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SF 2825

2nd Engrossment - 86th Legislature (2009 - 2010) Posted on 04/21/2010 08:57am

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; modifying continuing education provisions; amending
insurance laws involving insurance company rehabilitation and liquidation,
life insurance, the use of mortality tables, the Life and Health Insurance
Guaranty Association, and mutual insurance companies; regulating fraternal
benefit societies; amending Minnesota Statutes 2008, sections 60B.03, by
adding subdivisions; 61A.09, by adding a subdivision; 61A.245, subdivision
3; 61A.257, subdivisions 2, 3; 61B.19, subdivision 3; 61B.28, subdivision 7;
64B.19, by adding a subdivision; 66A.40, subdivision 11; 66A.42; Minnesota
Statutes 2009 Supplement, sections 45.31, subdivision 3; 60K.56, subdivision
6; 61B.19, subdivision 4; proposing coding for new law in Minnesota Statutes,
chapters 60B; 64B.

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

ARTICLE 1

LIFE INSURANCE

Section 1.

Minnesota Statutes 2009 Supplement, section 45.31, subdivision 3, is
amended to read:


Subd. 3.

Responsibilities.

A coordinator is responsible for:

(1) assuring compliance with all laws and rules relating to educational offerings
governed by the commissioner;

(2) assuring that students are provided with current and accurate information relating
to the laws and rules governing their licensed activity;

(3) supervising and evaluating courses and instructors. Supervision includes
assuring, especially when a course will be taught by more than one instructor, that all
areas of the curriculum are addressed without redundancy and that continuity is present
throughout the entire course;

(4) ensuring that instructors are qualified to teach the course offering;

(5) furnishing the commissioner, upon request, with copies of course and instructor
evaluations and qualifications of instructors. Evaluations must be completed by students
and coordinators;

(6) investigating complaints related to course offerings and instructors and
forwarding a copy of the written complaints to the Department of Commerce;

(7) maintaining accurate records relating to course offerings, instructors, tests taken
by students, and student attendance for a period of three years from the date on which
the course was completed. These records must be made available to the commissioner
upon request. In the event that an education provider ceases operation for any reason, the
coordinator is responsible for maintaining the records or providing a custodian for the
records acceptable to the commissioner. The coordinator must notify the commissioner
of the name and address of that person. In order to be acceptable to the commissioner,
custodians must agree to make copies of acknowledgments available to students at a
reasonable fee. Under no circumstances will the commissioner act as custodian of the
records;

(8) ensuring that the coordinator is available to instructors and students throughout
course offerings and providing to the students and instructor the name of the coordinator
and a telephone number at which the coordinator can be reached;

(9) attending workshops or instructional programs as reasonably required by the
commissioner;

(10) providing course completion certificates within ten days of, but not before,
completion of the entire course. Course completion certificates must be completed in
their entirety.new text begin It is not necessary to provide a written course completion certificate if the
course completion certificate has been electronically delivered to the department or its
designated licensing contractor.
new text end A coordinator may require payment of the course tuition
as a condition for receiving the course completion certificate;

(11) notifying the commissioner immediately of any change in an application for the
course, coordinator, or instructor approval application; and

(12) in conjunction with the instructor, assuring and certifying attendance of students
enrolled in courses.

Sec. 2.

Minnesota Statutes 2008, section 60B.03, is amended by adding a subdivision
to read:


new text begin Subd. 21. new text end

new text begin Netting agreement. new text end

new text begin "Netting agreement" means:
new text end

new text begin (1) a contract or agreement, including terms and conditions incorporated by
reference in it, including a master agreement, which master agreement, together with all
schedules, confirmations, definitions, and addenda to it and transactions under any of
them, shall be treated as one netting agreement, that documents one or more transactions
between the parties to the agreement for or involving one or more qualified financial
contracts and that provides for the netting, liquidation, setoff, termination, acceleration, or
close-out, under or in connection with one or more qualified financial contracts or present
or future payment or delivery obligations or payment or delivery entitlements under it,
including liquidation or close-out values relating to those obligations or entitlements,
among the parties to the netting agreement;
new text end

new text begin (2) any master agreement or bridge agreement for one or more master agreements
described in clause (1); or
new text end

new text begin (3) any security agreement or arrangement or other credit enhancement or guarantee
or reimbursement obligation related to any contract or agreement described in clause (1)
or (2); provided that any contract or agreement described in clause (1) or (2) relating to
agreements or transactions that are not qualified financial contracts shall be deemed to
be a netting agreement only with respect to those agreements or transactions that are
qualified financial contracts.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2008, section 60B.03, is amended by adding a subdivision
to read:


new text begin Subd. 22. new text end

new text begin Qualified financial contract. new text end

new text begin (a) "Qualified financial contract" means
any commodity contract, forward contract, repurchase agreement, securities contract,
swap agreement, and any similar agreement that the commissioner determines to be a
qualified financial contract for the purposes of this chapter.
new text end

new text begin (b) "Commodity contract" means:
new text end

new text begin (1) a contract for the purchase or sale of a commodity for future delivery on, or
subject to the rules of, a board of trade or contract market under the Commodity Exchange
Act, United States Code, title 7, section 1, et seq., or a board of trade outside the United
States;
new text end

new text begin (2) an agreement that is subject to regulation under Section 19 of the Commodity
Exchange Act, United States Code, title 7, section 1, et seq., and that is commonly known
to the commodities trade as a margin account, margin contract, leverage account, or
leverage contract;
new text end

new text begin (3) an agreement or transaction that is subject to regulation under Section 4c(b) of
the Commodity Exchange Act, United States Code, title 7, section 1, et seq., and that is
commonly known to the commodities trade as a commodity option;
new text end

new text begin (4) any combination of the agreements or transactions referred to in this paragraph; or
new text end

new text begin (5) any option to enter into an agreement or transaction referred to in this paragraph.
new text end

new text begin (c) "Forward contract," "repurchase agreement," "securities contract," and "swap
agreement" shall have the meanings set forth in the Federal Deposit Insurance Act, United
States Code, chapter 12, section 1821(e)(8)(D), as amended from time to time.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 4.

new text begin [60B.435] QUALIFIED FINANCIAL CONTRACTS.
new text end

new text begin Subdivision 1. new text end

new text begin Exercise of contractual rights. new text end

new text begin Notwithstanding any other provision
of this chapter, including any other provision of this chapter permitting the modification of
contracts, or other law of a state, no person shall be stayed or prohibited from exercising:
new text end

new text begin (1) a contractual right to cause the termination, liquidation, acceleration, or close-out
of obligations under or in connection with any netting agreement or qualified financial
contract with an insurer because of:
new text end

new text begin (i) the insolvency, financial condition, or default of the insurer at any time, provided
that the right is enforceable under applicable law other than this chapter; or
new text end

new text begin (ii) the commencement of a formal delinquency proceeding under this chapter;
new text end

new text begin (2) any right under a pledge, security, collateral, reimbursement or guarantee
agreement or arrangement or any other similar security arrangement, or arrangement or
other credit enhancement relating to one or more netting agreements or qualified financial
contracts;
new text end

new text begin (3) subject to any provision of section 60B.34, any right to set off or net out
any termination value, payment amount, or other transfer obligation arising under or
in connection with one or more qualified financial contracts where the counterparty or
its guarantor is organized under the laws of the United States or a state or a foreign
jurisdiction approved by the Securities Valuation Office (SVO) of the National Association
of Insurance Commissioners as eligible for netting; or
new text end

