ARTICLE 7. Financial Matters [11120. - 11146.]

Cal. Insurance Code - INS 7.

in effect

Cal. Insurance Code - INS § 11120. Section 11120.

When a society, or a class or section thereof, has assets equal to the reserves and credits on its policies, it may collect periodical or other contributions from the members of the society, class or section which, with interest accretions, will be sufficient to accomplish all the following: (a) Pay the claims arising from its policies. (b) Pay for the expense of management of the society. (c) Maintain a fund sufficient to meet its accrued liabilities. (d) Maintain assets equal to the reserves and credits. Societies not operating pursuant to this section shall comply with Section 11121.

Cal. Insurance Code - INS § 11121. Section 11121.

Unless it operates under Section 11120, a society, or class or section thereof, shall collect from its members both stated contributions expressly segregated for the mortuary or disability funds and stated contributions expressly segregated for the expense or management funds. Both of such contributions may be included in the member’s periodical payment to the society. The society shall not use the money in the mortuary or disability funds nor the interest accretions thereon for expense purposes.

Cal. Insurance Code - INS § 11122. Section 11122.

Any society may create, maintain, invest, disburse and apply any special fund or funds necessary to carry out any purpose permitted by the laws of the society. The funds may include hospital and help, sanitaria, home, thrift, pension for the society’s employees, patriotic, educational and relief funds, in accordance with the society’s laws.

Cal. Insurance Code - INS § 11122.1. Section 11122.1.

A society may, if authorized by a resolution of its supreme legislative or governing body, establish and operate one or more separate accounts and issue contracts on a variable basis to persons as specified in Section 11041, subject to compliance with the applicable laws. To the extent a society finds it necessary to comply with federal or state law, or regulations issued under state or federal law, a society may do the following: (a) Adopt special procedures for conducting the business of the separate account. (b) Provide special voting and other rights for a person with a beneficial interest in the special account, including, but not limited to, rights and procedures relating to investment policy, investment advisory services, selecting certified public accountants, and selecting a committee to manage the account. (c) Issue contracts on a variable basis that are exempted from the requirements of Sections 11062, 11064, and 11065.

Cal. Insurance Code - INS § 11123. Section 11123.

Any such society may own real estate and buildings within or without the state of its incorporation, for any purposes for which it may use funds. It may receive gifts and bequests for such purposes and may be named in policies as beneficiary in trust for such purposes.

Cal. Insurance Code - INS § 11124. Section 11124.

Unless otherwise provided in the contracts of the members, such funds shall be held, invested, and disbursed for the use and benefit of the society, and no member or beneficiary shall have or acquire individual rights therein or become entitled to any apportionment thereof.

Cal. Insurance Code - INS § 11125. Section 11125.

Every domestic society shall invest its funds only in securities permitted by the laws of this State for the investment of the assets of life insurers issuing nonassessable policies on a reserve basis. Such securities shall be valued according to the methods used in valuing similar securities held by such insurers.

Cal. Insurance Code - INS § 11126. Section 11126.

An admitted foreign society shall invest its funds either under the same restrictions as domestic societies or in accordance with the laws of the state in which it is incorporated. Any admitted foreign society may deposit securities in accordance with the laws of any state.

Cal. Insurance Code - INS § 11127. Section 11127.

An admitted foreign society organized under the laws of any jurisdiction other than a state of the United States shall at all times maintain with a trustee in the United States, in trust for the benefit and security of all its policyholders and creditors in the United States, assets as prescribed in Section 11128. Such assets are designated “trusteed assets.”

Cal. Insurance Code - INS § 11128. Section 11128.

The value of the trusteed assets referred to in Section 11127 shall be equal to the sum of all of the following: (a) All of the indebtedness of that society in the United States having a fixed maturity. (b) The percentage, specified in subdivision (c), of that part of the tabular reserve which is applicable to its United States business in force. (c) If the valuation report prescribed by Section 11133 indicates that the degree of actuarial solvency of the society is 100 percent or greater, the percentage prescribed in subdivision (b) is 100 percent. Otherwise the percentage prescribed in subdivision (b) is that percentage, less than 100 percent, which is indicated in the valuation report to be the degree of that society’s actuarial solvency. The society may maintain those trusteed assets in excess of the value herein prescribed.

