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HB 157: "An Act relating to the Alaska Life and Health Insurance Guaranty Association; and providing for an effective date."

00                             HOUSE BILL NO. 157                                                                          
01 "An Act relating to the Alaska Life and Health Insurance Guaranty Association; and                                      
02 providing for an effective date."                                                                                       
03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
04    * Section 1. AS 21.79.020(a) is amended to read:                                                                   
05            (a)  This chapter applies to a policy and contract specified in (b) of this section                          
06       and to a person who                                                                                               
07                 (1)  except for a nonresident certificate holder under a group policy or                                
08       contract, is the beneficiary, assignee, or payee of a person described in (2) of this                             
09       subsection; and                                                                                                   
10                 (2)  except in the case of an unallocated annuity contract or a structured                              
11       settlement annuity, is the owner of, or a certificate holder under, the policy or contract,                       
12       and who                                                                                                           
13                      (A)  is a resident; or                                                                             
14                      (B)  is not a resident, if the following conditions are satisfied:                                 
01                           (i)  the insurer that issued the policy or contract is                                        
02                 domiciled in this state;                                                                                
03                           (ii)  the state in which the person resides has an                                            
04                 association similar to the association created by this chapter; and                                     
05 (iii)  the person is not eligible for coverage by an                                                                    
06 association in any other state due to the fact that the insurer was not                                                 
07 licensed at the time specified in the guaranty association [AS                                                      
08                 REQUIRED BY] law of [IN] that state.                                                                
09    * Sec. 2. AS 21.79.020(b) is amended to read:                                                                      
10 (b)  This chapter applies to a person specified in (a) of this section and to a                                         
11 direct, nongroup life, health, annuity, and supplemental policy or contract, to a                                       
12 certificate under a direct group life, health, annuity, or supplemental policy or                                       
13 contract, to a subscriber's contract issued by a hospital or medical service                                        
14 corporation under AS 21.87, and to an unallocated annuity contract issued by a                                      
15 member insurer, except as otherwise limited by this chapter. In this subsection,                                    
16 "annuity policy or contract" or "certificate under a direct group life, health,                                     
17 annuity, or supplemental policy or contract" includes a guaranteed investment                                       
18 contract, a deposit administration contract, an unallocated funding agreement,                                      
19 an allocated funding agreement, a structured settlement annuity, an annuity                                         
20 issued to or in connection with a government lottery, and an immediate or                                           
21       deferred annuity contract.                                                                                    
22    * Sec. 3. AS 21.79.020(c) is amended to read:                                                                      
23            (c)  This chapter does not apply to                                                                          
24 (1)  that part of a policy or contract that is not guaranteed by the                                                    
25       insurer;                                                                                                          
26 (2)  that part of the risk borne by the policy or contract owner                                                    
27       [HOLDER];                                                                                                         
28 (3)  a policy or contract of reinsurance, unless an assumption certificate                                              
29       has been issued;                                                                                                  
30 (4)  that part of a policy or contract to the extent that the rate of interest                                          
31 on which it is based, or the interest rate, crediting rate, or similar factor determined by                             
01 use of an index or other external reference stated in the policy or contract employed in                                
02       calculating returns or changes in value,                                                                          
03 (A)  averaged over the period of four years before the date on                                                          
04 which the member insurer becomes an impaired or insolvent insurer under this                                            
05 chapter, whichever occurs first, exceeds the rate of interest determined by                                             
06 subtracting two percentage points from the published monthly average for that                                           
07 same four-year period or for a lesser period if the policy or contract was issued                                       
08 less than four years before the member insurer becomes an impaired or                                                   
09            insolvent insurer under this chapter, whichever occurs first; and                                            
10 (B)  on and after the date on which the member insurer becomes                                                          
11 an impaired or insolvent insurer under this chapter, whichever occurs first,                                            
12 exceeds the rate of interest determined by subtracting three percentage points                                          
13            from the most recent published monthly average;                                                              
14 (5)  a portion of a policy or contract issued to a plan or program of                                               
15 an employer, association, or similar entity to provide life, health, or an annuity benefit                              
16 to an employee, [OR] member, or other person, to the extent that the plan or program                            
17 is self-funded or uninsured, including a benefit payable by the employer, association,                                  
18       or similar entity under                                                                                           
19 (A)  a multiple employer welfare arrangement as defined in 29                                                           
20            U.S.C. 1002 (Employee Retirement Income Security Act of 1974);                                               
21                      (B)  a minimum premium group insurance plan;                                                       
22                      (C)  a stop-loss group insurance plan; or                                                          
23                      (D)  an administrative services only contract;                                                     
24 (6)  that part of a policy or contract that provides a dividend or                                                      
25 experience rating credit or voting rights, or provides that a fee or allowance be paid to                               
26 a person, including the policy or contract owner [HOLDER], in connection with the                                   
27       service to or administration of the policy or contract;                                                           
28 (7)  a policy or contract issued in this state by a member insurer at a                                                 
29 time when it was not licensed or did not have a certificate of authority to issue the                                   
30       policy or contract in this state;                                                                                 
31 (8)  a person who is a payee or beneficiary of a contract owner                                                     
01       [HOLDER] who is a resident of this state if the payee or beneficiary is provided                                  
02       coverage by the association of another state;                                                                     
03                 (9)  a person covered under (d) [(e)] of this section if any coverage is                            
04       provided by the association of another state to that person;                                                      
05 (10)  an unallocated annuity contract issued to or in connection with a                                                 
06 benefit plan protected under the United States Pension Benefit Guaranty Corporation,                                
07 regardless of whether the United States Pension Benefit Guaranty Corporation has                                        
08       become liable to make any payments with respect to the benefit plan;                                              
09                 (11)  that part of an unallocated annuity contract that is not issued to or                             
