Sec. 43.8. Mandatory provisions for policies containing market-value adjustments

(a) The policy cover page shall contain a prominent statement that the policy contains a market-value adjustment formula, and that the operation of the formula may result in both upward and downward adjustments in cash surrender benefits and policy loan value. Points in time when cash surrender benefits are available without the application of the market-value adjustment formula shall also be described on the cover page.

(b) The policy shall contain a description of the market-value adjustment formula, including:

(1) the provisions of the formula and a description of each of the elements used in the formula, along with an identification of any index used in the formula and the source or publication where the data used in the formula can be found;

(2) if an index of publicly traded obligations is used in the formula, a statement that in the event that this index is no longer available, a suitable replacement index, subject to approval of the superintendent, would then be utilized;

(3) if the new guarantee rate is used in the formula, a statement of the procedure to determine the rate to be used in the event that the new guarantee rate cannot be determined from the company's policies then being offered (or then in-force), and a statement of the procedure to determine the adjustment in the event that the company no longer issues guaranteed rate policies (see section 43.3[d][1][ii] of this Part);

(4) a statement of the frequency with which market-value adjustments will be calculated, including the dates to be used in identifying the interest factors;

(5) a statement of the points in time when cash surrender benefits are available without the application of any market-value adjustment formula, and for how long they are available on an unadjusted basis;

(6) a statement that a notice will be mailed at least 15 but not more than 45 days prior to the beginning of each of the 30-day periods referred to in section 43.3(d)(1)(iii) and (2) of this Part and containing at least the information specified therein (if the periods coincide, a combined notice will suffice);

(7) in case of flexible premium contracts, a statement as to any separate treatment of premiums with respect to guaranteed rates, specified time intervals and guaranteed benefit dates; and

(8) a description of how death benefits may be affected by market-value adjustment of policy loan values and, where death benefits are based upon the policy value, by market-value adjustments of policy values. Unless otherwise specifically permitted by law, when the death benefit is a function of the policy value, such value used in the death benefit formulae, shall not be less than the policy value before applying any market-value adjustment formulae.

(c) The policy's nonforfeiture provision shall describe how benefits are affected by the market-value adjustment formula.

(d) The policy loan provision shall describe how the market-value adjustment formula affects policy loans and loan accounts and how policy loans affect cash surrender benefits. The policy loan provision shall also describe how loan repayments are treated including effect on subsequent policy values, cash surrender values and market-value adjustments.

(e) A flexible premium policy must provide for at least 15 days and no more than 45 days written notice to be sent to the policyholder's last known address prior to the date when the policy value is no longer sufficient to prevent termination or lapse as defined in the policy.

(f) The policy shall provide that, if the shortest next specified time interval permitted by the company immediately following any guaranteed benefit date will exceed the initial specified time interval by three years or more, the policyholder may elect as of such guaranteed benefit date to exchange the policy without evidence of insurability for a general account policy issued by the company or any affiliate thereof having the same initial death benefit, class of risk, issue date for purposes of incontestability and suicide provisions, and containing substantially comparable provisions, except that the new policy (1) shall not provide for cash surrender benefits or policy loan values determined in accordance with a market-value adjustment formula; and (2) shall provide for guaranteed interest rates and policy loan interest rates suitable for such policy. Notice of such exchange right shall be contained in the notice referred to in section 43.3(d)(2) of this Part.

(g) The format of the notice required under paragraph (b)(6) of this section shall be filed with the department with the policy form submission.

(h) The policy shall have a provision describing any partial withdrawal right. The policy provision shall describe how such partial withdrawal and loans are allocated to portions of the policy value, such as first in/first out, last in/first out, etc.