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CSHB 403(L&C): "An Act relating to the Alaska Life and Health Insurance Guaranty Association; and providing for an effective date."

00                       CS FOR HOUSE BILL NO. 403(L&C)                                                                    
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 21.79.010 is amended to read:                                                                      
05 Sec. 21.79.010.  Purpose. The purpose of this chapter is to protect, subject to                                       
06 certain limitations, the persons specified in AS 21.79.020(a) against failure in the                                    
07 performance of contractual obligations under life, [INSURANCE AND] health,                                      
08 [INSURANCE POLICIES] and annuity policies, plans, or contracts specified in                                         
09 AS 21.79.020(b) because of the impairment or insolvency of the member insurer that                                      
10 issued the policies, plans, or contracts. To provide this protection, an association of                             
11 member insurers is created under AS 21.79.040 to pay benefits and continue                                          
12 coverages as limited by this chapter, and members of the association are subject to                                     
13       assessment to provide funds to carry out the purpose of this chapter.                                           
14    * Sec. 2. AS 21.79.020(a) is amended to read:                                                                      
01            (a)  This chapter applies to a policy and contract specified in (b) of this section                          
02       and to a person who                                                                                               
03 (1)  except for a nonresident certificate holder under a group policy or                                                
04 contract, is the beneficiary, assignee, or payee, including health care providers                                   
05 rendering services covered under health insurance policies or certificates, of a                                    
06       person described in (2) of this subsection; and                                                                   
07                 (2)  except in the case of an unallocated annuity contract or a structured                              
08       settlement annuity, is the owner of, or a certificate holder or enrollee under, the policy                    
09       or contract, and who                                                                                              
10                      (A)  is a resident; or                                                                             
11                      (B)  is not a resident, if the following conditions are satisfied:                                 
12 (i)  the member insurer that issued the policy or contract                                                          
13                 is domiciled in this state;                                                                             
14 (ii)  the state in which the person resides has an                                                                      
15                 association similar to the association created by this chapter; and                                     
16 (iii)  the person is not eligible for coverage by an                                                                    
17 association in any other state due to the fact that the insurer, hospital                                           
18 or medical service corporation, or health maintenance organization                                                  
19 was not licensed at the time specified in the guaranty association                                                  
20                 [AS REQUIRED BY] law of [IN] that state.                                                            
21    * Sec. 3. AS 21.79.020(b) is amended to read:                                                                      
22 (b)  This chapter applies to a person specified in (a) of this section for a policy                                 
23 or contract of [AND TO A] direct, nongroup life insurance, health insurance,                                
24 annuity, and supplemental policy or contract, to a certificate under a direct group life,                               
25 health, annuity, or supplemental policy or contract, to a subscriber's contract issued                              
26 by a hospital or medical service corporation under AS 21.87, to a subscriber's                                      
27 contract issued by a health maintenance organization under AS 21.86, and to an                                      
28 unallocated annuity contract issued by a member insurer, except as otherwise limited                                    
29 by this chapter. In this subsection, "annuity policy or contract" or "certificate                                   
30 under a direct group life, health, annuity, or supplemental policy or contract"                                     
31 includes a guaranteed investment contract, a deposit administration contract, an                                    
01       unallocated funding agreement, an allocated funding agreement, a structured                                   
02       settlement annuity, an annuity issued to or in connection with a government                                   
03       lottery, and an immediate or deferred annuity contract.                                                       
04    * Sec. 4. AS 21.79.020(c) is amended to read:                                                                      
05            (c)  This chapter does not apply to                                                                          
06                 (1)  that part of a policy or contract that is not guaranteed by the                                    
07       member insurer;                                                                                               
08                 (2)  that part of the risk borne by the policy or contract owner                                    
09       [HOLDER];                                                                                                         
10 (3)  a policy or contract of reinsurance, unless an assumption certificate                                              
11       has been issued;                                                                                                  
12 (4)  that part of a policy or contract, except for part of a policy or                                              
13 contract, including a rider, that provides long-term care or other health                                           
14 insurance benefits, to the extent that the rate of interest on which it is based, or the                            
15 interest rate, crediting rate, or similar factor determined by use of an index or other                                 
16 external reference stated in the policy or contract employed in calculating returns or                                  
17       changes in value,                                                                                                 
18 (A)  averaged over the period of four years before the date on                                                          
19 which the member insurer becomes an impaired or insolvent insurer under this                                            
20 chapter, whichever occurs first, exceeds the rate of interest determined by                                             
21 subtracting two percentage points from the published monthly average for that                                           
22 same four-year period or for a lesser period if the policy or contract was issued                                       
23 less than four years before the member insurer becomes an impaired or                                                   
24            insolvent insurer under this chapter, whichever occurs first; and                                            
25 (B)  on and after the date on which the member insurer becomes                                                          
26 an impaired or insolvent insurer under this chapter, whichever occurs first,                                            
27 exceeds the rate of interest determined by subtracting three percentage points                                          
28            from the most recent published monthly average;                                                              
29 (5)  a portion of a policy or contract issued to a plan or program of                                               
30 an employer, association, or similar entity to provide life, health, or an annuity benefit                              
31 to an employee, [OR] member, or other person, to the extent that the plan or program                            
01       is self-funded or uninsured, including a benefit payable by the employer, association,                            
02       or similar entity under                                                                                           
03                      (A)  a multiple employer welfare arrangement as defined in 29                                      
04            U.S.C. 1002 (Employee Retirement Income Security Act of 1974);                                               
05                      (B)  a minimum premium group insurance plan;                                                       
06                      (C)  a stop-loss group insurance plan; or                                                          
07                      (D)  an administrative services only contract;                                                     
08                 (6)  that part of a policy or contract that provides a dividend or                                      
09       experience rating credit or voting rights, or provides that a fee or allowance be paid to                         
10 a person, including the policy or contract owner [HOLDER], in connection with the                                   
11       service to or administration of the policy or contract;                                                           
12 (7)  a policy or contract issued in this state by a member insurer at a                                                 
13 time when it was not licensed or did not have a certificate of authority to issue the                                   
14       policy or contract in this state;                                                                                 
15 (8)  a person who is a payee or beneficiary of a contract owner                                                     
16 [HOLDER] who is a resident of this state if the payee or beneficiary is provided                                        
17       coverage by the association of another state;                                                                     
18 (9)  a person covered under (d) [(e)] of this section if any coverage is                                            
19       provided by the association of another state to that person;                                                      
20 (10)  an unallocated annuity contract issued to or in connection with a                                                 
21 benefit plan protected under the United States Pension Benefit Guaranty Corporation,                                
22 regardless of whether the United States Pension Benefit Guaranty Corporation has                                        
23       become liable to make any payments with respect to the benefit plan;                                              
24 (11)  that part of an unallocated annuity contract that is not issued to or                                             
25 in connection with a specific employee, union, or association of natural persons                                        
26       benefit plan or a government lottery;                                                                             
27 (12)  that part of a policy or contract to the extent that assessments                                                  
28       required by AS 21.79.070 with respect to the policy or contract are preempted by law;                             
29 (13)  an obligation that does not arise under the express written terms of                                              
30 the policy or contract issued by the member insurer to the enrollee, certificate                                
31       holder, contract owner, or policy owner, including, without limitation,                                   
01                      (A)  a claim based on marketing materials;                                                         
02                      (B)  a claim based on a side letter or other document that was                                     
03            issued by the member insurer without meeting applicable policy or contract                           
04            form filing or approval requirements;                                                                        
05                      (C)  a misrepresentation of or regarding policy or contract                                    
06            benefits;                                                                                                    
07                      (D)  an extra contractual claim; or                                                                
08                      (E)  a claim for penalties or consequential or incidental                                          
09            damages;                                                                                                     
10 (14)  a contractual agreement that establishes the member insurer's                                                     
11 obligations to provide a book value accounting guaranty for defined contribution                                        
12 benefit plan participants by reference to a portfolio of assets that is owned by the                                    
13 benefit plan or its trustee, which, in each case, is not an affiliate of the member                                     
14       insurer; [OR]                                                                                                     
15 (15)  that part of a policy or contract to the extent the part of the policy                                            
16 or contract provides for interest or other changes in value to be determined by the use                                 
17 of an index or other external reference stated in the policy or contract, but that have                                 
18 not been credited to the policy or contract, or as to which the policy or contract                                      
19 owner's rights are subject to forfeiture, as of the date the member insurer becomes an                                  
20 impaired or insolvent insurer under this chapter, whichever is earlier; if a policy's or                                
21 contract's interest or changes in value are credited less frequently than annually, then,                               
22 for purposes of determining the values that have been credited and are not subject to                                   
23 forfeiture under this paragraph, the interest or change in value determined by using the                                
24 procedures defined in the policy or contract shall be credited as if the contractual date                               
25 of crediting interest or changing values was the date of impairment or insolvency,                                      
26       whichever is earlier, and will not be subject to forfeiture;                                                  
27 (16)  a policy or contract providing a hospital, medical,                                                           
28 prescription drug, or other health care benefit in accordance with 42 U.S.C.                                        
29       1395w-21 - 1395w-154 or federal regulations adopted under those sections;                                     
30 (17)  a person who acquires rights to receive payments through a                                                    
31 structured settlement factoring transaction as defined in 26 U.S.C. 5891(c)(3)(A),                                  
01       regardless of whether the transaction occurred before, on, or after 26 U.S.C.                                 
