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Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

  
    Laws of Minnesota 1993 

                        CHAPTER 319-H.F.No. 1523 
           An act relating to insurance; regulating life 
          insurance and annuity contracts; establishing and 
          regulating the life and health guaranty association; 
          providing for its powers and duties; amending 
          Minnesota Statutes 1992, section 61A.02, subdivisions 
          2 and 3; proposing coding for new law in Minnesota 
          Statutes, chapter 61B; repealing Minnesota Statutes 
          1992, sections 61B.01; 61B.02; 61B.03; 61B.04; 61B.05; 
          61B.06; 61B.07; 61B.08; 61B.09; 61B.10; 61B.11; 
          61B.12; 61B.13; 61B.14; 61B.15; and 61B.16. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
     Section 1.  Minnesota Statutes 1992, section 61A.02, 
subdivision 2, is amended to read: 
    Subd. 2.  [APPROVAL REQUIRED.] No policy of life 
insurance or annuity contract nor any rider of any kind or 
description which is made a part thereof shall be issued or 
delivered in this state, or be issued by a life insurance 
company organized under the laws of this state, until the form 
of the same has been approved by the commissioner.  In making a 
determination under this section, the commissioner may require 
the insurer to provide rates and advertising materials related 
to policies or contracts issued or delivered in this state.  
    Sec. 2.  Minnesota Statutes 1992, section 61A.02, 
subdivision 3, is amended to read: 
    Subd. 3.  [DISAPPROVAL.] The commissioner shall, within 60 
days after the filing of any form, disapprove the form:  
    (1) if the benefits provided are unreasonable in relation 
to the premium charged; 
    (2) if the safety and soundness of the company would be 
threatened by the offering of an excess rate of interest on the 
policy or contract; 
    (3) if it contains a provision or provisions which are 
unlawful, unfair, inequitable, misleading, or encourages 
misrepresentation of the policy; or 
    (3) (4) if the form, or its provisions, is otherwise not in 
the public interest.  It shall be unlawful for the company to 
issue any policy in the form so disapproved.  If the 
commissioner does not within 60 days after the filing of any 
form, disapprove or otherwise object, the form shall be deemed 
approved.  
    For purposes of clause (2), an excess rate of interest is a 
rate of interest exceeding the rate of interest determined by 
subtracting three percentage points from Moody's corporate bond 
yield average as most recently available. 
    Sec. 3.  [61B.18] [CITATION.] 
    Sections 61B.18 to 61B.32 may be cited as the Minnesota 
life and health insurance guaranty association act. 
    Sec. 4.  [61B.19] [PURPOSE; SCOPE; LIMITATION OF COVERAGE; 
LIMITATION OF BENEFITS; CONSTRUCTION.] 
    Subdivision 1.  [PURPOSE.] (a) The purpose of sections 
61B.18 to 61B.32 is to protect, subject to certain limitations, 
the persons specified in subdivision 2 against failure in the 
performance of contractual obligations, under life insurance 
policies, health insurance policies, annuity contracts, and 
supplemental contracts specified in subdivision 2, because of 
the impairment or insolvency of the member insurer that issued 
the policies or contracts. 
    (b) To provide this protection, an association of insurers 
has been created and exists to pay benefits and to continue 
coverages, as limited in sections 61B.18 to 61B.32.  Members of 
the association are subject to assessment to provide funds to 
carry out the purpose of sections 61B.18 to 61B.32. 
    Subd. 2.  [SCOPE.] (a) Sections 61B.18 to 61B.32 provide 
coverage for the policies and contracts specified in paragraph 
(b) to: 
    (1) persons who are owners of or certificate holders under 
these policies or contracts, or, in the case of unallocated 
annuity contracts, to the persons who are the contract holders 
or participants in a covered retirement plan, and who: 
    (i) are residents; or 
    (ii) are not residents, but only under all of the following 
conditions:  the insurers that issued the policies or contracts 
are domiciled in the state of Minnesota; those insurers never 
held a license or certificate of authority in the states in 
which those persons reside; those states have associations 
similar to the association created by sections 61B.18 to 61B.32; 
and those persons are not eligible for coverage by those 
associations; and 
    (2) persons who, regardless of where they reside, except 
for nonresident certificate holders under group policies or 
contracts, are the beneficiaries, assignees, or payees of the 
persons covered under clause (1). 
    (b) Sections 61B.18 to 61B.32 provide coverage to the 
persons specified in paragraph (a) for direct, nongroup life, 
health, annuity, and supplemental policies or contracts, for 
subscriber contracts issued by a nonprofit health service plan 
corporation operating under chapter 62C, for certificates under 
direct group policies and contracts, and for unallocated annuity 
contracts issued by member insurers, except as limited by 
sections 61B.18 to 61B.32.  Except as expressly excluded under 
subdivision 3, annuity contracts and certificates under group 
annuity contracts include, but are not limited to, guaranteed 
investment contracts, deposit administration contracts, 
unallocated funding agreements, allocated funding agreements, 
structured settlement agreements, lottery contracts, and any 
immediate or deferred annuity contracts.  Covered unallocated 
annuity contracts include those that fund a qualified defined 
contribution retirement plan under sections 401, 403(b), and 457 
of the Internal Revenue Code of 1986, as amended through 
December 31, 1992. 
    Subd. 3.  [LIMITATION OF COVERAGE.] Sections 61B.18 to 
61B.32 do not provide coverage for: 
    (1) a portion of a policy or contract 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) a health insurance policy issued by a person other than 
a person authorized to write life insurance in this state or 
other than a person whose corporate charter would permit the 
writing of life insurance but who is authorized to write only 
health insurance in this state; 
    (5) 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; 
    (6) an annuity contract issued in connection with and for 
the purpose of funding a structured settlement of a liability 
claim, where the liability insurer remains liable; 
    (7) 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; 
    (8) 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; 
    (9) 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; 
    (10) an unallocated annuity contract issued to an employee 
benefit plan protected under the federal Pension Benefit 
Guaranty Corporation; and 
    (11) a portion of a policy or contract to the extent that 
it provides 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, or 
provides that a fee or allowance be paid to a person, including 
the policy or contract holder, in connection with the service 
to, or administration of, the policy or contract. 
     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 (4), with respect 
to any one life, regardless of the number of policies or 
contracts: 
    (i) $300,000 in life insurance death benefits, but not more 
than $100,000 in net cash surrender and net cash withdrawal 
values for life insurance; 
    (ii) $300,000 in health insurance benefits, including any 
net cash surrender and net cash withdrawal values; 
    (iii) $100,000 in annuity net cash surrender and net cash 
withdrawal values; 
     (iv) $300,000 in present value of annuity benefits for 
annuities which are part of a structured settlement 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, $100,000 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 $300,000 
in present value; 
    (5) in no event shall the association be liable to expend 
more than $300,000 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 $7,500,000 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 $7,500,000, the $7,500,000 shall be prorated 
among the claimants; 
    (7) for purposes of applying clause (2)(ii), 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:
                         $50,000 
                                Guaranty 
                   Estate      Association 
0% recovery         $ 0          $ 50,000 
from estate
25% recovery      $ 12,500       $ 37,500 
from estate
50% recovery      $ 25,000       $ 25,000 
from estate
75% recovery      $ 37,500       $ 12,500 
from estate
                        $100,000 
                                Guaranty
                   Estate      Association
0% recovery         $ 0          $100,000 
from estate
25% recovery      $ 25,000       $ 75,000 
from estate
50% recovery      $ 50,000       $ 50,000 
from estate
75% recovery      $ 75,000       $ 25,000 
from estate
                        $200,000 
                                Guaranty
                   Estate      Association
0% recovery         $ 0          $100,000
from estate
25% recovery      $ 50,000       $ 75,000
from estate
50% recovery      $100,000       $ 50,000
from estate
75% recovery
from estate       $150,000       $ 25,000
    For purposes of this subdivision, the commissioner shall 
determine the discount rate to be used in determining the 
present value of annuity benefits. 
    Subd. 5.  [LIMITED LIABILITY.] The liability of the 
association is strictly limited by the express terms of the 
covered policies and contracts and by the provisions of sections 
61B.18 to 61B.32 and is not affected by the contents of any 
brochures, illustrations, advertisements, or oral statements by 
agents, brokers, or others used or made in connection with their 
sale.  This limitation on liability does not prevent an insured 
from proving liability that is greater than the express terms of 
the covered policy or contract.  The insured must bring an 
action to claim the greater liability no later than one year 
after entry of an order of rehabilitation, conservation, or 
liquidation.  The association is not liable for any 
extra-contractual, exemplary, or punitive damages.  The 
association is not liable for attorney fees or interest other 
than as provided for by the terms of the policies or contracts, 
subject to the other limits of sections 61B.18 to 61B.32. 
