Citations Affected: IC 27-1-12.7-10; IC 27-8-8.
Synopsis: Life and health guaranty association. Amends the life and
health insurance guaranty association (association) law. Specifies
certain information concerning: (1) association coverage for Indiana
residents and nonresidents insured by domestic and nondomestic
insurers; (2) association accounts; (3) assessment procedures; (4)
subrogation; (5) powers and duties of the association, the board of
directors of the association, and the commissioner of the department of
insurance with respect to the association; (6) plan of operation of the
association; (7) prevention of insolvencies; (8) immunity; and (9)
notice to policy owners and contract owners. Repeals and replaces
provisions concerning association coverage. Makes a conforming
amendment.
Effective: Upon passage.
January 12, 2006, read first time and referred to Committee on Insurance.
A BILL FOR AN ACT to amend the Indiana Code concerning
insurance.
established by IC 27-1-29-10 and the political subdivision
catastrophic liability fund established by IC 27-1-29.1-7.
(11) The small employer health reinsurance board established
by IC 27-8-15.5-5.
(10) Any (12) A person similar to any person described in
subdivisions (1) through (9). (11).
(r) "Moody's Corporate Bond Yield Average" means:
(1) the monthly average of the composite yield on seasoned
corporate bonds as published by Moody's Investors Service,
Inc.; or
(2) if the monthly average described in subdivision (1) is no
longer published, an alternative publication of interest rates
or yields determined appropriate by the association.
(s) "Multiple employer welfare arrangement" has the meaning
set forth in IC 27-1-34-1.
(t) "Owner" means the person:
(1) identified as the legal owner of a policy or contract
according to the terms of the policy or contract; or
(2) otherwise vested with legal title to a policy or contract
through a valid assignment completed in accordance with the
terms of the policy or contract and properly recorded as the
owner on the books of the insurer.
The term does not include a person with a mere beneficial interest
in a policy or contract.
(u) "Person" means an individual, a corporation, a limited
liability company, a partnership, an association, a governmental
entity, a voluntary organization, a trust, a trustee, or another
business entity or organization.
(v) "Plan sponsor" refers to only one (1) of the following with
respect to a benefit plan:
(1) The employer, in the case of a benefit plan established or
maintained by a single employer.
(2) The holding company or controlling affiliate, in the case of
a benefit plan established or maintained by affiliated
companies comprising a consolidated corporation.
(3) The employee organization, in the case of a benefit plan
established or maintained by an employee organization.
(4) In a case of a benefit plan established or maintained:
(A) by two (2) or more employers;
(B) by two (2) or more employee organizations; or
(C) jointly by one (1) or more employers and one (1) or
more employee organizations;
and that is not of a type described in subdivision (2), the
association, committee, joint board of trustees, or other
similar group of representatives of the parties that establish
or maintain the benefit plan.
(w) "Premiums" means direct gross insurance premiums and annuity
amounts, deposits, and considerations received on covered policies,
less return returned premiums, returned deposits, and returned
considerations, and dividends, paid or credited to policyholders on
direct business. It and experience credits. The term does not include
premiums the following:
(1) Amounts, deposits, and considerations on contracts between
insurers and reinsurers. For purposes of assessments made under
section 6 of this chapter, "premiums" for covered policies shall
not be reduced on account of any limitation on benefits for which
the association is obligated under section 5(l) of this chapter.
However, "premiums" for assessment purposes does not include
that portion of any premium exceeding received for policies or
contracts or parts of policies or contracts for which coverage
is not provided under section 2.3(d) of this chapter, as
qualified by section 2.3(e) of this chapter, except that an
assessable premium must not be reduced on account of the
limitations set forth in section 2.3(e)(3), 2.3(e)(15), or 2.3(f)(2)
of this chapter.
(2) Premiums in excess of five million dollars ($5,000,000) for
any one (1) on an unallocated annuity contract not issued or not
connected with a governmental benefit plan established under
Section 401, 403(b), or 457 of the United States Internal
Revenue Code.
"Person" means any natural person, corporation, limited liability
company, partnership, association, voluntary organization, trust,
governmental organization or entity, or other business organization or
entity.
(x) "Principal place of business" refers to the single state in
which individuals who establish policy for the direction, control,
and coordination of the operations of an entity as a whole
primarily exercise the direction, control, and coordination, as
determined by the association in the association's reasonable
judgment by considering the following factors:
(1) The state in which the primary executive and
administrative headquarters of the entity is located.
(2) The state in which the principal office of the chief
executive officer of the entity is located.
(3) The state in which the board of directors or similar
governing person of the entity conducts the majority of the
board of directors' or governing person's meetings.
(4) The state in which the executive or management
committee of the board of directors or similar governing
person of the entity conducts the majority of the committee's
meetings.
(5) The state from which the management of the overall
operations of the entity is directed.
However, in the case of a plan sponsor, if more than fifty percent
(50%) of the participants in the plan sponsor's benefit plan are
employed in a single state, that state is considered to be the
principal place of business of the plan sponsor. The principal place
of business of a plan sponsor of a benefit plan described in
subsection (v)(4), if more than fifty percent (50%) of the
participants in the plan sponsor's benefit plan are not employed in
a single state, is considered to be the principal place of business of
the association, committee, joint board of trustees, or other similar
group of representatives of the parties that establish or maintain
the benefit plan and, in the absence of a specific or clear
designation of a principal place of business, is considered to be the
principal place of business of the employer or employee
organization that has the largest investment in the benefit plan in
question on the coverage date.
