May 21, 2013, Introduced by Rep. Lund and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending sections 102, 208, 814a, 1031, 1242, 1246, 1505, 2080,
2110b, 2153, 3010, 3580, 3926a, 3935, 4424, 4501, 4601, 4603, 4609,
4625, 4673, 4701, 4705, 4713, 4715, 4733, 4734, and 8111 (MCL
500.102, 500.208, 500.814a, 500.1031, 500.1242, 500.1246, 500.1505,
500.2080, 500.2110b, 500.2153, 500.3010, 500.3580, 500.3926a,
500.3935, 500.4424, 500.4501, 500.4601, 500.4603, 500.4609,
500.4625, 500.4673, 500.4701, 500.4705, 500.4713, 500.4715,
500.4733, 500.4734, and 500.8111), section 102 as amended by 2000
PA 252, section 208 as amended by 2002 PA 105, section 814a as
added by 2009 PA 198, section 1031 as added by 2008 PA 342, section
1242 as amended by 2002 PA 32, section 1246 as added by 2001 PA
228, section 1505 as amended by 2011 PA 75, section 2080 as amended
by 2008 PA 513, section 2110b as added by 2004 PA 190, section 2153
as added by 2012 PA 206, section 3010 as amended by 2006 PA 208,
section 3580 as added by 2000 PA 249, section 3935 as amended and
section 3926a as added by 2006 PA 442, section 4424 as amended by
2008 PA 497, section 4501 as amended by 2012 PA 39, sections 4601,
4603, 4609, 4625, 4673, 4701, 4705, 4713, 4715, 4733, and 4734 as
added by 2008 PA 29, and section 8111 as amended by 2006 PA 358.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 102. (1) "Commissioner" as used in this act means the
commissioner
of the office of financial and insurance
services.director.
(2)
"Department" as used in this act means the office of
financial
and insurance services.department
of insurance and
financial services.
(3) "Director" as used in this act, unless the context clearly
implies a different meaning, means the director of insurance and
financial services.
Sec. 208. The department of technology, management, and budget
shall
assign to the office of financial and insurance services
department of insurance and financial services at Lansing suitable
rooms
for conducting the business of the division, department of
insurance and financial services, the necessary expense of which
shall be audited by the department of technology, management, and
budget.
Sec. 814a. (1) Every property and casualty insurer doing
business
in this state, unless exempted by the commissioner,
director,
shall annually file with the commissioner
director the
opinion of an appointed actuary which shall be entitled statement
of actuarial opinion. This statement shall be filed pursuant to the
same
instructions issued by the commissioner director for the
filing of annual statements.
(2) Every property and casualty insurer domiciled in this
state that is required to file a statement of actuarial opinion
under
subsection (1) shall annually file with the commissioner
director an actuarial opinion summary, written by the insurer's
appointed actuary. This actuarial opinion summary shall be filed
pursuant
to the same instructions issued by the commissioner
director for the filing of annual statements and shall be
considered as a document supporting the statement of actuarial
opinion required in subsection (1).
(3) A property and casualty insurer not domiciled in this
state that is required to file a statement of actuarial opinion
under subsection (1) shall provide an actuarial opinion summary
described
in subsection (2) upon the commissioner's director's
request.
(4) An actuarial report and underlying workpapers shall be
prepared to support each statement of actuarial opinion. If the
property and casualty insurer fails to provide this actuarial
report
or workpapers at the commissioner's director's request, the
commissioner
director may engage a qualified actuary at the expense
of the insurer to review the statement of actuarial opinion and the
basis for the opinion and prepare the actuarial report or
workpapers.
(5) The statement of actuarial opinion shall be filed with the
annual statement in accordance with section 438 and shall be
treated as a public document.
(6) Documents, materials, or other information in the
possession
or control of the office of financial and insurance
regulation
department that are considered an actuarial report,
workpapers, or actuarial opinion summary provided in support of the
statement of actuarial opinion, and any other material provided by
the
insurer to the commissioner director
in connection with the
actuarial report, workpapers, or actuarial opinion summary, is
confidential and privileged and is not subject to the freedom of
information act, 1976 PA 442, MCL 15.231 to 15.246, subpoena, or to
discovery and is not admissible in evidence in any private civil
action. This subsection does not do either of the following:
(a)
Limit the commissioner's director's
authority to release
the documents for the purpose of professional disciplinary
proceedings
if the commissioner director
is satisfied that the
confidentiality of the documents will be preserved.
(b)
Limit the commissioner's director's
authority to use the
documents, materials, or other information in furtherance of any
regulatory
or legal action brought as part of the commissioner's
director's official duties.
(7)
Neither the commissioner director
nor any person who
received documents, materials, or other information while acting
under
the commissioner's director's
authority shall be permitted or
required to testify in any private civil action concerning any
confidential documents, materials, or information subject to
subsection (6).
(8) In order to assist in the performance of the
commissioner's
director's duties, the commissioner director may
do
any of the following:
(a) Share documents, materials, or other information,
including the confidential and privileged documents, materials, or
information subject to subsection (6) with any other state,
federal, or international regulatory agencies, with the national
association of insurance commissioners and its affiliates and
subsidiaries, and with state, federal, and international law
enforcement authorities, provided that the recipient agrees to
maintain the confidentiality and privileged status of the document,
material, or other information and has the legal authority to
maintain confidentiality.
(b) Receive documents, materials, or information, including
otherwise confidential and privileged documents, materials, or
information, from the national association of insurance
commissioners and its affiliates and subsidiaries, and from
regulatory and law enforcement officials of other foreign or
domestic jurisdictions, and shall maintain as confidential or
privileged any document, material, or information received with
notice or the understanding that it is confidential or privileged
under the laws of the jurisdiction that is the source of the
document, material, or information.
(9) Any applicable privilege or claim of confidentiality is
not waived by the disclosing or sharing of documents, materials, or
information as permitted by this section.
(10) For purposes of this section, the Michigan automobile
insurance placement facility created under chapter 33 is not a
property and casualty insurer.
Sec. 1031. (1) Every insurer required to file an audited
financial report pursuant to this chapter that has annual direct
written and assumed premiums, excluding premiums reinsured with the
federal crop insurance corporation and federal flood program, of
$500,000,000.00 or more shall prepare a report of the insurer's or
group of insurers' internal control over financial reporting, which
shall be as of the immediately preceding December 31. The report
shall
be filed with the commissioner director
along with the
communication of internal control related matters noted in an audit
described under section 1017.
(2) Notwithstanding the premium threshold in subsection (1),
the
commissioner director may require an insurer to file a report
of internal control over financial reporting if the insurer is in a
risk-based capital level event or meets 1 or more of the standards
listed in chapter 4 of an insurer considered to be in hazardous
financial condition, or otherwise exhibits signs of a troubled
insurer.
(3) An insurer or a group of insurers that is directly subject
to section 404, part of a holding company system whose parent is
directly subject to section 404, not directly subject to section
404 but is a SOX compliant entity, or a member of a holding company
system whose parent is not directly subject to section 404 but is a
SOX compliant entity may file its or its parent's section 404
report and an addendum in satisfaction of the requirements of this
section provided that those internal controls of the insurer or
group of insurers having a material impact on the preparation of
the insurer's or group of insurers' audited statutory financial
statements as required in section 1007 were included in the scope
of the section 404 report. The addendum shall be a positive
statement by management that there are no material processes with
respect to the preparation of the insurer's or group of insurers'
audited statutory financial statements as required in section 1007
excluded from the section 404 report. If there are internal
controls of the insurer or group of insurers that have a material
impact on the preparation of the insurer's or group of insurers'
audited statutory financial statements and those internal controls
were not included in the scope of the section 404 report, the
insurer or group of insurers may either file a report as specified
in subsection (1), or the section 404 report and a report as
specified in subsection (1) for those internal controls that have a
material impact on the preparation of the insurer's or group of
insurers' audited statutory financial statements not covered by the
section 404 report.
(4) The report of internal control over financial reporting
shall include all of the following:
(a) A statement that management is responsible for
establishing and maintaining adequate internal control over
financial reporting.
(b) A statement that management has established internal
control over financial reporting and an assertion, to the best of
management's knowledge and belief, after diligent inquiry, as to
whether its internal control over financial reporting is effective
to provide reasonable assurance regarding the reliability of
financial statements in accordance with statutory accounting
principles.
(c) A statement that briefly describes the approach or
processes by which management evaluated the effectiveness of its
internal control over financial reporting.
(d) A statement that briefly describes the scope of work that
is included and whether any internal controls were excluded.
(e) Disclosure of any unremediated material weaknesses in the
internal control over financial reporting identified by management
as of the immediately preceding December 31. Management shall not
conclude that the internal control over financial reporting is
effective to provide reasonable assurance regarding the reliability
of financial statements in accordance with statutory accounting
principles if there is 1 or more unremediated material weaknesses
in its internal control over financial reporting.
(f) A statement regarding the inherent limitations of internal
control systems.
(g) Signatures of the chief executive officer and the chief
financial officer or his or her equivalent.
(5) Management shall document and make available upon
financial condition examination the basis upon which its
assertions, required in subsection (4), are made. Management may
base its assertions, in part, upon its review, monitoring, and
testing of internal controls undertaken in the normal course of its
activities. Management has discretion as to the nature of the
internal control framework used, and the nature and extent of
documentation, in order to make its assertion in a cost-effective
manner and, as such, may include assembly of or reference to
existing documentation.
(6)
The office of financial and insurance regulation
department shall keep confidential the report on internal control
over financial reporting, required by subsection (1), and any
documentation provided in support thereof during the course of a
financial condition examination.
(7) This section takes effect beginning with the reporting
period that ends December 31, 2010. An insurer or group of insurers
that is not required to file a report because the total written
premium is below the required threshold and subsequently becomes
subject to the reporting requirement, whether through business
combination or not, shall have 2 years after the year the threshold
is exceeded to comply with this section's reporting requirements.
Sec.
1242. (1) The commissioner director
shall refuse to grant
a license to act as a solicitor, an insurance counselor, or an
adjuster to an applicant who fails to meet the requirements of this
chapter. Notice of the refusal shall be in writing and shall set
forth the basis for the refusal. If the applicant submits a written
request within 30 days after mailing of the notice of refusal, the
commissioner
director shall promptly conduct a hearing in which the
applicant shall be given an opportunity to show compliance with the
requirements of this chapter.
(2)
The commissioner, director,
after notice and opportunity
for a hearing, may suspend or revoke the license of a solicitor,
insurance counselor, or adjuster who fails to maintain the
standards required for initial licensing or who violates any
provision of this act.
(3) After notice and opportunity for a hearing, the
commissioner
director may refuse to grant or renew a license to act
as a solicitor, adjuster, or insurance counselor if he or she
determines by a preponderance of the evidence, that it is probable
that the business or primary occupation of the applicant will give
rise to coercion, indirect rebating of commissions, or other
practices in the sale of insurance that are prohibited by law.
(4)
Without prior hearing, the commissioner director may order
summary suspension of a license if he or she finds that protection
of the public requires emergency action and incorporates this
finding in his or her order. The suspension shall be effective on
the date specified in the order or upon service of a certified copy
of the order on the licensee, whichever is later. If requested, the
commissioner
director shall conduct a hearing on the suspension
within a reasonable time but not later than 20 days after the
effective date of the summary suspension unless the person whose
license is suspended requests a later date. At the hearing, the
commissioner
director shall determine if the suspension should be
continued or if the suspension should be withdrawn, and, if proper
notice is given, may determine if the license should be revoked.
The
commissioner director shall announce his or her decision within
30 days after conclusion of the hearing. The suspension shall
continue until the decision is announced.
(5)
The commissioner, director,
or his or her designated
deputy, may issue subpoenas to require the attendance and testimony
of witnesses and the production of documents necessary to the
conduct
of the hearing and may designate an office of financial and
insurance
services a department employee to make service. The
subpoenas
issued by the commissioner, director,
or his or her
designated deputy, may be enforced upon petition to the circuit
court of Ingham county to show cause why a contempt order should
not be issued, as provided by law.
Sec. 1246. (1) Any documents, materials, or other information
in
the control or possession of the office of financial and
insurance
services department that is furnished by an insurer, an
insurance producer, or an employee or representative acting on
behalf of the insurer or insurance producer, or obtained by the
commissioner
director in an investigation pursuant to this section
is confidential by law and privileged, is not subject to the
freedom of information act, 1976 PA 442, MCL 15.231 to 15.246, is
not subject to subpoena, and is not subject to discovery or
admissible in evidence in any private civil action. However, the
commissioner
director is authorized to use the documents,
materials, or other information in the furtherance of any
regulatory
or legal action brought as a part of the commissioner's
director's duties.
(2)
Neither the commissioner director
nor any person who
received documents, materials, or other information while acting
under
the commissioner's director's
authority is permitted or
required to testify in any private civil action concerning any
confidential documents, materials, or information under subsection
(1).
(3) In order to assist in the performance of the
commissioner's
director's duties under this chapter, the
commissioner
director may do any of the following:
(a) Share documents, materials, or other information,
including the confidential and privileged documents, materials, or
information subject to subsection (1), with other state, federal,
and international regulatory agencies, with the national
association of insurance commissioners, its affiliates or
subsidiaries, and with state, federal, and international law
enforcement authorities, provided that the recipient agrees to
maintain the confidentiality and privileged status of the document,
material, or other information.
(b) Receive documents, materials, or information, including
otherwise confidential and privileged documents, materials, or
information, from the national association of insurance
commissioners, its affiliates or subsidiaries, and from regulatory
and law enforcement officials of other foreign or domestic
jurisdictions, and shall maintain as confidential or privileged any
document, material, or information received with notice or the
understanding that it is confidential or privileged under the laws
of the jurisdiction that is the source of the document, material,
or information.
(c) Enter into agreements governing sharing and use of
information consistent with this subsection.
(4) No waiver of any applicable privilege or claim of
confidentiality in the documents, materials, or information shall
occur
as a result of disclosure to the commissioner director under
section 1208b or this section, or as a result of sharing as
authorized under subsection (3).
(5)
This chapter does not prohibit the commissioner director
from releasing final, adjudicated actions including for cause
terminations that are open to public inspection pursuant to the
freedom of information act, 1976 PA 442, MCL 15.231 to 15.246, to a
database or other clearinghouse service maintained by the national
association of insurance commissioners or its affiliates or
subsidiaries.
