2023 -- H 5832

========

LC002082

========

     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2023

____________

A N   A C T

RELATING TO INSURANCE -- PRODUCER LICENSING ACT

     Introduced By: Representatives Kennedy, Azzinaro, Diaz, Ackerman, Casimiro, and
Bennett

     Date Introduced: March 01, 2023

     Referred To: House Corporations

     (Dept. of Business Regulation)

It is enacted by the General Assembly as follows:

     SECTION 1. Sections 27-2.4-2 and 27-2.4-16 of the General Laws in Chapter 27-2.4

entitled "Producer Licensing Act" are hereby amended to read as follows:

     27-2.4-2. Definitions.

     The following definitions apply to this chapter:

     (1) "Business entity” means a corporation, association, partnership, limited liability

company, limited liability partnership, or other legal entity;

     (2) "Contracted producer report” means the annual report that all insurers contracting with

insurance producers must provide to the department on or by March 1 listing each insurance

producer to whom the insurer paid one hundred dollars ($100) or more in commissions for the

preceding calendar year of January 1 to December 31. The department shall prescribe the form and

manner of reporting.

     (3) "Department” means the department of business regulation;

     (4) "Home state” means any state or territory of the United States, or the District of

Columbia, in which an insurance producer maintains his or her principal place of residence or

principal place of business and is licensed to act as an insurance producer;

     (5) "Insurance” means any of the lines of authority set forth in this title;

     (6) "Insurance commissioner” means the director of the department of business regulation

or his or her designee;

     (7) "Insurance producer” means a person required to be licensed under the laws of this state

to sell, solicit or negotiate insurance;

     (8) "Insurer” means: (i) any person, reciprocal exchange, interinsurer, Lloyds insurer,

fraternal benefit society, and any other legal entity engaged in the business of insurance, including

insurance producers; (ii) notwithstanding §§ 27-19-2, 27-20-2, 27-20.1-2, 27-20.2-2, 27-20.3-2,

and 27-41-22, all of whom shall be engaged in the business of insurance for the purpose of this

chapter, nonprofit hospital and/or medical service corporation, a nonprofit dental service

corporation, a nonprofit optometric service corporation, a nonprofit legal service corporation, a

health maintenance organization as defined in chapter 41 of this title or as defined in chapter 62 of

title 42, or any other entity providing a plan of health benefits subject to state insurance regulation;

and (iii) an organization that for consideration assumes certain risks for an insured. Insurer

organizations may include corporations, stock companies, mutual companies, risk retention groups,

reciprocals, captives, Lloyds associations, and government residual plans.

     (9) "License” means a document issued by this state's insurance commissioner authorizing

a person to act as an insurance producer for the lines of authority specified in the document. The

license itself does not create any authority, actual, apparent or inherent, in the holder to represent

or commit an insurance carrier;

     (10) "Limited line credit insurance” includes credit life, credit disability, credit property,

credit unemployment, involuntary unemployment, mortgage life, mortgage guaranty, mortgage

disability, guaranteed automobile protection (gap) insurance, and any other form of insurance

offered in connection with an extension of credit that is limited to partially or wholly extinguishing

that credit obligation that the insurance commissioner determines should be designated a form of

limited line credit insurance;

     (11) "Limited line credit insurance producer” means a person who sells, solicits or

negotiates one or more forms of limited line credit insurance coverage to individuals through a

master, corporate, group or individual policy;

     (12) "Limited lines insurance” means those lines of insurance that the insurance

commissioner deems necessary to recognize for purposes of complying with subsection 27-2.4-

10(e);

     (13) "Limited lines producer” means a person authorized by the insurance commissioner

to sell, solicit or negotiate limited lines insurance;

     (14) "NAIC” means National Association of Insurance Commissioners;

     (15) "Negotiate” means the act of conferring directly with or offering advice directly to a

purchaser or prospective purchaser of a particular contract of insurance concerning any of the

substantive benefits, terms or conditions of the contract, provided that the person engaged in that

LC002082 - Page 2 of 61

act either sells insurance or obtains insurance from insurers for purchasers;

     (16) "Person” means an individual;

     (17) "Resident” means a person who either resides in Rhode Island or maintains an office

in Rhode Island where the business of producing insurance is transacted and designates Rhode

Island as the residence for purposes of licensure;

     (18) "Sell” means to exchange a contract of insurance by any means, for money or its

equivalent, on behalf of an insurance company;

     (19) "Solicit” means attempting to sell insurance or asking or urging a person to apply for

a particular kind of insurance from a particular company;

     (20) "Terminate” means the cancellation of the relationship between an insurance producer

and the insurer or the termination of an insurance producer's authority to transact insurance;

     (21) "Uniform application” means the current version of the NAIC uniform application for

resident and nonresident insurance producer licensing.

     27-2.4-16. Notification to insurance commissioner of termination.

     (a) Termination for cause. An insurer or authorized representative of the insurer that

terminates the appointment, employment contract or other insurance business relationship with an

insurance producer shall notify the insurance commissioner within thirty (30) days following the

effective date of the termination, using a format prescribed by the insurance commissioner, if the

reason for termination is one of the reasons set forth in § 27-2.4-14 or the insurer has knowledge

the insurance producer was found by a court, government body, or self-regulatory organization

authorized by law to have engaged in any of the activities in § 27-2.4-14. Upon the written request

of the insurance commissioner, the insurer shall provide additional information, documents, records

or other data pertaining to the termination or activity of the insurance producer.

     (b) Termination without cause. An insurer or authorized representative of the insurer that

terminates the appointment, employment, or contract with a producer for any reason not set forth

in § 27-2.4-14, shall notify the insurance commissioner within thirty (30) days following the

effective date of the termination, using a format prescribed by the insurance commissioner. Upon

written request of the insurance commissioner, the insurer shall provide additional information,

documents, records or other data pertaining to the termination.

     (b)(c) Ongoing notification requirement. The insurer or the authorized representative of

the insurer shall promptly notify the insurance commissioner in a format acceptable to the insurance

commissioner if, upon further review or investigation, the insurer discovers additional information

that would have been reportable to the insurance commissioner in accordance with subsection (a)

of this section had the insurer then known of its existence.

LC002082 - Page 3 of 61

     (c)(d) Copy of notification to be provided to the insurance producer.

     (1) Within fifteen (15) days after making the notification required by subsections (a) and

(b)(c) of this section, the insurer shall mail a copy of the notification to the insurance producer at

his or her last known address. If the insurance producer is terminated for cause for any of the

reasons listed in § 27-2.4-14, the insurer shall provide a copy of the notification to the insurance

producer at his or her last known address by certified mail, return receipt requested, postage prepaid

or by overnight delivery using a nationally recognized carrier.

     (2) Within thirty (30) days after the insurance producer has received the original or

additional notification, the insurance producer may file written comments concerning the substance

of the notification with the insurance commissioner. The insurance producer shall, by the same

means, simultaneously send a copy of the comments to the reporting insurer, and the comments

shall become a part of the insurance commissioner's file and accompany every copy of a report

distributed or disclosed for any reason about the insurance producer as permitted under subsection

(e)(f) of this section.

     (d)(e) Immunities.

     (1) In the absence of actual malice, an insurer, the authorized representative of the insurer,

an insurance producer, the insurance commissioner, or an organization of which the insurance

commissioner is a member and that compiles the information and makes it available to other

insurance commissioners or regulatory or law enforcement agencies shall not be subject to civil

liability, except as provided in this section, and a civil cause of action of any nature shall not arise

against these entities or their respective agents or employees, except as provided in this section, as

a result of any statement or information required by or provided pursuant to this section or any

information relating to any statement that may be requested in writing by the insurance

commissioner, from an insurer or insurance producer; or a statement by a terminating insurer or

insurance producer to an insurer or insurance producer limited solely and exclusively to whether a

termination for cause under subsection (a) of this section was reported to the insurance

commissioner, provided that the propriety of any termination for cause under subsection (a) of this

section is certified in writing by an officer or authorized representative of the insurer or insurance

producer terminating the relationship.

     (2) In any action brought against a person that may have immunity under this chapter for

making any statement required by this section or providing any information relating to any

statement that may be requested by the insurance commissioner, the party bringing the action shall

plead specifically in any allegation that subdivision (d)(e)(1) of this section does not apply because

the person making the statement or providing the information did so with actual malice.

LC002082 - Page 4 of 61

     (3) This chapter shall not abrogate or modify any existing statutory or common law

privileges or immunities.

     (e)(f) Confidentiality.

     (1) Any documents, materials or other information in the control or possession of the

department that is furnished by an insurer, insurance producer or an employee or agent of the

insurer or insurance producer acting on behalf of the insurer or insurance producer, or obtained by

the insurance commissioner in an investigation pursuant to this section, shall be confidential by law

and privileged, shall not be subject to chapter 2 of title 38, shall not be subject to subpoena, and

shall not be subject to discovery or admissible in evidence in any private civil action. The insurance

commissioner is authorized to use the documents, materials or other information in the furtherance

of any regulatory or legal action brought as a part of the insurance commissioner's duties.

     (2) Neither the insurance commissioner nor any person who received documents, materials

or other information while acting under the authority of the insurance commissioner shall be

permitted or required to testify in any private civil action concerning any confidential documents,

materials, or information subject to this chapter.

     (3) In order to assist in the performance of the insurance commissioner's duties under this

chapter, the insurance commissioner:

     (i) May share documents, materials or other information, including the confidential and

privileged documents, materials or information subject to this chapter, with other state, federal, and

international regulatory agencies, with the NAIC, its affiliates or subsidiaries, and with state,

federal, and international law enforcement authorities, provided that the recipient agrees to

maintain the confidentiality and privileged status of the document, material or other information;

     (ii) May receive documents, materials or information, including confidential and privileged

documents, materials or information, from the NAIC, its affiliates or subsidiaries and from

regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall

maintain as confidential or privileged any document, material or information received with notice

or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the

source of the document, material or information;

     (iii) May enter into agreements governing sharing and use of information consistent with

this subsection;

     (iv) No waiver of any applicable privilege or claim of confidentiality in the documents,

materials, or information shall occur as a result of disclosure to the commissioner under this section

or as a result of sharing as authorized in this chapter;

     (v) Nothing in this chapter shall prohibit the insurance commissioner from releasing final,

LC002082 - Page 5 of 61

adjudicated actions including for cause terminations that are open to public inspection pursuant to

chapter 2 of title 38 to a database or other clearinghouse service maintained by the NAIC, its

affiliates or subsidiaries; and

     (vi) If the department releases to an unauthorized third party any documents, materials or

other information provided to the department pursuant to this section, then the department shall be

subject to a fine not to exceed one thousand dollars ($1,000) after a hearing on this violation brought

in the Superior Court.

     (f)(g) Penalties for failing to report. An insurer, the authorized representative of the

insurer, or insurance producer that fails to report as required under the provisions of this section or

that is found to have reported with actual malice by a court of competent jurisdiction may, after

notice and hearing, have its license or certificate of authority suspended or revoked and may be

fined in accordance with § 42-14-16.

     SECTION 2. Section 27-10-1.1 of the General Laws in Chapter 27-10 entitled "Claim

Adjusters" is hereby amended to read as follows:

     27-10-1.1. Definitions.

     (a) "Adjuster” means an individual licensed as either a public company or independent

adjuster.