02       5891(c)(3)(A) became effective; or                                                                            
03 (18)  structured settlement annuity benefits to which a payee or                                                    
04 beneficiary has transferred the payee's or beneficiary's rights in a structured                                     
05 settlement factoring transaction as defined in 26 U.S.C. 5891(c)(3)(A), regardless                                  
06 of whether the transaction occurred before, on, or after 26 U.S.C. 5891(c)(3)(A)                                    
07       became effective.                                                                                             
08    * Sec. 5. AS 21.79.020(d) is amended to read:                                                                      
09            (d)  This chapter, except for (a) of this section, applies to an unallocated                                 
10 annuity contract [SPECIFIED UNDER (b) OF THIS SECTION,] and shall provide                                               
11       coverage to a person who is the owner of                                                                          
12 (1)  the unallocated annuity contract if the contract is issued to or in                                                
13 connection with a specific benefit plan whose plan sponsor has its principal place of                                   
14       business in this state; and                                                                                       
15 (2)  an unallocated annuity contract issued to or in connection with a                                                  
16       government lottery if the owner is a resident.                                                                    
17    * Sec. 6. AS 21.79.020(e) is amended to read:                                                                      
18 (e)  This chapter, except for (a) of this section, applies to a structured                                              
19 settlement annuity [SPECIFIED UNDER (b) OF THIS SECTION,] and shall provide                                             
20 coverage to a person who is a payee under a structured settlement annuity, or the                                       
21       beneficiary of a payee if the payee is deceased, if the payee is                                                  
22                 (1)  a resident, regardless of where the contract owner resides; or                                     
23 (2)  not a resident, but only if both of the following conditions exist                                             
24       [EXISTS]:                                                                                                         
25                      (A)  the contract owner of the structured settlement annuity is                                    
26                           (i)  a resident; or                                                                           
27 (ii)  not a resident, but the insurer that issued the                                                                   
28 structured settlement annuity is domiciled in this state, and the state in                                              
29 which the contract owner resides has an association similar to the                                                      
30                 association created by this chapter; and                                                                
31 (B)  the payee, or the payee's beneficiary, and the contract                                                            
01            owner are not eligible for coverage by the association of the state in which the                             
02            payee or contract owner resides.                                                                             
03    * Sec. 7. AS 21.79.025(a) is amended to read:                                                                      
04            (a)  The benefits for which the association may become liable may not exceed                                 
05       the lesser of                                                                                                     
06                 (1)  the contractual obligations for which the member insurer is liable                             
07       or would have been liable if it were not an impaired or insolvent insurer;                                        
08                 (2)  with respect to any one life, regardless of the number of policies or                              
09       contracts,                                                                                                        
10 (A)  $300,000 in life insurance death benefits, but not more than                                                       
11 $100,000 in net cash surrender and net cash withdrawal values for life                                                  
12            insurance;                                                                                                   
13                      (B)  for [IN] health insurance benefits,                                                       
14 (i)  $100,000 for coverage not defined as disability                                                                    
15 income insurance, health benefit plans, or long-term care insurance,                                            
16 [OR BASIC HOSPITAL, MEDICAL, AND SURGICAL                                                                               
17 INSURANCE OR MAJOR MEDICAL INSURANCE,] including any                                                                    
18                 net cash surrender and net cash withdrawal values;                                                      
19 (ii)  $300,000 for disability income insurance as defined                                                           
20 in AS 21.12.052 and $300,000 for long-term care insurance as defined                                                
21                 in AS 21.53.200;                                                                                        
22 (iii)  $500,000 for health benefit plans [BASIC                                                                     
23 HOSPITAL, MEDICAL, AND SURGICAL INSURANCE OR                                                                            
24                 MAJOR MEDICAL INSURANCE];                                                                               
25 (C)  $250,000 in the present value of annuity benefits, including                                                       
26            net cash surrender and net cash withdrawal values;                                                           
27 (3)  with respect to either [ANY] one contract owner provided                                                   
28 coverage under AS 21.79.020(d)(2) [HOLDER] or one plan sponsor whose plan                                       
29 owns directly or in trust one or more unallocated annuity contracts not included in (4)                                 
30 of this subsection, $5,000,000 in unallocated annuity contract benefits, irrespective of                                
31 the number of contracts held by that contract owner [HOLDER] or plan sponsor                                        
01 except that, in the case of one or more unallocated annuity contracts that are covered                                  
02 under this chapter and that are owned by a trust or other entity for the benefit of two or                              
03 more plan sponsors, coverage shall be provided by the association if the largest                                        
04 interest in the trust or entity owning the contract is held by a plan sponsor whose                                     
05 principal place of business is in this state; however, the association is not liable to                                 
06 cover more than $5,000,000 in benefits, regardless of the number of policies and                                    
07 contracts held by the owner [WITH RESPECT TO AN UNALLOCATED                                                         
08       ANNUITY CONTRACT NOT INCLUDED IN (4) OF THIS SUBSECTION];                                                         
09 (4)  with respect to an individual participating in a governmental                                                      
10 retirement benefit plan established under 26 U.S.C. 401, 26 U.S.C. 403(b), or 26                                        
11 U.S.C. 457 and covered by an unallocated annuity contract, or to a beneficiary of the                                   
12 individual if the individual is deceased, in the aggregate, $250,000 [$100,000] in                                  
13 present-value annuity benefits, including net cash surrender and net cash withdrawal                                    
14       values; or                                                                                                        
15 (5)  with respect to each payee of a structured settlement annuity, or                                                  
16 beneficiary of the payee if the payee is deceased, $250,000 [$100,000] in present-                                  
17 value annuity benefits in the aggregate, including net cash surrender and net cash                                      
18       withdrawal values, if any.                                                                                        
19    * Sec. 8. AS 21.79.025(c) is amended to read:                                                                      
20 (c)  In providing coverage required under AS 21.79.060, the association may                                             
21 not be required to guarantee, assume, reissue, reinsure, or perform, or cause to be                                 
22 guaranteed, assumed, reissued, reinsured, or performed, the contractual obligations of                              
23 an insolvent or impaired insurer under a covered policy or contract when the                                            
24 obligations do not materially affect the economic values or economic benefits of the                                    
25       covered policy or contract.                                                                                       
26    * Sec. 9. AS 21.79.025(d) is amended to read:                                                                      
27            (d)  The association may not be required to cover more than                                                  
28 (1)  an aggregate of $300,000 in benefits with respect to any one life                                                  
29 under (a)(2), (4), and (5) of this section, except that, with respect to benefits for health                        
30 benefit plans [BASIC HOSPITAL, MEDICAL, AND SURGICAL INSURANCE OR                                                   
31 MAJOR MEDICAL INSURANCE] under (a)(2)(B) of this section, the aggregate                                                 
01       liability of the association may not exceed $500,000 for any one individual; or                                   
02 (2)  $5,000,000 in benefits with respect to one owner of [OR] multiple                                              
03 nongroup policies of life insurance, whether the policy or contract owner is an                                     
04 individual, firm, corporation, or other person, and whether the persons insured are                                     
05 officers, managers, employees, or other persons, regardless of the number of policies                                   
06       and contracts held by the owner.                                                                                  
07    * Sec. 10. AS 21.79.025 is amended by adding a new subsection to read:                                             
08            (e)  For purposes of this chapter, benefits provided by a long-term care rider to                            
09       a life insurance policy or annuity contract will be considered the same type of benefits                          
10       as the base life insurance policy or annuity contract to which the rider relates.                                 
11    * Sec. 11. AS 21.79.040(a) is amended to read:                                                                     
12 (a)  There is established as a nonprofit legal entity the Alaska Life and Health                                        
13 Insurance Guaranty Association. Each member insurer shall be a member of the                                            
14 association as a condition of the insurer's authority to transact insurance, a hospital or                          
15 medical service corporation business, or a health maintenance organization                                          
16 business in this state. The association shall perform its functions under a plan of                                 
17 operation established and approved under AS 21.79.080 and shall exercise its powers                                     
18 through the Board of Governors established under AS 21.79.050. For purposes of                                          
19       administration and assessment, the association shall maintain the following accounts:                             
20                 (1)  the health [INSURANCE] account; and                                                                
21 (2)  the life insurance and annuity account, including the following                                                    
22       subaccounts:                                                                                                      
23                      (A)  life insurance account;                                                                       
24 (B)  annuity account that must include annuity contracts owned                                                          
25 by a governmental retirement benefit plan, or its trustee, qualified under 26                                           
26 U.S.C. 401, 26 U.S.C. 403(b), or 26 U.S.C. 457 (Internal Revenue Code), but                                             
27            that otherwise excludes unallocated annuities; and                                                           
28 (C)  unallocated annuity account that must exclude contracts                                                            
29 owned by a governmental retirement benefit plan, or its trustee, qualified under                                        
30            26 U.S.C. 401, 26 U.S.C. 403(b), or 26 U.S.C. 457 (Internal Revenue Code).                                   
