Ark. Code Ann. § 23-81-101 Title required.
There shall be a title on the policy briefly describing it.
Life Insurance Policies And Annuities
Ark. Code Ann. tit. 23, ch. 81
in effectArk. Code Ann. § 23-81-102 Scope.
(a) This section, §§ 23-81-101, 23-81-103 — 23-81-117, 23-81-120 — 23-81-136, and the Standard Nonforfeiture Law for Life Insurance, § 23-81-201 et seq., apply to contracts of life insurance and annuities, other than reinsurance, group life insurance, group annuities, and industrial life insurance.
(b) However, the following statutes shall also apply to industrial life insurance:
(1) Section 23-81-114, excluded or restricted coverage;
(2) Section 23-81-115, limitation of liability;
(3) Section 23-81-129, incontestability after reinstatement;
(4) Section 23-81-120, prohibited policy plans; and
(5) The Standard Nonforfeiture Law for Life Insurance, § 23-81-201 et seq.
Ark. Code Ann. § 23-81-103 Life insurance — Standard provisions required.
(a) No policy of life insurance, other than credit life, industrial, group, and pure endowments with or without return of premiums or of premiums and interest, shall be delivered or issued for delivery in this state unless it contains in substance each of the provisions required by §§ 23-81-101 and 23-81-104 — 23-81-112.
(b) This section shall not apply to annuity contracts nor to any provision of a life insurance policy, or contract supplemental thereto, relating to disability benefits or to additional benefits in the event of death by accident or accidental means.
(c) Any of the provisions or portions thereof not applicable to single premium or term policies shall to that extent not be incorporated therein.
Ark. Code Ann. § 23-81-104 Life insurance — Grace period provision.
(a) There shall be a provision that a grace period of thirty (30) days, or, at the option of the insurer, of one (1) month of not less than thirty (30) days, shall be allowed within which the payment of any premium after the first may be made, during which period of grace the policy shall continue in full force.
(b) However, if a claim arises under the policy during that period of grace, the amount of any premium due or overdue may be deducted from the policy proceeds.
Ark. Code Ann. § 23-81-105 Life insurance — Incontestability provision.
There shall be a provision that, except for fraud in the procurement, the policy, exclusive of provisions relating to disability benefits or to additional benefits in the event of death by accident or accidental means, shall be incontestable, except for nonpayment of premiums, after it has been in force during the lifetime of the insured for a period of two (2) years from its date of issue. However, at its option, the insurer may omit from the provision the phrase “except for fraud in the procurement”.
Ark. Code Ann. § 23-81-106 Life insurance — Integrity of contract and alteration of contract provisions.
(a) There shall be a provision that the policy, or the policy and the application therefor if a copy of the application is endorsed upon or attached to the policy when issued, shall constitute the entire contract between the parties and that all statements contained in the application, in the absence of fraud, shall be deemed representations and not warranties.
(b) At the option of the insurer, there shall be a provision that no agent shall have the power or authority to waive, change, or alter any of the terms or conditions of any policy, except that at the option of the insurer the terms or conditions may be changed by an endorsement or rider signed by an authorized officer of the insurer.
Ark. Code Ann. § 23-81-107 Life insurance — Misstatement of age provision.
(a) There shall be a provision that if the age of the insured or of any other person whose age is considered in determining the premium has been misstated, any amount payable or benefit accruing under the policy shall be such as the premium would have purchased at the correct age.
(b) As to overstatement of age, the policy may provide, in lieu of the provisions required under subsection (a) of this section, that the insurer will refund any excess of premium collected for the amount of insurance or benefit stated in the policy, as based upon the correct age.
Ark. Code Ann. § 23-81-108 Life insurance — Dividend provision.
(a) There shall be a provision in participating policies that, beginning not later than the end of the third policy year, the insurer shall annually ascertain and apportion the divisible surplus, if any, that will accrue on the policy anniversary or other dividend date specified in the policy, provided that the policy is in force and all premiums to that date are paid. Except as provided in this section, any dividend becoming payable shall, at the option of the party entitled to elect such an option, be either:
(1) Payable in cash; or
(2)(A) Applied to any one (1) of such other dividend options as may be provided by the policy.
(B) If other dividend options are provided, the policy shall further state which option shall be automatically effective if the party has not elected some other option.
(C) If the policy specified a period within which the other dividend option may be elected, the period shall be not less than thirty (30) days following the date on which the dividend is due and payable.
(D) The annually apportioned dividend shall be deemed to be payable in cash within the meaning of subdivision (a)(1) of this section, even though the policy provides that payment of the dividend is to be deferred for a specified period, provided that the period does not exceed six (6) years from the date of apportionment and that, if so provided in the policy, interest will be added to the dividend at a specified rate.
(E) If a participating policy provides that the benefit under any paid-up nonforfeiture provision is to be participating, it may provide that any divisible surplus becoming payable or apportioned while the insurance is in force under a nonforfeiture provision shall be applied in the manner set forth in the policy.
(b) “Divisible surplus” as used in subsection (a) of this section, subject, in the case of domestic insurers, to § 23-69-126, means that part of the insurer's total surplus which is determined by the insurer's board of directors to be available for distribution to policyholders. The matters set forth in this subsection need not be contained in the policy.
Ark. Code Ann. § 23-81-109 Life insurance — Adjustment of loan interest rates provision.
(a) Purpose. The purpose of this section is to permit and set guidelines for life insurers to include in life insurance policies issued after June 17, 1981, a provision for periodic adjustment of policy loan interest rates.
(b) Definitions. For purposes of this section, the “published monthly average” means:
(1) Moody's Corporate Bond Yield Average — Monthly Average Corporates as published by Moody's Investors Service, Inc., or any successor thereto; or
(2) In the event that Moody's Corporate Bond Yield Average — Monthly Average Corporates is no longer published, a substantially similar average, established by regulation issued by the Insurance Commissioner.
(c) Maximum Rate of Interest on Policy Loans.
(1) Policies issued on or after June 17, 1981, shall provide for policy loan interest rates as follows:
(A) A provision permitting a maximum interest rate of not more than eight percent (8%) per annum; or
(B) A provision permitting an adjustable maximum interest rate established from time to time by the life insurer as permitted by law and subject to any applicable usury limitation.
(2) The rate of interest charged on a policy loan made under subdivision (c)(1)(B) of this section shall not exceed the higher of the following:
(A) The published monthly average for the calendar month ending two (2) months before the date on which the rate is determined; or
(B) The rate used to compute the cash surrender values under the policy during the applicable period plus one percent (1%) per annum.
(3) If the maximum rate of interest is determined pursuant to subdivision (c)(1)(B) of this section, the policy shall contain a provision setting forth the frequency at which the rate is to be determined for that policy.
(4) The maximum rate for each policy must be determined at regular intervals at least one (1) time every twelve (12) months, but not more frequently than one (1) time in any three-month period. At the intervals specified in the policy:
(A) The rate being charged may be increased whenever the increase as determined under subdivision (c)(2) of this section would increase that rate by one-half of one percent (½ of 1%) or more per annum; and
(B) The rate being charged must be reduced whenever a reduction as determined under subdivision (c)(2) of this section would decrease that rate by one-half of one percent (½ of 1%) or more per annum.
(5) The life insurer shall:
(A) Notify the policyholder at the time a cash loan is made of the initial rate of interest on the loan;
(B) Notify the policyholder with respect to premium loans of the initial rate of interest on the loan as soon as it is reasonably practical to do so after making the initial loan. Notice need not be given to the policyholder when a further premium loan is added, except as provided in subdivision (c)(5)(C) of this section;
(C) Send to policyholders with loans reasonable advance notice of any increase in the rate; and
(D) Include in the notices required in this subdivision (c)(5) the substance of the pertinent provisions of subdivisions (c)(1) and (c)(3) of this section.
(6)(A) The loan value of the policy shall be at least equal to the cash surrender value at the end of the then-current policy year, provided that the insurer may deduct, either from the loan value or from the proceeds of the loan, any existing indebtedness not already deducted in determining the cash surrender value including any interest then accrued but not due, any unpaid balance of the premium for the current policy year, and interest on the loan to the end of the current policy year.
(B) No policy shall terminate in a policy year as the sole result of change in the interest rate during that policy year, and the life insurer shall maintain coverage during that policy year until the time at which it would otherwise have terminated if there had been no change during that policy year.
(7) The substance of the pertinent provisions of subdivisions (c)(1) and (c)(3) of this section shall be set forth in the policies to which they apply.
(d) Definitions. For purposes of this section:
(1) The rate of interest on policy loans permitted under this section includes the interest rate charged on reinstatement of policy loans for the period during and after any lapse of a policy;
(2) The term “policy loan” includes any premium loan made under a policy to pay one (1) or more premiums that were not paid to the life insurer as they fell due;
(3) The term “policyholder” includes the owner of the policy or the person designated to pay premiums as shown on the records of the life insurer; and
(4) The term “policy” includes certificates issued by a fraternal benefit society and annuity contracts which provide for policy loans.
(e) Other Provisions. No other provision of law shall apply to policy loan interest rates unless made specifically applicable to the rates.
(f) Applicability to Existing Policies. The provisions of this section shall not apply to any insurance contract issued before June 17, 1981.
Ark. Code Ann. § 23-81-110 Life insurance — Table of installments provision.
In case the policy provides that the proceeds may be payable in installments which are determinable at issue of the policy, there shall be a table showing the amounts of the guaranteed installments per stated unit.
Ark. Code Ann. § 23-81-111 Life insurance — Reinstatement provision.
There shall be a provision that unless the policy has been surrendered for its cash surrender value or its cash surrender value has been exhausted, or unless the paid-up term insurance, if any, has expired, the policy will be reinstated at any time within three (3) years from the date of premium default upon written application therefor, the production of evidence of insurability satisfactory to the insurer, the payment of all premiums in arrears, and the payment or reinstatement of any other indebtedness to the insurer upon the policy, all with interest at a rate not exceeding six percent (6%) per annum compounded annually.
Ark. Code Ann. § 23-81-112 Life insurance — Payment of premiums provision.
There shall be a provision relative to the payment of premiums.
Ark. Code Ann. § 23-81-113 Life insurance — Payment of claims provision.
(a) There shall be a provision that when a policy shall become a claim by the death of the insured, settlement shall be made upon receipt of due proof of death and, at the insurer's option, surrender of the policy or proof of the interest of the claimant, or both surrender and proof.
(b) If any insurer shall specify a particular period prior to the expiration of which settlement shall be made, the period shall not exceed two (2) months from the receipt of the proofs.
Ark. Code Ann. § 23-81-114 Life insurance — Excluded or restricted coverage clauses limited.
A clause in any policy of life insurance providing that the policy shall be incontestable after a specified period shall preclude only a contest of the validity of the policy. Such a clause shall not preclude the assertion at any time of defenses based upon provisions in the policy which exclude or restrict coverage, whether or not the restrictions or exclusions are excepted in the clause.
Ark. Code Ann. § 23-81-115 Life insurance — Limitation of liability.
(a) No policy of life insurance shall be delivered or issued for delivery in this state if it contains any of the following provisions:
(1) A provision for a period shorter than that provided by statute within which an action at law or in equity may be commenced on such a policy;
(2) A provision which excludes or restricts liability for death caused in a certain specified manner or occurring while the insured has a specified status, except that a policy may contain provisions excluding or restricting coverage as specified therein in the event of death under any one (1) or more of the following circumstances:
(A) Death as a result, directly or indirectly, of war, declared or undeclared, or of action by military forces, or of any act or hazard of the war or action, or of service in the military, naval, or air forces or in civilian forces auxiliary thereto, or from any cause while a member of the military, naval, or air forces of any country at war, declared or undeclared, or of any country engaged in the military action;
(B) Death as a result of aviation or any air travel or flight;
(C) Death as a result of a specified hazardous occupation or occupations;
(D) Death while the insured is a resident outside the continental United States and Canada; or
(E) Death within two (2) years from the date of issue of the policy or within two (2) years of the effective date of any increase in the face amount of the policy as a result of suicide, while sane or insane. However, the parts of this subdivision (a)(2)(E) applicable to increases in the face amount of the policy shall apply only to the additional amount.
(b) A policy which contains any exclusion or restriction pursuant to subsection (a) of this section shall also provide that in the event of death under the circumstances to which any exclusion or restriction is applicable, the insurer will pay an amount not less than a reserve determined according to the Insurance Commissioner's reserve valuation method upon the basis of the mortality table and interest rate specified in the policy for the calculation of nonforfeiture benefits, or if the policy provides for no such benefits, computed according to a mortality table and interest rate determined by the insurer and specified in the policy, with adjustment for indebtedness or dividend credit.
(c) This section shall not apply to group life insurance, disability insurance, reinsurance, or annuities, or to any provision in a life insurance policy relating to disability benefits or to additional benefits in the event of death by accident or accidental means.
(d) Nothing contained in this section shall prohibit any provision which, in the opinion of the commissioner, is more favorable to the policyholder than a provision permitted by this section.
Ark. Code Ann. § 23-81-116 Life insurance — Holding of proceeds.
(a) Any life insurer shall have the power to hold under agreement the proceeds of any policy issued by it, upon such terms and restrictions as to revocation by the policyholder and control by beneficiaries, and with exemptions from the claims of creditors of beneficiaries other than the policyholder as set forth in the policy or as agreed to in writing by the insurer and the policyholder.
(b) Upon maturity of a policy, by death in the event the policyholder has made no such agreement, the insurer shall have the power to hold the proceeds of the policy under an agreement with the beneficiaries.
(c) The insurer shall not be required to segregate the funds so held but may hold them as part of its general assets.
Ark. Code Ann. § 23-81-117 Life insurance — Indebtedness deducted from proceeds.
In determining the amount due under any life insurance policy issued, deduction may be made of:
(1) Any unpaid premiums or installments thereof for the current policy year due under the terms of the policy; and
(2) The amount of principal and accrued interest of any policy loan or other indebtedness against the policy then remaining unpaid.
Ark. Code Ann. § 23-81-118 Life insurance — Refund of certain premiums and payment of proceeds.
(a) Upon the death of an insured, the proceeds payable to the beneficiary under any policy of individual life insurance, delivered or issued for delivery in this state after July 20, 1979, that is in force on a premium-paying basis on the date of death shall include premiums paid for any period beyond the end of the policy month in which death occurred unless the refund of premiums is due some other person pursuant to contract provisions.
(b)(1) When proceeds of any individual policy of life insurance, delivered or issued for delivery in this state, or refunds of premiums on any individual policy of life insurance delivered or issued for delivery in this state after July 20, 1979, are not paid within a reasonable period of time after proof of the death of the insured has been furnished to the insurer, the insurer shall pay interest upon the proceeds or refunds of premiums at the rate of eight percent (8%) per year.
(2) For the purpose of this section, a reasonable period of time shall be that period of time sufficient to complete an investigation of the cause of death and to process the necessary claims. In no case shall this period exceed thirty (30) days from the date proof of death of the insured has been furnished to the insurer.
(c) Unearned premiums shall be paid in a lump sum on a date no later than thirty (30) days after the proof of the insured's death has been furnished to the insurer. If not paid within thirty (30) days after proof of the insured's death has been furnished the insurer, interest upon any unpaid proceeds and any unearned premiums shall accrue interest from the date of the insured's death.
(d) Nothing in this section shall be construed to require a refund of premiums on single premium policies.
Ark. Code Ann. § 23-81-120 Life insurance — Unnamed beneficiaries prohibited.
(a) No life insurance policy shall be issued or delivered in this state if it provides that on the death of anyone not specifically named therein, the owner or beneficiary of the policy shall receive the payment or granting of anything of value.
(b) This provision shall not be deemed to prohibit:
(1) The payment to policyholders or beneficiaries of sums representing in whole or in part gains to the insurer from mortality either in general or as resulting from particular classifications of policies;
(2) Family policies insuring unspecified members of a family; or
(3) Payments to unspecified beneficiaries of a class named by the insured.
Ark. Code Ann. § 23-81-121 Annuity and pure endowment contracts — Standard provisions required.
(a) No annuity or pure endowment contract, other than reversionary annuities, survivorship annuities, or group annuities and except as stated in this section, shall be delivered or issued for delivery in this state unless it contains in substance each of the provisions specified in §§ 23-81-122 — 23-81-127. Any of the provisions not applicable to single premium annuities or single premium pure endowment contracts shall not, to that extent, be incorporated therein.
(b) This section shall not apply to contracts for deferred annuities included in, or upon the lives of beneficiaries under, life insurance policies.
Ark. Code Ann. § 23-81-122 Annuity and pure endowment contracts — Grace period provision.
(a) In an annuity or pure endowment contract, other than a reversionary, survivorship, or group annuity, there shall be a provision that there shall be a period of grace of one (1) month, but not less than thirty (30) days, within which any stipulated payment to the insurer falling due after the first may be made, subject at the option of the insurer to an interest charge thereon at a rate to be specified in the contract but not exceeding six percent (6%) per annum for the number of days of grace elapsing before the payment, during which period of grace the contract shall continue in full force.
(b) However, in case a claim arises under the contract on account of death prior to expiration of the period of grace before the overdue payment to the insurer or the deferred payment of the current contract year, if any, is made, the amount of the payments, with interest on any overdue payments, may be deducted from any amount payable under the contract in settlement.
Ark. Code Ann. § 23-81-123 Annuity and pure endowment contracts — Incontestability provision.
If any statements, other than those relating to age, sex, and identity, are required as a condition to issuing an annuity or pure endowment contract, other than reversionary, survivorship, or group annuity, and subject to § 23-81-125 , there shall be a provision that, except for fraud in the procurement, the contract shall be incontestable after it has been in force during the lifetime of the person or of each of the persons as to whom the statements are required, for a period of two (2) years from its date of issue except for nonpayment of stipulated payments to the insurer. At the option of the insurer, the contract may also except any provisions relative to benefits in the event of disability and any provisions that grant insurance specifically against death by accident or accidental means. Furthermore, at its option, the insurer may omit from the provision the phrase “except for fraud in the procurement”.
Ark. Code Ann. § 23-81-124 Annuity and pure endowment contracts — Integrity of contract provision.
In an annuity or pure endowment contract, other than a reversionary, survivorship, or group annuity, there shall be a provision that the contract shall constitute the entire contract between the parties or, if a copy of the application is endorsed upon or attached to the contract when issued, a provision that the contract and the application shall constitute the entire contract between the parties.
Ark. Code Ann. § 23-81-125 Annuity and pure endowment contracts — Misstatement of age provision.
In an annuity or pure endowment contract, other than reversionary, survivorship, or group annuity, there shall be a provision that if the age of the person or persons upon whose life or lives the contract is made, or of any of them, has been misstated, the amount payable or benefits accruing under the contract shall be such as the stipulated payments to the insurer would have purchased according to the correct age, and that if the insurer shall make or has made any overpayments on account of any misstatement, the amount thereof, with interest at the rate to be specified in the contract but not exceeding six percent (6%) per annum, may be charged against the current or next succeeding payment or payments to be made by the insurer under the contract.