(6) An insurer, the authorized representative of the insurer,
or an insurance producer that fails to report as required under
section 1208b or this section or that is found to have reported
with actual malice by a court of competent jurisdiction may, after
notice and hearing, have its license or certificate of authority
suspended or revoked and may be fined under section 1244.
Sec.
1505. (1) The commissioner director
may revoke or suspend
the license of a premium finance company if after investigation it
appears
to the commissioner director
that any of the following has
occurred:
(a) Any license issued to the company was obtained by fraud.
(b) There was any misrepresentation in the application for the
license.
(c) The holder of the license has otherwise shown himself or
herself untrustworthy or incompetent to act as a premium finance
company.
(d) The company has violated any of the provisions of this
chapter or the rules and regulations promulgated under this
chapter.
(e) Except as otherwise provided in subsection (4), the
company has remunerated any insurance producer or any employee of
an insurance producer or any other person as an inducement to the
financing of any insurance policy with the premium finance company.
Except, that if the insurance producer prepares the premium finance
agreement, the premium finance company may pay him or her a service
fee not to exceed $2.00.
(2)
Before the commissioner director
revokes, suspends, or
refuses to renew the license of a premium finance company, he or
she shall give to the person an opportunity to be fully heard and
to introduce evidence on its behalf. Instead of revoking or
suspending the license for any of the reasons listed in subsection
(1),
after a hearing, the commissioner director may subject the
company to a penalty of not more than $200.00 for each offense with
a total not to exceed $1,000.00 when in his or her judgment the
commissioner
director finds that the public interest would not be
harmed by the continued operation of the company. The amount of any
penalty
shall be paid by the company through the office of
financial
and insurance regulation department
to the state
treasury.
At any hearing provided by this section, the commissioner
director shall have authority to administer oaths to witnesses.
Anyone testifying falsely, after having been administered an oath,
is subject to the penalty of perjury.
(3)
If the commissioner director
refuses to issue or renew a
license or if an applicant or licensee is aggrieved by any action
of
the commissioner, director
the applicant or licensee shall have
the right to a hearing and court proceeding as provided for in
section 244.
(4) Subsection (1)(e) does not prohibit a premium finance
company that is majority owned by insurance producers from
remunerating any of its insurance producer owners. This subsection
does not apply to a premium finance company that is involved in any
manner in financing life insurance or annuity policies or
contracts.
Sec. 2080. (1) It is unlawful for any life or accident insurer
authorized to do business in this state to own, manage, supervise,
operate, or maintain a mortuary or undertaking establishment, or to
permit its officers, agents, or employees to own or maintain any
such funeral or undertaking establishment.
(2) Except as otherwise provided in subsection (6), it is
unlawful for any life insurance, sick or funeral benefit company,
or any company, corporation, or association engaged in a similar
business to contract or agree with any funeral director,
undertaker, or mortuary to the effect that the funeral director,
undertaker, or mortuary conducts the funeral of any person insured
by the company, corporation, or association.
(3) A funeral establishment, cemetery, or seller shall not be
licensed as an insurance producer under chapter 12 other than as a
limited licensee pursuant to this subsection and chapter 12. A
funeral establishment, cemetery, or seller shall not be a limited
life insurance producer unless that funeral establishment,
cemetery, or seller provides a written assurance to the
commissioner
director at the time of application for the limited
licensure and with each license renewal that he or she has read and
understands the conditions contained in subsection (9) and agrees
to comply with those conditions. A person licensed as a limited
life insurance producer under this subsection and chapter 12 is
authorized and licensed to sell only an associated life insurance
policy or annuity contract and is not authorized or licensed to
sell any other type of insurance policy or annuity contract. A
person licensed as a limited life insurance producer under this
subsection and chapter 12 to sell associated life insurance
policies or annuity contracts shall not sell cemetery goods or
services or funeral goods or services unless all of the conditions
provided in subsection (9) are met. A person licensed as a life
insurance producer, other than a limited life insurance producer,
shall not sell cemetery goods or services or funeral goods or
services or be associated with a funeral establishment, cemetery,
or seller. Notwithstanding any other provision in this act, a
funeral establishment, cemetery, or seller may advise customers or
potential customers of the availability of life insurance, the
proceeds of which may be assigned pursuant to subsection (6), and
may provide application forms and other information in regard to
that life insurance. If an application form is provided, the
funeral establishment, cemetery, or seller shall also provide to
the
person a list annually prepared by the commissioner director
setting
forth the life insurance companies offering in Michigan
this state associated life insurance policies or annuity contracts.
The list shall include the name, address, and telephone number of a
producer for each of the life insurance companies listed. The list
also shall include a statement that a person who is insured under
any life insurance policy or annuity contract may assign all or a
portion of the proceeds, not to exceed the amount provided in
subsection (6)(g), of the existing life insurance policy or annuity
contract for the payment of funeral services or goods or cemetery
services or goods to any funeral establishment, cemetery, or seller
that has accepted any other assignment of an associated life
insurance policy or annuity contract during that calendar year. The
funeral establishment, cemetery, or seller shall accept an
assignment on the proceeds from any associated or nonassociated
life insurance policy or annuity contract pursuant to subsection
(6), and this requirement on the funeral establishment, cemetery,
or seller shall be set forth in the statement prepared by the
commissioner.
director. The assignor or the person or persons
legally entitled to make funeral arrangements for the person whose
life was insured may contract with the funeral establishment,
cemetery, or seller of his or her choice for the rendering of the
funeral goods or services or cemetery goods or services. Except as
otherwise provided in this subsection, each associated life
insurance policy or annuity contract delivered or issued for
delivery in this state shall have a death benefit that is
sufficient to cover the initial contract price of the cemetery
goods or services or funeral goods or services and that increases
at an annual rate of not less than the consumer price index.
However, a life insurer may provide an associated life insurance
policy or annuity contract with a limited death benefit to an
insured who does not meet insurance requirements for a policy that
provides immediate full coverage or who chooses not to answer
medical questions required for a policy that provides immediate
full coverage. An associated life insurance policy or annuity
contract with a limited death benefit shall disclose in boldfaced
type that the death benefit will not be sufficient to cover the
initial contract price for the cemetery goods and services or
funeral goods and services for a period of up to 2 years if the
premium is not paid in full and that during this period the price
for those goods and services may increase at a rate higher than the
increase in the consumer price index for this period.
(4) A person shall not be designated as the beneficiary in any
policy of life or accident insurance whereby the beneficiary,
directly or indirectly, shall, in return for all or a part of the
proceeds of the policy of insurance, furnish cemetery services or
goods or funeral services or goods in connection therewith.
(5)
Except as otherwise provided in subsection (6), it shall
be
is unlawful for any life or accident, or sick or
funeral benefit
company, or any person, company, corporation, or association, to
offer or furnish goods or services or anything but money to its
insureds or to his or her heirs, representatives, attorneys,
relatives, associates, or assigns in any connection with, or by way
of encumbrance, assignment, payment, settlement, satisfaction,
discharge, or release of any insurance policy. However, this
subsection does not prohibit any company, corporation, or
association from furnishing medical, surgical, or hospital service.
(6) Notwithstanding any other provision in this act, a life
insurer may write a life insurance policy or annuity contract that
is subject to an assignment of the proceeds of the insurance policy
or annuity contract as payment for cemetery services or goods or
funeral services or goods as provided in this subsection regardless
of the relationship between the life insurer and the assignee. An
assignment of the proceeds of the insurance policy or annuity
contract pursuant to this subsection shall be in writing on a form
approved
by the commissioner. director.
A predeath assignment of
the proceeds of a life insurance policy or annuity contract as
payment for cemetery services or goods or funeral services or goods
is void unless all of the following conditions and criteria are
met:
(a) The assignment is an inseparable part of the contract for
the cemetery services or goods or funeral services or goods for
which the assigned proceeds serve as payment.
(b) The assignment is revocable by the assignor, assignor's
successor, or if the assignor is the insured by the representative
of the insured's estate prior to the provision of the cemetery
services or goods or funeral services or goods.
(c) The contract for funeral services or goods or cemetery
services or goods and the assignment provide that upon revocation
of the assignment, the contract for the cemetery services or goods
or funeral services or goods is revoked and cemetery services or
goods or funeral services or goods may be obtained from any
cemetery, funeral establishment, or seller.
(d) The assignment contains the following disclosure in
boldfaced type:
"This assignment may be revoked by the assignor or assignor's
successor or, if the assignor is also the insured and deceased, by
the representative of the insured's estate before the rendering of
the cemetery services or goods or funeral services or goods. If the
assignment is revoked, the death benefit under the life insurance
policy or annuity contract shall be paid in accordance with the
beneficiary designation under the insurance policy or annuity
contract."
(e) The assignment provides for all of the following:
(i) That the actual price of the cemetery services or goods or
funeral services or goods delivered at the time of death may be
more than or less than the price set forth in the assignment.
(ii) For the assignment of an associated life insurance policy
or annuity contract, that any increase in the price of the cemetery
services or goods or funeral services or goods does not exceed the
ultimate death benefit under the life insurance policy or annuity
contract. This requirement does not apply to an insurance policy or
annuity contract with a limited death benefit during the period
that the limited death benefit is in effect. During this period,
neither the beneficiary nor the seller is obligated to fulfill the
terms of the contract for the cemetery services or goods or funeral
services or goods for which the assigned proceeds serve as payment
and the assignment of the associated life insurance policy or
annuity contract may be revoked.
(iii) For the assignment of a nonassociated life insurance
policy or annuity contract, that any increase in the price of the
cemetery services or goods or the funeral services or goods shall
not exceed the consumer price index or the retail price list in
effect when the death occurs, whichever is less.
(iv) That if the ultimate death benefit under a life insurance
policy or annuity contract exceeds the price of the cemetery
services or goods or funeral services or goods at the time of
performance, the excess amount shall be distributed to the
beneficiary designated under the life insurance policy or annuity
contract or the insured's estate.
(v) That any addition to or modification of the contract for
cemetery services or goods or funeral services or goods does not
revoke the assignment or the contract for the cemetery services or
goods or funeral services or goods that are not affected by the
addition or modification for which the assigned proceeds are
payment unless the assignment is revoked.
(f) The assignment is limited to that portion of the proceeds
of the life insurance policy or annuity contract that is needed to
pay for the cemetery services or goods or funeral services or goods
for which the assignor has contracted.
(g) For an associated life insurance policy or annuity
contract, the death benefit of the life insurance policy or annuity
contract subject to the assignment does not exceed $5,000.00 when
the first premium payment is made on the life insurance policy or
annuity contract. For a nonassociated life insurance policy or
annuity contract, the initial amount of proceeds assigned does not
exceed $5,000.00. The maximum amounts in this subdivision shall be
adjusted annually in accordance with the consumer price index.
(h) The assignment shall contain the dispute resolution rights
in subsection (8). After the death of the insured but before the
cemetery services or goods or funeral services or goods are
provided, the funeral establishment, cemetery, or seller shall
provide to a representative of the insured's estate a separate
document entitled, "dispute resolution disclosure statement," which
shall clearly set forth the dispute resolution rights in subsection
(8). The dispute resolution disclosure statement shall be filed
with
the commissioner director and shall be considered approved
unless disapproved within 30 days after the submission. The
language used to set forth the dispute resolution rights in
subsection (8) shall be written in a manner calculated to be
understood by a person of ordinary intelligence.
(i) The assignor and not the assignee is responsible for
making the premium payments due on the life insurance policy or
annuity contract. This subdivision does not apply to an insurance
producer when acting as a fiduciary pursuant to section 1207.
(j) After the death of the insured but before the cemetery
services or goods or funeral services or goods are provided, the
representative of the insured's estate is provided with a current
price list for the cemetery services or goods or funeral services
or goods provided pursuant to the assignment.
(k) At the time the assignment is made, the assignee complies
with the price disclosure rules of the federal trade commission
prescribed in 16 CFR part 453 whether or not the rules by their own
terms apply to the offering.
(l) At the time the assignment is made, the assignor certifies
that the insured does not have in effect other life insurance
policies or annuity contracts that have been assigned as payment
for cemetery goods or services or funeral goods or services which
together with the additional assignment would have an aggregate
face value in excess of the limitation provided in subdivision (g).
(m) For the assignment of a nonassociated life insurance
policy or annuity contract, the assignment complies with both of
the following:
(i) The assignment is sufficient to cover the initial contract
price of the cemetery goods or services or funeral goods or
services.
(ii) The assignment provides that any increase in the price of
the cemetery services or goods or the funeral services or goods
shall not exceed the consumer price index or the retail price list
in effect when the death occurs, whichever is less.
(7) An insurer or an insurance producer shall not make a false
or misleading statement, oral or written, regarding an assignment
subject to subsection (6) or regarding the rights or obligations of
any party or prospective party to the assignment. An insurer or an
insurance producer shall not advertise or promote an assignment
subject to subsection (6) in a manner that is false, misleading,
deceptive,
or unfair. The commissioner director
shall promulgate
rules regulating the solicitation of plans promoting assignments
subject to subsection (6) to protect against solicitations that are
intimidating, vexatious, fraudulent, or misleading, or which take
unfair advantage of a person's ignorance or emotional
vulnerability.
(8) After the cemetery services or goods or funeral services
or goods are provided, the funeral establishment, cemetery, or
seller shall provide to a representative of the insured's estate a
statement to be signed by the representative of the insured's
estate authorizing the release of the assignment proceeds for the
payment of the cemetery services or goods or funeral services or
goods. The insurer shall release to the funeral establishment,
cemetery, or seller the assignment proceeds upon receipt of the
authorization statement signed by a representative of the insured's
estate. If a representative of the insured's estate fails to sign
the authorization statement, the following shall take place:
(a) The funeral establishment, cemetery, or seller shall
provide the representative of the insured's estate with a dispute
resolution notice, a copy of which is to be sent to the insurer and
the
commissioner director that states all of the following:
(i) That the funeral establishment, cemetery, or seller has
provided the cemetery services or goods or funeral services or
goods.
(ii) That a representative of the insured's estate has refused
to authorize the insurer to release the assignment proceeds for the
payment of the cemetery services or goods or funeral services or
goods.
(iii) That a representative of the insured's estate may seek
arbitration to resolve the payment dispute.