     (b) "Catastrophic disaster” according to the Federal Response Plan, means an event that

results in large numbers of deaths and injuries; causes extensive damage or destruction of facilities

that provide and sustain human needs; produces an overwhelming demand on state and local

response resources and mechanisms; causes a severe long-term effect on general economic activity;

and severely affects state, local, and private sector capabilities to begin and sustain response

activities. A catastrophic disaster shall be declared by the President of the United States, the

governor of the state, or the insurance commissioner.

     (c) "Company adjuster” means a person who:

     (1) Is an individual who contracts for compensation with insurers or self-insurers as an

employee; and

     (2) Investigates, negotiates, or settles property, casualty, or workers' compensation claims

for insurers or for self-insurers as an employee.

     (d) "Department” means the insurance division of the department of business regulation.

     (e) "Home state” means the District of Columbia and any state or territory of the United

States in which the adjuster's principal place of residence or principal place of business is located.

If neither the state in which the public independent or company adjuster maintains the principal

place of residence, nor the state in which the adjuster maintains the principal place of business, has

LC002082 - Page 6 of 61

a substantially similar law governing adjusters, the adjuster may declare another state in which it

becomes licensed and acts as a public an independent or company adjuster to be the "home state.”

Designated home state is not available for public adjusters.

     (f) "Independent adjuster” means a person who:

     (1) Is an individual who contracts for compensation with insurers or self-insurers as an

independent contractor; or

     (2) Investigates, negotiates, or settles property, casualty, or workers' compensation claims

for insurers or for self-insurers as an independent contractor.

     (g) "Insurance commissioner” means the director of the department of business regulation

or his or her designee.

     (h) "NAIC” means the National Association of Insurance Commissioners.

     (i) "Public adjuster” means any person who, for compensation or any other thing of value

on behalf of the insured:

     (1) Acts or aids, solely in relation to first-party claims arising under insurance contracts

that insure the real or personal property of the insured, other than automobile, on behalf of an

insured in negotiating for, or effecting the settlement of, a claim for loss or damage covered by an

insurance contract;

     (2) Advertises for employment as a public adjuster of insurance claims or solicits business

or represents himself themself or herself to the public as a public adjuster of first-party insurance

claims for losses or damages arising out of policies of insurance that insure real or personal

property; or

     (3) Directly or indirectly solicits business, investigates or adjusts losses, or advises an

insured about first-party claims for losses or damages arising out of policies of insurance that insure

real or personal property for another person engaged in the business of adjusting losses or damages

covered by an insurance policy, for the insured.

     (j) "Uniform individual application” means the current version of the National Association

of Insurance Commissioners (NAIC) Uniform Individual Application for resident and nonresident

individuals.

     SECTION 3. Section 27-13.1-7 of the General Laws in Chapter 27-13.1 entitled

"Examinations" is hereby amended to read as follows:

     27-13.1-7. Cost of examinations.

     (a) The total cost of the examinations shall be borne by the examined companies and shall

include the following expenses:

     (1) One hundred fifty percent (150%) of the total salaries and benefits paid to the examining

LC002082 - Page 7 of 61

personnel of the banking and insurance division engaged in those examinations less any salary

reimbursements;

     (2) All reasonable technology costs related to the examination process. Technology costs

shall include the actual cost of software and hardware utilized in the examination process and the

cost of training examination insurance personnel in the proper use of the software or hardware;

     (3) All necessary and reasonable education and training costs incurred by the state to

maintain the proficiency and competence of the examining insurance personnel. All these costs

shall be incurred in accordance with appropriate state of Rhode Island regulations, guidelines and

procedures.

     (b) Expenses incurred pursuant to subsections (a)(2) and (a)(3) of this section shall be

allocated equally to each company domiciled in Rhode Island no more frequently than annually

and shall not exceed an annual average assessment of three thousand five hundred dollars ($3,500)

five thousand dollars ($5,000) per company for any given three (3) calendar year period. All

revenues collected pursuant to this section shall be deposited as general revenues. That assessment

shall be in addition to any taxes and fees payable to the state.

     SECTION 4. 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,

27-34.3-9, 27-34.3-11, 27-34.3-12, 27-34.3-13, 27-34.3-14, 27-34.3-19 and 27-34.3-20 of the

General Laws in Chapter 27-34.3 entitled "Rhode Island Life and Health Insurance Guaranty

Association Act" are hereby amended to read as follows:

     27-34.3-2. Purpose.

     (a) The purpose of this chapter is to protect, subject to certain limitations, the persons

specified in § 27-34.3-3(a) against failure in the performance of contractual obligations, under life,

and health insurance policies and annuity policies, plans or contracts specified in § 27-34.3-3(b),

because of the impairment or insolvency of the member insurer that issued the policies, plans, or

contracts.

     (b) To provide this protection, an association of member insurers is created to pay benefits

and to continue coverages as limited in this chapter, and members of the association are subject to

assessment to provide funds to carry out the purpose of this chapter.

     (c) In accordance with this purpose, in determining the coverage limits to be applied in §

27-34.3-3 in cases in which there were different statutory limits at the time the insurer was declared

impaired and the time the insurer was declared insolvent, the statute with the higher limits shall be

applied to the claim.

     27-34.3-3. Coverage and limitations.

     (a) This chapter shall provide coverage for the policies and contracts specified in subsection

LC002082 - Page 8 of 61

(b) of this section:

     (1) To persons who, regardless of where they reside (except for nonresident certificate

holders under group policies or contracts), are the beneficiaries, assignees or payees, including

health care providers rendering services covered under health insurance policies or certificates, of

the persons covered under subsection (2); and

     (2) To persons who are owners of or certificate holders or enrollees under the policies or

contracts (other than unallocated annuity contracts, and structured settlement annuities) and in each

case who:

     (i) Are residents; or

     (ii) Are not residents, but only under all of the following conditions:

     (A) The member insurer that issued the policies or contracts is domiciled in this state;

     (B) The states in which the persons reside have associations similar to the association

created by this chapter; and

     (C) The persons are not eligible for coverage by an association in any other state due to the

fact that the insurer or the health maintenance organization was not licensed in the state at the time

specified in the state's guaranty association law.

     (3) For unallocated annuity contracts set forth in subsection (b) of this section, paragraphs

(1) and (2) of this subsection shall not apply, and this chapter shall (except as provided in

paragraphs (5) and (a)(6) of this subsection) provide coverage to:

     (i) Persons who are owners of the unallocated annuity contracts if the contracts are issued

to or in connection with a specific benefit plan whose plan sponsor has its principal place of

business in this state; and

     (ii) Persons who are owners of unallocated annuity contracts issued to or in connection

with government lotteries if the owners are residents.

     (4) For structured settlement annuities specified in subsection (b)(1), paragraphs (1) and

(2) of this subsection shall not apply, and this chapter shall (except as provided in paragraphs (5)

and (6) of this subsection) provide coverage to a person who is a payee under a structured settlement

annuity (or beneficiary of a payee if the payee is deceased), if the payee:

     (i) Is a resident, regardless of where the contract owner resides; or

     (ii) Is not a resident, but only under both of the following conditions:

     (A)(I) The contract owner of the structured settlement annuity is a resident; or

     (II) The contract owner of the structured settlement annuity is not a resident but the insurer

that issued the structured settlement annuity is domiciled in this state; and

     The state in which the contract owner resides has an association similar to the association

LC002082 - Page 9 of 61

created by this chapter; and

     (B) Neither the payee or beneficiary, nor the contract owner is eligible for coverage by the

association of the state in which the payee or contract owner resides.

     (5) This chapter shall not provide coverage to:

     (i) A person who is a payee or beneficiary of a contract owner resident of this state, if the

payee or beneficiary is afforded any coverage by the association of another state; or

     (ii) A person covered under paragraph (3) of this subsection, if any coverage is provided

by the association of another state to the person.; or

     (iii) A person who acquires rights to receive payments through a structured settlement

factoring transaction as defined in 26 U.S.C. 5891(c)(3)(A), regardless of whether the transaction

occurred before or after such section became effective.

     (6) This chapter is intended to provide coverage to a person who is a resident of this state

and, in special circumstances, to a nonresident. In order to avoid duplicate coverage, if a person

who would otherwise receive coverage under this chapter is provided coverage under the laws of

any other state, the person shall not be provided coverage under this chapter. In determining the

application of the provisions of this paragraph in situations where a person could be covered by the

association of more than one state, whether as an owner, payee, enrollee, beneficiary, or assignee,

this chapter shall be construed in conjunction with other state laws to result in coverage by only

one association.

     (b)(1) This chapter shall provide coverage to the persons specified in subsection (a) of this

section for policies or contracts for direct, non-group life insurance, health, or annuity policies or

contracts including health maintenance organization subscriber contracts and certificates, or

annuities and supplemental policies or contracts to any of these, for certificates under direct group

policies and contracts, and for unallocated annuity contracts issued by member insurers, except as

limited by this chapter. Annuity contracts and certificates under group annuity contracts include,

but are not limited to, guaranteed investment contracts, deposit administration contracts,

unallocated funding agreements, allocated funding agreements, structured settlement annuities,

annuities issued to or in connection with government lotteries and any immediate or deferred

annuity contracts.

     (2) This Except as otherwise provided in subsection (b)(3) of this section, this chapter shall

not provide coverage for:

     (i) A portion of a policy or contract not guaranteed by the member insurer, or under which

the risk is borne by the policy or contract owner;

     (ii) A policy or contract of reinsurance, unless assumption certificates have been issued

LC002082 - Page 10 of 61

pursuant to the reinsurance policy or contract;

     (iii) A portion of a policy or contract to the extent that the rate of interest on which it is

based, or the interest rate, crediting rate or similar factor determined by use of an index or other

external reference stated in the policy or contract employed in calculating returns or changes in

value:

     (A) Averaged over the period of four (4) years prior to the date on which the member

insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds

the rate of interest determined by subtracting two (2) percentage points from Moody's corporate

bond yield average averaged for that same four-year (4) period or for such lesser period if the policy

or contract was issued less than four (4) years before the member insurer becomes an impaired or

insolvent insurer under this chapter, whichever is earlier; and

     (B) On and after the date on which the member insurer becomes an impaired or insolvent

insurer under this chapter, whichever is earlier, exceeds the rate of interest determined by

subtracting three (3) percentage points from Moody's corporate bond yield average as most recently

available;

     (iv) A portion of a policy or contract issued to a plan or program of an employer, association

or other person to provide life, health or annuity benefits to its employees, members or others to

the extent that the plan or program is self-funded or uninsured, including but not limited to benefits

payable by an employer, association or other person under:

     (A) A multiple employer welfare arrangement as defined in 29 U.S.C. § 1144;

     (B) A minimum premium group insurance plan;

     (C) A stop-loss group insurance plan; or

     (D) An administrative services only contract;

     (v) A portion of a policy or contract to the extent that it provides for:

     (A) Dividends or experience rating credits;

     (B) Voting rights; or

     (C) Payment of any fees or allowances to any person, including the policy or contract

owner, in connection with the service to or administration of the policy or contract.