new text begin (4) if a counterparty to a master netting agreement or a qualified financial contract
with an insurer subject to a proceeding under this chapter terminates, liquidates, closes out,
or accelerates the agreement or contract, damages shall be measured as of the date or dates
of termination, liquidation, close-out, or acceleration. The amount of a claim for damages
shall be actual direct compensatory damages calculated in accordance with subdivision 6.
new text end

new text begin Subd. 2. new text end

new text begin Termination of agreement; transfer to insurer's receiver. new text end

new text begin Upon
termination of a netting agreement or qualified financial contract, the net or settlement
amount, if any, owed by a nondefaulting party to an insurer against which an application
or petition has been filed under this chapter shall be transferred to or on the order of the
receiver for the insurer, even if the insurer is the defaulting party, notwithstanding any
walkaway clause in the netting agreement or qualified financial contract. For purposes of
this subdivision, the term "walkaway clause" means a provision in a netting agreement or
a qualified financial contract that, after calculation of a value of a party's position or an
amount due to or from one of the parties in accordance with its terms upon termination,
liquidation, or acceleration of the netting agreement or qualified financial contract, either
does not create a payment obligation of a party or extinguishes a payment obligation of a
party in whole or in part solely because of the party's status as a nondefaulting party. Any
limited two-way payment or first method provision in a netting agreement or qualified
financial contract with an insurer that has defaulted shall be deemed to be a full two-way
payment or second method provision as against the defaulting insurer. Any such property
or amount shall, except to the extent it is subject to one or more secondary liens or
encumbrances, or rights of netting or setoff, be a general asset of the insurer.
new text end

new text begin Subd. 3. new text end

new text begin Transfer by receiver. new text end

new text begin In making any transfer of a netting agreement or
qualified financial contract of an insurer subject to a proceeding under this chapter, the
receiver shall either:
new text end

new text begin (1) transfer to one party, other than an insurer subject to a proceeding under this
chapter, all netting agreements and qualified financial contracts between a counterparty
or any affiliate of the counterparty and the insurer that is the subject of the proceeding,
including:
new text end

new text begin (i) all rights and obligations of each party under each netting agreement and qualified
financial contract; and
new text end

new text begin (ii) all property, including any guarantees or other credit enhancement, securing any
claims of each party under each netting agreement and qualified financial contract; or
new text end

new text begin (2) transfer none of the netting agreements, qualified financial contracts, rights,
obligations, or property referred to in clause (1), with respect to the counterparty and
any affiliate of the counterparty.
new text end

new text begin Subd. 4. new text end

new text begin Transfer by receiver; obligation to notify certain parties. new text end

new text begin If a receiver
for an insurer makes a transfer of one or more netting agreements or qualified financial
contracts, then the receiver shall use its best efforts to notify any person who is party to
the netting agreements or qualified financial contracts of the transfer by 12:00 noon, the
receiver's local time, on the business day following the transfer. For purposes of this
subdivision, "business day" means a day other than a Saturday, Sunday, or any day on
which either the New York Stock Exchange or the Federal Reserve Bank of New York
is closed.
new text end

new text begin Subd. 5. new text end

new text begin Avoidance of transfer by receiver. new text end

new text begin Notwithstanding any other provision
of this chapter, a receiver may not avoid a transfer of money or other property arising under
or in connection with a netting agreement or qualified financial contract, or any pledge,
security, collateral, or guarantee agreement or any other similar security arrangement or
credit support document relating to a netting agreement or qualified financial contract,
that is made before the commencement of a formal delinquency proceeding under this
chapter. However, a transfer may be avoided under section 60B.32 if the transfer was
made with actual intent to hinder, delay, or defraud the insurer, a receiver appointed for
the insurer, or existing or future creditors.
new text end

new text begin Subd. 6. new text end

new text begin Disaffirmance or repudiation by receiver; damages. new text end

new text begin (a) In exercising
the receiver's rights of disaffirmance or repudiation with respect to any netting agreement
or qualified financial contract to which an insurer is a party, the receiver for the insurer
shall either:
new text end

new text begin (1) disaffirm or repudiate all netting agreements and qualified financial contracts
between a counterparty or any affiliate of the counterparty and the insurer that is the
subject of the proceeding; or
new text end

new text begin (2) disaffirm or repudiate none of the netting agreements and qualified financial
contracts referred to in clause (1), with respect to the person or any affiliate of the person.
new text end

new text begin (b) Notwithstanding any other provision of this chapter, any claim of a counterparty
against the estate arising from the receiver's disaffirmance or repudiation of a netting
agreement or qualified financial contract that has not been previously affirmed in
the liquidation or immediately preceding conservation or rehabilitation case shall be
determined and shall be allowed or disallowed as if the claim had arisen before the date of
the filing of the petition for liquidation or, if a conservation or rehabilitation proceeding
is converted to a liquidation proceeding, as if the claim had arisen before the date of the
filing of the petition for conservation or rehabilitation. The amount of the claim shall be
the actual direct compensatory damages determined as of the date of the disaffirmance
or repudiation of the netting agreement or qualified financial contract. The term "actual
direct compensatory damages" does not include punitive or exemplary damages, damages
for lost profit or lost opportunity, or damages for pain and suffering, but does include
normal and reasonable costs of cover or other reasonable measures of damages utilized in
the derivatives, securities, or other market for the contract and agreement claims.
new text end

new text begin Subd. 7. new text end

new text begin Sources of contractual right. new text end

new text begin The term "contractual right" as used in this
section includes any right set forth in a rule or bylaw of a derivatives clearing organization
as defined in the Commodity Exchange Act, a multilateral clearing organization as defined
in the Federal Deposit Insurance Corporation Improvement Act of 1991, a national
securities exchange, a national securities association, a securities clearing agency, a
contract market designated under the Commodity Exchange Act, a derivatives transaction
execution facility registered under the Commodities Exchange Act, or a board of trade as
defined in the Commodity Exchange Act, or in a resolution of the governing board thereof
and any right, whether or not evidenced in writing, arising under statutory or common law,
or under law merchant, or by reason of normal business practice.
new text end

new text begin Subd. 8. new text end

new text begin Affiliates of insurer; nonapplication. new text end

new text begin The provisions of this section shall
not apply to persons who are affiliates of the insurer that is the subject of the proceeding.
new text end

new text begin Subd. 9. new text end

new text begin Allocating among accounts. new text end

new text begin All rights of counterparties under this act
shall apply to netting agreements and qualified financial contracts entered into on behalf
of the general account or separate accounts if the assets of each separate account are
available only to counterparties to netting agreements and qualified financial contracts and
entered into on behalf of that separate account.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 5.

Minnesota Statutes 2009 Supplement, section 60K.56, subdivision 6, is
amended to read:


Subd. 6.

Minimum education requirement.

Each person subject to this section
shall complete a minimum of 24 credit hours of courses accredited by the commissioner
during each licensing period. No more than one-half of the credit hours per licensing
period required under this section may be credited to a person for attending courses either
sponsored by, offered by, or affiliated with an insurance company or its agents. For the
purposes of this subdivision, a course provided by a bona fide insurance trade association
is not considered to be sponsored by, offered by, or affiliated with an insurance company
or its agentsnew text begin regardless of the location of the course offeringnew text end. A licensee must obtain three
hours of the credit hours per licensing period from a class or classes in the area of ethics.
Courses sponsored by, offered by, or affiliated with an insurance company or agent may
restrict its students to agents of the company or agency.