(b) Upon the receipt of the dispute resolution notice
described in subdivision (a), the insurer shall retain the
assignment proceeds for 30 days. The insurer shall release the
assignment proceeds to the funeral establishment, cemetery, or
seller if after the expiration of the 30 days the insurer is not
informed that arbitration proceedings have been commenced, or
pursuant to the award of the arbitrator.
(c) The funeral establishment, cemetery, seller, or a
representative of the insured's estate may commence arbitration
proceedings to determine the disposition of the assignment
proceeds. Arbitration shall be conducted pursuant to the rules and
procedures of the American arbitration association. Expenses of the
arbitration shall be shared equally by the insured's estate and the
assignee unless otherwise ordered by the arbitrator.
(d) Nothing in this subsection limits the right of any party
involved in the payment dispute to seek other recourse permitted by
law.
(9) A life insurance producer shall not sell or solicit the
sale of a life insurance policy or annuity contract with the
intention of having the purchaser assign the proceeds of the policy
or contract to a funeral establishment, cemetery, or seller with
which the producer is associated unless all of the following
conditions are met:
(a) The producer discloses in writing to the purchaser the
nature of his or her association with the funeral establishment,
cemetery, or seller and that both the funeral establishment,
cemetery, or seller and the producer will or may profit from the
transaction, if that is the case.
(b) A funeral establishment, cemetery, or seller that accepts
assignments pursuant to subsection (6) shall also offer to sell or
provide cemetery goods or services or funeral goods or funeral
services pursuant to prepaid funeral contracts as provided in the
prepaid funeral and cemetery sales act, 1986 PA 255, MCL 328.211 to
328.235, or pursuant to the trust provisions of the cemetery
regulation act, 1968 PA 251, MCL 456.521 to 456.543.
(c) If the contemplated assignment is to be made to pay the
cost of cemetery goods or services or funeral goods or funeral
services, the producer shall disclose in writing to the purchaser
that the cemetery goods or services or funeral goods or services
may also be purchased prior to death by making payment directly to
a funeral establishment, cemetery, or seller who will hold funds in
escrow for the benefit of the purchaser pursuant to the prepaid
funeral and cemetery sales act, 1986 PA 255, MCL 328.211 to
328.235, or in trust pursuant to the provisions of the cemetery
regulation act, 1968 PA 251, MCL 456.521 to 456.543. The written
disclosure shall also state that upon cancellation of the prepaid
funeral contract, the purchaser is entitled to a refund of at least
90% of the principal and income earned.
(d) The sale of cemetery goods or services or funeral goods or
services shall not be conditioned on the purchaser buying or
agreeing to buy a life insurance policy or annuity contract or on
the assignment of the proceeds of the policy or contract to that
funeral establishment, cemetery, or seller.
(e) The sale of a life insurance policy or annuity contract
shall not be conditioned on the purchaser buying or agreeing to buy
cemetery goods or services or funeral goods or services from the
funeral establishment, cemetery, or seller with which the producer
is associated or on the assignment of the proceeds of the policy or
contract to that funeral establishment, cemetery, or seller.
(f) A discount from the current price of cemetery goods or
services or funeral goods or services shall not be offered as an
inducement to purchase or assign a life insurance policy or annuity
contract.
(g) The life insurance policy or annuity contract sold by the
producer may be canceled by the purchaser within 10 days after the
receipt of the policy or annuity contract, in which event a full
refund of all premiums shall be paid to the purchaser.
(h) The producer shall disclose in writing to the purchaser
that the funeral establishment, cemetery, or seller with which the
producer is associated will accept assignments of life insurance
policies or annuity contracts sold by any other licensed producer.
(10)
The commissioner director or any other person, in order
to force compliance with subsection (6) or (7), may bring an action
in a circuit court in any county in which the assignee or insurance
producer or any other person has solicited or sold a life insurance
policy or annuity contract that is assigned pursuant to subsection
(6), whether or not that person has purchased the life insurance
policy or annuity contract or is personally aggrieved by a
violation of this section. The court may award damages and issue
equitable orders in accordance with the Michigan court rules to
restrain conduct in violation of this section.
(11) Any person violating any of the provisions of this
section is guilty of a misdemeanor, and each violation shall be a
separate offense and upon conviction shall be punished by a fine
not exceeding $1,000.00 or by imprisonment for not more than 6
months, or both such fine and imprisonment within the discretion of
the courts.
(12) In addition to the penalty provided in subsection (11),
if, after a hearing conducted pursuant to the administrative
procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328, the
commissioner
director determines a person has violated this
section,
the commissioner director may order the person to pay a
civil fine of not more than $10,000.00 for each violation and may
also impose other sanctions provided pursuant to chapter 12. The
money collected under this subsection shall be deposited in the
funeral consumers education and advocacy fund. The funeral
consumers
education and advocacy fund is created within the office
of
financial and insurance regulation. department. The fund shall
be
administered by the commissioner. director. The money in the
fund shall be used to do both of the following:
(a) To promote the education of consumers concerning the
prearrangement and purchase of cemetery or funeral services or
goods through the purchase and assignment of life insurance or
annuity contracts.
(b) To provide legal assistance to persons who were injured as
a result of a violation of this section.
(13) For purposes of this section, a life insurance producer
is associated with a funeral establishment, cemetery, or seller if
any of the following apply:
(a) The producer is a funeral establishment, cemetery, or
seller.
(b) The producer owns an interest, directly or indirectly, in
a corporation or other entity that holds an interest in a funeral
establishment, cemetery, or seller.
(c) The producer is an officer, employee, or agent of a
funeral establishment, cemetery, or seller.
(d) The producer is an officer, employee, or agent of a
corporation or other entity that holds an interest, either directly
or indirectly, in a funeral establishment, cemetery, or seller, or
in a corporation or other entity that holds an interest, directly
or indirectly, in a corporation or other entity that holds an
interest in a funeral establishment, cemetery, or seller.
(14) As used in this section:
(a) "Associated life insurance policy or annuity contract" is
a life insurance policy or annuity contract that is marketed,
designed, and intended to be assigned as payment for cemetery goods
or services or funeral goods or services.
(b) "Casket" means any box or container consisting of 1 or
more parts in which a dead human body is placed prior to interment,
entombment, or cremation which may or may not be permanently
interred, entombed, or cremated with the dead human body. A
permanent interment or entombment receptacle designed or intended
for use without a cemetery burial vault or other outside container
shall also be considered a casket.
(c) "Catafalque" means an ornamental or decorative object or
structure placed beneath, over, or around a casket, vault, or a
dead human body prior to final disposition of the dead human body.
(d) "Cemetery" means that term as defined in but not
necessarily regulated under section 2 of the cemetery regulation
act, 1968 PA 251, MCL 456.522, or an officer, agent, or employee
thereof.
(e) "Cemetery burial vault or other outside container" means a
box or container used solely at the place of interment to
permanently surround or enclose a casket and to support the earth
above the casket after burial.
(f) "Cemetery goods" means land or interests in land, crypts,
lawn crypts, mausoleum crypts, or niches that are sold by a
cemetery. In addition, cemetery goods include cemetery burial
vaults or other outside containers, markers, monuments, urns, and
merchandise items used for the purpose of memorializing a decedent
and placed on or in proximity to a place of interment or entombment
of a casket, catafalque, or vault or to a place of inurnment which
are sold by a cemetery.
(g) "Cemetery services" means those services customarily
performed by a cemetery.
(h) "Combination unit" means any product consisting of a unit
or a series of units designed or intended to be used together as
both a casket and as a permanent burial receptacle.
(i) "Consumer price index" means the annual average percentage
increase in the Detroit consumer price index for all items for the
prior 12-month period as reported by the United States department
of
labor and as certified by the commissioner.director.
(j) "Funeral establishment" means a funeral establishment or a
person who is engaged in the practice of mortuary science as those
terms are defined in section 1801 of the occupational code, 1980 PA
299, MCL 339.1801, or an officer, agent, or employee thereof.
(k) "Funeral goods" means items of merchandise which will be
used in connection with a funeral or an alternative to a funeral or
final disposition of human remains including, but not limited to,
caskets, other burial containers, combination units, and
catafalques. Funeral goods does not include cemetery goods.
(l) "Funeral services" means services customarily performed by
a person who is licensed pursuant to sections 1801 to 1812 of the
occupational code, 1980 PA 299, MCL 339.1801 to 339.1812. Funeral
services includes, but is not limited to, care of human remains,
embalming, preparation of human remains for final disposition,
professional services relating to a funeral or an alternative to a
funeral or final disposition of human remains, transportation of
human remains, limousine services, use of facilities or equipment
for viewing human remains, visitation, memorial services, or
services used in connection with a funeral or alternative to a
funeral, coordinating or conducting funeral rites or ceremonies,
and other services provided in connection with a funeral,
alternative to a funeral, or final disposition of human remains.
(m) "Limited death benefit" means the sum payable upon the
insured's death during not more than the first 2 years that an
associated life insurance policy or annuity contract is in effect
that is less than the amount necessary to cover the initial
contract price of cemetery goods and services or funeral goods and
services, but that provides for a minimum benefit as follows:
(i) During the first year of the contract, not less than 25% of
the initial contract price of cemetery goods and services or
funeral goods and services.
(ii) During the second year of the contract, not less than 50%
of the initial contract price of cemetery goods and services or
funeral goods and services.
(n) "Nonassociated life insurance policy or annuity contract"
means a life insurance policy or annuity contract that is not
marketed to be assigned, designed to be assigned, or intended to be
assigned as payment for cemetery goods or services or funeral goods
or services.
(o) "Representative of insured's estate" means the person or
persons legally entitled to make the funeral arrangements for the
person whose life was insured.
(p) "Seller" means a person who offers to sell cemetery goods
or services or funeral goods or services or any agent, officer, or
employee thereof.
Sec. 2110b. (1) An automobile insurance policy and an
automobile insurer and its employees, agents, and adjusters shall
not unreasonably restrict an insured from using a particular
person, place, shop, or entity for the providing of any automobile
repair or automobile glass repair or replacement service or product
covered by the policy.
(2) An automobile insurer shall disclose, prior to or at the
time a claim is filed with the insurer, whether the insurer has an
agreement with any repair or replacement facility to provide a
repair or replacement service or product to an insured and shall
inform an insured that he or she is under no obligation to use a
particular repair or replacement facility.
(3)
The office of financial and insurance services department
shall
develop a plan whereby the office department informs
consumers of their rights regarding insurance coverage of
automobile repairs, that the insurer is not required to pay more
than a reasonable amount for repairs and parts, and of the
insured's ability to report violations of their rights to the
office
of financial and insurance services department through the
office's
department's toll-free telephone number or website. The
plan shall be developed and submitted to the senate and house of
representatives standing committees on insurance issues not later
than
6 months after the effective date of this section.July 8,
2004.
Sec. 2153. An insurer shall not use credit information or an
insurance score as any part of a decision to deny, cancel, or
nonrenew a personal insurance policy under chapters 21, 24, and 26.
However, credit information and an insurance score may be used to
determine premium installment payment options and availability. An
insurer shall not apply credit information or a credit-based
insurance score that is otherwise permitted under this act unless
all of the following are met:
(a) The insurer or its producer discloses, either on the
insurance application or at the time the application is taken, that
it may obtain credit information in connection with the
application. This disclosure shall be either written or provided to
an applicant in the same medium as the application for insurance.
An insurer may use the following disclosure statement:
"In connection with this application for insurance, we may
review your credit report or obtain or use a credit-based insurance
score based on the information contained in that credit report. We
may use a third party in connection with the development of your
insurance score.".
(b) The insurer or a third party on behalf of the insurer does
not use income, gender, address, zip code, ethnic group, religion,
marital status, or nationality of the insured or insurance
applicant in calculating an insurance score.
(c) The insurer does not take an adverse action against a
consumer because he or she does not have a credit card account.
However, an insurer may take an adverse action against that insured
if it is based on any other applicable factor that is independent
of the fact that the consumer does not have a credit card account.
(d) The insurer or a third party on behalf of the insurer does
not consider an absence of credit information or an inability to
calculate an insurance score in the rating of personal insurance
unless any resulting rate differential is filed with and not
disapproved
by the office of financial and insurance regulation.
department.
The office of financial and
insurance regulation
department shall not disapprove a filing under this subdivision if
it meets 1 of the following:
(i) Is reasonably justified by differences in losses, expenses,
or both.
(ii) Provides the insured or insurance applicant with a
discount that is not less, on average, than the average credit
based discount received by the insurer's insureds in this state.
(e) The insurer or a third party on the insurer's behalf uses
a credit report issued within 90 days before the date an insurance
score based on that credit report is first applied to the insured.
(f) Upon the insured's request or with the insured's
permission the insured's producer's request at annual renewal, or
upon the insured's request during the course of the policy, an
insurer or a third party on the insurer's behalf shall obtain a new
credit report or insurance score and rerate the insured. An insurer
or a third party on the insurer's behalf is not required to obtain
a new credit report or recalculate the insurance score more
frequently than once in a 12-month period. An insurer or a third
party on the insurer's behalf may order a credit report upon any
renewal if the insurer does so using a consistent methodology with
all its insureds.
(g) For insurance scores calculated or recalculated on or
after the effective date of the amendatory act that added this
section, the insurer or a third party on the insurer's behalf does
not use the following as a negative factor in any insurance score
or in reviewing credit information:
(i) Credit inquiries not initiated by the consumer or requested
by the consumer for his or her own credit information.
(ii) Credit inquiries relating to insurance coverage, if so
identified on an insured's or insurance applicant's credit report.
(iii) Multiple lender inquiries, if coded by the consumer
reporting agency on the credit report as being from the home
mortgage industry and made within 30 days of one another, unless
only 1 inquiry is considered.
(iv) Multiple lender inquiries, if coded by the consumer
reporting agency on the credit report as being from the automobile
lending industry and made within 30 days of one another, unless
only 1 inquiry is considered.
(v) Collection accounts with a medical industry code, if so
identified on the consumer's credit report.
Sec. 3010. (1) Notwithstanding any other provision of this
act, an automobile insurer shall not pay a claim of $2,000.00 or
more for loss or damage caused by fire or explosion to an insured
motor vehicle until a report under subsection (2) has been
submitted and the insurer has received from the insured a copy of
the report.
