# Title 45 — Insurance, Commissioner of

## Article 45-04 — Life Insurance

## Chapter 45-04-04 — Variable Life Insurance

### § 45-04-04-01. Definitions.

1. "Affiliate" 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.
2. "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.
3. "Benefit base" means the amount, to which the net investment return is applied.
4. "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 nonmanagement services, or
otherwise, unless the power is the result of an official position with or corporate office held by
the person. Control is presumed to exist if any person, directly or indirectly, owns, controls,
holds with the power to vote, or holds proxies representing more than ten percent of the voting
securities of any other person. This presumption may be rebutted by a showing made to the
satisfaction of the commissioner that control does not exist in fact. The commissioner 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.
5. "Flexible premium policy" means any variable life insurance policy other than a scheduled
premium policy such as specified in subsection 11.
6. "General account" means all assets of the insurer other than assets in separate accounts
established pursuant to North Dakota Century Code sections 26.1-33-13 and 26.1-34-11 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.

7. "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.
8. "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.
9. "Net investment return" means the rate of investment return in a separate account to be
applied to the benefit base.
10. "Policy processing day" means the day on which charges authorized in the policy are
deducted from the policy's cash values.
11. "Scheduled premium policy" means any variable life insurance policy under which both the
amount and timing of premium payments are fixed by the insurer.
12. "Separate account" means a separate account established pursuant to North Dakota Century
Code sections 26.1-33-13 and 26.1-34-11 or pursuant to the corresponding section of the
insurance laws of the state of domicile of a foreign or alien insurer.
13. "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 any minimum death benefit.
14. "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 North Dakota Century Code sections 26.1-33-13 and 26.1-34-11 or pursuant to
the corresponding section of the insurance laws of the state of domicile of a foreign or alien
insurer.
History: Effective June 1, 1984.
General Authority: NDCC 26.1-33-17, 26.1-34-11
Law Implemented: NDCC 26.1-33, 26.1-34
### § 45-04-04-02. Qualification of insurer to issue variable life insurance.

1. Licensing and approval to do business in this state. Any insurer may not deliver or issue
for delivery in this state any variable life insurance policy unless:
a. The insurer is licensed or organized to do a life insurance business in this state; and
b. The insurer has obtained the written approval of the commissioner for the issuance of
variable life insurance policies in this state. The commissioner shall grant such written
approval only after the commissioner has found that:
(1) The plan of operation for the issuance of variable life insurance policies is not
unsound;
(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

(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:
(a) The history of operation and financial condition of the insurer.
(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 service to the insurer.
(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.
(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.
2. Filing for approval to do business in this state. The commissioner may, at the
commissioner's 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 commissioner in making the determination required by subdivision b
of subsection 1:
a. Copies of a general description of the variable life insurance policies it intends to issue.
b. 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.
c. With respect to any separate account maintained by an insurer for any variable life
insurance policy, a statement of the investment policy the issuer intends to follow for the
investment of the assets held in the separate account, and a statement of procedures for
changing the investment policy. The statement of investment policy must include a
description of the investment objectives intended for the separate account.
d. A description of any investment advisory services contemplated as required by
subsection 10 of section 45-04-04-05.
e. A copy of the statutes and regulations of the state domicile of the insurer under which it is
authorized to issue variable life insurance policies.
f. Biographical data with respect to officers and directors of the insurer on the National
Association of Insurance Commissioners Uniform Biographical Data Form.
g. A statement of the insurer's actuary describing the mortality and expense risks which the
insurer will bear under the policy.
3. 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. The standards of suitability must specify that
no recommendations will be made to an applicant to purchase a variable life insurance policy
and that no variable life insurance policy will 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 the 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.
4. Use of sales materials. An insurer authorized to transact variable life insurance business in
this state may 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.
Variable life insurance sales material, advertising material, and descriptive literature are
subject to the additional requirements of North Dakota Century Code chapter 26.1-04 and
North Dakota Administrative Code chapter 45-04-01.
5. 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 insurance operations must 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 with 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 rules and any other applicable law or rules.
6. Reports to the commissioner. Any insurer authorized to transact the business of variable life
insurance in this state shall submit to the commissioner, in addition to any other materials
which may be required by this rule or any other applicable law or rules:
a. 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.
b. Prior to the use in this state any information furnished to applicants as provided for in
section 45-04-04-06.
c. Prior to the use in this state the form of any of the reports to policyholders as provided for
in section 45-04-04-08.
d. Such additional information concerning its variable life insurance operations or its
separate accounts as the commissioner shall deem necessary.
Any material submitted to the commissioner under this subsection shall be disapproved if it is
found to be false, misleading, deceptive, or inaccurate in any material respect and, if
previously distributed, the commissioner shall require the distribution of amended material.
7. Authority of commissioner to disapprove. Any material required to be filed with and
approved by the commissioner is subject to disapproval if at any time it is found by the
commissioner not to comply with the standards established by this rule.
History: Effective June 1, 1984.
General Authority: NDCC 26.1-33-17, 26.1-34-11
Law Implemented: NDCC 26.1-33, 26.1-34
### § 45-04-04-03. Insurance policy requirements.

