CSSB 191(JUD): "An Act relating to insurance pooling by air carriers."
00 CS FOR SENATE BILL NO. 191(JUD) 01 "An Act relating to insurance pooling by air carriers." 02 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 03 * Section 1. AS 21 is amended by adding a new chapter to read: 04 Chapter 77. Joint Aviation Insurance Arrangements. 05 Sec. 21.77.010. Authority to establish joint aviation insurance 06 arrangements. (a) Air carriers may enter into cooperative agreements with each 07 other for the purpose of establishing, operating, or participating in joint aviation 08 insurance arrangements through which the participating members agree to pool 09 contributions in order to either assume risks from losses to the participants on a group 10 basis or purchase coverage for the participants on a group basis. 11 (b) A joint aviation insurance arrangement 12 (1) may be for any kind of insurance defined by this title except for 13 health insurance, life insurance, and title insurance; and 14 (2) shall be considered an alternative or supplement to any other policy 15 or contract of insurance authorized or required by law, including insurance under
01 AS 21.75. 02 (c) For purposes of AS 23.30.075, a joint aviation insurance arrangement is 03 considered to be an association duly authorized to transact workers' compensation 04 insurance in the state. 05 Sec. 21.77.020. Regulation by division of insurance, notice, and annual 06 report. (a) A joint aviation insurance arrangement may not be considered insurance 07 for the purpose of any other law of the state and is not subject to regulations adopted 08 by the director. 09 (b) Before an air carrier signs a cooperative agreement, the joint aviation 10 insurance arrangement shall notify the air carrier in writing that the joint aviation 11 insurance arrangement is not licensed in this state, is not subject to this state's 12 supervision, and, in the event of the insolvency of the joint aviation insurance 13 arrangement, losses will not be covered under AS 21.80 (Alaska Insurance Guaranty 14 Association Act). 15 (c) By October 1 of each year, the administrator of a joint aviation insurance 16 arrangement shall prepare and deliver to the Legislative Budget and Audit Committee 17 and the director a report showing the true and correct financial condition of the joint 18 aviation insurance arrangement. The report must 19 (1) be attested to by the administrator and the board of directors; 20 (2) include an analysis, certified by a member of the American 21 Academy of Actuaries, of the sufficiency of the loss reserves; and 22 (3) be certified by a certified public accountant. 23 Sec. 21.77.030. General provisions of cooperative agreements. (a) A 24 cooperative agreement must provide for the proper operation of the joint aviation 25 insurance arrangement and include provisions for 26 (1) administration of the arrangement by a board of directors, 27 specifying the number of members of the board and other requirements necessary for 28 the proper functioning of the board; 29 (2) appointment of an administrator and other persons as necessary for 30 the proper functioning of the arrangement; 31 (3) organization of the arrangement, including a roster of participating
01 members and the names of the members of the board of directors; 02 (4) procedures to establish and promote an aggressive risk 03 management program among the members of the arrangement, including procedures 04 for identifying and reducing the risks that can be reduced through implementing better 05 safety technologies and improved work techniques and procedures; 06 (5) enforcing the collection of contributions or payments in default 07 from members of the arrangement; 08 (6) the addition of new members to the arrangement or the withdrawal 09 of members from the arrangement; 10 (7) the method of apportioning costs and disposition of excess 11 contributions; 12 (8) transmission of financial statements and audit reports of the 13 arrangement to participating members; 14 (9) terminating the arrangement and disposing of its assets; and 15 (10) establishing and administering a joint aviation insurance fund. 16 (b) A cooperative agreement may 17 (1) authorize the board of directors to enter into contracts for services 18 necessary to perform the functions of a joint aviation insurance arrangement; a person 19 contracting to perform functions under this paragraph is subject to the licensing 20 requirements of this title; 21 (2) delegate to the board of directors, or authorize delegation by the 22 board to another person or group, the power to compromise, arbitrate, or otherwise 23 settle claims on behalf of the arrangement; 24 (3) authorize the board of directors to adopt rules not inconsistent with 25 law for the fair and equitable administration of the joint aviation insurance 26 arrangement and the joint aviation insurance fund. 27 (c) The board of directors shall file a copy of the cooperative agreement with 28 the director at least 60 days before the effective date of the agreement. The agreement 29 shall be available for public inspection. 30 Sec. 21.77.040. Financial provisions of agreements. (a) A joint aviation 31 insurance arrangement formed in accordance with the provisions of this chapter shall