Sec. 6.

Minnesota Statutes 2008, section 61A.09, is amended by adding a subdivision
to read:


new text begin Subd. 4. new text end

new text begin Limits of group life insurance. new text end

new text begin Group life insurance offered to a resident
of this state under a group life insurance policy issued to a group other than one described
in section 60A.02, subdivision 28, shall be subject to the following requirements:
new text end

new text begin (1) no such group life insurance policy shall be delivered in this state unless the
commissioner finds that:
new text end

new text begin (i) the issuance of the group policy is not contrary to the best interest of the public;
new text end

new text begin (ii) the issuance of the group policy would result in economies of acquisition or
administration; and
new text end

new text begin (iii) the benefits are reasonable in relation to the premiums charged;
new text end

new text begin (2) no such group life insurance coverage may be offered in this state by an insurer
under a policy issued in another state unless this state or another state having requirements
substantially similar to those contained in clause (1) has made a determination that the
requirements have been met;
new text end

new text begin (3) the premium for the policy must be paid either from the policyholder's funds or
from funds contributed by the covered persons, or from both; and
new text end

new text begin (4) an insurer may exclude or limit the coverage on any person as to whom evidence
of individual insurability is not satisfactory to the insurer.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 7.

Minnesota Statutes 2008, section 61A.245, subdivision 3, is amended to read:


Subd. 3.

Required contract provisions.

(a) In the case of contracts issued on or
after the operative date specified in subdivision 12, no contract of annuity, except as stated
in subdivision 2, shall be delivered or issued for delivery in this state unless it contains
in substance the following provisions, or corresponding provisions which in the opinion
of the commissioner are at least as favorable to the contract holder, upon cessation of
payment of considerations under the contract:

(1) that upon cessation of payment of considerations under a contract, or upon the
written request of the contract owner, the company shall grant a paid-up annuity benefit on
a plan stipulated in the contract of the value specified in subdivisions 5, 6, 7, 8 and 10;

(2) if a contract provides for a lump sum settlement at maturity, or at any other
time, that upon surrender of the contract at or prior to the commencement of any annuity
payments, the company shall pay in lieu of any paid-up annuity benefit a cash surrender
benefit of the amount specified in subdivisions 5, 6, 8 and 10. The company may reserve
the right to defer the payment of the cash surrender benefit for a period not to exceed
six months after demand therefor with surrender of the contract after making a written
request and receiving written approval of the commissioner. The request must address the
necessity and equitability to all contract holders of the deferral;

(3) a statement of the mortality table, if any, and interest rates used in calculating any
minimum paid-up annuity, cash surrender or death benefits that are guaranteed under the
contract, together with sufficient information to determine the amounts of the benefits; and

(4) a statement that any paid-up annuity, cash surrender or death benefits that may
be available under the contract are not less than the minimum benefits required by any
statute of the state in which the contract is delivered and an explanation of the manner in
which the benefits are altered by the existence of any additional amounts credited by the
company to the contract, any indebtedness to the company on the contract or any prior
withdrawals from or partial surrenders of the contract.

(b) Notwithstanding the requirements of this subdivision, any deferred annuity
contract may provide that if no considerations have been received under a contract for
a period of two full years and the portion of the paid-up annuity benefit at maturity on
the plan stipulated in the contract arising from considerations paid prior to that period
would be less than $20 monthly, the company may at its option terminate the contract by
payment in cash of the then present value of the portion of the paid-up annuity benefit,
calculated on the basis of the mortality table, if any, and interest rate specified in the
contract for determining the paid-up annuity benefit, and by the payment shall be relieved
of any further obligation under the contract.

new text begin (c) If a death benefit becomes payable as specified in the contract, the contract
may not treat the payment of the death benefit as a surrender of the annuity contract
or otherwise impose a surrender penalty.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2011, and applies to
annuity contracts issued on or after that date.
new text end

Sec. 8.

Minnesota Statutes 2008, section 61A.257, subdivision 2, is amended to read:


Subd. 2.

2001 CSO Preferred Class Structure Mortality Table.

At the election
of the insurer, for each calendar year of issue, for any one or more specified plans of
insurance and subject to satisfying the conditions stated in this section, the 2001 CSO
Preferred Class Structure Mortality Table may be substituted in place of the 2001 CSO
Smoker or Nonsmoker Mortality Table as the minimum valuation standard under section
61A.25 for policies issued on or after January 1, 2007.new text begin For policies issued on or after
January 1, 2004, and prior to January 1, 2007, these tables may be substituted with the
written consent of the commissioner and subject to the conditions in subdivision 3. In
determining such consent, the commissioner may rely on the consent of the commissioner
of the company's state of domicile.
new text end No such election must be made until the insurer
demonstrates at least 20 percent of the business to be valued on this table is in one or more
of the preferred classes. A table from the 2001 CSO Preferred Class Structure Mortality
Table used in place of a 2001 CSO Mortality Table, pursuant to the requirements of this
section, will be treated as part of the 2001 CSO Mortality Table only for purposes of
reserve valuation pursuant to section 61A.25 and Minnesota Rules, chapter 2748.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 9.

Minnesota Statutes 2008, section 61A.257, subdivision 3, is amended to read:


Subd. 3.

Conditions.

(a) For each plan of insurance with separate rates for preferred
and standard nonsmoker lives, an insurer may use the super preferred nonsmoker,
preferred nonsmoker, and residual standard nonsmoker tables to substitute for the
nonsmoker mortality table found in the 2001 CSO Mortality Table to determine minimum
reserves. At the time of election and annually thereafter, except for business valued under
the residual standard nonsmoker table, the appointed actuary shall certify that:

(1) the present value of death benefits over the next ten years after the valuation date,
using the anticipated mortality experience without recognition of mortality improvement
beyond the valuation date for each class, is less than the present value of death benefits
using the valuation basic table corresponding to the valuation table being used for that
class; and

(2) the present value of death benefits over the future life of the contracts, using
anticipated mortality experience without recognition of mortality improvement beyond
the valuation date for each class, is less than the present value of death benefits using the
valuation basic table corresponding to the valuation table being used for that class.

(b) For each plan of insurance with separate rates for preferred and standard smoker
lives, an insurer may use the preferred smoker and residual standard smoker tables to
substitute for the smoker mortality table found in the 2001 CSO Mortality Table to
determine minimum reserves. At the time of election and annually thereafter, for business
valued under the preferred smoker table, the appointed actuary shall certify that:

(1) the present value of death benefits over the next ten years after the valuation date,
using the anticipated mortality experience without recognition of mortality improvement
beyond the valuation date for each class, is less than the present value of death benefits
using the preferred smoker valuation basic table corresponding to the valuation table being
used for that class; and

(2) the present value of death benefits over the future life of the contracts, using
anticipated mortality experience without recognition of mortality improvement beyond
the valuation date for each class, is less than the present value of death benefits using the
preferred smoker valuation basic table corresponding to the valuation table being used
for that class.

