Neb. Admin. Code tit. 210 — Department of Insurance

Chapter 6 Deposit of Securities; Definitions; Authorized Depositories; Manner of Depositing and Withdrawing Securities; Insurance

Neb. Admin. Code tit. 210, ch. 6 Deposit of Securities; Definitions; Authorized Depositories; Manner of Depositing and Withdrawing Securities; Insurance {#sec-210-nac-6 omnilex-key=us-ne-regs-official--title-210--210 NAC 6}

001. Statutory authority. This rule is promulgated under the authority of 44-319.11.

002. Definitions. Unless the context clearly indicates otherwise:

002.01 "Deposit" shall mean the delivery of securities by an insured to the director or the delivery of securities to any authorized depository, either by physical delivery of such securities or by the transfer of title to such securities by bookkeeping entry pursuant to Neb.Rev.Stat. §8-1302.

002.02 "Custody Receipt" shall mean a receipt issued by an authorized depository to evidence and describe securities deposited with it.

003. Depositories. The director shall maintain a list of designated authorized depositories. All securities must be deposited directly with an authorized depository. No securities may be delivered to the director.

004. Registered securities.

004.01 All registered securities must be registered as follows:

“Director of Insurance, Trustee for the benefit of all policyholders of the United States of (Insurer)(City), (State) under Nebraska law.”

004.02 If an insurer deposits securities with the Department or authorized depository under the requirements of any other state, or other government, such securities may be deposited in the manner set by the other state, or government. An insurer may deposit securities exceeding the minimum amount set under Nebraska law if it satisfies the requirement of making a deposit under the laws of another state or government.

005 Withdrawal - procedure - generally. Securities deposited with either the Department or an authorized depository shall be released only upon surrender of the department receipt. In the event such receipt is lost or destroyed, an officer of the insurer must file an affidavit stating the reasons for failure to surrender said receipt and indicating the securities to be released. In the event the insurer desires to withdraw only a portion of the securities described on a department receipt, the Department upon surrender of said receipt or upon filing of the affidavit aforementioned, shall issue its receipt for the securities remaining on deposit as described in the Department's copy of the applicable receipt. Except as hereinafter provided, no securities shall be released if the aggregate value of all securities on deposit will fall below the amount required by law, until an equivalent amount is first deposited with the Department or an authorized depository. In the event of maturity or other good cause being shown, the Department may release securities on deposit, even though the aggregate value will fall below the amount required by law upon the condition that the securities released will be sold, and the proceeds reinvested in securities to be immediately deposited with the Department or an authorized depository.

006 Retaliation. If the laws of another jurisdiction or other government require a domestic insurer to deposit securities in the state or other jurisdiction, all similar insurers domiciled in that state or jurisdiction shall deposit securities with the authorized depositories as described in section 003.

History

• Effective 2024-05-05

Chapter 9 Proxies, Consents and Authorization of Domestic Stock Insurers

Neb. Admin. Code tit. 210, ch. 9 Proxies, Consents and Authorization of Domestic Stock Insurers {#sec-210-nac-9 omnilex-key=us-ne-regs-official--title-210--210 NAC 9}

001 Statutory authority. Under the authority of Neb. Rev. Stat. §§44-3,115 through 44-3,118, the Department of Insurance hereby adopts the following rule:

002 Application of regulation. This regulation is applicable to all domestic stock insurers having one hundred or more shareholders; provided, however, that this regulation shall not apply to any insurer if ninety-five per cent or more of its stock is owned or controlled by a parent or an affiliated insurer and the remaining shares are held by less than five hundred shareholders. A domestic stock insurer which files with the Securities and Exchange Commission forms of proxies, consents, and authorizations complying with the requirements of the Securities Exchange Act of 1934 and the Securities Exchange Acts Amendments of 1964 and Regulation 14 of the Securities and Exchange Commission promulgated thereunder shall be exempt from the provisions of this regulation.

003 Proxies, consents and authorizations. No domestic stock insurer, or any director, officer or employee of such insurer subject to section 002 hereof, or any other person, shall solicit, or permit the use of his name to solicit, by mail or otherwise, any proxy, consent or authorization in respect of any stock of such insurer in contravention of this regulation and Schedules A and B hereto annexed and hereby made a part of this regulation.

004 Disclosure of equivalent information. Unless proxies, consents or authorizations in respect of a stock of a domestic insurer subject to section 002 hereof are solicited by or on behalf of the management of such insurer from the holders of records of stock of such insurer in accordance with this regulation and the Schedules thereunder prior to any annual or other meeting, such insurer shall, in accordance with this regulation and/or such further regulations as the Director may adopt, file with the Director and transmit to all shareholders of record information substantially equivalent to the information which would be required to be transmitted if a solicitation were made prior to any annual or other meetings.

005 Definitions

005.01. The definitions and instructions set out in Schedule SIS, as promulgated by the National Association of Insurance Commissioners, shall be applicable for purposes of this regulation.

005.02. The terms "solicit" and "solicitation" for purposes of this regulation shall include:

005.02A. Any request for a proxy, whether or not accompanied by or included in a form of proxy; or

005.02B. Any request to execute or not to execute, or to revoke, a proxy; or

005.02C. The furnishing of a proxy or other communication to shareholders under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy.

005.03. The terms "solicit" and "solicitation" shall not include:

005.03A. Any solicitation by a person in respect of stock of which he is the beneficial owner;

005.03B. Action by a broker or other person in respect to stock carried in his name or in the name of his nominee in forwarding to the beneficial owner of such stock soliciting material received from the company, or impartially instructing such beneficial owner to forward a proxy to the person, if any, to whom the beneficial owner desires to give a proxy, or impartially requesting instructions from the beneficial owner with respect to the authority to be conferred by the proxy and stating that a proxy will be given if the instructions are received by a certain date;

005.03C. The furnishing of a form of proxy to a shareholder upon the unsolicited request of such shareholder, or the performance by any person of ministerial acts on behalf of a person soliciting a proxy.

006 Information to be furnished to shareholders

006.01. No solicitation subject to this regulation shall be made unless each person solicited is concurrently furnished or has previously been furnished with a written proxy statement containing the information specified in Schedule A.

006.02. If the solicitation is made on behalf of the management of the insurer and relates to an annual meeting of shareholders at which directors are to be elected, each proxy statement furnished pursuant to subsection 006.01 hereof shall be accompanied or preceded by an annual report (in preliminary or final form) to such shareholders containing such financial statements for the last fiscal year as are referred to in Schedule SIS under the heading "Financial Reporting to Shareholders." Subject to the foregoing requirements with respect to financial statements, the annual report to shareholders may be in any form deemed suitable by the management.

006.03. Two copies of each report sent to the shareholders pursuant to this section shall be mailed to the Director, not later than the date on which such report is first sent or given to shareholders or the date on which preliminary copies of solicitation material are filed with the Director pursuant to subsection 008.01 of section 008, whichever date is later.

007 Requirements as to proxy

007.01. The form of proxy (a) shall indicate in distinctive type whether or not the proxy is solicited on behalf of the management, (b) shall provide a specifically designated blank space for dating the proxy and (c) shall identify clearly and impartially each matter or group of related matters intended to be acted upon, whether proposed by the management, or shareholders. No reference need be made to proposals as to which discretionary authority is conferred pursuant to subsection 007.03 hereof.

007.02. Means shall be provided in the proxy for the person solicited to specify by ballot a choice between approval or disapproval of each matter or group of related matters referred to therein, other than elections to office. A proxy may confer discretionary authority with respect to matters as to which a choice is not so specified if the form of proxy states in distinctive type how it is intended to vote the shares or authorization represented by the proxy in each such case.

007.03. A proxy may confer discretionary authority with respect to other matters which may come before the meeting, provided the persons on whose behalf the solicitation is made are not aware a reasonable time prior to the time the solicitation is made that any other matters are to be presented for action at the meeting and provided further that a specific statement to that effect is made in the proxy statement or in the form of proxy. A proxy may also confer discretionary authority with respect to any proposal omitted from the proxy statement and form of proxy pursuant to subsections 009.03 of section 009.

007.04. No proxy shall confer authority (a) to vote for the election of any person to any office for which a bona fide nominee is not named in the proxy statement, or (b) to vote at any annual meeting other than the next annual meeting (or any adjournment thereof) to be held after the date on which the proxy statement and form of proxy are first sent or given to shareholders.

007.05. The proxy statement or form of proxy shall provide, subject to reasonable specified conditions, that the proxy will be voted and that where the person solicited specified by means of ballot provided pursuant to subsection 007.02 thereof a choice with respect to any matter to be acted upon, the vote will be in accordance with the specifications so made.

007.06. The information included in the proxy statement shall be clearly presented and the statements made shall be divided into groups according to subject matter, with appropriate headings. All printed proxy statements shall be clearly and legibly presented.

008 Material required to be filed

008.01. Two preliminary copies of the proxy statement and form of proxy and any other soliciting material to be furnished to shareholders concurrently therewith shall be filed with the Director at least ten days prior to the date definitive copies of such material are first sent or given to shareholders, or such shorter period prior to that date as the Director may authorize upon a showing of good cause therefor.

008.02. Two preliminary copies of any additional soliciting material relating to the same meeting or subject matter to be furnished to shareholders subsequent to the proxy statements shall be filed with the Director at least two days (exclusive of Saturdays, Sundays or Holidays) prior to the date copies of this material are first sent or given to shareholders or a shorter period prior to such date as the Director may authorize upon a showing of good cause therefor.

008.03. Two definitive copies of the proxy statement, form of proxy and all other soliciting material, in the form in which this material is furnished to shareholders, shall be filed with, or mailed for filing to, the Director not later than the date such material is first sent or given to the shareholders.

008.04. Where any proxy statement, form of proxy or other material filed pursuant to these rules is amended or revised, two of the copies shall be marked to clearly show such changes.

008.05. Copies of replies to inquiries from shareholders requesting further information and copies of communications which do no more than request that forms of proxy theretofore solicited be signed and returned need not be filed pursuant to this section.

008.06. Notwithstanding the provisions of subsections 008.01 and 008.02 hereof and of subsection 012.05 of section 012, copies of soliciting material in the form of speeches, press releases and radio or television scripts may, but need not, be filed with the Director prior to use or publication. Definitive copies, however, shall be filed with or mailed for filing to the Director as required by subsection 008.03 hereof not later than the date such material is used or published. The provisions of subsections 008.01 and 008.02 hereof and subsection 012.05 of section 012 shall apply, however, to any reprints or reproductions of all or any part of such material.

009 Proposals of shareholders

009.01. If any shareholder entitled to vote at a meeting of the insurer shall, a reasonable time before the solicitation is made, submit to the management of the insurer a proposal which is accompanied by notice of his intention to present the proposal for action at the meeting, the management shall set forth the proposal in its proxy statement, identify the proposal in its proxy and provide means by which the specifications provided for by subsection 007.02 of section 007 can be made. A proposal so submitted with respect to an annual meeting more than sixty days in advance of a day corresponding to the first date on which management proxy soliciting material was released to shareholders in connection with the last annual meeting of the insurer shall prima facie be deemed to have been submitted a reasonable time before the solicitation. This rule shall not apply, however, to elections to office.

009.02. If the management opposes the proposal, it shall also, at the request of the shareholder, include in its proxy statement the name and address of the proposer and a statement by such person of not more than one hundred words in support of the proposal. The statement and request shall be furnished to the management at the same time that the proposal is furnished. Neither the management nor the insurer shall be responsible for such statement.

009.03. Notwithstanding the foregoing, the management may omit a proposal and any statement in support thereof from its proxy statement and form of proxy under any of the following circumstances:

009.03A. If the proposal as submitted is not a proper subject for action by shareholders under the laws of this state;

009.03B. If it clearly appears that the proposal is submitted primarily for the purpose of enforcing a personal claim or redressing a personal grievance against the insurer or its management, or primarily for the purpose of promoting general economic, political, racial, religious, social or similar causes;

009.03C. If the management has, at the shareholder's request, included a proposal in its proxy statement and form of proxy relating to either of the last two annual meetings or any special meeting held subsequent to the earlier of such two annual meetings and such shareholder has failed, without good cause, to present the proposal, in person or by proxy, for action at the meeting; or

009.03D. If substantially the same proposal has previously been submitted in the management's proxy statement and form of proxy relating to any annual or special meeting held within the preceding five calendar years, it may be omitted from the management's proxy material relating to any meeting held within the three calendar years after the latest such previous submission, provided that the proposal received less than five per cent of the total number of votes cast in regard thereto at the time of its latest submission;

009.03E. If the proposal consists of a recommendation or request that the management take action with respect to a matter relating to the conduct of the ordinary business operations of the insurer.

009.04. Whenever the management asserts that a proposal and any statement in support thereof may properly be omitted from its proxy statement and form of proxy, it shall file with the Director, not later than twenty days prior to the date of the preliminary copies of the proxy statement and form of proxy are filed pursuant to subsection 008.01 of section 008 or such shorter period prior to such date as the Department may permit, a copy of the proposal and any statement in support thereof as received from the shareholder or policyholder, together with a statement of the reasons why the management deems such omission to be proper and, where such reasons are based on matters of law, a supporting opinion of counsel. The management shall at the same time, if it has not already done so, notify the shareholder submitting the proposal of its intention to omit the proposal from its proxy statement and form of proxy and shall forward to him a copy of the statement of the reasons why the management deems the omission of the proposal to be proper and a copy of such supporting opinion of counsel.

010 False or misleading statements. No solicitation subject to this regulation shall be made by means of any proxy statement, form of proxy, notice of meeting, or other communication, written or oral, containing any statement which at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading.

011 Prohibition of certain solicitations. No persons making a solicitation which is subject to this regulation shall solicit any undated or postdated proxy or any proxy which provides that it shall be deemed to be dated as of any date subsequent to the date on which it is signed by the shareholder.

012 Special provisions applicable to election contests

012.01 Applicability. This section shall apply to any solicitation subject to this regulation by any person or group for the purpose of opposing a solicitation subject to this regulation by any other person or group with respect to the election or removal of directors at any annual or special meeting of the shareholders.

012.02 Participant or Participant in a Solicitation.

012.02A. For purposes of this section the terms "participant" and 11participant in a solicitation" include (i) the insurer; (ii) any director of the insurer, and any nominee for whose election as a director proxies are solicited; (iii) any other person, acting alone or with one or more other persons, committees or groups, in organizing, directing or financing the solicitation.

012.02B. For the purposes of this section the terms "participant" and "participant in a solicitation" do not include (i) a bank, broker or dealer who, in the ordinary course of business, lends money or executes orders for the purchase or sale of stock and who is not otherwise a participant; (ii) any person or organization retained or employed by a participant to solicit shareholders or any person who merely transmits proxy [soliciting] material or performs ministerial or clerical duties; (iii) any person employed in the capacity of attorney, accountant, or advertising, public relations or financial adviser, and whose activities are limited to the performance of his duties in the course of such employment; (iv) any person regularly employed as an officer or employee of the insurer or any of its subsidiaries or affiliates who is not otherwise a participant; or (v) any officer or director of, or any person regularly employed by any other participant, if such officer, director, or employee is not otherwise a participant.

012.03 Filing of Information Required by Schedule B.

012.03A. No solicitation subject to this section shall be made by any person other than the management of an insurer unless at least five business days prior thereto, or such shorter period as the Director may authorize upon a showing of good cause therefor, there has been filed, with the Director by or on behalf of each participant in such solicitation, a statement in duplicate containing the information specified by Schedule B and a copy of any material proposed to be distributed to shareholders in furtherance of such solicitation. Where preliminary copies of any materials are filed, distribution to shareholders should be deferred until the Director's comments have been received and complied with.

012.03B. Within five business days after a solicitation subject to this section is made by the management of an insurer, or such longer period as the Director may authorize upon a showing of good cause therefor, there shall be filed with the Director by or on behalf of each participant in such solicitation, other than the insurer, and by or on behalf of each management nominee for director, a statement in duplicate containing the information specified by Schedule B.

012.03C. If any solicitation on behalf of management or any other person has been made, or if proxy material is ready for distribution, prior to a solicitation subject to this section in opposition thereto, a statement in duplicate containing the information specified in Schedule B shall be filed with the Director by or on behalf of each participant in such prior solicitation, other than the insurer, as soon as reasonably practicable after the commencement of the solicitation in opposition thereto.

012.03D. If, subsequent to the filing of the statements required by subsections 012.03A, 012.03B, and 012.03C of this section, additional persons become participants in a solicitation subject to this rule, there shall be filed with the Director, by or on behalf of each such person, a statement in duplicate containing the information specified by Schedule B, within three business days after such person becomes a participant, or such longer period as the Director may authorize upon a showing of good cause therefor.

012.03E. If any material change occurs in the facts reported in any statement filed by or on behalf of any participant, an appropriate amendment to such statement shall be filed promptly with the Director.

012.03F. Each statement and amendment thereto filed pursuant to this paragraph shall be part of the public files of the Director.

012.04 Solicitations Prior to Furnishing Required Written Proxy Statement. Notwithstanding the provisions of subsection 006.01 of section 006, a solicitation subject to this section may be made prior to furnishing shareholders a written proxy statement containing the information specified in Schedule A with respect to such solicitation, provided that--

012.04A. The statements required by subsection 012.03C hereof are filed by or on behalf of each participant in such solicitation.

012.04B. No form of proxy is furnished to shareholders prior to the time the written proxy statement required by subsection 006.01 of section 006 is furnished to such persons; Provided, however, that this paragraph 006.02 shall not apply where a proxy statement then meeting the requirements of Schedule A has been furnished to shareholders.

012.04C. At least the information specified in subsections 006.02 and 006.03 of the statements required by subsection 012.03 hereof to be filed by each participant, or an appropriate summary thereof, are included in each communication sent or given to shareholders in connection with the solicitation.

012.04D. A written proxy statement containing the information specified in Schedule A with respect to a solicitation is sent or given shareholders at the earliest practicable date.

012.05 Solicitations Prior to Furnishing Required Written Proxy Statement -- Filing Requirements. Two copies of any soliciting material proposed to be sent or given to shareholders prior to the furnishing of the written proxy statement required by subsection 006.01 of section 006 shall be filed with the Director in preliminary form at least five business days prior to the date definitive copies of such material are first sent or given to such persons, or shorter period as the Director may authorize upon a showing of good cause therefor.

012.06 Application of This Section to Report. Notwithstanding the provisions of subsections 006.02 and 006.03 of section 006, two copies of any portion of the report referred to in subsection 006.02 of section 006 which comments upon or refers to any solicitation subject to this section, or to any participant in any such solicitation, other than the solicitation by the management, shall be filed with the Director as proxy material subject to this regulation. Such portion of the report shall be filed with the Director in preliminary form at least five business days prior to the date copies of the report are first sent or given to shareholders.

SCHEDULE A

INFORMATION REQUIRED IN PROXY STATEMENT

Item 1. Revocability of Proxy.

State whether or not the person giving the proxy has the power to revoke it. If the right of revocation before the proxy is exercised is limited or is subject to compliance with any formal procedure, briefly describe such limitation or procedure.

Item 2. Dissenters' Rights of Appraisal.

Outline briefly the rights of appraisal or similar rights of dissenting shareholders with respect to any matter to be acted upon and indicate any statutory procedure required to be followed by such shareholders in order to perfect their rights. Where such rights may be exercised only within a limited time after the date of the adoption of a proposal, the filing of a charter amendment, or other similar act, state whether the person solicited will be notified of such date.

Item 3. Persons Making Solicitations Not Subject to Section H.

(1) If the solicitation is made by the management of the insurer, so state. Give the name of any director of the insurer who has informed the management in writing that he intends to oppose any action intended to be taken by the management and indicate the action which he intends to oppose.

(2) If the solicitation is made otherwise than by the management of the insurer, state the names and addresses of the persons by whom and on whose behalf it is made and the names and addresses of the persons by whom the cost of solicitation has been or will be borne, directly or indirectly.

(3) If the solicitation is to be made by specially engaged employees or paid solicitors, state (i) the material features of any contract or arrangement for such solicitation and identify the parties, and (ii) the cost or anticipated cost thereof.

Item 4. Interest of Certain Persons in Matters to Be Acted Upon.

Describe briefly any substantial interest, direct or indirect, by shareholdings or otherwise, of any director, nominee for election for director, officer and, if the solicitation is made otherwise than on behalf of management, each person on whose behalf the solicitation is made, in any matter to be acted upon other than elections to office.

Item 5. Stocks and Principal Shareholders.

(1) State, as to each class of voting stock of the insurer entitled to be voted at the meeting, the number of shares outstanding and the number of votes to which class is entitled.

(2) Give the date as of which the record list of shareholders entitled to vote at the meeting will be determined. If the right to vote is not limited to shareholders of record on that date, indicate the conditions under which other shareholders may be entitled to vote.

*(3) If action is to be taken with respect to the election of directors and if the persons solicited have cumulative voting rights, make a statement that they have such rights and state briefly the conditions precedent to the exercise thereof.

Item 6. Nominees and Directors.

If action is to be taken with respect to the election of directors furnish the following information, in tabular form to the extent practicable, with respect to each person nominated for election as a director and each other person whose term of office as a director will continue after the meeting:

(a) Name each such person, state when his term of office or the term of office for which he is a nominee will expire, and all other positions and offices with the insurer presently held by him, and indicate which persons are nominees for election as directors at the meeting.

(b) State his present principal occupation or employment and give the name and principal business of any corporation or other organization in which such employment is carried on. Furnish similar information as to all of his principal occupations or employments during the last five years, unless he is now a director and was elected to his present term of office by a vote of shareholders at a meeting for which proxies were solicited under this regulation.

(c) If he is or has previously been a director of the insurer, state the period or periods during which he has served as such.

(d) State, as of the most recent practicable date, the approximate amount of each class of stock of the insurer or nay of its parents, subsidiaries, or affiliates other than directors' qualifying shares, beneficially owned directly or indirectly by him. If he is not the beneficial owner of any such stock make a statement to that effect.

Item 7. Remuneration and Other Transactions With Management and Others.

Furnish the information reported or required in Item One of Schedule SIS under the heading "Information Regarding Management and Directors" if action is to be taken with respect to (a) the election of directors, (b) any remuneration plan, contract or arrangement in which any director, nominee for election as a director, or officer of the insurer will participate, (c) any pension or retirement plan in which any such person will participate, or (d) the granting or extension to any such person of any options, warrants or rights to purchase any stocks, other than warrants or rights issued to shareholders, as such, on a pro rata basis. If the solicitation is made on behalf of persons other than the management information shall be furnished only as to Item One-A of the aforesaid heading of Schedule SIS.

Item 8. Bonus, Profit Sharing and Other Remuneration Plans.

If action is to be taken with respect to any bonus, profit sharing or other remuneration plan, of the insurer furnish the following information:

(a) A brief description of the material features of the plan, each class of persons who will participate therein, the approximate number of persons in each such class, and the basis of such participation.

(b) The amounts which would have been distributable under the plan during the last calendar year to (1) each person named in item seven of this schedule, (2) directors and officers as a group, and (3) to all other employees as a group, if the plan had been in effect.

(c) If the plan to be acted upon may be amended (other than by a vote of shareholders) in a manner which would materially increase the cost thereof to the insurer or to materially alter the allocation of the benefits as between the groups specified in paragraph (b) of this item, the nature of such amendments should be specified.

Item 9. Pension and Retirement Plan. If action is to be taken with respect to any pension or retirement plan of the insurer, furnish the following information:

(a) A brief description of the material features of the plan, each class of persons who will participate therein, the approximate number of persons in each such class, and the basis of such participation.

(b) State (1) the approximate total amount necessary to fund the plan with respect to past 3ervices, the period over which such amount is to be paid, and the estimated annual payments necessary to pay 'he total amount over such period; (2) the estimated annual payment to be made with respect to current services; and (3) the amount of such annual payments to be made for the benefit of (i) each person named in item seven of this schedule, (ii) directors and officers as a group, and (iii) employees as a group.

(c) If the plan to be acted upon may be amended (other than by a vote of shareholders) in a manner which would materially increase the cost thereof to the insurer or to materially alter the allocation of the benefits as between the groups specified in subparagraph (b)(3) of this item, the nature of such amendments should be specified.

Item 10. Options, Warrants, or Rights. If action is to be taken with respect to the granting or extension of any options, warrants or rights (all referred to herein as "warrants") to purchase stock of the insurer or any subsidiary or affiliate, other than warrants issued to all shareholders on a pro rata basis, furnish the following information:

(a) The title and amount of stocks called for or to be called for, the prices, expiration dates and other material conditions upon which the warrants may be exercised, the consideration received or to be received by the insurer, subsidiary or affiliate for the granting or extension of the warrants and the market value of the stocks called for or to be called for by the warrants, as of the latest practicable date.

(b) If known, state separately the amount of stock called for or to be called for by warrants received or to be received by the following persons, naming each such person: (1) each person named in item seven of this schedule, and (2) each other person who will be entitled to acquire five per cent or more of the stock called for or to be called for by such warrants.

(c) If known, state also the total amount of stock called for or to be called for by such warrants, received or to be received by all directors and officers of the company as a group and all employees, without naming them.

Item 11 Authorization or Issuance of Stock.

1. If action is to be taken with respect to the authorization or issuance of any stock of the insurer furnish the title, amount and description of the stock to be authorized or issued.

2. If the shares of stock are other than additional shares of common stock of a class outstanding, furnish a brief summary of the following, if applicable: dividend, voting, liquidation, preemptive, and conversion rights, redemption and sinking fund provisions, interest rate and date of maturity.

3. If the shares of stock to be authorized or issued are other than additional shares of common stock of a class outstanding, the Director may require financial statements comparable to those contained in the annual report.

Item 12. Mergers, Consolidations, Acquisitions and Similar Matters.

1. If action is to be taken with respect to a merger, consolidation, acquisition or similar matter, furnish in brief outline the following information:

(a) The rights of appraisal or similar rights of dissenters with respect to any matters to be acted upon. Indicate any procedure required to be followed by dissenting shareholders in order to perfect such rights.

(b) The material features of the plan or agreement.

(c) The business done by the company to be acquired or whose assets are being acquired.

(d) If available, the high and low sales prices for each quarterly period within two years.

(e) The percentage of outstanding shares which must approve the transaction before it is consummated.

2. For each company involved in a merger, consolidation or acquisition, the following financial statements should be furnished:

(a) A comparative balance sheet as of the close of the last two fiscal years.

(b) A comparative statement of operating income and expenses for each of the last two fiscal years and, as a continuation of each statement, a statement of earning per share after related taxes and cash dividends paid per share.

(c) A pro forma combined balance sheet and income and expenses statement for the last fiscal year giving effect to the necessary adjustments with respect to the resulting company.

Item 13. Restatement of Accounts.

If action is to be taken with respect to the restatement of any asset, capital, or surplus of the insurer, furnish the following information:

(a) State the nature of the restatement and the date as of which it is to be effective.

(b) Outline briefly the reasons for the restatement and for the selection of the particular effective date.

(c) State the name and amount of each account affected by the restatement and the effect of the restatement thereon.

Item 14. Matters Not Required to Be Submitted.

If action is to be taken with respect to any matter which is not required to be submitted to a vote of shareholders, state the nature of such matter, the reason for submitting it to a vote of shareholders and what action is intended to be taken by the management in the event of a negative vote on the matter by the shareholders.

Item 15. Amendment of Charter, By-Laws, or Other Documents.

If action is to be taken with respect to any amendment of the insurer's charter, by-laws or other documents as to which information is not required above, state briefly the reasons for and general effect of such amendment and the vote needed for its approval.

SCHEDULE B

INFORMATION TO BE INCLUDED IN STATEMENTS FILED BY OR ON BEHALF OF A PARTICIPANT (OTHER THAN THE INSURER) IN A PROXY SOLICITATION IN AN ELECTION CONTEST

Item 1. Insurer. State the name and address of the insurer.

Item 2. Identity and Background.

(a) State the following:

(1) Your name and business address.

(2) Your present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is carried on.

(b) State the following:

(1) Your residence address.

(2) Information as to all material occupations, positions, [offices] or employments during the last ten years, giving starting and ending dates of each and the name, principal business and address of any business corporation or other business organization in which each such occupation, position, office or employment was carried on.

(c) State whether or not you are or have been a participant in any other proxy contest involving this company or other companies within the past ten years. If so, identify the principals, the subject matter and your relationship to the parties and the outcome.

(d) State whether or not, during the past ten years, you have been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) and, if so, give dates, nature of conviction, name and location of court, and penalty imposed or other disposition of the case. A negative answer to this subitem need not be included in the proxy statement or other proxy soliciting material.

Item 3. Interest in Stock of the Insurer.

(a) State the amount of each class of stock of the insurer which you own beneficially, directly or indirectly.

(b) State the amount of each class of stock of the insurer which you own of record but not beneficially.

(c) State with respect to the stock specified in (a) and (b) the amounts acquired within the past two years, the dates of acquisition and the amounts acquired on each date.

(d) If any part of the purchase price or market value of any of the stock specified in paragraph (c) is represented by funds borrowed or otherwise obtained for the purpose of acquiring or holding such stock, so state and indicate the amount of the indebtedness as of the latest practicable date. If such funds were borrowed or obtained otherwise than pursuant to a margin account or bank loan in the regular course of business of a bank, broker or dealer, briefly describe the transaction, and state the names of the parties.

(e) State whether or not you are a [party] to any contracts, arrangements or understandings with any person with respect to any stock of the insurer, including, but not limited to joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. If so name the persons with whom such contracts, arrangements, or understandings exist and give the details thereof.

(f) State the amount of stock of the insurer owned beneficially, directly, or indirectly, by each of your associates and the name and address of each such associate.

(g) State the amount of each class of stock of any parent, subsidiary or affiliate of the insurer which you own beneficially, directly, or indirectly.

Item 4. Further Matters.

(a) Describe the time and circumstances under which you became a participant in the solicitation and state the nature and extent of your activities or proposed activities as a participant.

(b) Describe briefly, and where practicable state the approximate amount of, any material interest, direct or indirect, of yourself and of each of your associates in any material transactions since the beginning of the company's last fiscal year, or in any material proposed transactions, to which the company or any of its subsidiaries or affiliates was or is to be a party.

(c) State whether or not you or any of your associates have any arrangement or understanding with any person

(1) with respect to any future employment by the insurer or its subsidiaries or affiliates; or

(2) with respect to any future transactions to which the insurer or any of its subsidiaries or affiliates will or may be a party.

If so, describe such arrangement or understanding and state the names of the parties thereto.

Item 5. Signature.

The statement shall be dated and signed in the following manner:

I certify that the statements made in this statement are true, complete, and correct, to the best of my knowledge and belief.

(Date)

History

• Effective 1994-06-26

Chapter 10 Unincorporated Mutual Associations

Neb. Admin. Code tit. 210, ch. 10 Unincorporated Mutual Associations {#sec-210-nac-10 omnilex-key=us-ne-regs-official--title-210--210 NAC 10}

001. Statutory authority . Pursuant to the authority granted in Neb. Rev. Stat. §§ 44-101.01 and 44-386.08, the Department of Insurance hereby adopts the following Rule:

002. Statement of policy . The purpose of this Rule is to implement the intent of the Legislature as set out in Neb. Rev. Stat. § 44-101, with respect to the officers, directors and members of unincorporated mutual associations.

003. Limitation of membership . No association may have a membership of more than 2,500 members. Any association which presently has a membership of more than 2,500 members shall not accept any new members until the membership total is below 2,500.

004. Equal treatment of members . No person shall be a member of any association unless he pays the same membership fee and assessments that are charged all other members. All officers and directors must be residents of the State of Nebraska.

005. Prohibited expense payments . No personal expenses shall be paid to any officer, director or member. Rent may not be paid on office space unless the rent is approved at a regular or special meeting by the members.

006. Filings; disapproval . The Director may disapprove any filing if it be determined that said filing does not meet statutory and regulatory standards.

007. Dissolution . In the event any association desires to dissolve or merge, written approval must be obtained from the Department of Insurance. Application must be made and approved before any disbursement of any funds under this section is made.

008. Distribution of funds to members . If, at the end of any calendar year, a surplus exists in the allowable fund, distribution shall be equitably divided among the members in good standing that date. Application must be made to the Department of Insurance on or before March 15 of the year following said end of calendar year and distribution approved.

009. Change of principal office . Approval must be obtained in writing from the Department of Insurance before the principal office of any association can be changed. The request may be by letter from the President or Secretary and the reasons for the request stated.

010. Proxies; addresses; notice . No payment shall be made for any proxy from the funds of the association. Notice of any meeting and the names and addresses of the officers and directors elected at any meeting shall be sent to the Department of Insurance. Such notice and names and addresses shall not constitute a filing.

011. Books and records; examination . The books and records of every association shall be kept up-to-date and in order. The annual statement must be completed in its entirety. Whenever it is deemed necessary by the Director of Insurance to conduct an examination or inspection of the books and records of any association, officer, director or employee, the association shall pay the actual expenses, mileage and salary of the examiner.

History

• Effective 2012-08-04

Chapter 14 Advertisements of Accident and Sickness Insurance

Neb. Admin. Code tit. 210, ch. 14 Advertisements of Accident and Sickness Insurance {#sec-210-nac-14 omnilex-key=us-ne-regs-official--title-210--210 NAC 14}

001. Statutory authority . This regulation is issued by the Director of Insurance pursuant to Section 44-101:01 R.S. 1943. This rule is intended to set the minimum standards for rules governing advertisements of accident and sickness insurance and shall apply to 44-1522 et seq. R.S. 1943.

002. Purpose . The purpose of these rules is to assure truthful and adequate disclosure of all material and relevant information in the advertising of accident and sickness insurance. This purpose is intended to be accomplished by the establishment of, and adherence to, certain minimum standards and guidelines of conduct in the advertising of accident and sickness insurance in a manner which prevents unfair competition among insurers and is conductive to the accurate presentation and description to the insurance buying public of a policy of such insurance offered through various advertising media.

003. Applicability .

003.01 These rules shall apply to any accident and sickness insurance "advertisement", as that term is hereinafter defined in Sections 004.01, 004.07, 004.08 and 004.09, unless otherwise specified in these rules, intended for presentation, distribution or dissemination in this State when such presentation, distribution or dissemination is made either directly or indirectly by or on behalf of an insurer, agent, broker or solicitor as those terms are defined in the Insurance Code of this State and these rules.

003.02 Every insurer shall establish and at all times maintain a system of control over the content, form and method of dissemination of all advertisements of its policies. All such advertisements, regardless of by whom written, created, designed or presented, shall be the responsibility of the insurer whose policies are so advertised.

004. Definitions .

004.01 An advertisement for the purpose of these rules shall include:

004.01A printed and published material, audio-visual material, and descriptive literature of an insurer used in direct mail, newspapers, magazines, radio scripts, TV scripts, billboards, and similar displays; and

004.01B descriptive literature and sales aids of all kinds issued by an insurer, agent or broker for presentation to members of the insurance buying public, including but not limited to circulars, leaflets, booklets, depictions, illustrations, and solicitation form letters; and

004.01C prepared sales talks, presentations and material for use by agents, brokers and solicitors.

004.02 "Policy" for the purpose of these rules shall include any policy, plan, certificate, contract, agreement, statement of coverage, rider or endorsement which provides accident or sickness benefits, or medical, surgical or hospital expense benefits, whether on an indemnity, reimbursement, service or prepaid basis, except when issued in connection with another kind of insurance other than life, and except disability, waiver of premium and double indemnity benefits included in life insurance and annuity contracts.

004.03 "Insurer" for the purpose of these rules shall include any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds, fraternal benefit society, health maintenance organization, and any other legal entity which is defined as an "insurer" in the Insurance Code of this State and is engaged in the advertisement of a policy as "policy" is herein defined.

004.04 "Exception" for the purpose of these rules shall mean any provision in a policy whereby coverage for a specified hazard is entirely eliminated; it is a statement of a risk not assumed under the policy.

004.05 "Reduction" for the purpose of these rules shall mean any provision which reduces the amount of the benefit; a risk of loss is assumed but payment upon the occurrence of such loss is limited to some amount or period less than would be otherwise payable had such reduction not been used.

004.06 "Limitation" for the purpose of these rules shall mean any provision which restricts coverage under the policy other than an exception or a reduction.

004.07 "Institutional Advertisements" for the purpose of these rules shall mean an advertisement having as its sole purpose the promotion of the Reader's or Viewer's interest in the concept of accident and sickness insurance, or the promotion of the insurer.

004.08 "Invitation to Inquire" for the purpose of these rules shall mean an advertisement having as its objective the creation of a desire to inquire further about the product and which is limited to a brief description of the loss for which the benefit is payable, and which may contain:

004.08A The dollar amount of benefit payable, and/or

004.08B The period of time during which the benefit is payable; provided the advertisement does not refer to cost. An advertisement which specifies either the dollar amount of benefit payable or the period of time during which the benefit is payable shall contain a provision in effect as follows:

"For costs and further details of the coverage, including exclusions, any reduction or limitations and the terms under which the policy may be continued in force, see your agent or write to the company. "

004.09 "Invitation to Contract" for the purpose of these rules shall mean an advertisement which is neither an invitation to inquire nor an institutional advertisement.

005. Method of disclosure of required information . All information required to be disclosed by these rules shall be set out conspicuously and in close conjunction with the statements to which such information relates or under appropriate captions of such prominence that it shall not be minimized, rendered obscure or presented in an ambiguous fashion or intermingled with the context of the advertisement so as to be confusing or misleading.

006. Form and Content of Advertisements .

006.01 The format and content of an advertisement of an accident or sickness insurance policy shall be sufficiently complete and clear to avoid deception or the capacity or tendency to mislead or deceive whether an advertisement has a capacity or tendency to mislead or deceive shall be determined by the Director of Insurance from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence, within the segment of the public to which it is directed.

006.02 Advertisements shall be truthful and not misleading in fact or in implication. Words or phrases, the meaning of which is clear only by implication or by familiarity with insurance terminology, shall not be used.

007. Advertisements of Benefits Payable, Losses Covered or Premiums Payable .

007.01 Deceptive Words, Phrases or Illustrations Prohibited

007.01A No advertisement shall omit information or use words, phrases, statements, references or illustrations if the omission of such information or use of such words, phrases, statements, references, or illustrations has the capacity, tendency or effect of misleading or deceiving purchasers or prospective purchasers as to the nature or extent of any policy benefit payable, loss covered or premium payable. The fact that the policy offered is made available to a prospective insured for inspection prior to consummation of the sale or an offer is made to refund the premium if the purchaser is not satisfied, does not remedy misleading statements.

007.01B No advertisement shall contain or use words or phrases such as, "all"; "full"; "complete"; "comprehensive"; "unlimited"; "up to"; “as high as”; "this policy will help pay your hospital and surgical bills"; "this policy will help fill some of the gaps that Medicare and your present insurance leave out"; "this policy will help to replace your income" (when used to express loss of time benefits); or similar words and phrases, in a manner which exaggerates any benefits beyond the terms of the policy.

007.01C An advertisement shall not contain descriptions of a policy limitation, exception, or reduction, worded in a positive manner to imply that it is a benefit, such as, describing a waiting period as a "benefit builder", or stating "even pre-existing conditions are covered after two years." Words and phrases used in an advertisement to describe such policy limitations, exceptions and reductions shall fairly and accurately describe the negative features of such limitations, exceptions and reductions of the policy offered.

007.01D No advertisement of a benefit for which payment is conditional upon confinement in a hospital or similar facility shall use words or phrases such as "tax free"; "extra cash"; "extra income"; "extra pay"; or substantially similar words or phrases in such a manner as to have the capacity, tendency or effect of misleading the public into believing that the policy advertised will, in some way, enable them to make a profit from being hospitalized.

007.01E No advertisement of a hospital or other similar facility confinement benefit shall advertise that the amount of the benefit is payable on a monthly or weekly basis when, in fact, the amount of the benefit payable is based upon a daily pro rata basis relating to the number of days of confinement unless such statements of such monthly or weekly benefit amounts are followed immediately by equally prominent statements of the benefit payable on a daily basis; for example, either of the following statements is acceptable: $1,000.00 a Month ($33.33 a Day)" or “$33.33 a Day ($1,000.00 a Month)”. When the policy contains a limit on the number of days of coverage provided, such limit must appear in the advertisement.

007.01F No advertisement of a policy covering only one disease or a list of specified diseases shall imply coverage beyond the terms of the policy. Synonymous terms shall not be used to refer to any disease so as to imply broader coverage than is the fact.

007.01G An advertisement for a policy providing benefits for specified illnesses only, such as cancer, or for specified accidents only, such as automobile accidents, shall clearly and conspicuously in prominent type state the limited nature of the policy. The statement shall be in language identical to, or substantially similar to the following: "THIS IS A LIMITED POLICY"; "THIS IS A CANCER ONLY POLICY"; "THIS IS AN AUTOMOBILE ACCIDENT ONLY POLICY".

007.01 H An advertisement of a direct response insurance product shall not imply that because "no insurance agent will call and no commissions will be paid to agents" that it is "a low cost plan," or use other similar words or phrases because the cost of advertising and servicing such policies is a substantial cost in the marketing of a direct response insurance product.

007.02 Exceptions, Reductions and Limitations

007.02A When an advertisement which is an invitation to contract refers to either a dollar amount, or a period of time for which any benefit is payable, or the cost of the policy, or specific policy benefit, or the loss for which such benefit is payable, it shall also disclose those exceptions, reductions and limitations affecting the basic provisions of the policy without which the advertisement would have the capacity or tendency to mislead or deceive.

007.02B When a policy contains a waiting, elimination, probationary or similar time period between the effective date of the policy and the effective date of coverage under the policy or a time period between the date a loss occurs and the date benefits begin to accrue for such loss, an advertisement which is subject to the requirements of the preceding paragraph shall disclose the existence of such periods.

007.02C An advertisement shall not use the words "only"; "just"; “merely”; "minimum"; or similar words or phrases to describe the applicability of any exceptions and reductions in any manner which has the capacity or tendency to mislead or deceive, such as: "This policy is subject to the following minimum exceptions and reductions".

007.03 Pre-Existing Conditions

007.03A An advertisement which is subject to the requirements of Section 007.02 shall, in negative terms, disclose the extent to which any loss is not covered if the cause of such loss is traceable to a condition existing prior to the effective date of the policy. The use of the term “pre-existing condition” without an appropriate definition or description shall not be used. Pre-existing condition shall not be defined to be more restrictive than the following: Pre-existing condition means the existence of symptoms which would cause an ordinarily prudent person to seek diagnosis, care or treatment prior to the effective date of the policy; or a condition for which medical advice or treatment was recommended by a physician or received from a physician prior to the effective date of the policy or the effective date of coverage for a newly added family member.

007.03B When a policy does not cover losses resulting from pre-existing conditions, no advertisement of the policy shall state or imply that the applicant's physical condition or medical history will not affect the issuance of the policy or payment of a claim thereunder. This rule prohibits the use of the phrase "no medical examination required" and phrases of similar import, but does not prohibit explaining "automatic issue." If an insurer requires a medical examination for a specified policy, the advertisement if it is an invitation to contract shall disclose that a medical examination is required.

007.03C When an advertisement contains an application form to be completed by the applicant and returned by mail for a direct response insurance product, such application form shall contain a question or statement which reflects the pre-existing condition provisions of the policy immediately preceding the blank space for the applicant's signature. For example, such an application form shall contain a question or statement substantially as follows:

"Do you understand that this policy will not pay benefits during the first .... year(s) after the issue date for a disease or physical condition which you now have or have had in the past?"

Yes.

Or substantially the following statement:

"I understand that the policy applied for will not pay benefits for any loss incurred during the first .... year(s) after the issue date on account of disease or physical condition which I now have or have had in the past."

008. Necessity for Disclosing Policy Provisions Relating to Renewability, Cancellability, and Termination . When an advertisement which is an invitation to contract refers to either a dollar amount or a period of time for which any benefit is payable, or the cost of the policy, or specific policy benefit, or the loss for which such benefit is payable, it shall disclose the provisions relating to renewability, cancellability and termination and any modification of benefits, losses covered or premiums because of age or for other reasons, in a manner which shall not minimize or render obscure the qualifying conditions.

009. Testimonials or Endorsements by Third Parties .

009.01 Testimonials used in advertisements must be genuine, represent the current opinion of the author, be applicable to the policy advertised and be accurately reproduced. The insurer, in using a testimonial, makes as its own all of the statements contained therein, and the advertisement, including such statement, is subject to all the provisions of these rules.

009.02 If the person making a testimonial, an endorsement or an appraisal has a financial interest in the insurer or a related entity as a stockholder, director, officer, employee, or otherwise, such fact shall be disclosed in the advertisement. If a person is compensated for making a testimonial, endorsement or appraisal, such fact shall be disclosed in the advertisement by language substantially as follows:

"Paid Endorsement. "This rule does not require disclosure of union "scale" wages required by union rules if the payment is actually for such "scale" for TV or radio performances. The payment of substantial amounts, directly or indirectly, for "travel and entertainment" for filming or recording of TV or radio advertisements remove the filming or recording from the category of an unsolicited testimonial and require disclosure of such compensation. This rule does not apply to an institutional advertisement which has as its sole purpose theromotion of the insurer.

009.03 An advertisement shall not state or imply that an insurer or a policy has been approved or endorsed by any individual, group of individuals, society, association or other organizations, unless such is the fact, and unless any proprietary relationship between an organization and the insurer is disclosed. If the entity making the endorsement or testimonial has been formed by the insurer or is owned or controlled by the insurer or the person or persons who own or control the insurer, such fact shall be disclosed in the advertisement.

009.04 When a testimonial refers to benefits received under a policy, the specific claim data, including claim number, date of loss, and other pertinent information shall be retained by the insurer for inspection for a period of four years or until the filing of the next regular report on examination of the insurer, whichever is the longer period of time.

010. Use of statistics .

010.01 An advertisement relating to the dollar amounts of claims paid, the number of persons insured, or similar statistical information relating to any insurer or policy shall not use irrelevant facts, and shall not be used unless it accurately reflects all of the relevant facts. Such an advertisement shall not imply that such statistics are derived from the policy advertised unless such is the fact, and when applicable to other policies or plans shall specifically so state.

010.02 An advertisement shall not represent or imply that claim settlements by the insurer are "liberal" or "generous", or use words of similar import, or that claim settlements are or will be beyond the actual terms of the contract. An unusual amount paid for a unique claim for the policy advertised is misleading and shall not be used.

010.03 The source of any statistics used in an advertisement shall be identified in such advertisement.

011. Identification of plan or number of policies .

011.01 When a choice of the amount of benefits is referred to, an advertisement which is an invitation to contract shall disclose that the amount of benefits provided depends upon the plan selected and that the premium will vary with the amount of the benefits selected.

011.02 When an advertisement which is an invitation to contract refers to various benefits which may be contained in two or more policies, other than group master policies, the advertisement shall disclose that such benefits are provided only through a combination of such policies.

012. Disparaging comparisons and statements . An advertisement shall not directly or indirectly make unfair or incomplete comparisons of policies or benefits or comparisons of non-comparable policies of other insurers, and shall not disparage competitors, their policies, services or business methods, and shall not disparage or unfairly minimize methods of marketing insurance.

013. Jurisdictional Licensing and Status of Insurer .

013.01 The advertisement which is intended to be seen or heard beyond the limits or the jurisdiction in which the insurer is licensed shall not imply licensing beyond those limits.

013.02 An advertisement shall not create the impression directly or indirectly that the insurer, its financial condition or status, or the payment of its claims, or the merits, desirability, or advisability of its policy forms or kinds or plans of insurance are approved, endorsed, or accredited by any division or agency of this State or the United States Government.

014. Identity of Insurer .

014.01 The name of the actual insurer shall be stated in all of its advertisements. The form number or numbers of the policy advertised shall be stated in an advertisement which is an invitation to contract. An advertisement shall not use a trade name, any insurance group designation, name of the parent company of the insurer, name of a particular division of the insurer, service mark, slogan, symbol or other device which without disclosing the name of the actual insurer would have the capacity and tendency to mislead or deceive as to the true identity of the insurer.

014.02 No advertisement shall use any combination of words, symbols, or physical materials which by their content, phraseology, shape, color or other characteristics are so similar to combination of words, symbols or physical materials used by agencies of the federal government or of this State, or otherwise appear to be of such a nature that it tends to confuse or mislead prospective insureds into believing that the solicitation is in some manner connected with an agency of the municipal, state, or federal government.

015. Group or Quasi-Group Implications . An advertisement of a particular policy shall not state or imply that prospective insureds become group or quasi-group members covered under a group policy and as such enjoy special rates or underwriting privileges, unless such is the fact.

016. Introductory, Initial or Special Offers .

016.01A An advertisement of an individual policy shall not directly or by implication represent that a contract or combination of contracts is an introductory, initial or special offer, or that applicants will receive substantial advantages not available at a later date, or that the offer is available only to a specified group of individuals, unless such is the fact. An advertisement shall not contain phrases describing an enrollment period as "special," "limited," or similar words or phrases when the insurer uses such enrollment periods as the usual method of advertising accident and sickness insurance.

016.01B An enrollment period during which a particular insurance product may be purchased on an individual basis shall not be offered within this State unless there has been a lapse of not less than five (5) months between the close of the immediately preceding enrollment period for the same product and the opening of the new enrollment period. The advertisement shall indicate the date by which the applicant must mail the application which shall be not less than ten days and not more than forty days from the date that such enrollment period is advertised for the first time. This rule applies to all advertising media, i.e., mail, newspapers, radio, television, magazines and periodicals, by any one insurer. It is inapplicable to solicitations of employees or members of a particular group or association which otherwise would be eligible under specific provisions of the Insurance Code for group, blanket or franchise insurance. The phrase "any one insurer" includes all the affiliated companies of a group of insurance companies under common management or control.

016.01C This rule prohibits any statement or implication to the effect that only a specific number of policies will be sold, or that a time is fixed for the discontinuance of the sale of the particular policy advertised because of special advantages available in the policy, unless such is the fact.

016.01D The phrase "a particular insurance product" in Paragraph 016.01B of this Section means an insurance policy which provides substantially different benefits than those contained in any other policy. Different terms of renewability; an increase or decrease in the dollar amounts of benefits; an increase or decrease in any elimination period or waiting period from those available during an enrollment period for another policy shall not be sufficient to constitute the product being offered as a different product eligible for concurrent or overlapping enrollment periods.

016.02 An advertisement shall not offer a policy which utilizes a reduced initial premium rate in a manner which overemphasizes the availability and the amount of the initial reduced premium. When an insured charges an initial premium that differs in amount from the amount of the renewal premium payable on the same mode, the advertisement shall not display the amount of the reduced initial premium either more frequently or more prominently than the renewal premium, except in the application where it may be mentioned one additional time, and both the initial reduced premium and the renewal premium must be stated in juxtaposition in each portion of the advertisement where the initial reduced premium appears.

016.03 Special awards, such as a "safe drivers' award" shall not be used in connection with advertisements of accident or accident and sickness insurance.

017. Statements About an Insurer . An advertisement shall not contain statements which are untrue in fact, or by implication misleading, with respect to the assets, corporate structure, financial standing, age or relative position of the insurer in the insurance business. An advertisement shall not contain a recommendation by any commercial rating system unless it clearly indicates the purpose of the recommendation and the limitations of the scope and extent of the recommendation.

018. Enforcement Procedures .

018.01 Advertising File. Each insurer shall maintain at its home or principal office a complete file containing every printed, published or prepared advertisement of its individual policies and typical printed, published or prepared advertisements of its blanket, franchise and group policies hereafter disseminated in this or any other state whether or not licensed in such other state, with a notation attached to each such advertisement which shall indicate the manner and extent of distribution and the form number of any policy advertised. Such file shall be subject to regular and periodical inspection by this Department. All such advertisements shall be maintained in said file for a period of either four years or until the filing of the next regular report of examination of the insurer, whichever is the longer period of time.

018.02 Certificate of Compliance. Each insurer required to file an Annual Statement which is now or which hereafter becomes subject to the provisions of these rules must file with this Department with its Annual Statement a Certificate of Compliance executed by an authorized officer of the insurer wherein it is stated that to the best of his knowledge, information and belief the advertisements which were disseminated by the insurer during the preceding statement year complied or were made to comply in all respects with the provisions of these rules and the Insurance Laws of this State as implemented and interpreted by these rules.

019. Severability Provision . If any Section or portion of a Section of these rules, or the applicability thereof to any person or circumstance is held invalid by a court, the remainder of the rules, or the applicability of such provision to other persons or circumstances, shall not be affected thereby.

020. Effective date . This regulation shall become effective 90 days after its approval. Approved this 3rd day of February, 1975.

History

• Effective 1994-06-26

Chapter 15 Variable Life Insurance Contracts

Neb. Admin. Code tit. 210, ch. 15 Variable Life Insurance Contracts {#sec-210-nac-15 omnilex-key=us-ne-regs-official--title-210--210 NAC 15}

001. Authority . The following regulations applicable to variable life insurance policies are promulgated under the authority of Neb.Rev.Stat. §44-101.01, and are operative January 1, 1985.

002. Definitions . As used in this regulation:

002.01 "Affiliate" of an insurer means any person, directly or indirectly, controlling, controlled by, or under common control with such insurer; any person who regularly furnishes investment advice to such insurer with respect to its separate accounts for which a specific fee or commission is charged; or any director, officer, partner, or employee of any such insurer, controlling or controlled person, or person providing investment advice or any member of the immediate family of such person.

002.02 "Agent" means any person, corporation, partnership, or other legal entity which is licensed by this state as a life insurance agent.

002.03 "Assumed investment rate" means the rate of investment return which would be required to be credited to a variable life insurance policy, after deduction of charges for taxes, investment expenses, and mortality and expense guarantees to maintain the variable death benefit equal at all times to the amount of death benefit, other than incidental insurance benefits, which would be payable under the plan of insurance if the death benefit did not vary according to the investment experience of the separate account.

002.04 "Benefit base" means the amount, to which the net investment return is applied.

002.05 "Director" means the Director of Insurance of this state.

002.06 "Control" (including the terms "controlling", "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or non-management services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, hold with the power to vote, or holds proxies representing more than ten (10) percent of the voting securities of any other person. This presumption may be rebutted by a showing made to the satisfaction of the Director that control does not exist in fact. The Director may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.

002.07 "Flexible premium policy" means any variable life insurance policy other than a scheduled premium policy as specified in Subsection 002.15.

002.08 "General account" means all assets of the insurer other than assets in separate accounts established pursuant to Neb.Rev.Stat. §44-2212, and §44-402.01, or pursuant to the corresponding section of the Insurance Laws of the state of domicile of a foreign or alien insurer, whether or not for variable life insurance.

002.09 "Incidental insurance benefit" means all insurance benefits in a variable life insurance policy, other than the variable death benefit and the minimum death benefit, including but not limited to accidental death and dismemberment benefits, disability benefits, guaranteed insurability options, family income, or term riders.

002.10 "May" is permissive.

002.11 "Minimum death benefit" means the amount of the guaranteed death benefit, other than incidental insurance benefits, payable under a variable life insurance policy regardless of the investment performance of the separate account.

002.12 "Net investment return" means the rate of investment return in a separate account to be applied to the benefit base.

002.13 "Person" means an individual, corporation, partnership, association, trust or fund.

002.14 "Policy processing day" means the day on which charges authorized in the policy are deducted from the policy's cash value.

002.15 "Scheduled premium policy" means any variable life insurance policy under which both the amount and timing of premium payments are fixed by the insurer.

002.16 "Separate account" means a separate account established under Neb.Rev.Stat. §44-402.01 or pursuant to the corresponding Section of the Insurance Laws of the state of domicile of a foreign or alien insurer.

002.17 "Shall" is mandatory.

002.18 "Variable death benefit" means the amount of the death benefit other than incidental insurance benefits, payable under a variable life insurance policy dependent on the investment performance of the separate account, which the insurer would have to pay in the absence of the minimum death benefit.

002.19 "Variable life insurance policy" means any individual policy which provides for life insurance the amount or duration of which varies according to the investment experience of any separate account or accounts established and maintained by the insurer as to such policy, pursuant to Neb.Rev.Stat. §44-402.01 or pursuant to the corresponding section of the Insurance Laws of the state of domicile of a foreign or alien insurer.

003. Qualification of insurer to issue variable life insurance . The following requirements are applicable to all insurers either seeking authority to issue variable life insurance in this state or having authority to issue variable life insurance in this state.

003.01 Licensing and Approval to Do Business in This State. An insurer shall not deliver or issue for delivery in this state any variable life insurance policy unless:

003.01A the insurer is licensed or organized to do a life insurance business in this state;

003.01B the insurer has obtained the written approval of the Director for the issuance of variable life insurance policies in this state. The Director shall grant such written approval only after he has found that:

003.01B(1) the plan of operation for the issuance of variable life insurance policies is not unsound;

003.01B(2) the general character, reputation, and experience of the management and those persons or firms proposed to supply consulting, investment, administrative, or custodial services to the insurer are such as to reasonably assure competent operation of the variable life insurance business of the insurer in this state; and

003.01B(3) the present and foreseeable future financial condition of the insurer and its method of operation in connection with the issuance of such policies is not likely to render its operation hazardous to the public or its policyholders in this state. The Commissioner shall consider, among other things:

003.01B(3)(a) the history of operation and financial condition of the insurer;

003.01B(3)(b) the qualifications, fitness, character, responsibility, reputation, and experience of the officers and directors and other management of the insurer and those persons or firms proposed to supply consulting, investment, administrative, or custodial services to the insurer;

003.01B(3)(c) the applicable law and regulations under which the insurer is authorized in its state of domicile to issue variable life insurance policies. The state of entry of an alien insurer shall be deemed its state of domicile for this purpose; and

003.01B(3)(d) if the insurer is a subsidiary of, or is affiliated by common management or ownership with another company, its relationship to such other company and the degree to which the requesting insurer, as well as the other company, meet these standards.

003.02 Filing for Approval to Do Business in This State. The Director may, at his discretion, require that an insurer, before it delivers or issues for delivery any variable life insurance policy in this state, file with this Department the following information for the consideration of the Director in making the determination required by Subsection 003.01B:

003.02A copies of and a general description of the variable life insurance policies it intends to issue;

003.02B a general description of the methods of operation of the variable life insurance business of the insurer, including methods of distribution of policies and the names of those persons or firms proposed to supply consulting, investment, administrative, custodial or distribution services to the insurer;

003.02C with respect to any separate account maintained by an insurer for any variable life insurance policy, a statement of the investment policy the insurer intends to follow for the investment of the assets held in such separate account, and a statement of procedures for changing such investment policy. The statement of investment policy shall include a description of the investment objectives intended for the separate account;

003.02D a description of any investment advisory services contemplated as required by Subsection 006.10;

003.02E a copy of the statutes and regulations of the state of domicile of the insurer under which it is authorized to issue variable life insurance policies; and

003.02F biographical data with respect to officers and directors of the insurer on the National Association of Insurance Commissioners Uniform Biographical Data Form; and

003.02G a statement of the insurer's actuary describing the mortality and expense risks which the insurer will bear under the policy.

003.03 Standards of Suitability. Every insurer seeking approval to enter into the variable life insurance business in this state shall establish and maintain a written statement specifying the Standards of Suitability to be used by the insurer. Such Standards of Suitability shall specify that no recommendations shall be made to an applicant to purchase a variable life insurance policy and that no variable life insurance policy shall be issued in the absence of reasonable grounds to believe that the purchase of such policy is not unsuitable for such applicant on the basis of information furnished after reasonable inquiry of such applicant concerning the applicant's insurance and investment objectives, financial situation and needs, and any other information known to the insurer or to the agent making the recommendation.

003.04 Use of Sales Materials. An insurer authorized to transact variable life insurance business in this state shall not use any sales material, advertising material, or descriptive literature or other materials of any kind in connection with its variable life insurance business in this state which is false, misleading, deceptive or inaccurate.

003.05 Requirements Applicable to Contractual Services. Any material contract between an insurer and suppliers of consulting, investment, administrative, sales, marketing, custodial, or other services with respect to variable life or insurance operations shall be in writing and provide that the supplier of such services shall furnish the Commissioner with any information or reports in connection with such services which the Commissioner may request in order to ascertain whether the variable life insurance operations of the insurer are being conducted in a manner consistent with these regulations and any other applicable law or regulations.

003.06 Reports to the Director. Any insurer authorized to transact the business of variable life insurance in this state shall submit to the Director, in addition to any other materials which may be required by this regulation or any other applicable laws or regulations:

003.06A an Annual Statement of the business of its separate account or accounts in such form as may be prescribed by the National Association of Insurance Commissioners; and

003.06B prior to the use in this state any Information furnished to Applicants as provided for in Section 007; and

003.06C prior to the use in this state the form of any of the Reports to Policyholders as provided for in Section 009; and

003.06D such additional information concerning its variable life insurance operations or its separate accounts as the Director shall deem necessary.

Any material submitted to the Director under this Section shall be disapproved if it is found to be false, misleading, deceptive, or inaccurate in any material respect and, if previously distributed, the Director shall require the distribution of an amended report.

003.07 Authority of Director to Disapprove: Any material required to be filed with and approved by the Director shall be subject to disapproval if at any time it is found by him not to comply with the standards established by this regulation.

004. Insurance policy requirements . Policy Qualifications. The Director shall not approve any variable life insurance form filed pursuant to this regulation unless it conforms to the requirements of this Section.

004.01 Filing of Variable Life Insurance Policies: All variable life insurance policies, and all riders, endorsements, applications, and other related documents which are to be attached to and made a part of the policy and which relate to the variable nature of this policy, shall be filed with the Director and approved by him in writing prior to delivery or issuance for delivery in this state.

004.01A The procedure and requirements for such filing and approval shall be, to the extent appropriate and not inconsistent with this regulation, the same as those otherwise applicable to other life insurance policies.

004.01B The Director may approve variable life insurance policies and related forms with provisions the Director deems to be not less favorable to the policyholder and the beneficiary than those required by this regulation.

004.02 Mandatory Policy Benefit and Design Requirements: Variable life insurance policies delivered or issued for delivery in this state shall comply with the following minimum requirements:

004.02A Mortality and expense risks shall be borne by the insurer. The mortality and expense charges shall be subject to the maximums stated in the contract.

004.02B For scheduled premium policies, a minimum death benefit shall be provided in an amount at least equal to the initial face amount of the policy as long as premiums are duly paid (subject to the provisions of Subsection 004.04);

004.02C The policy shall reflect the investment experience of one or more separate accounts established and maintained by the insurer. The insurer must demonstrate that the reflection of investment experience in the variable life insurance policy is actuarially sound.

004.02D Each variable life insurance policy shall be credited with the full amount of the net investment return applied to the benefit base.

004.02E Any changes in variable death benefits of each variable life insurance policy shall be determined at least annually.

004.02F The cash value of each variable life insurance policy shall be determined at least monthly. The method of computation of cash values and other non-forfeiture benefits, as described either in the policy or in a statement filed with the commissioner of the state in which the policy is delivered, or issued for delivery, shall be in accordance with actuarial procedures that recognize the variable nature of the policy. The method of computation must be such that, if the net investment return credited to the policy at all times from the date of issue should be equal to the assumed investment rate with premiums and benefits determined accordingly under the terms of the policy, then the resulting cash values and other non-forfeiture benefits must be at least equal to the minimum values required by Neb.Rev.Stat. §§44-407 through 44-407.09, for a general account policy with such premiums and benefits. The assumed investment rate shall not exceed the maximum interest rate permitted under the Standard Non-Forfeiture Law of this state. If the policy does not contain an assumed investment rate this demonstration shall be based on the maximum interest rate permitted under the Standard Non-Forfeiture Law. The method of computation may disregard incidental minimum guarantees as to the dollar amounts payable. Incidental minimum guarantees include, for example, but are not to be limited to, a guarantee that the amount payable at death or maturity shall be at least equal to the amount that otherwise would have been payable if the net investment return credited to the policy at all times from the date of issue had been equal to the assumed investment rate.

004.02G The computation of values required for each variable life insurance policy may be based upon such reasonable and necessary approximations as are acceptable to the Director.

004.03 Mandatory Policy Provisions. Every variable life insurance policy filed for approval in this state shall contain at least the following:

004.03A the cover page or pages corresponding to the cover pages of each such policy shall contain:

004.03A(1) a prominent statement in either contrasting color or boldface type that the amount or duration of death benefit may be variable or fixed under specified conditions;

004.03A(2) a prominent statement in either contrasting color or boldface type that cash values may increase or decrease in accordance with the experience of the separate account subject to any specified minimum guarantees;

004.03A(3) a statement describing any minimum death benefit required pursuant to Subsection 004.02B;

004.03A(4) the method, or a reference to the policy provision which describes the method, for determining the amount of insurance payable at death;

004.03A(5) to the extent permitted by state law, a captioned provision that the policyholder may return the variable life insurance policy within 10 days of receipt of the policy by the policyholder, and receive a refund equal to the sum of (A) the difference between the premiums paid including any policy fees or other charges and the amounts allocated to any separate accounts under the policy and (B) the value of the amounts allocated to any separate accounts under the policy, on the date the returned policy is received by the insurer or its agent. Until such time as state law authorizes the return of payments as calculated in the preceding sentence, the amount of the refund shall be the total of all premium payments for such policy.

004.03A(6) such other items as are currently required for fixed benefit life insurance policies and which are not inconsistent with this regulation.

004.03B(1) For scheduled premium policies, a provision for a grace period of not less than thirty-one days from the premium due date which shall provide that where the premium is paid within the grace period, policy values will be the same, except for the deduction of any overdue premium, as if the premium were paid on or before the due date.

004.03B(2) For flexible premium policies, a provision for a grace period beginning on the policy processing day when the total charges authorized by the policy that are - necessary to keep the policy in force until the next policy processing day exceed the amounts available under the policy to pay such charges in accordance with the terms of the policy. Such grace period shall end on a date not less than 61 days after the mailing date of the Report to Policyholders required by Subsection 009.03. The death benefit payable during the grace period will equal the death benefit in effect immediately prior to such period less any overdue charges. If the policy processing days occur monthly, the insurer may require the payment of not more than 3 times the charges which were due on the policy processing day on which the amounts available under the policy were insufficient to pay all charges authorized by the policy that are necessary to keep such policy in force until the next policy processing day.

004.03C For scheduled premium policies, a provision that the policy will be reinstated at any time within two years from the date of default upon the written application of the insured and evidence of insurability, including good health, satisfactory to the insurer, unless the cash surrender value has been paid or the period of extended insurance has expired, upon the payment of any outstanding indebtedness arising subsequent to the end of the grace period following the date of default together with accrued interest thereon to the date of reinstatement and payment of an amount not exceeding the greater of:

004.03C(1) all overdue premiums with interest at a rate not exceeding 8 percent per annum compounded annually and any indebtedness in effect at the end of the grace period following the date of default with interest as provided in Neb.Rev.Stat. §44-502.03; or

004.03C(2) 110% of the increase in cash value resulting from reinstatement plus all overdue premiums for incidental insurance benefits with interest at a rate not exceeding 8 percent per annum compounded annually.

004.03D A full description of the benefit base and of the method of calculation and application of any factors used to adjust variable benefits under the policy;

004.03E A provision designating the separate account to be used and stating that:

004.03E(1) the assets of such separate account shall be available to cover the liabilities of the general account of the insurer only to the extent that the assets of the separate account exceed the liabilities of the separate account arising under the variable life insurance policies supported by the separate account.

004.03E(2) the assets of such separate account shall be valued at least as often as any policy benefits vary but at least monthly.

004.03F A provision specifying what documents constitute the entire insurance contract under state law;

004.03G A designation of the officers who are empowered to make an agreement or representation on behalf of the insurer and an indication that statements by the insured, or on his behalf, shall be considered as representations and not warranties;

004.03H An identification of the owner of the insurance contract;

004.03I A provision setting forth conditions or requirements as to the designation, or change of designation, of a beneficiary and a provision for disbursement of benefits in the absence of a beneficiary designation;

004.03J A statement of any conditions or requirements concerning the assignment of the policy;

004.03K A description of any adjustments in policy values to be made in the event of misstatement of age or sex of the insured;

004.03L A provision that the policy shall be incontestable by the insurer after it has been in force for two years during the lifetime of the insured, provided, however, that any increase in the amount of the policy's death benefits subsequent to the policy issue date, which increase occurred upon a new application or request of the owner and was subject to satisfactory proof of the insured's insurability, shall be incontestable after any such increase has been in force, during the lifetime of the insured, for two years from the date of issue of such increase;

004.03M A provision stating that the investment policy of the separate account shall not be changed without the approval of the Insurance Commissioner of the state of domicile of the insurer, and that the approval process is on file with the Director of this state;

004.03N A provision that payment of variable death benefits in excess of any minimum death benefits, cash values, policy loans, or partial withdrawals (except when used to pay premiums) or partial surrenders may be deferred:

004.03N(l) for up to six months from the date of request, if such payments are based on policy values which do not depend on the investment performance of the separate account, or

004.03N(2) otherwise, for any period during which the New York Stock Exchange is closed for trading (except for normal holiday closing) or when the Securities and Exchange Commission has determined that a state of emergency exists which may make such payment impractical.

004.03O If settlement options are provided, at least one such option shall be provided on a fixed basis only;

004.03P A description of the basis for computing the cash value and the surrender value under the policy shall be included;

004.03Q Premiums or charges for incidental insurance benefits shall be stated separately;

004.03R Any other policy provision required by this regulation;

004.03S Such other items as are currently required for fixed benefit life insurance policies and are not inconsistent with this regulation;

004.03T A provision for non-forfeiture insurance benefits. The insurer may establish a reasonable minimum cash value below which any non-forfeiture insurance options will not be available.

004.04 Policy Loan Provisions. Every variable life insurance policy, other than term insurance policies and pure endowment policies, delivered or issued for delivery in this state shall contain provisions which are not less favorable to the policyholder than the following:

A provision for policy loans after the policy has been in force for 3 full years which provides the following:

004.04A At least 75% of the policy's cash surrender value may be borrowed;

004.04B The amount borrowed shall bear interest at a rate not to exceed that permitted by state insurance law.

004.04C Any indebtedness shall be deducted from the proceeds payable on death.

004.04D Any indebtedness shall be deducted from the cash surrender value upon surrender or in determining any non-forfeiture benefit.

004.04E For scheduled premium policies, whenever the indebtedness exceeds the cash surrender value, the insurer shall give notice of any intent to cancel the policy if the excess indebtedness is not repaid within thirty-one days after the date of mailing of such notice. For flexible premium policies, whenever the total charges authorized by the policy that are necessary to keep the policy in force until the next following processing day exceed the amounts available under the policy to pay such charges, a report must be sent to the policyholder containing the information specified by Subsection 009.03.

004.04F The policy may provide that if, at any time, so long as premiums are duly paid, the variable death benefit is less than it would have been if no loan or withdrawal had ever been made, the policyholder may increase such variable death benefit up to what it would have been if there had been no loan or withdrawal by paying an amount not exceeding 110% of the corresponding increase in cash value and by furnishing such evidence of insurability as the insurer may request.

004.04G The policy may specify a reasonable minimum amount which may be borrowed at any time but such minimum shall not apply to any automatic premium loan provision.

004.04H No policy loan provision is required if the policy is under extended insurance non-forfeiture option.

004.04I The policy loan provisions shall be constructed so that variable life insurance policyholders who have not exercised such provisions are not disadvantaged by the exercise thereof.

004.04J Amounts paid to the policyholders upon the exercise of any policy loan provision shall be withdrawn from the separate account and shall be returned to the separate account upon repayment except that a stock insurer may provide the amounts for policy loans from the general account.

004.05 Other Policy Provisions. The following provision may in substance be included in a variable life insurance policy or related form delivered or issued for delivery in this state:

004.05A an exclusion for suicide within two years of the issue date of the policy; provided, however, that to the extent of the increased death benefits only, the policy may provide an exclusion for suicide within two years of any increase in death benefits which results from an application of the owner subsequent to the policy issue date;

004.05B incidental insurance benefits may be offered on a fixed or variable basis;

004.05C policies issued on a participating basis shall offer to pay dividend amounts in cash. In addition, such policies may offer the following dividend options:

004.05C(1) the amount of the dividend may be credited against premium payments;

004.05C(2) the amount of the dividend may be applied to provide amounts of additional fixed or variable benefit life insurance;

004.05C(3) the amount of the dividend may be deposited in the general account at a specified minimum rate of interest;

004.05C(4) the amount of the dividend may be applied to provide paid-up amounts of fixed benefit one-year term insurance;

004.05C(5) the amount of the dividend may be deposited as a variable deposit in a separate account.

004.05D A provision allowing the policyholder to elect in writing in the application for the policy or thereafter in automatic premium loan on a basis not less favorable than that required of policy loans under Subsection 004.04, except that a restriction that no more than two consecutive premiums can be paid under this provision may be imposed;

004.05E A provision allowing the policyholder to make partial withdrawals;

004.05F Any other policy provision approved by the Director.

005. Reserve liabilities for variable life insurance .

005.01 Reserve liabilities for variable life insurance policies shall be established under the Standard Valuation Law in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees.

005.02 For scheduled premium policies reserve liabilities for the guaranteed minimum death benefit shall be the reserve needed to provide for the contingency of death occurring when the guaranteed minimum death benefit exceeds the death benefit that would be paid in the absence of the guarantee, and shall be maintained in the general account of the insurer and shall be not less than the greater of the following minimum reserves:

005.02A The aggregate total of the term costs, if any, covering a period of one full year from the valuation date, of the guarantee on each variable life insurance contract, assuming an immediate one-third depreciation in the current value of the assets of the separate account followed by a net investment return equal to the assumed investment rate; or

005.02B The aggregate total of the "attained age level" reserves on each variable life insurance contract. The "attained age level" reserve on each variable life insurance contract shall not be less than zero and shall equal the "residue", as described in Subsection 005.02B(1), below, of the prior year's "attained age level" reserve on the contract, with any such "residue" increased or decreased by a payment computed on an attained age basis as described in Subsection 005.02B2 below.

005.02B(1) the "residue" of the prior year's "attained age level" reserve on each variable life insurance contract shall not be less than zero and shall be determined by adding interest at the valuation interest rate to such prior year's reserve, deducting the tabular claims based on the "excess", if any, of the guaranteed minimum death benefit over the death benefit that would be payable in the absence of such guarantee, and dividing the net result by the tabular probability of survival. The "excess" referred to in the preceding sentence shall be based on the actual level of death benefits that would have been in effect during the preceding year in the absence of the guarantee, taking appropriate account of the reserve assumptions regarding the distribution of death claim payments over the year.

005.02B(2) the payment referred to in Subsection 005.02B shall be computed so that the present value of a level payment of that amount each year over the future premium paying period of the contract is equal to (A) minus (B) minus (C), where (A) is the present value of the future guaranteed minimum death benefits, (B) is the present value of the future death benefits that would be payable in the absence of such guarantee, and (C) is any "residue", as described in Subsection 005.02B], of the prior year's "attained age level" reserve on such variable life insurance contract. If the contract is paid-up, the payment shall equal (A) minus (B) minus (C). The amounts of future death benefits referred to in (B) shall be computed assuming a net investment return of the separate account which may differ from the assumed investment rate and/or the valuation interest rate but in no event may exceed the maximum interest rate permitted for the valuation of life contracts.

005.02C The valuation interest rate and mortality table used in computing the two minimum reserves described in Subsections 005.02A and 005.02B above shall conform to permissible standards for the valuation of life insurance contracts. In determining such minimum reserve, the company may employ suitable approximations and estimates, including but not limited to groupings and averages.

005.03 For flexible premium policies, reserve liabilities for any guaranteed minimum death benefit shall be maintained in the general account of the insurer and shall be not less than the aggregate total of the term costs, if any, covering the period provided for in the guarantee not otherwise provided for by the reserves held in the separate account assuming an immediate one-third depreciation in the current value of the assets of the separate account followed by a net investment return equal to the valuation interest rate.

The valuation interest rate and mortality table used in computing this additional reserve, if any, shall conform to permissible standards for the valuation of life insurance contracts. In determining such minimum reserve, the company may employ suitable approximations and estimates, including but not limited to groupings and averages.

005.04 Reserve liabilities for all fixed incidental insurance benefits and any guarantees associated with variable incidental insurance benefits shall be maintained in the general account and reserve liabilities for all variable aspects of the variable incidental insurance benefits shall be maintained in a separate account, in amounts determined in accordance with the actuarial procedures appropriate to such benefit.

006. Separate accounts . The following requirements apply to the establishment and administration of variable life insurance separate accounts by any domestic insurer:

006.01 Establishment and Administration of Separate Accounts. Any domestic insurer issuing variable life insurance shall establish one or more separate accounts pursuant to Neb.Rev.Stat. §44-402.01.

006.01A If no law or other regulation provides for the custody of separate account assets and if such insurer is not the custodian of such separate account assets, all contracts for custody of such assets shall be in writing and the Director shall have authority to review and approve both of the terms of any such contract and the proposed custodian prior to the transfer of custody.

006.01B Such insurer shall not without the prior written approval of the Director employ in any material connection with the handling of separate account assets any person who:

006.01B(1) within the last ten years has been convicted of any felony or a misdemeanor arising out of such person's conduct involving embezzlement, fraudulent conversion, or misappropriation of funds or securities or involving violation of Sections 1341, 1342, or 1343 of Title 18, United States Code; or

006.01B(2) within the last ten years has been found by any state regulatory authority to have violated or has acknowledged violation of any provision of any state insurance law involving fraud, deceit, or knowing misrepresentation; or

006.01B(3) within the last ten years has been found by federal or state regulatory authorities to have violated or has acknowledged violation of any provision of federal or state securities laws involving fraud, deceit, or knowing misrepresentation.

006.01C All persons with access to the cash, securities, or other assets of the separate account shall be under bond in an amount of not less than $500,000.00.

006.01D The assets of such separate accounts shall be valued at least as often as variable benefits are determined but in any event at least monthly.

006.02 Amounts in the Separate Account. The insurer shall maintain in each separate account assets with a value at least equal to the greater of the valuation reserves for the variable portion of the variable life insurance policies or the benefit base for such policies.

006.03 Investments by the Separate Account.

006.03A No sale, exchange, or other transfer of assets may be made by an insurer or any of its affiliates between any of its separate accounts or between any other investment account and one or more of its separate accounts unless:

006.03A(1) in case of a transfer into a separate account, such transfer is made solely to establish the account or to support the operation of the policies with respect to the separate account to which the transfer is made; and

006.03A(2) such transfer, whether into or from a separate account, is made by a transfer of cash; but other assets may be transferred if approved by the Director in advance.

006.03B The separate account shall have sufficient net investment income and readily marketable assets to meet anticipated withdrawals under policies funded by the account.

006.04 Limitations on Ownership:

006.04A A separate account shall not purchase or otherwise acquire the securities of any issuer, other than securities issued or guaranteed as to principal and interest by the United States, if immediately after such purchase or. acquisition the value of such investment, together with prior investments of such account in such security valued as required by these regulations, would exceed 10% of the value of the assets of the separate account. The Director may waive this limitation in writing if he believes such waiver will not render the operation of the separate account hazardous to the public or the policyholders in this state.

006.04B No separate account shall purchase or otherwise acquire the voting securities of any issuer if as a result of such acquisition the insurer and its separate accounts, in the aggregate, will own more than 10% of the total issued and outstanding voter securities of such issuer. The Director may waive this limitation in writing if he believes such waiver will not render the operation of the separate account hazardous to the public or the policyholders in this state or jeopardize the independent operation of the issuer of such securities.

006.04C The percentage limitation specified in Subsection 006.04A shall not be construed to preclude the investment of the assets of separate accounts in shares of investment companies registered pursuant to the Investment Company Act of 1940 or other pools of investment assets if the investment and investment policies of such investment companies or asset pools comply substantially with the provisions of Subsection 006.03 and other applicable portions of this regulation.

006.05 Valuation of Separate Account Assets. Investments of the separate account shall be valued at their market value on the date of valuation, or at amortized cost if it approximates market value.

006.06 Separate Account Investment Policy. The investment policy of a separate account operated by a domestic insurer filed under Subsection 003.02C shall not be changed without first filing such change with the Insurance Director.

006.06A Any change filed pursuant to this Subsection shall be effective sixty days after the date it was filed with the Director, unless the Director notifies the insurer before the end of such sixty-day (60) period of his disapproval of the proposed change. At any time the Director may, after notice and public hearing, disapprove any change that has become effective pursuant to this Subsection.

006.06B The Director may disapprove the change if he determines that the change would be detrimental to the interests of the policyholders participating in such separate account.

006.07 Charges Against Separate Account. The insurer must disclose in writing, prior to or contemporaneously with delivery of the policy, all charges that may be made against the separate account, including, but not limited to, the following:

006.07A taxes or reserves for taxes attributable to investment gains and income of the separate account;

006.07B actual cost of reasonable brokerage fees and similar direct acquisition and sale costs incurred in the purchase or sale of separate account assets;

006.07C actuarially determined costs of insurance (tabular costs) and the release of separate account liabilities;

006.07D charges for administrative expenses and investment management expenses, including internal costs attributable to the investment management of assets of the separate account;

006.07E a charge, at a rate specified in the policy, for mortality and expense guarantees;

006.07F any amounts in excess of those required to be held in the separate accounts;

006.07G charges for incidental insurance benefits.

006.08 Standards of Conduct. Every insurer seeking approval to enter into the variable life insurance business in this state shall adopt by formal action of its Board of Directors a written statement specifying the Standards of Conduct of the insurer, its officers, directors, employees, and affiliates with respect to the purchase or sale of investments of separate accounts. Such Standards of Conduct shall be binding on the insurer and those to whom it refers. A code or codes of ethics meeting the requirements of Section 17j under the Investment Company Act of 1940 and applicable rules and regulations thereunder shall satisfy the provisions of this Section.

006.09 Conflicts of Interest. Rules under any provision of the Insurance Laws of this state or any regulation applicable to the officers and directors of insurance companies with respect to conflicts of interest shall also apply to members of any separate account's committee or other similar body.

006.10 Investment Advisory Services to a Separate Account. An insurer shall not enter into a contract under which any person undertakes, for a fee, to regularly furnish investment advice to such insurer with respect to its separate accounts maintained for variable life insurance policies unless:

006.10A the person providing such advise is registered as an investment adviser under the Investment Advisers Act of 1940; or

006.10B the person providing such advice is an investment manager under the Employee Retirement Income Security Act of 1974 with respect to the assets of each employee benefit plan allocated to the separate account; or

006.10C the insurer has filed with the Director and continues to file annually the following information and statements concerning the proposed adviser:

006.10C(1) the name and form of organization, state of organization, and its principal place of business;

006.10C(2) the names and addresses of its partners, officers, directors, and persons performing similar functions or, if such an investment adviser be an individual, of such individual;

006.10C(3) a written Standard of Conduct complying in substance with the requirements of Subsection 006.01B of this Article which has been adopted by the investment adviser and is applicable to the investment adviser, its officers, directors, and affiliates;

006.10C(4) a statement provided by the proposed adviser as to whether the adviser or any person associated therewith:

006.10C(4)(a) has been convicted within ten years of any felony or misdemeanor arising out of such person's conduct as an employee, salesman, officer or director or an insurance company, a banker, an insurance agent, a securities broker, or an investment adviser involving embezzlement, fraudulent conversion, or misappropriation of funds or securities, or involving the violation of Sections 1341, 1342, or 1343 of Tide 18 of the United States Code;

006.10C(4)(b) has been permanently or temporarily enjoined by order, judgment, or decree of any court of competent jurisdiction from acting as an investment adviser, underwriter, broker, or dealer, or as an affiliated person or as an employee of any investment company, bank, or insurance company, or from engaging in or continuing any conduct or practice in connection with any such activity;

006.10C(4)(c) has been found by federal or state regulatory authorities to have willfully violated or have acknowledged willful violation of any provision of federal or state securities laws or state insurance laws or of any rule or regulation under any such laws; or

006.10C(4)(d) has been censured, denied an investment adviser registration, had a registration as an investment adviser revoked or suspended, or been barred or suspended from being associated with an investment adviser by order of federal or state regulatory authorities; and

006.10D such investment advisory contract shall be in writing and provide that it may be terminated by the insurer without penalty to the insurer or the separate account upon no more than sixty days written notice to the investment adviser.

The Director may, after notice and opportunity for hearing, by order require such investment advisory contract to be terminated if he deems continued operation thereunder to be hazardous to the public or the insurance company's policyholders.

007. Information furnished to applicant . An insurer delivering or issuing for delivery in this state any variable life insurance policies shall deliver to the applicant for the policy, and obtain a written acknowledgement of receipt from such applicant coincident with or prior to the execution of the application, the following information. The requirements of this Section shall be deemed to have been satisfied to the extent that a disclosure containing information required by this Section is delivered, either in the form of (1) a prospectus included in the requirements of the Securities Act of 1933 and which was declared effective by the Securities and Exchange Commission; or (2) all information and reports required by the Employee Retirement Income Security Act of 1974 if the policies are exempted from the registration requirements of the Securities Act of 1933 pursuant to Section 3(a) (2) thereof.

007.01 A summary explanation, in non-technical terms, of the principal features of the policy, including a description of the manner in which the variable benefits will reflect the investment experience of the separate account and the factors which affect such variation. Such explanation must include notices of the provision required by Subsections 004.03A5 and 004.03F;

007.02 A statement of the investment policy of the separate account, including:

007.02A a description of the investment objectives intended for the separate account and the principal types of investments intended to be made; and

007.02B any restriction or limitations on the manner in which the operations of the separate account are intended to be conducted.

007.03 a statement of the net investment return of the separate account for each of the last ten years of such lesser period as the separate account has been in existence;

007.04 a statement of the charges levied against the separate account during the previous year;

007.05 a summary of the method to be used in valuing assets held by the separate account;

007.06 a summary of the federal income tax aspects of the policy applicable to the insured, the policyholder and the beneficiary;

007.07 illustrations of benefits payable under the variable life insurance contract. Such illustrations shall be prepared by the insurer and shall not include projections of past investment experience into the future or attempted predictions of future investment experience, provided that nothing contained herein prohibits use of hypothetical assumed rates of return to illustrate possible levels of benefits if it is made clear that such assumed rates are hypothetical only.

008. Applications . The application for a variable life insurance policy shall contain:

008.01 A prominent statement that the death benefit may be variable or fixed under specified conditions;

008.02 A prominent statement that cash values may increase or decrease in accordance with the experience of the separate account (subject to any specified minimum guarantees);

008.03 Questions designed to elicit information which enables the insurer to determine the suitability of variable life insurance for the applicant.

