2020 -- S 2619 | |
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LC004582 | |
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STATE OF RHODE ISLAND | |
IN GENERAL ASSEMBLY | |
JANUARY SESSION, A.D. 2020 | |
____________ | |
A N A C T | |
RELATING TO INSURANCE | |
| |
Introduced By: Senator Leonidas P. Raptakis | |
Date Introduced: February 27, 2020 | |
Referred To: Senate Commerce | |
(Dept. of Business Regulation) | |
It is enacted by the General Assembly as follows: | |
1 | SECTION 1. Sections 27-34.3-2, 27-34.3-3, 27-34.3-5, 27-34.3-6, 27-34.3-7, 27-34.3-8 |
2 | and 27-34.3-9 of the General Laws in Chapter 27-34.3 entitled "Rhode Island Life and Health |
3 | Insurance Guaranty Association Act" are hereby amended to read as follows: |
4 | 27-34.3-2. Purpose. |
5 | (a) The purpose of this chapter is to protect, subject to certain limitations, the persons |
6 | specified in § 27-34.3-3(a) against failure in the performance of contractual obligations, under life |
7 | and health insurance policies and annuity policies, plans, or contracts specified in § 27-34.3-3(b), |
8 | because of the impairment or insolvency of the member insurer that issued the policies, plans, or |
9 | contracts. |
10 | (b) To provide this protection, an association of member insurers is created to pay benefits |
11 | and to continue coverages as limited in this chapter, and members of the association are subject to |
12 | assessment to provide funds to carry out the purpose of this chapter. |
13 | (c) In accordance with this purpose, in determining the coverage limits to be applied in § |
14 | 27-34.3-3 in cases in which there were different statutory limits at the time the insurer was declared |
15 | impaired and the time the insurer was declared insolvent, the statute with the higher limits shall be |
16 | applied to the claim. |
17 | 27-34.3-3. Coverage and limitations. |
18 | (a) This chapter shall provide coverage for the policies and contracts specified in subsection |
19 | (b) of this section: |
| |
1 | (1) To persons who, regardless of where they reside (except for nonresident certificate |
2 | holders under group policies or contracts), are the beneficiaries, assignees or payees, including |
3 | health care providers rendering services covered under health insurance policies or certificates, of |
4 | the persons covered under subsection (2); and |
5 | (2) To persons who are owners of or certificate holders or enrollees under the policies or |
6 | contracts (other than unallocated annuity contracts, and structured settlement annuities) and in each |
7 | case who: |
8 | (i) Are residents; or |
9 | (ii) Are not residents, but only under all of the following conditions: |
10 | (A) The member insurer that issued the policies or contracts is domiciled in this state; |
11 | (B) The states in which the persons reside have associations similar to the association |
12 | created by this chapter; and |
13 | (C) The persons are not eligible for coverage by an association in any other state due to the |
14 | fact that the insurer or the health maintenance organization was not licensed in the state at the time |
15 | specified in the state's guaranty association law. |
16 | (3) For unallocated annuity contracts set forth in subsection (b) of this section, paragraphs |
17 | (1) and (2) of this subsection shall not apply, and this chapter shall (except as provided in |
18 | paragraphs (5) and (a)(6) of this subsection) provide coverage to: |
19 | (i) Persons who are owners of the unallocated annuity contracts if the contracts are issued |
20 | to or in connection with a specific benefit plan whose plan sponsor has its principal place of |
21 | business in this state; and |
22 | (ii) Persons who are owners of unallocated annuity contracts issued to or in connection |
23 | with government lotteries if the owners are residents. |
24 | (4) For structured settlement annuities specified in subsection (b)(1), paragraphs (1) and |
25 | (2) of this subsection shall not apply, and this chapter shall (except as provided in paragraphs (5) |
26 | and (6) of this subsection) provide coverage to a person who is a payee under a structured settlement |
27 | annuity (or beneficiary of a payee if the payee is deceased), if the payee: |
28 | (i) Is a resident, regardless of where the contract owner resides; or |
29 | (ii) Is not a resident, but only under both of the following conditions: |
30 | (A)(I) The contract owner of the structured settlement annuity is a resident; or |
31 | (II) The contract owner of the structured settlement annuity is not a resident but the insurer |
32 | that issued the structured settlement annuity is domiciled in this state; and |
33 | The state in which the contract owner resides has an association similar to the association |
34 | created by this chapter; and |
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1 | (B) Neither the payee or beneficiary, nor the contract owner is eligible for coverage by the |
2 | association of the state in which the payee or contract owner resides. |
3 | (5) This chapter shall not provide coverage to: |
4 | (i) A person who is a payee or beneficiary of a contract owner resident of this state, if the |
5 | payee or beneficiary is afforded any coverage by the association of another state; or |
6 | (ii) A person covered under paragraph (3) of this subsection, if any coverage is provided |
7 | by the association of another state to the person; or |
8 | (iii) A person who acquires rights to receive payments through a structured settlement |
9 | factoring transaction as defined in 26 U.S.C. 5891(c)(3)(A), regardless of whether the transaction |
10 | occurred before or after such section became effective. |
11 | (6) This chapter is intended to provide coverage to a person who is a resident of this state |
12 | and, in special circumstances, to a nonresident. In order to avoid duplicate coverage, if a person |
13 | who would otherwise receive coverage under this chapter is provided coverage under the laws of |
14 | any other state, the person shall not be provided coverage under this chapter. In determining the |
15 | application of the provisions of this paragraph in situations where a person could be covered by the |
16 | association of more than one state, whether as an owner, payee, enrollee, beneficiary, or assignee, |
17 | this chapter shall be construed in conjunction with other state laws to result in coverage by only |
18 | one association. |
19 | (b)(1) This chapter shall provide coverage to the persons specified in subsection (a) of this |
20 | section for policies or contracts of direct, non-group life insurance, health insurance (which for the |
21 | purposes of this chapter includes health maintenance organization subscriber contracts and |
22 | certificates), or annuity policies or contracts annuities and supplemental policies or contracts to any |
23 | of these, for certificates under direct group policies and contracts, and for unallocated annuity |
24 | contracts issued by member insurers, except as limited by this chapter. Annuity contracts and |
25 | certificates under group annuity contracts include, but are not limited to, guaranteed investment |
26 | contracts, deposit administration contracts, unallocated funding agreements, allocated funding |
27 | agreements, structured settlement annuities, annuities issued to or in connection with government |
28 | lotteries and any immediate or deferred annuity contracts. |
29 | (2) Except as otherwise provided in subsection (3) of this section, this This chapter shall |
30 | not provide coverage for: |
31 | (i) A portion of a policy or contract not guaranteed by the member insurer, or under which |
32 | the risk is borne by the policy or contract owner; |
33 | (ii) A policy or contract of reinsurance, unless assumption certificates have been issued |
34 | pursuant to the reinsurance policy or contract; |
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1 | (iii) A portion of a policy or contract to the extent that the rate of interest on which it is |
2 | based, or the interest rate, crediting rate or similar factor determined by use of an index or other |
3 | external reference stated in the policy or contract employed in calculating returns or changes in |
4 | value: |
5 | (A) Averaged over the period of four (4) years prior to the date on which the member |
6 | insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds |
7 | the rate of interest determined by subtracting two (2) percentage points from Moody's corporate |
8 | bond yield average averaged for that same four-year (4) period or for such lesser period if the policy |
9 | or contract was issued less than four (4) years before the member insurer becomes an impaired or |
10 | insolvent insurer under this chapter, whichever is earlier; and |
11 | (B) On and after the date on which the member insurer becomes an impaired or insolvent |
12 | insurer under this chapter, whichever is earlier, exceeds the rate of interest determined by |
13 | subtracting three (3) percentage points from Moody's corporate bond yield average as most recently |
14 | available; |
15 | (iv) A portion of a policy or contract issued to a plan or program of an employer, association |
16 | or other person to provide life, health or annuity benefits to its employees, members or others to |
17 | the extent that the plan or program is self-funded or uninsured, including but not limited to benefits |
18 | payable by an employer, association or other person under: |
19 | (A) A multiple employer welfare arrangement as defined in 29 U.S.C. § 1144; |