10 in connection with a specific employee, union, or association of natural persons                                        
11       benefit plan or a government lottery;                                                                             
12 (12)  that part of a policy or contract to the extent that assessments                                                  
13       required by AS 21.79.070 with respect to the policy or contract are preempted by law;                             
14 (13)  an obligation that does not arise under the express written terms of                                              
15 the policy or contract issued by the insurer to the contract owner or policy owner,                                     
16       including, without limitation,                                                                                    
17                      (A)  a claim based on marketing materials;                                                         
18 (B)  a claim based on a side letter or other document that was                                                          
19 issued by the insurer without meeting applicable policy form filing or approval                                         
20            requirements;                                                                                                
21                      (C)  a misrepresentation of or regarding policy benefits;                                          
22                      (D)  an extra contractual claim; or                                                                
23 (E)  a claim for penalties or consequential or incidental                                                               
24            damages;                                                                                                     
25 (14)  a contractual agreement that establishes the member insurer's                                                     
26 obligations to provide a book value accounting guaranty for defined contribution                                        
27 benefit plan participants by reference to a portfolio of assets that is owned by the                                    
28 benefit plan or its trustee, which, in each case, is not an affiliate of the member                                     
29       insurer; [OR]                                                                                                     
30 (15)  that part of a policy or contract to the extent the part of the policy                                            
31 or contract provides for interest or other changes in value to be determined by the use                                 
01 of an index or other external reference stated in the policy or contract, but that have                                 
02 not been credited to the policy or contract, or as to which the policy or contract                                      
03 owner's rights are subject to forfeiture, as of the date the member insurer becomes an                                  
04 impaired or insolvent insurer under this chapter, whichever is earlier; if a policy's or                                
05 contract's interest or changes in value are credited less frequently than annually, then,                               
06 for purposes of determining the values that have been credited and are not subject to                                   
07 forfeiture under this paragraph, the interest or change in value determined by using the                                
08 procedures defined in the policy or contract shall be credited as if the contractual date                               
09 of crediting interest or changing values was the date of impairment or insolvency,                                      
10       whichever is earlier, and will not be subject to forfeiture;                                                  
11 (16)  a policy or contract providing a hospital, medical,                                                           
12 prescription drug, or other health care benefit in accordance with 42 U.S.C.                                        
13       1395w-21 - 1395w-154 or federal regulations adopted under those sections;                                     
14 (17)  a person who acquires rights to receive payments through a                                                    
15 structured settlement factoring transaction as defined in 26 U.S.C. 5891(c)(3)(A),                                  
16 regardless of whether the transaction occurred on, before, or after 26 U.S.C.                                       
17       5891(c)(3)(A) became effective; or                                                                            
18 (18)  structured settlement annuity benefits to which a payee or                                                    
19 beneficiary has transferred the payee's or beneficiary's rights in a structured                                     
20 settlement factoring transaction as defined in 26 U.S.C. 5891(c)(3)(A), regardless                                  
21 of whether the transaction occurred on, before, or after 26 U.S.C. 5891(c)(3)(A)                                    
22       became effective.                                                                                             
23    * Sec. 4. AS 21.79.020(d) is amended to read:                                                                      
24 (d)  This chapter, except for (a) of this section, applies to an unallocated                                            
25 annuity contract [SPECIFIED UNDER (b) OF THIS SECTION,] and shall provide                                               
26       coverage to a person who is the owner of                                                                          
27 (1)  the unallocated annuity contract if the contract is issued to or in                                                
28 connection with a specific benefit plan whose plan sponsor has its principal place of                                   
29       business in this state; and                                                                                       
30 (2)  an unallocated annuity contract issued to or in connection with a                                                  
31       government lottery if the owner is a resident.                                                                    
01    * Sec. 5. AS 21.79.020(e) is amended to read:                                                                      
02 (e)  This chapter, except for (a) of this section, applies to a structured                                              
03 settlement annuity [SPECIFIED UNDER (b) OF THIS SECTION,] and shall provide                                             
04 coverage to a person who is a payee under a structured settlement annuity, or the                                       
05       beneficiary of a payee if the payee is deceased, if the payee is                                                  
06                 (1)  a resident, regardless of where the contract owner resides; or                                     
07                 (2)  not a resident, but only if both of the following conditions exist                             
08       [EXISTS]:                                                                                                         
09                      (A)  the contract owner of the structured settlement annuity is                                    
10                           (i)  a resident; or                                                                           
11 (ii)  not a resident, but the insurer that issued the                                                                   
12 structured settlement annuity is domiciled in this state, and the state in                                              
13 which the contract owner resides has an association similar to the                                                      
14                 association created by this chapter; and                                                                
15 (B)  the payee, or the payee's beneficiary, and the contract                                                            
16 owner are not eligible for coverage by the association of the state in which the                                        
17            payee or contract owner resides.                                                                             
18    * Sec. 6. AS 21.79.025(a) is amended to read:                                                                      
19 (a)  The benefits for which the association may become liable may not exceed                                            
20       the lesser of                                                                                                     
21 (1)  the contractual obligations for which the insurer is liable or would                                               
22       have been liable if it were not an impaired or insolvent insurer;                                                 
23 (2)  with respect to any one life, regardless of the number of policies or                                              
24       contracts,                                                                                                        
25 (A)  $300,000 in life insurance death benefits, but not more than                                                       
26 $100,000 in net cash surrender and net cash withdrawal values for life                                                  
27            insurance;                                                                                                   
28                      (B)  in health insurance benefits,                                                                 
29 (i)  $100,000 for coverage not defined as disability                                                                    
30 insurance, long-term care insurance, or basic hospital, medical, and                                                    
31 surgical insurance or major medical insurance, including any net cash                                                   
01                 surrender and net cash withdrawal values;                                                               
02                           (ii)  $300,000 for disability insurance as defined in                                         
