§ 4240. Separate accounts; fixed and variable life insurance and
annuities and funding agreements. (a) In accordance with paragraphs one,
two and three of subsection (a) of section one thousand one hundred
thirteen and section three thousand two hundred twenty-two of this
chapter, a domestic life insurance company may establish one or more
separate accounts and allocate thereto, pursuant to agreements for
separate accounts, amounts paid to it (i) to provide for annuities which
are payable in fixed amounts guaranteed by it, or variable amounts, or
both, including any amounts paid to it which are subject to annuity
options; or (ii) to provide life insurance with benefits, premiums or
both payable on a variable basis and the reserves for which vary
according to the investment experience of such separate account; or
(iii) to accumulate in such separate account funds to be applied to
provide life insurance, whether fixed or variable, or both; or (iv) to
accumulate or hold in such separate account funds to be applied to
provide health insurance; or (v) to accumulate or hold in such separate
account proceeds applied under settlement or dividend options; or (vi)
to accumulate or hold in such separate account funds credited under
funding agreements delivered pursuant to section three thousand two
hundred twenty-two of this chapter; provided that any such separate
account shall be maintained in accordance with the following:

(1) Income, gains and losses, whether or not realized, from assets
allocated to a separate account shall, in accordance with the applicable
agreement or agreements, be credited to or charged against such account
without regard to other income, gains or losses of the insurer.

(2) With respect to investments allocated to a separate account:

(A) except as provided in paragraphs three and five of this
subsection, the insurer may invest in any investments contractually
permitted for such separate account, the restrictions, limitations and
other provisions relating to investments specified in this chapter shall
not apply to such investments, and such investments shall be
disregarded, and shall be excluded from admitted assets, in applying the
quantitative investment limitations contained in this chapter to other
investments;

(B) no stock, bond, note or other security of a subsidiary or
affiliate of the insurer, or of any company controlling or under common
control with the insurer, shall be allocated to any separate account if,
after giving effect to such allocation, any security of a different
class issued by such subsidiary or affiliate would be held in any other
account of the insurer, or by any company controlling or under common
control with the insurer or by any other subsidiary or affiliate of the
insurer; and

(C) The insurer shall invest and reinvest for such separate account in
good faith and with that degree of care that an ordinarily prudent
person in a like position would use under similar circumstances.

(3) The insurer may allocate amounts to a separate account to
facilitate its initial operations and amounts so allocated shall be
deemed to be invested under section one thousand four hundred four (in
the case of insurers making investments under the authority of section
one thousand four hundred four) of this chapter or under section one
thousand four hundred five (in the case of insurers making investments
under the authority of section one thousand four hundred five) of this
chapter and shall be subject to the qualitative standards and
quantitative limitations provided in section one thousand four hundred
four or one thousand four hundred five of this chapter, as the case may
be.

(4) Amounts received by the insurer pursuant to one or more such
agreements may be maintained in one or more separate accounts.

(5) No guarantee of the value of the assets allocated to a separate
account, or any interest therein, or the investment results thereof, or
the income thereon, shall be made to a contractholder by the insurer,
without limitation of liability under all such guarantees to the extent
of the interest of the contractholder in assets allocated to said
separate account (i) unless the investments allocated to such separate
account are deemed part of the general assets of the insurer and are
subject to the qualitative standards and quantitative limitations
contained in section one thousand four hundred four or section one
thousand four hundred five of this chapter or (ii) if the applicable
agreements provide that the assets in such separate account shall not be
chargeable with liabilities arising out of any other business of the
insurer, unless such investments are subject to the requirements and
limitations on investments imposed by articles thirteen and fourteen
(except section one thousand four hundred two) of this chapter applied
as though the aggregate assets allocated to such separate account were
the insurer's total admitted assets or (iii) unless the insurer shall
submit annually to the superintendent an opinion, in form and substance
satisfactory to the superintendent, of a qualified actuary (as defined
in item (vi) of subparagraph (B) of paragraph four of subsection (c) of
section four thousand two hundred seventeen of this article) that, after
taking into account any risk charge payable from the assets of such
separate account with respect to such guarantee, the assets in such
separate account make good and sufficient provision for the liabilities
of the insurer with respect thereto, such opinion to be accompanied by a
memorandum, also in form and substance satisfactory to the
superintendent, of the qualified actuary describing the calculations
made in support of such opinion and the assumptions used in the
calculations, provided that, notwithstanding any other provision of this
paragraph, reserve liabilities for guaranteed minimum death benefits and
fixed incidental insurance benefits with respect to variable life
insurance policies shall be maintained in the general account of the
insurer.

(6) The insurer shall not, in connection with the allocation of
investments or expenses, or in any other respect, discriminate unfairly
between separate accounts or between separate and other accounts, but
this provision shall not require the insurer to follow uniform
investment policies for its accounts.