009. Reports to policyholders . Any insurer delivering or issuing for delivery in this state any variable life insurance policies shall mail to each variable life insurance policyholder at his or her last known address the following reports:

009.01 Within thirty days after each anniversary of the policy, a statement or statements of the cash surrender value, death benefit, any partial withdrawal or policy loan, any interest charge, any optional payments allowed pursuant to ,Subsection 004.04 under the policy computed as of the policy anniversary date. Provided, however, that such statement may be furnished within thirty days after a specified date in each policy year so long as the information contained therein is computed as of a date not more than sixty days prior to the mailing of such notice. This statement shall state that, in accordance with the investment experience of the separate account, the cash values and the variable death benefit may increase or decrease, and shall prominently identify any value described therein which may be recomputed prior to the next statement required by this Section. If the policy guarantees that the variable death benefit on the next policy anniversary date will not be less than the variable death benefit specified in such statement, the statement shall be modified to so indicate. For flexible premium policies, the report must contain a reconciliation of the change since the previous report in cash value and cash surrender value, if different, because of payments made (less deductions for expense charges), withdrawals, investment experience, insurance charges and any other charges made against the cash value. In addition, the report must show the projected cash value and cash surrender value, if different, as of one year from the end of the period covered by the report assuming that: (i) planned periodic premiums, if any, are paid as scheduled; (ii) guaranteed costs of insurance are deducted; and (iii) the net investment return is equal to the guaranteed rate or, in the absence of a guaranteed rate, is not greater than zero. If the projected value is less than zero, a warning message must be included that states that the policy may be in danger of terminating without value in the next 12 months unless additional premium is paid.

009.02 Annually, a statement or statements including:

009.02A a summary of the financial statement of the separate account based on the annual statement last filed with the Director;

009.02B the net investment return of the separate account for the last year and, for each year after the first, a comparison of the investment rate of the separate account during the last year with the investment rate during prior years, up to a total of not less than five years when available;

009.02C a list of investments held by the separate account as of a date not earlier than the end of the last year for which an annual statement was filed with the Director;

009.02D any charges levied against the separate account during the previous year;

009.02E a statement of any change, since the last report, in the investment objective and orientation of the separate account, in any investment restriction or material quantitative or qualitative investment requirement applicable to the separate account or in the investment adviser of the separate account;

009.03 For flexible premium policies, a report must be sent to the policyholder if the amounts available under the policy on any policy processing day to pay the charges authorized by the policy are less than the amount necessary to keep the policy in force until the next following policy processing day. The report must indicate the minimum payment required under the terms of the policy to keep it in force and the length of the grace period for payment of such amount.

010. Foreign companies . If the law or regulation in the place of domicile of a foreign company provides a degree of protection to the policyholders and the public which is substantially similar to that provided by these regulations, the Director to the extent deemed appropriate by him in his discretion, may consider compliance with such law or regulation as compliance with these regulations.

011. Qualifications of agents for the sale of variable life insurance .

011.01 Qualification to Sell Variable Life Insurance:

011.O1A No person may sell or offer for sale in this state any variable life insurance policy unless such person is an agent and has filed with the Director, in a form satisfactory to the Director, evidence that such person holds any license or authorization which may be required for the solicitation or sale of variable life insurance.

011.01B Any examination administered by the Department for the purpose of determining the eligibility of any person for licensing as an agent shall, after the effective date of this regulation, include such questions concerning the history, purpose, regulation, and sale of variable life insurance as the Director deems appropriate.

011.02 Reports of Disciplinary Actions: Any person qualified in this state under Section 011 to sell or offer to sell variable life insurance shall immediately report to the Director:

011.02A Any suspension or revocation of his agent's license in any other state or territory of the United States:

011.02B The imposition of any disciplinary sanction, including suspension or expulsion from membership, suspension, or revocation of or denial of registration, imposed upon him by any national securities exchange, or national securities association, or any federal, state, or territorial agency with jurisdiction over securities or variable life insurance.

011.02C Any judgment or injunction entered against him on the basis of conduct deemed to have involved fraud, deceit, misrepresentation, or violation of any insurance or securities law or regulation.

011.03 Refusal to Qualify Agent to Sell Variable Life Insurance: Suspension, Revocation, or Nonrenewal of Qualification: The Commissioner may reject any application or suspend or revoke or refuse to renew any agent’s qualification under this Section 011 to sell or offer to sell variable life insurance upon any ground that would bar such applicant or such agent from being licensed to sell other life insurance contracts in this state. The rules governing any proceeding relating to the suspension or revocation of an agent's license shall also govern any proceeding for suspension or revocation of an agent's qualification to sell or offer to sell variable life insurance.

012. Separability article . If any provision of this regulation or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the regulation and the application of such provision to other persons or circumstances shall not be affected thereby.

History

• Effective 1994-06-26

Chapter 17 Marine and Inland Marine Insurance Underwriting Regulations

Neb. Admin. Code tit. 210, ch. 17 Marine and Inland Marine Insurance Underwriting Regulations {#sec-210-nac-17 omnilex-key=us-ne-regs-official--title-210--210 NAC 17}

001. Statutory authority . Under the authority of Neb.Rev.Stat. §44-101.01 and §44-7501 et seq., the Department of Insurance hereby adopts the following Rule to govern the underwriting authority of marine and transportation underwriters.

002. Restrictions on writing . Marine or inland marine insurance shall not be written to cover properties or classes thereof which are by general custom of the insurance business a proper subject for fire and allied insurance only, unless application to underwrite such properties or classes thereof on a marine, inland marine, or floater basis is made to and approved by the Director of Insurance.

003. Nation-wide marine definitions . The so-called "Nation-Wide Marine Definition," as adopted by the National Association of Insurance Commissioners in 1933 and as subsequently amended shall be considered as a general guide in administering section 002 above and in interpreting the statutory definition of marine and inland marine insurance which appears in Neb.Rev.Stat. §44-201.

004. Severability . If any section or portion of this Rule or applicability thereof to any person or circumstance is held invalid by a court, the remainder of the rule or the applicability of such provision to other persons or circumstances shall not be affected thereby.

History

• Effective 2004-05-09

Chapter 19 Replacement of Life Insurance and Annuities

Neb. Admin. Code tit. 210, ch. 19 Replacement of Life Insurance and Annuities {#sec-210-nac-19 omnilex-key=us-ne-regs-official--title-210--210 NAC 19}

001. Statutory authority . This Rule is promulgated pursuant to the authority granted by NEB. REV. STAT. §§ 44-1533 and 44-101.01.

002. Purpose . The purpose of this Rule is:

002.01 To regulate the activities of insurers and producers with respect to the replacement of existing life insurance and annuities;

002.02 To protect the interests of life insurance and annuity purchasers by establishing minimum standards of conduct to be observed in replacement transactions or financed purchases by:

002.02A Assuring that the purchasers receive information with which a decision can be made in his or her own best interest;

002.02B Reducing the opportunity for misrepresentation and incomplete disclosures; and

002.02C Establishing penalties for failure to comply with the requirements of this Rule.

002.03 To declare that failure to comply with the provisions of this Rule will be deemed an unfair method of competition and an unfair trade practice.

002.04 This Rule is issued for the purpose of defining certain minimum standards which, if violated, would constitute a violation of NEB. REV. STAT. § 44-1525.

003. Scope . Unless otherwise specifically included, this regulation shall not apply to transactions involving:

003.01 Credit life insurance;

003.02 Group life insurance or group annuities where there is no direct solicitation of individuals by an insurance producer. Direct solicitation shall not include any group meeting held by an insurance producer solely for the purpose of educating or enrolling individuals or, when initiated by an individual member of the group, assisting with the selection of investment options offered by a single insurer in connection with enrolling that individual. Group life insurance or group annuity certificates marketed through direct response solicitation shall be subject to the provisions of Section 011;

003.03 Group life insurance and annuities used to fund prearranged funeral contracts;

003.04 An application to the existing insurer that issued the existing policy or contract when a contractual change or a conversion privilege is being exercised; or, when the existing policy or contract is being replaced by the same insurer pursuant to a program filed with and approved by the director; or, when a term conversion privilege is exercised among corporate affiliates;

003.05 Proposed life insurance that is to replace life insurance under a binding or conditional receipt issued by the same company;

003.06

003.06A Policies or contracts used to fund (i) an employee pension or welfare benefit plan that is covered by the Employee Retirement and Income Security Act (ERISA); (ii) a plan described by Sections 401(a), 401(k) or 403(b) of the Internal Revenue Code; where the plan, for purposes of ERISA, is established or maintained by an employer; (iii) a governmental or church plan defined in Section 414, a governmental or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax exempt organization under Section 457 of the Internal Revenue Code; or (iv) a nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor.

003.06B Notwithstanding Subparagraph (A), this regulation shall apply to policies or contracts used to fund any plan or arrangement that is funded solely by contributions an employee elects to make, whether on a pre-tax or after-tax basis, and where the insurer has been notified that plan participants may choose from among two (2) or more insurers and there is a direct solicitation of an individual employee by an insurance producer for the purchase of a contract or policy. As used in this subsection, direct solicitation shall not include any group meeting held by an insurance producer solely for the purpose of educating individuals about the plan or arrangement or enrolling individuals in the plan or arrangement or, when initiated by an individual employee, assisting with the selection of investment options offered by a single insurer in connection with enrolling that individual employee;

003.07 Where new coverage is provided under a life insurance policy or contract and the cost is borne wholly by the insured’s employer or by an association of which the insured is a member;

003.08 Existing life insurance that is a non-convertible term life insurance policy that will expire in five (5) years or less and cannot be renewed;

003.09 Immediate annuities that are purchased with proceeds from an existing contract. Immediate annuities purchased with proceeds from an existing life policy are not exempted from the requirements of this rule; or

003.10 Structured settlements. Registered contracts shall be exempt from the requirements of Subsection(s) 009.01B and 010.01B with respect to the provision of illustrations or policy summaries; however, premium or contract contribution amounts and identification or the appropriate prospectus or offering circular shall be required instead.

004. Definition of replacement . "Replacement" means any transaction in which a new policy or contract is to be purchased, and it is known or should be known to the proposing producer, or to the proposing insurer if there is no producer, that by reason of the transaction, an existing policy or contract has been or is to be:

004.01 Lapsed, forfeited, surrendered, or partially surrendered, assigned to the replacing insurer or otherwise terminated;

004.02 Converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values;

004.03 Amended so as to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid;

004.04 Reissued with any reduction in cash value; or

004.05 Used in a financed purchase.

005. Other definitions .

005.01 “Direct-response solicitation” means a solicitation through a sponsoring or endorsing entity or individually solely through mails, telephone, the Internet or other mass communication media.

005.02 "Existing Insurer" means the insurance company whose policy or contract is or will be changed or affected in a manner described within the definition of "replacement."

005.03 “Existing policy or contract” means an individual life insurance policy (policy) or annuity contract (contract) in force, including a policy under a binding or conditional receipt or a policy or contract that is within an unconditional refund period.

005.04 “Financed purchase” means the purchase of a new policy involving the actual or intended use of funds obtained by the withdrawal or surrender of, or by borrowing from values of an existing policy to pay all or part of any premium due on the new policy. For purposes of a regulatory review of an individual transaction only, if a withdrawal, surrender or borrowing involving the policy values of an existing policy is used to pay premiums on a new policy owned by the same policyholder and issued by the same company within four (4) months before or thirteen (13) months after the effective date of the new policy, it will be deemed prima facie evidence of the policyholder’s intent to finance the purchase of the new policy with existing policy values. This prima facie standard is not intended to increase or decrease the monitoring obligations contained in Subsection 008.01E of this regulation.

005.05 “Illustration” means a presentation or depiction that includes non-guaranteed elements of a policy of life insurance over period of years as defined in 210 NEB. ADMIN. R. & REG. 72.

005.06 “Policy summary,” for purposes of this rule;

005.06A For policies or contracts other than universal life policies, means a written statement regarding a policy or contract which shall contain to the extent applicable, but not need to be limited to, the following information:

005.06A(i) current death benefit;

005.06A(ii) annual contract premium;

005.06A(iii) current cash surrender value;

005.06A(iv) current dividend;

005.06A(v) application of current dividend; and

005.06A(vi) amount of outstanding loan.

005.06B For universal life policies, means a written statement that shall contain at least the following information:

005.06B(i) the beginning and end date of the current report period;

005.06B(ii) the policy value at the end of the previous report period and at the end of the current report period;

005.06B(iii) the total amounts that have been credited or debited to the policy value during the current report period, identifying each by type (e.g., interest, mortality, expense and riders);

005.06B(iv) the current death benefit at the end of the current report period on each life covered by the policy;

005.06B(v) the net cash surrender value of the policy as of the end of the current report period; and

005.06B(vi) the amount of outstanding loans, if any, as of the end of the current report period.

005.07 “Producer,” for the purpose of this regulation, shall be defined to include agents, brokers and producers.

005.08 "Replacing Insurer" means the insurance company that issues or proposes to issue a new policy or contract that replaces an existing policy or contract or is a financed purchase.

005.09 “Registered Contract” means a variable annuity contract or variable life insurance policy subject to the prospectus delivery requirements of the Securities Act of 1933.

005.10 “Sales material” means a sales illustration and any other written, printed or electronically presented information created, completed, or provided by the company or producer and used in the presentation to the policy or contract owner related to the policy or contract purchased.

006. Duties of Producers

006.01 A producer who initiates the application shall submit to the insurer, with or as part of the application a statement signed by both the applicant and the producer as to whether the applicant has existing policies or contracts. If the answer is “no,” the producer’s duties with respect to the replacement is complete.

006.02 If the applicant answered “yes” to the question regarding existing coverage referred to in Subsection 006.01, the producer shall present and read to the applicant, not later than at the time of taking the application, a notice regarding replacements in the form as described in Appendix A or other substantially similar form approved by the director of the Department of Insurance or the director’s designee. However, no approval shall be required when amendments to the notice are limited to the omission of references not applicable to the product being sold or replaced. The notice shall be signed by both the applicant and the producer attesting that the notice has been read aloud by the producer or that the applicant did not wish the notice to be read aloud (in which case the producer need not have read the notice aloud) and left with the applicant.

006.03 The notice shall list all life insurance policies or annuities proposed to be replaced, properly identified by name of insurer, the insured or annuitant, and policy or contract number if available, and shall include a statement as to whether each policy or contract will be replaced or whether a policy will be used as a source of financing for the new policy or contract. If a policy or contract number has not been issued by the existing insurer, alternative identification, such as an application or receipt number, shall be listed.

006.04 In connection with a replacement transaction, the producer shall leave with the applicant, at the time an application for the new policy or contract is completed, the original or a copy or all sales material. With respect to electronically presented sales material, it shall be provided to the policy or contract owner in printed form no later than at the time of policy or contract delivery.

006.05 Except as provided in Subsection 009.03, in connection with a replacement transaction the producer shall submit to the insurer to which an application for a policy or contract is presented, a copy of each document required by this section, a statement identifying any preprinted or electronically presented company approved sales materials used, and copies of any individual sales material, including any illustrations related to the specific policy or contract purchased.

007. Duties of all insurers . Each insurer shall:

007.01 Inform its field representatives or other personnel responsible for compliance with this Rule of the requirements of this Rule.

008. Duties of Insurers that use Producers . Each insurer shall:

008.01 Maintain a system of supervision and control to ensure compliance with the requirements of this regulation that shall include at least the following:

008.01A Inform its producers of the requirements of this regulation and incorporate the requirements of this regulation into all relevant producer training manuals prepared by the insurer;

008.01B Provide to each producer a written statement of the company's position with respect to the acceptability of replacements providing guidance to its producer as to the appropriateness of these transactions;

008.01C A system to review the appropriateness of each replacement transaction that the producer does not indicate is in accord with Subsection 008.01B above;

008.01D Procedures to confirm that the requirements of this regulation have been met; and

008.01E Procedures to detect transactions that are replacements of existing policies or contracts by the existing insurer, but that have not been reported as such by the applicant or producer. Compliance with this regulation may include, but shall not be limited to, systematic customer surveys, interviews, confirmation letters, or programs of internal monitoring;

008.02 Have the capacity to monitor each producer's life insurance policy and annuity contract replacements for that insurer, and shall produce, upon request, and make such records available to the Insurance Department. The capacity to monitor shall include the ability to produce records for each producer's:

008.02A Life replacements, including financed purchases, as a percentage of the producer's total annual sales for life insurance;

008.02B Number of lapses of policies by the producer as a percentage of the producer's total annual sales for life insurance;

008.02C Annuity contract replacements as a percentage of the producer's total annual annuity contract sales;

008.02D Number of transactions that are unreported replacements of existing policies or contracts by the existing insurer detected by the company's monitoring system as required by Subsection 008.01E of this section; and

008.02E Replacements, indexed by replacing producer and existing insurer;

008.03 Require with or as a part of each application for life insurance or an annuity a signed statement by both the applicant and the producer as to whether the applicant has existing policies or contracts;

008.04 Require with each application for life insurance or an annuity that indicates an existing policy or contract a completed notice regarding replacements as contained in Appendix A;

008.05 Shall be able to produce copies of any sales material required by Subsection 006.05, when the applicant has existing policies or contracts, the basic illustration and any supplemental illustrations related to the specific policy or contract that is purchased, and the producer's and applicant's signed statements with respect to financing and replacement for at least five (5) years after the termination or expiration of the proposed policy or contract;

008.06 Ascertain that the sales material and illustrations required by Subsection 006.05 of this regulation meet the requirements of this regulation and are complete and accurate for the proposed policy or contract;

008.07 Notify the producer and applicant and fulfill the outstanding requirements if an application does not meet the requirements of this regulation; and

008.08 Maintain records in paper, photograph, microprocess, magnetic, mechanical or electronic media or by any process that accurately reproduces the actual document.

009 . Duties of Replacing Insurers that Use Producers

009.01 Where a replacement is involved in the transaction, the replacing insurer shall:

009.01A Verify that the required forms are received and are in compliance with this rule;

009.01B Notify any other existing insurer that may be affected by the proposed replacement within five (5) business days of receipt of a completed application indicating replacement or when the replacement is identified if not indicated on the application, and mail a copy of the available illustration or policy summary for the proposed policy or available disclosure document for the proposed contract within five (5) business days of a request from an existing insurer;

009.01C Be able to produce copies of the notification regarding replacement required in Subsection 006.02, indexed by producer, for at least five (5) years or until the next regular examination by the insurance department of a company's state of domicile, whichever is later; and

009.01D Provide to the policy or contract owner notice of the right to return the policy or contract within thirty (30) days of the delivery of the contract and receive an unconditional full refund of all premiums or considerations paid on it, including any policy fees or charges or, in the case of a variable or market value adjustment policy or contract, a payment of the cash surrender value provided under the policy or contract plus the fees and other charges deducted from the gross premiums or considerations or imposed under such policy or contract; such notice may be included in Appendix A or C.

009.02 In transactions where the replacing insurer and the existing insurer are the same or subsidiaries or affiliates under common ownership or control, allow credit for the period of time that has elapsed under the replaced policy's or contract's incontestability and suicide period up to the face amount of the existing policy or contract. With regard to financed purchases, the credit may be limited to the amount the face amount of the existing policy is reduced by the use of existing policy values to fund the new policy or contract.

009.03 If an insurer prohibits the use of sales material other than that approved by the company, as an alternative to the requirements made of an insurer pursuant to Subsection 006.05, the insurer may:

009.03A Require with each application a statement signed by the producer that:

009.03A(i) Represents that the producer used only company-approved sales material; and

009.03A(ii) States that copies of all sales material were left with the applicant in accordance with Subsection 006.04; and

009.03B Within ten (10) days of the issuance of the policy or contract:

009.03B(i) Notify the applicant by sending a letter or by verbal communication with the applicant by a person whose duties are separate from the marketing area of the insurer, that the producer has represented that copies of all sales material have been left with the applicant in accordance with Subsection 006.04;

009.03B(ii) Provide the applicant with a toll free number to contact company personnel involved in the compliance function if such is not the case; and

009.03B(iii) Stress the importance of retaining copies of the sales material for future reference; and

009.03C Be able to produce a copy of the letter or other verification in the policy file for at least five (5) years after the termination or expiration of the policy or contract.

Section 10. Duties of the Existing Insurer

010.01 Where a replacement is involved in the transaction, the existing insurer shall:

010.01A Retain and be able to produce all replacement notifications received, indexed by replacing insurer, for at least five (5) years or until the conclusion of the next regular examination conducted by the Insurance Department of its state of domicile, whichever is later.

010.01B Send a letter to the policy or contract owner of the right to receive information regarding the existing policy or contract values including, if available, an in force illustration or policy summary if an in force illustration cannot be produced within five (5) business days of receipt of a notice that an existing policy or contract is being replaced. The information shall be provided within five (5) business days of receipt of the request from the policy or contract owner.

010.01C Upon receipt of a request to borrow, surrender or withdraw any policy values, send a notice, advising the policy owner that the release of policy values may affect the guaranteed elements, non-guaranteed elements, face amount or surrender value of the policy from which the values are released. The notice shall be sent separate from the check if the check is sent to anyone other than the policy owner. In the case of consecutive automatic premium loans, the insurer is only required to send the notice at the time of the first loan.

011 . Duties of Insurers with Respect to Direct Response Solicitations

011.01 In the case of an application that is initiated as a result of a direct response solicitation, the insurer shall require with or as part of each completed application for a policy or contract, a statement asking whether the applicant, by applying for the proposed policy or contract, intends to replace, discontinue or change an existing policy or contract. If the applicant indicates a replacement or change is not intended or if the applicant fails to respond to the statement, the insurer shall send the applicant, with the policy or contract, a notice regarding replacement in Appendix B, or other substantially similar form approved by the director.

011.02 If the insurer has proposed the replacement or if the applicant indicates a replacement is intended and the insurer continues with the replacement, the insurer shall:

011.02A Provide to applicants or prospective applicants with the policy or contract a notice, as described in Appendix C, or other substantially similar form approved by the director. In these instances the insurer may delete the references to the producer, including the producer's signature, and references not applicable to the product being sold or replaced, without having to obtain approval of the form from the director. The insurer's obligation to obtain the applicant's signature shall be satisfied if it can demonstrate that it has made a diligent effort to secure a signed copy of the notice referred to in this paragraph. The requirement to make a diligent effort shall be deemed satisfied if the insurer includes in the mailing a self-addressed postage prepaid envelope with instructions for the return of the signed notice referred to in this section; and

011.02B Comply with the requirements of Subsection 009.01B, if the applicant furnishes the names of the existing insurers, and the requirements of Subsections 009.01C, 009.01D and 009.02.

012 . Violations and Penalties

012.01 Any failure to comply with this regulation shall be considered a violation of the Nebraska Unfair Insurance Trade Practices as set forth in NEB. REV. STAT. §§ 44-1521 to 44-1535. Examples of violations include, but are not limited to:

012.01A Any deceptive or misleading information set forth in sales material;

012.01B Failing to ask the applicant in completing the application the pertinent questions regarding the possibility of financing or replacement;

012.01C The intentional incorrect recording of an answer;

012.01D Advising an applicant to respond negatively to any question regarding replacement in order to prevent notice to the existing insurer; or

012.01E Advising a policy or contract owner to write directly to the company in such a way as to attempt to obscure the identity of the replacing producer or company.

012.02 Policy and contract owners have the right to replace existing life insurance policies or annuity contracts after indicating in or as a part of applications for new coverage that replacement is not their intention; however, patterns of such action by policy or contract owners of the same producer shall be deemed prima facie evidence of the producer's knowledge that replacement was intended in connection with the identified transactions, and these patterns of action shall be deemed prima facie evidence of the producer's intent to violate this rule.

012.03 Where it is determined that the requirements of this rule have not been met the replacing insurer shall provide to the policy owner an in force illustration if available or policy summary for the replacement policy or available disclosure document for the replacement contract and the appropriate notice regarding replacements in Appendix A or C.

012.04 This rule does not prohibit the use of additional material, other than that which is required, that is not in violation of this Rule or any other statute or regulation.

012.05 Any insurer, producer, or representative, officer, employee of such insurer failing to comply with the requirements of this Rule shall be subject to the penalties of NEB. REV. STAT. § 44-1529.

013. Severability . If any provision of this regulation is for any reason held to be invalid, the remainder of the regulation shall not be affected thereby.

014. Effective Date . This Amended Rule shall become operative on October 1, 2008.

History

• Effective 2008-06-28

Chapter 22 Credit Life, Accident and Health Insurance

Neb. Admin. Code tit. 210, ch. 22 Credit Life, Accident and Health Insurance {#sec-210-nac-22 omnilex-key=us-ne-regs-official--title-210--210 NAC 22}

001. Statutory authority . Pursuant to the authority granted in Sections Neb.Rev.Stat. §44-101.01 R.S. Supp. 1969 . the Credit Life and Credit Health and Accident Insurance Act, §§44-1701 to through 44-1713 R.S. 1943, §44-1601 R.S. Supp. 1969 §44-1603 and §44-1607 R.S. 1943, the following Departmental Rule is adopted.

002. Definitions . For the purpose of this Rule:

"The Act" means Sections the Credit Life and Credit Health and Accident Insurance Act, Neb.Rev.Stat. §§44-1701 to through 44-1713 R.S. 1943.

"Premium" means the total amount of money paid for insurance coverage subject to the Act upon the person of any individual debtor.

"Identifiable charge" means the total amount of money paid by the individual debtor for insurance coverage subject to the Act.

The definitions set forth in Section 2 of the Act are adopted as full and completely as if set forth herein.

003. Existing insurance - choice of insurer . When credit life insurance or credit accident and health insurance is required by a creditor, the debtor shall have the option, upon notice to the creditor, of furnishing existing policies of insurance, or procuring and furnishing new policies of insurance, owned or controlled by him and issued by any insurer authorized to transact business in this state for an amount no less than the indebtedness, and for the term and type of insurance coverage required. Insurers writing credit life insurance and credit accident and health insurance shall be responsible for establishment of procedures whereby debtors are furnished a prominent written notice informing them of said option.

004. Provisions of policies of insurance, certificates of insurance, applications for insurance and notices of proposed group credit insurance-, disclosure to debtors .

004.01 As required by the Act, all credit life insurance and credit accident and health insurance subject to the Act shall be evidenced by an individual policy or, in the case of group insurance, by a certificate of group insurance.

004.02 In order to insure that the provisions of the forms required by this Act to be filed with the Department of Insurance are not unjust, unfair, inequitable, misleading or deceptive and to insure that such provisions do not encourage misrepresentation of the coverage, the following are adopted as basic guides for forms submitted to the Director of Insurance for approval:

004.02A Each such policy or certificate of group insurance shall set forth, in addition to the matters required by the Act and in addition to other requirements of law, a provision for refund as set forth in Section 005 hereof.

004.02B Application for individual policies of insurance and notices of proposed group insurance, required by the Act in those situations in which the individual policy or certificate of group insurance is not delivered to the debtor at the time the indebtedness is incurred, shall contain, in addition to the matters required by the Act and in addition to other requirements of law, a statement that if the insurance is declined by the insurer or for some other reason does not become effective, any premium or identifiable charge will be refunded to the debtor pursuant to the provisions of Section 005 of this Rule.

004.02C Each policy of credit accident and health insurance shall contain a provision that no claim for disability shall be reduced or denied on the ground that diseases or conditions arose from a condition which had existed prior to the effective date of the policy, or the effective date of the coverage under a group certificate, unless such exclusion or coverage for disability arising from preexisting conditions shall be prominently and explicitly set forth on the face of the policy or certificate, delivered to the debtor, by overprinting such exclusions diagonally across the face of such policy or certificate in at least 18 point contrasting color type.

004.02D No policy of credit accident and health insurance shall contain any provision which excludes or restricts liability in the event of disability caused in a certain specified manner except provisions excluding or restricting coverage in the event of disability as a result of pre-existing conditions excluded in accordance with subsection 004.02C, pregnancy, mental or nervous disease or disorder, intentionally self-inflicted injuries, foreign travel or residence, travel in non-scheduled aircraft, war, or military service. Any such excluding or restricting provision must be prominently and explicitly set forth in the policy or certificate delivered to the debtor.

004.02E No policy of credit life insurance or credit accident and health insurance subject to the Act will be approved unless the benefits provided bear a reasonable relationship to the rates to be used in conjunction therewith. The reasonableness of such relationship will be determined on the basis of studies made by the Department of Insurance and after considering all factors involved.

005. Refunds .

005.01 Each individual policy of credit life insurance and credit accident and health insurance on which the premium is paid by the debtor and each group certificate for which an identifiable charge is made to the debtor shall provide that, in the event of termination of the insurance prior to the scheduled maturity date of the indebtedness, any refund of premium or identifiable charge due shall be paid or credited promptly to the debtor. If a creditor requires a debtor to pay the premium or an identifiable charge for credit life insurance or credit accident and health insurance and such insurance is declined by the insurer or otherwise does not become effective, the insurer, creditor or licensed agent shall promptly arrange for a refund or credit to the debtor of any premium or identifiable charge paid by him for such insurance.

005.02 An insurer shall promptly refund to an individual policyholder and refund or credit to a group policyholder any refund of premium due on termination of insurance prior to the scheduled maturity date of the indebtedness, and a group policyholder or creditor shall promptly refund or credit to the debtor any refund due pursuant to this Section 005. Insurer shall be responsible for establishment of procedures by which such refunds or credits are made.

005.03 The following formulas for computing refunds of credit insurance premiums are hereby declared acceptable to the Director for the kinds of coverage specified.

005.03A Pro rata method. The pro rata unearned gross premium method for level term credit life insurance, credit accident and health insurance coverages under which premiums are collected from the consumer on a basis other than single premium basis.

005.03B Sum of the digits method. The "rule of 78" or "sum of the digits" unearned premium method for coverages other than those in Subsection paragraph 005.03A.

005.04 At the option of the insurer but consistent with subsection 005.03: no charge for credit insurance may be made for the first fifteen (15) days of a loan month and a full month may be charged for sixteen (16) days or more of a loan month; or a refund may be made on a pro rata basis for each day within the loan month. If the appropriate refund formula is the "sum of the digits" formula, commonly known as the " rule of 78", it shall be sufficient to refer to it by either phrase. No insurance refund need be made to the consumer if all refunds and credits due him amount to less than one dollar ($1).

006. Refinancing or consolidation . In any refinancing or consolidation of an indebtedness, no policy provision covering the new indebtedness shall operate to deny benefits which would have been payable had the refinancing or consolidation not taken place.

The provisions of Section 006 shall be applicable to all claims submitted following the effective date of the amendment. Nothing within Section 006 shall be interpreted as requiring the refiling of current policies but any future filings should include the language adopted and contained in Section 006 of Rule 22.

007. Experience statistics -- (earned and accrued basis) . Each insurer writing insurance subject to the Act shall maintain the following statistics with respect to such insurance business on either a calendar-year or policy-year basis: (a) gross premium received, (b) refunds of premiums on terminated insurance, (c) increase in unearned premium reserve, (d) earned premiums, (e) claims paid, (f) increase in claim reserve, (g) claims incurred, (h) reserve increases other than (c) and (f), (i) commissions, (j) fees and allowances, (k) dividends and experience rating refunds, (l) mean amount of life insurance in force, and (m) mean number of individual policies in force during the calendar year. Such statistics shall be subject to call by the Director of Insurance from time to time and shall be maintained in a manner which will facilitate the demonstration of each statistical item with respect to:

007.01 each distinctive type or plan of group insurance coverage;

007.02 each distinctive type or plan of individual insurance coverage;

007.03 reinsurance assumed in connection with coverages described in 007.01 and 007.02;

007.04 classifications 007.01, 007.02, and 007.03 restricted to risks residing in Nebraska;

007.05 classifications 007.01, 007.02, and 007.03 encompassing all risks wherever they may reside.

008. Annual report . Each company shall prepare a report on a form or forms prescribed by the Department of Insurance which shall be filed in conjunction with the Credit Life and Accident and Health Exhibit setting forth such information as may be required by the Director of Insurance.

009. Rate schedules . The rate schedules for each policy form of credit life or credit accident and health insurance shall be submitted with such forms in quadruplicate with a separate rate sheet for each form. In cases of combination filings (policy forms containing both life and accident and health) the rate schedules shall be filed separately. In addition each rate sheet shall state the form number of the policy with which it is to be used.

010. Sevarability Severability provision . If any provision of this regulation or the application thereof to any person or circumstances is held unconstitutional, the remainder of the regulation and the application of such provision to other persons or circumstances shall not be affected thereby.

History

• Effective 1994-06-26

Chapter 24 Holding Companies

Neb. Admin. Code tit. 210, ch. 24 Holding Companies {#sec-210-nac-24 omnilex-key=us-ne-regs-official--title-210--210 NAC 24}

001. Authority . These regulations are promulgated pursuant to the authority granted by Neb.Rev.Stat. §§44-101.01 and 44-2139.

002. Purpose . The purposes of these regulations are: to set forth rules and procedural requirements which the Director deems necessary to carry out the provisions of the Insurance Holding Company System Act (§§44-2120 through 44-2153 of the Insurance Code hereinafter referred to as "the Act"). The information called for by these regulations is hereby declared to be necessary and appropriate in the public interest and for the protection of policyholders in this State.

003. Severability clause . If any provision of these regulations, or the application thereof to any person or circumstance, is held invalid, such invalidity shall not affect other provisions or application of these regulations which can be given effect without the invalid provision or application, and to that end the provisions of these regulations are severable.

004. Forms -- General requirements .

004.01 Forms A, B, C, D, and F are intended to be guides in the preparation of statements required by Neb.Rev.Stat. §§44-2120 through 44-2133. They are not intended to be blank forms which are to be filled in. The statements filed shall contain the numbers and captions of all items, but the text of the items may be omitted provided the answers thereto are so prepared as to indicate to the reader the coverage of items without the necessity of his referring to the text of the items or the instructions thereto. All instructions, whether appearing under the items of the form or elsewhere therein, are to be omitted. Unless expressly provided otherwise, if any item is inapplicable or the answer thereto is in the negative, an appropriate statement to that effect shall be made.

004.02 Two complete copies of each statement including exhibits and all other papers and documents filed as a part thereof, shall be filed with the Director by personal delivery or mail addressed to: Insurance Director of the State of Nebraska, 941 "O" Street, Suite 400, Lincoln, Nebraska 68508, Attention: Director of Insurance. Alternatively, statements other than the Form A statement required by Neb.Rev.Stat. § 44-2126 may be submitted to the Department via electronic mail. At least one of the copies shall be signed in the manner prescribed on the form. Unsigned copies shall be conformed. If the signature of any person is affixed pursuant to a power of attorney or other similar authority, a copy of such power of attorney or other authority shall also be filed with the statement.

004.03 If an applicant requests a hearing on a consolidated basis under Neb.Rev.Stat. §44-2127(3) of the Act, in addition to filing the Form A with the commissioner, the applicant shall file a copy of Form A with the National Association of Insurance Commissioners (NAIC) in electronic form.

004.04 Statements should be prepared electronically. Statements shall be easily readable and suitable for review and reproduction. Debits in credit categories and credits in debit categories shall be designated so as to be clearly distinguishable as such on photocopies. Statements shall be in the English language and monetary values shall be stated in United States currency. If any exhibit or other paper or document filed with the statement is in a foreign language, it shall be accompanied by a translation into the English language and any monetary value shown in a foreign currency normally shall be converted into United States currency.

005. Forms -- Incorporation by reference, summaries, and omissions

005.01 Information required by any item of Form A, Form B, Form D, or Form F may be incorporated by reference in answer or partial answer to any other item. Information contained in any financial statement, annual report, proxy statement, statement filed with a governmental authority, or any other document may be incorporated by reference in answer or partial answer to any item of Form A, Form B, Form D, or Form F provided such document is filed as an exhibit to the statement. Excerpts of documents may be filed as exhibits if the documents are extensive. Documents already on file with the Director which were filed within three years need not be attached as exhibits. References to information contained in exhibits or in documents already on file shall clearly identify the material and shall specifically indicate that such material is to be incorporated by reference in answer to the item. Matter shall not be incorporated by reference in any case where such incorporation would render the statement incomplete, unclear or confusing.

005.02 Where an item requires a summary or outline of the provisions of any document, only a brief statement shall be made as to the most important provisions of the document. In addition to such statement, the summary or outline may incorporate by reference particular parts of any exhibit or document on file with the Director which was filed within three years and may be qualified in its entirety by such reference. In any case where two or more documents required to be filed as exhibits are substantially identical in all material respects except as to the parties thereto, the dates of execution, or other details, a copy of only one of such documents need be filed with a schedule identifying the omitted documents and setting forth the material details in which such documents differ from the documents, a copy of which is filed.

006. Forms -- Information unknown or unavailable and extension of time to furnish .

006.01 If it is impractical to furnish any required information, document or report at the time it is required to be filed, there may be filed with the Director a separate document:

006.01A Identifying the information, document or report in question;

006.01B Stating why the filing thereof at the time required is impractical; and

006.01C Requesting an extension of time for filing the information, document or report to a specified date. The request for extension shall be deemed granted unless the Director, within 60 days after receipt thereof, enters an order denying the request.

007. Forms -- Additional information and exhibits. In addition to the information expressly

required to be included in Form A, Form B, Form C, Form D, and Form F, there shall be added such further material information, if any, as may be necessary to make the information contained therein not misleading. The person filing may also file such exhibits as it may desire in addition to those expressly required by the statement. Such exhibits shall be so marked as to indicate clearly the subject matters to which they refer.

008. Forms - Amendments .

008.01 Any amendment for Form A, Form B, Form C, Form D, or Form F shall include on the top of the cover page the phrase:

"Amendment No. _____________ to Form ______________ of

____________________________.

Name

---

Date of Amendment

008.02 The applicant shall promptly advise the Director of any changes in the information so furnished arising subsequent to the date upon which such information was furnished but prior to the Director’s disposition of the application.

009. Definitions .

009.01 "Executive officer" means chief executive officer, chief operating officer, chief financial officer, treasurer, secretary, controller, and any other individual performing functions corresponding to those performed by the foregoing officers under whatever title.

009.02 "Foreign insurer" shall mean an insurer as defined in Neb.Rev.Stat. §44-103(3) and shall include an alien insurer except where noted otherwise.

009.03 "Ultimate controlling person" means that person which is not controlled by any other person.

009.04 Unless the context otherwise requires, other terms found in these regulations and in Neb.Rev.Stat. §44-2121 are used as defined in the said Section. Other nomenclature or terminology is according to the Insurance Code, or industry usage if not defined by the Code.

010. Subsidiaries of domestic insurers . The authority to invest in subsidiaries under §44-2122 and §44-2123, is in addition to any authority to invest in subsidiaries which may be contained in any other provision of the Insurance Code.

011. Acquisition of control -- Statement filing . A person required to file a statement pursuant to §44-2126 shall furnish the required information on Form A, hereby made a part of this regulation.

012. Amendments to Form A . The applicant shall promptly advise the Director of any changes in the information so furnished on Form A arising subsequent to the date upon which such information was furnished but prior to the Director's disposition of the application.

013. Acquisition of domestic insurers .

013.01 If the person being acquired is a "domestic insurer" [solely because of the provisions of §44-2126(3)], the name of the domestic insurer on the cover page should be clearly indicated along with the name of the parent holding company, if applicable, as follows:

"ABC Insurance Company, a subsidiary of XYZ Holding Company."

013.02 Where a domestic insurer is being acquired, references to "the insurer" contained in Form A shall refer to both the domestic subsidiary and the person being acquired.

014. Registration of insurers -- Statement filing . An insurer required to file a statement pursuant to §44-2132 shall furnish the required information on Form B, hereby made a part of these regulations.

015. Summary of registration -- Statement filing . An insurer required to file an annual registration statement pursuant to §44-2132, is also required to furnish information required on Form C, hereby made a part of these regulations.

016. Alternative and consolidated registrations .

016.01 Any authorized insurer may file a registration statement on behalf of any affiliated insurer or insurers which are required to register under §44-2132. A registration statement may include information regarding any insurer in the insurance holding company system even if such insurer is not authorized to do business in this State. In lieu of filing a registration statement on Form B, the authorized insurer may file a copy of the registration statement or similar report which it is required to file in its State of domicile, provided:

016.01A the statement or report contains substantially similar information required to be furnished on Form B; and

016.01B the filing insurer is the principal insurance company in the insurance holding company system.

016.02 The question of whether the filing insurer is the principal insurance company in the insurance holding company system is a question of fact and an insurer filing a registration statement or report in lieu of Form B on behalf of an affiliated insurer, shall set forth a simple statement of facts which will substantiate the filing insurer's claim that it, in fact, is the principal insurer in the insurance holding company system.

016.03 With the prior approval of the Director, an unauthorized insurer may follow any of the procedures which could be done by an authorized insurer under paragraph 016.01 above.

016.04 Any insurer may take advantage of the provisions of §§44-2132(8) or 44-2132(9) of the Act without obtaining the prior approval of the Director. The Director, however, reserves the right to require individual filings if he deems such filings necessary in the interest of clarity, ease of administration or the public good.

017. Disclaimers and termination of registration .

017.01 A disclaimer of affiliation or a request for termination of registration claiming that a person does not, or will not upon the taking of some proposed action, control another person (hereinafter referred to as the "subject") shall contain the following information:

017.01A the number of authorized, issued and outstanding voting securities of the subject;

017.01B with respect to the person whose control is denied and all affiliates of such person, the number and percentage of shares of the subject's voting securities which are held of record or known to be beneficially owned, and the number of such shares concerning which there is a right to acquire, directly or indirectly;

017.01C all material relationships and bases for affiliation between the subject and the person whose control is denied and all affiliates of such person; and

017.01D a statement explaining why such person should not be considered to control the subject.

017.02 A disclaimer of affiliation or a request for termination of registration shall be deemed to have been granted unless the Director, within 30 days after he receives the complete filing, notifies the registrant otherwise.

018. Transactions subject to prior notice -- Notice filing .

018.01 An insurer required to give notice of a proposed transaction pursuant to §44-2133(2) of the Act shall furnish the required information on Form D, hereby made a part of these regulations.

018.02 Agreements for cost sharing services and management services shall at a minimum and as applicable:

018.02A Identify the person providing services and the nature of such services;

018.02B Set forth the methods to allocate costs;

018.02C Require timely settlement, not less frequently than on a quarterly basis, and compliance with the requirements in the Accounting Practices and Procedures Manual;

018.02D Prohibit advancement of funds by the insurer to the affiliate except to pay for services defined in the agreement;

018.02E State that the insurer will maintain oversight for functions provided to the insurer by the affiliate and that the insurer will monitor services annually for quality assurance;

018.02F Define books and records of the insurer to include all books and records developed or maintained under or related to the agreement;

018.02G Specify that all books and records of the insurer are and remain the property of the insurer and are subject to control of the insurer;

018.02H State that all funds and invested assets of the insurer are the exclusive property of the insurer, held for the benefit of the insurer and are subject to the control of the insurer;

018.02I Include standards for termination of the agreement with and without cause;

018.02J Include provisions for indemnification of the insurer in the event of gross negligence or willful misconduct on the part of the affiliate providing the services;

018.02K Specify that, if the insurer is placed in receivership or seized by the director under the Nebraska Insurers Supervision, Rehabilitation, and Liquidation Act:

(a) all of the rights of the insurer under the agreement extend to the receiver or director; and

(b) all books and records will immediately be made available to the receiver or the director, and shall be turned over to the receiver or director immediately upon the receiver or the director’s request;

018.02L Specify that the affiliate has no automatic right to terminate the agreement if the insurer is placed in receivership pursuant to the Nebraska Insurers Supervision, Rehabilitation, and Liquidation Act; and

018.02M Specify that the affiliate will continue to maintain any systems, programs, or other infrastructure notwithstanding a seizure by the commissioner under the Nebraska Insurers Supervision, Rehabilitation, and Liquidation Act, and will make them available to the receiver, for so long as the affiliate continues to receive timely payment for services rendered.

019. Enterprise risk report . The ultimate controlling person of an insurer required to file an enterprise risk report pursuant to §44-2132(12) shall furnish the required information on Form F, hereby made a part of these regulations.

020. Extraordinary dividends and other distributions . Requests for approval of extraordinary dividends or any other extraordinary distribution to shareholders shall include the following:

020.01 The amount of the proposed dividend;

020.02 The date established for payment of the dividend;

020.03 A statement as to whether the dividend is to be in cash or other property and, if in property, a description thereof, its cost, and its fair market value together with an explanation of the basis for valuation;

020.04 A copy of the calculations determining that the proposed dividend is extraordinary. The work paper shall include the following information:

020.04A The amounts, dates and form of payment of all dividends or distributions (including regular dividends but excluding distributions of the insurer's own securities) paid within the period of 12 consecutive months ending on the date fixed for payment of the proposed dividend for which approval is sought and commencing on the day after the same day of the same month in the last preceding year;

020.04B Surplus as regards policyholders (total capital and surplus) as of the 31st day of December next preceding;

020.04C If the insurer is a life insurer, the net gain from operations for the 12-month period ending the 31st day of December next preceding;

020.04D If the insurer is not a life insurer, the net income less realized capital gains for the 12-month period ending the 31st day of December next preceding and the two preceding 12-month periods; and

020.05E If the insurer is not a life insurer, the dividends paid to stockholders excluding distributions of the insurer's own securities in the preceding two calendar years.

020.05 A balance sheet and statement of income for the period intervening from the last annual statement filed with the Director and the end of the month preceding the month in which the request for dividend approval is submitted; and

020.06 A brief statement as to the effect of the proposed dividend upon the insurer's surplus and the reasonableness of surplus in relation to the insurer's outstanding liabilities and the adequacy of surplus relative to the insurer's financial needs.

020.07 Subject to §§44-2134 and §44-325, each registered insurer shall give notice to the Director of all dividends and other distributions to shareholders within five (5) business days following the declaration thereof, and shall not pay any such dividends or other distributions to shareholders within ten (10) business days following receipt of such notice by the Director unless, for good cause shown, the Director has approved payment within such ten (10) business day period. The same information required by subsection 020.04 shall be submitted to the Director.

021. Adequacy of surplus . The factors set forth in §44-2136 are not intended to be an exhaustive list. In determining the adequacy and reasonableness of an insurer's surplus no single factor shall be controlling. The Director, instead, will consider the net effect of all of these factors plus other factors bearing on the financial condition of the insurer. In comparing the surplus maintained by other insurers, the Director will consider the extent to which each of these factors varies from company to company and in determining the quality and liquidity of investments in subsidiaries, the Director will consider the individual subsidiary and may discount or disallow its valuation to the extent that the individual investments so warrant.

022. Effective Date . This regulation shall become effective January 1, 2013.

History

• Effective 2013-01-21

Chapter 26 Department Administration, Practice and Procedure

Neb. Admin. Code tit. 210, ch. 26 Department Administration, Practice and Procedure {#sec-210-nac-26 omnilex-key=us-ne-regs-official--title-210--210 NAC 26}

001. Statutory authority . This rule is promulgated under Neb.Rev.Stat. § 84-909.01.

002. Application of Nebraska Attorney General Model Rules for Practice and Procedure . The Nebraska Department of Insurance adopts the Attorney General’s Model Rules for regulations and procedures governing hearings on contested cases, declaratory orders, petitions for rulemaking, and petitions for negotiated rulemaking found at 53 NAC 1 through 53 NAC 5, unless specific statutes or regulations require a different procedure or standard in particular circumstances. These regulations shall not create a right of appeal or right to contest an agency action which is not specifically authorized by statute or these regulations.

History

• Effective 2024-05-05

Chapter 28 Unfair Sex Discrimination

Neb. Admin. Code tit. 210, ch. 28 Unfair Sex Discrimination {#sec-210-nac-28 omnilex-key=us-ne-regs-official--title-210--210 NAC 28}

001. Purpose . The purpose of this regulation is to eliminate the act of denying benefits or coverage on the basis of sex or marital status in the terms and conditions of life, sickness and accident insurance contracts and in the underwriting criteria of such insurance carriers.

002. Authority . This regulation is issued pursuant to Neb.Rev.Stat. §44-101.01, §44-1527, and §44-1533.

003. Definitions .

003.01 Contracts - Any life, sickness and accident insurance policy or plan including any rider or endorsement thereto offered by an insurer.

003.02 Insurer. Any insurance company, association, reciprocal or inter insurance exchange, non-profit hospital plan, non-profit professional health service plan, health maintenance organization, fraternal benefit society or beneficial association writing life or sickness and accident insurance.

004. Applicability and scope . This regulation shall apply to all individual, group, franchise or blanket life, sickness and accident insurance contracts delivered or issued for delivery in this state by an insurer on or after October 1, 1977, to all existing group or blanket life, sickness and accident insurance contracts which are amended or renewed on or after October 1, 1977, and to all policy forms submitted for approval on or after October 1, 1977, provided however that in the case of contracts issued pursuant to all collective bargaining agreements this regulation shall apply on the first date after October 1, 1977 upon which any new bargaining agreement first becomes effective.

This regulation does not apply to or affect the right of fraternal benefit societies to determine eligibility requirements for membership. If a fraternal benefit society does, however, admit members of both sexes, this regulation is applicable to the insurance benefits or coverage available to members thereof.

005. Rates . When rates are differentiated on the basis of sex, or marital status, the insurer, upon request, must justify in writing to the satisfaction of the Director such rate differential. All rates shall be based on sound actuarial principles, valid classification systems and must be related to actual experience statistics.

006. Availability requirements . Availability of any life, sickness or accident insurance contract shall not be denied to an insured or prospective insured on the basis of the sex or marital status of the insured. The amount of benefits payable, or any term, conditions or type of coverage shall not be restricted, modified, excluded, or reduced on the basis of the sex or marital status of the insured or prospective insured except to the extent the amount of benefits, term, conditions or type of coverage vary as a result of the application of rate differentials permitted under the Nebraska Insurance Code. However, nothing in this regulation shall prohibit an insurer from taking marital status into account for the purpose of defining persons eligible for dependents benefits. Specific examples of practices prohibited by this regulation include but are not limited to the following:

006.01 Denying coverage to females gainfully employed at home, employed part-time or employed by relatives when coverage is offered to males similarly employed.

006.02 Denying policy riders to females when the riders are available to males.

006.03 Denying, under group contracts, dependent coverage to husbands of female employees, when dependent coverage is available to wives of male employees.

006.04 Denying disability income contracts to employed women when coverage is offered to men similarly employed.

006.05 Restricting, reducing, modifying or excluding benefits relating to coverage involving the genital organs of only one sex.

006.06 Offering lower maximum monthly benefits to women than to men who are in the same classification under a disability income contract.

006.07 Offering more restrictive benefit periods and more restrictive definitions of disability to women than to men in the same classifications under a disability income contract.

006.08 Establishing different conditions by sex under which the policyholder may exercise benefit options contained in the contract.

006.09 Limiting the amount of coverage an insured or prospective insured may purchase based upon the insured's or prospective insured's sex.

History

• Effective 1994-06-26

Chapter 32 Nebraska Hospital-Medical Liability Act Excess Liability Fund Residual Malpractice Insurance Authority

Neb. Admin. Code tit. 210, ch. 32 Nebraska Hospital-Medical Liability Act Excess Liability Fund Residual Malpractice Insurance Authority {#sec-210-nac-32 omnilex-key=us-ne-regs-official--title-210--210 NAC 32}

001. Authority . This rule is promulgated pursuant to the authority granted under Neb.Rev.Stat. Sections §44-2854.01, §44-2821(4), §44-2829 and §44-2837, as amended.

002. Purpose . The purpose of this rule is to implement and administer those provisions of the Nebraska Hospital-Medical Liability Act pertaining to the surcharge levied on qualified health care providers under the Excess Liability Fund, notices provided by the Excess Liability Fund to qualified health care providers, administration and management of the residual malpractice insurance authority, notification to patients by qualified health care providers and such other matters as may be necessary to promote the efficient operation of the Act in accordance with its terms.

003. Definitions .

003.01 The definitions set forth in the Nebraska Hospital-Medical Liability Act, Neb.Rev.Stat. §44-2801 et. seq., as amended, shall be adopted and applied unless the context otherwise requires.

003.02 Act shall mean Nebraska Hospital-Medical Liability Act;

003.03 Cancellation shall mean termination of the qualification of a health care provider due to cessation of professional liability insurance by:

003.03A The professional liability insurer pursuant to Section Neb.Rev.Stat. §44-2836(5)(b);

003.03B The Residual Malpractice Authority of insurance coverage provided pursuant to Neb.Rev.Stat. §§44-2837 through 44-2839; or

003.03C The health care provider.

003.04 Expiration of qualification shall mean that the qualification of the health care provider has ended as a result of not renewing his or her qualification;

003.05 Initial qualification shall mean first time qualification or qualification following an interruption in qualification;

003.06 Qualification shall mean that the health care provider has complied with all of the requirements of Neb.Rev.Stat. §44-2824;

003.07 Renewed qualification shall mean renewal of an existing qualification so that qualification is continuous and uninterrupted;

003.08 Suspension shall mean suspension of a health care provider's qualification pursuant to Neb.Rev.Stat. §44-2829 for failure to pay the surcharge premium or primary insurance premiums under Neb.Rev.Stat. §§44-2837 through 44-2839.

004. Qualification . In order to qualify under the Act, a health care provider must file with the Director proof of financial responsibility pursuant to Neb.Rev.Stat. §44-2827 and pay the surcharge and any special surcharge levied on all health care providers pursuant to Neb.Rev.Stat. §§44-2829 through 44-2831 and shall post notice of qualification under the Act in accordance with Section 009.

004.01 Proof of Financial Responsibility. Financial Responsibility of a health care provider may be established only by filing with the Director proof that the health care provider is currently insured pursuant to Neb.Rev.Stat. §§44-2837 through 44-2839 or by a policy of professional liability insurance in a company authorized to do business in Nebraska.

The use of deductibles on a policy of professional liability insurance utilized to establish proof of financial responsibility is acceptable with the provision that the insurer must pay any settlement or judgment and then may be reimbursed by the insured for the deductible set out in the policy. The full premium, without credit for the deductible, must be reported on the proof of financial responsibility and the applicable surcharge will be based upon that full premium.

004.01A The following constitutes acceptable proof of financial responsibility:

004.01A(1) certificate of professional liability insurance;

004.01A(2) copy of professional liability insurance policy or declarations page

004.01A(3) written statement or binder from insurance company representative or agent

004.01B Proof of financial responsibility shall provide the following information:

004.01B(1) name of each qualified health care provider and insurer;

004.01B(2) limits of coverage;

004.01B(3) policy inception and expiration date;

004.01B(4) premium for insurance coverage for limits required to qualify under the act without credit for deductibles, if applicable;

004.01B(5) any retroactive dates, if applicable;

004.01B(6) whether qualification is on an occurrence or a claims-made basis; and

004.01B(7) deductible amount, if any.

004.02 Qualification Effective Date.

004.02A Initial Qualification. An initial qualification is effective upon the date the health care provider's proof of financial responsibility is received by the Director on the condition that the Director also receives the required surcharge not later than 30 days thereafter. In no event shall a health care provider's qualification become effective prior to the effective date of the professional liability insurance coverage filed by the health care provider. If the Director does not receive the surcharge for an initial qualification within such 30 day period, the qualification shall not become effective until the surcharge is received by the Director along with current proof of financial responsibility.

004.02B Renewed Qualification. A health care provider's qualification expires on the date his or her proof of financial responsibility expires unless the Director receives proof of renewed financial responsibility on or before that date. The health care provider will be given a grace period of 30 days following the expiration of his or her proof of financial responsibility to submit proof of renewed financial responsibility. Qualification does not continue past the expiration date of the health care provider's proof of financial responsibility if the Director does not receive the proof of renewed financial responsibility within the 30 day grace period.

004.03 Cancellation of Qualification. In the event the professional liability insurance policy filed by the health care provider to qualify under the Act is terminated by cancellation pursuant to Neb.Rev.Stat. §44-2836, the health care provider's qualification under the Act also terminates automatically on the effective date of the cancellation without notice from the Excess Liability Fund unless the Director receives a replacement proof of financial responsibility on or before the cancellation date. The Director shall endeavor to notify the health care provider of the effect of the cancellation of primary coverage on his or her qualification under the Act within five (5) business days of receipt by the Director of notice of such cancellation.

004.04 Suspension of Qualification. If the annual premium surcharge is not paid in accordance with the Subsection 005.01 time period, the qualification of the health care provider shall be suspended until the annual surcharge premium is paid. Such suspension shall not be effective as to patients claiming against the health care provider unless, at least 30 days before the effective date of the suspension, a written notice giving the date upon which suspension becomes effective has been provided by the Director to the health care provider. During the period that the suspension is effective, the health care provider is not qualified under the Act and is not provided coverage by the Excess Liability Fund. Notification of suspension to the health care provider must be given in accordance with Subsection 006.02.

005. Surcharge premium .

005.01 As required by Neb.Rev.Stat. §44-2829 of the Act, all health care providers who have qualified under the Act shall contribute to the Excess Liability Fund. The surcharge is due and payable within 30 days after the health care provider has provided proof of financial responsibility to the Director and annual thereafter in such amounts as may be determined by the Director.

005.02 As required by Neb.Rev.Stat. §44-2830, effective on January 1 of each year, the Director shall adjust the amount of the surcharge to maintain the Excess Liability Fund at a level which is sufficient to pay all anticipated claims for the next year and to maintain an adequate reserve for future claims. Prior to making such adjustment, the Director shall conduct a public hearing concerning the proposed adjustment and shall give due regard to the size of the existing Fund, the number and size of potential claims against the Fund, the number of participating providers, and other pertinent factors utilizing sound actuarial principles. Any decrease in the annual surcharge percentage shall not operate to entitle a health care provider to a refund of any portion of the previously paid surcharge.

006. Notification of health care providers . The Excess Liability Fund shall provide the following notices to health care providers as appropriate.

006.01 Expiration Notice. If the Director has not received renewed proof of financial responsibility from a health care provider on or before the date such health care provider's professional liability insurance policy expires, the Excess Liability Fund shall cause a notice to be sent to the health care provider advising that if such proof is not received by the Director within 30 days, the qualification will expire on the date of the expiring proof of responsibility as set forth in Subsection(s) 004.02B.

006.02 Suspension Notice. If the Director has not received the health care provider's required surcharge premium within 30 days after the health care provider has provided proof of financial responsibility in accordance with 004.02B, the Excess Liability Fund shall cause a notice to be sent to the health care provider pursuant to Neb.Rev.Stat. §44-2829 advising that the Excess Liability Fund has not received the required surcharge; that the health care provider's qualification under the Act shall be suspended on a stated effective date not less than 30 days after the date of notice if the required surcharge is not paid and further stating that the suspension shall continue until the surcharge is paid.

006.03 Notice Acknowledging Qualification. Within five business days of receipt of the proof of financial responsibility and the required surcharge premium, the Excess Liability Fund shall notify the health care provider:

006.03A Whether the provider is qualified; and

006.03B If the provider is qualified, the qualification effective and expiration dates.

006.04 Manner of Notice. All notices provided in Subsection(s) 006 shall be sent by United States Mail, postage pre-paid to the health care providers last known address. Proof of mailing of the notices required by Subsections 006.01 and 006.02 shall be maintained. All notification periods shall begin to run on the date of mailing the notice.

007. Form of coverage . The coverage provided to a qualified health care provider under the Excess Liability Fund shall be either on an occurrence or on a claims-made basis and shall be the same as the insurance coverage provided by the insured's policy with the exception of the retroactive date. If the health care provider is no longer qualified under the Act and his or her professional liability insurance coverage was on a claims-made policy, the health care provider will no longer receive coverage under the Excess Liability Fund unless the health care provider purchases extended reporting endorsement coverage from the Fund. This coverage extends the time in which a claim may be made for incidents which occurred during the period of qualification under the Act. If the health care provider changes insurers and his or her professional liability insurance coverage was on a claims- made policy, the health care provider will no longer receive coverage under the Excess Liability Fund for prior acts unless the health care provider purchases extended reporting endorsement coverage from the insurer being replaced and the Fund. If the replacing insurer provides prior acts coverage back to the initial qualification date, extended reporting endorsement coverage is not needed.

008. Residual malpractice insurance authority . If, after diligent effort, a health care provider has been unable to obtain malpractice liability insurance and has been declined by at least two insurers authorized and writing medical malpractice liability insurance in the State of Nebraska, provided there are two such companies, the health care provider may apply for such coverage through the residual malpractice insurance authority. The application shall be made on a form prepared by the residual malpractice insurance authority which has been filed with and approved by the Department of Insurance. The application shall be accompanied by evidence of the two declinations in the form of letters from the declining insurer. If the application is accepted, the coverage shall be issued at the rates established by the Nebraska Department Insurance.

Qualification through the Residual Malpractice Insurance Authority shall be subject to the provisions of Subsection 004.02B regarding renewed qualification; Subsection 004.04 regarding suspension of qualification;

Section 005 regarding surcharge premium and Section 006 regarding notification to health care providers. Qualification under the Residual Malpractice Insurance Authority shall be on an occurrence form basis. As a condition for participating in the Residual Malpractice Insurance Authority, the health care provider must also maintain qualification in the Excess Liability Fund.

009. Patient notification . A qualified health care provider shall provide notice to his or her patients that he or she has qualified under the Act by continuously posting in his or her waiting room or other suitable location a sign stating:

(Name of Health Care Provider) has qualified under the provisions of the Nebraska Hospital-Medical Liability Act. Patients will be subject to the terms and conditions of the Act unless they file a refusal to be bound by that Act with the Director of Insurance of the State of Nebraska.

In addition to the foregoing information, the sign may include the following language:

This notice is being provided as required by the Nebraska Hospital-Medical Liability Act Neb.Rev.Stat. §44-2821(4), as amended.

The sign to be posted will measure at least 8 1/2" x 11" and shall be printed in substantially similar size and style of type as that used in the attached notice.

010. Confidentiality . Certain records of the Excess Liability Fund and the residual malpractice insurance authority shall be confidential and shall not be subject to disclosure as public records. These records include, but are not limited to the following:

010.01 Medical records in any form concerning any person and records of elections filed under Neb.Rev.Stat. §44-2821;

010.02 Any and all records regarding claims filed under the Act;

010.03 Any and all records which represent the work product of an attorney or of the Excess Liability Fund which are related to preparation for litigation under the Act.

010.04 Any records regarding specific case reserves;

010.05 Any examination or actuarial work papers; and

010.06 Any underwriting records of a professional liability insurer or the Residual Malpractice Insurance Authority.

011. Severability clause . The invalidity of any one or more provisions of this Rule shall not affect any other provision of this Rule or any part thereof, and in case of any such invalidity, this rule shall be construed as if such invalid provisions had not been inserted.

012. Operative date . This rule shall become operative on September 1, 1989.

NOTICE

has qualified under

(Name of Health Care Provider)

the provisions of the Nebraska Hospital-Medical Liability Act

th

(L.B. 434, 84 Nebraska Legislature (Neb.Rev.Stat. §§44-

2801 through 44-2855). Patients will be subject to the terms

and provisions of that act unless they file a refusal to be bound

by the act with the Director of Insurance of the State of

Nebraska and notify the above health care provider of the

election as soon as is reasonable under the circumstances that

such patient has so elected.

' Heading must be 90 point boldface type.

2 Text must be 32 point boldface type.

History

• Effective 1994-06-26

Chapter 33 Life Insurance Solicitation

Neb. Admin. Code tit. 210, ch. 33 Life Insurance Solicitation {#sec-210-nac-33 omnilex-key=us-ne-regs-official--title-210--210 NAC 33}

001. Authority . This rule is adopted and promulgated by the Nebraska Department of Insurance pursuant to NEB. REV. STAT. §§ 44-101.01, 44-1522, 44-1525(l)(a) and 44-1533.

002. Purpose .

002.01 The purpose of this regulation is to require insurers to deliver to purchasers of life insurance, information which will improve the buyer's ability to select the most appropriate plan of life insurance for the buyer's needs, improve the buyer's understanding of the basic features of the policy which has been purchased or which is under consideration and improve the ability of the buyer to evaluate the relative costs of similar plans of life insurance.

002.02 This regulation does not prohibit the use of additional material which is not in violation of this regulation or any other Nebraska statute or regulation.

003. Scope .

003.01 Except for the exemptions specified in Subsection 003.02, this regulation shall apply to any solicitation, negotiation or procurement of life insurance occurring within this state. Subsection 005.02 shall apply only to an existing nonexempt policy held by a policyowner residing in this state. This regulation shall apply to any issuer of life insurance contracts including fraternal benefit societies.

003.02 This regulation shall not apply to:

003.02A Individual and group annuity contracts;

003.02B Credit life insurance;

003.02C Group life insurance (except for disclosures relating to preneed funeral contracts or prearrangements; these disclosure requirements shall extend to the issuance or delivery of certificates as well as to the master policy);

003.02D Life insurance policies issued in connection with pension and welfare plans as defined by and which are subject to the federal Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Section 1001 et seq . as amended; or

003.02E Variable life insurance under which the amount or duration of the life insurance varies according to the investment experience of a separate account.

004. Definitions . For the purposes of this regulation, the following definitions shall apply:

004.01 “Buyer's Guide” means the current Life Insurance Buyer's Guide adopted by the National Association of Insurance Commissioners (NAIC) or language approved by the Director of Insurance.

004.02 “Current scale of nonguaranteed elements” means a formula or other mechanism that produces values for an illustration as if there is no change in the basis of those values after the time of illustration.

004.03 “Generic name” means a short title that is descriptive of the premium and benefit patterns of a policy or a rider.

004.04 “Nonguaranteed elements” means the premiums, credited interest rates (including any bonus), benefits, values, non-interest based credits, charges or elements of formulas used to determine any of these, that are subject to company discretion and are not guaranteed at issue. An element is considered non-guaranteed if any of the underlying non-guaranteed elements are used in its calculation.

004.05 “Policy data” means a display or schedule of numerical values, both guaranteed and nonguaranteed for each policy year or a series of designated policy years of the following information:

004.05A illustrated annual, other periodic, and terminal dividends;

004.05B premiums;

004.05C death benefits; and

004.05D cash surrender values and endowments benefits.

004.06 “Policy summary” means a written statement describing the elements of the policy, including, but not limited to:

004.06A A prominently placed title as follows: STATEMENT OF POLICY COST AND BENEFIT INFORMATION;

004.06B 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 Policy Summary;

004.06C The full name and home office or administrative office address of the company in which the life insurance policy is to be or has been written;

004.06D The generic name of the basic policy and each rider;

004.06E The following amounts, where applicable, for the first five (5) policy years and representative policy years thereafter sufficient to clearly illustrate the premium and benefit patterns, including, but not necessarily limited to, at least one age from sixty (60) through sixty-five (65) and maturity, whichever is earlier:

004.06E(i) The annual premium for the basic policy;

004.06E(ii) The annual premium for each optional rider;

004.06E(iii) The amount payable upon death at the beginning of the policy year regardless of the cause of death, other than suicide or other specifically enumerated exclusions, that is provided by the basic policy and each optional rider, with benefits provided under the basic policy and each rider shown separately;

004.06E(iv) The total guaranteed cash surrender values at the end of the year with values shown separately for the basic policy and each rider; and

004.06E(v) Any endowment amounts payable under the policy that are not included under cash surrender values above;

004.06F The effective policy loan annual percentage interest rate, if the policy contains this provision, specifying whether this rate is applied in advance or in arrears. If the policy loan interest rate is adjustable, the policy summary shall also indicate that the annual percentage rate will be determined by the company in accordance with the provisions of the policy and the applicable law; and

004.06G The date on which the policy summary is prepared.

004.07 “Preneed funeral contract or prearrangement” means an agreement by or for an individual before that individual’s death relating to the purchase or provision of specific funeral or cemetery merchandise or services.

005. Duties of Insurers .

005.01 Requirements Applicable Generally

005.01A The insurer shall provide a Buyer's Guide to all prospective purchasers, prior to accepting the applicant’s initial premium or premium deposit. However, if the policy for which application is made contains an unconditional refund provision of at least ten (10) days, the Buyer’s Guide may be delivered with the policy or prior to delivery of the policy.

005.01B The insurer shall provide a policy summary to prospective purchasers where the insurer has identified the policy form as one that will not be marketed with an illustration. The policy summary shall show guarantees only. It shall consist of a separate document with all required information set out in a manner that does not minimize or render any portion of the summary obscure. Any amounts that remain level for two (2) or more years of the policy may be represented by a single number if it is clearly indicated what amounts are applicable for each policy year. Amounts in Subsection 004.06E shall be listed in total, not on a per thousand or per unit basis. If more than one insured is covered under one policy or rider, death benefits shall be displayed separately for each insured or for each class of insureds if death benefits do not differ within the class. Zero amounts shall be displayed as a blank space. Delivery of the policy summary shall be consistent with the time for delivery of the Buyer’s Guide as specified in Subsection 005.01A.

005.02 Requirements Applicable to Existing Policies

005.02A Upon request by the policyowner, the insurer shall furnish either policy data or an in force illustration as follows:

005.02A(i) For policies issued prior to the effective date of 210 NEB. ADMIN. R. & REG. 72, the insurer shall furnish policy data, or, at its option, an in force illustration meeting the requirements of 210 NEB. ADMIN. R. & REG. 72.

005.02A(ii) For policies issued after the effective date of the illustration regulation that were declared not to be used with an illustration, the insurer shall furnish policy data, limited to guaranteed values, if it has chosen not to furnish an in force illustration meeting the requirements of this regulation.

005.02A(iii) If the policy was issued after the effective date of the illustration regulation and declared to be used with an illustration, an in force illustration shall be provided.

005.02A(iv) Unless otherwise requested, the policy data shall be provided for twenty (20) consecutive years beginning with the previous policy anniversary. The statement of policy data shall include nonguaranteed elements according to the current scale, the amount of outstanding policy loans, and the current policy loan interest rate. Policy values shown shall be based on the current application of nonguaranteed elements in effect at the time of the request. Notwithstanding Chapters 40 and 72 of Title 210 of the Nebraska Administrative Code, the insurer may charge a reasonable fee, not to exceed twenty ($20.00) dollars for the preparation of the statement.

005.02B If a life insurance company changes its method of determining scales of nonguaranteed elements on existing policies; it shall, no later than when the first payment is made on the new basis, advise each affected policy owner residing in this state of this change and of its implication on affected policies. This requirement shall not apply to policies for which the amount payable upon death under the basic policy as of the date when advice would otherwise be required does not exceed $5,000.

005.02C If the insurer makes a material revision in the terms and conditions under which it will limit its right to change any nonguaranteed factor; it shall, no later than the first policy anniversary following the revision, advise each affected policy owner residing in this state.

006. Preneed Funeral Contracts or Arrangements . The following information shall be adequately disclosed at the time an application is made, prior to accepting the applicant’s initial premium or deposit, for a preneed funeral contract or prearrangement that is funded or to be funded by a life insurance policy:

006.01 The fact that a life insurance policy is involved or being used to fund a prearrangement;

006.02 The nature of the relationship among the soliciting agent or agents, the provider of the funeral or cemetery merchandise or services, the administrator and any other person;

006.03 The relationship of the life insurance policy to the funding of the prearrangement and the nature and existence of any guarantees relating to the prearrangement;

006.04 The impact on the prearrangement:

006.04A Of any changes in the life insurance policy including but not limited to, changes in the assignment, beneficiary designation or use of the proceeds;

006.04B Of any penalties to be incurred by the policyholder as a result of failure to make premium payments;

006.04C Of any penalties to be incurred or monies to be received as a result of cancellation or surrender of the life insurance policy;

006.05 A list of the merchandise and services which are applied or contracted for in the prearrangement and all relevant information concerning the price of the funeral services, including an indication that the purchase price is either guaranteed at the time of purchase or to be determined at the time of need;

006.06 All relevant information concerning what occurs and whether any entitlements or obligations arise if there is a difference between the proceeds of the life insurance policy and the amount actually needed to fund the prearrangement;

006.07 Any penalties or restrictions, including but not limited to geographic restrictions or the inability of the provider to perform, on the delivery of merchandise, services or the prearrangement guarantee; and

006.08 Any sales commission or other form of compensation that is being paid and the identity of the individuals or entities to whom it is being paid.

007. General Rules .

007.01 Each insurer shall maintain at its home office or principal office, a complete file containing one copy of each document authorized by the insurer pursuant to this regulation. This file shall contain one copy of each authorized form for a period of three (3) years following the date of its last authorized use unless otherwise provided by this regulation.

007.02 An agent shall inform the prospective purchaser, prior to commencing a life insurance sales presentation, that he or she is acting as a life insurance agent and inform the prospective purchaser of the full name of the insurance company which the agent is representing to the buyer. In sales situations in which an agent is not involved, the insurer shall identify its full name.

007.03 An insurance producer shall not use terms such as “financial planner,” “investment advisor,” “financial consultant,” “financial counseling,” or other similar terms in such a way as to imply that he or she is primarily engaged in an advisory business in which compensation is unrelated to sales unless that is actually the case. This provision is not intended to preclude persons who hold some form of formal recognized financial planning or consultant designation from using this designation even when they are only selling insurance. This provision also is not intended to preclude persons who are members of a recognized trade or professional association having such terms as part of its name from citing membership, providing that a person citing membership, if authorized only to sell insurance products, shall disclose that fact. This provision does not permit persons to charge an additional fee for services that are customarily associated with the solicitation, negotiation or servicing of policies.

007.04 Any reference to nonguaranteed elements shall include a statement that the item is not guaranteed and is based on the company’s current scale of nonguaranteed elements (use appropriate special term such as “current dividend” or “current rate” scale.) If a nonguaranteed element would be reduced by the existence of a policy loan, a statement to that effect shall be included in any reference to nonguaranteed elements. A presentation or depiction of a policy issued after the effective date of 210 NEB. ADMIN. R. & REG. 72 that includes nonguaranteed elements over a period of years shall be governed by that regulation.

008. Failure to comply . Failure of an insurer to provide or deliver a Buyer's Guide, an in force illustration, a policy summary or policy data as provided in Section 005, shall constitute an omission which misrepresents the benefits, advantages, conditions or terms of an insurance policy.

009. Severability . If any provision of this regulation is for any reason held to be invalid, the remainder of the regulation shall not be affected thereby.

010. Effective date . This amended rule shall become effective on October 1, 2008.

History

• Effective 2008-06-28

Chapter 34 Title Insurance

Neb. Admin. Code tit. 210, ch. 34 Title Insurance {#sec-210-nac-34 omnilex-key=us-ne-regs-official--title-210--210 NAC 34}

001. Authority . This rule is adopted and promulgated by the Director of Insurance of the State of Nebraska pursuant to the Title Insurers Act, Neb. Rev. Stat. §44-1978 et seq., specifically §44-19,101 and pursuant to the Title Insurance Agent Act, Neb. Rev. Stat. §44-19,106 et seq., specifically §44-19,119.

002. Purpose . The purpose of this rule is to set forth standards the director deems necessary to carry out the provisions of Neb. Rev. Stat. §44-1978 et seq. and Neb. Rev. Stat. §44-19,106 et seq.

003. Severability . If any section of this rule, or the applicability thereof to any person or circumstance, is held invalid by a court, the remainder of this chapter and the applicability of such provision to other persons or circumstances shall not be affected thereby.

004. Scope . This rule shall apply to all title insurers authorized to do business in Nebraska and all title insurance agents licensed in Nebraska.

005. Definitions .

005.01 The definitions provided in Neb. Rev. Stat. §44-1981 and Neb. Rev. Stat. §44-19,108 apply for the purposes of this chapter.

005.02 Title insurance agency shall mean a business entity licensed by the Department of Insurance with a title insurance agent or agents appointed by the entity to act as the designated agent or agents of the entity and who are thereby responsible for the insurance related activities of the entity.

005.03 Audit sample or audit sampling shall mean samples selected based upon sampling guidelines established in the American Institute of Certified Public Accountants Audit and Accounting Guide - Audit Sampling as well as SAS 39 - Audit Sampling, the National Association of Insurance Commissioners Financial Condition Examiners Handbook, or the National Association of Insurance Commissioners Market Conduct Examiners Handbook. In the audit report, the auditor shall note the number of items selected for the audit sample and the reason(s) why that number was selected. The auditor shall select a sample which will give the auditor reasonable assurance the transactions and accounts are free from material errors.

006. Title Insurer On-Site Review and Report . Each title insurer authorized to do business in Nebraska shall adopt and utilize the following standards and procedures for the on-site review of title insurance agents as required by Neb. Rev. Stat. §44-1993(3). Such standards shall be deemed minimum standards and will not preclude title insurers from applying more stringent or comprehensive procedures. On-site review documentation, work papers, summaries and reports shall be maintained by each title insurer for the period of at least four (4) years and shall be made available to the Director of Insurance upon request pursuant to the Insurers Examination Act, Neb. Rev. Stat. §44-5901 et seq. A report shall be prepared by the title insurer at the completion of the on-site review setting forth the title insurer’s findings on each item listed below as well as any additional items the title insurer includes in its on-site review. In the case of a title insurance agency on-site review, the title insurer shall include in the report a list of title insurance agents employed by said title insurance agency on the date of the on-site review. The report shall be maintained by the title insurer and provided to the Director of Insurance upon request. If the title insurer’s on-site review indicates the title insurance agent is deficient in any of the areas listed below, the title insurer shall notify the Department within five (5) business days if the title insurance agent has not remedied or can not remedy the deficiency within that time. The title insurer shall file the on-site review report with the Director of Insurance and explain the areas of deficiency and the agent’s progress made, if any, during the five-business day grace period.

006.01 Agency Contract. Each on-site review shall include a review of the title insurer and title insurance agency/title insurance agent contracts to ensure (a) the contract sets forth the responsibilities of each party and, when both parties share the responsibility for a particular function, specifies the division of responsibilities and (b) the contract is up-to-date and properly executed.

006.02 Licensure Review. Each on-site review shall include a review of compliance with Nebraska licensing requirements related to the title insurance agent, and abstractors, if applicable.

006.03 Financial Responsibility. The title insurer shall obtain from the title insurance agent, or from the title insurance agency if the title insurance agent is employed by a title insurance agency, a statement of financial condition of the title insurance agent or title insurance agency as required pursuant to Neb. Rev. Stat. §44-1993(2) and §44-19,114(14) which includes an income statement and balance sheet showing the condition of the title insurance agent/agency affairs as of December 31 of the preceding year. This statement of financial condition shall be certified by the title insurance agent or the title insurance agency’s designated agent as being a true and correct representation of the financial condition. The title insurer shall document its receipt of the title insurance agent’s or title insurance agency’s statement of financial condition in the title insurer’s on-site review report.

006.04 Management Evaluation. Each on-site review shall include a review of management practices related to conflicts of interest, affiliated business arrangements, and regulatory compliance.

006.05 Title Plant Maintenance. The title insurer shall review the title insurance agent’s procedures to update and maintain title plant records, if applicable.

006.06 Underwriting Practices. The title insurer shall establish underwriting standards to minimize claims or potential losses to insurers, lenders, and consumers. The title insurer shall conduct a random file review using an audit sample to ascertain the thoroughness and accuracy of the title insurance agent’s search procedures.

006.07 Office Maintenance.

006.07(A) Each on-site review shall include a review of the following items:

006.07(A)(1) Order log and policy register;

006.07(A)(2) Reconciliation of orders with commitments, title searches, title policies, and collection of premium;

006.07(A)(3) Reconciliation of policy numbers provided to the title insurance agent, existing inventory and issued policies;

006.07(A)(4) Review of the title insurance agent’s procedure for tracking issued commitments;

006.07(A)(5) Review of the title insurance agent’s practices to cancel commitments on transactions that do not close;

006.07(A)(6) Review of the title insurance agent’s procedures for follow-up after closing to track status of outstanding conditions required for timely issuance of policies;

006.07(A)(7) Review of the title insurance agent’s procedure for voiding policies;

006.07(A)(8) Review of the title insurance agent’s tracking of open escrow, security, settlement or closing files;

006.07(A)(9) Review of title insurance agent’s issued policy reports to the title insurer.

006.07(B) To assist the title insurer and the Department, the title insurance agent shall maintain a log or logs containing the above referenced information and any additional information if required to be tracked by the title insurer.

006.08 Claims. If the title insurance agent has the authority to settle claims on behalf of the title insurer, the on-site review shall include a review of the agent’s claims procedures to ensure timely review, proper investigation, adequate documentation, and resolution.

006.09 Policy Delays. The on-site review shall include a review of the title insurance agent’s files awaiting policy issuance to determine the average length of time between closing and the issuance of the title policy. The title insurer shall document whether the title insurance agent has appropriate follow-up procedures in place to request needed items after the closing, and whether the title insurance agent is actively using those procedures. The delay between the date all of the requirements to insure have been met and policy issuance shall be no longer than sixty (60) days.

006.10 Policy Issuance. The on-site review shall include an audit sample and review of issued policy files. The review of the sample should determine compliance with the following: (a) use of correct policy and endorsement forms; (b) accuracy of insured information, exclusions, and property identification; (c) timely processing of policies after requirements to insure have been met; (d) accuracy of premium charged; (e) proper use of required disclosures; and (f) the title insurer shall track the receipt of premium funds from the closing to the agent’s escrow, settlement, security or closing account and any other accounts to the title insurance agent’s premium remittance account.

006.11 Escrow Closings. For those agents performing escrow, security settlement or closing services pursuant to Neb. Rev. Stat. §44-19,116, the title insurer shall review the title insurance agent’s closing procedures and shall include an audit sample of escrow closing files. The review shall include a determination of compliance with Neb. Rev. Stat. §44-19,116 with the following: (a) use of escrow agreements; (b) adherence to the “good funds” requirements, (c) deposit practices, (d) disbursement of funds in compliance with written instructions, and (e) recording of all deeds, releases, and other documents required of the title insurance agent.

007. Agent Records Retention The title insurance agent shall preserve and maintain records of its affairs, including title insurance, escrow operations, security deposit, and escrow trust accounts for as long as appropriate under the circumstances but, in no event, less than fifteen years after the title insurance policy has been issued or ten years after the escrow or security deposit account has been closed.

History

• Effective 2005-04-03

Chapter 35 Unfair Discrimination on the Basis of Blindness or Partial Blindness

Neb. Admin. Code tit. 210, ch. 35 Unfair Discrimination on the Basis of Blindness or Partial Blindness {#sec-210-nac-35 omnilex-key=us-ne-regs-official--title-210--210 NAC 35}

001. Statutory authority . This Rule is promulgated pursuant to the authority granted by Neb.Rev.Stat. §44-101.01 and §44-1533.

002. Purpose . The purpose of this Rule is to identify specific acts or practices which are

prohibited by Neb.Rev.Stat. §44-1525(7)(a) and (b).

003. Unfairly discriminatory acts or practices . The following are hereby identified as acts or practices which constitute unfair discrimination between individuals of the same class: refusing to insure, or refusing to continue to insure, or limiting the amount, extent or kind of coverage available to an individual or charging an individual a different rate for the same coverage solely because of blindness or partial blindness.

History

• Effective 1994-06-26

Chapter 36 Regulation to Implement the Medicare Supplement Insurance Minimum Standards Act

Neb. Admin. Code tit. 210, ch. 36 Regulation to Implement the Medicare Supplement Insurance Minimum Standards Act {#sec-210-nac-36 omnilex-key=us-ne-regs-official--title-210--210 NAC 36}

001 . The Department of Insurance (Department) hereby adopts the National Association of Insurance Commissioners (NAIC) model regulation, titled “Model Regulation to Implement the NAIC Medicare Supplement Insurance Minimum Standards Model Act” (hereinafter “model”), adopted by the NAIC on August 29, 2016 (as published in the 1^st quarter of 2018 by the NAIC Model Regulation Service) and as recognized in the Federal Register on September 1, 2017 with the following notes, exceptions and additions:

001.01 This regulation is adopted pursuant to the authority vested in the Director under Neb. Rev. Stat. §§ 44-3601 through 44-3610, specifically § 44-3609.

001.02 For purposes of the insertion of relevant dates of adoption that are bracketed throughout the model, the Department has previously approved standards for “Pre- Standardized Medicare Supplement Benefit Plans,” “Pre-Standardized Benefit Plan,” and “Pre-Standardized plan” that were issued prior to June 1, 1992. It also previously approved the standards for “1990 Standardized Medicare supplement benefit plan,” “1990 Standardized benefit plan” or “1990 plan” that were issued on or after June 1, 1992 but before June 1, 2010. This approval also included Medicare supplement insurance policies and certificates renewed on or after that date which are not replaced by the issuer at the request of the insured. The Department also approved standards for “2010 Standardized Medicare supplement benefit plan,” “2010 Standardized benefit plan” or “2010 plan” for an effective date for coverage on or after June 1, 2010. Those standards remain in effect and are incorporated by reference in this regulation via the NAIC model.

001.03 In Section 8A(7)(c) of the model, the last sentence is amended to read “If suspension occurs and if the policyholder or certificate holder loses coverage under the group health plan, the policy shall automatically re-instituted (effective as of the date of loss of coverage) if the policyholder provides notice of loss of coverage within ninety (90) days after the date of the loss and pays the premium attributable to the period, effective as of the date of termination of entitlement.”

001.04 In Section 8.1 of the model, the last sentence of the introductory paragraph is amended to read as follows: “Benefit standards applicable to Medicare supplement policies and certificates issued with an effective date for coverage prior to June 1, 2010 remain subject to the requirements of this regulation as it existed before June 1, 2010.”

001.05 In Section 12B(1) of the model, the paragraph is amended to read as follows: “The individual is enrolled under an employee welfare plan that provides health benefits that supplement the benefits under Medicare; and the plan terminates, or the plan ceases to provide all such supplemental health benefits to the individual; or an individual is enrolled, due to current employment, under an employee welfare benefit plan that pays benefits secondary to Medicare, and the individual loses eligibility for coverage under the plan.

001.06 Additionally, when a policy or certificate is delivered by an agent, a receipt of delivery of the policy or certificate, shall be signed by the agent and applicant, at the time of delivery of the policy, if hand delivered. A copy of the delivery receipt will be provided to the applicant and a copy retained by the agent.

002 The Model Regulation to Implement the NAIC Medicare Supplement Insurance Minimum Standards Model Act” can be found on the Nebraska Department of Insurance’s website at:

https://doi.nebraska.gov/insurers/legal-issues

Additionally, the Model Regulation is available for inspection at the offices of the Department of Insurance.

History

• Effective 2018-11-18

Chapter 38 Continuing Education of Insurance Producers and Consultants

Neb. Admin. Code tit. 210, ch. 38 Continuing Education of Insurance Producers and Consultants {#sec-210-nac-38 omnilex-key=us-ne-regs-official--title-210--210 NAC 38}

001. Authority . This rule is issued pursuant to the authority granted by NEB. REV. STAT. §§ 44-101.01 and 44-3908 of the Nebraska Insurance Laws.

