SENATE BILL NO. 414
INTRODUCED BY S. STANG
A BILL FOR AN ACT ENTITLED: "AN ACT ESTABLISHING ANNUAL ASSESSMENT AMOUNTS FOR THE MONTANA LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION; ALLOWING THE ASSOCIATION TO DELEGATE ITS POWERS AND DUTIES RELATED TO ASSESSMENTS; ALLOWING THE ASSOCIATION TO SUBJECT TO THE DISCIPLINE OF THE MARKET, WITHIN THE MEANING OF ARTICLE VIII, SECTION 17, OF THE MONTANA CONSTITUTION, ANY GUARANTEES, ASSUMPTIONS, OR REINSURANCE OF AN IMPAIRED INSURER'S CONTRACTUAL OBLIGATIONS; ALLOWING THE ASSOCIATION TO SUBJECT ASSESSMENTS TO THE DISCIPLINE OF THE MARKET WITHIN THE MEANING OF ARTICLE VIII, SECTION 17, OF THE MONTANA CONSTITUTION; AUTHORIZING THE ASSOCIATION TO ABATE, DEFER, OR CREDIT ASSESSMENTS THAT IN WHOLE OR IN PART MAY BE UNNECESSARY OR MAY VIOLATE ARTICLE VIII, SECTION 17, OF THE MONTANA CONSTITUTION; AMENDING SECTIONS 33-10-205, 33-10-216, 33-10-219, 33-10-220, AND 33-10-227, MCA; PROVIDING FOR CONTINGENT VOIDNESS; AND PROVIDING AN EFFECTIVE DATE."
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Section 33-10-205, MCA, is amended to read:
"33-10-205. General powers of association -- standing. (1) The association may:
(a) enter into such contracts as that are necessary or proper to carry out the provisions and purposes of this part,
including contracts that subject assessments under 33-10-227 to the discipline of the competitive market within the
meaning of Article VIII, section 17, of the Montana constitution;
(b) sue or be sued, including taking any legal actions necessary or proper for recovery of any unpaid assessments under 33-10-228;
(c) borrow money to effect the purposes of this part. Any notes or other evidence of indebtedness of the association not
in default shall be are legal investments for domestic insurers and may be carried as admitted assets.
(d) employ or retain such persons as that are necessary to handle the financial transactions of the association and to
perform such other functions as become necessary or proper under this part;
(e) negotiate and contract with any liquidator, rehabilitator, supervisor, or ancillary receiver to carry out the powers and duties of the association;
(f) take such legal action as that may be necessary to avoid payment of improper claims;
(g) exercise, for the purposes of this part and to the extent approved by the commissioner, the powers of a domestic life
or health insurer, but in no case may the association may not issue insurance policies or annuity contracts other than those
issued to perform the contractual obligations of the impaired insurer.
(2) The association may render assistance and advice to the commissioner, upon his request, concerning rehabilitation,
payment of claims, continuations of coverage, or the performance of other contractual obligations of any impaired insurer.
(3) The association shall have has standing to appear before any court in this state with jurisdiction over an impaired
insurer concerning which the association is or may become obligated under this part. Such standing Standing shall extend
to all matters germane to the powers and duties of the association, including but not limited to proposals for reinsuring or
guaranteeing the covered policies of the impaired insurer and the determination of the covered policies and contractual
obligations.
(4) The association is not a government or a governmental unit within the meaning of Article VIII, section 17, of the Montana constitution."
Section 2. Section 33-10-216, MCA, is amended to read:
"33-10-216. Plan of operation -- delegation of powers provision. (1) (a) The association shall submit to the
commissioner a plan of operation and any amendments thereto to the plan necessary or suitable to assure ensure the fair,
reasonable, and equitable administration of the association. The plan of operation and any amendments thereto shall
become effective upon approval in writing by the commissioner.
