Section 2534.42 - Notifications and Procedures Concerning Hazardous Operations(a) Variable products may be reviewed to determine if the investments involve hazardous operations.(b) Hazardous operations shall not exist if the variable product issued, or issued for delivery, in this state: (1) has underlying investment portfolio(s) that are registered under the Investment Company Act of 1940, regardless of whether such underlying portfolio(s) meet the criteria set forth in Section 2534.45 of these regulations;(2) is issued in connection with a plan that is subject to the fiduciary standards of the Employee Retirement Income Security Act of 1974 (ERISA) or is issued in connection with a welfare benefit, deferred compensation, pension, profit sharing, or retirement plan established or maintained by or for a plan sponsor;(3) is a variable life insurance contract issued under California Insurance Code Section 10506.3;(4) is issued under California Insurance Code Section 10541 to entities such as a trust or foundation;(5) or is issued only to "accredited investors" as that term is defined in Section 501(a) of Regulation D, promulgated under the Securities Act of 1933, (17 CFR Section 230.501(a)) or to "qualified purchasers" as that term is defined in Section 2(a)(51)(A) of the Investment Company Act of 1940, ( 15 USC § 80a -2(a)(51)(A)).(c) Notwithstanding the above, the Commissioner reserves the right to review any variable product falling into any of the above categories for possible hazardous operations where he deems there is good cause to believe that the issuance of such a product may pose a hazard to California policyholders or the public, or where he finds that any material risk is not adequately disclosed.(d) If the Commissioner determines that hazardous operations are involved, the following procedure will be utilized: (1) The insurer will be notified of the Commissioner's initial finding regarding hazardous operations. At that time, the insurer will be given a reasonable opportunity to present a response consisting of evidence to refute the Commissioner's initial findings. Such response shall be given within 30 days of the service of the Commissioner's initial findings.(2) If the insurer fails to provide satisfactory evidence that hazardous operations are not involved in the variable product, pursuant to the authority of Article 14.5., Chapter 1., Part 2., Division 1. of the Insurance Code, commencing with section 1065.1, the Commissioner shall issue such order or orders as are necessary to support his or her findings regarding hazardous operations. Such orders shall include, but not be limited to, the prohibition of the sale, issuance and delivery of an insurance policy or contract. The Commissioner may exercise all other powers provided in Article 14.5. Any hearing held pursuant to this article shall be before an administrative law judge of the Administrative Hearing Bureau of the Department of Insurance.Cal. Code Regs. Tit. 10, § 2534.42
1. New section filed 12-13-2006; operative 1-12-2007 (Register 2006, No. 50). Note: Authority cited: Sections 1065.1 and Section 10506(h), Insurance Code. Reference: Sections 1065.1 and Section 10506(h), Insurance Code.
1. New section filed 12-13-2006; operative 1-12-2007 (Register 2006, No. 50).