HB-6313, As Passed House, December 6, 2006

SUBSTITUTE FOR

HOUSE BILL NO. 6313

     A bill to amend 1956 PA 218, entitled

"The insurance code of 1956,"

by amending sections 7702, 7704, 7705, 7706, 7707, 7708, 7709,

7711, 7712, 7714, and 7717 (MCL 500.7702, 500.7704, 500.7705,

500.7706, 500.7707, 500.7708, 500.7709, 500.7711, 500.7712,

500.7714, and 500.7717), sections 7702, 7708, 7709, 7711, 7712,

7714, and 7717 as amended by 1989 PA 302, sections 7704, 7705, and

7706 as amended by 1996 PA 548, and section 7707 as added by 1982

PA 194, and by adding section 838a.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 838a. (1) As used in this section:

     (a) "2001 CSO mortality table" means that term as defined in

section 838.

     (b) "2001 CSO preferred class structure mortality table" means

mortality tables with separate rates of mortality for super

preferred nonsmokers, preferred nonsmokers, residual standard

nonsmokers, preferred smokers, and residual standard smoker splits

of the 2001 CSO nonsmoker and smoker tables as adopted by the NAIC

at the September 2006 national meeting and published in the "NAIC

Proceedings" (3rd Quarter 2006). Unless the context indicates

otherwise, the "2001 CSO preferred class structure mortality table"

includes both the ultimate form of that table and the select and

ultimate form of that table. It includes both the smoker and

nonsmoker mortality tables. It includes both the male and female

mortality tables and the gender composite mortality tables. It also

includes both the age-nearest-birthday and age-last-birthday bases

of the mortality table.

     (c) "NAIC" means the national association of insurance

commissioners.

     (d) "Smoker and nonsmoker mortality tables" means that term as

defined in section 838.

     (e) "Statistical agent" means an entity with proven systems

for protecting the confidentiality of individual insured and

insurer information; demonstrated resources for and history of

ongoing electronic communications and data transfer ensuring data

integrity with insurers, which are its members or subscribers; and

a history of and means for aggregation of data and accurate

promulgation of the experience modifications in a timely manner.

     (2) An insurer may, for each calendar year of issue for any 1

or more specified plans of insurance and subject to this section,

substitute the 2001 CSO preferred class structure mortality table

in place of the 2001 CSO smoker and nonsmoker mortality tables as

the minimum valuation standard for policies issued on or after

January 1, 2007. An insurer shall not elect the 2001 CSO preferred

class structure mortality table until the insurer demonstrates that

at least 20% of the business to be valued on this table is in 1 or

more of the preferred classes. A table from the 2001 CSO preferred

class structure mortality table used in place of a 2001 CSO

mortality table as provided in this section shall be treated as

part of the 2001 CSO mortality table only for purposes of reserve

valuation pursuant to section 838.

     (3) For each plan of insurance with separate rates for

preferred and standard nonsmoker lives, an insurer may use the

super preferred nonsmoker, preferred nonsmoker, and residual

standard nonsmoker tables to substitute for the nonsmoker mortality

table found in the 2001 CSO mortality table to determine minimum

reserves. At the time of election and annually thereafter, except

for business valued under the residual standard nonsmoker table,

the appointed actuary shall certify both of the following:

     (a) That the present value of death benefits over the next 10

years after the valuation date, using the anticipated mortality

experience without recognition of mortality improvement beyond the

valuation date for each class, is less than the present value of

death benefits using the valuation basic table corresponding to the

valuation table being used for that class.

     (b) That the present value of death benefits over the future

life of the contracts, using anticipated mortality experience

without recognition of mortality improvement beyond the valuation

date for each class, is less than the present value of death

benefits using the valuation basic table corresponding to the

valuation table being used for that class.

     (4) For each plan of insurance with separate rates for

preferred and standard smoker lives, an insurer may use the

preferred smoker and residual standard smoker tables to substitute

for the smoker mortality table found in the 2001 CSO mortality

table to determine minimum reserves. At the time of election and

annually thereafter, for business valued under the preferred smoker

table, the appointed actuary shall certify both of the following:

     (a) That the present value of death benefits over the next 10

years after the valuation date, using the anticipated mortality

experience without recognition of mortality improvement beyond the

valuation date for each class, is less than the present value of

death benefits using the preferred smoker valuation basic table

corresponding to the valuation table being used for that class.

     (b) That the present value of death benefits over the future

life of the contracts, using anticipated mortality experience

without recognition of mortality improvement beyond the valuation

date for each class, is less than the present value of death

benefits using the preferred smoker valuation basic table.

     (5) Unless exempted by the commissioner, every authorized

insurer using the 2001 CSO preferred class structure mortality

table shall file annually with the commissioner, with the NAIC, or

with a statistical agent designated by the NAIC and acceptable to

the commissioner statistical reports showing mortality and such

other information as the commissioner may consider necessary or

expedient for the administration of this section. The form of the

reports shall be established by the commissioner.

     Sec. 7702. (1) The purpose of this chapter is to protect,

subject to certain limitations, persons specified in section

7704(1) against failure in the performance of contractual

obligations under insurance policies and annuity contracts

specified in section 7704(2) because of the impairment or

insolvency of the insurer issuing the policies or contracts. To

provide this protection:

     (a) An association of insurers is created to enable the

guaranty of payment of benefits and continuation of coverages as

limited in this chapter.

     (b) Members of the association are subject to assessment to

provide funds to carry out the purpose of this chapter.

     (c) The association is authorized to assist the commissioner,

in the prescribed manner, in the detection and prevention of

insurer impairments or insolvencies.

     (2) This chapter shall be  liberally construed to execute the

purposes provided in subsection (1).

     Sec. 7704. (1) This chapter shall provide coverage for the

policies and contracts specified in subsection (2) to the following

persons:

     (a) To a person, other than nonresident certificate holders

under group policies or contracts, who, regardless of where he or

she resides, is the beneficiary, assignee, or payee of a person

covered under subdivision (b).

     (b) To a person who is an owner of, or certificate holder

under, a policy or contract described in subsection (2),  or, in

the case of  other than an unallocated annuity contract  , to the

person who is the contract holder or structured settlement

contract, and which owner  ,  or certificate holder  , or contract

holder is 1 of the following:

     (i) A resident.

     (ii) Not a resident, if all of the following conditions are

met:

     (A) The insurer that issued the policy or contract is

domiciled in this state.

     (B)  The insurer never held a license or certificate of

authority in the states in which the person resides.  The state in

which the person resides has an association similar to the

association created by this chapter.

     (C)  Such states have associations similar to the association

created by this chapter.  The person is not eligible for coverage

by an association in any other state because the insurer was not

licensed in that state at the time specified in the state's

guaranty association law.

     (D) The person is not eligible for coverage by those

associations.

     (iii) Not a resident, if both of the following conditions are

met:

     (A) The person  was  would have been considered a resident at

the time the coverage was obtained by the person.

     (B) The person is not eligible for coverage by another

guaranty association.

     (c) For an unallocated annuity contract, except as provided in

subsection (3), to either of the following:

     (i) To a person who is the owner of an unallocated annuity

contract if the contract is issued to or in connection with a

specific plan whose sponsor has its principal place of business in

this state.

     (ii) To a person who is the owner of an unallocated annuity

contract issued to or in connection with a government lottery if

the owner is a resident of this state.

     (d) For a structured settlement annuity, except as provided in

subsection (3), to a person who is a payee under a structured

settlement annuity, or a beneficiary of a payee if the payee is

deceased, and the payee is either of the following:

     (i) A resident, regardless of where the contract owner resides.

     (ii) Not a resident, if either of the following conditions is

met:

     (A) The contract owner of the structured settlement annuity is

a resident, and the payee or beneficiary is not eligible for

coverage from the association where the payee or beneficiary

resides.

     (B) The contract owner of the structured settlement annuity is

not a resident, and both of the following conditions are met:

     (I) The insurer that issued the structured settlement annuity

is domiciled in this state, and the state in which the contract

owner resides has an association similar to the association created

by this chapter.

     (II) Neither the payee or beneficiary nor the contract owner

is eligible for coverage by the association of the state in which

the payee or contract owner resides.

     (2) Except as provided in  subsection  subsections (3), (4),

and (5), this chapter provides coverage to a person specified in

subsection (1) for direct, nongroup life, health, annuity, and

supplemental policies or contracts, for certificates under direct

group life, health, annuity, and supplemental policies and

contracts, and for unallocated annuity contracts issued by member

insurers, except as limited by this chapter.

     (3) This chapter does not provide coverage to a person who is

a payee or beneficiary of a contract owner that is a resident of

this state, if the payee or beneficiary is afforded any coverage by

the association of another state or to a person otherwise covered

under subsection (1)(c), if any coverage is provided by the

association of another state to that person.

     (4) This chapter is intended to provide coverage to a person

who is a resident of this state and, in special circumstances, to a

nonresident. To avoid duplicate coverage, if a person who would

otherwise receive coverage under this chapter is provided coverage

under the laws of any other state, the person shall not be provided

coverage under this chapter. In determining the application of the

provisions of this chapter in situations where a person could be

covered by the association of more than 1 state, whether as an

owner, payee, beneficiary, or assignee, this chapter shall be

construed in conjunction with other state laws to result in

coverage by only 1 association.

(5)  (3) This chapter does not provide coverage for the

following:

     (a) A portion of a policy or contract not guaranteed by the

insurer or under which the risk is borne by the policy or contract

holder  owner, including, but not limited to, the nonguaranteed

portion of a variable or separate account product.

     (b) A policy or contract of reinsurance, unless assumption

certificates have been issued pursuant to the reinsurance policy or

contract.

     (c) A portion of a policy or contract to the extent that the

rate of interest on which it is based or the interest rate,

crediting rate, or similar factor determined by use of an index or

other external reference stated in the policy or contract employed

in calculating returns or changes in value exceeds the following:

     (i) Averaged over the period of 4 years prior to the date on

which the  association becomes obligated with respect to the policy

or contract, a  member insurer becomes an impaired insurer or an

insolvent insurer, whichever occurs first, the rate of interest

determined by subtracting 2 percentage points from Moody's

corporate bond yield average averaged for that same 4-year period

or for a lesser period if the policy or contract was issued less

than 4 years before the  association became obligated  member

insurer becomes an impaired insurer or an insolvent insurer,

whichever occurs first.

     (ii) On and after the date on which the  association becomes

obligated with respect to the policy or contract  member insurer

becomes an impaired insurer or an insolvent insurer, whichever

occurs first, the rate of interest determined by subtracting 3

percentage points from Moody's corporate bond yield average as most

recently available.

     (d) A portion of a plan or contract issued to a plan or

program of an employer, association, or  similar entity  other

person to provide life, health, or annuity benefits to its

employees,  or members, or others to the extent that the plan or

program is self-funded or uninsured, including, but not limited to,

benefits payable by an employer, association, or  similar entity

other person under any of the following:

     (i) A multiple employer welfare arrangement as defined in

section 7001.

     (ii) A minimum premium group insurance plan.

     (iii) A stop-loss or excess-loss group insurance plan. This

subparagraph does not apply to the insured portion of a stop-loss

or excess-loss group insurance plan written pursuant to section

407a or 5208 or written by a member property casualty insurer if

the premiums were identified as disability insurance premiums in

its annual statement.

     (iv) An administrative services only contract.

     (e) A portion of a policy or contract to the extent that it

provides dividends or experience rating credits,  or provides that

voting rights, or payment of any fees or allowances be paid to a

person, including the policy or contract  holder  owner, in

connection with the service to or administration of the policy or

contract.

     (f) A policy or contract issued in this state by an insurer at

a time when it did not have a certificate of authority to issue the

policy or contract in this state.

     (g) An unallocated annuity contract issued to  an employee  or

in connection with a benefit plan protected under the federal

pension benefit guaranty corporation regardless of whether the

federal pension benefit guaranty corporation has become liable to

make any payments with respect to the benefit plan.

     (h) A portion of an unallocated annuity contract that is not

issued to or in connection with a specific employee, union, or

association of natural persons benefit plan or a government

lottery.

     (i)  An amount that is not a contractual obligation including,

but not limited to, an award of exemplary or punitive damages or

statutory interest. An obligation that does not arise under the

express written terms of the policy or contract issued by the

insurer to the contract owner or policy owner, including, but not

limited to, any of the following:

     (i) A claim based on marketing materials.

     (ii) A claim based on side letters, riders, or other documents

that were issued by the insurer without meeting applicable policy

form filing or approval requirements.

     (iii) A claim based on misrepresentations of or regarding policy

benefits.

     (iv) An award of exemplary or punitive damages or statutory

interest and claims related to bad faith in the payment of claims,

and attorney fees and costs.

     (v) A claim for penalties or consequential or incidental

damages.

     (j) A contractual agreement that establishes the member

insurer's obligations to provide a book value accounting guaranty

for defined contribution benefit plan participants by reference to

a portfolio of assets that is owned by the benefit plan or its

trustee, which in each case is not an affiliate of the member

insurer.

     (k) A portion of a policy or contract to the extent it

provides for interest or other changes in value to be determined by

the use of an index or other external reference stated in the

policy or contract, but which have not been credited to the policy

or contract, or as to which the policy or contract owner's rights

are subject to forfeiture, as of the date the member insurer

becomes an impaired insurer or an insolvent insurer, whichever

occurs first. If a policy's or contract's interest or changes in

value are credited less frequently than annually, then for purposes

of determining the values that have been credited and are not

subject to forfeiture under this subdivision, the interest or

change in value determined by using the procedures defined in the

policy or contract shall be credited as if the contractual date of

crediting interest or changing values was the date of impairment or

insolvency, whichever is earlier, and is not subject to forfeiture.

(6)  (4) The benefits  for which that the association may

become liable  obligated to cover shall not exceed the lesser of

the following:

     (a) The contractual obligations for which the insurer is

liable or would have been liable if it were not an impaired insurer

or an insolvent insurer.

     (b) With respect to  any 1 life, regardless of the number of

policies or contracts:

     (i) $300,000.00 in life insurance death benefits, but not more

than $100,000.00 in net cash surrender and net cash withdrawal

values for life insurance.

     (ii) Except as otherwise provided in subparagraphs (iv) and (v),

$100,000.00 in health insurance benefits, including any net cash

surrender and net cash withdrawal values.

     (iii) $100,000.00 in the present value of annuity benefits,

including net cash surrender and net cash withdrawal values;

however, for an individual qualified retirement annuity,

$250,000.00 in the present value of annuity benefits, including net

cash surrender and net cash withdrawal values. As used in this

subparagraph, "individual qualified retirement annuity" means an

annuity issued to an individual or a custodian on behalf of the

individual pursuant to section 408 or 408A of the internal revenue

code of 1986, 26 USC 408 and 408A, or an annuity certificate issued

to an individual pursuant to section 403(b) of the internal revenue

code of 1986, 26 USC 403(b).

     (iv) $300,000.00 in disability income insurance benefits or

long-term care benefits.

     (v) $500,000.00 in basic hospital, medical, and surgical

insurance benefits.

     (c) With respect to each individual participating in a

governmental retirement benefit plan established under section

401(k), 403(b), or 457 of the internal revenue code of 1986, 26

U.S.C.  USC 401, 403, and 457, covered by an unallocated annuity

contract or the beneficiaries of each such individual, if deceased,

in the aggregate, $100,000.00 in present value annuity benefits,

including net cash surrender and net cash withdrawal values.

     (d) With respect to any 1 contract holder covered by an

unallocated annuity contract not included in subdivision (c),

$5,000,000.00 in benefits, irrespective of the number of contracts

held by that contract holder.

     (5) The association is not liable to expend more than the

$300,000.00 in the aggregate with respect to any 1 individual under

subsection (4)(b) and (c).

     (d) With respect to each payee of a structured settlement

annuity, or the beneficiary or beneficiaries of a deceased payee,

$100,000.00 in present value annuity benefits, in the aggregate,

including net cash surrender and net cash withdrawal values, if

any.

     (e) For either 1 contract owner provided coverage under

subsection (1)(c)(ii) or 1 plan sponsor whose plans own directly or

in trust 1 or more unallocated annuity contracts not included in

subdivision (C), $5,000,000.00 in benefits, irrespective of the

number of contracts with respect to the contract owner or plan

sponsor. However, if 1 or more unallocated annuity contracts are

covered contracts under this chapter and are owned by a trust or

other entity for the benefit of 2 or more plan sponsors, coverage

shall be afforded by the association if the largest interest in the

trust or entity owning the contract or contracts is held by a plan

sponsor whose principal place of business is in this state, but in

no event is the association obligated to cover more than

$5,000,000.00 in benefits for all those unallocated contracts.

     (7) In no event is the association obligated to cover more

than the following:

     (a) An aggregate of $300,000.00 in benefits for any 1 life

under subsection (6)(b)(i), (ii), (iii), and (iv), (c), and (d).

     (b) An aggregate of $500,000.00 in benefits for any 1 life

under subsection (6)(b)(v).

     (c) For 1 owner of multiple nongroup policies of life

insurance, whether the policy owner is an individual, firm,

corporation, or other person, and whether the persons insured are

officers, managers, employees, or other persons, $5,000,000.00 in

benefits, regardless of the number of policies and contracts held

by the owner.

     (8) The limitations under subsections (6) and (7) are

limitations on the benefits for which the association is obligated

before taking into account either its subrogation and assignment

rights or the extent to which those benefits could be provided out

of the assets of the impaired insurer or insolvent insurer

attributable to covered policies. The costs of the association's

obligations under this act may be satisfied by the use of assets

attributable to covered policies or reimbursed to the association

pursuant to its subrogation and assignment rights.

     (9) In performing its obligations to provide coverage under

section 7708, the association is not required to guarantee, assume,

reinsure, or perform, or cause to be guaranteed, assumed,

reinsured, or performed, contractual obligations of the insolvent

insurer or impaired insurer under a covered policy or contract that

do not materially affect the economic benefits of the covered

policy or contract.

     Sec. 7705. As used in this chapter:

     (a) "Account" means either of the 2 accounts created under

section 7706.

     (b) "Association" means the Michigan life and health insurance

guaranty association created under section 7706.

     (c) "Authorized assessment" or "authorized" when used in the

context of assessments means a resolution or motion passed by the

association's board of directors that directs that an assessment be

called immediately or in the future from member insurers for a

specific amount. An assessment is authorized when the resolution or

motion is passed.

     (d) "Benefit plan" means a specific employee, union, or

association of natural persons benefit plan.

     (e) "Called assessment" or "called" when used in the context

of assessments means that a notice has been issued by the

association to member insurers requiring that an authorized

assessment be paid within the time frame set forth within the

notice. An authorized assessment becomes a called assessment when

notice is mailed by the association to member insurers.

(f)  (c) "Contractual obligation" means an obligation under

covered policies.

(g)  (d) "Covered policy" means a policy or contract or

certificate under a group policy or contract, or portion thereof,

for which coverage is provided under section 7704.

(h)  (e) "Health insurance" means disability insurance as

defined in section 606.

(i)  (f) "Impaired insurer" means a member insurer considered

by the commissioner after May 1, 1982, to be potentially unable to

fulfill the insurer's contractual obligations or that is placed

under an order of rehabilitation or conservation by a court of

competent jurisdiction. Impaired insurer does not mean an insolvent

insurer.

(j)  (g) "Insolvent insurer" means a member insurer  which

that after May 1, 1982, becomes insolvent and is placed under an

order of liquidation, by a court of competent jurisdiction with a

finding of insolvency.

(k)  (h) "Member insurer" means a person authorized to

transact a kind of insurance or annuity business in this state for

which coverage is provided under section 7704 and includes an

insurer whose certificate of authority in this state may have been

suspended, revoked, not renewed, or voluntarily withdrawn. Member

insurer does not include the following:

     (i) A fraternal benefit society.

     (ii) A cooperative plan insurer authorized under chapter 64.

     (iii) A health maintenance organization authorized or licensed

under  part 210 of the public health code, Act No. 368 of the

Public Acts of 1978, being sections 333.21001 to 333.21098 of the

Michigan Compiled Laws  chapter 35.

     (iv) A mandatory state pooling plan.

     (v) A mutual assessment or any entity that operates on an

assessment basis.

     (vi) A nonprofit dental care corporation operating under  Act

No. 125 of the Public Acts of 1963, being sections 550.351 to

550.373 of the Michigan Compiled Laws  1963 PA 125, MCL 550.351 to

550.373.

     (vii) A nonprofit health care corporation operating under the

nonprofit health care corporation reform act,  Act No. 350 of the

Public Acts of 1980, being sections 550.1101 to 550.1704 of the

Michigan Compiled Laws  1980 PA 350, MCL 550.1101 to 550.1704.

     (viii) An insurance exchange.

     (ix) An organization that has a certificate or license limited

to the issuance of charitable gift annuities.

(x)  (ix) Any entity similar to the entities described in this

subdivision.

(l)  (i) "Moody's corporate bond yield average" means the

monthly average corporates as published by Moody's investors

service, inc., or a successor to that service.

     (m) "Owner" of a contract or policy and "contract owner" and

"policy owner" mean the person who is identified as the legal owner

under the terms of the contract or policy or who is otherwise

vested with the legal title to the contract or policy through a

valid assignment completed in accordance with the terms of the

contract or policy and properly recorded as the owner on the books

of the insurer. The terms owner, contract owner, and policy owner

do not include persons with a mere beneficial interest in a

contract or policy.

(n)  (j) "Person" means an individual, corporation,

partnership, association, or voluntary organization.

     (o) "Plan sponsor" means the following:

     (i) For a benefit plan established or maintained by a single

employer, the single employer.

     (ii) For a benefit plan established or maintained by an

employee organization, the employee or organization.

     (iii) For a benefit plan established or maintained by 2 or more

employers or jointly by 1 or more employers and 1 or more employee

organizations, the association, committee, joint board of trustees,

or other similar group of representatives of the parties who

establish or maintain the benefit plan.

(p)  (k) "Premiums" means amounts  received in a calendar

year  or considerations, by whatever name called, received on

covered policies or contracts less returned premiums,

considerations, and deposits  returned and less dividends and

experience credits. The term "premiums" does not include an amount

or consideration received for a policy or contract, or a portion of

a policy or contract for which coverage is not provided under

section 7704. However, accessible premiums shall not be reduced on

account of sections  7704(3)(c)  7704(5)(c) relating to interest

limitations and  7704(4)(b), (c), and (d)  7704(6)(b), (c), and (e)

relating to limitations with respect to any 1 individual, any 1

participant, and any 1 contract holder. Premiums shall not include

a premium in excess of $5,000,000.00 on an unallocated annuity

contract not issued under a governmental retirement plan

established under section 401(k), 403(b), or 457 of the internal

revenue code of 1986, 26 U.S.C. 401, 403, and 457.  premiums in

excess of the following:

     (i) $5,000,000.00 on an unallocated annuity contract not issued

under a governmental retirement plan established under section

401(k), 403(b), or 457 of the internal revenue code of 1986, 26 USC

401, 403, and 457.

     (ii) For multiple nongroup policies of life insurance owned by

1 owner, whether the policyowner is an individual, firm,

corporation, or other person, and whether the persons insured are

officers, managers, employees, or other persons, $5,000,000.00 with

respect to these polices or contracts, regardless of the number of

policies or contracts held by the owner.

     (q) "Principal place of business" of a plan sponsor or a

person other than a natural person means the state in which the

natural persons who establish policy for the direction, control,

and coordination of the entity as a whole primarily exercise that

function. In making this determination, the association, in its

reasonable judgment, shall consider all of the following factors:

     (i) The state in which the primary executive and administrative

headquarters of the entity is located.

     (ii) The state in which the principal office of the chief

executive officer of the entity is located.

     (iii) The state in which the board of directors, or the entity's

similar governing person or persons, conducts the majority of its

meetings.

     (iv) The state in which the executive or management committee

of the board of directors, or the entity's similar governing person

or persons, conducts the majority of its meetings.

     (v) The state from which the management of the overall

operations of the entity is directed.

     (vi) For a benefit plan sponsored by affiliated companies

comprising a consolidated corporation, the state in which the

holding company or controlling affiliate has its principal place of

business as determined using subparagraphs (i) to (v). However, for

a plan sponsor, if more than 50% of the participants in the benefit

plan are employed in a single state, that state is the principal

place of business of the plan sponsor.

     (vii) For a plan sponsor of a benefit plan, the principal place

of business of the association, committee, joint board of trustees,

or other similar group of representatives of the parties who

establish or maintain the benefit plan shall be based upon the

location of the principal place of business of the employer or

employee organization that has the largest investment in the

benefit plan in lieu of a specific or clear designation of a

principal place of business.

     (r) "Receivership court" means the court in the insolvent

insurer's or impaired insurer's state having jurisdiction over the

conservation, rehabilitation, or liquidation of the insurer.

(s)  (l) "Resident" means a person who resides in this state

at the time a member insurer is determined to be an impaired

insurer or insolvent insurer and to whom contractual obligations

are owed. A person  shall  may be considered a resident of only 1

state, which in the case of a person other than a natural person,

shall be  is its principal place of business. Citizens of the

United States who are either residents of foreign countries or

residents of the United States possessions, territories, or

protectorates that do not have an association similar to the

association created by this chapter shall be considered residents

of this state if the insurer that issued the policies or contracts

is domiciled in this state.

     (t) "State" means a state, the District of Columbia, Puerto

Rico, or a United States possession, territory, or protectorate.

     (u) "Structured settlement annuity" means an annuity purchased

in order to fund periodic payments for a plaintiff or other

claimant in payment for or with respect to personal injury suffered

by the plaintiff or other claimant.

(v)  (m) "Supplemental contract" means  an  a written

agreement entered into for the distribution of proceeds under a

life, health, or annuity policy or contract.  proceeds.

(w)  (n) "Unallocated annuity contract" means an annuity

contract or group annuity certificate that is not issued to and

owned by an individual, except to the extent of an annuity benefit

guaranteed to an individual by an insurer under the contract or

certificate. The term shall also include, but is not  be limited

to, guaranteed investment contracts  ,  and deposit administration

contracts.  , and contracts qualified under section 403(b) of the

internal revenue code of 1986, 26 U.S.C. 403.

     Sec. 7706. (1) There is created a nonprofit legal entity to be

known as the Michigan life and health insurance guaranty

association. A member insurer shall be and remain a member of the

association as a condition of authority to transact insurance in

this state. The association shall perform its functions under the

plan of operation established and approved under section 7710 and

shall exercise its powers through a board of directors established

under section 7707. For purposes of administration and assessment

the association shall maintain the following 2 accounts:

     (a) The health insurance account.

     (b) The life insurance and annuity account which includes the

following subaccounts:

     (i) A life insurance subaccount.

     (ii) An annuity subaccount, which shall include unallocated

annuity contracts owned by a governmental retirement plan, or its

trustee, established under section 401, 403(b), or 457 of the

internal revenue code of 1986, 26 USC 401, 403, and 457, but shall

not include other unallocated annuities.

     (iii) An unallocated annuity subaccount, which shall not include

unallocated annuity contracts owned by a governmental retirement

benefit plan, or its trustee, established under section 401,

403(b), or 457 of the internal revenue code of 1986, 26 USC 401,

403, and 457.

     (2) The association is under the immediate supervision of the

commissioner and is subject to the applicable provisions of the

insurance laws of this state. Meetings or records of the

association may be open to the public upon majority vote of the

board of directors of the association.

     Sec. 7707. (1) The board of directors of the association shall

consist of not less than 5 nor more than 9 member insurers and 2

persons representing the general public serving terms as

established in the plan of operation. The 2 members of the board

representing the general public shall be appointed by the

commissioner, shall not be engaged in the business of insurance,

and shall not be officers, directors, or employees of an insurance

company. The remaining members of the board shall be elected by

member insurers subject to the approval of the commissioner. A

vacancy on the board for a member representing the general public

shall be filled for the remaining period of the term by appointment

by the commissioner. A vacancy on the board for a member

representing member insurers shall be filled for the remaining

period of the term by a majority vote of the remaining board

members, subject to the approval of the commissioner. To elect the

initial board of directors, and initially organize the association,

the commissioner shall give notice to all member insurers of the

time and place of the organizational meeting. In determining voting

rights at the organizational meeting each member insurer shall be

entitled to 1 vote in person or by proxy.

     (2) In approving an election or in appointing a member to the

board, the commissioner shall consider, among other things, whether

all member insurers are fairly represented.

     (3) A member of the board may be reimbursed from the assets of

the association for expenses incurred by the member as a member of

the board of directors but a member of the board shall not

otherwise be compensated by the association for his or her

services.

     Sec. 7708. (1) In addition to the powers and duties enumerated

in other sections of this chapter, the association has the powers

and duties provided in this section.

     (2) If a member insurer is an impaired  domestic insurer, the

association, subject to conditions imposed by the association that

do not impair the contractual obligations of the impaired insurer,

and that are approved by the commissioner,  and, except for cases

of court ordered conservation or rehabilitation, also approved by

the impaired insurer, may do any of the following:

     (a) Guarantee, assume, or reinsure, or cause to be guaranteed,

assumed, or reinsured, any or all of the covered policies of the

impaired insurer.

     (b) Provide money, pledges, notes, guarantees, or other means

as are proper to effectuate subdivision (a), and to assure payment

of the contractual obligations of the impaired insurer pending

action under subdivision (a).

     (c) Loan money to the impaired insurer.

     (3) Subject to the conditions specified in subsection (4), if

a member insurer is an impaired insurer, whether domestic, foreign,

or alien, and the insurer is not paying claims timely, the

association shall do either of the following:

     (a) Take any of the actions specified in subsection (2).

     (b) Provide substitute benefits in lieu of the contractual

obligations of the impaired insurer solely for health claims,

periodic annuity benefit payments, death benefits, supplemental

benefits, and cash withdrawals for policy or contract owners who

petition  therefor  for them under claims of emergency or hardship

in accordance with standards proposed by the association and

approved by the commissioner.

     (4) The association  shall be  is subject to  the requirements

of subsection (3) only if the following are met:

     (a) The laws of the impaired insurer's state of domicile

provide that until all payments of or on account of the impaired

insurer's contractual obligations by all guaranty associations,

along with all expenses thereof and interest on all such payments

and expenses, have been repaid to the guaranty associations or a

plan of repayment by the impaired insurer shall have been approved

by the guaranty associations:

     (i) The delinquency proceeding shall not be dismissed.

     (ii)  Neither the impaired insurer nor its assets shall be

returned to the control of its shareholders or private management.

     (iii)  It shall not be permitted to solicit or accept new

business or have any suspended or revoked license restored.

     (b) If the impaired insurer is a domestic insurer, it has been

placed under an order of rehabilitation by a court of competent

jurisdiction in this state.

     (c) If the impaired insurer is a foreign or alien insurer, any

of the following has occurred:

     (i) It has been prohibited from soliciting or accepting new

business in this state.

     (ii)  Its certificate of authority has been suspended or

revoked in this state.

     (iii)  A petition for rehabilitation or liquidation has been

filed in a court of competent jurisdiction in its state of domicile

by the commissioner of that state.

     (5) If a member insurer is an insolvent insurer, the

association shall do either of the following:

     (a) Guarantee, assume, or reinsure, or cause to be guaranteed,

assumed, or reinsured, the covered policies of the insolvent

insurer or assure payment of the contractual obligations of the

insolvent insurer; and provide money, pledges, notes, guarantees,

or other means as are reasonably necessary to effectuate this

subdivision.

     (b)  With respect to life and health insurance policies,

provide  Provide benefits and coverage pursuant to subsection (6).

