Sec.38a-459-12. Plan of operations requirements

(a) A contract may not be delivered or issued for delivery in this state unless the issuing insurance company is licensed to do life insurance business in this state pursuant to section 38a-41 of the Connecticut General Statutes. In addition, a domestic insurance company may not deliver or issue for delivery, either in this state or outside this state, a contract belonging to a specific class of contracts unless the insurance company has satisfied the requirements of subsection (b) of this section with respect to that class.

(b) A domestic insurance company satisfies the requirements of this section with respect to a class of contracts if the insurance company has filed a plan of operations pertaining to the class of contracts, together with copies of forms of the contracts in the class, with the insurance commissioner and the filing has been approved or has not been disapproved within a sixty-day period following the date of the filing, in which event the plan of operations shall be deemed approved.

(c) The plan of operations for a class of contracts shall describe the financial implications for the insurance company of the issuance of contracts in the class, and shall include at least the following:

(1) A description of the class of contracts to which the plan of operations pertains, including a description of the products, the markets to which the products will be sold, and the benefits that are being offered (including whether those benefits will be paid on a market or book value basis);

(2) A statement that the plan of operations shall be administered in accordance with the requirements prescribed by the insurance commissioner pursuant to sections 38a-459-10 to 38a-459-20, inclusive, of the Regulations of Connecticut State Agencies, along with a statement that the insurance company shall comply with the plan of operations in its administration of the contract;

(3) A statement of the investment policy for the separate account and any supplemental account, including requirements for diversification, maturity, type and quality of assets, and, as applicable, target duration for matching guaranteed contract liabilities or the degree to which the investment policy is likely to match the performance of an interest rate series or index on which contract benefits are based;

(4) A description of how the value of the separate account assets and any supplemental account is to be determined, including but not limited to, a statement of procedures and rules for valuing securities and other assets that are not publicly traded;

(5) A description of how the guaranteed contract liabilities are to be valued, including, if applicable, with respect to guaranteed minimum benefits or other benefits, a description of the methodology for calculating spot rates and the rates proposed to be used to discount guaranteed contract liabilities if higher than the applicable spot rates, but the rate or rates used shall not exceed the blended spot rate, except that if the expected time of payment of a contract benefit is more than 30 years, the guaranteed minimum benefits or other benefits shall be discounted from the expected time of payment to year 30 at a rate of no more than 80 percent of the thirty year blended spot rate and from year 30 to the date of valuation at a rate not greater than the thirty year blended spot rate, and shall accurately reflect expected investment returns (taking into account foreign exchange risks);

(6) A statement of how the separate account's operations are designed to provide for payment of contract benefits as they become due, including but not limited to:

(A) A description of the method for estimating the amount and timing of benefit payments;

(B) The arrangements necessary to provide liquidity to cover contingencies:

(C) The method to be used to comply with the asset maintenance requirement;

(D) The manner in which account assets shall be allocated between the separate account, any supplemental account, and the general account;

(E) If applicable, the deductions to be used in determining the market value of an asset when determining the asset maintenance requirement when the investment policy of the separate account and any supplemental accounts is not likely to match the performance of an interest rate series or index on which contract benefits are based; and

(F) For index contracts, the deductions to be used for replicated (synthetic asset) transactions in determining the market value of the separate account.

(G) For market value separate accounts supporting contracts other than index contracts: (i) A description of the criteria used by the insurance company in approving issuance of a contract to a pooled fund representing multiple employer-sponsored plans; and (ii) a description of risk-mitigation techniques used by the insurance company in connection with contracts issued to pooled funds representing multiple employer-sponsored plans.

(7) An unqualified opinion by a qualified actuary with expertise in such matters as to the adequacy of the consideration charged by the insurance company for the risks it has assumed with respect to the contracts in the class to which the plan of operations pertains;

(8) If hedging transactions are to be utilized in managing separate account or any supplemental account assets, a description of the instruments and techniques and an explanation of how they are intended to reduce risk of loss;

(9) If the amount of the asset maintenance requirement depends on the separate account, any supplemental account or a subportfolio of either being duration matched, a description of the method used to determine the durations of separate account and any supplemental account assets and guaranteed contract liabilities;

(10) If a part of the asset maintenance requirement is to be met by maintaining a reserve liability in the general account, a description of:

(A) The circumstances under which increases and decreases in the general account portion of the reserve liability shall be made;

(B) The circumstances under which transfers shall be made between the separate account and the general account; and

(C) Any arrangements needed to provide sufficient liquidity in the general account to enable the insurance company to make transfers to the separate account when due.

(11) A statement as to the extent to which the contracts in the class shall provide that the separate account assets shall not be chargeable with liabilities arising out of any other business of the insurance company; and

(12) If any person other than the insurance company may authorize, approve, or review the acquisition and disposition of investments for the separate account or any supplemental account, a statement of the safeguards adopted by the insurance company to assure that the actions to be taken by these persons are appropriate, including a description of the criteria used by the insurance company in selecting the person.

(d) Notwithstanding the descriptions in the plan of operations, the insurance company may change the rate utilized, pursuant to section 38a-459-14(f) of the Regulations of Connecticut State Agencies, to discount guaranteed contract liabilities and other items applicable to the separate account or any supplemental accounts, (e.g., if the investment portfolio is different from the investment portfolio anticipated by the plan of operations), provided that the rate shall not exceed the blended spot rates as prescribed in subsection (c)(5) of this section. Any such change shall be disclosed and justified in the actuarial opinion submitted pursuant to section 38a-459-17 of the Regulations of Connecticut State Agencies.

(e) The plan of operations may provide that the separate account shall fund guaranteed contract liabilities denominated in the currency of a foreign country with separate account and any supplemental account assets denominated in that currency, provided that at the time of issuance of the account contracts the country is rated in one of the two highest rating categories by an independent, nationally-recognized United States rating agency acceptable to the insurance commissioner.

(f) The insurance commissioner, at his or her discretion, may require an insurance company to file additional information as part of the plan of operations upon a determination that the plan of operations is insufficient.

(Adopted effective June 1, 2002; Amended December 8, 2017; Amended April 30, 2019)