CSSB 191(L&C): "An Act relating to insurance pooling by air carriers."
00 CS FOR SENATE BILL NO. 191(L&C) 01 "An Act relating to insurance pooling by air carriers." 02 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 03 * Section 1. AS 21 is amended by adding a new chapter to read: 04 Chapter 77. Joint Aviation Insurance Arrangements. 05 Sec. 21.77.010. Authority to establish joint aviation insurance 06 arrangements. (a) Air carriers may enter into cooperative agreements with each 07 other for the purpose of establishing, operating, or participating in joint aviation 08 insurance arrangements through which the participating members agree to pool 09 contributions in order to either assume risks from losses to the participants on a group 10 basis or purchase coverage for the participants on a group basis. 11 (b) A joint aviation insurance arrangement 12 (1) may be for any kind of insurance defined by this title except for 13 health insurance, life insurance, and title insurance; and 14 (2) shall be considered an alternative or supplement to any other policy 15 or contract of insurance authorized or required by law, including insurance under
01 AS 21.75. 02 (c) For purposes of AS 23.30.075, a joint aviation insurance arrangement is 03 considered to be an association duly authorized to transact workers' compensation 04 insurance in the state. 05 Sec. 21.77.020. Regulation by division of insurance and annual report. 06 (a) A joint aviation insurance arrangement may not be considered insurance for the 07 purpose of any other law of the state and is not subject to regulations adopted by the 08 director. 09 (b) By October 1 of each year, the administrator of a joint aviation insurance 10 arrangement shall prepare and deliver to the Legislative Budget and Audit Committee 11 and the director a report showing the true and correct financial condition of the joint 12 aviation insurance arrangement. The report must 13 (1) be attested to by the administrator and the board of directors; 14 (2) include an analysis, certified by a member of the American 15 Academy of Actuaries, of the sufficiency of the loss reserves; and 16 (3) be certified by a certified public accountant. 17 Sec. 21.77.030. General provisions of cooperative agreements. (a) A 18 cooperative agreement must provide for the proper operation of the joint aviation 19 insurance arrangement and include provisions for 20 (1) administration of the arrangement by a board of directors, 21 specifying the number of members of the board and other requirements necessary for 22 the proper functioning of the board; 23 (2) appointment of an administrator and other persons as necessary for 24 the proper functioning of the arrangement; 25 (3) organization of the arrangement, including a roster of participating 26 members and the names of the members of the board of directors; 27 (4) procedures to establish and promote an aggressive risk 28 management program among the members of the arrangement, including procedures 29 for identifying and reducing the risks that can be reduced through implementing better 30 safety technologies and improved work techniques and procedures; 31 (5) enforcing the collection of contributions or payments in default
01 from members of the arrangement; 02 (6) the addition of new members to the arrangement or the withdrawal 03 of members from the arrangement; 04 (7) the method of apportioning costs and disposition of excess 05 contributions; 06 (8) transmission of financial statements and audit reports of the 07 arrangement to participating members; 08 (9) terminating the arrangement and disposing of its assets; and 09 (10) establishing and administering a joint aviation insurance fund. 10 (b) A cooperative agreement may 11 (1) authorize the board of directors to enter into contracts for services 12 necessary to perform the functions of a joint aviation insurance arrangement; a person 13 contracting to perform functions under this paragraph is subject to the licensing 14 requirements of this title; 15 (2) delegate to the board of directors, or authorize delegation by the 16 board to another person or group, the power to compromise, arbitrate, or otherwise 17 settle claims on behalf of the arrangement; 18 (3) authorize the board of directors to adopt rules not inconsistent with 19 law for the fair and equitable administration of the joint aviation insurance 20 arrangement and the joint aviation insurance fund. 21 (c) The board of directors shall file a copy of the cooperative agreement with 22 the director at least 60 days before the effective date of the agreement. The agreement 23 shall be available for public inspection. 24 Sec. 21.77.040. Financial provisions of agreements. (a) A joint aviation 25 insurance arrangement formed in accordance with the provisions of this chapter shall 26 (1) have and maintain a surplus no less than an amount equal to the 27 total of the capital and one-half of the surplus that would be required of a domestic 28 stock insurer writing the same lines as the joint aviation insurance arrangement; or 29 (2) post a bond for an amount equal to the capital that would be 30 required of a domestic stock insurer writing the same lines of insurance as the joint 31 aviation insurance arrangement and maintain a surplus of $250,000 in admitted assets