    Subd. 6.  [ADJUSTMENT OF LIABILITY LIMITS.] The dollar 
amounts stated in subdivision 4 shall be adjusted for inflation 
based upon the implicit price deflator for the gross domestic 
product compiled by the United States Department of Commerce and 
hereafter referred to as the index.  The dollar amounts stated 
in subdivision 4 are based upon the value of the index for the 
fourth quarter of 1992, which is the reference base index for 
purposes of this subdivision.  The dollar amounts in subdivision 
4 shall change on October 1 of each year after 1993 based upon 
the percentage difference between the index for the fourth 
quarter of the preceding year and the reference base index, 
calculated to the nearest whole percentage point.  The 
commissioner shall announce and publish, on or before April 30 
of each year, the changes in the dollar amounts required by this 
clause to take effect on October 1 of that year.  The 
commissioner shall use the most recent revision of the relevant 
gross domestic product implicit price deflators available as of 
April 1.  If the United States Department of Commerce changes 
the base year for the gross domestic product implicit price 
deflator, the commissioner shall make the calculations necessary 
to convert from the old to the new base year.  Changes must be 
in increments of $10,000.  No adjustment may be made until the 
change in the index results in at least a $10,000 increase. 
    Subd. 7.  [CONSTRUCTION.] (a) Sections 61B.18 to 61B.32 
shall be liberally construed to effect the purpose of sections 
61B.18 to 61B.32.  Subdivision 1 is an aid and guide to 
interpretation. 
     (b) Participants in an employer-sponsored plan, which is 
funded in whole or in part by a covered policy, as specified in 
subdivision 4, clause (3), shall only be required to verify 
their status as residents and the amount of money in the 
unallocated annuity that represents their funds.  Both these 
matters may be verified by the employer sponsoring the plan from 
plan records.  Payments made to a plan shall be deemed to be 
made on behalf of the resident participant and are not the funds 
of the plan, the plan trustee, or any nonresident plan 
participant, and to the extent of such payments, discharge the 
association's obligation. 
    Sec. 5.  [61B.20] [DEFINITIONS.] 
    Subdivision 1.  [APPLICATION.] The definitions in this 
section apply to sections 61B.19 to 61B.32. 
    Subd. 2.  [ACCOUNT.] "Account" means either of the two 
accounts created under section 61B.21, subdivision 1. 
    Subd. 3.  [ANNUITY CONTRACTS.] "Annuity contracts" means 
annuity contracts as described in section 60A.06, subdivision 1, 
clause (4). 
    Subd. 4.  [ASSOCIATION.] "Association" means the Minnesota 
life and health insurance guaranty association. 
    Subd. 5.  [COMMISSIONER.] "Commissioner" means the 
commissioner of commerce. 
    Subd. 6.  [CONTRACTUAL OBLIGATION.] "Contractual obligation"
means an obligation under a policy or contract or certificate 
under a group policy or contract, or portion of the policy or 
contract or certificate, for which coverage is provided under 
section 61B.19, subdivision 2. 
    Subd. 7.  [COVERED POLICY.] "Covered policy" means a policy 
or contract to which sections 61B.18 to 61B.32 apply, as 
provided in section 61B.19, subdivision 2. 
    Subd. 8.  [CURRENT CONTRACTUAL OBLIGATION.] "Current 
contractual obligation" means a contractual obligation which has 
become due and owing for:  (1) death benefits; (2) health 
insurance benefits; (3) periodic annuity benefit or supplemental 
contract payments, provided the annuitant or payee elected the 
commencement of the periodic annuity benefit or supplemental 
contract payments before the date of impairment or insolvency, 
or if the annuitant or payee elected the commencement of the 
periodic annuity benefit or supplemental contract payments after 
the date of impairment or insolvency, (i) the election was made 
pursuant to a written plan, such as a retirement plan, which 
existed before the impairment or insolvency, or (ii) 
commencement of the periodic annuity benefit or supplemental 
contract payments was elected at or after the annuitant's 
attainment of age 65 and, in either case, was for a payment 
period of not less than the annuitant's lifetime or a period 
certain of not less than ten years; or (4) cash surrender or 
loan values or endowment proceeds or any portion thereof, but 
only if, and to the extent that, an emergency or hardship such 
as, but not limited to, the funds being reasonably necessary to 
pay education, medical, home purchase, or essential living 
expenses, is established in accordance with standards proposed 
by the association and approved by the commissioner.  The 
hardship standards must also provide for an individual appeal to 
the board of directors in those circumstances which, while not 
meeting the standards approved by the commissioner, may truly be 
a hardship. 
    Subd. 9.  [DIRECT LIFE INSURANCE.] "Direct life insurance" 
means life insurance as described in section 60A.06, subdivision 
1, clause (4), and does not include credit life insurance 
regulated under chapter 62B. 
    Subd. 10.  [HEALTH INSURANCE.] "Health insurance" means 
accident and health insurance as described in section 60A.06, 
subdivision 1, clause (5)(a), credit accident and health 
insurance regulated under chapter 62B, and subscriber contracts 
issued by a nonprofit health service plan corporation operating 
under chapter 62C. 
    Subd. 11.  [IMPAIRED INSURER.] "Impaired insurer" means a 
member insurer that is not an insolvent insurer, and: 
    (1) is placed under an order of rehabilitation or 
conservation by a court of competent jurisdiction.  The order of 
rehabilitation or conservation referred to in this subdivision 
is the initial order granting a petition, application, or other 
request to begin a rehabilitation or conservatorship; or 
    (2) is determined by the commissioner to be potentially 
unable to fulfill its contractual obligations and the 
commissioner has notified the association of the determination. 
    Subd. 12.  [INSOLVENT INSURER.] "Insolvent insurer" means a 
member insurer that is placed under an order of liquidation by a 
court of competent jurisdiction with a finding of insolvency.  
The order of liquidation referred to in this subdivision is the 
initial order granting a petition, application, or other request 
to begin a liquidation. 
    Subd. 13.  [MEMBER INSURER.] "Member insurer" means an 
insurer licensed or holding a certificate of authority to 
transact in this state any kind of insurance for which coverage 
is provided under section 61B.19, subdivision 2, and includes an 
insurer whose license or certificate of authority in this state 
may have been suspended, revoked, not renewed, or voluntarily 
withdrawn.  The term does not include: 
    (1) a nonprofit hospital or medical service organization, 
other than a nonprofit health service plan corporation that 
operates under chapter 62C; 
    (2) a health maintenance organization; 
    (3) a fraternal benefit society; 
    (4) a mandatory state pooling plan; 
    (5) a mutual assessment company or an entity that operates 
on an assessment basis; 
    (6) an insurance exchange; or 
    (7) an entity similar to those listed in clauses (1) to (6).
    Subd. 14.  [PERSON.] "Person" means an individual, 
corporation, partnership, unincorporated association, limited 
liability company, or voluntary organization. 
    Subd. 15.  [PREMIUMS.] "Premiums" means amounts received on 
covered policies or contracts less premiums, considerations, and 
deposits returned, and less dividends and experience credits on 
those covered policies or contracts to the extent not guaranteed 
in advance.  The term does not include amounts received for 
policies or contracts or for the portions of policies or 
contracts for which coverage is not provided under section 
61B.19, subdivision 3, except that assessable premium shall not 
be reduced on account of section 61B.19, subdivision 4, relating 
to limitations with respect to any one life, any one individual, 
and any one contract holder, provided that "premiums" shall not 
include any premiums in excess of the liability limit on any 
unallocated annuity contract specified in section 61B.19, 
subdivision 4. 
    Subd. 16.  [RESIDENT.] "Resident" means a person who 
resides in Minnesota at the time a member insurer is initially 
determined by the commissioner or a court to be an impaired or 
insolvent insurer and to whom a contractual obligation is owed.  
A person may be a resident of only one state, which in the case 
of a person other than a natural person is its principal place 
of business, and which, in the case of a trust, is the principal 
place of business of the settlor or entity which established the 
trust. 
    Subd. 17.  [SUPPLEMENTAL CONTRACT.] "Supplemental contract" 
means an agreement entered into for the distribution of policy 
or contract proceeds. 
    Subd. 18.  [UNALLOCATED ANNUITY CONTRACT.] "Unallocated 
annuity contract" means an annuity contract or group annuity 
certificate that is not issued to and owned by an individual, 
except to the extent of annuity benefits guaranteed to an 
individual by an insurer under the contract or certificate. 
