Section 210-80-005 - Financial Requirements and Plan of Operation005.01 A contract may not be delivered or issued for delivery in this state unless the issuing insurer is licensed as a life insurance company in this state and is financially qualified under the provisions of Subsection 005.02 of this section. In addition, a domestic insurer may not deliver or issue for delivery, either in this state or outside this state, a contract belonging to a specific class of contracts unless the insurer has satisfied the requirements of Subsection 005.03 of this section with respect to that class of contracts.005.02 An insurer will be financially qualified under this section if its most recent statutory financial statements on file with the Director reflect that it meets the financial requirements of Neb. Rev. Stat. § 44-708.01, and its risk-based capital results do not place it at a regulatory level of action. In lieu of the requirements in the preceding sentence, the insurer may be required to satisfy such other financial qualification requirements set forth by the Director as having been deemed necessary or appropriate in a particular case to protect the insurer's policyholders and the public.005.03 A domestic insurer will satisfy the requirements of this section with respect to a class of contracts if the insurer has filed a plan of operation pertaining to the class of contracts, together with copies of the forms of the contract in the class, with the Director, and the filing of the plan of operation has been approved. 005.03A The plan of operation for a class of contracts shall describe the financial implications for the insurer of the issuance of the contracts in the class, and shall include at least the following:005.03A(1) A statement that the plan of operation will be administered in accordance with the requirements prescribed by the Director pursuant to this regulation, along with a statement that the insurer will comply with the plan of operation in its administration of the contract;005.03A(2) A statement describing the methods and procedures used to value statutory liabilities for purposes of Section 010;005.03A(3) A description of the criteria used by the insurer in approving the investment manager for the segregated portfolio of assets associated with a contract in the class, if the investment manager is an entity other than the insurer or its wholly owned subsidiary;005.03A(4) A description of the insurer's requirement for reports concerning the assets in each segregated portfolio and transactions involving the assets, and a description of how the insurer can use the information in a report to determine that the segregated portfolio is being managed in accordance with its investment guidelines. The insurer shall require that the report be prepared no less frequently than quarterly, and include a complete statement of segregated portfolio holdings and their fair market value;005.03A(5) A demonstration of financial results for one or more sample contracts from the class of contracts, showing at a minimum the projected contract value records, the applicable fixed rate or rates of return, and the projected market value records, describing how the investments in the segregated portfolio reflect provision for benefits insured by the contract and how the contract value and market values and the rates of return may be affected by changes in the investment returns of the segregated portfolio and reasonably anticipated deposits to and withdrawals from the segregated portfolio by the contract holder, as well as any advances made by the insurer to the contract holder. The sample contracts must be chosen to reasonably represent the range of results that could be expected from possible combinations of contract provisions of all contracts in the class. The demonstration shall include at least three (3) hypothetical return scenarios (level, increasing and decreasing) and for each of these scenarios, at least three (3) withdrawal scenarios (zero, moderate and high) shall be modeled. The Director may require additional scenarios if deemed necessary to fully understand the risks under the class of contracts. The demonstration period must be the greater of five (5) years or the minimum period the insurer must underwrite the risk;005.03A(6) A statement that all contracts in the class of contracts satisfy the requirement of Section 009 regarding unilateral contract terminations, together with a description of all termination events, discontinuation triggers and options, notice requirements, corrective action procedures, all other contract safeguards, and the procedures to be followed when a unilateral contract termination event occurs;005.03A(7) A description of the allowable investment parameters (such as objectives, derivative strategies, asset classes, quality, duration and diversification requirements applied to the assets held within the segregated portfolio) to be reflected in the investment guidelines applicable to each contract in the class to which the submitted plan of operation applies; and a description of the procedures that will be followed by the insurer in evaluating the appropriateness of any specific investment guidelines submitted by the contract holder.005.03A(8) A description of the criteria used by the insurer in approving for contract issuance a pooled fund representing multiple employer-sponsored plans and in approving the investment manager for the segregated portfolio of assets associated with such pooled fund contract;005.03A(9) A description of risk-mitigation techniques used by the insurer in connection with contracts issued to pooled funds representing multiple employer-sponsored plans;005.03A(10) An unqualified opinion by a qualified actuary with expertise in these matters as to the adequacy of the consideration charged by the insurer for the risks it has assumed with respect to the contracts in the class to which the plan of operation applies;005.03A(11) A statement that the actuarial opinion and memorandum required by Section 010 shall include, with respect to the class of contracts to which the plan of operation applies:005.03A(11)(i) If a payment has been made by the insurer in the prior reporting period under a contract in the class, the amount of aggregate risk charges (net of administrative expenses) for contracts in the class, and the aggregate amount of any losses incurred; and005.03A(11)(ii) An inventory of all material unilateral contract termination events in the class of contracts that have not been cured within the time period specified and that have occurred during the prior reporting period but where the company decided not to terminate the contract.005.03B Review of the plan of operation by the Director may necessitate requests for information to supplement that furnished pursuant to Subsection 005.03. Replies made in compliance with this paragraph should be made in sufficient detail that any follow-up correspondence can be held to a minimum.005.04 If an insurer chooses to operate a contract with a material change from the approved plan of operation, the changed provision(s) shall be filed with and approved by the Director in accordance with the requirements of Subsection 005.03.210 Neb. Admin. Code, ch. 80, § 005