03                 AS 21.12.052 and $300,000 for long-term care insurance as defined in                                
04                 AS 21.53.200;                                                                                           
05                           (iii)  $500,000 for basic hospital, medical, and surgical                                     
06                 insurance or major medical insurance;                                                                   
07                      (C)  $250,000 in the present value of annuity benefits, including                                  
08            net cash surrender and net cash withdrawal values;                                                           
09                 (3)  with respect to either [ANY] one contract owner provided                                   
10 coverage under AS 21.79.020(d)(2) [HOLDER] or one plan sponsor whose plan                                       
11 owns directly or in trust one or more unallocated annuity contracts not included in (4)                                 
12 of this subsection, $5,000,000 in unallocated annuity contract benefits, irrespective of                                
13 the number of contracts held by that contract owner [HOLDER] or plan sponsor                                        
14 except that, in the case of one or more unallocated annuity contracts that are covered                                  
15 under this chapter and that are owned by a trust or other entity for the benefit of two or                              
16 more plan sponsors, coverage shall be provided by the association if the largest                                        
17 interest in the trust or entity owning the contract is held by a plan sponsor whose                                     
18 principal place of business is in this state; however, the association is not liable to                                 
19 cover more than $5,000,000 in benefits, regardless of the number of policies and                                    
20 contracts held by the owner [WITH RESPECT TO AN UNALLOCATED                                                         
21       ANNUITY CONTRACT NOT INCLUDED IN (4) OF THIS SUBSECTION];                                                         
22 (4)  with respect to an individual participating in a governmental                                                      
23 retirement benefit plan established under 26 U.S.C. 401, 26 U.S.C. 403(b), or 26                                        
24 U.S.C. 457 and covered by an unallocated annuity contract, or to a beneficiary of the                                   
25 individual if the individual is deceased, in the aggregate, $250,000 [$100,000] in                                  
26 present-value annuity benefits, including net cash surrender and net cash withdrawal                                    
27       values; or                                                                                                        
28 (5)  with respect to each payee of a structured settlement annuity, or                                                  
29 beneficiary of the payee if the payee is deceased, $250,000 [$100,000] in present-                                  
30 value annuity benefits in the aggregate, including net cash surrender and net cash                                      
31       withdrawal values, if any.                                                                                        
01    * Sec. 7. AS 21.79.025(d) is amended to read:                                                                      
02            (d)  The association may not be required to cover more than                                                  
03 (1)  an aggregate of $300,000 in benefits with respect to any one life                                                  
04 under (a)(2), (4), and (5) of this section, except that, with respect to benefits for basic                             
05 hospital, medical, and surgical insurance or major medical insurance under (a)(2)(B)                                    
06 of this section, the aggregate liability of the association may not exceed $500,000 for                                 
07       any one individual; or                                                                                            
08                 (2)  $5,000,000 in benefits with respect to one owner of [OR] multiple                              
09       nongroup policies of life insurance, whether the policy owner is an individual, firm,                             
10 corporation, or other person, and whether the persons insured are officers, managers,                                   
11 employees, or other persons, regardless of the number of policies and contracts held                                    
12       by the owner.                                                                                                     
13    * Sec. 8. AS 21.79.060(a) is amended to read:                                                                      
14 (a)  If a member insurer becomes impaired, the association may, with the                                                
15 approval of the director and subject to any conditions imposed by the association that                                  
16       do not impair the contractual obligations of the impaired insurer,                                                
17 (1)  guarantee, assume, reinsure, or provide for the guarantee,                                                         
18 assumption, or reinsurance of the policies or contracts of the impaired insurer; and                                
19       [OR]                                                                                                              
20 (2)  provide money, pledges, loans, notes, guarantees, or other means                                               
21 that are necessary to act under (1) of this subsection and to assure payment of the                                     
22 contractual obligations of the impaired insurer until those obligations are guaranteed,                                 
23       reinsured, or assumed.                                                                                            
24    * Sec. 9. AS 21.79.060(d) is amended to read:                                                                      
25 (d)  If a member insurer becomes insolvent, the association shall, in its                                               
26       discretion and with the approval of the director,                                                                 
27 (1)  guarantee, assume, reinsure, or provide for the guarantee,                                                         
28 assumption, or reinsurance of the covered policies or contracts of the insolvent                                    
29 insurer, or otherwise assure payment of the contractual obligations of the                                          
30 insolvent insurer; and provide money, pledges, loans, notes, guarantees, or other                                   
31       means necessary to discharge the association's duties under this section; or                                  
01 (2)  provide benefits and coverage in accordance with the following                                                 
02       provisions:                                                                                                   
03 (A)  with respect to life and health insurance policies and                                                         
04 annuities, assure payment of benefits, other than terms of conversion and                                           
05 renewability, for a premium identical to the premium that would have                                                
06 been payable under a policy or contract of the insolvent insurer for claims                                         
07            incurred with respect to                                                                                 
08 (i)  a group policy or contract, not later than the                                                                 
09 earlier of the next renewal date under the policy or contract or 45                                                 
10 days, but in no event less than 30 days, after the date on which the                                                
11 association becomes obligated with respect to the policy or                                                         
12                 contract;                                                                                           
13 (ii)  an individual policy, contract, or annuity, not                                                               
14 later than the earlier of the next renewal date, if any, under the                                                  
15 policy or contract or one year, but in no event less than 30 days,                                                  
16 after the date on which the association becomes obligated with                                                      
17                 respect to the policy or contract;                                                                  
18 (B)  with respect to an individual or group policy or                                                               
19 contract, make a diligent effort to provide a known insured, an annuitant,                                          
20 or a group policy owner or group contract owner 30 days' notice of the                                              
21            termination of the benefits provided;                                                                    
22 (C)  with respect to an individual policy or annuity, make                                                          
23 available to each known insured or annuitant, or owner if other than an                                             
24 insured or annuitant, and with respect to an individual formerly insured                                            
25 or formerly an annuitant under a group policy or contract who is not                                                
26 eligible for replacement group coverage, make available substitute                                                  
27 coverage on an individual basis under (D) of this paragraph, if the insured                                         
