CHAPTER 200

INSURANCE DEPARTMENT LIFE INSURANCE AND INVESTMENTS OF FUNDS

AN ACT TO AMEND CHAPTER 20 OF THE REVISED CODE OF DELAWARE, 1935, AS AMENDED, RELATING TO THE INSURANCE DEPARTMENT AND MORE PARTICULARLY RELATING TO LIFE INSURANCE AND TO THE INVESTMENT OF FUNDS OF INSURANCE COMPANIES.

Be it enacted by the Senate and House of Representatives of the State of Delaware in General Assembly met:

Section 1. That Chapter 20 of the Revised Code of Delaware, 1935, as amended, be and it hereby is further amended by adding to 492. Sec. 31. of said Chapter a new paragraph numbered * (16) reading as follows,

* (16) Notwithstanding any direct or implied prohibitions in this section or in Section 30 of this Chapter, any domestic life, fire, marine, casualty or workmen's compensation insurance company may loan or invest its funds to an amount not exceeding in the aggregate five per centum of its total assets in loans or investments not qualified or permitted under the provisions of this Chapter other than this paragraph (16).

Section 2. That said Chapter 20 be and it hereby is further amended by inserting therein a new section to be known as 492-C. Sec. 31-C., reading as follows,

492-C. Sec. 31-C. Conditions Under Which Foreign or Alien Companies May Hold Real Estate:--A foreign or alien insurance company, authorized to do business in this State, may acquire, by purchase, lease or otherwise, or hold, improve, or develop, for the production of income, real property or any interest therein, and may thereafter own, maintain, manage, lease, collect or receive income from, or sell or convey, any real property or interest therein so acquired and held and any improvements thereon, as permitted by the laws of its domicile.

*so enrolled

Section 3. That said Chapter 20 be and it hereby is fur-the amended by striking out therefrom the first two paragraphs of 493. Sec. 32. (a) and inserting in lieu thereof two new paragraphs reading as follows,

493. Sec. 32. (a) The Insurance Commissioner shall annually value, or cause to be valued, the reserve liabilities (hereinafter called reserves) for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurance company doing business in this state, except that in the case of an alien company such valuation shall be limited to its insurance transactions in the United States, and may certify the amount of any such reserves, specifying the mortality table or tables, rate or rates of interest and methods (net level premium method or other) used in the calculation of such reserves. In calculating such reserves, he may use group methods and approximate averages for fractions of a year or otherwise. In lieu of the valuation of the reserves herein required of any foreign or alien company, he may accept any valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when such valuation complies with the minimum standard herein provided and if the official of such state or jurisdiction accepts as sufficient and valid for all legal purposes the certificate of valuation of the Insurance Commissioner when such certificate states the valuation to have been made in a specified manner according to which the aggregate reserves would be at least as large as if they had been computed in the manner prescribed by the law of that state or jurisdiction.

The Insurance Commissioner may vary the standards of interest and mortality in particular cases of invalid lives and other extra hazards.

Section 4. That said Chapter 20 be and it hereby is further amended by striking out therefrom paragraph numbered (4) of 496. Sec. 35., as amended, and inserting in lieu thereof a new paragraph (4) reading as follows,--

(4). A provision that if the age of the insured (or of any other person whose age is considered in determining the premium) has been mis-stated, the amount payable under the policy shall be such as the premium would have purchased at the correct age.

Section 5. That said Chapter 20 be and it hereby is further amended, by striking out therefrom paragraph numbered (6) of 496. Sec. 35., as amended, and inserting in lieu thereof a new paragraph (6) reading as follows,--

(6). A provision that after the policy has been in force three full years, the company, at any time while the policy is in force, will advance, on proper assignment or pledge of the policy and on the sole security thereof, at a specified rate of interest, a sum equal to, or at the option of the insured less than the amount required by 496-C. Sec. 35-C. under the conditions specified thereby; and that the company may deduct from such loan value (in addition to the indebtedness deducted in determining such value) any unpaid balance of the premium for the current policy year, and may collect interest in advance on the loan to the end of the current policy year. This provision shall not be required in term insurance, nor shall it apply to temporary insurance or pure endowment insurance, issued or granted in exchange for lapsed or surrendered policies. If any loan under the foregoing provision is made or extinguished on a date other than an interest due date, the company shall be entitled to interest pro-rata for the applicable portion of a year at the rate of interest specified in the policy. If the interest on any loan is not paid when due, it shall be added to the existing loan, and shall bear interest at the same rate.

