(a) Life insurance conforming to all of the following conditions is another form of group life insurance:

(1) Written under a policy issued and delivered in connection with the payment of benefits against the risk of loss in the value of redeemable securities of the insured investor issued by an investment company or companies operating under the Investment Company Act of 1940, as amended, and whose redeemable securities are registered under the Securities Act of 1933, as amended. For the purposes of this section, such benefits shall be referred to as group investment return assurance.

(2) Covering the lives of every eligible member of a group of persons who are or become investors in an investment company or companies.

(3) The group numbers not less than 100 investors yearly.

(4) The amount of insurance on any one investor does not exceed the amount of his investment, and does not exceed twenty thousand dollars ($20,000) on any one life.

(5) The period of assurance for each investor shall not extend over a period exceeding the life of such investor.

(6) The policy is issued upon the application of the investment company or companies, and the premiums are paid by the investment company, the investor, or jointly by the investment company and the investor.

Such insurance may be issued with or without medical examination.

(7) The policy provides a benefit equal to the difference between the amount paid for such redeemable securities and the value of such redeemable securities at the earlier of either (A) the end of the certificate period, or (B) the date of death of the insured.

(8) To protect the public and policyholders located in this state from hazardous operation by domestic, foreign, or alien companies, and to further the purpose and provision of this part, no domestic, foreign, or alien insurance company shall undertake the issuance of any policy providing for group investment return assurance until such company has satisfied the commissioner that its condition or method of operation in connection with the issuance of such policies shall not be such as to render its operation hazardous to the public, or its policyholders in this state, and, whether domestic, foreign, or alien, that it meets the conditions prescribed in Section 717 for the issuance of a certificate of authority. In the determination of the qualification of a company requesting authority to issue policies providing for group investment return assurance within this state, the commissioner shall consider, in addition to the requirements of Section 717, all of the following: (A) the history of the company, (B) the character, responsibility, and general fitness of the officers and directors of the company, (C) the regulation of a foreign company by its state of domicile, (D) the adequacy of the investment management which the company is providing, and (E) the company’s arrangements for the supervision of the marketing of such policies. No company may provide group investment return assurance in its policies unless it is an admitted insurer having and maintaining a combined capital and surplus of at least two million dollars ($2,000,000).

(9) In addition to the requirements of paragraph (8), no admitted insurer may provide group investment return assurance in its policies unless it establishes a special contingency fund of not less than one million dollars ($1,000,000). This fund shall be deemed to constitute a reserve liability in addition to other reserves of such insurer. In the event an insurer issues both group and individual investment return assurance, such special contingency fund shall not be less than one million dollars ($1,000,000) for both group and individual assurance.

(b) The commissioner shall require the payment of two hundred fifty dollars ($250) as a fee for the determination of qualification required by this section. Upon completion of the determination of qualification, and whether authorization to issue policies providing group investment return benefits is granted or denied, the commissioner shall require the payment of such additional amounts from the requesting insurer as may be necessary to defray all administrative costs in excess of two hundred fifty dollars ($250) incurred by the commissioner in making such determination.

(c) On and after the effective date of this section, a group investment return assurance policy, or certificate evidencing such insurance, shall not be issued or delivered in this state until a copy of the form thereof is filed with the commissioner, the fees required by Section 12973.9 are paid, and the commissioner has given written approval of such form.

(d) No certificate of group investment return assurance shall be delivered or issued for delivery to any person in this state unless each such certificate does all of the following:

(1) Includes a statement on the first page thereof, in boldface type, that in the event that the value of the redeemable securities covered by the contract exceeds the amount paid for such securities, there shall be no benefit.

(2) Provides that the reserves for all group investment return assurance policies shall be computed and maintained on a basis which shall place an actuarially sound value on the liabilities under such policies. To provide a basis for the determination of such actuarially sound values, the commissioner, from time to time, shall adopt rules requiring the use of appropriate tables of morbidity, mortality, interest rates, and valuation methods for such reserves.

(e) In furtherance of the purpose of this section, the commissioner may make reasonable rules and regulations therefor. Such rules and regulations shall be adopted, amended or repealed in accordance with the procedure provided in Chapter 4.5 (commencing with Section 11371) of Part 1 of Division 3 of Title 2 of the Government Code.

(Added by Stats. 1971, Ch. 1565.)