002. Purpose . This rule is issued for the purpose of implementing and administering provisions of an act establishing requirements for continuing education of insurance producers and consultants (hereinafter referred to as the Act).

003. Definitions . For the purposes of this rule, the following definitions shall apply unless the content otherwise requires.

003.01 Credit hours shall be the measure of the hours of continuing education that the director assigns to an approved continuing education activity.

003.02 Licensee shall mean a natural person who is licensed by the Department of Insurance as a resident insurance producer or resident consultant.

003.03 Department shall mean the Department of Insurance.

003.04 Director shall mean the Director of Insurance.

003.05 Two-year period shall mean the period commencing on the date of licensing and ending on the date of expiration of the licensee’s first license effective for not less than two years and each succeeding 24 month period.

003.06 Approved courses shall mean classes, seminars, or other forms of instruction that are approved by the director as meeting the requirements of this rule and the Act.

003.07 Due date shall mean the date of expiration of the licensee’s two-year license.

003.08 Courses shall mean classes, seminars or other forms of instruction that are filled with the department for certification as an approved course.

003.09 Continuing education sponsor shall mean any person, school, insurer, industry association, or other organization desiring to file or having filed a course with the department.

003.10 Certificate of completion shall mean a certification from the course sponsor to the licensee upon a form approved by the department that the licensee has completed the course.

003.11 A contracted provider shall mean a separate individual, school, insurer, or other organizational entity contracting with an approved continuing education sponsor to administer or implement the approved continuing education sponsor’s course, program of study, or subject for continuing education credit.

004. Applicability . This rule shall only apply to resident persons licensed to consult and/or engage in the sale, solicitation or negotiation of the following classifications of insurance coverage:

004.01 Life Insurance;

004.02 Accident and Health or Sickness Insurance;

004.03 Property Insurance;

004.04 Casualty Insurance;

004.05 Personal Lines Property and Casualty Insurance;

004.06 Title Insurance;

004.07 Crop Insurance; and

004.08 Miscellaneous Insurance.

005. Exceptions . This rule shall not apply to the following persons:

005.01 Licensees for whom an examination is not required under the laws of this state.

005.02 Licensees who sell or consult only in the areas of credit life insurance and credit accident and health insurance.

005.03 Licensees holding such limited or restricted licenses as the Director may exempt.

006. Education requirements .

006.01 Any course or program of instruction or seminar developed and/or sponsored by an authorized insurer, insurance education institute, recognized agents association, or insurance trade association or any independent program of instruction, shall, subject to the approval of the director, qualify for the equivalency of the number of credit hours assigned thereto by the director.

006.02 Any correspondence course approved by the director shall qualify for the equivalency of the number of credit hours assigned thereto by the director.

006.03 Any insurance-related course approved by the director taught by an accredited college or university shall qualify for the number of credit hours assigned thereto by the director.

006.04 A person teaching or lecturing at an approved course shall qualify for the same number of credit hours as would be granted to a person taking and successfully completing such course.

007. Classification of courses . Approved courses will be assigned at least one of the classifications as follows:

007.01 Life;

007.02 Accident and Health or Sickness;

007.03 Property;

007.04 Casualty;

007.05 Personal Lines Property and Casualty;

007.06 Crop;

007.07 Title;

007.08 General; and

007.09 Ethics.

A course may be assigned more than one classification.

008. Procedure and standards for approval of such education .

008.01 Any continuing education sponsor intending to provide approved courses shall first file with the department for approval by the director, on a form approved by the department accompanied by a nonrefundable fee as set forth by NEB. REV. STAT. § 44-3905(1)(a), an outline of the subject matter to be covered, the method of presentation, the qualifications required of the instructor, the number of credits being requested by the course sponsor, and other information supporting the request for approval. Any proposed change to the fee shall be posted by the Department of Insurance on its website for a reasonable period of time in order to allow the general public to review and provide comment before such fee adjustment is implemented by the director.

008.02 The course filed for approval shall include a statement of the method used to determine whether there has been a positive achievement of education on the part of the licensee being certified as having satisfactorily completed the approved course. The method may be a written examination, written report by the licensee, certification by the providing organization of the licensee's program attendance or completion, or other method approved by the director as appropriate for that approved course.

008.03 Upon receipt of such material, the director will grant or deny certification as an approved course and will indicate the number of credit hours that will be recognized for the course. In cases of denial, the director will furnish a written explanation of this action.

008.04 The director, at his or her discretion, may consider as approved courses, specific programs of study that have broad national or regional recognition, notwithstanding the lack of a request for certification.

008.05 The credit hours for a course, except an approved course of independent study, shall be determined on the basis of contact or classroom hours. For an approved program of independent study, the credit hours will be equal to the credit hours that would be assigned to an equivalent classroom approved course.

008.06 If the approval of a course or program of instruction has not been ruled upon 30 days after the course was filed for approval, it shall be deemed to be an approved course. The director may extend the period allowed to review a course by giving written notice prior to the expiration of 30 days from the date of filing. However, such extension shall not exceed a total of 60 days from the date of filing.

008.07 A continuing education sponsor that alters the teaching method of an approved course or materially amends the content of an approved course shall first recertify the continuing education course with the director in a manner consistent with the requirements of this section.

009. Procedure and standards for approval of continuing education sponsors .

009.01 Any individual, school, insurer, industry association, or other organization intending to provide a course, program of study, or subject for continuing education credit must submit an application on a form or in a format prescribed by the department, with a nonrefundable fee as set forth by NEB. REV. STAT. § 44-3905(1)(b), to become an approved continuing education sponsor. The director may require any documents reasonably necessary to verify the accuracy of the information contained in an application. Before approving the application, the director shall find that the applicant:

009.01(A) Has demonstrated financial and organizational stability;

009.01(B) Has agreed to comply with the administrative and regulatory guidelines set forth by the department;

009.01(C) Has not committed any act set forth in NEB. REV. STAT. § 44-3905(1)(b)(i) through (xv); and

009.01(D) Has certified to the director that all continuing education instructors utilized by the continuing education sponsor:

009.01(D)(i) Have not had an insurance producer license, or other professional license, denied, suspended, placed on probation, or revoked in Nebraska or in any other state, province, district, or territory; and

009.01(D)(ii) Possesses one of the following qualifications:

009.01(D)(ii)(1) An associate degree or bachelors degree from an accredited school with a concentration in the subject matter being taught;

009.01(D)(ii)(2) Two years of recent experience and 60 hours of course work in the subject matter being taught;

009.01(D)(ii)(3) Special expertise, such as employment with a governmental entity, or a documented history of research or study in the subject matter being taught; or

009.01(D)(ii)(4) Education and experience that are found by the director to be equivalent.

009.02 The director may request additional documents and/or information as he or she deems necessary to verify a continuing education sponsor applicant meets the qualifications set forth in subsection 009.01 of this rule.

009.03 An approved continuing education sponsor that is found to have used continuing education instructors who do not meet the instructor qualifications as set forth in subsection 009.01(D) of this rule may, after notice and hearing, have its approval rescinded by the director and be subject to an administrative penalty as set forth in NEB. REV. STAT. § 44-3905(1)(b).

009.04 Any proposed change to the fee set forth in subsection 009.01 shall be posted by the Department of Insurance on its website for a reasonable period of time in order to allow the general public to review and provide comment before such fee adjustment is implemented by the director.

010. Procedure and standards for reporting contracted provider agreements .

010.01 It is the responsibility of the continuing education sponsor to:

010.01(A) Give notice to the director that the continuing education sponsor has appointed a contracted provider to handle their approved course, program of study, or subject for continuing education credit, and provide the department with a description of the authority, duties, and responsibilities granted to the contracted provider; and

010.01(B) Give notice to the director of the primary contact person representing the contracted provider including fax and telephone number, email address and business address. The contracted provider’s primary contact person shall be responsible for resolving any course discrepancy that may arise.

010.02 The continuing education sponsor shall be ultimately responsible for the contracted provider’s adherence to all requirements set forth in this rule and the Act.

011. Maintenance of records .

011.01 The department will maintain records of the most recent four years of an insurance producer or consultant’s completion of the requirements of the Act.

011.02 The department will maintain a list of the courses that currently are approved by the director.

011.03 A continuing education sponsor will maintain records of the most recent four years of the certificates of completion issued. Such records should identify the following:

011.03(A) Full name of the insurance producer or consultant;

011.03(B) License number or producer identification number of the insurance producer or consultant;

011.03(C) Course title;

011.03(D) Date of course;

011.03(E) Category of course;

011.03(F) Course identification number; and

011.03(G) Number of credits earned.

011.04 The licensee shall maintain copies of the certificates of completion earned for the two most recent two-year periods.

012. List of approved courses . The director will provide upon request a list of all approved courses currently available to the public. The list will include information on the location where the approved course is to be held, the number of credit hours assigned as recognition for satisfactory completion of the approved course, and also the classification such as life, property and casualty, or general.

013. Approved courses - loss of certification .

013.01 The certification of a course as an approved course may be suspended by the director if, after notice and hearing, the director determines that:

013.01(A) The program teaching method or program content has been changed without first providing notice to the director and obtaining recertification from the director;

013.01(B) A certificate of completion is or has been issued to any individual who did not complete the approved course in accordance with the standards furnished for certification;

013.01(C) Certificates of completion are not given to all individuals who have satisfactorily completed the approved course in accordance with the standards furnished for certification;

013.01(D) Records are not maintained of the certificates issued;

013.01(E) Improprieties have occurred in connection with the classification, application for certification, maintenance of records, teaching method, program content, or issuance of certificates for a particular course or program; or

013.01(F) There has been a failure to give prior notification of course dates, course locations or authorized signatures to the director. The notification must be provided at least two weeks prior to the date the course commences.

013.02 Reinstatement of a suspended certification will be made upon the furnishing of satisfactory proof that the conditions responsible for the suspension have been corrected.

013.03 Where it is determined that improprieties have occurred in connection with a course which is no longer offered by a particular course sponsor, the director may suspend certification of existing approved courses offered by such sponsor for a period of time consistent with the severity of the impropriety.

014. Independent study .

014.01 A licensee who studies independently and passes the examination for an approved course will receive credit for the number of hours assigned by the director for completion of the course.

014.02 A licensee who satisfactorily completes an approved correspondence course and provides proof of such satisfactory completion as specified by the department will receive credit for the number of hours assigned by the director for completion of the course.

015. Course repetition . A licensee shall not repeat a continuing education activity for credit within a two-year period as the term is defined in subsection 003.05 of this rule.

016. Advisory committee . The director may create an advisory committee consisting of representatives from the insurance industry in Nebraska. Each organization desiring representation may submit the name of one member of their organization to the director for his approval. Participation as a member of the advisory committee will be voluntary without compensation from the department. The purpose of the committee will be to comment and review matters concerning continuing education that have been submitted to the committee by the director. Such committee will convene upon the request of the director that he or she has a matter for their consideration.

017. Compliance .

017.01 For good cause shown, the director may grant an extension of time during which the requirements imposed by the Act may be completed. Such extension shall not exceed one year. The extension will not alter the requirements or due date of the succeeding two-year periods.

017.02 Each licensee, shall on or prior to his/her due date, and only upon earning the total credit required for the two-year period, mail or deliver, to the department, the original certificates, of completion certifying that he/she has earned the required credit hours for the applicable two-year period. Such mailing or delivery will be made by placing the certificates of completion in an envelope which is to be addressed to the following:

Nebraska Department of Insurance

Terminal Building

941 O Street, Suite 400

Lincoln, NE 68508

After reviewing the licensee's current business address on file with the department, the department shall notify the licensee whether the certification is accepted or not accepted. Such notification shall be sent to the licensee’s current business address on file with the department.

018. Penalty . The director shall not renew a license or issue a new license to any licensee who has failed to comply with the requirements set forth in this rule and the Act unless such licensee has received an extension from the director.

History

• Effective 2009-05-05

Chapter 39 Coordination of Benefits Regulation

Neb. Admin. Code tit. 210, ch. 39 Coordination of Benefits Regulation {#sec-210-nac-39 omnilex-key=us-ne-regs-official--title-210--210 NAC 39}

Section 001. Authority

This regulation is adopted and promulgated by the Director of Insurance pursuant to Neb.Rev.Stat. §44-101.01, § 44-710.04(6), 44-710.09, § 44-3,159 and §44-1533.

Section 002. Purpose

The purpose of this regulation is to:

002.01 Establish a uniform order of benefit determination under which plans pay claims;

002.02 Reduce duplication of benefits by permitting a reduction of the benefits to be paid by plans that, pursuant to rules established by this regulation, do not have to pay their benefits first; and

002.03 Provide greater efficiency in the processing of claims when a person is covered under more than one plan.

Section 003. Definitions

As used in this regulation, these words and terms have the following meanings, unless the context clearly indicates otherwise:

003.01(A) “Allowable expense,” except as set forth below or where a statute requires a different definition, means any health care expense, including coinsurance or copayments and without reduction for any applicable deductible, that is covered in full or in part by any of the plans covering the person.

003.01(B) If a plan is advised by a covered person that all plans covering the person are high-deductible health plans and the person intends to contribute to a health savings account established in accordance with Section 223 of the Internal Revenue Code of 1986, the primary high-deductible health plan’s deductible is not an allowable expense, except for any health care expense incurred that may not be subject to the deductible as described in Section 223(c)(2)(C) of the Internal Revenue Code of 1986.

003.01(C) An expense or a portion of an expense that is not covered by any of the plans is not an allowable expense.

003.01(D) Any expense that a provider by law or in accordance with a contractual agreement is prohibited from charging a covered person is not an allowable expense.

003.01(E) The following are examples of expenses that are not allowable expenses:

003.01(E)(i) If a person is confined in a private hospital room, the difference between the cost of a semi-private room in the hospital and the private room is not an allowable expense, unless one of the plans provides coverage for private hospital room expenses.

003.01(E)(ii) If a person is covered by two (2) or more plans that compute their benefit payments on the basis of usual and customary fees or relative value schedule reimbursement or other similar reimbursement methodology, any amount charged by the provider in excess of the highest reimbursement amount for a specified benefit is not an allowable expense.

003.01(E)(iii) If a person is covered by two (2) or more plans that provide benefits or services on the basis of negotiated fees, any amount in excess of the highest of the negotiated fees is not an allowable expense.

003.01(E)(iv) If a person is covered by one plan that calculates its benefits or services on the basis of usual and customary fees or relative value schedule reimbursement or other similar reimbursement methodology and another plan that provides its benefits or services on the basis of negotiated fees, the primary plan’s payment arrangement shall be the allowable expense for all plans. However, if the provider has contracted with the secondary plan to provide the benefit or service for a specific negotiated fee or payment amount that is different than the primary plan’s payment arrangement and if the provider’s contract permits, that negotiated fee or payment shall be the allowable expense used by the secondary plan to determine its benefits.

003.01(F) The definition of “allowable expense” may exclude certain types of coverage or benefits such as dental care, vision care, prescription drug or hearing aids. A plan that limits the application of COB to certain coverages or benefits may limit the definition of allowable expense in its contract to expenses that are similar to the expenses that it provides. When COB is restricted to specific coverages or benefits in a contract, the definition of allowable expense shall include similar expenses to which COB applies.

003.01(G) When a plan provides benefits in the form of services, the reasonable cash value of each service will be considered an allowable expense and a benefit paid.

003.01(H) The amount of the reduction may be excluded from allowable expense when a covered person’s benefits are reduced under a primary plan:

003.01(H)(i) Because the covered person does not comply with the plan provisions concerning second surgical opinions or precertification of admissions or services; or

003.01(H)(ii) Because the covered person has a lower benefit because the covered person did not use a preferred provider.

003.02 “Birthday” refers only to month and day in a calendar year and does not include the year in which the individual is born.

003.03 “Claim” means a request that benefits of a plan be provided or paid. The benefits claimed may be in the form of:

003.03(A) Services (including supplies);

003.03(B) Payment for all or a portion of the expenses incurred;

003.03(C) A combination of 003.03(A) and 003.03(B); or

003.03(D) An indemnification.

003.04 “Closed panel plan” means a plan that provides health benefits to covered persons primarily in the form of services through a panel of providers that have contracted with or are employed by the plan, and that excludes benefits for services provided by other providers, except in cases of emergency or referral by a panel member.

003.05 “Consolidated Omnibus Budget Reconciliation Act of 1985” or “COBRA” means coverage provided under a right of continuation pursuant to federal law.

003.06 “Coordination of benefits” or “COB” means a provision establishing an order in which plans pay their claims, and permitting secondary plans to reduce their benefits so that the combined benefits of all plans do not exceed total allowable expenses.

003.07 “Custodial parent” means:

003.07(A) The parent awarded custody of a child by a court decree; or

003.07(B) In the absence of a court decree, the parent with whom the child resides more than one half of the calendar year without regard to any temporary visitation.

003.08(A) “Group-type contract” means a contract that is not available to the general public and is obtained and maintained only because of membership in or a connection with a particular organization or group, including blanket coverage.

003.08(B) “Group-type contract” does not include an individually underwritten and issued guaranteed renewable policy even if the policy is purchased through payroll deduction at a premium savings to the insured since the insured would have the right to maintain or renew the policy independently of continued employment with the employer.

003.09 “High-deductible health plan” has the meaning given the term under Section 223 of the Internal Revenue Code of 1986, as amended by the Medicare Prescription Drug, Improvement and Modernization Act of 2003.

003.10(A) “Hospital indemnity benefits” means benefits not related to expenses incurred.

003.10(B) “Hospital indemnity benefits” does not include reimbursement-type benefits even if they are designed or administered to give the insured the right to elect indemnity-type benefits at the time of claim.

003.11(A) “Plan” means a form of coverage with which coordination is allowed. Separate parts of a plan for members of a group that are provided through alternative contracts that are intended to be part of a coordinated package of benefits are considered one plan and there is no COB among the separate parts of the plan.

003.11(B) If a plan coordinates benefits, its contract shall state the types of coverage that will be considered in applying the COB provision of that contract. Whether the contract uses the term “plan” or some other term such as “program,” the contractual definition may be no broader than the definition of “plan” in this subsection. The definition of “plan” in the model COB provision in Appendix A is an example.

003.11(C) “Plan” includes:

003.11(C)(i) Group and nongroup insurance contracts and subscriber contracts;

003.11(C)(ii) Uninsured arrangements of group or group-type coverage;

003.11(C)(iii) Group and nongroup coverage through closed panel plans;

003.11(C)(iv) Group-type contracts;

003.11(C)(v) The medical care components of long-term care contracts, such as skilled nursing care;

003.11(C)(vi) The medical benefits coverage in motor vehicle “no fault” and traditional motor vehicle “fault” type contracts;

003.11(C)(vii) Medicare or other governmental benefits, as permitted by law, except as provided in Paragraph 003.11(D)(vii). That part of the definition of plan may be limited to the hospital, medical and surgical benefits of the governmental program; and

003.11(C)(viii) Group and nongroup insurance contracts and subscriber contracts that pay or reimburse for the cost of dental care.

003.11(D) “Plan” does not include:

003.11(D)(i) Hospital indemnity coverage benefits or other fixed indemnity coverage;

003.11(D)(ii) Accident only coverage except as stated in 003.11(C)(vi);

003.11(D)(iii) Specified disease or specified accident coverage except as stated in 003.11(C)(vi);

003.11(D)(iv) Other limited benefit health coverage;

003.11(D)(v) School accident-type coverages that cover students for accidents only, including athletic injuries, either on a twenty-four-hour basis or on a “to and from school” basis;

003.11(D)(vi) Benefits provided in long-term care insurance policies for non-medical services, for example, personal care, adult day care, homemaker services, assistance with activities of daily living, respite care and custodial care or for contracts that pay a fixed daily benefit without regard to expenses incurred or the receipt of services;

003.11(D)(vii) Medicare supplement policies;

003.11(D)(viii) A state plan under Medicaid;

003.11(D)(ix) A governmental plan, which, by law, provides benefits that are in excess of those of any private insurance plan or other non-governmental plan;

003.11(D)(x) Uninsured or underinsured coverage under a motor vehicle policy; or

003.11(D)(xi) Disability income insurance.

003.12 “Policyholder” means the primary insured named in a nongroup insurance policy.

003.13 “Primary plan” means a plan whose benefits for a person’s health care coverage must be determined without taking the existence of any other plan into consideration. A plan is a primary plan if:

003.13(A) The plan either has no order of benefit determination rules, or its rules differ from those permitted by this regulation; or

003.13(B) All plans that cover the person use the order of benefit determination rules required by this regulation, and under those rules the plan determines its benefits first.

003.14 “Secondary plan” means a plan that is not a primary plan.

Section 004. Applicability and Scope

This regulation applies to all plans that are issued on or after the effective date of this regulation.

Section 005. Use of Model COB Contract Provision

005.01 Appendix A contains a model COB provision for use in contracts. The use of this model COB provision is subject to the provisions of Subsections 005.02, 005.03, 005.04, 005.04(A), 005.04(B), 005.04(C) and to the provisions of Section 006 of this regulation.

005.02 Appendix B is a plain language description of the COB process that explains to the covered person how health plans will implement coordination of benefits. It is not intended to replace or change the provisions that are set forth in the contract. Its purpose is to explain the process by which the two (2) or more plans will pay for or provide benefits.

005.03 The COB provision and the plain language explanation used by a Plan do not have to use the specific words and format shown in Appendix A or Appendix B. Changes may be made to fit the language and style of the rest of the contract or to reflect differences among plans that provide services, that pay benefits for expenses incurred and that indemnify. No substantive changes are permitted.

005.04 A COB provision may not be used that permits a plan to reduce its benefits on the basis that:

005.04(A) Another plan exists and the covered person did not enroll in that plan;

005.04(B) A person is or could have been covered under another plan, except with respect to Part B of Medicare; or

005.04(C) A person has elected an option under another plan providing a lower level of benefits than another option that could have been elected.

005.05 No plan may contain a provision that its benefits are “always excess” or “always secondary” except in accordance with the rules permitted by this regulation.

005.06 Under the terms of a closed panel plan, benefits are not payable if the covered person does not use the services of a closed panel provider. In most instances, COB does not occur if a covered person is enrolled in two (2) or more closed panel plans and obtains services from a provider in one of the closed panel plans because the other closed panel plan (the one whose providers were not used) has no liability. However, COB may occur during the plan year when the covered person receives emergency services that would have been covered by both plans. Then the secondary plan shall use the provisions of Section 007 of this regulation to determine the amount it should pay for the benefit.

005.07 No plan may use a COB provision, or any other provision that allows it to reduce its benefits with respect to any other coverage its insured may have that does not meet the definition of plan under Section 003.11(A) through 003.011(D)(x) of this regulation.

Section 006. Rules for Coordination of Benefits

When a person is covered by two (2) or more plans, the rules for determining the order of benefit payments are as follows:

006.01(A) The primary plan shall pay or provide its benefits as if the secondary plan or plans did not exist.

006.01(B) If the primary plan is a closed panel plan and the secondary plan is not a closed panel plan, the secondary plan shall pay or provide benefits as if it were the primary plan when a covered person uses a non-panel provider, except for emergency services or authorized referrals that are paid or provided by the primary plan.

006.01(C) When multiple contracts providing coordinated coverage are treated as a single plan under this regulation, this section applies only to the plan as a whole, and coordination among the component contracts is governed by the terms of the contracts. If more than one carrier pays or provides benefits under the plan, the carrier designated as primary within the plan shall be responsible for the plan’s compliance with this regulation.

006.01(D) If a person is covered by more than one secondary plan, the order of benefit determination rules of this regulation decide the order in which secondary plans benefits are determined in relation to each other. Each secondary plan shall take into consideration the benefits of the primary plan or plans and the benefits of any other plan, which, under the rules of this regulation, has its benefits determined before those of that secondary plan.

006.02(A) Except as provided in Paragraph 006.02(B), a plan that does not contain order of benefit determination provisions that are consistent with this regulation is always the primary plan unless the provisions of both plans, regardless of the provisions of this paragraph, state that the complying plan is primary.

006.02(B) Coverage that is obtained by virtue of membership in a group and designed to supplement a part of a basic package of benefits may provide that the supplementary coverage shall be excess to any other parts of the plan provided by the contract holder. Examples of these types of situations are major medical coverages that are superimposed over base plan hospital and surgical benefits, and insurance type coverages that are written in connection with a closed panel plan to provide out-of-network benefits.

006.03 A plan may take into consideration the benefits paid or provided by another plan only when, under the rules of this regulation, it is secondary to that other plan.

006.04 Order of Benefit Determination

Each plan determines its order of benefits using the first of the following rules that applies:

006.04(A) Non-Dependent or Dependent

006.04(A)(i) Subject to Subparagraphs 006.04(A)(ii)(a) through 006.04(A)(ii)(b) of this paragraph, the plan that covers the person other than as a dependent, for example as an employee, member, subscriber, policyholder or retiree, is the primary plan and the plan that covers the person as a dependent is the secondary plan.

006.04(A)(ii)(a) If the person is a Medicare beneficiary, and, as a result of the provisions of Title XVIII of the Social Security Act and implementing regulations, Medicare is:

006.04(A)(ii)(a)(1) Secondary to the plan covering the person as a dependent; and

006.04(A)(ii)(a)(2) Primary to the plan covering the person as other than a dependent (e.g. a retired employee),

006.04(A)(ii)(b) Then the order of benefits is reversed so that the plan covering the person as an employee, member, subscriber, policyholder or retiree is the secondary plan and the other plan covering the person as a dependent is the primary plan.

006.04(B) Dependent Child Covered Under More Than One Plan Unless there is a court decree stating otherwise, plans covering a dependent child shall determine the order of benefits as follows:

006.04(B)(i) For a dependent child whose parents are married or are living together, whether or not they have ever been married:

006.04(B)(i)(a) The plan of the parent whose birthday falls earlier in the calendar year is the primary plan; or

006.04(B)(i)(b) If both parents have the same birthday, the plan that has covered the parent longest is the primary plan.

006.04(B)(ii) For a dependent child whose parents are divorced or separated or are not living together, whether or not they have ever been married:

006.04(B)(ii)(a) If a court decree states that one of the parents is responsible for the dependent child’s health care expenses or health care coverage and the plan of that parent has actual knowledge of those terms, that plan is primary. If the parent with responsibility has no health care coverage for the dependent child’s health care expenses, but that parent’s spouse does, that parent’s spouse’s plan is the primary plan. This item shall not apply with respect to any plan year during which benefits are paid or provided before the entity has actual knowledge of the court decree provision;

006.04(B)(ii)(b) If a court decree states that both parents are responsible for the dependent child’s health care expenses or health care coverage, the provisions of Subparagraph 006.04(B)(i) through 006.04(B)(i)(b) of this paragraph shall determine the order of benefits;

006.04(B)(ii)(c) If a court decree states that the parents have joint custody without specifying that one parent has responsibility for the health care expenses or health care coverage of the dependent child, the provisions of Subparagraph 006.04(B)(i) through 006.04(B)(i)(b) of this paragraph shall determine the order of benefits; or

006.04(B)(ii)(d) If there is no court decree allocating responsibility for the child’s health care expenses or health care coverage, the order of benefits for the child are as follows:

006.04(B)(ii)(d)(1) The plan covering the custodial parent;

006.04(B)(ii)(d)(2) The plan covering the custodial parent’s spouse;

006.04(B)(ii)(d)(3) The plan covering the non-custodial parent; and then

006.04(B)(ii)(d)(4) The plan covering the non-custodial parent’s spouse.

006.04(B)(iii) For a dependent child covered under more than one plan of individuals who are not the parents of the child, the order of benefits shall be determined, as applicable, under 006.04(B)(i) through 006.04(B)(i)(b) or 006.04(B)(ii) through 006.04(B)(ii)(d)(4) of this paragraph as if those individuals were parents of the child.

006.04(B)(iv)(a) For a dependent child who has coverage under either or both parents’ plans and also has his or her own coverage as a dependent under a spouse’s plan, the rule in Paragraph 006.04(E) applies.

006.04(B)(iv)(b) In the event the dependent child’s coverage under the spouse’s plan began on the same date as the dependent child’s coverage under either or both parents’ plans, the order of benefits shall be determined by applying the birthday rule in Paragraph 006.04(B) to be the dependent child’s parent(s) and the dependent’s spouse.

006.04(C) Active Employee or Retired or Laid-Off Employee

006.04(C)(i) The plan that covers a person as an active employee that is, an employee who is neither laid off nor retired or as a dependent of an active employee is the primary plan. The plan covering that same person as a retired or laid-off employee or as a dependent of a retired or laid-off employee is the secondary plan.

006.04(C)(ii) If the other plan does not have this rule, and as a result, the plans do not agree on the order of benefits, this rule is ignored.

006.04(C)(iii) This rule does not apply if the rule in Paragraphs 006.04A through 006.04(A)(ii)(b) can determine the order of benefits.

006.04(D) COBRA or State Continuation Coverage

006.04(D)(i) If a person whose coverage is provided pursuant to COBRA or under a right of continuation pursuant to state or other federal law is covered under another plan, the plan covering the person as an employee, member, subscriber or retiree or covering the person as a dependent of an employee, member, subscriber or retiree is the primary plan and the plan covering that same person pursuant to COBRA or under a right of continuation pursuant to state or other federal law is the secondary plan.

006.04(D)(ii) If the other plan does not have this rule, and if, as a result, the plans do not agree on the order of benefits, this rule is ignored.

006.04(D)(iii) This rule does not apply if the rule in Paragraph 006.04(A) through 006.04A(ii)(b) can determine the order of benefits

006.04(E) Longer or Shorter Length of Coverage

006.04(E)(i) If the preceding rules do not determine the order of benefits, the plan that covered the person for the longer period of time is the primary plan and the plan that covered the person for the shorter period of time is the secondary plan.

006.04(E)(ii) To determine the length of time a person has been covered under a plan, two successive plans shall be treated as one if the covered person was eligible under the second plan within twenty-four (24) hours after coverage under the first plan ended.

006.04(E)(iii) The start of a new plan does not include:

006.04(E)(iii)(1) A change in the amount or scope of a plan’s benefits;

006.04(E)(iii)(2) A change in the entity that pays, provides or administers the plan’s benefits; or

006.04(E)(iii)(3) A change from one type of plan to another, such as, from a single employer plan to a multiple employer plan.

006.04(E)(iv) The person’s length of time covered under a plan is measured from the person’s first date of coverage under that plan. If that date is not readily available for a group plan, the date the person first became a member of the group shall be used as the date from which to determine the length of time the person’s coverage under the present plan has been in force.

006.04(F) If none of the preceding rules determines the order of benefits, the allowable expenses shall be shared equally between the plans.

Section 007. Procedure to be Followed by Secondary Plan to Calculate Benefits and Pay a Claim

In determining the amount to be paid by the secondary plan on a claim, should the plan wish to coordinate benefits, the secondary plan shall calculate the benefits it would have paid on the claim in the absence of other health care coverage and apply that calculated amount to any allowable expense under its plan that is unpaid by the primary plan. The secondary plan may reduce its payment by the amount so that, when combined with the amount paid by the primary plan, the total benefits paid or provided by all plans for the claim do not exceed 100 percent of the total allowable expense for that claim. In addition, the secondary plan shall credit to its plan deductible any amounts it would have credited to its deductible in the absence of other health care coverage. Also, where the primary plan is medical payments coverage under a motor vehicle policy, the secondary plan shall credit payments from the motor vehicle insurance policy to deductibles, copayments and coinsurance after discounts under the health plan.

Section 008. Miscellaneous Provisions

008.01 A secondary plan that provides benefits in the form of services may recover the reasonable cash value of the services from the primary plan, to the extent that benefits for the services are covered by the primary plan and have not already been paid or provided by the primary plan. Nothing in this provision shall be interpreted to require a plan to reimburse a covered person in cash for the value of services provided by a plan that provides benefits in the form of services.

008.02(A) A plan with order of benefit determination rules that comply with this regulation (complying plan) may coordinate its benefits with a plan that is “excess” or “always secondary” or that uses order of benefit determination rules that are inconsistent with those contained in this regulation (noncomplying plan) on the following basis:

008.02(A)(i) If the complying plan is the primary plan, it shall pay or provide its benefits first;

008.02(A)(ii) If the complying plan is the secondary plan, it shall pay or provide its benefits first, but the amount of the benefits payable shall be determined as if the complying plan were the secondary plan. In such a situation, the payment shall be the limit of the complying plan’s liability; and

008.02(A)(iii) If the noncomplying plan does not provide the information needed by the complying plan to determine its benefits within a reasonable time after it is requested to do so, the complying plan shall assume that the benefits of the noncomplying plan are identical to its own, and shall pay its benefits accordingly. If, within two (2) years of payment, the complying plan receives information as to the actual benefits of the noncomplying plan, it shall adjust payments accordingly.

008.02(B) If the noncomplying plan reduces its benefits so that the covered person receives less in benefits than the covered person would have received had the complying plan paid or provided its benefits as the secondary plan and the noncomplying plan paid or provided its benefits as the primary plan, and governing state law allows the right of subrogation set forth below, then the complying plan shall advance to the covered person or on behalf of the covered person an amount equal to the difference.

008.02(C) In no event shall the complying plan advance more than the complying plan would have paid had it been the primary plan less any amount it previously paid for the same expense or service. In consideration of the advance, the complying plan shall be subrogated to all rights of the covered person against the noncomplying plan. The advance by the complying plan shall also be without prejudice to any claim it may have against a noncomplying plan in the absence of subrogation.

008.03 COB differs from subrogation. Provisions for one may be included in health care benefits contracts without compelling the inclusion or exclusion of the other.

008.04 If the plans cannot agree on the order of benefits within thirty (30) calendar days after the plans have received all of the information needed to pay the claim, the plans shall immediately pay the claim in equal shares and determine their relative liabilities following payment, except that no plan shall be required to pay more than it would have paid had it been the primary plan.

Section 009. Effective Date for Existing Contracts

009.01 A contract that provides health care benefits and that was issued before the effective date of this regulation shall be brought into compliance with this regulation by:

009.01(A) The later of:

009.01(A)(i) The next anniversary date or renewal date of the contract; or

009.01(A)(ii) Twelve (12) months following the effective date of this regulation; or

009.01(B) The expiration of any applicable collectively bargained contract pursuant to which it was written.

009.02 For the transition period between the adoption of this regulation and the timeframe for which plans are to be in compliance pursuant to Subsection A, a plan that is subject to the prior COB requirements shall not be considered a noncomplying plan by a plan subject to the new COB requirements and if there is a conflict between the prior COB requirements under the prior regulation and the new COB requirements under the amended regulation, the prior COB requirements shall apply.

History

• Effective 2016-11-09

Chapter 40 Universal Life Insurance

Neb. Admin. Code tit. 210, ch. 40 Universal Life Insurance {#sec-210-nac-40 omnilex-key=us-ne-regs-official--title-210--210 NAC 40}

001. Statutory authority . This regulation is promulgated under the authority of NEB. REV. STAT. § 44-101.01 and is operative October 1, 2008.

002. Purpose . The purpose of this regulation is to supplement existing regulations on life insurance policies in order to accommodate the development and issuance of universal life insurance plans.

003. Definitions . As used in this regulation:

003.01 "Universal life insurance policy" means any life insurance policy where separately identified interest credits (other than in connection with dividend accumulations, premium deposit funds, or other supplementary accounts) and mortality and expense charges are made to the policy. A universal life insurance policy may provide for other credits and charges, such as charges for the cost of benefits provided by rider.

003.02 "Flexible premium universal life insurance policy" means a universal life insurance policy which permits the policyowner to vary, independently of each other, the amount or timing of one or more premium payments or the amount of insurance.

003.03 "Fixed premium universal life insurance policy" means any universal life insurance policy other than a flexible premium universal life insurance policy.

003.04 "Interest-indexed universal life insurance policy" means any universal life insurance policy where the interest credits are linked to an external referent.

003.05 "Net cash surrender value" means the maximum amount payable to the policyowner upon surrender.

003.06 "Cash surrender value" means the net cash surrender value plus any amounts outstanding as policy loans.

003.07 "Policy Value" means the amount to which separately identified interest credits and mortality, expense, or other charges are made under a universal life insurance policy.

003.08 "Director" means the Insurance Director of this State.

004. Scope . This regulation encompasses all individual universal life insurance policies except those policies defined under Subsection 002.19 of Title 210, Chapter 15 of the Nebraska Administrative Code (Variable Life Insurance Rule).

005. Valuation .

005.01 Requirements. The minimum valuation standard for universal life insurance policies shall be the Commissioners Reserve Valuation Method, as described below for such policies, and the tables and interest rates specified below. The terminal reserve for the basic policy and any benefits and/or riders for which premiums are not paid separately as of any policy anniversary shall be equal to the net level premium reserves less (C) and less (D), where:

Reserves by the net level premium method shall be equal to ((A) - (B))r where

(A), (B) and “r” are as defined below:

(A) is the present value of all future guaranteed benefits at the date of valuation.

(B) is the quantity PVFB ä_{x + t}

ä_x

where PVFB is the present value of all benefits guaranteed at issue assuming future Guaranteed Maturity Premiums are paid by the policyowner and taking into account all guarantees contained in the policy or declared by the insurer.

ä_x and ä_{x + t} are present values of an annuity of one per year payable on policy

anniversaries beginning at ages x and x + t, respectively, and continuing until the

highest attained age at which a premium may be paid under the policy. The letter

“x” is defined as the issue age and the letter “t” is defined as the duration of the

policy.

The Guaranteed Maturity Premium for flexible premium universal life insurance policies shall be that level gross premium, paid at issue and periodically thereafter over the period during which premiums are allowed to be paid, which will mature the policy on the latest maturity date, if any, permitted under the policy (otherwise at the highest age in the valuation mortality table), for an amount which is in accordance with the policy structure. The Guaranteed Maturity Premium is calculated at issue based on all policy guarantees at issue (excluding guarantees linked to an external referent). The Guaranteed Maturity Premium for fixed premium universal life insurance policies shall be the premium defined in the policy which at issue provides the minimum policy guarantees.

The letter “r” is equal to one, unless the policy is a flexible premium policy and the policy value is less than the Guaranteed Maturity Fund, in which case “r” is the ratio of the policy value to the Guaranteed Maturity Fund.

The Guaranteed Maturity Fund at any duration is that amount which, together with future Guaranteed Maturity Premiums, will mature the policy based on all policy guarantees at issue.

(C) is the quantity ((a) - (b)) ä _{x + t} r , where (a) - (b) is as described in

ä _x

NEB. REV. STAT. § 44-404(d) for the plan of insurance defined at issue by the Guaranteed Maturity Premiums and all guarantees contained in the policy or declared by the insurer.

ä _{x + t} , and ä _x are defined in (B) above.

(D) is the sum of any additional quantities analogous to (C) which arise because of structural changes in the policy, with each such quantity being determined on a basis consistent with that of (C) using the maturity date in effect at the time of change.

The Guaranteed Maturity Premium, the Guaranteed Maturity Fund and (B) above shall be recalculated to reflect any structural changes in the policy. This recalculation shall be done in a manner consistent with the descriptions above. Future guaranteed benefits are determined by (1) projecting the greater of the Guaranteed Maturity Fund and the policy value, taking into account future Guaranteed Maturity Premiums, if any, and using all guarantees of interest, mortality, expense deductions, etc., contained in the policy or declared by the insurer; and (2) taking into account any benefits guaranteed in the policy or by declaration which do not depend on the policy value.

All present values shall be determined using (i) an interest rate (or rates) specified by the NEB. REV. STAT. § 44-404 for policies issued in the same year; (ii) the mortality rates specified by § 44-404 for policies issued in the same year or contained in such other table as may be approved by the Director for this purpose; and (iii) any other tables needed to value supplementary benefits provided by a rider which is being valued together with the policy.

005.02 Alternative Minimum Reserves. If, in any policy year, the Guaranteed Maturity Premium on any universal life insurance policy is less than the valuation net premium for such policy, calculated by the valuation method actually used in calculating the reserve thereon but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for such contract shall be the greater of (1) or (2).

(1) The reserve calculated according to the method, the mortality table, and the rate of interest actually used.

(2) The reserve calculated according to the method actually used but using the minimum valuation standards of mortality and rate of interest and replacing the valuation net premium by the Guaranteed Maturity Premium in each policy year for which the valuation net premium exceeds the Guaranteed Maturity Premium.

For universal life insurance reserves on a net level premium basis, the valuation net premium is

PVFB

ä_x

and for reserves on a Commissioners Reserve Valuation Method, the valuation net premium is

PVFB + (a) - (b).

ä_x ä_x

006. Nonforfeiture .

006.01 Minimum Cash Surrender Values for Flexible Premium Universal Life Insurance Policies. Minimum cash surrender values for flexible premium universal life insurance policies shall be determined separately for the basic policy and any benefits and riders for which premiums are paid separately. The following requirements pertain to a basic policy and any benefits and riders for which premiums are not paid separately.

The minimum cash surrender value (before adjustment for indebtedness and dividend credits) available on a date as of which interest is credited to the policy shall be equal to the accumulation to that date of the premiums paid minus the accumulations to that date of (i) the benefit charges, (ii) the averaged administrative expense charges for the first policy year and any insurance-increase years, (iii) actual administrative expense charges for other years, (iv) initial and additional acquisition expense charges not exceeding the initial or additional expense allowances, respectively, (v) any service charges actually made (excluding charges for cash surrender or election of a paid-up nonforfeiture benefit) and (vi) any deductions made for partial withdrawals; all accumulations being at the actual rate or rates of interest at which interest credits have been made unconditionally to the policy (or have been made conditionally, but for which the conditions have since been met), and minus any unamortized unused initial and additional expense allowances.

Interest on the premiums and on all charges referred to in items (i) - (vi) above shall be accumulated from and to such dates as are consistent with the manner in which interest is credited in determining the policy value.

The benefit charges shall include the charges made for mortality and any charges made for riders or supplementary benefits for which premiums are not paid separately. If benefit charges are substantially level by duration and develop low or no cash values, then the Director shall have the right to require higher cash values unless the insurer provides adequate justification that the cash values are appropriate in relation to the policy's other characteristics.

The administrative expense charges shall include charges per premium payment, charges per dollar of premium paid, periodic charges per thousand dollars of insurance, periodic per policy charges, and any other charges permitted by the policy to be imposed without regard to the policyowner's request for services. The averaged administrative expense charges for any year shall be those which would have been imposed in that year if the charge rate or rates for each transaction or period within the year had been equal to the arithmetic average of the corresponding charge rates which the policy states will be imposed in policy years two through twenty in determining the policy value.

The initial acquisition expense charges shall be the excess of the expense charges, other than service charges, actually made in the first policy year over the averaged administrative expense charges for that year. Additional acquisition expense charges shall be the excess of the expense charges, other than service charges, actually made in an insurance-increase year over the averaged administrative expense charges for that year. An insurance-increase year shall be the year beginning on the date of increase in the amount of insurance by policyowner request (or by the terms of the policy).

Service charges shall include charges permitted by the policy to be imposed as the result of a policyowner's request for a service by the insurer (such as the furnishing of future benefit illustrations) or of special transactions.

The initial expense allowance shall be the allowance provided by NEB. REV. STAT. § 44-407.04(a), (ii), (iii) and (iv) or by § 44-407.24(l)(b) and (c), as applicable, for a fixed premium, fixed benefit endowment policy with a face amount equal to the initial face amount of the flexible premium universal life insurance policy, with level premiums paid annually until the highest attained age at which a premium may be paid under the flexible premium universal life insurance policy, and maturing on the latest maturity date permitted under the policy, if any, otherwise at the highest age in the valuation mortality table. The unused initial expense allowance shall be the excess, if any, of the initial expense allowance over the initial acquisition expense charges as defined above. If the amount of insurance is subsequently increased upon request of the policyowner (or by the terms of the policy), an additional expense allowance and an unused additional expense allowance shall be determined on a basis consistent with the above and with § 44-407.24(5), using the face amount and the latest maturity date permitted at that time under the policy.

The unamortized unused initial expense allowance during the policy year beginning on the policy anniversary at age x + t (where “x” is the issue age) shall be the unused initial expense allowance multiplied by

ä_{x.+ t}

---

ä_x

where ä _{x + t} and ä_x are are present values of an annuity of one per year payable on policy anniversaries beginning at ages x + t and x, respectively, and continuing until the highest attained age at which a premium may be paid under the policy, both on the mortality and interest bases guaranteed in the policy. An unamortized unused additional expense allowance shall be the unused additional expense allowance multiplied by a similar ratio of annuities, with ä_x replaced by an annuity beginning on the date as of which the additional expense allowance was determined.

006.02 Minimum Cash Surrender Values For Fixed Premium Universal Life Insurance Policies. For fixed premium universal life insurance policies, the minimum cash surrender values shall be determined separately for the basic policy and any benefits and riders for which premiums are paid separately. The following requirements pertain to a basic policy and any benefits and riders for which premiums are not paid separately.

The minimum cash surrender value (before adjustment for indebtedness and dividend credits) available on a date as of which interest is credited to the policy shall be equal to ((A)-(B)-(C)-(D)), where:

(A) is the present value of all future guaranteed benefits.

(B) is the present value of future adjusted premiums. The adjusted premiums are calculated as described in NEB. REV. STAT. §§ 44-407.04 and 44-407.08, or in NEB. REV. STAT. § 44-407.24(1), as applicable. If 44-407.24(1) is applicable, the nonforfeiture net level premium is equal to the quantity

PVFB,

---

ä_x

where PVFB is the present value of all benefits guaranteed at issue assuming future premiums are paid by the insurer.

ä_x is the present value of an annuity of one per year payable on policy anniversaries beginning at age x and continuing until the highest attained age at which a premium may be paid under the policy.

(C) is the present value of any quantifies analogous to the nonforfeiture net level premium which arise because of guarantees declared by the insurer after the issue date of the policy. “ä_x” shall be replaced by an annuity beginning on the date as of which the declaration became effective and payable until the end of the period covered by the declaration.

(D)is the sum of any quantities analogous to (B) which arise because of structural changes in the policy.

Future guaranteed benefits are determined by (1) projecting the policy value, taking into account future premiums, if any, and using all guarantees of interest, mortality, expense deductions, etc., contained in the policy or declared by the insurer; and (2) taking into account any benefits guaranteed in the policy or by declaration which do not depend on the policy value.

All present values shall be determined using (i) an interest rate (or rates) specified by the Standard Nonforfeiture Law for Life Insurance for policies issued in the same year and (ii) the mortality rates specified by the Standard Nonforfeiture Law for Life Insurance for policies issued in the same year or contained in such other table as may be approved by the Director for this purpose.

006.03 Minimum Paid-Up Nonforfeiture Benefits. If a universal life insurance policy provides for the optional election of a paid-up nonforfeiture benefit, it shall be such that its present value shall be at least equal to the cash surrender value provided for by the policy on the effective date of the election. The present value shall be based on mortality and interest standards at least as favorable to the policyowner as (1) in the case of a flexible premium universal life insurance policy, the mortality and interest basis guaranteed in the policy for determining the policy value, or (2) in the case of a fixed premium policy the mortality and interest standards permitted for paid-up nonforfeiture benefits by the Standard Nonforfeiture Law for Life Insurance. In lieu of the paid-up nonforfeiture benefit, the insurer may substitute, upon proper request not later than sixty days after the due date of the premium in default, an actuarially equivalent alternative paid-up nonforfeiture benefit which provides a greater amount or longer period of death benefits, or, if applicable, a greater amount or earlier payment of endowment benefits.

007. Mandatory Policy Provisions . The policy shall provide the following:

007.01 Periodic Disclosure to Policyowner. The policy shall provide that the policyowner will be sent, without charge, at least annually, a report which will serve to keep such policyowner advised as to the status of the policy. The end of the current report period must be not more than three months previous to the date of the mailing of the report. Specific requirements of this report are detailed in Section 009.

007.02 Current Illustrations. The annual report shall provide notice that the policyholder may request an illustration of current and future benefits and values.

007.03 Policy Guarantees. The policy shall provide guarantees of minimum interest credits and maximum mortality and expense charges. All values and data shown in the policy shall be based on guarantees. No figures based on nonguarantees shall be included in the policy.

007.04 Calculation of Cash Surrender Values. The policy shall contain at least a general description of the calculation of cash surrender values including the following information:

007.04A The guaranteed maximum expense charges and loads.

007.04B Any limitation on the crediting of additional interest. Interest credits shall not remain conditional for a period longer than twenty-four (24) months.

007.04C The guaranteed minimum rate or rates of interest.

007.04D The guaranteed maximum mortality charges.

007.04E Any other guaranteed charges.

007.04F Any surrender or partial withdrawal charges.

007.05 Changes in Basic Coverage. If the policyowner has the right to change the basic coverage, any limitation on the amount or timing of such change shall be stated in the policy. If the policyowner has the right to increase the basic coverage, the policy shall state whether a new period of contestability and/or suicide is applicable to the additional coverage.

007.06 Grace Period and Lapse. The policy shall provide for written notice to be sent to the policyowner's last known address at least thirty (30) days prior to termination of coverage.

A flexible premium policy shall provide for a grace period of at least thirty (30) days after lapse. Unless otherwise defined in the policy, lapse shall occur on that date on which the net cash surrender value first equals zero.

007.07 Misstatement of Age or Sex. If there is a misstatement of age or sex in the policy, the amount of the death benefit shall be that which would be purchased by the most recent mortality charge at the correct age or sex. The Director may approve other methods which are deemed satisfactory.

007.08 Maturity Date. If a policy provides for a "maturity date", "end date", or similar date, then the policy shall also contain a statement, in close proximity to that date, that it is possible that coverage may not continue to the maturity date even if scheduled premiums are paid in a timely manner, if such is the case.

008. Disclosure Requirements . Disclosure of information about the policy being applied for shall follow the standards set forth in 210 NEB. ADMIN. R. & REG. 72.

009. Periodic Disclosure to Policyowner .

009.01 Requirements. The policy shall provide that the policyowner will be sent, without charge, at least annually, a report which will serve to keep such policyowner advised of the status of the policy. The end of the current report period shall be not more than three (3) months previous to the date of the mailing of the report.

Such report shall include the following:

009.01A The beginning and end of the current report period.

009.01B The policy value at the end of the previous report period and at the end of the current report period.

009.01C The total amounts which have been credited or debited to the policy value during the current report period, identifying each by type (e.g., interest, mortality, expense and riders).

009.01D The current death benefit at the end of the current report period on each life covered by the policy.

009.01E The net cash surrender value of the policy as of the end of the current report period.

009.01F The amount of outstanding loans, if any, as of the end of the current report period.

009.01G For fixed premium policies:

If, assuming guaranteed interest, mortality and expense loads and continued scheduled premium payments, the policy's net cash surrender value is such that it would not maintain insurance in force until the end of the next reporting period, a notice to this effect shall be included in the report.

009.01H For flexible premium policies:

If, assuming guaranteed interest, mortality and expense loads, the policy's net cash surrender value will not maintain insurance in force until the end of the next reporting period unless further premium payments are made, a notice to this effect shall be included in the report.

010. Interest-Indexed Universal Life Insurance Policies .

010.01 Initial Filing Requirements. The following information shall be submitted in connection with any filing of interest-indexed universal life insurance policies ("interest-indexed policies"). All such information received shall be treated confidentially to the extent permitted by law.

010.01A A description of how the interest credits are determined, including:

(i) a description of the index;

(ii) the relationship between the value of the index and the actual interest rate to be credited;

(iii) the frequency and timing of determining the interest rate; and

(iv) the allocation of interest credits, if more than one rate of interest applies to different portions of the policy value.

010.01B The insurer's investment policy, which includes a description of the following:

(i) how the insurer addressed the reinvestment risks.

(ii) how the insurer plans to address the risk of capital loss on cash outflows.

(iii) how the insurer plans to address the risk that appropriate investments may not be available or not available in sufficient quantities.

(iv) how the insurer plans to address the risk that the indexed interest rate may fall below the minimum contractual interest rate guaranteed in the policy.

(v) the amount and type of assets currently held for interest indexed policies.

(vi) the amount and type of assets expected to be acquired in the future.

010.01C If policies are linked to an index for a specified period less than to the maturity date of the policy, a description of the method used (or currently contemplated) to determine interest credits upon the expiration of such period.

010.01D A description of any interest guarantee in addition to or in lieu of the index.

010.01E A description of any maximum premium limitations and the conditions under which they apply.

010.02 Additional Filing Requirements.

010.02A Annually, every insurer shall submit a Statement of Actuarial Opinion by the insurer's actuary similar to the example contained in Subsection 010.03.

010.02B Annually, every insurer shall submit a description of the amount and type of assets currently held by the insurer with respect to its interest-indexed policies.

010.02C Prior to implementation, every domestic insurer shall submit a description of any material change in the insurer's investment strategy or method of determining the interest credits. A change is considered to be material if it would affect the form or definition of the index (i.e., any change in the information supplied in Subsection 010.01 above) or if it would significantly change the amount or type of assets held for interest-indexed policies.

010.03 Statement of Actuarial Opinion for Interest-Indexed Universal Life Insurance Policies.

History

• Effective 2008-06-28

Chapter 42 Rule for Recognizing Mortality Tables for Use in Determining Reserve Liabilities for Annuities

Neb. Admin. Code tit. 210, ch. 42 Rule for Recognizing Mortality Tables for Use in Determining Reserve Liabilities for Annuities {#sec-210-nac-42 omnilex-key=us-ne-regs-official--title-210--210 NAC 42}

001. Statutory authority .

This Rule is promulgated by the Director of Insurance under the authority granted by Neb. Rev. Stat. §§ 44-101.01 and 44-8907.

002. Purpose .

The purpose of this Rule is to recognize the following mortality tables for use in determining the minimum standard of valuation for annuity and pure endowment contracts: the 1983 Table "a," the 1983 Group Annuity Mortality (1983 GAM) Table, the Annuity 2000 Mortality Table, the 2012 Individual Annuity Reserving (2012 IAR) Table, and the 1994 Group Annuity Reserving (1994 GAR) Table.

003. Definitions .

003.01 As used in this Rule "1983 Table "a" means that mortality table developed by the Society of Actuaries Committee to Recommend a New Mortality Basis for Individual Annuity Valuation and adopted as a recognized mortality table for annuities in June 1982 by the National Association of Insurance Commissioners.

003.02 As used in this Rule "1983 GAM Table" means that mortality table developed by the Society of Actuaries Committee on Annuities and adopted as a recognized mortality table for annuities in December 1983 by the National Association of Insurance Commissioners.

003.03 As used in this Rule "1994 GAR Table" means that mortality table developed by the Society of Actuaries Group Annuity Valuation Table Task Force and shown on pages 866-867 of Volume XLVII of the Transactions of the Society of Actuaries (1995).

003.04 As used in this Rule "Annuity 2000 Mortality Table" means that mortality table developed by the Society of Actuaries Committee on Life Insurance Research and shown on page 240 of Volume XLVII of the Transactions of the Society of Actuaries (1995).

003.05 As used in this Rule, “Period table” means a table of mortality rates applicable to a given calendar year (the Period).

003.06 As used in this Rule, “Generational mortality table” means a mortality table containing a set of mortality rates that decrease for a given age from one year to the next based on a combination of a Period table and a projection scale containing rates of mortality improvement.

003.07 As used in this Rule “2012 IAR Table” means that Generational mortality table developed by the Society of Actuaries Committee on Life Insurance Research and containing rates, q_x²⁰¹²⁺ⁿ, derived from a combination of the 2012 IAM Period Table and Projection Scale G2, using the methodology stated in Section 005.

003.08 As used in this Rule, “2012 Individual Annuity Mortality Period Life (2012 IAM Period) Table” means the Period table containing loaded mortality rates for calendar year 2012. This table contains rates, q_x²⁰¹², developed by the Society of Actuaries Committee on Life Insurance Research and is shown in Appendices 1-2.

003.09 As used in this Rule, “Projection Scale G2 (Scale G2)” is a table of annual rates, G2_x, of mortality improvement by age for projecting future mortality rates beyond calendar year 2012. This table was developed by the Society of Actuaries Committee on Life Insurance Research and is shown in Appendices 3-4.

004. Individual annuity or page endowment contracts .

004.01 Except as provided in subsections 004.02 and 004.03 of this section, the 1983 Table "a" is recognized and approved as an individual annuity mortality table for valuation and, at the option of the company, may be used for purposes of determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after August 24, 1979.

004.02 Except as provided in subsection 004.03 of this section, either the 1983 Table "a" or the Annuity 2000 Mortality Table shall be used for determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after January 1, 1987.

004.03 Except as provided in subsection 004.04 of this section, the Annuity 2000 Mortality Table shall be used for determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after January 1, 1999.

004.04 Except as provided in subsection 004.05 of this section, the 2012 IAR Mortality Table shall be used for determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after January 1, 2015.

004.05 The 1983 Table "a" without projection is to be used for determining the minimum standards of valuation for an individual annuity or pure endowment contract issued on or after January 1, 1999, solely when the contract is based on life contingencies and is issued to fund periodic benefits arising from:

(1) Settlements of various forms of claims pertaining to court settlements or out-of-court settlements from tort actions; (2) Settlements involving similar actions such as workers' compensation claims; or (3) Settlements of long-term disability claims where a temporary or life annuity has been used in lieu of continuing disability payments.

005. Application of the 2012 IAR Mortality Table .

In using the 2012 IAR Mortality Table, the mortality rate for a person age x in year (2012 + n) is calculated as follows:

q_x²⁰¹²⁺ⁿ = q_x²⁰¹²(1-G2_x)ⁿ

The resulting q_x²⁰¹²⁺ⁿ shall be rounded to three decimal places per 1,000, e.g., 0.741 deaths per 1,000. Also, the rounding shall occur according to the formula above, starting at the 2012 periodic table rate.

For example, for a male age 30, q_x²⁰¹² = 0.741

q_x²⁰¹³ = 0.741 * (1 – 0.010) ^{1 = 0.73359, which is rounded to 0.734 q_x}2014 ^{= 0.741 * (1 – 0.010)} 2 = 0.7262541, which is rounded to 0.726

A method leading to incorrect rounding would be to calculate

q_x²⁰¹⁴ as q_x²⁰¹³ * (1 – 0.010), or 0.734 * 0.99 = 0.727

It is incorrect to use the already rounded q_x²⁰¹³ to calculate q_x²⁰¹⁴

006. Group annuity or pure endowment contracts .

006.01 Except as provided in subsections 006.02 and 006.03, the 1983 GAM Table, the 1983 Table "a" and the 1994 GAR Table are recognized and approved as group annuity mortality tables for valuation and, at the option of the company, any one of these tables may be used for purposes of valuation for an annuity or pure endowment purchased on or after August 24, 1979 under a group annuity or pure endowment contract.

006.02 Except as provided in subsection 006.03, either the 1983 GAM Table or the 1994 GAR Table shall be used for determining the minimum standard of valuation for any annuity or pure endowment purchased on or after January 1, 1987 under a group annuity or pure endowment contract.

006.03 The 1994 GAR Table shall be used for determining the minimum standard of valuation for any annuity or pure endowment purchased on or after January 1, 1999 under a group annuity or pure endowment contract.

007. Application of the 1994 GAR Table .

In using the 1994 GAR Table, the mortality rate for a person age x in year (1994 + n) is calculated as follows:

q_x ¹⁹⁹⁴⁺ⁿ = q_x ¹⁹⁹⁴ (1 -AA_x)ⁿ

where the q_x¹⁹⁹⁴ and AA_x are as specified in the 1994 GAR Table.

008. Separability .

If any provision of this Rule or the application thereof to any person or circumstances is for any reason held to be invalid, the remainder of the regulation and the application of such provision to other persons or circumstances shall not be affected thereby.

009. Operative date .

The operative date of this Rule is January 1, 2015.

APPENDIX 1

2012 IAM Period Table Female, Age Nearest Birthday

| AGE | 1000 · qx²⁰¹² | AGE | 1000 · qx²⁰¹² | AGE | 1000 · qx²⁰¹² | AGE | 1000 · qx²⁰¹² | | --- | --- | --- | --- | --- | --- | --- | --- | | 0 | 1.621 | 30 | 0.300 | 60 | 3.460 | 90 | 88.377 | | 1 | 0.405 | 31 | 0.321 | 61 | 3.916 | 91 | 97.491 | | 2 | 0.259 | 32 | 0.338 | 62 | 4.409 | 92 | 107.269 | | 3 | 0.179 | 33 | 0.351 | 63 | 4.933 | 93 | 118.201 | | 4 | 0.137 | 34 | 0.365 | 64 | 5.507 | 94 | 130.969 | | 5 | 0.125 | 35 | 0.381 | 65 | 6.146 | 95 | 146.449 | | 6 | 0.117 | 36 | 0.402 | 66 | 6.551 | 96 | 163.908 | | 7 | 0.110 | 37 | 0.429 | 67 | 7.039 | 97 | 179.695 | | 8 | 0.095 | 38 | 0.463 | 68 | 7.628 | 98 | 196.151 | | 9 | 0.088 | 39 | 0.504 | 69 | 8.311 | 99 | 213.150 | | 10 | 0.085 | 40 | 0.552 | 70 | 9.074 | 100 | 230.722 | | 11 | 0.086 | 41 | 0.600 | 71 | 9.910 | 101 | 251.505 | | 12 | 0.094 | 42 | 0.650 | 72 | 10.827 | 102 | 273.007 | | 13 | 0.108 | 43 | 0.697 | 73 | 11.839 | 103 | 295.086 | | 14 | 0.131 | 44 | 0.740 | 74 | 12.974 | 104 | 317.591 | | 15 | 0.156 | 45 | 0.780 | 75 | 14.282 | 105 | 340.362 | | 16 | 0.179 | 46 | 0.825 | 76 | 15.799 | 106 | 362.371 | | 17 | 0.198 | 47 | 0.885 | 77 | 17.550 | 107 | 384.113 | | 18 | 0.211 | 48 | 0.964 | 78 | 19.582 | 108 | 400.000 | | 19 | 0.221 | 49 | 1.051 | 79 | 21.970 | 109 | 400.000 | | 20 | 0.228 | 50 | 1.161 | 80 | 24.821 | 110 | 400.000 | | 21 | 0.234 | 51 | 1.308 | 81 | 28.351 | 111 | 400.000 | | 22 | 0.240 | 52 | 1.460 | 82 | 32.509 | 112 | 400.000 | | 23 | 0.245 | 53 | 1.613 | 83 | 37.329 | 113 | 400.000 | | 24 | 0.247 | 54 | 1.774 | 84 | 42.830 | 114 | 400.000 | | 25 | 0.250 | 55 | 1.950 | 85 | 48.997 | 115 | 400.000 | | 26 | 0.256 | 56 | 2.154 | 86 | 55.774 | 116 | 400.000 | | 27 | 0.261 | 57 | 2.399 | 87 | 63.140 | 117 | 400.000 | | 28 | 0.270 | 58 | 2.700 | 88 | 71.066 | 118 | 400.000 | | 29 | 0.281 | 59 | 3.054 | 89 | 79.502 | 119 | 400.000 | | | | | | | | 120 | 1000.000 |

APPENDIX 2

2012 IAM Period Table Male, Age Nearest Birthday

| AGE | 1000 · qx²⁰¹² | AGE | 1000 · qx²⁰¹² | AGE | 1000 · qx²⁰¹² | AGE | 1000 · qx²⁰¹² | | --- | --- | --- | --- | --- | --- | --- | --- | | 0 | 1.605 | 30 | 0.741 | 60 | 5.096 | 90 | 109.993 | | 1 | 0.401 | 31 | 0.751 | 61 | 5.614 | 91 | 123.119 | | 2 | 0.275 | 32 | 0.754 | 62 | 6.169 | 92 | 137.168 | | 3 | 0.229 | 33 | 0.756 | 63 | 6.759 | 93 | 152.171 | | 4 | 0.174 | 34 | 0.756 | 64 | 7.398 | 94 | 168.194 | | 5 | 0.168 | 35 | 0.756 | 65 | 8.106 | 95 | 185.260 | | 6 | 0.165 | 36 | 0.756 | 66 | 8.548 | 96 | 197.322 | | 7 | 0.159 | 37 | 0.756 | 67 | 9.076 | 97 | 214.751 | | 8 | 0.143 | 38 | 0.756 | 68 | 9.708 | 98 | 232.507 | | 9 | 0.129 | 39 | 0.800 | 69 | 10.463 | 99 | 250.397 | | 10 | 0.113 | 40 | 0.859 | 70 | 11.357 | 100 | 268.607 | | 11 | 0.111 | 41 | 0.926 | 71 | 12.418 | 101 | 290.016 | | 12 | 0.132 | 42 | 0.999 | 72 | 13.675 | 102 | 311.849 | | 13 | 0.169 | 43 | 1.069 | 73 | 15.150 | 103 | 333.962 | | 14 | 0.213 | 44 | 1.142 | 74 | 16.860 | 104 | 356.207 | | 15 | 0.254 | 45 | 1.219 | 75 | 18.815 | 105 | 380.000 | | 16 | 0.293 | 46 | 1.318 | 76 | 21.031 | 106 | 400.000 | | 17 | 0.328 | 47 | 1.454 | 77 | 23.540 | 107 | 400.000 | | 18 | 0.359 | 48 | 1.627 | 78 | 26.375 | 108 | 400.000 | | 19 | 0.387 | 49 | 1.829 | 79 | 29.572 | 109 | 400.000 | | 20 | 0.414 | 50 | 2.057 | 80 | 33.234 | 110 | 400.000 | | 21 | 0.443 | 51 | 2.302 | 81 | 37.533 | 111 | 400.000 | | 22 | 0.473 | 52 | 2.545 | 82 | 42.261 | 112 | 400.000 | | 23 | 0.513 | 53 | 2.779 | 83 | 47.441 | 113 | 400.000 | | 24 | 0.554 | 54 | 3.011 | 84 | 53.233 | 114 | 400.000 | | 25 | 0.602 | 55 | 3.254 | 85 | 59.855 | 115 | 400.000 | | 26 | 0.655 | 56 | 3.529 | 86 | 67.514 | 116 | 400.000 | | 27 | 0.688 | 57 | 3.845 | 87 | 76.340 | 117 | 400.000 | | 28 | 0.710 | 58 | 4.213 | 88 | 86.388 | 118 | 400.000 | | 29 | 0.727 | 59 | 4.631 | 89 | 97.634 | 119 | 400.000 | | | | | | | | 120 | 1000.000 |

APPENDIX 3

Projection Scale G2 Female, Age Nearest Birthday

| AGE | G2x | AGE | G2x | AGE | G2x | AGE | G2x | | --- | --- | --- | --- | --- | --- | --- | --- | | 0 | 0.010 | 30 | 0.010 | 60 | 0.013 | 90 | 0.006 | | 1 | 0.010 | 31 | 0.010 | 61 | 0.013 | 91 | 0.006 | | 2 | 0.010 | 32 | 0.010 | 62 | 0.013 | 92 | 0.005 | | 3 | 0.010 | 33 | 0.010 | 63 | 0.013 | 93 | 0.005 | | 4 | 0.010 | 34 | 0.010 | 64 | 0.013 | 94 | 0.004 | | 5 | 0.010 | 35 | 0.010 | 65 | 0.013 | 95 | 0.004 | | 6 | 0.010 | 36 | 0.010 | 66 | 0.013 | 96 | 0.004 | | 7 | 0.010 | 37 | 0.010 | 67 | 0.013 | 97 | 0.003 | | 8 | 0.010 | 38 | 0.010 | 68 | 0.013 | 98 | 0.003 | | 9 | 0.010 | 39 | 0.010 | 69 | 0.013 | 99 | 0.002 | | 10 | 0.010 | 40 | 0.010 | 70 | 0.013 | 100 | 0.002 | | 11 | 0.010 | 41 | 0.010 | 71 | 0.013 | 101 | 0.002 | | 12 | 0.010 | 42 | 0.010 | 72 | 0.013 | 102 | 0.001 | | 13 | 0.010 | 43 | 0.010 | 73 | 0.013 | 103 | 0.001 | | 14 | 0.010 | 44 | 0.010 | 74 | 0.013 | 104 | 0.000 | | 15 | 0.010 | 45 | 0.010 | 75 | 0.013 | 105 | 0.000 | | 16 | 0.010 | 46 | 0.010 | 76 | 0.013 | 106 | 0.000 | | 17 | 0.010 | 47 | 0.010 | 77 | 0.013 | 107 | 0.000 | | 18 | 0.010 | 48 | 0.010 | 78 | 0.013 | 108 | 0.000 | | 19 | 0.010 | 49 | 0.010 | 79 | 0.013 | 109 | 0.000 | | 20 | 0.010 | 50 | 0.010 | 80 | 0.013 | 110 | 0.000 | | 21 | 0.010 | 51 | 0.010 | 81 | 0.012 | 111 | 0.000 | | 22 | 0.010 | 52 | 0.011 | 82 | 0.012 | 112 | 0.000 | | 23 | 0.010 | 53 | 0.011 | 83 | 0.011 | 113 | 0.000 | | 24 | 0.010 | 54 | 0.011 | 84 | 0.010 | 114 | 0.000 | | 25 | 0.010 | 55 | 0.012 | 85 | 0.010 | 115 | 0.000 | | 26 | 0.010 | 56 | 0.012 | 86 | 0.009 | 116 | 0.000 | | 27 | 0.010 | 57 | 0.012 | 87 | 0.008 | 117 | 0.000 | | 28 | 0.010 | 58 | 0.012 | 88 | 0.007 | 118 | 0.000 | | 29 | 0.010 | 59 | 0.013 | 89 | 0.007 | 119 | 0.000 | | | | | | | | 120 | 0.000 |

APPENDIX 4

Projection Scale G2 Male, Age Nearest Birthday

| AGE | G2x | AGE | G2x | AGE | G2x | AGE | G2x | | --- | --- | --- | --- | --- | --- | --- | --- | | 0 | 0.010 | 30 | 0.010 | 60 | 0.015 | 90 | 0.007 | | 1 | 0.010 | 31 | 0.010 | 61 | 0.015 | 91 | 0.007 | | 2 | 0.010 | 32 | 0.010 | 62 | 0.015 | 92 | 0.006 | | 3 | 0.010 | 33 | 0.010 | 63 | 0.015 | 93 | 0.005 | | 4 | 0.010 | 34 | 0.010 | 64 | 0.015 | 94 | 0.005 | | 5 | 0.010 | 35 | 0.010 | 65 | 0.015 | 95 | 0.004 | | 6 | 0.010 | 36 | 0.010 | 66 | 0.015 | 96 | 0.004 | | 7 | 0.010 | 37 | 0.010 | 67 | 0.015 | 97 | 0.003 | | 8 | 0.010 | 38 | 0.010 | 68 | 0.015 | 98 | 0.003 | | 9 | 0.010 | 39 | 0.010 | 69 | 0.015 | 99 | 0.002 | | 10 | 0.010 | 40 | 0.010 | 70 | 0.015 | 100 | 0.002 | | 11 | 0.010 | 41 | 0.010 | 71 | 0.015 | 101 | 0.002 | | 12 | 0.010 | 42 | 0.010 | 72 | 0.015 | 102 | 0.001 | | 13 | 0.010 | 43 | 0.010 | 73 | 0.015 | 103 | 0.001 | | 14 | 0.010 | 44 | 0.010 | 74 | 0.015 | 104 | 0.000 | | 15 | 0.010 | 45 | 0.010 | 75 | 0.015 | 105 | 0.000 | | 16 | 0.010 | 46 | 0.010 | 76 | 0.015 | 106 | 0.000 | | 17 | 0.010 | 47 | 0.010 | 77 | 0.015 | 107 | 0.000 | | 18 | 0.010 | 48 | 0.010 | 78 | 0.015 | 108 | 0.000 | | 19 | 0.010 | 49 | 0.010 | 79 | 0.015 | 109 | 0.000 | | 20 | 0.010 | 50 | 0.010 | 80 | 0.015 | 110 | 0.000 | | 21 | 0.010 | 51 | 0.011 | 81 | 0.014 | 111 | 0.000 | | 22 | 0.010 | 52 | 0.011 | 82 | 0.013 | 112 | 0.000 | | 23 | 0.010 | 53 | 0.012 | 83 | 0.013 | 113 | 0.000 | | 24 | 0.010 | 54 | 0.012 | 84 | 0.012 | 114 | 0.000 | | 25 | 0.010 | 55 | 0.013 | 85 | 0.011 | 115 | 0.000 | | 26 | 0.010 | 56 | 0.013 | 86 | 0.010 | 116 | 0.000 | | 27 | 0.010 | 57 | 0.014 | 87 | 0.009 | 117 | 0.000 | | 28 | 0.010 | 58 | 0.014 | 88 | 0.009 | 118 | 0.000 | | 29 | 0.010 | 59 | 0.015 | 89 | 0.008 | 119 | 0.000 | | | | | | | | 120 | 0.000 |

History

• Effective 2014-12-27

Chapter 44 Scope of Coverage to Be Offered by the Nebraska Comprehensive Health Insurance Pool

Neb. Admin. Code tit. 210, ch. 44 Scope of Coverage to Be Offered by the Nebraska Comprehensive Health Insurance Pool {#sec-210-nac-44 omnilex-key=us-ne-regs-official--title-210--210 NAC 44}

001. Authority . This rule is issued pursuant to the authority granted by Neb.Rev.Stat. §44-101.01 and §44-4226.

002. Purpose . The purpose of this rule is to set forth the scope of the coverage to be offered by the Comprehensive Health Insurance Pool.

003. Definitions . For the purpose of this rule, unless the context otherwise requires, the definitions found in Neb.Rev.Stat. §44-4204 through §44-4215 shall apply.

004. Deductible . Each individual applying for coverage under the pool shall select one of the following deductible levels, which must be satisfied in each calendar year before any benefits will be payable:

004.01 For the Preferred Provider Organization Plan:

004.01(a) $500/$1,000 per year;

004.01(b) $1,000/$2,000 per year;

004.01(c) $1,500 / $3,000 per year

004.01(d) $2,000/$4,000 per year.

004.01(e) $3,000 / $6,000 per year

004.01(f) $4,000 / $8,000 per year

004.01(g) $5,000 / $10,000 per year

004.01(h) $7,500/ $15,000 per year

004.01(i) $10,000/ $20,000 per year

004.02 For the High Deductible Plan for Purposes of Creating a Health Savings Account:

004.02(a) The administrator of the Comprehensive Health Insurance Pool is hereby authorized to create a high deductible plan, separate and apart from the plans listed in 004.01, in order to allow Comprehensive Health Insurance Pool enrollees the opportunity to create a Health Savings Account. The high deductible plan and the Health Savings Account shall correlate with the terms and conditions of federal law that authorize said high deductible plans and Health Savings Accounts.

005. Cost containment .

005.01 The policy offered by the Comprehensive Health Insurance Pool may include one or more cost containment features which affect the level of benefits which will be paid. For purposes of this rule, "Cost Containment" is defined as formal activity related to the control of health services costs through efforts such as improved efficiency, utilization review, or claims review. It includes, but is not limited to, the following:

005.01A Hospital Confinement Preauthorization;

005.01B Outpatient Surgery;

005.01C Hospital Preadmission Testing;

005.01D Prescription Drug Management and

005.01E Preferred provider insurance arrangement.

006. Exceptions and limitations .

006.01 No benefits will be payable for:

006.01A Expense incurred while the policy is not in force.

006.01B Charges made by a physician for the treatment or movement of the teeth or tissues next to the teeth, except due to injury.

006.01C Injuries or sickness for which any benefits are provided for by workers' compensation or employer's liability laws whether or not you assert rights to such coverage.

006.01D Care of treatment in a hospital owned or operated by the United States Government or any of its agencies unless you are obligated to pay such charges.

006.01E Eye refractions, eyeglasses, contact lenses, hearing aids or their fitting.

006.01F Refractive corneal surgery, except for corneal grafts.

006.01G Private duty nursing.

006.01H Loss that results from an act of declared or undeclared war.

006.01I Loss sustained while in an armed service (Upon notice to the Pool of entry into a service, the pro rata premium will be refunded).

006.01J Normal childbirth, normal pregnancy, (unless insured purchases the optional Maternity Benefit Rider); or voluntarily induced abortion, or care of a newborn infant, except as provided by 00 8.01K.

006.01K Complications of pregnancy when the pregnancy had its inception before the policy date. For a person eligible for CHIP benefits pursuant to Neb. Rev. Stat. §44-4221(1)(b)(i) through §44-4221(1)(b)(iii), the policy will pay for complications of pregnancy regardless of whether the pregnancy began prior to the inception of eligibility for benefits under the CHIP policy.

006.01L Gender transformations or changes or the promotion of fertility including (but not limited to):

006.O1L(l) Fertility tests.

006.O1L(2) Reversal of surgical sterilization; and

006.01L(3) Direct attempts to cause pregnancy by hormone therapy, artificial insemination, in vitro fertilization or embryo transfer.

006.01M Routine physical exams or tests, except as provided in 008.01I and 008.01J.

006.01N Expenses incurred for the transplant of a part of the insured person's body to the body of another.

006.01O Treatment of a pre-existing condition or any complications of or resulting from such pre-existing condition, with the exception of prescription medication until the policy has been in force at least six months. This exclusion does not apply to an individual eligible for pool benefits pursuant to Neb. Rev. Stat. §44-4221(1)(b)(i) through §44-4221(1)(b)(iii).

006.01P Expenses incurred for services or treatment not medically necessary, or not administered or not provided under supervision of a physician.

006.01Q Investigative or experimental services and supplies.

006.01R Any expenses incurred that are covered by any local, state or federal programs;

006.01S Loss that is covered by any other insurance plan.

006.01T Services or supplies for any person other than the insured.

006.01U Services performed by a member of the insured's immediate family.

006.01V Education or training of any type, including biofeedback, treatment of learning disabilities and attention deficit disorders, IQ testing unless expressly provided for in the policy.

006.01W Weight modification or for surgical treatment of obesity, including wiring of the teeth and all forms of intestinal bypass surgery, or breast reduction or augmentation.

006.01X Transplant surgery which is not precertified; and

006.01Y Custodial care.

007. Covered services and supplies .

007.01 The following services will be considered covered services and supplies for which a benefit will be payable.

007.01A Hospital room and board and any other hospital furnished medical services and supplies. Limitations and conditions may be imposed where confinement is in a private room or intensive-care facility.

007.01B Services of a physician.

007.01C Services of a physical, occupational or speech therapist acting under the direction of a physician.

007.01D Anesthetics and their administration.

007.01E X-ray and laboratory examinations.

007.01F Skilled nursing facility benefits, subject to the following conditions and limitations;

007.01F(l) Benefits payable for up to 30 days in a calendar year;

007.01F(2) Confinement must begin within 14 days of discharge from hospital confinement which lasts at least three days in a row;

007.01F(3) Care is for the same condition which caused the hospital confinement; and

007.01F(4) Care is given in a skilled nursing facility which is a place licensed to provide skilled care to resident persons. It must have a registered graduate nurse (RN) on call 24 hours a day.

007.01G Ambulance services for:

007.01G(1) Local professional land and air ambulance service; and

007.01G(2) Transportation within the United States by a professional nonair ambulance or on a regularly scheduled flight on a commercial airline when:

007.O1G(2)(a) Special and unique Covered Hospital Services are required which are not provided by a local hospital;

007.O1G(2)(b) Transportation is medically necessary; and

007.O1G(2)(c) Transportation is to the nearest hospital equipped to furnish the services;

007.01H The following medical supplies:

007.01H(1) blood and blood plasma;

007.01H(2) artificial eyes or prosthetic limbs;

007.01H(3) surgical dressings, casts, splints, trusses, braces, (except dental braces) crutches, or heart pacemakers;

007.01H(4) oxygen and the rental or purchase of equipment for its administration;

007.01H(5) rental or purchase of a wheelchair or hospital type bed or other medically necessary durable medical equipment;

007.01H(6) rental or purchase of mechanical equipment required for respiratory paralysis; and

007.O1H(7) drugs and medicines that require a prescription are purchased upon a physicians' orders and dispensed by a licensed pharmacist.

007.01H(8) Where applicable the option of rental or purchase shall be determined by the pool.

007.01I The following services for a Hospice Care Program:

007.01I(1)(a) Room and board in a hospice while you are an inpatient;

007.01I(1)(b) Respite Care: Short-term Inpatient care which is necessary for you in order to give temporary relief to the person who regularly assists with the care at home. Respite Care must be provided in a Skilled or Intermediate Care Nursing facility that is affiliated with the Hospice that is providing services to you. Respite Care in a Skilled or Intermediate Care Nursing facility need not meet our normal Medical Necessary criteria ordinarily applied to Inpatient admissions;

007.01I(1)(c) The rental of medical appliances and equipment while the terminally ill covered person is in a hospice care program to the extent that such items would have been covered under the policy if the covered person had been confined in a hospital;

007.O1I(1)(d) Medical, palliative, and supportive care, and the procedures necessary for pain control and acute and chronic symptom management;

007.01I(2) Such services must be provided by a hospital related institution, home health agency, hospice or other licensed facility which would be approved under Medicare or any applicable state law as a Hospice Care Program

007.01I(3) "Hospice Care Program" means a program for meeting the special needs of terminally ill individuals and their immediate families, by providing support and care during the illness and bereavement:

007.01I(3)(a) A "Terminally ill" individual is defined as an individual who has no reasonable prospect of cure and, as estimated by a physician, has a life expectancy of less than six months.

007,01I(4) Notwithstanding the provisions of any other sections of this rule, benefits for the above hospice care are limited as follows:

007.01I(4)(a) Benefits are payable only if the terminally ill person is the insured person.

007.01I(4)(b) Benefits for counseling (other than bereavement counseling) for the insured person's immediate family are not to exceed a total maximum benefit of $500. (The immediate family includes the insured person's spouse, children, and parents); and

007.01I(4)(c) Benefits for bereavement counseling for the insured person's immediate family are not to exceed a total maximum benefit of $100.

007.01I(5) In addition to the Exclusions and Limitations found in Section 006, benefits for Hospice Care will not be provided for:

007.01I(5)(a) Services performed by volunteers;

007.01I(5)(b) Pastoral services, or legal or financial counseling services;

007.01I(5)(c) Services which are primarily for the convenience of the patient, or a person other than the patient;

007.01I(5)(d) Home delivered meals;

007.01I(5)(e) Any maintenance therapy which is not designed to improve the insured's condition; or

007.01I(5)(f) Services for Mental illness.

007.01J Home Health Care received in lieu of hospitalization, furnished under a planned program by an agency licensed to provide home health care, and ordered or directed by a physician.

007.01K Diabetes Patient Education Program.

007.01L Cosmetic or Reconstructive Surgery, but only if required due to injuries received while the policy is in force or for conditions resulting from surgery for which benefits are paid under the policy. For a person eligible for pool benefits pursuant to Neb. Rev. Stat. §44-4221(1)(b)(i) through §44-4221(1)(b)(iii), the policy will pay for such cosmetic or reconstructive surgery regardless of when the individual was injured, when they had the initial surgery or if the surgery was paid for under the policy.

007.01M Radiation therapy or treatment.

007.01N Ambulatory Surgical Facility expenses.

007.010 Services of a mental health practitioner.

007.01P Cardiac or pulmonary rehabilitation program

008. Benefits .

008.01A Except as indicated elsewhere in this rule, when an insured person incurs an expense for a covered service or supply, the pool will cover 80% of the usual, normal charges in excess of the deductible. The Preferred Provider Organization Plan may reduce the coverage of the charges to 70% if an insured person does not obtain a covered service or supply from a contracted medical provider with the pool. Benefits are limited to; (a) one million dollars during the lifetime of the insured; and (b) expense incurred after the deductible has been satisfied.

008.01B The following are exceptions to the general benefit payable under subsection 008.01:

008.01B(1) Hospital confinement preauthorization is required and when expenses are incurred for days of hospital confinement which are not preauthorized in accordance with the requirement of the policy:

008.01B(2) Benefits for these expenses will not exceed 75% of the expense incurred in excess of the deductible for all covered expenses;

008.01B(3) Those expenses will not be used to satisfy the maximum out-of-pocket expense amount described in section 009;

008.01B(4) The 75% limitation will be applied regardless of whether the individual has previously satisfied the maximum out-of-pocket expense amount.

008.01C Expenses for hospital preadmission testing will be paid at 100% of the usual customary and reasonable charges subject to the following limitations:

008.01C(1) The insured person must be admitted to the hospital as an inpatient within seven days after the pre-admission testing for the same condition for which the test was performed. If not, benefits will be considered at 80% of covered services after the deductible.

008.01C(2) If the tests are duplicated on an inpatient basis, benefits for the original and duplicate test will be considered at 80% of covered services after the deductible.

008.01D Where home health care expenses have been incurred and such care is received in lieu of hospitalization, furnished under a planned program by an agency licensed to provide home health care, and ordered and directed by your physician, the pool will pay benefits for forty (40) visits per year and shall be paid at 80% of the expense incurred.

008.01E Expenses incurred by the insured person who enrolls, participates and completes a Diabetes Patient Education Program will be paid at 90%. The deductible will not apply, but the following limitations are applicable:

008.01E(1) The maximum amount payable is $500 during the insureds lifetime.

008.01E(2) The person taking the program must be the insured.

008.01E(3) The person that has diabetes must be the insured person.

008.01E(4) Charges in excess of the $500 maximum will not be used to satisfy the deductible or maximum out-of-pocket expense amount.

008.01E(5) What constitutes Diabetes Patient Education Program will be defined in the policy.

008.01F The pool shall, subject to approval by the Director of Insurance, provide benefits for a prescription drug plan. The Board may implement co-payments for said prescription drugs as they deem necessary.

008.01G Where an insured receives an organ transplant, from a Preferred Transplant Center, the benefits payable for covered services and supplies will be the maximum provided as stated in the insurance contract. Where an insured receives an organ transplant from a non-approved provider, the maximum benefits payable for covered services and supplies will be limited to $100,000. No benefits are payable unless prior certification has been granted by the medical review board determining an organ transplant to be medically necessary.

008.01H Benefits for Mental Diseases or Disorders, Alcoholism or Drug, Dependency will be paid at 50% (after the deductible) of the covered expense up to a maximum of $25,000 during the lifetime of the insured. The Preferred Provider Organization Plan may reduce coverage to 40% if an insured person does not obtain services from a medical provider that has contracted with the pool. Out-of-Pocket expenses for such treatment will not be used to satisfy the Maximum Out-of-Pocket Expense Amount described in section 9.

008.01I Expenses will be paid for mammographic screening as required by Neb.Rev.Stat. §44-785.

008.01J Childhood immunizations for children from birth to six years of age including vaccinations for measles, mumps, rubella, poliomyelitis, diphtheria, pertussis, tetanus, haemophilus influenzae type B.

008.01K Coverage for a newly born child of the insured, from the moment of birth, for a period of 31 days.

