Chapter
04-044
2004 -- S 2754
Enacted 06/09/04
A N A C T
RELATING TO INSURANCE -- RHODE
ISLAND LIFE AND HEALTH INSURANCE
GUARANTY ASSOCIATION ACT
Introduced By: Senator
David E. Bates
Date
Introduced: February 11, 2004
It is enacted by the General
Assembly as follows:
SECTION
1. Sections 27-34.3-3, 27-34.3-4, 27-34.3-5, 27-34.3-6, 27-34.3-7, 27-34.3-8,
27-34.3-9, 27-34.3-10, 27-34.3-11,
27-34.3-12, 27-34.3-14, 27-34.3-15, 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:
27-34.3-3.
Coverage and limitations. -- (a) This chapter shall provide coverage
for the
policies and contracts specified in
subsection (b) of this section:
(1)
To persons who, regardless of where they reside (except for non-resident
nonresident
certificate holders under group
policies or contracts), are the beneficiaries, assignees or payees of
the persons covered under subdivision
(2) of this subsection, subsection (2); and
(2)
To persons who are owners of or certificate holders under such the
policies or
contracts (other than
unallocated annuity contracts, and structured settlement annuities);
or, in the
case of unallocated annuity
contracts, to the persons who are the contract holders, and in each
case who:
(i)
Are residents of this state,; or
(ii)
Are not residents, but only under all of the following conditions:
(A)
The insurers which insurer that issued the policies or contracts are
is domiciled in
this state;
(B) The
insurers never held a license or certificate of authority in the states in
which the
persons reside;
(C)
The states in which the persons reside have associations similar to the
association
created by this chapter; and
(D)
(C) Those The persons are not eligible for coverage by these
associations an
association in any other state
due to the fact that the insurer 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
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.
(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, 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 direct, non-group
life, health, or annuity policies or contracts 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 agreements, lottery contracts
annuities, annuities issued to
or in connection with government lotteries and any immediate or
deferred annuity contracts.
(2)
This chapter shall not provide coverage for:
(i) Any
A portion of a policy or contract not guaranteed by the insurer, or
under which
the risk is borne by the policy or
contract holder owner;
(ii)
Any A policy or contract of reinsurance, unless assumption
certificates have been
issued pursuant to the reinsurance
policy or contract;
(iii) Any 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 association
becomes obligated with respect
to the policy or contract member
insurer becomes an impaired or
insolvent insurer under this
chapter, whichever is earlier,
exceeds a 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 association
became obligated member insurer becomes an impaired
or insolvent insurer under this
chapter, whichever is earlier; and
(B)
On and after the date on which the association becomes obligated with
respect to the
policy or contract 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)
Any A portion of a policy or contract issued to a plan or program
of an employer,
association or similar entity
other person to provide life, health or annuity benefits to its
employees or, 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 similar
entity other person under:
(A)
A multiple employer welfare arrangement as defined in 29 U.S.C. section 1144;
(B)
A minimum premium group insurance plan;
(C)
A stop-loss group insurance plan; or
(D)
An administrative services only contract;
(v) Any
A portion of a policy or contract to the extent that it provides dividends
or
experience rating credits, or
provides that any fees or allowances be paid to any person, including
the policy or contract holder,
in connection with the service to or administration of the policy or
contract; 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)
Any 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) Any An unallocated annuity contract issued to an
employee benefit plan protected
under the federal pension
benefit guaranty corporation 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;
(viii) Any A portion of any unallocated annuity contract which
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)
Any A portion of a policy or contract to the extent that the
assessments required by
section 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 insurer
to the 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
insurer
without meeting applicable
policy form filing or approval requirements;
(C)
Misrepresentations of or regarding policy 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
section 27-34.3-3(b)(2)(xii),
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; and
(x)
(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 the
Protected Cell Companies Act,
chapter 64 of this title, as those terms are defined in that Act
chapter 64 of title 27.