(c) Unless exempted by the commissioner, every authorized insurer using the
2001 CSO Preferred Class Structurenew text begin Mortalitynew text end Table shall annually file with the
commissioner, the NAIC, or a statistical agent designated by the NAIC and acceptable to
the commissioner, statistical reports showing mortality and such other information as the
commissioner may deem necessary or expedient for the administration of the provisions
of this section. The form of the reports shall be established by the commissioner or the
commissioner may require the use of a form established by the NAIC or by a statistical
agent designated by the NAIC and acceptable to the commissioner.

new text begin (d) The use of the 2001 CSO Preferred Class Structure Mortality Table for the
valuation of policies issued prior to January 1, 2007, shall not be permitted in any statutory
financial statement in which a company reports, with respect to any policy or portion of a
policy coinsured, either of the following:
new text end

new text begin (1) in cases where the mode of payment of the reinsurance premium is less frequent
than the mode of payment of the policy premium, a reserve credit that exceeds, by more
than the amount specified in this paragraph as Y, the gross reserve calculated before
reinsurance. Y is the amount of the gross reinsurance premium that (i) provides coverage
for the period from the next policy premium due date to the earlier of the end of the policy
year and the next reinsurance premium due date, and (ii) would be refunded to the ceding
entity upon the termination of the policy; or
new text end

new text begin (2) in cases where the mode of payment of the reinsurance premium is more frequent
than the mode of payment of the policy premium, a reserve credit that is less than the gross
reserve, calculated before reinsurance, by an amount that is less than the amount specified
in this paragraph as Z. Z is the amount of the gross reinsurance premium that the ceding
entity would need to pay the assuming company to provide reinsurance coverage from
the period of the next reinsurance premium due date to the next policy premium due date
minus any liability established for the proportionate amount not remitted to the reinsurer.
new text end

new text begin (e) For purposes of paragraph (d), the reserve (1) for the mean reserve method
shall be defined as the mean reserve minus the deferred premium asset, and (2) for the
midterminal reserve method shall include the unearned premium reserve. A company may
estimate and adjust its accounting on an aggregate basis in order to meet the conditions to
use the 2001 CSO Preferred Class Structure Mortality Table.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 10.

Minnesota Statutes 2008, section 61B.19, subdivision 3, is amended to read:


Subd. 3.

Limitation of coverage.

Sections 61B.18 to 61B.32 do not provide
coverage for:

(1) a portion of a policy or contract not guaranteed by the insurer, or under which the
investment risk is borne by the policy or contract holder;

(2) a policy or contract of reinsurance, unless assumption certificates have been
issued and the insured has consented to the assumption as provided under section 60A.09,
subdivision 4a
;

(3) a policy or contract issued by an assessment benefit association operating under
section 61A.39, or a fraternal benefit society operating under chapter 64B;

(4) any obligation to nonresident participants of a covered retirement plan or to the
plan sponsor, employer, trustee, or other party who owns the contract; in these cases, the
association is obligated under this chapter only to participants in a covered plan who are
residents of the state of Minnesota on the date of impairment or insolvency;

(5) a structured settlement annuity in situations where a liability insurer remains
liable to the payee;

(6) a portion of an unallocated annuity contract which is not issued to or in
connection with a specific employee, union, or association of natural persons benefit plan
or a governmental lottery, including but not limited to, a contract issued to, or purchased
at the direction of, any governmental bonding authority, such as a municipal guaranteed
investment contract;

(7) a portion of a policy or contract issued to a plan or program of an employer,
association, or similar entity to provide life, health, or annuity benefits to its employees
or members to the extent that the plan or program is self-funded or uninsured, including
benefits payable by an employer, association, or similar entity under:

(i) a multiple employer welfare arrangement as defined in the Employee Retirement
Income Security Act of 1974, United States Code, title 29, section 1002(40)(A), as
amended;

(ii) a minimum premium group insurance plan;

(iii) a stop-loss group insurance plan; or

(iv) an administrative services only contract;

(8) any policy or contract issued by an insurer at a time when it was not licensed or
did not have a certificate of authority to issue the policy or contract in this state;

(9) an unallocated annuity contract issued to or in connection with a benefit plan
protected under the federal Pension Benefit Guaranty Corporation, regardless of whether
the federal Pension Benefit Guaranty Corporation has yet become liable to make any
payments with respect to the benefit plan;

(10) a portion of a policy or contract to the extent that it provides for (i) dividends or
experience rating credits except to the extent the dividends or experience rating credits
have actually become due and payable or have been credited to the policy or contract
before the date of impairment or insolvency, (ii) voting rights, or (iii) payment of any fees
or allowances to any person, including the policy or contract holder, in connection with
the service to, or administration of, the policy or contract;

(11) a contractual agreement that establishes the member insurer's obligations to
provide a book value accounting guaranty for defined contribution benefit plan participants
by reference to a portfolio of assets that is owned by the benefit plan or its trustee, which
in each case is not an affiliate of the member insurer;

(12) a portion of a policy or contract to the extent that the rate of interest on which
it is based, or the 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:

(i) averaged over the period of four years prior to the date on which the member
insurer becomes an impaired or insolvent insurer under sections 61B.18 to 61B.32,
whichever is earlier, exceeds the rate of interest determined by subtracting two percentage
points from Moody's Corporate Bond Yield Average averaged for that same four-year
period or for the lesser period if the policy or contract was issued less than four years
before the member insurer becomes an impaired or insolvent insurer under sections
61B.18 to 61B.32, whichever is earlier; and

(ii) on and after the date on which the member insurer becomes an impaired or
insolvent insurer under this chapter, whichever is earlier, exceeds the rate of interest
determined by subtracting three percentage points from Moody's Corporate Bond Yield
Average as most recently available;

(13) a portion of a policy or contract to the extent it provides for interest or other
changes in value to be determined by the use of an index or other external reference stated
in the policy or contract, but which have not been credited to the policy or contract, or
as to which the policy or contract owner's rights are subject to forfeiture, as of the date
the member insurer becomes an impaired or insolvent insurer under sections 61B.18 to
61B.32, whichever is earlier. If a policy's or contract's interest or changes in value are
credited less frequently than annually, then for purposes of determining the values that
have been credited and not subject to forfeiture under this clause, the interest or changes
in value determined by using the procedures defined in the policy or contract will be
credited as if the contractual date of crediting interest or changing values was the date of
impairment or insolvency, whichever is earlier, and will not be subject to forfeiture; deleted text beginand
deleted text end

(14) a portion of a policy or contract to the extent that the assessments required by
section 61B.24 with respect to the policy or contract are preempted by federal or state
lawdeleted text begin.deleted text endnew text begin; and
new text end

new text begin (15) a policy or contract providing any hospital, medical, prescription drug, or other
health care benefits pursuant to United States Code, title 42, chapter 7, subchapter XVIII,
Part C or Part D, commonly known as Medicare Part C & D, or any regulations issued
under those provisions.
new text end

Sec. 11.

Minnesota Statutes 2009 Supplement, section 61B.19, subdivision 4, is
amended to read:


Subd. 4.

Limitation of benefits.