     (vi) A policy or contract issued in this state by a member insurer at a time when it was not

licensed or did not have a certificate of authority to issue the policy or contract in this state;

     (vii) An unallocated annuity contract issued to or in connection with a benefit plan

protected under the federal pension benefit guaranty corporation, regardless of whether the federal

pension benefit guaranty corporation has yet become liable to make any payments with respect to

the benefit plan;

LC002082 - Page 11 of 61

     (viii) A portion of unallocated annuity contract that is not issued to or in connection with a

specific employee, union or association of natural persons benefit plan or a government lottery;

     (ix) A portion of a policy or contract to the extent that the assessments required by § 27-

34.3-9 with respect to the policy or contract are preempted by federal or state law; and

     (x) An obligation that does not arise under the express written terms of the policy or

contract issued by the member insurer to the enrollee, certificate holder, contract owner or policy

owner, including, without limitation:

     (A) Claims based on marketing materials;

     (B) Claims based on side letters, riders or other documents that were issued by the member

insurer without meeting applicable policy or contract form filing or approval requirements;

     (C) Misrepresentations of or regarding policy or contract benefits;

     (D) Extracontractual claims; or

     (E) A claim for penalties or consequential or incidental damages;

     (xi) A contractual agreement that establishes the member insurer's obligations to provide a

book value accounting guaranty for defined contribution benefit plan participants by reference to a

portfolio of assets that is owned by the benefit plan or its trustee, which in each case is not an

affiliate of the member insurer;

     (xii) A portion of a policy or contract to the extent it provides for interest or other changes

in value to be determined by the use of an index or other external reference stated in the policy or

contract, but which have not been credited to the policy or contract, or as to which the policy or

contract owner's rights are subject to forfeiture, as of the date the member insurer becomes an

impaired or insolvent insurer under this chapter, whichever is earlier. If a policy's or contract's

interest or changes in value are credited less frequently than annually, then, for purposes of

determining the values that have been credited and are not subject to forfeiture under this paragraph,

the interest or change in value determined by using the procedures defined in the policy or contract

will be credited as if the contractual date of crediting interest or changing values was the date of

impairment or insolvency, whichever is earlier, and will not be subject to forfeiture;

     (xiii) Any transaction or combination of transactions between a protected cell and the

general account or another protected cell of a protected cell company organized under chapter 64

of this title; or

     (xiv) A policy or contract providing any hospital, medical, prescription drug or other

healthcare benefits pursuant to Part C or Part D of subchapter XVIII, chapter 7 of title 42 of the

United States Code (commonly known as Medicare part C & D), or subchapter XIX, chapter 7 of

title 42 of the United States Code (commonly known as Medicaid), or any regulations issued

LC002082 - Page 12 of 61

pursuant thereto.; or

     (xvii) Structured settlement annuity benefits to which a payee (or beneficiary) has

transferred their rights in a structured settlement factoring transaction as defined in 26 U.S.C.

5891(c)(3)(A), regardless of whether the transaction occurred before or after such section became

effective.

     (3) The exclusion from coverage referenced in subsection (b)(2)(iii) of this section shall

not apply to any portion of a policy or contract, including a rider, that provides long-term care or

any other health insurance benefits.

     (c) The benefits that the association may become obligated to cover shall in no event exceed

the lesser of:

     (1) The contractual obligations for which the member insurer is liable or would have been

liable if it were not an impaired or insolvent insurer; or

     (2)(i) With respect to any one life, regardless of the number of policies or contracts:

     (A) Three hundred thousand dollars ($300,000) in life insurance death benefits, but not

more than one hundred thousand dollars ($100,000) in net cash surrender and net cash withdrawal

values for life insurance;

     (B) In For health insurance benefits:

     (I) One hundred thousand dollars ($100,000) for coverages not considered as disability

income insurance or basic hospital, medical and surgical insurance health benefit plans or major

medical insurance or long-term care insurance, including any net cash surrender and net cash

withdrawal values;

     (II) Three hundred thousand dollars ($300,000) for disability income insurance and three

hundred thousand dollars ($300,000) for long-term care insurance;

     (III) Five hundred thousand dollars ($500,000) for basic hospital, medical and surgical

insurance health benefit plans; or

     (C) Two hundred fifty thousand dollars ($250,000) in the present value of annuity benefits,

including net cash surrender and net cash withdrawal values;

     (ii) With respect to each individual participating in a governmental retirement plan

established under § 401, 403(b) or 457 of the U.S. Internal Revenue Code, 26 U.S.C. § 401, 403(b)

or 457, covered by an unallocated annuity contract or the beneficiaries of each such individual if

deceased, in the aggregate, two hundred fifty thousand dollars ($250,000) in present value annuity

benefits, including net cash surrender and net cash withdrawal values;

     (iii) With respect to each payee of a structured settlement annuity or beneficiary or

beneficiaries, of the payee if deceased, two hundred fifty thousand dollars ($250,000) in present

LC002082 - Page 13 of 61

value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal

values if any;

     (iv) However in no event shall the association be obligated to cover more than: (A) an

aggregate of three hundred thousand dollars ($300,000) in benefits with respect to any one life

under this paragraph and paragraphs (i), (ii) and (iii) of this subdivision except with respect to

benefits for basic hospital, medical and surgical insurance and major medical insurance health

benefit plans under subparagraph 2(i)(B) of this subsection, in which case the aggregate liability of

the association shall not exceed five hundred thousand dollars ($500,000) with respect to any one

individual; or (B) with respect to one owner of multiple non-group policies of life insurance,

whether the policy or contract owner is an individual, firm, corporation or other person, and whether

the persons insured are officers, managers, employees or other persons, more than five million

dollars ($5,000,000) in benefits, regardless of the number of policies and contracts held by the

owner;

     (v) With respect to either: (A) one contract owner provided coverage under subsection

(a)(3)(i); or (B) one plan sponsor whose plans own directly or in trust any one or more unallocated

annuity contracts not included in paragraph (ii) of this subdivision, five million dollars ($5,000,000)

in benefits, irrespective of the number of contracts with respect to the contract owner or plan

sponsor. Provided, however, in the case where one or more unallocated annuity contracts that are

covered contracts under this chapter and are owned by a trust or other entity for the benefit of two

(2) or more plan sponsors, coverage shall be afforded by the association if the largest interest in the

trust or entity owning the contract or contracts is held by a plan sponsor whose principal place of

business is in this state and in no event shall the association be obligated to cover more than five

million dollars ($5,000,000) in benefits with respect to all such unallocated contracts;

     (vi) The limitations set forth in this subsection are limitations on the benefits for which the

association is obligated before taking into account either its subrogation and assignment rights or

the extent to which those benefits could be provided out of the assets of the impaired or insolvent

insurer attributable to covered policies. The costs of the association's obligations under this chapter

may be met by the use of assets attributable to covered policies or reimbursed to the association

pursuant to its subrogation and assignment rights.

     (vii) For purposes of this chapter, benefits provided by a long-term care rider to a life

insurance policy or annuity contract shall be considered the same type of benefits as the base life

insurance policy or annuity contract to which it relates.

     (d) In performing its obligations to provide coverage under § 27-34.3-8, the association

shall not be required to guarantee, assume, reinsure, reissue or perform, or cause to be guaranteed,

LC002082 - Page 14 of 61

assumed, reinsured, reissued or performed, contractual obligations of the insolvent or impaired

insurer under a covered policy or contract that do not materially affect the economic values or

economic benefits of the covered policy or contract.

     27-34.3-5. Definitions.

     As used in this chapter:

     (1) "Account” means either of the two accounts created under § 27-34.3-6.

     (2) "Association” means the Rhode Island life and health insurance guaranty association

created under § 27-34.3-6.

     (3) "Authorized assessment” or the term "authorized” when used in the context of

assessments means a resolution by the board of directors has been passed whereby an assessment

will be called immediately or in the future from member insurers for a specified amount. An

assessment is authorized when the resolution is passed.

     (4) "Benefit plan” means a specific employee, union or association of natural persons

benefit plan.

     (5) "Called assessment” or the term "called” when used in the context of assessments means

that a notice has been issued by the association to member insurers requiring that an authorized

assessment be paid within the time frame set forth within the notice. An authorized assessment

becomes a called assessment when notice is mailed by the association to member insurers.

     (6) "Commissioner” means the commissioner of insurance within the department of

business regulation of this state definition prescribed by § 42-14-5.

     (7) "Contractual obligation” means any obligation under a policy or contract or certificate

under a group policy or contract, or portion of a group policy or contract for which coverage is

provided under § 27-34.3-3.

     (8) "Covered contract or covered policy” means any policy or contract or portion of a policy

or contract for which coverage is provided under § 27-34.3-3.

     (9) "Extra-contractual claims” means claims not arising directly out of contract provisions,

including, for example, claims relating to bad faith in the payment of claims, punitive or exemplary

damages or attorneys' fees and costs.

     (10) "Health benefit plan" means any hospital or medical expense policy or certificate, or

health maintenance organization subscriber contract or any other similar health contract. "Health

benefit plan" does not include:

     (i) Accident only insurance:

     (ii) Credit insurance;

     (iii) Dental only insurance;

LC002082 - Page 15 of 61

     (iv) Vision only insurance;

     (v) Medicare Supplement insurance;

     (vi) Benefits for long-term care, home health care, community-based care, or any

combination thereof;

     (vii) Disability income insurance;

     (viii) Coverage for on-site medical clinics; or

     (ix) Specified disease, hospital confinement indemnity, or limited benefit health insurance

if the types of coverage do not provide coordination of benefits and are provided under separate

policies or certificates.

     (10)(11) "Impaired insurer” means a member insurer which is not an insolvent insurer, and

     (i) Is placed under an order of rehabilitation or conservation by a court of competent

jurisdiction.

     (11)(12) "Insolvent insurer” means a member insurer which after January 1, 1996, is placed

under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.

     (12)(13) "Member insurer” means any insurer or health maintenance organization licensed

or which holds a certificate of authority to transact in this state any kind of insurance or health

maintenance organization business for which coverage is provided under § 27-34.3-3, and includes

any insurer or health maintenance organization whose license or certificate of authority in this state

may have been suspended, revoked, not renewed or voluntarily withdrawn, but does not include:

     (i) A hospital or medical service organization, whether profit or nonprofit; or

     (ii) A health maintenance organization; or

     (iii) A fraternal benefit society; or

     (iv) A mandatory state pooling plan; or

     (v) A mutual assessment company or other person that operates on an assessment basis; or

     (vi) An insurance exchange; or

     (vii) An organization that has a certificate or license limited to the issuance of charitable

gift annuities; or

     (viii) An entity similar to any of the above.

     (13)(14) "Moody's corporate bond yield average” means the monthly average corporates

as published by Moody's investors service, inc. Investors Service, Inc., or any successor to it.

     (14)(15) "Owner” of a policy or contract and "policyholder," "policy owner” and or

"contract owner” means the person who is identified as the legal owner under the terms of the

policy or contract or who is otherwise vested with legal title to the policy or contract through a

valid assignment completed in accordance with the terms of the policy or contract and properly

LC002082 - Page 16 of 61

recorded as the owner on the books of the member insurer. The terms owner, contract owner,

policyholder and policy owner do not include persons with a mere beneficial interest in a policy or

contract.

     (15)(16) "Person” means any individual, corporation, limited liability company,

partnership, association, governmental body or entity or voluntary organization.

     (16)(17) "Plan sponsor” means:

     (i) The employer in case of a benefit plan established or maintained by a single employer;

     (ii) The employee organization in the case of a benefit plan established or maintained by

an employee organization; or

     (iii) In the case of a benefit plan established or maintained by two (2) or more employers

or jointly by one or more employers and one or more employee organizations, the association,

committee, joint board of trustees, or other similar group of representatives of the parties who

establish or maintain the benefit plan.

