-2003)

      NAC 688A.210  Actuarial certification for certain forms. (NRS 679B.130, 688A.363)  In

addition to any other requirement for the approval of a form pursuant to NRS 679B.120, an insurer filing

forms for approval that incorporate the provisions of NRS 688A.363 must file an

actuarial certification that the form complies with the provisions of NAC 688A.200.

     (Added to NAC by Comm’r of Insurance by R130-03, eff.

11-24-2003)

MULTIPLE POLICIES OF LIFE INSURANCE

      NAC 688A.250  Written standards for processing claims; records substantiating

compliance. (NRS

679B.130, 679B.137)

     1.  Each insurer issuing a policy of life

insurance shall adopt a written standard for processing a claim for a benefit

under a policy of life insurance that provides for the search of all policies

issued by the insurer for other policies covering the life of the same person.

     2.  The written standard must provide that

the insurer shall:

     (a) Ask the person submitting a claim for a benefit

under a policy of life insurance for any other names by which the person

covered under the policy was known; and

     (b) Search all policies issued by the insurer to

determine whether the insured was covered under a policy issued by the insurer

under another name.

     3.  The insurer shall maintain records

substantiating compliance with the standard for processing a claim for a

benefit under a policy of life insurance adopted pursuant to subsection 1.

     (Added to NAC by Comm’r of Insurance by R177-03, eff.

12-16-2003)

      NAC 688A.260  Processing of claims: Search for and action on additional

policies issued by insurer on life of decedent. (NRS 679B.130)

     1.  Upon the submission of a claim for a

benefit under a policy of life insurance, the insurer issuing the policy shall

conduct a search pursuant to the standard adopted pursuant to NAC 688A.250 of all the policies issued by the

insurer to determine if any other policy issued by the insurer provides

coverage on the life of the decedent.

     2.  If the person filing a claim provides

information identifying other names by which the insured may have been known,

the insurer shall search all the policies issued by the insurer to determine if

the insured was covered by another policy under a different name.

     3.  If the insurer determines that it has

issued another policy on the life of the insured, the insurer shall:

     (a) Notify the policy owner and beneficiaries of

the discovery of the policy; and

     (b) Within 6 months after discovering the policy,

determine whether the insurer has liability to pay a claim on the policy.

     (Added to NAC by Comm’r of Insurance by R177-03, eff.

12-16-2003)

POLICIES OF SMALL FACE AMOUNT

      NAC 688A.300  Requirements for disclosure. (NRS 679B.130)

     1.  Except as otherwise provided in

subsection 7, if at any time during the term of a policy of small face amount

the total premiums paid for the policy may exceed the face amount of the

policy, the insurer that delivers or issues for delivery the policy of small

face amount shall provide the disclosure set forth in subsection 6.

     2.  The insurer shall provide the disclosure

required pursuant to subsection 1 to the owner of the policy of small face

amount or the holder of a certificate on the policy of small face amount before

or at the time the policy or certificate is delivered.

     3.  The disclosure required pursuant to

subsection 1 must not be attached to the policy of small face amount, but may

be delivered with the policy.

     4.  If the total premiums paid for a policy

of small face amount may exceed the face amount of the policy for only certain

demographics or certain benefit combinations, the insurer shall provide the

disclosure required pursuant to subsection 1:

     (a) In any circumstance in which the total premiums

paid for the policy may exceed the face amount of the policy; or

     (b) In all circumstances.

     5.  An insurer and any agent of the insurer

providing the disclosure required pursuant to subsection 1 shall promptly

provide assistance to an insured who has questions relating to the disclosure.

     6.  The disclosure required pursuant to

subsection 1 must be in substantially the following form:

 

IMPORTANT

INFORMATION ABOUT YOUR POLICY

 

     The premiums that you will pay

for your policy may exceed the amount of your coverage (the face amount). You

can find both the face amount and the annual premium for your policy. Look for

the page labeled [Use the label the insurer uses on the page containing that

information, for example, “Statement of Policy Cost and Benefit Information.”].

     Usually, you can calculate how

many years it will take before the premiums paid will be greater than the face

amount. For an estimate, divide the face amount by the annual premium. Several

factors may affect how many years this might take for your policy. These

factors include not paying premiums when due, taking out a loan on the policy,

surrendering your policy for cash, riders on your policy, changes in the face

amount and the payment of dividends, if applicable.

     Many factors will affect how

much your life insurance costs. Some are your age and health, the face amount

of the policy and the cost of a policy rider. You may be able to pay less for

your life insurance if you answer health questions. You may also pay less if

you pay your premium less often.

     Ask your insurance agent or your

insurance company if you have any questions about your premium, your coverage

or anything else about your policy.

 

If

You Change Your Mind . . .

 

     You can get a full refund of

premiums you have paid if you return your policy and cancel your coverage. You

must do this within the number of days stated on the front page of your policy.

To return your policy for a full refund, send it back to the agent or the

company.

     If you stop paying premiums or cancel

your policy after the time that a full refund is available, you have specific

rights. Ask your insurance agent or your insurance company about your rights.

 

Contact

Information

 

     If you have questions about your

insurance policy, ask your agent or your insurance company. If your agent is

not available, contact your insurance company at [provide telephone number

(including toll-free number, if available), address and website (if

available)].

 

     7.  The provisions of this section do not

apply to:

     (a) A policy of variable life insurance.

     (b) An annuity contract.