The benefits for which the association may become
liable shall in no event exceed the lesser of:

(1) the contractual obligations for which the insurer is liable or would have been
liable if it were not an impaired or insolvent insurer; or

(2) subject to the limitation in clause (5), with respect to any one life, regardless of
the number of policies or contracts:

(i) $500,000 in life insurance death benefits, but not more than $130,000 in net cash
surrender and net cash withdrawal values for life insurance;

(ii) $500,000 in health insurance benefits, including any net cash surrender and net
cash withdrawal values;

(iii) $250,000 in deleted text beginannuity net cash surrender and net cash withdrawal valuesdeleted text endnew text begin the
present value of annuity benefits, including net cash surrender and net cash withdrawal
values
new text end;

(iv) $410,000 in present value of annuity benefits for structured settlement annuities
or for annuities in regard to which periodic annuity benefits, for a period of not less than
the annuitant's lifetime or for a period certain of not less than ten years, have begun to be
paid, on or before the date of impairment or insolvency; or

(3) subject to the limitations in clauses (5) and (6), with respect to each individual
resident participating in a retirement plan, except a defined benefit plan, established under
section 401, 403(b), or 457 of the Internal Revenue Code of 1986, as amended through
December 31, 1992, covered by an unallocated annuity contract, or the beneficiaries of
each such individual if deceased, in the aggregate, $250,000 in net cash surrender and net
cash withdrawal values;

(4) where no coverage limit has been specified for a covered policy or benefit, the
coverage limit shall be $500,000 in present value;

(5) in no event shall the association be liable to expend more than $500,000 in the
aggregate with respect to any one life under clause (2), items (i), (ii), (iii), (iv), and clause
(4), and any one individual under clause (3);

(6) in no event shall the association be liable to expend more than $10,000,000 with
respect to all unallocated annuities of a retirement plan, except a defined benefit plan,
established under section 401, 403(b), or 457 of the Internal Revenue Code of 1986, as
amended through December 31, 1992. If total claims from a plan exceed $10,000,000,
the $10,000,000 shall be prorated among the claimants;

(7) for purposes of applying clause (2)(ii) and clause (5), with respect only to
health insurance benefits, the term "any one life" applies to each individual covered by a
health insurance policy;

(8) where covered contractual obligations are equal to or less than the limits stated in
this subdivision, the association will pay the difference between the covered contractual
obligations and the amount credited by the estate of the insolvent or impaired insurer, if
that amount has been determined or, if it has not, the covered contractual limit, subject
to the association's right of subrogation;

(9) where covered contractual obligations exceed the limits stated in this subdivision,
the amount payable by the association will be determined as though the covered
contractual obligations were equal to those limits. In making the determination, the estate
shall be deemed to have credited the covered person the same amount as the estate would
credit a covered person with contractual obligations equal to those limits; or

(10) the following illustrates how the principles stated in clauses (8) and (9) apply.
The example illustrated concerns hypothetical claims subject to the limit stated in clause
(2)(iii). The principles stated in clauses (8) and (9), and illustrated in this clause, apply
to claims subject to any limits stated in this subdivision.

CONTRACTUAL OBLIGATIONS OF:

deleted text begin $ 50,000
deleted text end new text begin $100,000
new text end
Estate
Guaranty
Association
0% recovery from estate
$ 0
deleted text begin $ 50,000
deleted text end new text begin $100,000
new text end
25% recovery from estate
deleted text begin $ 12,500
deleted text end new text begin 25,000
new text end
deleted text begin $ 37,500
deleted text end new text begin $75,000
new text end
50% recovery from estate
deleted text begin $ 25,000
deleted text end new text begin $50,000
new text end
deleted text begin $ 25,000
deleted text end new text begin $50,000
new text end
75% recovery from estate
deleted text begin $ 37,500
deleted text end new text begin $75,000
new text end
deleted text begin $ 12,500
deleted text end new text begin $25,000
new text end
deleted text begin $ 100,000
deleted text end new text begin $250,000
new text end
Estate
Guaranty
Association
0% recovery from estate
$ 0
deleted text begin $ 100,000
deleted text end new text begin $250,000
new text end
25% recovery from estate
deleted text begin $ 25,000
deleted text end new text begin $62,500
new text end
deleted text begin $ 75,000
deleted text end new text begin $187,500
new text end
50% recovery from estate
deleted text begin $ 50,000
deleted text end new text begin $125,000
new text end
deleted text begin $ 50,000
deleted text end new text begin $125,000
new text end
75% recovery from estate
deleted text begin $ 75,000
deleted text end new text begin $187,500
new text end
deleted text begin $ 25,000
deleted text end new text begin $62,500
new text end
deleted text begin $ 200,000
deleted text end new text begin $300,000
new text end
Estate
Guaranty
Association
0% recovery from estate
$ 0
deleted text begin $ 100,000
deleted text end new text begin $250,000
new text end
25% recovery from estate
deleted text begin $ 50,000
deleted text end new text begin $75,000
new text end
deleted text begin $ 75,000
deleted text end new text begin $187,500
new text end
50% recovery from estate
deleted text begin $ 100,000
deleted text end new text begin $150,000
new text end
deleted text begin $ 50,000
deleted text end new text begin $125,000
new text end
75% recovery from estate
deleted text begin $ 150,000
deleted text end new text begin $225,000
new text end
deleted text begin $ 25,000
deleted text end new text begin $62,500
new text end

deleted text begin For purposes of this subdivision, the commissioner shall determine the discount rate
to be used in determining the present value of annuity benefits.
deleted text end

Sec. 12.

Minnesota Statutes 2008, section 61B.28, subdivision 7, is amended to read:


Subd. 7.

Notice concerning limitations and exclusions.

(a) No person, including
an insurer, agent, or affiliate of an insurer or agent, shall offer for sale in this state a
covered life insurance, annuity, or health insurance policy or contract without deliveringnew text begin,
either
new text end at the time of application for that policy or contractnew text begin or at the time of delivery
of the policy or contract,
new text end a notice in the form specified in subdivision 8, or in a form
approved by the commissioner under paragraph (b), relating to coverage provided by the
Minnesota Life and Health Insurance Guaranty Association. The notice may be part of
the application. A copy of the notice must be given to the applicantnew text begin or the policyholdernew text end.
deleted text begin The notice must be delivered to the applicant at the time of application for the policy or
contract, except that if the application is not taken from the applicant in person, the notice
must be sent to the applicant within 72 hours after the application is taken.
deleted text end The person
offering the policy or contract shall document the fact that the notice was given at the time
of application or deleted text beginwas sent within the specified timedeleted text endnew text begin the fact that the notice was delivered at
the time the policy or contract was delivered
new text end. This does not require that the receipt of the
notice be acknowledged by the applicant.

(b) The association may prepare, and file with the commissioner for approval, a form
of notice as an alternative to the form of notice specified in subdivision 8 describing the
general purposes and limitations of this chapter. The form of notice shall:

(1) state the name, address, and telephone number of the Minnesota Life and Health
Insurance Guaranty Association;

(2) prominently warn the policy or contract holder that the Minnesota Life and
Health Insurance Guaranty Association may not cover the policy or, if coverage is
available, it will be subject to substantial limitations and exclusions and conditioned on
continued residence in the state;

(3) state that the insurer and its agents are prohibited by law from using the existence
of the Minnesota Life and Health Insurance Guaranty Association for the purpose of sales,
solicitation, or inducement to purchase any form of insurance;

(4) emphasize that the policy or contract holder should not rely on coverage under
the Minnesota Life and Health Insurance Guaranty Association when selecting an insurer;

(5) provide other information as directed by the commissioner. The commissioner
may approve any form of notice proposed by the association and, as to the approved form
of notice, the association may notify all member insurers by mail that the form of notice is
available as an alternative to the notice specified in subdivision 8.