31    * Sec. 12. AS 21.79.050(a) is amended to read:                                                                     
01 (a)  The Board of Governors of the association consists of not less than seven                                      
02 [FIVE] nor more than 11 [NINE] representatives of member insurers. The director                                     
03 may appoint two individuals as members of the board to represent the public. Terms of                                   
04 office for board members shall be established in the plan of operation submitted under                                  
05 AS 21.79.080. Member insurers shall select the insurer board members, subject to the                                    
06 approval of the director. A vacancy in a board membership held by an insurer member                                     
07 shall be filled for the unexpired term by a majority vote of the remaining board                                        
08 members, subject to the approval of the director. A vacancy in a board membership                                       
09 held by a representative of the public shall be filled by the director. A board member                                  
10 who represents the public may not be an officer, director, or employee of an insurer,                               
11 hospital or medical service corporation, or a health maintenance organization                                       
12       and may not be engaged in the business of insurance.                                                              
13    * Sec. 13. 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, reissue, reinsure, or provide for the guarantee,                                            
18 assumption, reissuance, or reinsurance of the policies or contracts of the impaired                                 
19       insurer; and [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. 14. 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, reissue, reinsure, or provide for the guarantee,                                            
28 assumption, reissuance, or reinsurance of the covered policies or contracts of the                              
29 insolvent insurer, or otherwise assure payment of the contractual obligations of                                    
30 the insolvent insurer; and provide money, pledges, loans, notes, guarantees, or                                     
31 other means that are necessary to discharge the association's duties under this                                     
01       section; or                                                                                                   
02                 (2)  provide benefits and coverage in accordance with the following                                 
03       provisions:                                                                                                   
04                      (A)  with respect to policies and contracts, assure payment                                    
05            of benefits that would have been payable under a policy or contract of the                               
06            insolvent insurer for claims incurred with respect to                                                    
07 (i)  a group policy or contract, not later than the                                                                 
08 earlier of the next renewal date under the policy or contract or 45                                                 
09 days, but in no event less than 30 days, after the date on which the                                                
10 association becomes obligated with respect to the policy or                                                         
11                 contract;                                                                                           
12 (ii)  an individual policy, contract, or annuity, not                                                               
13 later than the earlier of the next renewal date, if any, under the                                                  
14 policy or contract or one year, but in no event less than 30 days,                                                  
15 after the date on which the association becomes obligated with                                                      
16                 respect to the policy or contract;                                                                  
17 (B)  with respect to an individual or group policy or                                                               
18 contract, make a diligent effort to provide a known insured, an enrollee,                                           
19 an annuitant, or a group policy owner or group contract owner 30 days'                                              
20            notice of the termination of the benefits provided;                                                      
21 (C)  with respect to an individual policy or contract, make                                                         
22 available to each known insured, enrollee, or annuitant, or owner if other                                          
23 than an insured, enrollee, or annuitant, and with respect to an individual                                          
24 who was formerly an insured, enrollee, or annuitant under a group policy                                            
25 or contract who is not eligible for replacement group coverage, make                                                
26 available substitute coverage on an individual basis under (D) of this                                              
27 paragraph, if the insured, enrollee, or annuitant had a right under law or                                          
28 under the terminated policy or contract to convert coverage to individual                                           
29 coverage or to continue an individual policy or contract in force until a                                           
30 specified age, or for a specific time during which the insurer, hospital or                                         
31 medical service corporation, or health maintenance organization did not                                             
01            have the unilateral right to make changes in any provision of the policy or                              
02            contract or had a right only to 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 or contract at actuarially                                 
07                 justified rates;                                                                                    
08                           (ii)  shall offer an alternative or reissued policy or                                    
09                 contract without requiring evidence of insurability and may not                                     
10 provide for a waiting period or exclusion that would not have                                                       
11                 applied under the terminated policy or contract; and                                                
12 (iii)  may reinsure an alternative or reissued policy or                                                            
13                 contract;                                                                                           
14                      (E)  an alternative policy or contract must                                                    
15 (i)  if adopted by the association, be subject to the                                                               
16 approval of the director; the association may adopt alternative                                                     
17 policies or contracts of various types for future issuance without                                                  
18                 regard to a particular impairment or insolvency;                                                    
19 (ii)  contain at least the minimum statutory                                                                        
20 provisions required in the state and provide benefits that may not                                                  
21 be unreasonable in relation to the premium charged; the                                                             
22 association shall set the premium under a table of rates that it shall                                              
23 adopt; the premium must reflect the amount of insurance to be                                                       
24 provided and the age and class of risk of each insured, but may not                                                 
25 reflect changes in the health of the insured after the original policy                                              
26                 or contract was last underwritten;                                                                  
27 (iii)  if issued by the association, provide coverage of                                                            
28 a type similar to that of the policy or contract issued by the                                                      
29                 impaired or insolvent insurer, as determined by the association;                                    
30 (F)  if the association elects to reissue terminated coverage                                                       
31 at a premium rate different from that charged under the terminated                                                  
01 policy or contract, the premium shall be actuarially justified and set by                                           
02 the association according to the amount of insurance or coverage provided                                           
03            and the age and class of risk;                                                                           
04 (G)  the association's obligations with respect to coverage                                                         
05 under a policy or contract of an impaired or insolvent insurer or under a                                           
06 reissued or alternative policy or contract stop on the date the coverage,                                           
07 policy, or contract is replaced by another similar policy or contract by the                                        
08            policy or contract owner, the insured, the enrollee, or the association;                                 
09 (H)  when proceeding under this subsection with respect to a                                                        
10 policy or contract carrying guaranteed minimum interest rates, the                                                  
11 association shall assure the payment or crediting of a rate of interest                                             
12            consistent with AS 21.79.020(c)(4) [HELD BY RESIDENTS;                                                   
13 (2)  ASSURE PAYMENT TO RESIDENTS OF THE                                                                                 
14       CONTRACTUAL OBLIGATIONS OF THE INSOLVENT INSURER;                                                                 
15 (3)  PROVIDE MONEY, PLEDGES, NOTES, GUARANTEES, OR                                                                      
16 OTHER MEANS NECESSARY TO DISCHARGE THE ASSOCIATION'S DUTIES                                                             
17       UNDER THIS SUBSECTION; OR                                                                                         
18 (4)  WITH RESPECT ONLY TO LIFE AND HEALTH INSURANCE                                                                     
19 POLICIES AND ANNUITIES, PROVIDE BENEFITS AND COVERAGES                                                                  
20       REQUIRED UNDER (e) OF THIS SECTION].                                                                              
21    * Sec. 15. AS 21.79.060(k) is amended to read:                                                                     
22 (k)  Nonpayment of a premium within 31 days after the date required under the                                           
23 terms of a guaranteed, assumed, alternative or reissued policy or contract or substitute                                
24 coverage terminates the obligations of the association under the policy, contract, or                               
25 coverage except with respect to the claims incurred or the net cash surrender value that                                
26       may be due under the provisions of this chapter.                                                                  
27    * Sec. 16. AS 21.79.060(l) is amended to read:                                                                     
28 (l)  A premium due for coverage after entry of an order of liquidation of an                                            
29 insolvent insurer belongs to and is payable at the direction of the association. Upon                               
30 request of a liquidator of an insolvent insurer, the association shall provide a                                    
31 report to the liquidator regarding the premium collected by the association. The                                    
01       [, AND THE] association is liable for unearned premiums due to a policy or contract                               
02       owner arising after the entry of the order.                                                                       
03    * Sec. 17. AS 21.79.060(n) is amended to read:                                                                     
04 (n)  In carrying out its duties under [(a), (c), AND] (d) of this section, the                                          
05 association may impose a permanent policy or contract lien under a guarantee,                                           
06 assumption, or reinsurance agreement if the policy or contract lien is approved by a                                    
07       court and the association finds that                                                                              
08                 (1)  the amount that may be assessed under this chapter is less than the                                
09       amount needed to assure full and prompt performance of the association's duties                               
10 under this chapter [INSOLVENT INSURER'S CONTRACTUAL OBLIGATIONS];                                                   
11       or                                                                                                                
12 (2)  the economic or financial condition that affects member insurers is                                                
13 sufficiently adverse that the imposition of a policy or contract lien is in the public                                  
14       interest.                                                                                                         
15    * Sec. 18. AS 21.79.060(o) is amended to read:                                                                     
16 (o)  In carrying out its duties [BEFORE TAKING ACTION] under (d) [(a) -                                         
17 (e)] of this section, the association may request the superior court to impose an                                       
18 injunction against the payment of a cash value and policy loan, or the exercise of                                      
19 another right to withdraw funds held in connection with a policy or contract, in                                        
20 addition to a contractual provision for deferral of a cash or policy loan value. In                                     
21 addition, if the receivership court imposes an injunction on payment of cash values or                                  
22 policy loans or on any other right to withdraw funds of an impaired or insolvent                                        
23 insurer held in conjunction with a policy or contract, the association may defer                                        
24 payment of cash values, policy loans, or other rights for the period of the injunction,                                 
25 except for claims covered by the association to be paid as required by a hardship                                       
26 procedure established by the liquidator or rehabilitator and approved by the                                            
27       receivership court.                                                                                               
28    * Sec. 19. AS 21.79.060(p) is amended to read:                                                                     
29 (p)  If the association fails to take action under (d) [(a) - (e)] of this section                                  
30 within a reasonable period of time after a member insurer becomes insolvent, the                                        
31       director shall assume the powers of the association under (d) [(a) - (e)] of this section.                    
