SF 1964

as introduced - 82nd Legislature (2001 - 2002) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to insurance; regulating the life and health 
  1.3             guaranty association; modifying coverages; 
  1.4             assessments; rights and duties; amending Minnesota 
  1.5             Statutes 2000, sections 61B.19, subdivisions 2, 3, 4, 
  1.6             5; 61B.20, subdivisions 1, 14, 15, 16, 17, 18, by 
  1.7             adding subdivisions; 61B.22, subdivision 3; 61B.23, 
  1.8             subdivisions 3, 4, 11, 12, 13, by adding subdivisions; 
  1.9             61B.24, subdivisions 4, 5, by adding subdivisions; 
  1.10            61B.26; 61B.27; 61B.28, subdivisions 1, 3, by adding a 
  1.11            subdivision; 61B.29. 
  1.12  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.13     Section 1.  Minnesota Statutes 2000, section 61B.19, 
  1.14  subdivision 2, is amended to read: 
  1.15     Subd. 2.  [SCOPE.] (a) Sections 61B.18 to 61B.32 provide 
  1.16  coverage for the policies and contracts specified in paragraph 
  1.17  (b) to: 
  1.18     (1) persons who are owners of or certificate holders under 
  1.19  these policies or contracts, or, (i) in the case of unallocated 
  1.20  annuity contracts, to the persons who are the contract holders 
  1.21  or participants in a covered retirement plan, or (ii) in the 
  1.22  case of structured settlement annuities, to persons who are 
  1.23  payees in respect of their liability claims (or beneficiaries of 
  1.24  such payees who are deceased) and who: 
  1.25     (i) (A) are residents; or 
  1.26     (ii) (B) are not residents, but only under all of the 
  1.27  following conditions:  the insurers that issued the policies or 
  1.28  contracts are domiciled in the state of Minnesota; those 
  2.1   insurers never held a license or certificate of authority in the 
  2.2   states in which those persons reside; those states have 
  2.3   associations similar to the association created by sections 
  2.4   61B.18 to 61B.32; and those persons are not eligible for 
  2.5   coverage by those associations; and 
  2.6      (2) persons who, regardless of where they reside, except 
  2.7   for nonresident certificate holders under group policies or 
  2.8   contracts, are the beneficiaries, assignees, or payees of the 
  2.9   persons covered under clause (1). 
  2.10     (b) Sections 61B.18 to 61B.32 provide coverage to the 
  2.11  persons specified in paragraph (a) for direct, nongroup life, 
  2.12  health, annuity, and supplemental policies or contracts, for 
  2.13  subscriber contracts issued by a nonprofit health service plan 
  2.14  corporation operating under chapter 62C, for certificates under 
  2.15  direct group policies and contracts, and for unallocated annuity 
  2.16  contracts issued by member insurers, except as limited by 
  2.17  sections 61B.18 to 61B.32.  Except as expressly excluded under 
  2.18  subdivision 3, annuity contracts and certificates under group 
  2.19  annuity contracts include, but are not limited to, guaranteed 
  2.20  investment contracts, deposit administration contracts, 
  2.21  unallocated funding agreements, allocated funding agreements, 
  2.22  structured settlement agreements, lottery contracts, annuities, 
  2.23  annuities issued to or in connection with government lotteries, 
  2.24  and any immediate or deferred annuity contracts.  Covered 
  2.25  unallocated annuity contracts include those that fund a 
  2.26  qualified defined contribution retirement plan under sections 
  2.27  401, 403(b), and 457 of the Internal Revenue Code of 1986, as 
  2.28  amended through December 31, 1992. 
  2.29     Sec. 2.  Minnesota Statutes 2000, section 61B.19, 
  2.30  subdivision 3, is amended to read: 
  2.31     Subd. 3.  [LIMITATION OF COVERAGE.] Sections 61B.18 to 
  2.32  61B.32 do not provide coverage for: 
  2.33     (1) a portion of a policy or contract not guaranteed by the 
  2.34  insurer, or under which the investment risk is borne by the 
  2.35  policy or contract holder; 
  2.36     (2) a policy or contract of reinsurance, unless assumption 
  3.1   certificates have been issued and the insured has consented to 
  3.2   the assumption as provided under section 60A.09, subdivision 4a; 
  3.3      (3) a policy or contract issued by an assessment benefit 
  3.4   association operating under section 61A.39, or a fraternal 
  3.5   benefit society operating under chapter 64B; 
  3.6      (4) any obligation to nonresident participants of a covered 
  3.7   retirement plan or to the plan sponsor, employer, trustee, or 
  3.8   other party who owns the contract; in these cases, the 
  3.9   association is obligated under this chapter only to participants 
  3.10  in a covered plan who are residents of the state of Minnesota on 
  3.11  the date of impairment or insolvency; 
  3.12     (5) an annuity contract issued in connection with and for 
  3.13  the purpose of funding a structured settlement of a liability 
  3.14  claim, a structured settlement annuity in situations where the a 
  3.15  liability insurer remains liable to the payee; 
  3.16     (6) a portion of an unallocated annuity contract which is 
  3.17  not issued to or in connection with a specific employee, union, 
  3.18  or association of natural persons benefit plan or a governmental 
  3.19  lottery, including but not limited to, a contract issued to, or 
  3.20  purchased at the direction of, any governmental bonding 
  3.21  authority, such as a municipal guaranteed investment contract; 
  3.22     (7) a portion of a policy or contract issued to a plan or 
  3.23  program of an employer, association, or similar entity to 
  3.24  provide life, health, or annuity benefits to its employees or 
  3.25  members to the extent that the plan or program is self-funded or 
  3.26  uninsured, including benefits payable by an employer, 
  3.27  association, or similar entity under: 
  3.28     (i) a multiple employer welfare arrangement as defined in 
  3.29  the Employee Retirement Income Security Act of 1974, United 
  3.30  States Code, title 29, section 1002(40)(A), as amended; 
  3.31     (ii) a minimum premium group insurance plan; 
  3.32     (iii) a stop-loss group insurance plan; or 
  3.33     (iv) an administrative services only contract; 
  3.34     (8) any policy or contract issued by an insurer at a time 
  3.35  when it was not licensed or did not have a certificate of 
  3.36  authority to issue the policy or contract in this state; 
  4.1      (9) an unallocated annuity contract issued to an employee 
  4.2   or in connection with a benefit plan protected under the federal 
  4.3   Pension Benefit Guaranty Corporation, regardless of whether the 
  4.4   federal Pension Benefit Guaranty Corporation has yet become 
  4.5   liable to make any payments with respect to the benefit plan; 
  4.6      (10) a portion of a policy or contract to the extent that 
  4.7   it provides for (i) dividends or experience rating credits 
  4.8   except to the extent the dividends or experience rating credits 
  4.9   have actually become due and payable or have been credited to 
  4.10  the policy or contract before the date of impairment or 
  4.11  insolvency, (ii) voting rights, or provides that a fee or 
  4.12  allowance be paid to a (iii) payment of any fees or allowances 
  4.13  to any person, including the policy or contract holder, in 
  4.14  connection with the service to, or administration of, the policy 
  4.15  or contract; and 
  4.16     (11) a contractual agreement that establishes the member 
  4.17  insurer's obligations to provide a book value accounting 
  4.18  guaranty for defined contribution benefit plan participants by 
  4.19  reference to a portfolio of assets that is owned by the benefit 
  4.20  plan or its trustee, which in each case is not an affiliate of 
  4.21  the member insurer.; 
  4.22     (12) a portion of a policy or contract to the extent that 
  4.23  the rate of interest on which it is based, or the interest rate, 
  4.24  crediting rate, or similar factor determined by use of an index 
  4.25  or other external reference stated in the policy or contract, 
  4.26  employed in calculating returns or changes in value: 
  4.27     (i) averaged over the period of four years prior to the 
  4.28  date on which the member insurer becomes an impaired or 
  4.29  insolvent insurer under sections 61B.18 to 61B.32, whichever is 
  4.30  earlier, exceeds the rate of interest determined by subtracting 
  4.31  two percentage points from Moody's Corporate Bond Yield Average 
  4.32  averaged for that same four-year period or for the lesser period 
  4.33  if the policy or contract was issued less than four years before 
  4.34  the member insurer becomes an impaired or insolvent insurer 
  4.35  under sections 61B.18 to 61B.32, whichever is earlier; and 
  4.36     (ii) on and after the date on which the member insurer 
  5.1   becomes an impaired or insolvent insurer under this chapter, 
  5.2   whichever is earlier, exceeds the rate of interest determined by 
  5.3   subtracting three percentage points from Moody's Corporate Bond 
  5.4   Yield Average as most recently available; 
  5.5      (13) a portion of a policy or contract to the extent it 
  5.6   provides for interest or other changes in value to be determined 
  5.7   by the use of an index or other external reference stated in the 
  5.8   policy or contract, but which have not been credited to the 
  5.9   policy or contract, or as to which the policy or contract 
  5.10  owner's rights are subject to forfeiture, as of the date the 
  5.11  member insurer becomes an impaired or insolvent insurer under 
  5.12  sections 61B.18 to 61B.32, whichever is earlier.  If a policy's 
  5.13  or contract's interest or changes in value are credited less 
  5.14  frequently than annually, then for purposes of determining the 
  5.15  values that have been credited and not subject to forfeiture 
  5.16  under this clause, the interest or changes in value determined 
  5.17  by using the procedures defined in the policy or contract will 
  5.18  be credited as if the contractual date of crediting interest or 
  5.19  changing values was the date of impairment or insolvency, 
  5.20  whichever is earlier, and will not be subject to forfeiture; and 
  5.21     (14) a portion of a policy or contract to the extent that 
  5.22  the assessments required by section 61B.24 with respect to the 
  5.23  policy or contract are preempted by federal or state law.  