     (c) A policy of life insurance in which an

illustration was provided that meets the requirements of NAC 686A.460 to 686A.479, inclusive.

     (d) An individual policy of life insurance issued

to the members of a group of employees or another authorized group of persons

if:

          (1) Every plan of coverage was selected by the

employer or group representative;

          (2) A portion of the premium is paid by the

group or through payroll deduction; and

          (3) Group underwriting or simplified

underwriting is used.

     8.  As used in this section, “policy of small

face amount” means a policy of life insurance with an initial face amount of

$15,000 or less.

     (Added to NAC by Comm’r of Insurance by R178-03, 5-21-2004,

eff. 7-1-2004)

REVISER’S NOTE.

      The regulation of the Commissioner of Insurance filed

with the Secretary of State on May 21, 2004, and effective on July 1, 2004 (LCB

File No. R178-03), the source of this section (section 1 of the regulation),

contains the following provisions not included in NAC:

      “The amendatory provisions of section 1 of this

regulation [NAC 688A.300] apply to a policy of

small face amount delivered or issued for delivery on or after July 1, 2004. As

used in this subsection, “policy of small face amount” has the meaning ascribed

to it in section 1 of this regulation [NAC 688A.300].”

 

STANDARDS OF VALUATION

Determination of Minimum Reserve Liabilities

      NAC 688A.320  Definitions. (NRS 679B.130, 681B.120, 688A.325)  As used

in NAC 688A.320 to 688A.363,

inclusive, unless the context otherwise requires, the words and terms defined

in NAC 688A.325, 688A.327

and 688A.330 have the meanings ascribed to them in

those sections.

     (Added to NAC by Comm’r of Insurance by R031-08, eff. 8-26-2008)

      NAC 688A.325  “2001 CSO Mortality Table” defined. (NRS 679B.130, 681B.120, 688A.325)

     1.  “2001 CSO Mortality Table” means

the mortality table, consisting of separate rates of mortality for male and

female lives, developed by the CSO Task Force of the American Academy of

Actuaries from the 2001 Valuation Basic Mortality Table developed by the

Individual Life Insurance Valuation Mortality Task Force of the Society of

Actuaries and adopted by the National Association of Insurance Commissioners in

December 2002. The 2001 CSO Mortality Table is set forth in the Proceedings

of the NAIC (2nd Quarter 2002) and supplemented by the 2001 CSO

Preferred Class Structure Mortality Table.

     2.  Unless the context otherwise requires,

the 2001 CSO Mortality Table includes both the ultimate form of that

table and the select and ultimate form of that table, both the smoker and

nonsmoker mortality tables and the composite mortality tables. It also includes

both the age-nearest-birthday and age-last-birthday bases of the mortality

tables. The mortality tables in the 2001 CSO Mortality Table include:

     (a) A table which consists of the rates of

mortality for female lives from the 2001 CSO Mortality Table;

     (b) A table which consists of the rates of

mortality for male lives from the 2001 CSO Mortality Table;

     (c) Composite mortality tables, which consist of

rates of mortality that do not distinguish between smokers and nonsmokers; and

     (d) Smoker and nonsmoker mortality tables, which

consist of separate rates of mortality for smokers and nonsmokers.

     3.  A copy of the 2001 CSO Mortality Table

may be obtained from the Insurance Products and Services Division of the

National Association of Insurance Commissioners, 2301 McGee Street, Suite 800,

Kansas City, Missouri 64108-2662, by telephone at (816) 783-8300 or on the

Internet at http://www.naic.org/store_home.htm, for the price of $180.

     (Added to NAC by Comm’r of Insurance by R031-08, eff. 8-26-2008)

      NAC 688A.327  “2001 CSO Preferred Class Structure Mortality Table”

defined. (NRS 679B.130, 681B.120, 688A.325)

     1.  “2001 CSO Preferred Class Structure

Mortality Table” means the mortality table with separate rates of mortality

for super preferred nonsmokers, preferred nonsmokers, residual standard

nonsmokers, preferred smokers and residual standard smokers which are splits of

the 2001 CSO nonsmoker and smoker mortality tables as adopted by the National

Association of Insurance Commissioners at the September 2006 national meeting

and published in the Proceedings of the NAIC (3rd Quarter 2006).

     2.  Unless the context otherwise requires,

the 2001 CSO Preferred Class Structure Mortality Table includes both the

ultimate form of that table and the select and ultimate form of that table,

both the smoker and nonsmoker mortality tables, both the male and female

mortality tables and the gender composite mortality tables. It also includes

both the age-nearest-birthday and age-last-birthday bases of the mortality

table.

     3.  A copy of the 2001 CSO Preferred Class

Structure Mortality Table may be obtained from the Insurance Products and

Services Division of the National Association of Insurance Commissioners, 2301

McGee Street, Suite 800, Kansas City, Missouri 64108-2662, by telephone at

(816) 783-8300 or on the Internet at http://www.naic.org/store_home.htm,

for the price of $200.

     (Added to NAC by Comm’r of Insurance by R031-08, eff. 8-26-2008)

      NAC 688A.330  “CSO” defined. (NRS

679B.130, 681B.120, 688A.325)  “CSO”

means Commissioners Standard Ordinary.

