(a) As used in this section, unless the context otherwise requires: “Insurance bank” means a savings bank which has established an insurance department; “savings department” means any department of an insurance bank in which any business done by savings banks other than that provided for by this section is conducted; “insurance department” means the department of an insurance bank in which the business of issuing life insurance and the granting of annuities is conducted pursuant to this section; “The Savings Bank Life Insurance Company” or “company” means the corporation chartered under the name of The Savings Bank Life Insurance Company by special act of the General Assembly; and “agency bank” means a savings bank which acts as agent for an insurance bank or for The Savings Bank Life Insurance Company.

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(b) Any savings bank may, upon complying with the provisions set forth in this section, establish an insurance department if its governing board, at a meeting specially called for the purpose, has voted to do so by a two-thirds vote of the directors present at such meeting and voting. The notice of such meeting shall be given at least thirty days prior to the date of the meeting and shall be otherwise in accordance with any bylaws governing the calling of special meetings of the governing board. Statements of such vote, certified and sworn to by the president or vice president of the savings bank, shall be filed with the commissioner and the Insurance Commissioner within thirty days after the adoption thereof; and, if the commissioners find that such vote is in conformity with law, and that such savings bank has entered into a reinsurance agreement as required by subsection (c) of this section, the commissioners shall issue a joint certificate declaring such insurance department established.

(c) Each insurance bank and each savings bank proposing to establish an insurance department, as one party, and The Savings Bank Life Insurance Company, as the other party, shall enter into and comply with the terms of a reinsurance agreement providing substantially as follows:

(1) The company shall reinsure the mortality and morbidity risk of each life insurance policy and annuity contract issued or to be issued by such bank.

(2) The company shall prepare and furnish to such bank such forms of life insurance policies and annuity contracts as may from time to time be desirable, and such forms shall be the exclusive forms used for their intended purposes by such bank.

(3) The company shall prepare and furnish to such bank forms of blanks for applications for life insurance policies and annuity contracts and for proofs of loss, all forms of books of record and of account, all schedules and reports not otherwise provided for, and all other forms necessary or appropriate for the efficient conduct of the business of the insurance department of such bank, and those forms, blanks, books, schedules and reports shall be the exclusive ones used for their intended purposes by such bank.

(4) The company shall, in accordance with law, and with the approval of the Insurance Commissioner, determine, prepare or procure and furnish to such bank, tables of: (A) Premium rates for all life insurance policies; (B) purchase rates for all annuities; (C) surrender charges; (D) collection fees; (E) amounts which may be loaned on life insurance policies; (F) reinsurance premiums to be charged by the company; and (G) reserves to be held under life insurance policies and annuity contracts. Such rates, charges, fees, loan amounts and reserves shall be the exclusive ones used for their intended purposes by such bank.

(5) The company shall prescribe the standards of health or acceptability of applicants for insurance and annuity contracts to be issued by such bank and shall have the right to decline any class or classes of risk or reject any particular application or applications.

(6) No life insurance policy or annuity contract shall be delivered or issued for delivery by such bank without the prior approval of the company.

(7) Such bank shall not make any payment of any death or disability claim without the prior approval of the company unless such payment shall be made pursuant to a judgment or decree of a court of competent jurisdiction.

(8) The company shall defend any legal or equitable action or proceeding involving or arising out of any life insurance policy or annuity contract issued by such bank, and the company in its discretion may institute and prosecute in the name of such bank any legal or equitable action or proceeding to rescind any life insurance policy or annuity contract. Such bank shall cooperate with the company in its defense, or institution and prosecution, as the case may be, of any such action or proceeding, the expense of which shall be borne by the company.

(9) The company shall furnish to such bank the services of an actuary and of a medical director.

(d) (1) An insurance department, after the issue of the certificate provided for in subsection (b) of this section, shall be entitled to exercise all the powers conferred, and shall be subject to all the limitations imposed by this section, and may make and issue policies upon the lives of persons and grant or sell annuities, with all the rights, powers and privileges and subject to all duties, liabilities and restrictions in respect to the conduct of the business of life insurance conferred or imposed by the general statutes relating to domestic legal reserve life insurance companies, so far as the same are applicable and except as is otherwise provided in this section, and such insurance department shall be exempt from the provisions of section 38a-41. An insurance department shall, in all respects, except as is otherwise provided in this section, be managed as savings banks are managed under the laws of this state.