    Sec. 6.  [61B.21] [MINNESOTA LIFE AND HEALTH INSURANCE 
GUARANTY ASSOCIATION.] 
    Subdivision 1.  [FUNCTIONS.] The Minnesota life and health 
insurance guaranty association shall perform its functions under 
the plan of operation established and approved under section 
61B.25, and shall exercise its powers through a board of 
directors.  The association is not a state agency for purposes 
of chapter 14, 16A, 16B, or 43A.  For purposes of administration 
and assessment, the association shall establish and maintain two 
accounts: 
    (1) the life insurance and annuity account which includes 
the following subaccounts: 
    (i) the life insurance account; 
    (ii) the annuity account; and 
    (iii) the unallocated annuity account; and 
    (2) the health insurance account. 
    Subd. 2.  [SUPERVISION BY COMMISSIONER OF COMMERCE.] The 
association is under the immediate supervision of the 
commissioner and is subject to the applicable provisions of the 
insurance laws of this state. 
    Sec. 7.  [61B.22] [BOARD OF DIRECTORS.] 
    Subdivision 1.  [MEMBERS.] The board of directors of the 
association consists of nine members serving terms as 
established in the plan of operation under section 61B.25. 
Members of the board must be elected by member insurers, subject 
to the approval of the commissioner, for the terms of office 
specified in their nominations.  Vacancies on the board shall be 
filled for the remaining period of the term by a majority vote 
of the remaining board members, subject to approval of the 
commissioner.  In approving selections or in appointing members 
to the board, the commissioner shall consider whether all member 
insurers are fairly represented. 
    Subd. 2.  [EXPENSES.] Members of the board may be 
reimbursed from the assets of the association for reasonable and 
necessary expenses incurred by them as members of the board, but 
shall not otherwise be compensated by the association for their 
services. 
    Subd. 3.  [COMMITTEES AND MEETINGS.] Except as otherwise 
required under the plan of operation: 
    (a) The board of directors may, by unanimous affirmative 
action of the entire board, designate three or more directors as 
an executive committee, which, to the extent determined by 
unanimous affirmative action of the entire board, has and shall 
exercise the authority of the board in the management of the 
business of the association.  This executive committee shall act 
only in the interval between meetings of the board, and is 
subject at all times to the control and direction of the board. 
    (b) The board of directors may, by unanimous affirmative 
action of the entire board, create additional committees, which 
have and shall exercise the specific authority and 
responsibility as determined by the unanimous affirmative action 
of the entire board. 
    (c) Any action that may be taken at a meeting of the board 
of directors or of a lawfully constituted executive committee 
may be taken without a meeting if authorized by a writing or 
writings signed by all the directors or by all of the members of 
the committee, as the case may be.  This action is effective on 
the date on which the last signature is placed on the writing or 
writings, or on an earlier effective date established in the 
writing or writings. 
    (d) Members of the board of directors or of a lawfully 
constituted executive committee may participate in a meeting of 
the board or committee by means of conference telephone or 
similar communications equipment through which all persons 
participating in the meeting can hear each other.  Participation 
in a meeting as provided in this paragraph constitutes presence 
in person at the meeting. 
    Subd. 4.  [OPEN MEETINGS.] Board meetings are not subject 
to section 471.705. 
    Sec. 8.  [61B.23] [POWERS AND DUTIES OF THE ASSOCIATION.] 
    Subdivision 1.  [IMPAIRED DOMESTIC INSURER.] If a member 
insurer is an impaired domestic insurer, the association may, in 
its discretion, and subject to any conditions imposed by the 
association that do not impair the contractual obligations of 
the impaired insurer and that are approved by the commissioner, 
and that are, except in cases of court ordered conservation or 
rehabilitation, also approved by the impaired insurer: 
    (1) guarantee, assume, or reinsure, or cause to be 
guaranteed, assumed, or reinsured, any or all of the policies or 
contracts of the impaired insurer; 
    (2) provide money, pledges, notes, guarantees, or other 
means as are proper to exercise the power granted in clause (1) 
and assure payment of the contractual obligations of the 
impaired insurer pending action under clause (1); or 
    (3) loan money to the impaired insurer. 
    Subd. 2.  [IMPAIRED INSURER NOT PAYING CLAIMS.] (a) If a 
member insurer is an impaired insurer, whether domestic, 
foreign, or alien, and the insurer is not paying claims in a 
timely manner as required under section 72A.201, based in whole 
or in part on the insurer's financial inability to pay claims 
then subject to the preconditions specified in paragraph (b), 
the association shall, in its discretion, either: 
    (1) take any of the actions specified in subdivision 1, 
subject to the conditions in that subdivision; or 
    (2) provide for prompt payment of current contractual 
obligations. 
    (b) The association is subject to the requirements of 
paragraph (a) only if the commissioner has begun a formal 
administrative or judicial proceeding which seeks to suspend the 
authority of the impaired insurer to write new business in this 
state and to require the impaired insurer to cooperate with the 
association in the administration of claims.  The suspension of 
the impaired insurer's authority to write new business in this 
state shall continue until all payments of or on account of the 
impaired insurer's contractual obligations paid by the 
association, along with all expenses thereof and interest on 
these payments and expenses, shall have been repaid to the 
association or a plan of repayment of the payments, expenses, 
and interest by the impaired insurer shall have been approved by 
the association.  If the commissioner ceases to seek an 
administrative or judicial order suspending the impaired 
insurer's authority to write new business in this state within 
90 days, or is denied the order, the association shall not be 
required to proceed under this subdivision unless: 
    (1) the impaired insurer has been placed under an order of 
rehabilitation or conservation by a court of competent 
jurisdiction; and 
    (2) the court has approved and entered an order providing 
that the rehabilitation or conservation proceedings shall not be 
dismissed, and neither the impaired insurer nor its assets shall 
be returned to the control of its shareholders or private 
management, and the impaired insurer is prohibited from 
soliciting or accepting new business or having a suspended or 
revoked license restored until at least one of the following 
events has occurred: 
    (i) all payments of or on account of the impaired insurer's 
contractual obligations paid by all the affected guaranty 
associations, along with expenses thereof and interest on all of 
those payments and expenses incurred by those guaranty 
associations, have been repaid to them; or 
    (ii) a plan of repayment by the impaired insurer has been 
approved by all the affected guaranty associations. 
    (c) The association shall endeavor to obtain access to 
those records of the impaired insured as are needed for the 
association to discharge its obligations and, if requested by 
the association, the commissioner will assist the association in 
obtaining access to those records.  If the association is not 
given access to the necessary records, the association shall be 
relieved of its responsibility to make benefit payments until 
the time it is given access to those records. 
    (d) If the impaired insurer is subsequently determined to 
be insolvent by a court of competent jurisdiction in its state 
of domicile and is placed in liquidation, the association shall 
then proceed as provided in subdivision 3. 
    Subd. 3.  [INSOLVENT INSURER.] If a member insurer is an 
insolvent insurer then, subject to any conditions imposed by the 
association and approved by the commissioner, the association 
shall, in its discretion: 
    (1) guaranty, assume, or reinsure, or cause to be 
guaranteed, assumed, or reinsured, the policies or contracts of 
the insolvent insurer; 
    (2) assure payment of the contractual obligations of the 
insolvent insurer which are due and owing; 
    (3) provide money, pledges, guarantees, or other means as 
are reasonably necessary to discharge its duties; or 
    (4) with respect only to life and health insurance 
policies, provide benefits and coverages in accordance with 
subdivision 4. 
    Subd. 4.  [PAYMENTS; ALTERNATIVE POLICIES.] When proceeding 
under subdivision 2, paragraph (a), clause (2), or subdivision 
3, clause (4), the association shall, with respect to only life 
and health insurance policies: 
    (a) Assure payment of benefits for premiums identical to 
the premiums and benefits, except for terms of conversion and 
renewability, that would have been payable under the policies of 
the impaired or insolvent insurer, for claims incurred: 
    (1) with respect to group policies, not later than the 
earlier of the next renewal date under those policies or 
contracts or 45 days, but in no event less than 30 days, after 
the date on which the association becomes obligated with respect 
to those policies; or 
    (2) with respect to individual policies, not later than the 
earlier of the next renewal date, if any, under those policies 
or one year, but in no event less than 30 days, from the date on 
which the association becomes obligated with respect to those 
policies. 
    (b) Make diligent efforts to provide all known insureds or 
group policyholders with respect to group policies 30 days' 
notice of the termination of the benefits provided. 