  5.24     Sec. 3.  Minnesota Statutes 2000, section 61B.19, 
  5.25  subdivision 4, is amended to read: 
  5.26     Subd. 4.  [LIMITATION OF BENEFITS.] The benefits for which 
  5.27  the association may become liable shall in no event exceed the 
  5.28  lesser of: 
  5.29     (1) the contractual obligations for which the insurer is 
  5.30  liable or would have been liable if it were not an impaired or 
  5.31  insolvent insurer; or 
  5.32     (2) subject to the limitation in clause (4) (5), with 
  5.33  respect to any one life, regardless of the number of policies or 
  5.34  contracts: 
  5.35     (i) $300,000 in life insurance death benefits, but not more 
  5.36  than $100,000 in net cash surrender and net cash withdrawal 
  6.1   values for life insurance; 
  6.2      (ii) $300,000 in health insurance benefits, including any 
  6.3   net cash surrender and net cash withdrawal values; 
  6.4      (iii) $100,000 in annuity net cash surrender and net cash 
  6.5   withdrawal values; 
  6.6      (iv) $300,000 in present value of annuity benefits for 
  6.7   structured settlement annuities which are part of a structured 
  6.8   settlement or for annuities in regard to which periodic annuity 
  6.9   benefits, for a period of not less than the annuitant's lifetime 
  6.10  or for a period certain of not less than ten years, have begun 
  6.11  to be paid, on or before the date of impairment or insolvency; 
  6.12  or 
  6.13     (3) subject to the limitations in clauses (5) and (6), with 
  6.14  respect to each individual resident participating in a 
  6.15  retirement plan, except a defined benefit plan, established 
  6.16  under section 401, 403(b), or 457 of the Internal Revenue Code 
  6.17  of 1986, as amended through December 31, 1992, covered by an 
  6.18  unallocated annuity contract, or the beneficiaries of each such 
  6.19  individual if deceased, in the aggregate, $100,000 in net cash 
  6.20  surrender and net cash withdrawal values; 
  6.21     (4) where no coverage limit has been specified for a 
  6.22  covered policy or benefit, the coverage limit shall be $300,000 
  6.23  in present value; 
  6.24     (5) in no event shall the association be liable to expend 
  6.25  more than $300,000 in the aggregate with respect to any one life 
  6.26  under clause (2), items (i), (ii), (iii), (iv), and clause (4), 
  6.27  and any one individual under clause (3); 
  6.28     (6) in no event shall the association be liable to expend 
  6.29  more than $7,500,000 with respect to all unallocated annuities 
  6.30  of a retirement plan, except a defined benefit plan, established 
  6.31  under section 401, 403(b), or 457 of the Internal Revenue Code 
  6.32  of 1986, as amended through December 31, 1992.  If total claims 
  6.33  from a plan exceed $7,500,000, the $7,500,000 shall be prorated 
  6.34  among the claimants; 
  6.35     (7) for purposes of applying clause (2)(ii) and clause (5), 
  6.36  with respect only to health insurance benefits, the term "any 
  7.1   one life" applies to each individual covered by a health 
  7.2   insurance policy; 
  7.3      (8) where covered contractual obligations are equal to or 
  7.4   less than the limits stated in this subdivision, the association 
  7.5   will pay the difference between the covered contractual 
  7.6   obligations and the amount credited by the estate of the 
  7.7   insolvent or impaired insurer, if that amount has been 
  7.8   determined or, if it has not, the covered contractual limit, 
  7.9   subject to the association's right of subrogation; 
  7.10     (9) where covered contractual obligations exceed the limits 
  7.11  stated in this subdivision, the amount payable by the 
  7.12  association will be determined as though the covered contractual 
  7.13  obligations were equal to those limits.  In making the 
  7.14  determination, the estate shall be deemed to have credited the 
  7.15  covered person the same amount as the estate would credit a 
  7.16  covered person with contractual obligations equal to those 
  7.17  limits; or 
  7.18     (10) the following illustrates how the principles stated in 
  7.19  clauses (8) and (9) apply.  The example illustrated concerns 
  7.20  hypothetical claims subject to the limit stated in clause 
  7.21  (2)(iii).  The principles stated in clauses (8) and (9), and 
  7.22  illustrated in this clause, apply to claims subject to any 
  7.23  limits stated in this subdivision. 
  7.24                    CONTRACTUAL OBLIGATIONS OF:
  7.25                           $50,000 
  7.26                                  Guaranty 
  7.27                     Estate      Association 
  7.29  0% recovery         $ 0          $ 50,000 
  7.30  from estate
  7.32  25% recovery      $ 12,500       $ 37,500 
  7.33  from estate
  7.35  50% recovery      $ 25,000       $ 25,000 
  7.36  from estate
  7.38  75% recovery      $ 37,500       $ 12,500 
  7.39  from estate
  7.41                          $100,000 
  7.42                                  Guaranty
  7.43                     Estate      Association
  7.45  0% recovery         $ 0          $100,000 
  7.46  from estate
  8.1   25% recovery      $ 25,000       $ 75,000 
  8.2   from estate
  8.4   50% recovery      $ 50,000       $ 50,000 
  8.5   from estate
  8.7   75% recovery      $ 75,000       $ 25,000 
  8.8   from estate
  8.10                          $200,000 
  8.11                                  Guaranty
  8.12                     Estate      Association
  8.14  0% recovery         $ 0          $100,000
  8.15  from estate
  8.17  25% recovery      $ 50,000       $ 75,000
  8.18  from estate
  8.20  50% recovery      $100,000       $ 50,000
  8.21  from estate
  8.23  75% recovery      $150,000       $ 25,000
  8.24  from estate 
  8.26     For purposes of this subdivision, the commissioner shall 
  8.27  determine the discount rate to be used in determining the 
  8.28  present value of annuity benefits. 
  8.29     Sec. 4.  Minnesota Statutes 2000, section 61B.19, 
  8.30  subdivision 5, is amended to read: 
  8.31     Subd. 5.  [LIMITED LIABILITY.] The liability of the 
  8.32  association is strictly limited by the express terms of the 
  8.33  covered policies and contracts and by the provisions of sections 
  8.34  61B.18 to 61B.32 and is not affected by the contents of any 
  8.35  brochures, illustrations, advertisements, or oral statements by 
  8.36  agents, brokers, or others used or made in connection with their 
  8.37  sale.  This limitation on liability does not prevent an insured 
  8.38  from proving liability that is greater than the express terms of 
  8.39  the covered policy or contract.  The insured must bring an 
  8.40  action to claim the greater liability no later than one year 
  8.41  after entry of an order of rehabilitation, conservation, or 
  8.42  liquidation.  The association is not liable for any 
  8.43  extra-contractual claims, such as claims relating to bad faith 
  8.44  in payment of claims and claims relating to marketing practices, 
  8.45  exemplary, or punitive damages.  The association is not liable 
  8.46  for attorney fees or interest other than as provided for by the 
  8.47  terms of the policies or contracts, subject to the other limits 
  8.48  of sections 61B.18 to 61B.32. 