(7) Except as otherwise provided in paragraph ten hereof, assets
allocated to separate accounts shall, for the purpose of any valuation
required by this chapter, be valued at their market value at the date as
of which valued in accordance with the terms of the applicable
agreements, or if there is no readily available market, then in
accordance with the terms of such agreements, and no special reserve
under subsection (b) of section one thousand four hundred fourteen of
this chapter shall be required in respect thereof.

(8) Unless otherwise provided in approvals given by the superintendent
and under such conditions as he may prescribe, the insurer shall
maintain in each separate account assets with a value at least equal to
the amounts accumulated in accordance with the terms of the applicable
agreements with respect to such separate account and the reserves for
annuities in the course of payment that vary with the investment
experience of such separate account.

(9) Except as may be required by subsection (b) hereof, the insurer
shall not transfer any investment, or asset held for investment, between
separate accounts or between separate and other accounts, provided that
the superintendent may authorize transfers in circumstances where such
transfers would not be inequitable.

(10) Except with respect to separate accounts qualifying under item
(iii) of paragraph five of this subsection, assets supporting reserves
which do not vary with the investment experience of the separate account
shall be maintained in the separate account at their value determined in
accordance with section one thousand four hundred fourteen of this
chapter.

(11) Any contract providing for benefits, premiums or both, payable on
a variable basis, delivered or issued for delivery in this state, and
any certificate or other writing furnished by the insurer to the
employee under such a group contract in evidence of either benefits or
contributions, or both, payable on a variable basis, shall

(A) contain a statement of the essential features of the procedure to
be followed by the insurer in determining the dollar amount of such
variable elements thereunder,

(B) state in clear terms that such amount may decrease or increase
according to such procedure, and

(C) contain on its first page a statement that such elements
thereunder are on a variable basis.

(12) Amounts allocated by the insurer to separate accounts shall be
owned by the insurer, the assets therein shall be the property of the
insurer, and no insurer by reason of such accounts shall be or hold
itself out to be a trustee. If and to the extent so provided in the
applicable agreements, the assets in a separate account shall not be
chargeable with liabilities arising out of any other business of the
insurer.

(13) Every individual variable annuity contract and every certificate
subject to this section and subsection (a) of section three thousand two
hundred nineteen of this chapter shall contain a provision, or a notice
attached to the contract or certificate, to the effect that during a
period, specified in such provision or notice, it may be surrendered to
the insurer together with a written request for cancellation of the
contract or certificate, and in such event, the insurer will pay an
amount equal to the sum of (i) and (ii), where (i) is the difference
between the premiums paid, including any fees or other charges, and the
amounts, if any, allocated to any separate accounts under the contract
or certificate, and (ii) is the cash value of the contract or
certificate, or, if the contract or certificate does not have a cash
value, the reserve for the contract or certificate, on the date of
surrender attributable to the amounts so allocated. The period specified
in such provision or notice for a contract or certificate sold other
than by mail order shall not be less than ten nor more than thirty days,
and for a contract or certificate sold by mail order shall be thirty
days, from the date the contract or certificate is received by the
owner.

(14) The superintendent may, from time to time, promulgate reasonable
regulations setting forth:

(A) standards to be followed in the approval of forms for use in
connection with separate accounts; such standards may relate to, but
need not be limited to, any one or more of the following: guaranteed
face amounts, termination of contract, withdrawal of funds by the
contract holder, commitments with respect to future price of guaranteed
annuities, valuation of assets, and other elements required to effect
compliance with section three thousand two hundred one of this chapter;

(B) rules with respect to accounting and reporting of funds allocated
to separate accounts, identification of assets allocated to any separate
accounts, and the application of expenses to agreements relating to
separate accounts;

(C) rules with respect to adequate disclosure of information relating
to separate accounts; and

(D) rules with respect to required and prohibited contract provisions
for variable life insurance and variable annuity contracts delivered or
issued for delivery in this state by an authorized fraternal benefit
society.

(c) This section shall have no application to a charitable annuity
society.

(d) Except as otherwise provided in this section, all pertinent
provisions of this chapter shall apply to separate accounts and
agreements relating thereto.

(1) The following provisions of this chapter shall not apply to
annuity contracts or to certificates subject to this section and
subsection (a) of section three thousand two hundred nineteen of this
chapter: paragraphs one, seven, eight, and nine of subsection (a) of
section three thousand two hundred nineteen of this chapter, subsections
(a) and (d) of section three thousand two hundred twenty-three of this
chapter, sections four thousand two hundred seventeen, four thousand two
hundred twenty-one and four thousand two hundred twenty-three and
subsection (e) of section four thousand two hundred thirty-one of this
article, provided, however, that this paragraph shall not apply to any
contract or certificate providing benefits with respect to amounts
allocated to a separate account, if such benefits are guaranteed at any
time to be not less than an amount equal to or greater than such
allocated amounts accumulated to such time at three percent per annum.