    (c) With respect to individual policies, make available to 
each known insured, or owner if other than the insured, and with 
respect to an individual formerly insured under a group policy 
who is not eligible for replacement group coverage, make 
available substitute coverage on an individual basis in 
accordance with paragraph (d), if the insureds had a right under 
law or the terminated policy to convert coverage to individual 
coverage or to continue an individual policy in force until a 
specified age or for a specified time, during which the insurer 
had no right unilaterally to make changes in any provision of 
the policy or had a right only to make changes in premium by 
class. 
    (d)(1) In providing the substitute coverage required under 
paragraph (c), the association may offer either to reissue the 
terminated coverage or to issue an alternative policy. 
    (2) Alternative or reissued policies must be offered 
without requiring evidence of insurability, and must not provide 
for any waiting period or exclusion that would not have applied 
under the terminated policy. 
    (3) The association may reinsure any alternative or 
reissued policy. 
    (e)(1) Alternative policies adopted by the association are 
subject to the approval of the commissioner.  The association 
may adopt alternative policies of various types for future 
issuance without regard to any particular impairment or 
insolvency. 
    (2) Alternative policies must contain at least the minimum 
statutory provisions required in this state and provide benefits 
that are not unreasonable in relation to the premium charged. 
The association shall set the premium in accordance with a table 
of rates which it shall adopt.  The premium must reflect the 
amount of insurance to be provided and the age and class of risk 
of each insured, but must not reflect any changes in the health 
of the insured after the original policy was last underwritten. 
    (3) Any alternative policy issued by the association must 
provide coverage of a type similar to that of the policy issued 
by the impaired or insolvent insurer, as determined by the 
association. 
    (f) If the association elects to reissue terminated 
coverage at a premium rate different from that charged under the 
terminated policy, the premium must be set by the association in 
accordance with the amount of insurance provided and the age and 
class of risk, subject to approval of the commissioner or by a 
court of competent jurisdiction. 
    (g) The association's obligations with respect to coverage 
under any policy of the impaired or insolvent insurer or under 
any reissued or alternative policy ceases on the date the 
coverage or policy is replaced by another similar policy by the 
policyholder, the insurer, or the association and the 
preexisting condition limitations have been satisfied. 
    Subd. 5.  [OBLIGATIONS TERMINATED.] Nonpayment of all 
unpaid premiums within 31 days after the date required under the 
terms of a guaranteed, assumed, alternative, or reissued policy 
or contract or substitute coverage terminates the association's 
obligations under the policy, contract, or coverage under 
sections 61B.18 to 61B.32 with respect to the policy, contract, 
or coverage, except with respect to claims incurred or net cash 
surrender value that may be due in accordance with sections 
61B.18 to 61B.32.  The association will not terminate the policy 
or contract for nonpayment of premium until 31 days after the 
association sends a written cancellation notice by first class 
mail to the insured's last known address. 
    Subd. 6.  [POSTLIQUIDATION PREMIUMS.] Premiums due for 
coverage after entry of any order of liquidation of an insolvent 
insurer belong to and are payable at the direction of the 
association, and the association is liable for unearned premiums 
due policy or contract owners arising after the entry of the 
order. 
    Subd. 7.  [COVERAGE BY ANOTHER STATE.] The association has 
no liability under this section for a covered policy of a 
foreign or alien insurer whose domiciliary jurisdiction or state 
of entry provides protection, by statutes or rule, for residents 
of this state, which protection is substantially similar to that 
provided by sections 61B.18 to 61B.32, for residents of other 
states.  Recovery provided for under sections 61B.18 to 61B.32 
is reduced by the amount of recovery under the coverage provided 
by another state or jurisdiction.  If another state or 
jurisdiction providing substantially similar coverage as 
provided by sections 61B.18 to 61B.32 denies coverage, the 
association shall provide coverage if the policyholder or 
contract holder is otherwise eligible, and the association is 
then subrogated to the rights of the person receiving benefits 
with respect to the other state or jurisdiction.  If a person 
receiving benefits from the association has a claim remaining 
against another state or jurisdiction, whether or not such state 
or jurisdiction provides substantially similar protection within 
the meaning of this section, then such person's remaining claim 
has priority over any subrogation rights of the association with 
respect to that other state or jurisdiction. 
    Subd. 8.  [LIENS.] (a) In carrying out its duties under 
subdivision 2 or 3, the association may request that there be 
imposed policy liens, contract liens, moratoriums on payments, 
or other similar means.  The liens, moratoriums, or similar 
means may be imposed if the commissioner: 
    (1) finds:  (i) that the amounts that can be assessed under 
sections 61B.18 to 61B.32 are less than the amounts necessary to 
assure full and prompt performance of the impaired insurer's 
contractual obligations; (ii) that economic or financial 
conditions as they affect member insurers are sufficiently 
adverse to cause the imposition of policy or contract liens, 
moratoriums, or similar means to be in the public interest; 
(iii) that there is a reasonable likelihood that a plan of 
rehabilitation will be developed or other appropriate 
arrangements made for the orderly provision for covered 
contractual obligations of the impaired or insolvent insurer, 
and that the imposition of policy or contract liens, 
moratoriums, or similar means is necessary and appropriate to 
support the development of the plan of rehabilitation or other 
appropriate arrangements; (iv) that the imposition of policy or 
contract liens, moratoriums, or similar means is necessary and 
appropriate to ensure the equitable treatment of all 
policyholders of impaired or insolvent insurers protected by the 
guaranty association; (v) that the imposition of policy or 
contract liens, moratoriums, or similar means is necessary and 
appropriate to encourage recovery of the maximum possible amount 
from the remaining assets of the impaired or insolvent insurer's 
estate; or (vi) that the imposition of policy or contract liens, 
moratoriums, or similar means is necessary and appropriate in 
order for the association to participate in any multistate plan 
of rehabilitation, conservation, or liquidation of the impaired 
or insolvent insurer, and the commissioner considers the plan to 
be in the best interests of the impaired or insolvent insurer's 
policyholders or the association's member insurers; 
    (2) finds, in the case of a moratorium, that current 
contractual obligations are being, and will continue to be, 
promptly paid; and 
    (3) approves the specific policy liens, contract liens, 
moratoriums, or similar means to be used. 
    (b) Before being obligated under subdivision 2 or 3, the 
association may request that there be imposed temporary 
moratoriums or liens on payments of cash values and policy 
loans.  The temporary moratoriums and liens may be imposed if 
approved by the commissioner. 
    (c) A moratorium, lien, or other means imposed pursuant to 
this subdivision may be for:  (i) a specific term; or (ii) an 
indefinite term which shall continue in effect until the 
commissioner, at the request of the association or, on the 
commissioner's own motion after notice to the association, finds 
that the reason or reasons for the moratorium, lien, or other 
means no longer exists. 
    Subd. 9.  [FAILURE TO ACT.] If the association fails to act 
within a reasonable period of time as provided in subdivision 2, 
paragraph (a), clause (2); subdivision 3; or subdivision 4, the 
commissioner has the powers and duties of the association with 
respect to impaired or insolvent insurers including, but not 
limited to, the power to make assessments. 
    Subd. 10.  [ASSISTANCE TO COMMISSIONER.] The association 
may give assistance and advice to the commissioner, upon 
request, concerning rehabilitation, payment of claims, 
continuance of coverage, or the performance of other contractual 
obligations of an impaired or insolvent insurer. 
    Subd. 11.  [STANDING IN COURT.] The association has 
standing to appear before any court in this state with 
jurisdiction over an impaired or insolvent insurer concerning 
which the association is or may become obligated under sections 
61B.18 to 61B.32.  This standing extends to all matters germane 
to the powers and duties of the association, including proposals 
for reinsuring, modifying, or guaranteeing the policies or 
contracts of the impaired or insolvent insurer and the 
determination of the policies or contracts and contractual 
obligations.  The association may appear or intervene before a 
court in another state with jurisdiction over an impaired or 
insolvent insurer for which the association is or may become 
obligated or with jurisdiction over a third party against whom 
the association may have rights through subrogation of the 
insurer's policyholders or of any other person, provided, 
however, in the case of any such appearance or intervention, the 
association shall not submit for adjudication its obligations to 
provide coverage under the Minnesota life and health insurance 
guaranty association act without the prior approval of the 
commissioner. 
    Subd. 12.  [ASSIGNMENTS; SUBROGATION RIGHTS.] (a) A person 
receiving benefits under sections 61B.18 to 61B.32 shall be 
considered to have assigned the rights under, and any causes of 
action relating to, the covered policy or contract to the 
association to the extent of the benefits received because of 
sections 61B.18 to 61B.32, whether the benefits are payments of 
or on account of contractual obligations, continuation of 
coverage, or provision of substitute or alternative coverages. 