  9.1      Sec. 5.  Minnesota Statutes 2000, section 61B.20, 
  9.2   subdivision 1, is amended to read: 
  9.3      Subdivision 1.  [APPLICATION.] The definitions in this 
  9.4   section apply to sections 61B.19 61B.18 to 61B.32. 
  9.5      Sec. 6.  Minnesota Statutes 2000, section 61B.20, is 
  9.6   amended by adding a subdivision to read: 
  9.7      Subd. 13a.  [MOODY'S CORPORATE BOND YIELD 
  9.8   AVERAGE.] "Moody's Corporate Bond Yield Average" means the 
  9.9   Monthly Average Corporates as published by Moody's Investors 
  9.10  Service, Inc., or any successor thereto.  
  9.11     Sec. 7.  Minnesota Statutes 2000, section 61B.20, 
  9.12  subdivision 14, is amended to read: 
  9.13     Subd. 14.  [PERSON.] "Person" means an individual, 
  9.14  corporation, partnership, unincorporated association, limited 
  9.15  liability company, governmental body or entity, or voluntary 
  9.16  organization. 
  9.17     Sec. 8.  Minnesota Statutes 2000, section 61B.20, 
  9.18  subdivision 15, is amended to read: 
  9.19     Subd. 15.  [PREMIUMS.] "Premiums" means amounts or 
  9.20  considerations by whatever name called received on covered 
  9.21  policies or contracts less premiums, considerations, and 
  9.22  deposits returned, and less dividends and experience credits on 
  9.23  those covered policies or contracts to the extent not guaranteed 
  9.24  in advance.  The term does not include amounts received for 
  9.25  policies or contracts or for the portions of policies or 
  9.26  contracts for which coverage is not provided under section 
  9.27  61B.19, subdivision 3, except that assessable premium shall not 
  9.28  be reduced on account of section 61B.19, subdivision 4, relating 
  9.29  to limitations with respect to any one life, any one individual, 
  9.30  and any one contract holder.  Premiums subject to assessment 
  9.31  under section 61B.24, include all amounts received on any 
  9.32  unallocated annuity contract issued to a contract holder 
  9.33  resident in this state if the contract is not otherwise excluded 
  9.34  from coverage under section 61B.19, subdivision 3; provided that 
  9.35  "premiums" shall not include any premiums in excess of the 
  9.36  liability limit on any unallocated annuity contract specified in 
 10.1   section 61B.19, subdivision 4. 
 10.2      Sec. 9.  Minnesota Statutes 2000, section 61B.20, 
 10.3   subdivision 16, is amended to read: 
 10.4      Subd. 16.  [RESIDENT.] "Resident" means a person who 
 10.5   resides in Minnesota at the time a member insurer is initially 
 10.6   determined by the commissioner or a court to be an impaired or 
 10.7   insolvent insurer and to whom a contractual obligation is owed.  
 10.8   A person may be a resident of only one state, which in the case 
 10.9   of a person other than a natural person is its principal place 
 10.10  of business, and which, in the case of a trust, is the principal 
 10.11  place of business of the settlor or entity which established the 
 10.12  trust.  Citizens of the United States who are either (i) 
 10.13  residents of foreign countries, or (ii) residents of United 
 10.14  States possessions, territories, or protectorates that do not 
 10.15  have an association similar to the association created by 
 10.16  sections 61B.19 to 61B.32, are considered residents of this 
 10.17  state if the insurer that issued the covered policies or 
 10.18  contracts was domiciled in this state.  
 10.19     Sec. 10.  Minnesota Statutes 2000, section 61B.20, is 
 10.20  amended by adding a subdivision to read: 
 10.21     Subd. 16a.  [STATE.] "State" means a state, the District of 
 10.22  Columbia, Puerto Rico, and a United States possession, 
 10.23  territory, or protectorate.  
 10.24     Sec. 11.  Minnesota Statutes 2000, section 61B.20, is 
 10.25  amended by adding a subdivision to read: 
 10.26     Subd. 16b.  [STRUCTURED SETTLEMENT ANNUITY.] "Structured 
 10.27  settlement annuity" means an annuity purchased in order to fund 
 10.28  periodic payments for a plaintiff or other claimant in payment 
 10.29  for or with respect to personal injury suffered by the plaintiff 
 10.30  or other claimant.  
 10.31     Sec. 12.  Minnesota Statutes 2000, section 61B.20, 
 10.32  subdivision 17, is amended to read: 
 10.33     Subd. 17.  [SUPPLEMENTAL CONTRACT.] "Supplemental contract" 
 10.34  means an a written agreement entered into for the distribution 
 10.35  of policy or contract proceeds. 
 10.36     Sec. 13.  Minnesota Statutes 2000, section 61B.20, 
 11.1   subdivision 18, is amended to read: 
 11.2      Subd. 18.  [UNALLOCATED ANNUITY CONTRACT.] "Unallocated 
 11.3   annuity contract" means an annuity contract, funding agreement, 
 11.4   or group annuity certificate that is not issued to and owned by 
 11.5   an individual, except to the extent of annuity benefits 
 11.6   guaranteed to an individual by an insurer under the contract or 
 11.7   certificate. 
 11.8      Sec. 14.  Minnesota Statutes 2000, section 61B.22, 
 11.9   subdivision 3, is amended to read: 
 11.10     Subd. 3.  [COMMITTEES AND MEETINGS.] Except as otherwise 
 11.11  required under the plan of operation: 
 11.12     (a) The board of directors may, by unanimous affirmative 
 11.13  action of the entire board, designate three or more directors as 
 11.14  an executive committee, which, to the extent determined by 
 11.15  unanimous affirmative action of the entire board, has and shall 
 11.16  exercise the authority of the board in the management of the 
 11.17  business of the association.  This executive committee shall act 
 11.18  only in the interval between meetings of the board, and is 
 11.19  subject at all times to the control and direction of the board. 
 11.20     (b) The board of directors may, by unanimous affirmative 
 11.21  action of the entire board, create additional committees, which 
 11.22  have and shall exercise the specific authority and 
 11.23  responsibility as determined by the unanimous affirmative action 
 11.24  of the entire board. 
 11.25     (c) Any action that may be taken at a meeting of the board 
 11.26  of directors or of a lawfully constituted executive committee 
 11.27  may be taken without a meeting if authorized by a writing or 
 11.28  writings signed by all the directors or by all of the members of 
 11.29  the committee, as the case may be.  This action is effective on 
 11.30  the date on which the last signature is placed on the writing or 
 11.31  writings, or on an earlier effective date established in the 
 11.32  writing or writings. 
 11.33     (d) Members of the board of directors or of a lawfully 
 11.34  constituted executive committee may participate in a meeting of 
 11.35  the board or committee by means of conference telephone or 
 11.36  similar communications equipment through which all persons 
 12.1   participating in the meeting can hear each other.  Participation 
 12.2   in a meeting as provided in this paragraph constitutes presence 
 12.3   in person at the meeting. 
 12.4      Sec. 15.  Minnesota Statutes 2000, section 61B.23, 
 12.5   subdivision 3, is amended to read: 
 12.6      Subd. 3.  [INSOLVENT INSURER.] If a member insurer is an 
 12.7   insolvent insurer then, subject to any conditions imposed by the 
 12.8   association and approved by the commissioner, the association 
 12.9   shall, in its discretion: 
 12.10     (1) guaranty, assume, or reinsure, or cause to be 
 12.11  guaranteed, assumed, or reinsured, the policies or contracts of 
 12.12  the insolvent insurer; 
 12.13     (2) assure payment of the contractual obligations of the 
 12.14  insolvent insurer which are due and owing; 
 12.15     (3) provide money, pledges, guarantees, or other means as 
 12.16  are reasonably necessary to discharge its duties; or 
 12.17     (4) with respect only to life and health insurance 
 12.18  policies, provide benefits and coverages in accordance with 
 12.19  subdivision 4. 