(y) "Receivership court" refers to the court in an insolvent
insurer's or impaired insurer's state that has jurisdiction over the
conservation, rehabilitation, or liquidation of the insolvent insurer
or impaired insurer.
(z) "Resident" means any a person who that resides or has the
person's principal place of business in Indiana at the time the
association becomes obligated for an impaired or insolvent insurer.
Persons other than natural persons are considered to reside in the state
where their principal place of business is located. on the applicable
coverage date.
(aa) "State" includes a state, the District of Columbia, Puerto
Rico, and a United States possession, territory, or protectorate.
(bb) "Structured settlement annuity" means an annuity
purchased to fund periodic payments for a plaintiff or other
claimant in payment for or with respect to personal injury suffered
by the plaintiff or other claimant.
(cc) "Supplemental contract" means a written agreement
entered into for the distribution of proceeds under a life, health, or
annuity policy or contract.
(dd) "Unallocated annuity contract" means an annuity contract or
group annuity certificate: that is not issued to and held by a natural
person (excluding a natural person acting as a trustee),
(1) the owner of which is not a natural person; and
(2) that does not identify at least one (1) specific natural
person as an annuitant;
except to the extent of any annuity benefits guaranteed to a natural
person by an insurer under the contract or certificate. For the purposes
of section 1.5 of this chapter, an unallocated annuity contract shall not
be considered a group covered policy or group contract.
(b) For purposes of this chapter, a policy, contract, or certificate is
considered to be held by the person identified on the policy, contract,
or certificate as the holder or owner of the policy, contract, or
certificate.
to pay life, health, or annuity benefits or to provide services in
connection with a benefit plan or another plan, fund, or
program for the provision of employee welfare or pension
benefits.
(7) An administrative services only contract.
(8) A part of a certificate, policy, or contract to the extent that
the certificate, policy, or contract provides for:
(A) dividends or experience rating credits;
(B) voting rights; or
(C) payment of fees or allowances to a person, including
the certificate holder or policy or contract owner, in
connection with service with respect to or administration
of the certificate, policy, or contract.
(9) A certificate, policy, or contract issued in Indiana by a
member insurer when the member insurer did not have a
certificate of authority to issue the certificate, policy, or
contract in Indiana.
(10) An unallocated annuity contract issued to or in
connection with a benefit plan protected by the federal
Pension Benefit Guaranty Corporation, regardless of whether
the federal Pension Benefit Guaranty Corporation has yet
been required to make payments with respect to the benefit
plan.
(11) An unallocated annuity contract or part of an unallocated
annuity contract that is not issued to or in connection with a
benefit plan or a government lottery.
(12) A certificate, policy, or contract or part of a certificate,
policy, or contract with respect to which the Class B
assessments contemplated by section 6 of this chapter may not
be made or collected under federal or state law.
(13) An obligation or claim that does not arise under the
express written terms of the policy or contract issued by the
member insurer to the contract owner or policy owner,
including any of the following obligations and claims:
(A) Obligations and claims based on marketing materials.
(B) Obligations and claims based on side letters, riders, or
other documents issued by the member insurer without
meeting applicable policy form filing or approval
requirements.
(C) Obligations and claims based on actual or alleged
misrepresentations.
(D) Obligations and claims that are extracontractual
claims.
(E) Obligations and claims for penalties or consequential,
incidental, punitive, or exemplary damages.
(14) An obligation to provide a book value accounting
guaranty for defined contribution benefit plan participants by
reference to a portfolio of assets that is owned by the:
(A) benefit plan; or
(B) benefit plan's trustee;
that is not an affiliate of the member insurer.
(15) A part of a certificate, policy, or contract to the extent
the:
(A) certificate, policy, or contract provides for the
certificate's, policy's, or contract's interest rate, crediting
rate, or similar factor employed in calculating returns or
changes in values, to be determined by use of an index or
other external referent stated in the certificate, policy, or
contract; and
(B) returns or changes in value have not been credited to
the certificate, policy, or contract, or as to which the
certificate holder's or policy or contract owner's rights are
subject to forfeiture, as of the applicable coverage date.
If a certificate's, policy's, or contract's returns or changes in
values are credited to the certificate, policy, or contract less
frequently than annually, for purposes of determining the
returns and values that have been credited and are not subject
to forfeiture under this subdivision, the returns and changes
in value determined by using the procedures defined in the
certificate, policy, or contract must be considered credited as
if the contractual date of crediting returns or changes in
values were the applicable coverage date, and those credited
returns or changes in value are not subject to forfeiture under
this subdivision, but will be subject to any other applicable
limitations under this chapter.
(16) A funding agreement.
(17) An annuity not subject to regulation as described in
IC 27-1-12.4.
(f) The benefits that the association is obligated to cover do not
exceed the lesser of the following:
(1) The contractual obligations for which the member insurer
is liable or would have been liable if the member insurer were
not an impaired insurer or insolvent insurer.