The commissioner will not approve any variable life insurance form filed pursuant to this chapter
unless it conforms to the requirements of this section.
1. Filing of variable life insurance policies. All variable life insurance policies, and all riders,
endorsements, applications, and other documents which are to be attached to and made part

of the policy and which relate to the variable nature of the policy, must be filed with the
commissioner and approved by the commissioner prior to delivery or issuance for delivery in
this state.
a. The procedures and requirements for filing and approval are, to the extent appropriate
and not inconsistent with this chapter, the same as those otherwise applicable to other
life insurance policies.
b. The commissioner may approve variable life insurance policies and related forms with
provisions the commissioner deems to be not less favorable to the policyholder and the
beneficiary than those required by this chapter.
2. Mandatory policy benefit and design requirements. Variable life insurance policies
delivered or issued for delivery in this state must comply with the following minimum
requirements:
a. Mortality and expense risks must be borne by the insurer. The mortality and expense
charges must be subject to the maximums stated in the contract.
b. For scheduled premium policies, a minimum death benefit must be provided in an
amount at least equal to the initial face amount of the policy so long as premiums are
duly paid,subject to the provisions of subdivision b of subsection 3.
c. The policy must reflect the investment experience of one or more separate accounts
established and maintained by the insurer. The insurer must demonstrate that the
variable life insurance policy is actuarially sound.
d. Each variable life insurance policy must be credited with the full amount of the net
investment return applied to the benefit base.
e. Any changes in variable death benefits of each variable life insurance policy must be
determined at least annually.
f. The cash value of each variable life insurance policy must be determined at least
monthly. The method of computation of cash values and other nonforfeiture 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, must 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 nonforfeiture benefits must be at least equal to the minimum values
required by North Dakota Century Code chapter 26.1-33 for a general account policy with
such premiums and benefits. The assumed investment rate may not exceed the
maximum interest rate permitted under North Dakota Century Code chapter 26.1-33. If
the policy does not contain an assumed investment rate this demonstration must be
based on the maximum interest rate permitted under North Dakota Century Code chapter
26.1-33. 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 is 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.

g. 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
commissioner.
3. Mandatory policy provisions. Every variable life insurance policy filed for approval in this
state must contain at least the following:
a. The cover page or pages corresponding to the cover pages of each such policy shall
contain:
(1) A prominent statement in either contrasting color or in boldface type that the amount
or duration of death benefit may be variable or fixed under specified conditions.
(2) A prominent statement in either contrasting color or in boldface type that cash
values may increase or decrease in accordance with the experience of the separate
account subject to any specified minimum guarantees.
(3) A statement describing any minimum death benefit required pursuant to
subdivision b of subsection 2.
(4) The method, or a reference to the policy provision which describes the method, for
determining the amount of insurance payable at death.
(5) To the extent permitted by state law, a captioned provision that the policyholder may
return the variable life insurance policy within ten 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 must be the total of all premium payments for such policy.
(6) Such other items as are currently required for fixed benefit life insurance policies
and which are not inconsistent with this chapter.
b. (1) For scheduled premium policies, a provision for a grace period of not less than
thirty-one days from the premium due date which must 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.
(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 must end on a date not less than sixty-one days after the
mailing date of the report to policyholders required by subsection 3 of section
45-04-04-08.
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 three 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.

