23-62-109. Funding agreements.

23-62-109. Funding agreements. (a)(1) As used in this section, the term “funding agreement” means an agreement which authorizes an admitted life insurer to accept funds and which provides for an accumulation of those funds for the purpose of making one (1) or more payments at future dates in amounts that are not based on mortality or morbidity contingencies. (2)(A) However, the term “funding agreement” does not include any agreement in connection with the funding of one (1) or more payments which are excludable from the gross income of the recipient under section 104(a)(2) of the Internal Revenue Code, as it may be amended or renumbered from time to time. (B) The term “funding agreement” shall not be construed so as to include any annuity contract. (b) An insurer authorized to deliver or issue for delivery annuity contracts in this state may deliver or issue for delivery one (1) or more funding agreements. Notwithstanding the definition of “contracts of insurance”, “life insurance”, and “endowment insurance” or of “annuities” within subtitle 3 of this title, the issuance or delivery of a funding agreement meeting the definition set forth in subsection (a) of this section shall constitute a lawful activity of that insurer which is reasonably related to and incidental to its insurance activities and constitutes doing an insurance business in this state. (c)(1) Funding agreements may be issued to: (A) Individuals; (B) Entities authorized by this state to engage in an insurance business; (C) Entities other than individuals and other than persons or entities authorized to engage in an insurance business, but only for the purpose of funding benefits under any employee benefit plan as defined in the Employee Retirement Income Security Act of 1974, as now or hereafter amended, maintained in the United States or in a foreign country; (D) Fund any employee benefit plan or any other program sponsored by the United States Government, the government of any state or foreign country, or political subdivision thereof, or any agency thereof, and only if such agreement is issued in an amount of no less than five hundred thousand dollars ($500,000); or (E) Fund a program of an institution which has assets in excess of twenty-five million dollars ($25,000,000). (2) Otherwise, funding agreements may only be issued to any person or entity identified in this subsection, and in any sum, if the funding agreements are issued to fund an agreement providing for periodic payments in satisfaction of a claim and pursuant to order of a court of competent jurisdiction or a settlement agreement between the claimant and the putative or apparent obligor. (d) No amounts shall be guaranteed or credited under a funding agreement except upon reasonable assumptions as to investment income and expenses and on a basis equitable to all holders of funding agreements of a given class. The funding agreements shall not provide for payments to or by the insurer based on mortality or morbidity contingencies. (e) Amounts paid to the insurer and proceeds applied under optional modes of settlement under the funding agreements may be allocated by the insurer to one (1) or more separate accounts pursuant to § 23-81-402, but only if the insurer has separately qualified to issue variable products and only if the policy owner has elected and directed the insurer to invest the moneys backing the funding agreement in variable accounts. (f) Any and all funding agreements or guaranteed investment contracts issued prior to April 21, 1993, which do not meet the definition of “insurance”, “life insurance”, or “annuity” as hereinabove set forth are, nonetheless, valid obligations of the respective insurers which issue them according to the terms of the particular agreements. (g)(1) All basic or generic funding agreement forms shall be submitted to the Insurance Commissioner for approval and pursuant to the procedures at § 23-79-109. (2) The commissioner may adopt rules relating to: (A) The standards to be followed in the approval of the forms of the funding agreements; (B) The reserves to be maintained by insurers issuing the funding agreements; (C) The accounting and reporting of funds credited under the funding agreements; (D) The disclosure of information to be given to holders and prospective holders of the funding agreements; and (E) The qualification and compensation of persons selling the funding agreements on behalf of insurers. (h) Notwithstanding any other provision of law, the commissioner has sole authority to regulate the issuance and sale of the funding agreements, including the persons selling the funding agreements on behalf of insurers.