Section 6. That said Chapter 20 be and it hereby is further amended by striking out from the end of paragraph numbered (10) of 496. Sec. 35. the words "and that such reinstated policy shall be contestable, on account of fraud or misrepresentation of material facts pertaining to the reinstatement, for the same period after reinstatement as provided in the policy with respect to original issue." and inserting a period after the word "annually" immediately preceding the said words so stricken out.

Section 7. That said Chapter 20 be and it hereby is further amended by striking out therefrom paragraph numbered (11) of 496. Sec. 35. and inserting in lieu thereof a new paragraph (11) reading as follows,--

(11). A provision that when a policy shall become a claim by the death of the insured, settlement shall be made upon receipt of due proof of death and surrender of the policy.

Section 8. That said Chapter 20 be and it hereby is further amended by striking out therefrom paragraph numbered (6) of 496-B. Sec. 35-B. (a) and inserting in lieu thereof a new paragraph (6) reading as follows,--

(6). A statement of the method to be used in calculating

the cash surrender value and the paid-up non-forfeiture benefit, available under the policy on any policy anniversary beyond the last anniversary for which such values and benefits are consecutively shown in the policy, with an explanation of the manner in which the cash surrender values and the paid-up non-forfeiture benefits are altered by the existence of any paid-up additions credited to the policy or any indebtedness to the company on the policy.

Section 9. That said Chapter 20 be and it hereby is further amended by striking out therefrom the first paragraph of 496-l3. Sec. 35-B. (d) and inserting in lieu thereof a new paragraph reading as follows,--

(d). The adjusted premiums for any policy shall be calculated on an annual basis and shall be such uniform percentage of the respective premiums specified in the policy for each policy year, excluding extra premiums to cover impairments or special hazards, that the present value, at the date of issue of the policy, of all such adjusted premiums shall be equal to the sum of (i) the then present value of the future guaranteed benefits provided for by the policy; (ii) two per cent of the amount of insurance, if the insurance be uniform in amount, or of the equivalent uniform amount, as hereinafter defined, if the amount of insurance varies with duration of the policy; (iii) forty per cent of the adjusted premium for the first policy year; (iv) twenty-five per cent of either the adjusted premium for the first policy year or the adjusted premium for a whole 'life policy of the same uniform or equivalent uniform amount with uniform premiums for the whole of life issued at the same age for the same amount of insurance, whichever is less. Provided, however, that in applying the percentages specified in (iii) and (iv) above, no adjusted premium shall be deemed to exceed four per cent (4%) of the amount of insurance or level amount equivalent thereto. The date of issue of a policy for the purpose of this subsection shall be the date as of which the rated age of the insured is determined.

Section 10. That said Chapter 20 be and it hereby is further amended by striking out therefrom paragraph (a) of 496-C. Sec. 35-C. and inserting in lieu thereof a new paragraph (a) reading as follows,--

(a). In the case of policies issued after January 1, 1932 and prior to the operative date of 496-B. Sec. 35-B., the loan value referred to in Paragraph (6) of 496. Sec. 35. shall be the reserve at the end of the current policy year on the policy and on the dividend additions thereto, if any, exclusive of the reserve on account of return premium insurance and of total and permanent disability and additional accidental death benefits, less any existing indebtedness to the company on or secured by the policy, and less a sum not more than (i) two and one-half per centum of the amount insured by the policy and of any dividend additions thereto or, at the option of the company, (ii) one-fifth of said reserve. Such policies may provide that such loan may be deferred for not exceeding six months after the application therefor is made.

Section 11. That said Chapter 20 be and it hereby is further amended by striking out therefrom 501. Sec. 40. and inserting in lieu thereof a new 501. Sec. 40. reading as follows,--

501. Sec. 40. Contestability of Reinstated Policy:--A reinstated policy shall be contestable, on account of fraud or Misrepresentation of material facts pertaining to the reinstatement, for the same period after reinstatement as provided in the policy with respect to original issue.

