Office of the Revisor of Statutes
Minnesota Session Laws - 1994, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 425-H.F.No. 1886
An act relating to insurance; regulating insurers,
investments, rehabilitations and liquidations, policy
loans, and alternative coverage mechanisms; amending
Minnesota Statutes 1992, sections 60A.052, subdivision
2; 60A.11, subdivision 13; 60A.111, subdivision 2;
60A.13, subdivision 8; 60B.60, subdivisions 2 and 3;
61A.28, subdivisions 11 and 12; 62F.02, subdivision 1;
62F.03, by adding a subdivision; 62I.08; 62I.13,
subdivision 2; and 62I.21; Minnesota Statutes 1993
Supplement, sections 60A.23, subdivision 4; 60D.20,
subdivision 2; 62B.12; and 62C.10; repealing Minnesota
Statutes 1992, section 60D.19, subdivision 5.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1. Minnesota Statutes 1992, section 60A.052,
subdivision 2, is amended to read:
Subd. 2. [SUMMARY SUSPENSION OR REVOCATION OF AUTHORITY OR
CENSURE.] If the commissioner determines that one of the
conditions listed in subdivision 1 exists, the commissioner may
issue an order requiring the insurance company to show cause why
any or all of the following should not occur: (1) revocation or
suspension of any or all certificates of authority granted to
the foreign or domestic insurance company or its agent; (2)
censuring of the insurance company; or (3) the imposition of a
civil penalty. The order shall be calculated to give reasonable
notice of the time and place for hearing thereon, and shall
state the reasons for the entry of the order. The commissioner
may by order summarily suspend or revoke a certificate pending
final determination of any order to show cause. If a
certificate is suspended or revoked pending final determination
of an order to show cause, a hearing on the merits shall be held
within 30 days of the issuance of the summary order. All
hearings shall be conducted in accordance with chapter 14.
After the hearing, the commissioner shall enter an order
disposing of the matter as the facts require. If the insurance
company fails to appear at a hearing after having been duly
notified of it, the company shall be considered in default, and
the proceeding may be determined against the company upon
consideration of the order to show cause, the allegations of
which may be considered to be true.
Sec. 2. Minnesota Statutes 1992, section 60A.11,
subdivision 13, is amended to read:
Subd. 13. [UNITED STATES GOVERNMENT OBLIGATIONS.] (a)
Obligations issued or guaranteed by the United States of America
or any agency or instrumentality of the United States of America
backed by the full faith and credit of the issuer, including
rights to purchase or sell these obligations if those rights are
traded upon a contract market designated and regulated by a
federal agency. Pursuant to section 106 of title I of the
Secondary Mortgage Market Enhancement Act of 1984, United States
Code, title 15, section 77r-1, included under this paragraph are
obligations issued or guaranteed by the Federal Home Loan
Mortgage Corporation and the Federal National Mortgage
Association.
(b) Obligations issued or guaranteed by an agency or
instrumentality of the United States of America other than those
backed by the full faith and credit thereof, including rights to
purchase or sell these obligations if those rights are traded
upon a contract market designated and regulated by a federal
agency. The securities of a single issuer under this paragraph
shall comprise no more than 20 percent of the company's admitted
assets.
Sec. 3. Minnesota Statutes 1992, section 60A.111,
subdivision 2, is amended to read:
Subd. 2. [PLAN.] If the commissioner determines that the
required liabilities of any company are greater than its
qualified assets and that the combined financial resources of
the insurance company members of any insurance holding company
system of which the company is a member are not adequate to
counterbalance that fact, the commissioner may require the
company to submit to the commissioner for approval a plan by
which the company undertakes to bring the ratio of its required
liabilities to its qualified assets, expressed as a percentage,
up to at least 100 110 percent within a reasonable period,
usually not exceeding five years.
Sec. 4. Minnesota Statutes 1992, section 60A.13,
subdivision 8, is amended to read:
Subd. 8. [ANNUAL REPORTS.] Each insurer licensed to write
property and casualty insurance in this state, as a supplement
to the annual statement required by this section, shall submit a
report on a form furnished by the commissioner separately
showing its direct writings in Minnesota and in the United
States on: liquor liability, product liability, medical
malpractice, and any other line so designated by the
commissioner on January 1 of each year.
The supplemental reports must include the following data
for the previous year ending on the 31st day of December:
(1) direct premiums written;
(2) direct premiums earned;
(3) net investment income, including net realized capital
gains and losses, using appropriate estimates where necessary;
(4) incurred claims, developed as the sum, and with figures
provided for, of the following:
(a) dollar amount of claims closed with payment, plus
(b) reserves for reported claims at the end of the current
year, minus
(c) reserves for reported claims at the end of the previous
year, plus
(d) reserves for incurred but not reported claims at the
end of the current year, minus
(e) reserves for incurred but not reported claims at the
end of the previous year, plus
(f) reserves for loss adjustment expense at the end of the
current year, minus
(g) reserves for loss adjustment expense at the end of the
previous year;
(5) actual incurred expenses allocated separately to loss
adjustment, commissions, other acquisition costs, general office
expenses, taxes, licenses and fees, and all other expenses;
(6) net underwriting gain or loss; and
(7) net operation gain or loss, including net investment
income.