Cal. Insurance Code - INS § 11129. Section 11129.

The provisions of Sections 1596 to 1598, inclusive, shall apply to such society specified in Section 11127 and to the matters set forth in Sections 11127 and 11128.

Cal. Insurance Code - INS § 11130. Section 11130.

The commissioner may require any society specified in Section 11127 to file with him annually and at such other times as he may determine, and in such form as he may prescribe, a statement showing the extent to which such society’s policyholders and creditors in the United States are protected by trusteed assets in the United States.

Cal. Insurance Code - INS § 11131. Section 11131.

Every society transacting business in this state shall annually, on or before the first day of March, unless for cause shown such time has been extended by the commissioner, file with the commissioner, in such form as he may require, a statement under oath of its president, secretary or treasurer, or corresponding officers, of its affairs, financial condition and operations during the calendar year ending on the thirty-first day of December last preceding. Such statement shall contain items showing the reserve liabilities on all outstanding certificates classified according to the various mortality standards and interest assumptions for such certificates. The commissioner is authorized and empowered to address any additional inquiries to any such society in relation to its doings or condition, or any other matter connected with its transaction relative to the business contemplated by this chapter, and such officers of such society, as the commissioner may require, shall promptly reply in writing, and under oath, if so required to all such inquiries.

Cal. Insurance Code - INS § 11132. Section 11132.

A synopsis of its annual statement and valuation report providing an explanation of the facts concerning the condition of the society thereby disclosed shall be printed and mailed to each benefit member of the society not later than June 1st of each year, or, in lieu thereof, such synopsis may be published in the society’s official paper and the issue containing same mailed to each benefit member of the society.

Cal. Insurance Code - INS § 11133. Section 11133.

In addition to the annual report required by Section 11131, each society shall annually, on or before the first day of March, file with the commissioner a valuation of its certificates in force on December 31st last preceding: Provided, the commissioner may, in his discretion for cause shown, extend the time for filing such valuation for not more than two calendar months. Such report of valuation shall show, as reserve liabilities, the difference between the present mid-year value of the promised benefits provided in the certificates of such society in force and the present mid-year value of the future net rates as the same are in practice actually collected, not including therein any value for the right to make extra assessments and not including any amount by which the present mid-year value of future net contributions exceeds the present mid-year value of promised benefits on individual certificates. At the option of any society, in lieu of the above, the valuation may show the net tabular value which, in the case of monthly contributions, may be the means of the terminal reserve values for the end of the preceding and of the current certificate years. Such net tabular value as to certificates issued prior to the effective date of this chapter shall be determined in accordance with the provisions of law applicable thereto as of the date of issuance thereof and as to certificates issued on or after said date shall be not less than the reserves determined according to the commissioners’ reserve valuation method as hereinafter defined. If the rate or payment (by whatever name known) charged is less than the tabular net rate according to the basis of the valuation used, an additional reserve equal to the present value of the deficiency in such rates shall be set up and maintained as a liability.

Cal. Insurance Code - INS § 11134. Section 11134.

Except as otherwise provided in Section 10489.6, reserves according to the commissioners’ reserve valuation method, for the life insurance and endowment benefits of certificates providing for a uniform amount of insurance and requiring the payment of uniform rates shall be the excess, if any, of the present value, at the date of valuation, of such future guaranteed benefits provided for by such certificates, over the then present value of any future modified net rates therefor. The modified net rates for any such certificate shall be such uniform percentage of the respective contract payment for such benefits that the present value, at the date of issue of the certificate, of all such modified net rates shall be equal to the sum of the then present value of such benefits provided for by the certificate and the excess of (a) over (b), as follows: (a) A net level annual payment equal to the present value at the date of issue, of such benefits provided for after the first certificate year, divided by the present value, at the date of issue, of an annuity of one per annum payable on the first and each subsequent anniversary of such certificate on which a payment falls due; provided, however, that such net level annual payment shall not exceed the net level annual payment on the 19-year payment whole life plan for insurance of the same amount at an age one year higher than the age at issue of such certificate. (b) A net one-year term payment for such benefits provided for in the first certificate year. Provided that for any certificate issued on or after January 1, 1986, for which the contract premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the reserve according to the commissioners reserve valuation method as of any policy anniversary occurring on or before the assumed ending date defined herein as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than such excess premium shall be the greater of the reserve as of such policy anniversary calculated as described in the preceding paragraph and the reserve as of such policy anniversary calculated as described in that paragraph, but with (i) the value defined in subdivision (a) of that paragraph being reduced by 15 percent of the amount of such excess first year premium, (ii) all present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date, (iii) the policy being assumed to mature on such date as an endowment, and (iv) the cash surrender value provided on such date being considered as an endowment benefit. In making the above comparison the mortality and interest bases stated in Sections 11136 and 11136.1 shall be used. Reserves according to the commissioners’ reserve valuation method for (1) life insurance certificates providing for a varying amount of insurance or requiring the payment of varying rates, (2) group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, (3) disability and accidental death benefits in all certificates and contracts, and (4) all other benefits, except life insurance and endowment benefits in life insurance certificates, shall be calculated by a method consistent with the principles of the first paragraph of this section, except that any extra premiums charged because of impairments or special hazards shall be disregarded in the determination of modified net premiums.