 12.20     Sec. 16.  Minnesota Statutes 2000, section 61B.23, 
 12.21  subdivision 4, is amended to read: 
 12.22     Subd. 4.  [PAYMENTS; ALTERNATIVE POLICIES.] When proceeding 
 12.23  under subdivision 2, paragraph (a), clause (2), or subdivision 
 12.24  3, clause (4), the association shall, with respect to only life 
 12.25  and health insurance policies and annuities: 
 12.26     (a) Assure payment of benefits for premiums identical to 
 12.27  the premiums and benefits, except for terms of conversion and 
 12.28  renewability, that would have been payable under the policies of 
 12.29  the impaired or insolvent insurer, for claims incurred: 
 12.30     (1) with respect to group policies, not later than the 
 12.31  earlier of the next renewal date under those policies or 
 12.32  contracts or 45 days, but in no event less than 30 days, after 
 12.33  the date on which the association becomes obligated with respect 
 12.34  to those policies; or 
 12.35     (2) with respect to individual policies, not later than the 
 12.36  earlier of the next renewal date, if any, under those policies 
 13.1   or one year, but in no event less than 30 days, from the date on 
 13.2   which the association becomes obligated with respect to those 
 13.3   policies. 
 13.4      (b) Make diligent efforts to provide all known insureds or 
 13.5   annuitants for individual policies or group policyholders 
 13.6   policyowners with respect to group policies 30 days' notice of 
 13.7   the termination pursuant to paragraph (a) of the benefits 
 13.8   provided. 
 13.9      (c) With respect to individual policies, make available to 
 13.10  each known insured or annuitant, or owner if other than the 
 13.11  insured or annuitant, and with respect to an individual formerly 
 13.12  insured or formerly an annuitant under a group policy who is not 
 13.13  eligible for replacement group coverage, make available 
 13.14  substitute coverage on an individual basis in accordance with 
 13.15  paragraph (d), if the insureds or annuitants had a right under 
 13.16  law or the terminated policy or annuity to convert coverage to 
 13.17  individual coverage or to continue an individual policy or 
 13.18  annuity in force until a specified age or for a specified time, 
 13.19  during which the insurer had no right unilaterally to make 
 13.20  changes in any provision of the policy or annuity or had a right 
 13.21  only to make changes in premium by class. 
 13.22     (d)(1) In providing the substitute coverage required under 
 13.23  paragraph (c), the association may offer either to reissue the 
 13.24  terminated coverage or to issue an alternative policy. 
 13.25     (2) Alternative or reissued policies must be offered 
 13.26  without requiring evidence of insurability, and must not provide 
 13.27  for any waiting period or exclusion that would not have applied 
 13.28  under the terminated policy. 
 13.29     (3) The association may reinsure any alternative or 
 13.30  reissued policy. 
 13.31     (e)(1) Alternative policies adopted by the association are 
 13.32  subject to the approval of the commissioner.  The association 
 13.33  may adopt alternative policies of various types for future 
 13.34  issuance without regard to any particular impairment or 
 13.35  insolvency. 
 13.36     (2) Alternative policies must contain at least the minimum 
 14.1   statutory provisions required in this state and provide benefits 
 14.2   that are not unreasonable in relation to the premium charged. 
 14.3   The association shall set the premium in accordance with a table 
 14.4   of rates which it shall adopt.  The premium must reflect the 
 14.5   amount of insurance to be provided and the age and class of risk 
 14.6   of each insured, but must not reflect any changes in the health 
 14.7   of the insured after the original policy was last underwritten. 
 14.8      (3) Any alternative policy issued by the association must 
 14.9   provide coverage of a type similar to that of the policy issued 
 14.10  by the impaired or insolvent insurer, as determined by the 
 14.11  association. 
 14.12     (f) If the association elects to reissue terminated 
 14.13  coverage at a premium rate different from that charged under the 
 14.14  terminated policy, the premium must be set by the association in 
 14.15  accordance with the amount of insurance provided and the age and 
 14.16  class of risk, subject to approval of the commissioner or by a 
 14.17  court of competent jurisdiction. 
 14.18     (g) The association's obligations with respect to coverage 
 14.19  under any policy of the impaired or insolvent insurer or under 
 14.20  any reissued or alternative policy ceases on the date the 
 14.21  coverage or policy is replaced by another similar policy by the 
 14.22  policyholder, the insurer, or the association and the 
 14.23  preexisting condition limitations have been satisfied. 
 14.24     (h) When proceeding under this subdivision with respect to 
 14.25  any policy carrying guaranteed minimum interest rates, the 
 14.26  association shall assure the payment or crediting of a rate of 
 14.27  interest consistent with section 61B.19, subdivision 3, clause 
 14.28  (12).  
 14.29     Sec. 17.  Minnesota Statutes 2000, section 61B.23, is 
 14.30  amended by adding a subdivision to read: 
 14.31     Subd. 4a.  [BOARD DISCRETION.] The board of directors of 
 14.32  the association has discretion and may exercise reasonable 
 14.33  business judgment to determine the means by which the 
 14.34  association is to provide the benefits of sections 61B.18 to 
 14.35  61B.32 in an economical and efficient manner.  
 14.36     Sec. 18.  Minnesota Statutes 2000, section 61B.23, is 
 15.1   amended by adding a subdivision to read: 
 15.2      Subd. 4b.  [BENEFITS PROVIDED UNDER A PLAN.] Where the 
 15.3   association has arranged or offered to provide the benefits of 
 15.4   sections 61B.18 to 61B.32 to a covered person under a plan or 
 15.5   arrangement that fulfills the association's obligations under 
 15.6   sections 61B.18 to 61B.32, the person is not entitled to 
 15.7   benefits from the association in addition to or other than those 
 15.8   provided under the plan or arrangement.  
 15.9      Sec. 19.  Minnesota Statutes 2000, section 61B.23, is 
 15.10  amended by adding a subdivision to read: 
 15.11     Subd. 4c.  [COVERAGE OF POLICIES WITH INDEXED INTEREST OR 
 15.12  SIMILAR PROVISIONS.] In carrying out its duties in connection 
 15.13  with guaranteeing, assuming, or reinsuring policies or contracts 
 15.14  under sections 61B.18 to 61B.32, the association may, subject to 
 15.15  approval of the receivership court, issue substitute coverage 
 15.16  for a policy or contract that provides an interest rate, 
 15.17  crediting rate, or similar factor determined by use of an index, 
 15.18  or other external reference stated in the policy or contract 
 15.19  employed in calculating returns or changes in value by issuing 
 15.20  an alternative policy or contract in accordance with the 
 15.21  following provisions: 
 15.22     (1) in lieu of the index or other external reference 
 15.23  provided for in the original policy or contract, the alternative 
 15.24  policy or contract provides for (i) a fixed interest rate or 
 15.25  (ii) payment of dividends with minimum guarantees or (iii) a 
 15.26  different method for calculating interest or changes in value; 
 15.27     (2) there is no requirement for evidence of insurability, 
 15.28  waiting period or other exclusion that would not have applied 
 15.29  under the replaced policy or contract; and 
 15.30     (3) the alternative policy or contract is substantially 
 15.31  similar to the replaced policy or contract in all other material 
 15.32  terms.  
 15.33     Sec. 20.  Minnesota Statutes 2000, section 61B.23, is 
 15.34  amended by adding a subdivision to read: 
 15.35     Subd. 8a.  [DEPOSITS IN THIS STATE FOR INSOLVENT OR 
 15.36  IMPAIRED INSURER.] A deposit in this state, held pursuant to law 
 16.1   or required by the commissioner for the benefit of creditors, 
 16.2   including policy owners, not turned over to the domiciliary 
 16.3   liquidator upon the entry of a final order of liquidation or 
 16.4   order approving a rehabilitation plan of an insurer domiciled in 
 16.5   this state or in a reciprocal state, pursuant to section 60B.54, 
 16.6   shall be promptly paid to the association.  The association is 
 16.7   entitled to retain a portion of any amount so paid to it equal 
 16.8   to the percentage determined by dividing the aggregate amount of 
 16.9   policy owners claims related to that insolvency for which the 
 16.10  association has provided statutory benefits by the aggregate 
 16.11  amount of all policy owners' claims in this state related to 
 16.12  that insolvency.  The association shall remit to the domiciliary 
 16.13  receiver the amount so paid to the association and not retained 
 16.14  pursuant to this subdivision.  Any amount retained by the 
 16.15  association shall be treated as a distribution of estate assets 
 16.16  pursuant to section 60B.46 or similar provision of the state of 
 16.17  domicile of the impaired or insolvent insurer.  