20 | (B) A minimum premium group insurance plan; |
21 | (C) A stop-loss group insurance plan; or |
22 | (D) An administrative services only contract; |
23 | (v) A portion of a policy or contract to the extent that it provides for: |
24 | (A) Dividends or experience rating credits; |
25 | (B) Voting rights; or |
26 | (C) Payment of any fees or allowances to any person, including the policy or contract |
27 | owner, in connection with the service to or administration of the policy or contract. |
28 | (vi) A policy or contract issued in this state by a member insurer at a time when it was not |
29 | licensed or did not have a certificate of authority to issue the policy or contract in this state; |
30 | (vii) An unallocated annuity contract issued to or in connection with a benefit plan |
31 | protected under the federal pension benefit guaranty corporation, regardless of whether the federal |
32 | pension benefit guaranty corporation has yet become liable to make any payments with respect to |
33 | the benefit plan; |
34 | (viii) A portion of unallocated annuity contract that is not issued to or in connection with a |
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1 | specific employee, union or association of natural persons benefit plan or a government lottery; |
2 | (ix) A portion of a policy or contract to the extent that the assessments required by § 27- |
3 | 34.3-9 with respect to the policy or contract are preempted by federal or state law; and |
4 | (x) An obligation that does not arise under the express written terms of the policy or |
5 | contract issued by the member insurer to the enrollee, certificate holder, contract owner or policy |
6 | owner, including, without limitation: |
7 | (A) Claims based on marketing materials; |
8 | (B) Claims based on side letters, riders or other documents that were issued by the member |
9 | insurer without meeting applicable policy or contract form filing or approval requirements; |
10 | (C) Misrepresentations of or regarding policy or contract benefits; |
11 | (D) Extracontractual claims; or |
12 | (E) A claim for penalties or consequential or incidental damages; |
13 | (xi) A contractual agreement that establishes the member insurer's obligations to provide a |
14 | book value accounting guaranty for defined contribution benefit plan participants by reference to a |
15 | portfolio of assets that is owned by the benefit plan or its trustee, which in each case is not an |
16 | affiliate of the member insurer; |
17 | (xii) A portion of a policy or contract to the extent it provides for interest or other changes |
18 | in value to be determined by the use of an index or other external reference stated in the policy or |
19 | contract, but which have not been credited to the policy or contract, or as to which the policy or |
20 | contract owner's rights are subject to forfeiture, as of the date the member insurer becomes an |
21 | impaired or insolvent insurer under this chapter, whichever is earlier. If a policy's or contract's |
22 | interest or changes in value are credited less frequently than annually, then, for purposes of |
23 | determining the values that have been credited and are not subject to forfeiture under this paragraph, |
24 | the interest or change in value determined by using the procedures defined in the policy or contract |
25 | will be credited as if the contractual date of crediting interest or changing values was the date of |
26 | impairment or insolvency, whichever is earlier, and will not be subject to forfeiture; |
27 | (xiii) Any transaction or combination of transactions between a protected cell and the |
28 | general account or another protected cell of a protected cell company organized under chapter 64 |
29 | of this title; or |
30 | (xiv) A policy or contract providing any hospital, medical, prescription drug or other health |
31 | care benefits pursuant to Part C or Part D of subchapter XVIII, chapter 7 of title 42 of the United |
32 | States Code (commonly known as Medicare part C & D), or Subchapter XIX, Chapter 7 of Title |
33 | 42 of the United States Code (commonly known as Medicaid), or any regulations issued pursuant |
34 | thereto; or |
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1 | (xvii) Structured settlement annuity benefits to which a payee (or beneficiary) has |
2 | transferred his or her rights in a structured settlement factoring transaction as defined in 26 U.S.C. |
3 | 5891(c)(3)(A), regardless of whether the transaction occurred before or after such section became |
4 | effective. |
5 | (3) The exclusion from coverage referenced in subsection (2)(iii) of this section shall not |
6 | apply to any portion of a policy or contract, including a rider, that provides a long-term care or any |
7 | other health insurance benefits. |
8 | (c) The benefits that the association may become obligated to cover shall in no event exceed |
9 | the lesser of: |
10 | (1) The contractual obligations for which the member insurer is liable or would have been |
11 | liable if it were not an impaired or insolvent insurer; or |
12 | (2)(i) With respect to any one life, regardless of the number of policies or contracts: |
13 | (A) Three hundred thousand dollars ($300,000) in life insurance death benefits, but not |
14 | more than one hundred thousand dollars ($100,000) in net cash surrender and net cash withdrawal |
15 | values for life insurance; |
16 | (B) In For health insurance benefits: |
17 | (I) One hundred thousand dollars ($100,000) for coverages not considered as disability |
18 | income insurance or basic hospital, medical and surgical insurance or major medical insurance |
19 | health benefit plans or long-term care insurance, including any net cash surrender and net cash |
20 | withdrawal values; |
21 | (II) Three hundred thousand dollars ($300,000) for disability income insurance and three |
22 | hundred thousand dollars ($300,000) for long-term care insurance; |
23 | (III) Five hundred thousand dollars ($500,000) for health benefit plans basic hospital, |
24 | medical and surgical insurance; or |
25 | (C) Two hundred fifty thousand dollars ($250,000) in the present value of annuity benefits, |
26 | including net cash surrender and net cash withdrawal values; |
27 | (ii) With respect to each individual participating in a governmental retirement plan |
28 | established under § 401, 403(b) or 457 of the U.S. Internal Revenue Code, 26 U.S.C. § 401, 403(b) |
29 | or 457, covered by an unallocated annuity contract or the beneficiaries of each such individual if |
30 | deceased, in the aggregate, two hundred fifty thousand dollars ($250,000) in present value annuity |
31 | benefits, including net cash surrender and net cash withdrawal values; |
32 | (iii) With respect to each payee of a structured settlement annuity or beneficiary or |
33 | beneficiaries, of the payee if deceased, two hundred fifty thousand dollars ($250,000) in present |
34 | value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal |
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1 | values if any; |
2 | (iv) However in no event shall the association be obligated to cover more than: (A) an |
3 | aggregate of three hundred thousand dollars ($300,000) in benefits with respect to any one life |
4 | under this paragraph and paragraphs (i), (ii) and (iii) of this subdivision except with respect to |
5 | benefits for health benefit plans basic hospital, medical and surgical insurance and major medical |
6 | insurance under subparagraph 2(i)(B) of this subsection, in which case the aggregate liability of the |
7 | association shall not exceed five hundred thousand dollars ($500,000) with respect to any one |
8 | individual; or (B) with respect to one owner of multiple non-group policies of life insurance, |
9 | whether the policy or contract owner is an individual, firm, corporation or other person, and whether |
10 | the persons insured are officers, managers, employees or other persons, more than five million |
11 | dollars ($5,000,000) in benefits, regardless of the number of policies and contracts held by the |
12 | owner; |
13 | (v) With respect to either: (A) one contract owner provided coverage under subsection |
14 | (a)(3)(i); or (B) one plan sponsor whose plans own directly or in trust any one or more unallocated |
15 | annuity contracts not included in paragraph (ii) of this subdivision, five million dollars ($5,000,000) |
16 | in benefits, irrespective of the number of contracts with respect to the contract owner or plan |
17 | sponsor. Provided, however, in the case where one or more unallocated annuity contracts that are |
18 | covered contracts under this chapter and are owned by a trust or other entity for the benefit of two |
19 | (2) or more plan sponsors, coverage shall be afforded by the association if the largest interest in the |
20 | trust or entity owning the contract or contracts is held by a plan sponsor whose principal place of |
21 | business is in this state and in no event shall the association be obligated to cover more than five |
22 | million dollars ($5,000,000) in benefits with respect to all such unallocated contracts; |
23 | (vi) The limitations set forth in this subsection are limitations on the benefits for which the |
24 | association is obligated before taking into account either its subrogation and assignment rights or |
25 | the extent to which those benefits could be provided out of the assets of the impaired or insolvent |