     (6) If proceeding under subsection (3)(b) or (5)(b),  with

respect to only life and health insurance policies all of the

following apply:

     (a) The association shall assure payment of benefits for

premiums identical to the premiums and benefits, except for terms

of conversion and renewability, that would have been payable under

the policies or contracts of the insolvent insurer, for claims

incurred as follows:

     (i)  With respect to a  For group  policy  policies or

contracts, not later than the earlier of the next renewal date

under the policy or contract or 45 days, but not less than 30 days,

after the date on which the association becomes obligated with

respect to the  policy  policies and contracts.

     (ii) With respect to  an individual policy  nongroup policies,

contracts, and annuities, not later than the earlier of the next

renewal date, if any, under the  policy  policies or contracts or 1

year, but not less than 30 days, from the date on which the

association becomes obligated with respect to the  policy  policies

or contracts.

     (b) The association shall make diligent efforts to provide all

known insureds or annuitants of nongroup contracts, or group

policyholders  with respect to  of group policies and contracts, 30

days' notice of the termination of the benefits provided pursuant

to subdivision (a).

     (c) The association shall make available substitute coverage

on an individual basis in accordance with the provisions of

subdivision (d), to each known insured  under an individual policy

or an annuitant under nongroup life and health insurance policies

and annuities covered by the association, or owner if other than

the insured or annuitant, and to each individual formerly insured

or formerly an annuitant under a group policy who is not eligible

for replacement group coverage, if the insured or annuitant had a

right under law or the terminated policy or annuity to convert

coverage to individual coverage or to continue an individual policy

or annuity in force until a specified age or for a specified time,

during which the insurer had no right unilaterally to make changes

in any provision of the policy or annuity or had a right only to

make changes in premium by class.

     (d) In providing the substitute coverage required under

subdivision (c), all of the following apply:

     (i) The association may offer either to reissue the terminated

coverage or to issue an alternative policy.

     (ii)  Alternative or reissued policies shall be offered without

requiring evidence of insurability, and shall not provide for any

waiting period or exclusion that would not have applied under the

terminated policy.

     (iii)  The association may reinsure an alternative or reissued

policy.

     (e) An alternative policy adopted by the association shall be

subject to the approval of the commissioner. The association may

adopt an alternative policy for future issuance without regard to

any particular impairment or insolvency. An alternative policy

shall contain at least the minimum statutory provisions required in

this state and provide benefits that shall not be unreasonable in

relation to the premium charged. The association shall set the

premium in accordance with a table of rates which it shall adopt.

The premium shall reflect the amount of insurance to be provided

and the age and class of risk of each insured, but shall not

reflect any changes in the health of the insured after the original

policy was last underwritten. An alternative policy issued by the

association shall provide coverage of a type similar to that of the

policy issued by the impaired or insolvent insurer, as determined

by the association.

     (f) If the association elects to reissue terminated coverage

at a premium rate different from that charged under the terminated

policy, the premium shall be set by the association in accordance

with the amount of insurance provided and the age and class of

risk, subject to approval of the commissioner or by a court of

competent jurisdiction.

     (g) The association's obligations with respect to coverage

under a policy of the impaired or insolvent insurer or under a

reissued or alternative policy shall cease on the date the coverage

or policy is replaced by another similar policy by the

policyholder, the insured, or the association.

     (7) If proceeding under subsection (3)(b) or (5)  , with

respect to  for a policy or contract carrying guaranteed minimum

interest rates, the association shall assure the payment or

crediting of a rate of interest consistent with section  7704(3)(c)

7704(5)(c).

     (8) Nonpayment of premiums within 31 days after the date

required under the terms of a guaranteed, assumed, alternative, or

reissued policy or contract or substitute coverage  shall terminate

terminates the association's obligations under the policy or

coverage under this chapter with respect to the policy or coverage,

except  with respect to  for a claim incurred or any net cash

surrender value which may be due in accordance with the provisions

of this chapter.

     (9) Premiums due for coverage after entry of an order of

liquidation of an insolvent insurer  shall belong to and  be  are

payable at the direction of the association, and the association

shall be  is liable for unearned premiums due to policy or contract

owners arising after the entry of the order.

     (10) The protection provided by this chapter  shall  does not

apply if guaranty protection is also provided to residents of this

state by the laws of the domiciliary state of the impaired insurer

or insolvent insurer.

     (11) In carrying out its duties under this section, the

association, subject to approval by  the  a court in this state,

may do the following:

     (a) Impose permanent policy or contract liens in connection

with a guarantee, assumption, or reinsurance agreement, if the

association finds that the amounts  which  that can be assessed

under this chapter are less than the amounts needed to assure full

and prompt performance of the association's duties under this

chapter or that the economic or financial conditions as they affect

member insurers are sufficiently adverse to render the imposition

of the permanent policy or contract liens to be in the public

interest.

     (b) Impose temporary moratoriums or liens on payments of cash

values and policy loans, or any other right to withdraw funds held

in conjunction with policies or contracts, in addition to any

contractual provisions for deferral of cash or policy loan value.

In addition, if the receivership court imposes a temporary

moratorium or moratorium charge on payment of cash values or policy

loans, or on any other right to withdraw funds held in conjunction

with policies or contracts, out of the assets of the impaired

insurer or insolvent insurer, the association may defer the payment

of the cash values, policy loans, or other rights by the

association for the period of the moratorium or moratorium charge

imposed by the receivership court, but not for claims covered by

the association that are to be paid in accordance with a hardship

procedure established by the liquidator or rehabilitator and

approved by the receivership court.

     (12) A deposit in this state, held pursuant to law or required

by the commissioner for the benefit of creditors, including policy

owners, not turned over to the domiciliary liquidator upon the

entry of a final order of liquidation or order approving a

rehabilitation plan of an insurer domiciled in this state or in a

reciprocal state, pursuant to section 8153, shall be promptly

transferred to the association in accordance with section 8141a.

The association may apply a portion of any amount so paid to it

equal to the percentage determined by dividing the aggregate amount

of all policy owners' claims related to that insolvency for which

the association has provided or will provide statutory benefits by

the aggregate amount of all policy owners' claims in this state

related to that insolvency with the remainder used to pay claims

pursuant to section 8141a(1)(a) to (e). Any amount remaining after

the payment of claims under section 8141a(1)(a) to (e) shall be

transferred to the domiciliary receiver.

(13)  (12) If the association fails to act as provided in

subsections  (3)(b),  (3) and (5)  , and (6)  within a reasonable

period of time, the commissioner shall have the powers and duties

of the association under this chapter with respect to impaired

insurers or insolvent insurers.

(14)  (13) The association may render assistance and advice

to the commissioner, upon his or her request, concerning

rehabilitation, payment of claims, continuance of coverage, or the

performance of other contractual obligations of an impaired insurer

or insolvent insurer.

(15)  (14) The association  shall have  has standing to

appear or intervene before a court or agency in this state with

jurisdiction over an impaired insurer or insolvent insurer

concerning which the association is or may become obligated under

this chapter or with jurisdiction over any person or property that

the association may have rights to through subrogation or

otherwise. The standing shall extend to all matters germane to the

powers and duties of the association, including, but not limited

to, proposals for reinsuring, modifying, or guaranteeing the

covered policies or contracts of the impaired insurer or insolvent

insurer and the determination of the covered policies and

contractual obligations. The association may also appear or

intervene before a court in another state with jurisdiction over an

impaired insurer or insolvent insurer for which the association is

or may become obligated or with jurisdiction over a third party

against whom the association may have rights through subrogation of

the insurer's policyholders.

(16)  (15) A person receiving benefits under this chapter

shall be considered to have assigned the rights under, and any

causes of action against any person for losses arising under,

resulting from, or otherwise relating to, the covered policy or

contract to the association to the extent of the benefits received

because of this chapter whether the benefits are payments of or on

account of contractual obligations, continuation of coverage, or

provision of substitute or alternative coverages. The association

may require an assignment to the association of such rights and

causes of action by a payee, policy or contract owner, beneficiary,

insured, or annuitant as a condition precedent to the receipt of

rights or benefits conferred by this chapter upon that person. The

association shall be subrogated to these rights against the assets

of an impaired insurer or insolvent insurer. The subrogation rights

of the association under this subsection  shall have  has the same

priority against the assets of the impaired insurer or insolvent

insurer as that possessed by the person entitled to receive

benefits under this chapter. In addition, the association  shall

have  has all common law rights of subrogation and any other

equitable or legal remedy  which  that would have been available to

the impaired insurer or insolvent insurer or  holder  owner,

beneficiary, or payee of a policy or contract with respect to the

policy or contract, including without limitation for a structured

settlement annuity, any right of the owner, beneficiary, or payee

of the annuity, to the extent of benefits received pursuant to this

chapter, against a person originally or by succession responsible

for the losses arising from the personal injury relating to the

annuity or payment of the annuity.

