[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.”