01 (1) have and maintain a surplus no less than an amount equal to the 02 total of the capital and one-half of the surplus that would be required of a domestic 03 stock insurer writing the same lines as the joint aviation insurance arrangement; or 04 (2) post a bond for an amount equal to the capital that would be 05 required of a domestic stock insurer writing the same lines of insurance as the joint 06 aviation insurance arrangement and maintain a surplus of $500,000 in admitted assets 07 or a surplus sufficient to operate the joint aviation insurance arrangement for one year, 08 whichever is greater. 09 (b) A cooperative agreement must include a provision requiring an annual 10 determination by a casualty actuary who is a member of the American Academy of 11 Actuaries that procedures for establishing reserves for losses of the joint aviation 12 insurance arrangement are actuarially sound. 13 (c) A joint aviation insurance arrangement shall be subject to an annual 14 independent audit. The audit shall be conducted in accordance with generally 15 accepted auditing standards and must include a review of the actuarial assumptions 16 used for establishing the reserves under (b) of this section. The audit report must 17 include certification from a casualty actuary who is a member of the American 18 Academy of Actuaries that the actuarial assumptions continue to be sound and the 19 level of the reserves is adequate. 20 (d) A cooperative agreement may authorize the board of directors to purchase 21 excess or catastrophic insurance on behalf of the joint aviation insurance arrangement. 22 The cost of the insurance shall be apportioned in the manner specified in the joint 23 aviation insurance agreement. The board may purchase insurance under this 24 subsection only from an insurer authorized to do business in the state, except 25 insurance under this subsection may be purchased from a risk-sharing pool established 26 by a national association of similar entities if the risk-sharing pool meets the 27 qualifications for an unauthorized insurer under AS 21.34.040(b) and (d) and 28 21.34.220 and has capital and policyholders surplus in an amount at least as great as 29 would be required if the association were a domestic multiple line insurer. An 30 arrangement may purchase insurance under this subsection for property and liability 31 risks from unauthorized insurers allowed for use by licensed Alaska surplus lines
01 brokers. 02 Sec. 21.77.050. Joint aviation insurance fund. (a) A joint aviation 03 insurance arrangement shall establish a joint aviation insurance fund. The fund 04 consists of money 05 (1) contributed by members of the joint aviation insurance 06 arrangement through budgetary appropriations or transfers from a self-insurance 07 reserve; 08 (2) contributed by officers and employees of members of the joint 09 aviation insurance arrangement under an employee benefit plan; and 10 (3) collected by the joint aviation insurance arrangement through 11 subrogation of a claim paid from the fund to a member of the arrangement. 12 (b) An expenditure may be made from a joint aviation insurance fund only to 13 (1) pay claims, losses, or benefits, including interest on claims, losses, 14 or benefits, and the administrative and adjustment expenses incurred in connection 15 with claims, losses, or benefits, involving the types of protection for which the fund 16 provides coverage as specified in the joint aviation insurance agreement; and 17 (2) purchase insurance coverage for members of a joint aviation 18 insurance arrangement on a group basis. 19 (c) The administrator shall keep the fund separate from other funds of a 20 member of a joint aviation insurance arrangement. 21 (d) For each type of protection offered by the joint aviation insurance 22 arrangement, the method of accounting must show the order, source, date, and amount 23 of each payment from the fund. 24 (e) Within 150 days of the end of the fiscal year, the administrator shall 25 furnish a detailed report of the operation and condition of the fund to the board of 26 directors and the director. 27 (f) Money held by a fund as reserves and money not needed for daily 28 operations may be invested by the board of directors. 29 (g) A fund may not be terminated unless the administrator certifies that an 30 amount of money sufficient to pay accrued and contingent expenditures has been 31 placed in a fully collateralized escrow account.
01 Sec. 21.77.250. Definitions. In this chapter, 02 (1) "adjustment expenses" means expenses for investigative, 03 processing, legal, actuarial, arbitration, and settlement services incurred in the 04 adjustment of losses, claims, or benefits; 05 (2) "administrator" means a person or group appointed by the board of 06 directors to administer a joint aviation insurance arrangement or a joint aviation 07 insurance fund; 08 (3) "board" or "board of directors" means the board of directors 09 provided for in a cooperative agreement; 10 (4) "cooperative agreement" means a written agreement entered into 11 by two or more air carriers described in AS 21.77.010 for the purpose of establishing, 12 operating, or participating in a joint aviation insurance arrangement; 13 (5) "fund" or "joint aviation insurance fund" means a fund established 14 under AS 21.77.050; 15 (6) "joint aviation insurance arrangement" means a joint aviation 16 insurance arrangement authorized under AS 21.77.010.