     (17) If subsection (16) is invalid or ineffective for any

person or claim for any reason, the amount payable by the

association for the related covered obligations shall be reduced by

the amount realized by any other person with respect to the person

or claim that is attributable to the policies, or portions thereof,

covered by the association.

     (18) If the association has provided benefits for a covered

obligation and a person recovers an amount that the association has

rights to as described in subsection (16), the person shall pay to

the association the portion of the recovery attributable to the

policies, or portion thereof, covered by the association.

(19)  (16) The  In addition to other rights and powers under

this chapter, the association may do the following:

     (a) Enter into contracts  which are necessary or proper to

carry out the provisions and purposes of this chapter.

     (b) Sue or be sued, including taking legal actions necessary

or proper for recovery of unpaid assessments levied under section

7709 and to settle claims or potential claims against it.

     (c) Borrow money to effect the purposes of this chapter. Notes

or other evidence of indebtedness of the association not in default

shall be legal investments for domestic insurers and may be carried

as admitted assets.

     (d) Employ or retain the people necessary to handle the

financial transactions of the association and to perform other

functions  which  that become necessary or proper under this

chapter.

     (e) Negotiate and contract with a liquidator, rehabilitator,

conservator, or ancillary receiver to carry out the powers and

duties of the association.

     (f) Take legal action  which is necessary to avoid or recover

payment of improper claims.

     (g) Exercise, for the purposes of this chapter and to the

extent approved by the commissioner, the powers of a domestic life

or health insurer, but in no case may the association issue

insurance policies or annuity contracts other than those issued to

perform its obligations under this chapter.

     (h) Join an organization of 1 or more other state associations

of similar purposes, to further the purposes and administer the

powers and duties of the association.

     (i) Request information from a person seeking coverage from

the association in order to aid the association in determining its

obligations under this chapter to the person, and the person shall

promptly comply with the request.

     (j) Take other necessary or appropriate action to discharge

its duties and obligations and to exercise its powers under this

chapter.

     (20) At any time within 1 year after the coverage date, the

association may elect to succeed to the rights and obligations of

the member insurer, that accrue on or after the coverage date and

that relate to contracts, in whole or in part, by the association,

under any 1 or more indemnity reinsurance agreements entered into

by the member insurer as a ceding insurer and selected by the

association; provided, however, that the association shall not

exercise this election for a reinsurance agreement if the receiver,

rehabilitator, or liquidator of the member insurer has previously

and expressly disaffirmed the reinsurance agreement on which the

association becomes responsible for the obligations of a member

insurer. The association shall make an election under this

subsection by providing a notice to the receiver, rehabilitator, or

liquidator and to the affected reinsurer. If the association makes

an election, all of the following apply with respect to the

agreements selected by the association:

     (a) The association is responsible for all unpaid premiums due

under the agreements for periods both before and after the coverage

date, and for the performance of all other obligations to be

performed after the coverage date, for contracts covered, in whole

or in part, by the association. The association may charge

contracts covered in part by the association, through reasonable

allocation methods, the cost for reinsurance in excess of the

obligations of the association.

     (b) The association is entitled to any amounts payable by the

reinsurer under the agreements for losses or events that occur in

periods after the coverage date and that relate to contracts

covered by the association, in whole or in part, provided that the

association is obligated upon receipt of this amount to pay to the

beneficiary under the policy or contract on account of which they

were paid the amount received by the association that is in excess

of the benefits paid by the association on account of the policy or

contract less the retention of the impaired member insurer or

insolvent member insurer applicable to the loss or event.

     (c) Within 30 days following the association's election, the

association and each indemnity reinsurer shall calculate the net

balance due to or from the association under each such reinsurance

agreement as of the date of the association's election, which

calculation shall give full credit to all items paid by either the

member insurer or its receiver, rehabilitator, or liquidator or the

indemnity reinsurer during the period between the coverage date and

the date of the association's election. Either the association or

the indemnity reinsurer shall pay the net balance due the other

within 5 days of the completion of this calculation. If the

receiver, rehabilitator, or liquidator has received any amounts due

the association pursuant to subdivision (b), the receiver,

rehabilitator, or liquidator shall remit this amount to the

association as promptly as practicable.

     (d) If, within 60 days of the election, the association pays

the premiums due for periods both before and after the coverage

date that relate to contracts covered by the association, in whole

or in part, the reinsurer shall not terminate the reinsurance

agreements insofar as the agreements relate to contracts covered by

the association in whole or in part and shall not set off any

unpaid premiums due for periods prior to the coverage date against

amounts due the association.

     (e) As used in this subsection, "coverage date" means the date

on which the association becomes responsible for the obligations of

the member insurer.

     (21) If the association transfers its obligations to another

insurer, and if the association and the other insurer agree, the

other insurer shall succeed to the rights and obligations of the

association under subsection (20) effective on the date agreed to

by the association and the other insurer and regardless of whether

the association has made the election referred to in subsection

(20). If this occurs, the indemnity reinsurance agreement

automatically terminates for new reinsurance unless the indemnity

reinsurer and other insurer agree to the contrary and the

obligations described in subsection (20)(b) no longer apply on and

after the date the indemnity reinsurance agreement is transferred

to the third party insurer. This subsection does not apply if the

association has previously expressly determined in writing that it

will not exercise the election referred to in subsection (20).

     (22) Subsections (20) and (21) shall be applied consistently

with section 8132 and shall supersede the provisions of any

affected reinsurance agreement that provides for or requires any

payment of reinsurance proceeds, on account of losses or events

that occur in periods after the coverage date, to the receiver,

liquidator, or rehabilitator or the insolvent member insurer. The

receiver, rehabilitator, or liquidator remain entitled to any

amounts payable by the reinsurer under the reinsurance agreement

with respect to losses or events that occur in periods prior to the

coverage date, subject to applicable setoff provisions.

     (23) Except as otherwise expressly provided in subsections

(20) to (22), this section does not do any of the following:

     (a) Alter or modify the terms and conditions of the indemnity

reinsurance agreements of the insolvent member insurer.

     (b) Abrogate or limit any rights of any reinsurer to claim

that it is entitled to rescind a reinsurance agreement.

     (c) Give a policy owner or beneficiary an independent cause of

action against an indemnity reinsurer that is not otherwise set

forth in the indemnity reinsurance agreement.

     (24) The board of directors of the association, in the

exercise of reasonable business judgment, may determine the means

by which the association is to provide the benefits of this chapter

in an economical and efficient manner.

     (25) If the association has arranged or offered to provide the

benefits of this chapter to a covered person under a plan or

arrangement that fulfills the association's obligations under this

chapter, the person is not entitled to benefits from the

association in addition to, or other than those provided under, the

plan or arrangement.

     (26) Venue in a suit against the association arising under

this chapter shall be in Ingham county. The association shall not

be required to give an appeal bond in an appeal that relates to a

cause of action arising under this chapter.

     (27) In carrying out its duties in connection with

guaranteeing, assuming, or reinsuring policies or contracts under

subsection (3) or (5), the association may, subject to the

commissioner's or the receivership court's approval, issue

substitute coverage for a policy or contract that provides an

interest rate, crediting rate, or similar factor determined by use

of an index or other external reference stated in the policy or

contract employed in calculating returns or changes in value, by

issuing an alternative policy or contract in accordance with the

following provisions:

     (a) Instead of the index or other external reference provided

for in the original policy or contract, the alternative policy or

contract provides for a fixed interest rate, payment of dividends

with minimum guarantees, or a different method for calculating

interest or changes in value.

     (b) There is no requirement for evidence of insurability,

waiting period, or other exclusion that would not have applied

under the replaced policy or contract.