     (17)(18) "Premiums” means amounts or considerations (by whatever name called) received

on covered policies or contracts less returned premiums, considerations and deposits, and less

dividends and experience credits. "Premiums” does not include any amounts or consideration

received for any policies or contracts or for the portions of policies or contracts for which coverage

is not provided under § 27-34.3-3(b) except that assessable premium shall not be reduced on

account of § 27-34.3-3(b)(2)(iii) relating to interest limitations and § 27-34.3-3(c)(2) relating to

limitations with respect to one individual, one participant and one owner. "Premiums” shall not

include:

     (i) Premiums in excess of five million dollars ($5,000,000) on an unallocated annuity

contract not issued under a governmental retirement benefit plan (or its trustee) established under

§ 401, 403(b) or 457 of the United States Internal Revenue Code, 26 U.S.C. § 401, 403(b) or 457.

     (ii) With respect to multiple nongroup policies of life insurance owned by one owner,

whether the policy or contract owner is an individual, firm, corporation or other person, and whether

the persons insured are officers, managers, employees or other persons, premiums in excess of five

million dollars ($5,000,000) with respect to these policies or contracts, regardless of the number of

policies or contracts held by the owner.

     (18)(19)(i) "Principal place of business” of a plan sponsor or a person other than a natural

person means the single state in which the natural persons who establish policy for the direction,

control and coordination of the operations of the entity as a whole primarily exercise that function,

determined by the association in its reasonable judgment by considering the following factors:

     (A) The state in which the primary executive and administrative headquarters of the entity

LC002082 - Page 17 of 61

is located;

     (B) The state in which the principal office of the chief executive officer of the entity is

located;

     (C) The state in which the board of directors (or similar governing person or persons) of

the entity conducts the majority of its meetings;

     (D) The state in which the executive or management committee of the board of directors

(or a similar governing person or persons) of the entity, conducts the majority of its meetings;

     (E) The state from which the management of the overall operations of the entity is directed;

and

     (F) In the case of a benefit plan sponsored by affiliated companies comprising a

consolidated corporation, the state in which the holding company or controlling affiliate has its

principal place of business as determined using the above factors. However, in the case of a plan

sponsor, if more than fifty percent (50%) of the participants in the benefit plan are employed in a

single state, that state shall be deemed to be the principal place of business of the plan sponsor.

     (ii) The principal place of business of a plan sponsor of a benefit plan described in

subsection (16)(17)(iii) of this section shall be deemed to be the principal place of business of the

association, committee, joint board of trustees or other similar group of representatives of the

parties who establish or maintain the benefit plan that, in lieu of a specific or clear designation of

a principal place of business, shall be deemed to be the principal place of business of the employer

or employee organization that has the largest investment in the benefit plan in question.

     (19)(20) "Receivership court” means the court in the insolvent or impaired insurer's state

having jurisdiction over the conservation, rehabilitation or liquidation of the member insurer.

     (20)(21) "Resident” means a person to whom a contractual obligation is owed and who

resides in this state on the date of entry of court order that determines a member insurer to be an

impaired insurer or a court order that determines a member insured to be an insolvent insurer,

whichever occurs first. A person may be a resident of only one state, which in the case of a person

other than a natural person shall be its principal place of business. Citizens of the United States that

are either: (i) residents of foreign countries; or (ii) residents of United States possessions, territories

or protectorates that do not have an association similar to the association created by this chapter,

shall be deemed residents of the state of domicile of the member insurer that issued the polices or

contracts.

     (21)(22) "Structured settlement annuity” means an annuity purchased in order to fund

periodic payments for a claimant in payment for or with respect to personal injuries suffered by the

claimant.

LC002082 - Page 18 of 61

     (22)(23) "State” means a state, the District of Columbia, Puerto Rico, or a United States

possession, territory or protectorate.

     (23)(24) "Supplemental contract” means a written agreement entered into for the

distribution of proceeds under a life, health or annuity policy or contract.

     (24)(25) "Unallocated annuity contract” means any annuity contract or group annuity

certificate which is not issued to and owned by an individual, except to the extent of any annuity

benefits guaranteed to an individual by an insurer under the contract or certificate.

     27-34.3-6. Creation of the association.

     (a) There is created a nonprofit legal entity to be known as the Rhode Island life and health

insurance guaranty association. All member insurers shall be and remain members of the

association as a condition of their authority to transact insurance or health maintenance organization

business in this state. The association shall perform its functions under the plan of operation

established and approved under § 27-34.3-10, or as previously established and approved under §

27-34.1-11 [Repealed] and shall exercise its powers through a board of directors established under

§ 27-34.3-7 or as previously established under § 27-34.1-8 [Repealed]. For purposes of

administration and assessment, the association shall maintain two (2) accounts:

     (1) The life insurance and annuity account which includes the following subaccounts:

     (i) Life insurance account;

     (ii) Annuity account; which shall include annuity contracts owned by a governmental

retirement plan (or its trustee) established under section 401, 403(b) or 457 of the United States

Internal Revenue Code, 26 U.S.C. § 401, 403(b) or 457, but shall otherwise exclude unallocated

annuities; and

     (iii) Unallocated annuity account which shall exclude contracts owned by a governmental

retirement benefit plan (or its trustee) established under § 401, 403(b) or 457 of the United States

Internal Revenue Code, 26 U.S.C. § 401, 403(b) or 457.

     (2) The health insurance account.

     (b) The association shall come under the immediate supervision of the commissioner and

shall be subject to the applicable provisions of the insurance laws of this state. Meetings or records

of the association may be open to the public upon majority vote of the board of directors. The

commissioner or his or her designee shall have full and complete access to all documents received

by, created by or otherwise obtained by the association and shall be invited to be present at all

association meetings. The disclosure of confidential or privileged association information,

documents, or records to the commissioner shall not change the confidential or privileged status of

the information, documents or records.

LC002082 - Page 19 of 61

     27-34.3-7. Board of directors.

     (a) The board of directors of the association shall consist of:

     (1) Not less than five (5) seven (7) nor more than nine (9) eleven (11) member insurers

serving terms as established in the plan of operation; and

     (2) The commissioner or the commissioner's designee. Only member insurers or a health

maintenance organization shall be eligible to vote. The members of the board shall be selected by

member insurers subject to the approval of the commissioner. The board of directors, previously

established under § 27-34.1-8 [Repealed], shall continue to operate in accordance with the

provision of this section. Vacancies on the board shall be filled for the remaining period of the term

by a majority vote of the remaining board members, subject to the approval of the commissioner.

     (b) In approving selections to the board, the commissioner shall consider, among other

things, whether all member insurers are fairly represented.

     (c) Members of the board may be reimbursed from the assets of the association for expenses

incurred by them as members of the board of directors but members of the board shall not be

compensated by the association for their services.

     27-34.3-8. Powers and duties of the association.

     (a) If a member insurer is an impaired insurer, the association may, in its discretion, and

subject to any conditions imposed by the association that do not impair the contractual obligations

of the impaired insurer, and that are approved by the commissioner:

     (1) Guarantee, assume, reissue or reinsure, or cause to be guaranteed, assumed, reissued or

reinsured, any or all of the policies or contracts of the impaired insurer;

     (2) Provide the monies, pledges, loans, notes, guarantees or other means that are proper to

effectuate subdivision (1) of this subsection and assure payment of the contractual obligations of

the impaired insurer pending action under subdivision (1) of this subsection.

     (b) If a member insurer is an insolvent insurer, the association shall, in its discretion, either:

     (1)(i)(A) Guaranty, assume, reissue or reinsure, or cause to be guaranteed, assumed,

reissued or reinsured, the policies or contracts of the insolvent insurer; or

     (B) Assure payment of the contractual obligations of the insolvent insurer; and

     (ii) Provide monies, pledges, loans, notes, guarantees, or other means that are reasonably

necessary to discharge the association's duties; or

     (2) Provide benefits and coverages in accordance with the following provisions:

     (i) With respect to life and health insurance policies and annuities policies and contracts,

assure payment of benefits for premiums identical to the premiums and benefits (except for terms

of conversion and renewability) that would have been payable under the policies or contracts of the

LC002082 - Page 20 of 61

insolvent insurer, for claims incurred:

     (A) With respect to group policies and contracts, not later than the earlier of the next

renewal date under such policies or contracts or forty-five (45) days, but in no event less than thirty

(30) days after the date on which the association becomes obligated with respect to the policies or

contracts;

     (B) With respect to nongroup policies, contracts and annuities not later than the earlier of

the next renewal date (if any) under the policies or contracts or one year, but in no event less than

thirty (30) days from the date on which the association becomes obligated with respect to the

policies and contracts;

     (ii) Make diligent efforts to provide all known insured insureds, enrollees or annuitants (for

non-group policies and contracts) or group policy or contract owners with respect to group policies

or contracts thirty (30) days' notice of the termination (pursuant to subparagraph (i) of this

paragraph) of the benefits provided;

     (iii) With respect to nongroup life and health insurance policies and annuities policies and

contracts covered by the association, make available to each known insured, enrollee or annuitant,

or owner if other than the insured, enrollee, or annuitant and with respect to an individual formerly

an insured, enrollee or formerly an annuitant under a group policy or contract who is not eligible

for replacement group coverage, make available substitute coverage on an individual basis in

accordance with the provisions of subdivision (iv) of this subsection, if the insureds, enrollees or

annuitants had a right under law or the terminated policy, contract or annuity to convert coverage

to individual coverage or to continue an individual policy, contract or annuity in force until a

specified age or for a specified time, during which the insurer or health maintenance organization

had no right unilaterally to make changes in any provision of the policy, contract or annuity or had

a right only to make changes in premium by class;

     (iv)(A) In providing the substitute coverage required under subdivision (iii) of this

subsection, the association may offer either to reissue the terminated coverage or to issue an

alternative policy or contract at actuarially justified rates subject to the prior approval of the

commissioner.

     (B) Alternative or reissued policies or contracts shall be offered without requiring evidence

of insurability, and shall not provide for any waiting period or exclusion that would not have applied

under the terminated policy or contracts.

     (C) The association may reinsure any alternative or reissued policy or contract.

     (v)(A) Alternative policies or contracts adopted by the association shall be subject to the

approval of the domiciliary insurance commissioner and the receivership court. The association

LC002082 - Page 21 of 61

may adopt alternative policies or contracts of various types for future issuance without regard to

any particular impairment or insolvency.

     (B) Alternative policies or contracts shall contain at least the minimum statutory provisions

required in this state and provide benefits that shall not be unreasonable in relation to the premium

charged. The association shall set the premium in accordance with a table of rates which it shall

adopt. The premium shall reflect the amount of insurance to be provided and the age and class of

risk of each insured, but shall not reflect any changes in the health of the insured after the original

policy or contract was last underwritten.

     (C) Any alternative policy or contract issued by the association shall provide coverage of

a type similar to that of the policy or contract issued by the impaired or insolvent insurer, as

determined by the association.

     (vi) If the association elects to reissue terminated coverage at a premium rate different from

that charged under the terminated policy or contract, the premium shall be actuarially justified and

be set by the association in accordance with the amount of insurance or coverage provided and the

age and class of risk, subject to approval of the domiciliary insurance commissioner and the

receivership court.

     (vii) The association's obligations with respect to coverage under any policy or contract of

the impaired or insolvent insurer or under any reissued or alternative policy or contract shall cease

on the date such coverage or policy or contract is replaced by another similar policy or contract by

the policy or contract owner, the insured, the enrollee, or the association.

