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Minnesota Legislature

Office of the Revisor of Statutes

HF 3799

2nd Engrossment - 90th Legislature (2017 - 2018) Posted on 05/24/2018 12:26pm

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - 2nd Engrossment

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A bill for an act
relating to commerce; regulating fraternal benefit societies;amending Minnesota
Statutes 2016, sections 60B.03, subdivision 15; 64B.19, subdivision 4a, by adding
a subdivision; 64B.43.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2016, section 60B.03, subdivision 15, is amended to read:


Subd. 15.

Insolvencynew text begin or insolventnew text end.

"Insolvency"new text begin or "insolvent"new text end means:

(a) For an insurer organized under sections 67A.01 to 67A.26, the inability to pay any
uncontested debt as it becomes due.

new text begin (b) For purposes of a liquidation under section 64B.43, subdivision 4, a fraternal
authorized control level event under circumstances the commissioner determines will not
be promptly remedied pursuant to the plan submitted under section 64B.43, subdivision 3,
a society's inability to pay its debts or meet its obligations as they mature, or that a society's
assets do not exceed its liabilities plus the greater of any surplus required by law to be
constantly maintained.
new text end

deleted text begin (b)deleted text endnew text begin (c)new text end For any other insurer, that it is unable to pay its debts or meet its obligations as
they mature or that its assets do not exceed its liabilities plus the greater of (1) any capital
and surplus required by law to be constantly maintained, or (2) its authorized and issued
capital stock. For purposes of this subdivision, "assets" includes one-half of the maximum
total assessment liability of the policyholders of the insurer, and "liabilities" includes reserves
required by law. For policies issued on the basis of unlimited assessment liability, the
maximum total liability, for purposes of determining solvency only, shall be deemed to be
that amount that could be obtained if there were 100 percent collection of an assessment at
the rate of ten mills per dollar of insurance written by it and in force.

Sec. 2.

Minnesota Statutes 2016, section 64B.19, subdivision 4a, is amended to read:


Subd. 4a.

Notice of extra assessments.

In the event that a society intends to make extra
assessments, as provided in subdivision 4, it shall provide notice of the assessments it plans
to make to the commissioner, and to the deleted text begincommissionerdeleted text end new text begininsurance regulator new text endof its state of
domicile if it is a foreign society, at least 90 days before the effective date of the assessments.

Sec. 3.

Minnesota Statutes 2016, section 64B.19, is amended by adding a subdivision to
read:


new text begin Subd. 4b. new text end

new text begin Disapproval of extra assessments. new text end

new text begin Within 60 days of filing, the commissioner
may disapprove the extra assessment of a domestic society that has had a fraternal action
level event under section 64B.42, or a fraternal authorized control level event under section
64B.43, if the commissioner determines that the assessment was not duly adopted, is not in
the best interests of the benefit members, or does not materially improve the long-term
viability of the society. The commissioner may approve an earlier effective date for the
extra assessment.
new text end

Sec. 4.

Minnesota Statutes 2016, section 64B.43, is amended to read:


64B.43 FRATERNAL AUTHORIZED CONTROL LEVEL EVENTnew text begin; DOMESTIC
SOCIETIES
new text end.

Subdivision 1.

deleted text beginDefinitiondeleted text endnew text begin Definitionsnew text end.

new text begin (a) For purposes of this section, the terms in this
subdivision have the meanings given.
new text end

new text begin (b) new text end"Fraternal authorized control level event" means any of the following events:

(1) the filing of a risk-based capital report by the society that indicates that the society's
total adjusted capital is less than its fraternal authorized control level risk-based capital;

(2) the notification by the commissioner to the society of an adjusted risk-based capital
report that indicates the event in clause (1), provided the society does not challenge the
adjusted risk-based capital report under section 64B.44;

(3) if, pursuant to section 64B.44, the society challenges an adjusted risk-based capital
report that indicates the event in clause (1), notification by the commissioner to the society
that the commissioner has, after a hearing, rejected the society's challenge;

(4) the failure of the society to respond, in a manner satisfactory to the commissioner,
to a corrective order, provided the society has not challenged the corrective order under
section 64B.44;

(5) if the society has challenged a corrective order under section 64B.44 and the
commissioner has, after a hearing, rejected the challenge or modified the corrective order,
the failure of the society to respond, in a manner satisfactory to the commissioner, to the
corrective order subsequent to rejection or modification by the commissioner;

(6) the failure of the society to submit a risk-based capital plan to the commissioner
within the time period in section 64B.42;

(7) notification by the commissioner to the society that:

(i) the risk-based capital plan or revised risk-based capital plan submitted by the society
is, in the judgment of the commissioner, unsatisfactory; and

(ii) the society has not challenged the determination under section 64B.44;

(8) if, pursuant to section 64B.44, the society challenges a determination by the
commissioner under the notification by the commissioner to the society that the commissioner
has, after a hearing, rejected the challenge;

(9) notification by the commissioner to the society that the society has failed to adhere
to its risk-based capital plan or revised risk-based capital plan, but only if the failure has a
substantial adverse effect on the ability of the society to eliminate the fraternal action level
event according to its risk-based capital plan or revised risk-based capital plan and the
commissioner has so stated in the notification, provided the society has not challenged the
determination under section 64B.44; or

(10) if, pursuant to section 64B.44, the society challenges a determination by the
commissioner under clause (9), the notification by the commissioner to the society that the
commissioner has, after a hearing, rejected the challenge.

new text begin (c) "Qualifying society" means a fraternal benefit society, whether foreign or domestic,
that has the financial strength and administrative capability to accept a transfer of certificates
under subdivision 3 and is domiciled in a state accredited by the National Association of
Insurance Commissioners.
new text end

new text begin (d) "Society" means a domestic fraternal benefit society organized and operated under
the laws of this state.
new text end

Subd. 2.