(c)
The benefits for which that the association may become liable
obligated to cover
shall in no event exceed the lesser
of:
(1)
The contractual obligations for which the 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) One
hundred thousand dollars ($100,000) in health insurance benefits, including any
net cash surrender and net cash
withdrawal values; In health
insurance benefits:
(I)
One hundred thousand dollars ($100,000) for coverages not considered as
disability
insurance or basic hospital,
medical and surgical insurance or major medical insurance, including
any net cash surrender and net cash
withdrawal values;
(II)
Three hundred thousand dollars ($300,000) for disability insurance;
(III)
Five hundred thousand dollars ($500,000) for basic hospital, medical and
surgical
insurance; or
(C)
One hundred thousand dollars ($100,000) 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 Section 401,
403(b) or 457 of the U.S. Internal Revenue Code, 26 U.S.C.
section 401, 403(b) or 457, covered
by an unallocated annuity contract or the beneficiaries of
each such individual if deceased,
in the aggregate, one hundred thousand dollars ($100,000) in
present value annuity benefits,
including net cash surrender and net cash withdrawal values;
(iii) With respect to each payee covered by an annuity contract issued by an
insurer to
provide benefits pursuant to of a structured settlement agreement annuity
or beneficiary or
beneficiaries, or beneficiary of each the
payee if deceased, one hundred thousand dollars
($100,000) in present value annuity
benefits, in the aggregate, including net cash surrender and
net cash withdrawal values if
any;
(iv)
Provided, that However in no event shall the Association association
be liable to
expend obligated to cover more than: (A) an
aggregate of three hundred thousand dollars
($300,000) in the aggregate benefits
with respect to any one individual life under this paragraph
and paragraphs (i) and,
(ii) and (iii) of this subdivision except with respect to benefits
for basic
hospital, medical and surgical
insurance and major medical insurance 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 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;
(iv)
(v) With respect to any either: (A) one contract owner
provided coverage under
subsection (a)(3)(i); or (B) one contract plan sponsor whose plans own
directly or in trust any one
or more holder covered by any unallocated annuity contract
contracts not included in paragraph
(ii) of this subdivision, five
million dollars ($5,000,000) in benefits, irrespective of the number of
such contracts held by that contract holder. 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.
(d)
In performing its obligations to provide coverage under section 27-34.3-8, the
association shall not be
required to guarantee, assume, reinsure or perform, or cause to be
guaranteed, assumed, reinsured
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.
27-34.3-4.
Construction. -- This chapter shall be liberally construed to
effect the purpose
under section 27-34.3-2 which
shall constitute an aid and guide to interpretation.
27-34.3-5.
Definitions. -- As used in this chapter:
(1)
"Account" means either of the two accounts created under section
27-34.3-6.
(2)
"Association" means the Rhode Island life and health insurance
guaranty association
created under section 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.
(3)
(6) "Commissioner" means the commissioner of insurance within
the department of
business regulation of this state.
(4)
(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 section
27-34.3-3.
(5)
(8) "Covered policy" means any policy or contract within the
scope of this chapter or
portion of a policy or contract
for which coverage is provided under
section 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.
(6)
(10) "Impaired insurer" means a member insurer which is not an
insolvent insurer,
and:
(i) Is
deemed by the commissioner to be potentially unable to fulfill its contractual
obligations; or
(ii)
Is is placed under an order of rehabilitation or conservation by
a court of competent
jurisdiction.
(7)
(11) "Insolvent insurer" means a member insurer which after the
effective date of this
chapter January 1, 1996, is placed under an order of
liquidation by a court of competent
jurisdiction with a finding of
insolvency.
(8)
(12) "Member insurer" means any insurer licensed or which
holds a certificate of
authority to transact in this state
any kind of insurance for which coverage is provided under
section 27-34.3-3, and includes any
insurer 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 non-profit 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 any entity 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
(vii)
(viii) Any An entity similar to any of the above.
(9)
(13) "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)
"Owner" of a policy or contract and "policy owner" and
"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 recorded as the owner on the
books of the insurer. The terms
owner, contract owner and policy owner do not include persons
with a mere beneficial interest
in a policy or contract.
(10)
(15) "Person" means any individual, corporation, limited
liability company,
partnership, association,
governmental body or entity or voluntary organization.
(16)
"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.
(11)
(17) "Premiums" means amounts or considerations (by
whatever name called)
received on covered policies or
contracts less returned premiums, considerations and deposits
returned on the policies or
contracts, and less dividends and
experience credits. on them.