Ark. Code Ann. § 23-81-126 Annuity and pure endowment contracts — Dividend provision.
If an annuity or pure endowment contract, other than a reversionary, survivorship, or group annuity, is participating, there shall be a provision that the insurer shall annually ascertain and apportion any divisible surplus accruing on the contract.
Ark. Code Ann. § 23-81-127 Annuity and pure endowment contracts — Reinstatement provision.
In an annuity or pure endowment contract, other than a reversionary, survivorship, or group annuity, there shall be a provision that the contract may be reinstated at any time within one (1) year from the default in making stipulated payments to the insurer, unless the cash surrender value has been paid, but all overdue stipulated payments and any indebtedness to the insurer on the contract shall be paid or reinstated with interest thereon at a rate to be specified in the contract but not exceeding six percent (6%) per annum payable annually. In cases when applicable, the insurer may also include a requirement of evidence of insurability satisfactory to the insurer.
Ark. Code Ann. § 23-81-128 Reversionary annuities — Standard provisions required.
(a) Except as stated in this section, no contract for a reversionary annuity shall be delivered or issued for delivery in this state unless it contains in substance each of the following provisions:
(1) Any reversionary annuity contract shall contain the provisions specified in §§ 23-81-122 — 23-81-126, except that under § 23-81-122 the insurer may at its option provide for an equitable reduction of the amount of the annuity payments in settlement of an overdue or deferred payment in lieu of providing for deduction of the payments from an amount payable upon settlement under the contract; and
(2) In reversionary annuity contracts, there shall be a provision that the contract may be reinstated at any time within three (3) years from the date of default in making stipulated payments to the insurer, upon production of evidence of insurability satisfactory to the insurer, and upon condition that all overdue payments and any indebtedness to the issuer on account of the contract be paid, or, within the limits permitted by the then-cash values of the contract, reinstated, with interest as to both payments and indebtedness at a rate to be specified in the contract but not exceeding six percent (6%) per annum compounded annually.
(b) This section shall not apply to group annuities or to annuities included in life insurance policies, and any of the provisions not applicable to single premium annuities shall not to that extent be incorporated therein.
Ark. Code Ann. § 23-81-129 Incontestability of life insurance policy or annuity contract after reinstatement.
The reinstatement of any policy of life insurance or annuity contract delivered or issued for delivery in this state may be contested on account of fraud or misrepresentation of facts material to the reinstatement only for the same period following reinstatement and with the same conditions and exceptions as the policy provides with respect to contestability after original issuance.
Ark. Code Ann. § 23-81-130 Registered life insurance policies and annuity contracts — Deposit of reserves.
(a) A domestic life insurer existing on January 1, 1960, may deposit and shall thereafter maintain on deposit with the Insurance Commissioner securities and assets equal to the legal reserve on its registered life insurance policies and annuity contracts in force under the provisions of § 23-63-601 et seq. The securities and assets shall be held on deposit in trust for the common benefit of all the holders of the policies and contracts.
(b) However, no deposit shall be made or maintained as to industrial life insurance policies.
(c) All securities not negotiable by delivery and deposited by an insurer under this section shall be assigned to the commissioner and his or her successors in office, but the assignments shall be deemed to be conditional only and shall not be recorded unless and until the commissioner has revoked or refused to continue the insurer's certificate of authority or until the commissioner has applied to the court for receivership of the insurer in accordance with either § 23-68-106 or § 23-68-107.
(d) Deposits shall be subject to the applicable provisions of §§ 23-63-901 — 23-63-912, administration of deposits.
Ark. Code Ann. § 23-81-131 Registered life insurance policies and annuity contracts — Certificate.
(a)(1) After making the deposit mentioned in § 23-81-130, the insurer shall not thereafter issue a registered policy life insurance or of endowment, or annuity bond or contract, unless the policy, bond, or contract shall have upon its face a certificate substantially in the following words: “This policy is registered, and approved securities equal in value to the legal reserve hereon are held in trust by the Commissioner of Insurance of the State of Arkansas.”
(2) The certificate shall be signed by the Insurance Commissioner and sealed with the seal of the commissioner's office.
(b) Every insurer making a deposit under § 23-81-130 shall pay the commissioner for each certificate placed on registered policies, annuity bonds, or contracts issued by the insurer after the original or first deposit is made thereunder, a fee of twenty-five cents (25¢), and this fee so received shall be disposed of by the commissioner as follows:
(1) For payment of the annual rent or hire of the safe deposit box or custodial expense as provided for under § 23-63-904;
(2) Payment for the services of a competent and reliable representative of the commissioner, to be appointed by the commissioner, who shall have direct charge of the securities and safety box containing them, and through whom and under whose supervision the insurer may have access to its securities for the purposes provided in this section and §§ 23-81-130 and 23-81-132 — 23-81-136. The sum paid the representative shall not exceed the amount received from registration of policies by the insurer during any one (1) year; and
(3) The balance of the fees shall be paid to or deposited with the Treasurer of State to the credit of the General Revenue Fund Account of the State Apportionment Fund.
Ark. Code Ann. § 23-81-132 Registered life insurance policies and annuity contracts — Valuation.
(a) The insurer shall prepare and keep such records of all registered policies, bonds, or contracts issued by it and subject to § 23-81-131 as will enable the Insurance Commissioner to compute their value at any time.
(b) Upon proof that any of the policies, bonds, or contracts have been commuted or terminated, the insurer shall commute or cancel them upon its record. Until proof exists, all registered contracts shall be considered in force for the purposes of this section and §§ 23-81-130, 23-81-131, and 23-81-133 — 23-81-136.
(c) The net value of every policy, annuity bond, or contract, according to the standard prescribed by the laws of this state for the valuation of policies of life insurers, when the first premium shall have been paid thereon, less the amount of such liens as the insurer may have against it, not exceeding the value, shall be entered on the record of the policy, annuity bond, or contract at the time the record is made.
(d) On January 1 of each year, or within sixty (60) days thereafter, the insurer shall cause its registered policies, annuity bonds, or contracts to be carefully valued. The actual value of each at the time fixed for the valuation, less such liens as the insurer may have against it, not exceeding the value, shall be entered upon the insurer's record of the policy, bond, or contract.
Ark. Code Ann. § 23-81-133 Registered life insurance policies and annuity contracts — Mutilated or surrendered policies.
The Insurance Commissioner shall cancel mutilated or surrendered policies, annuity bonds, and contracts issued by any insurers subject to § 23-81-130 when surrendered to the commissioner and for the purpose of cancellation and certify other like policies, bonds, or contracts when issued in lieu thereof.
Ark. Code Ann. § 23-81-134 Registered life insurance policies and annuity contracts — Maintenance of deposit — Commissioner's duty to issue certificate.
(a)(1) Each insurer that has made the deposit provided for under § 23-81-130 shall make additional deposits from time to time in amounts not less than five thousand dollars ($5,000) and of such securities as are permitted by §§ 23-63-901 — 23-63-912 to be deposited so that the value of the securities deposited when valued as provided in § 23-63-601 et seq. and §§ 23-84-101 — 23-84-111 shall always be equal to the current net value of the currently outstanding registered policies and annuity bonds and contracts issued by the insurer, less such liens as the insurer may have against it, not exceeding the net value.
(2) So long as the insurer maintains its deposits at an amount equal to or in excess of the net value of its registered policies, bonds, and contracts, the Insurance Commissioner shall sign and affix his or her seal to the certificates on every policy, annuity bond, or contract presented to him or her for that purpose by the insurer as provided in § 23-81-131.
(b) The obligation to maintain and increase the deposits shall be binding likewise upon any insurer that is a successor in interest to the issuing insurer as to the registered policies, bonds, or contracts.
Ark. Code Ann. § 23-81-135 Registered life insurance policies and annuity contracts — Credit of certain deposits.
A domestic life insurer which has made a deposit as to reserves pursuant to § 23-81-130 and which has also heretofore made a similar deposit with respect to its capital stock under laws heretofore in force may, to the extent that the deposit as to capital stock is composed of securities and assets eligible for deposit under § 23-63-903 , credit the amount of the deposit as to capital upon the amount of deposit required as to such reserves.
Ark. Code Ann. § 23-81-136 Registered life insurance policies and annuity contracts — Deficiency of deposit.
(a) If at any time the value of the securities and assets held on deposit as to a particular insurer under § 23-81-130 is less than the actual value of the registered policies and annuity bonds or contracts issued by the insurer and then in force, the Insurance Commissioner shall not execute the certificate on any additional policies, annuity bonds, or contracts of the insurer until it shall have made good the deficit.
(b) In the event of any deficiency in its deposit, the insurer shall also be subject to the provisions of § 23-63-910(b).
Ark. Code Ann. § 23-81-137 Requirements to change designated or named beneficiary of life insurance policy or annuity contract — Prohibition.
A designated or named beneficiary of a life insurance policy or annuity contract:
(1) Can be changed according to the terms of the life insurance policy or annuity contract; and
(2) Cannot be changed in a will.
Ark. Code Ann. § 23-81-201 Title.
This subchapter shall be known and may be cited as the “Standard Nonforfeiture Law for Life Insurance”.
Ark. Code Ann. § 23-81-202 Applicability.
(a) This subchapter shall not apply to any of the following:
(1) Reinsurance;
(2) Group insurance;
(3) Pure endowment;
(4) Annuity or reversionary annuity contract;
(5) A term policy of uniform amount which provides no guaranteed nonforfeiture or endowment benefits, or renewal thereof, of twenty (20) years or less expiring before seventy-one (71) years of age, for which uniform premiums are payable during the entire term of the policy;
(6) A term policy of decreasing amount which provides no guaranteed nonforfeiture or endowment benefits, on which each adjusted premium, calculated as specified in §§ 23-81-206 — 23-81-209 is less than the adjusted premium so calculated, on a term policy of uniform amount, or renewal thereof, which provides no guaranteed nonforfeiture or endowment benefits, issued at the same age and for the same initial amount of insurance and for a term of twenty (20) years or less expiring before seventy-one (71) years of age, for which uniform premiums are payable during the entire term of the policy;
(7) A policy, which provides no guaranteed nonforfeiture or endowment benefits, for which no cash surrender value, if any, or present value of any paid-up nonforfeiture benefit, at the beginning of any policy year, calculated as specified in §§ 23-81-204 — 23-81-209 exceeds two and one-half percent (2.5%) of the amount of insurance at the beginning of the same policy year; or
(8) A policy which shall be delivered outside this state through an agent or other representative of the insurer issuing the policy.
(b) For purposes of determining the applicability of this subchapter, the age at expiry for a joint term life insurance policy shall be the age at expiry of the oldest life.
Ark. Code Ann. § 23-81-203 Nonforfeiture provisions.
(a) In the case of policies issued on and after the operative date as defined in § 23-81-213(a), no policy of life insurance, except as stated in § 23-81-202, shall be delivered or issued for delivery in this state unless it shall contain in substance the following provisions, or corresponding provisions which in the opinion of the Insurance Commissioner are at least as favorable to the defaulting or surrendering policyholder as are the minimum requirements specified in this section and are essentially in compliance with § 23-81-212:
(1) In the event of default in any premium payment, the insurer will grant, upon proper request not later than sixty (60) days after the due date of the premium in default, a paid-up nonforfeiture benefit on a plan stipulated in the policy, effective as of the due date, of such amount as may be specified. In lieu of the stipulated paid-up nonforfeiture benefit, the insurer may substitute, upon proper request not later than sixty (60) days after the due date of the premium in default, an actuarially equivalent alternative paid-up nonforfeiture benefit which provides a greater amount or longer period of death benefits or, if applicable, a greater amount or earlier payment of endowment benefits;
(2) Upon surrender of the policy within sixty (60) days after the due date of any premium payment in default after premiums have been paid for at least three (3) full years in the case of ordinary insurance or five (5) full years in the case of industrial insurance, the insurer will pay, in lieu of any paid-up nonforfeiture benefit, a cash surrender value of such amount as may be specified;
(3) A specified paid-up nonforfeiture benefit shall become effective as specified in the policy unless the person entitled to make such an election elects another available option not later than sixty (60) days after the due date of the premium in default;
(4) If the policy shall have become paid up by completion of all premium payments or if it is continued under any paid-up nonforfeiture benefit which became effective on or after the third policy anniversary in the case of ordinary insurance or the fifth policy anniversary in the case of industrial insurance, the insurer will pay, upon surrender of the policy within thirty (30) days after any policy anniversary, a cash surrender value of the amount as may be specified;
(5)(A) In the case of policies which cause on a basis guaranteed in the policy unscheduled changes in benefits or premiums, or which provide an option for changes in benefits or premiums other than a change to a new policy, a statement of the mortality table, interest rate, and method used in calculating cash surrender values and the paid-up nonforfeiture benefits available under the policy and, in the case of all other policies, a statement of the mortality table and interest rate used in calculating the cash surrender values and the paid-up nonforfeiture benefits available under the policy, together with a table showing the cash surrender value, if any, and paid-up nonforfeiture benefit, if any, available under the policy on each policy anniversary either during the first twenty (20) policy years or during the term of the policy, whichever is shorter.
(B) The values and benefits shall be calculated upon the assumption that there are no dividends or paid-up additions credited to the policy and that there is no indebtedness to the insurer on the policy; and
(6) A statement that the cash surrender values and the paid-up nonforfeiture benefits available under the policy are not less than the minimum values and benefits required by or pursuant to the insurance law of the state in which the policy is delivered, an explanation of the manner in which the cash surrender values and the paid-up nonforfeiture benefits are altered by the existence of any paid-up additions credited to the policy or any indebtedness to the insurer on the policy, if a detailed statement of the method of computation of the values and benefits shown in the policy is not stated therein, a statement that the method of computation has been filed with the insurance supervisory official of the state in which the policy is delivered, and a statement of the method to be used in calculating the cash surrender value and paid-up nonforfeiture benefit available under the policy on any policy anniversary beyond the last anniversary for which the values and benefits are consecutively shown in the policy.
(b) Any of the provisions or portions thereof of subsection (a) of this section not applicable by reason of the plan of insurance may, to the extent inapplicable, be omitted from the policy.
(c) On and after January 1, 2026, the insurer shall reserve the right to defer the payment of any cash surrender value for a period of six (6) months after demand therefor with surrender of the policy according to the terms of the policy, subject to the following:
(1) The policy death benefit shall remain in force until payment is made; and
(2) If payment is not made within forty-five (45) days after demand is made for the surrender of the policy, in addition to the cash surrender value, the insurer shall pay interest on the cash surrender at the rate specified under § 23-81-118 and accruing from the date of surrender until the cash surrender value is paid in full within the six-month period.
Ark. Code Ann. § 23-81-204 Cash surrender value.
(a) Any cash surrender value available under the policy in the event of default in a premium payment due on any policy anniversary, whether or not required by § 23-81-203, shall be an amount not less than the excess, if any, of the present value, on the anniversary, of the future guaranteed benefits which would have been provided for by the policy, including any existing paid-up additions, if there had been no default, over the sum of:
(1) The then-present value of the adjusted premiums as defined in §§ 23-81-206 — 23-81-209 corresponding to premiums which would have fallen due on and after the anniversary; and
(2) The amount of any indebtedness to the insurer on the policy.
(b) However, for any policy issued on or after the operative date of § 23-81-207 as defined therein, which provides supplemental life insurance or annuity benefits at the option of the insured and for an identifiable additional premium by rider or supplemental policy provision, the cash surrender value as defined in the section for an otherwise similar policy issued at the same age without the rider or supplemental policy provision and the cash surrender value as defined in the section for a policy which provides only the benefits otherwise provided by the rider or supplemental policy provision.
(c) For any family policy issued on or after the operative date of § 23-81-207 as defined therein, which defines a primary insured and provides term insurance on the life of the spouse of the primary insured expiring before the spouse's age seventy-one (71), the cash surrender value referred to in subsection (a) of this section shall be an amount not less than the sum of the cash surrender value as defined in the section for an otherwise similar policy issued at the same age without such term insurance on the life of the spouse and the cash surrender value as defined in the section for a policy which provides only the benefits otherwise provided by the term insurance on the life of the spouse.
(d) Any cash surrender value available within thirty (30) days after any policy anniversary under any policy paid up by completion of all premium payments or any policy continued under any paid-up nonforfeiture benefit, whether or not required by § 23-81-203, shall be an amount not less than the present value, on the anniversary, of the future guaranteed benefits provided for by the policy, including any existing paid-up additions, decreased by any indebtedness to the insurer on the policy.
Ark. Code Ann. § 23-81-205 Certain paid-up benefits.
Any paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment due on any policy anniversary shall be such that its present value as of the anniversary shall be at least equal to the cash surrender value then provided for by the policy or, if none is provided for, that cash surrender value which would have been required by this subchapter in the absence of the condition that premiums shall have been paid for at least a specified period.
Ark. Code Ann. § 23-81-206 Calculation of adjusted premiums and present values issued before operative date of § 23-81-213(d).
(a)(1) This section shall not apply to policies issued on or after the operative date of § 23-81-213(d) as defined therein. Except as provided in subsection (c) of this section, the adjusted premiums for any policy shall be calculated on an annual basis and shall be the uniform percentage of the respective premiums specified in the policy for each policy year, excluding amounts stated in the policy as extra premiums to cover impairments or special hazards, that the present value, at the date of issue of the policy of all adjusted premiums shall be equal to the sum of:
(A) The then-present value of the future guaranteed benefits provided for by the policy;
(B) Two percent (2%) of the amount of insurance, if the insurance is uniform in amount, or of the equivalent uniform amount, as hereinafter defined, if the amount of insurance varies with duration of the policy;
(C) Forty percent (40%) of the adjusted premium for the first policy year; and
(D) Twenty-five percent (25%) of either the adjusted premium for the first policy year or the adjusted premium for a whole life policy of the same uniform or equivalent uniform amount with uniform premiums for the whole of life issued at the same age for the same amount of insurance, whichever is less.
(2) However, in applying the percentages specified in subdivisions (a)(1)(C) and (D) of this section, no adjusted premium shall be deemed to exceed four percent (4%) of the amount of insurance or level amount equivalent thereto.
(3) The date of issue of a policy for the purpose of this subchapter shall be the date as of which the rated age of the insured is determined.
(b)(1) In the case of a policy providing an amount of insurance varying with duration of the policy, the equivalent level amount thereof for the purpose of this subchapter shall be deemed to be the level amount of insurance provided by an otherwise similar policy, containing the same endowment benefits, if any, issued at the same age and for the same term, the amount of which does not vary with duration and the benefits under which have the same present value at the inception of the insurance as the benefits under the policy.
(2) However, in the case of a policy providing an amount of insurance varying with the duration of the policy, the equivalent uniform amount thereof for the purpose of subsection (a) of this section shall be deemed to be the uniform amount of insurance provided by an otherwise similar policy, containing the same endowment benefit or benefits, if any, issued at the same age and for the same term, the amount of which does not vary with duration and the benefits under which have the same present value at the date of issue as the benefits under the policy.