(2) The assets of a savings department shall be liable only for and applicable only to the payment and satisfaction of the liabilities, obligations and expenses of such department. The assets of an insurance department shall be liable only for and applicable only to the payment and satisfaction of the liabilities, obligations and expenses of such department. Every insurance policy and annuity contract issued by an insurance bank shall contain on its face the following statement: “The only assets of this bank which are liable for and applicable to the payment and satisfaction of the liabilities, obligations and expenses of the insurance department of this bank are the assets of the insurance department of this bank.” A savings department and an insurance department shall be kept distinct in matters of accounting and of investment, and no assets of either department, except as otherwise provided in this section, shall be transferred to the other. Expenses pertaining to the conduct of both departments shall be apportioned by the governing board equitably between the two departments. The business of an insurance department may be carried on in the same building as that of the savings department, or, with the approval of the Insurance Commissioner, in a different building.

(3) Any savings bank may act as an agent of an insurance bank or as agent of The Savings Bank Life Insurance Company. No savings bank or employee of a savings bank may solicit, negotiate or effect coverage of savings bank life insurance unless such savings bank or employee is licensed by the Insurance Commissioner in accordance with the provisions of section 38a-769 to sell savings bank life insurance. Except as otherwise permissible under applicable law, no savings bank or employee of a savings bank may sell any other type of insurance. Any other party licensed to sell life insurance under section 38a-769 may be authorized to sell savings bank life insurance by The Savings Bank Life Insurance Company.

(4) No policy or annuity contract shall be issued except upon the life of a resident of this state or of a person regularly employed therein, or of the spouse or children residing in the household of a person regularly employed within this state; but any policy or contract so issued may be continued in force by the payment of premiums notwithstanding the termination of such residence or employment.

(5) Except as otherwise provided in this section, the assets of an insurance department shall be invested or loaned, in the same manner and to the same extent as the assets of Connecticut banks are permitted to be invested or loaned, but such assets shall not be invested in the surplus fund of any insurance department. The assets of an insurance department may also be loaned upon policies of insurance or annuity contracts issued by such insurance department or by another insurance department or by any legal reserve life insurance company authorized to do business in this state. Uninvested assets may be deposited with any bank, provided such bank shall have been designated as a depository by vote of a majority of all the directors, excluding any director who is an officer or director of the depository so designated.

(6) (A) The surplus of any insurance department, whether created from net profits or advances, shall be maintained and held or used, so far as necessary, to meet losses occasioned by unexpectedly great mortality, depreciation in securities or other causes. Such surplus shall also be maintained and held or used for the maintenance of a stable dividend scale, and for the payment of settlement or maturity dividends or both, in such manner and in such amounts as may, from time to time, be directed by the governing board subject to the approval of the Insurance Commissioner. (B) Upon the thirty-first day of December in each year, or as soon thereafter as may be practicable, each insurance department shall ascertain the net profits earned by such insurance department during such year. After setting aside such sums as are deemed advisable for the accumulation of a surplus, each such department shall annually distribute the remainder, if any, of such net profits equitably among the holders of its policies and annuity contracts, such distribution to be made at the option of the policyholder in accordance with the terms of such policyholder’s policy or annuity contract.

(7) Any insurance bank may, at any time, discontinue the issuance of insurance policies and annuity contracts, if its governing board, at a meeting specially called for the purpose, has voted so to do by a two-thirds vote of the directors present at such meeting and voting. The notice of such meeting shall be given at least thirty days prior to the date thereof and shall be otherwise in accordance with any bylaws governing the calling of special meetings of the governing board. A copy of the vote to discontinue such business, certified to by the secretary of the bank and sworn to by its president or vice president and its treasurer or assistant treasurer, shall be filed with the Insurance Commissioner and with The Savings Bank Life Insurance Company within five days after the meeting at which such vote was cast. A bank which has so voted shall reinsure all of its outstanding policies and annuity contracts either in another insurance bank or in The Savings Bank Life Insurance Company, in either case upon terms and conditions which the Insurance Commissioner shall deem satisfactory to assure the carrying out of the provisions of such policies and annuity contracts. If the insurance bank’s savings department is declared insolvent or acquired by a bank that is not permitted to issue savings bank life insurance, the company shall arrange to transfer all affected outstanding policies to another insurance bank or to the company with the approval of the commissioner and the Insurance Commissioner.