"Premiums" does not
include any amounts or consideration received for any policies or
contracts
or for the portions of any
policies or contracts for which coverage is not provided under section
27-34.3-3(b) except that assessable
premium shall not be reduced on account of section 27-34.3-
3(b)(2)(iii) relating to interest
limitations and section 27-34.3-3(c)(2) relating to limitations with
respect to any one
individual, any one participant and any one contract owner
holder;. provided
that "premiums" "Premiums" shall not include:
(i)
any premiums Premiums in excess of five million dollars
($5,000,000) on any an
unallocated annuity contract not
issued under a governmental retirement benefit plan (or its
trustee) established under section 401, 403(b) or 457 of the
United States Internal Revenue Code,
26 U.S.C. section 401, 403(b) or
457.
(ii)
With respect to multiple nongroup policies of life insurance owned by one
owner,
whether the policy 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)(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 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)(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)
"Receivership court" means the court in the insolvent or impaired
insurer's state
having jurisdiction over the
conservation, rehabilitation or liquidation of the insurer.
(12)
(20) "Resident" means any a person to whom a
contractual obligation is owed and
who resides in this state at the
time a member insurer is determined to be an impaired or insolvent
insurer and to whom a
contractual obligation is owed 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 insurer that
issued the polices or contracts.
(21)
"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.
(22)
"State" means a state, the District of Columbia, Puerto Rico, or a
United States
possession, territory or
protectorate.
(13)
(23) "Supplemental contract" means any a written
agreement entered into for the
distribution of proceeds under a
life, health or annuity of policy or contract proceeds.
(14)
(24) "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 in this state. The
association shall perform its functions under the plan of operation
established and approved under
section 27-34.3-10, or as previously established and approved
under section 27-34.1-11 and shall
exercise its powers through a board of directors established
under section 27-34.3-7 or as
previously established under section 27-34.1-8. 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.
section 401, 403(b) or 457, but shall otherwise exclude
unallocated annuities; and
(iii) Unallocated annuity account which shall include exclude
contracts owned by a
governmental retirement benefit
plan (or its trustee) established under section 401, 403(b) or 457
of the United States Internal
Revenue Code, 26 U.S.C. section 401, 403(b) or 457. qualified
under Section 403(b) of the
United States Internal Revenue Code, 26 U.S.C. 403(b).
(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.
27-34.3-7.
Board of directors. -- (a) The board of directors of the association
shall
consist of not less than five (5)
nor more than nine (9) member insurers serving terms as
established in the plan of
operation. The insurer members of the board shall be selected by
member insurers subject to the
approval of the commissioner. The board of directors, previously
established under section
27-34.1-8, 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, for member insurers 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 domestic 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, and that
are, except in cases of court-ordered
conservation or rehabilitation,
also approved by the impaired insurer:
(1)
Guarantee, assume or reinsure, or cause to be guaranteed, assumed, 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. ; or
(3)
Loan money to the impaired insurer.
(b) (1) If a member insurer is an impaired insurer, whether domestic, foreign
or alien,
and the insurer is not paying
claims in a timely manner, then subject to the preconditions
specified in subdivision (2) of
this subsection, the association shall, in its discretion, either:
(i) Take any of the actions specified in subsection (a) of this section,
subject to the
conditions in subsection (a) of
this section; or
(ii) Provide substitute benefits in lieu of the contractual obligations of the
impaired
insurer solely for health
claims, periodic annuity benefit payments, death benefits, supplemental
benefits, and cash withdrawals
for policy or contract owners who petition for those benefits under
claims of emergency or hardship
in accordance with standards proposed by the association and
approved by the commissioner.
(2) The association shall be subject to the requirements of subdivision (1) of
this
subsection only if:
(i) The laws of its state of domicile provide that until all payments of or on
account of
the impaired insurer's
contractual obligations by all guaranty associations, along with all expenses
of the guaranty associations and
interest on all such payments and expenses, shall have been
repaid to the guaranty
associations or a plan of repayment by the impaired insurer shall have been
approved by the guaranty
associations:
(A) The delinquency proceeding shall not be dismissed;
(B) Neither the impaired insurer nor its assets shall be returned to the
control of its
shareholders or private
management;
(C) It shall not be permitted to solicit or accept new business or have any
suspended or
revoked license restored; and
(ii) (A) The impaired insurer is a domestic insurer, and it has been placed
under an order
of rehabilitation by a court of
competent jurisdiction in this state; or
(B) The impaired insurer is a foreign or alien insurer, and
(I) It has been prohibited from soliciting or accepting new business in this
state;
(II) Its certificate of authority has been suspended or revoked in this state;
and
(III) A petition for rehabilitation or liquidation has been filed in a court of
competent
jurisdiction in its state of
domicile by the commissioner of the state.