(b) If the association fails to submit a suitable plan of operation within 180 days following July 1, 1974, or if at any time
thereafter the association fails to submit suitable amendments to the plan, the commissioner shall, after notice and hearing,
adopt and promulgate such reasonable rules as that are necessary or advisable to effectuate the provisions of this part. Such
The rules shall continue in force until modified by the commissioner or superseded by a plan submitted by the association
and approved by the commissioner.
(2) All member insurers shall comply with the plan of operation.
(3) The plan of operation shall must, in addition to requirements enumerated elsewhere in this part:
(a) establish procedures for handling the assets of the association;
(b) establish the amount and method of reimbursing members of the board of directors under 33-10-204;
(c) establish regular places and times for meetings of the board of directors;
(d) establish procedures for records to be kept of all financial transactions of the association, its insurance producers, and the board of directors;
(e) establish the procedures whereby selections for selection of the board of directors will be made and submitted
submission to the commissioner;
(f) establish any additional procedures for assessments under 33-10-227;
(g) contain additional provisions necessary or proper for the execution of the powers and duties of the association.
(4) The plan of operation may provide that any or all powers and duties of the association, except those under
33-10-205(1)(c) and 33-10-227, are delegated to a corporation, association, or other organization which that performs or
will perform functions similar to those of this association or its equivalent in two or more states. Such a The corporation,
association, or organization shall must be reimbursed for any payments made on behalf of the association and shall must be
paid for its performance of any function of the association. A delegation under this subsection shall take takes effect only
with the approval of both the board of directors and the commissioner and may be made only to a corporation, association,
or organization which that extends protection not substantially less favorable and effective than that provided by this part."
Section 3. Section 33-10-219, MCA, is amended to read:
"33-10-219. Impaired insurer -- association's powers prior to liquidation. (1) If an insurer is an impaired insurer,
the association may, prior to an order of liquidation or rehabilitation and subject to any conditions imposed by the
association other than those which that impair the contractual obligations of the impaired insurer and approved by the
impaired insurer and the commissioner:
(1)(a) guarantee or reinsure or cause to be guaranteed, assumed, or reinsured all the covered policies of the impaired
insurer;
(2)(b) provide such moneys money, pledges, notes, guarantees, or other means as that are proper to effectuate this
section and assure ensure payment of the contractual obligations of the impaired insurer pending action under subsection
(1); and
(3)(c) loan money to the impaired insurer.
(2) The powers enumerated in subsections (1)(a) through (1)(c) may be subjected to the discipline of the competitive market within the meaning of Article VIII, section 17, of the Montana constitution."
Section 4. Section 33-10-220, MCA, is amended to read:
"33-10-220. Impaired insurer -- association's powers during liquidation. (1) If an insurer is an impaired insurer under an order of liquidation or rehabilitation, the association shall, subject to the approval of the commissioner:
(a) guarantee, assume, or reinsure or cause to be guaranteed, assumed, or reinsured the covered policies of the impaired insurer;
(b) assure ensure payment of the contractual obligations of the impaired insurer; and
(c) provide such moneys money, pledges, notes, guarantees, or other means as that are reasonably necessary to
discharge such duties.
(2) If the association fails to act within a reasonable period of time, the commissioner shall have has the powers and
duties of the association under this part with respect to such domestic, foreign, or alien impaired insurer.
(3) In carrying out its duties under subsection (1), the association may request that there be imposed policy liens,
contract liens, moratoriums on payments, or other similar means; and such. The liens, moratoriums, or similar means may
be imposed if the commissioner:
(a) finds that the amounts which that can be assessed under this part are less than the amounts needed to assure ensure
full and prompt performance of the impaired insurer's contractual obligations or that the economic or financial conditions as
they affect member insurers are sufficiently adverse to render the imposition of policy or contract liens, moratoriums, or
similar means to be in the public interest; and
(b) approves the specific policy liens, contract liens, moratoriums, or similar means to be used.
(4) Before being obligated under subsection (1), the association may request that there be imposed temporary
moratoriums or liens on payments of cash values and policy loans, and such the temporary moratoriums and liens may be
imposed if they are approved by the commissioner.