28 or annuitant had a right under law or under the terminated policy or                                                
29 contract to convert coverage to individual coverage or to continue an                                               
30 individual policy or contract in force until a specified age, or for a specific                                     
31 time during which the insurer did not have the unilateral right to make                                             
01            changes in any provision of the policy or contract or had a right only to                                
02            make changes in premium by class;                                                                        
03                      (D)  in providing the substitute coverage under (C) of this                                    
04            paragraph, the association                                                                               
05                           (i)  shall offer either to reissue the terminated                                         
06                 coverage or to issue an alternate policy;                                                           
07 (ii)  shall offer an alternative or reissued policy                                                                 
08 without requiring evidence of insurability and may not provide for                                                  
09 a waiting period or exclusion that would not have applied under                                                     
10                 the terminated policy; and                                                                          
11                           (iii)  may reinsure an alternative or reissued policy;                                    
12                      (E)  an alternative policy must                                                                
13 (i)  if adopted by the association, be subject to the                                                               
14 approval of the director and the receivership court; the association                                                
15 may adopt alternative policies of various types for future issuance                                                 
16                 without regard to a particular impairment or insolvency;                                            
17 (ii)  contain at least the minimum statutory                                                                        
18 provisions required in the state and provide benefits that may not                                                  
19 be unreasonable in relation to the premium charged; the                                                             
20 association shall set the premium under a table of rates that it shall                                              
21 adopt; the premium must reflect the amount of insurance to be                                                       
22 provided and the age and class of risk of each insured, but may not                                                 
23 reflect changes in the health of the insured after the original policy                                              
24                 was last underwritten;                                                                              
25 (iii)  if issued by the association, provide coverage of                                                            
26 a type similar to that of the policy issued by the impaired or                                                      
27                 insolvent insurer, as determined by the association;                                                
28 (F)  if the association elects to reissue terminated coverage                                                       
29 at a premium rate different from that charged under the terminated                                                  
30 policy, the premium shall be set by the association according to the                                                
31 amount of insurance provided and the age and class of risk and is subject                                           
01            to the approval of the director and the receivership court;                                              
02 (G)  the association's obligations with respect to coverage                                                         
03 under a policy of an impaired or insolvent insurer or under a reissued or                                           
04 alternative policy cease on the date the coverage or policy is replaced by                                          
05 another similar policy by the policy owner, the insured, or the association;                                        
06 (H)  when proceeding under this subsection with respect to a                                                        
07 policy or contract carrying guaranteed minimum interest rates, the                                                  
08 association shall assure the payment or crediting of a rate of interest                                             
09            consistent with AS 21.79.020(c)(4) [HELD BY RESIDENTS;                                                   
10 (2)  ASSURE PAYMENT TO RESIDENTS OF THE                                                                                 
11       CONTRACTUAL OBLIGATIONS OF THE INSOLVENT INSURER;                                                                 
12 (3)  PROVIDE MONEY, PLEDGES, NOTES, GUARANTEES, OR                                                                      
13 OTHER MEANS NECESSARY TO DISCHARGE THE ASSOCIATION'S DUTIES                                                             
14       UNDER THIS SUBSECTION; OR                                                                                         
15 (4)  WITH RESPECT ONLY TO LIFE AND HEALTH INSURANCE                                                                     
16 POLICIES AND ANNUITIES, PROVIDE BENEFITS AND COVERAGES                                                                  
17       REQUIRED UNDER (e) OF THIS SECTION].                                                                              
18    * Sec. 10. AS 21.79.060(l) is amended to read:                                                                     
19 (l)  A premium due for coverage after entry of an order of liquidation of an                                            
20 insolvent insurer belongs to and is payable at the direction of the association. Upon                               
21 request of a liquidator of an insolvent insurer, the association shall provide a                                    
22 report to the liquidator regarding the premium collected by the association. The                                    
23 [, AND THE] association is liable for unearned premiums due to a policy or contract                                     
24       owner arising after the entry of the order.                                                                       
25    * Sec. 11. AS 21.79.060(n) is amended to read:                                                                     
26 (n)  In carrying out its duties under [(a), (c), AND] (d) of this section, the                                          
27 association may impose a permanent policy or contract lien under a guarantee,                                           
28 assumption, or reinsurance agreement if the policy or contract lien is approved by a                                    
29       court and the association finds that                                                                              
30 (1)  the amount that may be assessed under this chapter is less than the                                                
31 amount needed to assure full and prompt performance of the association's duties                                     
01       under this chapter [INSOLVENT INSURER'S CONTRACTUAL OBLIGATIONS];                                             
02       or                                                                                                                
03                 (2)  the economic or financial condition that affects member insurers is                                
04       sufficiently adverse that the imposition of a policy or contract lien is in the public                            
05       interest.                                                                                                         
06    * Sec. 12. AS 21.79.060(o) is amended to read:                                                                     
07 (o)  In carrying out its duties [BEFORE TAKING ACTION] under (d) [(a) -                                         
08 (e)] of this section, the association may request the superior court to impose an                                       
09 injunction against the payment of a cash value and policy loan, or the exercise of                                      
10 another right to withdraw funds held in connection with a policy or contract, in                                        
11 addition to a contractual provision for deferral of a cash or policy loan value. In                                     
12 addition, if the receivership court imposes an injunction on payment of cash values or                                  
13 policy loans or on any other right to withdraw funds of an impaired or insolvent                                        
14 insurer held in conjunction with a policy or contract, the association may defer                                        
15 payment of cash values, policy loans, or other rights for the period of the injunction,                                 
16 except for claims covered by the association to be paid as required by a hardship                                       
17 procedure established by the liquidator or rehabilitator and approved by the                                            
18       receivership court.                                                                                               
19    * Sec. 13. AS 21.79.060(p) is amended to read:                                                                     
20 (p)  If the association fails to take action under (d) [(a) - (e)] of this section                                  
21 within a reasonable period of time after a member insurer becomes insolvent, the                                        
22       director shall assume the powers of the association under (d) [(a) - (e)] of this section.                    