(2) The applicable limitations as follows:
(A) With respect to certificates, policies, and contracts not
subject to clause (B), (C), (E), or (F), with respect to one (1)
life, regardless of the number of policies or contracts, the
following limitations:
(i) Three hundred thousand dollars ($300,000) in life
insurance death benefits, but not more than one hundred
thousand dollars ($100,000) in net cash surrender and
net cash withdrawal values.
(ii) Three hundred thousand dollars ($300,000) in health
insurance benefits, but not more than one hundred
thousand dollars ($100,000) in net cash surrender and
net cash withdrawal values.
(iii) One hundred thousand dollars ($100,000) in the
present value of annuity benefits, including net cash
surrender and net cash withdrawal values.
(B) With respect to unallocated annuity contracts issued to
or in connection with a governmental benefit plan
established under Section 401, 403(b), or 457 of the United
States Internal Revenue Code, one hundred thousand
dollars ($100,000) in the present value of annuity benefits,
including net cash surrender and net cash withdrawal
values, per participant.
(C) With respect to structured settlement annuities, one
hundred thousand dollars ($100,000) in the present value
of annuity benefits, including net cash surrender and net
cash withdrawal values, per payee.
(D) In addition to the foregoing limitations, the association
is not obligated to cover more than:
(i) an aggregate of three hundred thousand dollars
($300,000) in benefits with respect to any one (1) person
under clauses (A), (B), and (C); or
(ii) with respect to one (1) owner of multiple nongroup
policies of life insurance, whether the policy owner is an
individual, a firm, a corporation, or another person, and
whether the persons insured are officers, managers,
employees, or other persons, five million dollars
($5,000,000) in benefits, including net cash surrender
and net cash withdrawal values, regardless of the
number of policies and contracts held by the owner.
(E) With respect to unallocated annuity contracts issued to
or in connection with a government lottery, five million
dollars ($5,000,000) in benefits per contract owner,
regardless of the number of contracts held by the contract
owner.
(F) With respect to unallocated annuity contracts:
(i) issued to or in connection with a benefit plan; and
(ii) not subject to clause (B);
five million dollars ($5,000,000) in benefits per plan
sponsor, regardless of the number of unallocated annuity
contracts entitled to coverage under this chapter.
(g) The limitations set forth in subsection (f) are limitations on
the benefits for which the association is obligated before taking into
account the:
(1) association's subrogation and assignment rights; or
(2) extent to which the benefits could be provided out of the
assets of the impaired insurer or insolvent insurer
attributable to covered policies.
The costs of discharging the association's obligations under this
chapter may be met by the use of assets attributable to covered
policies or reimbursed to the association under the association's
subrogation and assignment rights.
(h) In discharging the association's obligations to provide
coverage under this chapter, the association is not required to:
(1) guarantee, assume, reinsure, or perform;
(2) cause to be guaranteed, assumed, reinsured, or performed;
or
(3) otherwise assure the discharge of;
the obligations of the insolvent insurer or impaired insurer under
a covered policy that do not materially affect the economic values
or economic benefits of the covered policy.
otherwise compensate members of the board for the members'
services on the board.
assumed, or reinsured the covered policies of residents to whom
coverage is provided under section 1.5(d) of this chapter;
(2) assure payment of the contractual obligations of the insolvent
insurer to residents to whom coverage is provided under section
1.5(d) of this chapter; and
(3) provide money, pledges, notes, guarantees, or other means as
are necessary to discharge its duties.
The association may appear, intervene, assert objections, or take other
action as is necessary and appropriate to protect the interests of Indiana
residents to whom coverage is provided under section 1.5(d) of this
chapter who are policyholders of the foreign or alien insurer, in any
insolvency proceeding involving the foreign or alien insurer, whether
the proceeding is inside or outside Indiana.
(d) Subsection (c) shall not apply when the commissioner
determines that the foreign or alien insurer's domiciliary jurisdiction or
state of entry provides by statute protection that is substantially similar
to that provided by this chapter for residents of Indiana.
(b) An obligation undertaken by the association under
subsection (a) with respect to a covered policy of an impaired
insurer ceases on the date the covered policy is replaced by the
policy owner, insured, or association.
(c) If a member insurer is an insolvent insurer, the association
shall, in the association's sole discretion, do one (1) of the following
for each covered policy:
(1) Guarantee, assume, reinsure, or perform, or cause to be
guaranteed, assumed, reinsured, or performed, the
contractual obligations of the covered policy or otherwise
assure the discharge of the contractual obligations of the
covered policy.
(2) Terminate existing benefits and coverage and provide
benefits and coverages in accordance with the following
provisions:
(A) For premiums identical to the premiums that would
have been payable under the covered policy, assure
payment of benefits arising under the contractual
obligations, except for terms of conversion and
nonrenewability, for:
(i) with respect to a group covered policy, claims
incurred not later than the earlier of the next renewal
date under the covered policy or forty-five (45) days, but
not less than thirty (30) days, after the coverage date for
the insolvent insurer; and
(ii) with respect to a nongroup covered policy, claims
incurred not later than the earlier of the next renewal
date under the covered policy or one (1) year, but in no
event less than thirty (30) days, after the coverage date
for the insolvent insurer.