008.01L Coverage of hospital outpatient rehabilitation services for cardiac or pulmonary rehabilitation as medically necessary.

008.01M Coverage for up to 60 inpatient days per calendar year for covered services for physical rehabilitation, as defined in the policy.

009. Maximum out-of-pocket expense . Once the insured has incurred $1,500 in out-of-pocket expenses in a calendar year, over and above the deductible, benefits will be paid at 100% for the remainder of that calendar year, subject to the exceptions indicated elsewhere in this rule. The Preferred Provider Organization Plan may increase the maximum out-of-pocket expense to $3,000 for those services and supplies received from medical providers that have not contracted with the pool.

010. Maternity benefit rider .

010.01 An optional maternity benefit rider will be available to individuals enrolled in the pool upon payment of an additional premium.

010.02 Benefits will be paid as described in subsection 010.03 if the individual is:

010.02A Insured under the rider at least nine months prior to the birth, except as waived by Neb.Rev.Stat. §44-4228(5);

010.02B Confined for normal pregnancy or normal childbirth; and

010.02C Continuously insured under the rider and the policy during the entire period of the pregnancy.

010.03 Benefits will be paid for the expense incurred for covered services and supplies up to, but not to exceed a total maximum benefit of $3,000.

010.03A The provisions of section 008 of this rule do not apply to benefits payable under the rider.

010.04 Benefits due under the rider are not subject to the deductible described in section 004 of this rule.

010.05 No payments will be made for expenses:

010.05A Paid for under any other benefit provision of the policy;

010.05B For care of a newborn infant, except as provided by 008.01K.

011. Renewability of Policy Form

011.01 The board may nonrenew all policies issued on the same form number, subject to approval by the Director.

011.02 If the insured's policy is nonrenewed as stated in subsection 0 11. 0 1, the insured will be issued a replacement policy which will be the CHIP Policy Form then being issued to new enrollees. Any waiting period, deductible, out-of-pocket amount and maximums satisfied under the nonrenewed policy form will be carried forward and applied to the insured's replacement policy.

012. Severability . If any provision of this regulation or the application thereof to any person or circumstances is for any reason held to be invalid, the remainder of the regulation and the application of such provision to other persons or circumstances shall not be affected thereby.

History

• Effective 2012-12-31

Chapter 45 After Market Parts Regulation

Neb. Admin. Code tit. 210, ch. 45 After Market Parts Regulation {#sec-210-nac-45 omnilex-key=us-ne-regs-official--title-210--210 NAC 45}

001. Authority . This regulation is adopted pursuant to the Unfair Competition and Trade Practices Act, Neb.Rev.Stat. '44-1522, et seq.

002. Purpose . The purpose of this proposed regulation is to set forth standards for the prompt, fair and equitable settlements applicable to automobile insurance with regard to the use of after market parts. It is intended to regulate the use of after market parts in automobile damage repairs which insurers pay for on their insured's vehicle. The regulation requires disclosure when any use is proposed of a non-original manufacturer part. It also requires that all after market parts, as defined in the regulation, be identified and be of the same quality as the original part.

003. Definitions .

003.01 A Insurer@ includes any person authorized to present the insurer with respect to a claim who is acting within the scope of the person's authority.

003.02 A Non-Original Manufacturer@ means any manufacturer other than the original manufacturer of the part.

003.03 A After market part@ for purpose of this regulation, means sheet metal or plastic parts which generally constitute the exterior of a motor vehicle, including inner and outer panels.

004. Identification . All after market parts, which are subject to this regulation and manufactured after the effective date of this regulation, shall carry sufficient permanent identification so as to identify its manufacturer. Such identification shall be accessible to the extent possible after installation.

005. Like kind and quality . No insurer shall require the use of after market parts in the repair of an automobile unless the after market part is at least equal in like, kind, and quality to the original part in terms of fit, quality and performance. Insurers specifying the use of after market parts shall consider the cost of any modifications which may become necessary when making the repair.

006. Disclosure . The insurer must disclose to the claimant in writing, either on the estimate or on a separate document attached to the estimate, the following information in no smaller print than 10 point type:

THIS ESTIMATE HAS BEEN PREPARED BASED ON THE USE OF AUTOMOBILE PARTS NOT MADE BY THE ORIGINAL MANUFACTURER. PARTS USED IN THE REPAIR OF YOUR VEHICLE BY OTHER THAN THE ORIGINAL MANUFACTURER ARE REQUIRED TO BE AT LEAST EQUAL IN LIKE, KIND AND QUALITY IN TERMS OF FIT, QUALITY AND PERFORMANCE TO THE ORIGINAL MANUFACTURER PARTS THEY ARE REPLACING.

All after market parts installed on the vehicle shall be clearly identified on the estimate of such repair.

007. Enforcement . Violations of this regulation shall be enforced through the Unfair

Competition and Trade Practices Act, Neb.Rev.Stat. '44-1522 et seq.

008. Severability . If any section or portion of a section of this regulation, or the applicability thereof to any person or circumstance is held invalid by a court, the remainder of this regulation, or the applicability of such provision with a person shall not be affected thereby.

009. Effective date . This regulation shall become effective on January 1, 1988.

History

• Effective 1994-06-26

Chapter 46 Long-Term Care Insurance

Neb. Admin. Code tit. 210, ch. 46 Long-Term Care Insurance {#sec-210-nac-46 omnilex-key=us-ne-regs-official--title-210--210 NAC 46}

001 Purpose. The purpose of this regulation is to implement the Long-Term Care Insurance Act, to promote the public interest, to promote the availability of long-term care insurance coverage, to protect applicants for long-term care insurance, as defined, from unfair or deceptive sales or enrollment practices, to facilitate public understanding and comparison of long-term care insurance coverages, and to facilitate flexibility and innovation in the development of long-term care insurance.

002 Authority. This Rule is promulgated under the authority vested in the Director under Neb. Rev. Stat. §44-101.01, §44-404, §44-511, §44-4512, §44-4514, and §44-4518.

003 Applicability and Scope. Except as otherwise specifically provided, this regulation applies to all long-term care insurance policies and certificates, including qualified long-term care insurance contracts, and life insurance policies that accelerate benefits for long-term care delivered or issued for delivery in this state on or after the effective date hereof, by insurers, fraternal benefit societies, prepaid health plans, health maintenance organizations and all similar organizations. Certain provisions of this regulation apply only to qualified long-term care insurance contracts as noted.

004 Definitions

004.01. For the purpose of this regulation, the terms "long-term care insurance", "group long-term care insurance", "director", ''applicant", "policy" and "certificate" shall have the meanings set forth in the Long-Term Care Insurance Act. The term "qualified long-term care insurance," means an individual or group insurance contract that meets the requirements of Section 7702B(b) of the Internal Revenue Code of 1986, as amended.

004.02. Under section 7702B (c)(2)(B) of Internal Revenue Code of 1986, as amended, "activities of daily living" means:

004.02(A). Bathing;

004.02(B). Continence;

004.02(C). Dressing;

004.02(D). Eating;

004.02(E). Toileting; and

004.02(F). Transferring.

004.03. A contract shall not be treated as a qualified long-term care insurance contract unless the determination of whether an individual is a chronically ill individual described in subsection 025.01(B)(1) of this regulation takes into account at least five (5) activities of daily living.

005 Policy Definitions and Terms. No long-term care insurance policy or certificate delivered or issued for delivery in this state shall use the terms set forth below, unless the terms are defined in the policy or certificate, and the definitions satisfy the following requirements:

005.01. "Activities of daily living" means at least bathing, continence, dressing eating, toileting and transferring.

005.02. "Adult day care'' means a program for six (6) or more individuals, of social and health-related services provided during the day in a community group setting for the purpose of supporting frail, impaired, elderly or other disabled adults who can benefit from care in a group setting outside the home.

005.03. "Acute condition" means that the individual is medically unstable. Such an individual requires frequent monitoring by medical professionals, such as physicians and registered nurses, in order to maintain his or her health status.

005.04. "Bathing" means washing oneself by sponge bath; or in either a tub or shower, including the task of getting into or out of the tub or shower.

005.05. "Cognitive impairment" means a deficiency in a person's short or long-term memory, orientation as to a person, place and time, deductive or abstract reasoning, or judgment as it relates to safety awareness.

005.06. "Continence" means the ability to maintain control of bowel and bladder function; or, when unable to maintain control of bowel or bladder function, the ability to perform associated personal hygiene (including caring for catheter or colostomy bag).

005.07. "Dressing" means putting on and taking off all items of clothing and any necessary braces, fasteners or artificial limbs.

005.08. "Eating" means feeding oneself by getting food into the body from a receptacle (such as a plate, cup or table) or by feeding tube or intravenously.

005.09. "Hands-on assistance" means physical assistance (minimal, moderate or maximal) without which the individual would not be able to perform the activity of daily living.

005.10. "Home health care services" means medical and non-medical services, provided to ill, disabled or infirm persons in their residences. Such services may include homemaker services, assistance with activities of daily living and respite care services.

005.11. "Medicare" means "The Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965 as Then Constituted or Later Amended," or "Title I, Part I of Public Law 89-97, as Enacted by the Eighty-Ninth Congress of the United States of America and popularly known as the Health Insurance For the Aged Act," as then constituted and any later amendments or substitutes thereof' or words of similar import.

005.12. "Mental or Nervous Disorder" shall not be defined to include more than neurosis, psychoneurosis, psychopathy, psychosis, or mental or emotional disease or disorder.

005.13. "Personal care" means the provision of hands-on services to assist an individual with activities of daily living.

005.14. "Residential care facility" means any institution, facility, place or building in which there are provided for a period exceeding twenty-four consecutive hours accommodation, board, and care, such as personal assistance in feeding, dressing, and other essential daily living activities, to four or more non-related individuals who by reason of illness, disease, injury, deformity, disability, or physical or mental infirmity are unable to sufficiently or properly care for themselves or manage their own affairs but do not require the daily services of a licensed registered nurse or licensed practical nurse.

005.15. "Skilled nursing care", "intermediate care", "residential care", "personal care", "home health care", and other services shall be defined in relation to the level of skill required, the nature of the care and the setting in which care must be delivered.

005.16. "Skilled nursing facility", "intermediate care facility", "assisted-living facility" shall not be defined more restrictively than the definitions as set forth in Neb. Rev. Stat. §71-401 et seq.

005.17. "Custodial care facility" shall not be defined more restrictively than the definitions for "residential care facility" or "assisted-living facility" as set forth in subsection 005.14 and 005.21 of this regulation.

005.18. "Toileting" means getting to and from the toilet, getting on and off the toilet, and performing associated personal hygiene.

005.19. "Transferring" means moving into or out of a bed, chair or wheelchair."

005.20. All providers of services, including but not limited to, "skilled nursing facility," "extended care facility," "intermediate care facility," "convalescent nursing home," "personal care facility," "home care agency," "residential care facility," and "assisted-living facility" shall be defined in relation to the services and facilities required to be available and the licensure or degree status of those providing or supervising the services. The definition may require that the provider be appropriately licensed or certified.

005.21 Assisted Living Facility

005.21(A). Assisted-living facility means a facility where shelter, food, and care are provided for remuneration for a period of more than twenty-four consecutive hours to four or more persons residing at such facility who require or request such services due to age, illness, or physical disability as provided in Neb. Rev. Stat. §71-406.

005.21(B). Assisted-living facility does not include a home, apartment, or facility where (a) casual care is provided at irregular intervals or (b) a competent person residing in such home, apartment, or facility provides for or contracts for his or her own personal or professional services if no more than twenty-five percent of persons residing in such home, apartment, or facility receive such services as provided in Neb. Rev. Stat. §71-406.

006 Policy Practices and Provisions

006.01 Renewability. The terms "guaranteed renewable" and "non-cancellable" shall not be used in any individual long-term care insurance policy, without further explanatory language in accordance with the disclosure requirements of section 009 of this regulation.

006.01(A). A policy issued to an individual shall not contain renewal provisions other than "guaranteed renewable" or "non-cancellable."

006.01(B). The term "guaranteed renewable" may be used only when the insured has the right to continue the long-term care insurance in force by the timely payment of premiums and when the insurer has no unilateral right to make any change in any provision of the policy or rider while the insurance is in force, and cannot decline to renew, except that rates may be revised by the insurer on a class basis.

006.01(C). The term "non-cancellable" may be used only when the insured has the right to continue the long-term care insurance in force by the timely payment of premiums during which period the insurer bas no right to unilaterally make any change in any provision of the insurance or in the premium rate.

006.01(D). In addition to the other requirements of this subsection, a qualified long-term care insurance contract shall be guaranteed renewable, within the meaning of Section 7702B(b)(1)(C) of the Internal Revenue Code of 1986, as amended.

006.02 Limitations and Exclusions. A policy or certificate may not be delivered or issued for delivery in this state as long-term care insurance if the policy or certificate limits or excludes coverage by type of illness, treatment, medical condition or accident, except as follows:

006.02(A). Pre-existing conditions or diseases;

006.02(B). Mental or nervous disorders; however, this shall not permit exclusion or limitation of benefits on the basis of Alzheimer's Disease;

006.02(C). Alcoholism and drug addiction;

006.02(D). Illness, treatment or medical condition arising out of:

006.02(D)(l). War or act of war (whether declared or undeclared);

006.02(D)(2). Participation in a felony, riot or insurrection;

006.02(D)(3). Service in the armed forces or units auxiliary thereto;

006.02(D)(4). Suicide (sane or insane), attempted suicide or intentionally self-inflicted injury; or

006.02(D)(5). Aviation (this exclusion applies only to non-fare paying passengers).

006.02(E). Treatment provided in a government facility (unless otherwise required by law), services for which benefits are available under Medicare or other governmental program (except Medicaid), any state or federal workers' compensation, employer's liability or occupational disease law, or any motor vehicle no-fault law; services provided by a member of the covered person's immediate family and services for which no charge is normally made in the absence of insurance;

006.02(F). In the case of a qualified long-term care insurance contract, expenses for services or items to the extent that expenses are reimbursable under Title XVIII of the Social Security Act or would be so reimbursable but for the application of a deductible or coinsurance amount.

006.02(G). This subsection 006.02 is not intended to prohibit exclusions and limitations by type of provider or territorial limitations.

006.03 Extension of Benefits. Termination of long-term care insurance shall be without prejudice to any benefits payable for institutionalization if the institutionalization began while the long-term care insurance was in force and continues without interruption after termination. The extension of benefits beyond the period the long-term care insurance was in force may be limited to the duration of the benefit period, if any, or to payment of the maximum benefits and may be subject to any policy waiting period, and all other applicable provisions of the policy.

006.04 Continuation or Conversion

006.04(A). Group long-term care insurance issued in this state on or after the effective date of this section shall provide covered individuals with a basis for continuation or conversion of coverage.

006.04(B). For the purposes of this section, "a basis for continuation of coverage" means a policy provision which maintains coverage under the existing group policy when the coverage would otherwise terminate and which is subject only to the continued timely payment of premium when due. Group policies that restrict provision of benefits and services to, or contain incentives to use certain providers or facilities may provide continuation of benefits which are substantially equivalent to the benefits of the existing group policy. The Director shall make a determination as to the substantial equivalency of benefits, and in doing so, shall take into consideration the differences between managed care and non-managed care plans, including, but not limited to, provider system arrangements, service availability, benefit levels and administrative complexity.

006.04(C). For the purposes of this section, "a basis for conversion of coverage" means a policy provision that an individual whose coverage under the group policy would otherwise terminate or has been terminated for any reason, including discontinuance of the group policy in its entirety or with respect to an insured class, and who has been continuously insured under the group policy (and any group policy which it replaced), for at least six months immediately prior to termination, shall be entitled to the issuance of a converted policy by the insurer under whose group policy he or she is covered, without evidence of insurability.

006.04(D). For the purposes of this section, "converted policy" means an individual policy of long-term care insurance providing benefits identical to or benefits determined by the Director to be substantially equivalent to or in excess of those provided under the group policy from which conversion is made. Where the group policy from which conversion is made restricts provision of benefits and services to, or contains incentives to use certain providers and/or facilities, the Director, in making a determination as to the substantial equivalency of benefits, shall take into consideration the differences between managed care and non-managed care plans, including, but not limited to, provider system arrangements, service availability, benefit levels and administrative complexity.

006.04(E). Written application for the converted policy shall be made and the first premium due, if any, shall be paid as directed by the insurer not later than thirty-one (31) days after termination of coverage under the group policy. The converted policy shall be issued effective on the day following the termination of coverage under the group policy, and shall be renewable annually.

006.04(F). Unless the group policy from which conversion is made replaced previous group coverage, the premium for the converted policy shall be calculated on the basis of the insured's age at inception of coverage under the group policy from which conversion is made. Where the group policy from which conversion is made replaced previous group coverage, the premium for the converted policy shall be calculated on the basis of the insured's age at inception of coverage under the group policy replaced.

006.04(G). Continuation of coverage or issuance of a converted policy shall be mandatory, except where:

006.04(G)(1). Termination of group coverage resulted from an individual's failure to make any required payment of premium or contribution when due; or

006.04(G)(2). The terminating coverage is replaced not later than thirty-one (31) days after termination, by group coverage effective on the day following the termination of coverage:

006.04(G)(2)(i). Providing benefits identical to or benefits determined by the Director to be substantially equivalent to or in excess of those provided by the terminating coverage; and

006.04(G)(2)(ii). The premium for which is calculated in a manner consistent with the requirements of subsection 006.04(F).

006.04(H). Notwithstanding any other provision of this section, a converted policy issued to an individual who at the time of conversion is covered by another long-term care insurance policy which provides benefits on the basis of incurred expenses, may contain a provision which results in a reduction of benefits payable if the benefits provided under the additional coverage, together with the full benefits provided by the converted policy, would result in payment of more than 100 percent of incurred expenses. Such provision shall only be included in the converted policy if the converted policy also provides for a premium decrease or refund which reflects the reduction in benefits payable.

006.04(I). The converted policy may provide that the benefits payable under the converted policy, together with the benefits payable under the group policy from which conversion is made, shall not exceed those that would have been payable had the individual's coverage under the group policy remained in force and effect.

006.04(J). Notwithstanding any other provision of this section, any insured individual whose eligibility for group long-term care coverage is based upon his or her relationship to another person, shall be entitled to continuation of coverage under the group policy upon termination of the qualifying relationship by death or dissolution of marriage.

006.04(K). For the purposes of this section: a "managed care plan" is a health care or assisted living arrangement designed to coordinate patient care or control costs through utilization review, case management or use of specific provider networks.

006.05 Discontinuance and Replacement

If a group long-term care policy is replaced by another group long-term care policy issued to the same policyholder, the succeeding insurer shall offer coverage to all persons covered under the previous group policy on its date of termination. Coverage provided or offered to individuals by the insurer and premiums charged to persons under the new group policy:

006.05(A). Shall not result in any exclusion for preexisting conditions that would have been covered under the group policy being replaced; and

006.05(B). Shall not vary or otherwise depend on the individual's health or disability status, claim experience or use of long-term care services.

006.05(C). The premiums charged to an insured for long-term care insurance shall not increase due to either: (1) the increasing age of the insured at ages beyond sixty-five (65); or (2) the duration the insured has been covered under the policy.

006.05(D). The purchase of additional coverage shall not be considered a premium rate increase, but for purposes of the calculation required under section 023, the portion of the premium attributable to the coverage shall be added to and considered part of the initial annual premium.

006.05(E). A reduction in benefits shall not be considered a premium change, but for purpose of the calculation required under section 023, the initial annual premium shall be based on the reduced benefits.

006.06 Electronic Enrollment for Group Policies

006.06(A). In the case of a group defined in Neb. Rev. Stat. §44-4508(1), any requirement that a signature of an insured be obtained by an agent or insurer shall be deemed satisfied if:

006.06(A)(1). The consent is obtained by telephonic or electronic enrollment by the group policyholder or insurer. A verification of enrollment information shall be provided to the enrollee;

006.06(A)(2). The telephonic or electronic enrollment provides necessary and reasonable safeguards to assure the accuracy, retention and prompt retrieval of records; and

006.06(A)(3). The telephonic or electronic enrollment provides necessary and reasonable safeguards to assure that the confidentiality of individually identifiable information and "privileged information" is maintained.

006.06B. The insurer shall make available, upon request of the Director, records that will demonstrate the insurer's ability to confirm enrollment and coverage amounts.

007 Unintentional Lapse

007.01. Each insurer offering long-term care insurance shall, as a protection against unintentional lapse, comply with the following:

007.01(A). Notice before lapse or termination. No individual long-term care policy or certificate shall be issued until the insurer has received from the applicant either a written designation of at least one person, in addition to the applicant, who is to receive notice of lapse or termination of the policy or certificate for nonpayment of premium, or a written waiver dated and signed by the applicant electing not to designate additional persons to receive notice. The applicant has the right to designate at least one person who is to receive the notice of termination, in addition to the insured. Designation shall not constitute acceptance of any liability on the third party for services provided to the insured. The form used for the written designation must provide space clearly designated for listing at least one person. The designation shall include each person's full name and home address. In the case of an applicant who elects not to designate an additional person, the waiver shall state: "Protection against unintended lapse. I understand that I have the right to designate at least one person other than myself to receive notice of lapse or termination of this long-term care insurance policy for nonpayment of premium. I understand that notice will not be given until thirty (30) days after a premium is due and unpaid. I elect NOT to designate a person to receive this notice." The insurer shall notify the insured of the right to change this written designation, no less often than once every two (2) years.

007.01(B). When the policyholder or certificateholder pays premium for a long-term care insurance policy or certificate through a payroll or pension deduction plan, the requirements contained in subsection 007.01(A) need not be met until sixty (60) days after the policyholder or certificate holder is no longer on such a payment plan. The application or enrollment form for such policies or certificates shall clearly indicate the payment plan selected by the applicant.

007.01(C). Lapse or termination for nonpayment of premium. No individual long-term care policy or certificate shall lapse or be terminated for nonpayment of premium unless the insurer, at least thirty (30) days before the effective date of the lapse or termination, has given notice to the insured and to those persons designated pursuant to subsection 007.01(A), at the address provided by the insured for purposes of receiving notice of lapse or termination. Notice shall be given by first class United States mail, postage prepaid; and notice may not be given until thirty (30) days after a premium is due and unpaid. Notice shall be deemed to have been given as of five (5) days after the date of mailing.

007.02 Reinstatement. In addition to the requirements in subsection 007.01, a long-term care insurance policy or certificate shall include a provision that provides for reinstatement of coverage, in the event of lapse if the insurer is provided proof that the policyholder or certificateholder was cognitively impaired or had a loss of functional capacity before the grace period contained in the policy expired. This option shall be available to the insured if requested within five (5) months after termination and shall allow for the collection of past due premium, where appropriate. The standard of proof of cognitive impairment or loss of functional capacity shall not be more stringent than the benefit eligibility criteria on cognitive impairment or the loss of functional capacity contained in the policy and certificate.

008 Required Disclosure Provisions

008.01 Renewability. Individual long-term care insurance policies shall contain a renewal provision. Such provision shall be appropriately captioned, shall appear on the first page of the policy, and shall clearly state the duration, where limited, of renewability and the duration of the term of coverage for which the policy is issued and for which it may be renewed. This provision shall not apply to policies which do not contain a renewability provision, and under which the right to nonrenew is reserved solely to the policyholder.

008.02 Riders and Endorsements. Except for riders or endorsements by which the insurer effectuates a request made in writing by the insured under an individual long-term care insurance policy, all riders or endorsements added to an individual long-term care insurance policy after date of issue or at reinstatement or renewal which reduce or eliminate benefits or coverage in the policy shall require signed acceptance by the individual insured. After the date of policy issue, any rider or endorsement which increases benefits or coverage with a concomitant increase in premium during the policy term must be agreed to in writing signed by the insured, except if the increased benefits or coverage is required by law. Where a separate additional premium is charged for benefits provided in connection with riders or endorsements, such premium charge shall be set forth in the policy, rider or endorsement.

008.03 Payment of Benefits. A long-term care insurance policy which provides for the payment of benefits based on standards described as "usual and customary", "reasonable and customary", or words of similar import shall include a definition of such terms and an explanation of such terms in its accompanying outline of coverage.

008.04 Limitations. If a long-term care insurance policy or certificate contains any limitations with respect to pre-existing conditions, such limitations must appear as a separate paragraph of the policy or certificate and be labeled as "Pre-existing Condition Limitations."

008.05 Other Limitations or Conditions on Eligibility for Benefits. A long-term care insurance policy or certificate containing any limitations or conditions for eligibility other than those prohibited in Neb. Rev. Stat. §44-4513(7) shall set forth a description of such limitations or conditions, including any required number of days of confinement, in a separate paragraph of the policy or certificate and shall label such paragraph "Limitations or Conditions on Eligibility for Benefits."

008.06 Disclosure of Tax Consequences. With regard to life insurance policies which provide an accelerated benefit for long-term care, a disclosure statement is required at the time of application for the policy or rider and at the time the accelerated benefit payment request is submitted that receipt of these accelerated benefits may be taxable, and that assistance should be sought from a personal tax advisor. The disclosure statement shall be prominently displayed on the first page of the policy or rider and any other related documents. This subsection shall not apply to qualified long-term care insurance contracts.

008.07 Delivery Receipt. When the policy is delivered by an agent, a receipt of delivery of the policy, shall be signed by the agent and applicant, at the time of delivery of the policy, if hand delivered, a copy of which shall be retained by the applicant.

008.08 Refund. If a policyholder returns a policy as provided by Neb. Rev. Stat. .§44-4515, the insurer or organization issuing the long-term care insurance policy shall promptly refund the premium directly to the policyholder.

008.09 Benefit Triggers. Activities of daily living and cognitive impairment shall be used to measure an insured's need for long-term care and shall be described in the policy or certificate in a separate paragraph and shall be labeled "Eligibility for the Payment of Benefits." Any additional benefit triggers shall also be explained in this section. If these triggers differ for different benefits, explanation of the trigger shall accompany each benefit description. If an attending physician or other specified person must certify a certain level of functional dependency in order to be eligible for benefits, this too shall be specified.

008.10. A qualified long-term care insurance contract shall include a disclosure statement in the policy and in the outline of coverage as contained in section 026.05, that the policy is intended to be a qualified long-term care insurance contract under Section 7702B(b) of the Internal Revenue Code of 1986, as amended.

008.11. A non-qualified long-term care insurance contract shall include a disclosure statement in the policy and in the outline of coverage as contained in section 026.05, that the policy is not intended to be a qualified long-term care insurance contract.

009 Prohibition Against Post-Claims Underwriting

009.01. All applications for long-term care insurance policies or certificates except those which are guaranteed issue shall contain clear and unambiguous questions designed to ascertain the health condition of the applicant.

009.02

009.02(A). If an application for long-term care insurance contains a question which asks whether the applicant has had medication prescribed by a physician, it must also ask the applicant to list the medication that has been prescribed.

009.02(B). If the medications listed in such application were known by the insurer, or should have been known at the time of application, to be directly related to a medical condition for which coverage would otherwise be denied, then the policy or certificate shall not be rescinded for that condition.

009.03. Except for policies or certificates which are guaranteed issue:

009.03(A). The following language shall be set out conspicuously and in close conjunction with the applicant's signature block on an application for a long-term care insurance policy or certificate:

Caution: If your answers on this application are incorrect or untrue, [company] has the right to deny benefits or rescind your policy.

009.03(B). The following language, or language substantially similar to the following, shall be set out conspicuously on the long-term care insurance policy or certificate at the time of delivery:

Caution: The issuance of this long-term care insurance [policy] [certificate] is based upon your responses to the questions on your application. A copy of your [application] [enrollment form] [is enclosed] [was retained by you when you applied]. If your answers are incorrect or untrue, the company has the right to deny benefits or rescind your policy. The best time to clear up any questions is now, before a claim arises! If, for any reason, any of your answers are incorrect, contact the company at this address: [insert address]

009.03(C). Prior to issuance of a long-term care policy or certificate to an applicant age eighty (80) or older, the insurer shall obtain one of the following:

009.03(C)(1). A report of a physical examination;

009.03(C)(2). An assessment of functional capacity;

009.03(C)(3). An attending physician's statement; or

009.03(C)(4). Copies of medical records.

009.04. A copy of the completed application or enrollment form (whichever is applicable) shall be delivered to the insured no later than at the time of delivery of the policy or certificate unless it was retained by the applicant at the time of application.

009.05. Every insurer or other entity selling or issuing long-term care insurance benefits shall maintain a record of all policy or certificate rescissions, both state and countrywide, except those which the insured voluntarily effectuated and shall annually furnish this information to the Director in the format as prescribed by the Director, and/or the National Association of Insurance Commissioners in Appendix A.

0010 Minimum Standards for Home Health and Community Care Benefits in Long-Term Care Insurance Policies

0010.01. A long-term care insurance policy or certificate may not, if it provides benefits for home health care or community care services, limit or exclude benefits:

0010.01(A). By requiring that the insured/claimant would need skilled care in a skilled nursing facility if home health care services were not provided;

0010.01(B). By requiring that the insured/claimant first or simultaneously receive nursing and/or therapeutic services in a home, or community or institutional setting before home health care services are covered;

0010.01(C). By limiting eligible services to services provided by registered nurses or licensed practical nurses;

0010.01(D). By requiring that a nurse or therapist provide services covered by the policy that can be provided by a home health aide, or other licensed or certified home care worker acting within the scope of his or her Ii censure or certification.

0010.01(E). By requiring that the insured/claimant have an acute condition before home health care services are covered;

0010.01(F). By limiting benefits to services provided by Medicare-certified agencies or providers;

0010.01(G). By excluding coverage for personal care services provided by a home health aide;

0010.01(H). By requiring that the provisions of home health care services be at a level of certification of licensure greater than that required by the eligible service;

0010.01(I). By excluding coverage for adult day care services.

0010.02. A long-term care insurance policy or certificate, if it provides for home health or community care services, shall provide total home health or community care coverage that is a dollar amount equivalent to at least one-half of one year's coverage available for nursing home benefits under the policy or certificate; at the time covered home health or community care services are being received. This requirement shall not apply to policies or certificates issued to residents of continuing care retirement communities.

011 Requirement to Offer Inflation Protection

011.01. No insurer may offer a long-term care insurance policy unless the insurer also offers to the policyholder in addition to any other inflation protection the option to purchase a policy that provides for benefit levels to increase with benefit maximums or reasonable durations which are meaningful to account for reasonably anticipated increases in the costs of long-term care services covered by the policy. Insurers must offer to each policyholder, at the time of purchase, the option to purchase a policy with an inflation protection feature no less favorable than one of the following:

011.01(A). Increases benefit levels annually in a manner so that the increases are compounded annually at a rate not less than five percent (5%);

011.01(B). Guarantees the insured individual the right to periodically increase benefit levels without providing evidence of insurability or health status so long as the option for the previous period has not been declined. The amount of the additional benefit shall be no less than the difference between the existing policy benefit and that benefit compounded annually at a rate of at least five percent (5%) for the period beginning with the purchase of the existing benefit and extending until the year in which the offer is made; or

011.01(C). Covers a specified percentage of actual or reasonable charges and does not include a maximum specified indemnity amount or limit.

011.02. Where the policy is issued to a group, the required offer in subsection 010.01 shall be made to the group policyholder; except, if the policy is issued to a group defined in Neb. Rev. Stat. §44-4508(4) other than to a continuing care retirement community, the offering shall be made to each proposed certificateholder.

011.03. The offer in subsection 011.01 shall not be required of life insurance policies or riders containing accelerated long-term care benefits.

011.04. Insurers shall include the following information in or with the outline of coverage:

011.04(A). A graphic comparison of the benefit levels of a policy that increases benefits over the policy period with a policy that does not increase benefits. The graphic comparison shall show benefit levels over at least a twenty (20) year period.

011.04(B). Any expected premium increases or additional premiums to pay for automatic or optional benefit increases.

011.04(C). An insurer may use a reasonable hypothetical, or a graphic demonstration, for the purpose of this disclosure.

011.05. Inflation protection benefit increases under a policy which contains such benefits shall continue without regard to an insured's age, claim status or claim history, or the length of time the person has been insured under the policy.

011.06. An offer of inflation protection which provides for automatic benefit increases shall include an offer of a premium which the insurer expects to remain constant. The offer shall disclose in a conspicuous manner that the premium may change in the future unless the premium is guaranteed to remain constant.

011.07 Inflation protection

011.07(A). Inflation protection as provided in subsection 011.01(A) of this section shall be included in a long-term care insurance policy unless an insurer obtains a rejection of inflation protection signed by the policyholder as required in this subsection. The rejection may be either in the application or on a separate form.

011.07(B). The rejection shall be considered a part of the application and shall state: I have reviewed the outline of coverage and the graphs that compare the benefits and premiums of this policy with and without inflation protection. Specifically, I have reviewed Plans __________, and I reject inflation protection.

012 Requirements for Application Forms and Replacement Coverage

012.01. Application forms shall include the following questions designed to elicit information as to whether, as of the date of the application, the applicant has another long-term care insurance policy or certificate in force or whether a long-term care policy or certificate is intended to replace any other sickness and accident or long-term care policy or certificate presently in force. A supplementary application or other form to be signed by the applicant and agent, except where the coverage is sold without an agent, containing such questions may be used. With regard to a replacement policy issued to a group defined by Neb. Rev. Stat. §44-4508(1), the following questions may be modified only to the extent necessary to elicit information about health or long-term care insurance policies other than the group policy being replaced; provided, however, that the certificateholder has been notified of the replacement.

012.01(A). Do you have another long-term care insurance policy or certificate in force (including a health care service contract, and/or a health maintenance organization contract)?

012.01(B). Did you have another long-term care insurance policy or certificate in force during the last twelve (12) months?

012.01(B)(i). If so, with which company?

012.01(B)(ii). If that policy lapsed, when did it lapse?

012.01(C). Are you covered by Medicaid?

012.01(D). Do you intend to replace any of your medical or health insurance coverage with this policy [certificate]?

012.02. Agents shall list any other health insurance policies they have sold to the applicant.

012.02(A). List policies sold which are still in force.

012.02(B). List policies sold in the past five (5) years which are no longer in force.

012.03 Solicitations Other than Direct Response. Upon determining that a sale will involve replacement or addition to existing coverage, an insurer; other than an insurer using direct response solicitation methods, or its agent; shall furnish the applicant, prior to issuance or delivery of the individual long-term care insurance policy, a notice regarding replacement of or addition to existing sickness and accident or long-term care coverage. One copy of such notice shall be retained by the applicant and an additional copy signed by the applicant shall be retained by the insurer. The required notice shall be provided in the following manner:

NOTICE TO APPLICANT REGARDING REPLACEMENT OF OR ADDITION TO INDIVIDUAL SICKNESS AND ACCIDENT OR LONG-TERM CARE INSURANCE

[Insurance company's name and address]

SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FUTURE.

According to [your application] [information you have furnished], you intend to lapse or otherwise terminate or add to existing sickness and accident or long-term care insurance and replace it with an individual long-term care insurance policy to be issued by [company name]. Your new policy provides thirty (30) days within which you may decide, without cost, whether you desire to keep the policy. For your own information and protection, you should be aware of and seriously consider certain factors r-, which may affect the insurance protection available to you under the new policy.

[For replacements only] You should review this new coverage carefully, comparing it with all sickness and accident or long-term care insurance coverage you now have, and terminate your present policy only if, after due consideration, you find that purchase of this long-term care coverage is a wise decision.

STATEMENT TO APPLICANT BY AGENT [BROKER OR OTHER REPRESENTATIVE]:

(Use additional sheets, as necessary.)

I have reviewed your current medical or health insurance coverage. I believe the replacement of insurance involved in this transaction materially improves your position. My conclusion has taken into account the following considerations, which I call to your attention:

1. Health conditions which you may presently have (preexisting conditions), may not be immediately or fully covered under the new policy. This could result in denial or delay in payment of benefits under the new policy, whereas a similar claim might have been payable under your present policy.

2. State law provides that your replacement policy or certificate may not contain new preexisting conditions or probationary periods. The insurer will waive any time periods applicable to preexisting conditions or probationary periods in the new policy (or coverage) for similar benefits to the extent such time was spent (depleted) under the original policy.

3. If you are replacing existing long-term care insurance coverage, you may wish to secure the advice of your present insurer or its agent regarding the proposed replacement of your present policy. This is not only your right, but it is also in your best interest to make sure you understand all the relevant factors involved in replacing your present coverage.

4. If, after due consideration, you still wish to terminate or add to your present policy, and replace it with new coverage, be certain to truthfully and completely answer all questions on the application concerning your medical health history. Failure to include all material medical information on an application may provide a basis for the company to deny any future claims and to refund your premium as though your policy had never been in force. After the application has been completed and before you sign it, reread it carefully to be certain that all information has been properly recorded.

---

(Signature of Agent, Broker or Other Representative)

[Type Name and Address of Agent or Broker]

The above "Notice to Applicant" was delivered to me on:

---

(Date)

---

(Applicant's Signature)

012.04 Direct Response Solicitations. Insurers using direct response solicitation methods shall deliver a notice regarding replacement of sickness and accident or long-term care coverage to the applicant upon issuance of the policy. The required notice shall be provided in the following manner:

NOTICE TO APPLICANT REGARDING REPLACEMENT OF OR ADDITION TO SICKNESS AND ACCIDENT OR LONG-TERM CARE INSURANCE

[Insurance company's name and address]

SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FUTURE.

According to [your application] [information you have furnished], you intend to lapse or otherwise terminate or add to existing sickness and accident or long-term care insurance and replace or add to it with the long-term care insurance policy delivered herewith issued by [company name] Insurance Company. Your new policy provides thirty {30) days within which you may decide, without cost, whether you desire to keep the policy. For your own information and protection, you should be aware of and seriously consider certain factors which may affect the insurance protection available to you under the new policy.

[For replacements only] You should review this new coverage carefully, comparing it with all sickness and accident or long-term care insurance coverage you now have, and terminate your present policy only if, after due consideration, you find that purchase of this long-term care coverage is a wise decision.

1. Health conditions which you may presently have (preexisting conditions), may not be immediately or fully covered under the new policy. This could result in denial or delay in payment of benefits under the new policy, whereas a similar claim might have been payable under your present policy.

2. State law provides that your replacement policy or certificate may not contain new preexisting conditions or probationary periods. Your insurer will waive any time periods applicable to preexisting conditions or probationary periods in the new policy (or coverage) for similar benefits to the extent such time was spent (depleted) under the original policy.

3. If you are replacing existing long-term care insurance coverage, you may wish to secure the advice of your present insurer or its agent regarding the proposed replacement of your present policy. This is not only your right, but it is also in your best interest to make sure you understand all the relevant factors involved in replacing your present coverage.

4. [To be included only if the application is attached to the policy.] If, after due consideration, you still wish to terminate your present policy and replace it with new coverage, read the copy of the application attached to your new policy and be sure that all questions are answered fully and correctly. Omissions or misstatements in the application could cause an otherwise valid claim to be denied. Carefully check the application and write to [company name and address] within thirty (30) days if any information is not correct and complete, or if any past medical history has been left out of the application.

---

(Company Name)

012.05. Where replacement is intended, the replacing insurer shall notify, in writing, the existing insurer of the proposed replacement. The existing policy shall be identified by the insurer, name of the insured and policy number or address including zip code. Such notice shall be made within five (5) working days from the date the application is received by the insurer or the date the policy is issued, whichever is sooner.

012.06. Life Insurance policies that accelerate benefits for long-term care shall comply with this section if the policy being replaced is a long-term care insurance policy. If the policy being replaced is a life insurance policy, the insurer shall comply with the replacement requirements of Title 210, Nebraska Administrative Code, Chapter 19, Replacement of Life Insurance and Annuities. If a life insurance policy that accelerates benefits for long-term care is replaced by another such policy, the replacing insurer shall comply with both the long-term care and the life insurance replacement requirements.

013 Reporting Requirements

013.01. Every insurer shall maintain records for each agent of that agent's amount of replacement sales as a percent of the agent's total annual sales and the amount of lapses of long-term care insurance policies sold by the agent as a percent of the agent's total annual sales.

013.02. Each insurer shall report annually by June 30 the ten percent (10%) of its agents with the greatest percentages of lapses and replacements as measured by Subsection 013.01 above.

013.03. Reported replacement and lapse rates do not alone constitute a violation of insurance laws or necessarily imply wrongdoing. The reports are for the purpose of reviewing more closely agent activities regarding the sale of long-term care insurance.

013.04. Every insurer shall report annually by June 30 the number of lapsed policies as a percent of its total annual sales and as a percent of its total number of policies in force as of the end of the preceding calendar year.

013.05. Every insurer shall report annually by June 30 the number of replacement policies sold as a percent of its total annual sales and as a percent of its total number of policies in force as of the preceding calendar year.

013.06. Every insurer shall report annually by June 30, for qualified long-term care insurance contracts, the number of claims denied for each class of business, expressed as a percentage of claims denied. (Appendix E)

013.07. For purposes of this section:

013.07(A). "Policy" means only long-term care insurance.

013.07(B). Subject to subsection 013.07(3), "claim" means a request for payment of benefits under an enforce policy regardless of whether the benefit claimed is covered under the policy or any terms or conditions of the policy have been met.

013.07(C). "Denied" means the insurer refuses to pay a claim for any reason other than for claims not paid for failure to meet the waiting period or because of an applicable preexisting condition; and

013.07(D). "Report" means on a statewide basis.

013.08. Reports required under this section shall be filed with the Director.

014 Licensing. No agent is authorized to market, sell, solicit or otherwise contact any person for the purpose of marketing long-term care insurance unless the agent has demonstrated his or her knowledge of long-term care insurance and the appropriateness of such insurance by passing a test required by this state and maintaining appropriate licenses.

015 Discretionary Powers of Director. The Director may upon written request and after an administrative hearing, issue an order to modify or suspend a specific provision or provisions of this regulation with respect to a specific long-term care insurance policy or certificate upon a written finding that:

015.01. The modification or suspension would be in the best interest of the insureds; and

015.02. The purposes to be achieved could not be effectively or efficiently achieved without the modification or suspension; and

015.03.

015.03(A). The modification or suspension is necessary to the development of an innovative and reasonable approach for insuring long-term care; or

015.03(B). The policy or certificate is to be issued to residents of a life care or continuing care retirement community or some other residential community for the elderly and the modification or suspension is reasonably related to the special needs or nature of such a community; or

015.03(C). The modification or suspension is necessary to permit long-term care insurance to be sold as part of, or in conjunction with, another insurance product.

016 Reserve Standards

016.01. When long-term care benefits are provided through the acceleration of benefits under group or individual life policies or riders to such policies, policy reserves for such benefits shall be determined in accordance with Neb. Rev. Stat. §44-404. Claim reserves must also be established in the case when such policy or rider is in claim status.

Reserves for policies and riders subject to this subsection should be based on the multiple decrement model utilizing all relevant decrements except for voluntary termination rates. Single decrement approximations are acceptable if the calculation produces essentially similar reserves, if the reserve is clearly more conservative, or if the reserve is immaterial. The calculations may take into account the reduction in life insurance benefits due to the payment of long-term care benefits. However, in no event shall the reserves for the long-term care benefit and the life insurance benefit be less than the reserves for the life insurance benefit assuming no long-term care benefit. In the development and calculation of reserves for policies and riders subject to this subsection, due regard shall be given to the applicable policy provisions, marketing methods, administrative procedures and all other considerations which have an impact on projected claim costs, including, but not limited to, the following:

016.01(A). Definition of insured events;

016.01(B). Covered long-term care facilities;

016.01(C). Existence of home convalescence care coverage;

016.01(D). Definition of facilities;

016.01(E). Existence or absence of barriers to eligibility;

016.01(F). Premium waiver provision;

016.01(G). Renewability;

016.01(H). Ability to raise premiums;

016.01(I). Marketing method;

016.01(J). Underwriting procedures;

01.01(K). Claims adjustment procedures;

016.01(L). Waiting period;

016.01(M). Maximum benefit;

016.01(N). Availability of eligible facilities;

016.01(O). Margins in claim costs;

016.01(P). Optional nature of benefit;

016.01(Q). Delay in eligibility for benefit;

016.01(R). Inflation protection provisions; and

016.01(S). Guaranteed insurability option.

Any applicable valuation morbidity table shall be certified as appropriate as a statutory valuation table by a member of the American Academy of Actuaries.

016.02. When long-term care benefits are provided other than as in subsection 016.01 above, reserves shall be determined in accordance with the minimum standards for sickness and accident insurance policies.

017 Loss Ratio

017.01. Benefits under long-term care insurance policies shall be deemed reasonable in relation to premiums provided the expected loss ratio is at least sixty percent (60%), calculated in a manner which provides for adequate reserving of the long-term care insurance risk. In evaluating the expected loss ratio, due consideration shall be given to all relevant factors, including:

017.01(A). Statistical credibility of incurred claims experience and earned premiums;

017.01(B). The period for which rates are computed to provide coverage;

017.01(C). Experienced and projected trends;

017.01(D). Concentration of experience within early policy duration;

017.01(E). Expected claim fluctuation;

017.01(F). Experience refunds, adjustments or dividends;

017.01(G). Renewability features;

017.01(H). All appropriate expense factors;

017.01(I). Interest;

017.1(J). Experimental nature of the coverage;

017.1(K). Policy reserves;

017.1(L). Mix of business by risk classification; and

017.1(M). Product features such as long elimination periods, high deductibles and high maximum limits.

017.02. Subsection 017.01 shall not apply to life insurance policies that accelerate benefits for long-term care. A life insurance policy that funds long-term care benefits entirely by accelerating the death benefit is considered to provide reasonable benefits in relation to premiums paid, if the policy complies with all of the following provisions:

017.02(A). The interest credited internally to determine cash value accumulations, including long-term care, if any, are guaranteed not to be less than the minimum guaranteed interest rate for cash value accumulations without long-term care set forth in the policy;

017.02(B). The portion of the policy that provides life insurance benefits meets the non forfeiture requirements of Neb. Rev. Stat. §44-407.01;

017.02(C). The policy meets the disclosure requirements of Neb. Rev. Stat. §44-4516(4), (5), and §44-4517 of the Long-Term Care Insurance Act;

017.02(D). Any policy illustration that meets the applicable requirements of the Life Insurance Illustrations Regulation; and

017.02(E). An actuarial memorandum is filed with the insurance department that includes:

017.02(E)(1). A description of the basis on which the long-term care rates were determined;

017.02(E)(2). A description of the basis for the reserves;

017.02(E)(3). A summary of the type of policy, benefits, renewability, general marketing method, and limits on ages of issuance;

017.02(E)(4). A description and a table of each actuarial assumption used. For expenses, an insurer must include percent of premium dollars per policy and dollars per unit of benefits, if any;

017.02(E)(5). A description and a table of the anticipated policy reserves and additional reserves to be held in each future year for active lives;

017.02(E)(6). The estimated average annual premium per policy and the average issue age;

017.02(E)(7). A statement as to whether underwriting is performed at the time of application. The statement shall indicate whether underwriting is used and, if used, the statement shall include a description of the type or types of underwriting used, such as medical underwriting or functional assessment underwriting. Concerning a group policy, the statement shall indicate whether the enrollee or any dependent will be underwritten and when underwriting occurs; and

017.02(E)(8). A description of the effect of the long-term care policy provision on the required premiums, nonforfeiture values and reserves on the underlying life insurance policy, both for active lives and those in long-term care claims status.

018 Filing Requirement. Prior to an insurer or similar organization offering group long-term care insurance to a resident of this state pursuant to Neb. Rev. Stat. §44-4511, it shall file with the Director evidence that the group policy or certificate thereunder has been approved by a state having statutory or regulatory long-term care insurance requirements substantially similar to those adopted in this state.

019 Filing Requirements for Advertising

019.01. Every insurer, health care service plan or other entity providing long-term care insurance or benefits in this state shall provide a copy of any long-term care insurance advertisement intended for use in this state whether through written, radio or television medium to the Director of this state for review or approval by the Director to the extent it may be required under state law. In addition, all advertisements shall be retained by the insurer, health care service plan or other entity for at least three (3) years from the date the advertisement was first used.

019.02. The Director may exempt from these requirements any advertising form or material when, in the Director's opinion, this requirement may not be reasonably applied.

020 Standards for Marketing

020.01. Every insurer, health care service plan or other entity marketing long-term care insurance coverage in this state, directly or through its producers, shall:

020.01(A). Establish marketing procedures to assure that any comparison of policies by its agents or other producers will be fair and accurate.

020.0(B). Establish marketing procedures to assure excessive insurance is not sold or issued.

020.01(C). Display prominently by type, stamp or other appropriate means, on the first page of the outline of coverage and policy the following:

''Notice to buyer: This policy may not cover all the costs associated with long-term care incurred by the buyer during the period of coverage. The buyer is advised to review carefully all policy limitations."

020.01(D). Inquire and otherwise make every reasonable effort to identify whether a prospective applicant or enrollee for long-term care insurance already has sickness and accident or long-term care insurance and the types and amounts of any such insurance except that in the case of qualified long-term care insurance contracts, an inquiry into whether a prospective applicant or enrollee for long-term care insurance has accident and sickness insurance is not required.

020.01(E). Every insurer or entity marketing long-term care insurance shall establish auditable procedures for verifying compliance with this subsection 020.01.

020.01(F). If the state in which the policy or certificate is to be delivered or issued for delivery has a senior insurance counseling program approved by the Director, the insurer shall, at solicitation, provide written notice to the prospective policyholder and certificateholder that such a program is available and the name, address and telephone number of the program.

020.01(G). For long term care health insurance policies and certificates, use the terms "noncancellable" or "level premium" only when the policy or certificate conforms to section 006.01(C) of this regulation.

020.02. In addition to the practices prohibited in Neb.Rev.Stat. §44-1522 through §1544, the following acts and practices are prohibited:

020.02(A) Twisting. Knowingly making any misleading representation or incomplete or fraudulent comparison of any insurance policies or insurers for the purpose of inducing, or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on or convert any insurance policy or to take out a policy of insurance with another insurer.

020.02(B) High pressure tactics. Employing any method of marketing having the effect of or tending to induce the purchase of insurance through force, fright, threat, whether explicit or implied, or undue pressure to purchase or recommend the purchase of insurance.

020.02(C) Cold lead advertising. Making use directly or indirectly of any method of marketing which fails to disclose in a conspicuous manner that a purpose of the method of marketing is solicitation of insurance and that contact will be made by an insurance agent or insurance company.

020.02(D) Misrepresentation. Misrepresenting a material fact in selling or offering to sell a long-term care insurance policy.

020.03

020.03(A). With respect to the obligations set forth in this subsection, the primary responsibility of an association, as referenced in Neb. Rev. Stat. §44-4508, when endorsing or selling long-term care insurance shall be to educate its members concerning long-term care issues in general so that its members can make informed decisions. Associations shall provide objective information regarding long-term care insurance policies or certificates endorsed or sold by such associations to ensure that members of such. associations receive a balanced and complete explanation of the features m the pohc1es or certificates that are being endorsed or sold. This paragraph shall not apply to qualified long-term care insurance contracts.

020.03(B). The insurer shall file with the insurance department the following material:

020.03(B)(l). The policy and certificate,

020.03(B)(2). A corresponding outline of coverage, and

020.03(B)(3). All advertisements requested by the insurance department.

020.03(C). The association shall disclose in any long-term care insurance solicitation:

020.03(C)(l). The specific nature and amount of the compensation arrangements (including all fees, commissions, administrative fees and other forms of financial support) that the association receives from endorsement or sale of the policy or certificate to its members; and

020.03(C)(2). A brief description of the process under which the policies and the insurer issuing the policies were selected.

020.03(D). If the association and the insurer have interlocking directorates or trustee arrangements, the association shall disclose that fact to its members.

020.03(E). The board of directors of associations selling or endorsing long-term care insurance policies or certificates shall review and approve the insurance policies as well as the compensation arrangements made with the insurer.

020.03(F). The association shall also:

020.03(F)(l). At the time of the association's decision to endorse, engage the services of a person with expertise in long-term care insurance not affiliated with the insurer to conduct an examination of the policies, including its benefits, features, and rates and update the examination thereafter in the event of material change;

020.03(F)(2). Actively monitor the marketing efforts of the insurer and its agents; and

020.03(F)(3). Review and approve all marketing materials or other insurance communications used to promote sales or sent to members regarding the policies or certificates.

020.03(F)(4). Subsections 020.03(F)(l) through 020.03(F)(3) shall not apply to qualified long-term care insurance contracts.

020.03(G). No group long-term care insurance policy or certificate may be issued to an association unless the insurer files with the state insurance department the information required in this subsection.

020.03(H). The insurer shall not issue a long-term care policy or certificate to an association or continue to market such a policy or certificate unless the insurer certifies annually that the association has complied with the requirements set forth in this subsection.

020.03(I). Failure to comply with the filing and certification requirements of this section constitutes an unfair trade practice in violation of Neb. Rev. Stat. §44-1521 through §44-1535.

021 Suitability

21.01. This section shall not apply to life insurance policies that accelerate benefits for long-term care.

21.02. Every insurer, health care service plan or other entity marketing long-term care insurance (the "issuer") shall:

021.02(A). Develop and use suitability standards to determine whether the purchase or replacement of long-term care insurance is appropriate for the needs of the applicant;

021.02(B). Train its agents in the use of its suitability standards; and

021.02(C). Maintain a copy of its suitability standards and make them available for inspection upon request by the Director.

021.03

021.03(A). To determine whether the applicant meets the standards developed by the issuer, the agent and issuer shall develop procedures that take the following into consideration:

021.03(A)(1). The ability to pay for the proposed coverage and other pertinent financial information related to the purchase of the coverage;

021.03(A)(2). The applicant's goals or needs with respect to long-term care and the advantages and disadvantages of insurance to meet these goals or needs; and

021.03(A)(3). The values, benefits and costs of the applicant's existing insurance, if any, when compared to the values, benefits and costs of the recommended purchase or replacement.

021.03(B). The issuer, and where an agent is involved, the agent shall make reasonable efforts to obtain the information set out in subsection 021.03 above. The efforts shall include presentation to the applicant, at or prior to application, the "Long-Term Care Insurance Personal Worksheet." The personal worksheet used by the issuer shall contain, at a minimum, the information in the format contained in Appendix B, in not less than twelve (12) point type. The issuer may request the applicant to provide additional information to comply with its suitability standards. A copy of the issuer's personal worksheet shall be filed with the Director.

021.03(C). A completed personal worksheet shall be returned to the issuer, and a copy shall be provided to the applicant, prior to the issuer's consideration of the applicant for coverage, except the personal worksheet need not be returned for sales of employer group long-term care insurance to employees and their spouses.

021.03(D). The sale or dissemination outside the company or agency by the issuer or agent of information obtained through the personal worksheet in Appendix B is prohibited.

021.04. The issuer shall use the suitability standards it has developed pursuant to this section in determining whether issuing long-term care insurance coverage to an applicant is appropriate.

021.05. Agents shall use the suitability standards developed by the issuer in marketing long-term care insurance.

021.06. At the same time as the personal worksheet is provided to the applicant, the disclosure form entitled "Things You should Know Before You Buy Long-Term Care Insurance" shall be provided. The form shall be in the format contained in Appendix C, in not less than twelve (12) point type.

021.07. If the issuer determines that the applicant does not meet its financial suitability standards, or if the applicant has declined to provide the information, the issuer may reject the application. In the alternative, the issuer shall send the applicant a letter similar to Appendix D. However, if the applicant has declined to provide financial information, the issuer may use some other method to verify the applicant's intent. Either the applicant's returned letter or record of the alternative method of verification shall be made part of the applicant's file.

021.08. The issuer shall report annually to the Director the total number of applications received from the residents of this state, the number of those who declined to provide information on the personal worksheet, the number of applicants who did not meet the suitability standards, and the number of those who chose to confirm after receiving a suitability letter.

022 Prohibition Against Preexisting Conditions and Probationary Periods in Replacement Policies or Certificates

If a long-term care insurance policy or certificate replaces another long-term care policy or certificate the replacing insurer shall waive any time periods applicable to preexisting conditions and probationary periods in the new long-term care policy for similar benefits to the extent that similar exclusions have been satisfied under the original policy.

023 Nonforfeiture Benefit Requirement

023.01. This section does not apply to life insurance policies or riders containing accelerated long-term care benefits.

023.02. To comply with the requirement to offer a nonforfeiture benefit pursuant to the provisions of Neb. Rev. Stat. §44-4517.02:

023.02(A). A policy or certificate offered with nonforfeiture benefits shall have coverage elements, eligibility, benefit triggers and benefit length that are the same as coverage to be issued without nonforfeiture benefits. The nonforfeiture benefit included in the offer shall be the benefit described in subsection 023.05; and

023.02(B). The offer shall be in writing if the nonforfeiture benefit is not otherwise described in the Outline of Coverage or other materials given to the prospective policyholder.

023.03. If the offer required under Neb. Rev. Stat. §44-4517.02 is rejected, the insurer shall provide the contingent benefit upon lapse described in this section.

023.04

023.04(A). After rejection of the offer required under Neb. Rev. Stat. §44-4517.02, for individual and group policies without nonforfeiture benefits issued after the effective date of this section, the insurer shall provide a contingent benefit upon lapse.

023.04(B). In the event a group policyholder elects to make the nonforfeiture benefit an option to the certificateholder, a certificate shall provide either the nonforfeiture benefit or the contingent benefit upon lapse.

023.04(C). The contingent benefit on lapse shall be triggered every time an insurer increases the premium rates to a level which results in a cumulative increase of the annual premium equal to or exceeding the percentage of the insured's initial annual premium set forth below based on the insured's issue age, and the policy or certificate lapses within 120 days of the due date of the premium so increased. Unless otherwise required, policyholders shall be notified at least thirty (30) days prior to the due date of the premium reflecting the rate increase.

Triggers for a Substantial Premium Increase

| Issue Age | Percent Increase Over Initial Premium | | --- | --- | | 29 and under | 200% | | 30-34 | 190% | | 35-39 | 170% | | 40-44 | 150% | | 45-49 | 130% | | 50-54 | 110% | | 55-59 | 90% | | 60 | 70% | | 61 | 66% | | 62 | 62% | | 63 | 58% | | 64 | 54% | | 65 | 50% | | 66 | 48% | | 67 | 46% | | 68 | 44% | | 69 | 42% | | 70 | 40% | | 71 | 38% | | 72 | 36% | | 73 | 34% | | 74 | 32% | | 75 | 30% | | 76 | 28% | | 77 | 26% | | 78 | 24% | | 79 | 22% | | 80 | 20% | | 81 | 19% | | 82 | 18% | | 83 | 17% | | 84 | 16% | | 85 | 15% | | 86 | 14% | | 87 | 13% | | 88 | 12% | | 89 | 11% | | 90 and over | 10% |

023.04(D). On or before the effective date of a substantial premium increase as defined in subsection 023.04(C) above, the insurer shall:

023.04(D)(l). Offer to reduce policy benefits provided by the current coverage without the requirement of additional underwriting so that required premium payments are not increased;

023.04(D)(2). Offer to convert the coverage to a paid-up status with a shortened benefit period in accordance with the terms of subsection 023.05. This option may be elected at any time during the 120-day period referenced in subsection 023.04(C); and

023.04(D)(3). Notify the policyholder or certificateholder that a default or lapse at any time during the 120-day period referenced in subsection 023.04(C) shall be deemed to be the election of the offer to convert in subsection 023.04(D)(2) above.

023.05. Benefits continued as nonforfeiture benefits, including contingent benefits upon lapse, are described in this subsection.

023.05(A). For purposes of this subsection, attained age rating is defined as a schedule of premiums starting from the issue date which increases age at least one percent per year prior to age fifty (50), and at least three percent (3%) per year beyond age fifty (50).

023.05(B). For purposes of this subsection, the non forfeiture benefit shall be of a shortened benefit period providing paid-up long-term care insurance coverage after lapse. The same benefits (amounts and frequency in effect at the time of lapse but not increased thereafter) will be payable for a qualifying claim, but the lifetime maximum dollars or days of benefits shall be determined as specified in subsection 023.05(C).

023.05(C). The standard nonforfeiture credit will be equal to 100% of the sum of all premiums paid, including the premiums paid prior to any changes in benefits. The insurer may offer additional shortened benefit period options, as long as the benefits for each duration equal or exceed the standard nonforfeiture credit for that duration. However, the minimum nonforfeiture credit shall not be less than thirty (30) times the daily nursing home benefit at the time of lapse. In either event, the calculation of the nonforfeiture credit is subject to the limitation of subsection 023.06.

023.05(D)

023.05(D)(l). The nonforfeiture benefit and the contingent benefit upon lapse shall begin not later than the end of the third year following the policy or certificate issue date.

023.05(D)(2). Notwithstanding subsection 023.05(D)(l), except for a policy or certificate with a contingent benefit upon lapse or a policy or certificate with attained age rating, the nonforfeiture benefit shall begin on the earlier of:

023.05(D)(2)(i). The end of the tenth year following the policy or certificate issue date; or

023.05(D)(2)(ii). The end of the second year following the date the policy or certificate is no longer subject to attained age rating.

023.05(E). Nonforfeiture credits may be used for all care and services qualifying for benefits under the terms of the policy or certificate, up to the limits specified in the policy or certificate.

023.06. All benefits paid by the insurer while the policy or certificate is in premium paying status and in the paid up status will not exceed the maximum benefits which would be payable if the policy or certificate had remained in premium paying status.

023.07. There shall be no difference in the minimum nonforfeiture benefits as required under this section for group and individual policies.

023.08. The requirements set forth in this section shall become effective twelve (12) months after adoption of this provision and shall apply as follows:

023.08(A). Except as provided in subsection 023.08(B), the provisions of this section apply to any long-term care policy issued in this state on or after the effective date of this amended regulation.

023.08(B). For certificates issued on or after the effective date of this section, under a group long-term care insurance policy as defined in Neb. Rev. Stat. §44-4508(1), which policy was in force at the time this amended regulation became effective, the provisions of this section shall not apply.

023.09. Premiums charged for a policy or certificate containing nonforfeiture benefits or a contingent benefit on lapse shall be subject to the loss ratio requirements of section 017 treating the policy as a whole.

023.10. To determine whether contingent nonforfeiture upon lapse provisions are triggered under subsection 023.04(C), a replacing insurer that purchased or otherwise assumed a block or blocks of long-term care insurance policies from another insurer shall calculate the percentage increase based on the initial annual premium paid by the insured when the policy was first purchased from the original insurer.

023.11. A nonforfeiture benefit for qualified long-term care insurance contracts that are level premium contracts shall meet the following requirements:

023.11(A). The nonforfeiture provision shall be appropriately captioned;

023.11(B). The nonforfeiture provision shall provide a benefit available in the event of a default in the payment of any premiums and shall state that the amount of the benefit may be adjusted subsequent to being initially granted only as necessary to reflect changes in claims, persistency and interest as reflected in changes in rates for premium paying contracts filed with the Director for the same contract form; and

023.11(C). The nonforfeiture provisions shall provide at least one of the following:

023.11(C)(1). Reduced paid-up insurance;

023.11(C)(2). Extended term insurance;

023.11(C)(3). Shortened benefit period; or

023.11(C)(4). Other similar offerings approved by the Director.

Section 024 Standards for Benefit Triggers

024.01. A long-term care insurance policy shall condition the payment of benefits on a determination of the insured's ability to perform activities of daily living and on cognitive impairment. Eligibility for the payment of benefits shall not be more restrictive than requiring either a deficiency in the ability to perform not more than three (3) of the activities of daily living or the presence of cognitive impairment.

024.02 Activities of daily living

024.02(A). Activities of daily living shall include at least the following as defined in section 005 and in the policy:

024.02(A)(1). Bathing;

024.02(A)(2). Continence;

024.02(A)(3). Dressing;

024.02(A)(4). Eating;

024.02(A)(5). Toileting; and

024.02(A)(6). Transferring.

024.02(B). Insurers may use activities of daily living to trigger covered benefits in addition to those contained in subsection 024.02(A) as long as they are defined in the policy.

024.03. An insurer may use additional provisions for the determination of when benefits are payable under a policy or certificate; however the provisions shall not restrict and are not in lieu of, the requirements contained in subsections 024.01 and 024.02.

024.04. For purposes of this section the determination of a deficiency shall not be more restrictive than:

024.04(A). Requiring the hands-on assistance of another person to perform the prescribed activities of daily living; or

024.04(B). If the deficiency is due to the presence of a cognitive impairment, supervision or verbal cueing by another person is needed in order to protect the insured or others.

024.05. Assessments of activities of daily living and cognitive impairment shall be performed by licensed or certified professionals, such as physicians, nurses or social workers.

024.06. Long-term care insurance policies shall include a clear description of the process for appealing and resolving benefit determinations.

024.07. The requirements set forth in this section shall become effective twelve (12) months after adoption of this provisions and shall apply as follows:

024.07(A). Except as provided in subsection 024.07(B), the provisions of this section apply to a long-term care policy issued in this state on or after the effective date of the amended regulation.

024.07(B). For certificates issued on or after the effective date of this section, under a group long-term care insurance policy as defined in Neb. Rev. Stat. §44-4508(1) that was in force at the time this amended regulation became effective, the provisions of this section shall not apply.

Section 025 Additional Standards for Benefit Triggers for Qualified Long-Term Care Insurance Contracts

025.01. For purposes of this section the following definitions apply:

025.01(A). "Qualified long-term care services" means services that meet the requirements of Section 7702(c)(1) of the Internal Revenue Code as of 1986, as amended, as follows: necessary diagnostic, preventive, therapeutic, curative, treatment, mitigation and rehabilitative services, and maintenance or personal care services which are required by a chronically ill individual, and are provided pursuant to a plan of care prescribed by a licensed health care practitioner.

025.01(B)

025.01(B)(1). "Chronically ill individual" has the meaning prescribed for this term by section 7702B(c)(2) of the internal Revenue Code of 1986, as amended. Under this provision, a chronically ill individual means any individual who has been certified by a "licensed health care practitioner" as:

025.01(B)(1)(i). Being unable to perform (without substantial assistance from another individual) at least two (2) activities of daily living for a period of at least ninety (90) days due to a loss of functional capacity; or

025.01(B)(1)(ii). Requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment.

025.01(B)(2). The term "chronically ill individual" shall not include an individual otherwise meeting these requirements unless within the preceding twelve-month period a licensed health care practitioner has certified that the individual meets these requirements.

025.01(C). "Licensed health care practitioner'' means a physician, as defined in Section 1861 (r)(1) of the Social Security Act, a registered professional nurse, licensed social worker or other individual who meets requirements prescribed by the Secretary of the Treasury.

025.01(D). "Maintenance or personal care services" means any care the primary purpose of which is the provision of needed assistance with any of the disabilities as a result of which the individual is a chronically ill individual (including the protection from threats to health and safety due to severe cognitive impairment).

025.02. A qualified long term care insurance contract shall pay only for qualified long term care services received by a chronically ill individual provided pursuant to a plan of care prescribed by a licensed health care practitioner.

025.03. A qualified long-term care insurance contract shall condition the payment of benefits on a determination of the insured's inability to perform activities of daily living for an expected period of at least ninety (90) days due to· a loss of functional capacity; or to severe cognitive impairment.

025.04. Certifications regarding activities of daily living and cognitive impairment required pursuant to subsection 025.03 shall be performed by the following licensed or certified professionals: physicians; registered professional nurses; licensed social workers; or other individuals who meet requirements prescribed by the Secretary of the Treasury.

025.05. Certifications required pursuant to subsection 025.03 may be performed by a licensed health care professional at the direction of the carrier as is reasonably necessary with respect to a specific claim, except that when a licensed health care practitioner has certified that an insured is unable to perform activities of daily living for an expected period of at least ninety (90) days due to a loss of functional capacity and the insured is in claim status, the certification may not be recinded and additional certifications may not be performed until after the expiration of the ninety (90) day period.

025.06. Qualified long-term care contracts shall include a clear description of the process for appealing and resolving disputes with respect to benefit determinations.

026 Standard Format Outline of Coverage. This section of the regulation implements, interprets and makes specific, the provisions of Neb. Rev. Stat. §44-4512 and §44-4516 in prescribing a standard format and the content of an outline of coverage.

026.01. The outline of coverage shall be a free-standing document, using no smaller than ten point type.

026.02. The outline of coverage shall contain no material of an advertising nature.

026.03. Text which is capitalized or underscored in the standard format outline of coverage may be emphasized by other means which provide prominence equivalent to such capitalization or underscoring.

026.04. Use of the text and sequence of text of the standard format outline of coverage is mandatory, unless otherwise specifically indicated.

026.05. Format for outline of coverage:

[COMPANY NAME]

[ADDRESS - CITY & STATE]

[TELEPHONE NUMBER]

LONG-TERM CARE INSURANCE

OUTLINE OF COVERAGE

[Policy Number or Group Master Policy and Certificate Number]

[Except for policies or certificates which are guaranteed issue, the following caution statement, or language substantially similar, must appear as follows in the outline of coverage.]

Caution: The issuance of this long-term care insurance [policy] [certificate] is based upon your responses to the questions on your application. A copy of your [application] [enrollment form] [is enclosed] [was retained by you when you applied]. If your answers are incorrect or untrue, the company has the right to deny benefits or rescind your policy. The best time to clear up any questions is now, before a claim arises! If, for any reason, any of your answers are incorrect, contact the company at this address: [insert address]

1. This policy is [an individual policy of insurance] ([a group policy] which was issued in the [indicate jurisdiction in which group policy was issued]).

2. PURPOSE OF OUTLINE OF COVERAGE. This outline of coverage provides a very brief description of the important features of the policy. You should. compare this outline of coverage to outlines of coverage for other policies available to you. This is not an insurance contract, but only a summary of coverage. Only the individual or group policy contains governing contractual provisions. This means that the policy or group policy sets forth in detail the rights and obligations of both you and the insurance company. Therefore, if you purchase this coverage, or any other coverage, it is important that you READ YOUR POLICY (OR CERTIFICATE) CAREFULLY!

3. FEDERAL TAX CONSEQUENCES.

This [POLICY] [CERTIFICATE] is intended to be a federally tax-qualified long-term care insurance contract under Section 7702B(b) of the Internal Revenue Code of 1986, as amended.

OR

Federal Tax Implication of this [POLICY] [CERTIFICATE]. This [POLICY][CERTIFICATE] is not intended to be a federally a tax-qualified long-term care insurance contract under Section 7702B(b) of the Internal Revenue Code of 1986 as amended Benefits received under the [POLICY] [CERTIFICATE] may be taxable as income.

4. TERMS UNDER WHICH THE POLICY OR CERTIFICATE MAY BE CONTINUED IN FORCE OR DISCONTINUED

(a) [For long-term care health insurance policies or certificates describe one of the following permissible policy renewability provisions:

(1) Policies and certificates that are guaranteed renewable shall contain the following statement:] RENEWABILITY: THIS POLICY [CERTIFICATE] IS GUARANTEED RENEWABLE. This means you have the right, subject to the terms of your policy, [certificate] to continue this policy as long as you pay your premiums on time. [Company Name] cannot change any of the terms of your policy on its own, except that, in the future, IT MAY INCREASE THE PREMIUM YOU PAY.

(2) [Policies and certificates that are noncancellable shall contain the following statement:] RENEWABILITY: THIS POLICY [CERTIFICATE] IS NONCANCELLABLE. This means that you have the right, subject to the terms of your policy, to continue this policy as long as you pay your premiums on time. [Company Name] cannot change any of the terms of your policy on its own and cannot change the premium you currently pay. However, if your policy contains an inflation protection feature where you choose to increase your benefits, [Company Name] may increase your premium at that time for those additional benefits.

(b) [For group coverage, specifically describe continuation/conversion provisions applicable to the certificate and group policy;]

(c) [Describe waiver of premium provisions or state that there are not such provisions;]

(d) [State whether or not the company has a right to change premium, and if such right exists, describe clearly and concisely each circumstance under which premium may change.]

5. TERMS UNDER WHICH THE POLICY OR CERTIFICATE MAY BE RETURNED AND PREMIUM REFUNDED.

(a) [Provide a brief description of the right to return - "free look" provision of the policy".]

(b) [Include a statement that the policy either does or does not contain provisions providing for a refund or partial refund of premium upon the death of an insured or surrender of the policy or certificate. If the policy contains such provisions, include a description of them.]

6. THIS IS NOT MEDICARE SUPPLEMENT COVERAGE. If you are eligible for Medicare, review the Medicare Supplement Buyer's Guide available from the insurance company.

(a) [For agents] Neither [insert company name] nor its agents represent Medicare, the federal government or any state government.

(b) [For direct response] [insert company name] is not representing Medicare, the federal government or any state government.

7. LONG-TERM CARE COVERAGE. Policies of this category are designed to provide coverage for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services, provided in a setting other than an acute care unit of a hospital, such as in a nursing home, in the community or in the home.

This policy provides coverage in the form of a fixed dollar indemnity benefit for covered long-term care expenses, subject to policy [limitations] [waiting periods] and [coinsurance] requirements. [Modify this paragraph if the policy is not an indemnity policy.]

8. BENEFITS PROVIDED BY THIS POLICY.

(a) [Covered services, related deductible(s), waiting periods, elimination periods and benefit maximums.]

(b) [Institutional benefits, by skill level.]

(c) [Non-institutional benefits, by skill level.]

(d) Eligibility for Payment of Benefits

[Activities of daily living and cognitive impairment shall be used to measure an insured's need for long-term care and must be defined and described as part of the outline of coverage.]

[Any additional benefit triggers must be explained. If these triggers differ for different benefits, explanation of the triggers should accompany each benefit description. If an attending physician or other specified person must certify a certain level of functional dependency in order to be eligible for benefits, this too must be specified.]

9. LIMITATIONS AND EXCLUSIONS.

[Describe:

(a) Preexisting conditions;

(b) Non-eligible facilities and provider;

(c) Non-eligible levels of care (e.g., unlicensed providers, care or treatment provided by a family member, etc.);

(d) Exclusions and exceptions;

(e) Limitations.]

[This section should provide a brief specific description of any policy provisions which limit, exclude, restrict, reduce, delay, or in any other manner operate to qualify payment of the benefits described in (7) above.]

THIS POLICY MAY NOT COVER ALL THE EXPENSES ASSOCIATED WITH YOUR LONG-TERM CARE NEEDS.

10. RELATIONSHIP OF COST OF CARE AND BENEFITS. Because the costs of long-term care services will likely increase over time, you should consider whether and how the benefits of this plan may be adjusted. [As applicable, indicate the following:

(a) That the benefit level will not increase over time;

(b) Any automatic benefit adjustment provisions;

(c) Whether the insured will be guaranteed the option to buy additional benefits and the basis upon which benefits will be increased over time if not by a specified amount or percentage;

(d) If there is such a guarantee, include whether additional underwriting or health screening will be required, the frequency and amounts of the upgrade options, and any significant restrictions or limitations;

(e) And finally, describe whether there will be any additional premium charge imposed, and how that is to be calculated.]

11. ALZHEIMER'S DISEASE AND OTHER ORGANIC BRAIN DISORDERS.

[State that the policy provides coverage for insureds clinically diagnosed as having Alzheimer's disease or related degenerative and dementing illnesses. Specifically describe each benefit screen or other policy provision which provides preconditions to the availability of policy benefits for such an insured.]

12. PREMIUM.

[(a) State the total annual premium for the policy;

(b) If the premium varies with an applicant's choice among benefit options, indicate the portion of annual premium which corresponds to each benefit option.]

13. ADDITIONAL FEATURES.

[(a) Indicate if medical underwriting is used;

(b) Describe other important features.]

027 Requirement to Deliver Shopper's Guide

027.01. A long-term care insurance shopper's guide in the format developed by the National Association of Insurance Commissioners, or a guide developed or approved by the Director, shall be provided to all prospective applicants of a long-term care insurance policy or certificate.

027.01(A). In the case of agent solicitations, an agent must deliver the shopper's guide prior to the presentation of an application or enrollment form.

027.01(B). In the case of direct response solicitations, the shopper's guide must be presented in conjunction with any application or enrollment form.

027.02. Life insurance policies or riders containing accelerated long-term care benefits are not required to furnish the above-referenced guide, but shall furnish a policy summary required under Neb. Rev. Stat. §44-4512 through §44-4517.

028 Penalties. In addition to any other penalties provided by the laws of this state any insurer and any agent found to have violated any requirement of this state relating to the regulation of long-term care insurance or the marketing of such insurance shall be subject to a fine of up to three (3) times the amount of any commissions paid for each policy involved in the violation or up to $ 10,000, whichever is greater.

029 Severability. If any section or portion of a section of this Regulation, or the applicability thereof to any person or circumstance, is held invalid by a court, the remainder of this regulation, or the applicability of such provision to other persons, shall not be affected thereby.

030. Effective Date. The operative date of this regulation is October 1, 2000.

This regulation shall apply to all long-term care insurance policies and certificates delivered or issued for delivery in this state by an insurer on or after October l, 2001.

History

• Effective 2000-09-25

Chapter 47 Group Self-Insurance Rule Implementing the Intergovernmental Risk Management Act

Neb. Admin. Code tit. 210, ch. 47 Group Self-Insurance Rule Implementing the Intergovernmental Risk Management Act {#sec-210-nac-47 omnilex-key=us-ne-regs-official--title-210--210 NAC 47}

001. Authority . This rule is adopted under Neb.Rev.Stat. §§ 44-4308 and 44-4314.

002. Purpose . The purpose of this rule is to adopt procedures to carry out the provisions of the Intergovernmental Risk Management Act.

003. Definitions .

003.01 For the purposes of this rule, in addition to the definitions in Neb.Rev.Stat. § 44-4303 and in Neb.Rev.Stat. § 44-103.

003.02 Administrator means an individual, partnership, corporation, unincorporated association, limited liability company, or other entity, engaged by a risk management pool to provide services in connection with the management or operation of the pool.

003.03 Dividend means a share of earned surplus allocated to each member participating in the pool.

003.04 Hazardous to the public shall mean that, based on its present or reasonably anticipated financial condition, a group self-insurance pool, although it may not yet be financially impaired or insolvent, is unlikely to be able to (a) meet obligations to policyholders with respect to known claims and reasonably anticipated claims or (b) pay other obligations in the normal course of business.

003.05 Qualified Actuary shall mean a person:

003.05A(1) Who provides services to a pool described in Neb.Rev.Stat. § 44-4304(1), is a fellow or associate of the Casualty Actuarial Society, a member of the American Academy of Actuaries and independent of the insurance company electing to discount its reserves; or

003.05A(2) Who provides services to a pool described in Neb.Rev.Stat. § 44-4304(2), is a fellow or associate of the Society of Actuaries, a member of the American Academy of Actuaries, independent of the pool and its members, and independent of any insurance company electing to discount its reserves, and independent of any reinsurance company contracted with the pool; or

003.05B Who meets all the following requirements:

003.05B(1) Has demonstrated to the director that he or she is possessed of the educational background and experience necessary for the practice of actuarial science;

003.05B(2) Is independent of the insurance company electing to discount its reserves, the pool and its members, and any reinsurance company contracted with the pool; and

003.05B(3) Has the prior written approval of the director to sign claim or loss reserve opinions required by this rule.

003.10 Service company means a person or entity which provides services not provided by the administrator, including (a) claims adjustment, (b) loss control - safety management, (c) compilation of statistics and the preparation of premium and loss reports, (d) preparation of other required self-insurance reports, (e) development of members' assessments and fees, and (f) administration of a claim fund.

003.11 Surplus shall mean the amount obtained by subtracting, from the admitted assets, actual liabilities, including any reserves which by law must be maintained.

004. Application for certificate of authority . A risk management pool organized pursuant to the Intergovernmental Risk Management Act may apply to the director for a certificate of authority to provide group self-insurance to its members. The application shall include the pool's name, location of its principal office, date of organization, and the name and address of each member. The following information shall be submitted with the application, and shall specify the types of coverage involved, where applicable:

004.01 A copy of the agreement entered into for the purpose of establishing and operating a risk management pool as required by Neb.Rev.Stat. § 44-4306;

004.02 A copy of the pool's articles of incorporation, articles of association or by-laws;

004.03 Disclosure of the lines of insurance coverage to be provided as specified under Neb.Rev.Stat. § 44-4304;

004.04 Pro forma financial statements and projections for at least the first 5 years of operation;

004.05 Historical and expected loss experience of the proposed members to the extent reasonably available;

004.06 Appropriate actuarial opinions by a qualified, independent actuary, including a determination of minimum premium or participation levels required to begin operations and to prevent the pool from being hazardous to the public;

004.07 A copy of the agreement with any administrator or service company and biographical information on such individuals or if an entity, the individuals providing the services for such entity;

004.08 Address in Nebraska where books and records of the pool will be maintained at all times;

004.09 Disclosure of proposed standard insurance, excess insurance, excess stop-loss reinsurance arrangements, and reinsurance arrangements and a copy of such agreements as they become available;

004.10 Disclosure of member contribution levels and the criteria used to determine the contribution levels;

004.11 A copy of any insuring agreements, forms, and certificates of insurance coverage to be issued by the pool to each member of the pool;

004.12 Disclosure of the extent to which initial pool funding will be raised through the issuance of bonds; and

004.13 Such other information as the director may reasonably require.

005. Reserves . A risk management pool shall maintain the same reserves as required of a Nebraska domestic insurance company offering the same coverage as the group insurance offered by a pool to its members, except that a pool may discount loss reserves if the pool's annual statement is accompanied by a certified statement of opinion by a qualified actuary which accurately reflects the effect of discounting of claim or loss reserves on the pool's financial condition. In the event a pool discounts its claim or loss reserves, the certified actuarial opinion defined in this section shall include the following:

005.01 An assessment of the adequacy of the undiscounted reserves;

005.02 An assessment of the appropriateness of the assumed interest rate, considering at least the following:

005.02A Valuation basis of bonds;

005.02B Yield on assets; and

005.02C The match of asset maturities to corresponding liabilities.

005.03 An assessment of the appropriateness of the liabilities to surplus ratio of the company;

005.04 An assessment of the appropriateness of the anticipated payment schedule, considering at least the following:

005.04A The pool's own paid claim or loss development history to the extent relevant and credible;

005.04B To the extent that such history is not relevant or credible, the experience of other insurers after allowance for any differences in form of coverage, nature of risks insured, limits written or retention levels after excess stop-loss reinsurance or reinsurance; and

005.04C Timing of excess stop-loss reinsurance or reinsurance recoverables and, if applicable, any additional excess stop-loss reinsurance or reinsurance premiums that may become due.

005.05 A description of the formulas used for discounting, including any provision for adverse deviation;

005.06 An assessment of the appropriateness of the claim or loss reserve to surplus ratio of the pool;

005.07 For a pool described in Neb. Rev. Stat. § 44-4304(1), an evaluation of any additional reinsurance premiums which may be due if loss development covered under retrospectively rated reinsurance proves adverse; and

005.08 Any other factors needed to accurately reflect the effect of discounting on the financial condition of the pool or as required by the director.

006. Dividends . A pool may not distribute dividends to its members until it has received approval by the director. A pool may not declare or pay any dividends except from earned surplus, ascertained in accordance with statutory insurance accounting principles. The application for approval to distribute dividends shall specify the date established for payment of the dividend; a statement as to whether the dividend is to be in cash or property, and if in property, how valuation was determined; the dates and amounts of all previous dividends; financial statements as of the month preceding the application; a brief statement as to the effect of the proposed dividend upon the pool's reserves and the reasonableness of surplus in relation to the pool's outstanding liabilities; and, the adequacy of the surplus relative to the pool's financial needs.

007. Surplus . A pool shall maintain adequate surplus and reserves and receive adequate financial contributions from its members to operate in a manner which is not hazardous to the public.

008. Investments . The surplus and other funds, of a pool shall be invested as authorized by Nebraska domestic insurance companies offering the same coverage as the group insurance offered by the pool to its members.

009. Notice to Department .

009.01 A pool shall notify the Department 30 days in advance of any assessments to cure a deficiency and of any changes in:

009.01A Contribution levels;

009.01B Coverages offered by the pool;

009.01C Administrator or service company, and any material change in such agreements with the administrator or service company;

009.01D The pool's articles of incorporation, articles of association and by-laws;

009.01E Any amendments to the agreement establishing in the pool;

009.01F Standard insurance, excess insurance, excess stop-loss insurance, excess stop-loss reinsurance agreements, and reinsurance agreements; or

009.01G The extent to which pool funding will be raised through the issuance of bonds.

009.02 The notification shall be accompanied by a statement explaining the effect of such change on the pool and its ability to operate in a manner which is not hazardous to the public. A copy of any amended documents shall be provided and accompanied by appropriate supporting opinions and information to the extent necessary and reasonably available.

009.03 The changes shall become effective 30 days after submitted to the Department unless disapproved by the director. The director shall disapprove any such notified change if the director determines the pool will not:

009.03A Have adequate surplus and reserves and receive adequate financial contributions from its members to operate in a manner which is not hazardous to the public; or

009.03B Satisfy the requirements of Nebraska law, this chapter, the agreement establishing the pool, or the pool's by-laws.

010. Workers' compensation . A pool providing group self-insurance for Worker's Compensation coverage shall comply with the rules and regulations of the Nebraska Workers' Compensation Court.

011. Claims . A pool shall act upon claims in accordance with the guidelines for domestic insurance companies.

012. Annual report of affairs and examinations .

012.01 The report required under Neb. Rev. Stat. § 44-4310 shall show all contributions received by the pool for membership in the pool during the previous calendar year. Such annual statements shall use insurance statutory accounting principles and shall include an actuarial or loss reserve specialist opinion on claim or loss reserves and loss adjusting expense reserves.

012.02 A pool discounting claim or loss reserves shall disclose the discounting of claim or loss reserves in its annual and other financial statements in a manner which will accurately reflect the effect of discounting of claim or loss reserves on the pool's financial condition.

012.03 The reasonable expenses for examination of the business affairs, records, and assets of each pool conducted by the Department pursuant to Neb. Rev. Stat. § 44-4310(2) shall be determined by the director. Each pool shall be responsible for the payment of the determined expenses to the director within a reasonable time after the receipt of the statement for such expenses. The expenses shall be limited to a reasonable allocation for the salary of each examiner plus actual expenses.

013. Payment to director; computation .

013.01 On or before March 1 of each year, every risk management pool shall pay to the director the amounts required pursuant to Neb. Rev. Stat. § 44-4320 and § 48-162.02.

013.01A A pool which has a scheme of operations that contemplates a return of a portion of the contributions of pool members without such members being claimants under the pool's insuring agreements may deduct such return contributions from the pool's contributions for the purpose of calculating the payment due to the director under Neb. Rev. Stat. § 44-4320 and § 48-162.02.