(c)
(b) If a member insurer is an insolvent insurer, the association shall,
in its discretion,
either:
(1)(i) (A) Guaranty, assume or reinsure, or cause to be guaranteed,
assumed or reinsured,
the policies or contracts of the
insolvent insurer; or
(ii)
(B) Assure payment of the contractual obligations of the insolvent
insurer; and
(iii)
(ii) Provide the monies, pledges, loans, notes,
guarantees, or other means that are
reasonably necessary to discharge those
the association's duties; or
(2) With
respect only to life and health insurance policies, provide Provide
benefits and
coverages in accordance with subsection
(d) of this section. the following provisions:
(d)
When proceeding under paragraph (b)(1)(ii) or subdivision (c)(2) of this
section, the
association shall, with respect
to only life and health insurance policies:
(1)
(i) Assure With respect to life and health insurance policies
and annuities, 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
insolvent insurer, for claims
incurred:
(i)
(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;
(ii)
(B) With respect to individual 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;
(2)
(ii) Make diligent efforts to provide all known insured or group
policyholders
annuitants (for non-group
policies and contracts) or group policy 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; and
(3)
(iii) With respect to individual nongroup life and health
insurance policies and
annuities covered by the
association, make available to each
known insured or annuitant, or
owner if other than the insured, or
annuitant and with respect to an individual formerly insured or
formerly an annuitant under a group policy who is not eligible for
replacement group coverage,
make available substitute coverage
on an individual basis in accordance with the provisions of
subdivision (4) (iv)
of this subsection, if the insureds or annuitants had a right under law
or the
terminated policy to convert
coverage to individual coverage or to continue an individual policy
or annuity in force until a specified age or for a specified time,
during which the insurer had no
right unilaterally to make changes
in any provision of the policy or annuity or had a right only to
make changes in premium by class.;
(4) (i)
(iv)(A) In providing the substitute coverage required under subdivision (3)
(iii) of
this subsection, the association
may offer either to reissue the terminated coverage or to issue an
alternative policy.
(B)
(ii) Alternative or reissued policies 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.
(iii)
(C) The association may reinsure any alternative or reissued policy.
(5)
(i) (v)(A) Alternative policies adopted by the association shall be
subject to the
approval of the domiciliary
insurance commissioner and the receivership court. The association
may adopt alternative policies of
various types for future issuance without regard to any particular
impairment or insolvency.
(ii)
(B) Alternative policies 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 was last underwritten.
(iii)
(C) Any alternative policy issued by the association shall provide
coverage of a type
similar to that of the policy
issued by the impaired or insolvent insurer, as determined by the
association.
(6)
(vi) If the association elects to reissue terminated coverage at a
premium rate
different from that charged under
the terminated policy, the premium shall be set by the
association in accordance with the
amount of insurance provided and the age and class of risk,
subject to approval of the commissioner
or by a court of competent jurisdiction. domiciliary
insurance commissioner and the
receivership court.
(7)
(vii) The association's obligations with respect to coverage under any
policy of the
impaired or insolvent insurer or
under any reissued or alternative policy shall cease on the date
such coverage or policy is replaced
by another similar policy by the policyholder policy owner,
the insured, or the association.
(e)
(viii) When proceeding under paragraph (b)(1)(ii) or subsection (c)
(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 section 27-34.3-
3(b)(2)(iii).
(f)
(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 or coverage under this
chapter with respect to the policy
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.
(g)
(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, and the association shall
be liable for unearned premiums due
to policy or contract owners arising after the entry of the
order.
(h)
(e) The protection provided by this chapter shall not apply where any
guaranty
protection is provided to residents
of this state by laws of the domiciliary state or jurisdiction of
the impaired or insolvent insurer
other then this state.