(e) (1) No policy of life or endowment insurance issued by any insurance bank shall become forfeit or void for nonpayment of premiums after six months’ premiums have been paid thereon; and, in case of default in the payment of any subsequent premium, then, without any further stipulation or act, such policy shall be binding upon such bank at the option of the insured, either (A) for the cash surrender value, which shall be equal to the reserve less a surrender charge of not more than one per cent of the face amount of the policy, and which shall be increased by the value of any dividend additions or dividends then standing to the credit of the policy, and which shall be decreased by any indebtedness; or (B) for the amount of paid-up insurance which the cash surrender value, as defined in subparagraph (A), will purchase as a net single premium for the life or endowment insurance, as the case may be, provided by the policy; or (C) for an amount of paid-up term insurance which the cash surrender value, as defined in subparagraph (A), will purchase as a net single premium, but if such cash value is greater than the net single premium for such term insurance to the original date of maturity of the policy, the excess shall be used to purchase a paid-up pure endowment maturing at the original date of maturity of the policy. If no election is made, the option contained in subparagraph (C) shall be deemed to be elected by such insured. If the policy provides for both insurance and annuity, the provisions of this subdivision shall apply only to that part of the policy providing insurance. Said provisions shall not apply to annuity or pure endowment contracts, with or without return of premiums or of premiums and interest, whether simple or compound, or to survivorship annuity contracts or survivorship insurance contracts, but each policy providing for a deferred annuity on the life of the insured alone shall, unless paid for by a single premium, provide that, in the event of the nonpayment of any premium after six months’ premiums have been paid, the annuity shall automatically become converted into a paid-up annuity for such proportion of the original annuity as the period for which premiums have been paid bears to the total period for which premiums are required to be paid under the policy.

(2) Policies and annuity contracts may be signed on behalf of an insurance bank by such officer or employee thereof as the governing board may, from time to time, determine.

(f) Any savings bank may invest not more than five per cent of its capital and surplus in stocks, obligations or other securities of The Savings Bank Life Insurance Company. Such investment may include advances to the surplus of the company.

(g) (1) The Insurance Commissioner shall, and the commissioner may, at least once every five years and whenever they deem it expedient, either alone or together, personally or by deputy or assistant, examine each insurance department. During such examination, they shall have free access to the vaults, books and papers and shall thoroughly inspect and examine the affairs of any such department in order to ascertain its condition, its transactions and its ability to fulfill its obligations and whether it has complied with all the provisions of law applicable to it. Insurance departments shall be subject to the provisions of the insurance law concerning examinations, and copies of all reports on examinations shall be forwarded by the Insurance Commissioner to the commissioner and The Savings Bank Life Insurance Company.

(2) The Insurance Commissioner or such commissioner’s deputy may summon the directors, officers or agents of any insurance bank and such other witnesses as the Insurance Commissioner thinks proper, and examine them relative to the affairs, transactions and conditions of the insurance department and, for such purpose, may administer oaths. Any person who, without justifiable cause, refuses to appear and testify when so required, or who obstructs the Insurance Commissioner in the performance of the Insurance Commissioner’s duty, shall be fined not more than one thousand dollars or imprisoned not more than one year.

(3) If upon examination, any insurance department appears to the commissioner and to the Insurance Commissioner to be insolvent, or if they find its condition to be such as to render the continuance of its business hazardous to the public or to the holders of its policies or contracts, or if such insurance department appears to such commissioners to have exceeded its powers or to have failed to comply with any provision of law, such commissioners, jointly, but not separately, may apply to the Superior Court, which shall have jurisdiction in equity of such applications, for an injunction to restrain such insurance department, in whole or in part, from further proceeding with its business. The court may appoint one or more receivers to take possession of the property of the insurance department, subject to such direction as may, from time to time, be prescribed by the court without in any respect affecting the operations of the savings department of such insurance bank.

(4) The Insurance Commissioner shall prepare, annually, from such reports concerning insurance departments, and submit to the Governor in the annual report of his department, a statement of the condition of each insurance department and shall make such suggestions as the Insurance Commissioner considers expedient relative to the condition of each such insurance department visited by the Insurance Commissioner and to the manner in which the same is conducted.

(h) Each insurance department shall annually, on or before the first day of March, file with the Insurance Commissioner a statement showing its financial condition on the last business day of December. Such annual statement shall be in the form required by the Insurance Commissioner and shall contain such information as the Insurance Commissioner prescribes. The assets and liabilities of such insurance department shall be computed and allowed in such statement in accordance with the rules governing domestic legal reserve life insurance companies, except as otherwise provided in this section. Two officers of each insurance bank shall make oath that the annual report of the insurance department is correct to the best of their knowledge and belief. The Insurance Commissioner may also, at any time, require each insurance bank to make such other statement of condition or furnish such other information as the Insurance Commissioner deems necessary or expedient.

(i) Insurance departments shall be taxed by this state in the same manner and at the same rates as domestic mutual life insurance companies and shall be charged the same fees as are imposed upon domestic mutual life insurance companies under section 38a-11.