Commissioner's duties.

In the event of a fraternal authorized control level
event with respect to a society, the commissioner shall:

(1) take the actions required under section 64B.42 regarding a society with respect to
which a fraternal action level event has occurred; or

(2) if the commissioner considers it to be in the best interests of the certificate holders
of the society, require the society to take one or more of the following actions:

(i) merge or otherwise consolidate with another willing authorized society;

(ii) cede any individual risk or risks, in whole or in part, to a willing society or life
insurer;

(iii) suspend the issuance of new business; and

(iv) discontinue its insurance operations; or

(3) take the actions necessary to cause the society to be placed under regulatory control
under chapter 60B. In the event the commissioner takes these actions, the fraternal authorized
control level event is considered sufficient grounds for the commissioner to take action
under chapter 60B, and the commissioner has the rights, powers, and duties with respect to
the society set forth in chapter 60B. In the event the commissioner takes actions under this
clause pursuant to an adjusted risk-based capital report, the society is entitled to the
protections afforded to societies under section 60B.11 pertaining to summary proceedings.

new text begin Subd. 3. new text end

new text begin Plan to transfer members. new text end

new text begin (a) Within 45 days of a fraternal authorized control
level event with respect to a society, the society shall present to the commissioner a plan to
protect the interests of its members. The plan shall include transferring all members,
certificates, and related assets and liabilities of the society, together with any other assets
and liabilities the society desires to transfer, to another firm, corporation, or organization
through merger, consolidation, assumption, or other means. Any transfer shall constitute a
novation of the transferring society's certificates effective upon the date of transfer. The
commissioner shall review the plan within 45 days of its submission and may approve the
plan within that time frame if the plan provides sound financial security for the payment of
obligations arising under the certificates of the society and is otherwise in the best interest
of the members.
new text end

new text begin (b) The transfer shall be:
new text end

new text begin (1) concluded within the time frame established by the commissioner, which shall not
exceed 90 days;
new text end

new text begin (2) approved by the society upon majority vote of its board of directors prior to the
submission of the plan to the commissioner; and
new text end

new text begin (3) effective notwithstanding the provisions of section 64B.14 or any other requirement
of statute or rule or the laws of the society requiring another form of notice to members or
approval by the supreme governing body.
new text end

new text begin Any notice to or approval of a transfer required by the laws of the society or statute or rule
shall be suspended by this subdivision.
new text end

new text begin (c) Upon application, the commissioner may approve a transfer under this subdivision
to a foreign qualifying society that does not have a certificate of authority to transact
insurance in this state. If the commissioner determines that the foreign fraternal benefit
society has sufficient financial strength and servicing capabilities to satisfy the obligations
arising under the transferring society's certificates, the commissioner may issue an order to
authorize the foreign fraternal benefit society to service the certificates resulting from a
transfer, including issuing any amendments or revisions requested by the holder of the
certificate and to fulfill all obligations arising under the certificate, but not to otherwise
transact insurance business in this state.
new text end

new text begin (d) Upon the effective date of a transfer to an insurer with a certificate of authority to
do business in this state and in consideration of that transfer, each member of the society
shall be deemed to agree that any terms of a certificate subjecting the certificate to the laws
of the society or providing rights or obligations of membership, except to the extent of any
outstanding lien not released by the terms of the transfer, shall be null and void and the
insurer shall endorse the certificates accordingly.
new text end

new text begin (e) Upon the effective date of a transfer to a firm, corporation, or organization that is
not a fraternal benefit society and in consideration of that transfer, each member of the
society shall be deemed to agree that any terms of a certificate subjecting the certificate to
the laws of the society or providing rights or obligations of membership, except to the extent
of any outstanding lien not released by the terms of the transfer, shall be null and void and
the firm, corporation, or organization shall endorse the certificates accordingly.
new text end

new text begin (f) The board of directors of a society may suspend or modify its qualifications for
membership as necessary or appropriate to facilitate a transfer under this subdivision,
notwithstanding the laws of the society or any statute or rule to the contrary.
new text end

new text begin (g) Each society shall amend their laws to permit the transactions contemplated by this
subdivision, including suspending any provisions requiring any notice to members or
approval of the supreme governing body with respect to the transfer of its certificates if the
society has a fraternal authorized control level event and the transfer is approved by the
commissioner.
new text end

new text begin Subd. 4. new text end

new text begin Liquidation. new text end

new text begin (a) In the event of a fraternal authorized control level event with
respect to a society under circumstances the commissioner determines will not be promptly
remedied pursuant to the authorization provided in subdivision 3, the commissioner may
apply for a verified petition to commence liquidation of the society under section 60B.20.
These circumstances shall be deemed to satisfy grounds to commence a liquidation under
section 60B.20. The commissioner may issue an order declaring the society to be in hazardous
financial condition under the standards of section 60G.20, subdivision 1, clause (15), and
initiate proceedings pursuant to this subdivision. Nothing in this subdivision prevents the
commissioner from applying for an order to commence the liquidation of a society under
any of the grounds in section 60B.20.
new text end

new text begin (b) Liquidation proceedings for a society shall be governed by chapter 60B, except to
the extent the provisions of chapter 60B are in conflict or inconsistent with any provisions
in this chapter.
new text end

new text begin (c) Liquidation proceedings for a society shall be conducted consistent with the purposes
of section 60B.01, subdivision 4, paragraph (c), in a manner designed to conserve assets
and to limit expenses of the liquidation under section 60B.44, subdivision 2.
new text end