(i)
(f) In carrying out its duties under subsections (b) and (c)
of this section, the
association may, subject to
approval by the court:
(1) Impose
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; and/or
(2) Impose
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 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 insurer
domiciled in this state or in a
reciprocal state, pursuant to section 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 owners'
claims related to that
insolvency for which the association has provided statutory benefits by the
aggregate amount of all policy
owners' claims in this state related to that insolvency and shall
remit to the domiciliary
receiver the amount so paid to the association and retained pursuant to
this subsection. Any amount so
paid to the association less the amount retained by it shall be
treated as a distribution of
estate assets pursuant to section 27-14.3-38 or similar provision of the
state of domicile of the
impaired or insolvent insurer.
(j)
(h) If the association fails to act within a reasonable period of time with
respect to an
insolvent insurer, as provided in subsections (b)(1)(ii), (c), and (d) of this
section, the
commissioner shall have the powers
and duties of the association under this chapter with respect
to impaired or the
insolvent insurers.
(k)
(i) The association may render assistance and advice to the
commissioner, upon his
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.
(l)
(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. This
standing Standing shall extend to all matters germane
to the powers and duties of the association,
including, but not limited to,
proposals for reinsuring, 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 a third party any person or
property against whom the association may have rights through
subrogation of the insurer's
policyholders or otherwise.
(m)
(k) (1) Any 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 coverage. The
association may require an assignment to it of these rights and cause
causes of action by any 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 this 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 which that
would
have been available to the impaired
or insolvent insurer or holder owner, beneficiary or payee, of
a policy or contract with respect
to the policy or contract. 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 respect of a
qualified assignment under section 130 of the United States Internal
Revenue Code, 26 U.S.C. section
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 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
portions thereof, covered by the association.
(n)
(l) The 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 section
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 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 that as become necessary or
proper under this chapter;
(5) Take
any 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 health insurer, 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)
Take other necessary or appropriate action to discharge its duties and
obligations
under this chapter or to
exercise its powers under this chapter,
(o)
(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)
At any time within one year after the date on which the association becomes
responsible for the obligations
of a member insurer (the coverage date), the association may elect
to succeed to the rights and
obligations of the member insurer, that accrue on or after the
coverage date and that relate to
contracts covered, in whole or in part, by the association, under
any one or more indemnity
reinsurance agreements entered into by the member insurer as a
ceding insurer and selected by
the association. However, the association may not exercise an
election with respect to a
reinsurance agreement if the receiver, rehabilitator or liquidator of the
member insurer has previously
and expressly disaffirmed the reinsurance agreement. The
election shall be effected by a
notice to the receiver, rehabilitator or liquidator and to the affected
reinsurers. If the association
makes an election, subparagraphs (i) through (iv) below shall apply
with respect to the agreements
selected by the association:
(i)
The association shall be responsible for all unpaid premiums due under the
agreements
(for periods both before and
after the coverage date), and shall be responsible for the performance
of all other obligations to be
performed after the coverage date, in each case which relate to
contracts covered, in whole or
in part, by the association. The association may charge contracts
covered in part by the
association, through reasonable allocation methods, the costs for
reinsurance in excess of the
obligations of the association;
(ii)
The association shall be entitled to any amounts payable by the reinsurer under
the
agreements with respect to
losses or events that occur in periods after the coverage date and that
relate to contracts covered by
the association, in whole or in part, provided, that, upon receipt of
any such amounts, the
association shall be obliged to pay to the beneficiary under the policy or
contract on account of which the
amounts were paid a portion of the amount equal to the excess
of:
(A)
The amount received by the association; over
(B)
The benefits paid by the association on account of the policy or contract less
the
retention of the impaired or
insolvent member insurer applicable to the loss or event;
(iii)
Within thirty (30) days following the association's election, the association
and each
indemnity reinsurer shall
calculate the net balance due to or from the association under each such
reinsurance agreement as of the
date of the association's election, giving full credit to all items
paid by either the member insurer
(or its receiver, rehabilitator or liquidator) or the indemnity
reinsurer during the period
between the coverage date and the date of the association's election.
Either the association or
indemnity reinsurer shall pay the net balance due the other within five
(5) days of the completion of
the aforementioned calculation. If the receiver, rehabilitator or
liquidator has received any
amounts due the association pursuant to subparagraph (ii), the
receiver, rehabilitator or
liquidator shall remit the same to the association as promptly as
practicable.