     (Added to NAC by Comm’r of Insurance by R031-08, eff. 8-26-2008)

      NAC 688A.350  Adoption by reference of Recognition of the 2001 CSO Mortality

Table for Use in Determining Minimum Reserve Liabilities and Nonforfeiture

Benefits Model Regulation. (NRS

679B.130, 681B.120, 688A.325)

     1.  For the purposes of NRS 681B.120 and 688A.325 and NAC 681B.161 and 688A.320

to 688A.363, inclusive, and except as otherwise

provided in this section, the Commissioner hereby adopts by reference the Recognition

of the 2001 CSO Mortality Table for Use in Determining Minimum Reserve

Liabilities and Nonforfeiture Benefits Model Regulation as adopted by the

National Association of Insurance Commissioners on December 8, 2002.

     2.  Any reference in the Model Regulation

to:

     (a) “Section 4A(c) of the Standard Valuation Law”

shall be deemed a reference to “subparagraph (3) of paragraph (a) of subsection

2 of NRS 681B.120.”

     (b) “Section 5cH(6) of the Standard Nonforfeiture

Law for Life Insurance” shall be deemed a reference to “paragraph (f) of

subsection 8 of NRS 688A.325.”

     (c) The “Valuation of Life Insurance Policies Model

Regulation” or “Valuation of Life Insurance Model Regulation” shall be deemed a

reference to “NAC 681B.161.”

     (d) “Section 8 of the NAIC Model Standard Valuation

Law” shall be deemed a reference to “NRS 681B.150.”

     (e) “Section 5A of the Actuarial Opinion and

Memorandum Regulation” shall be deemed a reference to “NAC 681B.175.”

     (f) An “unfair trade practices statute” shall be

deemed a reference to “NRS

686A.100.”

     3.  A copy of the Recognition of the 2001

CSO Mortality Table for Use in Determining Minimum Reserve Liabilities and

Nonforfeiture Benefits Model Regulation may be obtained from the Insurance

Products and Services Division of the National Association of Insurance

Commissioners, 2301 McGee Street, Suite 800, Kansas City, Missouri 64108-2662,

for the price of $50, and is available, free of charge, on the Internet at www.naic.org.

     (Added to NAC by Comm’r of Insurance by R113-04, 11-24-2004,

eff. 1-1-2005; A by R031-08, 8-26-2008)

      NAC 688A.353  Policies issued on or after January 1, 2008. (NRS 679B.130, 681B.120, 688A.325)

     1.  Except as otherwise provided in

subsection 2, at the election of the insurer, for each calendar year of issue

and for any one or more specified plans of insurance, an insurer who satisfies

the requirements of NAC 688A.355 to 688A.363, inclusive, may use the 2001 CSO

Preferred Class Structure Mortality Table in lieu of the smoker and

nonsmoker mortality tables in the 2001 CSO Mortality Table as the

minimum valuation standard for policies of life insurance issued on or after

January 1, 2008.

     2.  An insurer may make the election

described in subsection 1 only if the insurer provides proof satisfactory to

the Commissioner that 20 percent or more of the business to be valued pursuant

to the 2001 CSO Preferred Class Structure Mortality Table is in one or

more of the preferred classes.

     3.  A mortality table used pursuant to this

section shall be deemed to be part of the 2001 CSO Mortality Table only

for purposes of reserve valuation pursuant to the Recognition of the 2001

CSO Mortality Table for Use in Determining Minimum Reserve Liabilities and

Nonforfeiture Benefits Model Regulation adopted by reference pursuant to NAC 688A.350.

     (Added to NAC by Comm’r of Insurance by R031-08, eff. 8-26-2008)

      NAC 688A.355  Plans with separate rates for preferred and standard nonsmoker

lives; certification by appointed actuary. (NRS

679B.130, 681B.120, 688A.325)  For each

plan of insurance with separate rates for preferred and standard nonsmoker

lives, an insurer may use the super preferred nonsmoker, preferred nonsmoker

and residual standard nonsmoker tables in the 2001 CSO Preferred Class

Structure Mortality Table in lieu of the nonsmoker mortality table in the 2001

CSO Mortality Table to determine minimum reserves. On the valuation date on

which the insurer first uses the tables in the 2001 CSO Preferred Class

Structure Mortality Table to determine minimum reserves, and annually

thereafter, except for business valued under the residual standard nonsmoker

table, the appointed actuary must certify that:

     1.  The present value of death benefits over

the 10-year period immediately following the valuation date, using the

anticipated mortality experience without recognition of mortality improvement

beyond the valuation date for each class, is less than the present value of

death benefits using the valuation basic table corresponding to the valuation

table being used for that class; and

     2.  The present value of death benefits over

the future life of the contracts, using anticipated mortality experience

without recognition of mortality improvement beyond the valuation date for each

class, is less than the present value of death benefits using the valuation

basic table corresponding to the valuation table being used for that class.

     (Added to NAC by Comm’r of Insurance by R031-08, eff. 8-26-2008)

      NAC 688A.357  Plans with separate rates for preferred and standard smoker

lives; certification by appointed actuary. (NRS

679B.130, 681B.120, 688A.325)  For each

plan of insurance with separate rates for preferred and standard smoker lives,

an insurer may use the preferred smoker and residual standard smoker tables in

the 2001 CSO Preferred Class Structure Mortality Table in lieu of the

smoker mortality table in the 2001 CSO Mortality Table to determine

minimum reserves. On the valuation date on which the insurer first uses the

tables in the 2001 CSO Preferred Class Structure Mortality Table to

determine minimum reserves, and annually thereafter, for business valued under

the preferred smoker table, the appointed actuary must certify that:

     1.  The present value of death benefits over

the 10-year period immediately following the valuation date, using the

anticipated mortality experience without recognition of mortality improvement

beyond the valuation date for each class, is less than the present value of

death benefits using the preferred smoker valuation basic table corresponding

to the valuation table being used for that class; and

     2.  The present value of death benefits over

the future life of the contracts, using anticipated mortality experience

without recognition of mortality improvement beyond the valuation date for each

class, is less than the present value of death benefits using the preferred

smoker valuation basic table.