The association may require an assignment to it of those rights 
and causes of action by a payee, policy or contract owner, 
beneficiary, insured, or annuitant as a condition precedent to 
the receipt of rights or benefits conferred by sections 61B.18 
to 61B.32 upon that person.  The subrogation rights of the 
association include any rights that a person may have as a 
beneficiary of a plan covered under the Employee Retirement 
Income Security Act of 1974, United States Code, title 29, 
section 1003, as amended. 
    (b) The subrogation rights of the association under this 
subdivision against the assets of the impaired or insolvent 
insurer have the same priority as those of a person entitled to 
receive benefits under sections 61B.18 to 61B.32. 
    (c) In addition to paragraphs (a) and (b), the association 
has all common law rights of subrogation and other equitable or 
legal remedies that would have been available to the impaired or 
insolvent insurer or person receiving benefits under sections 
61B.18 to 61B.32. 
    Subd. 13.  [PERMISSIVE POWERS.] The association may: 
    (1) enter into contracts as are necessary or proper to 
carry out the provisions and purposes of sections 61B.18 to 
61B.32; 
    (2) sue or be sued, including taking any legal actions 
necessary or proper to recover any unpaid assessments under 
section 61B.26 to settle claims or potential claims against it; 
    (3) borrow money to effect the purposes of sections 61B.18 
to 61B.32 and any notes or other evidence of indebtedness of the 
association not in default are legal investments for domestic 
insurers and may be carried as admitted assets; 
    (4) employ or retain persons as are necessary to handle the 
financial transactions of the association, and to perform other 
functions as the association considers necessary or proper under 
sections 61B.18 to 61B.32; 
    (5) enter into arbitration or take legal action as may be 
necessary to avoid payment of improper claims; 
    (6) exercise, for the purposes of sections 61B.18 to 61B.32 
and to the extent approved by the commissioner, the powers of a 
domestic life or health insurer, but in no case may the 
association issue insurance policies or annuity contracts other 
than those issued to perform its obligations under sections 
61B.18 to 61B.32; 
    (7) join an organization of one or more other state 
associations of similar purposes, to further the purposes and 
administer the powers and duties of the association; 
    (8) negotiate and contract with any liquidator, 
rehabilitator, conservator, or ancillary receiver to carry out 
the powers and duties of the association; and 
    (9) participate in the organization of and/or own stock in 
an entity which exists or was formed for the purpose of assuming 
liability for contracts or policies issued by impaired or 
insolvent insurers. 
    Sec. 9.  [61B.24] [ASSESSMENTS.] 
    Subdivision 1.  [PURPOSE.] For the purpose of providing the 
funds necessary to carry out the powers and duties of the 
association, the board of directors shall assess the member 
insurers, separately for each account or subaccount, at the 
times and for the amounts as the board finds necessary. 
Assessments are due not less than 30 days after prior written 
notice to the member insurers and accrue interest on and after 
the due date at the then applicable rate determined under 
section 549.09, subdivision 1, paragraph (c). 
    Subd. 2.  [CLASSES OF ASSESSMENTS.] There are two classes 
of assessments, as follows: 
    (1) class A assessments must be made for the purpose of 
meeting administrative and legal costs and other expenses and 
examinations conducted under the authority of section 61B.27. 
Class A assessments may be made whether or not related to a 
particular impaired or insolvent insurer; and 
    (2) class B assessments must be made to the extent 
necessary to carry out the powers and duties of the association 
under section 61B.23 with regard to an impaired or an insolvent 
insurer. 
    Subd. 3.  [FORMULA FOR DETERMINATION.] (a) The amount of a 
class A assessment shall be determined by the board and may be 
made on a pro rata or nonpro rata basis.  If pro rata, the board 
may provide that it be credited against future class B 
assessments.  A nonpro rata assessment shall not exceed $500 per 
member insurer in any one calendar year. 
    (b) The amount of any class B assessment must be allocated 
for assessment purposes among the accounts or subaccounts 
pursuant to an allocation formula which may be based on the 
premiums or reserves of the impaired or insolvent insurer or any 
other standard considered by the board in its sole discretion as 
being fair and reasonable under the circumstances. 
    (c) Class B assessments against member insurers for each 
subaccount or account must be in the proportion that the average 
annual premiums received on business in this state by each 
assessed member insurer on policies or contracts covered by each 
subaccount or account for the three most recent calendar years 
for which information is available preceding the calendar year 
in which the insurer became impaired or insolvent, as the case 
may be, bears to the average annual premiums received on 
business in this state by all assessed member insurers on 
policies or contracts covered by that subaccount or account for 
those same calendar years.  If the impaired insurer becomes 
insolvent, the date of impairment must be used to determine the 
assessment.  Premiums for purposes of calculating average annual 
premium for calendar years prior to 1993 shall be determined in 
accordance with Minnesota Statutes 1992, sections 61B.01 to 
61B.16.  
    (d) Assessments for funds to meet the requirements of the 
association with respect to an impaired or insolvent insurer 
must not be made until necessary to implement the purposes of 
sections 61B.18 to 61B.32.  Classification of assessments under 
subdivision 2 and computation of assessments under this 
subdivision must be made with a reasonable degree of accuracy, 
recognizing that exact determinations may not always be possible.
    Subd. 4.  [ABATEMENT OR DEFERMENT.] The association may 
abate or defer, in whole or in part, the assessment of a member 
insurer if, in the opinion of the board, payment of the 
assessment would endanger the ability of the member insurer to 
fulfill its contractual obligations.  In the event an assessment 
against a member insurer is abated, or deferred in whole or in 
part, the amount by which the assessment is abated or deferred 
may be assessed against the other member insurers in a manner 
consistent with the basis for assessments as provided in this 
section. 
    Subd. 5.  [MAXIMUM ASSESSMENT.] (a) The total of all 
assessments upon a member insurer for the life and annuity 
account and for each subaccount of the life and annuity account 
shall not in any one calendar year exceed two percent of that 
member insurer's average annual premiums as calculated in 
subdivision 3, paragraph (c), on policies or contracts covered 
by that account or subaccount.  If two or more assessments are 
made with respect to insurers that become impaired or insolvent 
in different calendar years, average annual premiums for 
purposes of the assessment percentage limitation are based upon 
the higher of the three-year averages calculated under 
subdivision 3, paragraph (c).  If an impaired insurer becomes 
insolvent, the date of impairment must be used to determine the 
assessment.  In addition, if the board of directors determines 
that a one percent assessment for any subaccount of the life and 
annuity account in any one calendar year will not provide an 
amount sufficient to carry out the responsibilities of the 
association, then pursuant to subdivision 3, the board of 
directors shall make a one percent assessment for the affected 
subaccount or subaccounts and assess the remaining necessary 
amount against all three subaccounts on a pro rata basis; 
provided that if the maximum annual two percent assessment limit 
would be exceeded in a subaccount by the assessment, then the 
other subaccounts will be assessed for the balance of any 
remaining necessary amount up to the maximum annual two percent 
limit in those other subaccounts. 
    (b) The total of all assessments upon a member insurer for 
the health account shall not in any one calendar year exceed two 
percent of that member insurer's average annual premiums as 
calculated under subdivision 3, paragraph (c), on policies or 
contracts covered by that account.  If two or more assessments 
are made with respect to insurers that become impaired or 
insolvent in different calendar years, average annual premiums 
for purposes of the assessment percentage limitation is based 
upon the higher of the three-year averages calculated under 
subdivision 3, paragraph (c). 
    (c) If the maximum assessment for an account, together with 
the other assets of the association in that account, does not 
provide in any one calendar year in that account an amount 
sufficient to carry out the responsibilities of the association, 
the necessary additional funds must be assessed as soon as 
permitted by sections 61B.18 to 61B.32. 
    (d) The board may adopt general principles in the plan of 
operation for allocating funds among claims, whether relating to 
one or more impaired or insolvent insurers, when the maximum 
assessment will be insufficient to cover anticipated claims. 
     (e) If assessments under this section are inadequate to pay 
all obligations of the impaired insurer that are or become due 
and owing, then the association shall prepare a plan approved by 
the commissioner for prioritization of payments.  If the 
association adopts general principles in the plan of operations, 
the association shall use the general principles in preparing 
the plan required under this paragraph.  No formerly impaired or 
insolvent insurer may be reinstated until all payments of or on 
account of the insurer's contractual obligations by the guaranty 
association, along with all expenses thereof and interest on all 
such payments and expenses, shall have been repaid to the 
guaranty association or a plan of repayment by the insurer shall 
have been approved by the commissioner. 