01    * Sec. 20. AS 21.79.060(s) is amended to read:                                                                     
02 (s)  A person who receives benefits under this chapter is considered to have                                            
03 assigned the rights under, and any cause of action against a person for losses arising                                  
04 under, resulting from, or otherwise relating to, the covered policy to the association to                               
05 the extent of the benefits received under this chapter, whether the benefits are payment                                
06 of or on account of contractual obligations, continuations of coverage, or provisions of                                
07 substitute or alternative policies, contracts, or coverages [COVERAGE]. The                                         
08 association may require an assignment to the association of those rights by the                                         
09 enrollee, payee [PAYEES], policy or contract owner, beneficiary, insured, or                                        
10 annuitant before a person receives the rights or benefits conferred by this chapter. The                                
11 priority of the association's subrogation right to the assets of the insolvent insurer is                               
12 the same as the priority of the person entitled to benefits under this chapter. In addition                             
13 to the rights described in this subsection, the association has common law rights of                                    
14 subrogation and any other equitable or legal remedy that would have been available to                                   
15 the impaired or insolvent insurer or owner, beneficiary, enrollee, or payee of a policy                             
16 or contract with respect to the policy or contract. These rights include, in the case of                        
17 a structured settlement annuity, the rights of the enrollee, owner, beneficiary, or payee                           
18 of the annuity, to the extent of benefits received under this chapter, against a person                                 
19 originally or by succession responsible for the losses arising from the personal injury                                 
20 relating to the annuity or annuity payment, except for a person responsible solely by                                   
21 reason of being an assignee in respect to a qualified assignment under 26 U.S.C. 130                                    
22 (Internal Revenue Code). If the provisions of this subsection are invalid with respect                                  
23 to a person or claim, the amount payable by the association with respect to the related                                 
24 coverage obligation shall be reduced by the amount realized by another person from                                      
25 the person or claim covered by the association. If the association has provided benefits                                
26 with respect to a covered obligation and a person recovers amounts to which the                                         
27 association has rights as described in this subsection, the person recovering the                                       
28 amounts shall pay to the association the portion of the recovery attributable to the                                    
29       policies or contracts [POLICY] covered by the association.                                                    
30    * Sec. 21. AS 21.79.060(t) is amended to read:                                                                     
31 (t)  In addition to the rights and powers otherwise established in this chapter,                                        
01       the association may                                                                                               
02                 (1)  enter into contracts that are necessary or proper to carry out the                                 
03       provisions of this chapter;                                                                                       
04                 (2)  sue or be sued, and take legal action necessary or proper for                                      
05       recovery of an unpaid assessment under AS 21.79.070 or settlement of a claim or                                   
06       potential claim;                                                                                                  
07                 (3)  borrow money to carry out the purposes of this chapter; notes or                                   
08       other evidence of indebtedness of the association not in default are legal investments                            
09       for domestic member insurers and may be carried as admitted assets;                                           
10 (4)  employ or retain those persons necessary to handle the financial                                                   
11       transactions of the association and other functions under this chapter;                                           
12 (5)  negotiate and contract with a liquidator, rehabilitator, conservator,                                              
13       or ancillary receiver to carry out the powers and duties of the association;                                      
14 (6)  exercise, for the purposes of this chapter and to the extent approved                                              
15 by the director, the powers of a domestic life insurer, [OR] health insurer, hospital or                        
16 medical service corporation, or health maintenance organization; however, the                                       
17 association may not issue [INSURANCE] policies or [ANNUITY] contracts other                                             
18 than those issued to perform its obligations under this chapter [THE                                                
19 CONTRACTUAL OBLIGATIONS OF AN IMPAIRED OR INSOLVENT                                                                     
20       INSURER];                                                                                                         
21 (7)  take legal action to prevent or recover the payment of improper                                                
22       claims;                                                                                                           
23 (8)  join an organization of one or more other state associations with                                                  
24       similar purposes;                                                                                                 
25 (9)  determine, using reasonable business judgment, the means by                                                        
26 which the association is to provide the benefits of this chapter in an economical and                                   
27       efficient manner;                                                                                                 
28 (10)  request information from a person seeking coverage from the                                                       
29 association in order to determine the obligations of the association under this chapter;                                
30 a person receiving a request under this paragraph shall promptly comply with the                                        
31       request;                                                                                                          
01                 (11)  request information from a member insurer in order to aid in the                                  
02       exercise of a power under this section; a member insurer receiving a request under this                           
03       paragraph shall promptly comply with the request; [AND]                                                           
04                 (12)  unless prohibited by law, in accordance with the terms of the                                 
05       policy or contract, file for actuarially justified rates or premium increases for a                           
06       policy or contract for which it provides coverage under this chapter; and                                     
07                 (13)  perform all other acts necessary or proper to implement this                                  
08       chapter.                                                                                                          
09    * Sec. 22. AS 21.79.060 is amended by adding a new subsection to read:                                             
10 (aa)  The rights and obligations of the association, reinsurers of an insolvent                                         
11 insurer, and the receiver of an insolvent insurer are governed by the following                                         
12       provisions:                                                                                                       
13 (1)  not later than 180 days after the date of the order of liquidation, the                                            
14 association may elect to succeed to the rights and obligations of the ceding member                                     
15 insurer that relate to policies, contracts, or annuities covered, in whole or in part, by                               
16 the association, in each case under any one or more reinsurance contracts entered into                                  
17 by the insolvent insurer and its reinsurers and selected by the association; an                                         
18 assumption is effective as of the date of the order of liquidation; the election shall be                               
19 effected by the association or the National Organization of Life and Health Insurance                                   
20 Guaranty Associations on the association's behalf by written notice, return receipt                                     
21 requested, to the affected reinsurers; to facilitate the earliest practicable decision about                            
22 whether to assume any of the contracts of reinsurance and to protect the financial                                      
23 position of the estate, as soon as possible after commencement of formal delinquency                                    
24 proceedings, the receiver and each reinsurer of the ceding member insurer shall make                                    
25 available, upon request, to the association or the National Organization of Life and                                    
26       Health Insurance Guaranty Associations on the association's behalf                                                
27 (A)  copies of in-force contracts of reinsurance and all related                                                        
28 files and records relevant to the determination of whether those contracts                                              
29            should be assumed; and                                                                                       
30 (B)  notices of any defaults under the reinsurance contracts or                                                         
31 any known event or condition that, with the passage of time, could become a                                             
01            default under the reinsurance contracts;                                                                     
02 (2)  as to reinsurance contracts assumed by the association under this                                                  
03       subsection,                                                                                                       
04 (A)  the association is responsible for all unpaid premiums due                                                         
05 under the reinsurance contracts for periods before, on, and after the date of the                                       
06 order of liquidation and is responsible for the performance of all other                                                
07 obligations to be performed on and after the date of the order of liquidation in                                        
08 each case that relates to policies, contracts, or annuities covered, in whole or in                                     
09 part, by the association; the association may charge policies, contracts, or                                            
10 annuities covered in part by the association, through reasonable allocation                                             
11 methods, the costs for reinsurance in excess of the obligations of the                                                  
12 association and shall provide notice and an accounting of those charges to the                                          
13            liquidator;                                                                                                  
14 (B)  the association is entitled to any amounts payable by the                                                          
15 reinsurer under the reinsurance contracts with respect to losses or events that                                         
16 occur in periods on and after the date of the order of liquidation and that relate                                      
17 to policies, contracts, or annuities covered, in whole or in part, by the                                               
18 association, if, upon receiving those amounts, the association is obliged to pay                                        
19 to the beneficiary, under the policy, contract, or annuity for which the amounts                                        
20            were paid, a portion of the amount equal to the lesser of the                                                
21                           (i)  amount received by the association; and                                                  
22 (ii)  amount by which the amount received by the                                                                        
23 association exceeds the amount equal to the benefits paid by the                                                        
24 association under the policy, contract, or annuity, less the amount                                                     
25                 retained by the insurer applicable to the loss or event;                                                
26 (C)  not later than 30 days after the association's election, the                                                       
27 association and each reinsurer under contracts assumed by the association shall                                         
28 calculate the net balance due to or from the association under each reinsurance                                         
29 contract as of the election date with respect to policies, contracts, or annuities                                      
30 covered, in whole or in part, by the association; in making the calculation, the                                        
31 association and reinsurer shall give full credit to all items paid by either the                                        
01 member insurer or its receiver or the reinsurer before the election date; the                                           
02 reinsurer shall pay the receiver any amounts due for losses or events before the                                        
03 date of the order of liquidation, subject to any set-off for premiums unpaid for                                        
04 periods before the date, and the association or reinsurer shall pay any                                                 