(2) If an insured motor vehicle suffers loss or damage caused
by fire or explosion, the insured shall submit to the fire or law
enforcement authority designated by the city, village, or township
a
report prescribed by the office of financial and insurance
services
department in conjunction with the bureau of fire services
created in section 1b of the fire prevention code, 1941 PA 207, MCL
29.1b, that requires information concerning the motor vehicle fire
or explosion.
(3) This section does not apply to accidental fires or
explosions as determined by the insurer or the fire or law
enforcement authority designated by the city, village, or township.
If the insurer or the fire or law enforcement authority designated
by the city, village, or township determines that the fire or
explosion may not be accidental, the insurer or the fire or law
enforcement authority designated by the city, village, or township
shall notify the insured of the requirement for a report under this
section by not later than 30 days after the determination by the
insurer or the fire or law enforcement authority designated by the
city, village, or township.
(4) This section applies only if the fire or law enforcement
authority responsible for investigating the fire or explosion is
located in a city, village, or township described in subsection (8)
and if the city, village, or township, pursuant to a resolution by
its governing body, notifies the commissioner in writing of both of
the following:
(a) That the city, village, or township has elected to receive
the reports prepared under subsection (2).
(b) The name and address of the fire or law enforcement
authority designated by the city, village, or township to receive
reports prepared under subsection (2).
(5)
The commissioner director shall prepare and distribute a
list of all cities, villages, and townships that have elected to
apply this section to all insurance companies transacting
automobile insurance in this state.
(6) A city, village, or township may be added to the list
prepared under subsection (5) by submitting a written request
containing the information required under subsection (4) to the
commissioner.
director. If a written request is received, the
commissioner
director shall prepare and distribute an amended list
indicating the addition. The addition shall be effective on the
date
specified by the commissioner director
in the amended list.
The
commissioner director shall notify the city, village, township,
and all insurers transacting automobile insurance in this state of
the effective date of an addition, which shall be not less than 30
days after receipt of the notice by the insurance company. This
section does not apply to any loss that occurred before the
effective date of the addition.
(7) A city, village, or township may request to be deleted
from the list or may cease to apply this section for a period of
not less than 6 months upon not less than 30 days' written notice
to
the commissioner. director.
After receipt of a request to be
deleted
from the list, the commissioner director
shall prepare and
distribute an amendment to the list indicating the deletion. The
deletion shall be effective on the date specified by the
commissioner
director in the amendment. The commissioner director
shall notify the city, village, township, and all insurers
transacting automobile insurance in this state of the effective
date of a deletion which shall be effective not less than 30 days
after receipt of the notice by the insurance company. A city,
village, or township shall continue to apply this section to any
loss that occurred before the effective date of the deletion,
notwithstanding the deletion.
(8) A city, village, or township may elect to apply this
section as provided in subsection (4) and as follows:
(a) If the city, village, or township is located in a county
with a population of 425,000 or more.
(b) If the city, village, or township is located in a county
with a population of less than 425,000 but the city, village, or
township has a population of 50,000 or more.
(9) There is no liability on the part of, and a cause of
action does not arise against, an insurer or an agent or employee
of an insurer for withholding money in the course of complying with
or attempting to comply with this section.
Sec.
3580. (1) The commissioner director
shall prepare and
beginning January 1, 2001 and annually thereafter publish a
consumer guide to health maintenance organizations as provided in
this section.
(2) The consumer guide to health maintenance organizations
shall include all of the following for the most recent year and for
the immediately preceding year for which the information is
available:
(a) The national accreditation status of and any limitation on
accreditation for each health maintenance organization.
(b) Measurements of the quality of care provided by each
health
maintenance organization, as required by the commissioner,
director, including, but not limited to, the following health
employer data information set categories:
(i) Child and adolescent care.
(ii) Maternity care.
(iii) Cardiac care.
(iv) Staying healthy.
(v) Member satisfaction.
(vi) Women's health.
(c)
The toll-free telephone number at the office of financial
and
insurance services department
that consumers may call to make
requests for the consumer guide and make inquiries and complaints
about health maintenance organizations.
(d) A summary for each health maintenance organization of the
report
required to be provided to the commissioner director under
section 23 of the patient's right to independent review act, 2000
PA 251, MCL 550.1923.
(3)
The commissioner director may request, and a health
maintenance organization and the department of community health
shall provide in a timely manner, audited health employer
information
set data and other information that the commissioner
director needs to prepare the annual consumer guide under
subsection (1).
(4) The annual consumer guide under subsection (1) shall be
written in plain English and shall be presented in a manner that
facilitates comparisons among individual health maintenance
organizations.
The commissioner director shall promote and
publicize to the general public the existence of the annual
consumer
guide. The commissioner director
shall distribute the
guide to members of the public upon request and shall provide
access to the consumer guide through the internet.
Sec. 3926a. (1) Except as provided in subsection (2), this
section applies to any long-term care policy or certificate issued
in this state on or after June 1, 2007.
(2) For certificates issued on or after June 1, 2007 under a
group long-term care insurance policy described in section
3901(c)(i), which policy was in force on June 1, 2007, this section
applies on the policy anniversary date following June 1, 2007.
(3) An insurer shall provide notice of a pending premium rate
schedule increase, including an exceptional increase, to the
commissioner
director at least 30 days prior to the notice to the
policyholders.
This notice to the commissioner director
shall
include all of the following:
(a) Information required by section 3925.
(b) Certification by a qualified actuary that if the requested
premium rate schedule increase is implemented and the underlying
assumptions, which reflect moderately adverse conditions, are
realized, no further premium rate schedule increases are
anticipated and that the premium rate filing is in compliance with
the provisions of this section.
(c) An actuarial memorandum justifying the rate schedule
change request that includes all of the following:
(i) Lifetime projections of earned premiums and incurred claims
based on the filed premium rate schedule increase and the method
and assumptions used in determining the projected values, including
reflection of any assumptions that deviate from those used for
pricing other policies or certificates currently available for
sale. Annual values for the 5 years preceding and the 3 years
following the valuation date shall be provided separately. The
projections shall include the development of the lifetime loss
ratio, unless the rate increase is an exceptional increase. The
projections shall demonstrate compliance with subsection (4). For
exceptional increases, the projected experience shall be limited to
the increases in claims expenses attributable to the approved
reasons
for the exceptional increase and if the commissioner
director determines that offsets may exist, the insurer shall use
appropriate net projected experience.
(ii) If the rate increase will trigger contingent benefit upon
lapse, disclosure of how reserves have been incorporated in this
rate increase.
(iii) Disclosure of the analysis performed to determine why a
rate adjustment is necessary, which pricing assumptions were not
realized and why, and what other actions taken by the insurer have
been relied on by the actuary.
(iv) A statement that policy design, underwriting, and claims
adjudication practices have been taken into consideration.
(v) If it is necessary to maintain consistent premium rates
for new certificates and certificates receiving a rate increase,
the insurer will need to file composite rates reflecting
projections of new certificates.
(d) A statement that renewal premium rate schedules are not
greater than new business premium rate schedules except for
differences attributable to benefits, unless sufficient
justification is provided to the commissioner.
(e) Sufficient information for review and approval of the
premium
rate schedule increase by the commissioner.director.
(4) All premium rate schedule increases shall be determined in
accordance with the following requirements:
(a) Exceptional increases shall provide that 70% of the
present value of projected additional premiums from the exceptional
increase will be returned to policyholders in benefits.
(b) Premium rate schedule increases shall be calculated such
that the sum of the accumulated value of incurred claims, without
the inclusion of active life reserves, and the present value of
future projected incurred claims, without the inclusion of active
life reserves, will not be less than the sum of the following:
(i) The accumulated value of the initial earned premium times
58%.
(ii) Eighty-five percent of the accumulated value of prior
premium rate schedule increases on an earned basis.
(iii) The present value of future projected initial earned
premiums times 58%.
(iv) Eighty-five percent of the present value of future
projected premiums not in subparagraph (iii) on an earned basis.
(c) If a policy or certificate has both exceptional and other
increases, the values in subdivision (b)(ii) and (iv) shall also
include 70% for exceptional rate increase amounts.
(d) All present and accumulated values used to determine rate
increases shall use the maximum valuation interest rate for
contract reserves as specified in section 733(1). The actuary shall
disclose as part of the actuarial memorandum the use of any
appropriate averages.
(5) For each rate increase that is implemented, the insurer
shall
file for review and approval by the commissioner director
updated projections, as described in subsection (3)(c)(i), annually
for the next 3 years and include a comparison of actual results to
projected
values. The commissioner director
may extend the period
to greater than 3 years if actual results are not consistent with
projected values from prior projections. For group insurance
certificates that meet the conditions in subsection (13), the
projection required by this subsection shall be provided to the
policyholder
in lieu of filing with the commissioner.director.
(6) If any premium rate in the revised premium rate schedule
is greater than 200% of the comparable rate in the initial premium
schedule, lifetime projections, as described in subsection
(3)(c)(i), shall be filed for review and approval by the
commissioner
director every 5 years following the end of the
required period in subsection (5). For group insurance certificates
that meet the conditions in subsection (13), the projections
required by this subsection shall be provided to the policyholder
in
lieu of filing with the commissioner.director.
(7)
If the commissioner director
has determined that the
actual experience following a rate increase does not adequately
match the projected experience and that the current projections
under moderately adverse conditions demonstrate that incurred
claims will not exceed proportions of premiums specified in
subsection
(4), the commissioner director
may require the insurer
to implement premium rate schedule adjustments or other measures to
reduce the difference between the projected and actual experience.
In determining whether the actual experience adequately matches the
projected experience, consideration should be given to subsection
(3)(c)(iii), if applicable.
(8) If the majority of the policies or certificates to which
an increase is applicable are eligible for the contingent benefit
upon lapse, the insurer shall file both of the following with the
commissioner:director:
(a)
A plan, subject to commissioner director
approval, for
improved administration or claims processing designed to eliminate
the potential for further deterioration of the policy or
certificate requiring further premium rate schedule increases, or
both, or to demonstrate that appropriate administration and claims
processing have been implemented or are in effect.
(b) The original anticipated lifetime loss ratio, and the
premium rate schedule increase that would have been calculated
according to subsection (4) had the greater of the original
anticipated lifetime loss ratio or 58% been used in the
calculations described in subsection (4)(b)(i) and (iii).
(9)
The commissioner director shall review, for all policies
and certificates included in a filing, the projected lapse rates
and past lapse rates during the 12 months following each increase
to determine if significant adverse lapsation has occurred or is
anticipated for any rate increase filing meeting the following
criteria:
(a) The rate increase is not the first rate increase requested
for the specific policy or certificate.
(b) The rate increase is not an exceptional increase.
(c) The majority of the policies or certificates to which the
increase is applicable are eligible for the contingent benefit upon
lapse.
(10) If significant adverse lapsation has occurred, is
anticipated in the filing, or is evidenced in the actual results as
presented in the updated projections provided by the insurer
following
the requested rate increase, the commissioner director
may determine that a rate spiral exists. Following the
determination
that a rate spiral exists, the commissioner director
may require the insurer to offer, without underwriting, to all in
force insureds subject to the rate increase the option to replace
existing coverage with 1 or more reasonably comparable products
being offered by the insurer or its affiliates. An offer under this
subsection
is subject to the commissioner's director's approval,
shall be based on actuarially sound principles, but shall not be
based on attained age, and shall provide that maximum benefits
under any new policy or certificate accepted by an insured shall be
reduced by comparable benefits already paid under the existing
policy or certificate. The insurer shall maintain the experience of
all the replacement insureds separate from the experience of
insureds originally issued the policy or certificate. If a rate
increase is requested on the policy or certificate, the rate
increase shall be limited to the lesser of the maximum rate
increase determined based on the combined experience and the
maximum rate increase determined based only on the experience of
the insureds originally issued the policy or certificate plus 10%.
(11)
If the commissioner director
determines that an insurer
has exhibited a persistent practice of filing inadequate initial
premium
rates for long-term care insurance, the commissioner,
director, in addition to the provisions of subsections (9) and
(10), may prohibit the insurer from either of the following:
(a) Filing and marketing comparable coverage for a period of
up to 5 years.
(b) Offering all other similar coverages and limiting
marketing of new applications to the products subject to recent
premium rate schedule increases.
(12) Subsections (1) to (11) do not apply to policies or
certificates for which the long-term care benefits provided by the
policy or certificate are incidental, if the policy or certificate
complies with all of the following:
(a) For any plan that may have a cash value, the interest
credited internally to determine cash value accumulations,
including long-term care, if any, are guaranteed not to be less
than the minimum guaranteed interest rate for cash value
accumulations without long-term care set forth in the policy or
certificate.
(b) The portion of the policy or certificate that provides
insurance benefits other than long-term care coverage meets the
nonforfeiture requirements as applicable in section 4060 or 4072.
(c) The policy or certificate meets sections 3928, 3933, 3951,
and 3953.
(d) The portion of the policy or certificate that provides
insurance benefits other than long-term care coverage meets, as
applicable, the policy illustrations and disclosure requirements
under section 4038.
(e)
An actuarial memorandum is filed with the office of
financial
and insurance services department
that includes all of
the following:
(i) A description of the basis on which the long-term care
rates were determined.
(ii) A description of the basis for the reserves.
(iii) A summary of the type of policy, benefits, renewability,
general marketing method, and limits on ages of issuance.
(iv) A description and a table of each actuarial assumption
used. For expenses, an insurer shall include percent of premium
dollars per policy or certificate and dollars per unit of benefits,
if any.
(v) A description and a table of the anticipated policy or
certificate reserves and additional reserves to be held in each
future year for active lives.
(vi) The estimated average annual premium per policy or
certificate and the average issue age.
(vii) A statement as to whether underwriting is performed at
the time of application. The statement shall indicate whether
underwriting is used and, if used, shall include a description of
the type or types of underwriting used, such as medical
underwriting or functional assessment underwriting. For a group
certificate, the statement shall indicate whether the enrollee or
any dependent will be underwritten and when underwriting occurs.
(viii) A description of the effect of the long-term care policy
or certificate provision on the required premiums, nonforfeiture
values, and reserves on the underlying insurance policy or
certificate, both for active lives and those in long-term care
claim status.