01 or a surplus sufficient to operate the joint aviation insurance arrangement for one year, 02 whichever is greater. 03 (b) A cooperative agreement must include a provision requiring an annual 04 determination by a casualty actuary who is a member of the American Academy of 05 Actuaries that procedures for establishing reserves for losses of the joint aviation 06 insurance arrangement are actuarially sound. 07 (c) A joint aviation insurance arrangement shall be subject to an annual 08 independent audit. The audit shall be conducted in accordance with generally 09 accepted auditing standards and must include a review of the actuarial assumptions 10 used for establishing the reserves under (b) of this section. The audit report must 11 include certification from a casualty actuary who is a member of the American 12 Academy of Actuaries that the actuarial assumptions continue to be sound and the 13 level of the reserves is adequate. 14 (d) A cooperative agreement may authorize the board of directors to purchase 15 excess or catastrophic insurance on behalf of the joint aviation insurance arrangement. 16 The cost of the insurance shall be apportioned in the manner specified in the joint 17 aviation insurance agreement. The board may purchase insurance under this 18 subsection only from an insurer authorized to do business in the state, except 19 insurance under this subsection may be purchased from a risk-sharing pool established 20 by a national association of similar entities if the risk-sharing pool meets the 21 qualifications for an unauthorized insurer under AS 21.34.040(b) and (d) and 22 21.34.220 and has capital and policyholders surplus in an amount at least as great as 23 would be required if the association were a domestic multiple line insurer. An 24 arrangement may purchase insurance under this subsection for property and liability 25 risks from unauthorized insurers allowed for use by licensed Alaska surplus lines 26 brokers. 27 Sec. 21.77.050. Joint aviation insurance fund. (a) A joint aviation 28 insurance arrangement shall establish a joint aviation insurance fund. The fund 29 consists of money 30 (1) contributed by members of the joint aviation insurance 31 arrangement through budgetary appropriations or transfers from a self-insurance
01 reserve; 02 (2) contributed by officers and employees of members of the joint 03 aviation insurance arrangement under an employee benefit plan; and 04 (3) collected by the joint aviation insurance arrangement through 05 subrogation of a claim paid from the fund to a member of the arrangement. 06 (b) An expenditure may be made from a joint aviation insurance fund only to 07 (1) pay claims, losses, or benefits, including interest on claims, losses, 08 or benefits, and the administrative and adjustment expenses incurred in connection 09 with claims, losses, or benefits, involving the types of protection for which the fund 10 provides coverage as specified in the joint aviation insurance agreement; and 11 (2) purchase insurance coverage for members of a joint aviation 12 insurance arrangement on a group basis. 13 (c) The administrator shall keep the fund separate from other funds of a 14 member of a joint aviation insurance arrangement. 15 (d) For each type of protection offered by the joint aviation insurance 16 arrangement, the method of accounting must show the order, source, date, and amount 17 of each payment from the fund. 18 (e) Within 150 days of the end of the fiscal year, the administrator shall 19 furnish a detailed report of the operation and condition of the fund to the board of 20 directors and the director. 21 (f) Money held by a fund as reserves and money not needed for daily 22 operations may be invested by the board of directors. 23 (g) A fund may not be terminated unless the administrator certifies that an 24 amount of money sufficient to pay accrued and contingent expenditures has been 25 placed in a fully collateralized escrow account. 26 Sec. 21.77.250. Definitions. In this chapter, 27 (1) "adjustment expenses" means expenses for investigative, 28 processing, legal, actuarial, arbitration, and settlement services incurred in the 29 adjustment of losses, claims, or benefits; 30 (2) "administrator" means a person or group appointed by the board of 31 directors to administer a joint aviation insurance arrangement or a joint aviation
01 insurance fund; 02 (3) "board" or "board of directors" means the board of directors 03 provided for in a cooperative agreement; 04 (4) "cooperative agreement" means a written agreement entered into 05 by two or more air carriers described in AS 21.77.010 for the purpose of establishing, 06 operating, or participating in a joint aviation insurance arrangement; 07 (5) "fund" or "joint aviation insurance fund" means a fund established 08 under AS 21.77.050; 09 (6) "joint aviation insurance arrangement" means a joint aviation 10 insurance arrangement authorized under AS 21.77.010.