23    * Sec. 14. AS 21.79.060(t) is amended to read:                                                                     
24 (t)  In addition to the rights and powers otherwise established in this chapter,                                        
25       the association may                                                                                               
26 (1)  enter into contracts that are necessary or proper to carry out the                                                 
27       provisions of this chapter;                                                                                       
28 (2)  sue or be sued, and take legal action necessary or proper for                                                      
29 recovery of an unpaid assessment under AS 21.79.070 or settlement of a claim or                                         
30       potential claim;                                                                                                  
31 (3)  borrow money to carry out the purposes of this chapter; notes or                                                   
01       other evidence of indebtedness of the association not in default are legal investments                            
02       for domestic insurers and may be carried as admitted assets;                                                      
03                 (4)  employ or retain those persons necessary to handle the financial                                   
04       transactions of the association and other functions under this chapter;                                           
05                 (5)  negotiate and contract with a liquidator, rehabilitator, conservator,                              
06       or ancillary receiver to carry out the powers and duties of the association;                                      
07 (6)  exercise, for the purposes of this chapter and to the extent approved                                              
08 by the director, the powers of a domestic life or health insurer; however, the                                          
09 association may not issue insurance policies or annuity contracts other than those                                      
10 issued to perform its obligations under this chapter [THE CONTRACTUAL                                               
11       OBLIGATIONS OF AN IMPAIRED OR INSOLVENT INSURER];                                                                 
12 (7)  take legal action to prevent or recover the payment of improper                                                
13       claims;                                                                                                           
14 (8)  join an organization of one or more other state associations with                                                  
15       similar purposes;                                                                                                 
16 (9)  determine, using reasonable business judgment, the means by                                                        
17 which the association is to provide the benefits of this chapter in an economical and                                   
18       efficient manner;                                                                                                 
19 (10)  request information from a person seeking coverage from the                                                       
20 association in order to determine the obligations of the association under this chapter;                                
21 a person receiving a request under this paragraph shall promptly comply with the                                        
22       request;                                                                                                          
23 (11)  request information from a member insurer in order to aid in the                                                  
24 exercise of a power under this section; a member insurer receiving a request under this                                 
25       paragraph shall promptly comply with the request; and                                                             
26 (12)  perform all other acts necessary or proper to implement this                                                      
27       chapter.                                                                                                          
28    * Sec. 15. AS 21.79.060 is amended by adding a new subsection to read:                                             
29 (aa)  The rights and obligations of the association, reinsurers of an insolvent                                         
30 insurer, and the receiver of an insolvent insurer are governed by the following                                         
31       provisions:                                                                                                       
01 (1)  not later than 180 days after the date of the order of liquidation, the                                            
02 association may elect to succeed to the rights and obligations of the ceding member                                     
03 insurer that relate to policies or annuities covered, in whole or in part, by the                                       
04 association, in each case under any one or more reinsurance contracts entered into by                                   
05 the insolvent insurer and its reinsurers and selected by the association; an assumption                                 
06 is effective as of the date of the order of liquidation; the election shall be effected by                              
07 the association or the National Organization of Life and Health Insurance Guaranty                                      
08 Associations on the association's behalf by written notice, return receipt requested, to                                
09 the affected reinsurers; to facilitate the earliest practicable decision about whether to                               
10 assume any of the contracts of reinsurance and to protect the financial position of the                                 
11 estate, as soon as possible after commencement of formal delinquency proceedings,                                       
12 the receiver and each reinsurer of the ceding member insurer shall make available,                                      
13 upon request, to the association or the National Organization of Life and Health                                        
14       Insurance Guaranty Associations on the association's behalf                                                       
15 (A)  copies of in-force contracts of reinsurance and all related                                                        
16 files and records relevant to the determination of whether those contracts                                              
17            should be assumed; and                                                                                       
18 (B)  notices of any defaults under the reinsurance contracts or                                                         
19 any known event or condition that, with the passage of time, could become a                                             
20            default under the reinsurance contracts;                                                                     
21 (2)  as to reinsurance contracts assumed by the association under this                                                  
22       subsection,                                                                                                       
23 (A)  the association is responsible for all unpaid premiums due                                                         
24 under the reinsurance contracts for periods before, on, and after the date of the                                       
25 order of liquidation and is responsible for the performance of all other                                                
26 obligations to be performed on and after the date of the order of liquidation in                                        
27 each case that relates to policies or annuities covered, in whole or in part, by                                        
28 the association; the association may charge policies or annuities covered in part                                       
29 by the association, through reasonable allocation methods, the costs for                                                
30 reinsurance in excess of the obligations of the association and shall provide                                           
31            notice and an accounting of those charges to the liquidator;                                                 
01 (B)  the association is entitled to any amounts payable by the                                                          
02 reinsurer under the reinsurance contracts with respect to losses or events that                                         
03 occur in periods on and after the date of the order of liquidation and that relate                                      
04 to policies or annuities covered, in whole or in part, by the association, if, upon                                     
05 receiving those amounts, the association is obliged to pay to the beneficiary,                                          
06 under the policy or annuity for which the amounts were paid, a portion of the                                           
07            amount equal to the lesser of the                                                                            
08                           (i)  amount received by the association; and                                                  
09 (ii)  amount by which the amount received by the                                                                        
10 association exceeds the amount equal to the benefits paid by the                                                        
11 association under the policy or annuity, less the amount retained by the                                                
12                 insurer applicable to the loss or event;                                                                
13 (C)  not later than 30 days after the association's election, the                                                       
14 association and each reinsurer under contracts assumed by the association shall                                         
15 calculate the net balance due to or from the association under each reinsurance                                         
16 contract as of the election date with respect to policies or annuities covered, in                                      
17 whole or in part, by the association; in making the calculation, the association                                        
18 and reinsurer shall give full credit to all items paid by either the insurer or its                                     