(B) Make diligent efforts to provide each:
(i) known insured or annuitant, for a nongroup covered
policy; and
(ii) owner, for a group covered policy;
at least thirty (30) days notice of the termination of the
benefits provided.
(C) Make available substitute coverage, on an individual
basis, to each:
(i) owner of a nongroup covered policy if the owner had
a right to continue the nongroup covered policy in force
until a specified age or for a specified period, during
which time the insurer had no unilateral right to make
changes in the nongroup covered policy's provisions or
had only a unilateral right to make changes in premiums
only by class; and
(ii) insured or annuitant under a group covered policy if
the insured or annuitant is not eligible for any
replacement group coverage and had a right, before
termination of the group covered policy, to convert to
individual coverage.
(D) In making available any substitute coverage under
clause (C), the association may offer to reissue the
terminated coverage or to issue an alternative policy or
contract. If made available under clause (C), alternative or
reissued policies and contracts must be offered without
requiring evidence of insurability and must not impose any
waiting period or coverage exclusion, other than a waiting
period or coverage exclusion provided for in this chapter,
that would not have applied under the terminated covered
policy. The association may cause any alternative or
reissued policy or contract to be assumed or reinsured.
(E) Use of alternative policies and contracts by the
association is subject to the approval of the domiciliary
insurance regulatory authority and the receivership court.
The association may adopt alternative policies and
contracts of various types for future issuance without
regard to any particular impairment or insolvency.
Alternative policies and contracts must contain at least the
minimum statutory provisions required in Indiana and
provide benefits that are reasonable in relation to the
premium charged. The association shall set the premium
in accordance with a table of rates adopted by the
association. The premium must:
(i) reflect the amount of insurance to be provided and the
age and class of risk of each insured; and
(ii) not reflect changes in the health of the insured after
the terminated covered policy was last underwritten.
Subject to coverage exceptions, exclusions, and limitations
provided for in this chapter, an alternative policy or
contract issued by the association must provide coverage
similar, in material respects, to the coverage under the
terminated covered policy as determined by the
association.
(F) If the association elects to reissue terminated coverage
at a premium rate different from the premium rate
charged under the terminated covered policy, the
association shall set the premium in accordance with a
table of rates adopted by the association. The premium:
(i) must reflect the amount of insurance to be provided
and the age and class of risk of each insured; and
(ii) is subject to approval of the domiciliary insurance
regulatory authority and the receivership court.
(G) The association's obligations with respect to coverage
under a covered policy of an insolvent insurer or under a
reissued or alternative policy or contract ceases on the date
the coverage or covered policy is replaced by another
similar policy by the policy owner, insured, or association.
(H) Subject to subsection (u), when proceeding under this
subdivision with respect to a covered policy carrying
guaranteed minimum interest rates, the association shall
assure the payment or crediting of a rate of interest
consistent with section 2.3(e)(3) of this chapter.
(3) Take any combination of the actions set forth in
subdivisions (1) and (2).
(d) The association may provide money, pledges, loans, notes, or
guarantees, or use other means that the association, in the
association's sole discretion, determines are necessary or
appropriate to discharge the association's duties under subsection
(c).
manner that appeals are taken from final judgments in other civil
actions. All parties to the proceeding shall take note of and be bound
by the appeal, but the appeal does not stay the proceeding.
(f) Before being obligated under subsections (b) and (c), the
association may request that there be imposed temporary moratoriums
or liens on payments of cash values and policy loans in addition to any
contractual provisions for deferral of cash or policy loan values.
(2) temporary moratoriums or liens on payments of cash
values and policy loans or any other right to withdraw funds
held in conjunction with a covered policy, in addition to any
contractual provisions for deferral of cash or policy loan
value.
In addition, in the event of a temporary moratorium or
moratorium charge imposed by the receivership court on payments
of cash values or policy loans or any other right to withdraw funds
held in conjunction with a covered policy out of the assets of the
impaired insurer or insolvent insurer, the association may defer
the payment of cash values, policy loans, or other rights by the
association for the period of the moratorium or moratorium
charge imposed by the receivership court, except for claims
covered by the association to be paid in accordance with a hardship
procedure established by the liquidator or rehabilitator and
approved by the receivership court.
(i) A deposit in Indiana, held by law or required by the
commissioner for the benefit of creditors, including policy owners,
that is not turned over to the domiciliary receiver before or
promptly after the coverage date for an impaired insurer or
insolvent insurer under IC 27-9-4-3 must be promptly paid to the
association. The association:
(1) may retain a part of an amount paid to the association
under this subsection equal to the percentage determined by
dividing the aggregate amount of policy owners' claims
related to the impairment or insolvency for which the
association provides statutory benefits by the aggregate
amount of all policy owners' claims in Indiana related to the
impairment or insolvency; and
(2) shall remit to the domiciliary receiver the difference
between the amount paid to the association and the amount
retained by the association under this subsection.
An amount retained by the association under this subsection must
be treated as a distribution of estate assets under IC 27-9-3-32 or
similar provision of the state of domicile of the impaired insurer or
insolvent insurer.