26 | insurer attributable to covered policies. The costs of the association's obligations under this chapter |
27 | may be met by the use of assets attributable to covered policies or reimbursed to the association |
28 | pursuant to its subrogation and assignment rights; |
29 | (vii) For purposes of this chapter, benefits provided by a long-term care rider to a life |
30 | insurance policy or annuity contract shall be considered the same type of benefits as the base life |
31 | insurance policy or annuity contract to which it relates. |
32 | (d) In performing its obligations to provide coverage under § 27-34.3-8, the association |
33 | shall not be required to guarantee, assume, reinsure, reissue or perform, or cause to be guaranteed, |
34 | assumed, reinsured, reissued or performed, contractual obligations of the insolvent or impaired |
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1 | insurer under a covered policy or contract that do not materially affect the economic values or |
2 | economic benefits of the covered policy or contract. |
3 | 27-34.3-5. Definitions. |
4 | As used in this chapter: |
5 | (1) "Account" means either of the two accounts created under § 27-34.3-6. |
6 | (2) "Association" means the Rhode Island life and health insurance guaranty association |
7 | created under § 27-34.3-6. |
8 | (3) "Authorized assessment" or the term "authorized" when used in the context of |
9 | assessments means a resolution by the board of directors has been passed whereby an assessment |
10 | will be called immediately or in the future from member insurers for a specified amount. An |
11 | assessment is authorized when the resolution is passed. |
12 | (4) "Benefit plan" means a specific employee, union or association of natural persons |
13 | benefit plan. |
14 | (5) "Called assessment" or the term "called" when used in the context of assessments means |
15 | that a notice has been issued by the association to member insurers requiring that an authorized |
16 | assessment be paid within the time frame set forth within the notice. An authorized assessment |
17 | becomes a called assessment when notice is mailed by the association to member insurers. |
18 | (6) "Commissioner" means the commissioner of insurance within the department of |
19 | business regulation of this state the definition prescribed by § 42-14-5. |
20 | (7) "Contractual obligation" means any obligation under a policy or contract or certificate |
21 | under a group policy or contract, or portion of a group policy or contract for which coverage is |
22 | provided under § 27-34.3-3. |
23 | (8) "Covered contract or covered policy" means any policy or contract or portion of a policy |
24 | or contract for which coverage is provided under § 27-34.3-3. |
25 | (9) "Extra-contractual claims" means claims not arising directly out of contract provisions, |
26 | including, for example, claims relating to bad faith in the payment of claims, punitive or exemplary |
27 | damages or attorneys' fees and costs. |
28 | (10) “Health benefit plan” means any hospital or medical expense policy or certificate, or |
29 | health maintenance organization subscriber contract or any other similar health contract. “Health |
30 | benefit plan” does not include: |
31 | (i) Accident only insurance: |
32 | (ii) Credit insurance; |
33 | (iii) Dental only insurance; |
34 | (iv) Vision only insurance; |
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1 | (v) Medicare Supplement insurance; |
2 | (vi) Benefits for long-term care, home health care, community-based care, or any |
3 | combination thereof; |
4 | (vii) Disability income insurance; |
5 | (viii) Coverage for on-side medical clinics; or |
6 | (ix) Specified disease, hospital confinement indemnity, or limited benefit health insurance |
7 | if the types of coverage do not provide coordination of benefits and are provided under separate |
8 | policies or certificates. |
9 | (10)(11) "Impaired insurer" means a member insurer which is not an insolvent insurer, and |
10 | (i) Is placed under an order of rehabilitation or conservation by a court of competent |
11 | jurisdiction. |
12 | (11)(12) "Insolvent insurer" means a member insurer which after January 1, 1996, is placed |
13 | under an order of liquidation by a court of competent jurisdiction with a finding of insolvency. |
14 | (12)(13) "Member insurer" means any insurer or health maintenance organization licensed |
15 | or which holds a certificate of authority to transact in this state any kind of insurance or health |
16 | maintenance organization business for which coverage is provided under § 27-34.3-3, and includes |
17 | any insurer or health maintenance organization whose license or certificate of authority in this state |
18 | may have been suspended, revoked, not renewed or voluntarily withdrawn, but does not include: |
19 | (i) A hospital or medical service organization, whether profit or nonprofit; or |
20 | (ii) A health maintenance organization; or |
21 | (iii) A fraternal benefit society; or |
22 | (iv) A mandatory state pooling plan; or |
23 | (v) A mutual assessment company or other person that operates on an assessment basis; or |
24 | (vi) An insurance exchange; or |
25 | (vii) An organization that has a certificate or license limited to the issuance of charitable |
26 | gift annuities; or |
27 | (viii) An entity similar to any of the above. |
28 | (13)(14) "Moody's corporate bond yield average" means the monthly average corporates |
29 | as published by Moody's investors service, inc., or any successor to it. |
30 | (14)(15) "Owner" of a policy or contract, “policyholder”, and "policy owner" and or |
31 | "contract owner" means the person who is identified as the legal owner under the terms of the policy |
32 | or contract or who is otherwise vested with legal title to the policy or contract through a valid |
33 | assignment completed in accordance with the terms of the policy or contract and properly recorded |
34 | as the owner on the books of the member insurer. The terms owner, contract owner, policyholder |
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1 | and policy owner do not include persons with a mere beneficial interest in a policy or contract. |
2 | (15)(16) "Person" means any individual, corporation, limited liability company, |
3 | partnership, association, governmental body or entity or voluntary organization. |
4 | (16)(17) "Plan sponsor" means: |
5 | (i) The employer in case of a benefit plan established or maintained by a single employer; |
6 | (ii) The employee organization in the case of a benefit plan established or maintained by |
7 | an employee organization; or |
8 | (iii) In the case of a benefit plan established or maintained by two (2) or more employers |
9 | or jointly by one or more employers and one or more employee organizations, the association, |
10 | committee, joint board of trustees, or other similar group of representatives of the parties who |
11 | establish or maintain the benefit plan. |
12 | (17)(18) "Premiums" means amounts or considerations (by whatever name called) received |
13 | on covered policies or contracts less returned premiums, considerations and deposits, and less |
14 | dividends and experience credits. "Premiums" does not include any amounts or consideration |
15 | received for any policies or contracts or for the portions of policies or contracts for which coverage |
16 | is not provided under § 27-34.3-3(b) except that assessable premium shall not be reduced on |
17 | account of § 27-34.3-3(b)(2)(iii) relating to interest limitations and § 27-34.3-3(c)(2) relating to |
18 | limitations with respect to one individual, one participant and one owner. "Premiums" shall not |
19 | include: |
20 | (i) Premiums in excess of five million dollars ($5,000,000) on an unallocated annuity |
21 | contract not issued under a governmental retirement benefit plan (or its trustee) established under |
22 | § 401, 403(b) or 457 of the United States Internal Revenue Code, 26 U.S.C. § 401, 403(b) or 457. |
23 | (ii) With respect to multiple nongroup policies of life insurance owned by one owner, |
24 | whether the policy or contract owner is an individual, firm, corporation or other person, and whether |
25 | the persons insured are officers, managers, employees or other persons, premiums in excess of five |
26 | million dollars ($5,000,000) with respect to these policies or contracts, regardless of the number of |
27 | policies or contracts held by the owner. |
28 | (18)(19)(i) "Principal place of business" of a plan sponsor or a person other than a natural |
29 | person means the single state in which the natural persons who establish policy for the direction, |
30 | control and coordination of the operations of the entity as a whole primarily exercise that function, |
31 | determined by the association in its reasonable judgment by considering the following factors: |
32 | (A) The state in which the primary executive and administrative headquarters of the entity |
33 | is located; |
34 | (B) The state in which the principal office of the chief executive officer of the entity is |
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1 | located; |
2 | (C) The state in which the board of directors (or similar governing person or persons) of |
3 | the entity conducts the majority of its meetings; |
4 | (D) The state in which the executive or management committee of the board of directors |
5 | (or a similar governing person or persons) of the entity, conducts the majority of its meetings; |
6 | (E) The state from which the management of the overall operations of the entity is directed; |