19 receiver or the reinsurer before the election date; the reinsurer shall pay the                                         
20 receiver any amounts due for losses or events before the date of the order of                                           
21 liquidation, subject to any set-off for premiums unpaid for periods before the                                          
22 date, and the association or reinsurer shall pay any remaining balance due the                                          
23 other, in each case, not later than five days after the completion of the                                               
24 calculation; a dispute over the amount due to the association or reinsurer shall                                        
25 be resolved by arbitration under the terms of the affected reinsurance contract                                         
26 or, if the contract does not contain an arbitration clause, as otherwise provided                                       
27 by law; if the receiver has received an amount due to the association under (B)                                         
28 of this paragraph, the receiver shall remit the amount to the association as                                            
29            promptly as practicable;                                                                                     
30 (D)  if the association or receiver on the association's behalf, not                                                    
31 later than 60 days after the election date, pays the unpaid premiums due for                                            
01 periods both before and after the election date that relate to policies or                                              
02 annuities covered, in whole or in part, by the association, the reinsurer may not                                       
03 terminate the reinsurance contracts for failure to pay premium insofar as the                                           
04 reinsurance contracts relate to policies or annuities covered, in whole or in                                           
05 part, by the association, and may not set off an unpaid amount due under                                                
06 another contract or an unpaid amount due from a party other than the                                                    
07            association against amounts due to the association;                                                          
08 (3)  during the period from the date of the order of liquidation until the                                              
09 election date, or, if the election date does not occur, until 180 days after the date of the                            
10       order of liquidation,                                                                                             
11 (A)  neither the association nor the reinsurer shall have any                                                           
12 rights or obligations under reinsurance contracts that the association has the                                          
13 right to assume, whether for periods before, on, or after the date of the order of                                      
14            liquidation; and                                                                                             
15 (B)  the reinsurer, the receiver, and the association shall, to the                                                     
16 extent practicable, provide to each other data and records reasonably requested,                                        
17 if, once the association has elected to assume a reinsurance contract, the                                              
18            parties' rights and obligations are governed by this subsection;                                             
19 (4)  if the association does not elect to assume a reinsurance contract by                                              
20 the election date, the association does not have rights or obligations, in each case for                                
21 periods before, on, and after the date of the order of liquidation, with respect to the                                 
22       reinsurance contract;                                                                                             
23 (5)  when policies or annuities or covered obligations with respect to                                                  
24 policies or annuities are transferred to an assuming insurer, the association may also                                  
25 transfer reinsurance on the policies or annuities, in the case of contracts assumed by                                  
26       the association, subject to the following:                                                                        
27 (A)  unless the reinsurer and the assuming insurer agree                                                                
28 otherwise, the reinsurance contract transferred may not cover any new policies                                          
29            or insurance or annuities in addition to those transferred;                                                  
30 (B)  the obligations described in (1) of this subsection do not                                                         
31 apply with respect to matters arising on and after the effective date of the                                            
01            transfer; and                                                                                                
02 (C)  notice shall be given in writing, return receipt requested, by                                                     
03 the transferring party to the affected reinsurer not less than 30 days before the                                       
04            effective date of the transfer;                                                                              
05 (6)  the provisions of this subsection supersede the provisions of any                                                  
06 state law or of any affected reinsurance contract that provides for or requires any                                     
07 payment of reinsurance proceeds, on account of losses or events that occur in periods                                   
08 on and after the date of the order of liquidation, to the receiver of the insolvent insurer                             
09 or another person; the receiver shall remain entitled to any amounts payable by the                                     
10 reinsurer under the reinsurance contracts with respect to losses or events that occur in                                
11       periods before the date of the liquidation, subject to applicable set-off provisions;                             
12 (7)  except as otherwise provided in this section, nothing in this                                                      
13       subsection                                                                                                        
14 (A)  alters or modifies the terms and conditions of a reinsurance                                                       
15            contract;                                                                                                    
16 (B)  abrogates or limits the right of a reinsurer to claim that the                                                     
17            reinsurer is entitled to rescind a reinsurance contract;                                                     
18 (C)  gives a policyholder or beneficiary an independent cause of                                                        
19 action against a reinsurer that is not otherwise set out in the reinsurance                                             
20            contract;                                                                                                    
21 (D)  limits or affects the association's rights as a creditor of the                                                    
22            estate against the assets of the estate; and                                                                 
23 (E)  applies to a reinsurance agreement covering property or                                                            
24            casualty risks.                                                                                              
25    * Sec. 16. AS 21.79.070(a) is amended to read:                                                                     
26 (a)  For the purpose of providing funds necessary to carry out the powers and                                           
27 duties of the association, the Board of Governors shall by resolution assess the                                    
28 member insurers, separately for each account, at a time and for an amount that the                                      
29 board finds necessary. Assessments are authorized when a resolution is passed and                                   
30 are due not less than 30 days after prior written notice to the member insurers and                                 
31 accrue interest at 10 percent a year from the date payment is due. Authorized                                       
01 assessments become called when notice is mailed by the association to member                                        
02       insurers.                                                                                                     
03    * Sec. 17. AS 21.79.070(c) is amended to read:                                                                     
04 (c)  The amount of a class A assessment shall be determined by the board and                                            
05 may be made on a pro rata or non pro rata basis. If a pro rata assessment is made, the                                  
06 board may provide that it be credited against future class B assessments. A non pro                                     
07 rata assessment may not exceed $500 for each [$250 PER] member insurer in a                                         
08 calendar year. The amount of a class B assessment shall be allocated for assessment                                     
09 purposes among the accounts under an allocation formula that may be based on the                                        
10 premiums or reserves of the impaired or insolvent insurer or by another standard                                        
11 determined by the board in its sole discretion as being fair and reasonable under the                                   
12       circumstances.                                                                                                    
13    * Sec. 18. AS 21.79.080(c) is amended to read:                                                                     
14 (c)  A member insurer shall comply with the plan of operation. The plan of                                              