    Subd. 6.  [REFUND.] The board may, by an equitable method 
as established in the plan of operation, refund to member 
insurers, in proportion to the contribution of each insurer to 
that account or subaccount, the amount by which the assets of 
the account or subaccount exceed the amount the board finds is 
necessary to carry out during the coming year the obligations of 
the association with regard to that account or subaccount, 
including assets accruing from assignment, subrogation, net 
realized gains, and income from investments.  A reasonable 
amount may be retained in any account or subaccount to provide 
funds for the continuing expenses of the association and for 
future losses. 
    Subd. 7.  [PREMIUM RATES AND DIVIDENDS.] A member insurer 
may, in determining its premium rates and policyowner dividends 
as to any kind of insurance within the scope of sections 61B.18 
to 61B.32, consider the amount reasonably necessary to meet its 
assessment obligations under sections 61B.18 to 61B.32. 
    Subd. 8.  [CERTIFICATE OF CONTRIBUTION.] The association 
shall issue to each insurer paying an assessment under sections 
61B.18 to 61B.32, other than a class A assessment, a certificate 
of contribution, in a form prescribed by the commissioner, for 
the amount of the assessment so paid.  All outstanding 
certificates must be of equal dignity and priority without 
reference to amounts or dates of issue.  A certificate of 
contribution may be shown by the insurer in its financial 
statement as an asset in the form and for the amount, if any, 
and period of time as the commissioner may approve. 
    Subd. 9.  [SURVIVAL OF OBLIGATION.] In the event a member 
insurer engages in any reorganization, including any merger, 
consolidation, restructuring, incorporation, or reincorporation, 
the member's obligations under this chapter shall survive the 
reorganization with respect to assessments for impairments or 
insolvencies occurring before the date of the reorganization. 
    Sec. 10.  [61B.25] [PLAN OF OPERATION.] 
    Subdivision 1.  [ADOPTION AND AMENDMENT.] The purpose of 
the plan of operation is to assure the fair, reasonable, and 
equitable administration of the association under sections 
61B.18 to 61B.32.  Amendments to the plan of operation must be 
submitted to the commissioner and become effective upon the 
commissioner's written approval or 30 days after submission if 
the commissioner has not disapproved.  If the association fails 
to submit suitable amendments to the plan, the commissioner 
shall, after notice and hearing, adopt reasonable rules 
necessary or advisable to implement sections 61B.18 to 61B.32. 
The rules shall continue in force until modified by the 
commissioner or superseded by amendments submitted by the 
association and approved by the commissioner. 
    Subd. 2.  [COMPLIANCE.] All member insurers shall comply 
with the plan of operation. 
    Subd. 3.  [CONTENTS.] The plan of operation must, in 
addition to requirements specified in sections 61B.18 to 61B.32: 
    (1) establish procedures for handling the assets of the 
association; 
    (2) establish the amount and method of reimbursing members 
of the board of directors under section 61B.22; 
    (3) establish regular places and times for meetings 
including telephone conference calls of the board of directors 
or of the executive committee; 
    (4) establish procedures for records to be kept of all 
financial transactions of the association, its agents, and the 
board of directors; 
    (5) establish procedures for selecting the board of 
directors; 
    (6) establish any additional procedures for assessments 
under section 61B.24; and 
    (7) contain additional provisions necessary or proper for 
the execution of the powers and duties of the association. 
    Subd. 4.  [DELEGATION OF POWERS AND DUTIES.] The plan of 
operation may provide that any or all powers and duties of the 
association, except those under sections 61B.23, subdivision 13, 
clause (3), and 61B.24, are delegated to a corporation, 
association, or other organization which performs or will 
perform functions similar to those of this association, or its 
equivalent, in two or more states.  The corporation, 
association, or organization shall be reimbursed for any 
payments made on behalf of the association and shall be paid for 
its performance of any function of the association.  A 
delegation under this subdivision shall take effect only with 
the approval of both the board of directors and the 
commissioner, and may be made only to a corporation, 
association, or organization which extends protection not 
substantially less favorable and effective than that provided by 
sections 61B.18 to 61B.32. 
    Sec. 11.  [61B.26] [DUTIES AND POWERS OF THE COMMISSIONER.] 
    (a) In addition to other duties and powers in sections 
61B.18 to 61B.32, the commissioner shall: 
     (1) notify the board of directors of the existence of an 
impaired or insolvent insurer within three days after a 
determination of impairment or insolvency is made or the 
commissioner receives notice of impairment or insolvency; 
    (2) upon request of the board of directors, provide the 
association with a statement of the premiums in this and any 
other appropriate states for each member insurer; 
    (3) when an impairment is declared and the amount of the 
impairment is determined, serve a demand upon the impaired 
insurer to make good the impairment within a reasonable time; 
notice to the impaired insurer shall constitute notice to its 
shareholders, if any; the failure of the insurer to promptly 
comply with the commissioner's demand shall not excuse the 
association from the performance of its powers and duties under 
sections 61B.18 to 61B.32; and 
    (4) in a liquidation, conservation, or rehabilitation 
proceeding involving a domestic insurer, be appointed as the 
liquidator, conservator, or rehabilitator. 
    (b) The commissioner may suspend or revoke, after notice 
and hearing, the certificate of authority to transact insurance 
in this state of any member insurer which fails to pay an 
assessment when due or fails to comply with the plan of 
operation.  As an alternative, the commissioner may levy a 
forfeiture on any member insurer which fails to pay an 
assessment when due.  A forfeiture shall not exceed five percent 
of the unpaid assessment per month, but no forfeiture shall be 
less than $100 per month. 
    (c) An action of the board of directors or the association 
may be appealed to the commissioner if the appeal is taken 
within 30 days of the notice of the action being appealed.  If a 
member company is appealing an assessment, the amount assessed 
must be paid to the association and be available to meet 
association obligations during the pendency of an appeal.  If 
the appeal on the assessment is upheld, the amount paid in error 
or excess must be returned to the member company.  Any final 
action or order of the commissioner is subject to judicial 
review in a court of competent jurisdiction, in the manner 
provided by chapter 14.  A determination or decision by the 
commissioner under sections 61B.18 to 61B.32 is not subject to 
the contested case or rulemaking provisions of chapter 14. 
    (d) The liquidator, rehabilitator, or conservator of an 
impaired insurer may notify all interested persons of the effect 
of sections 61B.18 to 61B.32. 
    (e) For the purposes of sections 61B.18 to 61B.32, the 
commissioner may delegate any of the powers conferred by law. 
    (f) Nonperformance of any of the acts specified in this 
section or failure to meet the specific time limits does not 
affect the association, its members, or any other person as to 
the person's duties and obligations. 
    Sec. 12.  [61B.27] [PREVENTION OF INSOLVENCIES.] 
    (a) To aid in the detection and prevention of insurer 
insolvencies or impairments the commissioner shall notify the 
commissioners of insurance of all the other states, territories 
of the United States, and the District of Columbia when the 
commissioner takes one of the following actions against a member 
insurer: 
    (i) revocation of license; or 
    (ii) suspension of license.  
     The notice must be mailed to all commissioners within 30 
days following the action. 
     (b) If the commissioner deems it appropriate, the 
commissioner may: 
    (1) Report to the board of directors when the commissioner 
has taken any of the actions specified in paragraph (a) or has 
received a report from another commissioner indicating that an 
action specified in paragraph (a) has been taken in another 
state.  The report to the board of directors must contain all 
significant details of the action taken or the report received 
from another commissioner. 
    (2) Report to the board of directors when the commissioner 
has reasonable cause to believe from an examination, whether 
completed or in process, of a member company that the company 
may be an impaired or insolvent insurer. 
    (3) Furnish to the board of directors the national 
association of insurance commissioners insurance regulatory 
information system ratios and listings of companies not included 
in the ratios developed by the national association of insurance 
commissioners, and the board may use the information in carrying 
out its duties and responsibilities under this section.  The 
report and the information contained in it must be kept 
confidential by the board of directors until it has been made 
public by the commissioner or other lawful authority.  Nothing 
in this provision supersedes other requirements of law.  
     (4) Notify the board if the commissioner makes a formal 
order requiring the company to restrict its premium writing, 
obtain additional contributions to surplus, withdraw from this 
state, reinsure all or any part of its business, or increase 
capital, surplus, or any other account for the security of 
policyholders or creditors. 