Cal. Insurance Code - INS § 11135. Section 11135.

The present value of deferred payments due under incurred claims or matured certificates shall be deemed a liability of the society and shall be computed upon the mortality and interest basis assumed by the society for such valuation.

Cal. Insurance Code - INS § 11136. Section 11136.

Except as otherwise provided in Section 10489.4, such valuation shall be certified by a competent actuary or, at the expense of the society, verified by the actuary of the insurance supervisory official of the state of domicile of the society, and the legal minimum standard of valuation shall be as follows: (a) All benefits promised by certificates issued prior to September 22, 1952, and the rates therefor shall be valued in accordance with the provisions of law applicable thereto as of the date of issuance, but not lower than the standards and interest assumptions used in the calculation of rates for such benefits. (b) The minimum standard for the valuation of all certificates issued after September 21, 1952, and prior to January 1, 1972, shall be 3 percent per annum interest; in the case of certificates issued on and after January 1, 1972, and prior to January 1, 1980, the minimum standard for the valuation of all such certificates shall be 4 percent per annum interest; and in the case of certificates issued on and after January 1, 1980, the minimum standard for the valuation of all single premium certificates shall be 5 1 2 percent per annum interest and for the valuation of all other such certificates shall be 4 1 2 percent per annum interest, and the following tables: (1) For all ordinary certificates of life insurance issued on the standard basis, excluding any disability and accidental death benefits in such certificates—the American Men Ultimate Table of Mortality, with Bowerman’s or Davis’ Extension thereof, or, at the option of the society, the Commissioners 1941 Standard Ordinary Mortality Table or the Commissioners 1958 Standard Ordinary Mortality Table, using actual age of the insured for male risks and an age not more than six years younger than the actual age of the insured for female risks, and for such policies issued on or after the operative date of Section 10163.2 (i) the Commissioners 1980 Standard Ordinary Mortality Table, or (ii) at the election of the company for any one or more specified plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors, or (iii) any ordinary mortality table, adopted after 1980 by the National Association of Insurance Commissioners, or its successor, that is approved by regulation promulgated or bulletin issued by the commissioner for use in determining the minimum standard of valuation for such policies. (2) For all industrial life insurance certificates issued on the standard basis, excluding any disability and accidental death benefits in such certificates—the 1941 Standard Industrial Mortality Table, for such certificates issued prior to the operative date of Section 10163.2, and for such policies issued on or after such operative date, the Commissioners 1961 Standard Industrial Mortality Table or any industrial mortality table, adopted after 1980 by the National Association of Insurance Commissioners, or its successor, that is approved by regulation promulgated or bulletin issued by the commissioner for use in determining the minimum standard of valuation for such policies. (3) For annuity and pure endowment certificates, excluding any disability and accidental death benefits in such certificates—the 1937 Standard Annuity Mortality Table, or the Annuity Mortality Table for 1949 Ultimate, or the Individual Annuity Mortality Table for 1971, or any individual annuity mortality table, adopted after 1980 by the National Association of Insurance Commissioners, or its successor, that is approved by regulation promulgated or bulletin issued by the commissioner for use in determining the minimum standard of valuation for such contracts, or any modification of any of these tables approved by the commissioner. (4) For disability benefits in or supplementary to ordinary certificates—Hunter’s Disability Table or the Class 3 Disability Table (1926), modified to conform to the contractual waiting period, or the tables of Period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 Disability Study of the Society of Actuaries with due regard to the type of benefit, or the 1964 Commissioners Disability Table, or any tables of disablement rates and termination rates, adopted after 1980 by the National Association of Insurance Commissioners, or its successor, that are approved by regulation promulgated or bulletin issued by the commissioner for use in determining the minimum standard of valuation for such policies. Any such table shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance certificates. (5) For accidental death benefits in or supplementary to certificates—The Inter-Company Double Indemnity Mortality Table or the 1959 Accidental Death Benefits Table, or any accidental death benefits table, adopted after 1980 by the National Association of Insurance Commissioners, or its successor, that is approved by regulation promulgated or bulletin issued by the commissioner for use in determining the minimum standard of valuation for such policies. Any such table shall be combined with a mortality table permitted for calculating the reserves for life insurance certificates. (6) For temporary accident and health benefits in or supplementary to certificates—Class 3 Disability Table (1926) with Conference Modifications or the 1964 Commissioners Disability Table, or any tables of disablement rates and termination rates, adopted after 1980 by the National Association of Insurance Commissioners, or its successor, that are approved by regulation promulgated or bulletin issued by the commissioner for use in determining the minimum standard of valuation for such policies. (7) For life insurance issued upon the substandard basis and other special benefits—such tables as may be approved by the commissioner. (c) The commissioner may, in his discretion, accept other standards for valuation if he finds that the reserves produced thereby will not be less in the aggregate than reserves computed in accordance with the minimum valuation standard prescribed. Whenever the mortality experience under the certificates valued on the same mortality table is in excess of the expected mortality according to such table for a period of three consecutive years, the commissioner may require additional reserves when in his judgment deemed necessary on account of such certificates. (d) Notwithstanding the provisions of subdivisions (a) and (b), any society, with the consent of the insurance supervisory official of the state of domicile of the society, and under such conditions, if any, which he may impose, may establish and maintain reserves on its certificates in excess of the reserves required thereunder, but the contractual rights of any insured member shall not be affected thereby.

