2011 Wisconsin Code
Chapter 632. Insurance contracts in specific lines.
632.62 Participating and nonparticipating policies.
632.62632.62 Participating and nonparticipating policies.
632.62(1)(a)(a) Stock insurers. A stock insurer may issue both participating and nonparticipating life insurance policies and annuity contracts, subject to this section.
632.62(1)(b)(b) Fraternals and mutual insurers. A fraternal or mutual insurer issuing life insurance policies may issue only participating policies, except for the following situations in which it may issue nonparticipating policies:
632.62(1)(b)1.1. Paid-up, temporary, pure endowment insurance and annuity settlements provided in exchange for lapsed, surrendered or matured policies;
632.62(1)(b)2.2. Annuities beginning within one year of the making of the contract; and
632.62(1)(b)3.3. Such term insurance policies as the commissioner may exempt by rule.
632.62(2)(2) Participation. Every participating policy shall by its terms give its holder full right to participate annually in the part of the surplus accumulations from the participating business of the insurer that are to be distributed.
632.62(3)(3) Accounting. Every insurer issuing both participating and nonparticipating policies shall separately account for the 2 classes of business and no part of the amounts accumulated or credited to the participating class may be voluntarily transferred to the nonparticipating class.
632.62(4)(4) Dividend payments.
632.62(4)(a)(a) Deferred dividends. No life insurance policy or certificate may be issued in which the accounting, apportionment and distribution of surplus is deferred for a period longer than one year.
632.62(4)(b)(b) Payment. Every insurer doing a participating business shall annually ascertain the surplus over required reserves and other liabilities. After setting aside such contingency reserves as may be considered necessary and be lawful, such reasonable nondistributable surplus as is needed to permit orderly growth, making provision for the payment of reasonable dividends upon capital stock and such sums as are required by prior contracts to be held on account of deferred dividend policies, the remaining surplus shall be equitably apportioned and returned as a dividend to the participating policyholders or certificate holders entitled to share therein. A dividend may be conditioned on the payment of the succeeding year's premium only on the first and second anniversaries of the policy.
632.62 - ANNOT.History: 1975 c. 373, 375, 422; 1979 c. 102.
632.62 - ANNOT.Sub. (4) (b) mandates how a divisible surplus is to be determined. After the surplus is determined, then and only then must the insurer decide how to equitably apportion the surplus. An allocation to annuity policyholders before determining the surplus is contrary to the terms of the statute. Noonan v. Northwestern Mutual Life Insurance Co. 2004 WI App 154, 276 Wis. 2d 33, 687 N.W.2d 254, 03-1432.
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