013.01B A pool which has a scheme of operations that includes the purchase of standard insurance subject to premium tax under Neb. Rev. Stat. § 77-908 or § 44-5506 may deduct the cost of such insurance from the pool's contributions for the purpose of calculating the payment due to the director under Neb. Rev. Stat. § 44-4320 and § 48-162.02.

014. Termination of membership in the pool .

014.01 Within 30 days after receiving notice of a member’s voluntary termination of participation under Neb. Rev. Stat. § 44-4309(1), the pool's governing board shall submit a written report to the Department which:

014.01A discloses whether the terminating member and remaining members of the pool have paid all contributions and assessments due the pool, have discharged all other obligations owed to the pool, and have complied with the laws of Nebraska, this rule, and the by-laws of the pool; and

014.01B projects the effect on the pool due to the member's withdrawal from the pool.

014.02 A member of the pool may be involuntarily terminated from the pool as provided for in Neb. Rev. Stat. § 44-4309(2).

015. Voluntary dissolution of the pool .

015.01 A pool shall not voluntarily dissolve or cease to function unless the governing board obtains the approval of the director and obtains the approval of the pool's members in accordance with the agreement establishing the pool and the pool's by-laws, which shall require a two-thirds majority vote. The governing board may submit a written application seeking the director’s approval to voluntarily dissolve, at least 90 days in advance of the proposed dissolution date, setting forth the following:

015.01A Desired date of pool's dissolution;

015.01B Resolution of the governing board to terminate the pool and seeking the director’s approval of such termination; and

015.01C A plan of dissolution adopted by the governing board which describes the pool's arrangements for satisfying its obligations, including the insurance or reinsurance of its obligations with insurers under appropriate agreements approved by the director, or such alternative arrangements which provide for the payment of all claims, liabilities and debts such as a contingency or trust fund for future claims and obligations. Such obligations shall include both known claims and associated expenses and claims incurred but not reported and associated expenses. The plan shall provide for the distribution of any assets remaining after payment of claims, liabilities and debts and the return of any unearned premium contributions. The return of surplus contributions must be based on an equitable formula.

015.02 The director shall, within 30 days from the date the application for voluntary dissolution was submitted to the Department, issue a written determination regarding the application to voluntarily dissolve, and if approved, the pool shall proceed by placing the matter before the pool members for a vote within 30 days after the approval of the director.

015.03 The governing board of the pool shall certify the results of the vote to the Department and proceed accordingly.

History

• Effective 2022-11-19

Chapter 50 Rules Concerning the Advertising of Life Insurance and Annuities

Neb. Admin. Code tit. 210, ch. 50 Rules Concerning the Advertising of Life Insurance and Annuities {#sec-210-nac-50 omnilex-key=us-ne-regs-official--title-210--210 NAC 50}

001. Authority . This rule is promulgated pursuant to the authority granted in NEB. REV. STAT. §§ 44-101.01 and 44-1533.

002. Purpose . The purpose of these rules is to set forth minimum standards and guidelines to assure a full and truthful disclosure to the public of all material and relevant information in the advertising of life insurance policies and annuity contracts.

003. Definitions . For the purpose of these rules:

003.01 "Advertisement" shall be material designed to create public interest in life insurance or annuities or in an insurer, or in an insurance producer; or to induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace, or retain a policy including:

003.01A printed and published material, audiovisual material, and descriptive literature of an insurer or producer used in direct mail, newspapers, magazines, telephone, radio and television scripts, telemarketing scripts, billboards and similar displays, and the Internet or any other mass communication media;

003.01B descriptive literature and sales aids of all kinds, authored by the insurer, its producers, or third parties, issued, distributed or used by such insurer or producer; including but not limited to circulars, leaflets, booklets, web pages, depictions, illustrations and form letters;

003.01C material used for the recruitment, training, and education of an insurer's insurance producers which is designed to be used or is used to induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace or retain a policy; and

003.01D prepared sales talks, presentations and material for use by insurance agents or brokers.

003.02 "Advertisement" for the purpose of these rules shall not include:

003.02A communications or materials used within an insurer's own organization and not intended for dissemination to the public;

003.02B communications with policyholders other than material urging policyholders to purchase, increase, modify, reinstate or retain a policy; and

003.02C a general announcement from a group or blanket policyholder to eligible individuals on an employment or membership list that a policy or program has been written or arranged; provided the announcement clearly indicates that it is preliminary to the issuance of a booklet explaining the proposed coverage.

003.03 “Determinable policy elements” means elements that are derived from processes or methods that are guaranteed at issue and not subject to company discretion, but where the values or amounts cannot be determined until some point after issue. These elements include the premiums, credited interest rates (including any bonus), benefits, values, non-interest based credits, charges or elements of formulas used to determine any of these. These elements may be described as guaranteed but not determined at issue. An element is considered determinable if it was calculated from underlying determinable policy elements only, or from both determinable and guaranteed policy elements.

003.04 “Guaranteed policy elements” means the premiums, benefits, values, credits or charges under a policy, or elements of formulas used to determine any of these that are guaranteed and determined at issue.

003.05 “Insurance producer” means a person required to be licensed under the laws of this state to sell, solicit or negotiate insurance.

003.06 “Insurer” shall include any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyd's, fraternal benefit society, and any other legal entity which is defined as an "insurer" in the insurance laws of this State or issues life insurance or annuities in this State and is engaged in the advertisement of a policy.

003.07 “Nonguaranteed elements” means the premiums, credited interest rates (including any bonus), benefits, values, non-interest based credits, charges or elements of formulas used to determine any of these, that are subject to company discretion and are not guaranteed at issue. An element is considered nonguaranteed if any of the underlying nonguaranteed elements are used in its calculation.

003.08 “Policy” shall include any policy, plan, certificate, including a fraternal benefit certificate, contract, agreement, statement of coverage, rider or endorsement which provides for life insurance or annuity benefits.

003.09 “Preneed Funeral Contract or Prearrangement” shall mean an agreement by or for an individual before the individual’s death relating to the purchase or provision of specific funeral or cemetery merchandise or services.

004. Applicability .

004.01 These rules shall apply to any life insurance or annuity advertisement intended for dissemination in this State. In variable contracts where disclosure requirements are established pursuant to federal regulation, this regulation shall be interpreted so as to eliminate conflict with federal regulation.

004.02 All advertisements, regardless of by whom written, created, designed or presented, shall be the responsibility of the insurer, as well as the producer who created or presented the advertisement. Insurers shall establish and at all times maintain a system of control over the content, form and method of dissemination of all advertisements of its policies. A system of control shall include regular and routine notification, at least once a year, to insurance producers and others authorized by the insurer to disseminate advertisements of the requirement and procedures for company approval prior to the use of any advertisements that is not furnished by the insurer and that clearly sets forth within the notice the most serious consequence of not obtaining the required prior approval.

005. Form and content of advertisements .

005.01 Advertisements shall be truthful and not misleading in fact or by implication. The form and content of an advertisement of a policy shall be sufficiently complete and clear so as to avoid deception. It shall not have the capacity or tendency to mislead or deceive.

Whether an advertisement has the capacity or tendency to mislead or deceive shall be determined by the Director of Insurance from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence within the segment of the public to which it is directed.

005.02 No advertisement shall use the terms "investment," "investment plan," "founder's plan," "charter plan," "deposit," "expansion plan," "profit," "profits," "profit sharing," "interest plan," "savings," "savings plan," "private pension plan," "retirement plan," or other similar terms in connection with a policy in a context or under such circumstances or conditions as to have the capacity or tendency to mislead a purchaser or prospective purchaser of such policy to believe that he will receive, or that it is possible that he will receive, something other than a policy or some benefit not available to other persons of the same class and equal expectation of life.

006. Disclosure requirements .

006.01 The information required to be disclosed by these rules shall not be minimized, rendered obscure, or presented in an ambiguous fashion or intermingled with the text of the advertisement so as to be confusing or misleading.

006.02 No advertisement shall omit material information or use words, phrases, statements, references or illustrations if such omission or such use has the capacity, tendency or effect of misleading or deceiving purchasers or prospective purchasers as to the nature or extent or any policy benefit payable, loss covered, premium payable, or State or federal tax consequences. The fact that the policy offered is made available to a prospective insured for inspection prior to consummation of the sale, or an offer is made to refund the premium if the purchaser is not satisfied, or that the policy or contract includes a “free look” period that satisfies or exceeds regulatory requirements, does not remedy misleading statements.

006.03 In the event an advertisement uses "Non-Medical," "No Medical Examination Required," or similar terms where issue is not guaranteed, such terms shall be accompanied by a further disclosure of equal prominence and in juxtaposition thereto to the effect that issuance of the policy may depend upon the answers to the health questions set forth in the application.

006.04 An advertisement shall not use as the name or title of a life insurance policy any phrase which does not include the words "life insurance" unless accompanied by other language clearly indicating it is life insurance. An advertisement shall not use as the name or title of an annuity contract any phrase that does not include the word "annuity" unless accompanied by other language clearly indicating it is an annuity. An annuity advertisement shall not refer to an annuity as a CD annuity, or deceptively compare an annuity to a certificate of deposit.

006.05 An advertisement shall prominently describe the type of policy advertised.

006.06 An advertisement of an insurance policy marketed by direct response techniques shall not state or imply that because there is no insurance producer or commission involved there will be a cost saving to prospective purchasers unless such is the fact. No cost savings may be stated or implied without justification satisfactory to the director prior to use.

006.07 An advertisement for a life policy containing graded or modified benefits shall prominently display any limitation of benefits. If the premium is level and coverage decreases or increases with age or duration, such fact shall be prominently disclosed. An advertisement of or for a life insurance policy under which the death benefit varies with the length of time the policy has been in force shall accurately describe and clearly call attention to the amount of minimum death benefit under the policy.

006.08 An advertisement for the types of policies described in Sections 006.06 and 006.07 shall not use the words "inexpensive," "low cost," or other phrase or words of similar import when the policies being marketed are guaranteed issue.

006.09 Premiums;

006.09A an advertisement for a policy with non-level premiums shall prominently describe the premium changes,

006.09B an advertisement in which the insurer describes a policy where it reserves the right to change the amount of the premium during the policy term, but which does not prominently describe this feature, is deemed to be deceptive and misleading and is prohibited,

006.09C an advertisement shall not contain a statement or representation that premiums paid for a life insurance policy can be withdrawn under the terms of the policy. Reference may be made to amounts paid into an advance premium fund, which are intended to pay premiums at a future time, to the effect that they may be withdrawn under the conditions of the prepayment agreement. Reference may also be made to withdrawal rights under any unconditional premium refund offer,

006.09D an advertisement which represents a pure endowment benefit as a "profit" or "return" on the premium paid rather than as a policy benefit for which a specified premium is paid is deemed to be deceptive and misleading and is prohibited,

006.09E an advertisement shall not represent in any way that premium payments will not be required for each year of the policy in order to maintain the illustrated death benefits, unless that is the fact, and

006.09F an advertisement shall not use the term "vanish" or "vanishing premium," or a similar term that implies the policy becomes paid up, to describe a plan using nonguaranteed elements to pay a portion of future premiums.

006.10 Analogies between a life insurance policy or annuity contract’s cash value and savings account or other investments and between premium payments and contributions to savings accounts or other investments must be complete and accurate. An advertisement shall not emphasize the investment or tax features of a life insurance policy to such a degree that the advertisement would mislead the purchaser to believe the policy is anything other than life insurance.

006.11 An advertisement shall not state or imply in any way that interest charged on a policy loan or the reduction of death benefits by the amount of outstanding policy loans is unfair, inequitable, or in any manner an incorrect or improper practice.

006.12 If nonforfeiture values are shown in any advertisement, the values must be shown either for the entire amount of the basic life policy death benefit or for each $1,000 of initial death benefit.

006.13 The words "free," "no cost," "without cost," "no additional cost," "at no extra cost," or words of similar import shall not be used with respect to any benefit or service being made available with a policy unless true. If there is no charge to the insured, then the identity of the payor must be prominently disclosed. An advertisement may specify the charge for a benefit or a service or may state that a charge is included in the premium or use other appropriate language.

006.14 No insurance producers may use terms such as "financial planner," "investment advisor," "financial consultant," "financial counseling" or other similar terms in such a way as to imply that he or she is generally engaged in an advisory business in which compensation is unrelated to sales unless such actually is the case. This provision is not intended to preclude persons who hold some form of formal recognized financial planning or consultant designation from using this designation even when they are only selling insurance. This provision also is not intended to preclude persons who are members of a recognized trade or professional association having such terms as part of its name from citing membership, providing that a person citing membership, if authorized only to sell insurance products, shall disclose that fact. This provision does not permit persons to charge an additional fee for services that are customarily associated with the solicitation, negotiation or servicing of policies.

006.15 Nonguaranteed policy elements;

006.15A an advertisement shall not utilize or describe nonguaranteed policy elements in a manner which is misleading or has the capacity or tendency to mislead,

006.15B an advertisement shall not state or imply that the payment or amount of a nonguaranteed policy element is guaranteed. Unless otherwise specified in 210 NEB. ADMIN. R. & REG. 72, if nonguaranteed policy elements are illustrated, they must be based on the insurer's current scale and the illustration must contain a statement to the effect that they are not to be construed as guarantees or estimates of amounts to be paid in the future,

006.15C an advertisement shall not use or describe determinable policy elements in a manner that is misleading or has the capacity or tendency to mislead,

006.15D an advertisement may describe determinable policy elements as guaranteed but not determinable at issue. This description should include an explanation of how these elements operate, and their limitations, if any,

006.15E an advertisement that includes any illustrations or statements containing or based upon nonguaranteed elements shall set forth with equal prominence comparable illustrations or statements containing or based upon the guaranteed elements,

006.15F if an advertisement refers to any nonguaranteed policy element, it shall indicate that the insurer reserves the right to change any such element at any time and for any reason. However, if an insurer has agreed to limit this right in any way; such as, for example, if it has agreed to change these elements only at certain intervals or only if there is a change in the insurer's current or anticipated experience, the advertisement may indicate any such limitation on the insurer's right,

006.15G an advertisement shall not refer to dividends as "tax free"or use words of similar import, unless the tax treatment of dividends is fully explained and the nature of the dividend as a return of premium is indicated clearly, and

006.15H an advertisement may not state or imply that illustrated dividends under either or both a participating policy or pure endowment will be or can be sufficient at any future time to assure without the future payment of premiums, the receipt of benefits, such as a paid-up policy, unless the advertisement clearly and precisely explains the benefits or coverage provided at that time and the conditions required for that to occur.

006.16 An advertisement shall not state that a purchaser of a policy will share in or receive a stated percentage or portion of the earnings on the general account assets of the company.

006.17 Testimonials, appraisals, analysis, or endorsements by third parties;

006.17A testimonials, appraisals or analysis used in advertisements must be genuine; represent the current opinion of the author; be applicable to the policy advertised, if any; and be accurately reproduced with sufficient completeness to avoid misleading or deceiving prospective insureds as to the nature or scope of the testimonial, appraisal, analysis or endorsement. In using testimonials, appraisals or analysis, the insurer or insurance producer makes as its own all of the statements contained therein, and such statements are subject to all the provisions of these rules,

006.17B if the individual making a testimonial, appraisal, analysis or an endorsement has a financial interest in the insurer or a related entity as a stockholder, director, officer, employee or otherwise, or receives any benefit directly or indirectly other than required union scale wages, such fact shall be prominently disclosed in the advertisement,

006.17C an advertisement shall not state or imply that an insurer or a policy has been approved or endorsed by a group of individuals, society, association or other organization unless such is the fact and unless any proprietary relationship between an organization and the insurer is disclosed. If the entity making the endorsement or testimonial is owned, controlled or managed by the insurer, or receives any payment or other consideration from the insurer for making such endorsement or testimonial such fact shall be disclosed in the advertisement, and

006.17D when an endorsement refers to benefits received under a policy for a specific claim, the claim date, including claim number, date of loss and other pertinent information shall be retained by the insurer for inspection for a period of five (5) years after the discontinuance of its use or publication.

006.18 An advertisement shall not contain statistical information relating to any insurer or policy unless it accurately reflects recent and relevant facts. The source of any such statistics used in an advertisement shall be identified therein.

006.19 Policies sold to students;

006.19A the envelope in which insurance solicitation material is contained may be addressed to the parents of students. The address may not include any combination or words which imply that the correspondence is from a school, college, university or other education or training institution nor may it imply that the institution has endorsed the material or supplied the insurer with information about the student unless such is a correct and truthful statement,

006.19B all advertisements, including but not limited to informational flyers, used in the solicitation of insurance must be identified clearly as coming from an insurer or insurance producer, if such is the case, and these entities must be clearly identified as such, and

006.19C the return address on the envelope may not imply that the soliciting insurer or insurance producer is affiliated with a university, college, school or other educational or training institution, unless true.

006.20 Introductory, initial or special offers and enrollment periods;

006.20A an advertisement of an individual policy or combination of such policies shall not state or imply that such policy or combination of such policies is an introductory, initial or special offer, or that applicants will receive substantial advantages not available at a later date, or that the offer is available only to a specified group or individuals, unless such is the fact. An advertisement shall not describe an enrollment period as "special" or "limited" or use similar words or phrases in describing it when the insurer uses successive enrollment period as its usual method of marketing its policies;

006.20B an advertisement shall not state or imply that only a specific number of policies will be sold, or that a time is fixed for the discontinuance of the sale of the particular policy advertised because of special advantages available in the policy;

006.20C an advertisement shall not offer a policy which utilizes a reduced initial premium rate in a manner which overemphasizes the availability and the amount of the reduced initial premium. A reduced initial or first year premium may not be described as constituting free insurance for a period of time. When an insurer charges an initial premium that differs in amount from the amount of the renewal premium payable on the same mode, all references to the reduced initial premium shall be followed by an asterisk or other appropriate symbol which refers the reader to that specific portion of the advertisement which contains the full rate schedule for the policy being advertised; and

006.20D an enrollment period during which a particular insurance policy may be purchased on an individual basis shall not be offered within this State unless there has been a lapse of not less than five months between the close of the immediately preceding enrollment period for the same policy and the opening of the new enrollment period. The advertisement shall specify the date by which the applicant must mail the application, which shall be not less than ten days and not more than forty days from the date on which such enrollment period is advertised for the first time. This Subsection applies to all advertising by any one insurer or insurance producer. The phrase "any one insurer" includes all the affiliate companies of a group of insurance companies under common management or control. This Subsection does not apply to the use of a termination or cutoff date beyond which an individual application for a guaranteed issue policy will not be accepted by an insurer in those instances where the application has been sent to the applicant in response to his request. It is also inapplicable to solicitations of employees or members of a particular group or association which otherwise would be eligible under specified provisions of the insurance laws for group, blanket or franchise insurance. In cases where an insurance product is marketed on a direct mail basis to prospective insureds by reason of some common relationship with a sponsoring organization, this rule shall be applied separately to each sponsoring organization.

006.21 An advertisement of a particular policy shall not state or imply that prospective insureds shall be or become members of a special class, group, or quasi-group and as such enjoy special rates, dividends or underwriting privileges, unless such is the fact.

006.22 An advertisement shall not make unfair or incomplete comparisons or policies, benefits, dividends or rates of other insurers. An advertisement shall not disparage other insurers, insurance producers, policies, services or methods of marketing.

006.23 For individual deferred annuity products or deposit funds, the following shall apply:

006.23A any illustrations or statements containing or based upon nonguaranteed interest rates shall likewise set forth with equal prominence comparable illustrations or statements containing or based upon the guaranteed accumulation interest rates. The nonguaranteed interest rate shall not be greater than those currently being credited by the company unless the nonguaranteed rates have been publicly declared by the company with an effective date for new issues not more than three months subsequent to the date of declaration;

006.23B if an advertisement states the net premium accumulation interest rate, whether guaranteed or not, it shall also disclose in close proximity thereto and with equal prominence, the actual relationship between the gross and the net premiums;

006.23C if any contract does not provide a cash surrender benefit prior to commencement of payment of any annuity benefits, any illustrations or statements concerning such contract shall prominently state that cash surrender benefits are not provided; and

006.23D Any illustrations, depictions or statements containing or based on determinable policy elements shall likewise set forth with equal prominence comparable illustrations, depictions or statements containing or based on guaranteed policy elements.

006.24 An advertisement of or for a life insurance policy or annuity that illustrates nonguaranteed values shall only do so in accordance with current applicable state law relative to illustrating such values for life insurance policies and annuity contracts.

006.25 An advertisement for the solicitation or sale of a preneed funeral contract or prearrangement as defined in Subsection 003.06 above which is funded or to be funded by a life insurance policy or annuity contract shall adequately disclose the following:

006.25A the fact that a life insurance policy or annuity contract is involved or being used to fund a prearrangement as defined in Section 003.06 of these rules;

006.25B the nature of the relationship among the soliciting agent or agents, the provider of the funeral or cemetery merchandise or services, the administrator and any other person.

007. Identity of insurer .

007.01 The name of the insurer shall be clearly identified in all advertisements about the insurer or its products, and if any specific individual policy is advertised it shall be identified either by form number or other appropriate description. If an application is a part of the advertisement, the name of the insurer shall be shown on the application. However, if an advertisement contains a listing of rates or features that is a composite of several different policies or contracts of different insurers, the advertisement shall so state, shall indicate, if applicable, that not all policies or contracts on which the composite is based may be available in all states, and shall provide a rating of the lowest rated insurer and reference the rating agency, but need not identify each insurer. If an advertisement identifies the issuing insurers, insurance issuer ratings need not be stated.

007.02 An advertisement shall not use a trade name, an insurance group designation, name of the parent company of the insurer, name of a particular division of the insurer, a reinsurer of the insurer, service mark, slogan, symbol or other device or reference without disclosing the name of the insurer, if the advertisement would have the capacity or tendency to mislead or deceive as to the true identity of the insurer or create the impression that a company other than the insurer would have any responsibility for the financial obligation under a policy.

007.03 An advertisement shall not use any combination of words, symbols or physical materials that by their content, phraseology, shape, color or other characteristics are so similar to a combination of words, symbols or physical materials used by a governmental program or agency or otherwise appear to be of such a nature that they tend to mislead prospective insureds into believing that the solicitation is in some manner connected with a governmental program or agency.

008. Jurisdictional licensing and status of insurer .

008.01 An advertisement which is intended to be seen or heard beyond the limits of the jurisdiction in which the insurer is licensed shall not imply licensing beyond such limits.

008.02 An advertisement may state that an insurer or insurance producer is licensed in the state where the advertisement appears, provided it does not exaggerate such fact or suggest or imply that competing insurers or insurance agents or brokers may not be so licensed.

008.03 An advertisement shall not create the impression that the insurer, its financial condition or status, the payment of its claims or the merits, desirability, or advisability or its policy forms or kinds of plans of insurance are recommended or endorsed by any governmental entity. However, where a governmental entity has recommended or endorsed a policy form or plan, such fact may be stated if the entity authorizes its recommendations or endorsement to be used in an advertisement.

009. Statements about the insurer . An advertisement shall not contain statements, pictures or illustrations which are false or misleading, in fact or by implication, with respect to the assets, liabilities, insurance in force, corporate structure, financial condition, age or relative position of the insurer in the insurance business. An advertisement shall not contain a recommendation by any commercial rating system unless it clearly defines the scope and extent of the recommendation including, but not limited to, the placement of the insurer's rating in the hierarchy of the rating system cited.

010. Enforcement procedures .

010.01 Each insurer shall maintain at its home or principal office a complete file containing a specimen copy of every printed, published or prepared advertisement of its individual policies and specimen copies of typical printed, published or prepared advertisements of its blanket, franchise and group policies, hereafter disseminated in this State, with a notation indicating the manner and extent of distribution and the form number of any policy advertised. Such file shall be subject to inspection by this Department. All advertisements shall be maintained in the file for a period of five (5) years after discontinuance of its use of publication.

010.02 If the Director determines that an advertisement has the capacity or tendency to mislead or deceive the public, the Director may require an insurer or insurance producer to submit all or any part of the advertising material for review or approval prior to use.

011. Penalties . Any insurer or any of its officers, directors, insurance producers or employees thereof which, or who, violate any of the provisions of this regulation, or knowingly participate in or abet such violation, shall be subject to a monetary penalty and/or cease and desist order, suspension or revocation of their certificate of authority or license pursuant to NEB. REV. STAT. § 44-1529.

012. Conflict with other rules . It is not intended that these rules conflict with or supersede any rules currently in force or subsequently adopted in this State governing specific aspects of the sale or replacement or life insurance including, but not limited to, rules dealing with life insurance cost comparison indices, deceptive practices in the sale of life insurance, replacement or life insurance policies, illustrations of life insurance policies, and annuity disclosures. Consequently, no disclosure required under any such rules shall be deemed to be an advertisement within the meaning of these rules.

013. Severability . If any provision of this regulation is for any reason held to be invalid, the remainder of the regulation shall not be affected thereby.

014. Operative date . This rule shall become operative on October 1, 2008.

History

• Effective 2008-06-28

Chapter 52 Regulation to Require Reporting of Statistical Data and Market Availability Information by Property and Casualty Insurance Companies

Neb. Admin. Code tit. 210, ch. 52 Regulation to Require Reporting of Statistical Data and Market Availability Information by Property and Casualty Insurance Companies {#sec-210-nac-52 omnilex-key=us-ne-regs-official--title-210--210 NAC 52}

001. Authority . This rule is promulgated pursuant to the Property and Casualty Insurance Data Reporting Act, Neb.Rev.Stat. §§ 44-4601 through 44-4607.

002. Purpose . This rule sets forth the manner of reporting and the kinds of data that are to be included in market availability and statistical reports required or which may be required to be submitted by property and casualty insurance companies and their statistical agents. This rule shall not be interpreted to limit the powers granted the Director by any laws or parts of laws of this state.

003. Exceptions . This rule shall not apply to the following lines of insurance:

003.01 Life Insurance;

003.03 Variable Annuities;

003.04 Sickness and Accident Insurance;

003.05 Title Insurance;

003.06 Mortgage Guaranty Insurance;

003.07 Financial Guaranty Insurance;

003.08 Reinsurance;

003.09 Ocean Marine Insurance;

003.10 Aviation Insurance; and

003.11 To insurance written by assessment associations doing business under Article 8, Chapter 44, except for insurance on growing crops.

004. Definitions .

004.01 Accelerated Reports shall mean statistical information that provides data on a quarterly basis for the purpose of identifying emerging trends in the commercial liability lines of insurance.

004.02 Fast Track Reports shall mean information generated from the NAIC Fast Track Monitoring System that gives a sampling of significant data for property and casualty insurance on a quarterly basis by insurers comprising a major segment of the market for the lines of insurance indicated.

004.03 NAIC Statistical Handbook shall mean the publication of the National Association of Insurance Commissioners (NAIC) that explains insurance statistical data and details report formats to be furnished by statistical agents.

004.04 Participating Insurer shall mean an insurer licensed to transact the business of property and casualty insurance in this state which has a market share for a line or class of insurance greater than the amounts defined in Section 008 and is therefore required to report on either a quarterly or annual basis.

004.05 Statistical Plan shall mean a system for collecting and recording insurance premium, loss, exposure and expense information.

005. Powers and duties . The Director may enter into agreements with any qualified data collection service corporations, associations or other entities to undertake the compilation and analysis of data collected pursuant to this regulation.

006. Market availability surveys . Insurers shall respond to market availability surveys as may be issued by the Department from time to time. These surveys will require companies to indicate, for those lines and types of insurance listed in the survey, the degree to which an insurer is currently willing to write the coverages listed. Such surveys shall be completed and returned to the Department within 30 days of their issuance.

007. Statistical reporting . Every insurance company licensed to transact the business of property and casualty insurance in this state shall report its insurance statistical experience to at least one of the statistical agents designated by the Director. Such information shall, at a minimum, be in the form and detail outlined below and specified in statistical plans filed with the Director.

007.01 Annual Data Reporting: Insurers shall submit annual data meeting the following specifications to a statistical agent:

007.01A Data Elements: In accordance with statistical plans filed with the Director and subject to the exceptions noted in subsection 007.01B, annual data shall include the following elements:

007.01A(1) Premiums earned (Written premiums shall be reported when a statistical agent uses written premiums to calculate earned premiums.);

007.01A(2) Losses paid;

007.01A(3) Allocated loss adjustment expenses paid;

007.01A(4) Losses outstanding; and

007.01A(5) Allocated loss adjustment expenses outstanding.

007.01B Lines of Insurance: The following lines of insurance shall be included in annual data:

007.01B(1) Private Passenger Automobile Liability;

007.01B(2) Commercial Automobile Liability;

007.01B(3) Private Passenger Automobile Physical Damage (exceptions: outstanding losses; allocated loss adjustment expenses paid and outstanding);

007.01B(4) Commercial Automobile Physical Damage (exceptions: outstanding losses; allocated loss adjustment expenses paid and outstanding);

007.01B(5) Boiler and Machinery (exceptions: allocated loss adjustment expenses paid and outstanding);

007.01B(6) Burglary (exceptions: allocated loss adjustment expenses paid and outstanding);

007.01B(7) Fire and Extended Coverage (exceptions: allocated loss adjustment expenses paid and outstanding);

007.01B(8) Inland Marine (exceptions: allocated loss adjustment expenses paid and outstanding);

007.01B(9) Glass (exceptions: allocated loss adjustment expenses paid and outstanding);

007.01B(10) Commercial Multiple Peril (Losses may be split into their respective monoline components. The exceptions applying would then be those applying to the components. If losses are collected on an aggregated basis subject to a minimum statistical plan, then allocated loss adjustment expenses paid and outstanding may be excepted);

007.01B(11) Insurance on Growing Crops (only premiums earned and losses paid or incurred need be recorded);

007.01B(12) Farmowners (exceptions: allocated loss adjustment expenses paid and outstanding);

007.01B(13) Homeowners (exceptions: allocated loss adjustment expenses paid and outstanding);

007.01B(14) Fidelity and Surety (exceptions: allocated loss adjustment expenses paid and outstanding);

007.01B(15) General Liability;

007.01B(16) Medical Professional Liability;

007.01B(17) Products Liability;

007.01B(18) Credit (only premiums written and losses paid need to be recorded); and

007.01B(19) Workers Compensation (exceptions: allocated loss adjustment expenses paid and outstanding).

007.01C Annual data shall include, in addition to the 19 lines specified in subsection 007.01B, those classes of liability insurance designated in subsection 007.03A1 as subject to accelerated reporting.

007.01D Compilation Bases: Annual data shall be reported according to one of the following compilation bases:

007.01D(1) Calendar year;

007.01D(2) Accident year; or

007.01D(3) Policy year.

007.01E Insurers shall submit data in accordance with filing deadlines established by various statistical agents. No statistical agent shall establish a deadline more than nine months after the expiration of the calendar, accident or policy year.

007.01F Statistical agents shall provide annual reports of information collected pursuant to this subsection within 18 months of the expiration of the calendar, accident or policy year.

007.02 Fast Track Data and Reports

007.02A Fast Track Data: Data necessary to produce Fast Track reports shall be submitted to statistical agents by selected insurers within forty-five (45) days of the close of the calendar quarter according to the following specifications:

007.02A(1) Lines and Classes; Loss Ratio Data: Selected insurers shall submit Fast Track quarterly premium and loss data to statistical agents for the following lines:

007.02A(1)(a) Private Passenger Liability;

007.02A(1)(b) Private Passenger Physical Damage;

007.02A(1)(c) Commercial Auto Liability;

007.02A(1)(d) Commercial Auto Physical Damage;

007.02A(1)(e) Homeowners;

007.02A(1)(f) Dwelling Fire;

007.02A(1)(g) Dwelling Allied Lines;

007.02A(1)(h) Commercial Fire;

007.02A(1)(i) Commercial Allied Lines;

007.02A(1)(j) Farm Business;

007.02A(1)(k) Commercial Multiple Peril;

007.02A(1)(l) Liability Other than Auto; and

007.02A(1)(m) Medical Malpractice.

007.02A(2) Lines and Classes; Claim Data: Fast Track data shall contain claim frequency and claim severity data for the following lines:

007.02A(2)(a) Private Passenger Comprehensive;

007.02A(2)(b) Private Passenger Collision;

007.02A(2)(c) Private Passenger Bodily Injury Liability; and

007.02A(2)(d) Private Passenger Property Damage Liability.

007.02B Fast Track Reports: Statistical agents shall provide Fast Track reports within sixty (60) days of the close of the calendar quarter for the private passenger automobile and homeowners lines of insurance. Fast Track reports for other lines of business shall be provided within seventy-five (75) days of the close of the calendar quarter.

007.03 Accelerated Data and Reports

007.03A Accelerated Data: Data necessary to produce accelerated reports shall be submitted to statistical agents by participating insurers within sixty days (60) of the close of the calendar quarter. The data submitted for accelerated reports shall include the following lines and classes and data elements:

007.03A(1) Lines and Classes:

007.03A(1)(a) Owners, Landlords and Tenants Liability;

007.03A(1)(b) Manufacturers and Contractors Liability;

007.03A(1)(c) Products Liability (countrywide only);

007.03A(1)(d) Premises/Operations Liability;

007.03A(1)(e) Lawyers Professional Liability;

007.03A(1)(f) Municipal Liability;

007.03A(1)(g) Public School Liability; and

007.03A(1)(h) Day Care Liability.

007.03A(2) Data Elements:

007.03A(2)(a) Direct premiums written;

007.03A(2)(b) Direct premiums earned; and

007.03A(2)(c) Incurred losses, developed as the sum of the following:

• the dollar amount of paid losses;

• the dollar amount of allocated loss adjustment expenses, plus

• reserves for reported claims at the end of the quarter, minus

• reserves for reported claims at the beginning of the quarter.

007.03B Accelerated Reports: Statistical agents shall provide accelerated reports to the Director within 180 days of the close of the calendar quarter.

007.04 Insurer Compliance

007.04A Statistical agents shall adopt edit procedures to screen data for reasonableness and apparent accuracy. Annual data shall be balanced against applicable annual statement entries showing Nebraska-specific and countrywide data for direct premiums and losses. Statistical agents shall attempt to reconcile discrepancies and shall not include data in their statistical reports to the Director where any such discrepancies have not been reasonably resolved.

007.04B All statistical reports made by statistical agents pursuant to this section shall contain a list of all insurers whose data is included. In addition, if data from an insurer that should have had their data included is, in fact, not included, then a separate listing of these insurers shall also be made with the statistical report.

007.04C For each insurer whose data has been omitted from a statistical report, the statistical agent shall provide reasons for the exclusion to the Director. These reasons, which shall be held confidential by the Director, shall be identified as one of the following:

007.04C1 Failed to meet statistical agent reporting deadlines;

007.04C2 Failed to pass edits for reasonableness and apparent accuracy; or

007.04C3 Other (specify reason for exclusion).

007.04D In reviewing reports made under subsections 007.04A, B, and C, the Director shall give due consideration to the following factors:

(a) The frequency with which an insurer has made apparently unacceptable data reports;

(b) The standards of the statistical agent which the insurer failed; that is, whether the insurer's data would have been acceptable under standards employed by other statistical agents;

(c) Whether errors or omissions were due to human or machine error, or whether they indicated a lack of regard by the insurer in maintaining accuracy and completeness in their data submissions; and

(d) Whether the insurer has taken effective steps to minimize the recurrence of such errors and omissions.

008. General liability reporting thresholds . Insurers shall report on general liability insurance in accordance with the following reporting level thresholds. These thresholds are based on an analysis of individual insurer premium volume by line and class. Such an analysis shall be made at least every three years by the statistical agent. Any resulting changes to an insurer's reporting level will apply on a prospective basis only.

008.01 Quarterly Reporting

008.01A An insurer must report at least quarterly in accordance with the specifications of commercial general liability statistical plans filed with the Director if it is large enough to meet any of the following criteria:

008.01A(1) It is in the 80th percentile of the total countrywide written premium for all commercial general liability lines; or

008.01A(2) It has greater than one percent of the statewide written premium for all commercial general liability lines.

008.01B An insurer must report at least quarterly in selected market detail consistent with the specifications of commercial general liability statistical plans filed with the Director if it has not already met the above criteria for reporting quarterly but does meet any of the following criteria:

008.01B(1) It has greater than $1 million written premium statewide for a selected market; or

008.01B(2) It has greater than ten percent of written premium statewide for a selected market and greater than $100,000 written premium for that market.

008.02 Annual Reporting

008.02A An insurer must report at least annually in accordance with the specifications of commercial general liability statistical plans filed with the Director if it has not already met the criteria in (1)(a) for reporting quarterly but it is in the 98th percentile of the total statewide written premium for all commercial general liability lines.

008.02B An insurer must report at least annually in selected market detail consistent with the specification of commercial general liability statistical plans filed with the Director if it has not already met any of the above criteria but it has greater than ten percent of written premium statewide for a selected market and less than $100,000 written premium for that market.

008.02C The experience of all other insurers and any experience not reported in accordance with subsections 008.01A and 008.01B above shall be reported annually in accordance with commercial general liability statistical plans filed with the Director.

009. Statistical plans; filing required . Statistical agents shall provide copies of all statistical plans and modifications thereof to the Director. All plans already in use as of the effective date of this rule shall be provided within 60 days after its effective date. All statistical plans or modifications thereof published after the effective date of this rule shall be provided to the Director prior to their use.

010. Special data requests . For lines or classes of insurance where more than 80% of the writings in Nebraska are by three or fewer insurers or company groups, the Director may require premium, exposure and loss information on a special request basis. Such requests shall be limited to the five largest writers of the specialty line in Nebraska, although fewer insurers may be included if sufficient to encompass 80% of the Nebraska market. When the information which the Director has requested is recorded by the insurer, an insurer shall respond to such requests within 60 days, except insurers are not required to submit such information less than six months following the end of the calendar, accident or policy years that are requested.

011. Additional data collections .

011.01 Statistical agents collecting and compiling data in addition to that collected under statistical plans filed with the Director under Section 009 shall provide descriptions to the Director of such compilations at the same time such compilations are distributed on a general basis or made available for distribution on a general basis to member insurers. Exceptions to this requirement are as follows:

011.01A Reports which are listed in the NAIC Statistical Handbook and are available upon request to the Director;

011.01B Reports not listed in the NAIC Statistical Handbook, but where the statistical agent has given the Director advance notice of the nature of the report and of its availability upon request;

011.01C Reports made from compilations of annual statements, insurance expense exhibits or other data sources that are public in nature;

011.01D Compilations made for editing, testing or research purposes and which are not distributed to insurers affiliated with the statistical agent on a general basis; or

011.01E Compilations of data which do not relate directly to indicated rate levels or indicated rate discriminations. Reports which directly relate to pricing decisions or whether a class of risks should or should not be written due to pricing adequacy are not exempted by this exception.

011.02 Upon the request by the Director for a specific statistical report, the statistical agent shall provide the Director a copy of any specific statistical report which they produce. Upon the request of the statistical agent submitting a report pursuant to this section, the Director shall hold a statistical report confidential if it is based upon statistical detail not contained in the statistical agent's statistical plans.

012. Exemption . Upon application by a statistical agent or an individual insurer, the Director may allow the submission of a report or statistical data at a specified later date if the submission of the report or data on the date required by this regulation would create a substantial hardship on the statistical agent or insurer.

013. Nonreporting insurers . Any licensed insurer writing any line of insurance not excepted in section 003 of this rule who finds or believes to have found that they are writing a line, type or class of insurance for which no statistical agent will accept their data shall notify the Director as soon as practicable of this fact.

014. Severability clause . If any provisions of this rule, or the application thereof to any person or circumstance, is held invalid, such invalidity shall not affect other provisions or application of this rule which can be given effect without the invalid portion or application, and to that end, the provisions of this rule are severable.

015. Operative date . This rule shall become operative on January 1, 1990.

History

• Effective 1994-06-26

Chapter 54 Regulation to Implement Transitional Requirements for the Conversion of Medicare Supplement Insurance Benefits and Premiums to Conform to Repeal of Medicare Catastrophic Coverage Act

Neb. Admin. Code tit. 210, ch. 54 Regulation to Implement Transitional Requirements for the Conversion of Medicare Supplement Insurance Benefits and Premiums to Conform to Repeal of Medicare Catastrophic Coverage Act {#sec-210-nac-54 omnilex-key=us-ne-regs-official--title-210--210 NAC 54}

001. Purpose . The purpose of this regulation is to assure the orderly implementation and conversion of Medicare supplement insurance benefits and premiums due to changes in the federal Medicare Program; to provide for the reasonable standardization of the coverage, terms and benefits of Medicare supplement policies or contracts; to facilitate public understanding of such policies or contracts; to eliminate provisions contained in such policies or contracts which may be misleading or confusing in connection with the purchase of such policies or contracts; to eliminate policy or contract provisions which may duplicate Medicare benefits; to provide for adjustment of required minimum benefits for Medicare supplement policies; to provide notice to former policyholders of offer to reinstitute coverage; to provide full disclosure of policy or contract benefits and benefit changes; and to provide for appropriate premium adjustments.

002. Authority . This regulation is issued pursuant to the authority vested in the Director under Neb.Rev.Stat., §44-101.01, the Unfair Insurance Trade Practices Act, §44-15221 et. seq., and the Medicare Supplement Insurance Minimum Standards Act, §44-3601 et. seq.

003. Applicability and scope . This regulation shall take precedence over other rules and requirements relating to Medicare supplement policies or contracts only to the extent necessary to assure that benefits are not duplicated and to adjust minimum required benefits to changes in Medicare benefits, that applicants receive adequate notice and disclosure of changes in Medicare supplement policies and contracts, that appropriate premium adjustments are made in a timely manner, and that premiums are reasonable in relation to benefits.

003.01 Except as otherwise provided in Section 005, this regulation shall apply to:

003.01A All Medicare supplement policies and contracts delivered, or issued for delivery, or which are otherwise subject to the jurisdiction of this state on or after the effective date hereof, and

003.01B All certificates issued under group Medicare supplement policies as provided in subsection 003.01A above.

004. Definitions .

004.01 For purposes of this regulation:

004.01A "Applicant" means:

004.01A(1) In the case of an individual Medicare supplement policy or contract, the person who seeks to contract for insurance benefits, and

004.01A(2) In the case of a group Medicare supplement policy or contract, the proposed certificate holder.

004.01B "Certificate" means any certificate issued under a group Medicare supplement policy.

004.01C "Medicare Supplement Policy" means a group or individual policy of sickness and accident insurance or any other contract which is advertised, marketed or designed primarily to provide health care benefits as a supplement to reimbursements under Medicare for the hospital, medical or surgical expenses of persons eligible for Medicare by reason of age.

005. Benefit conversion requirements .

005.01 Effective January 1, 1990, no Medicare supplement insurance policy, contract or certificate in force in this state shall contain benefits which duplicate benefits provided by Medicare.

005.02 Benefits eliminated by operation of the Medicare Catastrophic Coverage Act of 1988 transition provisions shall be restored.

005.03 For Medicare supplement policies subject to the minimum standards adopted by the states pursuant to Medicare Catastrophic Coverage Act of 1988, the minimum benefits shall be:

005.03A Coverage of Part A Medicare eligible expenses for hospitalization to the extent not covered by Medicare from the 61st day through the 90th day in any Medicare benefit period;

005.03B Coverage for either all or none of the Medicare Part A inpatient hospital deductible amount.

005.03C Coverage of Part A Medicare eligible expenses incurred as daily hospital charges during use of Medicare's lifetime hospital inpatient reserve days;

005.03D Upon exhaustion of all Medicare hospital inpatient coverage including the lifetime reserve days, coverage of ninety percent of all Medicare Part A eligible expenses for hospitalization not covered by Medicare subject to a lifetime maximum benefit of an additional 365 days;

005.03E Coverage under Medicare Part A for the reasonable cost of the first three (3) pints of blood (or equivalent quantities of packed red blood cells, as defined under federal regulations) unless replaced in accordance with federal regulations or already paid for under Part B;

005.03F Coverage for the coinsurance amount of Medicare eligible expenses under Part B regardless of hospital confinement, subject to a maximum calendar year out-of-pocket amount equal to the Medicare Part B deductible [$75].

005.03G Effective January 1, 1990, coverage under Medicare Part B for the reasonable cost of the first three (3) pints of blood (or equivalent quantities of packed red blood cells, as defined under federal regulations), unless replaced in accordance with federal regulations or already paid for under Part A, subject to the Medicare deductible amount.

005.04 General Requirements

005.04A No later than January 31, 1990, every insurer, health care service plan or other entity providing Medicare supplement insurance or benefits to a resident of this State shall notify its policyholders, contract holders and certificate holders of modifications it has made to Medicare supplement insurance policies or contracts. Such notice shall be in the format contained in Appendix A.

005.04A(1) Such notice shall include a description of revisions to the Medicare program and a description of each modification made to the coverage provided under the Medicare supplement insurance policy or contract.

005.04A(2) The notice shall inform each covered person as to when any premium adjustment due to changes in Medicare benefits will be effective.

005.04A(3) The notice of benefit modifications and any premium adjustments shall be in outline form and in clear and simple terms so as to facilitate comprehension.

005.04A(4) Such notice shall not contain or be accompanied by any solicitation.

005.04B No modifications to an existing Medicare supplement contract or policy shall be made at the time of or in connection with the notice requirements of this regulation except to the extent necessary to accomplish the purpose articulated in section 003 of this regulation.

006. Form and rate filing requirements .

006.01 As soon as practicable, but no longer than forty-five (45) days after the effective date of the Medicare benefit changes, every insurer, health care service plan or other entity providing Medicare supplement insurance or contracts in this State shall file with the Department, in accordance with the applicable filing procedures of this State:

006.01A Appropriate premium adjustments necessary to produce loss ratios as originally anticipated for the applicable policies or contracts. Such supporting documents as necessary to justify the adjustment shall accompany the filing.

006.01B Any appropriate riders, endorsements or policy forms needed to accomplish the Medicare supplement insurance modifications necessary to eliminate benefit duplications with Medicare and to provide the benefits required by section 005. Any such riders, endorsements or policy forms shall provide a clear description of the Medicare supplement benefits provided by the policy or contract.

006.02 Upon satisfying the filing requirements of this State, every insurer, health care service plan or other entity providing Medicare supplement insurance in this State shall provide each covered person with any rider, endorsement or policy form necessary to make the adjustments outlined in section 005 above.

006.03 Any premium adjustments shall produce an expected loss ratio under such policy or contract as will conform with minimum loss ratio standards for Medicare supplement policies and shall result in an expected loss ratio at least as great as that originally anticipated by the insurer, health care service plan or other entity for such Medicare supplement insurance policies or contracts. Premium adjustments may be calculated for the period commencing with Medicare benefit changes.

006.04 Require that such filing made pursuant to State laws and rules be accompanied by the certification of an officer of the filing entity that the filing complies with all the requirements of the Regulation to Implement Transitional Requirements for the Conversion of Medicare Supplement Insurance Benefits and Premiums to Conform to Repeal of the Medicare Catastrophic Coverage Act (Transition Rule), and that any portion of the filing found by the Director not to comply with any requirement of the Transition Rule will be modified by the filing entity as ordered by the Director to comply with the Transition Rule. The filing entity must further certify that any such modification ordered by the Director will be made effective as of the effective implementation date of the filing to which the original certification applies and that the entity will promptly notify affected insureds of the modification.

006.04.01A Upon receipt of a Medicare supplement insurance filing made solely for the purpose of implementing adjustments to Medicare supplement insurance necessary to provide a transition of benefits and premiums to conform to repeal of the Medicare Catastrophic Act and to the requirements of the Transition Rule, the Director deems approved for immediate use such filed adjustments as to comply with all requirements of the Transition Rule.

006.04.01B Upon completion of review of the filings received pursuant to these accelerated policy adjustment procedures, the Director shall order such modifications as are necessary to bring the filing into compliance with the Transition Rule. The review shall be conducted in accordance with the time period provided by the applicable laws and rules of the State.

007. Offer of reinstitution of coverage .

007.01 Except as provided in sub section 007.02, in the case of an individual who had in effect, as of December 31, 1988, a Medicare supplemental policy with an insurer (as a policyholder or, in the case of a group policy, as a certificateholder) and the individual terminated coverage under such policy before the date of the enactment of the repeal of the Medicare Catastrophic Coverage Act of 1988, the insurer shall:

007.01A Provide written notice no earlier than December 15, 1989, and no later than January 30, 1990, to the policyholder or certificate-holder (at the most recent available address) of the offer described below; and

007.01B Offer the individual, during a period of at least 60 days beginning not later than February 1, 1990, reinstitution of coverage (with coverage effective as of January 1, 1990), under the terms which:

007.01B(1) Does not provide for any waiting period with respect treatment of pre-existing conditions;

007.01B(2) Provides for coverage which is substantially equivalent to coverage in effect before the date of such termination; and

007.01B(3) Provides for classification of premiums on which terms are at least as favorable to the policyholder or certificate holder as the premium classification terms that would have applied to the policyholder or certificate holder had the coverage never terminated.

007.02 An insurer is not required to make the offer under subsection 007.01B in the case of an individual who is a policyholder or certificateholder in another Medicare supplemental policy as of January 1, 1990 if the individual is not subject to a waiting period with respect to treatment of a pre-existing condition under such other policy.

008. Requirements for new policies and certificates .

008.01 Effective January 1, 1990, no Medicare supplement insurance policy, contract or certificate shall be delivered or issued for delivery in this State which provides benefits which duplicate benefits provided by Medicare. No such policy, contract or certificate shall provide less benefits than those required under the existing Medicare Supplement Insurance Minimum Standards Act or Regulation except where duplication of Medicare benefits would result and except as required by these transition provisions.

008.02 General Requirements

008.02A Within ninety (90) days of the effective date of this regulation, every insurer, health care service plan or other entity required to file its policies or contracts with this State shall file new Medicare supplement insurance policies or contracts which eliminate any duplication of Medicare supplement benefits with benefits provided by Medicare, which adjust minimum required benefits to changes in Medicare benefits and which provides a clear description of the policy or contract benefit.

008.02B The filing required under subsection 006.01A shall provide for loss ratios which are in compliance with all minimum standards.

008.02C Every applicant for a Medicare supplement insurance policy, contract or certificate shall be provided with an outline of coverage which simplifies and accurately describes benefits provided by Medicare and policy or contract benefits along with benefit limitations.

009. Filing requirements for advertising . Every insurer, health care service plan or other entity providing Medicare supplement insurance or benefits in this State shall provide a copy of any advertisement intended for use in this State, whether through written, radio or television medium to the Director of this state for review or approval by the Director to the extent it may be required under state law. Such advertisement shall comply with all applicable laws of this State.

010. Buyer's guide . No insurer, health care service plan or other entity shall make use of or otherwise disseminate any Buyer's Guide or informational brochure which does not accurately outline current Medicare benefits and which has not been adopted by the Director.

011. Separability Severability . If any provision of this regulation or the application thereof to any person or circumstances is for any reason held to be invalid, the remainder of the regulation and the application of such provision to other persons or circumstances shall not be affected thereby.

012. Effective date . This regulation shall become operative on January 1, 1990.

APPENDIX A

[COMPANY NAME]

NOTICE OF CHANGES IN MEDICARE AND YOUR MEDICARE

History

• Effective 1994-06-26

Chapter 55 Rule to Define Standards and Director’s Authority for Companies Deemed to Be in Hazardous Financial Condition

Neb. Admin. Code tit. 210, ch. 55 Rule to Define Standards and Director’s Authority for Companies Deemed to Be in Hazardous Financial Condition {#sec-210-nac-55 omnilex-key=us-ne-regs-official--title-210--210 NAC 55}

001. Authority . This rule is adopted and promulgated by the Director of the Nebraska Department of Insurance pursuant to NEB. REV. STAT. §§ 44-101.01 and 44-4801 ET SEQ. of the Nebraska Insurance Code.

002. Purpose . The purpose of this rule is to set forth the standards which the Director may use for identifying insurers found to be in such condition as to render the continuance of their business hazardous to their policyholders, creditors or the general public as provided for in NEB. REV. STAT. §§ 44-4809, 44-4810, 44-4812 and 44-4817.

This rule shall not be interpreted to limit the powers granted to the Director by any laws or parts of laws of this state, nor shall this rule be interpreted to supersede any laws or parts of laws of this state.

003. Scope . This rule applies to all domestic and foreign insurers.

004. Standards . The following standards, either singly or a combination of two or more, may be considered by the Director to determine whether the continued operation of any insurer transacting an insurance business in this state might be deemed to be hazardous to its policyholders, creditors or the general public. The Director may consider:

004.01 Adverse findings reported in financial condition and market conduct examination reports, audit reports, and actuarial opinions, reports or summaries;

004.02 The National Association of Insurance Commissioners Insurance Regulatory Information System and its other financial analysis solvency tools and reports;

004.03 Whether the insurer has made adequate provision, according to presently accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the insurer, when considered in light of the assets held by the insurer with respect to such reserves and related actuarial items including, but not limited to, the investment earnings on such assets, and the considerations anticipated to be received and retained under such policies and contracts;

004.04 The ability of an assuming reinsurer to perform and whether the insurer's reinsurance program provides sufficient protection for the insurer's remaining surplus after taking into account the insurer's cash flow and the classes of business written as well as the financial condition of the assuming reinsurer;

004.05 Whether the insurer's operating loss in the last twelve-month period or any shorter period of time, including but not limited to net capital gain or loss, change in non-admitted assets, and cash dividends paid to shareholders, is greater than fifty percent (50%) of the insurer's remaining surplus as regards policyholders in excess of the minimum required;

004.06 Whether the insurer’s operating loss in the last twelve-month period or any shorter period of time, excluding net capital gains, is greater than twenty percent (20%) of the insurer’s remaining surplus as regards policyholders in excess of the minimum required;

004.07 Whether a reinsurer, obligor or any entity within the insurer’s insurance holding company system, is insolvent, threatened with insolvency or delinquent in payment of its monetary or other obligations, and which in the opinion of the Director may affect the solvency of the insurer;

004.08 Contingent liabilities, pledges or guarantees which either individually or collectively involve a total amount which in the opinion of the Director may affect the solvency of the insurer;

004.09 Whether any "controlling person" of an insurer is delinquent in the transmitting to, or payment of, net premiums to such insurer;

004.10 The age and collectability of receivables;

004.11 Whether the management of an insurer, including officers, directors, or any other person who directly or indirectly controls the operation of such insurer, fails to possess and demonstrate the competence, fitness and reputation deemed necessary to serve the insurer in such position;

004.12 Whether management of an insurer has failed to respond to inquiries relative to the condition of the insurer or has furnished false and misleading information concerning an inquiry;

004.13 Whether the insurer has failed to meet financial and holding company filing requirements in the absence of a reason satisfactory to the Director;

004.14 Whether management of an insurer either has filed any false or misleading sworn financial statement, or has released any false or misleading financial statement to lending institutions or to the general public, or has made a false or misleading entry, or has omitted an entry of material amount in the books of the insurer;

004.15 Whether the insurer has grown so rapidly and to such an extent that it lacks adequate financial and administrative capacity to meet its obligations in a timely manner;

004.16 Whether the insurer has experienced or will experience in the foreseeable future cash flow or liquidity problems;

004.17 Whether management has established reserves that do not comply with minimum standards established by state insurance laws, rules or regulations, statutory accounting standards, sound actuarial principles and standards of practice;

004.18 Whether management persistently engages in material under reserving that results in adverse development;

004.19 Whether transactions among affiliates, subsidiaries or controlling persons for which the insurer receives assets or capital gains, or both, do not provide sufficient value, liquidity or diversity to assure the insurer’s ability to meet its outstanding obligations as they mature; or

004.20 Any other finding determined by the Director to be hazardous to the insurer’s policyholders, creditors or general public.

005. Director's authority .

005.01 For the purposes of making a determination of an insurer's financial condition under this rule, the Director may:

005.01A Disregard any credit or amount receivable resulting from transactions with a reinsurer that is insolvent, impaired or otherwise subject to a delinquency proceeding;

005.01B Make appropriate adjustments including disallowance to asset values attributable to investments in or transactions with parents, subsidiaries, or affiliates consistent with the NAIC Accounting Practices and Procedures Manual, state laws and rules;

005.01C Refuse to recognize the stated value of accounts receivable if the ability to collect receivables is highly speculative in view of the age of the account or the financial condition of the debtor; or

005.01D Increase the insurer's liability in an amount equal to any contingent liability, pledge, or guarantee not otherwise included if there is a substantial risk that the insurer will be called upon to meet the obligation undertaken within the next twelve-month period.

005.02 If the Director determines that the continued operation of the insurer licensed to transact business in this state may be hazardous to its policyholders, creditors or the general public, then the Director may, upon a determination, take such action as is authorized by the Insurers Supervision, Rehabilitation and Liquidation Act, NEB. REV. STAT. § 44-4801, ET SEQ. In addition to taking any action authorized by § 44-4801 ET SEQ. and § 44-134, the Director may issue an order requiring such insurer to:

005.02A Reduce the total amount of present and potential liability for policy benefits by reinsurance;

005.02B Reduce, suspend or limit the volume of business being accepted or renewed;

005.02C Reduce general insurance and commission expenses by specific methods;

005.02D Increase the insurer's capital and surplus;

005.02E Suspend or limit the declaration and payment of dividend by an insurer to its stockholders or to its policyholders;

005.02F File reports in a form acceptable to the Director concerning the market value of an insurer's assets;

005.02G Limit or withdraw from certain investments or discontinue certain investment practices to the extent the Director deems necessary;

005.02H Document the adequacy of premium rates in relation to the risks insured;

005.02I File, in addition to regular annual statements, interim financial reports on the form adopted by the National Association of Insurance Commissioners or in such format as promulgated by the Director;

005.02J Correct corporate governance practice deficiencies, and adopt and utilize governance practices acceptable to the Director;

005.02K Provide a business plan to the Director in order to continue to transact business in the state;

005.02L Notwithstanding any other provision of law limiting the frequency or amount of premium rate adjustments, adjust rates for any non-life insurance product written by the insurer that the Director considers necessary to improve the financial condition of the insurer.

If the insurer is a foreign insurer the Director’s order may be limited to the extent provided by statute.

006. Administrative and Judicial Review . Any decision or order of the Director pursuant to this rule shall be subject to an administrative hearing and judicial review in accordance with the Administrative Procedure Act at the instance of any party to the proceedings whose interests are substantially affected.

007. Severability . If any provisions of this rule be held invalid, the remainder shall not be affected.

008. Effective Date . This regulation shall become effective January 1, 2011.

History

• Effective 2010-08-22

Chapter 56 Annual Audited Financial Reports

Neb. Admin. Code tit. 210, ch. 56 Annual Audited Financial Reports {#sec-210-nac-56 omnilex-key=us-ne-regs-official--title-210--210 NAC 56}

001. Authority . This Rule is promulgated by the Director of Insurance pursuant to Neb. Rev. Stat. §§ 44-101.01, 44-322, 44-1097, 44-1207, and 44-32,162.

002. Purpose .

002.01 The purpose of this Rule is to improve the Nebraska Insurance Department's surveillance of the financial condition of Insurers by requiring (1) an annual audit of financial statements reporting the financial position and the results of operations of Insurers by independent certified public accountants, (2) Communication of Internal Control Related Matters Noted in an Audit, (3) Management’s Report of Internal Control over Financial Reporting.

002.02 This Rule shall apply to all Insurers as defined in Section 003.09. Insurers having direct premiums written in this state of less than $1,000,000 in any calendar year and less than 1,000 policyholders or certificate holders of direct written policies nationwide at the end of the calendar year shall be exempt from this Rule for the year (unless the Director makes a specific finding that compliance is necessary for the Director to carry out statutory responsibilities) except that the Insurers having assumed premiums pursuant to contracts and/or treaties of reinsurance of $1,000,000 or more will not be so exempt.

002.02(a) Assessment associations subject to Neb. Rev. Stat. § 44-801 et. seq. shall be exempt from the requirements of this Rule unless the assessment association is operating in or licensed in another state.

002.03 Foreign or alien Insurers filing Audited financial reports in another state, pursuant to such other state's requirement of Audited financial reports, which has been found by the Director to be substantially similar to the requirements herein, are exempt from Sections 004 through 013 of this Rule if:

002.03(a) A copy of the Audited financial report, Communication of Internal Control Related Matters Noted in An Audit, and the Accountants' Letter of Qualifications which are filed with such other state are filed with the Director in accordance with the filing dates specified in Sections 004 and 011 and 012, respectively. Canadian Insurers may submit accountants' reports as filed with the Office of the Superintendent of Financial Institutions, Canada.

002.03(b) A copy of any Notification of Adverse Financial Condition Report filed with such other state is filed with the Director within the specified time in Section 010.

002.04 Foreign or alien Insurers required to file Management’s Report of Internal Control over Financial Reporting in another state are exempt from filing the Report in this state provided the other state has substantially similar reporting requirements and the Report is filed with the Director of the other state within the time specified.

002.05 This Rule shall not prohibit, preclude or in any way limit the Director of Insurance from ordering, conducting or performing examinations of Insurers under the Statutes and the Rules and Regulations of the Nebraska Department of Insurance and the practices and procedures of the Nebraska Department of Insurance.

003. Definitions . The terms and definitions provided herein are intended to provide definitional guidance as the terms used in this Rule.

003.01 “Accountant” or “independent certified public accountant” means an independent certified public accountant or accounting firm in good standing with the American Institute of Certified Public Accountants (AICPA) and in all states in which they are licensed to practice; for Canadian and British companies, it means a Canadian-chartered or British-chartered accountant. For purposes of this Rule, "independent" means not affiliated with an Insurer.

003.02 An “affiliate” of, or person “affiliated” with, a specific person, is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

003.03 “Audit committee” means a committee (or equivalent body) established by the board of directors of an entity for the purpose of overseeing the accounting and financial reporting processes of an Insurer or Group of insurers, the internal audit function of an insurer or group of insurers (if applicable), and external audits of financial statements of the Insurer or Group of insurers. The Audit committee of any entity that controls a Group of insurers may be deemed to be the Audit committee for one or more of these controlled Insurers solely for the purposes of this Rule at the election of the controlling person. Refer to Section 014.05 for exercising this election. If an Audit committee is not designated by the Insurer, the Insurer’s entire board of directors shall constitute the Audit committee.

003.04 “Audited financial report” means and includes those items specified in Section 005 of this Rule.

003.05 “Department” means the Nebraska Department of Insurance.

003.06 “Director” means the Director of Insurance for the State of Nebraska.

003.07 “Indemnification” means an agreement of indemnity or a release from liability where the intent or effect is to shift or limit in any manner the potential liability of the person or firm for failure to adhere to applicable auditing or professional standards, whether or not resulting in part from knowing or other misrepresentations made by the Insurer or its representatives.

003.08 “Independent board member” has the same meaning as described in Section 014.03.

003.09 “Insurer” means any stock insurance company, mutual insurance company, assessment company, reciprocal insurance company, fraternal benefit society or health maintenance organization holding a certificate of authority or license issued by the Department.

003.10 “Group of insurers” means those licensed Insurers included in the reporting requirements of Neb. Rev. Stat. § 44-2120, or a set of Insurers as identified by management, for the purpose of assessing the effectiveness of Internal control over financial reporting.

003.11 “Internal audit function” means a person or persons that provide independent, objective, and reasonable assurance designed to add value and improve an organization’s operations and accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

003.12 “Internal control over financial reporting” means a process effected by an entity’s board of directors, management and other personnel designed to provide reasonable assurance regarding the reliability of the financial statements, i.e., those items specified in Section 005.02 through 005.07 of this Rule and includes those policies and procedures that:

003.12(a) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets;

003.12(b) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements, i.e., those items specified in Section 005.02 through 005.07 of this Rule and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and

003.12(c) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements, i.e., those items specified in Section 005.02 through 005.07 of this Rule.

003.13 “NAIC” means the National Association of Insurance Commissioners.

003.14 “NAIC Annual Statement Instructions and the NAIC Accounting Practices and Procedures Manual” means the edition of the Annual Statement Instructions and Accounting Practice and Procedures Manuals adopted by the National Association of Insurance Commissioners in effect for the period under audit. The NAIC Annual Statement Instructions and the NAIC Accounting Practices and Procedures Manual are available for public inspection at the offices of the Nebraska Department of Insurance, located at 941 O Street, Suite 400, Lincoln, Nebraska 68508.

003.15 “SEC” means the United States Securities and Exchange Commission.

003.16 “Section 404” means Section 404 of the Sarbanes-Oxley Act of 2002 and the SEC’s rules and regulations promulgated thereunder.

003.17 “Section 404 Report” means management’s report on “internal control over financial reporting” as defined by the SEC and the related attestation report of the independent certified public accountant as described in Section 003.01.

003.18 “SOX Compliant Entity” means an entity that either is required to be compliant with, or voluntarily is compliant with, all of the following provisions of the Sarbanes-Oxley Act of 2002: (i) the preapproval requirements of Section 201 (Section 10A(i) of the Securities Exchange Act of 1934); (ii) the Audit committee independence requirements of Section 301 (Section 10A(m)(3) of the Securities Exchange Act of 1934); and (iii) the Internal control over financial reporting requirements of Section 404 (Item 308 of SEC Regulation S-K).

003.19 “Statutory accounting practices” has the meaning defined in the current editions of the Annual Statement Instructions and Accounting Practice and Procedures Manuals published by the National Association of Insurance Commissioners, or as otherwise prescribed by the insurance department of the Insurer's state of domicile.

004. General requirements related to filing and extensions for filing of annual Audited financial reports and Audit committee appointment .

004.01 All Insurers shall have an annual audit by an independent certified public accountant and shall file an Audited financial report with the Director on or before June 1 for the year ended December 31 immediately preceding. The Director may require an Insurer to file an Audited financial report earlier than June 1 with ninety (90) days advance notice to the Insurer.

004.02 Extensions of the June 1 filing date may be granted by the Director for thirty-day periods upon a showing by the Insurer and its independent certified public accountant of the reasons for requesting such extension and a determination by the Director of good cause for the extension. The request for extension must be submitted in writing not less than ten (10) days prior to the due date in sufficient detail to permit the Director to make an informed decision with respect to the requested extension.

004.03 If an extension is granted in accordance with the provisions in Section 004.02, a similar extension of thirty (30) days is granted to the filing of Management’s Report of Internal Control over Financial Reporting.

004.04 Every Insurer required to file an annual Audited financial report pursuant to this Rule shall designate a group of individuals as constituting its Audit committee, as defined in Section 003. The Audit committee of an entity that controls an Insurer may be deemed to be the Insurer’s Audit committee for purposes of this Rule at the election of the controlling person.

005. Contents of annual Audited financial report . The annual Audited financial report shall report the financial position of the Insurer as of the end of the most recent calendar year and the results of its operations, cash flows and changes in capital and surplus for the year then ended in conformity with statutory accounting practices prescribed, or otherwise permitted, by the Department of Insurance of the state of domicile. The annual Audited financial report shall include the following:

005.01 Report of independent certified public accountant.

005.02 Balance sheet reporting admitted assets, liabilities, capital and surplus.

005.03 Statement of operations.

005.04 Statement of cash flows.

005.05 Statement of changes in capital and surplus.

005.06 Notes to financial statements. These notes shall be those required by the appropriate NAIC Annual Statement Instructions and the NAIC Accounting Practices and Procedures Manual. The notes shall include a reconciliation of differences, if any, between the audited statutory financial statements and the annual statement filed pursuant to Neb. Rev. Stat. § 44-322 with a written description of the nature of these differences.

005.07 The financial statements included in the Audited financial report shall be prepared in a form and using language and groupings substantially the same as the relevant sections of the annual statement of the Insurer filed with the Director, and the financial statements shall be comparative, presenting the amounts as of December 31 of the current year and the amounts as of the immediately preceding December 31. However, in the first year in which an Insurer is required to file an Audited financial report, the comparative data may be omitted.

006. Designation of independent certified public accountant .

006.01 Each Insurer required by this Rule to file an annual Audited financial report must within sixty (60) days after becoming subject to such requirement, register with the Director in writing the name and address of the independent certified public accountant or accounting firm, generally referred to in this Rule as the “accountant,” retained to conduct the annual audit set forth in this Rule. Insurers not retaining an independent certified public accountant on the effective date of this Rule shall register the name and address of their retained independent certified public accountant not less than six (6) months before the date when the first Audited financial report is to be filed.

006.02 The Insurer shall obtain a letter from such accountant, and file a copy with the Director stating that the accountant is aware of the provisions of the insurance statutes and the Rules and Regulations of the Insurance Department of the state of domicile that relate to accounting and financial matters and affirming that he or she will express his or her opinion on the financial statements in the terms of their conformity to the statutory accounting practices prescribed or otherwise permitted by that Insurance Department, specifying such exceptions as he or she may believe appropriate.

006.03 If an accountant who was the accountant for the immediately preceding filed Audited financial report is dismissed or resigns, the Insurer shall notify the Department of this event within five (5) business days of this event. The Insurer shall also furnish the Director with a separate letter within ten (10) business days of the above notification stating whether in the twenty-four months (24) preceding such event there were any disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure; which disagreements, if not resolved to the satisfaction of the former accountant, would have caused him or her to make reference to the subject matter of the disagreement in connection with his or her opinion. The disagreements required to be reported in response to this Section include both those resolved to the former accountant's satisfaction and those not resolved to the former accountant's satisfaction. Disagreements contemplated by this Section are those that occur at the decision-making level, i.e., between personnel of the Insurer responsible for presentation of its financial statements and personnel of the accounting firm responsible for rendering its report. The Insurer shall also in writing request such former accountant to furnish a letter addressed to the Insurer stating whether the accountant agrees with the statements contained in the Insurer's letter and, if not, stating the reasons for which he or she does not agree; and the Insurer shall furnish such responsive letter from the former accountant to the Director together with its own.

007. Qualifications of independent certified public accountant .

007.01 The Director shall not recognize any person or firm as a qualified independent certified public accountant if the person or firm:

007.01(a) Is not in good standing with the AICPA and in all states in which the accountant is licensed to practice, or, for a Canadian or British company, that is not a chartered accountant; or

007.01(b) Has either directly or indirectly entered into an agreement of indemnity or release from liability (collectively referred to as Indemnification) with respect to the audit of the Insurer.

007.02 Except as otherwise provided herein, the Director shall recognize an independent certified public accountant as qualified as long as he or she conforms to the standards of his or her profession, as contained in the Code of Professional Ethics of the AICPA and Rules and Regulations and Code of Ethics and Rules of Professional Conduct of the Nebraska Board of Public Accountancy, or similar code.

007.03 A qualified independent certified public accountant may enter into an agreement with an Insurer to have disputes relating to an audit resolved by mediation or arbitration. However, in the event of a delinquency proceeding commenced against the Insurer under Neb. Rev. Stat. § 44-4801 et. seq., the mediation or arbitration provisions shall operate at the option of the statutory successor.

007.04

007.04(a) The lead (or coordinating) audit partner (having primary responsibility for the audit) may not act in that capacity for more than five (5) consecutive years. The person shall be disqualified from acting in that or a similar capacity for the same company or its insurance subsidiaries or affiliates for a period of five (5) consecutive years. An Insurer may make application to the Director for relief from the above rotation requirement on the basis of unusual circumstances. This application should be made at least thirty (30) days before the end of the calendar year. The Director may consider the following factors in determining if the relief should be granted:

007.04(a)(i) Number of partners, expertise of the partners or the number of insurance clients in the currently registered firm;

007.04(a)(ii) Premium volume of the Insurer; or

007.03(a)(iii) Number of jurisdictions in which the Insurer transacts business.

007.04(b) The Insurer shall file, with its annual statement filing, the approval for relief from Section 007.04(a) with the states that it is licensed in or doing business in and with the NAIC. If the nondomestic state accepts electronic filing with the NAIC, the Insurer shall file the approval in an electronic format acceptable to the NAIC.

007.05 The Director shall neither recognize as a qualified independent certified public accountant, nor accept any annual Audited financial report, prepared in whole or in part by, any natural person who:

007.05(a) Has been convicted of fraud, bribery, a violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Sections 1961-1968, or any dishonest conduct or practices under federal or state law;

007.05(b) Has been found to have violated the insurance laws of this state with respect to any previous reports submitted under this Rule; or

007.05(c) Has demonstrated a pattern or practice of failing to detect or disclose material information in previous reports filed under the provisions of this Rule.

007.06 The Director of Insurance may hold a hearing in accordance with the provisions of the Nebraska Administrative Procedure Act, Neb. Rev. Stat. § 84-901 et. seq., and Title 210, Nebraska Administrative Code, Chapter 26, to determine whether an independent certified public accountant is qualified and, considering the evidence presented, may rule that the accountant is not qualified for purposes of expressing his or her opinion of the financial statements in the annual Audited financial report made pursuant to this Rule and require the Insurer to replace the accountant with another whose relationship with the Insurer is independent within the meaning of this Rule.

007.07

007.07(a) The Director shall not recognize as a qualified independent certified public accountant, nor accept an annual Audited financial report, prepared in whole or in part by an accountant who provides to an Insurer, contemporaneously with the audit, the following non-audit services:

007.07(a)(i) Bookkeeping or other services related to the accounting records or financial statements of the Insurer;

007.07(a)(ii) Financial information systems design and implementation;

007.07(a)(iii) Appraisal or valuation services, fairness opinions, or contribution-in-kind reports;

007.07(a)(iv) Actuarially-oriented advisory services involving the determination of amounts recorded in the financial statements. The accountant may assist an Insurer in understanding the methods, assumptions and inputs used in the determination of amounts recorded in the financial statement only if it is reasonable to conclude that the services provided will not be subject to audit procedures during an audit of the Insurer’s financial statements. An accountant’s actuary may also issue an actuarial opinion or certification (“opinion”) on an Insurer’s reserves if the following conditions have been met:

007.07(a)(iv)(1) Neither the accountant nor the accountant’s actuary has performed any management functions or made any management decisions;

007.07(a)(iv)(2) The Insurer has competent personnel (or engages a third party actuary) to estimate the reserves for which management takes responsibility; and

007.07(a)(iv)(3) The accountant’s actuary tests the reasonableness of the reserves after the Insurer’s management has determined the amount of the reserves;

007.07(a)(v) Internal audit outsourcing services;

007.07(a)(vi) Management functions or human resources;

007.07(a)(vii) Broker or dealer, investment adviser, or investment banking services;

007.07(a)(viii) Legal services or expert services unrelated to the audit; or

007.07(a)(ix) Any other services that the Director determines, by regulation, are impermissible.

007.07(b) In general, the principles of independence with respect to services provided by the qualified independent certified public accountant are largely predicated on three basic principles, violations of which would impair the accountant’s independence. The principles are that the accountant cannot function in the role of management, cannot audit his or her own work, and cannot serve in an advocacy role for the Insurer.

007.08 Insurers having direct written and assumed premiums of less than $100,000,000 in any calendar year may request an exemption from Section 007.07(a). The Insurer shall file with the Director a written statement discussing the reasons why the Insurer should be exempt from these provisions. If the Director finds, upon review of this statement, that compliance with this Rule would constitute a financial or organizational hardship upon the Insurer, an exemption may be granted.

007.09 A qualified independent certified public accountant who performs the audit may engage in other non-audit services, including tax services, that are not described in Section 007.07(a) or that do not conflict with Section 007.07(b), only if the activity is approved in advance by the Audit committee, in accordance with Section 007.10.

007.10 All auditing services and non-audit services provided to an Insurer by the qualified independent certified public accountant of the Insurer shall be preapproved by the Audit committee. The preapproval requirement is waived with respect to non-audit services if the Insurer is a SOX Compliant Entity or a direct or indirect wholly-owned subsidiary of a SOX Compliant Entity or:

007.10(a) The aggregate amount of all such non-audit services provided to the Insurer constitutes not more than five percent (5%) of the total amount of fees paid by the Insurer to its qualified independent certified public accountant during the fiscal year in which the non-audit services are provided;

007.10(b) The services were not recognized by the Insurer at the time of the engagement to be non-audit services; and

007.10(c) The services are promptly brought to the attention of the Audit committee and approved prior to the completion of the audit by the Audit committee or by one or more members of the Audit committee who are the members of the board of directors to whom authority to grant such approvals has been delegated by the Audit committee.

007.11 The Audit committee may delegate to one or more designated members of the Audit committee the authority to grant the preapprovals required by Section 007.10. The decisions of any member to whom this authority is delegated shall be presented to the full Audit committee at each of its scheduled meetings.

007.12

007.12(a) The Director shall not recognize an independent certified public accountant as qualified for a particular Insurer if a member of the board, president, chief executive officer, controller, chief financial officer, chief accounting officer, or any person serving in an equivalent position for that Insurer, was employed by the independent certified public accountant and participated in the audit of that Insurer during the one-year period preceding the date that the most current statutory opinion is due. This section shall only apply to partners and senior managers involved in the audit. An Insurer may make application to the Director for relief from the above requirement on the basis of unusual circumstances.

007.12(b) The Insurer shall file, with its annual statement filing, the approval for relief from Section 007.12(a) with the states that it is licensed in or doing business in and with the NAIC. If the nondomestic state accepts electronic filing with the NAIC, the Insurer shall file the approval in an electronic format acceptable to the NAIC.

008. Consolidated or combined audits . An Insurer may make written application to the Director for approval to file audited consolidated or combined financial statements in lieu of separate annual audited financial statements if the Insurer is part of a group of insurance companies which utilizes a pooling or one hundred percent reinsurance agreement that affects the solvency and integrity of the Insurer's reserves and such Insurer cedes all of its direct and assumed business to the pool. In such cases, a columnar consolidating or combining worksheet shall be filed with the report, as follows:

008.01 Amounts shown on the consolidated or combined Audited financial report shall be shown on the worksheet;

008.02 Amounts for each Insurer subject to this section shall be stated separately;

008.03 Noninsurance operations may be shown on the worksheet on a combined or individual basis;

008.04 Explanations of consolidating and eliminating entries shall be included; and

008.05 A reconciliation shall be included of any differences between the amounts shown in the individual Insurer columns of the worksheet and comparable amounts shown on the annual statements of the Insurers.

009. Scope of audit and report of independent certified public accountant . Financial statements furnished pursuant to Section 005 hereof shall be examined by an independent certified public accountant. The examination of the Insurer's financial statements shall be conducted in accordance with generally accepted auditing standards. In accordance with AU Section 319 of the Professional Standards of the AICPA, Consideration of Internal Control in a Financial Statement Audit, the independent certified public accountant should obtain an understanding of internal control sufficient to plan the audit. To the extent required by AU 319, for those Insurers required to file a Management’s Report of Internal Control over Financial Reporting pursuant to Section 017, the independent certified public accountant should consider (as that term is defined in Statement on Auditing Standards (SAS) No. 102, Defining Professional Requirements in Statements on Auditing Standards or its replacement) the most recently available report in planning and performing the audit of the statutory financial statements. Consideration shall be given to the procedures illustrated in the Financial Condition Examiner's Handbook promulgated by the NAIC as the independent certified public accountant deems necessary.

010. Notification of adverse financial condition .

010.01 The Insurer required to furnish the annual Audited financial report shall require the independent certified public accountant to report in writing, within five (5) business days to the board of directors or its Audit committee, any determination by the independent certified public accountant that the Insurer has materially misstated its financial condition as reported to the Director as of the balance sheet date currently under audit or that the Insurer does not meet the minimum capital and surplus requirement of the Nebraska insurance statutes as of that date. An Insurer who has received a report pursuant to this paragraph shall forward a copy of the report to the Director within five (5) business days of receipt of such report and shall provide the independent certified public accountant making the report with evidence of the report being furnished to the Director. If the independent certified public accountant fails to receive such evidence within the required five (5) business day period, the independent certified public accountant shall furnish to the Director a copy of its report within the next five (5) business days.

010.02 No independent certified public accountant shall be liable in any manner to any person for any statement made in connection with the above paragraph if such statement is made in good faith in compliance with Section 010.01.

010.03 If the accountant, subsequent to the date of this Audited financial report filed pursuant to this Rule, becomes aware of facts which might have affected his report, the Department notes the obligation of the accountant to take such action as prescribed in Volume 1, Section AU 561 of the Professional Standards of the AICPA; as amended.

011. Communication of internal control related matter noted in an audit .

011.01 In addition to the annual Audited financial report, each Insurer shall furnish the Director with a written communication as to any unremediated material weaknesses in its Internal control over financial reporting noted during the audit. Such communication shall be prepared by the accountant within sixty (60) days after the filing of the annual Audited financial report, and shall contain a description of any unremediated material weakness (as the term material weakness is defined by Statement on Auditing Standard 60, Communication of Internal Control Related Matters Noted in an Audit, or it replacement) as of December 31 immediately preceding (so as to coincide with the Audited financial reporting noted by the accountant during the course of their audit of the financial statements. If no unremediated material weaknesses were noted, the communication should so state.

011.02 The Insurer is required to provide a description of remedial actions taken or proposed to correct unremediated material weakness, if such actions are not described in the accountant's communication.

012. Accountant's letter of qualifications . The accountant shall furnish the Insurer in connection with, and for inclusion in, the filing of the annual Audited financial report, a letter stating:

012.01 That the accountant is independent with respect to the Insurer and conforms to the standards of his or her profession as contained in the Code of Professional Ethics and pronouncements of the AICPA and the Rules of Professional Conduct of the Nebraska Board of Public Accountancy, or similar code;

012.02 The background and experience in general, and the experience in audits of Insurers of the staff assigned to the engagement and whether each is an independent certified public accountant. Nothing within this Rule shall be construed as prohibiting the accountant from utilizing such staff as he or she deems appropriate where use is consistent with the standards prescribed by generally accepted auditing standards;

012.03 That the accountant understands the Annual financial report and his opinion thereon will be filed in compliance with this Rule and that the Director will be relying on this information in the monitoring and regulation of the financial position of Insurers;

012.04 That the accountant consents to the requirements of Section 013 of this Rule and that the accountant consents and agrees to make available for review by the Director, or the Director’s designee or appointed agent, the workpapers, as defined in Section 013;

012.05 A representation that the accountant is properly licensed by an appropriate state licensing authority and is a member in good standing in the AICPA; and

012.06 A representation that the accountant is in compliance with the requirements of Section 007 of this Rule.

013. Definition, availability and maintenance of independent certified public accountant work papers .

013.01 Work papers are the records kept by the independent certified public accountant of the procedures followed, the tests performed, the information obtained, and the conclusions reached pertinent to the accountant’s audit of the financial statements of an Insurer. Work papers, accordingly, may include audit planning documentation, work programs, analyses, memoranda, letters of confirmation and representation, abstracts of company documents and schedules or commentaries prepared or obtained by the independent certified accountant in the course of his or her audit of the financial statements of an Insurer and which support the accountant’s opinion.

013.02 Every Insurer required to file an Audited financial report pursuant to this Rule shall require the accountant, to make available for review by Department examiners, all work papers prepared in the conduct of the accountant’s audit and any communications related to the audit between the accountant and the Insurer, at the offices of the Insurer, at the Department or at any other reasonable place designated by the Director. The Insurer shall require that the accountant retain the audit work papers and communications until the Department has filed a report of examination covering the period of the audit but no longer than seven (7) years from the date of the audit report.

013.03 In the conduct of the aforementioned periodic review by the Department examiners, it shall be agreed that photocopies of pertinent audit work papers may be made and retained by the Department. Such reviews by the Department examiners shall be considered investigations and all working papers and communications obtained during the course of such investigations shall be afforded the same confidentiality as other examination work papers generated by the Department.

014. Requirements for Audit committees . This section shall not apply to foreign or alien Insurers licensed in this state or an Insurer that is a SOX Compliant Entity or a direct or indirect wholly-owned subsidiary of a SOX Compliant Entity.

014.01 The Audit committee shall be directly responsible for the appointment, compensation and oversight of the work of any accountant (including resolution of disagreements between management and the accountant regarding financial reporting) for the purpose of preparing or issuing the Audited financial report or related work pursuant to this Rule. Each accountant shall report directly to the Audit committee.

014.02 The audit committee of an insurer or group of insurers shall be responsible for overseeing the insurer’s internal audit function and granting the person or persons performing the function suitable authority and resources to fulfill their responsibilities if required by Section 015 of this Rule.

014.03 Each member of the Audit committee shall be a member of the board of directors of the Insurer or a member of the board of directors of an entity elected pursuant to Section 014.05 and Section 003.03.

014.04 In order to be considered independent for purposes of this section, a member of the Audit committee may not, other than in his or her capacity as a member of the Audit committee, the board of directors, or any other board committee, accept any consulting, advisory or other compensatory fee from the entity or be an affiliated person of the entity or any subsidiary thereof. However, if law requires board participation by otherwise non-independent members, that law shall prevail and such members may participate in the Audit committee and be designated as independent for Audit committee purposes, unless they are an officer or employee of the Insurer or one of its affiliates.

014.05 If a member of the Audit committee ceases to be independent for reasons outside the member’s reasonable control, that person, with notice by the responsible entity to the state, may remain an Audit committee member of the responsible entity until the earlier of the next annual meeting of the responsible entity or one year from the occurrence of the event that caused the member to be no longer independent.

014.06 To exercise the election of the controlling person to designate the Audit committee for purposes of this Rule, the ultimate controlling person shall provide written notice to the Directors of the affected Insurers. Notification shall be made timely prior to the issuance of the statutory audit report and include a description of the basis for the election. The election can be changed through notice to the Director by the Insurer, which shall include a description of the basis for the change. The election shall remain in effect for perpetuity, until rescinded.

014.07

014.07(a) The Audit committee shall require the accountant that performs for an Insurer any audit required by this Rule to timely report to the Audit committee in accordance with the requirements of SAS 61, Communication with Audit Committees, or its replacement, including:

014.07(a)(i) All significant accounting policies and material permitted practices;

014.07(a)(ii) All material alternative treatments of financial information within statutory accounting principles that have been discussed with management officials of the Insurer, ramifications of the use of the alternative disclosures and treatments, and the treatment preferred by the accountant; and

014.07(a)(iii) Other material written communications between the accountant and the management of the Insurer, such as any management letter or schedule of unadjusted differences.

014.07(b) If an Insurer is a member of an insurance holding company system, the reports required by Section 014.07(a) may be provided to the Audit committee on an aggregate basis for Insurers in the holding company system, provided that any substantial differences among Insurers in the system are identified to the Audit committee.

014.08 The proportion of independent Audit committee members shall meet or exceed the following criteria:

| Prior Calendar Year Direct Written and Assumed Premiums | | | | --- | --- | --- | | $0 - $300,000,000 | Over $300,000,000 - $500,000,000 | Over $500,000,000 | | No minimum requirements. See also Note A and B. | Majority (50% or more) of members shall be independent. See also Note A and B. | Supermajority of members (75% or more) shall be independent. See also Note A. |

Note A: The Director has authority afforded by state law to require the entity’s board to enact improvements to the independence of the Audit committee membership if the Insurer is in a RBC action level event, meets one or more of the standards of an Insurer deemed to be in hazardous financial condition, or otherwise exhibits qualities of a troubled Insurer.