c. 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 that permitted by North Dakota
law.
d. 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.
e. A provision designating the separate account to be used and stating that:
(1) The assets of the separate account will 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.
(2) The assets of such separate account will be valued at least as often as any policy
benefits vary but at least monthly.
f. A provision specifying what documents constitute the entire insurance contract under
state law.
g. 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 the insured's behalf, are considered as representations and not warranties.
h. An identification of the owner of the insurance contract.
i. 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.
j. A statement of any conditions or requirements concerning the assignment of the policy.
k. A description of any adjustments in the policy values to be made in the event of
misstatement of age or sex of the insured.
l. A provision that the policy is 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, is 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.
m. A provision stating that the investment policy of the separate account will 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 commissioner of this state.
n. 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:

(1) 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
(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.
o. If settlement options are provided, at least one such option must be provided on a fixed
basis only.
p. A description of the basis for computing the cash value and the surrender value under
the policy.
q. Premiums or charges for incidental insurance benefits must be stated separately.
r. Any other policy provision required by this chapter.
s. Such other items as are currently required for fixed benefit life insurance policies and are
not inconsistent with this chapter.
t. A provision for nonforfeiture insurance benefits. The insurer may establish a reasonable
minimum cash value below which any nonforfeiture insurance options will not be
available.
4. Policy loan provision. Every variable life insurance policy, other than term insurance policies
and pure endowment policies, delivered or issued for delivery in this state must contain
provisions which are not less favorable to the policyholder than the following:
a. A provision for policy loans after the policy has been in force for three full years which
provides the following:
(1) At least seventy-five percent of the policy's cash surrender value may be borrowed.
(2) The amount borrowed must bear interest at a rate not to exceed that permitted by
chapter 45-04-03.
(3) Any indebtedness must be deducted from the proceeds payable on death.
(4) Any indebtedness must be deducted from the cash surrender value upon surrender
or in determining any nonforfeiture benefit.
(5) 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 3 of section 45-04-04-08.
(6) 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 one hundred percent of the corresponding increase in cash
value and by furnishing such evidence of insurability as the insurer may request.
(7) The policy may specify a reasonable minimum amount which may be borrowed at
any time but such minimum may not apply to any automatic premium loan provision.
(8) No policy loan provision is required if the policy is under extended insurance
nonforfeiture option.
(9) The policy loan provisions may be constructed so that variable life insurance
policyholders who have not exercised such provisions are not disadvantaged by the
exercise thereof.
(10) Amounts paid to the policyholders upon the exercise of any policy loan provision
must be withdrawn from the separate account and must be returned to the separate
account upon repayment except that a stock insurer may provide the amounts for
policy loans from the general account.
5. 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:
a. An exclusion for suicide within one year 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 one year of any increase in death benefits which results
from an application of the owner subsequent to the policy issue date.
b. Incidental insurance benefits may be offered on a fixed or variable basis.
c. Policies issued on a participating basis must offer to pay dividend amounts in cash. In
addition, such policies may offer the following dividend options:
(1) The amount of the dividend may be credited against premium payments.
(2) The amount of the dividend may be applied to provide amounts of additional fixed or
variable benefit life insurance.
(3) The amount of the dividend may be deposited in the general account at a specified
minimum rate of interest.
(4) The amount of the dividend may be applied to provide paid-up amounts of fixed
benefit one-year term insurance.
(5) The amount of the dividend may be deposited as a variable deposit in a separate
account.
d. A provision allowing the policyholder to elect in writing in the application for the policy or
thereafter an automatic premium loan on a basis not less favorable than that required of
policy loans under subsection 4, except that a restriction that no more than two
consecutive premiums can be paid under this provision may be imposed.
e. A provision allowing the policyholder to make partial withdrawals.
f. Any other policy provision approved by the commissioner.
History: Effective June 1, 1984; amended effective April 1, 2010.
General Authority: NDCC 26.1-33-17, 26.1-34-11
Law Implemented: NDCC 26.1-33, 26.1-34