(3) However, in the case of a policy for a varying amount of insurance issued on the life of a child under ten (10) years of age, the equivalent uniform amount may be computed as though the amount of insurance provided by the policy prior to the attainment of ten (10) years of age was the amount provided by the policy at ten (10) years of age.
(c)(1) The adjusted premiums for any policy providing term insurance benefits by rider or supplemental policy provision shall be equal to:
(A) The adjusted premiums for an otherwise similar policy issued at the same age without the term insurance benefits, increased, during the period for which premiums for the term insurance benefits, are payable; by
(B) The adjusted premiums for the term insurance.
(2) Subdivisions (c)(1)(A) and (B) of this section shall be calculated separately and as specified in subsections (a) and (b) of this section except that, for the purposes of subdivisions (a)(1)(B)-(D) of this section, the amount of insurance or equivalent uniform amount of insurance used in the calculation of the adjusted premiums referred to in subdivision (c)(1)(B) of this section shall be equal to the excess of the corresponding amount determined for the entire policy over the amount used in the calculation of the adjusted premiums in subdivision (c)(1)(A) of this section.
(d)(1) Except as otherwise provided in §§ 23-81-207 and 23-81-208, all adjusted premiums and present values referred to in this subchapter shall for all policies of ordinary insurance be calculated on the basis of the Insurance Commissioner's 1941 Standard Ordinary Mortality Table, provided that for any category of ordinary insurance issued on female risks, adjusted premiums and present values may be calculated according to an age not more than three (3) years younger than the actual age of the insured, and the calculations for all policies of industrial insurance shall be made on the basis of the 1941 Standard Industrial Mortality Table. All calculations shall be made on the basis of the rate of interest, not exceeding three and one-half percent (3.5%) per annum, specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits.
(2) However, in calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than one hundred thirty percent (130%) of the rates of mortality according to the applicable table.
(3) Further, for insurance issued on a substandard basis, the calculation of any adjusted premiums and present values may be based on another table of mortality as may be specified by the insurer and approved by the commissioner.
Ark. Code Ann. § 23-81-207 Calculation of adjusted premiums and present values — Ordinary policies issued on or after operative date of § 23-81-213(b).
(a) In the case of ordinary policies issued on or after the operative date of § 23-81-213(b) as defined therein, all adjusted premiums and present values referred to in this subchapter shall be calculated on the basis of the Insurance Commissioner's 1958 Standard Ordinary Mortality Table and the rate of interest specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits.
(b) The rate of interest shall not exceed three and one-half percent (3.5%) per annum except that a rate of interest not exceeding five and one-half percent (5.5%) per annum may be used for policies issued on or after March 18, 1977, except that for any single premium whole life or endowment insurance policy, a rate of interest not exceeding six and one-half percent (6.5%) per annum may be used.
(c) For any category of ordinary insurance issued on female risks, adjusted premiums and present values may be calculated according to an age not more than six (6) years younger than the actual age of the insured.
(d) However, in calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the commissioner's 1958 Extended Term Insurance Table.
(e) Further, for insurance issued on a substandard basis, the calculation of any adjusted premiums and present values may be based on such other table of mortality as may be specified by the insurer and approved by the commissioner.
(f) This section shall not apply to ordinary policies issued on or after the operative date of § 23-81-213(d).
Ark. Code Ann. § 23-81-208 Calculation of adjusted premiums and present values — Industrial policies issued on or after operative date of § 23-81-213(c).
(a) In the case of industrial policies issued on or after the operative date of § 23-81-213(c) as defined therein, all adjusted premiums and present values referred to in this subchapter shall be calculated on the basis of the Insurance Commissioner's 1961 Standard Industrial Mortality Table and the rate of interest specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits.
(b) However, the rate of interest shall not exceed three and one-half percent (3.5%) per annum, except that a rate of interest not exceeding five and one-half percent (5.5%) per annum may be used for policies issued on or after March 18, 1977, except that for any single premium whole life or endowment insurance policy a rate of interest not exceeding six and one-half percent (6.5%) per annum may be used.
(c) However, in calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the commissioner's 1961 Industrial Extended Term Insurance Table.
(d) Further, for insurance issued on a substandard basis, the calculations of any adjusted premiums and present values may be based on such other table of mortality as may be specified by the insurer and approved by the commissioner.
(e) This section shall not apply to industrial policies issued on or after the operative date of § 23-81-213(d) as defined therein.
Ark. Code Ann. § 23-81-209 Calculation of adjusted premiums and present values — All policies issued on or after operative date of § 23-81-213(d).
(a)(1) This section shall apply to all policies issued on or after the operative date of § 23-81-213(d) as defined therein.
(2) Except as provided in subsection (g) of this section, the adjusted premiums for any policy shall be calculated on an annual basis and shall be the uniform percentage of the respective premiums specified in the policy for each policy year, excluding:
(A) Amounts payable as extra premiums to cover impairments or special hazards; and
(B) Any uniform annual contract charge or policy fee specified in the policy in a statement of the method to be used in calculating the cash surrender values and paid-up nonforfeiture benefits, that the present value, at the date of issue of the policy, of all adjusted premiums shall be equal to the sum of:
(i) The then-present value of the future guaranteed benefits provided for by the policy;
(ii) One percent (1%) of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first ten (10) policy years; and
(iii) One hundred twenty-five percent (125%) of the nonforfeiture net level premium as defined in this section.
(3) However, in applying the percentage specified in subdivision (a)(2)(B)(iii) of this section, no nonforfeiture net level premium shall be deemed to exceed four percent (4%) of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first ten (10) policy years.
(4) The date of issue of a policy for the purpose of this subchapter shall be the date as of which the rate age of the insured is determined.
(b) The nonforfeiture net level premium shall be equal to the present value, at the date of issue of the policy, of the guaranteed benefits provided for by the policy divided by the present value, at the date of issue of the policy, of an annuity of one (1) per annum, payable on the date of issue of the policy and on each anniversary of the policy on which a premium falls due.
(c) In the case of policies which cause on a basis guaranteed in the policy unscheduled changes in benefits or premiums, or which provide an option for changes in benefits or premiums other than a change to a new policy, the adjusted premiums and present values shall initially be calculated on the assumption that future benefits and premiums do not change from those stipulated at the date of issue of the policy. At the time of any change in the benefits or premiums, the future adjusted premiums, nonforfeiture net level premiums, and present values shall be recalculated on the assumption that future benefits and premiums do not change from those stipulated by the policy immediately after the change.
(d) Except as otherwise provided in subsection (g) of this section, the recalculated future adjusted premiums for any policy shall be a uniform percentage of the respective future premiums specified in the policy for each policy year, excluding amounts payable as extra premiums to cover impairments and special hazards, and also excluding any uniform annual contract charge or policy fee specified in the policy in a statement of the method to be used in calculating the cash surrender values and paid-up nonforfeiture benefits, that the present value, at the time of change to the newly defined benefits or premiums, of all future adjusted premiums shall be equal to the excess of:
(1) The sum of the then-present value of the then-future guaranteed benefits provided for by the policy and the additional expense allowance, if any; over
(2) The then-cash surrender value, if any, or present value of any paid-up nonforfeiture benefit under the policy.
(e) The additional expense allowance, at the time of the change to the newly defined benefits or premiums, shall be the sum of:
(1) One percent (1%) of the excess, if positive, of the average amount of insurance at the beginning of each of the first ten (10) policy years subsequent to the change over the average amount of insurance prior to the change at the beginning of each of the first ten (10) policy years subsequent to the time of the most recent previous change, or, if there has been no previous change, the date of issue of the policy; and
(2) One hundred twenty-five percent (125%) of the increase, if positive, in the nonforfeiture net level premium.
(f) The recalculated nonforfeiture net level premium shall be equal to the result obtained by dividing subdivisions (d)(1) and (2) of this section when:
(1) Subdivision (d)(2) of this section equals the sum of:
(A) The nonforfeiture net level premium applicable prior to the change multiplied by the present value of an annuity of one (1) per annum payable on each anniversary of the policy on or subsequent to the date of the change on which a premium would have fallen due had the change not occurred; and
(B) The present value of the increase in future guaranteed benefits provided by the policy;
(2) Subdivision (d)(2) of this section equals the present value of an annuity of one (1) per annum payable on each anniversary of the policy on or subsequent to the date of change on which a premium falls due.
(g) Notwithstanding any other provisions of this section to the contrary, in the case of a policy issued on a substandard basis which provides reduced graded amounts of insurance so that, in each policy year, the policy has the same tabular mortality cost as an otherwise similar policy issued on the standard basis which provides higher uniform amounts of insurance, adjusted premiums and present values for the substandard policy may be calculated as if it were issued to provide higher uniform amounts of insurance on the standard basis.
(h)(1) All adjusted premiums and present values referred to in this subchapter shall:
(A) For all policies of ordinary insurance, be calculated on the basis of the Commissioner's 1980 Standard Ordinary Mortality Table or at the election of the insurer for any one (1) or more specified plans of life insurance, the Commissioner's 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors;
(B) For all policies of industrial insurance, be calculated on the basis of the Commissioner's 1961 Standard Industrial Mortality Table; and
(C) For all policies issued in a particular calendar year, be calculated on the basis of a rate of interest not exceeding the nonforfeiture interest rate as defined in this section, for policies issued in that calendar year.
(2) However:
(A) At the option of the insurer, calculations for all policies issued in a particular calendar year may be made on the basis of a rate of interest not exceeding the nonforfeiture interest rate, as defined in this subchapter, for policies issued in the immediately preceding calendar year;
(B) Under any paid-up nonforfeiture benefit, including any paid-up dividend additions, any cash surrender value available whether or not required by § 23-81-203 shall be calculated on the basis of the mortality table and rate of interest used in determining the amount of the paid-up nonforfeiture benefit and paid-up dividend additions, if any;
(C) An insurer may calculate the amount of any guaranteed paid-up nonforfeiture benefit including any paid-up additions under the policy on the basis of an interest rate no lower than that specified in the policy for calculating cash surrender values;
(D) In calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the Commissioner's 1980 Extended Term Insurance Table for policies of ordinary insurance and not more than the Commissioner's 1961 Industrial Extended Terms Insurance Table for policies of industrial insurance;
(E) For insurance issued on a substandard basis, the calculation of any adjusted premiums and present values may be based on appropriate modifications of the aforementioned tables;
(F)(i) For a policy issued before the operative date of the valuation manual, any Commissioner's Standard Ordinary Mortality Table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by rule promulgated by the Insurance Commissioner for use in determining the minimum nonforfeiture standard may be substituted for the 1980 Commissioner's Standard Ordinary Mortality Table with or without Ten-Year Select Mortality Factors or for the 1980 Commissioner's Extended Term Insurance Table.
(ii) For a policy issued on or after the operative date of the valuation manual, the valuation manual shall provide the Commissioner's Standard Ordinary Mortality Table for use in determining the minimum nonforfeiture standard that may be substituted for the 1980 Commissioner's Standard Ordinary Mortality Table with or without Ten-Year Select Mortality Factors or for the 1980 Commissioner's Extended Term Insurance Table.
(iii) If the Insurance Commissioner approves by rule any Commissioner's Standard Ordinary Mortality Table adopted by the National Association of Insurance Commissioners for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the valuation manual, then that minimum nonforfeiture standard shall supersede the minimum nonforfeiture standard provided by the valuation manual;
(G)(i) For a policy issued before the operative date of the valuation manual, any Commissioner's Standard Industrial Mortality Table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by rule promulgated by the Insurance Commissioner for use in determining the minimum nonforfeiture standard may be substituted for the 1961 Commissioner's Standard Industrial Mortality Table or the 1961 Commissioner's Industrial Extended Term Insurance Table.
(ii) For a policy issued on or after the operative date of the valuation manual, the valuation manual shall provide the Commissioner's Standard Industrial Mortality Table for use in determining the minimum nonforfeiture standard that may be substituted for the 1961 Commissioner's Standard Industrial Mortality Table or the 1961 Commissioner's Industrial Extended Term Insurance Table.
(iii) If the Insurance Commissioner approves by rule any Commissioner's Standard Industrial Mortality Table adopted by the National Association of Insurance Commissioners for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the valuation manual, then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard provided by the valuation manual;
(H)(i) For a policy issued before the operative date of the valuation manual, the nonforfeiture interest rate per annum for any policy issued in a particular calendar year shall be equal to one hundred twenty-five percent (125%) of the calendar year statutory valuation interest rate for the policy as defined in this subchapter, rounded to the nearest one-quarter of one percent (0.25%), provided the nonforfeiture interest rate shall not be less than four percent (4%).
(ii) For a policy issued on and after the operative date of the valuation manual, the nonforfeiture interest rate per annum for any policy issued in a particular calendar year shall be provided by the valuation manual; and
(I) Notwithstanding any other provision in this code to the contrary, any refiling of nonforfeiture values or their methods of computation for any previously approved policy form which involves only a change in the interest rate or mortality table used to compute nonforfeiture values shall not require refiling of any other provisions of that policy form.
Ark. Code Ann. § 23-81-210 Calculation of future adjusted premiums.
(a) In the case of any plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurer based on then estimates of future experience, or in the case of any plan of life insurance which is of such a nature that minimum values cannot be determined by the methods described in §§ 23-81-203 — 23-81-209:
(1) The Insurance Commissioner must be satisfied that the benefits provided under the plan are substantially as favorable to policyholders and insureds as the minimum benefits otherwise required by §§ 23-81-203 — 23-81-209;
(2) The commissioner must be satisfied that the benefits and the pattern of premiums of that plan are not such as to mislead prospective policyholders or insureds; and
(3) The cash surrender values and paid-up nonforfeiture benefits provided by the plan must not be less than the minimum values and benefits required for the plan computed by a method consistent with the principles of this subchapter, as determined by rules promulgated by the commissioner.
(b) Notwithstanding any other provision in the laws of the state, any policy, contract, or certificate providing life insurance under any plan must be affirmatively approved by the commissioner before it can be marketed, issued, delivered, or used in this state.
Ark. Code Ann. § 23-81-211 Calculation of certain cash surrender values and nonforfeiture benefits in event of default.
(a) Any cash surrender value and any paid-up nonforfeiture benefit, available under the policy in the event of default in a premium payment due at any time other than on the policy anniversary, shall be calculated with allowance for the lapse of time and the payment of fractional premiums beyond the last preceding policy anniversary.
(b) All values referred to in §§ 23-81-204 — 23-81-209 may be calculated upon the assumption that any death benefit is payable at the end of the policy year of death.
(c) The net value of any paid-up additions, other than paid-up term additions, shall be not less than the amounts used to provide the additions.
(d) Notwithstanding the provisions of § 23-81-204, additional benefits are payable:
(1) In the event of death or dismemberment by accident or accidental means;
(2) In the event of total and permanent disability;
(3) As reversionary annuity or deferred benefits;
(4) As term insurance benefits provided by a rider or supplemental policy provision to which, if issued as a separate policy, this subchapter would not apply;
(5) As term insurance on the life of a child or on the lives of children provided in a policy on the life of a parent of the child, if the term insurance expires before the child is twenty-six (26) years of age, is uniform in amount after the child's age is one (1) year, and has not become paid up by reason of the death of a parent of the child; and
(6) As other policy benefits additional to life insurance and endowment benefits, and premiums for all such additional benefits, shall be disregarded in ascertaining cash surrender values and nonforfeiture benefits required by this subchapter, and no additional benefits shall be required to be included in any paid-up nonforfeiture benefits.
Ark. Code Ann. § 23-81-212 Calculation of cash surrender value in event of default.
(a) In addition to all other applicable sections of this subchapter, this section shall apply to all policies issued on or after January 1, 1985.
(b) Any cash surrender value available under the policy in the event of default in a premium payment due on any policy anniversary shall be in an amount which does not differ by more than two-tenths of one percent (0.2%) of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first ten (10) policy years, from the sum of:
(1) The greater of zero (0) and the basic cash value specified in subsection (c) of this section; and
(2) The present value of any existing paid-up additions, less the amount of any indebtedness to the company under the policy.
(c)(1) The basic cash value shall be equal to the present value, on the anniversary, of the future guaranteed benefits which would have been provided for by the policy, excluding any existing paid-up additions and before deduction of any indebtedness to the insurer, if there had been no default, less the then-present value of the nonforfeiture factors, as defined in subsection (d) of this section, corresponding to premiums which would have fallen due on and after the anniversary.
(2) However, the effects on the basic cash value of supplemental life insurance or annuity benefits or of family coverage, as described in § 23-81-204, shall be the same as are the effects specified in that section on the cash surrender values defined therein.
(d) The nonforfeiture factor for each policy year shall be an amount equal to a percentage of the adjusted premium for the policy year, as defined in § 23-81-209. Except as is required by subsection (e) of this section, the percentage must be:
(1) The same percentage for each policy year between the second policy anniversary and the later of the fifth policy anniversary and the first policy anniversary at which there is available under the policy a cash surrender value in an amount, before including any paid-up additions and before deducting any indebtedness, of at least two-tenths of one percent (0.2%) of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first ten (10) policy years; and
(2) Such that no percentage after the later of the two (2) policy anniversaries specified in subdivision (d)(1) of this section, and no percentage may apply to fewer than five (5) consecutive policy years.
(e) However, no basic cash value may be less than the value which would be obtained if the adjusted premiums for the policy, as defined in § 23-81-209, were substituted for the nonforfeiture factors in the calculation of the basic cash value.
(f)(1) All adjusted premiums and present values referred to in this section for a particular policy shall be calculated on the same mortality and interest bases as are used in demonstrating the policy's compliance with the other sections of this subchapter.
(2) The cash surrender values referred to in this section shall include any endowment benefits provided for by the policy.
(g)(1) Any cash surrender value available other than in the event of default in a premium payment due on a policy anniversary and the amount of any paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment shall be determined in manners consistent with the manners specified for determining the analogous minimum amounts in §§ 23-81-203 — 23-81-205, 23-81-209, and 23-81-211.
(2) The amounts of any cash surrender values and of any paid-up nonforfeiture benefits granted in connection with additional benefits such as those listed in § 23-81-211(d) shall conform with the principles of this section.
Ark. Code Ann. § 23-81-213 Effective dates.
(a) After January 1, 1960, any insurer may file with the Insurance Commissioner a written notice of its election to comply after a specified date before January 1, 1961. After the filing of the notice and then upon the specified date, which shall be the operative date for the insurer, this subsection shall become operative with respect to the policies thereafter issued by such an insurer. If an insurer makes no election, the operative date of this subsection for the insurer shall be January 1, 1961.
(b) After March 16, 1961, any insurer may file with the commissioner a written notice of its election to comply after a specified date before January 1, 1966. After the filing of the notice and then upon the specified date, which shall be the operative date for the insurer, this subsection shall become operative with respect to the policies thereafter issued by the insurer. If an insurer makes no election, the operative date of this subsection for the insurer shall be January 1, 1966.
(c) After January 1, 1960, any insurer may file with the commissioner a written notice of its election to comply after a specified date before January 1, 1969. After the filing of the notice and then upon the specified date, which shall be the operative date for the insurer, this subsection shall become operative with respect to the policies thereafter issued by such an insurer. If an insurer makes no election, the operative date of this subsection for the insurer shall be January 1, 1969.