(13) Subsections (7), (8), and (9) do not apply to a group
insurance policy described in section 3901(c)(i) if the policy
insures 250 or more persons and the policyholder has 5,000 or more
eligible employees of a single employer or the policyholder, and
not the certificate holders, pays a material portion of the
premium, which shall not be less than 20% of the total premium for
the group in the calendar year prior to the year a rate increase is
filed.
(14) Except as otherwise provided in this section, exceptional
increases are subject to the same requirements as other premium
rate
schedule increases. The commissioner director may request a
review by an independent qualified actuary or a professional
qualified actuarial body of the basis for a request that an
increase
be considered an exceptional increase. The commissioner,
director, in determining that the necessary basis for an
exceptional increase exists, shall also determine any potential
offsets to higher claims costs.
(15) As used in this section:
(a) "Exceptional increase" means only those increases filed by
an
insurer as exceptional for which the commissioner director
determines the need for the premium rate increase is justified due
to changes in laws or regulations applicable to long-term care
coverage in this state or due to increased and unexpected
utilization that affects the majority of insurers of similar
products.
(b) "Incidental" means that the value of the long-term care
benefits provided is less than 10% of the total value of the
benefits provided over the life of the policy or certificate as
measured on the date of issue.
(c) "Qualified actuary" means a member in good standing of the
American academy of actuaries.
(d) "Similar policies" means all of the long-term care
insurance policies and certificates issued by an insurer in the
same long-term care benefit classification as the policy or
certificate being considered. Certificates of groups described in
section 3901(c)(i) are not considered similar to policies or
certificates otherwise issued as long-term care insurance, but are
similar to other comparable certificates with the same long-term
care benefit classifications. For purposes of determining similar
policies, long-term care benefit classifications are defined as
follows: institutional long-term care benefits only,
noninstitutional long-term care benefits only, or comprehensive
long-term care benefits.
Sec. 3935. An application for a long-term care policy shall
contain the following statement printed, stamped, or as part of a
sticker permanently affixed to the application in capital letters
on the first page:
"For additional information about long-term care coverage
write
to the office of financial and insurance services, department
of insurance and financial services, P.O. Box 30220, Lansing, MI
48909 or call the area agency on aging in your community.".
Sec.
4424. (1) The commissioner director
may authorize the
insuring on a group insurance basis of groups other than those
specifically defined in sections 4404 to 4420 if conditions or
circumstances indicate that granting permission for discretionary
group life insurance coverages is in the interest of public policy.
This
section does not limit the commissioner director to only
authorize those groups that are logically analagous in character
and composition to the groups specifically defined in sections 4404
to 4420.
(2)
The commissioner director may refuse to grant permission
in any instance on the basis of a finding that the requested group
plan:
(a) Would not result in economies of acquisition and
administration that justify a group rate.
(b) Would present hazards of voluntary adverse selection to a
degree not usually present in group insurance.
(c) Would be actuarially unsound.
(d) Would fail to preclude individual selection among persons
to be insured under the proposed group plan.
(3) The discretionary group shall consist of not less than 250
persons. The discretionary group may consist of only a portion of
the employees of an employer or of the members of an organization,
if segregation arises out of reasonable grounds, geographical or
otherwise, that make it presently impossible or undesirable to
include in a single group all of the employees or members. The
discretionary group may consist of employees of more than 1
employer, or the members of more than 1 organization or
association, if evidence submitted clearly indicates the
desirability of embracing the proposed assemblage of individuals
under a single group. By way of particular, but not in limitation,
the group may consist of the employees of 1 or more governmental or
quasigovernmental units, federal, state, municipal, or local.
(4)
If, for reasons that the commissioner director determines
to be adequate, it appears to be impossible or infeasible for the
employer to be the policyholder in any group authorized under this
section,
the commissioner director may authorize the designation of
a trustee or trustees to be the policyholder, subject to rules the
commissioner
director approves.
(5)
The commissioner director may authorize discretionary
groups and plans of group insurance that qualify in all other
respects under this section although there be no contribution to
the premium payment from the employer or organization if the
commissioner
director finds that circumstances render the
contribution inequitable, impossible, or impracticable.
(6) The percentage of employees or members required to
participate in any group authorized under this section, the types
of insurance coverage to be offered to the members of the group,
and the amounts of insurance to be provided, shall be as the
commissioner
director determines.
(7) Before any application for permission to qualify under
this section is considered, the applicant shall deposit with the
commissioner
director a specific fee of $100.00 to defray the costs
of examining into the circumstances and conditions appertaining to
the proposed group and group insurance and shall covenant to
compensate
the office of financial and insurance regulation
department for any additional unusual expenses that it may incur.
The applicant shall furnish such information, documents, and data
pertaining
to the proposed group plan as the commissioner director
requires
to arrive at his or her determination. The commissioner
director shall, from time to time, promulgate rules for the
enforcement of this section.
(8)
The applicant may appeal from the commissioner's
director's refusal to authorize the discretionary group to the
circuit court for the county of Ingham on the grounds that the
refusal is arbitrary or capricious and devoid of sound underwriting
or actuarial grounds; but any fees or costs paid to or incurred by
the
office of financial and insurance regulation department under
subsection (7) is not subject to recovery.
Sec. 4501. As used in this chapter:
(a) "Authorized agency" means the department of state police;
a city, village, or township police department; a county sheriff's
department; a United States criminal investigative department or
agency; the prosecuting authority of a city, village, township,
county,
or state or of the United States; the office of financial
and
insurance regulation; department;
or the department of state.
(b) "Financial loss" includes, but is not limited to, loss of
earnings, out-of-pocket and other expenses, repair and replacement
costs, investigative costs, and claims payments.
(c) "Insurance policy" or "policy" means an insurance policy,
benefit contract of a self-funded plan, health maintenance
organization contract, nonprofit dental care corporation
certificate, or health care corporation certificate.
(d) "Insurer" means a property-casualty insurer, life insurer,
third party administrator, self-funded plan, health insurer, health
maintenance organization, nonprofit dental care corporation, health
care corporation, reinsurer, or any other entity regulated by the
insurance laws of this state and providing any form of insurance.
(e) "Organization" means an organization or internal
department of an insurer established to detect and prevent
insurance fraud.
(f) "Person" includes an individual, insurer, company,
association, organization, Lloyds, society, reciprocal or inter-
insurance exchange, partnership, syndicate, business trust,
corporation, and any other legal entity.
(g) "Practitioner" means a licensee of this state authorized
to practice medicine and surgery, psychology, chiropractic, or law,
any other licensee of the state, or an unlicensed health care
provider whose services are compensated, directly or indirectly, by
insurance proceeds, or a licensee similarly licensed in other
states and nations, or the practitioner of any nonmedical treatment
rendered in accordance with a recognized religious method of
healing.
(h) "Runner", "capper", or "steerer" means a person who
receives a pecuniary or other benefit from a practitioner, whether
directly or indirectly, for procuring or attempting to procure a
client, patient, or customer at the direction or request of, or in
cooperation with, a practitioner whose intent is to obtain benefits
under a contract of insurance or to assert a claim against an
insured or an insurer for providing services to the client,
patient, or customer. Runner, capper, or steerer does not include a
practitioner who procures clients, patients, or customers through
the use of public media.
(i) "Statement" includes, but is not limited to, any notice
statement, proof of loss, bill of lading, receipt for payment,
invoice, account, estimate of property damages, bill for services,
claim form, diagnosis, prescription, hospital or doctor record, X-
rays, test result, or other evidence of loss, injury, or expense.
Sec. 4601. As used in this chapter:
(a) "Affiliated company" means a company in the same corporate
system as a parent, an industrial insured, or a member organization
by virtue of common ownership, control, operation, or management.
(b) "Alien captive insurance company" means an insurer formed
to write insurance business for its parents and affiliates and
licensed pursuant to the laws of a country other than the United
States or any state, district, commonwealth, territory, or
possession of the United States.
(c) "Association" means a legal group of individuals,
corporations, limited liability companies, partnerships, political
subdivisions, or groups that has been in continuous existence for
at least 1 year and the member organizations of which collectively,
or which does itself own, control, or hold, with power to vote, all
of the outstanding voting securities of an association captive
insurance company incorporated as a stock insurer or organized as a
limited liability company; or has complete voting control over an
association captive insurance company organized as a mutual
insurer.
(d) "Association captive insurance company" means a company
that insures risks of the member organizations of the association
and their affiliated companies.
(e) "Branch business" means any insurance business transacted
by a branch captive insurance company in this state.
(f) "Branch captive insurance company" means an alien captive
insurance
company authorized by the commissioner director to
transact the business of insurance in this state through a business
unit with a principal place of business in this state.
(g) "Branch operations" means any business operations of a
branch captive insurance company in this state.
(h) "Captive insurance company" means a pure captive insurance
company, association captive insurance company, sponsored captive
insurance company, special purpose captive insurance company, or
industrial insured captive insurance company authorized under this
chapter. For purposes of this chapter, a branch captive insurance
company shall be a pure captive insurance company with respect to
operations in this state, unless otherwise permitted by the
commissioner.director.
(i)
"Commissioner" means the commissioner of the office of
financial
and insurance regulation or the commissioner's designee.
(i) (j)
"Control", including the
terms "controlling",
"controlled by", and "under common control with", means the
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person, whether
through the ownership of voting securities, by contract other than
a commercial contract for goods or nonmanagement services, or
otherwise, unless the power is the result of an official position
with or corporate office held by the person. Control is presumed to
exist if a person, directly or indirectly, owns, controls, holds
with the power to vote, or holds proxies representing 10% or more
of the voting securities of another person. A showing that control
does not exist may rebut this presumption.
(j) (k)
"Controlled unaffiliated
business" means a company
that meets all of the following:
(i) Is not in the corporate system of a parent and affiliated
companies.
(ii) Has an existing contractual relationship with a parent or
affiliated company.
(iii) Has risks managed by a captive insurance company in
accordance with this chapter.
(k) (l) "Foreign
captive insurer" means an insurer formed under
the laws of the District of Columbia, or some state, commonwealth,
territory,
or possession of the United States other than the state
of
Michiganthis state.
(l) (m)
"GAAP" means generally
accepted accounting principles.
(m) (n)
"Industrial insured"
means an insured that meets all
of the following:
(i) That procures insurance by use of the services of a full-
time employee acting as a risk manager or insurance manager or
utilizing the services of a regularly and continuously qualified
insurance consultant.
(ii) Whose aggregate annual premiums for insurance on all risks
total at least $25,000.00.
(iii) That has at least 25 full-time employees.
(n) (o)
"Industrial insured captive
insurance company" means a
company that insures risks of the industrial insureds that comprise
the industrial insured group and their affiliated companies.
(o) (p)
"Industrial insured
group" means a group that meets
either of the following criteria:
(i) Is a group of industrial insureds that collectively own,
control, or hold, with power to vote, all of the outstanding voting
securities of an industrial insured captive insurance company
incorporated as a stock insurer or limited liability company or
have complete voting control over an industrial insured captive
insurance company incorporated as a mutual insurer.
(ii) Is a group created under the liability risk retention act
of 1986, 15 USC 3901 to 3906, and chapter 18, as a corporation or
other limited liability association taxable as a stock insurance
company or a mutual insurer under this chapter.
(p) (q)
"Irrevocable letter of
credit" means a letter of
credit that meets the description in section 1105(c).
(q) (r)
"Member organization"
means any individual,
corporation, limited liability company, partnership, or association
that belongs to an association.
(s)
"Office" means the office of financial and insurance
regulation.
(r) (t)
"Organizational document"
means the articles of
incorporation, articles of organization, bylaws, operating
agreement, or other foundational documents that create a legal
entity or prescribe its existence.
(s) (u)
"Parent" means any
corporation, limited liability
company, partnership, or individual that directly or indirectly
owns, controls, or holds with power to vote more than 50% of the
outstanding voting interests of a company.
(t) (v)
"Participant" means an
entity as described in section
4667, and any affiliates of that entity, that are insured by a
sponsored captive insurance company, where the recovery of the
participant is limited through a participant contract to the assets
of a protected cell.
(u) (w)
"Participant contract"
means a contract by which a
sponsored captive insurance company insures the risks of a
participant and limits the recovery of the participant to the
assets of a protected cell.
(v) (x)
"Protected cell" means a
segregated account
established and maintained by a sponsored captive insurance company
for 1 participant.
(w) (y)
"Pure captive insurance
company" means a company that
insures risks of its parent, affiliated companies, controlled
unaffiliated business, or a combination of its parent, affiliated
companies, and controlled unaffiliated business.
(x) (z)
"Qualified United States
financial institution" means
that term as defined in section 1101.
(y) (aa)
"Safe, reliable, and entitled
to public confidence"
means that term as defined in section 116(d).
(z) (bb)
"Special purpose captive
insurance company" means a
captive insurance company that is authorized under this chapter and
chapter 47 that does not meet the definition of any other type of
captive insurance company defined in this section.
(aa) (cc)
"Sponsor" means an entity
that meets the
requirements
of section 4665 and is approved by the commissioner
director to provide all or part of the capital and retained
earnings required by applicable law and to organize and operate a
sponsored captive insurance company.
(bb) (dd)
"Sponsored captive insurance
company" means a
captive insurance company in which the minimum capital and retained
earnings required by applicable law is provided by 1 or more
sponsors, is authorized under this chapter, insures the risks of
separate participants through the participant contract, and
segregates each participant's liability through 1 or more protected
cells.
(cc) (ee)
"Surplus" means unassigned
funds for an entity using
statutory accounting principles, with capital and surplus including
all capital stock, paid in capital and contributed surplus, and
other surplus funds with corresponding items under GAAP consisting
of retained earnings and accumulated other comprehensive income,
with capital and retained earnings including all capital stock,
additional paid in capital, and other equity funds.
(dd) (ff)
"Treasury rates" means
the United States treasury
strips asked yield as published in the Wall Street Journal as of a
balance sheet date.
(ee) (gg)
"Voting security"
includes any security convertible
into or evidencing the right to acquire a voting security.
Sec. 4603. (1) A captive insurance company, if permitted by
its
organizational documents, may apply to the commissioner
director for a limited certificate of authority to do any and all
insurance authorized by this chapter except worker's compensation
insurance, long-term care insurance, critical care insurance,
personal automobile insurance, or homeowners insurance, or any
component of these coverages. A captive insurance company is
subject to all of the following:
(a) A pure captive insurance company shall not insure any
risks other than those of its parent, affiliated companies,
controlled unaffiliated business, or a combination of its parent,
affiliated companies, and controlled unaffiliated business.