(2) Individual variable annuity contracts and group variable annuity
certificates delivered or issued for delivery in this state shall
contain grace, reinstatement, and nonforfeiture provisions appropriate
to such variable contracts and certificates. Payment of death benefits
under such contracts and certificates shall be made within seven
calendar days following receipt of the beneficiary's completed election
form with all information required by such form for the payment of
proceeds. If such death benefits are not paid within seven calendar days
following receipt of such completed election form, interest shall be
computed daily from the end of such seven day period at the rate of
interest currently paid by the insurer on proceeds left under the
interest settlement option and such contracts or certificates shall not
be subject to the payment of interest under subsection (c) of section
three thousand two hundred fourteen of this chapter. For amounts
received under actions commenced to recover proceeds pursuant to
subsections (a) and (b) of section three thousand two hundred fourteen
of this chapter, interest shall be computed daily at the rate of
interest currently paid by the insurer on proceeds left under the
interest settlement option from the earlier of the date the action is
commenced or the insurer's receipt of the beneficiary's completed
election form to: (A) the date the verdict is rendered or the report or
decision is made and thereafter in accordance with the provisions of
sections five thousand two and five thousand three of the civil practice
law and rules, for amounts received under subsection (a) of section
three thousand two hundred fourteen of this chapter; or (B) the date the
settlement is reached, for amounts received under subsection (b) of such
section.

(3) The following provisions of this chapter shall not apply to life
insurance policies to the extent that they provide for allocation of
amounts to separate accounts: paragraphs one, seven, eight, nine and ten
of subsection (a) of section three thousand two hundred three of this
chapter, section four thousand two hundred twenty-one and subsection (b)
of section four thousand two hundred thirty-two of this article,
provided, however, that this paragraph shall not apply to any policy
providing benefits with respect to the amounts so allocated, if such
benefits are guaranteed at any time to be not less than an amount equal
to or greater than such allocated amounts accumulated to such time at
three percent per annum.

(4) Contracts delivered or issued for delivery in this state for
individual variable life insurance policies shall contain loan, grace,
reinstatement and nonforfeiture provisions, and may provide for
settlement options, under conditions acceptable to the superintendent.

(5) Individual variable contracts shall be included in determining the
aggregate limits prescribed in section four thousand two hundred
twenty-eight of this article, with appropriate modification of expense
limits for such contracts, as required by the superintendent, to
recognize the variable nature of the contracts.

(6) The reserve liability for variable contracts shall be established
in accordance with actuarial procedures that recognize the variable
nature of the benefits provided and any mortality guarantees provided in
the contract.

(7) Notwithstanding any other provision of law, the superintendent
shall have the sole authority to regulate the issuance and sale of such
agreements; and, in addition to the powers expressly given by this
section, the superintendent shall have the power to promulgate, from
time to time, such regulations, not inconsistent with the provisions of
this chapter, as may be appropriate to carry out the provisions of this
section and, insofar as applicable to this section, other provisions of
this chapter.

(e) No authorized insurer shall make any such agreement in this state
providing for the allocation of amounts to a separate account until such
insurer has filed with the superintendent a statement as to its methods
of operation of such separate account and the superintendent has
approved such statement. Subject to the approval of the superintendent,
any such statement may apply to one or more groups of separate accounts
classified by investment policy, number or kinds of separate account
participants, methods of distribution of such agreements or otherwise.
In determining whether or not to approve any such statement, the
superintendent shall consider, among other things, the history,
reputation and financial stability of the insurer and the character,
experience, responsibility, competence and general fitness of the
officers and directors of the insurer. If the insurer files an amendment
of any such statement with the superintendent that does not change the
investment policy of a separate account and the superintendent does not
approve or disapprove such amendment within a period of thirty days
after such filing, such amendment shall be deemed to be approved as of
the end of such thirty day period, except that if the superintendent
requests further information on the statement during such period from
the insurer, such period shall be extended until thirty days after the
day on which the superintendent receives such information. An amendment
of any such statement that changes the investment policy of a separate
account shall be treated as an original filing.

(f) Notwithstanding the restrictions and limitations herein or
otherwise imposed by law, the insurer may with respect to any separate
account, (i) exercise any voting rights of any securities allocated
thereto in accordance with instructions from persons having interests in
such account ratably as determined by the insurer, or (ii) establish a
committee for such account, the members of which may be directors or
officers or other employees of the insurer or persons having no such
relationship to the insurer, or any combination thereof, who may be
elected to such membership by vote of the persons having interests in
such account ratably as determined by the insurer. Such committee may
have the power, which may be exercisable alone or in conjunction with
others, or which may be delegated to the insurer or any other person, as
investment manager or investment adviser, to authorize, approve or
review the acquisition and disposition of investments for such account.
In addition, the insurer may make such other provisions in respect to
the separate account, including but not limited to voting, investments,
audits and otherwise regarding management and administration, as the
insurer may deem appropriate to facilitate compliance with any
requirements of or pursuant to any federal or state law now or hereafter
in effect; provided that the superintendent approve such provisions as
not hazardous to the public or its policyholders in this state.