05 remaining balance due the other, in each case, not later than five days after the                                       
06 completion of the calculation; a dispute over the amount due to the association                                         
07 or reinsurer shall be resolved by arbitration under the terms of the affected                                           
08 reinsurance contract or, if the contract does not contain an arbitration clause, as                                     
09 otherwise provided by law; if the receiver has received an amount due to the                                            
10 association under (B) of this paragraph, the receiver shall remit the amount to                                         
11            the association as promptly as practicable;                                                                  
12 (D)  if the association or receiver on the association's behalf, not                                                    
13 later than 60 days after the election date, pays the unpaid premiums due for                                            
14 periods both before and after the election date that relate to policies, contracts,                                     
15 or annuities covered, in whole or in part, by the association, the reinsurer may                                        
16 not terminate the reinsurance contracts for failure to pay premium insofar as                                           
17 the reinsurance contracts relate to policies, contracts, or annuities covered, in                                       
18 whole or in part, by the association, and may not set off an unpaid amount due                                          
19 under another contract or an unpaid amount due from a party other than the                                              
20            association against amounts due to the association;                                                          
21 (3)  during the period from the date of the order of liquidation until the                                              
22 election date, or, if the election date does not occur, until 180 days after the date of the                            
23       order of liquidation,                                                                                             
24 (A)  neither the association nor the reinsurer shall have any                                                           
25 rights or obligations under reinsurance contracts that the association has the                                          
26 right to assume, whether for periods before, on, or after the date of the order of                                      
27            liquidation; and                                                                                             
28 (B)  the reinsurer, the receiver, and the association shall, to the                                                     
29 extent practicable, provide to each other data and records reasonably requested,                                        
30 if, once the association has elected to assume a reinsurance contract, the                                              
31            parties' rights and obligations are governed by this subsection;                                             
01 (4)  if the association does not elect to assume a reinsurance contract by                                              
02 the election date, the association does not have rights or obligations, in each case for                                
03 periods before, on, and after the date of the order of liquidation, with respect to the                                 
04       reinsurance contract;                                                                                             
05 (5)  when policies, contracts, annuities, or covered obligations with                                                   
06 respect to policies or annuities are transferred to an assuming insurer, the association                                
07 may also transfer reinsurance on the policies, contracts, or annuities, in the case of                                  
08       contracts assumed by the association, subject to the following:                                                   
09 (A)  unless the reinsurer and the assuming insurer agree                                                                
10 otherwise, the reinsurance contract transferred may not cover any new policies                                          
11            or insurance, contracts, or annuities in addition to those transferred;                                      
12 (B)  the obligations described in (1) of this subsection do not                                                         
13 apply with respect to matters arising on and after the effective date of the                                            
14            transfer; and                                                                                                
15 (C)  notice shall be given in writing, return receipt requested, by                                                     
16 the transferring party to the affected reinsurer not less than 30 days before the                                       
17            effective date of the transfer;                                                                              
18 (6)  the provisions of this subsection supersede the provisions of any                                                  
19 state law or of any affected reinsurance contract that provides for or requires any                                     
20 payment of reinsurance proceeds, on account of losses or events that occur in periods                                   
21 on and after the date of the order of liquidation, to the receiver of the insolvent insurer                             
22 or another person; the receiver shall remain entitled to any amounts payable by the                                     
23 reinsurer under the reinsurance contracts with respect to losses or events that occur in                                
24       periods before the date of the liquidation, subject to applicable set-off provisions;                             
25 (7)  except as otherwise provided in this section, nothing in this                                                      
26       subsection                                                                                                        
27 (A)  alters or modifies the terms and conditions of a reinsurance                                                       
28            contract;                                                                                                    
29 (B)  abrogates or limits the right of a reinsurer to claim that the                                                     
30            reinsurer is entitled to rescind a reinsurance contract;                                                     
31 (C)  gives a policy or contract owner, enrollee, certificate                                                            
01            holder, or beneficiary an independent cause of action against a reinsurer that is                            
02            not otherwise set out in the reinsurance contract;                                                           
03                      (D)  limits or affects the association's rights as a creditor of the                               
04            estate against the assets of the estate; and                                                                 
05                      (E)  applies to a reinsurance agreement covering property or                                       
06            casualty risks.                                                                                              
07    * Sec. 23. AS 21.79.070(a) is amended to read:                                                                     
08            (a)  For the purpose of providing funds necessary to carry out the powers and                                
09       duties of the association, the Board of Governors shall by resolution assess the                              
10 member insurers, separately for each account, at a time and for an amount that the                                      
11 board finds necessary. Assessments are authorized when a resolution is passed and                                   
12 are due not less than 30 days after prior written notice to the member insurers and                                 
13 accrue interest at 10 percent a year from the date payment is due. Authorized                                       
14 assessments become called when notice is mailed by the association to member                                        
15       insurers.                                                                                                     
16    * Sec. 24. AS 21.79.070(c) is amended to read:                                                                     
17 (c)  The amount of a class A assessment shall be determined by the board and                                            
18 may be made on a pro rata or non pro rata basis. If a pro rata assessment is made, the                                  
19 board may provide that it be credited against future class B assessments. [A NON                                        
20 PRO RATA ASSESSMENT MAY NOT EXCEED $250 PER MEMBER INSURER                                                              
21 IN A CALENDAR YEAR.] The amount of a class B assessment, except for                                                 
22 assessments related to long-term care insurance, shall be allocated for assessment                                  
23 purposes between [AMONG] the accounts and among the subaccounts of the life                                     
24 insurance and annuity account under an allocation formula that may be based on the                                  
25 premiums or reserves of the impaired or insolvent insurer or by another standard                                        
26 determined by the board in its sole discretion as being fair and reasonable under the                                   
27 circumstances. The amount of the class B assessment for long-term care insurance                                    
28 written by the impaired or insolvent insurer shall be allocated according to a                                      
29 methodology included in the association's plan of operation approved by the                                         
30 director. The methodology must provide for 50 percent of the assessment to be                                       
31 allocated to accident and health member insurers and 50 percent allocated to life                                   
01       and annuity member insurers.                                                                                  
02    * Sec. 25. AS 21.79.070(f) is amended to read:                                                                     
03 (f)  Except as provided in this subsection, the total of all assessments on a                                           
04 member insurer for each subaccount of the life and annuity account and for the health                                   
05 account may not in any one calendar year exceed two percent of the member insurer's                                 
06 average annual premiums received in this state on policies or contracts covered by the                                  
07 account or subaccount during the three calendar years preceding the year in which the                                   
08 member insurer became an impaired or insolvent insurer. If two or more assessments                                  
09 are authorized in one calendar year with respect to member insurers that become                                     
10 impaired or insolvent in different calendar years, the average annual premiums for                                      
11 purposes of the aggregate assessment percentage limitation imposed under this                                           
12 subsection shall be limited to the highest of the average annual premiums during the                                    
13 preceding three calendar years for the applicable subaccount or account as calculated                                   
14 under this section. If the maximum assessment, together with the other assets of the                                    
15 association in an account, does not provide in any one year in either account an                                        
16 amount sufficient to carry out the responsibilities of the association, the necessary                                   
17       additional funds shall be assessed as soon as permitted by this chapter.                                          
18    * Sec. 26. AS 21.79.070(j) is amended to read:                                                                     
19 (j)  The board may, by an equitable method as established in the plan of                                                
20 operation, refund to member insurers, in proportion to the contribution of each                                         
21 member insurer to that account, the amount by which the assets of the account exceed                                
22 the amount the board finds is necessary to carry out during the coming year the                                         
23 obligations of the association with regard to that account, including assets accruing                                   
24 from assignment, subrogation, net realized gains, and income from investments. A                                        
25 reasonable amount may be retained in any account to provide funds for the continuing                                    
26       expenses of the association and for future losses claims.                                                         
27    * Sec. 27. AS 21.79.070(k) is amended to read:                                                                     
28 (k)  A member insurer may, in determining its premium rates and policy owner                                            
29 dividends as to any kind of insurance, hospital or medical service corporation                                      
30 business, or health maintenance organization business within the scope of this                                      
31 chapter, consider the amount reasonably necessary to meet its assessment obligations                                    
01       under this chapter.                                                                                               
02    * Sec. 28. AS 21.79.070(l) is amended to read:                                                                     
03 (l)  A member insurer that wishes to protest all or part of an assessment shall                                         
04 pay when due the full amount of the assessment as set out in the notice provided by                                     
05 the association. The payment shall be available to meet association obligations during                                  
06 the pendency of the protest or any subsequent appeal. If a payment is made under                                        
07 protest, payment must be accompanied by a statement in writing that the payment is                                      
08 made under protest and setting out a brief statement of the grounds for the protest.                                    