7 | and |
8 | (F) In the case of a benefit plan sponsored by affiliated companies comprising a |
9 | consolidated corporation, the state in which the holding company or controlling affiliate has its |
10 | principal place of business as determined using the above factors. However, in the case of a plan |
11 | sponsor, if more than fifty percent (50%) of the participants in the benefit plan are employed in a |
12 | single state, that state shall be deemed to be the principal place of business of the plan sponsor. |
13 | (ii) The principal place of business of a plan sponsor of a benefit plan described in |
14 | subsection (16)(17)(iii) of this section shall be deemed to be the principal place of business of the |
15 | association, committee, joint board of trustees or other similar group of representatives of the |
16 | parties who establish or maintain the benefit plan that, in lieu of a specific or clear designation of |
17 | a principal place of business, shall be deemed to be the principal place of business of the employer |
18 | or employee organization that has the largest investment in the benefit plan in question. |
19 | (19)(20) "Receivership court" means the court in the insolvent or impaired insurer's state |
20 | having jurisdiction over the conservation, rehabilitation or liquidation of the member insurer. |
21 | (20)(21) "Resident" means a person to whom a contractual obligation is owed and who |
22 | resides in this state on the date of entry of court order that determines a member insurer to be an |
23 | impaired insurer or a court order that determines a member insured to be an insolvent insurer, |
24 | whichever occurs first. A person may be a resident of only one state, which in the case of a person |
25 | other than a natural person shall be its principal place of business. Citizens of the United States that |
26 | are either: (i) residents of foreign countries; or (ii) residents of United States possessions, territories |
27 | or protectorates that do not have an association similar to the association created by this chapter, |
28 | shall be deemed residents of the state of domicile of the member insurer that issued the polices or |
29 | contracts. |
30 | (21)(22) "Structured settlement annuity" means an annuity purchased in order to fund |
31 | periodic payments for a claimant in payment for or with respect to personal injuries suffered by the |
32 | claimant. |
33 | (22)(23) "State" means a state, the District of Columbia, Puerto Rico, or a United States |
34 | possession, territory or protectorate. |
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1 | (23)(24) "Supplemental contract" means a written agreement entered into for the |
2 | distribution of proceeds under a life, health or annuity policy or contract. |
3 | (24)(25) "Unallocated annuity contract" means any annuity contract or group annuity |
4 | certificate which is not issued to and owned by an individual, except to the extent of any annuity |
5 | benefits guaranteed to an individual by an insurer under the contract or certificate. |
6 | 27-34.3-6. Creation of the association. |
7 | (a) There is created a nonprofit legal entity to be known as the Rhode Island life and health |
8 | insurance guaranty association. All member insurers shall be and remain members of the |
9 | association as a condition of their authority to transact insurance or health management |
10 | organization business in this state. The association shall perform its functions under the plan of |
11 | operation established and approved under § 27-34.3-10, or as previously established and approved |
12 | under § 27-34.1-11 [Repealed] and shall exercise its powers through a board of directors established |
13 | under § 27-34.3-7 or as previously established under § 27-34.1-8 [Repealed] For purposes of |
14 | administration and assessment, the association shall maintain two (2) accounts: |
15 | (1) The life insurance and annuity account which includes the following subaccounts: |
16 | (i) Life insurance account; |
17 | (ii) Annuity account; which shall include annuity contracts owned by a governmental |
18 | retirement plan (or its trustee) established under section 401, 403(b) or 457 of the United States |
19 | Internal Revenue Code, 26 U.S.C. § 401, 403(b) or 457, but shall otherwise exclude unallocated |
20 | annuities; and |
21 | (iii) Unallocated annuity account which shall exclude contracts owned by a governmental |
22 | retirement benefit plan (or its trustee) established under § 401, 403(b) or 457 of the United States |
23 | Internal Revenue Code, 26 U.S.C. § 401, 403(b) or 457. |
24 | (2) The health insurance account. |
25 | (b) The association shall come under the immediate supervision of the commissioner and |
26 | shall be subject to the applicable provisions of the insurance laws of this state. Meetings or records |
27 | of the association may be open to the public upon majority vote of the board of directors. The |
28 | commissioner or his or her designee shall have full and complete access to all documents received |
29 | by, created by or otherwise obtained by the association and shall be invited to be present at all |
30 | association meetings. The disclosure of confidential or privileged association information, |
31 | documents, or records to the commissioner shall not change the confidential or privileged status of |
32 | the information, documents or records. |
33 | 27-34.3-7. Board of directors. |
34 | (a) The board of directors of the association shall consist of: |
| LC004582 - Page 12 of 27 |
1 | (1) Not less than five (5) seven (7) nor more than nine (9) (eleven (11) member insurers |
2 | serving terms as established in the plan of operation; and |
3 | (2) The commissioner or the commissioner's designee. Only member insurers or a health |
4 | maintenance organization shall be eligible to vote. The members of the board shall be selected by |
5 | member insurers subject to the approval of the commissioner. The board of directors, previously |
6 | established under § 27-34.1-8 [Repealed], shall continue to operate in accordance with the |
7 | provision of this section. Vacancies on the board shall be filled for the remaining period of the term |
8 | by a majority vote of the remaining board members, subject to the approval of the commissioner. |
9 | (b) In approving selections to the board, the commissioner shall consider, among other |
10 | things, whether all member insurers are fairly represented. |
11 | (c) Members of the board may be reimbursed from the assets of the association for expenses |
12 | incurred by them as members of the board of directors but members of the board shall not be |
13 | compensated by the association for their services. |
14 | 27-34.3-8. Powers and duties of the association. |
15 | (a) If a member insurer is an impaired insurer, the association may, in its discretion, and |
16 | subject to any conditions imposed by the association that do not impair the contractual obligations |
17 | of the impaired insurer, and that are approved by the commissioner: |
18 | (1) Guarantee, assume, reissue or reinsure, or cause to be guaranteed, assumed, reissued or |
19 | reinsured, any or all of the policies or contracts of the impaired insurer; |
20 | (2) Provide the monies, pledges, loans, notes, guarantees or other means that are proper to |
21 | effectuate subdivision (1) of this subsection and assure payment of the contractual obligations of |
22 | the impaired insurer pending action under subdivision (1) of this subsection. |
23 | (b) If a member insurer is an insolvent insurer, the association shall, in its discretion, either: |
24 | (1)(i)(A) Guaranty, assume, reissue or reinsure, or cause to be guaranteed, assumed, |
25 | reissued or reinsured, the policies or contracts of the insolvent insurer; or |
26 | (B) Assure payment of the contractual obligations of the insolvent insurer; and |
27 | (ii) Provide monies, pledges, loans, notes, guarantees, or other means that are reasonably |
28 | necessary to discharge the association's duties; or |
29 | (2) Provide benefits and coverages in accordance with the following provisions: |
30 | (i) With respect to policies and contracts life and health insurance policies and annuities, |
31 | assure payment of benefits for premiums identical to the premiums and benefits (except for terms |
32 | of conversion and renewability) that would have been payable under the policies or contracts of the |
33 | insolvent insurer, for claims incurred: |
34 | (A) With respect to group policies and contracts, not later than the earlier of the next |
| LC004582 - Page 13 of 27 |
1 | renewal date under such policies or contracts or forty-five (45) days, but in no event less than thirty |
2 | (30) days after the date on which the association becomes obligated with respect to the policies or |
3 | contracts; |
4 | (B) With respect to nongroup policies, contracts and annuities not later than the earlier of |
5 | the next renewal date (if any) under the policies or contracts or one year, but in no event less than |
6 | thirty (30) days from the date on which the association becomes obligated with respect to the |
7 | policies and contracts; |
8 | (ii) Make diligent efforts to provide all known insured insureds, enrollees or annuitants (for |
9 | non-group policies and contracts) or group policy or contract owners with respect to group policies |
10 | or contracts thirty (30) days notice of the termination (pursuant to subparagraph (i) of this |