     (Added to NAC by Comm’r of Insurance by R031-08, eff. 8-26-2008)

      NAC 688A.360  Notice to Commissioner. (NRS

679B.130, 681B.120, 688A.325)

     1.  An insurer shall provide written notice

to the Commissioner and the Life and Health Section of the Division of the

intent of the insurer to use the 2001 CSO Preferred Class Structure

Mortality Table to determine minimum reserves not later than 90 days before

the first use by the insurer of the 2001 CSO Preferred Class Structure

Mortality Table.

     2.  The notice required by subsection 1 must

include, without limitation, the date of valuation from which the insurer will

use the 2001 CSO Preferred Class Structure Mortality Table and any

additional information that the Commissioner determines is necessary.

     (Added to NAC by Comm’r of Insurance by R031-08, eff. 8-26-2008)

      NAC 688A.363  Communications and disclosures. (NRS

679B.130, 681B.120, 688A.325)  An

insurer who uses the 2001 CSO Preferred Class Structure Table to

determine minimum reserves shall make the communications and disclosures

required pursuant to Actuarial Guideline XLII which is set forth in the Accounting

Practices and Procedures Manual adopted by the National Association of

Insurance Commissioners and effective on January 1, 2001, and as amended by the

National Association of Insurance Commissioners after that date. The

communications and disclosures are required commencing on the first valuation

date that the 2001 CSO Preferred Class Structure Table is used for any

plan of insurance of the insurer, and annually thereafter.

     (Added to NAC by Comm’r of Insurance by R031-08, eff. 8-26-2008)

Preneed Insurance

      NAC 688A.370  Definitions. (NRS 679B.130, 689.720)  As used

in NAC 688A.370 to 688A.390,

inclusive, unless the context otherwise requires, the words and terms defined

in NAC 688A.373 to 688A.385,

inclusive, have the meanings ascribed to them in those sections.

     (Added to NAC by Comm’r of Insurance by R166-08, 9-18-2008,

eff. 1-1-2009)

      NAC 688A.373  “2001 CSO Mortality Table” defined. (NRS 679B.130, 689.720)

     1.  “2001 CSO Mortality Table” means

the mortality table, consisting of separate rates of mortality for male and

female lives, developed by the CSO Task Force of the American Academy of

Actuaries from the 2001 Valuation Basic Mortality Table developed by the

Individual Life Insurance Valuation Mortality Task Force of the Society of

Actuaries and adopted by the National Association of Insurance Commissioners in

December 2002. The 2001 CSO Mortality Table is set forth in the Proceedings

of the NAIC (2nd Quarter 2002) and supplemented by the 2001 CSO

Preferred Class Structure Mortality Table.

     2.  Unless the context otherwise requires,

the 2001 CSO Mortality Table includes both the ultimate form of that

table and the select and ultimate form of that table, both the smoker and

nonsmoker mortality tables and the composite mortality tables. It also includes

both the age-nearest-birthday and age-last-birthday bases of the mortality

tables. The mortality tables in the 2001 CSO Mortality Table include:

     (a) A table which consists of the rates of

mortality for female lives from the 2001 CSO Mortality Table;

     (b) A table which consists of the rates of mortality

for male lives from the 2001 CSO Mortality Table;

     (c) Composite mortality tables, which consist of

rates of mortality that do not distinguish between smokers and nonsmokers; and

     (d) Smoker and nonsmoker mortality tables, which

consist of separate rates of mortality for smokers and nonsmokers.

     3.  A copy of the 2001 CSO Mortality Table

may be obtained from the Insurance Products and Services Division of the

National Association of Insurance Commissioners, 2301 McGee Street, Suite 800,

Kansas City, Missouri 64108-2662, by telephone at (816) 783-8300 or on the

Internet at http://www.naic.org/store_home.htm, for the price of $180.

     (Added to NAC by Comm’r of Insurance by R166-08, 9-18-2008,

eff. 1-1-2009)

      NAC 688A.375  “CSO” defined. (NRS

679B.130, 689.720)  “CSO”

means Commissioners Standard Ordinary.

     (Added to NAC by Comm’r of Insurance by R166-08, 9-18-2008,

eff. 1-1-2009)

      NAC 688A.380  “Preneed insurance” defined. (NRS

679B.130, 689.720)  “Preneed

insurance” means a policy or contract of life insurance which is approved by

the Commissioner as preneed insurance and used solely to fund a prepaid

contract.

     (Added to NAC by Comm’r of Insurance by R166-08, 9-18-2008,

eff. 1-1-2009)

      NAC 688A.383  “Prepaid contract” defined. (NRS

679B.130, 689.720)  “Prepaid

contract” has the meaning ascribed to it in NRS 689.475.