15       operation must                                                                                                    
16                 (1)  establish procedures for handling assets of the association;                                       
17 (2)  establish the amount and method of reimbursing members of the                                                      
18       board under AS 21.79.050(c);                                                                                      
19 (3)  establish regular places and times for meetings of the board in the                                                
20       state; the board may conduct meetings telephonically;                                                             
21 (4)  establish procedures for keeping records of all financial                                                          
22       transactions of the association, its agents, and the board;                                                       
23 (5)  establish terms of office for members of the board, and establish                                                  
24 procedures for the selection of the members of the board and for the director's                                         
25       approval of the members selected;                                                                                 
26 (6)  establish additional procedures for assessments under                                                              
27       AS 21.79.070; [AND]                                                                                               
28 (7)  establish procedures for removing a member of the board for                                                    
29 cause, including procedures for removing a member of the board who becomes                                          
30       an impaired or insolvent insurer;                                                                             
31 (8)  establish policy and procedures for addressing conflicts of                                                    
01       interest; and                                                                                                 
02                 (9)  contain additional provisions necessary or proper for the                                      
03       association to exercise its powers and duties.                                                                    
04    * Sec. 19. AS 21.79.090(c) is amended to read:                                                                     
05 (c)  A final [AN] action of the board or the association may be appealed to the                                     
06 director by a member insurer if the appeal is taken not later than 60 [WITHIN 30]                                   
07 days after the date the notice of the action is mailed. Final action or order of the                                    
08       director may be reviewed by the superior court.                                                                   
09    * Sec. 20. AS 21.79.090(d) is amended to read:                                                                     
10 (d)  The liquidator, rehabilitator, or conservator of an impaired or insolvent                                      
11       insurer may notify all interested persons of the effect of this chapter.                                          
12    * Sec. 21. AS 21.79.110(b) is amended to read:                                                                     
13 (b)  The association shall keep records of meetings relating to its activities.                                         
14       Records of meetings may only be made public under AS 21.79.040(b)                                                 
15 (1)  after the termination of a liquidation, rehabilitation, or conservation                                            
16       proceeding that involves the impaired or insolvent insurer; or                                                
17 (2)  [AFTER THE INSURER IS NO LONGER IMPAIRED OR                                                                        
18       INSOLVENT; OR                                                                                                     
19                 (3)]  upon the order of a court of competent jurisdiction.                                              
20    * Sec. 22. AS 21.79.140 is amended to read:                                                                        
21 Sec. 21.79.140. Civil immunity. The association and its agents and                                                    
22 employees, members of the Board of Governors, member insurers, and agents and                                           
23 employees of member insurers, and the director and the director's representatives are                                   
24 not civilly liable, and a cause of action of any nature may not arise, for an action or                             
25 omission in performing duties under this chapter. The immunity extends to the                                       
26 participation in an organization of one or more other state associations of similar                                 
27 purposes and to that organization and its agents or employees [IN THIS                                              
28 SECTION, "DUTIES" INCLUDES PARTICIPATION IN AN ORGANIZATION OF                                                          
29       ONE OR MORE STATE ASSOCIATIONS OF LIFE OR HEALTH INSURERS].                                                       
30    * Sec. 23. AS 21.79.150 is amended to read:                                                                        
31 Sec. 21.79.150. Stay of proceedings; default judgment. Proceedings                                                    
01 involving an insolvent insurer shall be stayed at least 180 [60] days after the date of a                           
02 final order of liquidation, rehabilitation, or conservation in order to allow the                                       
03 association to exercise a power or duty authorized under this chapter. If a default                                     
04 judgment is entered against an insolvent insurer, the association may apply to have the                                 
05       judgment set aside or may defend against the action on its merits.                                                
06    * Sec. 24. AS 21.79.900(5) is amended to read:                                                                     
07                 (5)  "called" means that a notice has been mailed [ISSUED] by the                                   
08       association to member insurers requiring that an authorized assessment be paid within                             
09       the time set out in the notice;                                                                                   
10    * Sec. 25. AS 21.79.900(6) is amended to read:                                                                     
11 (6)  "contractual obligation" means an obligation under a policy,                                                       
12 contract, or certificate under a group policy or contract, or a portion of one for which                            
13       coverage is provided under AS 21.79.020(a), (b), (d), or (e);                                                 
14    * Sec. 26. AS 21.79.900(7) is amended to read:                                                                     
15 (7)  "covered policy" means a policy or contract or a portion of a                                                  
16 policy or contract for which coverage is provided under [DESCRIBED IN]                                              
17       AS 21.79.020(a), [AND] (b), (d), or (e);                                                                  
18    * Sec. 27. AS 21.79.900(10) is amended to read:                                                                    
19 (10)  "member insurer" means an insurer licensed to transact insurance                                                  
20 in the state, or a hospital or medical service corporation licensed under AS 21.87,                                 
21 for which coverage is provided in AS 21.79.020 [, OR A SUBSCRIBER CONTRACT                                              
22 PROVIDING BENEFITS DESCRIBED IN AS 21.87.120(a)(2) - (4) OR                                                             
23 21.87.130(a)(2) AND (3),] and includes an insurer, or a hospital or medical service                                 
24 corporation licensed under AS 21.87, whose license or certificate of authority in this                              
25 state may have been suspended, revoked, not renewed, or voluntarily withdrawn;                                          
26       "member insurer" does not include                                                                                 
27 (A)  a health maintenance organization licensed under                                                                   
28            AS 21.86;                                                                                                    
29                      (B)  a fraternal benefit society licensed under AS 21.84;                                          
30                      (C)  a mandatory state pooling plan;                                                               
31 (D)  a mutual assessment company or an entity that operates on                                                          
01            an assessment basis;                                                                                         
02                      (E)  an insurance exchange licensed under AS 21.75;                                                
03                      (F)  [A HOSPITAL OR MEDICAL SERVICE                                                                
04            ORGANIZATION LICENSED UNDER AS 21.87;                                                                        
05                      (G)]  an organization that has a license or certificate limited to                                 
06            the issuance of charitable gift annuities; or                                                                
07                      (G) [(H)]  an entity similar to one described under (A) - (F) [(A)                         
08            - (G)] of this paragraph;                                                                                    
09    * Sec. 28. AS 21.79.900(13) is amended to read:                                                                    
10 (13)  "plan sponsor" means, in the case of a benefit plan established or                                                