(g) (j) If the association fails to act within a reasonable period of
time as provided in subsections (b), and subsection (c) of this section,
with respect to an insolvent insurer, the commissioner has the
powers and duties of the association under this chapter with respect to
the insolvent insurers. insurer.
(h) Upon request, (k) The association may, upon the
commissioner's request, assist and advise the commissioner
concerning rehabilitation, payment of claims, continuance of coverage,
or the performance of other contractual obligations of an impaired
insurer or insolvent insurer.
(i) (l) The association is entitled has standing and the right to
appear or intervene before any a court or an agency in Indiana or
elsewhere with jurisdiction over an impaired insurer or insolvent
insurer to whom for which the association is or may become obligated
under this chapter or with jurisdiction over a person or property
against which the association may have rights through subrogation
or otherwise. Standing extends to all matters germane to the rights,
powers, and duties of the association, including proposals for
reinsuring, modifying, or guaranteeing the covered policies or
contracts of the impaired insurer or insolvent insurer and the
determination of the covered policies or contracts and contractual
obligations.
(j) (m) A person receiving benefits under this chapter assigns is
considered to have assigned:
(1) the person's rights under; and
(2) any cause of action against another person for losses
arising under, resulting from, or otherwise relating to;
the covered policy to the association to the extent of the benefits
received by that person because of this chapter, whether the benefits
are payments of or on account of contractual obligations or
continuation of coverage or provision of substitute or alternative
coverage. The association may require an assignment to it of those
rights and causes of action by a payee, policy or contract owner,
certificate holder, beneficiary, insured, or annuitant as a condition
precedent to the receipt of any rights right or benefits conferred by this
chapter on that the person. The association is subrogated to these rights
against the assets of an insolvent insurer.
(k) (n) The subrogation rights of the association under subsections
(m) and (o) have the same priority against the assets of the impaired
insurer or insolvent insurer as those possessed by the person entitled
to receive benefits under this chapter.
through (4), to succeed to the rights and obligations of the impaired
insurer or insolvent insurer that accrue on or after the coverage
date and that relate to covered policies under one (1) or more
indemnity reinsurance agreements entered into by the impaired
insurer or insolvent insurer as a ceding insurer. However, the
association may not exercise an election with respect to a
reinsurance agreement if the receiver, rehabilitator, or liquidator
of the impaired insurer or insolvent insurer has previously and
expressly disaffirmed the reinsurance agreement. The election by
the association must be effected by a notice to the receiver,
rehabilitator, or liquidator and to the affected reinsurers
specifying the reinsurance agreement concerning which the
association has made the foregoing election. If the association
makes an election, the following apply with respect to the
agreements selected by the association:
(1) The association is responsible for:
(A) all unpaid premiums due under the agreements for
periods before and after the coverage date; and
(B) the performance of all other obligations of the
impaired insurer or insolvent insurer to be performed
after the coverage date;
that relate to covered policies. The association may charge
covered policies that are only partially covered by the
association, through reasonable allocation methods, the costs
for reinsurance in excess of the obligations of the association.
(2) The association is entitled to any amount payable by the
reinsurer under the selected agreements:
(A) with respect to losses or events that occur during
periods after the coverage date; and
(B) that relate to covered policies.
Of the amount received from the reinsurer, the association is
obliged to pay to the beneficiary under the covered policy on
account of which the amount was paid a portion of the
amount equal to the excess of the amount received by the
association over benefits paid by the association on account of
the covered policy less the retention of the impaired insurer
or insolvent insurer applicable to the loss or event.
(3) Within thirty (30) days after the association's election, the
association and each indemnity reinsurer shall calculate the
net balance due to or from the association under each
reinsurance agreement as of the date of the association's
election, giving full credit to all items paid by the:
after the coverage date, to the receiver, liquidator, or rehabilitator
of the impaired insurer or insolvent insurer. The receiver,
rehabilitator, or liquidator remains entitled to amounts payable by
the reinsurer under the reinsurance agreement with respect to
losses or events that occur before the coverage date, subject to
applicable setoff provisions.
(d) Except as provided in subsections (a), (b), and (c), this
chapter does not alter or modify the terms and conditions of
indemnity reinsurance agreements of the insolvent insurer.
(e) This chapter does not:
(1) abrogate or limit the rights of a reinsurer to claim that the
reinsurer is entitled to rescind a reinsurance agreement; or
(2) give a policy owner or beneficiary an independent cause of
action against an indemnity reinsurer that is not otherwise set
forth in the indemnity reinsurance agreement.
board of directors shall assess the member insurers, separately for each
account, as established in section 3 of this chapter, at a time and for
amounts as the board finds necessary. Assessments are due not less
than thirty (30) days after prior written notice to the member insurers
and accrue interest is at six percent (6%) per year annum on and after
the due date.
(b) Three (3) There are two (2) classes of assessments are
established as follows:
(1) The first, to be referred to as Class A consists of assessments
made are assessments that are authorized and called by the
board for the purpose of meeting administrative and legal costs
and other general expenses. including examinations conducted
under section 9(f) of this chapter Class A assessments may be
authorized and called whether or not related to a particular
impaired insurer or insolvent insurer.