 16.18     Sec. 21.  Minnesota Statutes 2000, section 61B.23, 
 16.19  subdivision 11, is amended to read: 
 16.20     Subd. 11.  [STANDING IN COURT.] The association has 
 16.21  standing to appear or intervene before any court or agency in 
 16.22  this state with jurisdiction over an impaired or insolvent 
 16.23  insurer concerning which the association is or may become 
 16.24  obligated under sections 61B.18 to 61B.32 or with jurisdiction 
 16.25  over any person or property against whom the association may 
 16.26  have rights through subrogation or otherwise.  This standing 
 16.27  extends to all matters germane to the powers and duties of the 
 16.28  association, including proposals for reinsuring, modifying, or 
 16.29  guaranteeing the policies or contracts of the impaired or 
 16.30  insolvent insurer and the determination of the policies or 
 16.31  contracts and contractual obligations.  The association may 
 16.32  appear or intervene before a court or agency in another state 
 16.33  with jurisdiction over an impaired or insolvent insurer for 
 16.34  which the association is or may become obligated or with 
 16.35  jurisdiction over a third party any person or property against 
 16.36  whom the association may have rights through subrogation of the 
 17.1   insurer's policyholders or of any other person, or otherwise, 
 17.2   provided, however, in the case of any such appearance or 
 17.3   intervention, the association shall not submit for adjudication 
 17.4   its obligations to provide coverage under the Minnesota Life and 
 17.5   Health Insurance Guaranty Association Act without the prior 
 17.6   approval of the commissioner. 
 17.7      Sec. 22.  Minnesota Statutes 2000, section 61B.23, 
 17.8   subdivision 12, is amended to read: 
 17.9      Subd. 12.  [ASSIGNMENTS; SUBROGATION RIGHTS.] (a) A person 
 17.10  receiving benefits under sections 61B.18 to 61B.32 shall be 
 17.11  considered to have assigned the rights under, and any causes of 
 17.12  action against any person for losses arising under, resulting 
 17.13  from or otherwise relating to, the covered policy or contract to 
 17.14  the association to the extent of the benefits received because 
 17.15  of sections 61B.18 to 61B.32, whether the benefits are payments 
 17.16  of or on account of contractual obligations, continuation of 
 17.17  coverage, or provision of substitute or alternative coverages. 
 17.18  The association may require an assignment to it of those rights 
 17.19  and causes of action by a payee, policy or contract owner, 
 17.20  beneficiary, insured, or annuitant as a condition precedent to 
 17.21  the receipt of rights or benefits conferred by sections 61B.18 
 17.22  to 61B.32 upon that person.  The assignment and subrogation 
 17.23  rights of the association include any rights that a person may 
 17.24  have as a beneficiary of a plan covered under the Employee 
 17.25  Retirement Income Security Act of 1974, United States Code, 
 17.26  title 29, section 1003, as amended. 
 17.27     (b) The subrogation rights of the association under this 
 17.28  subdivision against the assets of the impaired or insolvent 
 17.29  insurer have the same priority as those of a person entitled to 
 17.30  receive benefits under sections 61B.18 to 61B.32. 
 17.31     (c) In addition to paragraphs (a) and (b), the association 
 17.32  has all common law rights of subrogation and other equitable or 
 17.33  legal remedies that would have been available to the impaired or 
 17.34  insolvent insurer or person receiving benefits under sections 
 17.35  61B.18 to 61B.32. including without limitation, in the case of a 
 17.36  structured settlement annuity, any rights of the owner, 
 18.1   beneficiary or payee of the annuity, to the extent of benefits 
 18.2   received pursuant to sections 61B.18 to 61B.32, against a person 
 18.3   originally or by succession responsible for the losses arising 
 18.4   from the personal injury relating to the annuity or payment 
 18.5   thereof, excepting any such person responsible solely by reason 
 18.6   of serving as an assignee in respect of a qualified assignment 
 18.7   under section 130 of the Internal Revenue Code of 1986, as 
 18.8   amended. 
 18.9      (d) If the preceding provisions of this subdivision are 
 18.10  invalid or ineffective with respect to any person or claim for 
 18.11  any reason, the amount payable by the association with respect 
 18.12  to the related covered obligations shall be reduced by the 
 18.13  amount realized by any other person with respect to the person 
 18.14  or claim that is attributable to the policies or portion thereof 
 18.15  covered by the association.  
 18.16     (e) If the association has provided benefits with respect 
 18.17  to a covered obligation and a person recovers amounts as to 
 18.18  which the association has rights as described in the preceding 
 18.19  paragraphs of this subdivision, the person shall pay to the 
 18.20  association the portion of the recovery attributable to the 
 18.21  policies or portion thereof covered by the association.  
 18.22     Sec. 23.  Minnesota Statutes 2000, section 61B.23, 
 18.23  subdivision 13, is amended to read: 
 18.24     Subd. 13.  [PERMISSIVE POWERS.] The association may: 
 18.25     (1) enter into contracts as are necessary or proper to 
 18.26  carry out the provisions and purposes of sections 61B.18 to 
 18.27  61B.32; 
 18.28     (2) sue or be sued, including taking any legal actions 
 18.29  necessary or proper to recover any unpaid assessments under 
 18.30  section 61B.26 to settle claims or potential claims against it; 
 18.31     (3) borrow money to effect the purposes of sections 61B.18 
 18.32  to 61B.32 and any notes or other evidence of indebtedness of the 
 18.33  association not in default are legal investments for domestic 
 18.34  insurers and may be carried as admitted assets; 
 18.35     (4) employ or retain persons as are necessary or 
 18.36  appropriate to handle the financial transactions of the 
 19.1   association, and to perform other functions as the association 
 19.2   considers necessary or proper under sections 61B.18 to 61B.32; 
 19.3      (5) enter into arbitration or take legal action as may be 
 19.4   necessary or appropriate to avoid or recover payment of improper 
 19.5   claims; 
 19.6      (6) exercise, for the purposes of sections 61B.18 to 61B.32 
 19.7   and to the extent approved by the commissioner, the powers of a 
 19.8   domestic life or health insurer, but in no case may the 
 19.9   association issue insurance policies or annuity contracts other 
 19.10  than those issued to perform its obligations under sections 
 19.11  61B.18 to 61B.32; 
 19.12     (7) join an organization of one or more other state 
 19.13  associations of similar purposes, to further the purposes and 
 19.14  administer the powers and duties of the association; 
 19.15     (8) negotiate and contract with any liquidator, 
 19.16  rehabilitator, conservator, or ancillary receiver to carry out 
 19.17  the powers and duties of the association; and 
 19.18     (9) participate in the organization of and/or own stock in 
 19.19  an entity which exists or was formed for the purpose of assuming 
 19.20  liability for contracts or policies issued by impaired or 
 19.21  insolvent insurers; and 
 19.22     (10) request information from a person seeking coverage 
 19.23  from the association in order to aid the association in 
 19.24  determining its obligations under sections 61B.18 to 61B.32 with 
 19.25  respect to the person, and the person shall promptly comply with 
 19.26  the request. 
 19.27     Sec. 24.  Minnesota Statutes 2000, section 61B.23, is 
 19.28  amended by adding a subdivision to read: 
 19.29     Subd. 14.  [ASSOCIATION ELECTION TO SUCCEED TO RIGHTS OF 
 19.30  INSOLVENT OR IMPAIRED INSURER UNDER INDEMNITY REINSURANCE 
 19.31  CONTRACTS.] (a) At any time within one year after the date on 
 19.32  which the association becomes responsible for the obligations of 
 19.33  a member insurer the coverage date, the association may elect to 
 19.34  succeed to the rights and obligations of the member insurer, 
 19.35  that accrue on or after the coverage date and that relate to 
 19.36  contracts covered in whole or in part by the association, under 
 20.1   any one or more indemnity reinsurance agreements entered into by 
 20.2   the member insurer as a ceding insurer and selected by the 
 20.3   association.  However, the association may not exercise an 
 20.4   election with respect to a reinsurance agreement if the 
 20.5   receiver, rehabilitator, or liquidator of the member insurer has 
 20.6   previously and expressly disaffirmed the reinsurance agreement.  
 20.7   The election shall be effected by a notice to the receiver, 
 20.8   rehabilitator, or liquidator, and to the affected reinsurers.  