(b) An association captive insurance company shall not insure
any risks other than those of the member organizations of its
association and their affiliated companies.
(c) An industrial insured captive insurance company shall not
insure any risks other than those of the industrial insureds that
comprise the industrial insured group and their affiliated
companies.
(d) In general, a special purpose captive insurance company
shall only insure the risks of its parent. Notwithstanding any
other provisions of this chapter, a special purpose captive
insurance company may provide insurance or reinsurance, or both,
for
risks as approved by the commissioner.director.
(e) A captive insurance company shall not accept or cede
reinsurance except as provided in section 4641.
(2) To conduct insurance business in this state, a captive
insurance company shall do all of the following:
(a)
Obtain from the commissioner director
a limited
certificate of authority authorizing it to conduct insurance
business in this state.
(b) Hold at least 1 board of directors meeting, or for a
limited liability company, a meeting of the managing board, each
year in this state.
(c) Maintain its principal place of business in this state, or
for a branch captive insurance company, maintain the principal
place of business for its branch operations in this state.
(d)
File with the commissioner director
the name and address
of a resident registered agent designated to accept service of
process and to otherwise act on its behalf in this state. The
designation shall remain in force as long as any liability remains
within this state.
(3) Before granting a limited certificate of authority, the
commissioner
director shall require the applicant to submit
organizational documents that contain the following:
(a) The names and places of residence of at least 3
incorporators or organizers of whom at least 2 are residents of
this state.
(b) The location of the principal office in this state.
(c) The name by which the legal entity will be known.
(d) The purposes of the creation of the entity including a
reference to this chapter.
(e) The manner in which the corporate powers are to be
exercised.
(f) The number of directors or managers, as applicable.
(g) The number of directors or managers, as applicable, that
constitute a quorum for the purposes of doing business which shall
consist of no fewer than 1/3 of the directors or managers.
(h) The amount and value of capital stock, if any. Each share
of authorized capital stock shall have a value of not less than
$1.00.
(i) The term of existence of the entity.
(4) The organizational documents of a proposed captive
insurance company may contain a provision providing that a director
is not personally liable to the corporation or its shareholders or
policyholders for monetary damages for a breach of the director's
fiduciary duty. However, the provision does not eliminate or limit
the liability of a director for any of the following:
(a) A breach of the director's duty of loyalty to the
corporation or its shareholders or policyholders.
(b) Acts or omissions not in good faith or that involve
intentional misconduct or knowing violation of law.
(c) A transaction from which the director derived an improper
personal benefit.
(5)
Before the organizational documents shall be are effective
for the purposes of this chapter, the organizational documents
shall be submitted to the office of the attorney general for
examination.
If such the organizational
documents are found to be
in compliance with this chapter, the office of the attorney general
shall
so certify to the commissioner. director.
Each applicant for
a captive insurance company limited certificate of authority that
submits its organizational documents to the office of the attorney
general shall pay to the attorney general the examination fee
provided in section 240(2).
(6)
Prior to Before granting a limited certificate of
authority
to any applicant, the commissioner director shall
require, consider, and review all of the following:
(a) A statement acknowledging that all financial records of
the captive insurance company, including records pertaining to
protected cells, if applicable, shall be made available for
inspection
or examination by the commissioner.director.
(b) A plan of operation, including, if applicable, a business
plan demonstrating how the applicant will account for the loss and
expense experience of each protected cell at a level of detail
found
to be sufficient by the commissioner director and how it will
report
the experience to the commissioner.director.
(c) Evidence of the source and form of the minimum
capitalization to be contributed to the company.
(d) Evidence of the amount and liquidity of its assets
relative to the risks to be assumed.
(e) Evidence of the character, reputation, financial standing,
and purposes of the incorporators or organizers.
(f) Evidence of the character, reputation, financial
responsibility, insurance experience, and business qualifications
of the officers and directors or managers.
(g) Biographical affidavits in the format prescribed by the
commissioner
director for all officers and directors.
(h) Evidence of the adequacy of the loss prevention programs
of its parent, member organization, or industrial insureds as
applicable.
(i) For sponsored insurance companies, copies of all contracts
or sample contracts with participants and evidence that expenses
will be allocated to each protected cell in an equitable manner.
(j) For limited liability company applicants, a certificate of
status demonstrating that the limited liability company has been
formed pursuant to the Michigan limited liability company act, 1993
PA 23, MCL 450.4101 to 450.5200, and is in good standing.
(k) Such other factors or documentation considered relevant by
the
commissioner.director.
(7)
The commissioner director shall issue a limited
certificate of authority to an applicant if, after reviewing the
documents and information provided pursuant to this chapter, the
commissioner
director finds that the documents and statements filed
by the applicant comply with this chapter, the applicant meets the
standards in this chapter and will promote the general good of the
state, and all required fees have been paid. The limited
certificate of authority shall authorize the applicant to do
business in this state until March 1, at which time the
commissioner
director may renew the limited certificate of
authority.
(8) Information submitted pursuant to this section is
confidential as provided in section 4609.
(9)
An applicant shall pay to the office department a
nonrefundable $10,000.00 fee for processing its application for a
limited
certificate of authority. In addition, the commissioner
director may retain legal, financial, and examination services from
outside
the office department to examine and investigate the
application, the reasonable cost of which may be charged against
the
applicant, or the commissioner department
may use internal
resources to examine and investigate the application for a
$2,700.00 fee.
(10)
Upon approval of the commissioner, director, a foreign
captive insurance company may become a captive insurance company by
complying with all of the requirements of law relative to the
authorization of a captive insurance company of the same or
equivalent type in this state. After this is accomplished, the
foreign captive insurance company is entitled to a limited
certificate of authority to transact business in this state and is
subject to the authority and jurisdiction of this state. It is not
necessary for a foreign captive insurance company redomesticating
into this state to merge, consolidate, transfer assets, or
otherwise engage in any other reorganization, other than as
specified in this section.
Sec. 4609. (1) Information and testimony submitted or
furnished
to the office department pursuant to this chapter,
examination reports, preliminary examination reports or results,
and
the office's department's work papers, correspondence,
memoranda, reports, records, and other written or oral information
related to an examination report or an investigation shall be
confidential, shall be withheld from public inspection, shall not
be subject to subpoena, and shall not be divulged to any person,
except as provided in this section or with the written consent of
the company. If assurances are provided that the information will
be
kept confidential, the commissioner director may disclose
confidential work papers, correspondence, memoranda, reports,
records, or other information as follows:
(a) To the governor or the attorney general.
(b) To any relevant regulatory agency, including regulatory
agencies of other states or the federal government.
(c) In connection with an enforcement action brought pursuant
to this or another applicable act.
(d) To law enforcement officials.
(e) To persons authorized by the Ingham county circuit court
to receive the information.
(f) To persons entitled to receive such information in order
to discharge duties specifically provided for in this act.
(2) The confidentiality requirements of subsection (1) do not
apply in any proceeding or action brought against or by the captive
insurer under this act or any other applicable act of this state,
any other state, or the United States.
Sec. 4625. (1) No provisions of this act, other than those
specifically referenced in this chapter, apply to a captive
insurance company, and those provisions apply only as modified by
this chapter. If a conflict occurs between a provision of this act
and a provision of this chapter, this chapter controls.
(2)
The commissioner director by rule, regulation, or order
may exempt special purpose captive insurance companies, on a case-
by-case basis, from provisions of this chapter that the
commissioner
director determines to be inappropriate given the
nature of the risks to be insured.
(3) Sections 210 to 222, 226 to 238, 244 to 251, and 2057 to
2062, and chapter 45 apply to captive insurance companies.
(4) The expenses and charges of a captive insurance company
examination
shall be paid to the this state by the captive
insurance
company or companies examined, and the office department
shall issue warrants for the proper charges incurred in all
examinations.
The payments received by the this
state shall be
deposited into the captive insurance regulatory and supervision
fund.
(5) A captive insurance company shall pay an annual renewal
fee
by March 1 of each calendar year. The annual renewal fee shall
be
is calculated based upon the annual volume of insurance
or
reinsurance premiums received by the captive insurance company as
follows:
(a) For annual premiums less than $5,000,000.00, the renewal
fee
shall be is $5,000.00.
(b) For annual premiums equal to or greater than
$5,000,000.00,
but less than $10,000,000.00, the renewal fee shall
be
is $10,000.00.
(c) For annual premiums equal to or greater than
$10,000,000.00,
but less then $15,000,000.00, the renewal fee shall
be
is $15,000.00.
(d) For annual premiums equal to or greater than
$15,000,000.00,
but less than $25,000,000.00, the renewal fee shall
be
is $25,000.00.
(e) For annual premiums equal to or greater than
$25,000,000.00,
but less than $40,000,000.00, the renewal fee shall
be
is $40,000.00.
(f) For annual premiums equal to or greater than
$40,000,000.00,
but less than $55,000,000.00, the renewal fee shall
be
is $50,000.00.
(g) For annual premiums equal to or greater than
$55,000,000.00,
but less than $75,000,000.00, the renewal fee shall
be
is $75,000.00.
(h) For annual premiums equal to or greater than
$75,000,000.00,
the renewal fee shall be is
$100,000.00.
(6)
The office department may charge a $15.00 fee for any
document requiring certification of authenticity or the signature
of
the commissioner. director.
The payments received shall be
deposited into the captive insurance regulatory and supervision
fund.
(7)
The office department may charge a fee of $25.00 payable
to the attorney general for the examination of any amendment to the
organizational documents.
(8) Notwithstanding any other provision of law, the
commissioner
director may employ legal counsel as he or she
considers necessary to assist in his or her responsibilities under
this chapter.
(9) The confidentiality provisions of this chapter do not
extend
to final examination reports produced by the commissioner
director in inspecting or examining a captive insurance company
formed as a risk retention group under the liability risk retention
act of 1986, 15 USC 3901 to 3906.
(10) Section 222 applies to all business written by a captive
insurance company except that the examination for a branch captive
insurance company shall be of branch business and branch operations
only, as long as the branch captive insurance company provides
annually
to the commissioner, director,
a certificate of
compliance, or its equivalent, issued by or filed with the
licensing authority of the jurisdiction in which the branch captive
insurance
company is formed and demonstrates to the commissioner's
director's satisfaction that it is operating in sound financial
condition in accordance with all applicable laws and regulations of
that jurisdiction.
Sec. 4673. (1) The captive insurance regulatory and
supervision fund is created within the state treasury.
(2) The state treasurer may receive money or other assets from
any source for deposit into the captive insurance regulatory and
supervision fund. All fees and assessments received by the
department
of treasury or the office pursuant to department under
the administration of this chapter and chapter 47 shall be credited
to the captive insurance regulatory and supervision fund. All fees
received by the department of treasury from reinsurers who assume
risk only from captive insurance companies shall be deposited into
the captive insurance regulatory and supervision fund. All fines
and administrative penalties ordered under this chapter or chapter
47 shall be deposited directly into the captive insurance
regulatory and supervision fund. The state treasurer shall direct
the investment of the captive insurance regulatory and supervision
fund. The state treasurer shall credit to the captive insurance
regulatory and supervision fund interest and earnings from fund
investments.
(3) Money in the captive insurance regulatory and supervision
fund at the close of the fiscal year shall remain in the captive
insurance regulatory and supervision fund and shall not lapse to
the general fund.
(4)
The commissioner shall be department
is the administrator
of the captive insurance regulatory and supervision fund for
auditing
purposes. Money The
department shall expend money in the
captive
insurance regulatory and supervision, fund shall be
expended
by the commissioner, upon
appropriation, for the purpose
of administering chapters 18 and 47 and this chapter and for
reasonable expenses incurred in promoting the captive insurance
industry in this state.
Sec. 4701. As used in this chapter:
(a) "Affiliated company" means a company in the same corporate
system as a parent, by virtue of common ownership, control,
operation, or management.
(b) "Captive LLC" means a limited liability company
established under the Michigan limited liability company act, 1993
PA 23, MCL 450.4101 to 450.5200, or comparable provisions of any
other state law, including the District of Columbia by a parent,
counterparty, affiliated company, or SPFC for the purpose of
issuing SPFC securities, entering an SPFC contract with a
counterparty, or otherwise facilitating an insurance
securitization.
(c)
"Commissioner" means the commissioner of the office of
financial
and insurance regulation or the commissioner's designee.
(c) (d)
"Contested case" means a
proceeding in which the legal
rights, duties, obligations, or privileges of a party are required
by law to be determined by the circuit court after an opportunity
for hearing.
(d) (e)
"Control" including the
terms "controlling",
"controlled by", and "under common control with" means the
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person, whether
through the ownership of voting securities, by contract other than
a commercial contract for goods or nonmanagement services, or
otherwise, unless the power is the result of an official position
with
or corporate office held by the person. Control shall be is
presumed to exist if a person, directly or indirectly, owns,
controls, holds with the power to vote, or holds proxies
representing 10% or more of the voting securities of another
person. This presumption may be rebutted by a showing that control
does
not exist. However, for purposes of this chapter, the fact
that
an SPFC that exclusively
provides reinsurance to a ceding
insurer under an SPFC contract is not by itself sufficient grounds
for a finding that the SPFC and ceding insurer are under common
control.
(e) (f)
"Counterparty" means an
SPFC's parent or affiliated
company,
or, subject to the prior approval of the commissioner,
director, a nonaffiliated company as ceding insurer to the SPFC
contract.
(f) (g)
"Fair value" means the
following:
(i) For cash, the amount of the cash.
(ii) For assets other than cash, the amount at which that asset
could be bought or sold in a current transaction between arm's
length, willing parties. If available, the quoted mid-market price
for the asset in active markets shall be used; and if quoted mid-
market prices are not available, a value shall be determined using
the best information available considering values of similar assets
and other valuation methods, such as present value of future cash
flows, historical value of the same or similar assets, or
comparison to values of other asset classes, the value of which
have been historically related to the subject asset.
(g) (h)
"Foreign captive" means a
captive insurer formed under
the laws of the District of Columbia or some state, commonwealth,
territory,
or possession of the United States other than the this
state. of
Michigan.
(h) (i)
"Insolvency" or
"insolvent" means 1 or more of the
following:
(i) That the An SPFC that is
unable to pay its obligations
within 30 days after they are due, unless those obligations are the
subject of a bona fide dispute.
