August 9, 2006, Introduced by Rep. Hune and referred to the Committee on Insurance.
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.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
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) This amendatory act applies to insurer
impairments and insurer insolvencies for which receivership or
liquidation proceedings are commenced on or after the effective
date of this amendatory act.
(2) This amendatory act applies 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.