     (viii) When proceeding under paragraph (b)(2) of this section with respect to any policy or

contract carrying guaranteed minimum interest rates, the association shall assure the payment or

crediting of a rate of interest consistent with § 27-34.3-3(b)(2)(iii).

     (c) Nonpayment of premiums within thirty-one (31) days after the date required under the

terms of any guaranteed, assumed, alternative or reissued policy or contract or substitute coverage

shall terminate the association's obligations under the policy, contract or coverage under this

chapter with respect to the policy, contract or coverage, except with respect to any claims incurred

or any net cash surrender value which may be due in accordance with the provisions of this chapter.

     (d) Premiums due for coverage after entry of an order of liquidation of an insolvent insurer

shall belong to and be payable at the direction of the association. If the liquidator of an insolvent

insurer requests, the association shall provide a report to the liquidator regarding such premium

collected by the association. The association shall be liable for unearned premiums due to policy

or contract owners arising after the entry of the order.

     (e) The protection provided by this chapter shall not apply where any guaranty protection

LC002082 - Page 22 of 61

is provided to residents of this state by laws of the domiciliary state or jurisdiction of the impaired

or insolvent insurer other than this state.

     (f) In carrying out its duties under subsection (b), the association may:

     (1) Subject to approval by a court of competent jurisdiction in this state, impose permanent

policy or contract liens in connection with any guarantee, assumption or reinsurance agreement, if

the association finds that the amounts which can be assessed under this chapter are less than the

amounts needed to assure full and prompt performance of the association's duties under this chapter,

or that the economic or financial conditions as they affect member insurers are sufficiently adverse

to render the imposition of such permanent policy or contract liens, to be in the public interest;

     (2) Subject to approval by a court of competent jurisdiction in this state, impose temporary

moratoriums or liens on payments of cash values and policy loans, or any other right to withdraw

funds held in conjunction with policies or contracts, in addition to any contractual provisions for

deferral of cash or policy loan value. In addition, in the event of a temporary moratorium or

moratorium charge imposed by the receivership court on payment of cash values or policy loans,

or on any other right to withdraw funds held in conjunction with policies or contracts, out of the

assets of the impaired or insolvent insurer, the association may defer the payment of such cash

values, policy loans or other rights by the association for the period of the moratorium or

moratorium charge imposed by the receivership court, except for claims covered by the association

to be paid in accordance with a hardship procedure established by the liquidator or rehabilitator and

approved by the receivership court.

     (g) A deposit in this state, held pursuant to law or required by the commissioner for the

benefit of creditors, including policy or contract owners, not turned over to the domiciliary

liquidator upon the entry of a final order of liquidation or order approving a rehabilitation plan of

an a member insurer domiciled in this state or in a reciprocal state, pursuant to § 27-14.3-56, shall

be promptly paid to the association. The association shall be entitled to retain a portion of any

amounts so paid to it equal to the percentage determined by dividing the aggregate amount of policy

or contract owners' claims related to that insolvency for which the association has provided

statutory benefits by the aggregate amount of all policy or contract owners' claims in this state

related to that insolvency and shall remit to the domiciliary receiver the amount so paid to the

association less the amount retained pursuant to this subsection. Any amount so paid to the

association and retained by it shall be treated as a distribution of estate assets pursuant to applicable

state insurance law dealing with early access disbursements.

     (h) If the association fails to act within a reasonable period of time with respect to an

insolvent insurer, as provided in subsection (b) of this section, the commissioner shall have the

LC002082 - Page 23 of 61

powers and duties of the association under this chapter with respect to the insolvent insurers.

     (i) The association may render assistance and advice to the commissioner, upon the

commissioner's request, concerning rehabilitation, payment of claims, continuance of coverage, or

the performance of other contractual obligations of any impaired or insolvent insurer.

     (j) The association shall have standing to appear or intervene before any court or agency in

this state with jurisdiction over an impaired or insolvent insurer concerning which the association

is or may become obligated under this chapter or with jurisdiction over any person or property

against whom the association may have rights through subrogation or otherwise. Standing shall

extend to all matters germane to the powers and duties of the association, including, but not limited

to, proposals for reinsuring, reissuing, modifying or guaranteeing the policies or contracts of the

impaired or insolvent insurer and the determination of the polices or contracts and contractual

obligations. The association shall also have the right to appear or intervene before a court or agency

in another state with jurisdiction over an impaired or insolvent insurer for which the association is

or may become obligated or with jurisdiction over any person or property against whom the

association may have rights through subrogation or otherwise.

     (k)(1) A person receiving benefits under this chapter shall be deemed to have assigned the

rights under, and any causes of action against any person for losses arising under, resulting from or

otherwise relating to, the covered policy or contract to the association to the extent of the benefits

received because of this chapter, whether the benefits are payments of or on account of contractual

obligations, continuation of coverage or provision of substitute or alternative policies, contracts or

coverage. The association may require an assignment to it of these rights and causes of action by

any enrollee, payee, policy or contract owner, beneficiary, insured or annuitant as a condition

precedent to the receipt of any right or benefits conferred by this chapter upon the person.

     (2) The subrogation rights of the association under this subsection shall have the same

priority against the assets of the impaired or insolvent insurer as that possessed by the person

entitled to receive benefits under this chapter.

     (3) In addition to subdivisions (1) and (2) of this subsection, the association shall have all

common law rights of subrogation and any other equitable or legal remedy that would have been

available to the impaired or insolvent insurer or owner, beneficiary, enrollee or payee, of a policy

or contract with respect to the policy or contracts including without limitation, in the case of a

structured settlement annuity, any rights of the owner, beneficiary or payee of the annuity, to the

extent of benefits received pursuant to this chapter, against a person originally or by succession

responsible for the losses arising from the personal injury relating to the annuity or payment

therefore, excepting any such person responsible solely by reason of serving as an assignee in

LC002082 - Page 24 of 61

respect of a qualified assignment under § 130 of the United States Internal Revenue Code, 26

U.S.C. § 130.

     (4) If the preceding provisions of this subsection are invalid or ineffective with respect to

any person or claim for any reason, the amount payable by the association with respect to the related

covered obligations shall be reduced by the amount realized by any other person with respect to the

person or claim that is attributable to the policies or contracts, or portion thereof, covered by the

association.

     (5) If the association has provided benefits with respect to a covered obligation and a person

recovers amounts to which the association has rights as described in the preceding paragraphs of

this subsection, the person shall pay to the association the portion of the recovery attributable to

the policies or contracts, or portions thereof, covered by the association.

     (l) In addition to the rights and powers provided in this chapter, the association may:

     (1) Enter into any contracts as are necessary or proper to carry out the provisions and

purposes of this chapter;

     (2) Sue or be sued, including taking any legal actions necessary or proper to recover any

unpaid assessments under § 27-34.3-9 and to settle claims or potential claims against it;

     (3) Borrow money to effect the purposes of this chapter; any notes or other evidence of

indebtedness of the association not in default shall be legal investments for domestic member

insurers and may be carried as admitted assets;

     (4) Employ or retain persons as are necessary or appropriate to handle the financial

transactions of the association, and to perform any other functions as become necessary or proper

under this chapter;

     (5) Take such legal action that may be necessary or appropriate to avoid or recover payment

of improper claims;

     (6) Exercise, for the purposes of this chapter and to the extent approved by the

commissioner, the powers of a domestic life or insurer, health insurer, or health maintenance

organization, but in no case may the association issue insurance policies or annuity contracts other

than those issued to perform its obligations under this chapter;

     (7) Organize itself as a corporation or another legal form permitted by the laws of this state;

     (8) Request information from a person seeking coverage from the association in order to

aid the association in determining its obligations under this chapter with respect to the person, and

the person shall promptly comply with the request; and

     (9) Unless prohibited by law, in accordance with the terms and conditions of the policy or

contract, file for actuarially justified rate or premium increases for any policy or contract for which

LC002082 - Page 25 of 61

it provides coverage under this chapter; and

     (9)(10) Take other necessary or appropriate action to discharge its duties and obligations

under this chapter or to exercise its powers under this chapter.

     (m) The association may join an organization of one or more other state associations of

similar purposes, to further the purposes and administer the powers and duties of the association.

     (n)(1)(a) At any time within one hundred eighty (180) days of the date of the order of

liquidation, the association may elect to succeed to the rights and obligations of the ceding member

insurer that relate to policies, contracts or annuities covered, in whole or in part, by the association,

in each case under any one or more reinsurance contracts entered into by the insolvent insurer and

its reinsurers and selected by the association. Any such assumption shall be effective as of the date

of the order of liquidation. The election shall be effected by the association or the national

organization of life and health insurance guaranty associations (NOLHGA) on its behalf sending

written notice, return receipt requested to the affected reinsurers.

     (b) To facilitate the earliest practicable decision about whether to assume any of the

contracts of reinsurance, and in order to protect the financial position of the estate, the receiver and

each reinsurer of the ceding member insurer shall make available upon request to the association

or to NOLHGA on its behalf as soon as possible after commencement of formal delinquency

proceedings: (i) Copies of in-force contracts of reinsurance and all related files and records relevant

to the determination of whether such contracts should be assumed, and (ii) Notices of any defaults

under the reinsurance contracts or any known event or condition which with the passage of time

could become a default under the reinsurance contracts.

     (c) The following subparagraphs (i) through (iv) shall apply to reinsurance contracts so

assumed by the association.

     (i) The association shall be responsible for all unpaid premiums due under the reinsurance

contracts for periods both before and after the date of the order of liquidation, and shall be

responsible for the performance of all other obligations to be performed after the date of the order

of liquidation, in each case which relate to policies, contracts and annuities covered, in whole or in

part, by the association. The association may charge policies, contracts and annuities covered in

part by the association, through reasonable allocation methods, the costs for reinsurance in excess

of the obligations of the association and shall provide notice and an accounting of these charges to

the liquidator;

     (ii) The association shall be entitled to any amounts payable by the reinsurer under the

reinsurance contracts with respect to losses or events that occur in periods after the date of the order

of liquidation and that relate to policies or annuities covered in whole or in part, by the association

LC002082 - Page 26 of 61

provided, that, upon receipt of any such amounts, the association shall be obliged to pay to the

beneficiary under the policy, contract or annuity on account of which the amounts were paid a

portion of the amount equal to the lesser of:

     (A) The amount received by the association; or

     (B) The excess of the amount received by the association; over the amount equal to the

benefits paid by the association on account of the policy, contract or annuity less the retention of

the insurer applicable to the loss or event;

     (iii) Within thirty (30) days following the association's election (the "election date”), the

association and each reinsurer under contracts assumed by the association shall calculate the net

balance due to or from the association under each such reinsurance contract as of the election date

with respect to policies, contracts or annuities covered, in whole or in part, by the association which

calculation shall give, full credit to all items paid by either the member insurer or its receiver or the

reinsurer prior to the election date. The reinsurer shall pay the receiver any amounts due for losses

or events prior to the date of the order of liquidation, subject to any set-off for premiums unpaid

for periods prior to the date, and the association or reinsurer shall pay any remaining premiums in

each case within five (5) days of the completion of the aforementioned calculation. Any disputes

over the amounts due to either the association or the reinsurer shall be resolved by arbitration

pursuant to the terms of the affected reinsurance contracts or, if the contract contains no arbitration

clause, as otherwise provided by law. If the receiver has received any amounts due the association

pursuant to paragraph (ii), the receiver, shall remit the same to the association as promptly as

practicable.