Note B: All Insurers with less than $500,000,000 in prior year direct written and assumed premiums are encouraged to structure their Audit committees with at least a supermajority of independent Audit committee members.

Note C: Prior calendar year direct written and assumed premiums shall be the combined total of direct premiums and assumed premiums from non-affiliates for the reporting entities.

014.09 An Insurer with direct written and assumed premium, excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than $500,000,000 may make application to the Director for a waiver from the Section 014 requirements based upon hardship. The Insurer shall file, with its annual statement filing, the approval for relief from Section 014 with the states that it is licensed in or doing business in and the NAIC. If the nondomestic state accepts electronic filing with the NAIC, the Insurer shall file the approval in an electronic format acceptable to the NAIC.

015. Internal Audit Function Requirements

015.01 Exemption. An insurer is exempt from the requirements of this section if:

015.01(a) The insurer has annual direct written and unaffiliated assumed premium, including international direct and assumed premium but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than $500,000,000; and,

015.01(b) If the insurer is a member of a group of insurers, the group has annual direct written and unaffiliated assumed premium including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than $1,000,000,000.

015.02 Function. The insurer or group of insurers shall establish an internal audit function providing independent, objective and reasonable assurance to the Audit committee and insurer management regarding the insurer’s governance, risk management and internal controls. This assurance shall be provided by performing general and specific audits, reviews and tests and by employing other techniques deemed necessary to protect assets, evaluate control effectiveness and efficiency, and evaluate compliance with policies and regulations.

015.03 Independence. In order to ensure that internal auditors remain objective, the Internal audit function must be organizationally independent. Specifically, the Internal audit function will not defer ultimate judgment on audit matters to others, and shall appoint an individual to head the Internal audit function who will have direct and unrestricted access to the board of directors. Organizational independence does not preclude dual-reporting relationships.

015.04 Reporting. The head of the internal audit function shall report to the audit committee regularly, but no less than annually, on the periodic audit plan, factors that may adversely impact the Internal audit function’s independence or effectiveness, material findings from completed audits and the appropriateness of corrective actions implemented by management as a result of audit findings.

015.05 Additional Requirements. If an insurer is a member of an insurance holding company system or included in a group of insurers, the insurer may satisfy the internal audit function requirements set forth in this section at the ultimate controlling parent level, an intermediate holding company level or the individual legal entity level.

016. Conduct of Insurer in connection with the preparation of required reports and documents .

016.01 No director or officer of an Insurer shall, directly or indirectly:

016.01(a) Make or cause to be made a materially false or misleading statement to an accountant in connection with any audit, review or communication required under this Rule; or

016.01(b) Omit to state, or cause another person to omit to state, any material fact necessary in order to make statements made, in light of the circumstances under which the statements were made, not misleading to an accountant in connection with any audit, review or communication required under this Rule.

016.02 No officer or director of an Insurer, or any other person acting under the direction thereof, shall directly or indirectly take any action to coerce, manipulate, mislead or fraudulently influence any accountant engaged in the performance of an audit pursuant to this Rule if that person knew or should have known that the action, if successful, could result in rendering the Insurer’s financial statements materially misleading.

016.03 For purposes of Section 016.02 of this section, actions that, “if successful, could result in rendering the Insurer’s financial statements materially misleading” include, but are not limited to, actions taken at any time with respect to the professional engagement period to coerce, manipulate, mislead or fraudulently influence an accountant:

016.03(a) To issue or reissue a report on an Insurer’s financial statements that is not warranted in the circumstances (due to material violations of statutory accounting principles prescribed by the commissioner, generally accepted auditing standards, or other professional or regulatory standards);

016.03(b) Not to perform audit, review or other procedures required by generally accepted auditing standards or other professional standards;

016.03(c) Not to withdraw an issued report; or

016.03(d) Not to communicate matters to an Insurer’s Audit committee.

017. Management’s report of internal control over financial reporting .

017.01 Every Insurer required to file an Audited financial report pursuant to this Rule that has annual direct written and assumed premiums, excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, of $500,000,000 or more shall prepare a report of the Insurer’s or Group of insurers’ Internal control over financial reporting, as these terms are defined in Section 003. The report shall be filed with the Director along with the Communication of Internal Control Related Matters Noted in an Audit described under Section 011. Management’s Report of Internal Control over Financial Reporting shall be as of December 31 immediately preceding.

017.02 Notwithstanding the premium threshold in Section 017.01, the Director may require an Insurer to file Management’s Report of Internal Control over Financial Reporting if the Insurer is in any RBC level event, or meets any one or more of the standards of an Insurer deemed to be in hazardous financial condition as defined in (include reference to Corrective Action statute).

017.03 An Insurer or a Group of insurers that is

017.03(a) directly subject to Section 404;

017.03(b) part of a holding company system whose parent is directly subject to Section 404;

017.03(c) not directly subject to Section 404 but is a SOX Compliant Entity; or

017.03(d) a member of a holding company system whose parent is not directly subject to Section 404 but is a SOX Compliant Entity; may file its or its parent’s Section 404 Report and an addendum in satisfaction of this Section 017 requirement provided that those internal controls of the Insurer or Group of insurers having a material impact on the preparation of the Insurer’s or Group of insurers’ audited statutory financial statements (those items included in Section 005.02 through 005.07 of this Rule) were included in the scope of the Section 404 Report. The addendum shall be a positive statement by management that there are no material processes with respect to the preparation of the Insurer’s or Group of insurers’ audited statutory financial statements (those items included in Section 005.02 through 005.07 of this Rule) excluded from the Section 404 Report. If there are internal controls of the Insurer or Group of insurers that have a material impact on the preparation of the Insurer’s or Group of insurers’ audited statutory financial statements and those internal controls were not included in the scope of the Section 404 Report, the Insurer or Group of insurers may either file (i) a Section 017 report, or (ii) the Section 404 Report and a Section 017 report for those internal controls that have a material impact on the preparation of the Insurer’s or Group of insurers’ audited statutory financial statements not covered by the Section 404 Report.

017.04 Management’s Report of Internal Control over Financial Reporting shall include:

017.04(a) A statement that management is responsible for establishing and maintaining adequate Internal control over financial reporting;

017.04(b) A statement that management has established Internal control over financial reporting and an assertion, to the best of management’s knowledge and belief, after diligent inquiry, as to whether its Internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of financial statements in accordance with statutory accounting principles;

017.04(c) A statement that briefly describes the approach or processes by which management evaluated the effectiveness of its Internal control over financial reporting; and

017.04(d) A statement that briefly describes the scope of work that is included and whether any Internal controls were excluded;

017.04(e) Disclosure of any unremediated material weaknesses in the Internal control over financial reporting identified by management as of December 31 immediately preceding. Management is not permitted to conclude that the Internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of financial statements in accordance with statutory accounting principles if there is one or more unremediated material weaknesses in its Internal control over financial reporting;

017.04(f) A statement regarding the inherent limitations of Internal control systems; and

017.04(g) Signatures of the chief executive officer and the chief financial officer (or equivalent position/title).

017.05 Management shall document and make available upon financial condition examination the basis upon which its assertions, required in Section 017.04 above, are made. Management may base its assertions, in part, upon its review, monitoring and testing of internal controls undertaken in the normal course of its activities.

017.05(a) Management shall have discretion as to the nature of the Internal control framework used, and the nature and extent of documentation, in order to make its assertion in a cost effective manner and, as such, may include assembly of or reference to existing documentation.

017.05(b) Management’s Report on Internal Control over Financial Reporting, required by Section 017.01 above, and any documentation provided in support thereof during the course of a financial condition examination, shall be kept confidential by the Department.

018. Exemptions and effective dates .

018.01 Upon written application of any Insurer, the Director may grant an exemption from compliance with any and all provisions of this Rule if the Director finds, upon review of the application, that compliance with this Rule would constitute a financial or organizational hardship upon the Insurer. An exemption may be granted at any time and from time to time for a specified period or periods. Within ten (10) days from a denial of an Insurer's written request for an exemption from this Rule, such Insurer may request in writing a hearing on its application for an exemption. Such hearing shall be held in accordance with the Nebraska Administrative Procedure Act, Neb. Rev. Stat. § 84-901 et. seq. and Title 210, Nebraska Administrative Code, Chapter 26.

018.02 Domestic Insurers retaining a certified public accountant on the effective date of this Rule who qualify as independent shall comply with this Rule for the year ending December 31, 2009 and each year thereafter unless the Director permits otherwise.

018.03 Domestic Insurers not retaining a certified public accountant on the effective date of this Rule who qualifies as independent may meet the following schedule for compliance unless the Director permits otherwise.

018.03(a) As of December 31, 2009, file with the Director an Audited financial report.

018.03(b) For the year ending December 31, 2009 and each year thereafter, such Insurers shall file with the Director all reports and communication required by this Rule.

018.04 Foreign Insurers shall comply with this Rule for the year ending December 31, 2009 and each year thereafter, unless the Director permits otherwise.

018.05 The requirements of Section 007.04 shall be in effect for audits of the year beginning January 1, 2010 and thereafter.

018.06 The requirements of Section 014 are to be in effect January 1, 2010. An Insurer or Group of insurers that is not required to have independent Audit committee members or only a majority of independent Audit committee members (as opposed to a supermajority) because the total written and assumed premium is below the threshold and subsequently becomes subject to one of the independence requirements due to changes in premium shall have one (1) year following the year the threshold is exceeded (but not earlier than January 1, 2010) to comply with the independence requirements. Likewise, an Insurer that becomes subject to one of the independence requirements as a result of a business combination shall have one (1) calendar year following the date of acquisition or combination to comply with the independence requirements.

018.07 The requirements of Section 017 and other modified sections, except for Section 014 covered above, are effective beginning with the reporting period ending December 31, 2010 and each year thereafter. An Insurer or Group of insurers that is not required to file a report because the total written premium is below the threshold and subsequently becomes subject to the reporting requirements shall have two (2) years following the year the threshold is exceeded (but not earlier than December 31, 2010) to file a report. Likewise, an Insurer acquired in a business combination shall have two (2) calendar years following the date of acquisition or combination to comply with the reporting requirements.

018.08 The requirements of Section 015 are to be in effect January 1, 2018. If an insurer or Group of insurers that is exempt from Section 015 requirements no longer qualifies for that exemption, it shall have one year after the year the threshold is exceeded to comply with the requirements of this article.

019. Canadian and British companies .

019.01 In the case of Canadian and British Insurers, the annual Audited financial report shall be defined as the annual statement of total business on the form filed by such companies with their supervision authority duly audited by an independent chartered accountant.

019.02 For such Insurers, the letter required in Section 006.02 shall state that the accountant is aware of the requirements relating to the annual Audited financial report filed with the Director pursuant to Section 004 and shall affirm that the opinion expressed is in conformity with such requirements.

020. Severability provision . If any Section or portion of a Section of this Rule or its applicability to any person or circumstance is held invalid by a court, the remainder of the rule or the applicability of such provision to other persons or circumstances shall not be affected.

History

• Effective 2018-03-13

Chapter 57 Life and Health Reinsurance Agreements

Neb. Admin. Code tit. 210, ch. 57 Life and Health Reinsurance Agreements {#sec-210-nac-57 omnilex-key=us-ne-regs-official--title-210--210 NAC 57}

001. Authority . This regulation is adopted and promulgated by the Director of Insurance of the State of Nebraska pursuant to Neb. Rev. Stat. §§ 44-101.01 and 44-416.04.

002. Preamble .

002.01 The Nebraska Insurance Department recognizes that licensed insurers routinely enter into reinsurance agreements that yield legitimate relief to the ceding insurer from strain to surplus.

002.02 However, it is improper for a licensed insurer, in the capacity of ceding insurer, to enter into reinsurance agreements for the principal purpose of producing significant surplus aid for the ceding insurer, typically on a temporary basis, while not transferring all of the significant risks inherent in the business being reinsured. In substance or effect, the expected potential liability to the ceding insurer remains basically unchanged by the reinsurance transaction, notwithstanding certain risk elements in the reinsurance agreement, such as catastrophic mortality or extraordinary survival. The terms of such agreements referred to herein and described in Section 004 violate:

002.02(a) Neb. Rev. Stat. § 44-322 relating to financial statements which do not properly reflect the financial condition of the ceding life insurer;

002.02(b) Neb. Rev. Stat. §§ 44-416.01 through 44-416.03 relating to reinsurance reserve credits, thus resulting in a ceding insurer improperly reducing liabilities or establishing assets for reinsurance ceded; and

002.02(c) Neb. Rev. Stat. §§ 44-4809, 44-4812, and 44-4817 relating to creating a situation that may be hazardous to policyholders and the people of this State.

3. Scope . This regulation shall apply to all domestic life and accident and health insurers and to all other licensed life and accident and health insurers which are not subject to a substantially similar regulation in their domiciliary state. This regulation shall also similarly apply to licensed property and casualty insurers with respect to their accident and health business. This regulation shall not apply to assumption reinsurance, yearly renewable term reinsurance or certain nonproportional reinsurance such as stop loss or catastrophe reinsurance.

004. Accounting requirements .

004.01 No insurer subject to this regulation shall, for reinsurance ceded, reduce any liability or establish any asset in any financial statement filed with the Department if, by the terms of the reinsurance agreement, in substance or effect, any of the following conditions exist:

004.01(a) Renewal expense allowances provided or to be provided to the ceding insurer by the reinsurer in any accounting period, are not sufficient to cover anticipated allocable renewal expenses of the ceding insurer on the portion of the business reinsured, unless a liability is established for the present value of the shortfall (using assumptions equal to the applicable statutory reserve basis on the business reinsured). Those expenses include commissions, premium taxes and direct expenses including, but not limited to, billing, valuation, claims and maintenance expected by the company at the time the business is reinsured;

004.01(b) The ceding insurer can be deprived of surplus or assets at the reinsurer’s option or automatically upon the occurrence of some event, such as the insolvency of the ceding insurer, except that termination of the reinsurance agreement by the reinsurer for nonpayment of reinsurance premiums or other amounts due, such as modified coinsurance reserve adjustments, interest and adjustments on funds withheld, and tax reimbursements, shall not be considered to be such a deprivation of surplus or assets;

004.01(c) The ceding insurer is required to reimburse the reinsurer for negative experience under the reinsurance agreement, except that neither offsetting experience refunds against current and prior years' losses under the agreement nor payment by the ceding insurer of an amount equal to the current and prior years' losses under the agreement upon voluntary termination of in force reinsurance by the ceding insurer shall be considered such a reimbursement to the reinsurer for negative experience. Voluntary termination does not include situations where termination occurs because of unreasonable provisions which allow the reinsurer to reduce its risk under the agreement. An example of such a provision is the right of the reinsurer to increase reinsurance premiums or risk and expense charges to excessive levels forcing the ceding company to prematurely terminate the reinsurance treaty;

004.01(d) The ceding insurer must, at specific points in time scheduled in the agreement, terminate or automatically recapture all or part of the reinsurance ceded;

004.01(e) The reinsurance agreement involves the possible payment by the ceding insurer to the reinsurer of amounts other than from income realized from the reinsured policies. For example, it is improper for a ceding company to pay reinsurance premiums, or other fees or charges to a reinsurer which are greater than the direct premiums collected by the ceding company;

004.01(f) The treaty does not transfer all of the significant risk inherent in the business being reinsured. The following table identifies for a representative sampling of products or type of business, the risks which are considered to be significant. For products not specifically included, the risks determined to be significant shall be consistent with this table.

Risk categories:

a. Morbidity

b. Mortality

c. Lapse

This is the risk that a policy will voluntarily terminate prior to the recoupment of a statutory surplus strain experienced at issue of the policy.

d. Credit Quality (C1)

This is the risk that invested assets supporting the reinsured business will decrease in value. The main hazards are that assets will default or that there will be a decrease in earning power. It excludes market value declines due to changes in interest rate.

e. Reinvestment (C3)

This is the risk that interest rates will fall and funds reinvested (coupon payments or monies received upon asset maturity or call) will therefore earn less than expected. If asset durations are less than liability durations, the mismatch will increase.

f. Disintermediation (C3)

This is the risk that interest rates rise and policy loans and surrenders increase or maturing contracts do not renew at anticipated rates of renewal. If asset durations are greater than the liability durations, the mismatch will increase. Policyholders will move their funds into new products offering higher rates. The company may have to sell assets at a loss to provide for these withdrawals.

• • Significant 0 – Insignificant RISK CATEGORY

a b c d e f

Health Insurance – other than LTC/LTD* + 0 + 0 0 0

Health Insurance – LTC/LTD* + 0 + + + 0

Immediate Annuities 0 + 0 + + 0

Single Premium Deferred Annuities 0 0 + + + +

Flexible Premium Deferred Annuities 0 0 + + + +

Guaranteed Interest Contracts 0 0 0 + + +

Other Annuity Deposit Business 0 0 + + + +

Single Premium Whole Life 0 + + + + +

Traditional Non-Par Permanent 0 + + + + +

Traditional Non-Par Term 0 + + 0 0 0

Traditional Par Permanent 0 + + + + +

Traditional Par Term 0 + + 0 0 0

Adjustable Premium Permanent 0 + + + + +

Indeterminate Premium Permanent 0 + + + + +

Universal Life Flexible Premium 0 + + + + +

Universal Life Fixed Premium 0 + + + + +

Universal Life Fixed Premium 0 + + + + +

dump-in premiums allowed

*LTC = Long Term Care Insurance

LTD = Long Term Disability Insurance

004.01(g)(i) The credit quality, reinvestment, or disintermediation risk is significant for the business reinsured and the ceding company does not (other than for the classes of business excepted in Section 004.01(g)(ii)) either transfer the underlying assets to the reinsurer or legally segregate such assets in a trust or escrow account or otherwise establish a mechanism satisfactory to the Director which legally segregates, by contract or contract provision, the underlying assets.

004.01(g)(ii) Notwithstanding the requirements of Section 004.01 (g)(i), the assets supporting the reserves for the following classes of business and any classes of business which do not have a significant credit quality, reinvestment or disintermediation risk may be held by the ceding company without segregation of such assets:

• Health Insurance – LTC/LTD
• Traditional Non-Par Permanent
• Traditional Par Permanent
• Adjustable Premium Permanent
• Indeterminate Premium Permanent
• Universal Life Fixed Premium

(no dump-in premiums allowed)

The associated formula for determining the reserve interest rate adjustment must use a formula which reflects the ceding company’s investment earnings and incorporates all realized and unrealized gains and losses reflected in the statutory statement. The following is an acceptable formula:

Rate = 2(I + CG)_____

X + Y – I – CG

Where: I is the net investment income (Exhibit 2, Line 15, Column 7)

CG is capital gains less capital losses (Exhibit 3, Line 11, Column 6, less Exhibit 4, Line 9, Column 4)

X is the current year cash and invested assets (Page 2, Line 11, Column 4) plus investment income due and accrued (Page 2, Line 17, Column 4) less borrowed money (Page 3, Line 22, Column 1)

Y is the same as X but for the prior year

004.01(h) Settlements are made less frequently than quarterly or payments due from the reinsurer are not made in cash within ninety (90) days of the settlement date.

004.01(i) The ceding insurer is required to make representations or warranties not reasonably related to the business being reinsured.

004.01(j) The ceding insurer is required to make representations or warranties about future performance of the business being reinsured.

004.01(k) The reinsurance agreement is entered into for the principal purpose of producing significant surplus aid for the ceding insurer, typically on a temporary basis, while not transferring all of the significant risks inherent in the business reinsured and, in substance or effect, the expected potential liability to the ceding insurer remains basically unchanged.

004.02 Notwithstanding subsection 004.01, an insurer subject to this regulation may, with the prior approval of the Director, take such reserve credit or establish such asset as the Director may deem consistent with Nebraska insurance statutes, rules, or regulations, including actuarial interpretations or standards adopted by the Department.

004.03(a) Agreements entered into after the effective date of this regulation which involve the reinsurance of business issued prior to the effective date of the agreements, along with any subsequent amendments thereto, shall be filed by the ceding company with the Director within thirty (30) days from its date of execution. Each filing shall include data detailing the financial impact of the transaction. The ceding insurer’s actuary who signs the financial statement actuarial opinion with respect to valuation of reserves shall consider this regulation and any applicable actuarial standards of practice when determining the proper credit in financial statements filed with this department. The actuary should maintain adequate documentation and be prepared upon request to describe the actuarial work performed for inclusion in the financial statements and to demonstrate that such work conforms to this regulation.

004.03(b) Any increase in surplus net of federal income tax resulting from arrangements described in Section 004.03(a) shall be identified separately on the insurer’s statutory financial statement as a surplus item (aggregate write-ins for gains and losses in surplus in the Capital and Surplus Account, page 4 of the Annual Statement) and recognition of the surplus increase as income shall be reflected on a net of tax basis in the "Reinsurance ceded" line, page 4 of the Annual Statement as earnings emerge from the business reinsured.

[For example, on the last day of calendar year N, company XYZ pays a $20 million initial commission and expense allowance to company ABC for reinsuring an existing block of business. Assuming a 34% tax rate, the net increase in surplus at inception is $13.2 million ($20 million - $6.8 million) which is reported on the "Aggregate write-ins for gains and losses in surplus" line in the Capital and Surplus account. $6.8 million (34% of $20 million) is reported as income on the "Commissions and expense allowances on reinsurance ceded" line of the Summary of Operations.

At the end of year N + 1 the business has earned $4 million. ABC has paid $.5 million in profit and risk charges in arrears for the year and has received a $1 million experience refund. Company ABC’s annual statement would report $1.65 million (66% of ($4 million - $1 million - $.5 million) up to a maximum of $13.2 million) on the "Commissions and expense allowance on reinsurance ceded" line of the Summary of Operations, and -$1.65 million on the "Aggregate write-ins for gains and losses in surplus" line of the Capital and Surplus account. The experience refund would be reported separately as a miscellaneous income item in the Summary of Operations.]

005. Written agreements .

005.01 No reinsurance agreement or amendment to any agreement may be used to reduce any liability or to establish any asset in any financial statement filed with the Department, unless the agreement, amendment or a binding letter of intent has been duly executed by both parties no later than the "as of date" of the financial statement.

005.02 In the case of a letter of intent, a reinsurance agreement or an amendment to a reinsurance agreement must be executed within a reasonable period of time, not exceeding ninety (90) days from the execution date of the letter of intent, in order for credit to be granted for the reinsurance ceded.

005.03 The reinsurance agreement shall contain provisions which provide that:

005.03(a) The agreement shall constitute the entire agreement between the parties with respect to the business being reinsured thereunder and that there are no understandings between the parties other than as expressed in the agreement; and

005.03(b) Any change or modification to the agreement shall be null and void unless made by amendment to the agreement and signed by both parties.

History

• Effective 2001-02-17

Chapter 58 Motor Vehicle Service Contract Reimbursement Insurance

Neb. Admin. Code tit. 210, ch. 58 Motor Vehicle Service Contract Reimbursement Insurance {#sec-210-nac-58 omnilex-key=us-ne-regs-official--title-210--210 NAC 58}

001. Authority . This rule is promulgated pursuant to the authority granted in the Motor Vehicle Service Contract Reimbursement Insurance Act, Neb. Rev. Stat. §§ 44-3520 through 44-3526.

002. Purpose . This rule sets forth regulations and procedural requirements which the Director of Insurance deems necessary to carry out the provisions of the Motor Vehicle Service Contract Reimbursement Insurance Act, including but not limited to the establishment of minimum standards for disclosure of the coverage limitation and exclusions in motor vehicle service contracts.

003. Definitions .

003.01A The definitions in the Motor Vehicle Service Contract Reimbursement Insurance Act as set forth in Neb. Rev. Stat. § 44-3521, shall apply in the construction of this rule.

003.01B The term “conspicuously” shall mean writing, displaying, or presenting a term in such a way that a reasonable person against whom it is to operate ought to have noticed it. Conspicuously stated terms include:

i. a heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size; and

ii. language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or other marks that call attention to the language.

004. Filing requirements . It is the responsibility of the motor vehicle service contract provider issuing the motor vehicle service contract to file a true and correct copy of the motor vehicle service contract form(s), motor vehicle service contract reimbursement insurance policy(ies), and the Notice of Filing form with the Department. The Notice of Filing shall be made on a form provided by the Department and must contain the name and address of the business entity filing the form as well as a contact person, the names and addresses of entities from which the service contract forms were purchased, the names and addresses of insurers insuring the provider’s contractual liability, and the names and addresses of sales personnel. It is the responsibility of the motor vehicle service contract provider to notify the Department on a continuing basis of any changes in the filings.

005. Insurer's obligation . Each insurer shall provide coverage for all obligations and liabilities incurred by a provider arising out of the provider’s contractual obligations to a service contract holder.

006. Disclosure to service contract holders . Every motor vehicle service contract shall be written in clear, understandable language and shall be printed or typed in easy-to-read type, size and style, and shall not be issued, sold, or offered for sale in this state unless the contract:

006.01 Identifies the motor vehicle service contract provider and the service contract holder;

006.02 Conspicuously states that the obligations of the motor vehicle service contract provider to the service contract holder are guaranteed under a service contract reimbursement insurance policy;

006.03 Conspicuously states the name and address of the insurance company issuing the reimbursement insurance policy;

006.04 Sets forth the total purchase price and the terms under which it is to be paid;

006.05 Sets forth the procedure for making a claim, including an address and telephone number for claim assistance;

006.06 Conspicuously states the existence of a deductible amount, if any;

006.07 Clearly specifies the merchandise or services, or both, to be provided and any limitations, exceptions or exclusions;

006.08 Sets forth all of the obligations and duties of the service contract holder, such as the duty to prevent any further damage to the vehicle, the obligation to notify the provider in advance of any repair, etc., if any;

006.09 Sets forth any terms, restrictions, or conditions governing transferability of a service contract, if any; and

006.10 Sets forth applicable cancellation requirements.

007. Violations . If the Director determines that a motor vehicle service contract provider has failed to comply with the Motor Vehicle Service Contract Reimbursement Insurance Act, the Director may issue an order to cease and desist from selling or offering for sale motor vehicle service contracts. Accompanied with that order shall be a Notice of Hearing setting forth the time, date, place and issues to be heard. Such hearing shall take place not less than ten days nor more than thirty days from the date from the cease and desist. Upon the failure of a motor vehicle service contract provider to obey a cease and desist order issued by the Director, the director may give notice in writing of the failure to the Attorney General, who may commence an action against the provider to enjoin that provider from selling or offering for sale motor vehicle service contracts.

008. Severability . If any provision of this regulation is held invalid, the remainder shall not be affected.

History

• Effective 2012-10-08

Chapter 59 Rule Implementing Managing General Agents Act

Neb. Admin. Code tit. 210, ch. 59 Rule Implementing Managing General Agents Act {#sec-210-nac-59 omnilex-key=us-ne-regs-official--title-210--210 NAC 59}

001. Authority . This Rule is promulgated pursuant to the authority granted in Neb.Rev.Stat. §44-4909.

002. Purpose . This Rule is promulgated to implement and administer provisions of the Managing General Agents Act.

003. Definitions . The definitions in Neb.Rev.Stat. §44-4902 apply in the construction of this Rule.

004. Bond . Coverage is to be written by an insurer that is different from and otherwise not affiliated with the insurer contracting with the managing general agent. All bonds are to be executed on a form approved by the Department and executed by an insurer licensed in Nebraska or operating under the Nebraska Surplus Lines Act with coverage placed through a surplus lines licensee, with a copy of the executed bond kept on file for review by any applicable state insurance director, superintendent, or commissioner.

005. Records Retention .

005.01 The insurer is to retain any contract entered into between a managing general agent and an insurer.

005.02 All books, bank accounts and records pertaining to business written by the managing general agent are to be retained at the managing general agent’s place of business, with all such items made available to inspection of the director or the director’s representatives during business hours. Records are to be maintained for 25 years following the completion of a liability insurance transaction, seven years following completion of a property insurance transaction, or until any statute of limitations period applicable to potential claims arising thereunder has expired, whichever is later.

005.03 Upon termination of the contract between an insurer and a managing general agent for any reason, all records maintained during the contract period are to be delivered by the managing general agent to the insurer within 90 days of any request.

005.04 The amount determined by the director under §44-4904(9)(i) is one-quarter of one percent of the policyholder surplus as reported in the last annual statement of the insurer.

005.05 The amount set by the director under §44-4904(9)(v) is one-quarter of one percent of the policyholder surplus as reported in the last annual statement of the insurer.

006. Reporting Requirements .

006.01 Domestic insurers are to maintain, at all times, an up-to-date list on file with the Department, containing all names and addresses of managing general agents with whom it has a contract, and the name of an officer of the insurer responsible for the contract.

006.02 A domestic insurer shall file with the Department the name of the officer of the insurer responsible for binding reinsurance contracts.

007. Examination . The Department retains authority to examine a managing general agent notwithstanding termination of the managing general agent's contractual authority. Any examination expenses are to be reimbursed to the Department by the insurer employing the managing general agent according to the provisions of the Insurers Examination Act.

008. Severability . If a court holds any section or portion of a section of this rule, or the applicability thereof, invalid the remainder of the rule or the applicability of such provision to other persons or circumstances are not to be affected thereby.

History

• Effective 2020-10-04

Chapter 60 Unfair Property and Casualty Settlement Practices Rule

Neb. Admin. Code tit. 210, ch. 60 Unfair Property and Casualty Settlement Practices Rule {#sec-210-nac-60 omnilex-key=us-ne-regs-official--title-210--210 NAC 60}

001. Authority . This rule is adopted under the authority of the Unfair Insurance Claims Settlement Practices Act, pursuant to Neb.Rev.Stat. §§44-1536 through 44-1544.

002. Purpose . This rule sets forth minimum standards for the investigation and disposition of property and casualty claims occurring in the State of Nebraska and arising under insurance policies or certificates which, if violated with such frequency as to indicate a general business practice or committed flagrantly and in conscious disregard, would constitute a violation of the Unfair Insurance Claims Settlement Practices Act or any rule or regulation promulgated thereunder. It is not intended to cover claims involving workers' compensation, fidelity, suretyship or boiler and machinery insurance. Various provisions of this rule are intended to define procedures and practices which constitute unfair insurance claims practices. This rule is not exclusive and other acts, not herein specified, may also be found to constitute such practices.

Nothing herein shall be construed to create nor imply a private cause of action for violation of this rule. This is merely a clarification of original intent and does not indicate any change of position.

This rule shall not apply to claims involving only subrogation rights.

003. Definitions . All definitions contained in the Unfair Insurance Claims Settlement Practices Act are hereby incorporated by reference. As otherwise used in this regulation:

003.01 "Agent" means any individual, corporation, association, partnership or other legal entity authorized to represent an insurer with respect to a claim;

003.02 "Automobile" means a four wheel motor vehicle of the private passenger, station wagon, pickup, panel or delivery type;

003.03 "Claim file" means any retrievable electronic file, microfilm/microfiche file, paper file, or any combination thereof;

003.04 "Claimant" means either a first party claimant, a third party claimant, or both and includes the claimant's designation legal representative or a member of the claimant's immediate family designated by the claimant;

003.05 "Days" means working days;

003.06 "Documentation" includes, but is not limited to, all pertinent communications, transactions, notes, work papers, claim forms, bills and explanation of benefits forms relative to the claim;

003.07 "First party claimant" means an individual, corporation, association, partnership or other legal entity asserting a right to payment under an insurance policy or insurance contract arising out of the occurrence of the contingency or loss covered by the policy or contract;

003.08 "Investigation" means all activities of an insurer directly or indirectly related to the determination of liabilities under coverages afforded by an insurance policy or insurance contract;

003.09 "Notification of claim" means any notification by a claimant, whether in writing or by other means acceptable under the terms of an insurance policy, business custom or statute, to an insurer or its agent which reasonably apprises the insurer of the facts pertinent to a claim;

003.10 "Third party claimant" means any person asserting a claim against any person under a policy or certificate of an insurer; and

003.11 "Written communications" includes all correspondence, regardless of source or type, that is related to the handling of the claim. Written communications shall be effectively communicated when placed in the mail with adequate first class postage.

004. File and record documentation . Each insurer's claim files are subject to examination by the Director of Insurance or by the Director's duly appointed designees. To aid in such examination:

004.01 The insurer shall maintain claim data that is accessible and retrievable for examination. An insurer shall be able to provide the claim number, line of coverage, date of loss and date of payment of the claim, date of denial or date closed without payment. This data must be available for all open and closed files for the current year and the two preceding years.

004.02 Detailed documentation shall be contained in each claim file in order to permit reconstruction of the insurer's activities relative to each claim.

004.03 Each relevant document within the claim file shall be noted as to date received, date processed or date mailed.

004.04 For those insurers that do not maintain hard copy files, claim files must be accessible from Cathode Ray Tube (CRT), Video Display Terminal (VDT) or micrographics and be capable of duplication to hard copy.

005. Misrepresentation of policy provisions .

005.01 No agent or insurer shall knowingly misrepresent or conceal from first party claimants, any pertinent benefits, coverages, or other provisions of any insurance policy or insurance contract when such benefits, coverages or other provisions are pertinent to a claim.

005.02 A claim shall not be denied on the basis of failure to exhibit property unless there is documentation of a breach of the policy provisions present in the claim file.

005.03 No insurer shall deny a claim based upon the failure of a first party claimant to give written notice of loss within a specific time limit unless the written notice requirement is a written policy condition, or the first party claimant's failure to give written notice after being requested to do so is so unreasonable as to constitute a breach of the claimant's contractual duty to cooperate with the insurer.

005.04 No insurer shall indicate to a first party claimant on a payment draft, check or in any accompanying letter that said payment is "final" or is "a release" of any claim(s) unless such is the case, or the policy limit has been paid, or there has been a compromise settlement agreed to by the first party claimant and the insurer as to coverage and amount payable under the contract.

005.05 No insurer shall issue checks or drafts in partial settlement of a loss or claim under a specific coverage that contains language purporting to release the insurer or its insured from total liability.

006. Failure to acknowledge pertinent communications .

006.01 Every insurer, upon receiving notification of a claim shall, within fifteen (15) days, acknowledge the receipt of such notice unless payment is made within that period of time. If an acknowledgement is made by means other than writing, an appropriate dated notation of the acknowledgement shall be made in the claim file of the insurer. Notification given to an agent of an insurer shall be notification to the insurer. If notification is given to an agent of an insurer, such agent may acknowledge receipt of such notice. Notice to an agent of an insurer shall not be notice to the insurer if such agent notifies the claimant that the agent is not authorized to receive notices of claim.

006.02 Every insurer, upon receipt of any inquiry from the Director respecting a claim shall furnish the Department, in duplicate, an adequate response to the inquiry or request additional reasonable time to respond within fifteen (15) days of receipt of such inquiry.

006.03 An appropriate reply shall be made within fifteen (15) days on all other pertinent communications from a claimant which reasonably suggest that a response is expected.

006.04 Every insurer, upon receiving notification of claim, shall provide, within fifteen (15) days, the necessary claim forms, instructions and reasonable assistance so that claimants can comply with the insurer's reasonable requirements and policy conditions. Compliance with this paragraph shall constitute compliance with Subsection 006.01.

007. Standards for the prompt investigation of claims . Every insurer shall, within fifteen (15) days of notification of claim, initiate investigation of any claim presented by a claimant.

008. Standards for prompt, fair and equitable settlements applicable to all insurers .

008.01 Within fifteen (15) days after receipt by the insurer of settlement information or a properly executed proof of loss, the claimant shall be advised of the acceptance or denial of the claim by the insurer. No insurer shall deny a claim on the grounds of a specific policy provision, condition or exclusion unless reference to such provision, condition, or exclusion is included in the denial. The denial must be given to the claimant in writing and the claim file of the insurer shall contain documentation of the denial.

008.02 If the insurer needs more time to determine whether a claim should be accepted or denied, it shall so notify the claimant within fifteen (15) days after receipt of settlement information or the proof of loss, giving the reasons more time is needed. If the investigation remains incomplete, the insurer shall, thirty (30) days from the initial notification and every thirty (30) days thereafter, send to the claimant a letter setting forth the reasons additional time is needed for investigation. This subsection shall not apply to claims in litigation.

008.03 Where there is a reasonable basis supported by specific information available for review by the Director of Insurance for suspecting that the claimant has fraudulently caused or contributed to the loss, the insurer is relieved from the requirements of subsections 008.01 to 008.02; provided, however, that the claimant shall be advised of the acceptance or denial of the claim by the insurer within a reasonable time for full investigation after receipt by the insurer of settlement information or a properly executed proof of loss.

008.04 In cases where there is no dispute as to coverage as to one or more portions of the insurance policy and where liability has become reasonably clear, the insurer shall offer to claimants, within fifteen (15) days of receipt of settlement information, amounts within policy limits which are fair and reasonable as shown by the insurer's completed investigation. The insurer shall tender payment within fifteen (15) days of claimant's acceptance. Payment shall be made for any such portion of the insurance policy notwithstanding the existence of disputes as to other portions of the insurance policy coverage where such payment can be made without prejudice to any interested party.

008.05 Insurers shall not fail to settle first party claims on the basis that responsibility for payment should be assumed by others, except as may otherwise be provided by policy provisions.

008.06 Insurers shall not assign a percentage of negligence to a claimant for the purpose of reducing a settlement, when there exists no reasonable evidence upon which the assigned percentage of negligence could be based.

008.07 No insurer shall request or require any insured to submit to a polygraph examination or examination under oath, unless authorized under the applicable insurance contract and not prohibited by state law.

008.08 If the insurer denies a claim or portion thereof, and the claimant objects to such denial, the insurer shall notify the claimant in writing that he or she may have the matter reviewed by the Nebraska Department of Insurance, and the insurer shall provide the claimant with the Department's current address and phone number.

009. Standards for prompt, fair and equitable settlements applicable to losses involving automobiles .

009.01 Where liability and damages are reasonably clear, insurers shall not recommend that third party claimants make claim under their own policies solely to avoid, delay or defer paying claims under such insurer's policy.

009.02 Insurers shall not require a claimant to travel an unreasonable distance either to inspect a replacement automobile, to obtain a repair estimate or to have the automobile repaired at a specific repair shop.

009.03 Insurers shall include the first party claimant's deductible, if any, in subrogation demands, unless requested not to by the first party claimant. Subrogation recoveries shall be shared on a proportionate basis no less than yearly with the first party claimant, unless the first party claimant has otherwise recovered the deductible amount. No deduction for expenses can be made from the deductible recovery unless an outside attorney is retained to pursue such collection and then the only expenses shared, on a pro rata basis, shall be legal expenses.

009.04 If the insurer designates any repairer owned or affiliated with the insurer, it shall assure that the repairs are performed in a skillful manner and shall comply with this subsection. If non-total losses are settled on the basis of a written estimate prepared by or for the insurer, the insurer shall supply the claimant a copy of the estimate upon which the settlement is based. The estimate prepared by or for the insurer shall be reasonable, in accordance with applicable policy provisions, and of an amount which will allow for repairs to be made in a skillful manner. If the claimant subsequently claims, based upon a written estimate which was obtained, that necessary repairs will exceed the written estimate prepared by or for the insurer, the insurer may (1) pay the difference between the written estimate and a higher estimate obtained by the claimant, or (2) promptly provide the claimant with the name of at least one quality repair shop that will make the repairs for the amount of the written estimate, or (3) contact the repair shop of the claimant's choice for repair, to negotiate the amount of the written estimate for repair. The insurer shall maintain documentation of all such communications.

009.05 When the amount claimed is reduced because of betterment or depreciation, all information for such reduction shall be contained in the claim file. Such deductions shall be measurable, discernable, itemized and specified as to dollar amount and shall be appropriate for the amount of deductions.

009.06 When the insurer elects to repair and designates a specific repair shop for automobile repairs, the insurer shall cause the damaged automobile to be restored to its condition prior to the loss within a reasonable period of time, at no additional cost to the first party claimant other than as stated in the policy.

009.07 Storage and Towing. The insurer shall provide reasonable notice to the claimant prior to termination of payment for automobile storage charges and shall document same as is required by section 004. Such insurer shall provide reasonable time for removal of the vehicle from storage prior to the termination of payment. Unless the insurer has provided the first party claimant with the name of a specific towing company prior to the use of another towing company, the insurer shall pay any and all reasonable towing charges irrespective of the towing company used.

010. Standards for prompt, fair and equitable settlements applicable to fire and extended coverage type policies .

010.01 Replacement Cost Coverage: When the insurance policy authorizes for the adjustment and settlement of losses based on replacement cost, the following shall apply:

010.01(A) When a loss requires repair or replacement of an item or part, any consequential physical damage incurred in making such repair or replacement not otherwise excluded by the policy, shall be included in the loss. Repair or replacement of consequential physical damage which requires the use of materials which are better or superior to the damaged materials shall not be considered betterment unless the use of such materials is at the request of the insured.

010.01(B) When a loss requires replacement of items and the replacement items do not reasonably match in quality, color or size, the insurer shall replace all items in the area so as to conform to a reasonably uniform appearance. This applies to both interior and exterior losses. The insured shall not bear cost over any applicable deductible.

010.02 Actual Cash Value Coverage: When the insurance policy provides for the adjustment and settlement of losses based on actual cash value, the following shall apply:

010.02(A) The insurer shall determine actual cash value, and shall provide a copy of the worksheet(s) detailing any and all deductions.

010.02(B) In cases in which the insured's interest is limited because the property has nominal or no market value, the insurer shall provide a written explanation of the basis for limiting the amount payable.

011. Standards for overpayment recovery applicable to all insurers .

011.01 No insurer shall withhold any portion of any benefit payable or request any refund, on the basis that the sum withheld or the refund requested is an adjustment or correction of an overpayment made on a prior claim arising under the same policy unless:

011.01(A) The insurer has within its files clear, documented evidence of an overpayment and written authorization from the claimant permitting such withholding procedure, or

011.01(B) The insurer has within its files clear, documented evidence that:

011.01(B)(1) The overpayment was clearly erroneous under the provisions of the policy. If the overpayment is the subject of a reasonable dispute as to facts, this procedure may not be used; and

011.01(B)(2) The error which resulted in the overpayment is not a mistake of law; and

011.01(B)(3) The insurer has notified the claimant within six (6) months of the date of the error, except that in instances of error prompted by representations or nondisclosures of claimants, the insurer notifies the claimant within fifteen (15) days after the date that clear, documented evidence of discovery of such error is included in its file; and

011.01(B)(4) Such notice states clearly the nature of the error, the amount of the overpayment, and the three year limitation as provided in subsection 011.01(C).

011.01(C) An insurer may use the procedure set forth in subsection 011.01(B) provided that the claim used to adjust the first overpayment is made no later than three years after the date of the error.

011.02 For the purpose of Section 011, the date of the error shall be the day on which the draft for benefits is issued.

012. Severability . If any section or portion of this Rule or the applicability thereof to any person or circumstance is held invalid by a court, the remainder of the rule or the applicability of such provision to other persons or circumstances shall not be affected thereby.

013. Effective date . This rule shall become operative on September 1, 1992.

History

• Effective 1994-06-26

Chapter 61 Unfair Life, Sickness and Accident Claims Settlement Practices Rule

Neb. Admin. Code tit. 210, ch. 61 Unfair Life, Sickness and Accident Claims Settlement Practices Rule {#sec-210-nac-61 omnilex-key=us-ne-regs-official--title-210--210 NAC 61}

001. Authority . This rule is adopted under the authority of the Unfair Insurance Claims Settlement Practices Act, pursuant to Neb.Rev.Stat. §§44-1536 through 44-1544.

002. Purpose . This rule sets forth minimum standards for the investigation and disposition of life, sickness and accident claims occurring in the State of Nebraska and arising under insurance policies or certificates which, if violated with such frequency as to indicate a general business practice or is committed flagrantly and in conscious disregard would constitute a violation of the Unfair Insurance Claims Settlement Practices Act and any rule or regulation promulgated thereunder. Various provisions of this rule are intended to define procedures and practices which constitute unfair insurance claims practices. This rule is not exclusive and other acts, not herein specified, may also be found to constitute such practices.

Nothing herein shall be construed to create nor imply a private cause of action for violation of this rule. This is merely a clarification of original intent and does to indicate any change of position.

003. Definitions . All definitions contained in the Unfair Insurance Claims Settlement Practices Act are hereby incorporated by reference. As otherwise used in this regulation:

003.01 "Agent" means any individual, corporation, association, partnership or other legal entity authorized to represent an insurer with respect to a claim;

003.02 "Beneficiary" means a party entitled to receive the proceeds or benefits occurring under the policy in lieu of the insured but shall not include a medical services provider receiving an assignment of proceeds;

003.03 "Claim file" means any retrievable electronic file, microfilm/microfiche file, paper file, or any combination thereof;

003.04 "Claimant" means an insured, or the beneficiary and includes a designated legal representative or a member of the insured's immediate family as designated by the insured, making a claim under a policy.

003.05 "Days" means working days;

003.06 "Documentation" includes, but is not limited to, all pertinent communications, transactions, notes, work papers, claim forms, bills and explanation of benefits forms relative to the claim;

003.07 "Investigation" means all activities of an insurer directly or indirectly related to the determination of liabilities under coverages afforded by an insurance policy or certificate;

003.08 "Notification of claim" means any notification by a claimant, whether in writing or by other means acceptable under the terms of an insurance policy or certificate, to an insurer or its agent which reasonably apprises the insurer of the facts pertinent to a claim;

003.09 "Proof of loss" means written proofs, such as claim forms, medical bills, or other reasonable evidence of the claim that is ordinarily required of persons submitting the claim(s);

003.10 "Reasonable explanation" means information reasonably sufficient to enable the insured or beneficiary to compare the allowable benefits with policy or certificate provisions and determine whether proper payment has been made;

003.11 "Written communications" includes all correspondence, regardless of source or type, that is related to the handling of the claim. Written communications shall be effectively communicated when placed in the mail with adequate first class postage.

004. File and record documentation . Each insurer's claim files are subject to examination by the Director or by the Director's duly appointed designees. To aid in such examination:

004.01 The insurer shall maintain claim data that is accessible and retrievable for examination. An insurer shall be able to provide the claim number, line of coverage, date of loss and date of payment of the claim, date of denial or date closed without payment. This data must be available for all open and closed files for the current year and the two preceding years.

004.02 Detailed documentation shall be contained in each claim file in order to permit reconstruction of the insurer's activities relative to each claim.

004.03 Each relevant document within the claim file shall be noted as to date received, date processed or date mailed.

004.04 For those insurers that do not maintain hard copy files, claim files must be accessible from Cathode Ray Tube (CRT), Video Display Terminal (VDT) or micrographics and be capable of duplication to hard copy.

005. Misrepresentation of policy provisions .

005.01 Not agent or insurer shall knowingly misrepresent or conceal from claimants, any pertinent benefits, coverages, or other provisions of any insurance policy or certificate when such benefits, coverages or other provisions are pertinent to a claim.

005.02 No insurer shall indicate to a claimant on a payment draft, check or in any accompanying letter that said payment is "final" or is "a release" of any claim(s) unless such is the case, or the policy limit has been paid, or there has been a compromise settlement agreed to by the claimant and the insurer as to coverage and amount payable under the insurance policy or certificate.

005.03 No insurer shall issue checks or drafts in partial settlement of a claim under a specific coverage that contains language purporting to release the insurer from total liability.

006. Failure to acknowledge pertinent communications .

006.01 Every insurer shall, within fifteen (15) days of receipt, acknowledge and respond to any written communication relating to a claim and to all other pertinent communications from a claimant which reasonably suggest that a response is expected. Communication to an agent of an insurer shall be communication to the insurer.

006.02 Every insurer, upon receipt of any inquiry from the Director respecting a claim shall furnish the Department, in duplicate, an adequate response to the inquiry or request additional reasonable time to respond within fifteen (15) days of receipt of such inquiry.

006.03 Every insurer, upon receiving notification of claim, shall provide, within fifteen (15) days, the necessary claim forms, instructions and reasonable assistance so the insured can comply with the insurer's reasonable requirements and also comply with the policy conditions. Compliance with this paragraph shall constitute compliance with Subsection 006.01.

007. Standards for the prompt investigation of claims .

007.01 Every insurer shall, within fifteen (15) days of receipt of proof of loss from a claimant, initiate investigation of the claim.

007.02 The insurer's standards for claims processing shall be such that notice of claim or proof of loss submitted against one policy issued by that insurer shall fulfill the insured's obligation under any and all similar policies issued by that insurer and specifically identified by the insured to the insurer to the same degree that the same form would be required under any similar policy. If additional information is required to fulfill the insured's obligation under similar policies, the insurer may request the additional information. When it is apparent to the insurer that additional benefits would be payable under an insured's policy upon additional proofs of loss, the insurer shall communicate to and cooperate with the insured in determining the extent of the insurer's additional liability.

008. Standards for prompt, fair and equitable settlements .

008.01 When a claim is denied, written notice of denial shall be sent to the claimant within fifteen (15) days of the determination. No insurer shall deny a claim, or portion thereof, on the grounds of a specific policy provision, condition or exclusion unless reference to such provision, condition, or exclusion is included in the denial. The denial must be given in writing, with reasonable and accurate explanation. The claim file of the insurer shall contain documentation of the denial as required by Section 004.

008.02 If a claim remains unresolved for fifteen (15) days from the date proof of loss is received, the insurer shall provide the insured a reasonable written explanation for delay. If the investigation remains incomplete, the insurer shall, thirty (30) days from the date of initial notification the claim is unresolved and every thirty (30) days thereafter, send to the insured a reasonable written explanation setting forth the reasons additional time is needed for investigation.

008.03 The insurer shall affirm or deny liability on claims within a reasonable time and shall tender payment within fifteen (15) days of affirmation of liability, if the amount of the claim is determined and not in dispute. In claims where multiple coverages are involved or portions of the claim are in dispute, payments to a known payee which are not in dispute should be tendered within fifteen (15) days after receipt by the insurer of settlement information if such payment would terminate the insurer's known liability under that individual coverage or portion of the claim which was not in dispute. This is notwithstanding the existence of disputes as to other portions of coverage.

008.04 With each claim payment, the insurer shall provide to the insured an Explanation of Benefits that shall include, if applicable, the name of the provider or services covered, amount charged, dates of service, and a reasonable explanation of the computation of benefits.

008.05 An insurer may not impose a penalty upon any insured for noncompliance with insurer requirements for pre-certification and/or concurrent review unless such penalty is specifically and clearly set forth in the policy.

008.06 No insurer shall deny a claim upon information obtained in a telephone conversation or personal interview with any source unless the telephone conversation or personal interview is documented in the claim file.

008.07 Insurers offering cash settlements of first party long-term disability income claims, except in cases where there is a bona fide dispute as to the coverage for, or amount of, the disability, shall develop a present value calculation of future benefits (with probability corrections for mortality and morbidity) utilizing contingencies such as mortality, morbidity, and interest rates assumptions, etc. appropriate to the risk. A copy of the amount so calculated shall be given to and attested to by the insured at settlement time.

008.08 If, after an insurer rejects a claim or portion thereof, the claimant objects to such rejection and the rejection is maintained, the insurer shall notify the claimant in writing that he or she may have the matter reviewed by the Nebraska Department of Insurance, and the insurer shall provide the claimant with the Department's address and phone number.

009. Standards for overpayment recovery .

009.01 No insurer shall withhold any portion of any benefit payable, on the basis that the sum withheld is an adjustment or correction of an overpayment made on a prior claim arising under the same policy unless:

009.01(A) The insurer has within its files clear, documented evidence of an overpayment and written authorization from the claimant permitting such withholding procedure, or

009.01(B) The insurer has within its files clear, documented evidence that:

009.01(B)(1) The overpayment was clearly erroneous under the provisions of the policy. If the overpayment is the subject of a reasonable dispute as to facts, this procedure may not be used; and

009.01(B)(2) The error which resulted in the overpayment is not a mistake of law; and

009.01(B)(3) The insurer has notified the claimant within six (6) months of the date of the error, except that in instances of error prompted by representations or nondisclosures of claimants, the insurer notifies the claimant within fifteen (15) days after the date that clear, documented evidence of discovery of such error is included in its file; and

009.01(B)(4) Such notice states clearly the nature of the error, the amount of the overpayment, and the three year limitation as provided in subsection 009.01(C).

009.01(C) An insurer may use the procedure set forth in Section 009.01(B) provided that the claim used to adjust the first overpayment is made no later than three years after the date of the error.

009.01(D) For the purpose of Section 009, the date of the error shall be the day on which the draft for benefits is issued.

010. Severability . If any section or portion of this Rule of the application thereof to any person or circumstance is held invalid by a court, the remainder of the rule shall not be affected thereby.

011. Effective date . This rule shall become operative on September 1, 1992.

History

• Effective 1994-06-26

Chapter 65 Credit for Reinsurance

Neb. Admin. Code tit. 210, ch. 65 Credit for Reinsurance {#sec-210-nac-65 omnilex-key=us-ne-regs-official--title-210--210 NAC 65}

001. The Department of Insurance ("Department") hereby adopts the National Association of Insurance Commissioners ("NAIC") model regulation entitled, "Credit for Reinsurance Model Regulation (#786)" ("Model"), adopted by the NAIC on June 25, 2019, a copy of which may be obtained at the offices of the Department or by visiting the Department's website at https://doi.nebraska.gov/public-info/rulesregulations-and-guidance-document-index, with the following notes, exceptions, clarifications and additions:

002. This regulation is promulgated pursuant to the authority granted by Neb. Rev. Stat. Sections 44-416.09 and 44-101.01.

003. All references in the Model of the term "commissioner" are replaced with "Director".

004. In Section 2 of the Model, the bracketed language is replaced in its entirety with the following, "statutes set forth in Neb. Rev. Stat. sections 44-416.05 et. seq. and 44-417."

005. In Section 4 of the Model, the bracketed language is replaced in its entirety with "44-416.06(2)".

006. In Section 5A of the Model, the bracketed language is replaced in its entirety with "44-416.06(3)".

007. In Section 6A of the Model, the bracketed language is replaced in its entirety with "44-416.06(4)".

008. In Section 7A of the Model, the language appearing in the first bracket is replaced in its entirety with, "44-416.06(5)", while the language appearing in the second bracket is replaced in its entirety with "44-416.08".

009. In Section 7E of the Model, bracketed language is included four times. In both instances where the bracketed language states "cite specific law equivalent to Section 2 of the Credit for Reinsurance Model Law (#785)" that language is replaced in its entirety with "Section 44-416.06". In both instances where the bracketed language states "cite state law equivalent of Section 4A of the Credit for Reinsurance Model Law (#785)" that language is replaced in its entirety with "Section 44-416.08(1)".

010. In Section 8A of the Model, the language appearing in the first bracket is replaced in its entirety with, "44-416.06(6)", while the language appearing in the second bracket is replaced in its entirety with "44-416.06(6) and 44-416.07".

011. In Section 8B(7) of the Model, the bracketed language is replaced in its entirety with "Section 84-712 et. seq."

012. In Section 8B(7)(b) of the Model, the bracketed language is replaced with "per NAIC instructions".

013. In Section 9A of the Model, the bracketed language is replaced in its entirety with "Section 44-416.06(7)".

014. In Section 9B(3) of the Model, the bracketed language is replaced in its entirety with "Section 44-416.06(6)( d)(i)-44-416.06(6)( d)(v) and Section 8C of this regulation".

015. In Section 9C(4)(e) of the Model, the bracketed language is replaced in its entirety with "Sections 44-416.06(6) and 44-416.07".

016. In Section 9D(2) of the Model, the bracketed language is replaced in its entirety with "Sections 44-416.05 et seq. and 44-417 or this regulation".

017. In Section 10 of the Model, the bracketed language that states, "cite specific law equivalent of Section 2G of the Credit for Reinsurance Model Law (#785) " is replaced in its entirety with "44-416.06(8)", while the bracketed language that states "cite state law equivalent of Sections 2A, B, C, D, E, F or other appropriate section of the of the Credit for Reinsurance Model Law (#785) " is replaced in its entirety with "44-416(2) to Section 44-416(7)".

018. In Section 11 of the Model, the language appearing in the first set of brackets is replaced in its entirety with "44-416.07"; the language appearing in the second set of brackets is replaced in its entirety with "44-416.06"; and the language appearing in the third set of brackets is replaced in its entirety with "44-416.08(2)".

019. In Section 11A(3) of the Model, the bracketed language is replaced in its entirety with "44-416.08(1)".

020. In both Sections 128(1) and 128(11)(c) of the Model, the bracketed language is replaced in its entirety with "44-416.08(2)".

021. In Section 12b(13) of the model, the first sentence is replaced in its entirety with "Either the reinsurance agreement or the trust agreement must stipulate that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash in United States dollars, certificates of deposit issued by a United States bank and payable in United States dollars, and investments permitted by§§ 44-5123 through 44-5132 and§§ 44-5137 through 44-5141 of the Insurance Code or any combination of the above, provided investments in or issued by an entity controlling, controlled by or under common control with either the granter or the beneficiary of the trust shall not exceed five percent (5%) of total investments."

022. With respect to Section 12F of the Model, the Department does not adopt that Section of the Model.

023. In Section 13A of the Model, the bracketed language is replaced in its entirety with "44-416.08(1)".

024 . In both Sections 15 and 158 of the Model, the bracketed language is replaced in its entirety with "44-416.06".

025. In Section 15A of the Model, the bracketed language is replaced in its entirety with "44-417".

026. In Section 16 of the Model, the bracketed language is replaced with "the effective date of this regulation".

027. All references to "Insurance Commissioner" and "commissioner'' appearing in Forms AR-1, CR-1 and RJ-1, which are included at the end of the Model, are replaced with "Director of Insurance".

028. In Form CR-1, which appears at the end of the Model: (i) the bracketed language appearing in item 5 is replaced in its entirety with "Section 88(7)(b) of the NAIC Credit for Reinsurance Model Regulation which was adopted at 210 Neb. Admin. Code §65-001"; and (ii) the bracketed language appearing in item 7 is replaced in its entirety with 11Section 88(7)(d) of the NAIC Credit for Reinsurance Model Regulation which was adopted at 210 Neb. Admin. Code §65-001".

029. In Form RJ-1, which appears at the end of the Model: (i) all bracketed language stating "Name of State" is replaced with "Nebraska"; and (ii) the bracketed language in item 7 is replaced in its entirety with "Section 9C(5) of the NAIC Credit for Reinsurance Model Regulation which was adopted at 210 Neb. Admin. Code §65-001"

History

• Effective 2021-03-09

Chapter 69 Actuarial Opinion and Memorandum Regulation

Neb. Admin. Code tit. 210, ch. 69 Actuarial Opinion and Memorandum Regulation {#sec-210-nac-69 omnilex-key=us-ne-regs-official--title-210--210 NAC 69}

001. Purpose

The purpose of this regulation is to prescribe:

001.01 Requirements for statements of actuarial opinion that are to be submitted in accordance with §44-421, and for memoranda in support thereof;

001.02 Rules applicable to the appointment of an appointed actuary; and

001.03 Guidance as to the meaning of “adequacy of reserves.”

002. Authority

This regulation is issued pursuant to the authority vested in the Director of Insurance of the State of Nebraska under §44-427. This regulation will take effect for annual statements beginning the year 2010.

003. Scope

This regulation shall apply to all life insurance companies and fraternal benefit societies doing business in this State and to all life insurance companies and fraternal benefit societies that are authorized to reinsure life insurance, annuities or accident and health insurance business in this State. This regulation shall be applied in a manner that allows the appointed actuary to utilize his or her professional judgment in performing the asset analysis and developing the actuarial opinion and supporting memoranda, consistent with relevant actuarial standards of practice. However, the Director shall have the authority to specify specific methods of actuarial analysis and actuarial assumptions when, in the Director’s judgment, these specifications are necessary for an acceptable opinion to be rendered relative to the adequacy of reserves and related items.

This regulation shall be applicable to all annual statements filed with the office of the Director after the effective date of this regulation. A statement of opinion on the adequacy of the reserves and related actuarial items based on an asset adequacy analysis in accordance with 006 of this regulation, and a memorandum in support thereof in accordance with 007 of this regulation, shall be required each year.

004. Definitions

004.01 Actuarial Opinion

“Actuarial Opinion” means:

The opinion of an Appointed Actuary regarding the adequacy of the reserves and related actuarial items based on an asset adequacy analysis in accordance with 006 of this regulation and with applicable Actuarial Standards of Practice.

004.02 Actuarial Standards Board

“Actuarial Standards Board” means the board established by the American Academy of Actuaries to develop and promulgate standards of actuarial practice.

004.03 Annual Statement

“Annual statement” means that statement required by §44-322 to be filed by the company with the office of the Director annually.

004.04 Appointed Actuary

“Appointed actuary” means any individual who is appointed or retained in accordance with the requirements set forth in 005.03 of this regulation to provide the actuarial opinion and supporting memorandum as required by §44-420 through §44-425.

004.05 Asset Adequacy Analysis

“Asset adequacy analysis” means an analysis that meets the standards and other requirements referred to in 005.04 this regulation.

004.06 Director

“Director” means the Insurance Director of this State.

004.07 Company

“Company” means a life insurance company, fraternal benefit society or reinsurer subject to the provisions of this regulation.

004.08 Qualified Actuary

“Qualified actuary” means any individual who meets the requirements set forth in 005.02 of this regulation.

005. General Requirements

005.01 Submission of Statement of Actuarial Opinion

005.01(A) There is to be included on or attached to Page 1 of the annual statement for each year beginning with the year in which this regulation becomes effective the statement of an appointed actuary, entitled “Statement of Actuarial Opinion,” setting forth an opinion relating to reserves and related actuarial items held in support of policies and contracts, in accordance with 006 of this regulation.

005.01(B) Upon written request by the company, the Director may grant an extension of the date for submission of the statement of actuarial opinion.

005.02 Qualified Actuary

A “qualified actuary” is an individual who:

005.02(A) Is a member in good standing of the American Academy of Actuaries;

005.02(B) Is qualified to sign statements of actuarial opinion for life and health insurance company annual statements in accordance with the American Academy of Actuaries qualification standards for actuaries signing such statements;

005.02(C) Is familiar with the valuation requirements applicable to life and health insurance companies;

005.02(D) Has not been found by the Director (or if so found has subsequently been reinstated as a qualified actuary), following appropriate notice and hearing to have:

005.02(D)(1) Violated any provision of, or any obligation imposed by, the Insurance Law or other law in the course of his or her dealings as a qualified actuary;

005.02(D)(2) Been found guilty of fraudulent or dishonest practices;

005.02(D)(3) Demonstrated his or her incompetency, lack of cooperation, or untrustworthiness to act as a qualified actuary;

005.02(D)(4) Submitted to the Director during the past five (5) years, pursuant to this regulation, an actuarial opinion or memorandum that the Director rejected because it did not meet the provisions of this regulation including standards set by the Actuarial Standards Board; or

005.02(D)(5) Resigned or been removed as an actuary within the past five (5) years as a result of acts or omissions indicated in any adverse report on examination or as a result of failure to adhere to generally acceptable actuarial standards; and

005.02(E) Has not failed to notify the Director of any action taken by any Director of any other state similar to that under 005.02(D) above.

005.03 Appointed Actuary

An “appointed actuary” is a qualified actuary who is appointed or retained to prepare the Statement of Actuarial Opinion required by this regulation, either directly by or by the authority of the board of directors through an executive officer of the company other than the qualified actuary. The company shall give the Director timely written notice of the name, title (and, in the case of a consulting actuary, the name of the firm) and manner of appointment or retention of each person appointed or retained by the company as an appointed actuary and shall state in the notice that the person meets the requirements set forth in 005.02. Once notice is furnished, no further notice is required with respect to this person, provided that the company shall give the Director timely written notice in the event the actuary ceases to be appointed or retained as an appointed actuary or to meet the requirements set forth in 005.02. If any person appointed or retained as an appointed actuary replaces a previously appointed actuary, the notice shall so state and give the reasons for replacement.

005.04 Standards for Asset Adequacy Analysis

The asset adequacy analysis required by this regulation:

005.04(A) Shall conform to the Standards of Practice as promulgated from time to time by the Actuarial Standards Board and on any additional standards under this regulation, which standards are to form the basis of the statement of actuarial opinion in accordance with this regulation; and

005.04(B) Shall be based on methods of analysis as are deemed appropriate for such purposes by the Actuarial Standards Board.

005.05 Liabilities to be Covered

005.05(A) Under authority of §44-420 through §44-427, the statement of actuarial opinion shall apply to all in force business on the statement date, whether directly issued or assumed, regardless of when or where issued, e.g., reserves of Exhibits 5, 6 and 7, and claim liabilities in Exhibit 8, Part 1 and equivalent items in the separate account statement or statements.

005.05(B) If the appointed actuary determines as the result of asset adequacy analysis that a reserve should be held in addition to the aggregate reserve held by the company and calculated in accordance with methods set forth in law, §§ 44-403 and 44-404, the company shall establish the additional reserve.

005.05(C) Additional reserves established under 005.05(B) above and deemed not necessary in subsequent years may be released. Any amounts released shall be disclosed in the actuarial opinion for the applicable year. The release of such reserves would not be deemed an adoption of a lower standard of valuation.

006. Statement of Actuarial Opinion Based On an Asset Adequacy Analysis

006.01 General Description

The statement of actuarial opinion submitted in accordance with this section shall consist of:

006.01(A) A paragraph identifying the appointed actuary and his or her qualifications (see 006.02(A));

006.01(B) A scope paragraph identifying the subjects on which an opinion is to be expressed and describing the scope of the appointed actuary's work, including a tabulation delineating the reserves and related actuarial items that have been analyzed for asset adequacy and the method of analysis, (see 006.02(B)) and identifying the reserves and related actuarial items covered by the opinion that have not been so analyzed;

006.01(C) A reliance paragraph describing those areas, if any, where the appointed actuary has deferred to other experts in developing data, procedures or assumptions, (e.g., anticipated cash flows from currently owned assets, including variation in cash flows according to economic scenarios (see 006.02(C)), supported by a statement of each such expert in the form prescribed by Section 006.05; and

006.01(D) An opinion paragraph expressing the appointed actuary's opinion with respect to the adequacy of the supporting assets to mature the liabilities (see 006.02(F)).

006.01(E) One or more additional paragraphs will be needed in individual company cases as follows:

006.01(E)(1) If the appointed actuary considers it necessary to state a qualification of his or her opinion;

006.01(E)(2) If the appointed actuary must disclose an inconsistency in the method of analysis or basis of asset allocation used at the prior opinion date with that used for this opinion.

006.01(E)(3) If the appointed actuary must disclose whether additional reserves of the prior opinion date are released as of this opinion date, and the extent of the release.

006.01(E)(4) If the appointed actuary chooses to add a paragraph briefly describing the assumptions that form the basis for the actuarial opinion.

006.02 Recommended Language

The following paragraphs are to be included in the statement of actuarial opinion in accordance with 006.02. Language is that which in typical circumstances should be included in a statement of actuarial opinion. The language may be modified as needed to meet the circumstances of a particular case, but the appointed actuary should use language that clearly expresses his or her professional judgment. However, in any event the opinion shall retain all pertinent aspects of the language provided in 006.02.

006.02(A) The opening paragraph should generally indicate the appointed actuary's relationship to the company and his or her qualifications to sign the opinion. For a company actuary, the opening paragraph of the actuarial opinion should include a statement such as :

“I, [name], am [title] of [insurance company name] and a member of the American Academy of Actuaries. I was appointed by, or by the authority of, the Board of Directors of said insurer to render this opinion as stated in the letter to the Director dated [insert date]. I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies.”

For a consulting actuary, the opening paragraph should include a statement such as:

“I, [name], a member of the American Academy of Actuaries, am associated with the firm of [name of consulting firm]. I have been appointed by, or by the authority of, the Board of Directors of [name of company] to render this opinion as stated in the letter to the Director dated [insert date]. I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies.”

006.02(B) The scope paragraph should include a statement such as:

“I have examined the actuarial assumptions and actuarial methods used in determining reserves and related actuarial items listed below, as shown in the annual statement of the company, as prepared for filing with state regulatory officials, as of December 31, 20[ ]. Tabulated below are those reserves and related actuarial items which have been subjected to asset adequacy analysis.”

Notes:

(a) The additional actuarial reserves are the reserves established under 005.05(B). (b) The appointed actuary should indicate the method of analysis, determined in accordance with the standards for asset adequacy analysis referred to in 005.04 of this regulation, by means of symbols that should be defined in footnotes to the table. (c) Allocated amount of Asset Valuation Reserve (AVR).

006.02(C) If the appointed actuary has relied on other experts to develop certain portions of the analysis, the reliance paragraph should include a statement such as :

“I have relied on [name], [title] for [e.g., “anticipated cash flows from currently owned assets, including variations in cash flows according to economic scenarios” or “certain critical aspects of the analysis performed in conjunction with forming my opinion”], as certified in the attached statement. I have reviewed the information relied upon for reasonableness.”

A statement of reliance on other experts should be accompanied by a statement by each of such experts of the form prescribed by 006.05.

006.02(D) If the appointed actuary has examined the underlying asset and liability records, the reliance paragraph should include a statement such as:

“My examination included such review of the actuarial assumptions and actuarial methods and of the underlying basic asset and liability records and such tests of the actuarial calculations as I considered necessary. I also reconciled the underlying basic asset and liability records to [exhibits and schedules listed as applicable] of the company’s current annual statement.”

006.02(E) If the appointed actuary has not examined the underlying records, but has relied upon date (e.g., listings and summaries of policies in force and/or asset records) prepared by the company, the reliance paragraph should include a statement such as:

“In forming my opinion on [specify types of reserves] I relied upon data prepared by [name and title of company officer certifying in force records or other data] as certified in the attached statements. I evaluated that data for reasonableness and consistency. I also reconciled that data to [exhibits and schedules to be listed as applicable] of the company’s current annual statement. In other respects, my examination included review of the actuarial assumptions and actuarial methods used and tests of the calculations I considered necessary.”

The section shall be accompanied by a statement by each person relied upon of the form prescribed by 006.05.

006.02(F) The opinion paragraph should include a statement such as:

“In my opinion the reserves and related actuarial values concerning the statement items identified above:

006.02(F)(1) Are computed in accordance with presently accepted actuarial standards consistently applied and are fairly stated, in accordance with sound actuarial principles;

006.02(F)(2) Are based on actuarial assumptions that produce reserves at least as great as those called for in any contract provision as to reserve basis and method, and are in accordance with all other contract provisions;

006.02(F)(3) Meet the requirements of the Insurance law and regulation of the state of [state of domicile]; and are at least as great as the minimum aggregate amounts required by the state in which this statement is filed;

006.02(F)(4) Are computed on the basis of assumptions consistent with those used in computing the corresponding items in the annual statement of the preceding year-end (with any exceptions noted below); and

006.02(F)(5) Include provision for all actuarial reserves and related statement items which ought to be established.

The reserves and related items, when considered in light of the assets held by the company with respect to such reserves and related actuarial items including, but not limited to, the investment earnings on the assets, and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision, according to presently accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the company.

The actuarial methods, considerations and analyses used in forming my opinion conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis of this statement of opinion. This opinion is updated annually as required by statute. To the best of my knowledge, there have been no material changes from the applicable date of the annual statement to the date of the rendering of this opinion which should be considered in reviewing this opinion.

or

The following material change(s) which occurred between the date of the statement for which this opinion is applicable and the date of this opinion should be considered in reviewing this opinion: (Describe the change or changes.)

NOTE: Choose one of the above two paragraphs, whichever is applicable.

The impact of unanticipated events subsequent to the date of this opinion is beyond the scope of this opinion. The analysis of asset adequacy portion of this opinion should be reviewed recognizing that the company's future experience may not follow all the assumptions used in the analysis.

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Signature of Appointed Actuary

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Address of Appointed Actuary

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Telephone Number of Appointed Actuary

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Date

006.03 Assumption for New Issues

The adoption for new issues or new claims or other new liabilities of an actuarial assumption that differs from a corresponding assumption used for prior new issues or new claims or other new liabilities is not a change in actuarial assumptions within the meaning of 006.

006.04 Adverse Opinions

If the appointed actuary is unable to form an opinion, then he or she shall refuse to issue a statement of actuarial opinion. If the appointed actuary's opinion is adverse or qualified, then he or she shall issue an adverse or qualified actuarial opinion explicitly stating the reason(s) for the opinion. This statement should follow the scope paragraph and precede the opinion paragraph.

006.05 Reliance on Information Furnished by Other Persons

If the appointed actuary relies on the certification of others on matters concerning the accuracy or completeness of any data underlying the actuarial opinion, or the appropriateness of any other information used by the appointed actuary in forming the actuarial opinion, the actuarial opinion should so indicate the persons the actuary is relying upon and a precise identification of the items subject to reliance. In addition, the persons on whom the appointed actuary relies shall provide a certification that precisely identifies the items on which the person is providing information and a statement as to the accuracy, completeness or reasonableness, as applicable, of the items. This certification shall include the signature, title, company, address and telephone number of the person rendering the certification, as well as the date on which it is signed.

006.06 Alternate Option

006.06(A) The Standard Valuation Law gives the Director broad authority to accept the valuation of a foreign insurer when that valuation meets the requirements applicable to a company domiciled in this state in the aggregate. As an alternative to the requirements of 006.02(F)(3), the Director may make one or more of the following additional approaches available to the opining actuary:

006.06(A)(1) A statement that the reserves “meet the requirements of the insurance laws and regulations of the State of [state of domicile] and the formal written standards and conditions of this state for filing an opinion based on the law of the state of domicile.” If the Director chooses to allow this alternative, a formal written list of standards and conditions shall be made available. If a company chooses to use this alternative, the standards and conditions in effect on July 1 of a calendar year shall apply to statements for that calendar year, and they shall remain in effect until they are revised or revoked. If no list is available, this alternative is not available.

006.06(A)(2) A statement that the reserves “meet the requirements of the insurance laws and regulations of the State of [state of domicile] and I have verified that the company’s request to file an opinion based on the law of the state of domicile has been approved and that any conditions required by the Director for approval of that request have been met.” If the Director chooses to allow this alternative, a formal written statement of such allowance shall be issued no later than March 31 of the year it is first effective. It shall remain valid until rescinded or modified by the Director. Such rescission or modifications shall be issued no later than March 31 of the year they are first effective. Subsequent to that statement being issued, if a company chooses to use this alternative, the company shall file a request to do so, along with justification for its use, no later than April 30 of the year of the opinion to be filed. The request shall be deemed approved on October 1 of that year if the Director has not denied the request by that date.

006.06(A)(3) A statement that the reserves “meet the requirements of the insurance laws and regulations of the State of [state of domicile] and I have submitted the required comparison as specified by this state.”

006.06(A)(3)(i) If the Director chooses to allow this alternative, a formal written list of products (to be added to the table in Item (ii) below) for which the required comparison shall be provided will be published. If a company chooses to use this alternative, the list in effect on July 1 of a calendar year shall apply to statements for that calendar year, and it shall remain in effect until it is revised or revoked. If no list is available, this alternative is not available.

006.06(A)(3)(ii) If a company desires to use this alternative, the appointed actuary shall provide a comparison of the gross nationwide reserves held to the gross nationwide reserves that would be held under NAIC codification standards. Gross nationwide reserves are the total reserves calculated for the total company in force business directly sold and assumed, indifferent to the state in which the risk resides, without reduction for reinsurance ceded. The information provided shall be at least:

006.06(A)(3)(iii) The information listed shall include all products identified by either the state of filing or any other states subscribing to this alternative.

006.06(A)(3)(iv) If there is no codification standard for the type of product or risk in force or if the codification standard does not directly address the type of product or risk in force, the appointed actuary shall provide detailed disclosure of the specific method and assumptions used in determining the reserves held.

006.06(A)(3)(v) The comparison provided by the company is to be kept confidential to the same extent and under the same conditions as the actuarial memorandum.

006.06(B) Notwithstanding the above, the Director may reject an opinion based on the laws and regulations of the state of domicile and require an opinion based on the laws of this state. If a company is unable to provide the opinion within sixty (60) days of the request or such other period of time determined by the Director after consultation with the company, the Director may contract an independent actuary at the company’s expense to prepare and file the opinion.

007. Description of Actuarial Memorandum Including an Asset Adequacy Analysis and Regulatory Asset Adequacy Issues Summary

007.01 General

007.01(A) In accordance with §44-425, the appointed actuary shall prepare a memorandum to the company describing the analysis done in support of his or her opinion regarding the reserves. The memorandum shall be made available for examination by the Director upon his or her request but shall be returned to the company after such examination and shall not be considered a record of the insurance department or subject to automatic filing with the Director.

007.01(B) In preparing the memorandum, the appointed actuary may rely on, and include as a part of his or her own memorandum, memoranda prepared and signed by other actuaries who are qualified within the meaning of 005.02 of this regulation, with respect to the areas covered in such memoranda, and so state in their memoranda.

007.01(C) If the Director requests a memorandum and the company fails to provide the Director with the memorandum within thirty days of such request or if the Director finds that the analysis described in the memorandum fails to meet the standards of the Actuarial Standards Board or the standards and requirements of this regulation, the Director may designate a qualified actuary to review the opinion and prepare such supporting memorandum as is required for review. The reasonable and necessary expense of the independent review shall be paid by the company but shall be directed and controlled by the Director.

007.01(D) The reviewing actuary shall have the same status as an examiner for purposes of obtaining data from the company and the work papers and documentation of the reviewing actuary shall be retained by the Director; provided, however, that any information provided by the company to the reviewing actuary and included in the work papers shall be considered as material provided by the company to the Director and shall be kept confidential to the same extent as is prescribed by law with respect to other material provided by the company to the Director pursuant to the statute governing this regulation. The reviewing actuary shall not be an employee of a consulting firm involved with the preparation of any prior memorandum or opinion for the insurer pursuant to this regulation for any one of the current year or the preceding three (3) years.

007.01(E) In accordance with § 44-421, the appointed actuary shall prepare a regulatory asset adequacy issues summary, the contents of which are specified in 007.03. The regulatory asset adequacy issues summary will be submitted no later than March 15 of the year following the year for which a statement of actuarial opinion based on asset adequacy is required. The regulatory asset adequacy issues summary is to be kept confidential to the same extent and under the same conditions as the actuarial memorandum.

007.02 Details of the Memorandum Section Documenting Asset Adequacy Analysis

When an actuarial opinion is provided, the memorandum shall demonstrate that the analysis has been done in accordance with the standards for asset adequacy referred to in 005.04 of this regulation and any additional standards under this regulation. It shall specify:

007.02(A) For reserves:

007.02(A)(1) Product descriptions including market description, underwriting and other aspects of a risk profile and the specific risks the appointed actuary deems significant;

007.02(A)(2) Source of liability in force;

007.02(A)(3) Reserve method and basis;

007.02(A)(4) Investment reserves;

007.02(A)(5) Reinsurance arrangements.

007.02(A)(6) Identification of any explicit or implied guarantees made by the general account in support of benefits provided through a separate account or under a separate account policy or contract and the methods used by the appointed actuary to provide for the guarantees in the asset adequacy analysis;

007.02(A)(7) Documentation of assumptions to test reserves for the following:

007.02(A)(7)(i) Lapse rates (both base and excess);

007.02(A)(7)(ii) Interest crediting rate strategy;

007.02(A)(7)(iii) Mortality;

007.02(A)(7)(iv) Policyholder dividend strategy;

007.02(A)(7)(v) Competitor or market interest rate;

007.02(A)(7)(vi) Annuitization rates;

007.02(A)(7)(vii) Commissions and expenses; and

007.02(A)(7)(viii) Morbidity.

The documentation of the assumptions shall be such that an actuary reviewing the actuarial memorandum could form a conclusion as to the reasonableness of the assumptions.

007.02(B) For assets:

007.02(B)(1) Portfolio descriptions, including a risk profile disclosing the quality, distribution and types of assets;

007.02(B)(2) Investment and disinvestment assumptions;

007.02(B)(3) Source of asset data;

007.02(B)(4) Asset valuation bases; and

007.02(B)(5) Documentation of assumptions made for:

007.02(B)(5)(i) Default costs;

007.02(B)(5)(ii) Bond call function;

007.02(B)(5)(iii) Mortgage prepayment function;

007.02(B)(5)(iv) Determining market value for assets sold due to disinvestment strategy; and

007.02(B)(5)(v) Determining yield on assets acquired through the investment strategy.

The documentation of the assumptions shall be such that an actuary reviewing the actuarial memorandum could form a conclusion as to the reasonableness of the assumptions.

007.02(C) For the analysis basis:

007.02(C)(1) Methodology;

007.02(C)(2) Rationale for inclusion or exclusion of different blocks of business and how pertinent risks were analyzed;

007.02(C)(3) Rationale for degree of rigor in analyzing different blocks of business (include in the rationale the level of “materiality” that was used in determining how rigorously to analyze different blocks of business);

007.02(C)(4) Criteria for determining asset adequacy (include in the criteria the precise basis for determining if assets are adequate to cover reserves under “moderately adverse conditions” or other conditions as specified in relevant actuarial standards of practice); and

007.02(C)(5) Whether the impact of federal income taxes was considered and the method of treating reinsurance in the asset adequacy analysis;

007.02(D) Summary of material changes in methods, procedures, or assumptions from prior year’s asset adequacy analysis;

007.02(E) Summary of Results; and

007.02(F) Conclusions

007.03 Details of the Regulatory Asset Adequacy Issues Summary

007.03(A) The regulatory asset adequacy issues summary shall include:

007.03(A)(1) Descriptions of the scenarios tested (including whether those scenarios are stochastic or deterministic) and the sensitivity testing done relative to those scenarios. If negative ending surplus results under certain tests in the aggregate, the actuary should describe those tests and the amount of additional reserve as of the valuation date which, if held, would eliminate the negative aggregate surplus values. Ending surplus values shall be determined by either extending the projection period until the in force and associated assets and liabilities at the end of the projection period are immaterial or by adjusting the surplus amount at the end of the projection period by an amount that appropriately estimates the value that can reasonably be expected to arise from the assets and liabilities remaining in force.

007.03(A)(2) The extent to which the appointed actuary uses assumptions in the asset adequacy analysis that are materially different than the assumptions used in the previous asset adequacy analysis;

007.03(A)(3) The amount of reserves and the identity of the product lines that had been subjected to asset adequacy analysis in the prior opinion but were not subject to analysis for the current opinion;

007.03(A)(4) Comments on any interim results that may be of significant concern to the appointed actuary. For example, the impact of the insufficiency of assets to support the payment of benefits and expenses and the establishment of statutory reserves during one or more interim periods;

007.03(A)(5) The methods used by the actuary to recognize the impact of reinsurance on the company’s cash flows, including both assets and liabilities, under each of the scenarios tested; and

007.03(A)(6) Whether the actuary has been satisfied that all options whether explicit or embedded, in any asset or liability (including but not limited to those affecting cash flows embedded in fixed income securities) and equity-like features in any investments have been appropriately considered in the asset adequacy analysis.

007.03(B) The regulatory asset adequacy issues summary shall contain the name of the company for which the regulatory asset adequacy issues summary is being supplied and shall be signed and dated by the appointed actuary rendering the actuarial opinion.

007.04 Conformity to Standards of Practice

The memorandum shall include a statement:

“Actuarial methods, considerations and analyses used in the preparation of this memorandum conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis for this memorandum.”

007.05 Use of Assets Supporting the Interest Maintenance Reserve and the Asset Valuation Reserve:

An appropriate allocation of assets in the amount of the Interest Maintenance Reserve (IMR), whether positive or negative, shall be used in any asset adequacy analysis. Analysis of risks regarding asset default may include an appropriate allocation of assets supporting the Asset Valuation Reserve (AVR); these AVR assets may not be applied for any other risks with respect to reserve adequacy. Analysis of these and other risks may include assets supporting other mandatory or voluntary reserves available to the extent not used for risk analysis and reserve support.

The amount of the assets used for the AVR shall be disclosed in the Table of Reserves and Liabilities of the opinion and in the memorandum. The method used for selecting particular assets or allocated portions of assets shall be disclosed in the memorandum.

007.06 Documentation

The appointed actuary shall retain on file, for at least seven (7) years, sufficient documentation so that it will be possible to determine the procedures followed, the analyses performed, the bases for assumptions and the results obtained.

008. Severability

If any section of this regulation, or the applicability thereof to any person or circumstance, is held invalid, the remainder of the rule and the application of such provision to other persons or circumstances shall not be affected thereby.

History

• Effective 2010-08-07

Chapter 71 Valuation of Life Insurance Policies Regulation

Neb. Admin. Code tit. 210, ch. 71 Valuation of Life Insurance Policies Regulation {#sec-210-nac-71 omnilex-key=us-ne-regs-official--title-210--210 NAC 71}

001. Purpose .

001.01 The purpose of this regulation is to provide:

001.01(1) Tables of select mortality factors and rules for their use;

001.01(2) Rules concerning a minimum standard for the valuation of plans with nonlevel premiums or benefits; and

001.01(3) Rules concerning a minimum standard for the valuation of plans with secondary guarantees.

001.02 The method for calculating basic reserves defined in this regulation will constitute the Commissioner's Reserve Valuation Method for policies to which this regulation is applicable.

002. Authority .

This regulation is issued under the authority of Neb.Rev.Stat. §44-101.01 of the Insurance Laws of Nebraska.

003. Applicability .

This regulation shall apply to all life insurance policies, with or without nonforfeiture values, issued on or after January 1, 2000, subject to the following exceptions and conditions.

003.01 Exceptions

003.01(1)

This regulation shall not apply to any individual life insurance policy issued on or after January 1, 2000, if the policy is issued in accordance with and as a result of the exercise of a reentry provision contained in the original life insurance policy of the same or greater face amount, issued before January 1, 2000, that guarantees the premium rates of the new policy. This regulation also shall not apply to subsequent policies issued as a result of the exercise of such a provision, or a derivation of the provision, in the new policy.

003.01(2) This regulation shall not apply to any universal life policy that meets all the following requirements:

003.01(2)(a) Secondary guarantee period, if any, is five (5) years or less;

003.01(2)(b) Specified premium for the secondary guarantee period is not less than the net level reserve premium for the secondary guarantee period based on the CSO valuation tables as defined in Section 004.06 and the applicable valuation interest rate; and

003.01(2)(c) The initial surrender charge is not less than 100 percent of the first year annualized specified premium for the secondary guarantee period.

003.01(3) This regulation shall not apply to any variable life insurance policy that provides for life insurance, the amount or duration of which varies according to the investment experience of any separate account or accounts.

