SECTION 365:10-9-15. Contracts providing for variable benefits

(a)   Statement of essential features. Any variable annuity contract providing benefits payable in variable amounts delivered or issued for delivery in this state shall contain a statement of the essential features of the procedures to be followed by the insurance company in determining the dollar amount of such variable benefits. Any such contract, including a group contract and any certificate issued thereunder, shall state that such dollar amount will vary to reflect investment experience and may decrease or increase, and shall contain on its first page a clear statement to the effect that the benefits thereunder are on a variable basis.

(b)   Illustrations of benefits payable. Illustrations of benefits payable under any variable annuity contract providing benefits payable in variable amounts shall not include projections of past experience into the future or attempted predictions of future investment experience.

(c)   Individual variable annuity contract provisions. No individual variable annuity contract calling for the payment of periodic stipulated payments to the insurer shall be delivered or issued for delivery in this state unless it contains in substance the following provision, or provisions which, in the opinion of the Commissioner, are more favorable to the holders of such contracts:

(1)   a provision that there shall be a period of grace of 30 days, within which any stipulated payment to the insurer falling due after the first may be made, during which period of grace the contract shall continue in force. The contract may include a statement of the basis for determining the date as of which any such payment received during the period of grace shall be applied to produce the values under the contact arising there from;

(2)   a provision that, at any time within one year from the date of default, in making periodic stipulated payments to the insurer during the life of the annuitant and unless the cash surrender value has been paid, the contract may be reinstated upon payment to the insurer of such overdue payments as required by the contract, and of all indebtedness to the insurer on the contract, including interest. The contract may include a statement of the basis for determining the date as of which the amount to cover such overdue payments and indebtedness shall be applied to produce the values under the contract arising there from;

(3)   a provision specifying the options available in the event of default in a periodic stipulated payment. Such options may include an option to surrender the contract for a cash value as determined by the contract, and shall include an option to receive a paid-up annuity if the contract is not surrendered for cash, the amount of such paid-up annuity commencement date in accordance with the terms of the contract.

(d)   Investment increment factor. Any individual variable annuity contract delivered or issued for delivery in this state shall stipulate the investment increment factor to be used in computing the dollar amount of variable benefits or other contractual payments or values thereunder, and may guarantee that expense and/or mortality results shall not adversely affect such dollar amounts. If not guaranteed, the expense and mortality factors shall also be stipulated in the contract.

(1)   In computing the dollar amount of variable benefits or other contractual payments or values under an individual variable annuity contract:

(A)   The annual net investment increment assumption shall not exceed 5%, except with the approval of the Commissioner;

(B)   To the extent that the level of benefits may be affected by mortality results, the mortality factor shall be determined from the Annuity Mortality Table for 1949, Ultimate, or any modification of that table not having a higher mortality rate of any age, or, if approved by the Commissioner, from another table.

(2)   "Expense", as used in this subsection, may exclude some or all taxes, as stipulated in the contact.

(e)   Reserve liability for variable annuities. The reserve liability for variable annuities shall be computed on the basis of the 1937 Standard Annuity Mortality Table, the Annuity Mortality Table for 1949, Ultimate, the Group Annuity Mortality Table for 1951 or any modification of such tables approved by the Commissioner and in accordance with actuarial procedures that recognize the variable nature of the benefits provided.

(f)   Incidental benefit provision. Variable annuity contracts may include as an incidental benefit provision for payment on death during the deferred period of an amount not in excess of the greater of the sum of the premiums or stipulated payments paid under the contract or the value of the contract at time of death. Any such provision shall not be deemed to be life insurance and therefore not subject to the provisions of the insurance law governing life insurance contacts. Provision for any other benefit on death during the deferred period will be subject to such insurance provisions.