 20.9   If the association makes an election, clauses (1) through (4) 
 20.10  apply with respect to the agreements selected by the association:
 20.11     (1) the association is responsible for all unpaid premiums 
 20.12  due under the agreements for periods both before and after the 
 20.13  coverage date, and is responsible for the performance of all 
 20.14  other obligations to be performed after the coverage date, in 
 20.15  each case that relates to contracts covered in whole or in part 
 20.16  by the association and the association may charge contracts 
 20.17  covered in part by the association, through reasonable 
 20.18  allocation methods, the costs for reinsurance in excess of the 
 20.19  obligations of the association; 
 20.20     (2) the association is entitled to any amounts payable by 
 20.21  the reinsurer under the agreements with respect to losses or 
 20.22  events that occur in periods after the coverage date and that 
 20.23  relate to contracts covered by the association in whole or in 
 20.24  part, provided that, upon receipt of any such amounts, the 
 20.25  association is obliged to pay to the beneficiary under the 
 20.26  policy or contract on account of which the amounts were paid a 
 20.27  portion of the amount equal to the excess of: 
 20.28     (i) the amount received by the association, over 
 20.29     (ii) the benefits paid by the association on account of the 
 20.30  policy or contract less the retention of the impaired or 
 20.31  insolvent member insurer applicable to the loss or event; 
 20.32     (3) within 30 days following the association's election, 
 20.33  the association and each indemnity reinsurer shall calculate the 
 20.34  net balance due to or from the association under each 
 20.35  reinsurance agreement as of the date of the association's 
 20.36  election, giving full credit to all items paid by either the 
 21.1   member insurer or its receiver, rehabilitator, or liquidator or 
 21.2   the indemnity reinsurer during the period between the coverage 
 21.3   date and the date of the association's election and (i) either 
 21.4   the association or indemnity reinsurer shall pay the net balance 
 21.5   due the other within five days of the completion of the 
 21.6   aforementioned calculation and (ii) if the receiver, 
 21.7   rehabilitator, or liquidator has received any amounts due the 
 21.8   association pursuant to paragraph (a), the receiver, 
 21.9   rehabilitator, or liquidator shall remit the same to the 
 21.10  association as promptly as practicable; and 
 21.11     (4) if the association, within 60 days of the election, 
 21.12  pays the premiums due for periods both before and after the 
 21.13  coverage date that relate to contracts covered by the 
 21.14  association in whole or in part, the reinsurer shall not be 
 21.15  entitled to terminate the reinsurance agreements insofar as the 
 21.16  agreements relate to contracts covered by the association in 
 21.17  whole or in part and shall not be entitled to set off any unpaid 
 21.18  premium due for periods prior to the coverage date against 
 21.19  amounts due the association.  
 21.20     (b) In the event the association transfers its obligations 
 21.21  to another insurer, and if the association and the other insurer 
 21.22  agree, the other insurer shall succeed to the rights and 
 21.23  obligations of the association under paragraph (a) effective as 
 21.24  of the date agreed upon by the association and the other insurer 
 21.25  and regardless of whether the association has made the election 
 21.26  referred to in paragraph (a) provided that: 
 21.27     (1) the indemnity reinsurance agreements shall 
 21.28  automatically terminate for new reinsurance unless the indemnity 
 21.29  reinsurer and the other insurer agree to the contrary; 
 21.30     (2) the obligations described in the proviso to paragraph 
 21.31  (a), clause (2) shall no longer apply on and after the date the 
 21.32  indemnity reinsurance agreement is transferred to the third 
 21.33  party insurer; and 
 21.34     (3) paragraph (b) does not apply if the association has 
 21.35  previously expressly determined in writing that it will not 
 21.36  exercise the election referred to in paragraph (a).  
 22.1      (c) The provisions of this subdivision shall supersede the 
 22.2   provisions of any law of this state or of any affected 
 22.3   reinsurance agreement that provides for or requires any payment 
 22.4   of reinsurance proceeds, on account of losses or events that 
 22.5   occur in periods after the coverage date, to the receiver, 
 22.6   liquidator, or rehabilitator of the insolvent member insurer.  
 22.7   The receiver, rehabilitator, or liquidator shall remain entitled 
 22.8   to any amounts payable by the reinsurer under the reinsurance 
 22.9   agreement with respect to losses or events that occur in periods 
 22.10  prior to the coverage date subject to applicable setoff 
 22.11  provisions.  
 22.12     (d) Except as otherwise expressly provided in this 
 22.13  subdivision, nothing in this subdivision alters or modifies the 
 22.14  terms and conditions of the indemnity reinsurance agreements of 
 22.15  the insolvent member insurer.  Nothing in this subdivision 
 22.16  abrogates or limits any rights of any reinsurer to claim that it 
 22.17  is entitled to rescind a reinsurance agreement.  Nothing in this 
 22.18  subdivision gives a policyowner or beneficiary an independent 
 22.19  cause of action against an indemnity reinsurer that is not 
 22.20  otherwise set forth in the indemnity reinsurance agreement. 
 22.21     Sec. 25.  Minnesota Statutes 2000, section 61B.23, is 
 22.22  amended by adding a subdivision to read: 
 22.23     Subd. 15.  [VENUE; APPEAL BOND.] Except as otherwise 
 22.24  provided in section 61B.24, subdivision 10, or 61B.26, paragraph 
 22.25  (c), venue in a suit against the association arising under 
 22.26  sections 62B.18 to 62B.32 shall be in Ramsey county.  The 
 22.27  association shall not be required to give an appeal bond in an 
 22.28  appeal that relates to a cause of action arising under sections 
 22.29  61B.18 to 61B.32.  
 22.30     Sec. 26.  Minnesota Statutes 2000, section 61B.24, 
 22.31  subdivision 4, is amended to read: 
 22.32     Subd. 4.  [ABATEMENT OR DEFERMENT.] The association may 
 22.33  abate or defer, in whole or in part, the assessment of a member 
 22.34  insurer if, in the opinion of the board, payment of the 
 22.35  assessment would endanger the ability of the member insurer to 
 22.36  fulfill its contractual obligations.  In the event an assessment 
 23.1   against a member insurer is abated, or deferred in whole or in 
 23.2   part, the amount by which the assessment is abated or deferred 
 23.3   may be assessed against the other member insurers in a manner 
 23.4   consistent with the basis for assessments as provided in this 
 23.5   section.  Once the conditions which caused a deferral have been 
 23.6   removed or rectified, the member insurer shall pay all 
 23.7   assessments that were deferred pursuant to a repayment plan 
 23.8   approved by the association.  
 23.9      Sec. 27.  Minnesota Statutes 2000, section 61B.24, 
 23.10  subdivision 5, is amended to read: 
 23.11     Subd. 5.  [MAXIMUM ASSESSMENT.] (a) The total of all 
 23.12  assessments upon a member insurer for the life and annuity 
 23.13  account and for each subaccount of the life and annuity account 
 23.14  and for the health account shall not in any one calendar year 
 23.15  exceed two percent of that member insurer's average annual 
 23.16  premiums as calculated in subdivision 3, paragraph (c), on 
 23.17  policies or contracts covered by that account or subaccount.  If 
 23.18  two or more assessments are made with respect to insurers that 
 23.19  become impaired or insolvent in different calendar years, 
 23.20  average annual premiums for purposes of the assessment 
 23.21  percentage limitation are based upon the higher of the 
 23.22  three-year averages calculated under subdivision 3, paragraph 
 23.23  (c).  If an impaired insurer becomes insolvent, the date of 
 23.24  impairment must be used to determine the assessment.  In 
 23.25  addition, if the board of directors determines that a one 
 23.26  percent If the maximum assessment for any subaccount of the life 
 23.27  and annuity account in any one calendar year will not provide an 
 23.28  amount sufficient to carry out the responsibilities of the 
 23.29  association, then pursuant to subdivision 3, the board of 
 23.30  directors shall make a one percent assessment for the affected 
 23.31  subaccount or subaccounts and assess the remaining necessary 
 23.32  amount against all three subaccounts on a pro rata basis; 
 23.33  provided that if the maximum annual two percent assessment limit 
 23.34  would be exceeded in a subaccount by the assessment, then the 
 23.35  other subaccounts will be assessed for the balance of any 
 23.36  remaining necessary amount up to the maximum annual two percent 
 24.1   limit in those other subaccounts assess based on the other 
 24.2   subaccounts of the life and annuity account for the necessary 
 24.3   additional amount, subject to the maximum of two percent stated 
 24.4   above for each subaccount. 