(iv)
If the association, within sixty (60) days of the election, pays the premiums
due for
periods both before and after
the coverage date, that relate to contracts covered by the association,
(in whole or in part), the
reinsurer shall not be entitled to terminate the reinsurance agreements
insofar as the agreements relate
to contracts covered by the association, (in whole or in part) and
shall not be entitled to set off
any unpaid premium due for periods prior to the coverage date
against amounts due to the
association.
(2)
In the event the association transfers its obligations to another insurer, and
if the
association and the other
insurer agree, the other insurer shall succeed to the rights and
obligations of the association
under paragraph (1) effective as of the date agreed upon by the
association and the other
insurer and regardless of whether the association has made an election
referred to above in paragraph
(1) provided that:
(i)
The indemnity reinsurance agreements shall automatically terminate for new
reinsurance unless the indemnity
reinsurer and the other insurer agree to the contrary;
(ii)
The obligations described in paragraph (1)(ii) of this subsection shall not
apply on
and after the date the indemnity
reinsurance agreement is transferred to the third-party insurer;
(iii)
This paragraph (2) shall not apply if the association has previously expressly
determined in writing that it
will not exercise the election referred to in paragraph (1);
(3)
The provisions of subsection (n) shall supercede the provisions of any law of
this state
or of any affected reinsurance
agreement that provides for or requires any payment of reinsurance
proceeds, on account of losses
or events that occur in periods after the coverage date, to the
receiver, liquidator or
rehabilitator of the insolvent member insurer. The receiver, rehabilitator or
liquidator shall remain entitled
to any amounts payable by the reinsurer under the reinsurance
agreement with respect to losses
or events that occur in periods prior to the coverage date (subject
to applicable setoff
provisions); and
(4)
Except as otherwise expressly provided in this chapter, nothing herein shall:
(i)
Alter or modify the terms and conditions of the indemnity reinsurance
agreements of
the insolvent member insurer; or
(ii)
Abrogate or limit any rights of any reinsurer to claim that it is entitled to
rescind a
reinsurance agreement; or
(iii)
Shall give a policy owner or beneficiary an independent cause of action against
an
indemnity reinsurer that is not
otherwise set forth in the indemnity reinsurance agreement.
(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)
In carrying out its duties in connection with guaranteeing, assuming 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:
(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 that 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 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 made authorized and called for the
purpose of meeting
administrative and legal costs and
other expenses and examinations conducted under the authority
of section 27-34.3-12(5). Class A assessments may be made authorized
and called whether or not
related to a particular impaired or
insolvent insurer.
(2)
Class B assessments shall be made authorized and called to the
extent necessary to
carry out the powers and duties of
the association under section 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 made 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. A The total of all non-pro rata
assessment shall not exceed one
hundred fifty dollars ($150) 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)
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 impaired
or insolvent, as the case may be, (or, in the
case of an assessment with respect to an impaired
insurer, the three (3) most
recent calendar years for which information is available preceding the
year in which the insurer became
impaired) bears to the
premiums received on business in this
state for such calendar years by
all assessed member insurers.
(3)
Assessments for funds to meet the requirements of the Association with respect
to an
impaired or insolvent insurer shall
not be made 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) The Subject to the provisions of subparagraph (ii) of
this paragraph, the total of
all assessments upon authorized
by the association with respect to a member insurer for the life
each subaccount of the life
insurance and annuity account and for
each subaccount under it the
health account shall not in any one calendar year exceed three
percent (3%) and for the health
account shall not in any one
calendar year exceed three percent (3%) of the insurer's average 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 insurer became an
impaired or insolvent insurer.
(ii)
If two (2) or more assessments are authorized in one calendar year with respect
to
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.
(3)
If a one percent (1%) the maximum assessment for any 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 access all 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 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 losses
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 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 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
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 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. Interest on a refund due a protesting member 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.
27-34.3-10.
Plan of operation. -- (a) (1) The plan of operation as previously
established
and approved under this
section 27-34.1-11 shall continue to be effective under this section.
The
association may amend the plan of
operation and the amendments shall be when necessary or
suitable to assure the fair,
reasonable and equitable administration of the association.
Amendments shall become effective upon the commissioner's written approval.
