33-10-220. Insolvent insurer -- association's powers. (1) If an insurer is an insolvent insurer, 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 insolvent insurer;
(b) ensure payment of the contractual obligations of the insolvent insurer and provide money, pledges, notes, guarantees, or other means that are reasonably necessary to discharge its duties; or
(c) provide benefits and coverages in accordance with the provisions of subsection (6).
(2) If the association fails to act within a reasonable period of time, the commissioner has the powers and duties of the association under this part with respect to a domestic, foreign, or alien insolvent 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 the liens, moratoriums, or similar means may be imposed if the commissioner:
(a) finds that the amounts that can be assessed under this part are less than the amounts needed to ensure full and prompt performance of the insolvent 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 the temporary moratoriums and liens may be imposed if they are approved by the commissioner.
(5) The association is not liable 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 and annuities:
(i) 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 or contracts, not later than the earlier of the next renewal date under the policy or contract or 45 days, but in any event not less than 30 days, after the date on which the association becomes obligated with respect to the policies or contracts;
(B) with respect to individual policies or contracts, not later than the earlier of the next renewal date, if any, under the policies or contracts or 1 year, but in any event not less than 30 days, from the date on which the association becomes obligated with respect to the policies or contracts;
(ii) make diligent efforts to provide all known insureds, annuitants, or group policyowners 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 annuitant, or owner if other than the insured or annuitant, of an individual policy or contract and to any individual formerly insured under a group policy who is not eligible for replacement group coverage, if the insured or annuitant had a right under law or the terminated policy or contract to convert coverage to individual coverage or to continue an individual policy or annuity in force until a specified age or for a specified time during which the insurer had no right unilaterally to make changes in any provision of the policy or 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 alternative policies of various types for future issuance 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 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 or contract of the 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 policyowner, insured, or association.
(f) When proceeding under this section with respect to a policy or contract carrying guaranteed minimum interest rates, the association shall ensure the payment or crediting of a rate of interest consistent with 33-10-201(10).
(7) In carrying out its duties under this section, the association may, subject to the approval of the receivership court, issue substitute coverage for a policy or contract that provides an interest rate, crediting rate, or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value by issuing an alternative policy or contract in accordance with the following provisions:
(a) in lieu of the index or other external reference provided for in the original policy or contract, the alternative policy or contract provides for:
(i) a fixed interest rate;
(ii) payment of dividends with minimum guarantees; or
(iii) a different method for calculating interest or changes in value;
(b) there is not a requirement for evidence of insurability, waiting period, or other exclusion that would not have applied under the replaced policy or contract; and
(c) the alternative policy or contract is substantially similar to the replaced policy or contract in all other material terms.
(8) Nonpayment of premiums within 31 days after the date required under the terms of any guaranteed, assumed, alternative, or reissued policy or contract or substitute coverage terminates the association's obligations under the policy or coverage under this part with respect to the policy or coverage, except with respect to any claims incurred or any net cash surrender value that may be due in accordance with the provisions of this part.
(9) Premiums due for coverage after entry of an order of liquidation of an insolvent insurer belong to and are payable at the direction of the association, and the association is liable only for unearned premiums due to policyowners or contract owners arising after the entry of the order of liquidation.
(10) The protection provided by this part does not apply when any guaranty protection is provided to residents of this state by the laws of the domiciliary state or jurisdiction of the insolvent insurer that is other than this state.
History: En. 40-5808 by Sec. 8, Ch. 245, L. 1974; R.C.M. 1947, 40-5808(3) thru (6); amd. Sec. 140, Ch. 575, L. 1981; amd. Sec. 5, Ch. 576, L. 1987; amd. Sec. 13, Ch. 195, L. 2003.