     (iv) If the association or receiver, on the association's behalf, within sixty (60) days of the

election date, pays the unpaid premiums due for periods both before and after the election date, that

relate to policies, contracts or annuities covered in whole or in part by the association the reinsurer

shall not be entitled to terminate the reinsurance contracts for failure to pay premium insofar as the

reinsurance contracts relate to policies, contracts or annuities covered in whole or in part by the

association and shall not be entitled to set off any unpaid amounts due under other contracts, or

unpaid amounts due from parties other than the association against amounts due to the association.

     (2) During the period from the date of the order of liquidation until the election date (or, if

the election date does not occur, until one hundred eighty (180) days after the date of the order of

liquidation).

     (a)(i) Neither the association nor the reinsurer shall have any rights or obligations under

reinsurance contracts that the association has the right to assume under subdivision (n)(1), whether

for periods prior to or after the date of the order of liquation; and

LC002082 - Page 27 of 61

     (ii) The reinsurer, the receiver and the association shall, to the extent practicable, provide

each other data and records reasonably requested;

     (b) Provided that once the association has elected to assume a reinsurance contract, the

parties' rights and obligations shall be governed by subdivision (n)(1).

     (3) If the association does not elect to assume a reinsurance contract by the election date

pursuant to subdivision (n)(1), the association shall have no rights or obligations, in each case for

periods both before and after the date of the order of liquidation, with respect to the reinsurance

contract.

     (4) When policies, contracts or annuities, or covered obligations with respect thereto, are

transferred to an assuming insurer, reinsurance on the policies, contracts or annuities may also be

transferred by the association, in the case of contracts assumed under subdivision (n)(1), subject to

the following:

     (a) Unless the reinsurer and the assuming insurer agree otherwise, the reinsurance contract

transferred shall not cover any new policies of insurance, contracts or annuities in addition to those

transferred;

     (b) The obligations described in paragraph (n)(1) of this section shall not apply with respect

to matters arising after the effective date of the transfer;

     (c) Notice shall be given in writing, return receipt requested, by the transferring party to

the affected reinsurer not less than thirty (30) days prior to the effective date of the transfer.

     (5) The provisions of subsection (n) shall supersede the provisions of any state law or of

any affected reinsurance contract that provides for or requires any payment of reinsurance proceeds,

on account of losses or events that occur in periods after the date of the order of liquidation to the

receiver, of the insolvent insurer or any other person. The receiver, shall remain entitled to any

amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events

that occur in periods prior to the date of the order of liquidation subject to applicable setoff

provisions.

     (6) Except as otherwise provided in this section, nothing in this section (n):

     Shall alter or modify the terms and conditions of any reinsurance contract.

     Nothing in this section shall abrogate or limit any rights of any reinsurer to claim that it is

entitled to rescind a reinsurance contract.

     Nothing in this section shall give a policy holder, contract owner, enrollee, certificate

holder or beneficiary an independent cause of action against an indemnity reinsurer that is not

otherwise set forth in the reinsurance contract. Nothing in this section shall limit or affect the

association's rights as a creditor of the estate against the assets of the estate. Nothing in this section

LC002082 - Page 28 of 61

shall apply to reinsurance agreements covering property or casualty risks.

     (o) The board of directors of the association shall have discretion and shall exercise

reasonable business judgment to determine the means by which the association is to provide the

benefits of this chapter in an economical and efficient manner.

     (p) Where the association has arranged or offered to provide the benefits of this chapter to

a covered person under a plan or arrangement that fulfills the association's obligations under this

chapter, the person shall not be entitled to benefits from the association in addition to or other than

those provided under the plan or arrangement.

     (q) Venue in a suit against the association arising under this chapter shall be in Providence

county. The association shall not be required to give an appeal bond in an appeal that relates to a

cause of action arising under this chapter.

     (q)(r) In carrying out its duties in connection with guaranteeing, assuming, reissuing or

reinsuring policies or contracts under subsection (a) or (b) of this section, the association may,

subject to approval of the receivership court, issue substitute coverage for a policy or contract that

provides an interest rate, crediting rate or similar factor determined by use of an index or other

external reference stated in the policy or contract employed in calculating returns or changes in

value by issuing an alternative policy or contract in accordance with the following provisions:

     (r) Venue in a suit against the association arising under this chapter shall be in Providence

County. The association shall not be required to give an appeal bond in an appeal that relates to a

cause of action arising under this chapter.

     (1) In lieu of the index or other external reference provided for in the original policy or

contract, the alternative policy or contract provides for:

     (i) A fixed interest rate; or

     (ii) Payment of dividends with minimum guarantees; or

     (iii) A different method of calculating interest or changes in value.

     (2) There is no requirement for evidence of insurability, waiting period or other exclusion

that would not have applied under the replaced policy or contract; and

     (3) The alternative policy or contract is substantially similar to the replaced policy or

contract in all other material terms.

     27-34.3-9. Assessments.

     (a) For the purpose of providing the funds necessary to carry out the powers and duties of

the association, the board of directors shall assess the member insurers, separately for each account,

at such time and for such amounts as the board finds necessary. Assessments shall be due not less

than thirty (30) days after prior written notice to the member insurers and shall accrue interest at

LC002082 - Page 29 of 61

nine percent (9%) per annum on and after the due date.

     (b) There shall be two (2) classes of assessments, as follows:

     (1) Class A assessments shall be authorized and called for the purpose of meeting

administrative and legal costs and other expenses. Class A assessments may be authorized and

called whether or not related to a particular impaired or insolvent insurer.

     (2) Class B assessments shall be authorized and called to the extent necessary to carry out

the powers and duties of the association under § 27-34.3-8 with regard to an impaired or an

insolvent insurer.

     (c)(1) The amount of any Class A assessment shall be determined by the board and may be

authorized and called on a pro rata or non-pro rata basis. If pro rata, the board may provide that it

be credited against future Class B assessments. The total of all non-pro rata assessment shall not

exceed three hundred dollars ($300) per member insurer in any one calendar year. The amount of

any Class B assessment shall be allocated for assessment purposes among the accounts pursuant to

an allocation formula that may be based on the premiums or reserves of the impaired or insolvent

insurer or any other standard deemed by the board in its sole discretion as being fair and reasonable

under the circumstances.

     (2) The amount of a Class B assessment, except for assessments related to long-term care

insurance, shall be allocated for assessment purposes between the accounts and among the

subaccounts of the life insurance and annuity account, pursuant to an allocation formula which may

be based on the premiums or reserves of the impaired or insolvent insurer, or any other standard

deemed by the board in its sole discretion as being fair and reasonable under the circumstances.

     (3) The amount of the Class B assessment for long-term care insurance written by the

impaired or insolvent insurer shall be allocated according to a methodology included in the plan of

operation and approved by the commissioner. The methodology shall provide for fifty percent

(50%) of the assessment to be allocated to accident and health member insurers and fifty percent

(50%) to be allocated to life and annuity member insurers.

     (2)(4) Class B assessments against member insurers for each account and subaccount shall

be in the proportion that the premiums received on business in this state by each assessed member

insurer or policies or contracts covered by each account for the three (3) most recent calendar years

for which information is available preceding the year in which the insurer became insolvent, (or, in

the case of an assessment with respect to an impaired member insurer, the three (3) most recent

calendar years for which information is available preceding the year in which the member insurer

became impaired) bears to premiums received on business in this state for such calendar years by

all assessed member insurers.

LC002082 - Page 30 of 61

     (3)(5) Assessments for funds to meet the requirements of the Association with respect to

an impaired or insolvent insurer shall not be authorized or called until necessary to implement the

purposes of this chapter. Classification of assessments under subsection (b) of this section and

computation of assessments under this subsection shall be made with a reasonable degree of

accuracy, recognizing that exact determinations may not always be possible. The association shall

notify each member insurer of its anticipated pro rata share of an authorized assessment not yet

called within one hundred eighty (180) days after the assessment is authorized.

     (d) The association may abate or defer, in whole or in part, the assessment of a member

insurer if, in the opinion of the board, payment of the assessment would endanger the ability of the

member insurer to fulfill its contractual obligations. In the event an assessment against a member

insurer is abated, or deferred in whole or in part, the amount by which the assessment is abated or

deferred may be assessed against the other member insurers in a manner consistent with the basis

for assessments set forth in this section. Once the conditions which have caused a deferral have

been removed or rectified, the member insurer shall pay all assessments that were deferred pursuant

to a repayment plan approved by the association.

     (e)(1)(i) Subject to the provisions of subparagraph (ii) of this paragraph, the total of all

assessments authorized by the association with respect to a member insurer for each subaccount of

the life insurance and annuity account and for the health account shall not in any one calendar year

exceed three percent (3%) of that member insurer's average annual premiums received in this state

on the policies and contracts covered by the subaccount or account during the three (3) calendar

years preceding the year in which the member insurer became an impaired or insolvent insurer.

     (ii) If two (2) or more assessments are authorized in one calendar year with respect to

member insurers that become impaired or insolvent in different calendar years, the average annual

premiums for purposes of the aggregate assessment percentage limitation referenced in

subparagraph (i) of this paragraph shall be equal and limited to the higher of the three (3) year

average annual premiums for the applicable subaccount or account as calculated pursuant to this

section.

     (iii) If the maximum assessment, together with the other assets of the association in any

account, does not provide in any one year in either account an amount sufficient to carry out the

responsibilities of the association, the necessary additional funds shall be assessed as soon after this

as permitted by this chapter.

     (2) The board may provide in the plan of operation a method of allocating funds among

claims, whether relating to one or more impaired or insolvent insurers, when the maximum

assessment will be insufficient to cover anticipated claims.

LC002082 - Page 31 of 61

     (3) If the maximum assessment for a subaccount of the life and annuity account in any one

year does not provide an amount sufficient to carry out the responsibilities of the association, then

pursuant to subdivision (c)(2) of this section, the board shall assess the other subaccounts of the

life and annuity account for the necessary additional amount, subject to the maximum stated in

subdivision (1) of this subsection.

     (f) The board may, by an equitable method as established in the plan of operation, refund

to member insurers, in proportion to the contribution of each member insurer to that account, the

amount by which the assets of the account exceed the amount the board finds is necessary to carry

out during the coming year the obligations of the association with regard to that account, including

assets accruing from assignment, subrogation, net realized gains and income from investments. A

reasonable amount may be retained in any account to provide funds for the continuing expenses of

the association and for future claims.

     (g) It shall be proper for any member insurer, in determining its premium rates and policy

owner dividends as to any kind of insurance or health maintenance organization business within

the scope of this chapter, to consider the amount reasonably necessary to meet its assessment

obligations under this chapter.

     (h) The association shall issue to each member insurer paying an assessment under this

chapter, other than Class A assessment, a certificate of contribution, in a form prescribed by the

commissioner, for the amount of the assessment so paid. All outstanding certificates shall be of

equal dignity and priority without reference to amounts or dates of issue. A certificate of

contribution may be shown by the member insurer in its financial statement as an asset in such form

and for such amount, if any, and period of time as the commissioner may approve.

     (i)(1) A member insurer that wishes to protest all or part of an assessment shall pay when

due the full amount of the assessment as set forth in the notice provided by the association. The

payment shall be available to meet association obligations during the pendency of the protest or

any subsequent appeal. Payment shall be accompanied by a statement in writing that the payment

is made under protest and setting forth a brief statement of the grounds for the protest.