(2) The second class, to be referred to as Class B consists of
assessments made are assessments that are authorized and
called by the board to the extent necessary to carry out the
powers and duties of the association under section 5 of this
chapter with regard to an impaired insurer or insolvent domestic
insurer.
(3) The third class, to be referred to as Class C, consists of
assessments made to the extent necessary to carry out the powers
and duties of the association under section 5 of this chapter with
regard to an insolvent foreign or alien insurer.
(c) The amount of a Class B or C assessment must be allocated
among the three (3) accounts, set out in section 3 of this chapter, in
proportion to the contractual obligations on the policies covered by
each account.
(d) The amount of a Class A assessment to be paid by each member
insurer shall be determined by the board and may be made on a
nonproportional basis. The amount assessed a member insurer each
calendar year may not exceed fifty dollars ($50), and the amount must
be credited against future insolvency assessments.
(e) Except as provided in subsection (o), a member insurer shall
only pay a proportion of a Class B assessment for those accounts that
the member has in common with the impaired or insolvent domestic
insurer in each state that the impaired or insolvent domestic insurer and
member insurer have been authorized to transact the business of
insurance. For each account that the member has in common with the
impaired or insolvent domestic insurer in each state, the member
insurer shall pay an amount equal to the product of:
by the account or subaccount during the assessment base year for
the impaired insurer or insolvent insurer bears to premiums
received in Indiana by all assessed members on policies and
contracts covered by the same account or subaccount during the
same assessment base year.
(f) Assessments for funds to meet the requirements of the
association with respect to an impaired insurer or insolvent insurer
must not be authorized or called until necessary to implement the
purposes of this chapter. Classification of assessments under subsection
(b) and computation of assessments under subsections (c), (d), and (e)
must be made as accurately as possible. with a reasonable degree of
accuracy, recognizing that exact determinations are not always
possible. The association shall notify each member insurer of the
member insurer's anticipated share of an assessment that has been
authorized but not yet called not more than one hundred eighty
(180) days after the assessment is authorized.
(h) (g) The association may abate or defer, in whole or in part, the
amount of an assessment that of a member insurer is to pay if, in the
opinion of the board, payment of the assessment would endanger the
ability of the member insurer to fulfill its contractual policy and
contract obligations. In the event an assessment against a member
insurer is abated or deferred in whole or in part, the amount by which
the assessment is abated or deferred may be assessed against the other
member insurers in a manner consistent with the computation provided
for basis for assessments set forth in this section. Once the
conditions that caused a deferral have been removed or rectified,
the member insurer shall pay assessments that were deferred
under a repayment plan approved by the association.
(i) (h) Subject to subsection (i), the total amount of all assessments
to be paid by authorized by the association in one (1) calendar year
against a member insurer for each a given subaccount of the life
insurance and annuity account in any one (1) calendar year may or
for the health insurance account with respect to any single
assessment base year must not exceed two percent (2%) of the
member insurer's premiums received by the insurer from business in
Indiana during the calendar year preceding the assessment on the
policies and contracts covered by each the subaccount or account
during the applicable assessment base year.
(i) If two (2) or more assessments are authorized in one (1)
calendar year with respect to impaired insurers or insolvent
insurers having different assessment base years, the annual
premium used for purposes of determining the aggregate
assessment percentage limitation referenced in subsection (h) must
be equal to the higher of the annual premiums for the applicable
subaccount or account as calculated under this section.
(j) If the maximum assessment, for each account together with other
assets of the association in that an account, does not provide in one (1)
year in the account an amount sufficient to carry out the
responsibilities of the association, for one (1) year, additional funds
must be assessed as soon as permitted by this chapter.
(k) The board may provide in the plan of operation a method of
or procedure for allocating funds among claims relating to one (1)
or more impaired insurers or insolvent insurers when the
maximum assessment is insufficient to cover anticipated claims.
(l) If the maximum assessment for a subaccount of the life
insurance and annuity account in one (1) year does not provide an
amount sufficient to carry out the responsibilities of the
association, the board shall, under subsection (e), access the other
subaccounts of the life insurance and annuity account for the
necessary additional amount, subject to the maximum stated in
subsections (h) and (i).
(k) (m) The board may, by an equitable method or procedure as
established in the plan of operation, refund to member insurers, in
proportion to their the contribution of each member insurer to the
account, the amount by which the assets of the account exceed the
amount the board determines is necessary to carry out the
obligations of the association with regard to the account, including
assets accruing from assignment, subrogation, net realized gains, and
income from investments. exceed the amount the board finds necessary
to carry out the obligations of the association. A reasonable amount
may be retained in an account to provide funds for the continuing
expenses of the association and for the future losses if refunds are
impractical. discharge of the association's obligations.
(l) An (n) It is proper for a member insurer, in determining its
premium rates and policyowner dividends as to any type of insurance
within the scope of this chapter, may take into consideration to
consider the amount reasonably necessary to meet its assessment
obligations under this chapter.
(m) (o) The association shall issue to each member insurer paying
an assessment under this chapter, other than a Class B or C Class
A assessment, a certificate of contribution, in a form prescribed by the
commissioner, for the amount of each the assessment paid. All
outstanding certificates are of equal dignity and priority without
reference to amounts or dates of issue. A certificate of contribution may
be shown by the member insurer in its financial statement as an asset
in a the form and for an the amount and period of time as the
commissioner may approve.