(5) The association shall have no does not have liability under 33-10-219 or this section for any covered policy of a
foreign or alien insurer whose domiciliary jurisdiction or state of entry provides by statute or regulation for residents of this
state protection substantially similar to that provided by this part for residents of other states.
(6) (a) If proceeding under this section, the association may, with respect to life and health insurance policies:
(i) assure ensure payment of benefits for premiums identical to the premiums and benefits, except for terms of
conversion and renewability, that would have been payable under the policies of the insolvent insurer for claims incurred:
(A) with respect to group policies, not later than the earlier of the next renewal date under the policy or contract or 45 days, but in no event less than 30 days, after the date on which the association becomes obligated with respect to the policies;
(B) with respect to individual policies, not later than the earlier of the next renewal date, if any, under the policies or 1 year, but in no event less than 30 days, from the date on which the association becomes obligated with respect to the policies;
(ii) make diligent efforts to provide all known insureds, or group policyholders with respect to group policies, 30 days' notice of the termination of the benefits provided; and
(iii) make available substitute coverage on an individual basis in accordance with subsection (6)(b) to each known insured, or owner if other than the insured, of an individual policy and to any individual formerly insured under a group policy who is not eligible for replacement group coverage, if the insured had a right under law or the terminated policy to convert coverage to individual coverage or to continue an individual policy in force until a specified age or for a specified time during which the insurer had no right unilaterally to make changes in any provision of the policy or had a right only to make changes in premium by class.
(b) (i) In providing the substitute coverage required under subsection (6)(a)(iii), the association may offer to reissue the terminated coverage or issue an alternative policy.
(ii) Reissued or alternative policies must be offered without requiring evidence of insurability and may not provide for any waiting period or exclusion that would not have applied under the terminated policy.
(iii) The association may reinsure any reissued or alternative policy.
(c) (i) Alternative policies adopted by the association are subject to the approval of the commissioner. The association may adopt policies of various types for future reissuance without regard to any particular impairment or insolvency.
(ii) Alternative policies must contain at least the minimum statutory provisions required in this state and provide benefits that are not unreasonable in relation to the premium charged. The association shall set the premium in accordance with a table of rates that it shall adopt. The premium must reflect the amount of insurance to be provided and the age and class of risk of each insured, but may not reflect any changes in the health of the insured after the original policy was last underwritten.
(iii) Alternative policies issued by the association shall provide coverage of a type similar to that of the policy issued by the impaired or insolvent insurer, as determined by the association.
(d) If the association elects to reissue terminated coverage at a premium different from that charged under the terminated policy, the premium must be set by:
(i) the association in accordance with the amount of insurance provided and the age and class of risk, subject to approval of the commissioner; or
(ii) a court of competent jurisdiction.
(e) The association's obligation with respect to coverage under any policy of the impaired or insolvent insurer or under any reissued or alternative policy ceases on the date the coverage or policy is replaced by another similar policy by the policyholder, insured, or association.
(7) The powers enumerated in subsection (1) may be subjected to the discipline of the competitive market within the meaning of Article VIII, section 17, of the Montana constitution."
Section 5. Section 33-10-227, MCA, is amended to read:
"33-10-227. Assessments -- abatement -- basis for ratesetting. (1) For the purpose of providing the funds necessary
to carry out the powers and duties of the association, the board of directors shall assess the member insurers, separately for
each account, at the times and for the amounts as the board finds necessary. The board shall collect the assessments after 30
days' written notice to the member insurers before payment is due.
(2) There are two classes of assessments, as follows:
(a) Class A assessments must be made for the purpose of meeting administrative costs and other general expenses not related to a particular impaired insurer.
(b) Class B assessments totaling 2% for each account of the member insurer's premiums in this state on policies covered
by the account must be made annually to the extent necessary to carry out the powers and duties of the association under
33-10-219 and 33-10-220(1) with regard to an impaired insurer.
(3) (a) The amount of any Class A assessment for each account must be determined by the board. The amount of any Class B assessment must be divided among the accounts in the proportion that the premiums received by the impaired insurer on the policies covered by each account bear to the premiums received by the insurer on all covered policies.