11 | paragraph) of the benefits provided; |
12 | (iii) With respect to nongroup policies and contracts life and health insurance policies and |
13 | annuities covered by the association, make available to each known insured, enrollee, or annuitant, |
14 | or owner if other than the insured, or annuitant and with respect to an individual formerly an |
15 | insured, enrollee or formerly an annuitant under a group policy or contract who is not eligible for |
16 | replacement group coverage, make available substitute coverage on an individual basis in |
17 | accordance with the provisions of subdivision (iv) of this subsection, if the insureds, enrollees or |
18 | annuitants had a right under law or the terminated policy to convert coverage to individual coverage |
19 | or to continue an individual policy, contract or annuity in force until a specified age or for a |
20 | specified time, during which the insurer or health maintenance organization had no right |
21 | unilaterally to make changes in any provision of the policy or contract or annuity or had a right |
22 | only to make changes in premium by class; |
23 | (iv)(A) In providing the substitute coverage required under subdivision (iii) of this |
24 | subsection, the association may offer either to reissue the terminated coverage or to issue an |
25 | alternative policy or contract at actuarially justified rates subject to the prior approval of the |
26 | commissioner. |
27 | (B) Alternative or reissued policies shall be offered without requiring evidence of |
28 | insurability, and shall not provide for any waiting period or exclusion that would not have applied |
29 | under the terminated policy or contract. |
30 | (C) The association may reinsure any alternative or reissued policy or contract. |
31 | (v)(A) Alternative policies adopted by the association shall be subject to the approval of |
32 | the domiciliary insurance commissioner and the receivership court. The association may adopt |
33 | alternative policies or contracts of various types for future issuance without regard to any particular |
34 | impairment or insolvency. |
| LC004582 - Page 14 of 27 |
1 | (B) Alternative policies or contracts shall contain at least the minimum statutory provisions |
2 | required in this state and provide benefits that shall not be unreasonable in relation to the premium |
3 | charged. The association shall set the premium in accordance with a table of rates which it shall |
4 | adopt. The premium shall reflect the amount of insurance to be provided and the age and class of |
5 | risk of each insured, but shall not reflect any changes in the health of the insured after the original |
6 | policy or contract was last underwritten. |
7 | (C) Any alternative policy or contract issued by the association shall provide coverage of |
8 | a type similar to that of the policy or contract issued by the impaired or insolvent insurer, as |
9 | determined by the association. |
10 | (vi) If the association elects to reissue terminated coverage at a premium rate different from |
11 | that charged under the terminated policy or contract, the premium shall be actuarially justified and |
12 | be set by the association in accordance with the amount of insurance or coverage provided and the |
13 | age and class of risk, subject to approval of the domiciliary insurance commissioner and the |
14 | receivership court. |
15 | (vii) The association's obligations with respect to coverage under any policy or contract of |
16 | the impaired or insolvent insurer or under any reissued or alternative policy or contract shall cease |
17 | on the date such coverage or policy or contract is replaced by another similar policy or contract by |
18 | the policy owner, the insured, the enrollee or the association. |
19 | (viii) When proceeding under paragraph (b)(2) of this section with respect to any policy or |
20 | contract carrying guaranteed minimum interest rates, the association shall assure the payment or |
21 | crediting of a rate of interest consistent with § 27-34.3-3(b)(2)(iii). |
22 | (c) Nonpayment of premiums within thirty-one (31) days after the date required under the |
23 | terms of any guaranteed, assumed, alternative or reissued policy or contract or substitute coverage |
24 | shall terminate the association's obligations under the policy, contract or coverage under this |
25 | chapter with respect to the policy, contract or coverage, except with respect to any claims incurred |
26 | or any net cash surrender value which may be due in accordance with the provisions of this chapter. |
27 | (d) Premiums due for coverage after entry of an order of liquidation of an insolvent insurer |
28 | shall belong to and be payable at the direction of the association. If the liquidator of an insolvent |
29 | insurer requests, the association shall provide a report to the liquidator regarding such premium |
30 | collected by the association. The association shall be liable for unearned premiums due to policy |
31 | or contract owners arising after the entry of the order. |
32 | (e) The protection provided by this chapter shall not apply where any guaranty protection |
33 | is provided to residents of this state by laws of the domiciliary state or jurisdiction of the impaired |
34 | or insolvent insurer other than this state. |
| LC004582 - Page 15 of 27 |
1 | (f) In carrying out its duties under subsection (b), the association may: |
2 | (1) Subject to approval by a court of competent jurisdiction in this state, impose permanent |
3 | policy or contract liens in connection with any guarantee, assumption or reinsurance agreement, if |
4 | the association finds that the amounts which can be assessed under this chapter are less than the |
5 | amounts needed to assure full and prompt performance of the association's duties under this chapter, |
6 | or that the economic or financial conditions as they affect member insurers are sufficiently adverse |
7 | to render the imposition of such permanent policy or contract liens, to be in the public interest; |
8 | (2) Subject to approval by a court of competent jurisdiction in this state, impose temporary |
9 | moratoriums or liens on payments of cash values and policy loans, or any other right to withdraw |
10 | funds held in conjunction with policies or contracts, in addition to any contractual provisions for |
11 | deferral of cash or policy loan value. In addition, in the event of a temporary moratorium or |
12 | moratorium charge imposed by the receivership court on payment of cash values or policy loans, |
13 | or on any other right to withdraw funds held in conjunction with policies or contracts, out of the |
14 | assets of the impaired or insolvent insurer, the association may defer the payment of such cash |
15 | values, policy loans or other rights by the association for the period of the moratorium or |
16 | moratorium charge imposed by the receivership court, except for claims covered by the association |
17 | to be paid in accordance with a hardship procedure established by the liquidator or rehabilitator and |
18 | approved by the receivership court. |
19 | (g) A deposit in this state, held pursuant to law or required by the commissioner for the |
20 | benefit of creditors, including policy or contract owners, not turned over to the domiciliary |
21 | liquidator upon the entry of a final order of liquidation or order approving a rehabilitation plan of |
22 | an a member insurer domiciled in this state or in a reciprocal state, pursuant to § 27-14.3-56, shall |
23 | be promptly paid to the association. The association shall be entitled to retain a portion of any |
24 | amounts so paid to it equal to the percentage determined by dividing the aggregate amount of policy |
25 | or contract owners' claims related to that insolvency for which the association has provided |
26 | statutory benefits by the aggregate amount of all policy or contract owners' claims in this state |
27 | related to that insolvency and shall remit to the domiciliary receiver the amount so paid to the |
28 | association less the amount retained pursuant to this subsection. Any amount so paid to the |
29 | association and retained by it shall be treated as a distribution of estate assets pursuant to applicable |
30 | state insurance law dealing with early access disbursements. |
31 | (h) If the association fails to act within a reasonable period of time with respect to an |
32 | insolvent insurer, as provided in subsection (b) of this section, the commissioner shall have the |
33 | powers and duties of the association under this chapter with respect to the insolvent insurers. |
34 | (i) The association may render assistance and advice to the commissioner, upon the |
| LC004582 - Page 16 of 27 |
1 | commissioner's request, concerning rehabilitation, payment of claims, continuance of coverage, or |
2 | the performance of other contractual obligations of any impaired or insolvent insurer. |
3 | (j) The association shall have standing to appear or intervene before any court or agency in |
4 | this state with jurisdiction over an impaired or insolvent insurer concerning which the association |
5 | is or may become obligated under this chapter or with jurisdiction over any person or property |
6 | against whom the association may have rights through subrogation or otherwise. Standing shall |
7 | extend to all matters germane to the powers and duties of the association, including, but not limited |
8 | to, proposals for reinsuring, reissuing, modifying or guaranteeing the policies or contracts of the |