(n) The board may, as established in the plan of operation, agree to
accord a member insurer a credit against the amount of a Class B or C
assessment otherwise payable by that member insurer with respect to
contractual obligations of an impaired or insolvent insurer to the extent,
but only to the extent, that the member insurer has, by means of
payment, guarantee, assumption, or reinsurance, taken action to reduce
the contractual obligations of the impaired or insolvent insurer with
respect to which the assessment is made and for which the association
would otherwise be responsible.
(o) Notwithstanding subsection (e), this subsection applies where a
domestic insurer has been subject to proceedings under IC 27-9-3 and
the initial proceeding was filed after December 31, 1985. A member
insurer shall only pay a proportion of a Class B assessment for those
accounts that the member has in common with the impaired or
insolvent domestic insurer in Indiana. For each account that the
member has in common with the impaired or insolvent domestic
insurer in Indiana, the member insurer shall pay an amount equal to the
product of:
(1) the total amount of the Class B assessment allocated to the
account; multiplied by
(2) a fraction:
(A) the numerator of which is the premiums received on
business in Indiana on policies covered by the account for the
year preceding the year in which this assessment is made; and
(B) the denominator of which is the premiums received by all
assessed member insurers on business in Indiana for the
calendar year preceding the year this assessment is made.
shall notify the member insurer in writing of the association's
determination with respect to the protest (unless the association
notifies the member insurer that additional time is required to
resolve the issues raised by the protest).
(c) Not more than sixty (60) days after receipt of notice of the
association's determination with respect to a protest, the protesting
member insurer may appeal the determination to the
commissioner.
(d) Instead of making a determination with respect to a protest
based on a question regarding the assessment base, the association
may refer the protest to the commissioner for a determination,
with or without a recommendation from the association.
(e) If a protest of an assessment is upheld, the amount paid by
the protesting member insurer in error or excess must be returned
to the member insurer. Interest on a refund due to a protesting
member insurer must be paid at the rate actually earned by the
association.
until modified by the commissioner or superseded by a plan submitted
by the association and approved by the commissioner.
(c) A member insurer shall comply with the plan of operation.
(c) (d) The plan of operation must, in addition to requirements
stated elsewhere in this chapter establish:
(1) procedures for handling the assets of the association;
(2) the amount and method of reimbursing members of the board
of directors under section 4 of this chapter;
(3) regular places and times for meetings, including, if desired
by the association, telephone conference calls, of the board; of
directors;
(4) procedures for records to be kept of all financial transactions
of the association, its agents, and the board; of directors;
(5) procedures whereby selections for the board of directors will
be made and submitted to the commissioner; and
(6) any additional procedures for assessments under section
sections 6 and 6.2 of this chapter. and
(7) The plan of operation may contain additional provisions
necessary or appropriate for the execution of the powers and duties
of the association.
(d) (e) The plan of operation may provide that any or all powers and
duties of the association, except those under subdivision 5(m)(3) and
section sections 5(r)(3), 6, 6.2, and 6.5 of this chapter, are may be
delegated to a corporation, association, or other organization that
performs or will perform functions similar to those of this the
association, or its equivalent, in two (2) or more states. The
corporation, association, or organization is to must be reimbursed for
payments made on behalf of the association and is to must be paid for
its performance of any function of the association. A delegation under
this subsection takes effect only upon with the approval of both the
board of directors and the commissioner and may be made only to a
corporation, association, or organization that extends protection that is
not substantially similar to less favorable and effective than that
provided by this chapter.
(f) To the extent and in the manner specified in the plan of
operation, the board may create one (1) or more committees, each
of which may exercise the authority of the board to the extent
specified in the plan of operation or by the board.
association with a statement of the premiums in the Indiana and
other appropriate states for each member insurer.
(2) When an impairment is declared and the amount of the
impairment is determined, serve a demand on the impaired
insurer to make good the impairment within a reasonable time.
Notice to the impaired insurer shall constitute notice to its
shareholders. The failure of the insurer to promptly comply with
the demand shall not excuse the association from the performance
of its powers and duties under this chapter.
(3) In any liquidation or rehabilitation proceeding involving a
domestic insurer, be appointed as the liquidator or rehabilitator.
and
(4) if a foreign or alien member insurer is subject to a liquidation
proceeding in its domiciliary jurisdiction or state of entry, be
appointed conservator.
(b) The commissioner may suspend or revoke, after notice and
hearing, the certificate of authority to transact insurance in Indiana of
a member insurer who that fails to pay an assessment when due or fails
to comply with the plan of operation. As an alternative, the
commissioner may levy a forfeiture on a member insurer who that fails
to pay an assessment when due. A forfeiture shall not exceed five
percent (5%) of the unpaid assessment per month, but no forfeiture
shall be less than one hundred dollars ($100) per month.
(c) Any A final action of the association or the board of directors
or the association may be appealed to the commissioner by a member
insurer an if the appeal must be is taken within thirty (30) sixty (60)
days of the member insurer's receipt of notice of the final action
being appealed. A final action or order of the commissioner is subject
to judicial review in a court with jurisdiction in accordance with the
Indiana law that applies to the actions or orders of the
commissioner.
