Assessment of Public Comment for the Second Amendment to 11 NYCRR 54 (Insurance Regulation 77)
The purpose of the proposed amendment is to extend the timeframes for insurers to make payment of variable death benefits, cash surrender values, policy loans, partial withdrawals or partial surrenders under private placement individual variable life insurance policies.
The proposed amendment includes a requirement for a prominent disclosure statement to be set forth in an application for an individual private placement variable life insurance policy. The disclosure notifies the applicant that due to the illiquid nature of the investment options, the payment of the death benefit, cash surrender value, policy loans, partial withdrawals or partial surrenders, as applicable, may be delayed. It also advises the applicant to refer to the policy for further details on any delay of payments.
The Department of Financial Services received one comment during the public comment period. An insurer commented that to include the disclosure language in applications for private placement variable life insurance policies where no illiquid investment options are offered would create confusion.
The Department considered the insurer’s suggestion but determined that it is not necessary to make any changes to the proposed rule for several reasons. A private placement individual variable life insurance policy typically offers illiquid investment options. In the event that an insurer submits a life insurance application for use with a private placement variable life insurance policy that does not offer illiquid investment options, the Department would permit the insurer to add clarifying language in conjunction with the required disclosure statement. Finally, no other insurer has raised a similar issue as a result of the Department’s outreach to the industry prior to beginning the SAPA process or during the SAPA public comment period.