    (c) The commissioner may seek the advice and 
recommendations of the board of directors concerning any matter 
affecting the commissioner's duties and responsibilities 
regarding the financial condition of member insurers and of 
companies seeking admission to transact insurance business in 
this state. 
    (d) The board of directors may, upon majority vote, make 
reports and recommendations to the commissioner upon matters 
germane to the solvency, liquidation, rehabilitation, or 
conservation of any member insurer or germane to the solvency of 
a company seeking to do an insurance business in this state. 
Those reports and recommendations shall not be considered public 
documents. 
    (e) The board of directors, upon majority vote, shall 
notify the commissioner of information indicating that a member 
insurer may be an impaired or insolvent insurer. 
    (f) The board of directors may, upon majority vote, request 
that the commissioner order an examination of a member insurer 
which the board in good faith believes may be an impaired or 
insolvent insurer.  Within 30 days of the receipt of the 
request, the commissioner shall begin the examination.  The 
examination may be conducted as a national association of 
insurance commissioners examination or may be conducted by those 
persons designated by the commissioner.  The cost of the 
examination must be paid by the association and the examination 
report must be treated as are other examination reports.  In no 
event shall an examination report be released to the board of 
directors prior to its release to the public, but this shall not 
preclude the commissioner from complying with paragraph (a). 
     The commissioner shall notify the board of directors when 
the examination is completed.  The request for an examination 
must be kept on file by the commissioner, but it shall not be 
open to public inspection prior to the release of the 
examination report to the public. 
    (g) The board of directors may, upon majority vote, make 
recommendations to the commissioner for the detection and 
prevention of insurer insolvencies. 
    (h) The board of directors may, at the conclusion of an 
insurer insolvency in which the association was obligated to pay 
covered claims, prepare a report to the commissioner containing 
the information it may have in its possession bearing on the 
history and causes of the insolvency.  The board shall cooperate 
with the boards of directors of guaranty associations in other 
states in preparing a report on the history and causes of 
insolvency of a particular insurer, and may adopt by reference 
any report prepared by those other associations. 
    (i) Nonperformance by the commissioner of any of the acts 
specified in this section or failure to meet the specified time 
limits does not affect the association, its members, or any 
other person as to the person's duties and obligations. 
     Nothing in this section supersedes other requirements of 
law. 
    Sec. 13.  [61B.28] [MISCELLANEOUS PROVISIONS.] 
    Subdivision 1.  [RECORDS.] Records must be kept of all 
negotiations and meetings in which the association or its 
representatives are involved to discuss the activities of the 
association in carrying out its powers and duties under section 
61B.23.  Records of negotiations or meetings shall be made 
public only upon the termination of a liquidation, 
rehabilitation, or conservation proceeding involving the 
impaired or insolvent insurer, upon the termination of the 
impairment or insolvency of the insurer, or upon the order of a 
court of competent jurisdiction.  Nothing in this subdivision 
limits the duty of the association to report its activities 
under section 61B.27. 
    Subd. 2.  [REPORTS.] (a) A report, recommendation, or 
notification by the association, its board of directors, or 
officers to the commissioner concerning a member insurer, 
together with statements or documents furnished to the 
commissioner with, or subsequent to, a report, recommendation, 
or notification, is confidential and a privileged communication. 
Reports, recommendations, notifications, statements, and 
documents furnished to the commissioner are not admissible in 
whole or in part for any purpose in an action or proceeding 
against: 
    (1) the association or its member insurers, officers, 
employees, or representatives submitting or providing the 
report, recommendation, notification, statement, or document; or 
    (2) a person, firm, or entity who in good faith furnishes 
to the association the information or document upon which the 
association has relied in making its report, recommendation, or 
notification to the commissioner. 
    (b) Notwithstanding the provisions of section 13.71, the 
commissioner may release to the association's board of directors 
any or all nonpublic data collected and maintained by the 
commissioner on a member insurer or a potential member insurer. 
Information furnished to the board of directors is private. 
    Subd. 3.  [ASSOCIATION AS CREDITOR.] For the purpose of 
carrying out its obligations under sections 61B.18 to 61B.32, 
the association is considered to be a creditor of the impaired 
or insolvent insurer to the extent of assets attributable to 
covered policies, reduced by amounts to which the association is 
entitled as subrogee under section 61B.23, subdivision 12. 
Assets of the impaired or insolvent insurer attributable to 
covered policies must be used to continue all covered policies 
and pay all contractual obligations of the impaired or insolvent 
insurer as required by sections 61B.18 to 61B.32.  Assets 
attributable to covered policies, as used in this subdivision, 
are that proportion of the assets which the reserves that should 
have been established for those policies bear to the reserves 
that should have been established for all policies of insurance 
written by the impaired or insolvent insurer. 
    Subd. 4.  [PROHIBITED SALES PRACTICE.] No person, including 
an insurer, agent, or affiliate of an insurer, shall make, 
publish, disseminate, circulate, or place before the public, or 
cause directly or indirectly, to be made, published, 
disseminated, circulated, or placed before the public, in any 
newspaper, magazine, or other publication, or in the form of a 
notice, circular, pamphlet, letter, or poster, or over any radio 
station or television station, or in any other way, an 
advertisement, announcement, or statement, written or oral, 
which uses 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 
covered by sections 61B.18 to 61B.32.  The notice required by 
subdivision 8 is not a violation of this subdivision.  This 
subdivision does not apply to the Minnesota life and health 
insurance guaranty association or an entity that does not sell 
or solicit insurance.  A person violating this section is guilty 
of a misdemeanor. 
    Subd. 5.  [DISTRIBUTION TO STOCKHOLDERS.] No distribution 
to stockholders of an impaired domiciliary insurer shall be made 
until the total amount of assessments levied by the association 
with respect to the insurer have been fully recovered by the 
association. 
    Subd. 6.  [REINSTATEMENT.] No insurer may be reinstated to 
do business in this state until all payments of or on account of 
the impaired insurer's contractual obligations by the guaranty 
association, along with all expenses thereof and interest on all 
such payments and expenses, shall have been repaid to the 
guaranty association or a plan of repayment by the impaired 
insurer shall have been approved by the association. 
    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 delivering at the time of application 
for that policy or contract 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 applicant.  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.  The person offering the policy 
or contract shall document the fact that the notice was given at 
the time of application or was sent within the specified time. 
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 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. 
    Subd. 8.  [FORM.] The form of notice referred to in 
subdivision 7, paragraph (a), is as follows: 
"NOTICE CONCERNING POLICYHOLDER RIGHTS IN AN 
INSOLVENCY UNDER THE MINNESOTA LIFE AND HEALTH
INSURANCE GUARANTY ASSOCIATION LAW
    If the insurer that issued your life, annuity, or health 
insurance policy becomes impaired or insolvent, you are entitled 
to compensation for your policy from the assets of that insurer. 
The amount you recover will depend on the financial condition of 
the insurer. 
    In addition, residents of Minnesota who purchase life 
insurance, annuities, or health insurance from insurance 
companies authorized to do business in Minnesota are protected, 
SUBJECT TO LIMITS AND EXCLUSIONS, in the event the insurer 
becomes financially impaired or insolvent.  This protection is 
provided by the Minnesota Life and Health Insurance Guaranty 
Association. 
 Minnesota Life and Health Insurance Guaranty Association
(insert current
address and telephone number)
    The maximum amount the guaranty association will pay for 
all policies issued on one life by the same insurer is limited 
to $300,000.  Subject to this $300,000 limit, the guaranty 
association will pay up to $300,000 in life insurance death 
benefits, $100,000 in net cash surrender and net cash withdrawal 
values for life insurance, $300,000 in health insurance 
benefits, including any net cash surrender and net cash 
withdrawal values, $100,000 in annuity net cash surrender and 
net cash withdrawal values, $300,000 in present value of annuity 
benefits for annuities which are part of a structured settlement 
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 if no 
coverage limit has been specified for a covered policy or 
benefit, the coverage limit shall be $300,000 in present value.  
Unallocated annuity contracts issued to retirement plans, other 
than defined benefit plans, established under section 401, 
403(b), or 457 of the Internal Revenue Code of 1986, as amended 
through December 31, 1992, are covered up to $100,000 in net 
cash surrender and net cash withdrawal values, for Minnesota 
residents covered by the plan provided, however, that the 
association shall not be responsible for more than $7,500,000 in 
claims from all Minnesota residents covered by the plan.  If 
total claims exceed $7,500,000, the $7,500,000 shall be prorated 
among all claimants.  These are the maximum claim amounts.  