     (c) The alternative policy or contract is substantially

similar to the replaced policy or contract in all other material

terms.

     Sec. 7709. (1) Except as otherwise provided in this section,

for the purpose of providing the funds necessary to carry out the

powers and duties of the association, the board of directors shall

assess the member insurers, separately for each account, at such

time and for such amounts as the board finds necessary. Assessments

shall be due not less than 30 days after written notice to the

member insurers and shall accrue interest at 12% per annum on and

after the due date.

     (2) There shall be 2 classes of assessments, as follows:

     (a) Class A assessments shall be  made  authorized and called

for the purpose of meeting administrative and legal costs  ,  and

other general expenses  , and the expenses of examinations

conducted under section 7712(5)  and may be authorized and called

whether or not the assessment relates to a particular impaired

insurer or insolvent insurer.

     (b) Class B assessments shall be  made  authorized and called

to the extent necessary to carry out the powers and duties of the

association under section 7708  with regard to  for an impaired

insurer or insolvent insurer.

     (3) The amount of a class A assessment shall be determined by

the board and may be  made  authorized and called on a pro rata or

non pro  nonpro rata basis. If pro rata, the board may provide that

it be credited against future class B assessments.  A  The total of

all  non pro  nonpro rata  assessment  assessments shall not exceed

$150.00 per member insurer in 1 calendar year.

     (4) The amount of a class B assessment shall be allocated for

assessment purposes among the accounts pursuant to an allocation

formula  which  that may be based on the premiums or reserves of

the impaired insurer or insolvent insurer or any other standard

considered by the board in its sole discretion as being fair and

reasonable under the circumstances.

     (5) A class B assessment against member insurers for each

account and subaccount shall be in the proportion that the premiums

received on business in this state by each assessed member insurer

on policies or contracts covered by each account for the 3 most

recent calendar years for which information is available preceding

the year in which the insurer became impaired or insolvent bears to

such premiums received on business in this state for those 3 most

recent calendar years by all assessed member insurers.

     (6) An assessment for funds to meet the requirements of the

association with respect to an impaired insurer or insolvent

insurer shall not be  made  authorized or called until necessary to

implement the purposes of this chapter. Classification of

assessments under subsection (2) and computation of assessments

under this section shall be made with a reasonable degree of

accuracy, recognizing that exact determinations may not always be

possible. The association shall notify each member insurer of its

anticipated pro rata share of an authorized assessment not yet

called within 180 days after the assessment is authorized.

     (7) The association may abate or defer, in whole or in part,

the assessment of a member insurer if, in the opinion of the board,

payment of the assessment would endanger the ability of the member

insurer to fulfill that insurer's contractual obligations.  In the

event  If an assessment against a member insurer is abated or

deferred, in whole or in part, the amount by which  such  the

assessment is abated or deferred may be assessed against the other

member insurers in a manner consistent with the basis for

assessments set forth in this section. Once the conditions that

caused a deferral have been removed or rectified, the member

insurer shall pay all assessments that were deferred pursuant to a

repayment plan approved by the association.

     (8) The total of all assessments  upon  authorized by the

association for a member insurer for each  account or subaccount

of the life insurance and annuity account and for the health

account shall not in 1 calendar year exceed 2% of that member

insurer's average annual premiums received in this state  during

the calendar years for which information is available preceding the

assessment on the policies covered by the account on the policies

and contracts covered by the account or subaccount during the 3

calendar years preceding the year in which the insurer became an

impaired insurer or insolvent insurer,  . If the maximum assessment

for any account, together with the other assets of the association

in that account, does not provide in 1 calendar year in that

account an amount sufficient to carry out the responsibilities of

the association, the necessary additional funds shall be assessed

as soon thereafter as permitted by this chapter. subject to the

following:

     (a) If 2 or more assessments are authorized in 1 calendar year

for insurers that become impaired insurers or insolvent insurers in

different calendar years, the average annual premiums for purposes

of the aggregate assessment percentage limitation under this

subsection are equal and limited to the higher of the 3-year

average annual premiums for the applicable subaccount or account as

calculated pursuant to this section.

     (b) If the maximum assessment, together with the other assets

of the association in an account, does not provide in 1 year, in

either account, an amount sufficient to carry out the

responsibilities of the association, the necessary additional funds

shall be assessed as soon thereafter as permitted by this chapter.

     (9) The board may provide in the plan of operation a method of

allocating funds among claims, whether relating to 1 or more

impaired insurers or insolvent insurers, when the maximum

assessment will be insufficient to cover anticipated claims.

     (10) If the maximum assessment  under subsection (1) in 2

successive years for any subaccount in the life and annuity account

does not provide an amount sufficient to carry out the

responsibilities of the association, then pursuant to subsection

(5), the board shall allocate the necessary additional amount among

the other subaccounts, in the following sequence: from the life

insurance subaccount to the annuity subaccount to the unallocated

annuity subaccount; from the annuity subaccount to the unallocated

annuity subaccount to the life insurance subaccount; from the

unallocated annuity subaccount to the annuity subaccount to the

life insurance subaccount; however no amount shall be allocated to

a subaccount for assessment until the maximum amount has been

allocated to the preceding subaccount  for a subaccount of the life

insurance and annuity account in any 1 year does not provide an

amount sufficient to carry out the responsibilities of the

association, then, pursuant to subsection (5), the board shall

access the other subaccounts of the life insurance and annuity

account for the necessary additional amount, subject to the maximum

stated in subsection (8).

     (11) The board may refund to member insurers, by an equitable

method as established in the plan of operation and in proportion to

the contribution of each insurer to that account, the amount by

which the assets of the account exceed the amount the board finds

is necessary to carry out  during the coming year the  future

obligations of the association with regard to that account,

including assets accruing from net realized gains and income from

investments. A reasonable amount may be retained in an account to

provide funds for the continuing expenses of the association and

for future  losses  claims. Instead of a class A assessment, the

board may transfer on an equitable pro rata basis excess amounts

from class B accounts to the class A account.

     (12) In determining premium rates and policy owner dividends

as to any kind of insurance within the scope of this chapter, a

member insurer may consider the amount reasonably necessary to meet

assessment obligations under this chapter.

     (13) The association shall issue to an insurer paying an

assessment under this chapter, other than a class A assessment, a

certificate of contribution in a form prescribed by the

commissioner for the amount of the assessment so paid. All

outstanding certificates shall be of equal dignity and priority

without reference to amounts or dates of issue. A certificate of

contribution may be shown by the insurer in the insurer's financial

statement as an asset in such form and for such amount, if any, and

period of time as the commissioner may approve.

     (14) A member insurer that wishes to protest all or part of an

assessment shall pay when due the full amount of the assessment as

stated in the notice provided by the association. The payment shall

be available to meet association obligations during the pendency of

the protest or any subsequent appeal. Payment shall be accompanied

by a statement in writing that the payment is made under protest

and setting forth a brief statement of the grounds for the protest.

Within 60 days following the payment of an assessment under protest

by a member insurer, the association shall notify the member

insurer in writing of its determination with respect to the protest

unless the association notifies the member insurer that additional

time is required to resolve the issues raised by the protest.

Within 30 days after a final decision has been made, the

association shall notify the protesting member insurer in writing

of that final decision. Within 60 days of receipt of notice of the

final decision, the protesting member insurer may appeal that final

action to the commissioner. Instead of rendering a final decision

on a protest based on a question regarding the assessment base, the

association may refer protests to the commissioner for a final

decision, with or without a recommendation from the association. If

the protest or appeal is resolved in the member insurer's favor,

the amount paid in error or excess shall be returned to the member

insurer. Interest on a refund due a protesting member insurer shall

be paid at the rate actually earned by the association.

     (15) The association may request information of member

insurers in order to aid in the exercise of its power under this

section, and member insurers shall promptly comply with this

request.

     Sec. 7711. (1) In addition to the duties enumerated elsewhere

in this chapter, the commissioner shall:

     (a) Upon request of the board of directors, provide the

association with a statement of the premiums in the appropriate

states for each member insurer.