### § 45-04-04-04. Reserve liabilities for variable life insurance.

1. Reserve liabilities for variable life insurance policies must be established under North Dakota
Century Code chapter 26.1-33 in accordance with actuarial procedures that recognize the
variable nature of the benefits provided and any mortality guarantees.
2. For scheduled premium policies, reserve liabilities for the guaranteed minimum death benefit
must 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 must be maintained in the general account of the insurer, and
may not be less than the greater of the following minimum reserves:
a. 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
b. 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 may
not be less than zero and must equal the "residue", as described in paragraph 1, 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 paragraph 2:
(1) The "residue" of the prior year's "attained age level" reserve on each variable life
insurance contract may not be less than zero and must 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 must 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.
(2) The payment referred to in subdivision b must 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 paragraph 1, 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 or the
valuation interest rate but in no event may exceed the maximum interest rate
permitted for the valuation of life contracts.
The valuation interest rate and mortality table used in computing the two minimum reserves
described in a and b 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.
3. For flexible premium policies, reserve liabilities for any guaranteed minimum death benefit
must be maintained in the general account of the insurer and may 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 in computing this additional reserve, if any, must
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.
4. 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.
History: Effective June 1, 1984.
General Authority: NDCC 26.1-33-17, 26.1-34-11
Law Implemented: NDCC 26.1-33, 26.1-34
### § 45-04-04-05. Separate accounts.

The following requirements apply to the establishment and administration of variable life insurance
separate accounts by any domestic insurer.
1. Establishment and administration of separate accounts. Any domestic insurer issuing
variable life insurance shall establish one or more separate accounts pursuant to North
Dakota Century Code sections 26.1-33-13 and 26.1-34-11.
a. 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 must be in writing and the commissioner may review and approve
of both the terms of any such contract and the proposed custodian prior to the transfer of
custody.
b. The insurer may not without the prior written approval of the commissioner employ in any
material connection with the handling of separate account assets any person who:
(1) Within the last ten years has been convicted of any felony or misdemeanor arising
out of such person's conduct involving embezzlement, fraudulent, conversion, or
misappropriation of funds or securities or involving violation of 18 U.S.C. 1341,
1342, or 1343;
(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
(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.
c. All persons with access to the cash, securities, or other assets of the separate account
must be under bond in the amount of not less than a value indexed to the fidelity bonding
recommendations stated in the financial condition examiners handbook published by the
national association of insurance commissioners, 2009 edition, regarding personnel
handling general account assets.

d. The assets of such separate accounts must be valued at least as often as variable
benefits are determined but in any event at least monthly.
2. 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.
3. Investments by the separate account.
a. 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:
(1) In case of a transfer into a separate account, the 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
(2) The 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 commissioner in advance.
b. The separate account must have sufficient net investment income and readily marketable
assets to meet anticipated withdrawals under policies funded by the account.
4. Limitations on ownership.
a. A separate account may 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 ten percent of the value of the assets of the separate
account. The commissioner may waive this limitation in writing if the commissioner
believes waiver will not render the operation of the separate account hazardous to the
public or the policyholders in this state.
b. No separate account may purchase or otherwise acquire the voting securities of an
issuer if as a result of such acquisition the insurer and its separate accounts, in the
aggregate, will own more than ten percent of the total issued and outstanding voting
securities of the issuer. The commissioner may waive this limitation in writing if the
commissioner believes 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.
c. The percentage limitation specified in subdivision a may 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 investments and investment policies of such investment companies or
assets pools comply substantially with subsection 3 and the other applicable portions of
this chapter.
5. Valuation of separate account assets. Investments of the separate account must be valued
at their market value on the date of valuation, or at amortized cost if it approximates market
value.
6. Separate account investment policy. The investment policy of a separate account operated
by a domestic insurer filed under subdivision c of subsection 2 of section 45-04-04-02 may not
be changed without first filing the change with the commissioner.