 24.5      (b) The total of all assessments upon a member insurer for 
 24.6   the health account shall not in any one calendar year exceed two 
 24.7   percent of that member insurer's average annual premiums as 
 24.8   calculated under subdivision 3, paragraph (c), on policies or 
 24.9   contracts covered by that account.  If two or more assessments 
 24.10  are made with respect to insurers that become impaired or 
 24.11  insolvent in different calendar years, average annual premiums 
 24.12  for purposes of the assessment percentage limitation is based 
 24.13  upon the higher of the three-year averages calculated under 
 24.14  subdivision 3, paragraph (c). 
 24.15     (c) (b) If the maximum assessment for an account, together 
 24.16  with the other assets of the association in that account, does 
 24.17  not provide in any one calendar year in that account an amount 
 24.18  sufficient to carry out the responsibilities of the association, 
 24.19  the necessary additional funds must be assessed as soon as 
 24.20  permitted by sections 61B.18 to 61B.32. 
 24.21     (d) (c) The board may adopt general principles in the plan 
 24.22  of operation for allocating funds among claims, whether relating 
 24.23  to one or more impaired or insolvent insurers, when the maximum 
 24.24  assessment will be insufficient to cover anticipated claims. 
 24.25     (e) (d) If assessments under this section are inadequate to 
 24.26  pay all obligations of the impaired insurer that are or become 
 24.27  due and owing, then the association shall prepare a plan 
 24.28  approved by the commissioner for prioritization of payments.  If 
 24.29  the association adopts general principles in the plan of 
 24.30  operations, the association shall use the general principles in 
 24.31  preparing the plan required under this paragraph.  No formerly 
 24.32  impaired or insolvent insurer may be reinstated until all 
 24.33  payments of or on account of the insurer's contractual 
 24.34  obligations by the guaranty association, along with all expenses 
 24.35  thereof and interest on all such payments and expenses, shall 
 24.36  have been repaid to the guaranty association or a plan of 
 25.1   repayment by the insurer shall have been approved by the 
 25.2   commissioner. 
 25.3      Sec. 28.  Minnesota Statutes 2000, section 61B.24, is 
 25.4   amended by adding a subdivision to read: 
 25.5      Subd. 10.  [PROCEDURE FOR PROTESTS REGARDING 
 25.6   ASSESSMENTS.] (a) A member insurer that wishes to protest all or 
 25.7   part of an assessment shall pay when due the full amount of the 
 25.8   assessment as set forth in the notice provided by the 
 25.9   association.  The payment is available to meet association 
 25.10  obligations during the pendency of the protest or any subsequent 
 25.11  appeal.  Payment must be accompanied by a statement in writing 
 25.12  that the payment is made under protest and setting forth a brief 
 25.13  statement of the grounds for the protest.  
 25.14     (b) Within 60 days following the payment of an assessment 
 25.15  under protest by a member insurer, the association shall notify 
 25.16  the member insurer in writing of its determination with respect 
 25.17  to the protest unless the association notifies the member 
 25.18  insurer that additional time is required to resolve the issues 
 25.19  raised by the protest.  
 25.20     (c) Within 30 days after a final decision has been made, 
 25.21  the association shall notify the protesting member insurer in 
 25.22  writing of that final decision.  Within 60 days of receipt of 
 25.23  notice of the final decision, the protesting member insurer may 
 25.24  appeal that final action to the commissioner.  
 25.25     (d) In the alternative to rendering a final decision with 
 25.26  respect to a protest based on a question regarding the 
 25.27  assessment base, the association may refer the protest to the 
 25.28  commissioner for a final decision, with or without a 
 25.29  recommendation from the association.  
 25.30     (e) If the protest or appeal on the assessment is upheld, 
 25.31  the amount paid in error or excess shall be returned to the 
 25.32  member company.  Interest on a refund due a protesting member 
 25.33  shall be paid at the rate actually earned by the association.  
 25.34     Sec. 29.  Minnesota Statutes 2000, section 61B.24, is 
 25.35  amended by adding a subdivision to read: 
 25.36     Subd. 11.  [MEMBER INSURERS' DUTY TO PROVIDE INFORMATION TO 
 26.1   ASSOCIATION.] The association may request information of member 
 26.2   insurers in order to aid in the exercise of its power under this 
 26.3   section and member insurers shall promptly comply with a request.
 26.4      Sec. 30.  Minnesota Statutes 2000, section 61B.26, is 
 26.5   amended to read: 
 26.6      61B.26 [DUTIES AND POWERS OF THE COMMISSIONER.] 
 26.7      (a) In addition to other duties and powers in sections 
 26.8   61B.18 to 61B.32, the commissioner shall: 
 26.9      (1) notify the board of directors of the existence of an 
 26.10  impaired or insolvent insurer within three days after a 
 26.11  determination of impairment or insolvency is made or the 
 26.12  commissioner receives notice of impairment or insolvency; 
 26.13     (2) upon request of the board of directors, provide the 
 26.14  association with a statement of the premiums in this and any 
 26.15  other appropriate states for each member insurer; 
 26.16     (3) when an impairment is declared and the amount of the 
 26.17  impairment is determined, serve a demand upon the impaired 
 26.18  insurer to make good the impairment within a reasonable time; 
 26.19  notice to the impaired insurer shall constitute notice to its 
 26.20  shareholders, if any; the failure of the insurer to promptly 
 26.21  comply with the commissioner's demand shall not excuse the 
 26.22  association from the performance of its powers and duties under 
 26.23  sections 61B.18 to 61B.32; and 
 26.24     (4) in a liquidation, conservation, or rehabilitation 
 26.25  proceeding involving a domestic insurer, be appointed as the 
 26.26  liquidator, conservator, or rehabilitator. 
 26.27     (b) The commissioner may suspend or revoke, after notice 
 26.28  and hearing, the certificate of authority to transact insurance 
 26.29  in this state of any member insurer which fails to pay an 
 26.30  assessment when due or fails to comply with the plan of 
 26.31  operation.  As an alternative, the commissioner may levy a 
 26.32  forfeiture on any member insurer which fails to pay an 
 26.33  assessment when due.  A forfeiture shall not exceed five percent 
 26.34  of the unpaid assessment per month, but no forfeiture shall be 
 26.35  less than $100 per month. 
 26.36     (c) An A final action of the board of directors or the 
 27.1   association may be appealed to the commissioner if the appeal is 
 27.2   taken within 30 60 days of the aggrieved party's receipt of 
 27.3   notice of the final action being appealed.  If a member company 
 27.4   is appealing an assessment, the amount assessed must be paid to 
 27.5   the association and be available to meet association obligations 
 27.6   during the pendency of an appeal.  If the appeal on the 
 27.7   assessment is upheld, the amount paid in error or excess must be 
 27.8   returned to the member company.  Any final action or order of 
 27.9   the commissioner is subject to judicial review in a court of 
 27.10  competent jurisdiction, in the manner provided by chapter 14.  A 
 27.11  determination or decision by the commissioner under sections 
 27.12  61B.18 to 61B.32 is not subject to the contested case or 
 27.13  rulemaking provisions of chapter 14. 
 27.14     (d) The liquidator, rehabilitator, or conservator of an 
 27.15  impaired insurer may notify all interested persons of the effect 
 27.16  of sections 61B.18 to 61B.32. 
 27.17     (e) For the purposes of sections 61B.18 to 61B.32, the 
 27.18  commissioner may delegate any of the powers conferred by law. 
 27.19     (f) Nonperformance of any of the acts specified in this 
 27.20  section or failure to meet the specific time limits does not 
 27.21  affect the association, its members, or any other person as to 
 27.22  the person's duties and obligations. 
 27.23     Sec. 31.  Minnesota Statutes 2000, section 61B.27, is 
 27.24  amended to read: 
 27.25     61B.27 [PREVENTION OF INSOLVENCIES.] 
 27.26     (a) To aid in the detection and prevention of insurer 
 27.27  insolvencies or impairments the commissioner shall notify the 
 27.28  commissioners of insurance of all the other states, territories 
 27.29  of the United States, and the District of Columbia when the 
 27.30  commissioner takes one of the following actions against a member 
 27.31  insurer: 
 27.32     (i) revocation of license; or 
 27.33     (ii) suspension of license.  
 27.34     The notice must be mailed to all commissioners within 30 
 27.35  days following the action. 