(c) A policy or contract not covered by the Minnesota Life and Health Insurance
Guaranty Association or the Minnesota Insurance Guaranty Association must contain the
following notice in ten-point type, stamped in red ink or contrasting type on the policy
or contract and the application:

"THIS POLICY OR CONTRACT IS NOT PROTECTED BY THE MINNESOTA
LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION OR THE
MINNESOTA INSURANCE GUARANTY ASSOCIATION. IN THE CASE OF
INSOLVENCY, PAYMENT OF CLAIMS IS NOT GUARANTEED. ONLY THE
ASSETS OF THIS INSURER WILL BE AVAILABLE TO PAY YOUR CLAIM."

This section does not apply to fraternal benefit societies regulated under chapter 64B.

Sec. 13.

Minnesota Statutes 2008, section 66A.40, subdivision 11, is amended to read:


Subd. 11.

Sale of stock and payment of dividends.

(a) A reorganized insurance
company and an intermediate stock holding company may issue subscription rights and
may issue or grant any other securities, rights, options, and similar items to the same
extent as any business corporation organized under chapter 302A. However, except as
provided in paragraphs (b) to (d), no sale of deleted text beginsecuritiesdeleted text endnew text begin common or preferred stocknew text end of the
reorganized insurance company, or of an intermediate stock holding company that directly
or indirectly controls a majority of voting shares of the reorganized insurance company,
may be made without the commissioner's prior written approval.

(b) A registration statement covering securities that has been approved by the
commissioner and filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933 pursuant to any provision of that statute or
rule that allows registration of securities to be sold on a delayed or continuous basis may
be sold without further approval.

(c) Unless the commissioner has granted the mutual insurance holding company a
written exemption from the requirements of this paragraph, any securities which are
regularly traded on the New York Stock Exchange, the American Stock Exchange,
or another exchange approved by the commissioner, or designated on the National
Association of Securities Dealers automated quotations (NASDAQ) national market
system, shall be sold according to the procedure in this paragraph. If the mutual insurance
holding company, an intermediate holding company, or a reorganized insurance company
intends to offer securities that are governed by this paragraph, that entity shall deliver to
the commissioner, not less than ten days before the offering, a notice of the planned
offering and information regarding: (1) the approximate number of shares intended to be
offered; (2) the target date of sale; (3) evidence the security is regularly traded on one of
the public exchanges noted above; and (4) the recent history of the trading price and
trading volume of the security. The commissioner is considered to have approved the
sale unless within ten days following receipt of the notice, the commissioner issues an
objection to the sale. If the commissioner issues an objection to the sale, the security may
not be sold until the commissioner issues an order approving the sale.

(d) A reorganized insurance company or intermediate holding company that has
issued securities that are regularly traded on one of the exchanges or markets described in
paragraph (c), may establish stock option, incentive, and share ownership plans customary
for publicly traded companies in the same or similar industries. If the reorganized
insurance company or intermediate holding company intends to establish a stock option,
incentive or share ownership plan, that entity shall deliver to the commissioner, not less
than 30 days before the establishment of the plan, a notice of the proposed plan along with
any information about the proposed plan the commissioner requires. The commissioner is
considered to have approved the plan unless within 30 days following receipt of the notice,
the commissioner issues an objection to the proposed plan. If the commissioner issues an
objection to the proposed plan, the plan may not be established until the commissioner
issues an order approving the plan. If the commissioner approves the establishment of the
stock option, incentive, or share ownership plan, the reorganized insurance company or
the intermediate holding company that obtained the approval may sell or issue securities
according to the approved plan without further approval.

(e) The total number of shares of capital stock issued by the reorganized insurance
company or an intermediate holding company that may be held by directors and officers
of the mutual insurance holding company, any intermediate holding company, and of
any reorganized insurance company, and acquired according to subscription rights or
stock option, incentive, and share ownership plans, may not exceed the percentage limits
set forth in section 66A.41, subdivision 11, paragraph (b). Subject to the requirements
of subdivision 1, paragraph (c), nothing in this section prohibits the acquisition of any
securities of a reorganized insurance company or intermediate stock holding company
through a licensed securities broker-dealer by any officer or director of the reorganized
company, an intermediate stock holding company, or the mutual insurance holding
company.

(f) Dividends and other distributions to the shareholders of the reorganized stock
insurance company or of an intermediate stock holding company must comply with section
60D.20. Any dividends and other distributions to the members of the mutual insurance
holding company must comply with section 60D.20 and any other approval requirements
contained in the mutual insurance holding company's articles of incorporation.

(g) Unless previously approved as part of the plan of reorganization, the initial
offering of any voting shares to the public by a reorganized company, a stock insurance
company subsidiary, or an intermediate holding company which holds a majority of the
voting shares of a reorganized insurance company or stock insurance company subsidiary,
must be approved by a majority of votes cast at a regular or special meeting of the
members of the mutual insurance holding company. Any issuer repurchase program,
plan of exchange, recapitalization, or offering of capital securities to the public, shall, in
addition to any other approvals required by law or by the issuer's articles of incorporation,
be approved by a majority of the board of directors of the mutual insurance holding
company and by a majority of the disinterested members of the board of directors of the
mutual insurance holding company.

Sec. 14.

Minnesota Statutes 2008, section 66A.42, is amended to read:


66A.42 DOMESTIC INSURANCE CORPORATIONS MAY BECOME
MUTUAL CORPORATIONS.

Any domestic insurance corporation heretofore or hereafter incorporated for
the transaction of the kinds of business authorized and permitted by section 60A.06,
subdivision 1
, deleted text beginclause (4),deleted text end and having capital stock may become a mutual corporation and
to that end may formulate and carry out a plan for the acquisition by it of its outstanding
capital stock, and for the mutualization of such corporation, as follows:

(a) Such plan shall have been adopted by vote of a majority of the directors of
such company.

(b) Such plan shall have been submitted to the commissioner of commerce and shall
have been approved as conforming to the requirements of this section and section 66A.43
and as not prejudicial to the policyholders of such company or to the insuring public.

(c) Such plan shall have been approved by a vote of stockholders representing
a majority of the outstanding capital stock at a meeting of stockholders called for that
purpose. Stockholders may vote in person or by proxy filed with the company at least five
days before the meeting at which it is to be used. Notice of such meeting shall be given by
mailing such notice from the home office of such company at least 30 days prior to such
meeting in a sealed envelope, postage prepaid, directed to each stockholder at the address
shown on the stock records of the company.

(d) Such plan shall have been approved by a majority of the votes cast by
policyholders (whether or not members) who vote at a meeting called for that purpose.
Eligibility of policyholders, whether or not members of the company, and the number of
votes to which each is entitled, shall be determined by the laws of Minnesota relating to
the rights of members of domestic mutual deleted text beginlifedeleted text end insurance companies to vote at company
meetings. Policyholders may vote in person or by proxy filed with the company at least
five days before the meeting at which it is to be used. Notice of such meeting shall be
given by mailing such notice from the home office of such company at least 30 days prior
to such meeting in a sealed envelope, postage prepaid, directed to each policyholder at the
address shown on the policy records of the company. Such meeting shall be conducted in
such manner as may be provided for in such plan, with the approval of the commissioner.
The commissioner shall supervise and direct the methods and procedure of said meeting
and appoint an adequate number of inspectors to conduct the voting at said meeting, who
shall have power to determine all questions concerning the verification of the ballots,
the ascertaining of the validity thereof, the qualifications of the voters and the canvass
of the vote. Such inspectors, or any one thereof designated by the commissioner, shall
certify to the commissioner and to such company the result of such vote, and with
respect thereto shall act under such rules as shall be prescribed by the commissioner. All
necessary expenses incurred by the commissioner, or incurred with the commissioner's
approval by the inspectors appointed, shall be paid by such company upon the certificate
of the commissioner.