     (Added to NAC by Comm’r of Insurance by R166-08, 9-18-2008,

eff. 1-1-2009)

      NAC 688A.385  “Ultimate 1980 CSO Mortality Table” defined. (NRS 679B.130, 689.720)  “Ultimate

1980 CSO Mortality Table” means the 1980 CSO Mortality Table,

without the Ten-Year Select Mortality Factors, incorporated into the 1980

amendments to the Standard Valuation Law approved by the National Association

of Insurance Commissioners in December 1983. A copy of the Ultimate 1980 CSO

Mortality Table may be obtained from the Research Library of the National

Association of Insurance Commissioners, 2301 McGee Street, Suite 800, Kansas City,

Missouri 64108-2662 or by telephone at (816) 783-8250, for the price of $10,

plus $1 per page.

     (Added to NAC by Comm’r of Insurance by R166-08, 9-18-2008,

eff. 1-1-2009)

      NAC 688A.387  Calculation of reserve liabilities and nonforfeiture values. (NRS 679B.130, 689.720)  Except

as otherwise provided in NAC 688A.390, for preneed

insurance:

     1.  The minimum mortality standard for

determining reserve liabilities and nonforfeiture values for both male and

female insureds must be determined based on the Ultimate 1980 CSO Mortality

Table;

     2.  The standard for the minimum valuation of

reserves must be calculated pursuant to the provisions of NRS 681B.110 to 681B.150, inclusive; and

     3.  The standard for the minimum

nonforfeiture values must be calculated pursuant to the provisions of NRS 688A.290 to 688A.360, inclusive.

     (Added to NAC by Comm’r of Insurance by R166-08, 9-18-2008,

eff. 1-1-2009)

      NAC 688A.390  Policies issued on or after January 1, 2009, but before January

1, 2012. (NRS 679B.130, 689.720)

     1.  For preneed insurance issued on or after

January 1, 2009, but before January 1, 2012, an insurer may elect to use the 2001

CSO Mortality Table to determine the minimum mortality standard for

determining reserve liabilities and nonforfeiture values for both male and

female insureds.

     2.  If an insurer elects to use the 2001

CSO Mortality Table to determine the minimum standards for reserve

liabilities and nonforfeiture values, the insurer shall provide to the

Commissioner, as part of the actuarial opinion memorandum submitted annually in

support of the insurer’s asset adequacy testing, a written notification which

must include, without limitation:

     (a) A complete list of all preneed insurance policy

forms for which the insurer uses the 2001 CSO Mortality Table to

determine the minimum standards for reserve liabilities and nonforfeiture

values;

     (b) A certification signed by the appointed actuary

which states that the reserve methodology used by the insurer to determine

reserves for preneed insurance for which the insurer uses the 2001 CSO

Mortality Table to determine the minimum standards for reserve liabilities

develops adequate reserves; and

     (c) Any other relevant information concerning the

adequacy of the reserves as may be determined by the Commissioner.

     3.  For the purposes of the certification

required by paragraph (b) of subsection 2, policies of preneed insurance for

which the insurer elects to use the 2001 CSO Mortality Table to

determine the minimum standards for reserve liabilities and nonforfeiture

values may not be aggregated with any other policies of insurance.

     (Added to NAC by Comm’r of Insurance by R166-08, 9-18-2008,

eff. 1-1-2009)

PURCHASE OR EXCHANGE OF ANNUITIES

      NAC 688A.400  Definitions. (NRS 679B.130)  As used

in NAC 688A.400 to 688A.475,

inclusive, unless the context otherwise requires, the words and terms defined

in NAC 688A.405 to 688A.445,

inclusive, have the meanings ascribed to them in those sections.

     (Added to NAC by Comm’r of Insurance by R076-05, eff. 2-23-2006)

      NAC 688A.405  “Annuity” defined. (NRS 679B.130)  “Annuity”

has the meaning ascribed to it in NRS

688A.020.

     (Added to NAC by Comm’r of Insurance by R076-05, eff. 2-23-2006)

      NAC 688A.410  “Buyer’s guide” defined. (NRS 679B.130)  “Buyer’s

guide” means a current guide relating to annuities that is published by the

National Association of Insurance Commissioners for use by consumers.

     (Added to NAC by Comm’r of Insurance by R076-05, eff. 2-23-2006)

      NAC 688A.415  “Determinable elements” defined.

(NRS 679B.130)  “Determinable

elements” means the elements under an annuity that are guaranteed at the time

the annuity is issued, but the values of which cannot be determined until after

the annuity is issued. A determinable element is calculated using other

determinable elements or a combination of determinable elements and guaranteed

elements. The term includes, without limitation, premiums, benefits, values,

noninterest-based credits, credited interest rates, bonuses and charges.

     (Added to NAC by Comm’r of Insurance by R076-05, eff. 2-23-2006)

      NAC 688A.420  “Generic name” defined. (NRS 679B.130)  “Generic

name” means a term that is descriptive of an annuity, including, without

limitation, the term “single premium deferred annuity.”

     (Added to NAC by Comm’r of Insurance by R076-05, eff. 2-23-2006)

      NAC 688A.425  “Guaranteed elements” defined. (NRS 679B.130)  “Guaranteed

elements” means the premiums, benefits, values, credits or charges under an

annuity that are guaranteed and determined at the time the annuity is issued.

     (Added to NAC by Comm’r of Insurance by R076-05, eff. 2-23-2006)

      NAC 688A.430  “Insurer” defined. (NRS 679B.130)  “Insurer”

has the meaning ascribed to it in NRS

679A.100.

     (Added to NAC by Comm’r of Insurance by R076-05, eff. 2-23-2006)

      NAC 688A.435  “Nonguaranteed elements” defined.

