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.