9 | impaired or insolvent insurer and the determination of the polices or contracts and contractual |
10 | obligations. The association shall also have the right to appear or intervene before a court or agency |
11 | in another state with jurisdiction over an impaired or insolvent insurer for which the association is |
12 | or may become obligated or with jurisdiction over any person or property against whom the |
13 | association may have rights through subrogation or otherwise. |
14 | (k)(1) A person receiving benefits under this chapter shall be deemed to have assigned the |
15 | rights under, and any causes of action against any person for losses arising under, resulting from or |
16 | otherwise relating to, the covered policy or contract to the association to the extent of the benefits |
17 | received because of this chapter, whether the benefits are payments of or on account of contractual |
18 | obligations, continuation of coverage or provision of substitute or alternative policies, contracts or |
19 | coverage. The association may require an assignment to it of these rights and causes of action by |
20 | any enrollee, payee, policy or contract owner, beneficiary, insured or annuitant as a condition |
21 | precedent to the receipt of any right or benefits conferred by this chapter upon the person. |
22 | (2) The subrogation rights of the association under this subsection shall have the same |
23 | priority against the assets of the impaired or insolvent insurer as that possessed by the person |
24 | entitled to receive benefits under this chapter. |
25 | (3) In addition to subdivisions (1) and (2) of this subsection, the association shall have all |
26 | common law rights of subrogation and any other equitable or legal remedy that would have been |
27 | available to the impaired or insolvent insurer or owner, beneficiary, enrollee or payee, of a policy |
28 | or contract with respect to the policy or contracts including without limitation, in the case of a |
29 | structured settlement annuity, any rights of the owner, beneficiary or payee of the annuity, to the |
30 | extent of benefits received pursuant to this chapter, against a person originally or by succession |
31 | responsible for the losses arising from the personal injury relating to the annuity or payment |
32 | therefore, excepting any such person responsible solely by reason of serving as an assignee in |
33 | respect of a qualified assignment under § 130 of the United States Internal Revenue Code, 26 U.S.C. |
34 | § 130. |
| LC004582 - Page 17 of 27 |
1 | (4) If the preceding provisions of this subsection are invalid or ineffective with respect to |
2 | any person or claim for any reason, the amount payable by the association with respect to the related |
3 | covered obligations shall be reduced by the amount realized by any other person with respect to the |
4 | person or claim that is attributable to the policies or contracts, or portion thereof, covered by the |
5 | association. |
6 | (5) If the association has provided benefits with respect to a covered obligation and a person |
7 | recovers amounts to which the association has rights as described in the preceding paragraphs of |
8 | this subsection, the person shall pay to the association the portion of the recovery attributable to |
9 | the policies, contracts or portions thereof, covered by the association. |
10 | (l) In addition to the rights and powers provided in this chapter, the association may: |
11 | (1) Enter into any contracts as are necessary or proper to carry out the provisions and |
12 | purposes of this chapter; |
13 | (2) Sue or be sued, including taking any legal actions necessary or proper to recover any |
14 | unpaid assessments under § 27-34.3-9 and to settle claims or potential claims against it; |
15 | (3) Borrow money to effect the purposes of this chapter; any notes or other evidence of |
16 | indebtedness of the association not in default shall be legal investments for domestic insurers and |
17 | may be carried as admitted assets; |
18 | (4) Employ or retain persons as are necessary or appropriate to handle the financial |
19 | transactions of the association, and to perform any other functions as become necessary or proper |
20 | under this chapter; |
21 | (5) Take such legal action that may be necessary or appropriate to avoid or recover payment |
22 | of improper claims; |
23 | (6) Exercise, for the purposes of this chapter and to the extent approved by the |
24 | commissioner, the powers of a domestic life insurer, or health insurer, or health maintenance |
25 | organization, but in no case may the association issue insurance policies or annuity contracts other |
26 | than those issued to perform its obligations under this chapter; |
27 | (7) Organize itself as a corporation or another legal form permitted by the laws of this state; |
28 | (8) Request information from a person seeking coverage from the association in order to |
29 | aid the association in determining its obligations under this chapter with respect to the person, and |
30 | the person shall promptly comply with the request; and |
31 | (9) Unless prohibited by law, in accordance with the terms and conditions of the policy or |
32 | contract, file for actuarially justified rate or premium increases for any policy or contract for which |
33 | it provides coverage under this act; and |
34 | (9)(10) Take other necessary or appropriate action to discharge its duties and obligations |
| LC004582 - Page 18 of 27 |
1 | under this chapter or to exercise its powers under this chapter. |
2 | (m) The association may join an organization of one or more other state associations of |
3 | similar purposes, to further the purposes and administer the powers and duties of the association. |
4 | (n)(1)(a) At any time within one hundred eighty (180) days of the date of the order of |
5 | liquidation, the association may elect to succeed to the rights and obligations of the ceding member |
6 | insurer that relate to policies, contracts or annuities covered, in whole or in part, by the association, |
7 | in each case under any one or more reinsurance contracts entered into by the insolvent insurer and |
8 | its reinsurers and selected by the association. Any such assumption shall be effective as of the date |
9 | of the order of liquidation. The election shall be effected by the association or the national |
10 | organization of life and health insurance guaranty associations (NOLHGA) on its behalf sending |
11 | written notice, return receipt requested to the affected reinsurers. |
12 | (b) To facilitate the earliest practicable decision about whether to assume any of the |
13 | contracts of reinsurance, and in order to protect the financial position of the estate, the receiver and |
14 | each reinsurer of the ceding member insurer shall make available upon request to the association |
15 | or to NOLHGA on its behalf as soon as possible after commencement of formal delinquency |
16 | proceedings: (i) Copies of in-force contracts of reinsurance and all related files and records relevant |
17 | to the determination of whether such contracts should be assumed, and (ii) Notices of any defaults |
18 | under the reinsurance contracts or any known event or condition which with the passage of time |
19 | could become a default under the reinsurance contracts. |
20 | (c) The following subparagraphs (i) through (iv) shall apply to reinsurance contracts so |
21 | assumed by the association. |
22 | (i) The association shall be responsible for all unpaid premiums due under the reinsurance |
23 | contracts for periods both before and after the date of the order of liquidation, and shall be |
24 | responsible for the performance of all other obligations to be performed after the date of the order |
25 | of liquidation, in each case which relate to policies, contracts and annuities covered, in whole or in |
26 | part, by the association. The association may charge policies, contracts and annuities covered in |
27 | part by the association, through reasonable allocation methods, the costs for reinsurance in excess |
28 | of the obligations of the association and shall provide notice and an accounting of these charges |
29 | to the liquidator; |
30 | (ii) The association shall be entitled to any amounts payable by the reinsurer under the |
31 | reinsurance contracts with respect to losses or events that occur in periods after the date of the order |
32 | of liquidation and that relate to policies, contracts or annuities covered in whole or in part, by the |
33 | association provided, that, upon receipt of any such amounts, the association shall be obliged to |
34 | pay to the beneficiary under the policy, contract or annuity on account of which the amounts were |
| LC004582 - Page 19 of 27 |
1 | paid a portion of the amount equal to the lesser of: |
2 | (A) The amount received by the association; or |
3 | (B) The excess of the amount received by the association; over the amount equal to the |
4 | benefits paid by the association on account of the policy, contract or annuity less the retention of |
5 | the insurer applicable to the loss or event; |
6 | (iii) Within thirty (30) days following the association's election (the "election date"), the |
7 | association and each reinsurer under contracts assumed by the association shall calculate the net |
8 | balance due to or from the association under each such reinsurance contract as of the election date |
9 | with respect to policies, contracts or annuities covered, in whole or in part, by the association which |