This report is due by the first of May of each year and the
report due May 1, 1987 must cover the last six months of 1986.
The commissioner shall annually compile and review all reports
submitted by insurers pursuant to this section. These filings
must be published and made available to any interested insured
or citizen.
Sec. 5. Minnesota Statutes 1993 Supplement, section
60A.23, subdivision 4, is amended to read:
Subd. 4. [DIVIDENDS; LIMITATIONS.] Domestic stock
companies shall follow the dividend limitation and reporting
requirements set forth in chapter 60D.
Sec. 6. Minnesota Statutes 1992, section 60B.60,
subdivision 2, is amended to read:
Subd. 2. [PRIORITY OF SPECIAL DEPOSIT CLAIMS.] The owners
of special deposit claims against an insurer for which a
liquidator is appointed in this or any other state shall be
given priority against the special deposits in accordance with
the statutes governing the creation and maintenance of the
deposits. If there is a deficiency in any deposit so that the
claims secured by it are not fully discharged from it, the
claimants may claim against a security fund share in the general
assets, but the sharing shall be deferred until general
creditors having the same priority, and also claimants against
other special deposits having the same priority who have
received smaller percentages from their respective special
deposits, have been paid percentages of their claims equal to
the percentage paid from the special deposit.
Sec. 7. Minnesota Statutes 1992, section 60B.60,
subdivision 3, is amended to read:
Subd. 3. [PRIORITY OF SECURED CLAIMS.] The owner of a
secured claim against an insurer for which a liquidator has been
appointed in this or any other state may surrender the security
and file a claim as a general creditor, or the claim may be
discharged by resort to the security in accordance with section
60B.43, in which case the deficiency, if any, shall be treated
as a claim against the general assets of the insurer on the same
basis as claims of unsecured creditors having the same priority.
Sec. 8. Minnesota Statutes 1993 Supplement, section
60D.20, subdivision 2, is amended to read:
Subd. 2. [DIVIDENDS AND OTHER DISTRIBUTIONS.] (a) Subject
to the limitations and requirements of this subdivision, the
board of directors of any domestic insurer within an insurance
holding company system may authorize and cause the insurer to
declare and pay any dividend or distribution to its shareholders
as the directors deem prudent from the earned surplus of the
insurer. An insurer's earned surplus, also known as unassigned
funds, shall be determined in accordance with the accounting
procedures and practices governing preparation of its annual
statement, minus 25 percent of earned surplus attributable
to net unrealized capital gains. Dividends which are paid from
sources other than an insurer's earned surplus or are
extraordinary dividends or distributions may be paid only as
provided in paragraphs (d), (e), and (f).
(b) The insurer shall notify the commissioner within five
business days following declaration of a dividend declared
pursuant to paragraph (a) and at least ten days prior to its
payment. The commissioner shall promptly consider the
notification filed pursuant to this paragraph, taking into
consideration the factors described in subdivision 4.
(c) The commissioner shall review at least annually the
dividends paid by an insurer pursuant to paragraph (a) for the
purpose of determining if the dividends are reasonable based
upon (1) the adequacy of the level of surplus as regards
policyholders remaining after the dividend payments, and (2) the
quality of the insurer's earnings and extent to which the
reported earnings include extraordinary items, such as surplus
relief reinsurance transactions and reserve destrengthening.
(d) No domestic insurer shall pay any extraordinary
dividend or make any other extraordinary distribution to its
shareholders until: (1) 30 days after the commissioner has
received notice of the declaration of it and has not within the
period disapproved the payment; or (2) the commissioner has
approved the payment within the 30-day period.
(e) For purposes of this section, an extraordinary dividend
or distribution includes any dividend or distribution of cash or
other property, whose fair market value together with that of
other dividends or distributions made within the preceding 12
months exceeds the greater of (1) ten percent of the insurer's
surplus as regards policyholders as of the 31st day of December
next preceding; or (2) the net gain from operations of the
insurer, if the insurer is a life insurer, or the net income, if
the insurer is not a life insurer, not including realized
capital gains, for the 12-month period ending the 31st day of
December next preceding, but does not include pro rata
distributions of any class of the insurer's own securities.
(f) Notwithstanding any other provision of law, an insurer
may declare an extraordinary dividend or distribution that is
conditional upon the commissioner's approval, and the
declaration shall confer no rights upon shareholders until: (1)
the commissioner has approved the payment of such a dividend or
distribution; or (2) the commissioner has not disapproved the
payment within the 30-day period referred to above.