     (2) Within sixty (60) days following the payment of an assessment under protest by a

member insurer, the association shall notify the member insurer in writing of its determination with

respect to the protest unless the association notifies the member insurer that additional time is

required to resolve the issues raised by the protest.

     (3) Within thirty (30) days after a final decision has been made, the association shall notify

the protesting member insurer in writing of that final decision. Within sixty (60) days of receipt of

notice of the final decision, the protesting member insurer may appeal that final action to the

LC002082 - Page 32 of 61

commissioner.

     (4) In the alternative to rendering a final decision with respect to a protest based on a

question regarding the assessment base, the association may refer the protest to the commissioner

for a final decision, with or without a recommendation from the association.

     (5) If the protest or appeal on the assessment is upheld, the amount paid in error or excess

shall be returned to the member company insurer. Interest on a refund due a protesting member

insurer shall be paid at the rate actually earned by the association.

     (j) The association may request information of member insurers in order to aid in the

exercise of its power under this section and member insurers shall promptly comply with a request.

     27-34.3-11. Duties and powers of the commissioner.

     In addition to the duties and powers enumerated in this chapter,

     (a) The commissioner shall:

     (1) Upon request of the board of directors, provide the association with a statement of the

premiums in this and any other appropriate states for each member insurer;

     (2) When an impairment is declared and the amount of the impairment is determined, serve

a demand upon the impaired insurer to make good the impairment within a reasonable time; notice

to the impaired insurer shall constitute notice to its shareholders, if any; the failure of the impaired

insurer to promptly comply with a demand shall not excuse the association from the performance

of its powers and duties under this chapter.

     (3) [Deleted by P.L. 2009, ch. 158, § 1 and by P.L. 2009, ch. 169, § 1].

     (4) Maintain the confidentiality and privileged status of confidential association

information provided to the commissioner or department of business regulation.

     (b) The commissioner may suspend or revoke, after notice and hearing, the certificate of

authority to transact insurance business in this state of any member insurer which fails to pay an

assessment when due or fails to comply with the plan of operation. As an alternative the

commissioner may levy a forfeiture on any member insurer which fails to pay an assessment when

due. The forfeiture shall not exceed five percent (5%) of the unpaid assessment per month, but no

forfeiture shall be less than one hundred dollars ($100) per month.

     (c) A final action of the board of directors or the association may be appealed to the

commissioner by any member insurer if the appeal is taken within sixty (60) days of its receipt of

notice of the final action being appealed. A final action or order of the commissioner shall be subject

to judicial review.

     (d) The liquidator, rehabilitator, or conservator of any impaired or insolvent insurer may

notify all interested persons of the effect of this chapter.

LC002082 - Page 33 of 61

     (e) The commissioner shall not participate in the association's adjudication of a protest by

an insurer pursuant to § 27-34.3-9(i).

     27-34.3-12. Prevention of insolvencies.

     To aid in the detection and prevention of member insurer insolvencies or impairments:

     (a) It shall be the duty of the commissioner:

     (1) To notify the commissioners of all the other states, territories of the United States and

the District of Columbia within thirty (30) days following the action taken or the date the action

occurs, when the commissioner takes any of the following actions against a member insurer:

     (i) Revocation of license;

     (ii) Suspension of license; or

     (iii) Makes a formal order that the company member insurer restrict its premium writing,

obtain additional contributions to surplus, withdraw from the state, reinsure all or any part of its

business, or increase capital, surplus, or any other account for the security of policy owners,

contract owners, certificate holders or creditors.

     (2) To report to the board of directors when the commissioner has taken any of the actions

set forth in paragraph (1) of this subdivision or has received a report from any other commissioner

indicating that this action has been taken in another state. The report to the board of directors shall

contain all significant details of the action taken or the report received from another commissioner.

     (3) To report to the board of directors when the commissioner has reasonable cause to

believe from any examination, whether completed or in process, of any member company insurer

that the company insurer may be an impaired or insolvent insurer.

     (4) To furnish to the board of directors the NAIC insurance regulatory information system

(IRIS) ratios and listings of companies not included in the ratios developed by the national

association of insurance commissioners, and the board may use the information contained in the

ratios and listings in carrying out its duties and responsibilities under this section. The report and

the information contained in it shall be kept confidential by the board of directors until the time it

is made public by the commissioner or other lawful authority.

     (b) The commissioner may seek the advice and recommendations of the board of directors

concerning any matter affecting the duties and responsibilities of the commissioner regarding the

financial condition of member insurers and companies insurers or health maintenance organizations

seeking admission to transact insurance business in this state.

     (c) The board of directors may, upon majority vote, make reports and recommendations to

the commissioner upon any matter germane to the solvency, liquidation, rehabilitation or

conservation of any member insurer or germane to the solvency of any company insurer or health

LC002082 - Page 34 of 61

maintenance organization seeking to do an insurance business in this state. The reports and

recommendations shall not be considered public documents.

     (d) The board of directors may, upon majority vote, notify the commissioner of any

information indicating a member insurer may be an impaired or insolvent insurer.

     (e) The board of directors may, upon majority vote, make recommendations to the

commissioner for the detection and prevention of member insurer insolvencies.

     27-34.3-13. Credits for assessments paid (tax offsets).

     (a) A member insurer may offset against its premium, franchise or income tax liability (or

liabilities) to this state an assessment described in § 27-34.3-9(h) to the extent of ten percent (10%)

of the amount of the assessment for each of the five (5) calendar years following the year in which

the assessment was paid. In the event a member insurer should cease doing business, all uncredited

assessments may be credited against its premium, franchise, or income tax liability (or liabilities)

for the year it ceases doing business.

     (b) Any sums which are acquired by refund, pursuant to § 27-34.3-9(f), from the

association by member insurers, and which have been offset against premium, franchise or income

taxes as provided in subsection (a) of this section, shall be paid by the member insurers to this state

in any manner that the tax authorities may require. The association shall notify the commissioner

that refunds have been made.

     27-34.3-14. Miscellaneous provisions.

     (a) This chapter shall not be construed to reduce the liability for unpaid assessments of the

insureds of an impaired or insolvent insurer operating under a plan with assessment liability.

     (b) Records shall be kept of all meetings of the board of directors to discuss the activities

of the association in carrying out its powers and duties under § 27-34.3-8. The records of the

association with respect to an impaired or insolvent insurer shall not be disclosed prior to the

termination of a liquidation, rehabilitation or conservation proceeding involving the impaired or

insolvent insurer, upon the termination of the impairment or insolvency of the insurer, or upon the

order of a court of competent jurisdiction. Nothing in this subsection shall limit the duty of the

association to render a report of its activities under § 27-34.3-15.

     (c) For the purpose of carrying out its obligations under this chapter, the association shall

be deemed to be a creditor of the impaired or insolvent insurer to the extent of assets attributable

to covered policies reduced by any amounts to which the association is entitled as subrogee

pursuant to § 27-34.3-8(k). Assets of the impaired or insolvent insurer attributable to covered

policies shall be used to continue all covered policies and pay all contractual obligations of the

impaired or insolvent insurer as required by this chapter. Assets attributable to covered policies or

LC002082 - Page 35 of 61

contracts, as used in this subsection, are that proportion of the assets which the reserves that should

have been established for covered policies or contracts bear to the reserves that should have been

established for all policies of insurance or health benefit plans written by the impaired or insolvent

insurer.

     (d) As a creditor of the impaired or insolvent insurer as established in subsection (c) of this

section and consistent with § 27-14.3-38, the association and other similar associations shall be

entitled to receive a disbursement of assets out of the marshalled assets, from time to time as the

assets become available to reimburse it, as a credit against contractual obligations under this

chapter. If the liquidator has not, within one hundred twenty (120) days of a final determination of

insolvency of an a member insurer by the receivership court, made an application to the court for

the approval of a proposal to disperse assets out of marshalled assets to guaranty associations

having obligations because of the insolvency, then the association shall be entitled to make

application to the receivership court for approval of its own proposal to disburse these assets.

     (e)(1) Prior to the termination of any liquidation, rehabilitation or conservation proceeding,

the court may take into consideration the contributions of the respective parties, including the

association, the shareholders, contract owners, certificate holders, enrollees and policy owners of

the insolvent insurer, and any other party with a bona fide interest, in making an equitable

distribution of the ownership rights of the insolvent insurer. In that determination, consideration

shall be given to the welfare of the policy owners, contract owners, certificate holders, enrollees of

the continuing or successor member insurer.

     (2) No distribution to stockholders, if any, of an impaired or insolvent insurer shall be made

until and unless the total amount of valid claims of the association with interest on the claims for

funds expended in carrying out its powers and duties under § 27-34.3-8 with respect to the member

insurer have been fully recovered by the association.

     (f)(1) If an order for liquidation or rehabilitation of an a member insurer domiciled in this

state has been entered, the receiver appointed under the order shall have a right to recover on behalf

of the member insurer, from any affiliate that controlled it, the amount of distributions, other than

stock dividends paid by the member insurer on its capital stock, made at any time during the five

(5) years preceding the petition for liquidation or rehabilitation subject to the limitations of

subdivisions (2) — (4) of this subsection.

     (2) No distribution shall be recoverable if the member insurer shows that when paid the

distribution was lawful and reasonable, and that the member insurer did not know and could not

reasonably have known that the distribution might adversely affect the ability of the member insurer

to fulfill its contractual obligations.

LC002082 - Page 36 of 61

     (3) Any person who was an affiliate that controlled the member insurer at the time the

distributions were paid shall be liable up to the amount of distributions received. Any person who

was an affiliate who controlled the member insurer at the time the distributions were declared, shall

be liable up to the amount of distributions which would have been received if they had been paid

immediately. If two (2) or more persons are liable with respect to the same distributions, they shall

be jointly and severally liable.

     (4) The maximum amount recoverable under this subsection shall be the amount needed in

excess of all other available assets of the insolvent insurer to pay the contractual obligations of the

insolvent insurer.

     (5) If any person liable under subdivision (3) of this subsection is insolvent, all its affiliates

that controlled it at the time the distribution was paid, shall be jointly and severally liable for any

resulting deficiency in the amount recovered from the insolvent affiliate.

     27-34.3-19. Prohibited advertisement of insurance guaranty association act in

insurance sales — Notice to policy owners.

     (a) No person, including an a member insurer, agent, producer, or affiliate of an insurer

shall make, publish, disseminate, circulate or place before the public, or cause directly or indirectly,

to be made, published, disseminated, circulated or placed before the public, in any newspaper,

magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or in

the form of e-mail or an electronic website, or over any radio station or television station, or in any

other way, any advertisement, announcement or statement, written or oral, which uses the existence

of the insurance guaranty association of this state for the purpose of sales, solicitation or

inducement to purchase any form of insurance or other coverage covered by the Rhode Island life

and health insurance guaranty association act; provided, that this section shall not apply to the

association or any other entity which does not sell or solicit insurance or other coverage by a health

maintenance organization. The use of the protection afforded by this chapter, other than as provided

by this section, by any person in the sale, marketing or advertising of insurance constitutes unfair

methods of competition and unfair or deceptive acts or practices under chapter 29 of this title and

is subject to the sanctions imposed in that chapter.