(b) Class B assessments against member insurers for each account must be in the proportion that the premiums received on business in this state by each assessed member insurer on policies covered by each account bear to the premiums received on business in this state by all assessed member insurers.
(c) Assessments for funds to meet the requirements of the association with respect to an impaired insurer may not must
be made until as necessary to implement the purposes of this part. Classification of assessments under subsection (2) and
computation of assessments under this subsection must be made with a reasonable degree of accuracy, recognizing that
exact determinations may not always be possible.
(4) The association may abate or defer, in whole or in part, the assessment of a member insurer if, in the opinion of the
board, payment of the assessment would endanger the ability of the member insurer to fulfill its contractual obligations or
the assessment, in whole or in part, would violate Article VIII, section 17, of the Montana constitution. The association may
also abate, defer, or credit, in whole or in part and on the same pro rata basis as those assessments were calculated, the
payment of any assessment by all member insurers for any year if, in the opinion of the association, the payment would
result in more funds than necessary to carry out the powers and duties of the association under 33-10-219 and 33-10-220
with regard to an impaired insurer. The total of all assessments upon a member insurer for each account may not in any one
calendar year exceed 2% of the insurer's premiums in this state on the policies covered by the account. THE TOTAL OF
ALL ASSESSMENTS UPON A MEMBER INSURER FOR EACH ACCOUNT MAY NOT IN ANY 1 CALENDAR
YEAR EXCEED 2% OF THE INSURER'S PREMIUMS IN THIS STATE ON THE POLICIES COVERED BY THE
ACCOUNT.
(5) In the event an assessment against a member insurer is abated or deferred, in whole or in part, because of the
limitations set forth in subsection (4), the amount by which the assessment is abated or deferred must be assessed against
the other member insurers in a manner consistent with the basis for assessments set forth in this section. If the maximum
assessment, together with the other assets of the association in either account, does not provide in any one 1 year in either
account an amount sufficient to carry out the responsibilities of the association, the necessary additional funds must be
assessed as soon thereafter as permitted by this part.
(6) If a 1% assessment for any subaccount of the life insurance account and the annuity account in any 1 year does not provide an amount sufficient to carry out the responsibilities of the association, then pursuant to subsection (3)(b), the board shall assess all subaccounts of the life insurance account and the annuity account for the necessary additional amount, subject to the maximum assessment stated in subsection (4).
(7) The board may, by an equitable method as established in the plan of operation, refund to member insurers, in proportion to the contribution of each insurer to that account, the amount by which the assets of the account exceed the amount the board finds is necessary to carry out during the coming year the obligations of the association with regard to that amount, including assets accruing from net realized gains and income from investments. A reasonable amount may be retained in any account to provide funds for the continuing expenses of the association and for future losses if refunds are impractical.
(8) It is proper for any member insurer, in determining its premium rates and policyowner dividends as to any kind of insurance within the scope of this part, to consider the amount reasonably necessary to meet its assessment obligations under this part.
(9) The association shall issue to each insurer paying an assessment under this part a certificate of contribution, in a form prescribed by the commissioner, for the amount paid. All outstanding certificates must be of equal dignity and priority without reference to amounts or dates of issue. A certificate of contribution may be shown by the insurer in its financial statement as an asset in that form and for the amount, if any, and period of time that the commissioner may approve."
NEW SECTION. Section 6. Contingent voidness. (1) If Constitutional Initiative No. 75, enacting Article VIII, section 17, of the Montana constitution, is declared invalid, then [this act] is void.
(2) If [LC 1741] is submitted to and not approved by the electorate, then [section 5(2) of this act] is void.
(3) If a court of competent jurisdiction determines that Constitutional Initiative No. 75, enacting Article VIII, section 17, of the Montana constitution, does not apply to assessments by the Montana life and health insurance guaranty association, then [this act] is void.
NEW SECTION. Section 7. Effective date. [This act] is effective July 1, 1999.
- END -
Latest Version of SB 414 (SB0414.02)
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