Cal. Insurance Code - INS § 11137. Section 11137.

Whenever the commissioner finds from any financial statement or valuation report made to him or her by any society authorized to do business in this state or from a filed report on examination of any such society that the admitted assets of the society are less than the sum of its required reserves and accrued liabilities, the commissioner shall determine the amount of that deficiency and shall issue a written requisition to the society to remove, repair, or make good that deficiency within such period as he or she shall designate, not less than 30 days nor more than six months from the service of the requisition, except that if the commissioner believes the interests of the certificate holders of such society will best be served by extending the period of time beyond six months, he or she may do so for such period or periods of time as he or she in his or her discretion deems best. The commissioner may also by official order prohibit the society, while that deficiency exists, from issuing any new contracts of insurance in this state, and in case of a domestic society, from issuing any new contracts in this state or elsewhere. If the society fails or is unable to make good the deficiency within the time specified in the order, the commissioner shall proceed against the society under the provisions of Article 14 (commencing with Section 1010) of Chapter 1 of Part 2 of Division 1 on the ground that its further transaction of business will be hazardous to its certificate holders, its creditors, or the public. In the case of a foreign society the commissioner may also, or in lieu of that proceeding, revoke its certificate of authority to do business in this state or refuse to issue a renewal certificate of authority.

Cal. Insurance Code - INS § 11138. Section 11138.

The commissioner, or any person he may appoint, shall have the power of visitation and examination into the affairs of any domestic society. He may employ assistants for the purpose of such examination, and he, or any person he may appoint, shall have free access to all the books, papers and documents that relate to the business of the society. The minutes of the proceedings of the supreme governing or legislative body and of the board of directors or corresponding body of a society shall be in the English language. In making any such examination the commissioner may summon and qualify as witnesses under oath and examine its officers, agents and employees or other persons in relation to the affairs, transactions and condition of the society. The report of the commissioner or in his discretion a summary thereof, and such recommendations or statements of the commissioner as may accompany such report, shall be read at the first meeting of the board of directors or corresponding body of the society following the receipt thereof, and if directed so to do by the commissioner shall also be read at the first meeting of the supreme legislative or governing body of the society following the receipt thereof. The expense of each examination and of each valuation, including compensation and actual expense of examiners, shall be paid by the society examined or whose certificates are valued, upon statements furnished by the commissioner.