(ii) That the The admitted assets of the
SPFC do not exceed
liabilities plus minimum capital and surplus for a period of time
in excess of 30 days.
(iii) That the The Ingham county circuit
court has issued an
order as provided for in section 8113, 8117, or 8120 in connection
with a delinquency proceeding under chapter 81 instituted against
the SPFC.
(i) (j)
"Insurance
securitization" means a package of related
risk transfer instruments, capital market offerings, and
facilitating administrative agreements by which all of the
following apply:
(i) The proceeds of the sale of SPFC securities are obtained,
in a transaction that complies with applicable securities laws, by
an SPFC directly through the issuance of the SPFC securities by the
SPFC or indirectly through the issuance of preferred securities by
the SPFC in exchange for some or all of the proceeds of the sale of
SPFC securities by the SPFC's parent, an affiliated company of the
SPFC, a counterparty, or a captive LLC.
(ii) The proceeds of the issuance of the SPFC securities secure
the obligations of the SPFC under 1 or more SPFC contracts with a
counterparty.
(iii) The obligation to the holders of the SPFC securities is
secured by assets obtained with proceeds of the SPFC securities in
accordance with the transaction terms.
(j) (k)
"Irrevocable letter of
credit" means a letter of
credit that meets the description in section 1105(c).
(k) (l) "Management"
means the board of directors, managing
board, or other individual or individuals vested with overall
responsibility
for the management of the affairs of the an SPFC,
including the election and appointment of officers or other agents
to act on behalf of the SPFC.
(m)
"Office" means the office of financial and insurance
regulation.
(l) (n)
"Organizational document"
means the an SPFC's articles
of incorporation, articles of organization, bylaws, operating
agreement, or other foundational documents that establish the SPFC
as a legal entity or prescribes its existence.
(m) (o)
"Parent" means any
corporation, limited liability
company, partnership, or individual that directly or indirectly
owns, controls, or holds with power to vote more than 50% of the
outstanding voting securities of an SPFC.
(n) (p)
"Permitted investments"
means those investments that
meet the qualifications in section 4727(1).
(o) (q)
"Preferred securities"
means securities, whether stock
or debt, issued by an SPFC to the issuer of the SPFC securities in
exchange for some or all of the proceeds of the issuance of the
SPFC securities.
(p) (r)
"Protected cell" means a
segregated account
established and maintained by an SPFC for 1 or more SPFC contracts
that are part of a single securitization transaction as further
provided for in chapter 48.
(q) (s)
"Qualified United States
financial institution" means
that term as defined in section 1101.
(r) (t)
"Reserves" means that
term as used in chapter 8.
(s) (u)
"Safe, reliable, and entitled
to public confidence"
means that term as defined in section 116(d).
(t) (v)
"Securities" means those
different types of debt
obligations, equity, surplus certificates, surplus notes, funding
agreements, derivatives, and other legal forms of financial
instruments.
(u) (w)
"Securities commissioner"
means the
commissioner.director.
(v) (x)
"SPFC" or "special
purpose financial captive" means a
captive insurance company, a captive LLC, or a company otherwise
qualified as an authorized insurer that has received a limited
certificate
of authority from the commissioner director for the
purposes provided for in this chapter.
(w) (y)
"SPFC contract" means a
contract between the an SPFC
and
the a counterparty pursuant to which the SPFC agrees to
provide
insurance or reinsurance protection to the counterparty for risks
associated with the counterparty's insurance or reinsurance
business.
(x) (z)
"SPFC securities" means
the securities issued pursuant
to an insurance securitization, the proceeds of which are used in
the
manner described in subdivision (j).(i).
(y) (aa)
"Surplus note" means an
unsecured subordinated debt
obligation possessing characteristics consistent with accounting
practices
and procedures designated by the commissioner.director.
(z) (bb)
"Third party" means a
person unrelated to an SPFC or
its counterparty, or both, that has been aggrieved by a decision of
a
commissioner director regarding that SPFC or its activities.
Sec. 4705. (1) A captive insurance company, a captive LLC, or
a company otherwise qualified as an authorized insurer may apply to
the
commissioner director for a limited certificate of authority to
transact
insurance or reinsurance business as authorized by under
this chapter. An SPFC only may insure or reinsure the risks of its
counterparty. Notwithstanding any other provision of this chapter,
an SPFC may purchase reinsurance to cede the risks assumed under
the
SPFC contract as approved by the commissioner.director.
(2) To transact business in this state, an SPFC shall do all
of the following:
(a)
Obtain from the commissioner director
a limited
certificate of authority authorizing it to conduct insurance or
reinsurance business, or both, in this state.
(b) Hold at least 1 management meeting each year in this
state.
(c) Maintain its principal place of business in this state.
(d)
File with the commissioner director
the name and address
of a resident registered agent designated to accept service of
process and to otherwise act on its behalf in this state. The
designation shall remain in force as long as any liability remains
within the state.
(e) Provide such documentation of the insurance securitization
as
requested by the commissioner director
immediately upon the
closing of the insurance securitization transaction, including an
opinion of legal counsel with respect to compliance with this
chapter and any other applicable laws as of the effective date of
the insurance securitization transaction and a statement under oath
of its president and secretary showing its financial condition.
(f) Provide a complete set of documentation of the insurance
securitization
to the commissioner director
shortly following
closing of the insurance securitization transaction.
(3) Before granting a limited certificate of authority for an
SPFC,
the commissioner director shall require the applicant to
submit organizational documents that contain all of the following:
(a) The names and places of residence of at least 3
incorporators or organizers of whom at least 2 are residents of
this state.
(b) The location of the principal office in this state.
(c) The name by which the legal entity will be known.
(d) The purposes of the creation of the entity including a
reference to this chapter.
(e) The manner in which the corporate powers are to be
exercised.
(f) The number of directors or managers, as applicable.
(g) The number of directors or managers, as applicable, that
constitute a quorum for the purposes of doing business which
consists of no fewer than 1/3 of the managers required by the
organizational document.
(h) The amount and value of capital stock, if any. Each share
of authorized capital stock shall have a value of not less than
$1.00.
(i) The term of existence of the entity.
(4) The organizational documents of an SPFC may contain a
provision providing that a director is not personally liable to the
corporation or its shareholders or policyholders for monetary
damages for a breach of the director's fiduciary duty. However, the
provision does not eliminate or limit the liability of a director
for any of the following:
(a) A breach of the director's duty of loyalty to the
corporation or its shareholders or policyholders.
(b) Acts or omissions not in good faith or that involve
intentional misconduct or knowing violation of law.
(c) A transaction from which the director derived an improper
personal benefit.
(5)
Before the organizational documents shall be are effective
for the purposes of this chapter, the organizational documents
shall be submitted to the office of the attorney general for
examination.
If such the documents are found to be in compliance
comply with this chapter, the office of the attorney general shall
so
certify to the commissioner. director.
Each applicant for an
SPFC limited certificate of authority that submits its
organizational documents to the office of the attorney general
shall pay to the attorney general the examination fee provided in
section 240(2).
(6) Prior to granting a limited certificate of authority to
any
an SPFC, the commissioner director shall
require, consider, and
review all of the following:
(a) Evidence of all of the following:
(i) The amount and liquidity of its assets relative to the
risks to be assumed.
(ii) The adequacy of the expertise, experience, and character
of the person or persons who manage it.
(iii) The overall soundness of its plan of operation.
(iv) Other factors considered relevant by the commissioner
director in ascertaining whether the proposed SPFC is able to meet
its policy obligations.
(v) The applicant SPFC's financial condition, including the
source and form of the minimum capitalization to be contributed to
the SPFC.
(b) A plan of operation, consisting of a description of or
statement of intent with respect to the contemplated insurance
securitization, the SPFC contract, and related transactions, which
shall include all of the following:
(i) Draft documentation or, at the commissioner's director's
discretion, a written summary of all material agreements that are
entered into in connection with the SPFC contracts and the
insurance securitization, including the names of the counterparty,
the nature of the risks to be assumed, and the proposed use of
protected cells, if any. The documentation or written summary shall
also include the maximum amounts, purpose, nature, and the
relationship between the various transactions effectuating the
insurance securitization.
(ii) A description of any party, other than the SPFC or the
counterparty, that will issue SPFC securities in an insurance
securitization, including a description of its contemplated
operation.
(iii) The source and form of additional capitalization to be
contributed to the SPFC.
(iv) The proposed investment strategy of the SPFC.
(v) A description of the underwriting, reporting, and claims
payment methods by which reserves covered by the SPFC contract are
reported, accounted for, and settled.
(vi) A pro forma balance sheet and income statement
illustrating various stress case scenarios for the performance of
the SPFC under the SPFC contract.
(c) Biographical affidavits in a form prescribed by the
commissioner
director of all of the prospective SPFC's officers and
directors, providing their legal names, any names under which they
have or are conducting their affairs, and any affiliations with
other persons, together with other biographical information as the
commissioner
director may request.
(d) An affidavit from the applicant SPFC verifying all of the
following:
(i) The applicant SPFC meets the provisions of this chapter.
(ii) The applicant SPFC operates only pursuant to under the
provisions in this chapter.
(iii) The applicant SPFC's investment strategy reflects and
takes into account the liquidity of assets and the reasonable
preservation,
administration, and asset management of such the
assets relative to the risks associated with the SPFC contract and
the insurance securitization transaction.
(iv) The SPFC securities proposed to be issued are valid legal
obligations that are either properly registered with the securities
commissioner or constitute an exempt security or form part of an
exempt
transaction under section 402 of the uniform securities act,
1964
PA 265, MCL 451.802. 2008 PA
551, (2002) MCL 451.2101 to
451.2703. If the issuer of the SPFC securities is not the SPFC, the
SPFC shall obtain and submit an affidavit from the issuer that the
securities proposed to be issued satisfy this subparagraph.
(v) Unless otherwise exempted by the commissioner, director,
the trust agreement, the trusts holding assets that secure the
obligations of the SPFC under the SPFC contract, and the SPFC
contract with the counterparty in connection with the contemplated
insurance securitization are structured pursuant to the provisions
in this chapter.
(e) Any other statements or documents required by the
commissioner
director to evaluate and authorize the SPFC.
(7) In addition to the requirements of this section and
section 4713, if a protected cell is used, an applicant SPFC shall
file
with the commissioner director
all of the following:
(a) A business plan demonstrating how the applicant accounts
for the paid losses, reserves, and expenses of each protected cell
at
a level of detail found to be sufficient by the commissioner,
director, and how it reports those paid losses, reserves, and
expenses
to the commissioner.director.
(b) A statement acknowledging that all financial records of
the SPFC, including reports pertaining to any protected cells,
shall be made available for inspection or examination by the
commissioner.director.
(c) All contracts or sample contracts between the SPFC and any
counterparty or captive LLC related to each protected cell.
(d) A description of the expenses allocated to each protected
cell.
(8)
Information submitted pursuant to under this section is
confidential
and is subject to sections section
4734. and 4743.
(9) To transact insurance or reinsurance business in this
state, an SPFC is subject to all of the following:
(a) For an applicant not authorized under chapter 46 and not
filing a concurrent application under chapter 46, a nonrefundable
fee of $10,000.00 for processing its application for a limited
certificate
of authority. In addition, the commissioner director
may retain legal, financial, actuarial, and examination services
from
outside the office department
to examine and investigate the
application, the reasonable cost of which may be charged against
the
applicant, or the commissioner director
may use internal
resources to examine and investigate the application for a fee of
$2,700.00, which is payable upon the filing of the application.
(b) An SPFC shall pay an annual renewal fee by March 1 of each
calendar year. However, an SPFC that is authorized under both
chapter 46 and this chapter and that pays the renewal fee provided
in section 4625(5) is exempt from paying this renewal fee. The
annual renewal fee shall be calculated based upon the annual volume
of insurance or reinsurance premiums received by the SPFC as
follows:
(i) For annual premiums less than $5,000,000.00, the renewal
fee
shall be is $5,000.00.
(ii) For annual premiums equal to or greater than
$5,000,000.00,
but less than $10,000,000.00, the renewal fee shall
be
is $10,000.00.
(iii) For annual premiums equal to or greater than
$10,000,000.00,
but less than $15,000,000.00, the renewal fee shall
be
is $15,000.00.
(iv) For annual premiums equal to or greater than
$15,000,000.00,
but less than $25,000,000.00, the renewal fee shall
be
is $25,000.00.
(v) For annual premiums equal to or greater than
$25,000,000.00,
but less than $40,000,000.00, the renewal fee shall
be
is $40,000.00.
(vi) For annual premiums equal to or greater than
$40,000,000.00,
but less than $55,000,000.00, the renewal fee shall
be
is $50,000.00.
(vii) For annual premiums equal to or greater than
$55,000,000.00,
but less than $75,000,000.00, the renewal fee shall
be
is $75,000.00.
(viii) For annual premiums equal to or greater than
$75,000,000.00,
the renewal fee shall be is
$100,000.00.
(10)
The commissioner director may grant a limited certificate
of authority authorizing the applicant to transact insurance or
reinsurance business as an SPFC in this state upon finding by the
commissioner
director of all of the following:
(a) The proposed plan of operation provides a reasonable and
expected successful operation.
(b) The terms of the SPFC contract and related transactions
comply with this chapter.
(c) All required fees have been paid.
(d) The commissioner of the state of domicile of each
counterparty
has notified the commissioner director
in writing or
otherwise
provided assurance satisfactory to the commissioner
director that it has approved or not disapproved the transaction.
(e) The limited certificate of authority authorizing the SPFC
to transact business is limited to the insurance or reinsurance
activities
that the SPFC is allowed to conduct pursuant to under
this chapter.
(11) The limited certificate of authority shall be renewed
annually upon payment of the renewal fee provided for by this
section.
(12)
A foreign captive, upon approval of the commissioner,
director, may become an SPFC by complying with all of the
provisions of this chapter. After this is accomplished, the foreign
captive is entitled to a limited certificate of authority to
transact business as an SPFC in this state and is subject to the
authority and jurisdiction of this state. It is not necessary for a
foreign captive redomesticating into this state to merge,
consolidate, transfer assets, or otherwise engage in another
reorganization, other than as specified in this section.