(NRS 679B.130)  “Nonguaranteed

elements” means the elements under an annuity the values of which are not

guaranteed at the time that the annuity is issued. The term includes, without

limitation, premiums, benefits, values, noninterest-based credits, credited

interested rates, bonuses and charges.

     (Added to NAC by Comm’r of Insurance by R076-05, eff. 2-23-2006;

A by R115-06, 9-18-2006)

REVISER’S NOTE.

      The regulation of the Commissioner of Insurance filed

with the Secretary of State on September 18, 2006 (LCB File No. R115-06), which

amended this section, contains the following provision not included in NAC:

      “An insurer or provider of insurance is not required

to comply with the provisions of this regulation until December 17, 2006.”

 

      NAC 688A.440  “Producer of insurance” defined.

(NRS 679B.130)  “Producer

of insurance” has the meaning ascribed to it in NRS 679A.117.

     (Added to NAC by Comm’r of Insurance by R076-05, eff. 2-23-2006)

      NAC 688A.445  “Recommendation” defined. (NRS 679B.130)  “Recommendation”

means advice provided by an insurer or a producer of insurance to a prospective

purchaser of an annuity concerning the purchase or exchange of one or more

annuities that results in the purchase or exchange of an annuity in accordance

with the advice provided by the insurer or producer of insurance.

     (Added to NAC by Comm’r of Insurance by R076-05, eff. 2-23-2006;

A by R115-06, 9-18-2006)

REVISER’S NOTE.

      The regulation of the Commissioner of Insurance filed

with the Secretary of State on September 18, 2006 (LCB File No. R115-06), which

amended this section, contains the following provision not included in NAC:

      “An insurer or provider of insurance is not required

to comply with the provisions of this regulation until December 17, 2006.”

 

      NAC 688A.450  Applicability of provisions. (NRS 679B.130)

     1.  Except as otherwise provided in

subsections 2 and 3, NAC 688A.400 to 688A.475, inclusive, apply to:

     (a) Any solicitation, negotiation or procurement of

annuities occurring within this State;

     (b) Any issuer of annuities, including, without

limitation, fraternal benefit societies; and

     (c) Individual deferred annuities.

     2.  NAC 688A.400

to 688A.475, inclusive, do not apply to:

     (a) Annuities used to pay for:

          (1) An employee pension or welfare benefit

plan that is covered by the Employee Retirement and Income Security Act of

1974, 29 U.S.C. §§ 1001 et seq.

          (2) A plan established or maintained by an

employer and authorized by 26 U.S.C. § 401(a), 401(k), 403(b), 408(k) or

408(p).

          (3) A governmental plan, as defined in 26

U.S.C. § 414(d).

          (4) A church plan, as defined in 26 U.S.C. §

414(e).

          (5) A government or church welfare benefit

plan.

          (6) A deferred compensation plan of a state or

local government or a tax exempt organization authorized by 26 U.S.C. § 457.

          (7) A nonqualified deferred compensation

arrangement.

          (8) A settlement or an assumption of

liabilities associated with litigation or any other process for dispute

resolution related to a claim for compensation for personal injury.

          (9) A prepaid funeral contract.

          (10) A structured settlement annuity.

          (11) A funding agreement.

     (b) Immediate annuity contracts that do not contain

any nonguaranteed elements.

     (c) Annuities purchased from an insurer in response

to a direct-response solicitation and where the purchase was not based on a

recommendation from the insurer.

     3.  Notwithstanding the provisions of

subsection 2, NAC 688A.400 to 688A.475, inclusive, apply to any annuity that is

used to pay for a plan or arrangement which is paid for solely by contributions

made by an employee on a pretax or after-tax basis and where participants are

able to choose from among two or more fixed annuity providers.

     4.  As used in this section:

     (a) “Funding agreement” means an agreement under

which an insurer accepts and accumulates money for the purpose of making one or

more future payments to a person that are not based on mortality or morbidity

contingencies.

     (b) “Structured settlement annuity” means:

          (1) A qualified funding asset that meets the

requirements of section 130(d) of the Internal Revenue Code, 26 U.S.C. §

130(d); or

          (2) An annuity that meets the requirements to

be a qualified funding asset pursuant to section 130(d) of the Internal Revenue

Code, 26 U.S.C. § 130(d), except that the annuity is not owned by an assignee

under qualified assignment.

     (Added to NAC by Comm’r of Insurance by R076-05, eff. 2-23-2006)

      NAC 688A.455  Recommendations: Responsibilities of insurer or producer of

insurance; corrective action. (NRS 679B.130)

     1.  Except as otherwise provided in

subsection 2, before an insurer or a producer of insurance recommends to a

person the purchase of an annuity, or the exchange of an annuity that results

in the purchase or exchange of an annuity in accordance with the

recommendation, the insurer or producer of insurance must make reasonable

efforts to obtain:

     (a) The financial and tax status of the person;

     (b) The investment objectives of the person; and

     (c) Any other information that the insurer or

producer of insurance determines would be useful in making such a

recommendation.

     2.  Before an insurer or a producer of

insurance recommends to a person the purchase of a variable annuity, or the

exchange of a variable annuity that results in any additional insurance

transaction, the insurer or producer of insurance must make reasonable efforts

to obtain:

     (a) The information described in subsection 1; or

     (b) The information described in Conduct Rule 2310

of the National Association of Securities Dealers.