(d) After January 1, 1982, any insurer may file with the commissioner a written notice of its election to comply after a specified date before January 1, 1989. After the filing of the notice and then upon the specified date, which shall be the operative date for the insurer, this subsection shall become operative with respect to the policies thereafter issued by the insurer. If an insurer makes no election, the operative date of this subsection for the insurer shall be January 1, 1989.
(e) After January 1, 1982, any insurer may file with the commissioner a written notice of its election to comply after a specified date before January 1, 1985. After the filing of the notice and then upon the specified date, which shall be the operative date for the insurer, this subsection shall become operative with respect to the policies thereafter issued by the insurer. If any insurer makes no election, the operative date of this subsection shall be January 1, 1985.
Ark. Code Ann. § 23-81-301 Title.
This subchapter shall be known as the “Standard Nonforfeiture Law for Individual Deferred Annuities”.
Ark. Code Ann. § 23-81-302 Applicability.
This subchapter shall not apply to any reinsurance, group annuity 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, premium deposit fund, variable annuity, investment annuity, immediate annuity, any deferred annuity contract after annuity payments have commenced, or reversionary annuity, nor to any contract which shall be delivered outside this state through an agent or other representative of the insurer issuing the contract.
Ark. Code Ann. § 23-81-303 Nonforfeiture requirements.
(a) In the case of contracts issued on or after the operative date of this subchapter as defined in § 23-81-312, no contract of annuity, except as stated in § 23-81-302, shall be delivered or issued for delivery in this state unless it contains in substance the following provisions or corresponding provisions, which in the opinion of the Insurance Commissioner are at least as favorable to the contract holder, upon cessation of payment of considerations under the contract:
(1) That upon cessation of payment of considerations under a contract or upon the written request of the contract owner, the insurer will grant a paid-up annuity benefit on a plan stipulated in the contract of such value as is specified in §§ 23-81-305 — 23-81-308 and 23-81-310;
(2)(A) If a contract provides for a lump-sum settlement at maturity or at any other time, that upon surrender of the contract at or prior to the commencement of any annuity payments, the insurer will pay in lieu of any paid-up annuity benefit a cash surrender benefit of such amount as is specified in §§ 23-81-305, 23-81-306, 23-81-308, and 23-81-310.
(B) The insurer may reserve the right to defer the payment of the cash surrender benefit for a period not to exceed six (6) months after demand therefor with surrender of the contract after making written request and receiving written approval of the commissioner. The request shall address the necessity and equitability of the deferral to all policyholders;
(3) A statement of the mortality table, if any, and interest rates used in calculating any minimum paid-up annuity, cash surrender, or death benefits that are guaranteed under the contract, together with sufficient information to determine the amounts of the benefits; and
(4) A statement that any paid-up annuity, cash surrender, or death benefits that may be available under the contract are not less than the minimum benefits required by any statute of the state in which the contract is delivered and an explanation of the manner in which such benefits are altered by the existence of any additional amounts credited by the insurer to the contract, any indebtedness to the insurer on the contract, or any prior withdrawals from or partial surrenders of the contract.
(b) Notwithstanding the requirements of this section, any deferred annuity contract may provide that if no considerations have been received under a contract for a period of two (2) full years and the portion of the paid-up annuity benefit at maturity on the plan stipulated in the contract arising from consideration paid prior to the period would be less than twenty dollars ($20.00) monthly, the insurer may at its option terminate the contract by payment in cash of the then-present value of the portion of the paid-up annuity benefit, calculated on the basis of the mortality table, if any, and interest rate specified in the contract for determining the paid-up annuity benefit, and by the payment shall be relieved of any further obligation under the contract.
Ark. Code Ann. § 23-81-304 Minimum values.
(a)(1) Prior to July 15, 2006, a company may elect to comply with the provisions of:
(A) Subsections (b) and (c) of this section; or
(B) Subsections (d)-(f) of this section.
(2) On and after July 15, 2006, all companies shall comply with the provisions of subsections (d)-(f) of this section.
(b) The minimum values as specified in §§ 23-81-305 — 23-81-308 and 23-81-310 of any paid-up annuity, cash surrender, or death benefits available under an annuity contract shall be based upon minimum nonforfeiture amounts as defined in this subchapter.
(c)(1)(A) With respect to contracts providing for flexible considerations, the minimum nonforfeiture amount at any time at or prior to the commencement of any annuity payments shall be equal to an accumulation up to such time at a rate of interest of one and one-half percent (1.5%) per annum of percentages of the net considerations paid prior to the time, decreased by the sum of:
(i) Any prior withdrawals from or partial surrenders of the contract accumulated at a rate of interest of one and one-half percent (1.5%) per annum; and
(ii) The amount of any indebtedness to the insurer on the contract, including interest due and accrued and increased by any existing additional amounts credited by the insurer to the contract.
(B)(i) The net considerations for a given contract year used to define the minimum nonforfeiture amount shall be an amount not less than zero (0) and shall be equal to the corresponding gross considerations credited to the contract during that contract year less an annual contract charge of thirty dollars ($30.00) and less a collection charge of one dollar and twenty-five cents ($1.25) per consideration credited to the contract during that contract year.
(ii) The percentages of net considerations shall be sixty-five percent (65%) of the net consideration for the first contract year and eighty-seven and one-half percent (87.5%) of the net considerations for the second and later contract years.
(iii) Notwithstanding the provisions of subdivision (c)(1)(B)(ii) of this section, the percentage shall be sixty-five percent (65%) of the portion of the total net consideration for any renewal contract year that exceeds by not more than two (2) multiplied by the sum of those portions of the net considerations in all prior contract years for which the percentage was sixty-five percent (65%).
(2) With respect to contracts providing for fixed scheduled considerations, minimum nonforfeiture amounts shall be calculated on the assumption that considerations are paid annually in advance and shall be defined as for contracts with flexible considerations that are paid annually, with two (2) exceptions:
(A) The portion of the net consideration for the first contract year to be accumulated shall be the sum of sixty-five percent (65%) of the net consideration for the first contract year plus twenty-two and one-half percent (22.5%) of the excess of the net considerations for the first contract year over the lesser of the net considerations for the second and third contract years; and
(B) The annual contract charge shall be the lesser of thirty dollars ($30.00) or ten percent (10%) of the gross annual consideration.
(3) With respect to contracts providing for a single consideration, minimum nonforfeiture amounts shall be defined as for contracts with flexible considerations, except that the percentage of net consideration used to determine the minimum nonforfeiture amount shall be equal to ninety percent (90%) and the net consideration shall be the gross consideration less a contract charge of seventy-five dollars ($75.00).
(d) On and after July 15, 2006, the minimum values as specified in §§ 23-81-305 — 23-81-308 and 23-81-310 of any paid-up annuity, cash surrender, or death benefits available under an annuity contract shall be based upon minimum nonforfeiture amounts as defined in subsections (e) and (f) of this section.
(e)(1)(A) The minimum nonforfeiture amount at any time at or prior to the commencement of any annuity payments shall be equal to an accumulation up to such time at a rate of interest as indicated in subdivisions (e)(2) and (3) of this section of the net considerations paid prior to the time, decreased by the sum of:
(i) Any prior withdrawals from or partial surrenders of the contract accumulated at a rate of interest as indicated in subdivisions (e)(2) and (3) of this section;
(ii) An annual contract charge of fifty dollars ($50.00) accumulated at a rate of interest as indicated in subdivisions (e)(2) and (3) of this section;
(iii) Any premium tax paid by the company for the contract accumulated at a rate of interest as indicated in subdivisions (e)(2) and (3) of this section; and
(iv) The amount of an indebtedness to the insurer on the contract, including interest due and accrued.
(B) The net considerations for a given contract year used to define the minimum nonforfeiture amount shall be an amount equal to eighty-seven and one-half percent (87.5%) of gross considerations credited to the contract during that contract year.
(2) The interest rate used in determining minimum nonforfeiture amounts shall be an annual rate of interest equal to the lesser of:
(A) Three percent (3%) per annum; or
(B) The following rate, which shall be specified in the contract if the interest rate is reset:
(i) The five-year Constant Maturity Treasury Rate reported by the Federal Reserve System as of a date or average over a period rounded to the nearest one-twentieth of one percent (.05%) that is specified in the contract no longer than fifteen (15) months before the contract issue date or redetermination date under subdivision (e)(3) of this section, reduced by one hundred twenty-five (125) basis points; and
(ii) The resulting interest rate shall not be less than fifteen-hundredths of one percent (0.15%).
(3)(A) The interest rate under subdivision (e)(2) of this section shall apply for an initial period and may be redetermined for additional periods.
(B)(i) The redetermination date, basis, and period, if any, shall be stated in the contract.
(ii) The basis is the date or average over a specified period that produces the value of the five-year Constant Maturity Treasury Rate to be used at each redetermination date.
(f)(1) During the period or term that a contract provides substantive participation in an equity indexed benefit, it may increase the reduction described in subdivisions (e)(2) and (3) of this section by up to an additional one hundred (100) basis points to reflect the value of the equity index benefit.
(2) The present value of the additional reduction at the contract issue date and at each redetermination date shall not exceed the market value of the benefit.
(3)(A) The Insurance Commissioner may require a demonstration that the present value of the additional reduction does not exceed the market value of the benefit.
(B) If no demonstration is acceptable to the commissioner, the commissioner may disallow or limit the additional reduction.
(g) The commissioner may adopt rules to implement the provisions of subsection (d) of this section and to provide for further adjustments to the calculation of minimum nonforfeiture amounts for contracts that provide substantive participation in an equity index benefit and for other contracts for which the commissioner determines adjustments are justified.
Ark. Code Ann. § 23-81-305 Computation of present value.
(a) Any paid-up annuity benefit available under a contract shall be such that its present value on the date annuity payments are to commence is at least equal to the minimum nonforfeiture amount on that date.
(b) The present value shall be computed using the mortality table, if any, and the interest rate specified in the contract for determining the minimum paid-up annuity benefits guaranteed in the contract.
Ark. Code Ann. § 23-81-306 Calculation of cash surrender values.
(a) For contracts which provide cash surrender benefits, the cash surrender benefits available prior to maturity shall not be less than the present value as of the date of surrender of that portion of the maturity value of the paid-up annuity benefit which would be provided under the contract at maturity arising from considerations paid prior to the time of cash surrender reduced by the amount appropriate to reflect any prior withdrawals from or partial surrenders of the contract, the present value being calculated on the basis of an interest rate not more than one percent (1%) higher than the interest rate specified in the contract for accumulating the net considerations to determine the maturity value, decreased by the amount of any indebtedness to the company on the contract, including interest due and accrued, and increased by any existing additional amounts credited by the insurer to the contract.
(b) In no event shall any cash surrender benefit be less than the minimum nonforfeiture amount at that time.
(c) The death benefit under the contracts shall be at least equal to the cash surrender benefit.
Ark. Code Ann. § 23-81-307 Calculation of paid-up annuity benefits.
(a) For contracts which do not provide cash surrender benefits, the present value of any paid-up annuity benefit available as a nonforfeiture option at any time prior to maturity shall not be less than the present value of that portion of the maturity value of the paid-up annuity benefit provided under the contract arising from considerations paid prior to the time the contract is surrendered in exchange for, or changed to, a deferred paid-up annuity. The present value shall be calculated for the period prior to the maturity date on the basis of the interest rate specified in the contract for accumulating the net considerations to determine the maturity value and increased by any existing additional amounts credited by the insurer to the contract.
(b) For contracts which do not provide any death benefits prior to the commencement of any annuity payments, the present values shall be calculated on the basis of the interest rate and the mortality table specified in the contract for determining the maturity value of the paid-up annuity benefit.
(c) However, in no event shall the present value of a paid-up annuity benefit be less than the minimum nonforfeiture amount at that time.
Ark. Code Ann. § 23-81-308 Maturity date.
(a) For the purpose of determining the benefits calculated under §§ 23-81-306 and 23-81-307, in the case of annuity contracts under which an election may be made to have annuity payments commence at optional maturity dates, the maturity date shall be deemed to be the latest date for which election shall be permitted by the contract. This date shall not be deemed to be later than the anniversary of the contract next following the annuitant's seventieth birthday or the tenth anniversary of the contract, whichever is later.
(b) This section does not apply to annuities funding funeral and related expenses.
Ark. Code Ann. § 23-81-309 Disclosure of limited death benefits.
Any contract which does not provide cash surrender benefits or does not provide death benefits at least equal to the minimum nonforfeiture amount prior to the commencement of any annuity payments shall include a statement in a prominent place in the contract that such benefits are not provided.
Ark. Code Ann. § 23-81-310 Inclusion of lapse-of-time considerations.
Any paid-up annuity, cash surrender, or death benefits available at any time, other than on the contract anniversary under any contract with fixed scheduled considerations, shall be calculated with allowance for the lapse of time and the payment of any scheduled considerations beyond the beginning of the contract year in which cessation of payment of considerations under the contract occurs.
Ark. Code Ann. § 23-81-311 Proration of values — Additional benefits.
(a) For any contract which provides, within the same contract by rider or supplemental contract provision, both annuity benefits and life insurance benefits that are in excess of the greater of cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits, if any, for the life insurance portion shall be computed as if each portion were a separate contract.
(b)(1) Notwithstanding the provisions of §§ 23-81-305 — 23-81-308 and 23-81-310, additional benefits payable:
(A) In the event of total and permanent disability;
(B) As reversionary annuity or deferred reversionary annuity benefits; or
(C) As other policy benefits additional to life insurance, endowment, and annuity benefits, and considerations for all the additional benefits,
(2) The inclusion of additional benefits shall not be required in any paid-up benefit, unless the additional benefits separately would require minimum nonforfeiture amounts, paid-up annuity, cash surrender, and death benefits.
shall be disregarded in ascertaining the minimum nonforfeiture amounts, paid-up annuity, cash surrender, and death benefits that may be required by this subchapter.
Ark. Code Ann. § 23-81-312 Operative date.
(a) After June 17, 1981, any insurer may file with the Insurance Commissioner a written notice of its election to comply with the provisions of this subchapter after a specified date before January 1, 1983.
(b) After the filing of the notice, then upon the specified date, which shall be the operative date of this subchapter for the insurer, this subchapter shall become operative with respect to annuity contracts thereafter issued by the insurer.
(c) If an insurer makes no election, the operative date of this subchapter for the insurer shall be January 1, 1983.
Ark. Code Ann. § 23-81-313 Rules.
The Insurance Commissioner may adopt rules to implement the provisions of this subchapter.
Ark. Code Ann. § 23-81-401 Exceptions from Arkansas Insurance Code.
(a)(1) All pertinent provisions of the Arkansas Insurance Code shall apply to separate accounts and contracts relating to those accounts, except:
(A) Sections 23-81-122, 23-81-127, and 23-81-128 in the case of a variable annuity contract;
(B) Sections 23-81-104, 23-81-109 — 23-81-111, and the Standard Nonforfeiture Law for Life Insurance, § 23-81-201 et seq., in the case of a variable life insurance policy;
(C) Section 23-83-109 in the case of group variable life insurance; and
(D) As otherwise provided in this subchapter.
(2) Any group or individual variable life insurance contract or annuity contract delivered or issued for delivery in this state shall contain grace, reinstatement, and nonforfeiture provisions appropriate to the contract.
(b) 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 guaranteed.
Ark. Code Ann. § 23-81-402 Provisions for allocation of income.
A domestic life insurance company may establish one (1) or more separate accounts and may allocate thereto amounts including, without limitation, proceeds applied under optional modes of settlement or under dividend options to provide for life insurance or annuities, and benefits incidental thereto, payable in fixed or variable amounts, or subject to a market value adjustment as provided in rules adopted by the Insurance Commissioner, subject to the following:
(1) The income, gains, and losses, realized or unrealized, from assets allocated to a separate account shall be credited to or charged against the account without regard to other income, gains, or losses of the company or to any other separate account of the company;
(2) Except as may be provided with respect to reserves for guaranteed benefits and funds referred to in subdivision (3) of this section, amounts allocated to any separate account and accumulations thereon may be invested and reinvested without regard to any requirements or limitations prescribed by the laws of this state governing the investments of life insurance companies. The investments in the separate accounts shall not be considered when applying the investment limitations otherwise applicable to the investments of the company;
(3) Except with the approval of the commissioner and under such conditions as to investments and other matters as the commissioner may prescribe which shall recognize the guaranteed nature of the benefits provided, reserves for benefits guaranteed as to dollar amount and duration and funds guaranteed as to principal amount or stated rate of interest shall not be maintained in a separate account;
(4)(A) Unless otherwise approved by the commissioner, assets allocated to a separate account shall be valued at their market value on the date of valuation, with the exception of separate accounts supporting modified guaranteed annuities which shall be valued as provided in such rules as the commissioner shall adopt, or, if there is no readily available market, then as provided under the terms of the contract or the rules or other written agreement applicable to the separate account.
(B) However, unless approved by the commissioner, the portion of any of the assets of the separate account equal to the company's reserve liability with regard to the guaranteed benefits and funds referred to in subdivision (3) of this section shall be valued in accordance with the rules otherwise applicable to the company's assets;
(5)(A) Amounts allocated to a separate account in the exercise of the power granted by this subchapter shall be owned by the company. The company shall not be, nor hold itself out to be, a trustee with respect to the amounts.
(B)(i) If and to the extent so provided under the applicable contracts, that portion of the assets of any such separate account equal to the reserves and other contract liabilities with respect to the account shall not be chargeable with liabilities arising out of any other business the company may conduct.
(ii) However, in no event shall the assets in a separate account for support of modified guaranteed annuity contracts subject to a market adjustment as provided in this section be immune from liabilities arising out of any other business the company conducts;
(6)(A) No sale, exchange, or other transfer of assets may be made by a company between any of its separate accounts or between any other investment account and one (1) or more of its separate accounts unless, 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 contracts with respect to the separate account to which the transfer is made, and unless such a transfer, whether into or from a separate account, is made by a transfer of cash or by a transfer of securities having a readily determinable market value, provided that the transfer of securities is approved by the commissioner.
(B) The commissioner may approve other transfers among accounts if, in the commissioner's opinion, the transfers would not be inequitable; and
(7) To the extent the company deems it necessary to comply with any applicable federal or state laws, the company, with respect to any separate account, including, without limitation, any separate account which is a management investment company or a unit investment trust, may provide for persons having an interest therein appropriate voting and other rights and special procedures for the conduct of the business of the account, including, without limitation, special rights and procedures relating to investment policy, investment advisory services, selection of independent public accountants, and the selection of a committee, the members of which need not be otherwise affiliated with the company, to manage the business of the account.
Ark. Code Ann. § 23-81-403 Contract provisions required.
(a) Any contract providing benefits payable in variable amounts delivered or issued for delivery in this state shall contain a statement of the essential features of the procedures to be followed by the insurance company in determining the dollar amount of the variable benefits.