(2)
If at any time the association fails to submit suitable amendments to the plan,
the
commissioner shall, after notice
and hearing, adopt and promulgate any reasonable rules
necessary or advisable to
effectuate the provisions of this chapter. The rules shall continue in
force until modified by the
commissioner or superseded by amendments to the plan submitted by
the association and approved by the
commissioner.
(b)
All member insurers shall comply with the plan of operation.
(c)
The plan of operation shall, in addition to requirements enumerated in this
chapter:
(1)
Establish procedures for handling the assets of the association;
(2)
Establish the amount and method of reimbursing members of the board of
directors
under section 27-34.3-7;
(3)
Establish regular places and times for meetings including telephone conference
calls
of the board of directors;
(4)
Establish procedures for records to be kept of all financial transactions of
the
association, its agents, and the
board of directors;
(5)
Establish the procedures by which selections for the board of directors will be
made
and submitted to the commissioner;
(6)
Establish any additional procedures for assessments under section 27-34.3-9;
(7)
Contain additional provisions necessary or proper for the execution of the powers
and
duties of the association.
(d)
The plan of operation may provide that any or all powers and duties of the
association, except those under
section 27-34.3-8(m)(l)(3) and section 27-34.3-9, are delegated
to
a corporation, association, or other
organization which performs or will perform functions similar
to those of this association, or
its equivalent, in two (2) or more states. This corporation,
association, or organization shall
be reimbursed for any payments made on behalf of the
association and shall be paid for
its performance of any function of the association. A delegation
under this subsection shall take
effect only with the approval of both the board of directors and
the commissioner, and may be made
only to a corporation, association, or organization which
extends protection not
substantially less favorable and effective than that provided by this
chapter.
27-34.3-11.
Duties and powers of the commissioner. -- In addition to the duties and
powers enumerated in this chapter,
(1)
(a) The commissioner shall:
(i)
(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;
(ii)
(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
insurer to promptly comply with a
demand shall not excuse the association from the performance
of its powers and duties under this
chapter;
(iii)
(3) In any liquidation or rehabilitation proceeding involving a domestic
insurer, be
appointed as the liquidator or
rehabilitator.
(2)
(b) The commissioner may suspend or revoke, after notice and hearing,
the certificate
of authority to transact insurance
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.
(3)
(c) Any 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. If a member
company is appealing an
assessment, the amount assessed
shall be paid to the association and available to meet association
obligations during the pendancy
of an appeal. If the appeal on the assessment is upheld, the
amount paid in error or excess
shall be returned to the member company. Any A final action or
order of the commissioner shall be
subject to judicial review in a court of competent jurisdiction.
(4)
(d) The liquidator, rehabilitator, or conservator of any impaired
insurer may notify all
interested persons of the effect of
this chapter.
27-34.3-12.
Prevention of insolvencies. -- To aid in the detection and prevention
of
insurer insolvencies or
impairments:
(1)
The commissioner may, in his or her discretion: (a) It shall be the duty
of the
commissioner:
(i)
Notify (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:
(A)
(i) Revocation of license;
(B)
(ii) Suspension of license; or
(C)
(iii) Makes any a formal order that the company 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 policyholders policy
owners or creditors.
(ii)
Report (2) To report to the board of directors when the commissioner
has taken any
of the actions set forth in
paragraph (i) 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.
(iii)
Report (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 that the company may be an
impaired or insolvent insurer.
(iv)
Furnish (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 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.
(2)
(b) The commissioner may seek the advice and recommendations of the
board of
directors concerning any matter
affecting his the duties and responsibilities of the
commissioner
regarding the financial condition
of member insurers and companies seeking admission to
transact insurance business in this
state.
(3)
(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
seeking to do an insurance business
in this state. The reports and recommendations shall not be
considered public documents.
(4)
It shall be the duty of the (d) The board of directors may,
upon majority vote, to
notify the commissioner of any
information indicating any a member insurer may be an impaired
or insolvent insurer.
(5)
The board of directors may, upon majority vote, request that the commissioner
order
an examination of any member
insurer which the board in good faith believes may be an impaired
or insolvent insurer. Within
thirty (30) days of the receipt of the request, the commissioner shall
begin an examination. The
examination may be conducted as a National Association of Insurance
Commissioners examination or may
be conducted by persons the commissioner designates. The
cost of the examination shall be
paid by the association and the examination report shall be
treated as are other examination
reports. The commissioner shall notify the board of directors
when the examination is
completed. The request for an examination shall be kept on file by the
commissioner, but it shall not
be open to public inspection prior to the release of the examination
report to the public.