     3.  Except as otherwise provided in

subsection 4, if an insured is harmed financially because an insurer or a

producer of insurance failed to comply with subsection 1 or 2, the Commissioner

may require the insurer or producer of insurance to take corrective action.

     4.  An insurer or a producer of insurance is

not responsible for any financial damages incurred by an insured relating to

the purchase or exchange of an annuity that was recommended by the insurer or

producer of insurance if the insured:

     (a) Refused to provide to the insurer or producer

of insurance the information described in subsection 1 or 2;

     (b) Provided to the insurer or producer of

insurance information that was incomplete or inaccurate; or

     (c) Entered into an insurance transaction that was

not based on the recommendation of the insurer or producer of insurance.

     (Added to NAC by Comm’r of Insurance by R076-05, eff. 2-23-2006;

A by R115-06, 9-18-2006)

REVISER’S NOTE.

      The regulation of the Commissioner of Insurance filed

with the Secretary of State on September 18, 2006 (LCB File No. R115-06), which

amended this section, contains the following provision not included in NAC:

      “An insurer or provider of insurance is not required

to comply with the provisions of this regulation until December 17, 2006.”

 

      NAC 688A.460  Establishment and maintenance of system to supervise

recommendations. (NRS 679B.130)

     1.  An insurer shall provide for a system to

supervise recommendations which is reasonably designed to comply with the

provisions of this chapter and which is established and maintained pursuant to

subsections 3, 4 and 5. The system must include, without limitation, a process

for maintaining written procedures and a process for reviewing records which is

reasonably designed to detect and prevent violations of the provisions of this

chapter.

     2.  A producer of insurance shall provide for

a system to supervise recommendations which is reasonably designed to comply

with the provisions of this chapter and which is established and maintained

pursuant to subsections 3, 4 and 5. The system must include, without

limitation, a process for maintaining written procedures and a process for

reviewing records which is reasonably designed to detect and prevent violations

of the provisions of this chapter.

     3.  An insurer may contract with a third

party, including, without limitation, a producer of insurance, to establish and

maintain a system to supervise recommendations pursuant to the provisions of

subsection 1 with respect to producers of insurance under contract with or

employed by the third party.

     4.  An insurer shall make a reasonable

inquiry to ensure that a third party with whom the insurer contracts pursuant

to subsection 3 complies with the provisions of subsection 1 and shall take

reasonable action to enforce the contractual obligation to comply with the

provisions of subsection 1. An insurer may comply with its obligation to make a

reasonable inquiry by:

     (a) Obtaining a certification that the third party

is complying with the provisions of subsection 1 from a senior manager of the

third party who has responsibility for complying with the provisions of

subsection 1; and

     (b) Periodically reviewing the performance of the

third party to determine whether the third party is complying with the

provisions of subsection 1. The insurer shall use reasonable procedures in

conducting the review.

     5.  The provisions of subsections 1 and 2 do

not require an insurer or a producer of insurance to:

     (a) Review, or provide for the review of, all

solicited transactions of a producer of insurance; or

     (b) Include in its system to supervise

recommendations advice given to consumers by a producer of insurance concerning

products other than the annuities offered by the insurer or producer of

insurance.

     6.  A producer of insurance contracting with

an insurer pursuant to subsection 3, when requested by an insurer pursuant to

subsection 4, shall provide to the insurer a certification as described in

subsection 4 or a clear statement that the producer of insurance is unable to

meet the criteria for certification within 10 days after the producer of

insurance receives the request from the insurer.

     7.  A person may not provide a certification

pursuant to paragraph (a) of subsection 4 unless:

     (a) The person is a senior manager with

responsibility for complying with the provisions of subsection 1; and

     (b) The person has a reasonable basis for making

the certification.

     8.  Compliance with Conduct Rule 2310 of the

National Association of Securities Dealers pertaining to suitability satisfies

the requirements of this section for the recommendation of variable annuities.

     9.  An insurer that contracts with a third

party pursuant to subsection 3 and that complies with the requirements set

forth in subsection 4 shall be deemed to have complied with the provisions of

subsection 1.

     (Added to NAC by Comm’r of Insurance by R115-06, eff. 9-18-2006)

REVISER’S NOTE.

      The regulation of the Commissioner of Insurance filed

with the Secretary of State on September 18, 2006 (LCB File No. R115-06), the

source of this section, contains the following provision not included in NAC:

      “An insurer or provider of insurance is not required

to comply with the provisions of this regulation until December 17, 2006.”

 

      NAC 688A.465  Maintenance and availability of records or information regarding

purchaser of recommended annuity. (NRS 679B.130, 679B.137)

     1.  If a person purchases an annuity that was

recommended to him or her by an insurer or producer of insurance, the insurer

or producer of insurance that made the recommendation shall:

     (a) Maintain all records or information that it

obtained from the person for making the recommendation for at least 7 years

after the date on which the annuity was purchased; and

     (b) Make the records or information described in

paragraph (a) available to the Commissioner, upon request, during that period.

     2.  The records and information that are

described in subsection 1 may be maintained by an insurer or producer of

insurance on paper, on photographic, microprocessed, magnetic, mechanical or

electronic media or by any other process that accurately maintains the records

and information.