(b) Any contract under which the benefits vary to reflect investment experience, including a group contract and any certificate in evidence of variable benefits issued thereunder, shall state that the dollar amount will so vary and shall contain on its first page a statement to the effect that the benefits thereunder are on a variable basis.
Ark. Code Ann. § 23-81-404 Licensure requirements for delivery of contracts.
(a) No company shall deliver or issue for delivery within this state variable contracts unless it is licensed or organized to do a life insurance or annuity business in this state and unless the Insurance Commissioner is satisfied that its condition or method of operation in connection with the issuance of such contracts will not render its operation hazardous to the public or its policyholders in this state.
(b)(1) In this connection, the commissioner shall consider among other things:
(A) The history and financial condition of the company;
(B) The character, responsibility, and fitness of the officers and directors of the company; and
(C) The law and regulation under which the company is authorized in the state of domicile to issue variable contracts. The state of entry of an alien company shall be deemed its place of domicile for this purpose.
(2) If the company is a subsidiary of an admitted life insurance company or affiliated with such a company through common management or ownership, it may be deemed by the commissioner to have met the provisions of this section if either it or the parent or the affiliated company meets the requirements of this subsection.
Ark. Code Ann. § 23-81-405 Insurance Commissioner's authority to regulate.
Notwithstanding any other provision of law, the Insurance Commissioner shall have sole authority to regulate the issuance and sale of variable contracts and to issue such reasonable rules and regulations as may be appropriate to carry out the purposes and provisions of this subchapter.
Ark. Code Ann. § 23-81-701 Title.
This subchapter shall be known and may be cited as the “Structured Settlement Protection Act”.
Ark. Code Ann. § 23-81-702 Definitions.
As used in this subchapter:
(1) “Annuity issuer” means an insurer that has issued a contract to fund periodic payments under a structured settlement;
(2) “Dependents” includes a payee's spouse and minor children and all other persons for whom the payee is legally obligated to provide support, including alimony;
(3) “Discounted present value” means the present value of future payments determined by discounting such payments to the present using the most recently published applicable federal rate for determining the present value of an annuity, as issued by the Internal Revenue Service;
(4) “Gross advance amount” means the sum payable to the payee or for the payee's account as consideration for a transfer of structured settlement payment rights before any reductions for transfer expenses or other deductions are made from the consideration;
(5) “Independent professional advice” means advice of an attorney, certified public accountant, actuary, or other licensed professional adviser;
(6) “Interested parties” means, with respect to any structured settlement:
(A) The payee;
(B) Any beneficiary irrevocably designated under the annuity contract to receive payments following the payee's death;
(C) The annuity issuer;
(D) The structured settlement obligor; and
(E) Any other party that has continuing rights or obligations under the structured settlement;
(7) “Net advance amount” means the gross advance amount less the aggregate amount of the actual and estimated transfer expenses required to be disclosed under § 23-81-703(5);
(8) “Payee” means an individual who is receiving tax-free payments under a structured settlement and proposes to make a transfer of payment rights under the structured settlement;
(9) “Periodic payments” includes both recurring payments and scheduled future lump-sum payments;
(10) “Qualified assignment agreement” means an agreement providing for a qualified assignment within the meaning of section 130 of the Internal Revenue Code of 1986, as in existence on January 1, 2005;
(11) “Responsible administrative authority” means, with respect to a structured settlement, any government authority vested by law with exclusive jurisdiction over the settled claim resolved by the structured settlement;
(12) “Settled claim” means the original tort claim or workers' compensation claim resolved by a structured settlement;
(13) “Structured settlement” means an arrangement for periodic payment of damages for personal injuries or sickness established by settlement or judgment in resolution of a tort claim or for periodic payments in settlement of a workers' compensation claim;
(14) “Structured settlement agreement” means the agreement, judgment, stipulation, or release embodying the terms of a structured settlement;
(15) “Structured settlement obligor” means, with respect to any structured settlement, the party that has the continuing obligation to make periodic payments to the payee under a structured settlement agreement or a qualified assignment agreement;
(16) “Structured settlement payment rights” means rights to receive periodic payments under a structured settlement, whether from the structured settlement obligor or the annuity issuer, when:
(A) The payee is domiciled in or the domicile or principal place of business of the structured settlement obligor or the annuity issuer is located in this state;
(B) The structured settlement agreement was approved by a court or responsible administrative authority in this state; or
(C) The structured settlement agreement is expressly governed by the laws of this state;
(17) “Terms of the structured settlement” includes, with respect to any structured settlement:
(A) The terms of the structured settlement agreement;
(B) The annuity contract;
(C) Any qualified assignment agreement; and
(D) Any order or other approval of any court or responsible administrative authority or other government authority that authorized or approved the structured settlement;
(18)(A) “Transfer” means any sale, assignment, pledge, hypothecation, or other alienation or encumbrance of structured settlement payment rights made by a payee for consideration.
(B) However, “transfer” does not include the creation or perfection of a security interest in structured settlement payment rights under a blanket security agreement entered into with an insured depository institution, in the absence of any action to redirect the structured settlement payments to the insured depository institution or an agent or successor in interest, or otherwise to enforce the blanket security interest against the structured settlement payment rights;
(19) “Transfer agreement” means the agreement providing for a transfer of structured settlement payment rights;
(20)(A) “Transfer expenses” means all expenses of a transfer that are required under the transfer agreement to be paid by the payee or deducted from the gross advance amount, including, without limitation:
(i) Court filing fees;
(ii) Attorney's fees;
(iii) Escrow fees;
(iv) Lien recordation fees;
(v) Judgment and lien search fees;
(vi) Finders' fees;
(vii) Commissions; and
(viii) Other payments to a broker or other intermediary.
(B) “Transfer expenses” does not include preexisting obligations of the payee payable for the payee's account from the proceeds of a transfer; and
(21) “Transferee” means a party acquiring or proposing to acquire structured settlement payment rights through a transfer.
Ark. Code Ann. § 23-81-703 Required disclosures to payee.
Not less than three (3) days prior to the date on which a payee signs a transfer agreement, the transferee shall provide to the payee a separate disclosure statement in bold type no smaller than fourteen (14) points, setting forth:
(1) The amounts and due dates of the structured settlement payments to be transferred;
(2) The aggregate amount of the payments;
(3) The discounted present value of the payments to be transferred, which shall be identified as the “calculation of current value of the transferred structured settlement payments under federal standards for valuing annuities”, and the amount of the applicable federal rate used in calculating the discounted present value;
(4) The gross advance amount;
(5) An itemized listing of all applicable transfer expenses, other than attorney's fees and related disbursements payable in connection with the transferee's application for approval of the transfer, and the transferee's best estimate of the amount of any such fees and disbursements;
(6) The net advance amount;
(7) The amount of any penalties or liquidated damages payable by the payee in the event of any breach of the transfer agreement by the payee; and
(8) A statement that the payee has the right to cancel the transfer agreement, without penalty or further obligation, not later than the third business day after the date the agreement is signed by the payee.
Ark. Code Ann. § 23-81-704 Approval of transfers of structured settlement payment rights.
No direct or indirect transfer of structured settlement payment rights shall be effective and no structured settlement obligor or annuity issuer shall be required to make any payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been approved in advance in a final court order or order of a responsible administrative authority based on express findings by the court or responsible administrative authority that:
(1) The transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependents;
(2) The payee has been advised in writing by the transferee to seek independent professional advice regarding the transfer and has either received the advice or knowingly waived the advice in writing; and
(3) The transfer does not contravene any applicable statute or the order of any court or other government authority.
Ark. Code Ann. § 23-81-705 Effects of transfer of structured settlement payment rights.
Following a transfer of structured settlement payment rights under this subchapter:
(1) The structured settlement obligor and the annuity issuer shall be discharged and released from all liability for the transferred payments as to all parties except the transferee;
(2) The transferee shall be liable to the structured settlement obligor and the annuity issuer:
(A) If the transfer contravenes the terms of the structured settlement, for any taxes incurred by such parties as a consequence of the transfer; and
(B) For any other liabilities or costs, including reasonable costs and attorney's fees, arising from compliance by the parties with the order of the court or responsible administrative authority or arising as a consequence of the transferee's failure to comply with this subchapter;
(3) Neither the annuity issuer nor the structured settlement obligor may be required to divide any periodic payment between the payee and any transferee or assignee or between two (2) or more transferees or assignees; and
(4) Any further transfer of structured settlement payment rights by the payee may be made only after compliance with all of the requirements of this subchapter.
Ark. Code Ann. § 23-81-706 Procedure for approval of transfers.
(a) An application under this subchapter for approval of a transfer of structured settlement payment rights shall be made by the transferee and may be brought:
(1) In the county in which:
(A) The payee resides; or
(B) The structured settlement obligor or the annuity issuer maintains its principal place of business; or
(2) In any court or before any responsible administrative authority which approved the structured settlement agreement.
(b) Not less than twenty (20) days prior to the scheduled hearing on any application for approval of a transfer of structured settlement payment rights under § 23-81-704, the transferee shall file with the court or responsible administrative authority and serve on all interested parties a notice of the proposed transfer and the application for its authorization, including with the notice:
(1) A copy of the transferee's application;
(2) A copy of the transfer agreement;
(3) A copy of the disclosure statement required under § 23-81-703;
(4) A listing of each of the payee's dependents and each dependent's age;
(5) Notification that any interested party is entitled to support, oppose, or otherwise respond to the transferee's application, either in person or by counsel, by submitting written comments to the court or responsible administrative authority or by participating in the hearing; and
(6)(A) Notification of:
(i) The time and place of the hearing; and
(ii) The manner in which and the time by which written responses to the application must be filed in order to be considered by the court or responsible administrative authority.
(B) The time by which written responses to the application must be filed shall be not less than twenty (20) days after service of the transferee's notice.
Ark. Code Ann. § 23-81-707 General provisions — Construction.
(a) The provisions of this subchapter may not be waived by any payee.
(b)(1) Any transfer agreement entered into on or after August 12, 2005, by a payee who resides in this state shall provide that disputes under the transfer agreement, including any claim that the payee has breached the agreement, shall be determined in and under the laws of the State of Arkansas.
(2) No transfer agreement shall authorize the transferee or any other party to confess judgment or consent to entry of judgment against the payee.
(c) No transfer of structured settlement payment rights shall extend to any payments that are life-contingent unless prior to the date on which the payee signs the transfer agreement, the transferee has established and has agreed to maintain procedures reasonably satisfactory to the annuity issuer and the structured settlement obligor for:
(1) Periodically confirming the payee's survival; and
(2) Giving the annuity issuer and the structured settlement obligor prompt written notice in the event of the payee's death.
(d) No payee who proposes to make a transfer of structured settlement payment rights shall incur any penalty, forfeit any application fee or other payment, or otherwise incur any liability to the proposed transferee or any assignee based on any failure of the transfer to satisfy the conditions of this subchapter.
(e) Nothing contained in this subchapter shall be construed to authorize any transfer of structured settlement payment rights in contravention of any law or to imply that any transfer under a transfer agreement entered into prior to August 12, 2005, is valid or invalid.
(f) Compliance with the requirements set forth in § 23-81-703 and fulfillment of the conditions set forth in § 23-81-704 shall be solely the responsibility of the transferee in any transfer of structured settlement payment rights, and neither the structured settlement obligor nor the annuity issuer shall bear any responsibility for or any liability arising from noncompliance with the requirements or failure to fulfill the conditions.
Ark. Code Ann. § 23-81-801 Short title.
This subchapter shall be known and may be cited as the “Life Settlements Act”.
Ark. Code Ann. § 23-81-802 Definitions.
As used in this subchapter:
(1) “Advertisement” means any written, electronic, or printed communication or any communication by means of recorded telephone messages or transmissions on radio, television, the Internet, or similar communications media, including film strips, motion pictures, and videos, published, disseminated, circulated, or placed before the public, directly or indirectly, to create an interest in or to induce a person to purchase or sell, assign, devise, bequest, or transfer the death benefit or ownership of a life insurance policy or an interest in a life insurance policy pursuant to a life settlement contract;
(2)(A) “Broker” means a person who on behalf of an owner and for a fee, commission, or other valuable consideration offers or attempts to negotiate life settlement contracts between an owner and providers.
(B) A broker represents only the owner and owes a fiduciary duty to the owner to act according to the owner's instructions and in the best interest of the owner, notwithstanding the manner in which the broker is compensated.
(C) “Broker” does not include an attorney, certified public accountant, or financial planner retained in the type of practice customarily performed in his or her professional capacity to represent the owner whose compensation is not paid directly or indirectly by the provider or any other person except the owner;
(3) “Business of life settlements” means an activity involved in, but not limited to, offering to enter into, soliciting, negotiating, procuring, effectuating, monitoring, or tracking life settlement contracts;
(4) “Chronically ill” means:
(A) Being unable to perform at least two (2) activities of daily living such as eating, toileting, transferring, bathing, dressing, or continence;
(B) Requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment; or
(C) Having a level of disability similar to that described in subdivision (4)(A) of this section as determined by regulations of the Secretary of the United States Department of Health and Human Services if adopted by rule of the Insurance Commissioner;
(5)(A) “Financing entity” means an underwriter, placement agent, lender, purchaser of securities, purchaser of a policy or certificate from a provider, credit enhancer, or any entity that has a direct ownership in a policy or certificate that is the subject of a life settlement contract, but:
(i) Whose principal activity related to the transaction is providing funds to effect the life settlement contract or purchase of one (1) or more policies; and
(ii) Has an agreement in writing with one (1) or more providers to finance the acquisition of life settlement contracts.
(B) “Financing entity” does not include a nonaccredited investor or purchaser;
(6) “Financing transaction” means a transaction in which a licensed provider obtains financing from a financing entity, including without limitation any secured or unsecured financing, any securitization transaction, or any securities offering that either is registered or exempt from registration under federal and state securities law;
(7) “Fraudulent life settlement act” includes:
(A) Acts or omissions committed by a person who knowingly and with intent to defraud for the purpose of depriving another of property or for pecuniary gain commits or permits its employees or its agents to engage in acts, including without limitation:
(i) Presenting, causing to be presented, or preparing with knowledge and belief that it will be presented to or by a provider, premium finance lender, broker, insurer, insurance producer, or any other person, false material information, or concealing material information, as part of, in support of, or concerning a fact material to one (1) or more of the following:
(a) An application for the issuance of a life settlement contract or insurance policy;
(b) The underwriting of a life settlement contract or insurance policy;
(c) A claim for payment or benefit pursuant to a life settlement contract or insurance policy;
(d) Premiums paid on an insurance policy;
(e) Payments and changes in ownership or beneficiary made in accordance with the terms of a life settlement contract or insurance policy;
(f) The reinstatement or conversion of an insurance policy;
(g) The solicitation, offer to enter into, or effectuation of a life settlement contract or insurance policy;
(h) The issuance of written evidence of life settlement contracts or insurance;
(i) Any application for or the existence of or any payments related to a loan secured directly or indirectly by any interest in a life insurance policy; or
(j) Entering into any practice or plan that involves stranger-originated life insurance;
(ii) Failing to disclose to the insurer when the request for such disclosure has been asked for by the insurer that the prospective insured has undergone a life expectancy evaluation by any person or entity other than the insurer or its authorized representatives in connection with the issuance of the policy;
(iii) Employing any device, scheme, or artifice to defraud in the business of life settlements; or
(iv) In the solicitation, application, or issuance of a life insurance policy, employing any device, scheme, or artifice in violation of state insurable interest laws; and
(B) In the furtherance of a fraud or to prevent the detection of a fraud, any person commits or permits its employees or its agents to:
(i) Remove, conceal, alter, destroy, or sequester from the commissioner the assets or records of a licensee or other person engaged in the business of life settlements;
(ii) Misrepresent or conceal the financial condition of a licensee, financing entity, insurer, or other person;
(iii) Transact the business of life settlements in violation of laws requiring a license, certificate of authority, or other legal authority for the transaction of the business of life settlements;
(iv) File with the commissioner or the chief insurance regulatory official of another jurisdiction a document containing false information or otherwise concealing information about a material fact from the commissioner;
(v) Engage in embezzlement, theft, misappropriation, or conversion of moneys, funds, premiums, credits, or other property of a provider, insurer, insured, owner, insurance, policy owner, or any other person engaged in the business of life settlements or insurance;
(vi) Knowingly and with intent to defraud, enter into, broker, or otherwise deal in a life settlement contract, the subject of which is a life insurance policy that was obtained by presenting false information concerning any fact material to the policy or by concealing for the purpose of misleading another information concerning any fact material to the policy, when the owner or the owner's agent intended to defraud the policy's issuer;
(vii) Attempt to commit, assist, aid, or abet in the commission of or conspiracy to commit the acts or omissions specified in this subdivision (7); or
(viii) Misrepresent the state of residence of an owner to be a state or jurisdiction that does not have a law substantially similar to this subchapter for the purpose of evading or avoiding the provisions of this subchapter;
(8) “Insured” means the person covered under the policy being considered for sale in a life settlement contract;
(9) “Life expectancy” means the arithmetic mean of the number of months the insured under the life insurance policy to be settled can be expected to live considering medical records and appropriate experiential data;
(10) “Life insurance producer” means any person licensed in this state as a resident or nonresident insurance producer who has received qualification or authority for life insurance coverage or a life line of coverage pursuant to § 23-64-507(a)(1);
(11)(A) “Life settlement contract” means a written agreement entered into between a provider and an owner, establishing the terms under which compensation or anything of value will be paid, which compensation or thing of value is less than the expected death benefit of the insurance policy or certificate, in return for the owner's assignment, transfer, sale, devise, or bequest of the death benefit or any portion of an insurance policy or certificate of insurance for compensation, provided, however, that the minimum value for a life settlement contract shall be greater than a cash surrender value or accelerated death benefit available at the time of an application for a life settlement contract.
(B) “Life settlement contract” also includes the transfer for compensation or value of ownership or beneficial interest in a trust or other entity that owns such policy if the trust or other entity was formed or availed of for the principal purpose of acquiring one (1) or more life insurance contracts, which life insurance contract insures the life of a person residing in this state.
(C) “Life settlement contract” also includes a premium finance loan made for a policy on or before the date of issuance of the policy when:
(i) The loan proceeds are not used solely to pay premiums for the policy and any costs or expenses incurred by the lender or the borrower in connection with the financing;
(ii) The owner receives on the date of the premium finance loan a guarantee of the future life settlement value of the policy; or
(iii) The owner agrees on the date of the premium finance loan to sell the policy or any portion of its death benefit on any date following the issuance of the policy.