Coverage by the guaranty association is also subject to other 
substantial limitations and exclusions and requires continued 
residency in Minnesota.  If your claim exceeds the guaranty 
association's limits, you may still recover a part or all of 
that amount from the proceeds of the liquidation of the 
insolvent insurer, if any exist.  Funds to pay claims may not be 
immediately available.  The guaranty association assesses 
insurers licensed to sell life and health insurance in Minnesota 
after the insolvency occurs.  Claims are paid from this 
assessment. 
    THE COVERAGE PROVIDED BY THE GUARANTY ASSOCIATION IS NOT A 
SUBSTITUTE FOR USING CARE IN SELECTING INSURANCE COMPANIES THAT 
ARE WELL MANAGED AND FINANCIALLY STABLE.  IN SELECTING AN 
INSURANCE COMPANY OR POLICY, YOU SHOULD NOT RELY ON COVERAGE BY 
THE GUARANTY ASSOCIATION. 
    THIS NOTICE IS REQUIRED BY MINNESOTA STATE LAW TO ADVISE 
POLICYHOLDERS OF LIFE, ANNUITY, OR HEALTH INSURANCE POLICIES OF 
THEIR RIGHTS IN THE EVENT THEIR INSURANCE CARRIER BECOMES 
FINANCIALLY INSOLVENT.  THIS NOTICE IN NO WAY IMPLIES THAT THE 
COMPANY CURRENTLY HAS ANY TYPE OF FINANCIAL PROBLEMS.  ALL LIFE, 
ANNUITY, AND HEALTH INSURANCE POLICIES ARE REQUIRED TO PROVIDE 
THIS NOTICE." 
    Additional language may be added to the notice if approved 
by the commissioner prior to its use in the form.  This section 
does not apply to fraternal benefit societies regulated under 
chapter 64B. 
    Subd. 9.  [COMBINATION FIXED-VARIABLE POLICY.] The notice 
required in subdivision 8 must clearly describe what portions of 
a combination fixed-variable policy are not covered by the 
Minnesota life and health insurance guaranty association.  The 
notice requirements specified in subdivision 8 do not apply to a 
combination fixed-variable policy. 
    Subd. 10.  [EFFECT OF NOTICES.] The distribution, delivery, 
contents, or interpretation of the notices described in 
subdivision 7, 8, or 9 shall not mean that either the policy or 
contract, or the owner or holder thereof, would be covered in 
the event of the impairment or insolvency of a member insurer if 
coverage is not otherwise provided by sections 61B.18 to 61B.32. 
Failure to receive the notice does not give the policyholder, 
contract holder, certificate holder, insured, owner, 
beneficiaries, assignees, or payees any greater rights than 
those provided by sections 61B.18 to 61B.32. 
    Sec. 14.  [61B.29] [EXAMINATION OF THE ASSOCIATION; ANNUAL 
REPORT.] 
    The association is subject to examination and regulation by 
the commissioner.  The board of directors shall submit to the 
commissioner before May 1 each year, a financial report in a 
form approved by the commissioner and a report of its activities 
during the association's preceding fiscal year. 
    Sec. 15.  [61B.30] [TAX EXEMPTIONS.] 
    Subdivision 1.  [STATE FEES AND TAXES.] The association is 
exempt from payment of all fees and all taxes levied by this 
state or its subdivisions, except taxes levied on real property. 
    Subd. 2.  [FEDERAL AND FOREIGN STATE TAXES.] The 
association may seek exemption from payment of all fees and 
taxes levied by the federal or any other state government or its 
subdivision. 
    Sec. 16.  [61B.31] [INDEMNIFICATION.] 
    The association has authority to indemnify certain persons 
against certain expenses and liabilities as provided in section 
300.083, including the power to purchase and maintain insurance 
on behalf of these persons as provided by section 300.083, 
subdivision 7.  In applying section 300.083 for this purpose, 
the term "member insurers" shall be substituted for the terms 
"shareholders" and "stockholders" and the term "association" 
shall be substituted for the term "corporation." 
    Sec. 17.  [61B.32] [STAY OF PROCEEDINGS; REOPENING DEFAULT 
JUDGMENTS.] 
    All proceedings in which the insolvent insurer is a party 
in a court in this state must be stayed 60 days from the date an 
order of liquidation, rehabilitation, or conservation is final 
to permit proper legal action by the association on matters 
germane to its powers or duties.  As to judgment under a 
decision, order, verdict, or finding based on default, the 
association may apply to have the judgment set aside by the same 
court that made the judgment and may defend against the suit on 
the merits. 
    Sec. 18.  [CONTINUATION OF ASSOCIATION.] 
    Subdivision 1.  [ASSOCIATION.] The nonprofit legal entity 
known as the Minnesota life and health insurance guaranty 
association established under Minnesota Statutes 1992, section 
61B.04, subdivision 1, shall continue to exist under sections 
61B.19 to 61B.32.  All member insurers shall be and remain 
members of the association as a condition of their authority to 
transact insurance in this state. 
    Subd. 2.  [BOARD OF DIRECTORS.] Those persons who, as of 
the effective date of sections 61B.19 to 61B.32, are serving on 
the board of directors of the association pursuant to Minnesota 
Statutes 1992, section 61B.05, may continue to serve on the 
board established by this section for their remaining terms of 
office.  As those terms expire, members of the board shall be 
elected by member insurers, subject to the approval of the 
commissioner of commerce, for the terms of office specified in 
their nominations. 
    Subd. 3.  [PLAN OF OPERATION.] The association's existing 
plan of operation established under Minnesota Statutes 1992, 
section 61B.08, shall continue in existence under sections 
61B.19 to 61B.32, subject to amendments and modifications, until 
a new plan of operation is submitted to and approved by the 
commissioner of commerce.  If the association fails to submit a 
plan of operation within 120 days following the effective date 
of sections 61B.19 to 61B.32, the commissioner shall, after 
notice and hearing, adopt reasonable rules necessary or 
advisable to implement sections 61B.19 to 61B.32.  The rules are 
effective until modified by the commissioner or superseded by a 
plan submitted by the association and approved by the 
commissioner. 
     Sec. 19.  [APPLICATION.] 
    The rehabilitations of mutual benefit life insurance 
company and executive life and insurance company (California) 
and any insolvencies, rehabilitations, or impairments which 
occur prior to the effective date of this act, are subject to 
Minnesota Statutes 1992, sections 61B.01 to 61B.16.  Any 
policies or other contracts of insurance which are reformed, 
reissued, or which are replaced through administrative or 
judicial action as a result of any insolvency, rehabilitation, 
or impairment occurring prior to the effective date of this act, 
shall be subject to Minnesota Statutes 1992, sections 61B.01 to 
61B.16.  Participants in a covered plan shall only be required 
to verify their status as residents and what the amount of money 
is in the unallocated annuity that represents their funds.  Both 
these matters may be verified by the employer sponsoring the 
plan from plan records. 
     Payments made to a plan shall be deemed to be made on 
behalf of the resident participant and are not the funds of the 
plan, the plan trustee, or any nonresident plan participant and 
to the extent of such payments, discharge the association's 
obligation. 
    All rulings and interpretations of the commissioner of 
commerce relative to the obligation and duties of or coverage by 
the life and health guaranty association are hereby affirmed and 
shall apply to all covered contracts issued on or before the 
effective date of this act. 
    Sec. 20.  [REPEALER.] 
    Minnesota Statutes 1992, sections 61B.01; 61B.02; 61B.03; 
61B.04; 61B.05; 61B.06; 61B.07; 61B.08; 61B.09; 61B.10; 61B.11; 
61B.12; 61B.13; 61B.14; 61B.15; and 61B.16, are repealed. 
    Sec. 21.  [EFFECTIVE DATE.] 
    (a) This act is effective the day following final enactment 
and applies with respect to an insurer which becomes impaired or 
insolvent as defined under section 61B.20 on or after that date, 
provided that the coverage and limits applicable to unallocated 
annuity contracts issued before the effective date of this act, 
continue to be those provided under Minnesota Statutes 1992, 
sections 61B.01 to 61B.16, with respect to any insurer or any 
successor to that insurer that becomes impaired or insolvent 
before or on the earliest of any maturity, renewal, extension, 
or withdrawal date of the contract. 
    (b) Minnesota Statutes 1992, sections 61B.01 to 61B.16, 
apply with respect to an insurer which is placed under an order 
of liquidation, conservation, or rehabilitation, or becomes 
impaired as defined under section 61B.03, subdivision 9, before 
the effective date of sections 61B.18 to 61B.32. 
    Presented to the governor May 17, 1993 
    Signed by the governor May 20, 1993, 2:25 p.m.