     (Added to NAC by Comm’r of Insurance by R076-05, eff. 2-23-2006)

      NAC 688A.470  Provision of buyer’s guide and disclosure statement to applicant

for annuity. (NRS

679B.130)

     1.  Except as otherwise provided in

subsection 3, an insurer or a producer of insurance shall provide a buyer’s

guide and a disclosure statement to each applicant for an annuity:

     (a) If the application for an annuity is submitted

in person to the insurer or producer of insurance, at the time that the

application is submitted.

     (b) If the application for an annuity is not

submitted in person to the insurer or producer of insurance, not later than 5

business days after the application is received by the insurer or producer of

insurance.

     2.  The disclosure statement required by

subsection 1 must be written in plain language and include, without limitation:

     (a) A brief description of the annuity, including,

without limitation, a statement that the contract is an annuity, an explanation

of the long-term nature of an annuity, the generic name of the annuity and the

product name for the annuity that is used by the insurer or producer of

insurance;

     (b) The name, address and telephone number,

including a toll-free number, if available, of the insurer or producer of

insurance;

     (c) A brief description of any determinable

elements, the guaranteed elements and the nonguaranteed elements, an

explanation of the method by which the determinable elements, guaranteed

elements and nonguaranteed elements will be calculated and an explanation of

the impact that the nonguaranteed elements may have on the benefits and values

of the annuity;

     (d) The crediting rate, any bonus or introductory

portion of the crediting rate, the duration of the crediting rate and a

disclosure that the crediting rate may change in value during the life of the

annuity;

     (e) Periodic income options, regardless of whether

the options are guaranteed or nonguaranteed;

     (f) An explanation of any reduction in the value of

the annuity that would be caused by a withdrawal of money from the annuity or

the surrender of the annuity by the owner of the annuity;

     (g) An explanation of any method by which the

values of the annuity can be accessed by the owner of the annuity;

     (h) The value of any death benefit paid by the

annuity and an explanation of the method by which the death benefit is

calculated;

     (i) An explanation of any effect that the annuity

will have upon the tax status of the owner of the annuity and any tax penalties

that may result upon any withdrawal of money from the annuity;

     (j) An explanation of any rider to the annuity,

including, without limitation, a rider that contains long-term care benefits;

     (k) The amount of and an explanation of any charges

and fees associated with the annuity, including, without limitation, a premium

tax;

     (l) The amount of the current guaranteed interest

rates of the annuity and an explanation that the interest rates are not

guaranteed for any other annuities that may be purchased in the future by the

owner of the annuity;

     (m) An explanation of the method by which the owner

of the annuity may terminate the annuity and any penalties that may occur as a

result of the termination;

     (n) The date on which the owner of the annuity will

begin to receive benefits from the annuity and the date on which the payment of

those benefits will cease; and

     (o) An explanation of the method by which the owner

of the annuity may withdraw money from the annuity and any penalties associated

with a withdrawal.

     3.  An insurer or a producer of insurance is

not required to provide to an applicant the buyer’s guide and disclosure

statement that is required by subsection 1 if:

     (a) The annuity that the applicant is applying for

is a variable annuity, investment annuity or any other type of annuity that is

subject to the registration requirements of the Securities Act of 1933, 15

U.S.C. §§ 77a et seq.; and

     (b) The insurer or producer of insurance provides a

prospectus to the applicant that satisfies the requirements of section 10 of

the Securities Act of 1933, 15 U.S.C. §§ 77b(a)(10).

     (Added to NAC by Comm’r of Insurance by R076-05, eff. 2-23-2006)

      NAC 688A.475  Provision of annual report to owner of annuity. (NRS 679B.130)

     1.  An insurer shall provide an annual report

to each owner of an annuity that was purchased from the insurer.

     2.  The annual report required pursuant to

subsection 1 must include, without limitation:

     (a) The beginning and ending dates of the reporting

period;

     (b) A comparison of the cash surrender and

accumulated values of the annuity between the end of the prior reporting period

and the end of the current reporting period;

     (c) Any amount that was paid out to the owner

during the reporting period;

     (d) Any amount that was credited or charged to the

value of the annuity during the reporting period; and

     (e) The amount of any loans taken out by the owner

of the annuity on the annuity that remain outstanding at the end of the

reporting period.

     (Added to NAC by Comm’r of Insurance by R076-05, eff. 2-23-2006)

 

PROHIBITED ACTS AND PRACTICES

      NAC 688A.500  Engaging in certain acts or practices regarding sales to active

duty service members. (NRS 679B.130, 686A.015)

     1.  An insurer or producer of insurance

engages in an unfair or deceptive act or practice in violation of NRS 686A.020 if the insurer or

producer of insurance sells to a person who the insurer knows, or, with the

exercise of ordinary care, would know, is an active duty service member any

annuity or life insurance product, other than accidental death coverage, that

excludes coverage if the death of the insured active duty service member is

related to a declared or undeclared war or any other act related to military

service.

     2.  As used in this section:

     (a) “Active duty service member” has the meaning

ascribed to it in NAC 686A.486.

     (b) “Life insurance product” has the meaning

ascribed to it in NAC 686A.4885.

     (Added to NAC by Comm’r of Insurance by R031-07, 8-31-2007,

eff. 9-1-2007)

REVISER’S NOTE.

      The regulation of the Commissioner of Insurance filed

with the Secretary of State on August 31, 2007 (LCB File No. R031-07), the

source of this section (section 24 of the regulation), became effective on

September 1, 2007, and contains the following provision not included in NAC:

      “The amendatory provisions of this regulation apply to

an act or practice which occurs on or after September 1, 2007.”
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