(D) “Life settlement contract” does not include:
(i) A policy loan by a life insurance company pursuant to the terms of the life insurance policy or accelerated death provisions contained in the life insurance policy, whether issued with the original policy or as a rider;
(ii) A premium finance loan, as defined herein, or any loan made by a bank or other licensed financial institution, provided that neither default on the loan nor the transfer of the policy in connection with the default is pursuant to an agreement or understanding with any other person for the purpose of evading regulation under this subchapter;
(iii) A collateral assignment of a life insurance policy by an owner;
(iv) An agreement in which all the parties:
(a) Are closely related to the insured by blood or law; or
(b) Have a lawful substantial economic interest in the continued life, health, and bodily safety of the person insured or are trusts established primarily for the benefit of such parties;
(v) Any designation, consent, or agreement by an insured who is an employee of an employer in connection with the purchase by the employer or trust established by the employer of life insurance on the life of the employee;
(vi) A bona fide business succession planning arrangement:
(a) Between one (1) or more shareholders in a corporation or between a corporation and one (1) or more of its shareholders or one (1) or more trusts established by its shareholders;
(b) Between one (1) or more partners in a partnership or between a partnership and one (1) or more of its partners or one (1) or more trusts established by its partners; or
(c) Between one (1) or more members in a limited liability company or between a limited liability company and one (1) or more of its members or one (1) or more trusts established by its members; or
(vii) An agreement entered into by a service recipient, or a trust established by the service recipient, and a service provider, or a trust established by the service provider, who performs significant services for the service recipient's trade or business;
(12) “Net death benefit” means the amount of the life insurance policy or certificate to be settled, less any outstanding debts or liens;
(13)(A) “Owner” means the owner of a life insurance policy or a certificate holder under a group policy, with or without a terminal illness, who enters or seeks to enter into a life settlement contract.
(B) “Owner” is not limited to an owner of a life insurance policy or a certificate holder under a group policy that insures the life of an individual with a terminal or chronic illness or condition except when specifically addressed.
(C) “Owner” does not include:
(i) Any provider or other licensee under this subchapter;
(ii) A qualified institutional buyer as defined in Rule 144A of the Securities Act of 1933, as amended;
(iii) A financing entity;
(iv) A special purpose entity; or
(v) A related provider trust;
(14) “Patient identifying information” means an insured's address, telephone number, facsimile number, electronic mail address, photograph or likeness, employer, employment status, social security number, or any other information that is likely to lead to the identification of the insured;
(15) “Person” means any natural person or legal entity, including without limitation a partnership, limited liability company, association, trust, or corporation;
(16) “Policy” means an individual or group policy, group certificate, contract, or arrangement of life insurance owned by a resident of this state, regardless of whether delivered or issued for delivery in this state;
(17) “Premium finance loan” means a loan made primarily for the purposes of making premium payments on a life insurance policy, which loan is secured by an interest in such life insurance policy;
(18)(A) “Provider” means a person other than an owner who enters into or effectuates a life settlement contract with an owner.
(B) “Provider” does not include:
(i) Any bank, savings bank, savings and loan association, or credit union;
(ii) A licensed lending institution or creditor or secured party pursuant to a premium finance loan agreement which takes an assignment of a life insurance policy or certificate issued pursuant to a group life insurance policy as collateral for a loan;
(iii) The insurer of a life insurance policy or rider to the extent it provides accelerated death benefits or cash surrender value under the insurance code or rules of the commissioner;
(iv) Any natural person who enters into or effectuates no more than one (1) agreement in a calendar year for the transfer of a life insurance policy or certificate issued pursuant to a group life insurance policy for compensation or anything of value less than the expected death benefit payable under the policy;
(v) A purchaser;
(vi) Any authorized or eligible insurer that provides stop loss coverage to a provider, purchaser, financing entity, special purpose entity, or related provider trust;
(vii) A financing entity;
(viii) A special purpose entity;
(ix) A related provider trust;
(x) A broker; or
(xi) An accredited investor or qualified institutional buyer as defined in, respectively, Regulation D, Rule 501 or Rule 144A of the Securities Act of 1933, as amended, who purchases a life settlement policy from a provider;
(19) “Purchased policy” means a policy or group certificate that has been acquired by a provider pursuant to a life settlement contract;
(20) “Purchaser” means a person who pays compensation or anything of value as consideration for a beneficial interest in a trust which is vested with, or for the assignment, transfer, or sale of, an ownership or other interest in a life insurance policy or a certificate issued pursuant to a group life insurance policy which has been the subject of a life settlement contract;
(21)(A) “Related provider trust” means a titling trust or other trust established by a licensed provider or a financing entity for the sole purpose of holding the ownership or beneficial interest in purchased policies in connection with a financing transaction.
(B) In order to qualify as a related provider trust, the trust must have a written agreement with the licensed provider under which the licensed provider is responsible for ensuring compliance with all statutory and regulatory requirements and under which the trust agrees to make all records and files relating to life settlement transactions available to the State Insurance Department as if those records and files were maintained directly by the licensed provider;
(22) “Settled policy” means a life insurance policy or certificate that has been acquired by a provider pursuant to a life settlement contract;
(23) “Special purpose entity” means a corporation, partnership, trust, limited liability company, or other legal entity formed solely to provide either directly or indirectly access to institutional capital markets:
(A) For a financing entity or provider; or
(B) In connection with a transaction in which:
(i) The securities in the special purpose entity are acquired by the owner or by a qualified institutional buyer, as defined in Rule 144A as promulgated under the Securities Act of 1933, as amended; or
(ii) The securities pay a fixed rate of return commensurate with established asset-backed institutional capital markets;
(24)(A) “Stranger-originated life insurance” is a practice or plan to initiate a life insurance policy for the benefit of a third-party investor who at the time of policy origination has no insurable interest in the insured.
(B) Stranger-originated life insurance practices include without limitation cases in which life insurance is purchased with resources or guarantees from or through a person or entity that at the time of policy inception could not lawfully initiate the policy himself, herself, or itself, and in which at the time of inception there is an arrangement or agreement, whether verbal or written, to directly or indirectly transfer the ownership of the policy, the policy benefits, or the policy and the policy benefits to a third party.
(C) Trusts that are created to give the appearance of insurable interest and are used to initiate policies for investors violate insurable interest laws and the prohibition against wagering on life.
(D) Stranger-originated life insurance arrangements do not include those practices set forth in subdivision (11)(D) of this section; and
(25) “Terminally ill” means having an illness or sickness that can reasonably be expected to result in death in twenty-four (24) months or less.
Ark. Code Ann. § 23-81-803 Licensing requirements.
(a) A person, wherever located, shall not act as a provider or broker with an owner or multiple owners who is a resident of this state without first having obtained a license from the Insurance Commissioner.
(b)(1) Application for a provider or broker license shall be made to the commissioner by the applicant on a form prescribed by the commissioner, and the application shall be accompanied by a fee in an amount established by the commissioner.
(2) However, the license and fees to continue the license for a provider license shall be reasonable, and the license and fees to continue the license for a broker license shall not exceed those established for an insurance producer, as such fees are otherwise provided for by statute or rule of the commissioner.
(c) A life insurance producer who has been licensed as a resident insurance producer with a life line of authority in this state or his or her home state for at least one (1) year and is licensed as a nonresident producer in this state shall be deemed to meet the licensing requirements of this section and shall be permitted to operate as a broker.
(d)(1) Not later than thirty (30) days from the first day of operating as a broker, the life insurance producer shall notify the commissioner that he or she is acting as a broker on a form prescribed by the commissioner and shall pay any applicable fee to be determined by the commissioner.
(2) Notification shall include an acknowledgement by the life insurance producer that he or she will operate as a broker in accordance with this subchapter.
(e) The insurer that issued the policy that is the subject of a life settlement contract shall not be responsible for any act or omission of a broker or provider or purchaser arising out of or in connection with the life settlement transaction unless the insurer receives compensation for the placement of a life settlement contract from the provider or purchaser or broker in connection with the life settlement contract.
(f) A person licensed as an attorney, certified public accountant, or financial planner accredited by a nationally recognized accreditation agency who is retained to represent the owner and whose compensation is not paid directly or indirectly by the provider or purchaser may negotiate life settlement contracts on behalf of the owner without having to obtain a license as a broker.
(g)(1) Licenses issued under this subchapter may be continued by paying the fees and satisfying the education and other requirements established by rule of the commissioner.
(2) Failure to pay the fee within the terms prescribed shall result in the automatic revocation of the license.
(h)(1) The applicant shall provide such information as the commissioner may require on forms prepared by the commissioner.
(2) The commissioner may require the applicant to fully disclose the identity of its stockholders other than stockholders owning less than ten percent (10%) of the shares of an applicant whose shares are publicly traded, partners, officers, and employees, and the commissioner, in the exercise of the commissioner's sole discretion, may refuse to issue such a license in the name of any person if not satisfied that any officer, employee, stockholder, or partner thereof who may materially influence the applicant's conduct meets the standards of §§ 23-81-801 — 23-81-814.
(i) A license issued to a partnership, corporation, or other entity authorizes all members, officers, and designated employees to act as licensees under the license, if those persons are named in the application and any supplements to the application.
(j) Upon the filing of an application and the payment of the license fee, the commissioner shall make an investigation of each applicant and may issue a license if the commissioner finds that the applicant:
(1) If a provider, has provided a detailed plan of operation;
(2) Is competent and trustworthy and intends to transact its business in good faith;
(3) Has a good business reputation and has had experience, training, or education so as to be qualified in the business for which the license is applied;
(4) If the applicant is a legal entity, is formed or organized pursuant to the laws of this state, is a foreign legal entity authorized to transact business in this state, or provides a certificate of good standing from the state of its domicile; and
(5) Has provided to the commissioner an antifraud plan that meets the requirements of § 23-81-814 and includes:
(A) A description of the procedures for detecting and investigating possible fraudulent acts and procedures for resolving material inconsistencies between medical records and insurance applications;
(B) A description of the procedures for reporting fraudulent insurance acts to the commissioner;
(C) A description of the plan for antifraud education and training of its underwriters and other personnel; and
(D) A written description or chart outlining the arrangement of the antifraud personnel who are responsible for the investigation and reporting of possible fraudulent insurance acts and investigating unresolved material inconsistencies between medical records and insurance applications.
(k) The commissioner shall not issue any license to any nonresident applicant unless a written designation of an agent for service of process is filed under § 4-20-112 and maintained with the commissioner or unless the applicant has filed with the commissioner the applicant's written irrevocable consent that any action against the applicant may be commenced against the applicant by service of process on the commissioner.
(l) Each licensee shall file with the commissioner on or before March 1 of each year an annual statement containing such information as the commissioner by rule may prescribe.
(m) A provider shall not use any person to perform the functions of a broker as defined in this subchapter unless the person holds a current, valid license as a broker, as provided in this section.
(n) A broker shall not use any person to perform the functions of a provider as defined in this subchapter unless the person holds a current, valid license as a provider, as provided in this section.
(o) A provider or broker shall provide to the commissioner new or revised information about officers, ten percent (10%) or more stockholders, partners, directors, members, or designated employees within thirty (30) days of the change.
(p)(1)(A) An individual licensed as a broker shall complete on a biennial basis a minimum of fifteen (15) hours of training related to life settlements and life settlement transactions, as required by the commissioner.
(B) However, a life insurance producer who is operating as a broker pursuant to this section shall not be subject to the requirements of this subsection.
(2) Any person failing to meet the requirements of this subsection shall be subject to the penalties imposed by the commissioner.
Ark. Code Ann. § 23-81-804 License suspension, revocation, or refusal to renew.
(a) The Insurance Commissioner may suspend, revoke, or refuse to renew the license of any licensee if the commissioner finds that:
(1) There was any material misrepresentation in the application for the license;
(2) The licensee or any officer, partner, member, or director has been guilty of fraudulent or dishonest practices, is subject to a final administrative action, or is otherwise shown to be untrustworthy or incompetent to act as a licensee;
(3) The provider demonstrates a pattern of unreasonably withholding payments to policy owners;
(4) The licensee no longer meets the requirements for initial licensure;
(5) The licensee or any officer, partner, member, or director has been convicted of a felony or of any misdemeanor of which criminal fraud is an element or the licensee has pleaded guilty or nolo contendere with respect to any felony or any misdemeanor of which criminal fraud or moral turpitude is an element, regardless of whether a judgment of conviction has been entered by the court;
(6) The provider has entered into any life settlement contract using a form that has not been approved pursuant to this subchapter;
(7) The provider has failed to honor contractual obligations set out in a life settlement contract;
(8) The provider has assigned, transferred, or pledged a settled policy to a person other than a provider licensed in this state, a purchaser, or an accredited investor or qualified institutional buyer as defined in, respectively, Regulation D, Rule 501, or Rule 144A of the Securities Act of 1933, as amended, a financing entity, a special purpose entity, or a related provider trust; or
(9) The licensee or any officer, partner, member, or key management personnel has violated provisions of this subchapter.
(b)(1) The commissioner may deny a license application or suspend, revoke, or refuse to renew a license of a licensee for the licensee's failure to comply with this subchapter.
(2) A proceeding under this subsection is subject to the Arkansas Administrative Procedure Act, § 25-15-201 et seq.
Ark. Code Ann. § 23-81-805 Contract requirements.
(a) A person shall not use any form of life settlement contract in this state unless it has been filed with and approved, if required, by the Insurance Commissioner in a manner that conforms with the filing procedures and any time restrictions or deeming provisions, if any, for life insurance forms, policies, and contracts.
(b) An insurer shall not as a condition of responding to a request for verification of coverage or in connection with the transfer of a policy pursuant to a life settlement contract require that the owner, insured, provider, or broker sign any form, disclosure, consent, waiver, or acknowledgment that has not been expressly approved by the commissioner for use in connection with life settlement contracts in this state.
(c)(1) A person shall not use a life settlement contract form or provide to an owner a disclosure statement form in this state unless first filed with and approved by the commissioner.
(2) The commissioner shall disapprove a life settlement contract form or disclosure statement form if, in the commissioner's opinion, the contract or provisions contained in the life settlement contract form or disclosure statement form fail to meet the requirements of §§ 23-81-808 — 23-81-811 and § 23-81-815(b) or are unreasonable, contrary to the interests of the public, or otherwise misleading or unfair to the owner.
(3) At the commissioner's discretion, the commissioner may require the submission of advertising material.
Ark. Code Ann. § 23-81-806 Reporting requirements and privacy.
(a)(1)(A) For any policy settled within five (5) years of policy issuance, each provider shall file with the Insurance Commissioner on or before March 1 of each year an annual statement containing such information as the commissioner may prescribe by rule.
(B) In addition to any other requirements, the annual statement shall specify the total number, aggregate face amount, and life settlement proceeds of policies settled during the immediately preceding calendar year, together with a breakdown of the information by policy issue year.
(C) The annual statement shall also include the names of the insurance companies whose policies have been settled and the brokers that have settled the policies.
(2) The information shall be limited to only those transactions in which the owner is a resident of this state and shall not include individual transaction data regarding the business of life settlements or information that there is a reasonable basis to believe could be used to identify the owner or the insured.
(3) Every provider that willfully fails to file an annual statement as required in this section or willfully fails to reply within thirty (30) days to a written inquiry by the commissioner in connection therewith, in addition to other penalties provided by this chapter, shall be subject upon due notice and opportunity to be heard to a penalty of up to two hundred fifty dollars ($250) per day of delay, not to exceed twenty-five thousand dollars ($25,000) in the aggregate for each such failure.
(b) Except as otherwise allowed or required by law, a provider, broker, insurance company, insurance producer, information bureau, rating agency or company, or any other person with actual knowledge of an insured's identity shall not disclose the identity of an insured or information that there is a reasonable basis to believe could be used to identify the insured or the insured's financial or medical information to any other person unless the disclosure:
(1) Is necessary to effect a life settlement contract between the owner and a provider and the owner and insured have provided prior written consent to the disclosure;
(2) Is necessary to effectuate the sale of life settlement contracts, or interests in life settlement contracts, as investments, provided the sale is conducted in accordance with applicable state and federal securities law and provided further that the owner and the insured have both provided prior written consent to the disclosure;
(3) Is provided in response to an investigation or examination by the commissioner or any other governmental officer or agency or pursuant to the requirements of § 23-81-813;
(4) Is a term or condition to the transfer of a policy by one (1) provider to another provider, in which case the receiving provider shall be required to comply with the confidentiality requirements of this subsection;
(5)(A) Is necessary to allow the provider or broker or their authorized representatives to make contacts for the purpose of determining health status.
(B) For the purposes of subdivision (b)(5)(A) of this section, “authorized representative” does not include any person who has or may have any financial interest in the settlement contract other than a provider, licensed broker, financing entity, related provider trust, or special purpose entity.
(C) A provider or broker shall require its authorized representative to agree in writing to adhere to the privacy provisions of this subchapter; or
(6) Is required to purchase stop loss coverage.
(c) Nonpublic personal information solicited or obtained in connection with a proposed or actual life settlement contract shall be subject to the provisions applicable to financial institutions under the Gramm-Leach-Bliley Act, Pub. L. No. 106-102, and all other state and federal laws relating to confidentiality of nonpublic personal information.
Ark. Code Ann. § 23-81-807 Examination.
(a)(1) When the Insurance Commissioner deems it reasonably necessary to protect the interests of the public, the commissioner may examine the business and affairs of any licensee or applicant for a license.
(2) The commissioner may order any licensee or applicant to produce any records, books, files, or other information reasonably necessary to ascertain whether the licensee or applicant is acting or has acted in violation of the law or otherwise contrary to the interests of the public.
(3) The expenses incurred in conducting any examination shall be paid by the licensee or applicant.
(b) In lieu of an examination under this subchapter of any foreign or alien licensee licensed in this state, at the commissioner's discretion, the commissioner may accept an examination report on the licensee as prepared by the commissioner for the licensee's state of domicile or port-of-entry state.
(c) Names of and individual identification data for all owners and insureds shall be considered private and confidential information and shall not be disclosed by the commissioner unless required by law.
(d) Records of all consummated transactions and life settlement contracts shall be maintained by the provider for three (3) years after the death of the insured and shall be available to the commissioner for inspection during reasonable business hours.
(e) Conduct of Examinations.
(1)(A) Upon determining that an examination should be conducted, the commissioner shall issue an examination warrant appointing one (1) or more examiners to perform the examination and instructing them as to the scope of the examination.
(B) In conducting the examination, the examiner shall use methods common to the examination of any life settlement licensee and shall use those guidelines and procedures set forth in an examiner's handbook adopted by a national organization prescribed by rule of the commissioner.
(2)(A) Every licensee or person from whom information is sought, its officers, directors, and agents shall provide to the examiners timely, convenient, and free access at all reasonable hours at its offices to all books, records, accounts, papers, documents, assets, and computer or other recordings relating to the property, assets, business, and affairs of the licensee being examined.
(B) The officers, directors, employees, and agents of the licensee or person shall facilitate the examination and aid in the examination so far as it is in their power to do so.
(C) The refusal of a licensee or the licensee's officers, directors, employees, or agents to submit to examination or to comply with any reasonable written request of the commissioner shall be grounds for suspension or refusal of or nonrenewal of any license or authority held by the licensee to engage in the life settlement business or other business subject to the commissioner's jurisdiction.
(D) Any proceedings for suspension, revocation, or refusal of any license or authority shall be conducted pursuant to § 23-61-301 et seq. and the Arkansas Administrative Procedure Act, § 25-15-201 et seq.
(3)(A) The commissioner may issue subpoenas, administer oaths, and examine under oath any person as to any matter pertinent to the examination.