Cal. Insurance Code - INS § 11139. Section 11139.

No report of examination shall be adopted by the commissioner or filed by him as an official document except after a notice is given and a hearing held thereon, if demanded, in accordance with the provisions of Section 11141. The commissioner in his determination made upon the basis of his findings from the record of such hearing may direct the society to comply with such recommendations or take such other corrective steps as may be contained therein. In any action or proceeding in the name of the commissioner or instituted in his behalf against the society, such report, if adopted by the commissioner and filed as an official document shall be admissible in evidence and shall be prima facie evidence of the facts stated therein. Nothing herein contained shall preclude the commissioner from instituting any proceeding under Section 11137 of this chapter at any time or from using as proof in such proceeding any report of examination or part thereof, whether or not such report has been adopted and filed.

Cal. Insurance Code - INS § 11140. Section 11140.

The commissioner, or any person whom he may appoint, may examine any foreign society, transacting or applying for admission to transact business in this State. He may employ assistants and he, or any person he may appoint, shall have free access to all books, papers and documents that relate to the business of the society. He may summon, qualify as witnesses under oath and examine any persons in relation to the affairs, transactions and condition of the society. He may in his discretion accept, in lieu of such examination, the examination of the insurance department of the state, territory, district, province or country where such society is organized. The compensation and actual expenses of the examiners making any examination or general or special valuation shall be paid by the society examined or by the society whose certificates obligations have been valued, upon statements furnished by the commissioner.

Cal. Insurance Code - INS § 11141. Section 11141.

Pending, during or after an examination or investigation of a society, either domestic or foreign, the commissioner shall make public no financial statement, report or finding, nor shall he permit to become public any financial statement, report or finding affecting the status, standing or rights of any society, until a copy thereof shall have been served upon the society at its principal office and the society shall have been afforded a reasonable opportunity to answer any such financial statement, report or finding, and to make such showing in connection therewith as it may desire.

Cal. Insurance Code - INS § 11142. Section 11142.

No person shall cause or permit to be made, issued or circulated in any form: (a) Any misrepresentation or false or misleading statement concerning the terms, benefits or advantages of any fraternal insurance contract now issued or to be issued in this State; or the financial condition of any society or the legal reserve system upon which it operates; or any other matter concerning any society; (b) Any false or misleading estimate or statement concerning the dividends or shares of surplus paid or to be paid by any society on any insurance contract; or (c) Any incomplete comparison of an insurance contract of one society with an insurance contract of another society or insurer for the purpose of inducing the lapse, forfeiture or surrender of any insurance contract.

Cal. Insurance Code - INS § 11143. Section 11143.

A comparison of insurance contracts is incomplete if it does not compare in detail: (a) The gross rates, and the gross rates less any dividend or other reduction allowed at the date of the comparison; (b) Any increase in cash values, and all the benefit provided by each contract for the possible duration thereof as determined by the life expectancy of the insured.

Cal. Insurance Code - INS § 11144. Section 11144.

A comparison of insurance contracts is incomplete if it omits from consideration: (a) Any benefit or value provided in the contract, (b) Any differences as to amount or period of premiums or payments, (c) Any differences in limitations or conditions or provisions which directly or indirectly affect the benefits.

Cal. Insurance Code - INS § 11145. Section 11145.

In any determination of the incompleteness or misleading character of any comparison or statement, it shall be presumed that the insured had no knowledge of any of the contents of the contract involved.

Cal. Insurance Code - INS § 11146. Section 11146.

Any person who violates any provision of Sections 11142 to 11145 or knowingly receives any compensation or commission by or in consequence of such violation, shall upon conviction be punished by a fine not exceeding one thousand dollars ($1,000), or by imprisonment in the county jail for not more than six months, or by both fine and imprisonment.

Source: CA Legislative Counsel Bulk DataURL: https://downloads.leginfo.legislature.ca.gov/pubinfo_2025.zipFetched: 6/27/2026