31A-22-418 - Participating and nonparticipating policies.
31A-22-418. Participating and nonparticipating policies.
(1) (a) A stock insurer and a mutual insurer may issue both participating andnonparticipating life insurance policies and annuity contracts, subject to this section.
(b) A fraternal insurer issuing life insurance policies in this state may only issueparticipating policies, except for the following nonparticipating policies:
(i) paid-up, temporary, pure endowment insurance, and annuity settlements provided inexchange for lapsed, surrendered, or matured policies;
(ii) annuities beginning within one year of the making of the contract; and
(iii) those term insurance policies which the commissioner exempts by rule.
(2) Every participating policy shall by its terms give its holder full right to participateannually in the surplus accumulations from the participating business of the insurer that aredistributed.
(3) Every insurer issuing both participating and nonparticipating policies shall separatelyaccount for the two classes of business.
(4) (a) No life insurance policy or certificate may be issued in which the accounting,apportionment, and distribution of surplus is deferred for a period longer than three years.
(b) Every insurer doing a participating business shall annually ascertain the surplus overrequired reserves and other liabilities. After setting aside the contingency reserves it considersnecessary and as are required by law, the reasonable nondistributable surplus needed to permitorderly growth, making provision for the payment of reasonable dividends upon capital stock andthose sums as are required by prior contracts to be held for deferred dividend policies, theremaining surplus shall be equitably apportioned and returned as a dividend to the participatingpolicyholders or certificate-holders entitled to share in the dividend. A dividend may beconditioned on the payment of the succeeding year's premium only on the first and secondanniversaries of the policy.
Amended by Chapter 204, 1986 General Session