a. Any change filed pursuant to this subsection is effective sixty days after the date it was
filed with the commissioner, unless the commissioner notifies the insurer before the end
of such sixty-day period of approval of the proposed change. At any time the
commissioner may, after notice and public hearing, disapprove any change that has
become effective pursuant to this subsection.
b. The commissioner may disapprove the change if the commissioner determines that the
change would be detrimental to the interests of the policyholders participating in such
separate account.
7. 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 the following:
a. Taxes or reserves for taxes attributable to investment gains and income of the separate
account.
b. Actual cost of reasonable brokerage fees and similar direct acquisition and sale costs
incurred in the purchase or sale of separate account assets.
c. Actuarially determined costs of insurance (tabular costs) and the release of separate
account liabilities.
d. Charges for administrative expenses and investment management expenses, including
internal costs attributable to the investment management of assets of the separate
account.
e. A charge, at a rate specified in the policy, for mortality and expense guarantees.
f. Any amounts in excess of those required to be held in the separate accounts.
g. Charges for incidental insurance benefits.
8. 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. The
standards of conduct must 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 satisfies the provisions of this
subsection.
9. Conflicts of interest. Rules under any provision of the insurance laws of this state or any rule
applicable to the officers and directors of insurance companies with respect to conflicts of
interest also apply to members of any separate account's committee or other similar body.
10. Investment advisory services to a separate account. An insurer may not enter into a
contract under which any person undertakes, for a fee, to regularly furnish investment advice
to the insurer with respect to its separate accounts maintained for variable life insurance
policies unless the investment advisory contract is in writing and provides 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 and unless:
a. The person providing such advice is registered as an investment adviser under the
Investment Advisers Act of 1940;

b. 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
c. The insurer has filed with the commissioner and continues to file annually the following
information and statements concerning the proposed adviser:
(1) The name and form of organization, state of organization, and its principal place of
business;
(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;
(3) A written standard of conduct complying in substance with the requirements of
subsection 8 which has been adopted by the investment adviser and is applicable to
the investment adviser, its officers, directors, and affiliates;
(4) A statement provided by the proposed adviser as to whether the adviser or any
person associated therewith:
(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 of 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 18 U.S.C.
1341, 1342, or 1343;
(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 or in
continuing any conduct or practice in connection with any such activity;
(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
(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.
The commissioner may, after notice and opportunity for hearing, by order require such
investment advisory contract to be terminated if the commissioner deems continued operation
thereunder to be hazardous to the public or the insurer's policyholders.
History: Effective June 1, 1984; amended effective April 1, 2010.
General Authority: NDCC 26.1-33-17, 26.1-34-11
Law Implemented: NDCC 26.1-33, 26.1-34
### § 45-04-04-06. Information furnished to applicants.

An insurer delivering or issuing for delivery in this state any variable life insurance policy shall
deliver to the applicant for the policy, and obtain a written acknowledgment of receipt from such
application coincident with or prior to the execution of the application, the following information. The

requirements of this section are deemed to have been satisfied to the extent that a disclosure
containing information required by this section is delivered in the form of a prospectus included in the
requirements of the Securities Act of 1933 and which was 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.
1. A summary explanation, in nontechnical 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 paragraph 5 of subdivision a of
subsection 3 and subdivision f of subsection 3 of section 45-04-04-03.
2. A statement of the investment policy of the separate account, including:
a. A description of the investment objectives intended for the separate account and the
principal types of investments intended to be made; and
b. Any restriction of limitations on the manner in which the operations of the separate
account are intended to be conducted.
3. A statement of the net investment return of the separate account for each of the last ten years
or such lesser period as the separate account has been in existence.
4. A statement of the charges levied against the separate account during the previous year.
5. A summary of the method to be used in valuing assets held by the separate account.
6. A summary of the federal income tax aspects of the policy applicable to the insured, the
policyholder, and the beneficiary.
7. Illustrations of benefits payable under the variable life insurance contract. Such illustrations
shall be prepared by the insurer and may 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.
History: Effective June 1, 1984.
General Authority: NDCC 26.1-33-17, 26.1-34-11
Law Implemented: NDCC 26.1-33, 26.1-34
### § 45-04-04-07. Applications.