09 Within 60 days following the payment of an assessment under protest by a member                                         
10 insurer, the association shall notify the member insurer in writing of its determination                                
11 with respect to the protest unless the association notifies the member insurer that                                     
12 additional time is required to resolve the issues raised by the protest. Within 30 days                                 
13 after a final decision has been made, the association shall notify the protesting member                                
14 insurer in writing of that final decision. Within 60 days after [OF] receipt of notice of                           
15 the final decision, the protesting member insurer may appeal that final action to the                                   
16 director. In the alternative to rendering a final decision with respect to a protest based                              
17 on a question regarding the assessment base, the association may refer protests to the                                  
18 director for a final decision with or without recommendation from the association. If a                                 
19 protest or appeal on an assessment is upheld, the amount paid in error or excess shall                                  
20 be returned to the member insurer [COMPANY]. Interest on a refund due a protesting                                  
21       member insurer shall be paid at the rate actually earned by the association.                                  
22    * Sec. 29. AS 21.79.080(c) is amended to read:                                                                     
23 (c)  A member insurer shall comply with the plan of operation. The plan of                                              
24       operation must                                                                                                    
25                 (1)  establish procedures for handling assets of the association;                                       
26 (2)  establish the amount and method of reimbursing members of the                                                      
27       board under AS 21.79.050(c);                                                                                      
28 (3)  establish regular places and times for meetings of the board in the                                                
29       state; the board may conduct meetings telephonically;                                                             
30 (4)  establish procedures for keeping records of all financial                                                          
31       transactions of the association, its agents, and the board;                                                       
01                 (5)  establish terms of office for members of the board, and establish                                  
02       procedures for the selection of the members of the board and for the director's                                   
03       approval of the members selected;                                                                                 
04                 (6)  establish additional procedures for assessments under                                              
05       AS 21.79.070; [AND]                                                                                               
06                 (7)  establish procedures for removing a member of the board for                                    
07       cause, including procedures for removing a member of the board who becomes                                    
08       an impaired or insolvent insurer;                                                                             
09                 (8)  establish policy and procedures for addressing conflicts of                                    
10       interest; and                                                                                                 
11 (9)  contain additional provisions necessary or proper for the                                                      
12       association to exercise its powers and duties.                                                                    
13    * Sec. 30. AS 21.79.090(b) is amended to read:                                                                     
14            (b)  The director may                                                                                        
15 (1)  after notice and hearing as provided in AS 21.06.180 - 21.06.230,                                                  
16 suspend or revoke the certificate of authority to transact business [INSURANCE] in                                  
17 this state of a member insurer that fails to pay an assessment when due or fails to                                     
18       comply with the plan of operation;                                                                                
19 (2)  levy a penalty on a member insurer that fails to comply with the                                                   
20       plan of operation; or                                                                                             
21 (3)  levy a penalty on a member insurer that fails to pay an assessment                                                 
22 when due; if the unpaid assessment is more than $2,000, the penalty may not exceed                                      
23 five percent of the unpaid assessment a [PER] month or be less than $100 a [PER]                                
24       month; if the unpaid assessment is $2,000 or less, the penalty is $100 a [PER] month.                         
25    * Sec. 31. AS 21.79.090(c) is amended to read:                                                                     
26 (c)  A final [AN] action of the board or the association may be appealed to the                                     
27 director by a member insurer if the appeal is taken not later than 60 [WITHIN 30]                                   
28 days after the date the notice of the action is mailed. Final action or order of the                                    
29       director may be reviewed by the superior court.                                                                   
30    * Sec. 32. AS 21.79.090(d) is amended to read:                                                                     
31 (d)  The liquidator, rehabilitator, or conservator of an impaired or insolvent                                      
01       insurer may notify all interested persons of the effect of this chapter.                                          
02    * Sec. 33. AS 21.79.100(a) is amended to read:                                                                     
03 (a)  The director shall notify, by mail, the commissioner, director, or                                                 
04 superintendent of insurance of the other states, territories of the United States, and the                              
05 District of Columbia within 30 days after the date on which the following actions are                                   
06       taken against a member insurer:                                                                                   
07                 (1)  revocation of a license;                                                                           
08                 (2)  suspension of a license; or                                                                        
09                 (3)  a formal order that a member insurer restrict its premium writing,                                 
10 obtain additional contributions to surplus, withdraw from the state, reinsure all or any                                
11 part of its business, or increase capital, surplus, or any other account for the security of                            
12       policyholders, contract owners, certificate holders, or creditors.                                            
13    * Sec. 34. AS 21.79.100(e) is amended to read:                                                                     
14 (e)  The director may seek the board's advice and recommendations concerning                                            
15 the financial condition of member insurers, [AND] insurers, hospital and medical                                
16 service corporations, and health maintenance organizations who apply for                                            
17       admission to transact insurance business in the state.                                                            
18    * Sec. 35. AS 21.79.100(f) is amended to read:                                                                     
19            (f)  The board may                                                                                           
20 (1)  make reports and recommendations to the director relating to the                                                   
21 solvency, liquidation, rehabilitation, or conservation of a member insurer or the                                       
22 solvency of an insurer, hospital or medical service corporation, or health                                          
23 maintenance organization that applies [INSURERS WHO APPLY] to transact                                              
24 insurance business in the state; the director and the board shall keep the reports and                                  
25       recommendations confidential;                                                                                     
26 (2)  notify the director of any information that indicates that a member                                                
27       insurer may be impaired or insolvent.                                                                             
28    * Sec. 36. AS 21.79.100(h) is amended to read:                                                                     
29 (h)  The board may make recommendations to the director for detecting and                                               
30       preventing member insurer insolvencies.                                                                       
31    * Sec. 37. AS 21.79.110(c) is amended to read:                                                                     
01 (c)  The association is considered to be a creditor of the impaired or insolvent                                        
02 insurer to the extent of assets attributable to covered policies that are reduced by an                                 
03 amount to which the association is entitled under AS 21.79.060(s). Assets of the                                        
04 impaired or insolvent insurer that are attributable to covered policies shall be used to                                
05 continue all covered policies and pay all contractual obligations of the impaired or                                    
06 insolvent insurer as required by this chapter. Assets attributable to covered policies or                           
07 contracts include those assets that should have been established as reserves for the                                
08 covered policies or contracts. These assets are determined by multiplying the total                                 
09 assets of the impaired or insolvent insurer by a fraction, the numerator of which is the                                
10 amount that should have been established as reserves for the covered policies or                                    
11 contracts of the impaired or insolvent insurer, and the denominator of which is the                                 
12 amount that should have been established as reserves for all policies or contracts of                               
13 insurance issued in all states by that insurer. As a creditor of the impaired or insolvent                              
14 insurer, the association and other similar entities in other states are entitled to receive a                           
15 disbursement of assets out of the marshaled assets as a credit against contractual                                      
16 obligations under this chapter from time to time as the assets become available. If the                                 
17 liquidator has not, within 120 days after [OF] the date of a final determination of                                 
18 insolvency of a member [AN] insurer by the court, made an application to the court                                  
19 for the approval of a proposal to disburse assets, the association may make application                                 
20       to the court for the approval of the association's proposal to disburse assets.                                   
21    * Sec. 38. AS 21.79.110(d) is amended to read:                                                                     
22 (d)  Before the termination of a liquidation, rehabilitation, or conservation                                           
23 proceeding, the court may consider the contributions of the respective parties,                                         
24 including the association, [THE] shareholders, contract owners, certificate holders,                                
25 enrollees, and policyholders of the impaired or insolvent insurer, and any other party                              
26 with a bona fide interest, in distributing the ownership rights of the impaired or                                      
27 insolvent insurer. The court shall consider the welfare of policyholders, contract                                  
28 owners, certificate holders, and enrollees of the continuing or successor member                                
29 insurer [INSURERS]. A distribution to stockholders of an impaired or insolvent                                      
30 insurer may not be made until the total amount of valid claims of the association for                                   
31 money spent in carrying out its powers and duties under AS 21.79.060, with respect to                                   
01       the impaired or insolvent insurer, has been fully recovered by the association.                               