003.01(4) This regulation shall not apply to any variable universal life insurance policy that provides for life insurance, the amount or duration of which varies according to the investment experience of any separate account or accounts.

003.01(5) This regulation shall not apply to a group life insurance certificate unless the certificate provides for a stated or implied schedule of maximum gross premiums required in order to continue coverage in force for a period in excess of one year.

003.02 Conditions

003.02(1) Calculation of the minimum valuation standard for policies with guaranteed nonlevel gross premiums or guaranteed nonlevel benefits (other than universal life policies), or both, shall be in accordance with the provisions of Section 006.

003.02(2) Calculation of the minimum valuation standard for flexible premium and fixed premium universal life insurance policies, that contain provisions resulting in the ability of a policyholder to keep a policy in force over a secondary guarantee period shall be in accordance with the provisions of Section 007.

004. Definitions .

For purposes of this regulation:

004.01 "Basic reserves" means reserves calculated in accordance with Neb.Rev.Stat. §44-404(d).

004.02 "Contract segmentation method" means the method of dividing the period from issue to mandatory expiration of a policy into successive segments, with the length of each segment being defined as the period from the end of the prior segment (from policy inception, for the first segment) to the end of the latest policy year as determined below. All calculations are made using the 1980 CSO valuation tables, as defined in Subsection 004.06 of this section, (or any other valuation mortality table adopted by the National Association of Insurance Commissioners (NAIC) after the operative date of this regulation and promulgated by regulation by the director for this purpose), and, if elected, the optional minimum mortality standard for deficiency reserves stipulated in Section 005.02 of this regulation.

The length of a particular contract segment shall be set equal to the minimum of the value t for which G_t is greater than R_t (if G_t never exceeds R_t the segment length is deemed to be the number of years from the beginning of the segment to the mandatory expiration date of the policy), where G_t and R_t are defined as follows:

where:

x = original issue age;

k = the number of years from the date of issue to the beginning of the segment;

t = 1, 2, ...; t is reset to 1 at the beginning of each segment;

GP_x+k+t-1 = Guaranteed gross premium per thousand of face amount for year t of the segment, ignoring policy fees only if level for the premium paying period of the policy.

However, Rt may be increased or decreased by one percent in any policy year, at the company's option, but Rt shall not be less than one;

where:

x, k and t are as defined above, and

q_x+k+t-1 = valuation mortality rate for deficiency reserves in policy year k+t but using the mortality of Section 005.02(2) if Section 005.02(3) is elected for deficiency reserves.

However, if GP_x+k+t is greater than 0 and GP_x+k+t-1 is equal to 0, Gt shall be deemed to be 1000. If GP_x+k+t and GP_x+k+t-1 are both equal to 0, Gt shall be deemed to be 0.

004.03 "Deficiency reserves" means the excess, if greater than zero, of

004.03(1) Minimum reserves calculated in accordance with Neb.Rev.Stat. §44-404(h) over

004.03(2) Basic reserves.

004.04 "Guaranteed gross premiums" means the premiums under a policy of life insurance that are guaranteed and determined at issue.

004.05 "Maximum valuation interest rates" means the interest rates defined in Neb.Rev.Stat. §44-404(c) (Computation of Minimum Standard by Calendar Year of Issue) that are to be used in determining the minimum standard for the valuation of life insurance policies.

004.06 "1980 CSO valuation tables" means the Commissioner's 1980 Standard Ordinary Mortality Table (1980 CSO Table) without ten-year selection factors, incorporated into the 1980 amendments to the NAIC Standard Valuation Law, and variations of the 1980 CSO Table approved by the NAIC, such as the smoker and nonsmoker versions approved in December 1983.

004.07 "Scheduled gross premium" means the smallest illustrated gross premium at issue for other than universal life insurance policies. For universal life insurance policies, scheduled gross premium means the smallest specified premium described in 007.01(3), if any, or else the minimum premium described in Section 007.01(4).

004.08 (1) "Segmented reserves" means reserves, calculated using segments produced by the contract segmentation method, equal to the present value of all future guaranteed benefits less the present value of all future net premiums to the mandatory expiration of a policy, where the net premiums within each segment are a uniform percentage of the respective guaranteed gross premiums within the segment. The uniform percentage for each segment is such that, at the beginning of the segment, the present value of the net premiums within the segment equals:

004.08(1)(a) The present value of the death benefits within the segment, plus

004.08(1)(b) The present value of any unusual guaranteed cash value (see section 006.04) occurring at the end of the segment, less

004.08(1)(c) Any unusual guaranteed cash value occurring at the start of the segment, plus

004.08(1)(d) For the first segment only, the excess of

004.08(1)(d)(i) over 004.08(1)(d)(ii), as follows:

004.08(1)(d)(i) A net level annual premium equal to the present value, at the date of issue, of the benefits provided for in the first segment after the first policy year, divided by the present value, at the date of issue, of an annuity of one per year payable on the first and each subsequent anniversary within the first segment on which a premium falls due. However, the net level annual premium shall not exceed the net level annual premium on the nineteen-year premium whole life plan of insurance of the same renewal year equivalent level mount at an age one year higher than the age at issue of the policy.

004.08(1)(d)(ii) A net one year term premium for the benefits provided for in the first policy year.

004.08(2) The length of each segment is determined by the "contract segmentation method," as defined in this section.

004.08(3) The interest rates used in the present value calculations for any policy may not exceed the maximum valuation interest rate, determined with a guarantee duration equal to the sum of the lengths of all segments of the policy.

004.08(4) For both basic reserves and deficiency reserves computed by the segmented method, present values shall include future benefits and net premiums in the current segment and in all subsequent segments.

004.09 "Tabular cost of insurance" means the net single premium at the beginning of a policy year for one-year term insurance in the amount of the guaranteed death benefit in that policy year.

004.10 "Ten-year select factors" means the select factors adopted with the 1980 amendments to the NAIC Standard Valuation Law.

004.11 (1) "Unitary reserves" means the present value of all future guaranteed benefits less the present value of all future modified net premiums, where:

004.011(1)(a) Guaranteed benefits and modified net premiums are considered to the mandatory expiration of the policy; and

004.011(1)(b) Modified net premiums are a uniform percentage of the respective guaranteed gross premiums, where the uniform percentage is such that, at issue, the present value of the net premiums equals the present value of all death benefits and pure endowments, plus the excess of 004.11(1)(b)(i) over 004.11(1)(b)(ii), as follows:

004.011(1)(b)(i) A net level annual premium equal to the present value, at the date of issue, of the benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one per year payable on the first and each subsequent anniversary of the policy on which a premium falls due. However, the net level annual premium shall not exceed the net level annual premium on the nineteen-year premium whole life plan of insurance of the same renewal year equivalent level amount at an age one year higher than the age at issue of the policy.

004.11(1)(b)(ii) A net one year term premium for the benefits provided for in the first policy year.

004.11 (2) The interest rates used in the present value calculations for any policy may not exceed the maximum valuation interest rate, determined with a guarantee duration equal to the length from issue to the mandatory expiration of the policy.

004.12 "Universal life insurance policy" means any individual life insurance policy under the provisions of which separately identified interest credits (other than in connection with dividend accumulations, premium deposit funds, or other supplementary accounts) and mortality or expense charges are made to the policy.

005. General Calculation Requirements for Basic Reserves and Premium Deficiency Reserves .

005.01 At the election of the company for any one or more specified plans of life insurance, the minimum mortality standard for basic reserves may be calculated using the 1980 CSO valuation tables with select mortality factors (or any other valuation mortality table adopted by the NAIC after January 1, 2000 and promulgated by regulation by the director for this purpose). If select mortality factors are elected, they may be:

005.01(1) The ten-year select mortality factors incorporated into the 1980 amendments to the NAIC Standard Valuation Law;

005.01(2) The select mortality factors in the Appendix; or

005.01(3) Any other table of select mortality factors adopted by the NAIC after the effective date of this regulation and promulgated by regulation by the director for the purpose of calculating basic reserves.

005.02 Deficiency reserves, if any, are calculated for each policy as the excess, if greater than zero, of the quantity A over the basic reserve. The quantity A is obtained by recalculating the basic reserve for the policy using guaranteed gross premiums instead of net premiums when the guaranteed gross premiums are less than the corresponding net premiums. At the election of the company for any one or more specified plans of insurance, the quantity A and the corresponding net premiums used in the determination of quantity A may be based upon the 1980 CSO valuation tables with select mortality factors (or any other valuation mortality table adopted by the NAIC after January 1, 2000 and promulgated by regulation by the director). If select mortality factors are elected, they may be:

005.02(1) The ten-year select mortality factors incorporated into the 1980 amendments to the NAIC Standard Valuation Law;

005.02(2) The select mortality factors in the Appendix of this regulation;

005.02(3) For durations in the first segment, X percent of the select mortality factors in the Appendix, subject to the following:

005.02(3)(a) X may vary by policy year, policy form, underwriting classification, issue age, or any other policy factor expected to affect mortality experience;

005.02(3)(b) X is such that, when using the valuation interest rate used for basic reserves, 005.02(3)(b)(i) is greater than or equal to 005.02(3)(b)(ii);

005.02(3)(b)(i) The actuarial present value of future death benefits, calculated using the mortality rates resulting from the application of X;

005.02(3)(b)(ii) The actuarial present value of future death benefits calculated using anticipated mortality experience without recognition of mortality improvement beyond the valuation date;

005.02(3)(c) X is such that the mortality rates resulting from the application of X are at least as great as the anticipated mortality experience, without recognition of mortality improvement beyond the valuation date, in each of the first five (5) years after the valuation date;

005.02(3)(d) The appointed actuary shall increase X at any valuation date where it is necessary to continue to meet all the requirements of Subsection 005.02(3);

005.02(3)(e) The appointed actuary may decrease X at any valuation date as long as X continues to meet all the requirements of Subsection 005.02(3); and

005.02(3)(f) The appointed actuary shall specifically take into account the adverse effect on expected mortality and lapsation of any anticipated or actual increase in gross premiums.

005.02(3)(g) If X is less than 100 percent at any duration for any policy, the following requirements shall be met:

005.02(3)(g)(i) The appointed actuary shall annually prepare an actuarial opinion and memorandum for the company in conformance with the requirements of Section 006 of Chapter 69 of the Nebraska Department of Insurance Regulations;

005.02(3)(g)(ii) The appointed actuary shall disclose, in the Regulatory Asset Adequacy Issues Summary, the impact of the insufficiency of assets to support the payment of benefits and expenses and the establishment of statutory reserves during one or more interim periods; and

005.02(3)(g)(iii) The appointed actuary shall annually opine for all policies subject to this regulation as to whether the mortality rates resulting from the application of X meet the requirements of Subsection 005.02(3). This opinion shall be supported by an actuarial report, subject to appropriate Actuarial Standards of Practice promulgated by the Actuarial Standards Board of the American Academy of Actuaries. The X factors shall reflect anticipated future mortality, without recognition of mortality improvement beyond the valuation date, taking into account relevant emerging experience.

005.02(4) Any other table of select mortality factors adopted by the NAIC after January 1, 2000 and promulgated by regulation by the director for the purpose of calculating deficiency reserves.

005.03 This subsection applies to both basic reserves and deficiency reserves. Any set of select mortality factors may be used only for the first segment. However, if the first segment is less than ten (10) years, the appropriate ten-year select mortality factors incorporated into the 1980 amendments to the NAIC Standard Valuation Law may be used thereafter through the tenth policy year from the date of issue.

005.04 In determining basic reserves or deficiency reserves, guaranteed gross premiums without policy fees may be used where the calculation involves the guaranteed gross premium but only if the policy fee is a level dollar amount after the first policy year. In determining deficiency reserves, policy fees may be included in guaranteed gross premiums, even if not included in the actual calculation of basic reserves.

005.05 Reserves for policies that have changes to guaranteed gross premiums, guaranteed benefits, guaranteed charges, or guaranteed credits that are unilaterally made by the insurer after issue and that are effective for more than one year after the date of the change shall be the greatest of the following: (1) reserves calculated ignoring the guarantee, (2) reserves assuming the guarantee was made at issue, and (3) reserves assuming that the policy was issued on the date of the guarantee.

005.06 The director may require that the company document the extent of the adequacy of reserves for specified blocks, including but not limited to policies issued prior to January 1, 2000. This documentation may include a demonstration of the extent to which aggregation with other non-specified blocks of business is relied upon in the formation of the appointed actuary opinion pursuant to and consistent with the requirements of Section 006 of Chapter 69 of the Nebraska Department of Insurance Regulations.

006. Calculation of Minimum Valuation Standard for Policies with Guaranteed Nonlevel Gross Premiums or Guaranteed Nonlevel Benefits (Other than Universal Life Policies)

006.01 Basic Reserves

Basic reserves shall be calculated as the greater of the segmented reserves and the unitary reserves. Both the segmented reserves and the unitary reserves for any policy shall use the same valuation mortality table and selection factors. At the option of the insurer, in calculating segmented reserves and net premiums, either of the adjustments described in Subsections 006.01(1) or 006.01(2) below may be made:

006.01(1) Treat the unitary reserve, if greater than zero, applicable at the end of each segment as a pure endowment and subtract the unitary reserve, if greater than zero, applicable at the beginning of each segment from the present value of guaranteed life insurance and endowment benefits for each segment.

006.01(2) Treat the guaranteed cash surrender value, if greater than zero, applicable at the end of each segment as a pure endowment; and subtract the guaranteed cash surrender value, if greater than zero, applicable at the beginning of each segment from the present value of guaranteed life insurance and endowment benefits for each segment.

006.02 Deficiency Reserves

006.02(1) The deficiency reserve at any duration shall be calculated:

006.02(1)(a) On a unitary basis if the corresponding basic reserve determined by Subsection 006.01 is unitary;

006.02(1)(b) On a segmented basis if the corresponding basic reserve determined by Subsection 006.01 is segmented; or

006.02(1)(c) On the segmented basis if the corresponding basic reserve determined by Subsection 006.01 is equal to both the segmented reserve and the unitary reserve.

006.02(2) This subsection shall apply to any policy for which the guaranteed gross premium at any duration is less than the corresponding modified net premium calculated by the method used in determining the basic reserves, but using the minimum valuation standards of mortality (specified in Section 005.02) and rate of interest.

006.02(3) Deficiency reserves, if any, shall be calculated for each policy as the excess if greater than zero, for the current and all remaining periods, of the quantity A over the basic reserve, where A is obtained as indicated in Section 005.02.

006.02(4) For deficiency reserves determined on a segmented basis, the quantity A is determined using segment lengths equal to those determined for segmented basic reserves.

006.03 Minimum Value

Basic reserves may not be less than the tabular cost of insurance for the balance of the policy year, if mean reserves are used. Basic reserves may not be less than the tabular cost of insurance for the balance of the current modal period or to the paid-to-date, if later, but not beyond the next policy anniversary, if mid-terminal reserves are used. The tabular cost of insurance shall use the same valuation mortality table and interest rates as that used for the calculation of the segmented reserves. However, if select mortality factors are used, they shall be the ten-year select factors incorporated into the 1980 amendments of the NAIC Standard Valuation Law. In no case may total reserves (including basic reserves, deficiency reserves and any reserves held for supplemental benefits that would expire upon contract termination) be less than the amount that the policyowner would receive (including the cash surrender value of the supplemental benefits, if any, referred to above), exclusive of any deduction for policy loans, upon termination of the policy.

006.04 Unusual Pattern of Guaranteed Cash Surrender Values

006.04(1) For any policy with an unusual pattern of guaranteed cash surrender values, the reserves actually held prior to the first unusual guaranteed cash surrender value shall not be less than the reserves calculated by treating the first unusual guaranteed cash surrender value as a pure endowment and treating the policy as an n year policy providing term insurance plus a pure endowment equal to the unusual cash surrender value, where n is the number of years from the date of issue to the date the unusual cash surrender value is scheduled.

006.04(2) The reserves actually held subsequent to any unusual guaranteed cash surrender value shall not be less than the reserves calculated by treating the policy as an n year policy providing term insurance plus a pure endowment equal to the next unusual guaranteed cash surrender value, and treating any unusual guaranteed cash surrender value at the end of the prior segment as a net single premium, where

006.04(2)(a) n is the number of years from the date of the last unusual guaranteed cash surrender value prior to the valuation date to the earlier of:

006.04(2)(a)(i) The date of the next unusual guaranteed cash surrender value, if any, that is scheduled after the valuation date; or

006.04(2)(a)(ii) The mandatory expiration date of the policy; and

006.04(2)(b) The net premium for a given year during the n year period is equal to the product of the net to gross ratio and the respective gross premium; and

006.04(2)(c) The net to gross ratio is equal to 006.04(2)(c)(i) divided by 006.04(2)(c)(ii) as follows:

006.04(2)(c)(i) The present value, at the beginning of the n year period, of death benefits payable during the n year period plus the present value, at the beginning of the n year period, of the next unusual guaranteed cash surrender value, if any, minus the amount of the last unusual guaranteed cash surrender value, if any, scheduled at the beginning of the n year period.

006.04(2)(c)(ii) The present value, at the beginning of the n year period, of the scheduled gross premiums payable during the n year period.

006.04(3) For purposes of this subsection, a policy is considered to have an unusual pattern of guaranteed cash surrender values if any future guaranteed cash surrender value exceeds the prior year's guaranteed cash surrender value by more than the sum of:

006.04(3)(a) One hundred ten percent (110%) of the scheduled gross premium for that year;

006.04(3)(b) One hundred ten percent (110%) of one year's accrued interest on the sum of the prior year's guaranteed cash surrender value and the scheduled gross premium using the nonforfeiture interest rate used for calculating policy guaranteed cash surrender values; and

006.04(3)(c) Five percent (5%) of the first policy year surrender charge, if any.

006.05 Optional Exemption for Yearly Renewable Term Reinsurance. At the option of the company, the following approach for reserves on YRT reinsurance may be used:

006.05(1) Calculate the valuation net premium for each future policy year as the tabular cost of insurance for that future year.

006.05(2) Basic reserves shall never be less than the tabular cost of insurance for the appropriate period, as defined in Subsection 006.03.

006.05(3) Deficiency reserves.

006.05(3)(a) For each policy year, calculate the excess, if greater than zero, of the valuation net premium over the respective maximum guaranteed gross premium.

006.05(3)(b) Deficiency reserves shall never be less than the sum of the present values, at the date of valuation, of the excesses determined in accordance with Subparagraph 006.05(3)(a) above.

006.05(4) For purposes of this subsection, the calculations use the maximum valuation interest rate and the 1980 CSO mortality tables with or without ten-year select mortality factors, or any other table adopted after January 1, 2000 by the NAIC and promulgated by regulation by the director for this purpose.

006.05(5) A reinsurance agreement shall be considered YRT reinsurance for purposes of this subsection if only the mortality risk is reinsured.

006.05(6) If the assuming company chooses this optional exemption, the ceding company's reinsurance reserve credit shall be limited to the amount of reserve held by the assuming company for the affected policies.

006.06 Optional Exemption for Attained-Age-Based Yearly Renewable Term Life Insurance Policies. At the option of the company, the following approach for reserves for attained-age-based YRT life insurance policies may be used:

006.06(1) Calculate the valuation net premium for each future policy year as the tabular cost of insurance for that future year.

006.06(2) Basic reserves shall never be less than the tabular cost of insurance for the appropriate period, as defined in Subsection 006.03.

006.06(3) Deficiency reserves.

006.06(3)(a) For each policy year, calculate the excess, if greater than zero, of the valuation net premium over the respective maximum guaranteed gross premium.

006.06(3)(b) Deficiency reserves shall never be less than the sum of the present values, at the date of valuation, of the excesses determined in accordance with Subparagraph 006.06(3)(a) above.

006.06(4) For purposes of this subsection, the calculations use the maximum valuation interest rate and the 1980 CSO valuation tables with or without ten-year select mortality factors, or any other table adopted after January 1, 2000 by the NAIC and promulgated by regulation by the director for this purpose.

006.06(5) A policy shall be considered an attained-age-based YRT life insurance policy for purposes of this subsection if:

006.06(5)(a) The premium rates (on both the initial current premium scale and the guaranteed maximum premium scale) are based upon the attained age of the insured such that the rate for any given policy at a given attained age of the insured is independent of the year the policy was issued; and

006.06(5)(b) The premium rates (on both the initial current premium scale and the guaranteed maximum premium scale) are the same as the premium rates for policies covering all insureds of the same sex, risk class, plan of insurance and attained age.

006.06(6) For policies that become attained-age-based YRT policies after an initial period of coverage, the approach of this subsection may be used after the initial period if:

006.06(6)(a) The initial period is constant for all insureds of the same sex, risk class and plan of insurance; or

006.06(6)(b) The initial period runs to a common attained age for all insureds of the same sex, risk class and plan of insurance; and

006.06(6)(c) After the initial period of coverage, the policy meets the conditions of Paragraph 006.06(5) above.

006.06(7) If this election is made, this approach shall be applied in determining reserves for all attained-age-based YRT life insurance policies issued on or after January 1, 2000.

006.07 Exemption from Unitary Reserves for Certain n-Year Renewable Term Life Insurance Policies. Unitary basic reserves and unitary deficiency reserves need not be calculated for a policy if the following conditions are met:

006.07(1) The policy consists of a series of n-year periods, including the first period and all renewal periods, where n is the same for each period, except that for the final renewal period, n may be truncated or extended to reach the expiry age, provided that this final renewal period is less than 10 years and less than twice the size of the earlier n-year periods, and for each period, the premium rates on both the initial current premium scale and the guaranteed maximum premium scale are level;

006.07(2) The guaranteed gross premiums in all n-year periods are not less than the corresponding net premiums based upon the 1980 CSO Table with or without the ten-year select mortality factors; and

006.07(3) There are no cash surrender values in any policy year.

006.08 Exemption from Unitary Reserves for Certain Juvenile Policies Unitary basic reserves and unitary deficiency reserves need not be calculated for a policy if the following conditions are met, based upon the initial current premium scale at issue:

006.08(1) At issue, the insured is age twenty-four (24) or younger;

006.08(2) Until the insured reaches the end of the juvenile period, which shall occur at or before age twenty-five (25), the gross premiums and death benefits are level, and there are no cash surrender values; and

006.08(3) After the end of the juvenile period, gross premiums are level for the remainder of the premium paying period, and death benefits are level for the remainder of the life of the policy.

007. Calculation of Minimum Valuation Standard for Flexible Premium and Fixed Premium Universal Life Insurance Policies That Contain Provisions Resulting in the Ability of a Policyowner to Keep a Policy in Force Over a Secondary Guarantee Period .

007.01 General

007.01(1) Policies with a secondary guarantee include:

007.01(1)(a) A policy with a guarantee that the policy will remain in force at the original schedule of benefits, subject only to the payment of specified premiums;

007.01(1)(b) A policy in which the minimum premium at any duration is less than the corresponding one year valuation premium, calculated using the maximum valuation interest rate and the 1980 CSO valuation tables with or without ten-year select mortality factors, or any other table adopted after January 1, 2000 by the NAIC and promulgated by regulation by the director for this purpose; or

007.01(1)(c) A policy with any combination of Subparagraph 007.01(1)(a) and 007.01(1)(b).

007.01(2) A secondary guarantee period is the period for which the policy is guaranteed to remain in force subject only to a secondary guarantee. When a policy contains more than one secondary guarantee, the minimum reserve shall be the greatest of the respective minimum reserves at that valuation date of each unexpired secondary guarantee, ignoring all other secondary guarantees. Secondary guarantees that are unilaterally changed by the insurer after issue shall be considered to have been made at issue. Reserves described in Subsections 007.02 and 007.03 below shall be recalculated from issue to reflect these changes.

007.01(3) Specified premiums mean the premiums specified in the policy, the payment of which guarantees that the policy will remain in force at the original schedule of benefits, but which otherwise would be insufficient to keep the policy in force in the absence of the guarantee if maximum mortality and expense charges and minimum interest credits were made and any applicable surrender charges were assessed.

007.01(4) For purposes of this section, the minimum premium for any policy year is the premium that, when paid into a policy with a zero account value at the beginning of the policy year, produces a zero account value at the end of the policy year. The minimum premium calculation shall use the policy cost factors (including mortality charges, loads and expense charges) and the interest crediting rate, which are all guaranteed at issue.

007.01(5) The one-year valuation premium means the net one-year premium based upon the original schedule of benefits for a given policy year. The one-year valuation premiums for all policy years are calculated at issue. The select mortality factors defined in Section 005.02(2), 005.02(3), and 005.02(4) may not be used to calculate the one-year valuation premiums.

007.01(6) The one-year valuation premium should reflect the frequency of fund processing, as well as the distribution of deaths assumption employed in the calculation of the monthly mortality charges to the fund.

007.02 Basic Reserves for the Secondary Guarantees

Basic reserves for the secondary guarantees shall be the segmented reserves for the secondary guarantee period. In calculating the segments and the segmented reserves, the gross premiums shall be set equal to the specified premiums, if any, or otherwise to the minimum premiums, that keep the policy in force and the segments will be determined according to the contract segmentation method as defined in Section 004.02.

007.03 Deficiency Reserves for the Secondary Guarantees

Deficiency reserves, if any, for the secondary guarantees shall be calculated for the secondary guarantee period in the same manner as described in Section 006.02 with gross premiums set equal to the specified premiums, if any, or otherwise to the minimum premiums that keep the policy in force.

007.04 Minimum Reserves

The minimum reserves during the secondary guarantee period are the greater of:

007.04(1) The basic reserves for the secondary guarantee plus the deficiency reserve, if any, for the secondary guarantees; or

007.04(2) The minimum reserves required by other rules or regulations governing universal life plans.

Appendix A SELECT MORTALITY FACTORS

The six tables of select mortality factors contained herein include: (1) male aggregate, (2) male nonsmoker, (3) male smoker, (4) female aggregate, (5) female nonsmoker, and (6) female smoker.

These tables apply to both age last birthday and age nearest birthday mortality tables. For sex-blended mortality tables, compute select mortality factors in the same proportion as the underlying mortality. For example, for the 1980 CSO-B Table, the calculated select mortality factors are eighty percent (80%) of the appropriate male table in this Appendix, plus twenty percent (20%) of the appropriate female table in this Appendix.

History

• Effective 2010-11-02

Chapter 72 Life Insurance Illustrations Regulation

Neb. Admin. Code tit. 210, ch. 72 Life Insurance Illustrations Regulation {#sec-210-nac-72 omnilex-key=us-ne-regs-official--title-210--210 NAC 72}

001. Purpose . The purpose of this regulation is to provide rules for life insurance policy illustrations that will protect consumers and foster consumer education. The regulation provides illustration formats, prescribes standards to be followed when illustrations are used, and specifies the disclosures that are required in connection with illustrations. The goals of this regulation are to ensure that illustrations do not mislead purchasers of life insurance and to make illustrations more understandable. Insurers will, as far as possible, eliminate the use of footnotes and caveats and define terms used in the illustration in language that would be understood by a typical person within the segment of the public to which the illustration is directed.

002. Authority . This rule is adopted and promulgated by the Director of Insurance of the State of Nebraska pursuant to the authority granted by Neb.Rev.Stat. §44-101.01, §44-1522, §44-1525(1)(a) and §44-1533.

003. Applicability and Scope . This regulation applies to all group and individual life insurance policies and certificates except:

003.01 Variable life insurance;

003.02 Individual and group annuity contracts;

003.03 Credit life insurance; or

003.04 Life insurance policies with no illustrated death benefits on any individual exceeding $10,000.

004. Definitions . For the purposes of this regulation:

004.01 "Actuarial Standards Board" means the board established by the American Academy of Actuaries to develop and promulgate standards of actuarial practice.

004.02 "Contract premium" means the gross premium that is required to be paid under a fixed premium policy, including the premium for a rider for which benefits are shown in the illustration.

004.03 "Currently payable scale" means a scale of non-guaranteed elements in effect for a policy form as of the preparation date of the illustration or declared to become effective within the next ninety-five (95) days.

004.04 "Disciplined current scale" means a scale of non-guaranteed elements constituting a limit on illustrations currently being illustrated by an insurer that is reasonably based on actual recent historical experience, as certified annually by an illustration actuary designated by the insurer. Further guidance in determining the disciplined current scale as contained in standards established by the Actuarial Standards Board may be relied upon if the standards:

004.04(1) Are consistent with all provisions of this regulation;

004.04(2) Limit a disciplined current scale to reflect only actions that have already been taken or events that have already occurred;

004.04(3) Do not permit disciplined current scale to include any projected trends of improvements in experience or any assumed improvements in a experience beyond the illustration date; and

004.04(4) Do not permit assumed expenses to be less than minimum assumed expenses.

004.05 "Generic name" means a short title descriptive of the policy being illustrated such as "whole life," "term life" or "flexible premium adjustable life."

004.06 "Guaranteed elements" and "non-guaranteed elements"

004.06(1) "Guaranteed elements" means the premiums, benefits, values, credits or charges under a policy of life insurance that are guaranteed and determined at issue.

004.06(2) "Non-guaranteed elements" means the premiums, benefits, values, credits or charges under a policy of life insurance that are not guaranteed or not determined at issue.

004.07 "Illustrated scale" means a scale of non-guaranteed elements currently being illustrated that is not more favorable to the policyowner than the lesser of:

004.07(1) The disciplined current scale; or

004.07(2) The currently payable scale.

004.08 "Illustration" means a presentation or depiction that includes non-guaranteed elements of a policy of life insurance over a period of years and that is one of the three (3) types defined below:

004.08(1) "Basic illustration" means a ledger or proposal used in the sale of a life insurance policy that shows both guaranteed and non-guaranteed elements.

004.08(2) "Supplemental illustration" means an illustration furnished in addition to a basic illustration that meets the applicable requirements of this regulation, and that may be presented in a format differing from the basic illustration, but may only depict a scale of non-guaranteed elements that is permitted in a basic illustration.

004.08(3) "In force illustration" means an illustration furnished at any time after the policy that it depicts has been in force for one year or more.

004.09 "Illustration actuary" means an actuary meeting the requirements of Section 011 who certifies to illustrations based on the standard of practice promulgated by the Actuarial Standards Board.

004.10 "Lapse-supported illustration" means an illustration of a policy form failing the test of self-supporting as defined in this regulation, under a modified persistency rate assumption using persistency rates underlying the disciplined current scale for the first five (5) years and 100 percent policy persistency thereafter.

004.11

004.11(1) "Minimum assumed expenses" means the minimum expenses that may be used in the calculation of the disciplined current scale for a policy form. The insurer may choose to designate each year the method of determining assumed expenses for all policy forms from the following:

004.11(1)(a) Fully allocated expenses;

004.11(1)(b) Marginal expenses; and

004.11(1)(c) A generally recognized expense table based on fully allocated expenses representing a significant portion of insurance companies and approved by the director.

004.11(2) Marginal expenses may be used only if greater than a generally recognized expense table. If no generally recognized expense table is approved, fully allocated expenses must be used.

004.12 "Non-term group life" means a group policy or individual policies of life insurance issued to members of an employer group or other permitted group where:

004.12(1) Every plan of coverage was selected by the employer or other group representative;

004.12(2) Some portion of the premium is paid by the group or through payroll deduction; and

004.12(3) Group underwriting or simplified underwriting is used.

004.13 "Policyowner" means the owner named in the policy or the certificate holder in the case of a group policy.

004.14 "Premium outlay" means the amount of premium assumed to be paid by the policyowner or other premium payer out-of-pocket.

004.15 "Self-supporting illustration" means an illustration of a policy form for which it can be demonstrated that, when using experience assumptions underlying the disciplined current scale, for all illustrated points in time on or after the fifteenth policy anniversary or the twentieth policy anniversary for second-or-later-to-die policies (or upon policy expiration if sooner), the accumulated value of all policy cash flows equals or exceeds the total policyowner value available. For this purpose, policyowner value will include cash surrender values and any other illustrated benefit amounts available at the policyowner’s election.

005. Policies to be Illustrated .

005.01 Each insurer marketing policies to which this regulation is applicable shall notify the director whether a policy form is to be marketed with or without an illustration. For all policy forms being actively marketed on the effective date of this regulation, the insurer shall identify in writing those forms and whether or not an illustration will be used with them. For policy forms filed after the effective date of this regulation, the identification shall be made at the time of filing. Any previous identification may be changed by notice to the director.

005.02 If the insurer identifies a policy form as one to be marketed without an illustration, any use of an illustration for any policy using that form prior to the first policy anniversary is prohibited.

005.03 If a policy form is identified by the insurer as one to be marketed with an illustration, a basic illustration prepared and delivered in accordance with this regulation is required, except that a basic illustration need not be provided to individual members of a group or to individuals insured under multiple lives coverage issued to a single applicant unless the coverage is marketed to these individuals. The illustration furnished an applicant for a group life insurance policy or policies issued to a single applicant on multiple lives may be either an individual or composite illustration representative of the coverage on the lives of members of the group or the multiple lives covered.

005.04 Potential enrollees of non-term group life subject to this regulation shall be furnished a quotation with the enrollment materials. The quotation shall show potential policy values for sample ages and policy years on a guaranteed and non-guaranteed basis appropriate to the group and the coverage. This quotation shall not be considered an illustration for purposes of this regulation, but all information provided shall be consistent with the illustrated scale. A basic illustration shall be provided at delivery of the certificate to enrollees for non-term group life who enroll for more than the minimum premium necessary to provide pure death benefit protection. In addition, the insurer shall make a basic illustration available to any non-term group life enrollee who requests it.

006. General Rules and Prohibitions .

006.01 An illustration used in the sale of a life insurance policy shall satisfy the applicable requirements of this regulation, be clearly labeled "life insurance illustration" and contain the following basic information:

006.01(1) Name of insurer;

006.01(2) Name and business address of producer or insurer’s authorized representative, if any;

006.01(3) Name, age and sex of proposed insured, except where a composite illustration is permitted under this regulation;

006.01(4) Underwriting or rating classification upon which the illustration is based;

006.01(5) Generic name of policy, the company product name, if different, and form number;

006.01(6) Initial death benefit; and

006.01(7) Dividend option election or application of non-guaranteed elements, if applicable.

006.02 When using an illustration in the sale of a life insurance policy, an insurer or its producers or other authorized representatives shall not:

006.02(1) Represent the policy as anything other than a life insurance policy;

006.02(2) Use or describe non-guaranteed elements in a manner that is misleading or has the capacity or tendency to mislead;

006.02(3) State or imply that the payment or amount of non-guaranteed elements is guaranteed;

006.02(4) Use an illustration that does not comply with the requirements of this regulation;

006.02(5) Use an illustration that at any policy duration depicts policy performance more favorable to the policyowner than that produced by the illustrated scale of the insurer whose policy is being illustrated;

006.02(6) Provide an applicant with an incomplete illustration;

006.02(7) Represent in any way that premium payments will not be required for each year of the policy in order to maintain the illustrated death benefits, unless that is the fact;

006.02(8) Use the term "vanish" or "vanishing premium," or a similar term that implies the policy becomes paid up, to describe a plan for using non-guaranteed elements to pay a portion of future premiums;

006.02(9) Except for policies that can never develop nonforfeiture values, use an illustration that is "lapse-supported"; or

006.02(10) Use an illustration that is not "self-supporting."

006.03 If an interest rate used to determine the illustrated non-guaranteed elements is shown, it shall not be greater than the earned interest rate underlying the disciplined current scale.

007. Standards for Basic Illustrations .

007.01 Format. A basic illustration shall conform with the following requirements:

007.01(1) The illustration shall be labeled with the date on which it was prepared.

007.01(2) Each page, including any explanatory notes or pages, shall be numbered and show its relationship to the total number of pages in the illustration (e.g., the fourth page of a seven-page illustration shall be labeled "page 4 of 7 pages").

007.01(3) The assumed dates of payment receipt and benefit pay-out within a policy year shall be clearly identified.

007.01(4) If the age of the proposed insured is shown as a component of the tabular detail, it shall be issue age plus the numbers of years the policy is assumed to have been in force.

007.01(5) The assumed payments on which the illustrated benefits and values are based shall be identified as premium outlay or contract premium, as applicable. For policies that do not require a specific contract premium, the illustrated payments shall be identified as premium outlay.

007.01(6) Guaranteed death benefits and values available upon surrender, if any, for the illustrated premium outlay or contract premium shall be shown and clearly labeled guaranteed.

007.01(7) If the illustration shows any non-guaranteed elements, they cannot be based on a scale more favorable to the policyowner than the insurer’s illustrated scale at any duration. These elements shall be clearly labeled non-guaranteed.

007.01(8) The guaranteed elements, if any, shall be shown before corresponding non-guaranteed elements and shall be specifically referred to on any page of an illustration that shows or describes only the non-guaranteed elements (e.g., "see page one for guaranteed elements.")

007.01(9) The account or accumulation value of a policy, if shown, shall be identified by the name this value is given in the policy being illustrated and shown in close proximity to the corresponding value available upon surrender.

007.01(10) The value available upon surrender shall be identified by the name this value is given in the policy being illustrated and shall be the amount available to the policyowner in a lump sum after deduction of surrender charges, policy loans and policy loan interest, as applicable.

007.01(11) Illustrations may show policy benefits and values in graphic or chart form in addition to the tabular form.

007.01(12) Any illustration of non-guaranteed elements shall be accompanied by a statement indicating that:

007.01(12)(a) The benefits and values are not guaranteed;

007.01(12)(b) The assumptions on which they are based are subject to change by the insurer; and

007.01(12)(c) Actual results may be more or less favorable.

007.01(13) If the illustration shows that the premium payer may have the option to allow policy charges to be paid using non-guaranteed values, the illustration must clearly disclose that a charge continues to be required and that, depending on actual results, the premium payer may need to continue or resume premium outlays. Similar disclosure shall be made for premium outlay of lesser amounts or shorter durations than the contract premium. If a contract premium is due, the premium outlay display shall not be left blank or show zero unless accompanied by an asterisk or similar mark to draw attention to the fact that the policy is not paid up.

007.01(14) If the applicant plans to use dividends or policy values, guaranteed or non-guaranteed, to pay all or a portion of the contract premium or policy charges, or for any other purpose, the illustration may reflect those plans and the impact on future policy benefits and values.

007.02 Narrative Summary. A basic illustration shall include the following:

007.02(1) A brief description of the policy being illustrated, including a statement that it is a life insurance policy;

007.02(2) A brief description of the premium outlay or contract premium, as applicable, for the policy. For a policy that does not require payment of a specific contract premium, the illustration shall show the premium outlay that must be paid to guarantee coverage for the term of the contract, subject to maximum premiums allowable to qualify as a life insurance policy under the applicable provisions of the Internal Revenue Code;

007.02(3) A brief description of any policy features, riders or options, guaranteed or non-guaranteed, shown in the basic illustration and the impact they may have on the benefits and values of the policy;

007.02(4) Identification and a brief definition of column headings and key terms used in the illustration; and

007.02(5) A statement containing in substance the following: "This illustration assumes that the currently illustrated nonguaranteed elements will continue unchanged for all years shown. This is not likely to occur, and actual results may be more or less favorable than those shown."

007.03 Numeric Summary.

007.03(1) Following the narrative summary, a basic illustration shall include a numeric summary of the death benefits and values and the premium outlay and contract premium, as applicable. For a policy that provides for a contract premium, the guaranteed death benefits and values shall be based on the contract premium. This summary shall be shown for at least policy years five (5), ten (10) and twenty (20) and at age 70, if applicable, on the three bases shown below. For multiple life policies the summary shall show policy years five (5), ten (10), twenty (20) and thirty (30).

007.03(1)(a) Policy guarantees;

007.03(1)(b) Insurer’s illustrated scale;

007.03(1)(c) Insurer’s illustrated scale used but with the non-guaranteed elements reduced as follows:

007.03(2) In addition, if coverage would cease prior to policy maturity or age 100, the year in which coverage ceases shall be identified for each of the three (3) bases.

007.04 Statements. Statements substantially similar to the following shall be included on the same page as the numeric summary and signed by the applicant, or the policyowner in the case of an illustration provided at time of delivery, as required in this regulation.

007.04(1) A statement to be signed and dated by the applicant or policyowner reading as follows: "I have received a copy of this illustration and understand that any non-guaranteed elements illustrated are subject to change and could be either higher or lower. The agent has told me they are not guaranteed."

007.04(2) A statement to be signed and dated by the insurance producer or other authorized representative of the insurer reading as follows: "I certify that this illustration has been presented to the applicant and that I have explained that any non-guaranteed elements illustrated are subject to change. I have made no statements that are inconsistent with the illustration."

007.05 Tabular Detail.

007.05(1) A basic illustration shall include the following for at least each policy year from one (1) to ten (10) and for every fifth policy year thereafter ending at age 100, policy maturity or final expiration; and except for term insurance beyond the 20th year, for any year in which the premium outlay and contract premium, if applicable, is to change:

007.05(1)(a) The premium outlay and mode the applicant plans to pay and the contract premium, as applicable;

007.05(1)(b) The corresponding guaranteed death benefit, as provided in the policy; and

007.05(1)(c) The corresponding guaranteed value available upon surrender, as provided in the policy.

007.05(2) For a policy that provides for a contract premium, the guaranteed death benefit and value available upon surrender shall correspond to the contract premium.

007.05(3) Non-guaranteed elements may be shown if described in the contract. In the case of an illustration for a policy on which the insurer intends to credit terminal dividends, they may be shown if the insurer’s current practice is to pay terminal dividends. If any non-guaranteed elements are shown they must be shown at the same durations as the corresponding guaranteed elements, if any. If no guaranteed benefit or value is available at any duration for which a non-guaranteed benefit or value is shown, a zero shall be displayed in the guaranteed column.

008. Standards for Supplemental Illustrations .

008.01 A supplemental illustration may be provided so long as:

008.01(1) It is appended to, accompanied by or preceded by a basic illustration that complies with this regulation;

008.01(2) The non-guaranteed elements shown are not more favorable to the policyowner than the corresponding elements based on the scale used in the basic illustration;

008.01(3) It contains the same statement required of a basic illustration that non-guaranteed elements are not guaranteed; and

008.01(4) For a policy that has a contract premium, the contract premium underlying the supplemental illustration is equal to the contract premium shown in the basic illustration. For policies that do not require a contract premium, the premium outlay underlying the supplemental illustration shall be equal to the premium outlay shown in the basic illustration.

008.02 The supplemental illustration shall include a notice referring to the basic illustration for guaranteed elements and other important information.

009. Delivery of Illustration and Record Retention .

009.01

009.01(1) If a basic illustration is used by an insurance producer or other authorized representative of the insurer in the sale of a life insurance policy and the policy is applied for as illustrated, a copy of that illustration, signed in accordance with this regulation, shall be submitted to the insurer at the time of policy application. A copy also shall be provided to the applicant.

009.01(2) If the policy is issued other than as applied for, a revised basic illustration conforming to the policy as issued shall be sent with the policy. The revised illustration shall conform to the requirements of this regulation, shall be labeled "Revised Illustration" and shall be signed and dated by the applicant or policyowner and producer or other authorized representative of the insurer no later than the time the policy is delivered. A copy shall be provided to the insurer and the policyowner.

009.02

009.02(1) If no illustration is used by an insurance producer or other authorized representative in the sale of a life insurance policy or if the policy is applied for other than as illustrated, the producer or representative shall certify to that effect in writing on a form provided by the insurer. On the same form the applicant shall acknowledge that no illustration conforming to the policy applied for was provided and shall further acknowledge an understanding that an illustration conforming to the policy as issued will be provided no later than at the time of policy delivery. This form shall be submitted to the insurer at the time of policy application.

009.02(2) If the policy is issued, a basic illustration conforming to the policy as issued shall be sent with the policy and signed no later than the time the policy is delivered. A copy shall be provided to the insurer and the policyowner.

009.03 If the basic illustration or revised illustration is sent to the applicant or policyowner by mail from the insurer, it shall include instructions for the applicant or policyowner to sign the duplicate copy of the numeric summary page of the illustration for the policy issued and return the signed copy to the insurer. The insurer’s obligation under this subsection shall be satisfied if it can demonstrate that it has made a diligent effort to secure a signed copy of the numeric summary page. The requirement to make a diligent effort shall be deemed satisfied if the insurer includes in the mailing a self-addressed postage prepaid envelope with instructions for the return of the signed numeric summary page.

009.04 A copy of the basic illustration and a revised basic illustration, if any, signed as applicable, along with any certification that either no illustration was used or that the policy was applied for other than as illustrated, shall be retained by the insurer until three (3) years after the policy is no longer in force. A copy need not be retained if no policy is issued.

010. Annual Report; Notice to Policyholders .

010.01 In the case of a policy designated as one for which illustrations will be used, the insurer shall provide each policyowner with an annual report on the status of the policy that shall contain at least the following information:

010.01(1) For universal life policies, the report shall include the following:

010.01(1)(a) The beginning and end date of the current report period;

010.01(1)(b) The policy value at the end of the previous report period and at the end of the current report period;

010.01(1)(c) The total amounts that have been credited or debited to the policy value during the current report period, identifying each by type (e.g., interest, mortality, expense and riders);

010.01(1)(d) The current death benefit at the end of the current report period on each life covered by the policy;

010.01(1)(e) The net cash surrender value of the policy as of the end of the current report period;

010.01(1)(f) The amount of outstanding loans, if any, as of the end of the current report period; and

010.01(1)(g) For fixed premium policies:

If, assuming guaranteed interest, mortality and expense loads and continued scheduled premium payments, the policy’s net cash surrender value is such that it would not maintain insurance in force until the end of the next reporting period, a notice to this effect shall be included in the report; or

010.01(1)(h) For flexible premium policies:

If, assuming guaranteed interest, mortality and expense loads, the policy’s net cash surrender value will not maintain insurance in force until the end of the next reporting period unless further premium payments are made, a notice to this effect shall be included in the report.

010.01(2) For all other policies, where applicable:

010.01(2)(a) Current death benefit;

010.01(2)(b) Annual contract premium;

010.01(2)(c) Current cash surrender value;

010.01(2)(d) Current dividend;

010.01(2)(e) Application of current dividend; and

010.01(2)(f) Amount of outstanding loan.

010.01(3) Insurers writing life insurance policies that do not build nonforfeiture values shall only be required to provide an annual report with respect to these policies for those years when a change has been made to nonguaranteed policy elements by the insurer."

010.02 If the annual report does not include an in force illustration, it shall contain the following notice displayed prominently: "IMPORTANT POLICYOWNER NOTICE: You should consider requesting more detailed information about your policy to understand how it may perform in the future. You should not consider replacement of your policy or make changes in your coverage without requesting a current illustration. You may annually request, without charge, such an illustration by calling [insurer’s phone number], writing to [insurer’s name] at [insurer’s address] or contacting your agent. If you do not receive a current illustration of your policy within 30 days from your request, you should contact your state insurance department." The insurer may vary the sequential order of the methods for obtaining an in force illustration.

010.03 Upon the request of the policyowner, the insurer shall furnish an in force illustration of current and future benefits and values based on the insurer’s present illustrated scale. This illustration shall comply with the requirements of subsections 006.01, 006.02, 007.01 and 007.05. No signature or other acknowledgment of receipt of this illustration shall be required.

010.04 If an adverse change in non-guaranteed elements that could affect the policy has been made by the insurer since the last annual report, the annual report shall contain a notice of that fact and the nature of the change prominently displayed.

011. Annual Certifications .

011.01 The board of directors of each insurer shall appoint one or more illustration actuaries.

011.02 The illustration actuary shall certify that the disciplined current scale used in illustrations is in conformity with the Actuarial Standard of Practice for Compliance with the NAIC Model Regulation on Life Insurance Illustrations promulgated by the Actuarial Standards Board, and that the illustrated scales used in insurer-authorized illustrations meet the requirements of this regulation.

011.03 The illustration actuary shall:

011.03(1) Be a member in good standing of the American Academy of Actuaries;

011.03(2) Be familiar with the standard of practice regarding life insurance policy illustrations;

011.03(3) Not have been found by the director, following appropriate notice and hearing to have:

011.03(3)(a) Violated any provision of, or any obligation imposed by, the insurance law or other law in the course of his or her dealings as an illustration actuary;

011.03(3)(b) Been found guilty of fraudulent or dishonest practices;

011.03(3)(c) Demonstrated his or her incompetence, lack of cooperation, or untrustworthine to act as an illustration actuary; or

011.03(3)(d) Resigned or been removed as an illustration actuary within the past five (5) years as a result of acts or omissions indicated in any adverse report on examination or as a result of a failure to adhere to generally acceptable actuarial standards;

011.03(4) Not fail to notify the director of any action taken by a commissioner or a director of another state similar to that under subsection 011.03(3) above;

011.03(5) Disclose in the annual certification whether, since the last certification, a currently payable scale applicable for business issued within the previous five (5) years and within the scope of the certification has been reduced for reasons other than changes in the experience factors underlying the disciplined current scale. If nonguaranteed elements illustrated for new policies are not consistent with those illustrated for similar in force policies, this must be disclosed in the annual certification. If nonguaranteed elements illustrated for both new and in force policies are not consistent with the nonguaranteed elements actually being paid, charged or credited to the same or similar forms, this must be disclosed in the annual certification; and

011.03(6) Disclose in the annual certification the method used to allocate overhead expenses for all illustrations:

011.03(6)(a) Fully allocated expenses;

011.03(6)(b) Marginal expenses; or

011.03(6)(c) A generally recognized expense table based on fully allocated expenses representing a significant portion of insurance companies and approved by the director.

011.04 Certification Filing

011.04(1) The illustration actuary shall file a certification with the board and with the director:

011.04(1)(a) Annually for all policy forms for which illustrations are used; and

011.04(1)(b) Before a new policy form is illustrated.

011.04(2) If an error in a previous certification is discovered, the illustration actuary shall notify the board of directors of the insurer and the director promptly.

011.05 If an illustration actuary is unable to certify the scale for any policy form illustration the insurer intends to use, the actuary shall notify the board of directors of the insurer and the director promptly of his or her inability to certify.

011.06 A responsible officer of the insurer, other than the illustration actuary, shall certify annually:

011.06(1) That the illustration formats meet the requirements of this regulation and that the scales used in insurer-authorized illustrations are those scales certified by the illustration actuary; and

011.06(2) That the company has provided its agents with information about the expense allocation method used by the company in its illustrations and disclosed as required in subsection 011.03(6).

011.07 The annual certifications shall be provided to the director each year by a date determined by the insurer.

011.08 If an insurer changes the illustration actuary responsible for all or a portion of the company’s policy forms, the insurer shall notify the director of that fact promptly and disclose the reason for the change.

012. Penalties . In addition to any other penalties provided by the laws of this state, an insurer which or a producer who violates a requirement of this regulation shall be guilty of a violation of Neb.Rev.Stat. §44-1521 through §44-1535.

013. Severability . If any provision of this regulation or its application to any person or circumstance is for any reason held to be invalid by any court of law, the remainder of the regulation and its application to other persons or circumstances shall not be affected.

014. Effective Date . This regulation shall become effective July 1, 1997, to policies sold on or after the effective date.

History

• Effective 1997-06-21

Chapter 73 Exempt Commercial Policyholders

Neb. Admin. Code tit. 210, ch. 73 Exempt Commercial Policyholders {#sec-210-nac-73 omnilex-key=us-ne-regs-official--title-210--210 NAC 73}

001. Purpose and scope .

001.01 The purpose of this chapter is to implement sections 15 and 16 of LB 1119, passed in the 2000 session of the Nebraska Legislature and codified at Neb.Rev.Stat. §§ 44-7515 and 44-7516, which require the director of insurance to adopt rules that:

(1) Modify or eliminate requirements for insurers to use filed rates and approved policy forms for commercial lines property and casualty insurance sold to certain commercial policyholders under common ownership; and

(2) Allow certain exempt commercial policyholders to be exempt from those provisions of Neb.Rev.Stat. §§ 44-5510 and 55-5511 that require, as a condition for the purchase of insurance from a nonadmitted insurer, that the applicant demonstrate an inability to obtain insurance from a licensed insurer.

001.02 This chapter includes rate filing and form approval and surplus lines access exemptions for the lines, types and classes of commercial lines property and casualty insurance filed pursuant to Neb.Rev.Stat. § 44-7508, and workers’ compensation insurance, medical professional liability insurance, and insurance covering farms and ranches, including crop insurance.

002. Authority . This Rule is promulgated under the authority vested in the Director by Neb.Rev.Stat. §§ 44-101.01, 44-7515, and 44-7516.

003. Definitions . For the purposes of Chapter 73, the following definitions apply.

03.01 The definitions set forth in Neb.Rev.Stat. § 44-7504 apply for purposes of this chapter.

03.02 “Class RFS policyholder” means an exempt commercial policyholder that fulfills either of the two following sets of conditions:

(1) (A) The policyholder utilizes the services of a qualifying risk manager;

(B) The policyholder generates at least $100,000 in aggregate commercial lines property and casualty insurance premiums per year, and

(C) The policyholder meets at least two of the following conditions:

(i) The policyholder generates aggregate commercial lines property and casualty insurance premiums of at least $250,000 per year, excluding premiums for workers’ compensation and medical professional liability insurance, or generates at least $1,000,000 aggregate commercial property and casualty insurance premiums per year, including premiums for workers’ compensation and medical professional liability insurance.

(ii) The policyholder’s net worth is at least $25,000,000.

(iii) The policyholder’s annual net revenues or sales are at least $50,000,000.

(iv) The policyholder employs at least 250 employees.

(v) If the policyholder is a not-for-profit or government entity, the policyholder has an annual operating budget of at least $25,000,000.

(2) (A) The policyholder generates at least $100,000 in aggregate commercial lines property and casualty insurance premiums per year for all jurisdictions combined, and

(B) In a jurisdiction that generates greater aggregate commercial property and casualty insurance premiums for the policyholder than Nebraska:

(i) No rates for the policyholder are subject to a requirement that the insurer adheres to its rating manuals;

(ii) No policy forms for the policyholder, other than policy forms for workers’ compensation and automobile liability insurance, are subject to a requirement that the insurer must use filed forms, and

(iii) Access to surplus lines markets for other than workers’ compensation and automobile liability insurance for the policyholder is not subject to any requirement that such coverage is not available from a licensed insurer.

003.03 “Class RF policyholder” means an exempt commercial policyholder that meets any one of the three following sets of conditions:

(1) The policyholder utilizes the services of a qualifying risk manager and generates at least $50,000 in aggregate property and casualty insurance premiums per year.

(2) The policyholder generates aggregate commercial lines property and casualty insurance premiums of at least $250,000 per year, excluding premiums for workers’ compensation and medical professional liability insurance, or generates at least $1,000,000 per year in aggregate property and casualty insurance premiums, including premiums for workers’ compensation and medical professional liability insurance.

(3) (A) The policyholder generates at least $50,000 in aggregate commercial lines property and casualty insurance premiums per year for all jurisdictions combined, and

(B) In a jurisdiction that generates greater aggregate commercial property and casualty insurance premiums for the policyholder than Nebraska:

(i) No rates for the policyholder are subject to a requirement that the insurer adhere to its rating manuals, and

(ii) No policy forms for the policyholder, other than policy forms for workers’ compensation and automobile liability insurance, are subject to a requirement that the insurer must use filed forms.

003.04 “Class R policyholder” means an exempt commercial policyholder that meets any one of the three following sets of conditions:

(1) The policyholder utilizes the services of a qualifying risk manager and generates at least $25,000 in aggregate commercial lines property and casualty insurance premiums per year.

(2) The policyholder generates aggregate property and casualty insurance premiums of at least $75,000 per year excluding premiums for medical professional liability insurance, or generates at least $250,000 in aggregate commercial lines property and casualty insurance premiums per year, including premiums for medical professional liability insurance.

(3) The policyholder generates at least $25,000 in aggregate commercial lines property and casualty insurance premiums per year for all jurisdictions combined and, in a jurisdiction that generates greater aggregate commercial property and casualty insurance premiums for the policyholder than Nebraska, rates for the policyholder are not subject to a requirement that the insurer adheres to its rating manuals.

003.05 “Commercial lines property and casualty insurance” means property and casualty insurance filed pursuant to Neb.Rev.Stat. § 44-7508, and also includes workers’ compensation insurance, medical professional liability insurance, and insurance covering farms and ranches, including crop insurance.

003.06 “Exempt commercial policyholder” means a Class RFS, RF, or R policyholder, as defined by this chapter, that may purchase insurance policies for which specific aspects of rate or policy form regulation do not apply or have been relaxed, or that is exempt from those provisions of §§ 44-5510 and 44-5511 that require, as a condition for the purchase of insurance from a nonadmitted insurer, that applicants demonstrate inability to obtain insurance from a licensed insurer.

003.07 “Qualifying risk manager” means:

(1) (A) A person that is a full time employee of the policyholder with primary duties consisting of property and casualty risk management and the purchase of insurance, and that meets the qualification standards in paragraph (2); or

(B) A person or persons, operating as a contractor that primarily provides risk management services, that devotes at least one hundred twenty hours per year to the policyholder’s risk management and purchase of insurance. No such person shall be an agent for an insurer providing insurance for the policyholder, and shall not receive any compensation from an insurer, or from an agent of an insurer that is providing insurance for the policyholder, or from an agency compensated by the insurer that is providing insurance for the policyholder. Each person whose hours are included in the total hours necessary to meet this requirement is required to meet the qualification standards in paragraph (2).

(2) Who has demonstrated qualification through:

(A) Five or more years of full time experience in property and casualty insurance as a commercial lines underwriter with an insurance company or as an insurance producer dealing primarily with commercial accounts, except that health and employee benefit experience shall not count towards this requirement; or

(B) Three years of full-time experience related to property and casualty insurance or risk management and attainment of one of the following insurance professional designations:

(i) Associate in Risk Management;

(ii) Certified Risk Manager; or

(iii) Chartered Property Casualty Underwriter.

003.08 “Workers’ compensation insurance” means workers’ compensation insurance, as defined in Neb.Rev.Stat. § 44-201 (11), and includes insurance written with deductibles. “Workers’ compensation insurance” does not include excess workers’ compensation insurance provided for policyholders that have qualified with the Nebraska Workers’ Compensation Court as approved self-insureds.

004. Exemptions applicable to policies of insurance sold to exempt commercial policyholders .

004.01 Exemptions applicable to Class RFS policyholders.

(1) As permitted by Neb.Rev.Stat. § 44-7515, an insurer shall not be required to use filed rates and approved policy forms for commercial lines property and casualty insurance policies insuring Class RFS policyholders. The provisions of this chapter regarding the regulation of policy forms shall not apply to an exempt commercial policyholder that is also a qualifying multistate commercial policyholder as defined pursuant to Chapter 75.

(2) As permitted by Neb.Rev.Stat. § 44-7516, a Class RFS policyholder is exempt from those provisions of §§ 44-5510 and 44-5511 that require, as a condition for the purchase of insurance from a nonadmitted insurer, that applicants demonstrate inability to obtain insurance from a licensed insurer. This exemption shall not apply to workers’ compensation insurance, excess workers’ compensation insurance, or automobile liability insurance. This exemption may apply to automobile liability insurance purchased as excess insurance over a policy that provides limits that are at least equal to the minimum limits of liability required by Neb.Rev.Stat. § 60-534.

004.02 Exemptions applicable to Class RF policyholders. As permitted by Neb.Rev.Stat. § 44-7515, an insurer shall not be required to use filed rates and approved policy forms for commercial lines property and casualty insurance policies insuring Class RF policyholders. The provisions of this chapter regarding the regulation of policy forms shall not apply to an exempt commercial policyholder that is also a qualifying multistate commercial policyholder as defined pursuant to Chapter 75.

004.03 Exemptions applicable to Class R policyholders. As permitted by Neb.Rev.Stat. § 44-7515, an insurer shall not be required to use filed rates for commercial lines property and casualty insurance policies insuring Class R policyholders.

005. Status as an exempt commercial policyholder is optional . An insurer or policyholder that does not desire to avail itself of the provisions of this regulation is not required to make a determination of exempt commercial policyholder status. Such a policyholder shall be accorded the same treatment as a policyholder that does not qualify as an exempt commercial policyholder. In addition, the provisions of this chapter regarding the regulation of policy forms shall not apply to an exempt commercial policyholder that is also a qualifying multistate commercial policyholder as defined pursuant to Chapter 75.

006. Unrelated entities may not be combined to attain exempt commercial policyholder status . Premiums or other attributes for entities that are not under common ownership may not be combined to qualify a policyholder as an exempt commercial policyholder.

007. Premiums used to determine exempt commercial policyholder status .

007.01 Calculation of premium amounts. For purposes of determining whether a policyholder is a Class RF, RFS or R policyholder, premiums shall include all commercial lines property and casualty insurance premiums generated by a policyholder on risks located in Nebraska and elsewhere, without regard to whether such insurance is purchased from one or more insurers. Such premiums shall be those offered by an insurer for the prospective policy term. If an insurer is not offering all of the commercial lines property and casualty insurance that an exempt commercial policyholder is purchasing, premiums for expiring policies for which the insurer is not offering insurance shall be used as the basis for premium determination. If not all policies for a policyholder have a common inception date, premium for policies that are in force as of the inception date of coverage for which the calculation is made shall be used. For policies that the insurer does not write, the insurer shall only use premiums for which policyholder documentation is provided. If an insurer is not provided with policyholder documentation of the premiums for policies that the insurer does not write, then the insurer shall not include premiums for such policies to determine whether a policyholder is a Class RF, RFS, or R policyholder.

007.02 Retrospectively determined premium. For purposes of determining whether a policyholder is a Class RF, RFS or R policyholder, if a policy’s premium will be determined retrospectively, then it shall be calculated as if the policyholder were rated on a guaranteed cost basis. Exempt commercial policyholder status shall not be retroactively denied if actual losses incurred under the policy result in an actual premium lower than the estimated premium calculated on a guaranteed cost basis.

007.03 Premium based on auditable exposures. For purposes of determining whether a policyholder is a Class RF, RFS or R policyholder, if a policy’s premium is determined based on exposures that are subject to audit as defined in the policy, then it shall be calculated using a good faith estimate of exposures. Exempt commercial policyholder status shall not be retroactively denied if the audited exposures result in a premium that is lower than the estimated premium.

008. Restrictions on rate filing exemptions .

008.01 Nebraska premiums must arise from Nebraska exposures. The Nebraska premiums for each individual policy and for each separately coded exposure under that policy shall be the amounts that most closely correspond with the insurer’s evaluation of the expected losses and expenses that will be generated by each exposure and policy. Premiums for Nebraska exposures shall not be discounted or surcharged based on a policyholder’s premiums for exposures in another state that are higher or lower than are desired by the insurer.

008.02 Restrictions on permissible discounts. Rate credits for an exempt commercial policyholder may not be used to reduce the policyholder’s premium to less than the amount necessary for the policyholder to qualify as an exempt commercial policyholder. Nothing in this subsection shall require reduction of rate credits if the premium for a retrospectively rated policy or for a policy with premium based on auditable exposures is ultimately lower than was originally estimated.

008.03 Restrictions on permissible surcharges. An insurer may not impose a surcharge against a policyholder exceeding the surcharge permissible under Neb.Rev.Stat. § 44-7509, unless the aggregate property and casualty insurance premiums for such policyholder, prior to the application of any surcharge permissible under Neb.Rev.Stat. § 44-7509, exceed the minimum aggregate property and casualty insurance premium threshold to qualify as an exempt commercial policyholder.

008.04 Workers compensation. As required by Neb.Rev.Stat. § 44-7524, every insurer writing workers’ compensation shall adhere to the uniform workers’ compensation classification system and shall report its workers’ compensation experience in accordance with statistical plans and other reporting requirements to ensure that workers’ compensation data is combined for all insurers for the development of prospective loss costs and the application of experience rating. This includes the requirement that premiums are determined from audited payrolls instead of being written on a guaranteed cost basis, not subject to audit.

009. Restrictions on form approval exemptions .

009.01 Workers’ compensation and excess workers’ compensation. As permitted by Neb.Rev.Stat. § 44-7515 (2) and as set forth in Neb.Rev.Stat. § 44-7515 (6), only policy forms and endorsements approved by the director may be used to provide workers’ compensation and excess workers’ compensation coverage. An insurer may use endorsements that have not been approved by the director for workers’ compensation and excess workers’ compensation policies if the endorsements only amend policy provisions pertaining to the calculation or remission of premiums. An insurer may not use endorsements that have not been approved if the endorsements amend coverage or alter provisions relating to the administration of claims set forth in policies filed with the director;

009.02 Medical professional liability. As required by Neb.Rev.Stat. § 44-7515 (2), only policy forms and endorsements approved by the director may be used to provide coverage for a policyholder seeking to qualify under the Nebraska Excess Medical Liability Fund;

009.03 Automobile insurance. Insurers may not use automobile insurance policy forms that provide coverage limits less than those required by Nebraska law; and

009.04 Policy forms may not violate laws. Insurers may not use policy forms that violate any law of this state.

010. Statistical reporting . Credits and debits applied pursuant to this chapter shall be reported in the same manner as credits and debits allowed by Neb.Rev.Stat. §44-7509.

011. Continued use of an unapproved policy form for a commercial policyholder that no longer qualifies as a Class RFS or Class RF exempt commercial policyholder . A policyholder may continue to purchase coverage using an unapproved policy form, even though the policyholder no longer qualifies as a Class RFS or Class RF exempt commercial policyholder, if:

(a) Such policy form was originally agreed to during a period of time for which the policyholder could purchase coverage using policy forms which had not been approved; and

(b) The policyholder’s aggregate commercial property and casualty insurance premiums are at least $50,000 per year.

012. Continued use of a surplus lines carrier by a commercial policyholder that no longer qualifies as a Class RFS exempt commercial policyholder . A policyholder may continue to renew coverage from a surplus lines insurer without the need to demonstrate that it is unable to obtain that coverage from a licensed insurer, even though the policyholder no longer qualifies as a Class RFS exempt commercial policyholder, if:

(a) Such coverage was originally purchased from the surplus lines insurer during a period of time for which the policyholder could purchase coverage from a surplus lines insurer without the need to demonstrate that it is unable to obtain insurance from a licensed insurer; and

(b) The policyholder’s aggregate commercial property and casualty insurance premiums are at least $100,000 per year.

013. Policyholder notification of policy forms that have not been approved by the director . Insurers shall inform exempt commercial policyholders at the earliest practical date, but no later than thirty days after the inception of coverage of those policy forms applying to them that have not been approved by the director.

014. Responsibility to determine exempt commercial policyholder status . The insurer shall obtain a written statement from the policyholder regarding the information necessary to determine the policyholder’s status as an exempt commercial policyholder if such status depends on information not already contained in the insurer’s files. An insurer is not required to make further inquiry of the policyholder’s status unless the information available to the insurer makes it unlikely that the policyholder’s representations are accurate.

015. Documentation to be maintained by the insurer . An insurer shall retain documentation supporting an exemption for the time set forth in Neb.Rev.Stat. § 44-5905(2)(b)(i)(B) if the insurer uses rates or policy forms that have not been filed with or approved by the director or places coverage with a surplus lines insurer without demonstrating inability to obtain insurance from an admitted insurer.

016. Severability . If any section or portion of a section of this chapter, or the applicability thereof to any person or circumstance, is held invalid by a court, the remainder of this chapter, or the applicability of such provision to other persons, shall not be affected thereby.

017. Effective date . This chapter shall apply to all property and liability insurance subject to the Property and Casualty Insurance Rate and Form Act with an effective date on or after April 14, 2003.

History

• Effective 2003-03-15

Chapter 76 Viatical Settlements

Neb. Admin. Code tit. 210, ch. 76 Viatical Settlements {#sec-210-nac-76 omnilex-key=us-ne-regs-official--title-210--210 NAC 76}

001. Authority

This regulation is adopted by the director pursuant to the authority in Neb. Rev. Stat. § 44-1114.

002. Definitions

In addition to the definitions in Neb. Rev. Stat. § 44-1102, the following definitions apply to this regulation:

(002.01) “Insured” means the person covered under the policy being considered for viatication.

(002.02) “Life expectancy” means the mean of the number of months the individual insured under the life insurance policy to be viaticated can be expected to live as determined by the viatical settlement provider considering medical records and appropriate experiential data.

(002.03) “Net death benefit” means the amount of the life insurance policy or certificate to be viaticated less any outstanding debts or liens.

(002.04) “Patient identifying information” means an insured’s address, telephone number, facsimile number, electronic mail address, photograph or likeness, employer, employment status, social security number, or any other information that is likely to lead to the identification of the insured.

003. License Requirements

(003.01) The Director may require an individual applying for a viatical settlement broker license to pass a written examination designated by the Department testing the knowledge of the individual concerning viatical settlements, the duties and responsibilities of a viatical settlement broker, and the laws, rules and regulations applicable to viatical settlement sales in Nebraska.

(003.02) In addition to the information required in Neb. Rev. Stat. § 44-1103, the director may ask for other information necessary to determine whether the applicant for a license as a viatical settlement provider or viatical settlement broker complies with the requirements of Neb. Rev. Stat. § 44-1103.

(003.03) The application for a viatical settlement broker shall be accompanied by a fee of $40.00. The broker license may be renewed by payment of $40.00 and a current copy of a letter of good standing obtained from the filing officer of the applicant’s state of domicile. The application for a viatical settlement provider shall be accompanied by a fee of $1,000. The provider license may be renewed annually by payment of $100 and a current copy of a letter of good standing from the state of domicile. If a viatical settlement provider or viatical settlement broker fails to pay the renewal fee within the time prescribed, or a viatical settlement provider fails to submit the reports required in Section 006 of this regulation, such nonpayment or failure to submit the required reports shall result in expiration of the license. If a viatical settlement provider has, at the time of renewal, viatical settlements where the insured has not died, it shall do one of the following:

(003.03A) Renew or maintain its current license status until the earlier of the following events:

(003.03A(1)) The date the viatical settlement provider properly assigns, sells or otherwise transfers the viatical settlements where the insured has not died; or

(003.03A(2)) The date that the last insured covered by viatical settlement transaction has died.

(003.03B) Appoint, in writing, either the viatical settlement provider that entered into the viatical settlement, the broker who received commissions from the viatical settlement, if applicable, or any other viatical settlement provider or broker licensed in this state to make all inquiries to the viator, or the viator’s designee, regarding health status of the viator or any other matters.

(003.04) An individual licensed as a viatical settlement broker or authorized to act under a license issued to a licensed entity as a viatical settlement broker shall complete fifteen (15) hours of department-approved continuing education during each continuing education biennium.

(003.04A) The required continuing education hours shall include a minimum of:

(a) Twelve (12) hours in life insurance; (b) Three (3) hours in ethics.

(003.04B) Pursuant to Neb. Rev. Stat. § 44-1103(8), a life insurance producer who is operating as a viatical settlement broker pursuant to Neb. Rev. Stat. § 44-1103(1) shall be exempt from the requirements of section 003.04.

(003.04C) Each continuing education biennium shall begin at the end of the licensee’s birth month when licensee’s age ends in an even number.

(003.04D) The license of an individual who fails to comply with this continuing education requirement and who has not been granted an extension of time to comply in accordance with the procedures set forth in Neb. Rev. Stat. § 44-4054(6) shall terminate and shall be promptly surrendered to the director without demand.

(003.05) A viatical settlement broker or viatical settlement provider shall file with the director, and thereafter for as long as the license remains in effect shall keep in force, evidence of financial responsibility. Evidence of financial responsibility shall be in the form of:

(003.05A) A surety bond executed and issued by an insurer authorized to issue surety bonds in this state in the amount of $250,000; or

(003.05B) A deposit of cash, certificates of deposit, or securities, or any combination thereof, in the amount of $250,000.

(003.06) The license issued to a viatical settlement provider or viatical settlement broker shall be a limited license that allows it to operate only within the scope of its license.

004. Appointments

(004.01) A viatical settlement broker shall not act as an agent of a viatical settlement provider unless the viatical settlement broker becomes an appointed agent of that provider. A viatical settlement broker who is not acting as a viatical settlement broker of a provider is not required to be appointed.

(004.02) To appoint a viatical settlement broker as its agent, the appointing provider shall file, in a format approved by the director, a notice of appointment within fifteen (15) days from the date the agency contract is executed or the first viatical settlement contract is negotiated on behalf of the provider.

(004.03) Upon receipt of the notice of appointment, the director shall verify within a reasonable time not to exceed thirty (30) days that the viatical settlement broker is determined to be eligible for appointment. If the viatical settlement broker is determined to be ineligible for appointment, the director shall notify the provider within ten (10) days of its determination.

(004.04) A provider shall pay an annual appointment fee, in the amount and method of payment set forth in Neb. Rev. Stat. § 44-4064(1)(b) not to exceed $10.00, for each viatical settlement broker appointed by the provider.

(004.05) A licensed life insurance producer acting as a viatical settlement broker pursuant to Neb. Rev. Stat. § 44-1103(1) who is an appointed agent of a viatical settlement provider under the Insurance Producer’s Licensing Act does not need to be separately appointed with that viatical settlement provider under this section.

005. Standards for Evaluation of Reasonable Payments for Terminally or Chronically Ill Insureds

In order to assure that viators receive a reasonable return for viaticating an insurance policy, the return for viaticating a policy shall be no less than the following payouts for insureds who are terminally or chronically ill:

| Insured’s Life Expectancy | Minimum Percentage of Face Value Less Outstanding Loans Received by Viator | | --- | --- | | Less than 6 months | [80%] | | At least 6 but less than 12 months | [70%] | | At least 12 but less than 18 months | [65%] | | At least 18 but less than 24 months | [60%] | | Twenty-four months or more | [50%] |

The percentage may be reduced by [5%] for viaticating a policy written by an insurer rated less than the highest [4] categories by A.M. Best, or a comparable rating by another rating agency.

006. Reporting Requirement

(006.01) On or before March 1 of each calendar year, each viatical settlement provider licensed in this state shall submit the following related to the licensee’s activities for the previous calendar year:

(006.01A) For viatical settlements contracted during reporting period:

(006.01A(1)) A report of the viatical settlement transactions related to Nebraska viators, which shall be submitted on Form VSP 001 (Appendix B);

(006.01A(2)) A report of the individual mortality of Nebraska insureds, which shall be submitted on Form VSP 002 (Appendix C);

(006.01A(3)) A certification of the information contained in the reports, which shall be submitted on Form VSP 003 (Appendix D) and shall be filed with the reports.

(006.02) Each viatical settlement provider shall remit an annual statement filing fee of $200.00 in accordance with Neb. Rev. Stat. § 44-114(7).

007. General Rules

(007.01) With respect to policies containing a provision for double or additional indemnity for accidental death, the additional payment shall remain payable to the beneficiary last named by the viator prior to entering into the viatical settlement contract, or to such other beneficiary, other than the viatical settlement provider, as the viator may thereafter designate, or in the absence of a beneficiary, to the estate of the viator.

(007.02) Payment of the proceeds of a viatical settlement pursuant to Neb. Rev. Stat. § 44-1109(4) shall be by means of wire transfer to the account of the viator or by certified check or cashier’s check.

(007.03) Payment of the proceeds of the viator pursuant to a viatical settlement shall be made in a lump sum except where the viatical settlement provider has purchased an annuity or similar financial instrument issued by a licensed insurance company or bank, or an affiliate of either. Retention of a portion of the proceeds by the viatical settlement provider or escrow agent is not permissible.

(007.04) A viatical settlement provider or viatical settlement broker shall not discriminate in the making or solicitation of viatical settlements or discriminate between viators with dependents and without dependents.

(007.05) A viatical settlement provider or viatical settlement broker shall not pay or offer to pay any finder’s fee, commission or other compensation to any insured’s physician, or to an attorney, accountant or other person providing medical, legal or financial planning services to the viator, or to any other person acting as an agent of the viator, other than a viatical settlement broker, with respect to the viatical settlement.

(007.06) If a viatical settlement provider enters into a viatical settlement that allows the viator to retain an interest in the policy, the viatical settlement contract shall contain the following provisions;

(007.06A) A provision that the viatical settlement provider will effect the transfer of the amount of the death benefit only to the extent or portion of the amount viaticated. Benefits in excess of the amount viaticated shall be paid directly to the viator’s beneficiary by the insurance company.

(007.06B) A provision that the viatical settlement provider will, upon acknowledgment of the perfection of the transfer, either;

(007.06B(1)) Advise the insured, in writing, that the insurance company has confirmed the viator’s interest in the policy; or

(007.06B(2)) Send a copy of the instrument sent from the insurance company to the viatical settlement provider that acknowledges the viator’s interest in the policy; and

(007.06C) A provision that apportions the premiums to be paid by the viatical settlement provider and the viator. It is permissible for the viatical settlement contract to specify that all premiums shall be paid by the viatical settlement provider. The contract may also require that the viator reimburse the viatical settlement provider for the premiums attributable to the retained interest.

(007.07) In all cases where the insured is a minor child, disclosures to and permission of a parent satisfy the requirements of Neb. Rev. Stat. § 44-1108 and this regulation.

008. Prohibited Practices

(008.01) A viatical settlement provider or viatical settlement broker shall obtain from a person that is provided with patient identifying information a signed affirmation that the person or entity will not further divulge the information without procuring the express, written consent of the insured for the disclosure. Notwithstanding the foregoing, if a viatical settlement provider, or viatical settlement broker is served with a subpoena and, therefore, compelled to produce records containing patient identifying information, it shall notify the viator and the insured in writing at their last known addresses within five (5) business days after receiving notice of the subpoena.

(008.02) A viatical settlement provider shall not act also as a viatical settlement broker, whether entitled to collect a fee directly or indirectly, in the same viatical settlement.

(008.03) A viatical settlement broker shall not, without the written agreement of the viator obtained prior to performing any services in connection with a viatical settlement, seek or obtain any compensation from the viator.

(008.04) A viatical settlement provider shall not use a longer life expectancy than is reasonable in order to reduce the pay-out to the viator.

009. Insurance Company Practices

(009.01) Life insurance companies authorized to do business in this state shall respond to a request for verification of coverage from a viatical settlement provider or a viatical settlement broker within thirty (30) calendar days of the date a request is received, including the insurer’s intent whether to pursue an additional investigation regarding possible fraud or the validity of the insurance contract, subject to the following conditions:

(009.01A) A current authorization consistent with applicable law, signed by the policyowner or certificateholder, accompanies the request;

(009.01B) In the case of an individual policy or group insurance coverage where details with respect to the certificate holder’s coverage are maintained by the insurer, submission of a form substantially similar to Appendix A, which has been completed by the viatical settlement provider or viatical settlement broker in accordance with the instructions on the form.

(009.02) Nothing in this section shall prohibit a life insurance company and a viatical settlement provider or a viatical settlement broker from using another verification of coverage form that has been mutually agreed upon in writing in advance of submission of the request.

(009.03) A life insurance company may not charge a fee for responding to a request for information from a viatical settlement provider or viatical settlement broker in compliance with this section in excess of any usual and customary charges to contractholders, certificateholders or insureds for similar services.

(009.04) The life insurance company may send an acknowledgement of receipt of the request for verification of coverage to the policyowner or certificateholder and, where the policy owner or certificate owner is other than the insured, to the insured. The acknowledgment may contain a general description of any accelerated death benefit that is available under a provision of or rider to the life insurance contract.

010. Severability .

If any section or portion of a section of this chapter, or the applicability thereof to any person or circumstance, is held invalid by a court, the remainder of this chapter, or the applicability of such provision to other persons shall not be affected thereby.

History

• Effective 2016-05-11

Chapter 77 Standards for Safeguarding Customer Information

Neb. Admin. Code tit. 210, ch. 77 Standards for Safeguarding Customer Information {#sec-210-nac-77 omnilex-key=us-ne-regs-official--title-210--210 NAC 77}

001. Purpose and scope .

001.01 This regulation establishes standards for developing and implementing administrative, technical and physical safeguards to protect the security, confidentiality and integrity of customer information, pursuant to Sections 501, 505(b), and 507 of the Gramm-Leach-Bliley Act, codified at 15 U.S.C. 6801, 6805(b) and 6807.

001.02 Section 501(a) provides that it is the policy of the Congress that each financial institution has an affirmative and continuing obligation to respect the privacy of its customers and to protect the security and confidentiality of those customers’ nonpublic personal information. Section 501(b) requires the state insurance regulatory authorities to establish appropriate standards relating to administrative, technical and physical safeguards: (1) to ensure the security and confidentiality of customer records and information; (2) to protect against any anticipated threats or hazards to the security or integrity of such records; and (3) to protect against unauthorized access to or use of records or information that could result in substantial harm or inconvenience to a customer.

001.03 Section 505(b)(2) calls on state insurance regulatory authorities to implement the standards prescribed under Section 501(b) by regulation with respect to persons engaged in providing insurance.

001.04 Section 507 provides, among other things, that a state regulation may afford persons greater privacy protections than those provided by subtitle A of Title V of the Gramm-Leach-Bliley Act. This regulation requires that the safeguards established pursuant to this regulation shall apply to nonpublic personal information, including nonpublic personal financial information and nonpublic personal health information.

002. Authority . This Rule is promulgated under the authority vested in the Director by Neb.Rev.Stat. §§ 44-101.01 and 44-924 (2).

003. Definitions . For the purposes of Chapter 77, the following definitions apply.

003.01 “Customer” has the same meaning as defined in Neb.Rev.Stat. §44-903 (8).

003.02 “Customer information” means nonpublic personal information as defined in Neb.Rev.Stat. §44-903 (19) about a customer, whether in paper, electronic or other form, that is maintained by or on behalf of the licensee.

003.03 “Customer information systems” means the electronic or physical methods used to access, collect, store, use, transmit, protect or dispose of customer information.

003.04 “Licensee” means a licensee as that term is defined in Neb.Rev.Stat. §44-903 (17), except that “licensee” shall not include: a purchasing group; or an unauthorized insurer in regard to the excess line business conducted pursuant to the Surplus Lines Insurance Act.

003.05 “Service provider” means a person that maintains, processes or otherwise is permitted access to customer information through its provision of services directly to the licensee.

004. Information Security Program . Each licensee shall implement a comprehensive written information security program that includes administrative, technical and physical safeguards for the protection of customer information. The administrative, technical and physical safeguards included in the information security program shall be appropriate to the size and complexity of the licensee and the nature and scope of its activities.

005. Objectives of Information Security Program . A licensee’s information security program shall be designed to:

005.01 Ensure the security and confidentiality of customer information.

005.02 Protect against any anticipated threats or hazards to the security or integrity of the information; and

005.03 Protect against unauthorized access to or use of the information that could result in substantial harm or inconvenience to any customer.

006. Examples of Methods of Development and Implementation . The actions and procedures described in Sections 007 through 010 of this regulation are examples of methods of implementation of the requirements of Sections 004 and 005 of this regulation. These examples are non-exclusive illustration of actions and procedures that licensees may follow to implement Sections 004 and 005 of this regulation.

007. Assess Risk . The licensee:

007.01 Identifies reasonably foreseeable internal or external threats that could result in unauthorized disclosure, misuse, alteration or destruction of customer information or customer information systems;

007.02 Assesses the likelihood and potential damage of these threats, taking into consideration the sensitivity of customer information; and

007.03 Assesses the sufficiency of policies, procedures, customer information systems and other safeguards in place to control risks.

008. Manage and Control Risk . The licensee

008.01 Designs its information security program to control the identified risks, commensurate with the sensitivity of the information, as well as the complexity and scope of the licensee’s activities;

008.02 Trains staff, as appropriate, to implement the licensee’s information security program; and

008.03 Regularly tests or otherwise regularly monitors the key controls, systems and procedures of the information security program. The frequency and nature of these tests or other monitoring practices are determined by the licensee’s risk assessment.

009. Oversee Service Provider Arrangements . The licensee

009.01 Exercises appropriate due diligence in selecting service providers; and

009.02 Requires its service providers to implement appropriate measures designed to meet the objectives of this regulation, and, where indicated by the licensee’s risk assessment, takes appropriate steps to confirm that its service providers have satisfied these obligations.

010. Adjust the Program . The licensee monitors, evaluates and adjusts, as appropriate, the information security program in light of any relevant changes in technology, the sensitivity of its customer information, internal or external threats to information, and the licensee’s own changing business arrangements, such as mergers and acquisitions, alliances and joint ventures, outsourcing arrangements and changes to customer information systems.

011. Determined Violation . Violations of this regulation shall be enforced through the Unfair Trade Practices Act, Neb.Rev.Stat. 44-1522 et seq.

012. Effective date . Each licensee shall establish and implement an information security program, including appropriate policies and systems pursuant to this regulation by October 1, 2003.

History

• Effective 2003-08-16

Chapter 79 Recognition of the 2001 Cso Mortality Table for Use in Determining Minimum Reserve Liabilities and Non-Forfeiture Benefits Model Regulation

Neb. Admin. Code tit. 210, ch. 79 Recognition of the 2001 Cso Mortality Table for Use in Determining Minimum Reserve Liabilities and Non-Forfeiture Benefits Model Regulation {#sec-210-nac-79 omnilex-key=us-ne-regs-official--title-210--210 NAC 79}

001. Authority . This Rule is promulgated under the authority vested in the director of insurance by Neb.Rev.Stat. § 44-404 (a) (i) (c) and Neb.Rev.Stat. § 44-407.24 (8), and Title 210 Nebraska Administrative Code Chapter 71, Sections 005.01 and 005.02.

002. Purpose . The purpose of this regulation is to recognize, permit and prescribe the use of the 2001 Commissioners Standard Ordinary (CSO) Mortality Table in accordance with Neb.Rev.Stat. § 44-404 (a) (i) (c) and Neb.Rev.Stat. § 44-407.24 (8), and Title 210 Nebraska Administrative Code Chapter 71, Sections 005.01 and 005.02.

003 Definitions . For the purposes of this Chapter

003.01 “2001 CSO Mortality Table" means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the American Academy of Actuaries CSO Task Force from the Valuation Basic Mortality Table developed by the Society of Actuaries Individual Life Insurance Valuation Mortality Task Force, and adopted by the National Association of Insurance Commissioners in December 2002. The 2001 CSO Mortality Table is included in the Proceedings of the National Association of Insurance Commissioners (2nd Quarter 2002) and is available for public inspection at the offices of the Nebraska Department of Insurance, 941 “O” Street, Suite 400, Lincoln, Nebraska 68509. Unless the context indicates otherwise, the "2001 CSO Mortality Table" includes both the ultimate form of that table and the select and ultimate form of that table and includes 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.

003.02 "2001 CSO Mortality Table (F)" means that mortality table consisting of the rates of mortality for female lives from the 2001 CSO Mortality Table.

003.03 "2001 CSO Mortality Table (M)" means that mortality table consisting of the rates of mortality for male lives from the 2001 CSO Mortality Table.