(B) Upon the failure or refusal of a person to obey a subpoena, the commissioner may petition a court of competent jurisdiction for an order to compel the witness to obey the subpoena, and upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence.
(4) When making an examination under this subchapter, the commissioner may retain attorneys, appraisers, independent actuaries, independent certified public accountants, or other professionals and specialists as examiners, the reasonable cost of which shall be borne by the licensee that is the subject of the examination.
(5)(A) This subchapter does not limit the commissioner's authority to terminate or suspend an examination in order to pursue other legal or regulatory action pursuant to the insurance laws of this state.
(B) Findings of fact and conclusions made pursuant to any examination shall be prima facie evidence in any legal or regulatory action.
(6) Any information gathered during an examination as provided in this subchapter shall be deemed confidential pursuant to § 23-61-207.
(f) Examination Reports.
(1) Examination reports shall be composed of only facts appearing upon the books, from the testimony of its officers or agents or other persons examined concerning its affairs, and such conclusions and recommendations as the examiners find reasonably warranted from the facts.
(2)(A) No later than sixty (60) days following completion of the examination, the examiner in charge shall file with the commissioner a verified written report of examination under oath.
(B) Upon receipt of the verified report, the commissioner shall transmit the report to the licensee that has been examined, together with a notice that shall afford the licensee that has been examined a reasonable opportunity of not more than thirty (30) days to make a written submission or rebuttal with respect to any matters contained in the examination report and which shall become part of the report or to request a hearing on any matter in dispute.
(3) If the commissioner determines that regulatory action is appropriate as a result of an examination, the commissioner may initiate any proceedings or actions provided by law.
(g) Confidentiality of Examination Information.
(1) Names and individual identification data for all owners, purchasers, and insureds shall be considered private and confidential information and shall not be disclosed by the commissioner unless the disclosure is to another regulator or is required by law.
(2)(A) Except as otherwise provided in this subchapter, all examination reports, working papers, recorded information, documents and copies thereof produced by, obtained by, or disclosed to the commissioner or any other person in the course of an examination made under this subchapter or in the course of analysis or investigation by the commissioner of the financial condition or market conduct of a licensee shall be confidential by law and privileged, shall not be open to inspection to the public or subject to disclosure under the Freedom of Information Act of 1967, § 25-19-101 et seq., shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action.
(B) The commissioner may use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as part of the commissioner's official duties.
(C) The licensee being examined may have access to all documents used to make the report.
(h) Conflict of Interest.
(1) An examiner shall not be appointed by the commissioner if the examiner, either directly or indirectly, has a conflict of interest or is affiliated with the management of or owns a pecuniary interest in any person subject to examination under this subchapter. This subsection does not automatically preclude an examiner from being:
(A) An owner;
(B) An insured in a life settlement contract or insurance policy; or
(C) A beneficiary in an insurance policy that is proposed for a life settlement contract.
(2) Notwithstanding the requirements of this subsection, the commissioner may retain from time to time, on an individual basis, qualified actuaries, certified public accountants, or other similar individuals who are independently practicing their professions even though these persons may from time to time be similarly employed or retained by persons subject to examination under this subchapter.
(i) Immunity from Liability.
(3)(A) A person identified in subdivision (i)(1) or subdivision (i)(2) of this section is entitled to an award of attorney's fees and costs if he or she is the prevailing party in a civil cause of action for libel, slander, or any other relevant tort arising out of activities in carrying out the provisions of this subchapter and the party bringing the action was not substantially justified in doing so.
(B) For purposes of this subsection, a proceeding is “substantially justified” if it had a reasonable basis in law or fact at the time that it was initiated.
(1) A cause of action shall not arise nor shall any liability be imposed against the commissioner, the commissioner's authorized representatives, or any examiner appointed by the commissioner for any statements made or conduct performed in good faith while carrying out this subchapter.
(2)(A) A cause of action shall not arise, nor shall any liability be imposed against any person for the act of communicating or delivering information or data to the commissioner or the commissioner's authorized representative or examiner pursuant to an examination made under this subchapter if the act of communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive.
(B) This subsection does not abrogate or modify in any way any common law or statutory privilege or immunity heretofore enjoyed by any person identified in subdivision (i)(1) of this section.
(j) Investigative Authority of the Commissioner. The commissioner may investigate suspected fraudulent life settlement acts and persons engaged in the business of life settlements.
(k)
Cost of Examinations. Costs of examinations under this subchapter shall be paid to the State Insurance Department to the same extent as examination expenses are imposed on persons pursuant to § 23-61-206 .
Ark. Code Ann. § 23-81-808 Advertising.
(a)(1) A broker or provider licensed pursuant to this subchapter may conduct or participate in advertisements within this state.
(2) Advertisements shall comply with all advertising and marketing laws or rules promulgated by the Insurance Commissioner that are applicable to life insurers or to brokers and providers licensed pursuant to this subchapter.
(b) Advertisements shall be accurate, truthful, and not misleading in fact or by implication.
(c) A person or trust shall not:
(1) Directly or indirectly market, advertise, solicit, or otherwise promote the purchase of a policy for the sole purpose of or with an emphasis on settling the policy; or
(2) Use the words “free”, “no cost”, or words of similar import in the marketing, advertising, soliciting, or otherwise promoting of the purchase of a policy.
Ark. Code Ann. § 23-81-809 Disclosures to owners.
(a) The provider or broker shall provide in writing in a separate document that is signed by the owner and provider or broker the following information to the owner no later than the date of the application for a life settlement contract:
(1) The fact that possible alternatives to life settlement contracts exist, including without limitation accelerated benefits offered by the issuer of the life insurance policy;
(2) The fact that some or all of the proceeds of a life settlement contract may be taxable and that assistance should be sought from a professional tax advisor;
(3) The fact that the proceeds from a life settlement contract could be subject to the claims of creditors;
(4) The fact that receipt of proceeds from a life settlement contract may adversely affect a recipient's eligibility for public assistance or other government benefits or entitlements and that advice should be obtained from the appropriate agencies;
(5)(A) The fact that the owner has a right to terminate a life settlement contract within fifteen (15) days of the date it is executed by all parties and the owner has received the disclosures required by this section.
(B) Rescission, if exercised by the owner, is effective only if both notice of the rescission is given and the owner repays all proceeds and any premiums, loans, and loan interest paid on account of the provider within the rescission period.
(C) If the insured dies during the rescission period, the contract shall be deemed to have been rescinded subject to repayment by the owner or the owner's estate of all proceeds and any premiums, loans, and loan interest to the provider;
(6) The fact that proceeds will be sent to the owner within three (3) business days after the provider has received the insurer or group administrator's acknowledgement that ownership of the policy or interest in the certificate has been transferred and the beneficiary has been designated in accordance with the terms of the life settlement contract;
(7) The fact that entering into a life settlement contract may cause other rights or benefits, including conversion rights and waiver of premium benefits that may exist under the policy or certificate of a group policy to be forfeited by the owner, and that assistance should be sought from a professional financial advisor;
(8) The amount and method of calculating the compensation paid or to be paid to the broker or any other person acting for the owner in connection with the transaction, wherein the term “compensation” includes anything of value paid or given;
(9) The date by which the funds will be available to the owner and the transmitter of the funds;
(10) The fact that the Insurance Commissioner shall require delivery of a buyer's guide or a similar consumer advisory package in the form prescribed by the commissioner to owners during the solicitation process;
(11) The following language:
(12) The fact that the commissioner shall require providers and brokers to print separate signed fraud warnings on their applications and on their life settlement contracts as follows:
(13)(A) The fact that the insured may be contacted by either the provider or broker or its authorized representative for the purpose of determining the insured's health status or to verify the insured's address.
(B) This contact is limited to one (1) time every three (3) months if the insured has a life expectancy of more than one (1) year and no more than one (1) time per month if the insured has a life expectancy of one (1) year or less;
(14) The affiliation, if any, between the provider and the issuer of the insurance policy to be settled;
(15) That a broker represents exclusively the owner and not the insurer or the provider or any other person and owes a fiduciary duty to the owner, including a duty to act according to the owner's instructions and in the best interest of the owner;
(16) The name, address, and telephone number of the provider;
(17) The name, business address, and telephone number of the independent third-party escrow agent and the fact that the owner may inspect or receive copies of the relevant escrow or trust agreements or documents; and
(18) The fact that a change of ownership could in the future limit the insured's ability to purchase future insurance on the insured's life because there is a limit to how much coverage insurers will issue on one (1) life.
(b) The written disclosures shall be conspicuously displayed in any life settlement contract furnished to the owner by a provider, including any affiliations or contractual arrangements between the provider and the broker.
(c) A broker shall provide the owner and the provider with at least the following disclosures no later than the date the life settlement contract is signed by all parties. The disclosures shall be conspicuously displayed in the life settlement contract or in a separate document signed by the owner and provide the following information:
(1) The name, business address, and telephone number of the broker;
(2) A full, complete, and accurate description of all the offers, counteroffers, acceptances, and rejections relating to the proposed life settlement contract;
(3) A written disclosure of any affiliations or contractual arrangements between the broker and any person making an offer in connection with the proposed life settlement contracts;
(4) The name of each broker who receives compensation and the amount of compensation received by that broker. The compensation includes anything of value paid or given to the broker in connection with the life settlement contract;
(5)(A) A complete reconciliation of the gross offer or bid by the provider to the net amount of proceeds or value to be received by the owner.
(B) For the purpose of subdivision (c)(5)(A) of this section, “gross offer or bid” means the total amount or value offered by the provider for the purchase of one (1) or more life insurance policies, inclusive of commissions and fees; and
(6) The failure to provide the disclosures or rights described in this section shall be deemed an unfair trade practice pursuant to § 23-81-817.
“All medical, financial, or personal information solicited or obtained by a provider or broker about an insured, including the insured's identity or the identity of family members, a spouse, or a significant other may be disclosed as necessary to effect the life settlement contract between the owner and provider. If you are asked to provide this information, you will be asked to consent to the disclosure. The information may be provided to someone who buys the policy or provides funds for the purchase. You may be asked to renew your permission to share information every two years.”;
“Any person who knowingly presents false information in an application for insurance or life settlement contract is guilty of a crime and may be subject to fines and confinement in prison.”;
Ark. Code Ann. § 23-81-810 Disclosure to insurer.
(a) Without limiting the ability of an insurer from assessing the insurability of a policy applicant and determining whether or not to issue the policy and in addition to other questions an insurance carrier may lawfully pose to a life insurance applicant, insurance carriers may inquire in the application for insurance whether the proposed owner intends to pay premiums with the assistance of financing from a lender that will use the policy as collateral to support the financing.
(b) If as described in § 23-81-802(11) the loan provides funds that can be used for a purpose other than paying for the premiums, costs, and expenses associated with obtaining and maintaining the life insurance policy and loan, the application shall be rejected as a violation of the prohibited practices in § 23-81-813.
(c) If the financing does not violate § 23-81-813 in this manner, the insurance carrier:
(1) May make disclosures, including without limitation to the following, to the applicant and the insured on the application or an amendment to the application to be completed no later than the delivery of the policy:
(2) May require certifications, such as the following, from the applicant, the insured, or the applicant and the insured:
(A) “I have not entered into any agreement or arrangement providing for the future sale of this life insurance policy.”;
(B) “My loan arrangement for this policy provides funds sufficient to pay for some or all of the premiums, costs, and expenses associated with obtaining and maintaining my life insurance policy, but I have not entered into any agreement by which I am to receive consideration in exchange for procuring this policy.”; and
(C) “The borrower has an insurable interest in the insured.”.
(1) A change of ownership could lead to a stranger owning an interest in the insured's life;
(2) A change of ownership could in the future limit your ability to purchase future insurance on the insured's life because there is a limit to how much coverage insurers will issue on one life;
(3) Should there be a change of ownership and you wish to obtain more insurance coverage on the insured's life in the future, the insured's higher issue age, a change in health status, and/or other factors may reduce the ability to obtain coverage and/or may result in significantly higher premiums;
(4) You should consult a professional advisor, since a change in ownership in satisfaction of the loan may result in tax consequences to the owner, depending on the structure of the loan.”; and
“If you have entered into a loan arrangement in which the policy is used as collateral and the policy does change ownership at some point in the future in satisfaction of the loan, the following may be true:
Ark. Code Ann. § 23-81-811 General rules.
(a) A provider entering into a life settlement contract with any owner of a policy when the insured is terminally or chronically ill shall first obtain:
(1) If the owner is the insured, a written statement from a licensed attending physician that the owner is of sound mind and under no constraint or undue influence to enter into a life settlement contract; and
(2) A document in which the insured consents to the release of his or her medical records to a provider, settlement broker, or insurance producer, and if the policy was issued less than two (2) years from the date of application for a life settlement contract, to the insurance company that issued the policy.
(b)(1) The insurer shall respond to a request for verification of coverage submitted by a provider, settlement broker, or life insurance producer not later than thirty (30) calendar days of the date the request is received.
(2) The request for verification of coverage shall be made on a form approved by the Insurance Commissioner.
(3) The insurer shall complete and issue the verification of coverage or indicate in which respects it is unable to respond.
(4) In its response, the insurer shall indicate whether, based on the medical evidence and documents provided, the insurer intends to pursue an investigation at this time regarding the validity of the insurance contract.
(c) Before or at the time of execution of the life settlement contract, the provider shall obtain a witnessed document in which the owner consents to the life settlement contract and represents that the owner has a full and complete understanding of the life settlement contract, that the owner has a full and complete understanding of the benefits of the policy, acknowledges that the owner is entering into the life settlement contract freely and voluntarily, and for persons with a terminal or chronic illness or condition, acknowledges that the insured has a terminal or chronic illness and that the terminal or chronic illness or condition was diagnosed after the policy was issued.
(d) The insurer shall not unreasonably delay effecting change of ownership or beneficiary with any life settlement contract lawfully entered into in this state or with a resident of this state.
(e) If a settlement broker or life insurance producer performs any of these activities required of the provider, the provider is deemed to have fulfilled the requirements of this section.
(f) If a broker performs those verification-of-coverage activities required of the provider, the provider is deemed to have fulfilled the requirements of § 23-81-809(a).
(g) Within twenty (20) days after an owner executes the life settlement contract, the provider shall give written notice to the insurer that issued that insurance policy that the policy has become subject to a life settlement contract.
(h) All medical information solicited or obtained by any licensee shall be subject to the applicable provision of state law relating to confidentiality of medical information, if not otherwise provided in this subchapter.
(i)(1) All life settlement contracts entered into in this state shall provide that the owner may rescind the contract on or before fifteen (15) days after the date it is executed by all parties to the life settlement contract.
(2) Rescission, if exercised by the owner, is effective only if both notice of the rescission is given and the owner repays all proceeds and any premiums, loans, and loan interest paid on account of the provider within the rescission period.
(3) If the insured dies during the rescission period, the contract shall be deemed to have been rescinded subject to repayment by the owner or the owner's estate of all proceeds and any premiums, loans, and loan interest to the provider.
(j)(1) Within three (3) business days after receipt from the owner of documents to effect the transfer of the insurance policy, the provider shall pay the proceeds of the settlement to an escrow or trust account managed by a trustee or escrow agent in a state or federally chartered financial institution pending acknowledgement of the transfer by the issuer of the policy.
(2) The trustee or escrow agent shall transfer the proceeds due to the owner within three (3) business days of acknowledgement of the transfer from the insurer.
(k)(1) Failure to tender the life settlement contract proceeds to the owner by the date disclosed to the owner renders the life settlement contract voidable by the owner for lack of consideration until the proceeds are tendered to and accepted by the owner.
(2) A failure to give written notice of the right of rescission hereunder shall toll the right of rescission until thirty (30) days after the written notice of the right of rescission has been given.
(l)(1) Any fee paid by a provider, party, individual, or an owner to a broker in exchange for services provided to the owner pertaining to a life settlement contract shall be computed as a percentage of the offer obtained, not the face value of the policy.
(2) This section does not prohibit a broker from reducing the broker's fee below this percentage if the broker so chooses.
(m) The broker shall disclose to the owner anything of value paid or given to a broker that relates to a life settlement contract.
(n) At any time prior to or at the time of the application for or issuance of a policy or during a two-year period commencing with the date of issuance of the policy, a person shall not enter into a life settlement contract regardless of the date the compensation is to be provided and regardless of the date the assignment, transfer, sale, devise, bequest, or surrender of the policy is to occur. This prohibition does not apply if the owner certifies to the provider that:
(1)(A) The policy was issued upon the owner's exercise of conversion rights arising out of a group or individual policy, provided the total of the time covered under the conversion policy plus the time covered under the prior policy is at least twenty-four (24) months.
(B) The time covered under a group policy shall be calculated without regard to a change in insurance carriers, provided the coverage has been continuous and under the same group sponsorship; or
(2) The owner submits independent evidence to the provider that one (1) or more of the following conditions have been met within the two-year period:
(A) The owner or insured is terminally or chronically ill;
(B) The owner or insured disposes of his or her ownership interests in a closely held corporation pursuant to the terms of a buyout or other similar agreement in effect at the time the insurance policy was initially issued;
(C) The owner's spouse dies;
(D) The owner divorces his or her spouse;
(E) The owner retires from full-time employment;
(F) The owner becomes physically or mentally disabled and a physician determines that the disability prevents the owner from maintaining full-time employment; or
(G) A final order, judgment, or decree is entered by a court of competent jurisdiction on the application of a creditor of the owner adjudicating the owner bankrupt or insolvent or approving a petition seeking reorganization of the owner or appointing a receiver, trustee, or liquidator to all or a substantial part of the owner's assets.
(3)(A) Copies of the independent evidence required by subdivision (n)(2) of this section shall be submitted to the insurer when the provider submits a request to the insurer for verification of coverage.
(B) The copies shall be accompanied by a letter of attestation from the provider that the copies are true and correct copies of the documents received by the provider.
(C) This section does not prohibit an insurer from exercising its right to contest the validity of any policy.
(4) If the provider submits to the insurer a copy of independent evidence provided in subdivision (n)(2)(A) of this section when the provider submits a request to the insurer to effect the transfer of the policy to the provider, the copy is deemed to establish that the life settlement contract satisfies the requirements of this section.
Ark. Code Ann. § 23-81-812 Authority to promulgate rules — Conflict of laws.
(a) The Insurance Commissioner may promulgate rules implementing this subchapter regulating the activities and relationships of providers, brokers, insurers, and their agents, subject to statutory limitations on administrative rulemaking.
(b) Conflict of Laws.
(1)(A) If there is more than one (1) owner on a single policy and the owners are residents of different states, the life settlement contract shall be governed by the law of the state in which the owner having the largest percentage ownership resides or, if the owners hold equal ownership, the state of residence of one (1) owner agreed upon in writing by all of the owners.
(B) The law of the state of the insured shall govern if equal owners fail to agree in writing upon a state of residence for jurisdictional purposes.
(2)(A) A provider from this state who enters into a life settlement contract with an owner who is a resident of another state that has enacted statutes or adopted regulations governing life settlement contracts shall be governed in the effectuation of that life settlement contract by the statutes and regulations of the owner's state of residence.
