Final answer:
The Replacement Regulation pertains to changes in insurance policies. It applies to a whole life policy being reissued with a reduction in cash value because it involves replacing an existing policy with different terms. The correct option is B.
Step-by-step explanation:
The Replacement Regulation applies to a situation where an insurance policy is being surrendered or significantly changed in favor of a new one.
It is designed to protect policyholders by ensuring that they are fully informed of the changes and implications of replacing their insurance policy.
The correct answer to the question of which situation the Replacement Regulation applies to is B. A whole life policy reissued with reduction in cash value.
This is because it involves replacing an existing policy with a new one which has different terms, specifically, a reduction in cash value which impacts the policy's savings element.
Group life insurance and coverage under a binding receipt issued by the same company do not typically involve replacing one policy with another.
An immediate annuity purchased with proceeds from an existing policy represents a transaction and change in the form of the policy, but isn't a direct replacement of life insurance coverage with another life insurance policy. The correct option is B.