 27.36     (b) If the commissioner deems it appropriate, the 
 28.1   commissioner may: 
 28.2      (1) Report to the board of directors when the commissioner 
 28.3   has taken any of the actions specified in paragraph (a) or has 
 28.4   received a report from another commissioner indicating that an 
 28.5   action specified in paragraph (a) has been taken in another 
 28.6   state.  The report to the board of directors must contain all 
 28.7   significant details of the action taken or the report received 
 28.8   from another commissioner. 
 28.9      (2) Report to the board of directors when the commissioner 
 28.10  has reasonable cause to believe from an examination, whether 
 28.11  completed or in process, of a member company that the company 
 28.12  may be an impaired or insolvent insurer. 
 28.13     (3) Furnish to the board of directors the national 
 28.14  association of insurance commissioners insurance regulatory 
 28.15  information system ratios and listings of companies not included 
 28.16  in the ratios developed by the national association of insurance 
 28.17  commissioners, and the board may use the information in carrying 
 28.18  out its duties and responsibilities under this section.  The 
 28.19  report and the information contained in it must be kept 
 28.20  confidential by the board of directors until it has been made 
 28.21  public by the commissioner or other lawful authority.  Nothing 
 28.22  in this provision supersedes other requirements of law.  
 28.23     (4) Notify the board if the commissioner makes a formal 
 28.24  order requiring the company to restrict its premium writing, 
 28.25  obtain additional contributions to surplus, withdraw from this 
 28.26  state, reinsure all or any part of its business, or increase 
 28.27  capital, surplus, or any other account for the security of 
 28.28  policyholders or creditors. 
 28.29     (c) The commissioner may seek the advice and 
 28.30  recommendations of the board of directors concerning any matter 
 28.31  affecting the commissioner's duties and responsibilities 
 28.32  regarding the financial condition of member insurers and of 
 28.33  companies seeking admission to transact insurance business in 
 28.34  this state. 
 28.35     (d) The board of directors may, upon majority vote, make 
 28.36  reports and recommendations to the commissioner upon matters 
 29.1   germane to the solvency, liquidation, rehabilitation, or 
 29.2   conservation of any member insurer or germane to the solvency of 
 29.3   a company seeking to do an insurance business in this state. 
 29.4   Those reports and recommendations shall not be considered public 
 29.5   documents. 
 29.6      (e) The board of directors, upon majority vote, shall may 
 29.7   notify the commissioner of information indicating that a member 
 29.8   insurer may be an impaired or insolvent insurer. 
 29.9      (f) The board of directors may, upon majority vote, request 
 29.10  that the commissioner order an examination of a member insurer 
 29.11  which the board in good faith believes may be an impaired or 
 29.12  insolvent insurer.  Within 30 days of the receipt of the 
 29.13  request, the commissioner shall begin the examination.  The 
 29.14  examination may be conducted as a national association of 
 29.15  insurance commissioners examination or may be conducted by those 
 29.16  persons designated by the commissioner.  The cost of the 
 29.17  examination must be paid by the association and the examination 
 29.18  report must be treated as are other examination reports.  In no 
 29.19  event shall an examination report be released to the board of 
 29.20  directors prior to its release to the public, but this shall not 
 29.21  preclude the commissioner from complying with paragraph (a). 
 29.22     The commissioner shall notify the board of directors when 
 29.23  the examination is completed.  The request for an examination 
 29.24  must be kept on file by the commissioner, but it shall not be 
 29.25  open to public inspection prior to the release of the 
 29.26  examination report to the public. 
 29.27     (g) (f) The board of directors may, upon majority vote, 
 29.28  make recommendations to the commissioner for the detection and 
 29.29  prevention of insurer insolvencies. 
 29.30     (h) (g) The board of directors may, at the conclusion of an 
 29.31  insurer insolvency in which the association was obligated to pay 
 29.32  covered claims, prepare a report to the commissioner containing 
 29.33  the information it may have in its possession bearing on the 
 29.34  history and causes of the insolvency.  The board shall cooperate 
 29.35  with the boards of directors of guaranty associations in other 
 29.36  states in preparing a report on the history and causes of 
 30.1   insolvency of a particular insurer, and may adopt by reference 
 30.2   any report prepared by those other associations. 
 30.3      (i) (h) Nonperformance by the commissioner of any of the 
 30.4   acts specified in this section or failure to meet the specified 
 30.5   time limits does not affect the association, its members, or any 
 30.6   other person as to the person's duties and obligations. 
 30.7      Nothing in this section supersedes other requirements of 
 30.8   law. 
 30.9      Sec. 32.  Minnesota Statutes 2000, section 61B.28, 
 30.10  subdivision 1, is amended to read: 
 30.11     Subdivision 1.  [RECORDS.] Records must be kept of all 
 30.12  negotiations and meetings in which the association or its 
 30.13  representatives are involved of the board of directors to 
 30.14  discuss the activities of the association in carrying out its 
 30.15  powers and duties under section 61B.23.  Records of negotiations 
 30.16  or meetings the association with respect to an impaired or 
 30.17  insolvent insurer shall be made public only upon the termination 
 30.18  of a liquidation, rehabilitation, or conservation proceeding 
 30.19  involving the impaired or insolvent insurer, upon the 
 30.20  termination of the impairment or insolvency of the insurer, or 
 30.21  upon the order of a court of competent jurisdiction.  Nothing in 
 30.22  this subdivision limits the duty of the association to report 
 30.23  its activities under section 61B.27. 
 30.24     Sec. 33.  Minnesota Statutes 2000, section 61B.28, 
 30.25  subdivision 3, is amended to read: 
 30.26     Subd. 3.  [ASSOCIATION AS CREDITOR.] For the purpose of 
 30.27  carrying out its obligations under sections 61B.18 to 61B.32, 
 30.28  the association is considered to be a creditor of the impaired 
 30.29  or insolvent insurer to the extent of assets attributable to 
 30.30  covered policies, reduced by amounts to which the association is 
 30.31  entitled recovers from the assets of the impaired or insolvent 
 30.32  insurer as subrogee under section 61B.23, subdivision 
 30.33  12.  Recoveries by the association as subrogee under section 
 30.34  61B.23, subdivision 12, from assets other than from assets of 
 30.35  the impaired or insolvent insurer shall not reduce or act as an 
 30.36  offset to the association's claim as creditor of the impaired or 
 31.1   insolvent insurer.  Assets of the impaired or insolvent insurer 
 31.2   attributable to covered policies must be used to continue all 
 31.3   covered policies and pay all contractual obligations of the 
 31.4   impaired or insolvent insurer as required by sections 61B.18 to 
 31.5   61B.32.  Assets attributable to covered policies, as used in 
 31.6   this subdivision, are that proportion of the assets which the 
 31.7   reserves that should have been established for those policies 
 31.8   bear to the reserves that should have been established for all 
 31.9   policies of insurance written by the impaired or insolvent 
 31.10  insurer. 
 31.11     Sec. 34.  Minnesota Statutes 2000, section 61B.28, is 
 31.12  amended by adding a subdivision to read: 
 31.13     Subd. 3a.  [ASSOCIATION ACCESS TO INSOLVENT INSURER'S 
 31.14  ASSETS.] As a creditor of the impaired or insolvent insurer as 
 31.15  established in subdivision 3 of this section and consistent with 
 31.16  section 60B.46, the association and other similar associations 
 31.17  is entitled to receive a disbursement of assets out of the 
 31.18  marshalled assets, from time to time as the assets become 
 31.19  available to reimburse it, as a credit against contractual 
 31.20  obligations under sections 61B.18 to 61B.32.  If the liquidator 
 31.21  has not, within 120 days of a final determination of insolvency 
 31.22  of an insurer by the receivership court, made an application to 
 31.23  the court for the approval of a proposal to disburse assets out 
 31.24  of marshalled assets to guaranty associations having obligations 
 31.25  because of the insolvency, then the association shall be 
 31.26  entitled to make application to the receivership court for 
 31.27  approval of its own proposal to disburse these assets.  
 31.28     Sec. 35.  Minnesota Statutes 2000, section 61B.29, is 
 31.29  amended to read: 
 31.30     61B.29 [EXAMINATION OF THE ASSOCIATION; ANNUAL REPORT.] 
 31.31     The association is subject to examination and regulation by 
 31.32  the commissioner.  The board of directors shall submit to the 
 31.33  commissioner before May 1 each year, a financial report in a 
 31.34  form approved by the commissioner and a report of its activities 
 31.35  during the association's preceding fiscal year.  Upon request of 
 31.36  a member insurer, the association must provide the member 
 32.1   insurer with a copy of the report.