02    * Sec. 39. AS 21.79.110(e) is amended to read:                                                                     
03 (e)  The receiver appointed under an order for liquidation or rehabilitation of a                                       
04 domestic member insurer may recover the amount distributed, other than stock                                        
05 dividends paid by the member insurer on its capital stock, to a controlling affiliate, as                           
06 defined in AS 21.22.200, during the five years preceding the petition for liquidation or                                
07 rehabilitation. However, if the member insurer shows that, when paid, the distribution                              
08 was lawful and reasonable, and that the distribution might adversely affect the ability                                 
09 of the member insurer to fulfill the member insurer's contractual obligations, the                              
10 receiver may not recover the amount distributed to the controlling affiliate. The                                       
11       following provisions apply to recovery of amounts distributed:                                                    
12 (1)  a controlling affiliate of the member insurer at the time the                                                  
13 distribution was paid is liable for a distribution received; a controlling affiliate at the                             
14 time the distribution was declared is liable for a distribution that would have been                                    
15 received if the distribution had been paid at that time; if two or more persons are liable                              
16       with respect to the same distribution, they are jointly and severally liable;                                     
17 (2)  if an affiliate liable under (1) of this subsection is insolvent, all its                                          
18 controlling affiliates at the time the dividend was paid are jointly and severally liable                               
19       for any amount that is not recovered from the insolvent affiliate;                                                
20 (3)  the amount needed to pay the contractual obligations of the                                                        
21 insolvent insurer that exceeds the available assets of the insolvent insurer is the                                     
22       greatest amount that may be recovered under this subsection.                                                      
23    * Sec. 40. AS 21.79.110(f) is amended to read:                                                                     
24 (f)  A deposit in this state, held by law or required by the director for the                                           
25 benefit of creditors, including policy or contract owners, not turned over to the                                   
26 domiciliary liquidator upon the entry of a final order of liquidation or order approving                                
27 a rehabilitation plan of a member [AN] insurer domiciled in this state or in a                                      
28       reciprocal state shall be promptly paid to the association. The association                                       
29 (1)  is entitled to retain a portion of any amount paid to it equal to the                                              
30 percentage determined by dividing the aggregate amount of policy or contract                                        
31 owners' claims related to that insolvency for which the association has provided                                        
01       statutory benefits by the aggregate amount of all policy or contract owners' claims in                        
02       this state related to that insolvency; and                                                                        
03 (2)  shall remit to the domiciliary receiver the amount paid to the                                                     
04 association and retained under (1) of this subsection; any amount paid to the                                           
05 association not retained by it under (1) of this subsection shall be treated as a                                       
06 distribution of state assets under AS 21.78.294 or a similar provision of the state of                                  
07       domicile of the impaired or insolvent insurer.                                                                    
08    * Sec. 41. AS 21.79.140 is amended to read:                                                                        
09            Sec. 21.79.140. Civil immunity. The association and its agents and                                         
10 employees, members of the Board of Governors, member insurers, and agents and                                           
11 employees of member insurers, and the director and the director's representatives are                                   
12 not civilly liable, and a cause of action of any nature may not arise, for an action or                             
13 omission in performing duties under this chapter. The immunity extends to the                                       
14 participation in an organization of one or more other state associations of similar                                 
15 purposes and to that organization and its agents or employees [IN THIS                                              
16 SECTION, "DUTIES" INCLUDES PARTICIPATION IN AN ORGANIZATION OF                                                          
17       ONE OR MORE STATE ASSOCIATIONS OF LIFE OR HEALTH INSURERS].                                                       
18    * Sec. 42. AS 21.79.150 is amended to read:                                                                        
19 Sec. 21.79.150. Stay of proceedings; default judgment. Proceedings                                                    
20 involving an insolvent insurer shall be stayed at least 180 [60] days after the date of a                           
21 final order of liquidation, rehabilitation, or conservation in order to allow the                                       
22 association to exercise a power or duty authorized under this chapter. If a default                                     
23 judgment is entered against an insolvent insurer, the association may apply to have the                                 
24       judgment set aside or may defend against the action on its merits.                                                
25    * Sec. 43. AS 21.79.160(a) is amended to read:                                                                     
26 (a)  A person, including a member [AN] insurer, agent, or affiliate of a                                        
27 member [AN] insurer, may not make, publish, disseminate, circulate, or place before                                 
28 the public, or cause, directly or indirectly, to be made, published, disseminated,                                      
29 circulated, or placed before the public, in any newspaper, magazine, or other                                           
30 publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any                             
31 radio station or television station, or in any other way, an advertisement,                                             
01 announcement, or statement, written or oral, that uses the existence of the association                                 
02 for the purpose of sales, solicitation, or inducement to purchase any form of insurance                                 
03 or other coverage covered by the association. However, this section does not apply to                               
04 the association or any other entity that does not sell or solicit insurance, coverage by a                          
05 hospital or medical service corporation, or coverage by a health maintenance                                        
06       organization.                                                                                                 
07    * Sec. 44. AS 21.79.160(b) is amended to read:                                                                     
08 (b)  The association shall prepare a summary document describing the general                                            
09 purposes and current limitations of this chapter and complying with (c) of this section.                                
10 This document shall be submitted to the director for approval. Beginning 60 days after                                  
11 the date on which the director approves the document, a member [AN] insurer may                                     
12 not deliver a policy or contract to a policy or contract owner, certificate holder, or                              
13 enrollee [POLICY OR CONTRACT OWNER] unless the summary document is                                                  
14 delivered to the policy or contract owner, certificate holder, or enrollee [POLICY                                  
15 OR CONTRACT OWNER] at the time of delivery of the policy or contract. The                                               
16 document shall also be available upon request by a policy or contract owner,                                        
17 certificate holder, or enrollee [OWNER]. The distribution, delivery, contents, or                                   
18 interpretation of this document does not guarantee that either the policy or the                                        
19 contract, or the policy or contract owner, certificate holder, or enrollee [OWNER                                   
20 OF THE POLICY OR CONTRACT,] is covered in the event of the impairment or                                                
21 insolvency of a member insurer. The description document shall be revised by the                                        
22 association as amendments to this chapter may require. Failure to receive this                                          
23 document does not give the policy or [OWNER,] contract owner, certificate holder,                                   
24       enrollee, or insured any greater rights than those stated in this chapter.                                    
25    * Sec. 45. AS 21.79.160(c) is amended to read:                                                                     
26 (c)  The document prepared under (b) of this section must contain a clear and                                           
27 conspicuous disclaimer on its face. The director shall establish the form and content of                                
28       the disclaimer. The disclaimer must                                                                               
29 (1)  state the name and address of the association and the division of                                                  
30       insurance;                                                                                                        
31 (2)  prominently warn the policy or contract owner, certificate holder,                                             
01       or enrollee that the association may not cover the policy or, if coverage is available,                       
02       that the policy will be subject to substantial limitations and exclusions and conditioned                         
03       on continued residence in this state;                                                                             
04                 (3)  state the types of policies or contracts for which guaranty funds                              
05       will provide coverage;                                                                                            
06 (4)  state that the member insurer and its agents are prohibited by law                                             
07 from using the existence of the association for the purpose of sales, solicitation, or                                  
08 inducement to purchase any form of insurance, hospital or medical service                                           
09       corporation coverage, or health maintenance organization coverage;                                            
10 (5)  state that the policy or contract owner, certificate holder, or                                                
11 enrollee should not rely on coverage under the association when selecting and insurer;                              
12 (6)  explain rights available and procedures for filing a complaint to                                                  
13       allege a violation of a provision of this chapter; and                                                            
14 (7)  provide other information as required by the director, including                                                   
15 sources for information about the financial condition of insurers if the information is                                 
16       not proprietary and is subject by law to disclosure.                                                              
17    * Sec. 46. AS 21.79.900(5) is amended to read:                                                                     
18 (5)  "called" means that a notice has been mailed [ISSUED] by the                                                   
19 association to member insurers requiring that an authorized assessment be paid within                                   
20       the time set out in the notice;                                                                                   
21    * Sec. 47. AS 21.79.900(6) is amended to read:                                                                     
22 (6)  "contractual obligation" means an obligation under a policy,                                                       
23 contract, or certificate under a group policy or contract, or a portion of one for which                            
24       coverage is provided under AS 21.79.020(a), (b), (d), or (e);                                                 
25    * Sec. 48. AS 21.79.900(7) is amended to read:                                                                     
26 (7)  "covered contract" or "covered policy" means a policy or                                                       
27 contract or a portion of a policy or contract for which coverage is provided under                                  
28       [DESCRIBED IN] AS 21.79.020(a), [AND] (b), (d), or (e);                                                   
29    * Sec. 49. AS 21.79.900(10) is amended to read:                                                                    
30 (10)  "member insurer" means an insurer licensed to transact insurance                                                  
31 in the state, a hospital or medical service corporation licensed under AS 21.87, or                                 
01 a health maintenance organization licensed under AS 21.86, for which coverage is                                    
02 provided in AS 21.79.020 [, OR A SUBSCRIBER CONTRACT PROVIDING                                                          
03 BENEFITS DESCRIBED IN AS 21.87.120(a)(2) - (4) OR 21.87.130(a)(2) AND (3),]                                             
04 and includes an insurer, a hospital or medical service corporation licensed under                                   
05 AS 21.87, or a health maintenance organization licensed under AS 21.86, whose                                       
06 license or certificate of authority in this state may have been suspended, revoked, not                                 
07       renewed, or voluntarily withdrawn; "member insurer" does not include                                              
08 (A)  [A HEALTH MAINTENANCE ORGANIZATION                                                                                 
09            LICENSED UNDER AS 21.86;                                                                                     
10                      (B)]  a fraternal benefit society licensed under AS 21.84;                                         
11                      (B) [(C)]  a mandatory state pooling plan;                                                     
12 (C) [(D)] a mutual assessment company or an entity that                                                             
13            operates on an assessment basis;                                                                             