11       maintained by                                                                                                     
12                      (A)  a single employer, the employer;                                                              
13                      (B)  an employee organization, the employee organization; or                                       
14 (C)  two or more employers or jointly by one or more                                                                    
15 employers and one or more employee organizations, the association,                                                      
16 committee, joint board of trustees, or other similar group of representatives of                                    
17            the parties who establish or maintain the benefit plan;                                                      
18    * Sec. 29. AS 21.79.900(14) is amended to read:                                                                    
19 (14)  "premium" means the amounts or considerations, by whichever                                                   
20 name called, [AMOUNT] received on a covered policy or contract less a premium,                                      
21 consideration, and deposit returned, and less a dividend and experience credit;                                         
22 "premium" does not include amounts or considerations [AN AMOUNT] charged for                                        
23 an assessment or an amount received for a policy or contract or for the portions of a                                   
24 policy or contract for which coverage is not provided under AS 21.79.020(b) and (c),                                
25 except that assessable premium may not be reduced on account of                                                     
26 AS 21.79.020(c)(4) relating to interest limitations and AS 21.79.025(a)(2) - (5), (b),                              
27 and (d) relating to limitations with respect to one individual, one participant, and                                
28       one contract owner; "premium" does not include                                                                
29 (A)  premiums in excess of $5,000,000 on an unallocated                                                             
30 annuity contract not issued under a governmental retirement benefit plan                                            
31 or its trustee established under 26 U.S.C. 401, 26 U.S.C. 403(b), or 26                                             
01            U.S.C. 457; or                                                                                           
02 (B)  with respect to multiple nongroup policies of life                                                             
03 insurance owned by one owner, whether the policy holder is an individual,                                           
04 firm, corporation, or other person, and whether the persons insured are                                             
05 officers, managers, employees, or other persons, premiums in excess of                                              
06 $5,000,000 with respect to those policies or contracts, regardless of the                                           
07            number of policies or contracts held by the owner;                                                       
08    * Sec. 30. AS 21.79.900(16) is amended to read:                                                                    
09                 (16)  "resident" means a person to whom a contractual obligation is                                     
10 owed under this chapter and who resides in this state on the date of entry of a court                                   
11 order that determines a member insurer to be an impaired or insolvent insurer [,                                        
12 WHICHEVER OCCURS FIRST]; a person may be a resident of only one state,                                                  
13 which, in the case of a person other than a natural person, shall be the principal place                                
14       of business;                                                                                                      
15    * Sec. 31. AS 21.79.900(19) is amended to read:                                                                    
16 (19)  "supplemental contract" means a written [AN] agreement entered                                                
17 into for the distribution of proceeds under life, health, or annuity policy or contract                             
18       benefits;                                                                                                         
19    * Sec. 32. AS 21.79.900 is amended by adding new paragraphs to read:                                               
20 (21)  "benefit plan" means a specific employee, union, or association of                                                
21       natural persons benefit plan;                                                                                     
22 (22)  "election date" means the date of the association's election under                                                
23       AS 21.79.060(aa);                                                                                                 
24 (23)  "extra contractual claim" includes a claim related to bad faith in                                                
25       payment of a claim, punitive or exemplary damages, and attorney fees and costs;                                   
26 (24)  "published monthly average" means the monthly average of                                                          
27 corporate bond yields, as published by Moody's Investors Service, Inc., or its                                          
28 successor or, if Moody's average of corporate bond yields is not published, a                                           
29       substantially similar average established by regulation adopted by the director.                                  
30    * Sec. 33. AS 21.87.340 is amended to read:                                                                        
31 Sec. 21.87.340. Other provisions applicable. In addition to the provisions                                            
01 contained or referred to previously in this chapter, the following chapters and                                         
02 provisions of this title also apply with respect to service corporations to the extent                                  
03 applicable and not in conflict with the express provisions of this chapter and the                                      
04 reasonable implications of the express provisions, and, for the purposes of the                                         
05       application, the corporations shall be considered to be mutual "insurers":                                        
06 (1)  AS 21.03;                                                                                                          
07 (2)  AS 21.06;                                                                                                          
08 (3)  AS 21.07;                                                                                                          
09                 (4)  AS 21.09, except AS 21.09.090;                                                                     
10 (5)  AS 21.18.010;                                                                                                      
11 (6)  AS 21.18.030;                                                                                                      
12 (7)  AS 21.18.040;                                                                                                      
13                 (8)  AS 21.18.080 - 21.18.086;                                                                          
14                 (9)  AS 21.36;                                                                                          
15                 (10)  AS 21.42.110, 21.42.345 - 21.42.395;                                                              
16                 (11)  AS 21.51.120 and 21.51.400;                                                                       
17                 (12)  AS 21.51.405;                                                                                     
18 (13)  AS 21.53;                                                                                                         
19 (14)  AS 21.54;                                                                                                         
20 (15)  AS 21.56;                                                                                                         
21                 (16)  AS 21.69.400;                                                                                     
22                 (17)  AS 21.69.520;                                                                                     
23                 (18)  AS 21.69.600, 21.69.620, and 21.69.630;                                                           
24                 (19)  AS 21.78;                                                                                         
25                 (20)  AS 21.79;                                                                                     
26                 (21)  AS 21.96.060;                                                                                 
27                 (22) [(21)]  AS 21.97.                                                                              
28    * Sec. 34. AS 21.79.020(f), 21.79.060(c), 21.79.060(e), 21.79.060(f), 21.79.060(g),                                
29 21.79.060(h), 21.79.060(i), 21.79.060(j), 21.79.060(u), 21.79.060(v), 21.79.060(w),                                     
30 21.79.060(x), and 21.79.110(e) are repealed.                                                                            
31    * Sec. 35. The uncodified law of the State of Alaska is amended by adding a new section to                         
01 read:                                                                                                                   
02 TRANSITION: REGULATIONS. The director of the division of insurance may adopt                                            
03 regulations necessary to implement the changes made by this Act. The regulations take effect                            
04 under AS 44.62 (Administrative Procedure Act), but not before the effective date of the                                 
05 relevant provisions of this Act.                                                                                        
06    * Sec. 36. Section 35 of this Act takes effect immediately under AS 01.10.070(c).                                  
07    * Sec. 37. Except as provided in sec. 36 of this Act, this Act takes effect July 1, 2017.