10 | calculation shall give, full credit to all items paid by either the member insurer or its receiver or the |
11 | reinsurer prior to the election date. The reinsurer shall pay the receiver any amounts due for losses |
12 | or events prior to the date of the order of liquidation, subject to any set-off for premiums unpaid |
13 | for periods prior to the date, and the association or reinsurer shall pay any remaining premiums in |
14 | each case within five (5) days of the completion of the aforementioned calculation. Any disputes |
15 | over the amounts due to either the association or the reinsurer shall be resolved by arbitration |
16 | pursuant to the terms of the affected reinsurance contracts or, if the contract contains no arbitration |
17 | clause, as otherwise provided by law. If the receiver has received any amounts due the association |
18 | pursuant to paragraph (ii), the receiver, shall remit the same to the association as promptly as |
19 | practicable. |
20 | (iv) If the association or receiver, on the association's behalf, within sixty (60) days of the |
21 | election date, pays the unpaid premiums due for periods both before and after the election date, that |
22 | relate to policies, contracts or annuities covered in whole or in part by the association the reinsurer |
23 | shall not be entitled to terminate the reinsurance contracts for failure to pay premium insofar as the |
24 | reinsurance contracts relate to policies, contracts, or annuities covered in whole or in part by the |
25 | association and shall not be entitled to set off any unpaid amounts due under other contracts, or |
26 | unpaid amounts due from parties other than the association against amounts due to the association. |
27 | (2) During the period from the date of the order of liquidation until the election date (or, if |
28 | the election date does not occur, until one hundred eighty (180) days after the date of the order of |
29 | liquidation). |
30 | (a)(i) Neither the association nor the reinsurer shall have any rights or obligations under |
31 | reinsurance contracts that the association has the right to assume under subdivision (n)(1), whether |
32 | for periods prior to or after the date of the order of liquation; and |
33 | (ii) The reinsurer, the receiver and the association shall, to the extent practicable, provide |
34 | each other data and records reasonably requested; |
| LC004582 - Page 20 of 27 |
1 | (b) Provided that once the association has elected to assume a reinsurance contract, the |
2 | parties' rights and obligations shall be governed by subdivision (n)(1). |
3 | (3) If the association does not elect to assume a reinsurance contract by the election date |
4 | pursuant to subdivision (n)(1), the association shall have no rights or obligations, in each case for |
5 | periods both before and after the date of the order of liquidation, with respect to the reinsurance |
6 | contract. |
7 | (4) When policies, contracts or annuities, or covered obligations with respect thereto, are |
8 | transferred to an assuming insurer, reinsurance on the policies, contracts or annuities may also be |
9 | transferred by the association, in the case of contracts assumed under subdivision (n)(1), subject to |
10 | the following: |
11 | (a) Unless the reinsurer and the assuming insurer agree otherwise, the reinsurance contract |
12 | transferred shall not cover any new policies of insurance, contracts, or annuities in addition to those |
13 | transferred; |
14 | (b) The obligations described in paragraph (n)(1) of this section shall not apply with respect |
15 | to matters arising after the effective date of the transfer; |
16 | (c) Notice shall be given in writing, return receipt requested, by the transferring party to |
17 | the affected reinsurer not less than thirty (30) days prior to the effective date of the transfer. |
18 | (5) The provisions of subsection (n) shall supersede the provisions of any state law or of |
19 | any affected reinsurance contract that provides for or requires any payment of reinsurance proceeds, |
20 | on account of losses or events that occur in periods after the date of the order of liquidation to the |
21 | receiver, of the insolvent insurer or any other person. The receiver, shall remain entitled to any |
22 | amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events |
23 | that occur in periods prior to the date of the order of liquidation subject to applicable setoff |
24 | provisions. |
25 | (6) Except as otherwise provided in this section, nothing in this section (n): |
26 | Shall alter or modify the terms and conditions of any reinsurance contract. |
27 | Nothing in this section shall abrogate or limit any rights of any reinsurer to claim that it is |
28 | entitled to rescind a reinsurance contract. |
29 | Nothing in this section shall give a policy holder, contract owner, enrollee, certificate |
30 | holder, or beneficiary an independent cause of action against an indemnity reinsurer that is not |
31 | otherwise set forth in the reinsurance contract. Nothing in this section shall limit or affect the |
32 | association's rights as a creditor of the estate against the assets of the estate. Nothing in this section |
33 | shall apply to reinsurance agreements covering property or casualty risks. |
34 | (o) The board of directors of the association shall have discretion and shall exercise |
| LC004582 - Page 21 of 27 |
1 | reasonable business judgment to determine the means by which the association is to provide the |
2 | benefits of this chapter in an economical and efficient manner. |
3 | (p) Where the association has arranged or offered to provide the benefits of this chapter to |
4 | a covered person under a plan or arrangement that fulfills the association's obligations under this |
5 | chapter, the person shall not be entitled to benefits from the association in addition to or other than |
6 | those provided under the plan or arrangement. |
7 | (q) Venue in a suit against the association arising under this chapter shall be in Providence |
8 | County. The association shall not be required to give an appeal bond in an appeal that relates to a |
9 | cause of action arising under this chapter. |
10 | (q)(r) In carrying out its duties in connection with guaranteeing, assuming, reissuing, or |
11 | reinsuring policies or contracts under subsection (a) or (b) of this section, the association may, |
12 | subject to approval of the receivership court, issue substitute coverage for a policy or contract that |
13 | provides an interest rate, crediting rate or similar factor determined by use of an index or other |
14 | external reference stated in the policy or contract employed in calculating returns or changes in |
15 | value by issuing an alternative policy or contract in accordance with the following provisions: |
16 | (r) Venue in a suit against the association arising under this chapter shall be in Providence |
17 | County. The association shall not be required to give an appeal bond in an appeal that relates to a |
18 | cause of action arising under this chapter. |
19 | (1) In lieu of the index or other external reference provided for in the original policy or |
20 | contract, the alternative policy or contract provides for: |
21 | (i) A fixed interest rate; or |
22 | (ii) Payment of dividends with minimum guarantees; or |
23 | (iii) A different method of calculating interest or changes in value. |
24 | (2) There is no requirement for evidence of insurability, waiting period or other exclusion |
25 | that would not have applied under the replaced policy or contract; and |
26 | (3) The alternative policy or contract is substantially similar to the replaced policy or |
27 | contract in all other material terms. |
28 | 27-34.3-9. Assessments. |
29 | (a) For the purpose of providing the funds necessary to carry out the powers and duties of |
30 | the association, the board of directors shall assess the member insurers, separately for each account, |
31 | at such time and for such amounts as the board finds necessary. Assessments shall be due not less |
32 | than thirty (30) days after prior written notice to the member insurers and shall accrue interest at |
33 | nine percent (9%) per annum on and after the due date. |
34 | (b) There shall be two (2) classes of assessments, as follows: |
| LC004582 - Page 22 of 27 |
1 | (1) Class A assessments shall be authorized and called for the purpose of meeting |
2 | administrative and legal costs and other expenses. Class A assessments may be authorized and |
3 | called whether or not related to a particular impaired or insolvent insurer. |
4 | (2) Class B assessments shall be authorized and called to the extent necessary to carry out |
5 | the powers and duties of the association under § 27-34.3-8 with regard to an impaired or an |
6 | insolvent insurer. |
7 | (c)(1) The amount of any Class A assessment shall be determined by the board and may be |
8 | authorized and called on a pro rata or non-pro rata basis. If pro rata, the board may provide that it |
9 | be credited against future Class B assessments. The total of all non-pro rata assessment shall not |
10 | exceed three hundred dollars ($300) per member insurer in any one calendar year. The amount of |
11 | any Class B assessment shall be allocated for assessment purposes among the accounts pursuant to |
12 | an allocation formula that may be based on the premiums or reserves of the impaired or insolvent |
13 | insurer or any other standard deemed by the board in its sole discretion as being fair and reasonable |