(6)
(e) The board of directors may, upon majority vote, make recommendations
to the
commissioner for the detection and
prevention of insurer insolvencies.
(7)
The board of directors shall, at the conclusion of any insurer insolvency in
which the
association was obligated to pay
covered claims, prepare a report to the commissioner containing
any information as it may have
in its possession bearing on the history and causes of the
insolvency. The board shall
cooperate with the boards of directors of guaranty associations in
other states in preparing a
report on the history and causes of insolvency of a particular insurer,
and may adopt by reference any
report prepared by other associations.
27-34.3-14.
Miscellaneous provisions. -- (a) Nothing in this This
chapter shall 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 negotiations and meetings in which the
association or its
representatives are involved of the board of directors to discuss the
activities of the association in
carrying out its powers and duties
under section 27-34.3-8. Records of the negotiations or
meetings shall be made public
only upon 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
section 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 section 27-34.3-8(m)(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, as used in this
subsection, are that proportion of the assets which the reserves that should
have been established for covered
policies bear to the reserves that should have been established
for all policies of insurance
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
section 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 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.
(d)
(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, 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
policyholders policy owners of the continuing or successor
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 it powers and duties under section 27-34.3-8 with
respect to the insurer have been
fully recovered by the association.
(e)
(f) (1) If an order for liquidation or rehabilitation of an insurer
domiciled in this state
has been entered, the receiver
appointed under the order shall have a right to recover on behalf of
the insurer, from any affiliate
that controlled it, the amount of distributions, other than stock
dividends paid by the 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 insurer shows that when paid the
distribution was lawful and
reasonable, and that the insurer did not know and could not
reasonably have known that the
distribution might adversely affect the ability of the insurer to
fulfill its contractual
obligations.
(3)
Any person who was an affiliate who that controlled the 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 that
controlled the 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.
27-34.3-15.
Examination of the association -- Annual report. -- The association
shall
be subject to examination and
regulation by the commissioner. The board of directors shall
submit to the commissioner each
year, not later than one hundred twenty (120) days after the
association's fiscal year, a
financial report in a form approved by the commissioner and a report
of its activities during the
preceding fiscal year. Upon the request of a member insurer, the
association shall provide the
member insurer with a copy of the report.
27-34.3-19.
Prohibited advertisement of insurance guaranty association act in
insurance sales. Prohibited advertisement of insurance guaranty
association act in
insurance sales – Notice to
policy owners. – (a) No
person, including an 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
covered by the Rhode Island life
and health insurance guaranty association act; provided, that this
section shall not apply to the Rhode
Island life and health insurance guaranty association or any
other entity which does not sell or
solicit insurance. 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 insurer may not deliver
a policy or contract to a policy
or contract owner unless the summary document is delivered to
the policy or contract owner at
the time of delivery of the policy or contract. The document shall
also be available upon request
by a policy owner. The distribution, delivery or contents or
interpretation of this document
does not guarantee that either the policy or the contract or the
owner of the policy or contract
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 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 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 for which guaranty funds will provide coverage;
(4)
State that the 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;
(5)
State that the policy or contract owner should not rely on coverage under the
association when selecting an
insurer;
(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 insurer
that is
insolvent or unable to fulfill its
contractual obligations prior to the effective date of this chapter.
The 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 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
2. The amendments to section 27-34.3(2), 27-34.3-3(a)(3), 27-34.3-3(a)(4),
27-34.3-3(b)(2)(viii),
27-34.3-3(c)(2)(iv)(B), 27-34.3-4, 27-34.3-5(17)(ii), 27-34.3-8(b), 27-34.3-
8(g), 27-34.3-8(n), and
27-34.3-9(e) in this act shall apply to the association's rights and
obligations with respect to such
insurers that become insolvent or impaired on or after January 1,
2005.
The
remaining provisions of this act shall take effect upon passage and shall apply
to
insurers that become insolvent or
impaired on or after January 1, 1996.
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LC02289
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