Sec. 9. Minnesota Statutes 1992, section 61A.28,
subdivision 11, is amended to read:
Subd. 11. [POLICY LOANS.] Loans on the security of
insurance policies issued by itself to an amount not exceeding
the loan value thereof; and loans on the pledge of any of the
securities eligible for investment under the provisions of
subdivisions 2 to 10, with the exception of noninvestment grade
obligations as defined in subdivision 6, paragraph (f), but not
exceeding 95 percent of the value of securities enumerated in
subdivisions 2, 3, and 4 and 80 percent of the value of stocks
and other securities; in case of securities enumerated in
subdivisions 3, 5, and 10 "value" means principal amount unpaid
thereon and in case of other securities market value thereof; in
case of securities enumerated in subdivisions 3 and 10 the
pledge agreement shall require principal payments by the pledgor
at least equal to and concurrent with principal payments on the
pledged security; in loans authorized by this subdivision,
except as otherwise provided by law in regard to policy loans,
the company shall reserve the right at any time to declare the
indebtedness due and payable when in excess of such proportions
of value or, in case of pledge of securities other than those
enumerated in subdivisions 3 and 10, upon depreciation of
security. In the case of securities enumerated in subdivision
8, the provision of this subdivision must be applied in
accordance with the type of security subject to the asset backed
arrangement.
Sec. 10. Minnesota Statutes 1992, section 61A.28,
subdivision 12, is amended to read:
Subd. 12. [ADDITIONAL INVESTMENTS.] Investments of any
kind, without regard to the categories, conditions, standards,
or other limitations set forth in the foregoing subdivisions and
section 61A.31, subdivision 3, except that the prohibitions in
clause (d) of subdivision 3 remains applicable, may be made by a
domestic life insurance company in an amount not to exceed the
lesser of the following:
(1) Five percent of the company's total admitted assets as
of the end of the preceding calendar year, or
(2) Fifty percent of the amount by which its capital and
surplus as of the end of the preceding calendar year exceeds
$675,000. Except as provided in section 61A.281, a company's
total investment under this section in the common stock of any
corporation, other than the stock of the types of corporations
specified in subdivision 6, paragraph (a) section 61A.284, may
not exceed ten percent of the common stock of the corporation.
No investment may be made under the authority of this clause or
clause (1) by a company that has not completed five years of
actual operation since the date of its first certificate of
authority.
If, subsequent to being made under the provisions of this
subdivision, an investment is determined to have become
qualified or eligible under any of the other provisions of this
chapter, the company may consider the investment as being held
under the other provision and the investment need no longer be
considered as having been made under the provisions of this
subdivision.
In addition to the investments authorized by this
subdivision, a domestic life insurance company may make
qualified investments in any additional securities or property
of the type authorized by subdivision 6, paragraph (e), (f), or
(g), with the written order of the commissioner. This approval
is at the discretion of the commissioner, provided that the
additional investments allowed by the commissioner's written
order may not exceed five percent of the company's admitted
assets. This authorization does not negate or reduce the
investment authority granted in subdivision 6, paragraph (e),
(f), or (g), or this subdivision.
Sec. 11. Minnesota Statutes 1993 Supplement, section
62B.12, is amended to read:
62B.12 [RULEMAKING.]
The commissioner may, after notice and hearing, issue rules
the commissioner deems appropriate for the supervision of
sections 62B.01 to 62B.14. The commissioner shall promulgate
rules to establish rates for credit involuntary unemployment
insurance prior to its issuance, and to enact the other
provisions of Laws 1993, chapter 343, and the commissioner shall
report by February 15, 1994, to the house of representatives
committee on financial institutions and insurance and to the
senate commerce and consumer protection committee on the rules
or status of the rulemaking, including the expected loss ratio.
The commissioner is not obligated to promulgate a rule unless
and until four or more insurers who plan to write credit
involuntary unemployment insurance in Minnesota agree to pay for
the cost of the promulgation of any rules authorized by this
section. Companies selling credit involuntary unemployment
insurance shall be assessed by the department to pay the costs
of rulemaking.
Moneys collected pursuant to this provision must be
deposited in the state treasury and credited to a special
account and are appropriated to the commissioner for the
rulemaking purposes authorized by this section.
For the purposes of chapter 62B, any insurer authorized to
offer the coverage specified by section 60A.06, subdivision 1,
clause (1) or (4), shall be authorized to sell credit
involuntary unemployment insurance pursuant to this chapter.
Sec. 12. Minnesota Statutes 1993 Supplement, section
62C.10, is amended to read:
62C.10 [INVESTMENT.]
