CSSB 276(L&C): "An Act relating to the Alaska Insurance Guaranty Association; relating to the powers of the Alaska Industrial Development and Export Authority concerning the association; and providing for an effective date."
00 CS FOR SENATE BILL NO. 276(L&C) 01 "An Act relating to the Alaska Insurance Guaranty Association; relating to the powers 02 of the Alaska Industrial Development and Export Authority concerning the association; 03 and providing for an effective date." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 21.80.060(a) is amended to read: 06 (a) The association 07 (1) is obligated to pay covered claims existing before the order of 08 liquidation and arising within 30 days after the order of liquidation, or before the 09 policy expiration date if less than 30 days after the order of liquidation, or before the 10 insured replaces the policy or causes its cancellation if the insured does so within 30 11 days after the order of liquidation, but this obligation includes only that amount of 12 each covered claim that is less than $500,000, except that a covered claim for return of 13 unearned premium may not exceed $10,000 for each policy, and except that the 14 association shall pay the full amount of any covered claim arising out of a workers'
01 compensation policy; the association is not obligated 02 (A) to a policyholder or claimant in an amount in excess of the 03 obligation of the insolvent insurer under the policy from which the claim 04 arises; or 05 (B) to pay a claim filed with the association after the final date 06 set by the court for the filing of claims against the liquidator or receiver of an 07 insolvent insurer; 08 (2) is considered the insurer to the extent of its obligation on the 09 covered claims and to that extent has all rights, duties, and obligations of the insolvent 10 insurer as if the insurer had not become insolvent; 11 (3) shall allocate claims paid and expenses incurred among the three 12 accounts separately, and assess member insurers separately for each account amounts 13 necessary to pay the obligation of the association under (1) of this subsection 14 subsequent to an insolvency, the expenses of handling covered claims subsequent to 15 an insolvency, and other expenses authorized by this chapter; under this paragraph, 16 (A) the assessments of each member insurer must initially be 17 based on a uniform percentage, as determined by the association, of the net 18 direct written premiums of each member insurer for the last year for which 19 annual statements have been filed on the kinds of insurance in the account; this 20 initial assessment shall be adjusted by applying the same uniform percentage 21 as initially used to each member insurer's net direct written premiums for the 22 calendar year following the year in which the initial assessment was issued; 23 any difference between the initial assessment amount and the adjusted 24 assessment amount allocated to a member insurer shall be levied against or 25 credited back to the member insurer, as appropriate, by the association; the 26 association shall calculate and issue all appropriate levies and credits as soon 27 as practical after all member insurers have filed their annual statements for the 28 calendar year following the year in which the initial assessment was issued; 29 (B) on an annual basis, the association shall determine if 30 funding is required for any of the three accounts; based on this determination, 31 the association shall, during November of each year, issue initial assessments
01 as may be necessary to cover the projected reasonable costs of claims and 02 expenses to administer the association for the following year; under this 03 subparagraph, 04 (i) the association shall use the services of an 05 independent actuary to assist the association to evaluate and make the 06 projection; 07 (ii) an initial assessment may be made at any other time 08 if the association determines funding is necessary, except that a 09 member insurer may not be assessed initial assessments on any account 10 in an amount greater than two percent of the member insurer's net 11 direct written premiums for the applicable calendar year; 12 (C) the association may pay claims in any order that it 13 determines reasonable, including the payment of claims as they are received 14 from claimants or in groups or categories of claims; however, if the maximum 15 of all assessments made under this section [ASSESSMENT], together with 16 the other assets of the association in any account, does not provide, in any one 17 year, in any account, an amount sufficient to make all necessary payments 18 from that account, the funds available shall be prorated, and the unpaid portion 19 shall be paid as soon thereafter as funds become available; 20 (D) the association may defer, in whole or in part, an 21 assessment of any member insurer if the assessment would endanger the ability 22 of the member insurer to fulfill the insurer's contractual obligations or cause 23 the member insurer's financial statement to reflect amounts of capital or 24 surplus less than the minimum amounts required for a certificate of authority 25 by any jurisdiction in which the member insurer is authorized to transact 26 insurance; however, during the period of deferment, the member insurer may 27 not pay dividends to shareholders or policyholders; a deferred assessment may 28 only be paid when the payment does not reduce capital or surplus below 29 minimums required by law; a member insurer who pays a larger assessment as 30 a result of a deferment given to another member insurer shall receive a refund 31 when the deferment ends or, at the election of the member insurer, receive a
