10540-10541

INSURANCE CODE
SECTION 10540-10541




10540.  An incorporated life insurer issuing life insurance policies
on the reserve basis may collect premiums in advance. Such insurers
may also accept moneys for the payment of future premiums related to
any policies issued by it. No such insurer may accept such moneys in
an amount to exceed (1) the sum of future unpaid premiums on any such
policy or (2) the sum of 10 such future unpaid annual premiums on
any such policy if such sum is less than the sum of future unpaid
premiums on any such policy. This section shall not limit the right
of such insurers to accept funds under an agreement which provides
for an accumulation of such funds for the purpose of purchasing
annuities at future dates.


10541.  (a) Insurers authorized to deliver or issue for delivery
life insurance policies in this state may deliver or issue for
delivery one or more funding agreements, but the issuance or delivery
of those funding agreements shall not be deemed to be doing the
insurance business described in Section 700, a class of business as
provided in Section 100 or 101, a "security" as defined in Section
821, or receipt of "gross premiums" as defined in Section 12221 or
12222 of the Revenue and Taxation Code. Notwithstanding the
definition of "insurance" in Section 22 or the definition of "life
insurance" in Section 101, the issuance or delivery of a funding
agreement by an admitted life insurer in this state shall constitute
a lawful activity of that insurer that is reasonably related to and
incidental to its insurance activities as provided in this section.
However, this section shall not authorize any insurer to transact,
under the guise of funding agreements, any class of insurance not
authorized by its certificate of authority.
   (b) As used in this section, the term "funding agreement" means an
agreement that authorizes an admitted life insurer to accept funds
and that provides for an accumulation of those funds for the purpose
of making one or more payments at future dates in amounts that are
not based on mortality or morbidity contingencies. However, the term
"funding agreement" does not include any agreement in connection with
the funding of one or more payments that are excludable from the
gross income of the recipient under Section 104(a)(2) of the United
States Internal Revenue Code, as it may be amended or renumbered from
time to time.
   (c) No amounts shall be guaranteed or credited under any funding
agreement except upon reasonable assumptions as to investment income
and expenses and on a basis equitable to all holders of funding
agreements of a given class.
   (d) Amounts paid to the insurer, and proceeds applied under
optional modes of settlement, under those funding agreements may be
allocated by the insurer to one or more separate accounts pursuant to
Section 10506.
   (e) The commissioner may establish reasonable conditions or adopt
reasonable regulations relating to (1) the reserves to be maintained
by insurers issuing those funding agreements, (2) the accounting and
reporting of funds credited under those funding agreements, (3) the
disclosure of information to be given to holders and prospective
holders of those funding agreements, (4) the qualification of persons
selling those funding agreements on behalf of insurers, and (5) any
other matters relating to funding agreements that the commissioner
considers necessary, proper, and advisable.
   (f) Notwithstanding any other provision of law, the commissioner
shall have sole authority to regulate the issuance and sale of those
funding agreements, including the persons selling those funding
agreements on behalf of insurers.
   (g) Nothing in this section is intended to affect the order in
which allowed claims shall be given preference under Section 1033.
Holders of funding agreements shall retain the priority in allowance
of claims described in paragraph (2) of subdivision (a) of Section
1033.