     (b) When an impairment is declared and the amount of the

impairment is determined, serve a demand upon the impaired insurer

to make good the impairment within a reasonable time. Notice to the

impaired insurer  shall constitute  constitutes notice to that

insurer's shareholders, if any. The failure of the insurer to

promptly comply with the demand  shall  does not excuse the

association from the performance of the association's powers and

duties under this chapter.

     (c) In a liquidation or rehabilitation proceeding involving a

domestic insurer, be appointed as the liquidator or rehabilitator.

     (2) In addition to the powers enumerated elsewhere in this

chapter, the commissioner may suspend or revoke, after notice and

hearing, the certificate of authority to transact insurance in this

state of a member insurer  which  that fails to pay an assessment

when due or fails to comply with the plan of operation. As an

alternative the commissioner may levy a forfeiture on a member

insurer  which  that fails to pay an assessment when due. The

forfeiture shall not exceed 5% of the unpaid assessment per month,

but forfeiture shall not be less than $100.00 per month.

     (3)  An  A final action by the board of directors or the

association may be appealed to the commissioner by a member insurer

if the appeal is taken within 60 days of its receipt of notice of

the final action being appealed.  If a member company is appealing

an assessment, the amount assessed shall be paid to the association

and available to meet association obligations during the pendency

of an appeal. If the appeal on the assessment is upheld, the amount

paid in error or excess shall be returned to the member company. A

final action or order of the commissioner  shall be  is subject to

judicial review in a court of competent jurisdiction in accordance

with this state's laws applying to actions or orders of the

commissioner.

     (4) The liquidator, rehabilitator, or conservator of an

impaired insurer may notify all interested persons of the effect of

this chapter.

     Sec. 7712. (1) To aid in the detection and prevention of

insurer insolvencies or impairments, the commissioner shall do the

following:

     (a) Notify the commissioners of all the other states,

territories of the United States, and the District of Columbia when

he or she takes any of the following actions against a member

insurer:

     (i) Revokes a certificate of authority.

     (ii) Suspends a certificate of authority.

     (iii) Makes a formal order that the company restricts its

premium writing, obtains additional contributions to surplus,

withdraws from the state, reinsures all or a part of its business,

or increases capital, surplus, or any other account for the

security of policyholders or creditors.

     (b) Mail the notice under subdivision (a) to all commissioners

within 30 days following the action taken.

     (c) Report to the board of directors when he or she has taken

any of the actions set forth in subdivision (a) or has received a

report from any other commissioner indicating that such action has

been taken in another state. The report to the board of directors

shall contain all significant details of the action taken or the

report received from another commissioner.

     (d) Report to the board of directors when the commissioner has

reasonable cause to believe from an examination, whether completed

or in process, of a member  company  insurer that the  company

insurer may be an impaired insurer or insolvent insurer.

     (e) Furnish to the board of directors the NAIC insurance

regulatory information system (IRIS) ratios and listings of

companies not included in the ratios developed by the national

association of insurance commissioners. The board may use that

information in carrying out its duties and responsibilities under

this section.

     (f) The report and the information furnished pursuant to this

subsection shall be kept confidential by the board of directors

until made public by the commissioner or other lawful authority.

     (2) The commissioner may seek the advice and recommendations

of the board of directors concerning a matter affecting his or her

duties and responsibilities regarding the financial condition of a

member company seeking to transact insurance business in this

state.

     (3) The board of directors, upon majority vote, may make

reports and recommendations to the commissioner upon a matter

germane to the solvency, liquidation, rehabilitation, or

conservation of a member insurer or germane to the solvency of a

company seeking to transact insurance business in this state. The

reports and recommendations shall not be considered public

documents.

     (4) The board of directors, upon majority vote,  shall  may

notify the commissioner of information indicating that a member

insurer may be an impaired insurer or insolvent insurer.

     (5) The board of directors, upon majority vote, may request

that the commissioner order an examination of a member insurer

which  that the board in good faith believes may be an impaired

insurer or insolvent insurer. Within 30 days after the receipt of

the request, the commissioner shall begin the examination. The

examination may be conducted as a national association of insurance

commissioners examination or may be conducted by a person whom the

commissioner designates. The cost of the examination shall be paid

by the association, and the examination report shall be treated in

the same manner as other examination reports. An examination report

shall not be released to the board of directors before release to

the public, but this  shall  does not preclude the commissioner

from complying with subsection (1). The commissioner shall notify

the board of directors when the examination is completed. The

request for an examination shall be kept on file by the

commissioner but shall not be open to public inspection before

release of the examination report to the public.

     (6) The board of directors, upon majority vote, may make

recommendations to the commissioner for the detection and

prevention of insurer insolvencies.

     (7) At the conclusion of an insurer insolvency in which the

association was obligated to pay covered claims, the board of

directors shall prepare a report to the commissioner containing

information in the board's possession bearing on the history and

causes of the insolvency. The board shall cooperate with the boards

of directors of guaranty associations in other states in preparing

a report on the history and causes for insolvency of a particular

insurer and may adopt by reference a report prepared by such other

associations.

     Sec. 7714. (1) This chapter shall not be construed to reduce

the liability for unpaid assessments of the insureds on an impaired

insurer or insolvent insurer operating under a plan with assessment

liability.

     (2) Records shall be kept of all  negotiations and meetings in

which the association or the association's representatives are

involved  meetings of the board of directors to discuss the

activities of the association in carrying out powers and duties

under section 7708.  Records of such negotiations or meetings shall

be made public only upon  Association records concerning an

impaired insurer or an insolvent insurer shall not be disclosed

before the termination of a liquidation, rehabilitation, or

conservation proceeding involving an impaired insurer or insolvent

insurer,  upon  or before the termination of the impairment or

insolvency of the insurer, or upon the order of a court of

competent jurisdiction. This subsection  shall  does not limit the

duty of the association to render a report of association

activities under section 7715.

     (3) For the purpose of carrying out obligations under this

chapter, the association shall be considered a creditor of the

impaired insurer or insolvent insurer to the extent of assets

attributable to covered policies reduced by any amounts to which

the association is entitled as subrogee pursuant to section

7708(15)  7708(16). Assets of the impaired insurer or insolvent

insurer attributable to covered policies shall be used to continue

all covered policies and pay all contractual obligations of the

impaired insurer or insolvent insurer as required by this chapter.

As used in this subsection, "assets attributable to covered

policies" means that proportion of the assets which the reserves

that should have been established for the covered policies bear to

the reserves that should have been established for all policies of

insurance written by the impaired insurer or insolvent insurer.

     (4) As a creditor of an impaired insurer or insolvent insurer

as provided in subsection (3) and consistent with chapter 81, the

association and other similar associations are entitled to receive

a disbursement of assets out of the marshaled assets, from time to

time as the assets become available to reimburse it, as a credit

against contractual obligations under this act. If the liquidator

has not, within 120 days of a final determination of insolvency of

an insurer by the receivership court, made an application to the

court for the approval of a proposal to disburse assets out of

marshaled assets to guaranty associations having obligations

because of the insolvency, then the association may make

application to the receivership court for approval of its own

proposal to disburse assets.

     Sec. 7717. There  shall be  is no liability on the part of and

a cause of action  shall  does not arise against a member insurer

or an insurer's agents or employees, the association or the

association's agents or employees, members of the board of

directors, or the commissioner or his or her representatives for

any action or omission by them in the performance of powers and

duties under this  chapter  act. This immunity shall extend to the

participation in an organization of 1 or more other state

associations of similar purposes and to the organization and its

agents or employees.

     Enacting section 1. (1) Sections 7702, 7704, 7705, 7706, 7707,

7708, 7709, 7711, 7712, 7714, and 7717 of the insurance code of

1956, 1956 PA 218, MCL 500.7702, 500.7704, 500.7705, 500.7706,

500.7707, 500.7708, 500.7709, 500.7711, 500.7712, 500.7714, and

500.7717, as amended by this amendatory act, apply to an insurer

impairment or insurer insolvency proceeding commenced on or after

the effective date of this amendatory act for which guaranty

association coverage obligations are incurred.

     (2) Section 838a of the insurance code of 1956, 1956 PA 218,

MCL 500.838a, as added by this amendatory act, applies on and after

January 1, 2007.