01 credit against future assessments; 02 (E) each member insurer may set off against an assessment 03 authorized payments made on covered claims and expenses incurred in the 04 payment of these claims by the member insurer if they are chargeable to the 05 account for which the assessment is made; 06 (4) shall investigate claims brought against the association, adjust, 07 compromise, settle, and pay covered claims to the extent of the association's 08 obligation, and deny all other claims, and may review settlements, releases, and 09 judgments to which the insolvent insurer or its insureds were parties to determine the 10 extent to which settlements, releases, and judgments may be properly contested; 11 (5) may, subject to AS 21.89.100, appoint, substitute, or direct legal 12 counsel retained under an insurance policy for the defense of a covered claim; 13 (6) shall handle claims through its employees or through one or more 14 insurers or other persons designated as servicing facilities; a servicing facility shall 15 operate and maintain its principal office in this state unless the use of a servicing 16 facility located outside of the state would result in operating cost savings of at least 10 17 percent and would not result in material delay in claim payments; designation of a 18 servicing facility is subject to the approval of the director, but designation may be 19 declined by a member insurer; 20 (7) shall reimburse each servicing facility for obligations of the 21 association paid by the facility and for expenses incurred by the facility while handling 22 claims on behalf of the association and shall pay the other expenses of the association 23 authorized by this chapter. 24 * Sec. 2. AS 21.80.060(b) is amended to read: 25 (b) The association may 26 (1) employ or retain those persons necessary to handle claims and 27 perform other duties of the association; 28 (2) borrow funds necessary to effect the purposes of this chapter in 29 accord with the plan of operation and secure guarantees from the Alaska Industrial 30 Development and Export Authority for association loans that are necessary to 31 make the association financially able to meet cash flow needs;
01 (3) sue or be sued; 02 (4) negotiate and become a party to those contracts that are necessary 03 to carry out the purposes of this chapter; 04 (5) perform all other acts necessary or proper to carry out the purposes 05 of this chapter; 06 (6) retain amounts excess of claims, expenses, credits, and other 07 liabilities in any account to be applied to reduce future assessments in that account, 08 except that, if, in any year, the association determines that significant funds in excess 09 of projected claims, expenses, credits, and other liabilities exist in an account, the 10 association shall return amounts to policyholders, through procedures established by 11 the association, whereby the association reimburses member insurers for providing 12 uniform credits against rates and premiums charged for all policies applicable to the 13 account issued during the next calendar year. 14 * Sec. 3. AS 21.80.080(b) is amended to read: 15 (b) The director may 16 (1) suspend or revoke, after notice and hearing, the certificate of 17 authority to transact insurance in this state of any member insurer that fails to pay an 18 assessment when due or fails to comply with the plan of operation; as an alternative, 19 the director may levy a fine on any member insurer that fails to pay an assessment 20 when due; this fine may not exceed five percent of the unpaid assessment per month or 21 portion of a month, except that a fine may not be less than $250 a month; 22 (2) revoke the designation of any servicing facility upon a finding that 23 claims are being handled unsatisfactorily; 24 (3) upon a finding by the superior court that the board of governors has 25 failed to comply with a requirement of this chapter or the plan of operation, assume 26 the powers of the board of governors under AS 21.80.060; 27 (4) subject to an appropriation by the legislature from the 28 earnings reserve account established under AS 37.13.145, make a grant or grants 29 to the association as may be required to ensure the long-term solvency of the 30 association. 31 * Sec. 4. AS 44.88.080 is amended by adding a new paragraph to read:
01 (27) to guarantee loans made to the Alaska Insurance Guaranty 02 Association (AS 21.80.040), with these guarantees limited to loans necessary to make 03 the association financially able to meet cash flow needs up to a maximum outstanding 04 principal balance at any time of $30,000,000. 05 * Sec. 5. This Act takes effect immediately under AS 01.10.070(c).