14 | under the circumstances. |
15 | (2) The amount of a Class B assessment, except for assessments related to long-term care |
16 | insurance, shall be allocated for assessment purposes between the accounts and among the |
17 | subaccounts of the life insurance and annuity account, pursuant to an allocation formula which may |
18 | be based on the premiums or reserves of the impaired or insolvent insurer or any other standard |
19 | deemed by the board in its sole discretion as being fair and reasonable under the circumstances. |
20 | (3) The amount of the Class B assessment for long-term care insurance written by the |
21 | impaired or insolvent insurer shall be allocated according to a methodology included in the Plan of |
22 | Operation and approved by the commissioner. The methodology shall provide for fifty percent |
23 | (50%) of the assessment to be allocated to accident and health member insurers and fifty percent |
24 | (50%) to be allocated to life and annuity member insurers. |
25 | (2)(4) Class B assessments against member insurers for each account and subaccount shall |
26 | be in the proportion that the premiums received on business in this state by each assessed member |
27 | insurer or policies or contracts covered by each account for the three (3) most recent calendar years |
28 | for which information is available preceding the year in which the insurer became insolvent, (or, in |
29 | the case of an assessment with respect to an impaired insurer, the three (3) most recent calendar |
30 | years for which information is available preceding the year in which the insurer became impaired) |
31 | bears to premiums received on business in this state for such calendar years by all assessed member |
32 | insurers. |
33 | (3)(5) Assessments for funds to meet the requirements of the Association with respect to |
34 | an impaired or insolvent insurer shall not be authorized or called until necessary to implement the |
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1 | purposes of this chapter. Classification of assessments under subsection (b) of this section and |
2 | computation of assessments under this subsection shall be made with a reasonable degree of |
3 | accuracy, recognizing that exact determinations may not always be possible. The association shall |
4 | notify each member insurer of its anticipated pro rata share of an authorized assessment not yet |
5 | called within one hundred eighty (180) days after the assessment is authorized. |
6 | (d) The association may abate or defer, in whole or in part, the assessment of a member |
7 | insurer if, in the opinion of the board, payment of the assessment would endanger the ability of the |
8 | member insurer to fulfill its contractual obligations. In the event an assessment against a member |
9 | insurer is abated, or deferred in whole or in part, the amount by which the assessment is abated or |
10 | deferred may be assessed against the other member insurers in a manner consistent with the basis |
11 | for assessments set forth in this section. Once the conditions which have caused a deferral have |
12 | been removed or rectified, the member insurer shall pay all assessments that were deferred pursuant |
13 | to a repayment plan approved by the association. |
14 | (e)(1)(i) Subject to the provisions of subparagraph (ii) of this paragraph, the total of all |
15 | assessments authorized by the association with respect to a member insurer for each subaccount of |
16 | the life insurance and annuity account and for the health account shall not in any one calendar year |
17 | exceed three percent (3%) of that member insurer's average annual premiums received in this state |
18 | on the policies and contracts covered by the subaccount or account during the three (3) calendar |
19 | years preceding the year in which the insurer became an impaired or insolvent insurer. |
20 | (ii) If two (2) or more assessments are authorized in one calendar year with respect to |
21 | insurers that become impaired or insolvent in different calendar years, the average annual premiums |
22 | for purposes of the aggregate assessment percentage limitation referenced in subparagraph (i) of |
23 | this paragraph shall be equal and limited to the higher of the three (3) year average annual premiums |
24 | for the applicable subaccount or account as calculated pursuant to this section. |
25 | (iii) If the maximum assessment, together with the other assets of the association in any |
26 | account, does not provide in any one year in either account an amount sufficient to carry out the |
27 | responsibilities of the association, the necessary additional funds shall be assessed as soon after this |
28 | as permitted by this chapter. |
29 | (2) The board may provide in the plan of operation a method of allocating funds among |
30 | claims, whether relating to one or more impaired or insolvent insurers, when the maximum |
31 | assessment will be insufficient to cover anticipated claims. |
32 | (3) If the maximum assessment for a subaccount of the life and annuity account in any one |
33 | year does not provide an amount sufficient to carry out the responsibilities of the association, then |
34 | pursuant to subdivision (c)(2) of this section, the board shall assess the other subaccounts of the |
| LC004582 - Page 24 of 27 |
1 | life and annuity account for the necessary additional amount, subject to the maximum stated in |
2 | subdivision (1) of this subsection. |
3 | (f) The board may, by an equitable method as established in the plan of operation, refund |
4 | to member insurers, in proportion to the contribution of each insurer to that account, the amount by |
5 | which the assets of the account exceed the amount the board finds is necessary to carry out during |
6 | the coming year the obligations of the association with regard to that account, including assets |
7 | accruing from assignment, subrogation, net realized gains and income from investments. A |
8 | reasonable amount may be retained in any account to provide funds for the continuing expenses of |
9 | the association and for future claims. |
10 | (g) It shall be proper for any member insurer, in determining its premium rates and policy |
11 | owner dividends as to any kind of insurance within the scope of this chapter, to consider the amount |
12 | reasonably necessary to meet its assessment obligations under this chapter. |
13 | (h) The association shall issue to each insurer paying an assessment under this chapter, |
14 | other than Class A assessment, a certificate of contribution, in a form prescribed by the |
15 | commissioner, for the amount of the assessment so paid. All outstanding certificates shall be of |
16 | equal dignity and priority without reference to amounts or dates of issue. A certificate of |
17 | contribution may be shown by the insurer in its financial statement as an asset in such form and for |
18 | such amount, if any, and period of time as the commissioner may approve. |
19 | (i)(1) A member insurer that wishes to protest all or part of an assessment shall pay when |
20 | due the full amount of the assessment as set forth in the notice provided by the association. The |
21 | payment shall be available to meet association obligations during the pendency of the protest or |
22 | any subsequent appeal. Payment shall be accompanied by a statement in writing that the payment |
23 | is made under protest and setting forth a brief statement of the grounds for the protest. |
24 | (2) Within sixty (60) days following the payment of an assessment under protest by a |
25 | member insurer, the association shall notify the member insurer in writing of its determination with |
26 | respect to the protest unless the association notifies the member insurer that additional time is |
27 | required to resolve the issues raised by the protest. |
28 | (3) Within thirty (30) days after a final decision has been made, the association shall notify |
29 | the protesting member insurer in writing of that final decision. Within sixty (60) days of receipt of |
30 | notice of the final decision, the protesting member insurer may appeal that final action to the |
31 | commissioner. |
32 | (4) In the alternative to rendering a final decision with respect to a protest based on a |
33 | question regarding the assessment base, the association may refer the protest to the commissioner |
34 | for a final decision, with or without a recommendation from the association. |
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1 | (5) If the protest or appeal on the assessment is upheld, the amount paid in error or excess |
2 | shall be returned to the member company. Interest on a refund due a protesting member shall be |
3 | paid at the rate actually earned by the association. |
4 | (j) The association may request information of member insurers in order to aid in the |
5 | exercise of its power under this section and member insurers shall promptly comply with a request. |
6 | SECTION 2. This act shall take effect upon passage. |
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EXPLANATION | |
BY THE LEGISLATIVE COUNCIL | |
OF | |
A N A C T | |
RELATING TO INSURANCE | |
*** | |
1 | This act would bring the Rhode Island Life and Health Insurance Guaranty Fund statute |
2 | into conformance with the latest version of the National Association of Insurance Commissioners |
3 | Model Act. |
4 | This act would take effect upon passage. |
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