(e) Approval of the plan by stockholders and policyholders as above provided may
be given at a joint meeting thereof.

(f) Such plan may specify the purchase price to be paid by such company for shares
of its capital stock, and in such case the price so specified shall be adhered to. If such plan
does not specify the price to be paid for such shares, such company shall first obtain the
approval of the commissioner for every payment made for the acquisition of any shares
of its capital stock.

(g) Such plan may authorize the board of directors of the company to provide for
participation in the surplus of the company by holders of policies which do not by their
terms provide for such participation or which provide for a limited participation only, and
may include appropriate proceedings to confer upon policyholders the right to vote at
meetings of the company. Policyholders upon whom the right to vote is so conferred shall
have the same voting rights and shall be entitled to the same notice of annual meeting as
members of domestic mutual deleted text beginlifedeleted text end insurance companies.

(h) Before approving any such plan or any such payment, the commissioner shall
be satisfied, by making investigation or such evidence as the commissioner may require,
that such company, after deducting the aggregate sum appropriated by such plan for
the acquisition of any part or all of its capital stock, and in the case of any payment not
fixed by such plan and subject to approval as aforesaid, after deducting also the amount
of such payment, will be possessed of admitted assets in an amount equal to the sum
of (1) and (2) as follows:

(1) Its entire liabilities, including the net value of its outstanding contracts computed
as provided by law, and (2) the contingency reserve deemed by the commissioner
necessary to protect its policyholders and the insuring public, in view of the past
experience of such company, the character of its assets, its present management and its
probable future earnings.

The commissioner's action in refusing to give any approval required by this section
shall be subject to review by any court of competent jurisdiction.

Such plan may be amended by vote of stockholders representing a majority of the
outstanding capital stock and by a majority of the votes cast by policyholders who vote
at the meeting, but in such case the plan shall not become effective until approved, as
amended, by vote of a majority of the directors of such company and by the commissioner.

ARTICLE 2

FRATERNAL BENEFIT SOCIETIES

Section 1.

Minnesota Statutes 2008, section 64B.19, is amended by adding a
subdivision to read:


new text begin Subd. 4a. new text end

new text begin Notice of extra assessments. new text end

new text begin 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 commissioner of its state of domicile if it
is a foreign society, at least 90 days before the effective date of the assessments.
new text end

Sec. 2.

new text begin [64B.40] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin For the purposes of sections 64B.40 to 64B.48, the terms
defined in this section have the meanings given them.
new text end

new text begin Subd. 2. new text end

new text begin Adjusted risk-based capital report. new text end

new text begin "Adjusted risk-based capital report"
means a risk-based capital report that has been adjusted by the commissioner according
to section 64B.41, subdivision 3.
new text end

new text begin Subd. 3. new text end

new text begin Corrective order. new text end

new text begin "Corrective order" means an order issued by the
commissioner specifying corrective actions that the commissioner has determined are
required.
new text end

new text begin Subd. 4. new text end

new text begin NAIC. new text end

new text begin "NAIC" means the National Association of Insurance
Commissioners.
new text end

new text begin Subd. 5. new text end

new text begin Negative trend. new text end

new text begin "Negative trend" means, with respect to a society,
negative trend over a period of time, as determined according to the "trend test calculation"
included in the risk-based capital instructions.
new text end

new text begin Subd. 6. new text end

new text begin Risk-based capital instructions. new text end

new text begin "Risk-based capital instructions" means
the risk-based capital report including risk-based capital instructions adopted by the
NAIC, as those risk-based instructions may be amended by the NAIC from time to time
according to the procedures adopted by the NAIC.
new text end

new text begin Subd. 7. new text end

new text begin Risk-based capital level. new text end

new text begin "Risk-based capital level" means a fraternal
action level risk-based capital or fraternal authorized control level risk-based capital
where:
new text end

new text begin (1) "fraternal action level risk-based capital" means the product of 2.0 and its
authorized control level risk-based capital; and
new text end

new text begin (2) "fraternal authorized control level risk-based capital" means the number
determined under the risk-based capital formula according to the risk-based capital
instructions.
new text end

new text begin Subd. 8. new text end

new text begin Risk-based capital plan. new text end

new text begin "Risk-based capital plan" means a
comprehensive financial plan containing the elements specified in section 64B.42. If the
commissioner rejects the risk-based capital plan, and it is revised by the society, with
or without the commissioner's recommendation, the plan must be called the "revised
risk-based capital plan."
new text end

new text begin Subd. 9. new text end

new text begin Risk-based capital report. new text end

new text begin "Risk-based capital report" means the report
required in section 64B.41.
new text end

new text begin Subd. 10. new text end

new text begin Society. new text end

new text begin "Society" means a fraternal benefit society that is admitted to do
business in this state under this chapter.
new text end

new text begin Subd. 11. new text end

new text begin Total adjusted capital. new text end

new text begin "Total adjusted capital" means the sum of:
new text end

new text begin (1) a society's statutory capital and surplus as determined in accordance with
statutory accounting applicable to the annual statement required to be filed under section
60A.13; and
new text end

new text begin (2) other items, if any, as the risk-based capital instructions may provide.
new text end

Sec. 3.

new text begin [64B.41] RISK-BASED CAPITAL REPORTS.
new text end

new text begin Subdivision 1. new text end

new text begin General requirements. new text end

new text begin Every society shall, on or before each March
1, prepare and submit to the commissioner a report of its risk-based capital levels as of the
end of the calendar year just ended, in a form and containing the information required
by the risk-based capital instructions. In addition, every society shall file its risk-based
capital report with the NAIC according to the risk-based capital instructions.
new text end

new text begin Subd. 2. new text end

new text begin Specific requirements. new text end

new text begin A society's risk-based capital must be determined
according to the formula set forth in the risk-based capital instructions. The formula must
take into account, and may adjust for the covariance between:
new text end

new text begin (1) the risk with respect to the society's assets;
new text end

new text begin (2) the risk of adverse insurance experience with respect to the society's liabilities
and obligations;
new text end

new text begin (3) the interest rate risk with respect to the society's business; and
new text end

new text begin (4) all other business risks and other relevant risks set forth in the risk-based capital
instructions;
new text end

new text begin determined in each case by applying the factors in the manner set forth in the risk-based
capital instructions.
new text end

new text begin Subd. 3. new text end

new text begin Adjusted risk-based capital report. new text end

new text begin If a society files a risk-based capital
report that in the judgment of the commissioner is inaccurate, then the commissioner shall
adjust the risk-based capital report to correct the inaccuracy and shall notify the society of
the adjustment. The notice must contain a statement of the reason for the adjustment. A
risk-based capital report as so adjusted is referred to as an "adjusted risk-based capital
report."
new text end

Sec. 4.

