Insurance regulators in Iowa and Virginia have adopted the NAIC’s Model Rules regulating term and universal life insurance reserve financing. The stated purpose of the rules is “to establish uniform, national standards governing reserve financing arrangements pertaining to life insurance policies containing guaranteed nonlevel gross premiums, life insurance policies containing guaranteed nonlevel benefits, and universal life insurance policies with secondary guarantees” and to require certain funds or securities to be held in association with such financing arrangements. The regulations “specif[y] additional requirements relating to the valuation of asset or reserve credits, the amount and forms of security supporting certain reinsurance arrangements, and the circumstances pursuant to which credit will be reduced or eliminated.

Both states provide a rule specifically prohibiting an insurer that has policies covered by the rules from “tak[ing] any action … or enter[ing] into any transaction … if the purpose of such action, transaction or arrangement … is to avoid the requirements of this chapter, or to circumvent its purpose and intent.”

The Iowa regulations take effect on January 10, 2018, and can be found at 191 – Chapter 112, Iowa Administrative Code. The Virginia regulations take effect on January 1, 2018, and can be found at Title 14, Chapter 318, Virginia Administrative Code.