003.04 "Composite mortality tables" means mortality tables with rates of mortality that do not distinguish between smokers and nonsmokers.

003.05 “CSO” means Commissioners Standard Ordinary.

003.06 "Smoker and nonsmoker mortality tables" means mortality tables with separate rates of mortality for smokers and nonsmokers.

004 2001 CSO Mortality Table

004.01 At the election of the company for any one or more specified plans of insurance and subject to the conditions stated in this regulation, the 2001 CSO Mortality Table may be used as the minimum standard for policies issued on or after January 1, 2004 and before the date specified in Subsection 004.02 to which Neb.Rev.Stat. § 44-404 (a) (i) (c) and Neb.Rev.Stat. § 44-407.24 (8), and Title 210 Nebraska Administrative Code Chapter 71, Sections 005.01 and 005.02 are applicable. If the company elects to use the 2001 CSO Mortality Table, it shall do so for both valuation and nonforfeiture purposes.

004.02 Subject to the conditions stated in this regulation, the 2001 CSO Mortality Table shall be used in determining minimum standards for policies issued on and after January 1, 2009, to which Neb.Rev.Stat. § 44-404 (a) (i) (c) and Neb.Rev.Stat. § 44-407.24 (8), and Title 210 Nebraska Administrative Code Chapter 71, Sections 005.01 and 005.02 are applicable.

005 Conditions

005.01 For each plan of insurance with separate rates for smokers and nonsmokers an insurer may use:

005.01 (1) Composite mortality tables to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits;

005.01 (2) Smoker and nonsmoker mortality tables to determine the valuation net premiums and additional minimum reserves, if any, required by Neb.Rev.Stat. § 44-404 (h) and use composite mortality tables to determine the basic minimum reserves, minimum cash surrender values and amounts of paid-up nonforfeiture benefits; or

005.01 (3) Smoker and nonsmoker mortality to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits.

005.02 For plans of insurance without separate rates for smokers and nonsmokers the composite mortality tables shall be used.

005.03 For the purpose of determining minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits, the 2001 CSO Mortality Table may, at the option of the company for each plan of insurance, be used in its ultimate or select and ultimate form, subject to the restrictions of Section 006 and Title 210 Nebraska Administrative Code Chapter 71 relative to use of the select and ultimate form.

005.04 When the 2001 CSO Mortality Table is the minimum reserve standard for any plan for a company, the actuarial opinion in the annual statement filed with the commissioner shall be based on an asset adequacy analysis as specified in Title 210 Nebraska Administrative Code Chapter 69, Section 005.01 in accordance with the requirements of Section 008, without exemption pursuant to Section 006. The director of insurance may exempt a company from this requirement if it only does business in this state and in no other state.

006 Applicability of the 2001 CSO Mortality Table to Title 210 Nebraska Administrative Code Chapter 71

006.01 The 2001 CSO Mortality Table may be used in applying Title 210 Nebraska Administrative Code Chapter 71 in the following manner, subject to the transition dates for use of the 2001 CSO Mortality Table in Section 004 of this regulation (unless otherwise noted, the references in this section 006 are to Title 210 Nebraska Administrative Code Chapter 71):

006.01 (1) Section 3A(2)(b): The net level reserve premium is based on the ultimate mortality rates in the 2001 CSO Mortality Table.

006.01 (2) Section 4B: All calculations are made using the 2001 CSO Mortality Rate, and, if elected, the optional minimum mortality standard for deficiency reserves stipulated in Section 6A(4) of this regulation. The value of "qx+k+t-1" is the valuation mortality rate for deficiency reserves in policy year k+t, but using the unmodified select mortality rates if modified select mortality rates are used in the computation of deficiency reserves.

006.01 (3) Section 5A: The 2001 CSO Mortality Table is the minimum standard for basic reserves.

006.01 (4) Section 5B: The 2001 CSO Mortality Table is the minimum standard for deficiency reserves. If select mortality rates are used, they may be multiplied by X percent for durations in the first segment, subject to the conditions specified in Sections 5B(3)(a) to (i). In demonstrating compliance with those conditions, the demonstrations may not combine the results of tests that utilize the 1980 CSO Mortality Table with those tests that utilize the 2001 CSO Mortality Table, unless the combination is explicitly required by regulation or necessary to be in compliance with relevant Actuarial Standards of Practice.

006.01 (5) Section 6C: The valuation mortality table used in determining the tabular cost of insurance shall be the ultimate mortality rates in the 2001 CSO Mortality Table.

006.01 (6) Section 6E(4): The calculations specified in Section 6E shall use the ultimate mortality rates in the 2001 CSO Mortality Table.

006.01 (7) Section 6F(4): The calculations specified in Section 6F shall use the ultimate mortality rates in the 2001 CSO Mortality Table.

006.01 (8) Section 6G(2): The calculations specified in Section 6G shall use the ultimate mortality rates in the 2001 CSO Mortality Table.

006.01 (9) Section 7A(1)(b): The one-year valuation premium shall be calculated using the ultimate mortality rates in the 2001 CSO Mortality Table.

006.02 Nothing in this section shall be construed to expand the applicability of Title 210 Nebraska Administrative Code Chapter 71 to include life insurance policies exempted under Section 3A of Title 210 Nebraska Administrative Code Chapter 71.

007 Gender-Blended Tables

007.01 For any ordinary life insurance policy delivered or issued for delivery in this state on and after January 1, 2004, that utilizes the same premium rates and charges for male and female lives or is issued in circumstances where applicable law does not permit distinctions on the basis of gender, a mortality table that is a blend of the 2001 CSO Mortality Table (M) and the 2001 CSO Mortality Table (F) may, at the option of the company for each plan of insurance, be substituted for the 2001 CSO Mortality Table for use in determining minimum cash surrender values and amounts of paid-up nonforfeiture benefits. No change in minimum valuation standards is implied by this subsection of the regulation.

007.02 The company may choose from among the blended tables developed by the American Academy of Actuaries CSO Task Force and adopted by the National Association of Insurance Commissioners in December 2002.

007.01 It shall not, in and of itself, be a violation of Neb.Rev.Stat § 44-1525 for an insurer to issue the same kind of policy of life insurance on both a sex-distinct and sex-neutral basis.

008 Severability If any provision of this regulation or its application to any person or circumstance is for any reason held to be invalid, the remainder of the regulation and the application of the provision to other persons or circumstances shall not be affected.

009 Effective Date The effective date of this regulation is January 1, 2004.

History

• Effective 2003-12-14

Chapter 80 Synthetic Guaranteed Investment Contracts

Neb. Admin. Code tit. 210, ch. 80 Synthetic Guaranteed Investment Contracts {#sec-210-nac-80 omnilex-key=us-ne-regs-official--title-210--210 NAC 80}

001. Authority . This regulation is promulgated under the authority vested in the Director of Insurance by Neb. Rev. Stat. § 44-708.01(3).

002. Purpose .

002.01 The purpose of this regulation is to implement Neb. Rev. Stat. § 44-708.01 by prescribing:

002.01A The terms and conditions under which life insurance companies may issue group annuity contracts and other agreements that in whole or in part establish the insurer’s obligation by reference to a segregated portfolio of assets that is not owned by the insurer;

002.01B The essential operational features of the segregated portfolio of assets;

002.01C The reserve requirements for these group annuity contracts and agreements.

002.02 This regulation is intended to aid in the timely approval of such products by the Director, and recognizes that timely approval is essential given the competitive nature of the market for these products.

003. Scope and Application .

003.01 This regulation applies to that portion of a group annuity contract or other agreement described in Section 004.24 and issued by a life insurer:

003.01A That functions as an accounting record for an accumulation fund; and

003.01B That has benefit guarantees relating to a principal amount and levels of interest at a fixed rate of return specified in advance.

003.02 The fixed rates of return:

003.02A Shall be constant over the applicable rate periods;

003.02B May reflect prior and current market conditions with respect to the segregated portfolio; and

003.02C Shall not reference future changes in market conditions.

003.03 This regulation is applicable to all contracts issued on or after January 1, 2019. An insurer may elect to apply this regulation to contracts issued on or after the effective date of this regulation. If a company elects to apply this regulation to contracts issued prior to January 1, 2019, the company must continue to apply the requirements of this regulation to all future contracts issued. Contracts that have been negotiated prior to January 1, 2019, or prior to a company’s election if such an election occurs prior to January 1, 2019, need not be refiled with the Director.

004. Definitions . As used in this regulation, the following terms shall have these meanings:

004.01 “Account assets” means the assets in the segregated portfolio plus any assets held in the general account or a separate account to meet the asset maintenance requirements.

004.02 “Actuarial opinion and memorandum” means the opinion and memorandum of the valuation actuary required to be submitted to the Director pursuant to Subsection 010.02 of this regulation.

004.03 “Affirmatively approved” means approval of an insurer’s plan of operation for a class of contracts containing the form of contract under review, after the plan of operation associated with the class of contracts has been reviewed by the insurer’s domiciliary insurance department, and the plan of operation has been found to be in compliance with guidelines substantially similar to the NAIC Synthetic Guaranteed Investment Contracts Model Regulation by the domiciliary insurance department. Affirmatively approved does not mean approval as a result of the deemer provision.

004.04 “Appointed actuary” means the qualified actuary appointed or retained either directly by or by the authority of the board of directors through an executive officer of the company to prepare the annual statement of actuarial opinion for the company as a whole pursuant to Neb. Rev. Stat. § 44-8905.

004.05 “Asset maintenance requirement” means the requirement to maintain assets to fund contract benefits in accordance with Section 010 of this regulation.

004.06 “Class of contracts” or “contracts in the class” means the set of all contracts to which a given plan of operation pertains.

004.07 “Contract value record" means an accounting record, provided by the contract in relation to the segregated portfolio of assets, that is credited with a fixed rate of return over regular periods, and that is used to measure the extent of the insurer’s obligation to the contractholder. The fixed rate of return credited to the contract value record is determined by means of a crediting rate formula or declared at the inception of the contract and valid for the entire term of the contract.

004.08 “Crediting rate formula” means a mathematical formula used to calculate the fixed rate of return credited to the contract value record during any rate period and based in part upon the difference between the contract value record and the market value record amortized over an appropriate period. The fixed rate of return calculated by means of this formula may reflect prior and current market conditions with respect to the segregated portfolio, but may not reference future changes in market conditions.

004.09 “"Department” means the Nebraska Department of Insurance and any employee of the Department authorized to act on behalf of the Department.

004.10 "Director” means the Director of the Nebraska Department of Insurance.

004.11 “Duration” means, with respect to the segregated portfolio assets or guaranteed contract liabilities, a measure of price sensitivity to changes in interest rates, such as the Macaulay duration or option-adjusted duration..

004.12 "Fair market value" means a reasonable estimate of the amount that a knowledgeable buyer of an asset would be willing to pay, and a knowledgeable seller of an asset would be willing to accept, for the asset without duress in an arm's length transaction. In the case of a publicly traded security, the fair market value is the price at which the security is traded or, if no price is available, a price that appropriately reflects the latest bid and asked prices for the security. In the case of a debt instrument that is not publicly traded, the fair market value is the discounted present value of the asset calculated at a reasonable discount rate. For all other non-publicly traded assets, fair market value will be determined in accordance with valuation practices customarily used within the financial industry.

004.13 “Guaranteed minimum benefits” means contract benefits on a specified date that may be either:

004.13A A principal guarantee, with or without a fixed minimum interest rate guarantee, related to the segregated portfolio;

004.13B An assurance as to the future investment return or performance of the segregated portfolio; or

004.13C The fair market value of the segregated portfolio, to the extent that the fair market value of the assets determines the contractholder’s benefits.

004.14 “Hedging instrument” means:

004.14A An interest rate futures agreement or foreign currency futures agreement, an option to purchase or sell an interest rate futures agreement or foreign currency futures agreement, or any option to purchase or sell a security or foreign currency, used in a bona fide hedging transaction; or

004.14B An assurance as to the future investment return or performance of the segregated portfolio; or

004.14B A financial agreement or arrangement entered into with a broker, dealer or bank, qualified under applicable federal and state securities or banking law and regulation, in connection with investment in one or more securities in order to reduce the risk of changes in market valuation or to create a synthetic investment that, when added to the portfolio, reduces the risk of changes in market valuation.

An instrument is not a hedging instrument or a part of a bona fide hedging transaction if it is purchased in conjunction with another instrument where the effect of the combined transaction is an increase in the portfolio's exposure to market risk.

004.15 “Investment guidelines” means the set of written guidelines established in advance by the person with investment authority over the segregated portfolio, to be followed by the investment manager. The guidelines will include a description of:

004.15A The segregated portfolio's investment objectives and limitations;

004.15B The investment manager's degree of discretion;

004.15C The duration, asset class, quality, diversification, and other requirements of the segregated portfolio; and

004.15D The manner in which derivative instruments may be used, if at all, in the segregated portfolio.

004.16 “Investment manager" means the person (including subcontractor) responsible for managing the assets in the segregated portfolio in accordance with the investment guidelines in a fiduciary capacity to the owner of the assets.

004.17 “Market value record” means an accounting record provided by the contract to reflect the fair market value of the segregated portfolio.

004.18 “Permitted custodial institution” means a bank, trust company or other licensed fiduciary services provider.

004.19 “Plan of operation” means a written plan meeting the requirements of Subsection 005.03A of this regulation.

004.20 “Qualified actuary” means an individual who meets the qualification standards set forth in Neb. Rev. Stat. § 44-420(2).

004.21 “Rate period” means the period of time during which the fixed rate of return credited to the contract value record is applicable between crediting formula adjustments.

004.22 “Segregated portfolio” means:

004.22A A portfolio or sub-portfolio of assets to which the contract pertains that is held in a custody or trust account by the permitted custodial institution and identified on the records of the permitted custodial institution as special custody assets held for the exclusive benefit of the retirement plans or other entities on whose behalf the contractholder holds the contract; and

004.22B Any related cash or currency received by the permitted custodial institution for the account of the contractholder and held in a deposit account for the exclusive benefit of the retirement plans or other entities on whose behalf the contractholder holds the contract.

004.23 “Spot rate”

004.23A “Treasury-based spot rate” corresponding to a given time of benefit payment means the yield on a zero-coupon non-callable and non-prepayable United States government obligation maturing at that time, or the zero-coupon yield implied by the price of a representative sampling of coupon-bearing, non-callable and non-prepayable United States government obligations in accordance with a formula set forth in the plan of operation.

004.23B “Index spot rate” corresponding to a given time of benefit payment means the zero-coupon yield implied by (x) the Barclays Short Term Corporate Index (for a given time of benefit payment under one year) or (y) the zero-coupon yield implied by the Barclays U.S. Corporate Investment Grade Bond Index (for a given time of benefit payment greater than or equal to one year).

004.23C “Blended spot rate” corresponding to a given time of benefit payment means a blend of 50% each of (i) the treasury-based spot rate, and (ii) the index spot rate. To the extent that guaranteed contract liabilities are denominated in the currency of a foreign country rated in one of the two (2) highest rating categories by an independent nationally recognized United States rating agency acceptable to the Director and are supported by investments denominated in the currency of the foreign country, the treasury-based spot rate component of the blended spot rate may be determined by reference to substantially similar obligations of the government of the foreign country. For liabilities other than those described above, the blended spot rate shall be determined on a basis mutually agreed upon by the insurer and the Director.

004.24 “Synthetic guaranteed investment contract” or “contract” means a group annuity contract or other agreement that establishes the insurer’s obligations by reference to a segregated portfolio of assets that is not owned by the insurer. The contract functions as an accounting record for an accumulation fund and the fixed rate of return credited to the fund reflects an amortization of the segregated portfolio’s market gains and losses based on the period specified in the crediting rate formula, subject to any minimum interest rate guarantee.

004.25 “Unilateral contract termination event” means an event allowing the insurer to unilaterally and immediately terminate the contract, without future liability or obligation to the contractholder.

004.26 “United States government obligation” means a direct obligation issued, assumed, guaranteed or insured by the United States of America or by an agency or instrumentality of the United States government.

004.27 “Valuation actuary” means the appointed actuary or, alternatively, a qualified actuary designated by the appointed actuary to render the actuarial opinion pursuant to Section 010. Written documentation of any such designation shall be on file at the company and available for review by the Director upon request.

005. Financial Requirements and Plan of Operation .

005.01 A contract may not be delivered or issued for delivery in this state unless the issuing insurer is licensed as a life insurance company in this state and is financially qualified under the provisions of Subsection 005.02 of this section. In addition, a domestic insurer 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 insurer has satisfied the requirements of Subsection 005.03 of this section with respect to that class of contracts.

005.02 An insurer will be financially qualified under this section if its most recent statutory financial statements on file with the Director reflect that it meets the financial requirements of Neb. Rev. Stat. § 44-708.01, and its risk-based capital results do not place it at a regulatory level of action. In lieu of the requirements in the preceding sentence, the insurer may be required to satisfy such other financial qualification requirements set forth by the Director as having been deemed necessary or appropriate in a particular case to protect the insurer's policyholders and the public.

005.03 A domestic insurer will satisfy the requirements of this section with respect to a class of contracts if the insurer has filed a plan of operation pertaining to the class of contracts, together with copies of the forms of the contract in the class, with the Director, and the filing of the plan of operation has been approved.

005.03A The plan of operation for a class of contracts shall describe the financial implications for the insurer of the issuance of the contracts in the class, and shall include at least the following:

005.03A(1) A statement that the plan of operation will be administered in accordance with the requirements prescribed by the Director pursuant to this regulation, along with a statement that the insurer will comply with the plan of operation in its administration of the contract;

005.03A(2) A statement describing the methods and procedures used to value statutory liabilities for purposes of Section 010;

005.03A(3) A description of the criteria used by the insurer in approving the investment manager for the segregated portfolio of assets associated with a contract in the class, if the investment manager is an entity other than the insurer or its wholly owned subsidiary;

005.03A(4) A description of the insurer's requirement for reports concerning the assets in each segregated portfolio and transactions involving the assets, and a description of how the insurer can use the information in a report to determine that the segregated portfolio is being managed in accordance with its investment guidelines. The insurer shall require that the report be prepared no less frequently than quarterly, and include a complete statement of segregated portfolio holdings and their fair market value;

005.03A(5) A demonstration of financial results for one or more sample contracts from the class of contracts, showing at a minimum the projected contract value records, the applicable fixed rate or rates of return, and the projected market value records, describing how the investments in the segregated portfolio reflect provision for benefits insured by the contract and how the contract value and market values and the rates of return may be affected by changes in the investment returns of the segregated portfolio and reasonably anticipated deposits to and withdrawals from the segregated portfolio by the contractholder, as well as any advances made by the insurer to the contractholder. The sample contracts must be chosen to reasonably represent the range of results that could be expected from possible combinations of contract provisions of all contracts in the class. The demonstration shall include at least three (3) hypothetical return scenarios (level, increasing and decreasing) and for each of these scenarios, at least three (3) withdrawal scenarios (zero, moderate and high) shall be modeled. The Director may require additional scenarios if deemed necessary to fully understand the risks under the class of contracts. The demonstration period must be the greater of five (5) years or the minimum period the insurer must underwrite the risk;

005.03A(6) A statement that all contracts in the class of contracts satisfy the requirement of Section 009 regarding unilateral contract terminations, together with a description of all termination events, discontinuation triggers and options, notice requirements, corrective action procedures, all other contract safeguards, and the procedures to be followed when a unilateral contract termination event occurs;

005.03A(7) A description of the allowable investment parameters (such as objectives, derivative strategies, asset classes, quality, duration and diversification requirements applied to the assets held within the segregated portfolio) to be reflected in the investment guidelines applicable to each contract in the class to which the submitted plan of operation applies; and a description of the procedures that will be followed by the insurer in evaluating the appropriateness of any specific investment guidelines submitted by the contractholder.

005.03A(8) A description of the criteria used by the insurer in approving for contract issuance a pooled fund representing multiple employer-sponsored plans and in approving the investment manager for the segregated portfolio of assets associated with such pooled fund contract;

005.03A(9) A description of risk-mitigation techniques used by the insurer in connection with contracts issued to pooled funds representing multiple employer-sponsored plans;

005.03A(10) An unqualified opinion by a qualified actuary with expertise in these matters as to the adequacy of the consideration charged by the insurer for the risks it has assumed with respect to the contracts in the class to which the plan of operation applies;

005.03A(11) A statement that the actuarial opinion and memorandum required by Section 010 shall include, with respect to the class of contracts to which the plan of operation applies:

005.03A(11)(i) If a payment has been made by the insurer in the prior reporting period under a contract in the class, the amount of aggregate risk charges (net of administrative expenses) for contracts in the class, and the aggregate amount of any losses incurred; and

005.03A(11)(ii) An inventory of all material unilateral contract termination events in the class of contracts that have not been cured within the time period specified and that have occurred during the prior reporting period but where the company decided not to terminate the contract.

005.03B Review of the plan of operation by the Director may necessitate requests for information to supplement that furnished pursuant to Subsection 005.03. Replies made in compliance with this paragraph should be made in sufficient detail that any follow-up correspondence can be held to a minimum.

005.04 If an insurer chooses to operate a contract with a material change from the approved plan of operation, the changed provision(s) shall be filed with and approved by the Director in accordance with the requirements of Subsection 005.03.

006. Required Contract Provisions and Filing Requirements .

006.01 A contract may not be delivered or issued for delivery in this state unless the contract satisfies the requirements of Subsection 006.02 of this section and the issuing insurer has satisfied the requirements of Subsection 006.03 of this section with respect to the contract.

006.02 The contract shall:

006.02A Provide that the assets to which the contract pertains and for which a contract value record is established will be maintained in a segregated portfolio of a permitted custodial institution;

006.02B Grant the insurer the right to perform audits and inspections of assets held in the segregated portfolio from time to time upon reasonable notice to the permitted custodial institution;

006.02C Provide the insurer will receive prior notice of and the right to approve any appointment or change of investment managers;

006.02D Give a description of how the contract value record will be determined and, where applicable, adjusted by a crediting rate formula;

006.02E State the maximum rate period between crediting rate formula recalculations that will be permitted, if any;

006.02F Provide the insurer with the right to refuse to recognize any new deposits to the segregated portfolio unless there is a written agreement between the insurer and the contractholder as to the permissible levels and timing of new deposits;

006.02G Clearly identify all circumstances under which insurer payments or advances to the contractholder are to be made;

006.02H Clearly identify the types of withdrawals made on a market value basis;

006.02I Provide either a fixed maturity schedule or a settlement option permitting the contractholder to receive the contract value record over time, provided that no unilateral contract termination event has occurred; and

006.02J Include a provision stating, or substantially similar to, the following:

“No waiver of remedies by the insurer that is a party to this agreement, following the breach of any contractual provision of the agreement or of the investment guidelines applicable to it, or failure to enforce the provisions or guidelines, which constitutes grounds for termination of this agreement for cause by the insurer, and is not cured within thirty (30) days following the insurer's discovery of it, shall be effective against an insurance director in any future rehabilitation or insolvency proceedings against the insurer unless approved in advance in writing by the director.”

006.03 An insurer will satisfy the filing and approval requirements of this section with respect to a contract if the insurer has filed the form of the contract (including application) with the Director and it is accompanied by the items specified in 006.03A, B, C, D and E of this subsection, and the form has been approved. The contract form may not be used unless approved by the director.

006.03A The form of contract filed for approval shall be accompanied by a statement that the contract meets the conditions of Subsection 006.02 of this section.

006.03B The form of contract filed for approval shall be accompanied by a statement:

006.03B(1) Specifying the range of variation of variable contract provisions, if any, that could have a material effect on the risk assumed by the insurer under the contract, including withdrawal methodology, crediting rate formula and termination events;

006.03B(2) Describing how fair market value will be determined, including a description of the procedures for valuing securities and other assets that are not publicly traded;

006.03B(3) Describing the crediting rate formula, if any, and how it will operate to take into account the difference between the market value record and the contract value record over time; and

006.03B(4) Listing events that give the insurer the right to unilaterally and immediately terminate the contract.

006.03C In the case that the plan of operation pertaining to the class of contracts to which the contract belongs:

006.03C(1) Has been affirmatively approved by the state in which the issuing insurer is domiciled, the form of contract filed for approval shall be accompanied by a statement indicating receipt of affirmative approval.

006.03C(2) In the case that the plan of operation pertaining to the class of contracts to which the contract belongs has been deemed approved in the state in which the issuing insurer is domiciled, the form of contract filed for approval must be accompanied by a statement indicating that the issuing insurer has met the requirements for deemed approval.

006.03C(3) Has not been affirmatively approved, either affirmatively or by deemer, in the state in which the issuing insurer is domiciled, the form of contract filed for approval shall be accompanied by a statement of this fact, together with the plan of operation pertaining to the contract.

006.04 The Director may disapprove a contract form filing upon a finding that the form of contract contemplates practices that are unfair or unreasonable or otherwise inconsistent with the provisions of Chapter 44 of the Revised Statutes of Nebraska, including the requirements of this regulation, specifying in what regard the contract form is unfair or unreasonable or otherwise inconsistent with the provisions of Chapter 44 of the Revised Statutes of Nebraska.

006.05 The Director may withdraw an approval of a contract form on any basis that would have justified initial disapproval. The Director shall notify the insurer in writing of the reason for the withdrawal of the contract form approval. The insurer may, within 15 days of the withdrawal of approval, make a written request for a hearing before the Director to determine the reasonableness of the Director’s action. The hearing shall be held within 30 days of the request.

007. Investment Management of the Segregated Portfolio .

007.01 The investment manager must have full responsibility for, and control over, the management of all segregated portfolio assets within the constraints specified in the investment guidelines.

007.02 The investment guidelines shall be submitted to the insurer for underwriting review before the contract becomes effective.

007.03 If the insurer accepts a proposed change to the investment guidelines or allows the contract to operate in accordance with investment guidelines not meeting the criteria established in Subsection 005.03A(7), approval of the non-conforming investment guidelines must be obtained pursuant to Subsection 005.04.

008. Purchase of Annuities . For contracts that are group annuity contracts, and that make available to the contractholder the purchase of immediate or deferred annuities for the benefit of individual members of the group, an annuity may not be purchased without the delivery of the contractually-agreed upon consideration in cash to the insurer from the segregated portfolio for allocation to the insurer’s general account or separate account. The insurer shall collect adequate consideration for the cost of annuities purchased under contract option by transfer from the segregated portfolio.

009. Unilateral Contract Terminations .

009.01 A contract subject to this regulation shall allow the insurer to unilaterally and immediately terminate, without future liability of the insurer or obligation to provide further benefits, upon the occurrence of any one of the following events that is material and that is not cured within thirty (30) days following the insurer’s discovery of it:

009.01A The investment guidelines are changed without the advance consent of the insurer and the investment manager is not controlling, controlled by or under common control with the insurer;

009.01B The segregated portfolio, if managed by an entity that is not controlling, controlled by or under common control with the insurer, is invested in a manner that does not comply with the investment guidelines;

009.01C Investment discretion over the segregated portfolio is exercised by or granted to anyone other than the investment manager without the approval of the insurer; or

009.01D Any act of fraud, misrepresentation of material facts, deceit or any other unauthorized action of the contractholder that has a material adverse affect on the insurer.

010. Reserves .

010.01 Asset maintenance requirements for segregated portfolios governed by this regulation:

010.01A At all times an insurer shall hold minimum reserves in the general account or one or more separate accounts, as appropriate, equal to the excess, if any, of the value of the guaranteed contract liabilities, determined in accordance with 010.01(F) and 010.01(G) of this subsection, over the market value of the assets in the segregated portfolio less the deductions provided for in 010.01B of this subsection. The reserve requirements of this subsection shall be applied on a contract-by-contract basis.

010.01B In determining compliance with the asset maintenance requirement and the reserve for guaranteed contract liabilities specified in Subsection 010.01A, the insurer shall deduct a percentage of the market value of an asset as follows:

010.01B(1) For debt instruments, the percentage shall be the NAIC asset valuation reserve "reserve objective factor," but the factor shall be increased by fifty percent (50%) for the purpose of this calculation if the difference in durations of the assets and liabilities is more than one-half year. The above notwithstanding, in the event that, under the terms of the synthetic guaranteed investment contract, the asset default risk for debt instruments is borne solely by the contractholder, there shall be no asset valuation reserve percentage deduction from the market value of an asset, for purposes of complying with the asset maintenance requirement and the reserve for guaranteed contract liabilities specified in Subsection 010.01A.

010.01B(2) For assets that are not debt instruments, the percentage shall be the NAIC asset valuation reserve “maximum reserve factor.”

010.01C To the extent that guaranteed contract liabilities are denominated in the currency of a foreign country and are supported by segregated portfolio assets denominated in the currency of the foreign country, the percentage deduction for these assets under Subsection 010.01B shall be that for a substantially similar investment denominated in the currency of the United States.

010.01D To the extent that guaranteed contract liabilities are denominated in the currency of the United States and are supported by segregated portfolio assets denominated in the currency of a foreign country, and to the extent that guaranteed contract liabilities are denominated in the currency of a foreign country and are supported by segregated portfolio assets denominated in the currency of the United States, the deduction for debt instruments under 010.01B of this subsection shall be increased by fifteen percent (15%) of the market value of the assets unless the currency exchange risk on the assets has been adequately hedged, in which case the percentage deduction under 010.01B of this subsection shall be increased by one-half percent (.5%). No guaranteed contract liabilities denominated in the currency of a foreign country shall be supported by segregated portfolio assets denominated in the currency of another foreign country without the approval of the Director. For purposes of this paragraph, the currency exchange risk on an asset is deemed to be adequately hedged if:

010.01D(1) It is an obligation of

010.01D(1)(i) A jurisdiction that is rated in one of the two (2) highest rating categories by an independent nationally recognized United States rating agency acceptable to the Director;

010.01D(1)(ii) Any political subdivision or other governmental unit of such a jurisdiction, or any agency or instrumentality of jurisdiction, political subdivision or other governmental unit; or

010.01D(1)(iii) An institution that is organized under the laws of any such jurisdiction; and

010.01D(2) At all times the principal amount of the obligation and scheduled interest payments on the obligation are hedged against the United States dollar pursuant to contracts or agreements that are:

010.01D(2)(i) Issued by or traded on a securities exchange or board of trade regulated under the laws of the United States or Canada or a province of Canada;

010.01D(2)(ii) Entered into with a United States banking institution that has assets in excess of $5 billion and that has obligations outstanding, or has a parent corporation that has obligations outstanding, that are rated in one of the two (2) highest rating categories by an independent, nationally recognized, United States rating agency, or with a broker-dealer registered with the Securities and Exchange Commission that has net capital in excess of $250 million; or

010.01D(2)(iii) Entered into with any other banking institution that has assets in excess of $5 billion and that has obligations outstanding, or has a parent corporation that has obligations outstanding, that are rated in one of the two (2) highest rating categories by an independent, nationally recognized, United States rating agency and that is organized under the laws of a jurisdiction that is rated in one of the two (2) highest rating categories by an independent, nationally recognized United States rating agency.

010.01E These contracts may provide for the allocation to one or more separate accounts of all or any portion of the amount needed to meet the asset maintenance requirement. If the contract provides that the assets in the separate account shall not be chargeable with liabilities arising out of any other business of the insurer, the insurer shall maintain in a distinct separate account that is so chargeable:

010.01E(1) That portion of the amount needed to meet the asset maintenance requirement that has been allocated to separate accounts; less

010.01E(2) The amounts contributed to separate accounts by the contractholder in accordance with the contract and the earnings on the contract.

010.01F For purposes of this section, the minimum value of guaranteed contract liabilities is defined to be the sum of the expected guaranteed contract benefits, each discounted at a rate corresponding to the expected time of payment of the contract benefit that is not greater than the spot rate supportable by the expected return from the segregated portfolio assets, and in no event greater than the blended spot rate as described in the plan of operation (pursuant to Section 005) or the actuary's opinion and memorandum (pursuant to Subsection 010.02), except that if the expected time of payment of a contract benefit is more than thirty (30) years, it shall be discounted from the expected date of payment to year thirty (30) at a rate of no more than eighty percent (80%) of the thirty-year blended spot rate and from year thirty (30) to the date of valuation at a rate not greater than the thirty-year blended spot rate.

010.01G In calculating the minimum value of guaranteed contract benefits:

010.01G(1) All guaranteed benefits potentially available to the contractholder on an ongoing basis shall be considered in the valuation process and analysis, and the reserve held must be sufficient to fund the greatest present value of each independent guaranteed contract benefit. For purposes of this subparagraph, the right granted to the contractholder to exit the contract by discharging the insurer of its guarantee obligation under the contract and taking control of the assets in the segregated portfolio shall not be considered a guaranteed benefit.

010.01G(2) To the extent that future guaranteed cash flows are dependent upon the benefit responsiveness of an employer-sponsored plan, a best estimate based on company experience, or other reasonable criteria if company experience is not available, shall be used in the projections of future cash flows.

010.01G(3) The minimum value of guaranteed contract benefits under a contract issued to a pooled fund representing multiple employer-sponsored plans shall be determined so as to reflect projected plan sponsor contract value withdrawals available to the member plans in the pooled fund.

Projections of such future cash flows shall take into account (i) known plan sponsor withdrawals, and (ii) a prudent estimate of future plan sponsor withdrawals. The prudent estimate shall be based on company experience and other relevant criteria.

A single valuation rate shall be determined, consistent with Subsection 010.01F, equal to the lesser of:

010.01G(3)(i) The expected return from the segregated portfolio of assets, or

010.01G(3)(ii) The blended spot rate based on the duration of the segregated portfolio of assets.

This single valuation rate shall be used to model future market values of the segregated portfolio of assets. Future credited interest rates shall be modeled according to the contractually defined crediting rate formula. Modeled future contract values shall reflect modeled future market values, modeled future credited interest rates, known future plan sponsor withdrawals, the prudent estimate of future plan sponsor withdrawals, future withdrawals consistent with Subsection 010.01G(2) and any remaining final payment at the modeled contract termination date. All such modeled withdrawals and termination payments shall be discounted using the single valuation rate and the modeled times of those withdrawals and payments. The sum of these present values shall be deemed the minimum value of the guaranteed contract liabilities for a pooled fund contract.

010.02 Actuarial opinion and supporting memorandum for segregated portfolios governed by this regulation.

010.02A An insurer that issues a synthetic guaranteed investment contract subject to this regulation shall submit an actuarial opinion and, upon request, a supporting memorandum to the Director annually by March 1 following the December 31 valuation date showing the status of the accounts as of the prior December 31. For purposes of clarity, if an insurer submits to the Director an opinion and, if requested by the Director, a supporting memorandum in accordance with Title 210 Neb. Admin. Code § 69 that comply with the requirements set forth in Neb. Rev. Stat. § 44-8905, and such opinion and supporting memorandum collectively address the matters set forth in Subsections 010.02D, 010.02E and 010.02G, the insurer shall not be required to submit to the Director a separate actuarial opinion and supporting memorandum relating only to synthetic guaranteed investment contracts. The actuarial opinion and memorandum shall be in form and substance satisfactory to the Director.

010.02B The actuarial memorandum (or portion thereof) required by this regulation is deemed to be confidential to the same extent, and under the same conditions, as the actuarial memorandum required by Neb. Rev. Stat. § 44-8905.

010.02C Except in cases of fraud or willful misconduct, the valuation actuary shall not be liable for damages to any person (other than the insurance company and the Director) for any act, error, omission, decision, or conduct with respect to the actuary's opinion.

010.02D The statement of actuarial opinion and/or supporting memorandum submitted in accordance with Subsection 010.02A shall consist of:

010.02D(1) A paragraph identifying the valuation actuary and his or her qualification;

010.02D(2) A scope paragraph identifying the subjects on which the opinion and/or memorandum is to be expressed and describing the scope of the valuation actuary's work;

010.02D(3) A reliance paragraph describing those areas, if any, where the valuation actuary has deferred to other experts in developing data, procedures or assumptions;

010.02D(4) An opinion paragraph expressing the valuation actuary’s opinion with respect to the matters described in Subsections 010.02E(1) and (2) below; and

010.02D(5) One or more additional paragraphs may be needed in individual company cases as follows:

010.02D(5)(i) If the valuation actuary considers it necessary to state a qualification of his or her opinion;

010.02D(5)(ii) If the valuation actuary must disclose an inconsistency in the method of analysis used at the prior opinion date with that used for this opinion;

010.02D(5)(iii) If the valuation actuary chooses to add a paragraph briefly describing the assumptions which form the basis of the actuarial opinion.

010.02E Contents of the actuarial opinion or supporting memorandum.

010.02E(1) The actuarial opinion or supporting memorandum shall include an asset adequacy analysis that measures the segregated portfolio assets and the amount of any reserve liability with respect to the asset maintenance requirement to determine whether the account assets make adequate provision for contract liabilities after taking into account any risk charge payable.

010.02E(2) The actuarial opinion or supporting memorandum shall also substantively state:

010.02E(2)(i) Reserves for contract liabilities are calculated pursuant to the requirements of Subsection 010.01A;

010.02E(2)(ii) After taking into account any reserve liability with respect to the asset maintenance requirement, the amount of the account assets satisfied the asset maintenance requirement;

010.02E(2)(iii) The fixed-income segregated portfolio conformed to and justified the rates used to discount contract liabilities for valuation pursuant to Subsection 010.01F;

010.02E(2)(iv) Whether any rates used pursuant to Subsection 010.01F to discount guaranteed contract liabilities and other items applicable to the segregated portfolio were modified from the rate or rates described in the plan of operation filed pursuant to Section 005; and

010.02E(2)(v) The level of risk charges, if any, retained in the general account was appropriate in view of such factors as the nature of the guaranteed contract liabilities and losses experienced in connection with account contracts and other pricing factors.

010.02F The actuarial opinion and supporting memorandum shall be accompanied by a certificate of an officer of the insurance company responsible for monitoring compliance with the asset maintenance requirements for synthetic guaranteed investment contracts describing the extent to and manner in which, during the preceding year:

010.02F(1) Actual benefit payments conformed to the benefit payment estimated to be made as described in the plan of operation;

010.02F(2) The determination of the fair market value of the segregated portfolio conformed to the valuation procedures described in the plan of operation, including a statement of the procedures and sources used during the year; and

010.02F(3) Any assets were transferred to or from the insurer's general account, or any amounts were paid to the insurer by any contractholder to support the insurer's guarantee.

010.02G The actuarial memorandum supporting the actuarial opinion shall:

010.02G(1) Substantially conform with those portions of Title 210 Neb. Admin. Code § 69 that are applicable to asset adequacy testing and either:

010.02G(1)(i) Demonstrate the adequacy of account assets based upon cash flow analysis, or

010.02G(1)(ii) Explain why cash flow testing analysis is not appropriate, describe the alternative methodology of asset adequacy testing used, and demonstrate the adequacy of account assets under that methodology;

010.02G(2) Clearly describe the assumptions the valuation actuary used in support of the actuarial opinion, including any assumptions made in projecting cash flows under each class of assets, and any dynamic portfolio hedging techniques utilized and the tests performed on the utilization of the techniques;

010.02G(3) Clearly describe how the valuation actuary has reflected the cost of capital;

010.02G(4) Clearly describe how the valuation actuary has reflected the risk of default on obligations and mortgage loans, including obligations and mortgage loans that are not investment grade;

010.02G(5) Clearly describe how the valuation actuary has reflected withdrawal risks, if applicable, including a discussion of the positioning of the contracts within the benefit withdrawal priority order pertaining to the contracts, the impact of any dynamic lapse assumption and the results of sensitivity testing the prudent estimate of future plan sponsor withdrawals pursuant to Subsection 010.01G(3);

010.02G(6) If the plan of operation provides for investments in segregated portfolio assets other than United States government obligations, demonstrate that the rates used to discount contract liabilities pursuant to Subsection 010.01G conservatively reflect expected investment returns, taken into account any foreign exchange risks;

010.02G(7) If the contracts provide that in certain circumstances they would cease to be funded by a segregated portfolio and, instead would become contracts funded by the general account, clearly describe how any increased reserves would be provided for if and to the extent these circumstances occurred;

010.02G(8) State the amount of account assets maintained in a separate account that are not chargeable with liabilities arising out of any other business of the insurance company;

010.02G(9) State the amount of reserves and supporting assets as of December 31 and where the reserves are shown in the annual statement;

010.02G(10) State the amount of any contingency reserve carried as part of surplus;

010.02G(11) State the market value of the segregated asset portfolio; and

010.02G(12) Where separate account assets are not chargeable with liabilities arising out of any other business of the insurance company, describe how the level of risk charges payable to the general account provides an appropriate compensation for the risk taken by the general account.

010.03 When the insurer issues a synthetic guaranteed investment contract and complies with the asset maintenance requirements of Subsection 010.01, it need not maintain an asset valuation reserve with respect to those account assets.

010.04 This section describes the reserve valuation requirements for contracts subject to this regulation.

010.04A Reserves for synthetic investment contracts subject to this regulation shall be an amount equal to the sum of the following:

010.04A(1) The amounts determined as the minimum reserve as required under Subsection 010.01A;

010.04A(2) Any additional amount determined by the insurer's valuation actuary as necessary to make adequate provision for all contract liabilities; and

010.04A(3) Any additional amount determined as necessary by the Director due to the nature of the benefits.

010.04B The amount of any reserves required by Subsection 010.04A may be established by either:

010.04B(1) Allocating sufficient assets to one or more separate accounts; or

010.04B(2) Setting up the additional reserves in the general account.

011. Severability . If any provision of this regulation or its application to any person or circumstance is for any reason held to be invalid by a court of competent jurisdiction, the remainder of the regulation and the application of the provision to other persons or circumstances shall not be affected.

History

• Effective 2018-05-22

Chapter 81 Custodial Agreements and the Use of Clearing Corporations

Neb. Admin. Code tit. 210, ch. 81 Custodial Agreements and the Use of Clearing Corporations {#sec-210-nac-81 omnilex-key=us-ne-regs-official--title-210--210 NAC 81}

001. Authority . This Rule is promulgated by the Director of Insurance pursuant to Neb. Rev. Stat . §44-101.01 and §44-5154.

002. Definitions .

002.01 “Agent” means a national bank, state bank, trust company, or broker/dealer that maintains an account in its name in a clearing corporation or that is a member of the Federal Reserve Systems and through which a custodian participates in a clearing corporation, including the Treasury/Reserve Automated Debit Entry Securities Systems (TRADES) or Treasury Direct systems, except that with respect to securities issued by institutions organized or existing under the laws of a foreign country or securities used to meet the deposit requirements pursuant to the laws of a foreign country as a condition of doing business therein, “agent” may include a corporation that is organized or existing under the laws of a foreign country and that is legally qualified under those laws to accept custody of securities.

002.02 “Clearing corporation” means a corporation as defined in subdivision 8-102 (a) (5) of the Uniform Commercial Code that is organized for the purpose of effecting transactions in securities by computerized book-entry, except that with respect to securities issued by institutions organized or existing under the laws of a foreign country or securities used to meet deposit requirements pursuant to the laws of a foreign country as a condition of doing business therein, “clearing corporation” may include a corporation that is organized or existing under the laws of a foreign country and which is legally qualified under those laws to effect transactions in securities by computerized book-entry. Clearing corporation also includes “Treasury/Reserve Automated Debt Entry Securities System” and “Treasury Direct” book-entry securities systems established pursuant to 31 U.S.C. § 3100 et seq ., 12 U.S.C. pt. 391 and 5 U.S.C. pt. 301.

002.03 “Custodian” means:

002.03(a) A national bank, state bank or trust company that shall at all times during which it acts as a custodian pursuant to the Insurers Investment Act be no less than adequately capitalized as determined by the standards adopted by United States banking regulators and that is regulated by either state banking laws or is a member of the Federal Reserve System and that is legally qualified to accept custody of securities in accordance with the standards set forth below, except that with respect to securities issued by institutions organized or existing under the laws of a foreign country, or securities used to meet the deposit requirements pursuant to the laws of a foreign country as a condition of doing business therein, “custodian” may include a bank or trust company incorporated and organized under the laws of a country other than the United States that is regulated as such by that country’s government or an agency thereof that shall at all times during which it acts as a custodian pursuant to this regulation be no less than adequately capitalized as determined by the standards adopted by international banking authorities and that is legally qualified to accept custody of securities; or

002.03(b) A broker/dealer that shall be registered with and subject to jurisdiction of the Securities and Exchange Commission, maintains membership in the Securities Investor Protection Corporation, and has a tangible net worth equal to or greater than two hundred fifty million dollars ($250,000,000).

002.04 “Custodied securities” means securities held by the custodian or its agent or in a clearing corporation, including the Treasury/Reserve Automated Debt Equity Securities System (TRADES) or Treasury Direct systems.

002.05 “Securities’ certificate” has the same meaning as that defined in Section 8-102 (a) (16) of the Uniform Commercial Code.

002.06 “Security” has the same meaning as that defined in Section 8-102 (a) (15) of the Uniform Commercial Code.

002.07 “Tangible net worth” means shareholders equity, less intangible assets, as reported in the broker/dealer’s most recent Annual or Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (S.E.C. Form 10-K) filed with the Securities and Exchange Commission.

002.08 “Treasury/Reserve Automated Debt Entry Securities System (“TRADES”) and “Treasury Direct” mean the book-entry securities systems established pursuant to 31 U.S.C. § 3100 et seq ., 12 U.S.C. pt. 391 and 5 U.S.C. pt 301. The operation of TRADES and Treasury Direct are subject to 31 C.F.R. pt. 357 et seq .

002.09 The remaining definitions of Neb. Rev. Stat . §44-5103 apply for purposes of this chapter.

003. Custody Agreements/Requirements .

003.01 An insurance company may, by written agreement with a custodian, provide for the custody of its securities with that custodian. The securities that are the subject of the agreement may be held by the custodian or its agent or in a clearing corporation.

003.02 The agreement shall be in writing and shall be authorized by a resolution of the board of directors of the insurance company or of an authorized committee of the board. The terms of the agreement shall comply with the following:

003.02(a) Securities’ certificates held by the custodian shall be held separate from the securities’ certificates of the custodian and all of its other customers.

003.02(b) Securities held indirectly by the custodian and securities in a clearing corporation shall be separately identified on the custodian’s official records as being owned by the insurance company. The records shall identify which securities are held by the custodian or by its agent and which securities are in a clearing corporation. If the securities are in a clearing corporation, the records shall also identify where the securities are and if in a clearing corporation, the name of the clearing corporation and if through an agent, the name of the agent.

003.02(c) All custodied securities that are registered shall be registered in the name of the company or in the name of a nominee of the company or in the name of the custodian or its nominee or, if in a clearing corporation, in the name of the clearing corporation or its nominee.

003.02(d) Custodied securities shall be held subject to the instructions of the insurance company and shall be withdrawable upon the demand of the insurance company.

003.02(e) The custodian shall be required to send or cause to be sent to the insurance company a confirmation of all transfers of custodied securities to or from the account of the insurance company. In addition, the custodian shall be required to furnish no less than monthly the insurance company with reports of holdings of custodied securities at times and containing information reasonably requested by the insurance company. The custodian’s trust committee’s annual reports of its review of the insurer’ trust accounts shall also be provided to the insurer. Reports and verifications may be transmitted in electronic or paper form.

003.02(f) During the course of the custodian’s regular business hours, an officer or employee of the insurance company, an independent accountant selected by the insurance company and a representative of an appropriate regulatory body shall be entitled to examine, on the premises of the custodian, the custodian’s records relating to custodied securities, but only upon furnishing the custodian with written instructions to that effect from an appropriate officer of the insurance company.

003.02(g) The custodian and its agents shall be required to send to the insurance company:

003.02(g)(i) All reports which they receive from a clearing corporation on their respective systems of internal accounting control, and

003.02(g)(ii) Reports prepared by outside auditors on the custodians or its agent’s internal accounting control of custodied securities that the insurance company may reasonably request.

003.02(h) The custodian shall maintain records sufficient to determine and verify information relating to custodied securities that may be reported in the insurance company’s annual statement and supporting schedules and information required in an audit of the financial statements of the insurance company.

003.02(i) The custodian shall provide, upon written request from an appropriate officer of the insurance company, the appropriate affidavits, substantially in the form attached to this regulation, with respect to custodied securities.

003.02(j) A national bank, state bank or trust company shall secure and maintain insurance protection in an adequate amount covering the bank’s or trust company’s duties and activities as custodian for the insurer’s assets, and shall state in the custody agreement that protection is in compliance with the requirements of the custodian’s banking regulator. A broker/dealer shall secure and maintain insurance protection for each insurance company’s custodied securities in excess of that provided by the Securities Investor Protection Corporation in an amount equal to or greater than the market value of each respective insurance company’s custodied securities. The director may determine whether the type of insurance is appropriate and the amount of coverage is adequate.

003.02(k) The custodian shall be obligated to indemnity the insurance company for any loss of custodied securities, except that the custodian shall not be so obligated to the extent that the loss was caused by other than the negligence or dishonesty of the custodian.

003.02(l) In the event that there is a loss of custodied securities for which the custodian shall be obligated to indemnify the insurance company as provided in 003.02(k), the custodian shall promptly replace the securities or the value thereof and the value of any loss of rights or privileges resulting from the loss of securities.

003.02(m) The agreement may provide that the custodian will not be liable for a failure to take an action required under the agreement in the event and to the extent that the taking of the action is prevented or delayed by war (whether declared or not and including existing wars), revolution, insurrection, riot, civil commotion, act of God, accident, fire, explosion, stoppage of labor, strikes or other differences with employees, laws, regulations, orders or other acts of any governmental authority, or any other cause whatever beyond its reasonable control.

003.02(n) In the event that the custodian gains entry in a clearing corporation through an agent, there shall be an agreement between the custodian and the agent under which the agent shall be subject to the same liability for loss of custodied securities as the custodian. However, if the agent shall be subject to regulation under the laws of a jurisdiction that is different from the jurisdiction the laws of which regulate the custodian, the Commissioner or Director of Insurance of the state of domicile of the insurance company may accept a standard of liability applicable to the agent that is different from the standard of liability applicable to the custodian.

003.02(o) The custodian shall provide written notification to the insurer’s domiciliary commissioner if the custodial agreement with the insurer has been terminated or if 100% of the account assets in any one custody account have been withdrawn. This notification shall be remitted to the insurance commissioner within three (3) business days of receipt by the custodian of the insurer’s written notice of termination or within three (3) business days of the withdrawal of 100% of the account assets.

004. Severability provision . If any section or portion of a section of this rule or the applicability thereof to any person or circumstance is held invalid by a court, the remainder of the rule or the applicability of such provision to other persons or circumstances shall not be affected thereby.

History

• Effective 2005-11-01

Chapter 82 Military Sales Practices

Neb. Admin. Code tit. 210, ch. 82 Military Sales Practices {#sec-210-nac-82 omnilex-key=us-ne-regs-official--title-210--210 NAC 82}

001. Authority . This Rule is adopted and promulgated pursuant to the authority granted by Neb.Rev.Stat. §44-1534.01.

002. Purpose . This Rule is promulgated to protect active duty service members of the United States Armed Forces from dishonest and predatory insurance sales practices by declaring certain identified practices to be false, misleading, deceptive or unfair; nothing contained herein creates or implies private causes of action for any violations.

003. Scope . This Rule applies only to the solicitation or sale of any life insurance or annuity product by an insurer or insurance producer to an active duty service member of the United States Armed Forces (USAF).

004. Exemptions .

004.01 This rule does not apply to solicitations or sales involving:

004.01A Credit insurance;

004.01B Group life insurance or group annuities where there is no face-to-face solicitation of individuals by an insurance producer or where the contract or certificate does not include a side fund;

004.01C An application to the insurer that issued the existing policy or contract when a contractual change or a conversion privilege is being exercised; when the existing policy or contract is replaced by the same insurer pursuant to a program filed with and approved by the commissioner; or, when a term conversion privilege is exercised among corporate affiliates;

004.01D Individual stand-alone health and disability income policies;

004.01E Contracts offered by Service members’ Group Life Insurance (SGLI) or Veterans’ Group Life Insurance (VGLI), as authorized by 38 U.S.C. § 1965 et seq.;

004.01F Life insurance contracts offered by a non-profit military association, qualifying under Internal Revenue Code (IRC) Section 501 (c) (23), and which are not underwritten by an insurer;

004.01G Contracts used to fund:

004.01G (1) Employee pensions or welfare benefit plans that are covered by the Employee Retirement and Income Security Act (ERISA);

004.01G (2) Plans described by IRC Sections 401(a), 401(k), 403(b), 408(k) or 408(p), as amended, if established or maintained by an employer;

004.01G (3) Government or church plans defined in IRC Section 414, government or church welfare benefit plans, or deferred compensation plans of state or local government or tax exempt organizations under IRC Section 457;

004.01G (4) Nonqualified deferred compensation arrangements established or maintained by an employer or plan sponsor;

004.01G (5) Settlements or assumptions of liabilities associated with personal injury claims; or

004.01G (6) Contracts governed by the Burial Pre-Need Sale Act.

004.02 Nothing in this Rule will restrict the ability of organizations to educate members of the USAF pursuant to Department of Defense DoD Instruction 1344.07 – PERSONAL COMMERCIAL SOLICITATION ON DOD INSTALLATIONS, or successor directive.

004.03 For purposes of this rule, “solicitation” does not include general advertisements, direct mail and internet marketing. Telephone marketing is not "solicitation" provided the caller explicitly discloses that the product concerned is life insurance.

005. Definitions . 005 As used in this rule:

005.01 “Active Duty” carries the same definition as that included in 38 U.S.C. § 1965(1).

005.02 “Department of Defense (DoD) Personnel” means all active duty service members and all civilian employees, including nonappropriated fund employees and special government employees, of the Department of Defense.

005.03 “Door to Door” means a solicitation or sales method whereby an insurance producer proceeds randomly or selectively from household to household without prior specific appointment.

005.04 “General Advertisement” means an advertisement having as its sole purpose the promotion of the viewer's interest in the concept of insurance, the promotion of the insurer, or the insurance producer.

005.05 “Insurer” means an insurance company required to be licensed under Nebraska law to provide life insurance products, including annuities.

005.06 “Insurance producer” carries the same definition as that set out in Neb.Rev.Stat. §44-103(10).

005.07 “Known” or “Knowingly” means, depending on its use, the insurance producer or insurer had actual awareness, or in the exercise of ordinary care should have known, at the time of the act or practice complained of, that the person solicited is a service member.

005.08 “Life Insurance” means insurance coverage on human lives including benefits of endowment and may include: (a) benefits in the event of death or dismemberment by accident; (b) benefits for disability income; and (c) individually issued annuities unless otherwise excluded.

005.09 “Military Installation” means any federally owned, leased, or operated base, reservation, post, camp, building, or other facility to which service members are assigned for duty, including barracks, transient housing, and family quarters.

005.10 “MyPay” is a Defense Finance and Accounting Service (DFAS) web-based system that enables service members to process certain discretionary pay transactions or provide updates to personal information data elements without using paper forms.

005.11 “Service Member” means any active duty officer (commissioned and warrant) or enlisted member of the USAF.

005.12 “Side Fund” means a fund or reserve that is part of or otherwise attached to a life insurance policy (excluding individually issued annuities) by rider, endorsement or other mechanism which accumulates premium or deposits with interest or other means. The term does not include:

005.13 A accumulated value, cash value, or secondary guarantees provided by a universal life policy;

005.13 B cash values provided by a whole life policies which are subject to standard nonforfeiture law for life insurance; or

005.13 C a premium deposit fund which:

005.13 C (1) contains only premiums paid in advance which accumulate at interest;

005.13 C (2) imposes no penalty for withdrawal;

005.13 C (3) does not permit funding beyond future mandatory premiums;

005.13 C (4) is not marketed or intended as an investment; and

005.13 C (5) does not carry a commission, either paid or calculated.

005.14 “Specific Appointment” means a prearranged meeting at a specific place and time agreed upon by both parties.

005.15 “United States Armed Forces (USAF)” means all components of the Army, Navy, Air Force, Marine Corps, and Coast Guard.

006. Practices Declared False, Misleading, Deceptive or Unfair on a Military Installation .

006.01 The following acts or practices when committed on a military installation by an insurer or insurance producer are declared to be false, misleading, deceptive or unfair:

006.01 (A) Knowingly soliciting any life insurance product “door to door” or without first establishing a specific appointment with the prospective purchaser.

006.01 (B) Soliciting service members in a group or “mass” or “captive” audience where attendance is not voluntary.

006.01 (C) Knowingly making appointments with or soliciting service members during their normally scheduled duty hours.

006.01 (D) Making appointments with or soliciting service members in barracks, day rooms, unit areas, or transient personnel housing or any areas where the installation commander has barred solicitation.

006.01 (E) Soliciting the sale of life insurance without first obtaining permission from the installation commander or the commander’s designee.

006.01 (F) Posting unauthorized bulletins, notices or advertisements.

006.01 (G) Failing to present DD Form 2885, Personal Commercial Solicitation Evaluation, to service members solicited or encouraging service members solicited not to complete or submit a DD Form 2885.

006.01 (H) Knowingly accepting an application for life insurance or issuing a policy of life insurance on the life of an enlisted member of the USAF without first obtaining a completed copy of all forms which confirm that the applicant has received counseling or fulfilled any similar requirements for the sale of life insurance established by regulations, directives or rules of the DoD or any branch of the USAF.

006.01 (I) Using DoD personnel, directly or indirectly, as a representative or agent in any official or business capacity with or without compensation with respect to the solicitation or sale of life insurance to service members.

006.01 (J) Having an insurance producer participate in any USAF sponsored education or orientation program.

007. Practices Declared False, Misleading, Deceptive or Unfair Regardless of Location .

007.01 The following acts or practices by an insurer or insurance producer are declared to be false, misleading, deceptive or unfair:

007.01 (A) Submitting, processing or assisting in the submission or processing of any allotment form or similar device used by the USAF to direct a service member’s pay to a third party for the purchase of life insurance. The foregoing includes, but is not limited to, using or assisting in using a service member's “MyPay” account or other similar internet or electronic medium for such purposes. This subsection does not prohibit assisting a service member by providing insurer or premium information necessary to complete any allotment form.

007.01 (B) Knowingly receiving funds from a service member for the payment of premium from a depository institution with which the service member has no formal banking relationship. For purposes of this section, a formal banking relationship is established when the depository institution:

007.01 (B) (1) provides the service member a deposit agreement, periodic statements and makes the disclosures outlined in the Truth in Savings Act, 12 U.S.C. § 4301 et seq. and regulations promulgated thereunder; and

007.01 (B) (2) permits the service member to make deposits and withdrawals unrelated to the payment or processing of insurance premiums.

007.01 (C) Employing any device or method or entering into any agreement whereby funds received from a service member for the payment of insurance premiums are identified on the service member’s Leave and Earnings Statement or equivalent form as “Savings” or “Checking”.

007.01 (D) Using DoD personnel, directly or indirectly, as a representative or agent in any capacity with or without compensation with respect to the solicitation or sale of life insurance to service members (or their family members) that are junior in rank or grade.

007.01 (E) Offering or giving anything of value, directly or indirectly, to DoD personnel to procure their assistance in encouraging, assisting or facilitating the solicitation or sale of life insurance to another service member.

007.01 (F) Knowingly offering or giving anything of value to a service member with a pay grade of E-4 or below for his or her attendance to any event where an application for life insurance is solicited.

007.01 (G) Advising service members in pay grades E-4 and below to change their income tax withholdings or states of legal residence for the sole purpose of increasing disposable income to purchase life insurance.

007.01 (H) Making any representation, or using any device, title, descriptive name or identifier that has the tendency or capacity to confuse or mislead a service member into believing that the insurer, insurance producer or product offered is affiliated, connected or associated with, endorsed, sponsored, sanctioned or recommended by the U.S. Government, the USAF, any state or federal agency or government entity. Examples of improper insurance producer titles include, "Battalion Insurance Counselor," "Unit Insurance Advisor," "Servicemen's Group Life Insurance Conversion Consultant" or “Veteran’s Benefits Counselor.”

Nothing herein may be construed to prohibit a person from using a professional designation awarded after the successful completion of a course of instruction in the business of insurance by accredited institutions or organizations. Some such designations include, Chartered Life Underwriter (CLU), Chartered Financial Consultant (ChFC), Certified Financial Planner (CFP), Master of Science Financial Services (MSFS), or Masters of Science Financial Planning (MS).

007.01 (I) Soliciting any life insurance product through the use of or in conjunction with any third party organization that promotes the welfare of or assists members of the USAF in a manner that has the tendency or capacity to confuse or mislead a service member into believing that the insurer, insurance producer or insurance product is affiliated, connected or associated with, endorsed, sponsored, sanctioned or recommended by the U.S. Government, or the USAF.

007.01 (J) Using or describing the credited interest rate on a life insurance policy in a manner that implies that the credited interest rate is a net return on premium paid.

007.01 (K) Excluding individually issued annuities, misrepresenting the mortality costs of a life insurance product, including stating or implying that the product "costs nothing" or is "free."

007.01 (L) Making any false, misleading or deceptive representation regarding the availability, suitability, amount, cost, exclusions or limitations to coverage provided to a service member or dependents by SGLI or VGLI.

007.01 (M) Making any false, misleading or deceptive representation regarding conversion requirements, including the costs of coverage, or exclusions or limitations to coverage of SGLI or VGLI to private insurers..

007.01 (N) Suggesting or recommending a service member cancel or terminate an SGLI policy or issuing a life insurance policy which replaces an existing SGLI policy unless the replacement takes effect upon or after the service member’s separation from the USAF.

007.01 (O) Deploying, using or contracting for any lead generating materials designed exclusively for use with service members that do not clearly disclose that the recipient will be contacted by an insurance producer, for the purpose of soliciting life insurance.

007.01 (P) Failing to disclose that a solicitation for life insurance will be made when establishing a specific appointment for a face-to-face meeting with a prospective purchaser.

007.01 (Q) Excluding individually issued annuities, failing to clearly and conspicuously disclose the fact that the product being sold is life insurance.

007.01 (R) Failing to make, at the time of sale or offer to an individual known to be a service member, the written disclosures outlined in Section 10 of the “Military Personnel Financial Services Protection Act,” Pub. L. No. 109-290, p.16.

007.01 (S) Excluding individually issued annuities, when the sale is conducted face-to-face with an individual known to be a service member, failing to provide the applicant at the time the application is taken:

007.01 (T) (1) an explanation of any free look period with instructions on how to cancel if a policy is issued; and

007.05 (T) (2) either a copy of the application or a written disclosure. The copy of the application or the written disclosure needs to clearly set out the type of life insurance, the death benefit, and the expected first year cost. A basic illustration that meets the requirements of 210 Neb. Admin. Code §72 is sufficient to meet this requirement.

007.01 (U) Excluding individually issued annuities, recommending the purchase of any life insurance product which includes a side fund to service members in pay grades E-4 and below unless the insurer has reasonable grounds for believing that the life insurance death benefit, standing alone, is suitable.

007.01 (V) Offering or selling a life insurance product which includes a side fund to service members in pay grades E-4 and below who are currently enrolled in SGLI unless, after the completion of a needs assessment, the insurer demonstrates that the applicant’s SGLI death benefit, together with any military survivor benefits, savings, investments, survivor income, and other life insurance are insufficient to meet the applicant’s insurable needs.

007.01 (V) (1) “Insurable needs” are the risks associated with premature death taking into consideration the financial obligations and immediate and future cash needs of the applicant’s survivors, dependents and estate.

007.01 (V) (2) “Military survivor benefits” include such things as: the Death Gratuity, Funeral Reimbursement, Transition Assistance, Survivor and Dependents’ Educational Assistance, Dependency and Indemnity Compensation, TRICARE Healthcare benefits, Survivor Housing Benefits and Allowances, Federal Income Tax Forgiveness, and Social Security Survivor Benefits.

007.01 (W) Excluding individually issued annuities, offering for sale or selling any life insurance contract which includes a side fund:

007.01 (W) (1) unless interest credited accrues from the date of deposit to the date of withdrawal and permits withdrawals without limit or penalty;

007.01 (W) (2) unless the applicant has been provided with a schedule of effective rates of return based upon cash flows of the combined product. For this disclosure, the effective rate of return will consider all premiums and cash contributions made by the policyholder and all cash accumulations and cash surrender values available to the policyholder in addition to life insurance coverage. This schedule will be provided each of the first ten policy years and every fifth policy year thereafter, ending at age 100, policy maturity or final expiration; and

007.01 (W) (3) which diverts or transfers funds accumulated in the side fund to pay, reduce or offset any premiums due.

007.01 (X) Excluding individually issued annuities, offering or selling any life insurance contract which after considering all policy benefits, including but not limited to endowment, return of premium or persistency, does not comply with standard life insurance nonforfeiture law.

007.01 (Y) Selling any life insurance product to an individual known to be a service member that excludes coverage if the insured’s death is related to war, declared or undeclared, or any act related to military service except for an accidental death coverage, e.g., double indemnity, which may be excluded.

008. Severability . If any provision of this Rule or the application thereof is held invalid for any reason, the invalidity will not affect the other provisions or any other application thereof which can be given effect without the invalid provisions. To this end all provisions are declared to be severable.

009. Effective Date . This rule becomes effective January 1, 2009 and applies to acts or practices committed on or after that date.

History

• Effective 2020-10-04

Chapter 83 Preneed Life Insurance Minimum Standards for Determining Reserve Liabilities and Non Forfeiture Values Model Regulation

Neb. Admin. Code tit. 210, ch. 83 Preneed Life Insurance Minimum Standards for Determining Reserve Liabilities and Non Forfeiture Values Model Regulation {#sec-210-nac-83 omnilex-key=us-ne-regs-official--title-210--210 NAC 83}

001. Statutory Authority . This regulation is promulgated pursuant to the authority granted by NEB. REV. STAT. §§44-101.01, 44-404, and 44-420 to 44-427.

002. Scope . This regulation applies to preneed insurance contracts, as defined in section 004 of this regulation, and to similar policies and certificates.

003 Purpose . The purpose of this regulation is to establish for preneed insurance products minimum mortality standards for reserves and nonforfeiture values, and to require the use of the 1980 Commissioners’ Standard Ordinary (CSO) Life Valuation Mortality Table for use in determining the minimum standard of valuation of reserves and the minimum standard nonforfeiture values for preneed insurance products.

004. Definitions .

004.01 “2001 CSO Mortality Table” means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the American Academy of Actuaries CSO Task Force from the Valuation Basic Mortality Table developed by the Society of Actuaries Individual Life Insurance Valuation Mortality Task Force, and adopted by the NAIC in December 2002. The 2001 CSO Mortality Table is included in the Proceedings of the NAIC (2nd Quarter 2002). Unless the context indicates otherwise, the “2001 CSO Mortality Table” includes both the ultimate form of that table and the select and ultimate form of that table and includes 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.

004.02 “Ultimate 1980 CSO” means the Commissioners’ 1980 Standard Ordinary Life Valuation Mortality Tables (1980 CSO) without ten-year (10-year) selection factors, incorporated into the 1980 amendments to the NAIC Standard Valuation Law approved in December 1983.

004.03 “Preneed insurance,” for the purposes of this regulation, shall mean any life insurance policy or certificate that is issued in combination with, in support of, with an assignment to, or as a guarantee for a prearrangement contract or agreement for goods and services to be provided at the time of and immediately following the death of the insured. Goods and services may include, but are not limited to embalming, cremation, body preparation, viewing or visitation, coffin or urn, memorial stone, and transportation of the deceased. The status of the policy or contract as preneed insurance is determined at the time of issue in accordance with the policy form filing.

005. Minimum Valuation Mortality Standards . For preneed insurance contracts, as defined in subsection 004.03, and similar policies and contracts, the minimum mortality standard for determining reserve liabilities and nonforfeiture values for both male and female insureds shall be the Ultimate 1980 CSO.

006. Minimum Valuation Interest Rate Standards .

006.01 The interest rates used in determining the minimum standard for valuation of preneed insurance shall be the calendar year statutory valuation interest rates as defined in NEB. REV. STAT. §§44-404 and 44-420 to 44-427.

006.02 The interest rates used in determining the minimum standard for nonforfeiture values for preneed insurance shall be the calendar year statutory nonforfeiture interest rates as defined in NEB. REV. STAT. §44-407 ET SEQ.

007. Minimum Valuation Method Standards .

007.01 The method used in determining the standard for the minimum valuation of reserves of preneed insurance shall be the method defined in NEB. REV. STAT. §§44-404 and 44-420 to 44-427.

007.02 The method used in determining the standard for the minimum nonforfeiture values for preneed insurance shall be the method defined in NEB. REV. STAT. §44-407 ET SEQ.

008. Transition Rules .

008.01 For preneed insurance policies issued on or after the effective date of this regulation and before January 1, 2012, the 2001 CSO may be used as the minimum standard for reserves and minimum standard for nonforfeiture benefits for both male and female insureds.

008.02 If an insurer elects to use the 2001 CSO as a minimum standard for any policy issued on or after the effective date of this regulation and before January 1, 2012, the insurer shall provide, as a part of the actuarial opinion memorandum submitted in support of the company’s asset adequacy testing, an annual written notification to the domiciliary commissioner/director. The notification shall include:

008.02A A complete list of all preneed policy forms that use the 2001 CSO as a minimum standard;

008.02B A certification signed by the appointed actuary stating that the reserve methodology employed by the company in determining reserves for the preneed policies issued after the effective date and using the 2001 CSO as a minimum standard, develops adequate reserves (For the purposes of this certification, the preneed insurance policies using the 2001 CSO as a minimum standard cannot be aggregated with any other policies.); and

008.02C Supporting information regarding the adequacy of reserves for preneed insurance policies issued after the effective date of this regulation and using the 2001 CSO as a minimum standard for reserves.

008.03 Preneed insurance policies issued on or after January 1, 2012, must use the Ultimate 1980 CSO in the calculation of minimum nonforfeiture values and minimum reserves.

009. Effective Date . This regulation is applicable to preneed insurance policies and certificates and similar contracts and certificates, as specified in section 002 of this regulation, issued on or after January 1, 2009.

History

• Effective 2008-10-12

Chapter 84 Model Regulation Permitting the Recognition of Preferred Mortality Tables for Use in Determining Minimum Reserve Liabilities

Neb. Admin. Code tit. 210, ch. 84 Model Regulation Permitting the Recognition of Preferred Mortality Tables for Use in Determining Minimum Reserve Liabilities {#sec-210-nac-84 omnilex-key=us-ne-regs-official--title-210--210 NAC 84}

001. Authority This Rule is promulgated under the authority vested in the Director of Insurance by Neb.Rev.Stat. § 44-404 (a) (i) (c) and Title 210 Nebraska Administrative Code Chapter 71, Sections 005.01 and 005.02.

002. Purpose The purpose of this regulation is to recognize, permit and prescribe the use of mortality tables that reflect the differences in mortality between preferred and standard lives in determining minimum reserve liabilities in accordance with Neb.Rev.Stat. § 44-404 (a) (i) (c) and Title 210 Nebraska Administrative Code Chapter 71, Sections 005.01 and 005.02.

003. Definitions For the purposes of this Chapter

003.01 “2001 CSO Mortality Table" means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the American Academy of Actuaries CSO Task Force from the Valuation Basic Mortality Table developed by the Society of Actuaries Individual Life Insurance Valuation Mortality Task Force, and adopted by the National Association of Insurance Commissioners in December 2002. The 2001 CSO Mortality Table is included in the Proceedings of the National Association of Insurance Commissioners (2nd Quarter 2002) and supplemented by the 2001 CSO Preferred Class Structure Mortality Table defined below in Subsection 003.02. Unless the context indicates otherwise, the "2001 CSO Mortality Table" includes both the ultimate form of that table and the select and ultimate form of that table and includes 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. Mortality tables in the 2001 CSO Mortality Table include the following:

003.01(A) “2001 CSO Mortality Table (F)” means that mortality table consisting of the rates of mortality for female lives from the 2001 CSO Mortality Table.

003.01(B) “2001 CSO Mortality Table (M)” means that mortality table consisting of the rates of mortality for male lives from the 2001 CSO Mortality Table.

003.01(C) “Composite mortality tables” means mortality tables with rates of mortality that do not distinguish between smokers and nonsmokers.

003.01(D) “Smoker and nonsmoker mortality tables” means mortality tables with separate rates of mortality for smokers and nonsmokers.

003.02 “2001 CSO Preferred Class Structure Mortality Table” means mortality tables with separate rates of mortality for Super Preferred Nonsmokers, Preferred Nonsmokers, Residual Standard Nonsmokers, Preferred Smokers, and Residual Standard Smoker splits of the 2001 CSO Nonsmoker and Smoker tables as adopted by the National Association of Insurance Commissioners at the September, 2006 national meeting and published in the National Association of Insurance Commissioners Proceedings (3rd Quarter 2006). Unless the context indicates otherwise, 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. It includes both the smoker and nonsmoker mortality tables. It includes 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.

003.03 “Statistical agent” means an entity with proven systems for protecting the confidentiality of individual insured and insurer information; demonstrated resources for and history of ongoing electronic communications and data transfer ensuring data integrity with insurers, which are its members or subscribers; and a history of and means for aggregation of data and accurate promulgation of the experience modifications in a timely manner.

004. 2001 CSO Preferred Class Structure Table At the election of the company, for each calendar year of issue, for any one or more specified plans of insurance and subject to satisfying the conditions stated in this regulation, the 2001 CSO Preferred Class Structure Mortality Table may be substituted in place of the 2001 CSO Smoker or Nonsmoker Mortality Table as the minimum valuation standard for policies issued on or after January 1, 2004. No such election shall be made until the company demonstrates at least 20% of the business to be valued on this table is in one or more of the preferred classes. A table from the 2001 CSO Preferred Class Structure Mortality Table used in place of a 2001 CSO Mortality Table, pursuant to the requirements of this Rule, will be treated as part of the 2001 CSO Mortality Table only for purposes of reserve valuation pursuant to the requirements of Title 210 Nebraska Administrative Code Chapter 79 “Recognition of the 2001 CSO Mortality Table For Use In Determining Minimum Reserve Liabilities And Nonforfeiture Benefits Model Regulation”.

005. Conditions

005.01 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 to substitute for the nonsmoker mortality table found in the 2001 CSO Mortality Table to determine minimum reserves. At the time of election and annually thereafter, except for business valued under the Residual Standard Nonsmoker Table, the appointed actuary shall certify that:

005.01(A) The present value of death benefits over the next ten years after 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.

005.01(B) The present value of death benefits over the future life of the contracts, 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.

005.02 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 to substitute for the smoker mortality table found in the 2001 CSO Mortality Table to determine minimum reserves. At the time of election and annually thereafter, for business valued under the Preferred Smoker Table, the appointed actuary shall certify that:

005.02(A) The present value of death benefits over the next ten years after 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.

005.02(B) The present value of death benefits over the future life of the contracts, 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.

005.03 Unless exempted by the Director, every authorized insurer using the 2001 CSO Preferred Class Structure Table shall annually file with the Director, with the National Association of Insurance Commissioners, or with a statistical agent designated by the National Association of Insurance Commissioners and acceptable to the Director, statistical reports showing mortality and such other information as the Director may deem necessary or expedient for the administration of the provisions of this regulation. The form of the reports shall be established by the Director or the Director may require the use of a form established by the National Association of Insurance Commissioners or by a statistical agent designated by the National Association of Insurance Commissioners and acceptable to the Director.

006. Severability If any provision of this regulation or its application to any person or circumstance is for any reason held to be invalid, the remainder of the regulation and the application of the provision to other persons or circumstances shall not be affected.

History

• Effective 2009-07-11

Chapter 87 Health Carrier External Review

Neb. Admin. Code tit. 210, ch. 87 Health Carrier External Review {#sec-210-nac-87 omnilex-key=us-ne-regs-official--title-210--210 NAC 87}

001. Authority

This regulation is adopted by the director pursuant to the authority in Neb. Rev. Stat. §§ 44-1305 (1)(c), 44-1306(1)(b), 44-1315(1)(b), 44-1315(2)(b), and 44-1317(1)(b).

002. Purpose

The purpose of this rule is to adopt the forms required pursuant to the Health Carrier External Review Act, Neb.Rev.Stat. §§ 44-1301 through 44-1318.

003. Notice of Appeal Rights

A health carrier required to provide notice pursuant to §44-1305(1) shall provide the notice in the form in Appendix A, hereby made a part of this regulation. The health carrier may provide the notice in a form substantially similar to the form in Appendix A, if the form of such notice has been reviewed and approved by the Director.

004. External Review Request Form

A covered person or person acting on behalf of a covered person requesting an external review pursuant to §44-1306(1)(b) shall provide the notice in the form in Appendix B, hereby made a part of this regulation. The form in Appendix B must be provided by the carrier with all final adverse benefit determinations, published on a carrier’s website, and otherwise available upon request.

005. Independent Review Organization External Review Annual Report Form

An independent review organization requested by the director to prepare a report regarding requests for external review under Neb. Rev. Stat. 44-1315(1) shall provide the report in the form in Appendix C, hereby made a part of this regulation. The independent review organization may provide the report in a form substantially similar to the form in Appendix C, if the form of such report has been reviewed and approved by the Director.

History

• Effective 2013-12-07

Chapter 88 Corporate Governance Annual Disclosure

Neb. Admin. Code tit. 210, ch. 88 Corporate Governance Annual Disclosure {#sec-210-nac-88 omnilex-key=us-ne-regs-official--title-210--210 NAC 88}

001. Authority These regulations are promulgated pursuant to the authority granted by Neb. Rev. Stat. § 44-101.01 and LB772 § 9 (2016).

002. Purpose The purpose of these regulations is to set forth the procedures for filing and the required contents of the Corporate Governance Annual Disclosure (CGAD), deemed necessary by the Director to carry out the provisions of the Corporate Governance Annual Disclosure Act, LB772 §§ 1 through 9 (2016).

003. Definitions .

(003.01) “Director.” The Director of Insurance.

(003.02) “Insurance group.” For the purpose of this regulation, the term “insurance group” shall mean those insurers and affiliates included within an insurance holding company system as defined in Neb. Rev. Stat. § 44-2121.

(003.03) “Insurer.” The term “insurer” shall have the same meaning as set forth in Neb. Rev. Stat. § 44-103, except that it shall not include agencies, authorities or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state.

(003.04) “Senior Management.” The term “senior management” shall mean any corporate officer responsible for reporting information to the board of directors at regular intervals or providing this information to shareholders or regulators and shall include, for example and without limitation, the Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), Chief Operations Officer (“COO”), Chief Procurement Officer (“CPO”), Chief Legal Officer (“CLO”), Chief Information Officer (“CIO”), Chief Technology Officer (“CTO”), Chief Revenue Officer (“CRO”), Chief Visionary Officer (“CVO”), or any other “C” level executive.

004. Filing Procedures

(004.01) An insurer, or the insurance group of which the insurer is a member, required to file a CGAD by the Corporate Governance Annual Disclsoure Act, shall, no later than June 1 of each calendar year, submit to the Director a CGAD that contains the information described in 005 of these regulations.

(004.02) The CGAD must include a signature of the insurer’s or insurance group’s chief executive officer or corporate secretary attesting to the best of that individual’s belief and knowledge that the insurer or insurance group has implemented the corporate governance practices and that a copy of the CGAD has been provided to the insurer’s or insurance group’s Board of Directors (hereafter “Board”) or the appropriate committee thereof.

(004.03) The insurer or insurance group shall have discretion regarding the appropriate format for providing the information required by these regulations and is permitted to customize the CGAD to provide the most relevant information necessary to permit the Director to gain an understanding of the corporate governance structure, policies and practices utilized by the insurer or insurance group.

(004.04) For purposes of completing the CGAD, the insurer or insurance group may choose to provide information on governance activities that occur at the ultimate controlling parent level, an intermediate holding company level and/or the individual legal entity level, depending upon how the insurer or insurance group has structured its system of corporate governance. The insurer or insurance group is encouraged to make the CGAD disclosures at the level at which the insurer’s or insurance group’s risk appetite is determined, or at which the earnings, capital, liquidity, operations, and reputation of the insurer are overseen collectively and at which the supervision of those factors are coordinated and exercised, or the level at which legal liability for failure of general corporate governance duties would be placed. If the insurer or insurance group determines the level of reporting based on these criteria, it shall indicate which of the three criteria was used to determine the level of reporting and explain any subsequent changes in level of reporting.

(004.05) Notwithstanding (004.01), and as outlined in LB772 § 4 (2016), if the CGAD is completed at the insurance group level, then it must be filed with the lead state of the group as determined by the procedures outlined in the most recent Financial Analysis Handbook adopted by the NAIC. In these instances, a copy of the CGAD must also be provided to the chief regulatory official of any state in which the insurance group has a domestic insurer, upon request.

(004.06) An insurer or insurance group may comply with this section by referencing other existing documents (e.g., own risk solvency assessment summary report, Holding Company Form B or F Filings, Securities and Exchange Commission (SEC) Proxy Statements, foreign regulatory reporting requirements, etc.) if the documents provide information that is comparable to the information described in 005. The insurer or insurance group shall clearly reference the location of the relevant information within the CGAD and attach the referenced document if it is not already filed or available to the regulator.

(004.07) Each year following the initial filing of the CGAD, the insurer or insurance group shall file an amended version of the previously filed CGAD indicating where changes have been made. If no changes were made in the information or activities reported by the insurer or insurance group, the filing should so state.

005. Contents of Corporate Governance Annual Disclosure

(005.01) The insurer or insurance group shall be as descriptive as possible in completing the CGAD, with inclusion of attachments or example documents that are used in the governance process, since these may provide a means to demonstrate the strengths of their governance framework and practices.

(005.02) The CGAD shall describe the insurer’s or insurance group’s corporate governance framework and structure including consideration of the following.

(005.02(A)) The Board and various committees thereof ultimately responsible for overseeing the insurer or insurance group and the level(s) at which that oversight occurs (e.g., ultimate control level, intermediate holding company, legal entity, etc.). The insurer or insurance group shall describe and discuss the rationale for the current Board size and structure; and

(005.02(B)) The duties of the Board and each of its significant committees and how they are governed (e.g., bylaws, charters, informal mandates, etc.), as well as how the Board’s leadership is structured, including a discussion of the roles of Chief Executive Officer (CEO) and Chairman of the Board within the organization.

(005.03) The insurer or insurance group shall describe the policies and practices of the most senior governing entity and significant committees thereof, including a discussion of the following factors:

(005.03(A)) How the qualifications, expertise and experience of each Board member meet the needs of the insurer or insurance group.

(005.03(B)) How an appropriate amount of independence is maintained on the Board and its significant committees.

(005.03(C)) The number of meetings held by the Board and its significant committees over the past year as well as information on director attendance.

(005.03(D)) How the insurer or insurance group identifies, nominates and elects members to the Board and its committees. The discussion should include, for example:

(005.03(D)(1)) Whether a nomination committee is in place to identify and select individuals for consideration.

(005.03(D)(2)) Whether term limits are placed on directors.

(005.03(D)(3)) How the election and re-election processes function.

(005.03(D)(4)) Whether a Board diversity policy is in place and if so, how it functions.

(005.03(E)) The processes in place for the Board to evaluate its performance and the performance of its committees, as well as any recent measures taken to improve performance (including any Board or committee training programs that have been put in place).

(005.04) The insurer or insurance group shall describe the policies and practices for directing Senior Management, including a description of the following factors:

(005.04(A)) Any processes or practices (i.e., suitability standards) to determine whether officers and key persons in control functions have the appropriate background, experience and integrity to fulfill their prospective roles, including:

(005.04(A)(1)) Identification of the specific positions for which suitability standards have been developed and a description of the standards employed.

(005.04(A)(2) Any changes in an officer’s or key person’s suitability as outlined by the insurer’s or insurance group’s standards and procedures to monitor and evaluate such changes.

(005.04(B)) The insurer’s or insurance group’s code of business conduct and ethics, the discussion of which considers, for example:

(005.04(B)(1)) compliance with laws, rules, and regulations; and

(005.04(B)(2)) proactive reporting of any illegal or unethical behavior.

(005.04(C)) The insurer’s or insurance group’s processes for performance evaluation, compensation and corrective action to ensure effective senior management throughout the organization, including a description of the general objectives of significant compensation programs and what the programs are designed to reward. The description shall include sufficient detail to allow the Director to understand how the organization ensures that compensation programs do not encourage and/or reward excessive risk taking. Elements to be discussed may include, for example:

(005.04(C)(1)) The Board’s role in overseeing management compensation programs and practices.

(005.04(C)(2)) The various elements of compensation awarded in the insurer’s or insurance group’s compensation programs and how the insurer or insurance group determines and calculates the amount of each element of compensation paid;

(005.04(C)(3)) How compensation programs are related to both company and individual performance over time;

(005.04(C)(4)) Whether compensation programs include risk adjustments and how those adjustments are incorporated into the programs for employees at different levels;

(005.04(C)(5)) Any clawback provisions built into the programs to recover awards or payments if the performance measures upon which they are based are restated or otherwise adjusted;

(005.04(C)(6)) Any other factors relevant in understanding how the insurer or insurance group monitors its compensation policies to determine whether its risk management objectives are met by incentivizing its employees.

(005.04(D)) The insurer’s or insurance group’s plans for CEO and Senior Management succession.

(005.05) The insurer or insurance group shall describe the processes by which the Board, its committees and Senior Management ensure an appropriate amount of oversight to the critical risk areas impacting the insurer’s business activities, including a discussion of:

(005.05(A)) How oversight and management responsibilities are delegated between the Board, its committees and Senior Management;

(005.05(B)) How the Board is kept informed of the insurer’s strategic plans, the associated risks, and steps that Senior Management is taking to monitor and manage those risks;

(005.05(C)) How reporting responsibilities are organized for each critical risk area. The description should allow the Director to understand the frequency at which information on each critical risk area is reported to and reviewed by Senior Management and the Board. This description may include, for example, the following critical risk areas of the insurer:

(005.05(C)(1)) Risk management processes (An own risk solvency assessment summary report filer may refer to its own risk solvency assessment summary report pursuant to the Risk Management and Own Risk and Solvency Assessment Act, Neb. Rev. Stat. §§ 44-9001 through 44-9011);

(005.05(C)(2)) Actuarial function;

(005.05(C)(3)) Investment decision-making processes;

(005.05(C)(4)) Reinsurance decision-making processes;

(005.05(C)(5)) Business strategy/finance decision-making processes;

(005.05(C)(6)) Compliance function;

(005.05(C)(7)) Financial reporting/internal auditing; and

(005.05(C)(8)) Market conduct decision-making processes.

006. Severability Clause If any provision of these regulations, or the application thereof to any person or circumstance, is held invalid, such determination shall not affect other provisions or applications of these regulations which can be given effect without the invalid provision or application, and to that end the provisions of these regulations are severable.

History

• Effective 2016-09-27