An Illinois consumer transfers a non-qualified deferred annuity to a new carrier as an IRC § 1035 exchange. Under Illinois law, which regulation governs the producer's replacement-notice and conservation duties?

Why this is the answer

Illinois's replacement regulation, 50 Ill. Adm. Code 917, defines 'replacement' broadly to include any transaction in which an existing annuity is surrendered, converted, or otherwise reduced in value in connection with the purchase of a new annuity. IRC § 1035 governs only the federal tax treatment and does not exempt the transaction from state insurance regulation. The producer must deliver the replacement notice, complete the disclosure statement, notify the existing insurer within five working days, and provide a 20-day free-look on the new contract.