     (b) The association shall prepare a summary document describing the general purposes and

current limitations of this chapter in compliance with subsection (c) of this section. This document

shall be submitted to the commissioner for approval. At the expiration of the sixty (60) days after

the date on which the commissioner approves the document, an a member insurer may not deliver

a policy or contract to a policy owner, or contract owner, certificate holder or enrollee unless the

summary document is delivered to the policy owner, or contract owner, certificate holder or

LC002082 - Page 37 of 61

enrollee at the time of delivery of the policy or contract. The document shall also be available upon

request by a policy owner, contract owner, certificate holder or enrollee. The distribution, delivery

or contents or interpretation of this document does not guarantee that either the policy or the policy

owner, contract owner, certificate holder or enrollee contract or the owner of the policy or contract

policy owner, contract owner, certificate holder or enrollee is covered in the event of the

impairment or insolvency of a member insurer. The summary document shall be revised by the

association as amendments to this chapter may require. Failure to receive this document does not

give the policy owner, contract owner, certificate holder, enrollee or insured any greater rights than

those stated in this act.

     (c) The summary document prepared under subsection (b) of this section shall contain a

clear and conspicuous disclaimer on its face. The commissioner shall establish the form and content

of the disclaimer. The disclaimer shall:

     (1) State the name and address of the association and the insurance department;

     (2) Prominently warn the policy or contract owner, contract owner, certificate holder or

enrollee that the association may not cover the policy or, if coverage is available, it will be subject

to substantial limitations and exclusions and conditioned on continued residence in this state;

     (3) State the types of policies or contracts for which guaranty funds will provide coverage;

     (4) State that the member insurer and its agents are prohibited by law from using the

existence of the association for the purpose of sales, solicitation or inducement to purchase any

form of insurance or health maintenance organization coverage;

     (5) State that the policy or contract owner policy owner, contract owner, certificate holder

or enrollee should not rely on coverage under the association when selecting an insurer or health

maintenance organization;

     (6) Explain rights available and procedures for filing a complaint to allege a violation of

any provisions of this chapter; and

     (7) Provide other information as directed by the commissioner including, but not limited

to, sources for information about the financial condition of insurers provided that the information

is not proprietary and is subject to disclosure under chapter 2 of title 38.

     (d) A member insurer shall retain evidence of compliance with subsection (b) for so long

as the policy or contract for which the notice is given remains in effect.

     27-34.3-20. Prospective application.

     This chapter shall not apply to any member insurer that is insolvent or unable to fulfill its

contractual obligations prior to January 1, 1996, and any such insurer shall be subject to the

provisions under chapter 34.1 of this title. Nothing in this chapter shall be construed to require an

LC002082 - Page 38 of 61

insurer to recompute its assessment bases for any year prior to January 1, 2005, and any assessment

bases computed between January 1, 1966 and December 31, 2004 are hereby acknowledged and

recognized as factual on the basis of premium date collected from or reported by member insurers

with respect to those years.

     SECTION 5. Section 42-14-5 of the General Laws in Chapter 42-14 entitled "Department

of Business Regulation" is hereby amended to read as follows:

     42-14-5. Superintendents of banking and insurance.

     (a) The superintendents of banking and insurance shall administer the functions of the

department relating to the regulation and control of banking and insurance.

     (b) Wherever the words "banking administrator” or "banking commissioner” or "insurance

administrator” or "insurance commissioner” occur in this chapter or any general law, public law,

act, or resolution of the general assembly or department regulation, they shall be construed to mean

superintendent of banking and superintendent of insurance except as delineated in subsection (d)

below.

     (c) "Health insurance” shall mean "health insurance coverage,” as defined in §§ 27-18.5-2

and 27-18.6-2, "health benefit plan,” as defined in § 27-50-3 and a "medical supplement policy,”

as defined in § 27-18.2-1 or coverage similar to a Medicare supplement policy that is issued to an

employer to cover retirees, and dental coverage, including, but not limited to, coverage provided

by a nonprofit dental service plan as defined in § 27-20.1-1(3).

     (d) Whenever the words "commissioner,” "insurance commissioner,” "health insurance

commissioner” or "director” appear in Title 27 or Title 42, those words shall be construed to mean

the health insurance commissioner established pursuant to § 42-14.5-1 with respect to all matters

relating to health insurance. The health insurance commissioner shall have sole and exclusive

jurisdiction over enforcement of those statutes with respect to all matters relating to health

insurance except for purposes of producer licensing or producer appointments.

     (e) Whenever the word "director” appears or is a defined term in title 19, this word shall

be construed to mean the superintendent of banking established pursuant to this section.

     (f) Whenever the word "director” or "commissioner” appears or is a defined term in title

27, this word shall be construed to mean the superintendent of insurance established pursuant to

this section except as delineated in subsection (d) of this section.

     SECTION 6. Chapter 27-2.4 of the General Laws entitled "Producer Licensing Act" is

hereby amended by adding thereto the following section:

     27-2.4-14.1. Appointments.

     (a) An insurance producer shall not act as an agent of an insurer unless the insurance

LC002082 - Page 39 of 61

producer becomes an appointed agent of that insurer. An insurance producer who is not acting as

an agent of an insurer is not required to become appointed.

     (b) To appoint a producer as its agent, the appointing insurer shall file, in a format approved

by the insurance commissioner, a notice of appointment within fifteen (15) days from the date the

first insurance application is submitted. An insurer may also elect to appoint a producer to all or

some insurers within the insurer's holding company system or group by the filing of a single

appointment request.

     (c) An insurer shall pay an appointment fee, in the amount and method of payment set forth

in a regulation promulgated for that purpose, for each insurance producer appointed by the insurer.

     (d) An insurer shall remit, in a manner prescribed by the insurance commissioner, a renewal

appointment fee in the amount set forth in a regulation promulgated for that purpose.

     SECTION 7. Chapter 27-9 of the General Laws entitled "Casualty Insurance Rating" is

hereby amended by adding thereto the following section:

     27-9-57. Unfair discrimination.

     (a) No individual or entity subject to this chapter shall, because of race, color, creed,

national origin, or disability:

     (1) Make any distinction or discrimination between persons as to the premiums or rates

charged for insurance policies.

     (2) Demand or require a greater premium from any persons than it requires at that time

from others in similar cases.

     (3) Insert in the policy any condition, or make any stipulation, whereby the insured binds

themselves, or their heirs, executors, administrators, or assigns, to accept any sum or service less

than the full value or amount of such policy in case of a claim thereon except such conditions and

stipulations as are imposed upon others in similar cases; and any such stipulation or condition so

made or inserted shall be void.

     SECTION 8. Title 27 of the General Laws entitled "INSURANCE" is hereby amended by

adding thereto the following chapter:

CHAPTER 1.3

INSURANCE DATA SECURITY ACT

     27-1.3-1. Title.

     This chapter shall be known and may be cited as the "Insurance Data Security Act."

     27-1.3-2. Purpose and intent.

     (a) The purpose and intent of this chapter is to establish standards for data security and

standards for the investigation of, and notification to the commissioner of, a cybersecurity event

LC002082 - Page 40 of 61

applicable to licensees, as defined in § 27-1.3-3. Notwithstanding any other provision of law, this

chapter establishes the exclusive state standards applicable to licensees for data security, the

investigation of a cybersecurity event as defined in § 27-1.3-3, and notification to the

commissioner. These provisions do not affect a licensee's responsibility to notify consumers in

accordance with § 27-1.3-6(c).

     (b) This chapter may not be construed to create or imply a private cause of action for

violation of its provisions nor may it be construed to curtail a private cause of action which would

otherwise exist in the absence of this chapter.

     27-1.3-3. Definitions.

     As used in this chapter, the following terms shall have the following meanings:

     (1) "Authorized individual" means an individual known to and screened by the licensee

and determined to be necessary and appropriate to have access to the nonpublic information held

by the licensee and its information systems.

     (2) "Commissioner" shall have the meaning established in § 42-14-5.

     (3) "Consumer" means an individual, including, but not limited to, applicants,

policyholders, insureds, beneficiaries, claimants, and certificate holders who is a resident of this

state and whose nonpublic information is in a licensee's possession, custody or control.

     (4) "Cybersecurity event" means an event resulting in unauthorized access to, disruption

or misuse of, an information system or nonpublic information stored on such information system.

     (i) The term "cybersecurity event" does not include the unauthorized acquisition of

encrypted nonpublic information if the encryption, process or key is not also acquired, released or

used without authorization.

     (ii) The term "cybersecurity event" does not include an event with regard to which the

licensee has determined that the nonpublic information accessed by an unauthorized person has not

been used or released and has been returned or destroyed.

     (5) "Department" means the department of business regulation, division of insurance.

     (6) "Encrypted" means the transformation of data into a form which results in a low

probability of assigning meaning without the use of a protective process or key.

     (7) "Information security program" means the administrative, technical, and physical

safeguards that a licensee uses to access, collect, distribute, process, protect, store, use, transmit,

dispose of, or otherwise handle nonpublic information.

     (8) "Information system" means a discrete set of electronic information resources

organized for the collection, processing, maintenance, use, sharing, dissemination, or disposition

of electronic information, as well as any specialized system such as industrial/process controls

LC002082 - Page 41 of 61

systems, telephone switching and private branch exchange systems, and environmental control

systems.

     (9) "Licensee" means any person licensed, authorized to operate, or registered, or required

to be licensed, authorized, or registered pursuant to the insurance laws of this state, but shall not

include a purchasing group or a risk retention group chartered and licensed in a state other than this

state or a licensee that is acting as an assuming insurer that is domiciled in another state or

jurisdiction.

     (10) "Multi-factor authentication" means authentication through verification of at least two

(2) of the following types of authentication factors:

     (i) Knowledge factors, such as a password; or

     (ii) Possession factors, such as a token or text message on a mobile phone; or

     (iii) Inherence factors, such as a biometric characteristic.

     (11) "Nonpublic information" means information that is not publicly available information

and is:

     (i) Business related information of a licensee the tampering with which, or unauthorized

disclosure, access or use of which, would cause a material adverse impact to the business,

operations or security of the licensee;

     (ii) Any information concerning a consumer which because of name, number, personal

mark, or other identifier can be used to identify such consumer, in combination with any one or

more of the following data elements:

     (A) Social security number;

     (B) Driver's license number or non-driver identification card number;

     (C) Account number, credit or debit card number;

     (D) Any security code, access code or password that would permit access to a consumer's

financial account; or

     (E) Biometric records;

     (iii) Any information or data, except age or gender, in any form or medium created by or

derived from a health care provider or a consumer and that relates to:

     (A) The past, present or future physical, mental, behavioral health or medical condition of

any consumer or a member of the consumer's family;

     (B) The provision of health care to any consumer; or

     (C) Payment for the provision of health care to any consumer.

     (12) "Person" means any individual or any non-governmental entity, including, but not

limited to, any non-governmental partnership, corporation, limited liability company, branch,

LC002082 - Page 42 of 61

agency or association.

     (13) "Publicly available information" means any information that a licensee has a

reasonable basis to believe is lawfully made available to the general public from: federal, state or

local government records; widely distributed media; or disclosures to the general public that are

required to be made by federal, state or local law:

     (i) For the purposes of this definition, a licensee has a reasonable basis to believe that

information is lawfully made available to the general public if the licensee has taken steps to

determine:

     (A) That the information is of the type that is available to the general public; and

     (B) Whether a consumer can direct that the information not be made available to the general

public and the consumer has not done so.

     (14) "Risk assessment" means the procedure that each licensee is required to complete

under § 27-1.3-4(c).

     (15) "State" means the State of Rhode Island.

     (16) "Third-party service provider" means a person, not otherwise defined as a licensee,