new text begin [64B.42] FRATERNAL ACTION LEVEL EVENT.
new text end

new text begin Subdivision 1. new text end

new text begin Definition. new text end

new text begin "Fraternal action level event" means, with respect to a
society, any of the following events:
new text end

new text begin (1) the filing of a risk-based capital report by the society that indicates that:
new text end

new text begin (i) the society's total adjusted capital is greater than or equal to its fraternal authorized
control level risk-based capital but less than its fraternal action level risk-based capital; or
new text end

new text begin (ii) the society's total adjusted capital is greater than or equal to its fraternal action
level risk-based capital but less than the product of its fraternal authorized control level
risk-based capital and 2.5 and has a negative trend;
new text end

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

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

new text begin (4) the failure of the society to file a risk-based capital report by March 1, unless the
society has provided an explanation for the failure that is satisfactory to the commissioner
and has cured the failure within ten days after March 1.
new text end

new text begin Subd. 2. new text end

new text begin Commissioner's duties. new text end

new text begin In the event of a fraternal action level event,
the commissioner shall:
new text end

new text begin (1) require the society to prepare and submit a risk-based capital plan, or, if
applicable, a revised risk-based capital plan that:
new text end

new text begin (i) identifies the conditions that contribute to the fraternal action level event;
new text end

new text begin (ii) contains proposals of corrective actions that the society intends to take and
would be expected to result in the elimination of the fraternal action level event;
new text end

new text begin (iii) provides projections of the society's financial results in the current year and at
least the four succeeding years, both in the absence of proposed corrective actions and
giving effect to the proposed corrective actions, including projected statutory balance
sheets, income statements, and cash flow statements. The projections for both new and
renewal business might include separate projections for each major line of business and
separately identify each significant income, expense, and benefit component;
new text end

new text begin (iv) identifies the key assumptions impacting the society's projections and the
sensitivity of the projections to the assumptions; and
new text end

new text begin (v) identifies the quality of, and problems associated with, the society's business,
including, but not limited to, its assets, anticipated business growth and associated surplus
strain, extraordinary exposure to risk, mix of business, and use of reinsurance, if any,
in each case;
new text end

new text begin (2) examine or analyze as the commissioner considers necessary the assets,
liabilities, and operations of the society including reviewing its risk-based capital plan or
revised risk-based capital plan; and
new text end

new text begin (3) subsequent to the examination or analysis, issue a corrective order specifying the
corrective actions the commissioner determines are required.
new text end

new text begin Subd. 3. new text end

new text begin Corrective action. new text end

new text begin In determining corrective actions, the commissioner
may take into account factors considered relevant with respect to the society based upon
the commissioner's examination or analysis of the assets, liabilities, and operations of
the society, including, but not limited to, the results of any sensitivity tests undertaken
pursuant to the risk-based capital instructions. The risk-based capital plan or revised
risk-based capital plan must be submitted:
new text end

new text begin (1) within 45 days after the occurrence of the fraternal action level event;
new text end

new text begin (2) if the society challenges an adjusted risk-based capital report pursuant to section
64B.44 and the challenge is not frivolous in the judgment of the commissioner, within
45 days after the notification to the society that the commissioner has, after a hearing,
rejected the society's challenge; or
new text end

new text begin (3) if the society challenges a revised risk-based capital plan pursuant to section
64B.44 and the challenge is not frivolous in the judgment of the commissioner, within
45 days after the notification to the society that the commissioner has, after a hearing,
rejected the society's challenge.
new text end

new text begin Subd. 4. new text end

new text begin Examination and review. new text end

new text begin The commissioner may retain actuaries
and investment experts and other consultants as may be necessary in the judgment of
the commissioner to review the society's risk-based capital plan or revised risk-based
capital plan; examine or analyze the assets, liabilities, and operations of the society; and
formulate the corrective order with respect to the society. The fees, costs, and expenses
relating to consultants must be borne by the affected society or other party as directed by
the commissioner.
new text end

Sec. 5.

new text begin [64B.43] FRATERNAL AUTHORIZED CONTROL LEVEL EVENT.
new text end

new text begin Subdivision 1. new text end

new text begin Definition. new text end

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

new text begin (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;
new text end

new text begin (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;
new text end

new text begin (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;
new text end

new text begin (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;
new text end

new text begin (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;
new text end

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

new text begin (7) notification by the commissioner to the society that:
new text end

new text begin (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
new text end

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

new text begin (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;
new text end

new text begin (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
new text end

new text begin (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 end

new text begin Subd. 2. new text end

new text begin Commissioner's duties. new text end

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

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

new text begin (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:
new text end

new text begin (i) merge or otherwise consolidate with another willing authorized society;
new text end

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

new text begin (iii) suspend the issuance of new business; and
new text end

new text begin (iv) discontinue its insurance operations; or
new text end

new text begin (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 end

Sec. 6.

new text begin [64B.44] HEARINGS.
new text end

new text begin Upon notification to a society by the commissioner:
new text end

new text begin (1) that the risk-based capital report is being adjusted by the commissioner;
new text end

new text begin (2) that the society's risk-based capital plan or revised risk-based capital plan is
unsatisfactory, and that the notification constitutes a fraternal action level event or fraternal
authorized control level event with respect to the society;
new text end

new text begin (3) that the society has failed to adhere to its risk-based capital plan or revised
risk-based capital plan and that the failure has substantial adverse effect on the ability
of the society to eliminate the fraternal action level event with respect to the society
according to its risk-based capital plan or revised risk-based capital plan; or
new text end

new text begin (4) that a corrective order will be issued with respect to the society;
new text end

new text begin the society has the right to a contested case hearing conducted in accordance with chapter
14, on a record, at which the society may challenge a determination or action by the
commissioner. The society shall notify the commissioner of its request for a hearing
within five days after the notification by the commissioner under clause (1), (2), (3), or (4).
Upon receipt of the society's request for a hearing, the commissioner shall set a date for
the hearing no less than ten nor more than 30 days after the date of the society's request.
new text end

Sec. 7.

new text begin [64B.45] PROHIBITION ON ANNOUNCEMENTS.
new text end

new text begin Except as otherwise required under sections 64B.40 to 64B.48, the making,
publishing, dissemination, circulating, or placing before the public, or causing, directly or
indirectly to be made, published, disseminated, circulated, or placed before the public,
in a newspaper, magazine, or other publication, or in any other way, an advertisement,
announcement, or statement containing an assertion, representation, or statement with
regard to the risk-based capital levels of a society, or of any component derived in the
calculation, by a society, agent, broker, or other person engaged in any manner in the
insurance business would be misleading and is prohibited.
new text end

Sec. 8.

new text begin [64B.46] SUPPLEMENTAL PROVISIONS.
new text end

new text begin Sections 64B.40 to 64B.48 are supplemental to other laws of this state and do not
preclude or limit other powers or duties of the commissioner under those laws, including,
but not limited to, chapters 60B and 60G.
new text end

Sec. 9.

new text begin [64B.47] IMMUNITY.
new text end

new text begin There is no liability on the part of, and no cause of action arises against, the
commissioner or the Department of Commerce or its employees or agents for an action
taken by them in the performance of their powers and duties under sections 64B.40 to
64B.48.
new text end

Sec. 10.

new text begin [64B.48] NOTICES.
new text end

new text begin All notices by the commissioner to a society that may result in regulatory action
under sections 64B.40 to 64B.48 are effective upon dispatch if transmitted by registered
or certified mail, or, in the case of other transmission, are effective upon the society's
receipt of the notice.
new text end