14                      (D)  [(E)] an insurance exchange licensed under AS 21.75;                                      
15 (E) [(F) A HOSPITAL OR MEDICAL SERVICE                                                                              
16            ORGANIZATION LICENSED UNDER AS 21.87;                                                                        
17 (G)]  an organization that has a license or certificate limited to                                                      
18            the issuance of charitable gift annuities; or                                                                
19 (F) [(H)]  an entity similar to one described under (A) - (E) [(A)                                              
20            - (G)] of this paragraph;                                                                                    
21    * Sec. 50. AS 21.79.900(12) is amended to read:                                                                    
22 (12)  "owner," when used with respect to [IN RELATION TO] a                                                         
23       policy or contract, "policyholder," "policy owner," and "contract owner"                                      
24 (A)  mean [MEANS] the person who is identified as the legal                                                         
25 owner under the terms of the policy or contract, or who is otherwise vested                                             
26 with legal title to the policy or contract through a valid assignment completed                                         
27 under the terms of the policy or contract and who is properly recorded as the                                           
28            owner on the records of the member insurer;                                                              
29 (B)  do [DOES] not include a person with a mere beneficial                                                          
30            interest in a policy or contract;                                                                            
31    * Sec. 51. AS 21.79.900(13) is amended to read:                                                                    
01                 (13)  "plan sponsor" means, in the case of a benefit plan established or                                
02       maintained by                                                                                                     
03                      (A)  a single employer, the employer;                                                              
04                      (B)  an employee organization, the employee organization; or                                       
05 (C)  two or more employers or jointly by one or more                                                                    
06 employers and one or more employee organizations, the association,                                                      
07 committee, joint board of trustees, or other similar group of representatives of                                    
08            the parties who establish or maintain the benefit plan;                                                      
09    * Sec. 52. AS 21.79.900(14) is amended to read:                                                                    
10 (14)  "premium" means the amounts or considerations, by whichever                                                   
11 name called, [AMOUNT] received on a covered policy or contract less a premium,                                      
12 consideration, and deposit returned, and less a dividend and experience credit;                                         
13 "premium" does not include amounts or considerations [AN AMOUNT] charged for                                        
14 an assessment or an amount received for a policy or contract or for the portions of a                                   
15 policy or contract for which coverage is not provided under AS 21.79.020(b) and (c),                                
16 except that assessable premium may not be reduced on account of                                                     
17 AS 21.79.020(c)(4) relating to interest limitations and AS 21.79.025(a)(2) - (5), (b),                              
18 and (d) relating to limitations with respect to one individual, one participant, and                                
19       one policy or contract owner; "premium" does not include                                                      
20 (A)  premiums in excess of $5,000,000 on an unallocated                                                             
21 annuity contract not issued under a governmental retirement benefit plan                                            
22 or its trustee established under 26 U.S.C. 401, 26 U.S.C. 403(b), or 26                                             
23            U.S.C. 457; or                                                                                           
24 (B)  with respect to multiple nongroup policies of life                                                             
25 insurance owned by one owner, whether the policy or contract owner is an                                            
26 individual, firm, corporation, or other person, and whether the persons                                             
27 insured are officers, managers, employees, or other persons, premiums in                                            
28 excess of $5,000,000 with respect to those policies or contracts, regardless                                        
29            of the number of policies or contracts held by the owner;                                                
30    * Sec. 53. AS 21.79.900(15) is amended to read:                                                                    
31 (15)  "receivership court" means the court in the insolvent or impaired                                                 
01       insurer's state having jurisdiction over the conservation, rehabilitation, or liquidation                         
02       of the member insurer;                                                                                        
03    * Sec. 54. AS 21.79.900(16) is amended to read:                                                                    
04 (16)  "resident" means a person to whom a contractual obligation is                                                     
05 owed under this chapter and who resides in this state on the date of entry of a court                                   
06 order that determines a member insurer to be an impaired or insolvent insurer [,                                        
07 WHICHEVER OCCURS FIRST]; a person may be a resident of only one state,                                                  
08 which, in the case of a person other than a natural person, shall be the principal place                                
09       of business;                                                                                                      
10    * Sec. 55. AS 21.79.900(19) is amended to read:                                                                    
11 (19)  "supplemental contract" means a written [AN] agreement entered                                                
12 into for the distribution of proceeds under life, health, or annuity policy or contract                             
13       benefits;                                                                                                         
14    * Sec. 56. AS 21.79.900 is amended by adding new paragraphs to read:                                               
15 (21)  "benefit plan" means a specific employee, union, or association of                                                
16       natural persons benefit plan;                                                                                     
17 (22)  "election date" means the date of the association's election under                                                
18       AS 21.79.060(aa);                                                                                                 
19 (23)  "extra contractual claim" includes a claim related to bad faith in                                                
20       payment of a claim, punitive or exemplary damages, and attorney fees and costs;                                   
21 (24)  "health benefit plan" means a hospital or medical expense policy                                                  
22 or certificate, a hospital or medical service corporation subscriber contract, or health                                
23 maintenance organization subscriber contract or any other similar health contract;                                      
24       "health benefit plan" does not include                                                                            
25                      (A) accident only insurance;                                                                       
26                      (B) credit insurance;                                                                              
27                      (C) dental only insurance;                                                                         
28                      (D) vision only insurance;                                                                         
29                      (E) Medicare supplement insurance;                                                                 
30 (F) benefits for long-term care, home health care, community-                                                           
31            based care, or any combination thereof;                                                                      
01                      (G) disability income insurance;                                                                   
02                      (H) coverage for on-site medical clinics; or                                                       
03                      (I) specified disease, hospital confinement indemnity, or limited                                  
04            benefit health insurance if the types of coverage do not provide coordination of                             
05            benefits and are provided under separate policies or certificates;                                           
06 (25)  "published monthly average" means the monthly average of                                                          
07 corporate bond yields, as published by Moody's Investors Service, Inc., or its                                          
08 successor or, if Moody's average of corporate bond yields is not published, a                                           
09       substantially similar average established by regulation adopted by the director.                                  
10    * Sec. 57. AS 21.86.260(a) is amended to read:                                                                     
11 (a)  Except as provided in AS 21.36, AS 21.42, AS 21.54, AS 21.56, AS 21.79,                                        
12 and in this chapter, this title does not apply to a health maintenance organization that                                
13 obtains a certificate of authority under this chapter. This subsection does not apply to                                
14 an insurer licensed under AS 21.09 or a hospital or medical service corporation                                         
15 licensed under AS 21.87 except with respect to its health maintenance organization                                      
16       activities authorized by and regulated under this chapter.                                                        
17    * Sec. 58. AS 21.87.340 is amended to read:                                                                        
18 Sec. 21.87.340. Other provisions applicable. In addition to the provisions                                            
19 contained or referred to previously in this chapter, the following chapters and                                         
20 provisions of this title also apply with respect to service corporations to the extent                                  
21 applicable and not in conflict with the express provisions of this chapter and the                                      
22 reasonable implications of the express provisions, and, for the purposes of the                                         
23       application, the corporations shall be considered to be mutual "insurers":                                        
24 (1)  AS 21.03;                                                                                                          
25 (2)  AS 21.06;                                                                                                          
26 (3)  AS 21.07;                                                                                                          
27                 (4)  AS 21.09, except AS 21.09.090;                                                                     
28 (5)  AS 21.18.010;                                                                                                      
29 (6)  AS 21.18.030;                                                                                                      
30 (7)  AS 21.18.040;                                                                                                      
31                 (8)  AS 21.18.080 - 21.18.086;                                                                          
01                 (9)  AS 21.36;                                                                                          
02                 (10)  AS 21.42.110, 21.42.345 - 21.42.395;                                                              
03                 (11)  AS 21.51.120 and 21.51.400;                                                                       
04                 (12)  AS 21.51.405;                                                                                     
05 (13)  AS 21.53;                                                                                                         
06 (14)  AS 21.54;                                                                                                         
07 (15)  AS 21.56;                                                                                                         
08                 (16)  AS 21.69.400;                                                                                     
09                 (17)  AS 21.69.520;                                                                                     
10                 (18)  AS 21.69.600, 21.69.620, and 21.69.630;                                                           
11                 (19)  AS 21.78;                                                                                         
12                 (20)  AS 21.79;                                                                                     
13                 (21)  AS 21.96.060;                                                                                 
14                 (22) [(21)]  AS 21.97.                                                                              
15    * Sec. 59. AS 21.79.020(f), 21.79.060(c), 21.79.060(e), 21.79.060(f), 21.79.060(g),                                
16 21.79.060(h), 21.79.060(i), 21.79.060(j), 21.79.060(u), 21.79.060(v), 21.79.060(w),                                     
17 21.79.060(x), 21.79.110(b)(2), and 21.79.110(e) are repealed.                                                           
18    * Sec. 60. The uncodified law of the State of Alaska is amended by adding a new section to                         
19 read:                                                                                                                   
20 TRANSITION: REGULATIONS. The director of the division of insurance may adopt                                            
21 regulations necessary to implement the changes made by this Act. The regulations take effect                            
22 under AS 44.62 (Administrative Procedure Act), but not before the effective date of the law                             
23 implemented by the regulation.                                                                                          
24    * Sec. 61. Section 60 of this Act takes effect immediately under AS 01.10.070(c).                                  
25    * Sec. 62. Except as provided in sec. 61 of this Act, this Act takes effect July 1, 2018.