(B) If the state in which the owner is a resident has not enacted statutes or regulations governing life settlement contracts, the provider shall give the owner notice that neither state regulates the transaction upon which he or she is entering.
(C) For transactions in those states, however, the provider shall maintain all records required if the transactions were executed in the state of residence. The forms used in those states need not be approved by the State Insurance Department.
(3) If there is a conflict in the laws that apply to an owner and a purchaser in any individual transaction, the laws of the state that apply to the owner shall take precedence, and the provider shall comply with those laws.
Ark. Code Ann. § 23-81-813 Prohibited practices.
(a) It is unlawful for any person to:
(1) Enter into a life settlement contract if the person knows or reasonably should have known that the life insurance policy was obtained by means of a false, deceptive, or misleading application for the policy;
(2) Engage in any transaction, practice, or course of business if the person knows or reasonably should have known that the intent was to avoid the notice requirements of this section;
(3) Engage in any fraudulent act or practice in connection with any transaction relating to any settlement involving an owner who is a resident of this state;
(4) Issue, solicit, market, or otherwise promote the purchase of an insurance policy for the purpose of or with an emphasis on settling the policy;
(5)(A) Enter into a premium finance agreement with any person or agency or any person affiliated with the person or agency pursuant to which the person shall receive any proceeds, fees, or other consideration, directly or indirectly, from the policy or owner of the policy or any other person with respect to the premium finance agreement or any settlement contract or other transaction related to the policy that are in addition to the amounts required to pay the principal, interest, and service charges related to policy premiums pursuant to the premium finance agreement or subsequent sale of the agreement.
(B) Any payments, charges, fees, or other amounts in addition to the amounts required to pay the principal, interest, and service charges related to policy premiums paid under the premium finance agreement shall be remitted to the original owner of the policy or to his or her estate if he or she is not living at the time of the determination of the overpayment;
(6) With respect to any life settlement contract or insurance policy and a broker, knowingly solicit an offer from, effectuate a life settlement contract with, or make a sale to any provider, financing entity, or related provider trust that is controlling, controlled by, or under common control with the broker;
(7) With respect to any life settlement contract or insurance policy and a provider, knowingly enter into a life settlement contract with an owner, if in connection with the life settlement contract, anything of value will be paid to a broker that is controlling, controlled by, or under common control with the provider or the financing entity or related provider trust that is involved in the life settlement contract;
(8)(A) With respect to a provider, enter into a life settlement contract unless the life settlement contract promotional, advertising, and marketing materials, as may be prescribed by rule, have been filed with the Insurance Commissioner.
(B) Marketing materials shall not expressly reference that the insurance is free for any period of time.
(C) The inclusion of any reference in the marketing materials that would cause an owner to reasonably believe that the insurance is free for any period of time is a violation of this subchapter; or
(9) With respect to any life insurance producer, insurance company, broker, or provider, make any statement or representation to the applicant or policyholder in connection with the sale or financing of a life insurance policy to the effect that the insurance is free or without cost to the policyholder for any period of time unless provided in the policy.
(b) A violation of this section is a fraudulent life settlement act.
Ark. Code Ann. § 23-81-814 Fraud prevention and control.
(a) Fraudulent Life Settlement Act, Interference, and Participation of Convicted Felons Prohibited.
(1) A person shall not commit a fraudulent life settlement act.
(2) A person shall not knowingly and intentionally interfere with the enforcement of this subchapter or investigations of suspected or actual violations of this subchapter.
(3) A person in the business of life settlements shall not knowingly or intentionally permit any person convicted of a felony involving dishonesty or breach of trust to participate in the business of life settlements.
(b) Fraud Warning Required.
(1) Life settlement contracts and applications for life settlement contracts, regardless of the form of transmission, shall contain the following statement or a substantially similar statement:
(2) The lack of a statement as required in subdivision (b)(1) of this section does not constitute a defense in any prosecution for a fraudulent life settlement act.
(c) Mandatory Reporting of Fraudulent Life Settlement Act.
(1) Any person engaged in the business of life settlements having knowledge or a reasonable belief that a fraudulent life settlement act is being, will be, or has been committed shall provide to the Insurance Commissioner the information required by and in a manner prescribed by the commissioner.
(2) Any other person having knowledge or a reasonable belief that a fraudulent life settlement act is being, will be, or has been committed may provide to the commissioner the information required by and in a manner prescribed by the commissioner.
(d) Immunity from Liability.
(1) Civil liability shall not be imposed on and a cause of action shall not arise from a person's furnishing information concerning suspected, anticipated, or completed fraudulent life settlement acts or suspected or completed fraudulent insurance acts if the information is provided to or received from:
(A) The commissioner or the commissioner's employees, agents, or representatives;
(B) Federal, state, or local law enforcement or regulatory officials or their employees, agents, or representatives;
(C) A person involved in the prevention and detection of fraudulent life settlement acts or that person's agents, employees, or representatives;
(D) Any regulatory body or its employees, agents, or representatives overseeing life insurance, life settlements, securities, or investment fraud;
(E) The life insurer that issued the life insurance policy covering the life of the insured; or
(F) The licensee and any agents, employees, or representatives of the licensee.
(2)(A) Subdivision (d)(1) of this section does not apply to statements made with actual malice.
(B) In an action brought against a person for filing a report or furnishing other information concerning a fraudulent life settlement act or a fraudulent insurance act, the party bringing the action shall plead specifically any allegation that subdivision (d)(1) of this section does not apply because the person filing the report or furnishing the information did so with actual malice.
(3)(A) A person identified in subdivision (d)(1) of this section shall be entitled to an award of attorney's fees and costs if he or she is the prevailing party in a civil cause of action for libel, slander, or any other relevant tort arising out of activities in carrying out the provisions of this subchapter and the party bringing the action was not substantially justified in doing so.
(B) For purposes of this section, a proceeding is “substantially justified” if it had a reasonable basis in law or fact at the time that it was initiated.
(4) This section does not abrogate or modify common law or statutory privileges or immunities enjoyed by a person described in subdivision (d)(1) of this section.
(e) Confidentiality.
(1) The documents and evidence provided pursuant to subsection (d) of this section or obtained by the commissioner in an investigation of suspected or actual fraudulent life settlement acts shall be privileged and confidential, shall not be a public record, and shall not be subject to discovery or subpoena in a civil or criminal action.
(2) Subdivision (e)(1) of this section does not prohibit release by the commissioner of documents and evidence obtained in an investigation of suspected or actual fraudulent life settlement acts:
(A) In administrative or judicial proceedings to enforce laws administered by the commissioner;
(B) To federal, state, or local law enforcement or regulatory agencies, to an organization established for the purpose of detecting and preventing fraudulent life settlement acts, or to the National Association of Insurance Commissioners; or
(C) At the discretion of the commissioner, to a person in the business of life settlements that is aggrieved by a fraudulent life settlement act.
(3) Release of documents and evidence under subdivision (e)(2) of this section does not abrogate or modify the privilege granted in subdivision (e)(1) of this section.
(f) Other Law Enforcement or Regulatory Authority.
(1) Preempt the authority or relieve the duty of other law enforcement or regulatory agencies to investigate, examine, and prosecute suspected violations of law;
(2) Preempt, supersede, or limit any provision of any state securities law or any rule, order, or notice issued under a state securities law;
(3) Prevent or prohibit a person from disclosing voluntarily information concerning life settlement fraud to a law enforcement or regulatory agency other than the State Insurance Department; or
(4) Limit the powers granted elsewhere by the laws of this state to the commissioner or an insurance fraud unit to investigate and examine possible violations of law and to take appropriate action against wrongdoers.
(g) Life Settlement Antifraud Initiatives.
(1) Providers and brokers shall have in place antifraud initiatives reasonably calculated to detect, prosecute, and prevent fraudulent life settlement acts. At the discretion of the commissioner, the commissioner may order or a licensee may request and the commissioner may grant such modifications of the following required initiatives as necessary to ensure an effective antifraud program. The modifications may be more or less restrictive than the required initiatives so long as the modifications may reasonably be expected to accomplish the purpose of this section. Antifraud initiatives shall include:
(A) Fraud investigators who may be provider or broker employees or independent contractors; and
(B)(i) An antifraud plan that shall be submitted to the commissioner.
(ii) The antifraud plan shall include without limitation:
(a) A description of the procedures for detecting and investigating possible fraudulent life settlement acts and procedures for resolving material inconsistencies between medical records and insurance applications;
(b) A description of the procedures for reporting possible fraudulent life settlement acts to the commissioner;
(c) A description of the plan for antifraud education and training of underwriters and other personnel; and
(d) A description or chart outlining the organizational arrangement of the antifraud personnel who are responsible for the investigation and reporting of possible fraudulent life settlement acts and investigating unresolved material inconsistencies between medical records and insurance applications.
(2) Antifraud plans submitted to the commissioner shall be privileged and confidential, shall not be a public record, and shall not be subject to discovery or subpoena in a civil or criminal action.
“Any person who knowingly presents false information in an application for insurance or life settlement contract is guilty of a crime and may be subject to fines and confinement in prison.”
This subchapter does not:
Ark. Code Ann. § 23-81-815 Injunctions — Civil remedies — Cease and desist.
(a) In addition to the penalties and other enforcement provisions of this subchapter, if any person violates this subchapter or any rule implementing this subchapter, the Insurance Commissioner may seek an injunction in a court of competent jurisdiction in the county where the person resides or has a principal place of business and may apply for temporary and permanent orders that the commissioner determines necessary to restrain the person from further committing the violation.
(b) Any person damaged by the acts of another person in violation of this subchapter or any rule implementing this subchapter may bring a civil action for damages in a court of competent jurisdiction against the person committing the violation.
(c) The commissioner may issue a cease and desist order upon a person who violates any provision of this section, any rule or order adopted by the commissioner, or any written agreement entered into with the commissioner, in accordance with the Arkansas Administrative Procedure Act, § 25-15-201 et seq.
(d)(1) When the commissioner finds that such an action presents an immediate danger to the public and requires an immediate final order, he or she may issue an emergency cease and desist order reciting with particularity the facts underlying such findings.
(2) The emergency cease and desist order is effective immediately upon service of a copy of the order on the respondent and remains effective for ninety (90) days. If the State Insurance Department begins nonemergency cease and desist proceedings under subsection (a) of this section, the emergency cease and desist order remains effective, absent an order by an appellate court of competent jurisdiction pursuant to the Arkansas Administrative Procedure Act, § 25-15-201 et seq.
(3) In the event of a willful violation of this subchapter, the trial court may award statutory damages in addition to actual damages in an additional amount up to three (3) times the actual damage award.
(4) The provisions of this subchapter shall not be waived by agreement.
(5) A choice of law provision shall not be utilized to prevent the application of this subchapter to any settlement in which a party to the settlement is a resident of this state.
Ark. Code Ann. § 23-81-816 Penalties.
(a) It is a violation of this subchapter for any person, provider, broker, or any other party related to the business of life settlements to commit a fraudulent life settlement act.
(b) For criminal liability purposes, a person that commits a fraudulent life settlement act is guilty of committing insurance fraud and shall be subject to the penalty provisions under § 23-66-512.
Ark. Code Ann. § 23-81-817 Unfair trade practices.
A violation of §§ 23-81-801 — 23-81-816 shall be considered an unfair trade practice pursuant to § 23-66-206 and shall be subject to the provisions related to hearings and penalties for violations of §§ 23-66-207 — 23-66-212 of the Trade Practices Act, § 23-66-201 et seq.
Ark. Code Ann. § 23-81-818 Effective date.
(a)(1) A provider lawfully transacting business in this state before July 31, 2009, may continue to do so pending approval or disapproval of that person's application for a license if the application is filed with the Insurance Commissioner not later than thirty (30) days after publication by the commissioner of an application form and instructions for licensure of providers.
(2) If the publication of the application form and instructions is before July 31, 2009, then the filing of the application shall not be later than thirty (30) days after July 31, 2009.
(3) During the time that the application form and instructions are pending with the commissioner, the applicant may use any form of life settlement contract that has been filed with the commissioner pending approval of the application form and instructions, provided the form and instructions are otherwise in compliance with the provisions of this subchapter.
(4) Any person transacting business in this state under this subsection shall comply with all other requirements of this subchapter.
(b)(1) A person who has lawfully negotiated life settlement contracts between any owner residing in this state and one (1) or more providers for at least one (1) year immediately before July 31, 2009, may continue to do so pending approval or disapproval of that person's application for a license if the application is filed with the commissioner not later than thirty (30) days after publication by the commissioner of an application form and instructions for licensure of brokers.
(2) If the publication of the application form and instructions is before July 31, 2009, then the filing of the application shall not be later than thirty (30) days after July 31, 2009.
(3) Any person transacting business in this state under this subsection shall comply with all other requirements of this subchapter.
Ark. Code Ann. § 23-81-901 Title.
This subchapter shall be known and may be cited as the “Unclaimed Life Insurance Benefits Act”.
Ark. Code Ann. § 23-81-902 Legislative intent.
The General Assembly intends for this subchapter to:
(1) Recognize the escheat or unclaimed property statutes under the Unclaimed Property Act, § 18-28-201 et seq.; and
(2) Require the complete and proper disclosure, transparency, and accountability for any method of payment of death benefits under a life insurance policy that is subject to regulation by the State Insurance Department.
Ark. Code Ann. § 23-81-903 Definitions.
As used in this subchapter:
(1)(A) “Contract” means an annuity contract.
(B) “Contract” does not include:
(i) An annuity contract used to fund an employment-based retirement plan or program in which an insurer:
(a) Does not perform recordkeeping services; or
(b) Is not required to pay death benefits to the beneficiaries of a specific plan participant by terms of the annuity contract; or
(ii) An annuity used to fund a funeral or related expenses or a prepaid funeral benefits contract;
(2) “Death master file” means a comprehensive database or source of death information used to verify the death of an individual maintained by the Division of Vital Records, the Social Security Administration, or other database or service;
(3) “Death master file match” means locating a Social Security number or the name and date of birth of an insured, annuity owner, or retained asset account holder in a search of a death master file;
(4) “Knowledge of death” means:
(A) Receipt of an original or valid copy of a death certificate issued by the state or a political subdivision of the state; or
(B) A death master file match validated by an insurer under § 23-81-904(c)(1)(A);
(5)(A) “Policy” means a policy or certificate of life insurance issued in this state that provides a death benefit.
(B) “Policy” does not include:
(i) A policy or certificate of life insurance that provides a death benefit under:
(a) A defined employee benefit pension plan, as defined in section 3(35) of the Employee Retirement Income Security Act of 1974, Pub. L. No. 93-406; or
(b) Any federal employee benefit program;
(ii) A policy or certificate of life insurance that is used to fund a funeral or related expenses or a prepaid funeral benefits contract;
(iii) A policy or certificate of credit life or accidental death insurance; or
(iv) A policy issued to a group master policyholder for which the insurer does not provide recordkeeping services;
(6) “Recordkeeping services” means services under a group policy or contract between an insurer and a group policy or contract customer to obtain, maintain, and administer on behalf of the insured a list of the individuals who are insured under a group insurance contract or a line of coverage, including an individual's:
(A) Social Security number or name and date of birth;
(B) Beneficiary designation information;
(C) Coverage eligibility;
(D) Benefit amount; and
(E) Premium payment status; and
(7) “Retained asset account” means a mechanism to deposit the settlement of proceeds payable under a policy or contract into a deposit account where the proceeds are retained by the insurer or its agent under a supplementary contract that only involves death benefits.
Ark. Code Ann. § 23-81-904 Insurer conduct.
(a) An insurer shall make a good faith effort to determine the death of an insured upon receipt of knowledge of death.
(b)(1) An insurer shall compare an in-force policy, contract, and retained asset account against a death master file to identify a potential match to an insured covered under the policy, contract, and retained asset account by using the full version of the death master file.
(2) An insurer shall perform the comparison under subdivision (b)(1) of this section semiannually by using the death master file update.
(c)(1) For a potential match that is identified as a result of a death master file match, the insurer shall within ninety (90) days of a death master file match:
(A) Make and document a good faith effort to confirm the death of the insured or retained asset account holder against other available records and information;
(B) Determine if death benefits are due under an applicable policy or contract; and
(C) If death benefits are due under the applicable policy or contract:
(i) Make a good faith effort to document and locate any beneficiary or beneficiaries; and
(ii) Provide the beneficiary or beneficiaries the necessary claim form or instructions to make a claim under the policy or contract, including submitting a death certificate issued by the state or any political subdivision of the state if required under the policy or contract.
(2) If an insurer is unable to confirm the death of an individual under subdivision (c)(1) of this section, the policy, annuity, or retained asset account may be considered by an insurer to be in force according to the terms of the policy, annuity, or retained asset account.
(3) An insurer is required to confirm a possible death of an insured under a group life insurance if the insurer maintains for an individual covered under a policy or certificate an insured's:
(A) Social Security number or name and date of birth;
(B) Beneficiary designation information;
(C) Coverage eligibility;
(D) Benefit amount; and
(E) Premium payment status.
(4) To the extent permitted by law, an insurer may disclose the necessary personal information about an insured or beneficiary to a person who the insurer reasonably believes may be able to assist the insurer in locating a beneficiary or a person entitled to payment of the claims proceeds.
(d) An insurer shall not charge a beneficiary or the beneficiary's authorized representative a fee or charge any costs associated with a death master file search or verification of a death master file match performed under this section.
(e)(1) A benefit or any accrued contractual interest under a policy, contract, or a retained asset account is payable to the designated beneficiary or owner.
(2) If a beneficiary or owner cannot be found, the benefit or any accrued contractual interest shall escheat to the state as unclaimed property under the Unclaimed Property Act, § 18-28-201 et seq.
(3) Interest payable under § 23-81-118 shall not be payable as unclaimed property under the Unclaimed Property Act, § 18-28-201 et seq.
(f) An insurer shall notify the Auditor of State upon the expiration of the statutory time period for escheat that:
(1) A beneficiary under a life insurance policy, contract, or retained asset account holder has not submitted a claim with the insurer; and
(2) The insurer has complied with subsection (b) of this section and has documented its good faith effort to locate and notify a beneficiary or retained asset account holder but has been unsuccessful.
(g) Upon delivery of a notice under subsection (f) of this section, an insurer shall submit immediately any unclaimed benefits under a policy, contract, or retained asset account, plus any applicable interest, to the Auditor of State.
Ark. Code Ann. § 23-81-905 Unfair trade practices.
(a) If an insurer fails to comply with this subchapter so frequently as to be a general business practice, then it is a violation of this subchapter and may be subject to the Trade Practices Act, § 23-66-201 et seq.
(b) A violation of this subchapter does not create a private right of action.
Source: Public.Resource.Org / UniCourt, Official Code of Arkansas Annotated, Release 78 (2020) (unicourt.github.io/cic-code-ar)URL: https://unicourt.github.io/cic-code-ar/transforms/ar/ocar/r78/gov.ar.code.title.23.htmlFetched: 11/8/2026