Section 12. That said Chapter 20 be and it hereby is further amended by striking out therefrom 504. Sec. 43. and inserting in lieu thereof a new 504. Sec. 43 reading as follows,

504. Sec. 43. Rights of Creditors and Beneficiaries Under Policies of Life Insurance:--If a policy of insurance, whether heretofore or hereafter issued, is effected by any person on his own life or on another life, in favor of a person other than himself, or, except in cases of transfer with intent to defraud creditors, if a policy of life insurance is assigned or in any way made payable to any such person, the lawful beneficiary or assignee thereof, other than the insured or the person so effecting such insurance or the executors or administrators of such insured or of the person so effecting such insurance, shall be entitled to its proceeds and avails against the creditors and representatives of the insured and of the person effecting the same, whether or not the right to change the beneficiary is reserved or permitted, and whether or not the policy is made payable to the person whose life is insured if the beneficiary or assignee shall predecease such person; provided, that, subject to the statute of limitations, the amount of any premiums for said insurance paid with intent to defraud creditors, with interest thereon, shall ensure to their benefit from the proceeds of the policy; but the company issuing the policy shall be discharged of all liability thereon by payments of its proceeds in accordance with its terms, unless before such payment the company shall have written notice, by or in behalf of a creditor, of a claim to recover for transfer made or premiums paid with intent to defraud creditors, with specification of the amount claimed.

Section 13. That said Chapter 20 be and it hereby is further amended by striking out therefrom 505. Sec. 44. and inserting in lieu thereof a new 505. Sec. 44. reading as follows,

505. Sec. 44. To Hold Proceeds of Certain Policies in Trust:--Any Life Insurance Company may hold the proceeds of any policy issued by it under a trust or other agreement upon such terms and restrictions as to revocation by the policyholder and control by beneficiaries and with such exemptions from the claims of creditors of beneficiaries other than the policyholder as shall have been agreed to in writing by such company and the policy holder. Such insurance company shall not be required to segregate funds so held but may hold them as a part of its general corporate assets.

Section 14. That said Chapter 20 be and it hereby is further amended by striking out therefrom the first paragraph of 507. Sec. 46. and inserting in lieu thereof a new paragraph reading as follows,

507. Sec. 46. Insurance Without the Consent of the Insured Prohibited; Minors:--No policy or agreement for insurance, other than an annuity or a policy of group insurance, or medical reimbursement insurance, shall be issued upon the life or health of another or against loss by disablement by accident except upon the application or with the written consent of the person insured; except that, a wife may take a policy of insurance upon the life or health of her husband or against loss by his disablement by accident; an employer may take out a policy of insurance covering his employees collectively for the benefit of such as may suffer loss from injury, death or disablement resulting from sickness; a parent or guardian of a student, or a college, school or other institution of learning, or the head or principal thereof, may take a policy of insurance against loss caused by the sickness or injury of a student or other person; and a person upon whom a child is dependent for support may take a policy of insurance on such child.

Section 15. That said Chapter 20 be and it hereby is further amended by striking out therefrom 508. Sec. 47. and inserting in lieu thereof a new 508. Sec. 47. reading as follows,

508. Sec. 47. Insurance of Husband's Life; Married Woman May Effect:--A married woman may effect insurance on the life of her husband and all proceeds and avails of such insurance shall be free from the claims of the representatives of the husband, or of any of his creditors, whether or not the right to change the beneficiary is reserved or permitted; provided that, subject to the statute of limitations, the amount of any premiums for said insurance paid out of the funds or property of the husband with intent to defraud creditors, with interest thereon, shall ensure to their benefit from the proceeds of the policy; but the company issuing the policy shall be discharged of all liability thereon by payment of its proceeds in accordance with its terms, unless before such payment the company shall have written notice, by or in behalf of a creditor, of a claim to recover for premiums paid with intent to defraud creditors, with specifications of the amount claimed.

Section 16. That said Chapter 20 be and it hereby is further amended by striking out therefrom 509. Sec. 48. and the said 509. Sec. 48. is hereby repealed.

Approved April 7, 1947.