Sec. 4713. (1) This section and section 4715 provide a basis
for the creation and use of protected cells by an SPFC. If a
conflict occurs between a provision of chapter 46 or chapter 48 and
either this section or section 4715, this section and section 4715
control.
(2) An SPFC may establish and maintain 1 or more protected
cells
with prior written approval of the commissioner director and
subject to compliance with the applicable provisions of this
chapter and the following conditions:
(a) A protected cell shall be established only for the purpose
of isolating and identifying the assets and liabilities
attributable to the risk ceded to the SPFC by the counterparty
pursuant to 1 or more SPFC contracts and the assets and liabilities
of the SPFC arising out of the related insurance securitization.
(b) Each protected cell shall be accounted for separately on
the books and records of the SPFC to reflect the financial
condition and results of operations of the protected cell,
including income, gain, expense, or loss; dividends; other
distributions to the counterparty for the SPFC contract with each
cell; and other items as may be provided in the SPFC contract,
insurance securitization transaction documents, plan of operation,
or
business plan, or as required by the commissioner.director.
(c) Amounts attributed to a protected cell under this chapter,
including assets transferred to a protected cell account, are owned
by the SPFC, and the SPFC shall not be, or shall not hold itself
out to be, a trustee with respect to those protected cell assets of
that protected cell account.
(d) All attributions of assets and liabilities between a
protected cell and the general account shall be in accordance with
the
plan of operation submitted to the commissioner. director. No
other attribution of assets or liabilities shall be made by an SPFC
between the SPFC's general account and its protected cell or cells.
The SPFC shall attribute all insurance obligations, assets, and
liabilities relating to an SPFC contract and all obligations,
assets, and liabilities of the SPFC arising out of the related
insurance securitization transaction to a particular protected
cell. The rights, benefits, obligations, and liabilities of any
securities attributable to that protected cell, the performance
under an SPFC contract and the related securitization transaction,
and any tax benefits, losses, refunds, or credits allocated at any
point in time pursuant to a tax allocation agreement between the
SPFC and the SPFC's counterparty, parent, or affiliated company, as
the
case may be, applicable, including any payments made by or due
to be made to the SPFC pursuant to the terms of the tax allocation
agreement, shall reflect the insurance obligations, assets, and
liabilities relating to the SPFC contract and proceeds of the
insurance securitization transaction that are attributed to a
particular protected cell.
(e) The assets of a protected cell shall not be chargeable
with liabilities arising out of an SPFC contract related to or
associated with another protected cell. However, 1 or more SPFC
contracts may be attributed to a protected cell so long as those
SPFC contracts are intended to be, and ultimately are, part of a
single securitization transaction.
(f) A sale, an exchange, or another transfer of assets shall
not be made by the SPFC between or among any of its protected cells
without the consent of the counterparty and each protected cell.
(g) Except as otherwise contemplated in the SPFC contract or
related insurance securitization transaction documents, or both, a
dividend or a distribution shall not be made from a protected cell
to a counterparty, captive LLC, or parent or affiliated company of
the
SPFC without the commissioner's director's
approval and shall
not be approved if the dividend or distribution would result in
insolvency or impairment with respect to a protected cell.
(h) Except as otherwise contemplated in the SPFC contract or
related insurance securitization transaction documents, or both, a
sale, an exchange, or a transfer of assets shall not be made from a
protected cell to a counterparty, captive LLC, or parent or
affiliated company of the SPFC if the sale, exchange, or transfer
would result in insolvency or impairment with respect to the
protected cell.
(i) An SPFC shall pay interest or repay principal or both or
make distributions or repayments of any SPFC securities issued by
the SPFC or make payments of preferred securities issued to a
particular protected cell from assets or cash flows relating to or
emerging from the SPFC contract and the insurance securitization
transactions that are attributable to that particular protected
cell as provided in this chapter or as otherwise approved by the
commissioner.director.
(3) An SPFC contract with or attributable to a protected cell
does
not take effect without the commissioner's director's prior
written
approval. The commissioner director
may retain legal,
financial,
and examination services from outside the office
department to examine and investigate the application for a
protected cell, the reasonable cost of which may be charged against
the
applicant, or the commissioner director
may use internal
resources to examine and investigate the application the reasonable
cost of which may be charged against the applicant up to a maximum
of $1,200.00, or may use both retained services and internal
resources.
(4) An SPFC utilizing protected cells shall possess minimum
capitalization for each protected cell separate and apart from the
capitalization required by section 4709. For purposes of
determining the capitalization of each protected cell, an SPFC
initially shall capitalize and after that time maintain
capitalization in each protected cell in the amount and manner
required for an SPFC in section 4709.
(5)
The establishment of 1 or more protected cells alone does
not
constitute, and shall not be considered to be, is not a
fraudulent conveyance, an intent by the SPFC to defraud creditors,
or the carrying out of business by the SPFC for any other
fraudulent purpose.
Sec.
4715. (1) The Subject to
subsections (2) and (3),
creation of a protected cell does not create, with respect to that
protected cell, a legal person separate from the SPFC.
(2)
Notwithstanding subsection (1), if If an order of
conservation, rehabilitation, or liquidation is entered for a
counterparty,
the SPFC and each protected cell of the SPFC shall be
considered
are separate persons for purposes of any offset
undertaken as part of the conservation, rehabilitation, or
liquidation, such that any offset of mutual debts and credits
between the counterparty and either the SPFC or any protected cell
shall not involve the debts and credits of any other protected cell
or, if the offset involves a protected cell, the SPFC.
(3)
Notwithstanding subsection (1), a A protected cell shall
have its own distinct name or designation that includes the words
"protected cell". The SPFC shall transfer all assets attributable
to the protected cell to 1 or more separately established and
identified protected cell accounts bearing the name or designation
of that protected cell.
(4) Although the protected cell is not a separate legal
person, the property of an SPFC in a protected cell is subject to
orders of a court by name as it would have been if the protected
cell were a separate legal person.
(5) The property of an SPFC in a protected cell shall be
served in its own name with process in all civil actions or
proceedings involving or relating to the activities of that
protected cell or a breach by the SPFC of a duty to the protected
cell or to a counterparty to a transaction linked or attributed to
it by serving the SPFC in the manner described in section 1920 of
the revised judicature act of 1961, 1961 PA 236, MCL 600.1920.
(6) A protected cell exists only at the pleasure of the SPFC.
At the cessation of business of a protected cell in accordance with
the
plan of operation submitted to the commissioner, director, the
SPFC voluntarily shall close out the protected cell account.
(7) Nothing in this section shall be construed to prohibit an
SPFC from contracting with, or arranging for, an investment
advisor, commodity trading advisor, or other third party to manage
the assets of a protected cell, if all remuneration, expenses, and
other compensation of the third party advisor or manager are
payable from the assets of that protected cell and not from the
assets of other protected cells or the assets of the SPFC's general
account.
(8) Creditors to a protected cell are not entitled to have
recourse against the protected cell assets of other protected cells
or the assets of the SPFC's general account. If an obligation of an
SPFC relates only to the general account, the obligation of the
SPFC extends only to that creditor for that obligation and that
creditor is entitled to have recourse only to the assets of the
SPFC's general account.
(9) The assets of the protected cell shall not be used to pay
expenses or claims other than those attributable to the protected
cell. Protected cell assets are available only to the SPFC
counterparty and other creditors of the SPFC that are creditors
only to that protected cell and, accordingly, are entitled, in
conformity with this chapter, to have recourse to the protected
cell assets attributable to that protected cell. Protected cell
assets are absolutely protected from the creditors of the SPFC that
are not creditors with respect to that protected cell and who,
accordingly, are not entitled to have recourse to the protected
cell assets attributable to that protected cell. If an obligation
of an SPFC to a person or counterparty arises from an SPFC contract
or related insurance securitization transaction or is otherwise
incurred for a protected cell, both of the following apply:
(a) That obligation of the SPFC extends only to the protected
cell assets attributable to that protected cell, and the person or
counterparty, for that obligation, is entitled to have recourse
only to the protected cell assets attributable to that protected
cell.
(b) That obligation of the SPFC does not extend to the
protected cell assets of another protected cell or the assets of
the SPFC's general account, and that person, for that obligation,
is not entitled to have recourse to the protected cell assets of
another protected cell or the assets of the SPFC's general account.
The SPFC's capitalization of its protected cell or cells as
required by section 4713(4) shall be available at all times to pay
expenses of or claims against the SPFC and shall not be used to pay
expenses or claims attributable to any protected cell.
(10) Notwithstanding any other provision of law, an SPFC may
allow for a security interest in accordance with applicable law to
attach to protected cell assets or a protected cell account when in
favor of a creditor of the protected cell or to facilitate the
insurance securitization, including, without limitation, the
issuance of the SPFC contract, to the extent those protected cell
assets are not required at all times to support the risk, but
without otherwise affecting the discharge of liabilities under the
SPFC contract, or as otherwise approved by the
commissioner.director.
(11) An SPFC shall establish administrative and accounting
procedures necessary to properly identify the 1 or more protected
cells of the SPFC and the assets and liabilities of each protected
cell. The directors of an SPFC shall keep protected cell assets and
liabilities separate and separately identifiable from the assets
and liabilities of the SPFC's general account. The assets and
liabilities attributable to 1 protected cell shall be kept separate
and separately identifiable from the assets and liabilities
attributable to other protected cells.
(12) All contracts or other documentation reflecting protected
cell liabilities shall indicate clearly that only the protected
cell assets are available for the satisfaction of those protected
cell liabilities. In all SPFC insurance securitizations involving a
protected cell, including the issuance of preferred securities, the
contracts or other documentation effecting the transaction shall
contain provisions identifying the protected cell to which the
transaction is attributed. In addition, the contracts or other
documentation shall disclose clearly that the assets of that
protected cell, and only those assets, are available to pay the
obligations of that protected cell. Notwithstanding the provisions
of this subsection and subject to the provisions of this chapter
and any other applicable law or regulation, the failure to include
this language in the contracts or other documentation shall not be
used as the sole basis by creditors, insureds or reinsureds,
insurers or reinsurers, or other claimants to circumvent this
section.
(13) The income, and gains and losses, whether realized or
unrealized, from protected cell assets and protected cell
liabilities shall be credited to or charged against the protected
cell without regard to other income and gains or losses of the
SPFC, including income and gains or losses of other protected
cells. Amounts attributed to any protected cell and accumulations
on the attributed amounts may be invested and reinvested. The
investments in a protected cell or cells shall not be taken into
account in applying the investment limitations otherwise applicable
to the investments of the SPFC.
(14) An SPFC with protected cells shall file annually with the
office
department accounting statements and financial reports
required by this chapter that, among other things, shall do all of
the following:
(a) Detail the financial experience of each protected cell and
the SPFC separately.
(b) Provide the combined financial experience of the SPFC and
all protected cells.
(c) Account for the financial experience of each protected
cell and the SPFC, both separately and on a combined basis, in
satisfaction of section 4731(4).
(15) An SPFC with protected cells shall notify the
commissioner
director in writing within 10 business days of a
protected cell becoming insolvent.
Sec. 4733. (1) The expenses and charges of a captive insurance
company
examination shall be paid to the this state by the captive
insurance
company or companies examined, and the office department
shall issue warrants for the proper charges incurred in all
examinations.
The payments received by the this
state shall be
deposited into the captive insurance regulatory and supervision
fund.
(2)
The office department may charge a $15.00 fee for any
document requiring certification of authenticity or the signature
of
the commissioner. director.
The payments received shall be
deposited into the captive insurance regulatory and supervision
fund.
(3)
The office department may charge a fee of $25.00 payable
to the attorney general for the examination of any amendment to the
organizational documents.
Sec. 4734. (1) Information and testimony submitted or
furnished
to the office pursuant to department
under this chapter,
examination reports, preliminary examination reports or results,
and
the office's department's work papers, correspondence,
memoranda, reports, records, and other written or oral information
related
to an examination report or an investigation shall be are
confidential, shall be withheld from public inspection, shall not
be subject to subpoena, and shall not be divulged to any person,
except as provided in this section or with the written consent of
the company. If assurances are provided that the information will
be
kept confidential, the commissioner director may disclose
confidential work papers, correspondence, memoranda, reports,
records, or other information as follows:
(a) To the governor or the attorney general.
(b) To any relevant regulatory agency, including regulatory
agencies of other states or the federal government.
(c) In connection with an enforcement action brought pursuant
to this or another applicable act.
(d) To law enforcement officials.
(e) To persons authorized by the Ingham county circuit court
to receive the information.
(f) To persons entitled to receive such information in order
to discharge duties specifically provided for in this act.
(2) The confidentiality requirements of subsection (1) do not
apply in any proceeding or action brought against or by the insurer
under this act or any other applicable act of this state, any other
state, or the United States.
Sec. 8111. (1) Except as provided in subsection (2), in all
proceedings and judicial review of these proceedings under sections
8109
and 8110, all records of the insurer, other documents, office
of
financial and insurance services department
files, and court
records and papers, so far as they pertain to or are a part of the
record of the proceedings, are confidential and shall be held by
the clerk of the court in a confidential file except as is
necessary to obtain compliance therewith, unless the court, after
hearing arguments from the parties in chambers, orders otherwise or
the insurer requests that the matter be made public.
(2) Without compromising the confidentiality of the records of
the
commissioner, office of financial and insurance services,
director,
department, or supervisor, the commissioner
director or
his or her supervisor may advise third parties of the existence of
a supervision order and of the supervisor's authority if considered
by either of them necessary to further the insurer's compliance
with
the supervision order. The commissioner director may advise
third parties of the existence of a supervision order and of facts
pertaining to the supervision order if considered necessary by the
commissioner
director with regard to other regulatory matters
affecting the insurer or a person or entity related to the insurer.
Third parties advised under this subsection are required to keep
the existence of a supervision confidential. As used in this
subsection, "third parties" means the following persons:
(a) Debtors and creditors of the insurer and its affiliates.
(b) Persons who hold or control assets of the insurer and its
affiliates.
(c) Reinsurers of the insurer and its affiliates.
(d) Insurance regulatory officials.
(e) Law enforcement agencies.
(f) The workers' compensation agency.
(g) Representatives of a guaranty association or foreign
guaranty association that may become obligated as a result of the
insolvency of the insurer. Confidentiality obligations of a
guaranty association or foreign guaranty association to the
receiver end upon the entry of an order of liquidation with a
finding of insolvency against the insurer.