The application for a variable life insurance policy must contain:
1. A prominent statement that the death benefit may be variable or fixed under specified
conditions.
2. 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).
3. Questions designed to elicit information which enables the insurer to determine the suitability
of variable life insurance for the applicant.
History: Effective June 1, 1984.
General Authority: NDCC 26.1-33-17, 26.1-34-11
Law Implemented: NDCC 26.1-33, 26.1-34

### § 45-04-04-08. 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 the policyholder's last-known address the following
reports:
1. 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, and
any optional payments allowed pursuant to subsection 4 of section 45-04-04-03 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 the notice. This statement must 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 must 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 must 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: (a) planned periodic premiums, if
any, are paid as scheduled; (b) guaranteed costs of insurance are deducted; and (c) 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
twelve months unless additional premium is paid.
2. Annually, a statement or statements including:
a. A summary of the financial statement of the separate account based on the annual
statement last filed with the commissioner.
b. 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.
c. 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 commissioner.
d. Any charges levied against the separate account during the previous year.
e. 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.
3. 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.

History: Effective June 1, 1984.
General Authority: NDCC 26.1-33-17, 26.1-34-11
Law Implemented: NDCC 26.1-33, 26.1-34
### § 45-04-04-09. Foreign companies.

If the law or regulation in the place of domicile of a foreign company provides a degree of protection
to the policyholder and the public which is substantially similar to that provided by this chapter, the
commissioner to the extent deemed appropriate by the commissioner in the commissioner's discretion,
may consider compliance with such law or regulation as compliance with this chapter.
History: Effective June 1, 1984.
General Authority: NDCC 26.1-33-17, 26.1-34-11
Law Implemented: NDCC 26.1-33, 26.1-34
### § 45-04-04-10. Qualification of agents for the sale of variable life insurance.

1. Qualification to sell variable life insurance.
a. 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 commissioner, in a form satisfactory to the
commissioner, evidence that such person holds any license or authorization which may
be required for the solicitation or sale of variable life insurance and evidence that such
person holds a license as a securities salesman under North Dakota law.
b. Any examination administered by the department for the purpose of determining the
eligibility of any person for licensing as an agent shall, after June 1, 1984, include such
questions concerning the history, purpose, regulation, and sale of variable life insurance
as the commissioner deems appropriate.
2. Reports of disciplinary actions. Any person qualified in this state under this section to sell or
offer to sell variable life insurance shall immediately report to the commissioner:
a. Any suspension or revocation of that person's agent's license in any other state or
territory of the United States.
b. The imposition of any disciplinary sanction, including suspension or expulsion from
membership, suspension or revocation of or denial of registration, imposed upon that
person by any national securities exchange, or national securities association, or any
federal, state or territorial agency with jurisdiction over securities or variable life
insurance.
c. Any judgment or injunction entered against that person on the basis of conduct deemed
to have involved fraud, deceit, misrepresentation, or violation of any insurance or
securities law or regulation.
3. Refusal to qualify agent to sell variable life insurance. The commissioner may reject any
application or suspend or revoke or refuse to renew any agent's qualification under this
section 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.
History: Effective June 1, 1984.
General Authority: NDCC 26.1-33-17, 26.1-34-11
Law Implemented: NDCC 26.1-33, 26.1-34

### § 45-04-04-11. Separability.

If any provision of this chapter or the application thereof to any person or circumstance is for any
reason held to be invalid, the remainder of the chapter and the application of such provision to other
persons or circumstances not affected thereby.
History: Effective June 1, 1984.
General Authority: NDCC 26.1-33-17, 26.1-34-11
Law Implemented: NDCC 26.1-33, 26.1-34
### § 45-04-04-12. Supersession of conflicting rules.

This chapter supersedes and fully replaces any prior rule concerning variable life insurance. This
chapter is particularly intended to replace any provisions of chapter 45-04-02, sections 45-04-04-01
through 45-04-02-18 as they may pertain to variable life insurance. The provisions of chapter 45-04-02,
sections 45-04-02-01 through 45-04-02-18 that regulate variable annuities remain undisturbed by this
chapter.
History: Effective June 1, 1984.
General Authority: NDCC 26.1-33-17, 26.1-34-11
Law Implemented: NDCC 26.1-33, 26.1-34