(d) The liquidator, rehabilitator, or conservator of an impaired
insurer or insolvent insurer must may notify all interested persons of
the effect of this chapter.
commissioner takes any of the following actions against a
member insurer:
(A) Revokes its license; the member insurer's certificate of
authority.
(B) Suspends its licenses; or the member insurer's
certificate of authority.
(C) makes any Issues a formal order that a company the
member insurer restrict its premium writing, obtain
additional contributions to surplus, withdraw from Indiana,
reinsure all or any part of its business, or increase capital,
surplus, or any other account for the security of policyholders
policy owners or creditors.
(2) Report to the board of directors association when he the
commissioner takes any of the actions set forth in subdivision
(a)(1) (1) or when he the commissioner has received a report
from any other commissioner insurance regulatory authority
indicating that an action has been taken in another state. The
report to the board of directors association must contain all
significant details of the action taken or of the report received
from another commissioner; insurance regulatory authority.
(3) Report to the board of directors association when he the
commissioner has reasonable cause to believe from any an
examination, whether completed or in process, of a member
company insurer that the member insurer may be an impaired
or insolvent. insurer; and
(4) Furnish to the board of directors the NAIC Early Warning
Tests association the NAIC Insurance Regulatory Information
System (IRIS) ratios and listings of companies not included in
the ratios developed by the National Association of Insurance
Commissioners. The board association may use the information
contained in those tests the ratios and listings in carrying out its
duties and responsibilities under this chapter. The report shall and
the information contained in the report must be kept
confidential by the association until made public by the
commissioner or other lawful authority.
(b) The notice required under subdivision 9(a)(1) must be mailed to
all commissioners within thirty (30) days from the action taken.
(c) (b) The commissioner may seek the advice and
recommendations of the board of directors association concerning a
matter affecting his the commissioner's duties and responsibilities in
regard to the financial condition of member companies insurers and
companies seeking admission to transact insurance business in Indiana.
which the association or its representatives were involved in discussing
of the board to discuss the activities of the association in carrying out
its powers and duties under section sections 5, 5.2, and 5.4 of this
chapter. Records of negotiations or meetings are to be made public only
upon: the association with respect to an impaired insurer or
insolvent insurer must not be disclosed except:
(1) after the termination of a the liquidation, rehabilitation, or
conservation proceeding involving the impaired insurer or
insolvent insurer;
(2) termination of the impairment of insolvency of the insurer; or
(3) court order.
(2) upon the order of a court with jurisdiction if the order is
made before the time described in subdivision (1).
(c) Nothing in subsection (a) limits This subsection does not limit
the duty of the association to present submit a report of its activities
under section 12 of this chapter.
(d) (b) For the purpose of carrying out its obligations under this
chapter, the association is a creditor of the impaired insurer or
insolvent insurer to the extent of assets attributable to covered policies
reduced by any amounts to which that the association is entitled has
received, from a person other than the impaired insurer or
insolvent insurer, as subrogee under section 5 section 5(m), 5(o), and
5(q) of this chapter. Assets of the impaired insurer or insolvent insurer
attributable to covered policies shall be used to continue all covered
policies and pay all contractual obligations of the impaired insurer or
insolvent insurer as required by this chapter. "Assets attributable to
covered policies", as used in this subsection, is that proportion of the
assets that the reserves that should have been established for such
policies bear to the reserves that should have been established for all
policies of insurance written by the impaired insurer or insolvent
insurer.
(c) As a creditor of an impaired insurer or insolvent insurer
under subsection (b) and consistent with IC 27-9-3-32, the
association and other similar associations are entitled to receive
disbursements of assets out of the marshaled assets, as the assets
become available to reimburse the association or another similar
association, as a credit against contractual obligations under this
chapter. If the liquidator has not, within one hundred twenty (120)
days after a member insurer becomes an insolvent insurer, made
an application to the court for the approval of a proposal to
disburse assets out of marshaled assets to guaranty associations
having obligations because of the insolvency, the association is
entitled to make application to the receivership court for approval
of the association's own proposal to disburse the assets.
(e) (d) Before the termination of a liquidation, rehabilitation, or
conservation proceeding, the court may take into consideration the
contributions of the respective parties, including the association, the
shareholders and policy owners of the impaired insurer or insolvent
insurer, and any other party with a bona fide interest, in making an
equitable distribution of the ownership rights of the impaired insurer
or insolvent insurer. Consideration should be given to In making the
determination, the court shall consider the welfare of the
policyholders policy owners of the continuing or successor insurer.
(f) No (e) A distribution to stockholders of an impaired insurer or
insolvent insurer may must not be made until the total amount of valid
claims of the association, with interest, for funds expended by in
carrying out the association association's powers and duties under
sections 5, 5.2, 5.4, and 5.5 of this chapter with respect to the
impaired insurer or insolvent insurer, have been fully recovered by
the association.
action by the association on matters related germane to its powers or
duties. As to judgment under any decision, order, verdict, or
finding based on default, the association may apply to have any the
judgment set aside by the same court that made the judgment and is
entitled to defend against the suit on the merits.