Funds of a corporation subject to this chapter shall be
invested only in securities and property designated by law for
investment by domestic life insurance companies.
Notwithstanding any limitations set forth in chapter 61A, an
organization which has received a certificate of authority from
the commissioner to operate under this chapter only for the
provision of prepaid dental plans may invest up to 20 percent of
its admitted assets in subsidiary corporations whose business is
the arrangement for, management of, or provision of health care
services, including dental and related managed care and
administrative services. Any amounts so invested in subsidiary
corporations shall, for purposes of section 62C.09, be added to
the minimum and maximum reserve requirements as calculated for a
service plan corporation.
Sec. 13. Minnesota Statutes 1992, section 62F.02,
subdivision 1, is amended to read:
Subdivision 1. [CREATION.] There is created a joint
underwriting association to provide medical malpractice
insurance coverage to any licensed health care provider unable
to obtain this insurance through ordinary methods, who practices
or provides professional services within the state of Minnesota
and obtains at least 60 percent of gross revenues from patients
who are residents of the state of Minnesota. Every insurer
authorized to write and writing personal injury liability
insurance in this state shall be a member of the association as
a condition to obtaining and retaining a license to write
insurance in this state.
Sec. 14. Minnesota Statutes 1992, section 62F.03, is
amended by adding a subdivision to read:
Subd. 8. "Professional services" means services performed
by a licensed health care provider which are undertaken with the
objective of: providing prevention care, rehabilitative care,
treatment of specific diseases, injuries, or conditions, or care
rendered with the intent of stabilizing the patient's condition
and to prevent further deterioration or injury. Professional
services does not include services provided by licensed health
care providers who rely solely on spiritual or divine
intervention as the only means of care or treatment.
Sec. 15. Minnesota Statutes 1992, section 62I.08, is
amended to read:
62I.08 [APPLICATION PROCEDURE.]
A person or entity that has been denied coverage or is
unable to find an insurer willing to write coverage is eligible
to make an application to the association. The application
shall be on a form approved by the board of directors. To show
eligibility to participate in the association the applicant
shall certify that the applicant has been unable to find anyone
to offer the coverage sought by the applicant. No further proof
shall be required of the applicant, except that the application
form approved by the board of directors may require the date and
the name of the insurance company denying coverage and may
require a copy of a written offer if the rate qualifies the
applicant to apply under section 62I.13, subdivision 2. The
application shall be filed simultaneously with the association
and the market assistance plan of the association.
Sec. 16. Minnesota Statutes 1992, section 62I.13,
subdivision 2, is amended to read:
Subd. 2. [MINIMUM OF QUALIFICATIONS.] Anyone who is unable
to obtain insurance in the private market and who so certifies
to the association in the application is eligible to make
written application to the association for coverage. The
application may require information as provided in section
62I.08. Payment of the applicable premium or required portion
of it must be paid prior to coverage by the association. An
offer of coverage at a rate in excess of the rate that would be
charged by the association for similar coverage and risk shall
be deemed to be a refusal of coverage for purposes of
eligibility for participation in the association. It shall not
be deemed to be a written notice of refusal if the rate for
coverage offered is less than five ten percent in excess of the
joint underwriting association rates for similar coverage and
risk. However, the offered rate must also be the rate that the
insurer has filed with the department of commerce if the insurer
is required to file its rates with the department. If the
insurer is not required to file its rates with the department,
the offered rate must be the rate generally charged by the
insurer for similar coverage and risk.
Sec. 17. Minnesota Statutes 1992, section 62I.21, is
amended to read:
62I.21 [ACTIVATION OF MARKET ASSISTANCE PLAN AND JOINT
UNDERWRITING ASSOCIATION.]
At any time the commissioner of commerce deems it necessary
to provide assistance with respect to the Upon submission of an
application for placement of general liability insurance
coverage on Minnesota risks for under section 62I.13 in a class
of business for which the market assistance plan and the joint
underwriting association are not then activated, where the
applicant has been refused coverage within the meaning of
section 62I.13, subdivision 2, the commissioner shall may by
notice in the State Register activate the market assistance plan
and the joint underwriting association on Minnesota risks for
the class of business. The plan and association are activated
for a period of 180 days from publication of the notice. At the
same time the notice is published, the commissioner shall
prepare a written petition requesting that a hearing be held to
determine whether activation of the market assistance plan and
the joint underwriting association is necessary beyond the
180-day period. The hearing must be held in accordance with
section 62I.22. The commissioner by order shall deactivate a
market assistance program and the joint underwriting association
at any time the commissioner finds that the market assistance
program and the joint underwriting association are not necessary.
Sec. 18. [REPEALER.]
Minnesota Statutes 1992, section 60D.19, subdivision 5, is
repealed.
Presented to the governor April 11, 1994
Signed by the governor April 13, 1994, 1:10 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes