1999 Minnesota Statutes

CHAPTER 60A. General insurance powers

     60A.01 Scope.  

    This chapter includes the provisions relating to 
 administration in general and the provisions applicable to 
 insurance in general.  

    HIST: 1967 c 395 art 1 s 1 

     60A.02 Definitions. 

    Subdivision 1.    Terms.  Unless the language or 
 context clearly indicates that a different meaning is intended, 
 the following terms shall, for the purposes of chapters 60A to 
 72A, 69, 70A and 299F, have the meanings ascribed to them. 

    Subd. 1a.    Association or associations.  (a) 
 "Association" or "associations" means an organized body of 
 people who have some interest in common and that has at the 
 onset a minimum of 100 persons; is organized and maintained in 
 good faith for purposes other than that of obtaining insurance; 
 and has a constitution and bylaws which provide that:  (1) the 
 association or associations hold regular meetings not less 
 frequently than annually to further purposes of the members; (2) 
 except for credit unions, the association or associations 
 collect dues or solicit contributions from members; (3) the 
 members have voting privileges and representation on the 
 governing board and committees, which provide the members with 
 control of the association including the purchase and 
 administration of insurance products offered to members; and (4) 
 the members are not, within the first 30 days of membership, 
 directly solicited, offered, or sold an insurance policy if the 
 policy is available as an association benefit. 

    (b) An association may apply to the commissioner for a 
 waiver of the 30-day waiting period to that association.  The 
 commissioner may grant the waiver upon a finding of at least 
 three of the following:  (1) the association is in full 
 compliance with this subdivision; (2) sanctions have not been 
 imposed against the association as a result of significant 
 disciplinary action by the commissioner; (3) at least 80 percent 
 of the association's income comes from dues, contributions, or 
 sources other than income from the sale of insurance; or (4) the 
 association has been organized and maintained for at least ten 
 years. 

    Subd. 2.    Commissioner.  "Commissioner" means the 
 commissioner of commerce of the state of Minnesota and, in the 
 commissioner's absence or disability, a deputy or other person 
 duly designated to act in the commissioner's place. 

    Subd. 2a.    Continued.  An insurance policy that is 
 issued for a term in excess of one year or that has no specified 
 term or that is designated as being continuous is "continued" 
 each year on the anniversary date of the issuance of the policy. 

    Subd. 2b.    Filed.  In cases where a law requires 
 documents to be filed with the commissioner, the documents will 
 be considered filed when they are received by the department of 
 commerce. 

    Subd. 3.    Insurance.  (a) "Insurance" is any agreement 
 whereby one party, for a consideration, undertakes to indemnify 
 another to a specified amount against loss or damage from 
 specified causes, or to do some act of value to the assured in 
 case of such loss or damage.  A program of self-insurance, 
 self-insurance revolving fund or pool established under section 
 471.981 is not insurance for purposes of this subdivision.  

    (b) Expired 

    Subd. 4.    Company or insurance company.  "Company" or 
 "insurance company" includes every insurer, corporation, 
 business trust, or association engaged in insurance as 
 principal, but for purposes of this subdivision does not include 
 a political subdivision providing self-insurance or establishing 
 a pool under section 471.981, subdivision 3. 

    Subd. 4a.    Mutual property and casualty insurance 
 company.  "Mutual property and casualty insurance company" 
 includes a property and casualty insurance company that was 
 converted to a stock company after December 31, 1987, and before 
 January 1, 1994, if the company was controlled on the date of 
 conversion by a mutual life insurance company and so long as the 
 company continues to be controlled by a mutual life insurance 
 company. 

    Subd. 5.    Domestic.  "Domestic" shall designate those 
 companies incorporated or organized in this state. 

    Subd. 6.    Foreign.  "Foreign," when used without 
 limitations, shall designate those companies incorporated or 
 organized in any other state or country. 

    Subd. 7.    Insurance agent or insurance agency.  An 
 "insurance agent" or "insurance agency" is a person acting under 
 express authority from, and an appointment pursuant to section 
 60K.02 by, an insurer and on its behalf to solicit insurance, or 
 to appoint other agents to solicit insurance, or to write and 
 countersign policies of insurance, or to collect premiums 
 therefor within this state, or to exercise any or all these 
 powers when so authorized by the insurer.  The term "person" 
 includes a natural person, a partnership, a corporation, or 
 other entity, including an insurance agency.  

    Subd. 8. Repealed, 1981 c 307 s 22 

    Subd. 9.    Net assets.  "Net assets" means that 
 portion of the excess of the entire assets of an insurance 
 company over its entire liabilities, exclusive of capital, and 
 inclusive of policy liability, available for the payment of its 
 obligations, including capital stock in this state and including 
 as assets deferred premiums on policies written within three 
 months and actually in force; and, in the case of a mutual 
 marine or fire and marine company, its subscription funds and 
 premium notes not more than 30 days past due and uncollected.  
 In the case of a mutual fire insurance company, there shall be 
 included as assets premium notes absolutely payable within six 
 months from date and given for policies actually in force, when 
 such notes are not more than 30 days overdue.  Unpaid guaranty 
 fund subscriptions shall not be included as assets, and guaranty 
 fund certificates upon which there is no liability of the 
 company until all of its other obligations and liabilities are 
 paid shall not be included as a liability. 

    Subd. 10.    Earned premiums.  "Earned premiums" 
 includes gross premiums charged on all policies written, 
 including all determined excess and additional premiums, less 
 return premiums, other than premiums returned to policyholders 
 as dividends, and less reinsurance premiums and premiums on 
 policies canceled, and less unearned premiums on policies in 
 force.  Any participating company which has charged in its 
 premiums a loading solely for dividends shall not be required to 
 include such loading in its earned premiums; provided, a 
 statement of the amount of such loading has been filed and 
 approved by the commissioner. 

    Subd. 11.    Unearned premiums, insurance reserve, net 
 value policies, and premium reserve.  "Unearned premiums," 
 "insurance reserve," "net value policies," and "premium reserve" 
 severally refer to the liability of an insurance company upon 
 its insurance contracts other than accrued claims computed by 
 rules on valuation herein established. 

    Subd. 12.    Profits.  "Profits" of a mutual insurance 
 company means that portion of its net earnings not required for 
 payment of losses and expenses, nor set apart for any lawful 
 purposes. 

    Subd. 13.    Loss payments and loss expense payments.  
 The terms "loss payments" and "loss expense payments" include 
 all payments to claimants, including payments for medical and 
 surgical attendance, legal expense, salaries and expenses of 
 investigators, adjusters, and field representatives, rents, 
 stationery, telegraph and telephone charges, postage, salaries 
 and expenses of office employees, home office expenses, and all 
 other payments made on account of claims, whether such payments 
 shall be allocated to specific claims or unallocated. 

    Subd. 14.    Compensation.  The term "compensation" 
 relates to all insurance effected by virtue of statutes 
 providing compensation to employees for personal injuries 
 irrespective of fault of the employer. 

    Subd. 15.    Liability.  The term "liability" relates 
 to all insurance, except compensation insurance, against loss or 
 damage from accident to or injuries suffered by an employee or 
 other person and for which the insured is liable. 

    Subd. 16.    Department of commerce.  "Department of 
 commerce" of the state of Minnesota also means department of 
 commerce or commissioner of commerce. 

    Subd. 17.    Leasehold estate.  The term "leasehold 
 estate" means an estate in land which includes the ground lease 
 covering the land and any improvements thereon. 

    Subd. 18.    State.  "State" means any state of the 
 United States of America, the District of Columbia, the 
 commonwealth of Puerto Rico and any other possessions of the 
 United States. 

    Subd. 19.    Alien.  "Alien" means an insurer domiciled 
 outside of the United States, but conducting business within the 
 United States. 

    Subd. 20.    Assume.  "Assume" means to accept all or 
 part of a ceding company's insurance or reinsurance on a risk or 
 exposure. 

    Subd. 21.    Cede.  "Cede" means to pass on to another 
 insurer all or part of the insurance written by an insurer for 
 the purpose of reducing the possible liability of the insurer. 

    Subd. 22.    Cession.  "Cession" means the unit of 
 insurance passed to a reinsurer by an insurer which issued a 
 policy to the insured. 

    Subd. 23.    Facultative reinsurance.  "Facultative 
 reinsurance" means the reinsurance of part or all of the 
 insurance provided by a single policy, with separate negotiation 
 for each cession. 

    Subd. 24.    Reinsurer.  "Reinsurer" means an insurer 
 which assumes the liability of another insurer through 
 reinsurance. 

    Subd. 25.    Retrocession.  "Retrocession" means a 
 transaction in which a reinsurer cedes to another reinsurer all 
 or part of the reinsurance that the reinsurer had previously 
 assumed. 

    Subd. 26.    United States branch.  "United States 
 branch" means the business unit through which business is 
 transacted within the United States by an alien insurer.  

    Subd. 27.    Admitted assets.  "Admitted assets" means 
 the assets as shown by the company's annual statement on 
 December 31 valued according to valuation regulations prescribed 
 by the National Association of Insurance Commissioners and 
 procedures adopted by the National Association of Insurance 
 Commissioners' financial condition Ex 4 subcommittee if not 
 addressed in another section, unless the commissioner requires 
 or finds another method of valuation reasonable under the 
 circumstances. 

    Subd. 28.    Group insurance.  "Group insurance" means 
 that form of insurance coverage sponsored by: 

    (1) an employer covering not less than two employees and 
 which may include the employees' dependents, consisting of 
 husband, wife, children, and actual dependents residing in the 
 household, written under a master policy issued to any employer, 
 or group of employers who have joined into an arrangement for 
 the purposes of providing the employees insurance for their 
 individual benefit.  Employees' dependents, consisting of 
 husband, wife, children, and actual dependents residing in the 
 same household, are not employees for purposes of this 
 definition except for a spouse employed on a regular full-time 
 basis by the same employer.  This clause does not apply to 
 chapter 62L; 

    (2) an association to provide insurance to its members; or 

    (3) a creditor to provide life insurance to insure its 
 debtors in connection with real estate mortgage loans, in an 
 amount not to exceed the actual or scheduled amount of their 
 indebtedness. 

    Subd. 29.    Multiple employer trust.  "Multiple 
 employer trust" means a trust organized for the benefit of two 
 or more employers for the purpose of providing health insurance 
 coverage to employees and dependents. 

    HIST: 1967 c 395 art 1 s 2; 1969 c 494 s 1,2; 1971 c 24 s 9; 
 1980 c 529 s 1,2; 1981 c 307 s 1; 1983 c 289 s 114 subd 1; 1983 
 c 328 s 1; 1984 c 655 art 1 s 92; 1Sp1985 c 10 s 49; 1986 c 444; 
 1989 c 260 s 1; 1991 c 325 art 1 s 1-9; art 10 s 1; 1992 c 564 
 art 1 s 13; art 3 s 1; 1994 c 485 s 4; 1994 c 587 art 1 s 1; 
 1994 c 625 art 8 s 1; 1995 c 234 art 7 s 1; 1999 c 177 s 1,2 

     60A.03 Commissioner of commerce. 

    Subdivision 1.    Commissioner; appointment.  The 
 commissioner of commerce shall be appointed by the governor 
 under the provisions of section 15.06.  All of the 
 commissioner's time shall be devoted to the duties of the office.

    Subd. 2.    Powers of commissioner.  The commissioner 
 shall have and exercise the power to enforce all the laws of 
 this state relating to insurance, and shall enforce all the 
 provisions of the laws of this state relating to insurance in 
 the manner provided by the laws defining the powers and duties 
 of the commissioner of commerce, or, in the absence of any law 
 prescribing the procedure, by any reasonable procedure the 
 commissioner prescribes. 

    Subd. 3.    Commissioner may appoint.  (1)   Official 
 staff.  The commissioner may appoint a deputy or assistant 
 commissioner of commerce to assist in the commissioner's duties, 
 an actuary, a chief examiner, a statistician, and such 
 assistants to these employees and such stenographic and clerical 
 help as may be required for the proper conduct of the department 
 of commerce. 

    (2)   Duties of departmental officials.  In the absence 
 or disability of the commissioner, the commissioner's duties 
 shall be performed by the deputy or assistant commissioner of 
 commerce.  The actuary of the department shall, under the 
 direction of the commissioner, make such valuation of life 
 insurance policies as shall be necessary, from time to time, to 
 the proper supervision of life insurance companies transacting 
 business in this state, and shall perform such other actuarial 
 duties, including the visitation and examination of insurance 
 companies, as the commissioner may prescribe.  The chief and 
 assistant examiners shall, under the direction of the 
 commissioner, devote their principal time to necessary or 
 required examinations of insurance companies, and perform such 
 other duties as the commissioner may prescribe.  Other salaried 
 employees of the department of commerce shall be under the 
 direction of the commissioner and perform such duties, in 
 connection with the department of commerce, as the commissioner 
 may prescribe. 

    (3)   Consulting actuary, appointment and compensation.  
  The commissioner may, when the commissioner shall deem it 
 necessary, appoint any experienced and competent professional 
 insurance actuary to personally make or conduct, or assist in 
 making or conducting, an examination of any insurance company 
 admitted, or applying for admission, to do business in this 
 state, on condition that the commissioner shall have previously 
 filed with the secretary of state a written declaration 
 designating such person, by name and address, as a consulting 
 actuary of the department of commerce.  In this case, the 
 commissioner shall fix a reasonable compensation for the actuary 
 on a per diem basis for the actual time employed in making or 
 conducting, or assisting to make or conduct, the examination, 
 which compensation, together with the amount of the necessary 
 expenses actually incurred by the actuary, including expenses of 
 any necessary appraisal or clerical assistance, shall be charged 
 to the company and paid by it to the actuary. 

    (4)   Appraiser, appointment and compensation.  The 
 commissioner, when deeming it necessary, may appoint any 
 qualified person to make an appraisal of any or all of the 
 assets of any such company.  Such person shall be paid such 
 reasonable fees for the appraisal as may be approved by the 
 commissioner and shall also be paid necessary expenses actually 
 incurred in connection with the services.  Such compensation and 
 expenses shall be paid by the company. 

    Subd. 4.  Repealed, 1969 c 7 s 2 

    Subd. 5.    Examination fees and expenses.  When any 
 visitation, examination, or appraisal is made by order of the 
 commissioner, the company being examined, visited, or appraised, 
 including, but not limited to, fraternals, township mutuals, 
 reciprocal exchanges, nonprofit service plan corporations, 
 health maintenance organizations, vendors of risk management 
 services licensed under section 60A.23, or self-insurance plans 
 or pools established under section 176.181 or 471.982, shall pay 
 to the department of commerce the necessary expenses of the 
 persons engaged in the examination, visit, appraisal, or desk 
 audits of annual statements and records performed by the 
 department other than on the company premises plus the per diem 
 salary fees of the employees of the department of commerce who 
 are conducting or participating in the examination, visitation, 
 appraisal, or desk audit.  The per diem salary fees may be based 
 upon the approved examination fee schedules of the National 
 Association of Insurance Commissioners or otherwise determined 
 by the commissioner.  All of these fees and expenses must be 
 paid into the department of commerce revolving fund. 

    Subd. 6.    Examination revolving fund.  (1)    
 Revolving fund created.  There is hereby created the 
 department of commerce examination revolving fund for the 
 purpose of carrying on the examination of foreign and domestic 
 insurance companies. 

    (2)    Money in revolving fund.  Such fund shall consist 
 of the $7,500 appropriated therefor and the money transferred to 
 it as herein provided, which are reappropriated to the 
 commissioner of commerce for the purpose of this subdivision. 

    (3)    Fund to be kept in state treasury.  Such fund 
 shall be kept in the state treasury and shall be paid out in the 
 manner prescribed by law for money therein. 

    (4)    Purposes for which fund may be expended.  Such 
 fund shall be used for the payment of per diem salaries and 
 expenses of special examiners and appraisers, and the expenses 
 of the commissioner of commerce, deputy commissioner of 
 commerce, chief examiner, actuary other than a consulting 
 actuary appointed under subdivision 3, clause (3) hereof, 
 regular salaried examiners and other employees of the department 
 of commerce when participating in examinations.  Expenses 
 include meals, lodging, laundry, transportation, and mileage.  
 The salary of regular employees of the division of insurance 
 shall not be paid out of this fund. 

    (5)    Collections to be deposited in fund.  All money 
 collected by the division of insurance from insurance companies 
 for fees and expenses of examinations, shall be deposited in the 
 insurance division examination revolving fund. 

    (6)    Payments from such fund.  Upon authorization by 
 the commissioner of commerce, the money due each examiner or 
 employee engaged in an examination shall be paid from the 
 insurance division examination revolving fund in the manner 
 prescribed by law. 

    (7)    Excess over $25,000 canceled into general fund.  
 The balance in such fund on June 30 of each year in excess of 
 $25,000 shall be forthwith canceled into the general fund. 

    Subd. 7.  Repealed, 1969 c 707 s 1; 1969 c 1129 art 4 s 
 11 

    Subd. 8.    Computation of net value; life insurance.  
 (1)   Domestic insurers.  The commissioner shall compute, 
 yearly, the net value of all outstanding policies in every 
 company authorized to insure lives in this state, calculated 
 upon the basis stated in section 61A.25. 

    (2)   Foreign insurers.  The commissioner may accept 
 the valuation made by the insurance commissioner of the state 
 under whose authority a life company was organized, when that 
 valuation has been made on sound and recognized principles and 
 on the legal basis provided in section 61A.25, or its 
 equivalent, when furnished with a certificate of that 
 commissioner setting forth that value on the last day of the 
 preceding year.  Every such life company which fails to promptly 
 furnish this certificate shall, on demand, furnish the 
 commissioner detailed lists of all its policies and securities, 
 and shall be liable for all charges and expenses resulting 
 therefrom. 

    Subd. 9.    Confidentiality of information.  The 
 commissioner may not be required to divulge any information 
 obtained in the course of the supervision of insurance 
 companies, or the examination of insurance companies, including 
 examination related correspondence and workpapers, until the 
 examination report is finally accepted and issued by the 
 commissioner, and then only in the form of the final public 
 report of examinations.  Nothing contained in this subdivision 
 prevents or shall be construed as prohibiting the commissioner 
 from disclosing the content of this information to the insurance 
 department of another state or the National Association of 
 Insurance Commissioners if the recipient of the information 
 agrees in writing to hold it as nonpublic data as defined in 
 section 13.02, in a manner consistent with this subdivision.  
 This subdivision does not apply to the extent the commissioner 
 is required or permitted by law, or ordered by a court of law to 
 testify or produce evidence in a civil or criminal proceeding.  
 For purposes of this subdivision, a subpoena is not an order of 
 a court of law. 

    HIST: 1967 c 395 art 1 s 3; 1969 c 7 s 3; 1969 c 399 s 1; 1969 
 c 707 s 1; 1969 c 1129 art 4 s 11; 1976 c 2 s 35; 1977 c 305 s 
 17; 1978 c 470 s 1; 1983 c 289 s 114 subd 1; 1983 c 328 s 2; 
 1984 c 655 art 1 s 92; 1985 c 248 s 20; 1986 c 444; 1990 c 573 s 
 19; 1991 c 325 art 10 s 2; 1992 c 540 art 2 s 1; 1992 c 564 art 
 1 s 14; 1994 c 485 s 5; 1995 c 214 s 2 

     60A.031 Examinations. 

    Subdivision 1.    Power to examine.  (1)    Insurers 
 and other licensees.  At any time and for any reason related 
 to the enforcement of the insurance laws, or to ensure that 
 companies are being operated in a safe and sound manner and to 
 protect the public interest, the commissioner may examine the 
 affairs and conditions of any foreign or domestic insurance or 
 reinsurance company, including reciprocals and fraternals, 
 licensee or applicant for a license under the insurance laws, or 
 any other person or organization of persons doing or in the 
 process of organizing to do any insurance business in this 
 state, and of any licensed advisory organization serving any of 
 the foregoing in this state. 

    The commissioner shall examine the affairs and conditions 
 of every insurer licensed in this state not less frequently than 
 once every five years. 

    (2)    Who may be examined.  The commissioner in making 
 any examination of an insurance company as authorized by this 
 section may, if in the commissioner's discretion, there is cause 
 to believe the commissioner is unable to obtain relevant 
 information from such insurance company or that the examination 
 or investigation is, in the discretion of the commissioner, 
 necessary or material to the examination of the company, examine 
 any person, association, or corporation: 

    (a) transacting, having transacted, or being organized to 
 transact the business of insurance in this state; 

    (b) engaged in or proposing to be engaged in the 
 organization, promotion, or solicitation of shares or capital 
 contributions to or aiding in the formation of a domestic 
 insurance company; 

    (c) holding shares of capital stock of an insurance company 
 for the purpose of controlling the management thereof as voting 
 trustee or otherwise; 

    (d) having a contract, written or oral, pertaining to the 
 management or control of an insurance company as general agent, 
 managing agent, attorney-in-fact, or otherwise; 

    (e) which has substantial control directly or indirectly 
 over an insurance company whether by ownership of its stock or 
 otherwise, or owning stock in any domestic insurance company, 
 which stock constitutes a substantial proportion of either the 
 stock of the domestic insurance company or of the assets of the 
 owner thereof; 

    (f) which is a subsidiary or affiliate of an insurance 
 company; 

    (g) which is a licensed agent or solicitor or has made 
 application for the licenses; 

    (h) engaged in the business of adjusting losses or 
 financing premiums. 

    Nothing contained in this clause (2) shall authorize the 
 commissioner to examine any person, association, or corporation 
 which is subject to regular examination by another division of 
 the commerce department of this state.  The commissioner shall 
 notify the other division when an examination is deemed 
 advisable. 

    Subd. 2. Repealed, 1981 c 211 s 42 

    Subd. 2a.    Purpose, scope, and notice of examination.  
 An examination may, but need not, cover comprehensively all 
 aspects of the examinee's affairs, practices, and conditions.  
 The commissioner shall determine the nature and scope of each 
 examination and in doing so shall take into account all 
 available relevant factors concerning the financial and business 
 affairs, practices and conditions of the examinee.  For 
 examinations undertaken pursuant to this section, the 
 commissioner shall issue an order stating the scope of the 
 examination and designating the person responsible for 
 conducting the examination.  A copy of the order shall be 
 provided to the examinee.  

    In conducting the examination, the examiner shall observe 
 the guidelines and procedures in the examiner's handbook adopted 
 by the National Association of Insurance Commissioners.  The 
 commissioner may also employ other guidelines or procedures that 
 the commissioner may consider appropriate. 

    Subd. 3.    Access to examinee.  (a) The commissioner, 
 or the designated person, shall have timely, convenient, and 
 free access at all reasonable hours to all books, records, 
 securities, accounts, documents, and any or all computer or 
 other records and papers relating to the property, assets, 
 business, and affairs of any company, applicant, association, or 
 person which may be examined pursuant to this section for the 
 purpose of ascertaining, appraising, and evaluating the assets, 
 conditions, affairs, operations, ability to fulfill obligations, 
 and compliance with all the provisions of law of the company or 
 person insofar as any of the above pertain to the business of 
 insurance of a person, organization, or corporation transacting, 
 having transacted, or being organized to transact business in 
 this state.  Every company or person being examined, its 
 officers, directors, and agents, shall provide to the 
 commissioner or the designated person timely, convenient, and 
 free access at all reasonable hours at its office to all its 
 books, records, accounts, papers, securities, documents, any or 
 all computer or other records relating to the property, assets, 
 business, and affairs of the company or person.  The officers, 
 directors, and agents of the company or person shall facilitate 
 the examination and aid in the examination so far as it is in 
 their power to do so.  

    The refusal of a company, by its officers, directors, 
 employees, or agents, to submit to examination or to comply with 
 a reasonable request of the examiners is grounds for suspension 
 or refusal of, or nonrenewal of, a license or authority held by 
 the company to engage in an insurance or other business subject 
 to the commissioner's jurisdiction.  The proceedings for 
 suspension, revocation, or refusal of a license or authority 
 must be conducted as provided in section 45.027.  

    (b) The commissioner or any examiners may issue subpoenas, 
 administer oaths, and examine under oath any person as to any 
 matter pertinent to the examination.  If a person fails or 
 refuses to obey a subpoena, the commissioner may petition a 
 court of competent jurisdiction, and upon proper showing, the 
 court may enter an order compelling the witness to appear and 
 testify or produce documentary evidence.  Failure to obey the 
 court order is punishable as contempt of court. 

    (c) When making an examination or audit under this section, 
 the commissioner may retain attorneys, appraisers, independent 
 actuaries, independent certified public accountants, or other 
 professionals and specialists as examiners, the cost of which 
 must be paid by the company that is the subject of the 
 examination or audit. 

    (d) This section does not limit the commissioner's 
 authority to terminate or suspend any examination in order to 
 pursue other legal or regulatory action pursuant to the 
 insurance laws of this state.  Findings of fact and conclusions 
 made pursuant to an examination are prima facie evidence in a 
 legal or regulatory action. 

    (e) Nothing contained in this section shall be construed to 
 limit the commissioner's authority to use as evidence a final or 
 preliminary examination report, examiner or company workpapers 
 or other documents, or other information discovered or developed 
 during the course of an examination in the furtherance of a 
 legal or administrative action which the commissioner may, in 
 the commissioner's sole discretion, consider appropriate. 

    Subd. 4.    Examination report; foreign and domestic 
 companies.  (a) The commissioner shall make a full and true 
 report of every examination conducted pursuant to this chapter, 
 which shall include (1) a statement of findings of fact relating 
 to the financial status and other matters ascertained from the 
 books, papers, records, documents, and other evidence obtained 
 by investigation and examination or ascertained from the 
 testimony of officers, agents, or other persons examined under 
 oath concerning the business, affairs, assets, obligations, 
 ability to fulfill obligations, and compliance with all the 
 provisions of the law of the company, applicant, organization, 
 or person subject to this chapter and (2) a summary of important 
 points noted in the report, conclusions, recommendations and 
 suggestions as may reasonably be warranted from the facts so 
 ascertained in the examinations.  The report of examination 
 shall be verified by the oath of the examiner in charge thereof, 
 and shall be prima facie evidence in any action or proceedings 
 in the name of the state against the company, applicant, 
 organization, or person upon the facts stated therein.  

    (b) No later than 60 days following completion of the 
 examination, the examiner in charge shall file with the 
 department a verified written report of examination under oath.  
 Upon receipt of the verified report, the department shall 
 transmit the report to the company examined, together with a 
 notice which provides the company examined with a reasonable 
 opportunity of not more than 30 days to make a written 
 submission or rebuttal with respect to matters contained in the 
 examination report. 

    (c) Within 30 days of the end of the period allowed for the 
 receipt of written submissions or rebuttals, the commissioner 
 shall fully consider and review the report, together with the 
 written submissions or rebuttals and the relevant portions of 
 the examiner's workpapers and enter an order: 

    (1) adopting the examination report as filed or with 
 modification or corrections.  If the examination report reveals 
 that the company is operating in violation of any law, rule, or 
 prior order of the commissioner, the commissioner may order the 
 company to take any action the commissioner considers necessary 
 and appropriate to cure the violation; 

    (2) rejecting the examination report with directions to the 
 examiners to reopen the examination for purposes of obtaining 
 additional data, documentation, or information, and refiling the 
 report as required under paragraph (b); or 

    (3) calling for an investigatory hearing with no less than 
 20 days' notice to the company for purposes of obtaining 
 additional documentation, data, information, and testimony. 

    (d)(1) All orders entered under paragraph (c), clause (1), 
 must be accompanied by findings and conclusions resulting from 
 the commissioner's consideration and review of the examination 
 report, relevant examiner workpapers, and any written 
 submissions or rebuttals.  The order is a final administrative 
 decision and may be appealed as provided under chapter 14.  The 
 order must be served upon the company by certified mail, 
 together with a copy of the adopted examination report.  Within 
 30 days of the issuance of the adopted report, the company shall 
 file affidavits executed by each of its directors stating under 
 oath that they have received a copy of the adopted report and 
 related orders.  

    (2) A hearing conducted under paragraph (c), clause (3), by 
 the commissioner or authorized representative, must be conducted 
 as a nonadversarial confidential investigatory proceeding as 
 necessary for the resolution of inconsistencies, discrepancies, 
 or disputed issues apparent upon the face of the filed 
 examination report or raised by or as a result of the 
 commissioner's review of relevant workpapers or by the written 
 submission or rebuttal of the company.  Within 20 days of the 
 conclusion of the hearing, the commissioner shall enter an order 
 as required under paragraph (c), clause (1).  

    (3) The commissioner shall not appoint an examiner as an 
 authorized representative to conduct the hearing.  The hearing 
 must proceed expeditiously.  Discovery by the company is limited 
 to the examiner's workpapers which tend to substantiate 
 assertions in a written submission or rebuttal.  The 
 commissioner or the commissioner's representative may issue 
 subpoenas for the attendance of witnesses or the production of 
 documents considered relevant to the investigation whether under 
 the control of the department, the company, or other persons.  
 The documents produced must be included in the record.  
 Testimony taken by the commissioner or the commissioner's 
 representative must be under oath and preserved for the record. 

    This section does not require the department to disclose 
 information or records which would indicate or show the 
 existence or content of an investigation or activity of a 
 criminal justice agency. 

    (4) The hearing must proceed with the commissioner or the 
 commissioner's representative posing questions to the persons 
 subpoenaed.  Thereafter, the company and the department may 
 present testimony relevant to the investigation.  
 Cross-examination may be conducted only by the commissioner or 
 the commissioner's representative.  The company and the 
 department shall be permitted to make closing statements and may 
 be represented by counsel of their choice.  

    (e)(1) Upon the adoption of the examination report under 
 paragraph (c), clause (1), the commissioner shall continue to 
 hold the content of the examination report as private and 
 confidential information for a period of 30 days except as 
 otherwise provided in paragraph (b).  Thereafter, the 
 commissioner may open the report for public inspection if a 
 court of competent jurisdiction has not stayed its publication. 

    (2) Nothing contained in this subdivision prevents or shall 
 be construed as prohibiting the commissioner from disclosing the 
 content of an examination report, preliminary examination report 
 or results, or any matter relating to the reports, to the 
 commerce department or the insurance department of another state 
 or country, or to law enforcement officials of this or another 
 state or agency of the federal government at any time, if the 
 agency or office receiving the report or matters relating to the 
 report agrees in writing to hold it confidential and in a manner 
 consistent with this subdivision.  

    (3) If the commissioner determines that regulatory action 
 is appropriate as a result of an examination, the commissioner 
 may initiate proceedings or actions as provided by law. 

    (f) All working papers, recorded information, documents and 
 copies thereof produced by, obtained by, or disclosed to the 
 commissioner or any other person in the course of an examination 
 made under this subdivision must be given confidential treatment 
 and are not subject to subpoena and may not be made public by 
 the commissioner or any other person, except to the extent 
 provided in paragraph (e).  Access may also be granted to the 
 National Association of Insurance Commissioners.  The parties 
 must agree in writing prior to receiving the information to 
 provide to it the same confidential treatment as required by 
 this section, unless the prior written consent of the company to 
 which it pertains has been obtained. 

    Subd. 5.    Order; foreign and domestic companies.  
 Within a reasonable time of receipt of an examination report the 
 commissioner may issue an order to the examinee directing 
 compliance within a time specified in the order or by law with 
 one or more of the following: 

    (a) to restore within the time and extent prescribed by law 
 or the commissioner's order any deficiency, whenever its 
 capital, reserves or surplus have become impaired, 

    (b) to cease and desist from transaction of any business or 
 from any business practice which if transacted or continued 
 might result in the examinee's condition or further transaction 
 of business being hazardous to its policyholders, its creditors, 
 or the public, 

    (c) to cease and desist from any other violation of its 
 charter or any law of the state.  

    Subd. 6.    Penalty.  Notwithstanding section 72A.05, 
 any person who violates or aids and abets any violation of a 
 written order issued pursuant to this section may be fined not 
 more than $10,000 for each day the violation continues for each 
 violation of the order in an action commenced in Ramsey county 
 by the attorney general on behalf of the state of Minnesota and 
 the money so recovered shall be paid into the general fund. 

    Subd. 7.    Alternatives to examinations.  In lieu of an 
 examination under this section of a foreign or an alien insurer 
 licensed in this state, the commissioner may accept an 
 examination report on the company as prepared by the insurance 
 department for the company's state of domicile or port of entry 
 state until January 1, 1994.  After January 1, 1994, the reports 
 may only be accepted if:  

    (1) the insurance department is accredited under the 
 National Association of Insurance Commissioners Financial 
 Regulation Standards and Accreditation Program at the time of 
 the examination; or 

    (2) the examination is performed under the supervision of 
 an accredited insurance department or with the participation of 
 one or more examiners who are employed by an accredited state 
 insurance department and who, after a review of the examination 
 workpapers and report, state under oath that the examination was 
 performed in a manner consistent with the standards and 
 procedures required by their insurance department. 

    Subd. 7a.    Conflict of interest.  The department shall 
 establish reasonable procedures so that no examiner, either 
 directly or indirectly, has a conflict of interest or is 
 affiliated with the management of or owns a pecuniary interest 
 in a person subject to examination under this chapter.  This 
 section shall not be construed to automatically preclude an 
 examiner from being: 

    (1) a policyholder or claimant under an insurance policy; 

    (2) a grantor of a mortgage or similar instrument on the 
 examiner's residence to a regulated entity if done under 
 customary terms and in the ordinary course of business; 

    (3) an investment owner in shares of regulated diversified 
 investment companies; or 

    (4) a settlor or beneficiary of a "blind trust" into which 
 any otherwise impermissible holdings have been placed. 

    Notwithstanding the requirements of this section, the 
 commissioner may retain from time to time, on an individual 
 basis, qualified actuaries, certified public accountants, or 
 other similar individuals who are independently practicing their 
 professions, even though the persons may from time to time be 
 similarly employed or retained by persons subject to examination 
 under this chapter. 

    Subd. 8.    Power to make rules.  The commissioner may 
 promulgate any rules which may be necessary to the 
 administration of subdivisions 1 to 9.  

    Subd. 9.    Immunity from liability.  (a) No cause of 
 action shall arise nor shall liability be imposed against the 
 commissioner, the commissioner's authorized representatives, or 
 an examiner appointed by the commissioner for statements made or 
 conduct performed in good faith while carrying out the 
 provisions of this section.  

    (b) No cause of action shall arise, nor shall liability be 
 imposed against a person for the act of communicating or 
 delivering information or data to the commissioner or the 
 commissioner's authorized representative or examiner pursuant to 
 an examination made under this section, if the act of 
 communication or delivery is performed in good faith and without 
 fraudulent intent or the intent to deceive. 

    (c) This section does not abrogate or modify a common law 
 or statutory privilege or immunity enjoyed by a person 
 identified in paragraph (a).  

    (d) A person identified in paragraph (a) may be awarded 
 attorney fees and costs if the person is the prevailing party in 
 a civil cause of action for libel, slander, or other relevant 
 tort arising out of activities in carrying out the provisions of 
 this section, and the party bringing the action was not 
 substantially justified in doing so.  For purposes of this 
 section, a proceeding is "substantially justified" if it had a 
 reasonable basis in law or fact at the time that it was 
 initiated. 

    HIST: 1967 c 591 s 1; 1969 c 234 s 1,2; 1969 c 399 s 1; 1981 c 
 211 s 1-7; 1984 c 628 art 3 s 11; 1986 c 444; 1991 c 325 art 10 
 s 3; 1992 c 540 art 2 s 2 

     60A.032 Commissioner's orders, report.  

    When, upon receipt of an examination report, the 
 commissioner forwards to the company an order based on the 
 report, the commissioner shall immediately report the fact to 
 the governor and the attorney general.  Within 20 days after 
 submission of the report the commissioner shall submit to the 
 governor and attorney general a supplementary report if the 
 company has not complied with the order.  

    HIST: 1969 c 7 s 1; 1986 c 444 

  60A.04 Repealed, 1969 c 708 s 62 

  60A.05 Repealed, 1992 c 564 art 3 s 30 

  60A.051 Repealed, 1992 c 564 art 3 s 30 

     60A.052 Certificates of authority; enforcement actions. 

    Subdivision 1.    Grounds.  The commissioner may by 
 order take any or all of the following actions:  (a) deny, 
 suspend, or revoke a certificate of authority; (b) censure the 
 insurance company; or (c) impose a civil penalty as provided for 
 in section 45.027, subdivision 6.  In order to take this action 
 the commissioner must find that the order is in the public 
 interest, and the insurance company: 

    (1) has a board of directors or principal management that 
 is incompetent, untrustworthy, or so lacking in insurance 
 company managerial experience as to make its operation hazardous 
 to policyholders, its stockholders, or to the insurance buying 
 public; 

    (2) is controlled directly or indirectly through ownership, 
 management, reinsurance transactions, or other business 
 relations by any person or persons whose business operations are 
 or have been marked by manipulation of any assets, reinsurance, 
 or accounts as to create a hazard to the company's 
 policyholders, stockholders, or the insurance buying public; 

    (3) is in an unsound or unsafe condition; 

    (4) has the actual liabilities that exceed the actual funds 
 of the company; 

    (5) has filed an application for a license which is 
 incomplete in any material respect or contains any statement 
 which, in light of the circumstances under which it was made, 
 contained any misrepresentation or was false, misleading, or 
 fraudulent; 

    (6) has pled guilty, with or without explicitly admitting 
 guilt, pled nolo contendere, or been convicted of a felony, 
 gross misdemeanor, or misdemeanor involving moral turpitude, or 
 similar conduct; 

    (7) is permanently or temporarily enjoined by any court of 
 competent jurisdiction from engaging in or continuing any 
 conduct or practice involving any aspect of the insurance 
 business; 

    (8) has violated or failed to comply with any order of the 
 insurance regulator of any other state or jurisdiction; 

    (9) has had a certificate of authority denied, suspended, 
 or revoked, has been censured or reprimanded, has been the 
 subject of any other discipline imposed by, or has paid or has 
 been required to pay a monetary penalty or fine to, another 
 state; 

    (10) agents, officers, or directors refuse to submit to 
 examination or perform any related legal obligation; or 

    (11) has violated or failed to comply with, any of the 
 provisions of the insurance laws including chapter 45 or 
 chapters 60A to 72A or any rule or order under those chapters. 

    Subd. 2.    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; (3) cancellation of all or 
 some of the company's insurance contracts then in force in this 
 state; or (4) 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.  All hearings shall be conducted in 
 accordance with chapter 14.  The insurer may waive its right to 
 the hearing.  If the insurer is under the supervision or control 
 of the insurance department of the insurer's state of domicile, 
 that insurance department, acting on behalf of the insurer, may 
 waive the insurer's right to the hearing.  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. 

    Subd. 3.    Applicants.  Whenever it appears to the 
 commissioner that an application for a certificate of authority 
 should be denied pursuant to subdivision 1, the commissioner 
 shall promptly give a written notice to the applicant of the 
 denial.  The notice must state the grounds for the denial and 
 give reasonable notice of the rights of the applicant to request 
 a hearing.  A hearing must be held not later than 30 days after 
 the request for hearing is received by the commissioner unless 
 the applicant and the department of commerce agree that the 
 hearing may be held at a later date.  If no hearing is requested 
 within 30 days of service of the notice, the denial will become 
 final.  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 
 applicant fails to appear at a hearing after having been duly 
 notified of it, the applicant shall be considered in default, 
 and the proceeding may be determined against the applicant upon 
 consideration of the notice denying the application, the 
 allegations of which may be considered to be true. 

    Subd. 4.    Actions against lapsed certificate of 
 authority.  If a certificate of authority lapses, is 
 surrendered, withdrawn, terminated, or otherwise becomes 
 ineffective, the commissioner may institute a proceeding under 
 this subdivision within two years after the certificate of 
 authority was last effective and enter a revocation or 
 suspension order as of the last date on which the certificate of 
 authority was in effect, or impose a civil penalty as provided 
 for in section 45.027, subdivision 6. 

    Subd. 4a.    Withdrawal of insurer from state.  No 
 insurer shall withdraw from this state until its direct 
 liability to its policyholders and obligees under all its 
 insurance contracts then in force in this state have been 
 assumed by another licensed insurer according to section 60A.09, 
 subdivision 4a. 

    HIST: 1992 c 564 art 3 s 2; 1994 c 425 s 1; 1994 c 485 s 6; 
 1999 c 177 s 3,4 

     60A.06 Kinds of insurance permitted. 

    Subdivision 1.    Statutory lines.  Insurance 
 corporations may be authorized to transact in any state or 
 territory in the United States, in the Dominion of Canada, and 
 in foreign countries, when specified in their charters or 
 certificates of incorporation, either as originally granted or 
 as thereafter amended, any of the following kinds of business, 
 upon the stock plan, or upon the mutual plan when the formation 
 of such mutual companies is otherwise authorized by law; and 
 business trusts as authorized by law of this state shall only be 
 authorized to transact in this state the following kind of 
 business hereinafter specified in clause (7) hereof when 
 specified in their "declaration of trust": 

    (1) To insure against loss or damage to property on land 
 and against loss of rents and rental values, leaseholds of 
 buildings, use and occupancy and direct or consequential loss or 
 damage caused by fire, smoke or smudge, water or other fluid or 
 substance, lightning, windstorm, tornado, cyclone, earthquake, 
 collapse and slippage, rain, hail, frost, snow, freeze, change 
 of temperature, weather or climatic conditions, excess or 
 deficiency of moisture, floods, the rising of waters, oceans, 
 lakes, rivers or their tributaries, bombardment, invasion, 
 insurrection, riot, civil war or commotion, military or usurped 
 power, electrical power interruption or electrical breakdown 
 from any cause, railroad equipment, motor vehicles or aircraft, 
 accidental injury to sprinklers, pumps, conduits or containers 
 or other apparatus erected for extinguishing fires, explosion, 
 whether fire ensues or not, except explosions on risks specified 
 in clause (3); provided, however, that there may be insured 
 hereunder the following:  (a) explosion of any kind originating 
 outside the insured building or outside of the building 
 containing the property insured, (b) explosion of pressure 
 vessels which do not contain steam or which are not operated 
 with steam coils or steam jackets; and (c) risks under home 
 owners multiple peril policies; 

    (2)(a) To insure vessels, freight, goods, wares, 
 merchandise, specie, bullion, jewels, profits, commissions, bank 
 notes, bills of exchange, and other evidences of debt, bottomry 
 and respondentia interest, and every insurance appertaining to 
 or connected with risks of transportation and navigation on and 
 under water, on land or in the air; 

    (b) To insure all personal property floater risks; 

    (3) To insure against any loss from either direct or 
 indirect damage to any property or interest of the assured or of 
 another, resulting from the explosion of or injury to (a) any 
 boiler, heater or other fired pressure vessel; (b) any unfired 
 pressure vessel; (c) pipes or containers connected with any of 
 said boilers or vessels; (d) any engine, turbine, compressor, 
 pump or wheel; (e) any apparatus generating, transmitting or 
 using electricity; (f) any other machinery or apparatus 
 connected with or operated by any of the previously named 
 boilers, vessels or machines; and including the incidental power 
 to make inspections of and to issue certificates of inspection 
 upon, any such boilers, apparatus, and machinery, whether 
 insured or otherwise; 

    (4) To make contracts of life and endowment insurance, to 
 grant, purchase, or dispose of annuities or endowments of any 
 kind; and, in such contracts, or in contracts supplemental 
 thereto to provide for additional benefits in event of death of 
 the insured by accidental means, total permanent disability of 
 the insured, or specific dismemberment or disablement suffered 
 by the insured, or acceleration of life or endowment or annuity 
 benefits in advance of the time they would otherwise be payable; 

    (5)(a) To insure against loss or damage by the sickness, 
 bodily injury or death by accident of the assured or dependents, 
 or those for whom the assured has assumed a portion of the 
 liability for the loss or damage, including liability for 
 payment of medical care costs or for provision of medical care; 

    (b) To insure against the legal liability, whether imposed 
 by common law or by statute or assumed by contract, of employers 
 for the death or disablement of, or injury to, employees; 

    (6) To guarantee the fidelity of persons in fiduciary 
 positions, public or private, or to act as surety on official 
 and other bonds, and for the performance of official or other 
 obligations; 

    (7) To insure owners and others interested in real estate 
 against loss or damage, by reason of defective titles, 
 encumbrances, or otherwise; 

    (8) To insure against loss or damage by breakage of glass, 
 located or in transit; 

    (9)(a) To insure against loss by burglary, theft, or 
 forgery; 

    (b) To insure against loss of or damage to moneys, coins, 
 bullion, securities, notes, drafts, acceptance or any other 
 valuable paper or document, resulting from any cause, except 
 while in the custody or possession of and being transported by 
 any carrier for hire or in the mail; 

    (c) To insure individuals by means of an all risk type of 
 policy commonly known as the "personal property floater" against 
 any kind and all kinds of loss of or damage to, or loss of use 
 of, any personal property other than merchandise; 

    (d) To insure against loss or damage by water or other 
 fluid or substance; 

    (10) To insure against loss from death of domestic animals 
 and to furnish veterinary service; 

    (11) To guarantee merchants and those engaged in business, 
 and giving credit, from loss by reason of giving credit to those 
 dealing with them; this shall be known as credit insurance; 

    (12) To insure against loss or damage to automobiles or 
 other vehicles or aircraft and their contents, by collision, 
 fire, burglary, or theft, and other perils of operation, and 
 against liability for damage to persons, or property of others, 
 by collision with such vehicles or aircraft, and to insure 
 against any loss or hazard incident to the ownership, operation, 
 or use of motor or other vehicles or aircraft; 

    (13) To insure against liability for loss or damage to the 
 property or person of another caused by the insured or by those 
 for whom the insured is responsible, including insurance of 
 medical, hospital, surgical, funeral or other related expense of 
 the insured or other person injured, irrespective of legal 
 liability of the insured, when issued with or supplemental to 
 policies of liability insurance; 

    (14) To insure against loss of or damage to any property of 
 the insured, resulting from the ownership, maintenance or use of 
 elevators, except loss or damage by fire; 

    (15) To insure against attorneys fees, court costs, witness 
 fees and incidental expenses incurred in connection with the use 
 of the professional services of attorneys at law.  

    Subd. 2.    Other lines.  Any insurance corporation or 
 association heretofore or hereafter licensed to transact within 
 the state any of the kinds or classes of insurance specifically 
 authorized under the laws of this state may, when authorized by 
 its charter, transact within and without the state any lines of 
 insurance germane to its charter powers and not specifically 
 provided for under the laws of this state when these lines, or 
 combinations of lines, of insurance are not in violation of the 
 constitution or the laws of the state and, in the opinion of the 
 commissioner, not contrary to public policy, provided the 
 company or association shall first obtain authority of the 
 commissioner and meet capital or surplus and other solvency and 
 policy form requirements as the commissioner shall prescribe.  
 These additional hazards may be insured against by attachment 
 to, or in extension of, any policy which the company may be 
 authorized to issue under the laws of this state.  This 
 subdivision shall apply to companies operating upon the stock or 
 mutual plan, reciprocal or interinsurance exchanges.  

    Subd. 3.    Limitation on combination policies.  (a) 
 Unless specifically authorized by subdivision 1, clause (4), it 
 is unlawful to combine in one policy coverage permitted by 
 subdivision 1, clauses (4) and (5)(a).  This subdivision does 
 not prohibit the simultaneous sale of these products, but the 
 sale must involve two separate and distinct policies.  

    (b) This subdivision does not apply to group policies.  

    (c) This subdivision does not apply to policies permitted 
 by subdivision 1, clause (4), that contain benefits providing 
 acceleration of life, endowment, or annuity benefits in advance 
 of the time they would otherwise be payable, or to long-term 
 care policies as defined in section 62A.46, subdivision 2.  

    HIST: 1967 c 395 art 1 s 6; 1969 c 7 s 5; 1973 c 634 s 1; 1986 
 c 444; 1986 c 455 s 4; 1989 c 125 s 1,2; 1995 c 258 s 1; 1999 c 
 177 s 5,6 

     60A.07 Authorization and requirements. 

    Subdivision 1.    Incorporation.  Except when the manner 
 of organization is specifically otherwise provided in sections 
 dealing with these insurers, domestic insurance corporations 
 shall be organized under and governed by chapter 300.  The 
 articles or certificate of incorporation must meet the 
 requirements of section 300.025, other than:  

    (1) the requirement that a majority of board members shall 
 always be residents of this state; and 

    (2) the requirements of section 300.025, clause (7). 

    Subd. 2.    Powers of insurers.  Corporations may be 
 formed for carrying on any one branch of the business of 
 insurance authorized by law, or any two or more branches 
 thereof, which are permitted by law to be transacted by one 
 company; and business trusts as authorized by law of this state 
 may be formed for carrying on the kind of business of insurance 
 specified in section 60A.06, subdivision 1, clause (7). 

    Subd. 3.    Acceptance of laws.  Every company, 
 domestic or foreign, shall file with the commissioner its 
 acceptance of the provisions of the insurance laws of the state 
 of Minnesota, and its charter and any amendments thereto, and 
 each such company shall be governed thereby and by those laws 
 relative to corporations in general, so far as applicable and 
 not otherwise specifically provided.  No foreign company shall 
 be denied a license in this state because its corporate powers 
 exceed those which it is permitted to exercise under the laws of 
 this state, but no foreign company, which does outside of this 
 state any kind or combination of kinds of insurance not 
 permitted to be done in this state by similar domestic 
 companies, now or hereafter organized, shall be or continue to 
 be authorized to do an insurance business in this state if the 
 commissioner of commerce finds, after ten days' notice sent by 
 certified mail to the home office of the company involved, and 
 an opportunity to be heard, that the doing of such kind or 
 combination of kinds of insurance business impairs the financial 
 solvency of the company or its financial ability to meet its 
 obligations incurred in this state, or finds that the doing of 
 such kinds or combination of kinds of insurance business is 
 prejudicial to the interests of policyholders, creditors or the 
 people of this state. 

    Subd. 4.    License required.  No insurance company or 
 association, or fraternal benefit society, not specifically 
 exempted therefrom by law, shall transact the business of 
 insurance in this state unless it shall hold a license therefor 
 from the commissioner. 

    Subd. 5.  Repealed, 1969 c 7 s 6 

    Subd. 5a.    Financial requirements; stock companies.  
 No insurance company operating upon the stock plan shall be 
 initially authorized to transact any one of the kinds of 
 business enumerated in section 60A.06, subdivision 1, clauses 
 (1) to (15), unless it shall have paid-up capital stock and 
 surplus of not less than the amounts specified below.  Except as 
 otherwise provided by this subdivision, after initial 
 authorization has been granted, surplus shall be constantly 
 maintained in an amount not less than one-half of the surplus 
 originally required for that kind of business.  If the kind of 
 business being transacted is of the type authorized by section 
 60A.06, subdivision 1, clause (4), surplus shall be constantly 
 maintained after initial authorization in an amount not less 
 than 25 percent of the amount of surplus originally required. 

               Paid Up Capital Stock           Surplus    
   Clause (1),      $350,000                   $350,000   
   Clause (2),      $350,000                   $350,000   
   Clause (3),      $200,000                   $200,000   
   Clause (4),    $1,000,000                 $2,000,000   
   Clause (5a),     $500,000                 $1,000,000   
   Clause (5b),     $500,000                 $1,000,000   
   Clause (6),      $500,000                   $500,000   
   Clause (7),      $500,000                   $500,000   
   Clause (8),      $200,000                   $200,000   
   Clause (9),      $200,000                   $200,000   
   Clause (10),     $200,000                   $200,000   
   Clause (11),     $350,000                   $700,000   
   Clause (12),     $500,000                 $1,000,000   
   Clause (13),     $500,000                 $1,000,000   
   Clause (14),     $200,000                   $200,000   
   Clause (15),     $350,000                   $350,000   

    Subd. 5b.    Financial requirements; mutual companies.  
 No insurance company operating upon the mutual plan as provided 
 in chapter 66A, shall be authorized to transact any one of the 
 kinds of business enumerated in section 60A.06, subdivision 1, 
 clauses (1) to (3) and (5) to (15), unless in addition to the 
 requirements specified in chapter 66A it shall have met the 
 following requirements as to surplus:  As to a mutual company 
 operating on a nonassessable basis, an initial surplus of not 
 less than the amount of surplus enumerated in subdivision 5a for 
 a stock company authorized to transact that kind of business, 
 provided that after initial authorization has been granted, the 
 surplus shall thereafter be constantly maintained in an amount 
 equal to not less than one-half of such initial surplus; as to a 
 mutual company operating on an assessable basis, an initial 
 surplus of not less than one-half of the amount of surplus 
 enumerated in subdivision 5a for a stock company authorized to 
 transact that kind of business, provided that after initial 
 authorization has been granted, the surplus shall thereafter be 
 constantly maintained in an amount equal to not less than 
 one-half of such initial surplus. 

    No insurance company operating upon the mutual plan shall 
 be authorized to transact the kind of business enumerated in 
 section 60A.06, subdivision 1, clause (4), unless it shall have 
 surplus of not less than $3,000,000; provided that after initial 
 authorization has been granted, the surplus shall thereafter be 
 constantly maintained in an amount of not less than $1,500,000. 

    No insurance company operating upon the mutual plan, other 
 than as provided in chapter 66A, shall be authorized to transact 
 the kind of business enumerated in section 60A.06, subdivision 
 1, clause (5) (a), unless it shall have a surplus of not less 
 than $1,500,000; provided that after initial authorization has 
 been granted, the surplus thereafter shall be constantly 
 maintained in the amount of not less than $1,000,000. 

    Subd. 5c.    Authorization to transact more than one kind 
 of business.  Any insurance corporation authorized to 
 transact the kinds of business specified in section 60A.06, 
 subdivision 1, clause (4) may also transact the kinds of 
 business specified in section 60A.06, subdivision 1, clause (5) 
 (a), upon meeting the following financial requirements:  As to 
 companies operating upon the stock plan, paid-up capital stock 
 of not less than $1,000,000 and an initial surplus of not less 
 than $2,000,000 which surplus shall thereafter be constantly 
 maintained in the amount of not less than $500,000; as to 
 companies operating on the mutual plan, an initial surplus of 
 not less than $3,000,000 which shall thereafter be constantly 
 maintained in the amount of not less than $1,500,000. 

    Any insurance corporation which prior to January 1, 1949 
 was authorized to transact personal injury liability insurance 
 and also the kinds of business specified in section 60A.06, 
 subdivision 1, clauses (4) and (5) shall continue to be 
 authorized to transact personal injury liability insurance, 
 providing the corporation continues to meet the revised 
 financial requirements of this subdivision. 

    Any stock company may, when authorized by its articles of 
 incorporation, transact any two or more of the kinds of business 
 specified in section 60A.06, subdivision 1, clauses (1) to (3) 
 and (5) to (15), upon meeting the following financial 
 requirements:  paid-up capital stock of not less than $1,000,000 
 and an initial surplus of not less than $1,000,000 which surplus 
 shall thereafter be constantly maintained in the amount of not 
 less than $500,000; provided, however, that if the sum of the 
 capital stock and surplus requirements specified in subdivision 
 5a for the kinds of business to be transacted is less than the 
 amount of the capital stock and surplus requirements stated in 
 the foregoing clauses of this sentence, then the company may 
 transact those kinds of business upon meeting the capital stock 
 and surplus requirements specified in subdivision 5a for those 
 kinds of business.  Any insurance company operating upon the 
 mutual plan as provided in chapter 66A, may, when authorized by 
 its articles of incorporation, transact any two or more of the 
 kinds of business specified in section 60A.06, subdivision 1, 
 clauses (1) to (3) and (5) to (15), upon meeting the following 
 requirements as to surplus which shall be in addition to the 
 requirements specified in chapter 66A:  as to mutual companies 
 operating on a nonassessable basis, an initial surplus of not 
 less than $1,000,000, which surplus shall thereafter be 
 constantly maintained in the amount of not less than $500,000; 
 as to mutual companies operating on an assessable basis, an 
 initial surplus of not less than $750,000, which surplus shall 
 thereafter be constantly maintained in the amount of not less 
 than $375,000; provided, however, that if the sum of the surplus 
 requirements specified in subdivisions 5a and 5b for the kinds 
 of business to be transacted is less than the amount of the 
 surplus requirements stated in the foregoing clauses of this 
 sentence, then the company may transact those kinds of business 
 upon meeting the surplus requirements specified in subdivisions 
 5a and 5b for those kinds of business. 

    Subd. 5d. Repealed, 1993 c 299 s 33 

    Subd. 5e.    Minimum requirements; deficiency.  
 Whenever the commissioner finds that the capital or surplus of a 
 stock company, or the surplus of a mutual company, is less than 
 the minimum requirements prescribed by this section, the 
 commissioner shall determine the amount of the deficiency and 
 issue an order in writing requiring the insurance company to 
 restore the deficiency within such reasonable period as the 
 commissioner shall designate.  The commissioner may, by order 
 served upon the insurance company, prohibit the insurance 
 company from issuing any new policies while the deficiency 
 exists.  If at the expiration of the designated period the 
 insurance company has not restored the deficiency and filed 
 proof satisfactory to the commissioner, the commissioner shall 
 proceed against the insurance company as provided in chapter 
 60B; provided, however, that if the surplus of a mutual company 
 operating on the nonassessable basis declines below the minimum 
 requirement prescribed by this section for such a company, and 
 if its surplus is equal to or greater than the minimum 
 requirement for a mutual company operating on the assessable 
 basis, it may continue to write on the assessable basis by 
 issuing only assessable policies. 

    Subd. 5f.    Capital and surplus requirements.  (a) 
 Capital and surplus requirements apply to all types of insurance 
 transacted by the insurer, whether or not only a portion of the 
 types of insurance are transacted in this state.  The 
 commissioner may for the protection of the public require an 
 insurer to maintain funds in excess of the amounts required 
 under this section, due to the amount, kind, or combination of 
 types of insurance transacted by the insurer.  Failure of an 
 insurer to maintain funds as ordered by the commissioner is 
 grounds for suspension or revocation of the insurer's 
 certificate of authority.  

    (b) After June 30, 1991, an insurer may not renew and 
 continue its certificate of authority unless the insurer 
 possesses at least the basic capital and surplus, and additional 
 surplus required by the commissioner under this section.  

    Subd. 6.    Reduction of capital stock.  When the 
 capital of any domestic stock company is impaired, it may, upon 
 a vote of the majority of the stock, reduce the same to not less 
 than the legal minimum.  In this case no part of its assets 
 shall be distributed to the stockholders.  Any such company 
 whose capital is not impaired may, by a two-thirds vote of its 
 stock and with the consent of the commissioner, reduce the same 
 to not less than the legal minimum capital and surplus required 
 for such a company.  In either case, within ten days after the 
 meeting at which the reduction was made, the company shall 
 submit to the commissioner a certified statement of the 
 proceedings thereof, including the amount of the reduction and 
 its assets and liabilities, verified by its president, 
 secretary, and a majority of its directors.  The commissioner 
 shall examine the facts and, if they conform to law and the 
 commissioner is of opinion that injury to the public will not 
 result, the commissioner shall endorse approval upon the 
 statement.  Upon filing the same with the secretary of state and 
 paying a filing fee of $5, and duly amending its certificate of 
 incorporation in conformity therewith, it may transact business 
 upon the reduced capital as though the same were its original 
 capital, and the commissioner shall issue a license to that 
 effect.  The company may thereafter, by a majority vote of its 
 directors, require the return of every original stock 
 certificate in exchange for a new certificate for such number of 
 shares as each stockholder is entitled to, in the proportion 
 that the reduced capital bears to the original. 

    Subd. 7.    New certificate of authority.  Upon 
 application, the commissioner shall examine the proceedings of 
 any domestic company to increase or reduce its capital stock 
 and, when found conformable to law, shall revoke the old and 
 issue a new certificate of authority to the company to transact 
 business upon the increased or reduced capital. 

    Subd. 8.    Special provisions as to mutual companies.  
 (1)   Amendment of articles or certificate of incorporation.  
 The certificate of incorporation or articles of association of 
 any domestic insurance company without capital stock, now or 
 hereafter organized and existing under the laws of this state, 
 may be amended in respect to any matter which an original 
 certificate of incorporation or articles of association of a 
 corporation of the same kind might lawfully have contained by 
 the adoption of a resolution specifying the proposed amendment, 
 at a regular meeting of the members thereof or at a special 
 meeting called for that expressly stated purpose, by the 
 affirmative vote of a majority of the members present, in person 
 or by proxy, at the meeting, and by causing the resolution to be 
 embraced in a certificate duly executed by its president and 
 secretary or other presiding and recording officers, under its 
 corporate seal, and approved, filed, recorded, and published in 
 the manner prescribed by law for the execution, approval, 
 filing, recording, and publishing of a like original certificate 
 of incorporation or articles of association. 

    (2)    Renewal of corporate existence.  Any domestic 
 insurance company or corporation having no capital stock, 
 heretofore or hereafter organized and existing under the laws of 
 this state, whose period of duration has expired or is about to 
 expire, may, on or before the date of the expiration, or within 
 six months after the date of expiration, renew its corporate 
 existence from the date of such expiration for any period 
 permitted by the laws of this state, by the adoption of a 
 resolution to that effect by the affirmative vote of 
 three-fourths of the members present, in person or by proxy, at 
 a regular meeting of the members, or at any special meeting 
 called for that expressly stated purpose, and by causing the 
 resolution to be embraced in a certificate duly executed by its 
 president and secretary or other presiding and recording 
 officers, under its corporate seal, and approved, filed, 
 recorded, and published in the manner prescribed by law for the 
 execution, approval, filing, recording, and publishing of an 
 original certificate of incorporation or articles of association.

    (3)    Bylaws.  The bylaws of any domestic insurance 
 corporation without capital stock, in cases where the bylaws 
 must be adopted or approved by the members thereof, may be 
 adopted, altered, or amended at a regular meeting of the members 
 thereof, or at a special meeting called for that expressly 
 stated purpose, by the affirmative vote of a majority of the 
 members present, in person or by proxy, at the meeting. 

    Subd. 9.    Retaliatory provision.  When the laws of 
 any other state, territory, or country prohibit the organization 
 of or do not provide for the organization of or the licensing in 
 that state, territory, or country of a class or kind of 
 insurance companies or associations organized under the laws of 
 this state and authorized to transact the business of insurance 
 in this state, then companies or associations of the same kind 
 or class of the other state, territory, or country shall not be 
 licensed to do business in this state. 

    This provision shall not apply to companies or 
 associations, organized under the laws of another state, now 
 licensed to do business in this state. 

    Subd. 10.    Special provisions as to life companies.  
 (1)   Prerequisites of life companies.  No mutual life 
 company shall be qualified to issue any policy until 
 applications for at least $200,000 of insurance, upon lives of 
 at least 200 separate residents, have been actually and in good 
 faith made, accepted, and entered upon its books and at least 
 one full annual premium thereunder, based upon the authorized 
 table of mortality, received in cash or in absolutely payable 
 and collectible notes.  A duplicate receipt for each premium, 
 conditioned for the return thereof unless the policy be issued 
 within one year thereafter, shall be issued, and one copy 
 delivered to the applicant and the other filed with the 
 commissioner, together with the certificate of a solvent 
 authorized bank in the state, of the deposit therein of such 
 cash and notes, aggregating the amount aforesaid, specifying the 
 maker, payee, date, maturity, and amount of each.  Such cash and 
 notes shall be held by it not longer than one year, and at or 
 before the expiration thereof to be by it paid or delivered, 
 upon the written order of the commissioner, to such company or 
 applicants, respectively. 

    (2)    Temporary capital stock of mutual life companies. 
  A new mutual life insurance company which has complied with 
 the provisions of clause (1) or an existing mutual life 
 insurance company may establish, a temporary capital of, such 
 amount not less than $100,000, as may be approved by the 
 commissioner.  Such temporary capital shall be invested by the 
 company in the same manner as is provided for the investment of 
 its other funds.  Out of the net surplus of the company the 
 holders of the temporary capital stock may receive a dividend 
 which may be cumulative.  This capital stock shall not be a 
 liability of the company but shall be retired within a 
 reasonable time and according to terms approved by the 
 commissioner.  At the time for the retirement of this capital 
 stock, the holders shall be entitled to receive from the company 
 the par value thereof and any dividends thereon due and unpaid, 
 and thereupon the stock shall be surrendered and canceled.  In 
 the event of the liquidation of the company, the holders of 
 temporary capital stock shall have the same preference in the 
 assets of the company as shareholders have in a stock insurance 
 company.  Dividends on this stock are subject to section 60D.20, 
 subdivision 2. 

    Temporary capital stock may be issued with or without 
 voting rights.  If issued with voting rights, the holders shall, 
 at all meetings, be entitled to one vote for each $10 of 
 temporary capital stock held.  

    Subd. 11.   Officers and employees bonded.  Every 
 company shall provide a fidelity bond for its officers and 
 employees.  The bond shall be in the amount deemed necessary by 
 the commissioner to adequately protect the public. 

    HIST: 1967 c 395 art 1 s 7; 1969 c 7 s 7-13; 1969 c 598 s 1; 
 1969 c 708 s 63; 1973 c 634 s 2-4; 1976 c 213 s 1-4; 1978 c 465 
 s 1,2; 1978 c 674 s 60; 1980 c 516 s 2; 1983 c 216 art 1 s 15; 
 1983 c 289 s 114 subd 1; 1984 c 655 art 1 s 92; 1986 c 313 s 2; 
 1986 c 444; 1991 c 325 art 10 s 4; art 14 s 1; 1992 c 564 art 1 
 s 15,16,54; 1995 c 214 s 3; 1996 c 446 art 2 s 1,2 

     60A.075 Mutual company conversion to stock company. 

    Subdivision 1.    Definitions.  For the purposes of this 
 section, the terms in this subdivision have the meanings given 
 them. 

    (a) "Eligible member" means a policyholder whose policy is 
 in force as of the record date, which is the date that the 
 mutual company's board of directors adopts a plan of conversion 
 or some other date specified as the record date in the plan of 
 conversion and approved by the commissioner.  Unless otherwise 
 provided in the plan, a person insured under a group policy is 
 not an eligible member, unless on the record date: 

    (1) the person is insured or covered under a group life 
 policy or group annuity contract under which funds are 
 accumulated and allocated to the respective covered persons; 

    (2) the person has the right to direct the application of 
 the funds so allocated; 

    (3) the group policyholder makes no contribution to the 
 premiums or deposits for the policy or contract; and 

    (4) the converting mutual company has the names and 
 addresses of the persons covered under the group life policy or 
 group annuity contract. 

    (b) "Reorganized company" means a Minnesota domestic stock 
 insurance company that has converted from a Minnesota domestic 
 mutual insurance company according to this section. 

    (c) "Plan of conversion" or "plan" means a plan adopted by 
 a Minnesota domestic mutual insurance company's board of 
 directors under this section to convert the mutual company into 
 a Minnesota domestic stock insurance company. 

    (d) "Policy" means a policy or contract of insurance issued 
 by a converting mutual company, including an annuity contract. 

    (e) "Commissioner" means the commissioner of commerce. 

    (f) "Converting mutual company" means a Minnesota domestic 
 mutual insurance company seeking to convert to a Minnesota 
 domestic stock insurance company according to this section. 

    (g) "Effective date of a conversion" means the date 
 determined according to subdivision 6. 

    (h) "Membership interests" means all policyholders' rights 
 as members of the converting mutual company, including but not 
 limited to, rights to vote and to participate in any 
 distributions of surplus, whether or not incident to the 
 company's liquidation. 

    (i) "Equitable surplus" means the converting mutual 
 company's surplus as regards policyholders as of the record date 
 of the conversion or other date approved by the commissioner 
 determined in a manner that is not unfair or inequitable to 
 policyholders. 

    (j) "Permitted issuer" means:  (1) a corporation organized 
 and owned by the converting mutual company or by any other 
 insurance company or insurance holding company for the purpose 
 of purchasing and holding securities representing a majority of 
 voting control of the reorganized company; (2) a stock insurance 
 company owned by the converting mutual company or by any other 
 insurance company or insurance holding company into which the 
 converting mutual company will be merged; or (3) any other 
 corporation approved by the commissioner. 

    Subd. 2.    Authorization.  A mutual insurance company 
 may become a stock insurance company according to a plan of 
 conversion established and approved in the manner provided by 
 this section. 

    Subd. 3.    Adoption of a plan of conversion by the board 
 of directors.  (a) A converting mutual company shall, by the 
 affirmative vote of a majority of its board of directors, adopt 
 a plan of conversion consistent with the requirements of this 
 section. 

    (b) At any time before approval of a plan by the 
 commissioner, the converting mutual company, by the affirmative 
 vote of a majority of its board of directors, may amend or 
 withdraw the plan. 

    Subd. 4.    Approval of the plan of conversion by the 
 commissioner.  (a)    Documents to be filed.  After 
 adoption of the plan by the converting mutual company's board of 
 directors, but before the members' approval of the plan, the 
 converting mutual company shall file the following documents 
 with the commissioner for review and approval: 

    (1) the plan of conversion, including an independent 
 evaluation of the pro forma market value and of the equitable 
 surplus of the company and of the estimated value of any shares 
 to be issued and an independent actuarial opinion, if required; 

    (2) the form of notice of meeting for eligible members to 
 vote on the plan; 

    (3) the form of any proxies to be solicited from eligible 
 members; 

    (4) the proposed articles of incorporation and bylaws of 
 the converted stock company; 

    (5) information required under chapter 60D if the plan 
 results in a change of control of the converting mutual company; 
 and 

    (6) other information or documentation requested by the 
 commissioner or required by rule. 

    (b)    Required findings.  The commissioner shall 
 approve or conditionally approve the plan upon finding that: 

    (1) the provisions of this section have been fully met; and 

    (2) the plan will not be unfair or inequitable to 
 policyholders. 

    (c)    Time.  The plan of conversion shall, by order, be 
 approved, conditionally approved, or disapproved by the 
 commissioner within the later of 30 days from the commissioner's 
 receipt of all required information from the converting mutual 
 company or 30 days after the conclusion of a public hearing held 
 according to paragraph (e).  An approval or conditional approval 
 of a plan expires if the reorganization is not completed within 
 180 days after the approval or conditional approval unless this 
 time period is extended by the commissioner for good cause shown.

    (d)    Consultants.  The commissioner may retain, at the 
 converting mutual company's expense, qualified experts not 
 otherwise a part of the commissioner's staff to assist in 
 reviewing the plan and supplemental materials and valuations. 

    (e)    Hearing.  The commissioner may, but need not, 
 conduct a public hearing regarding the proposed plan of 
 conversion.  The hearing must begin no later than 30 days after 
 submission to the commissioner of a plan of conversion and all 
 required information.  The commissioner shall give the 
 converting mutual company at least 20 days' notice of the 
 hearing.  At the hearing, the converting mutual company, its 
 policyholders, and any other person whose interest may be 
 affected by the proposed conversion may present evidence, 
 examine and cross-examine witnesses, and offer oral and written 
 arguments or comments according to the procedure for contested 
 cases under chapter 14.  The persons participating may conduct 
 discovery proceedings in the same manner as prescribed for the 
 district courts of this state.  All discovery proceedings must 
 be concluded no later than three days before the scheduled 
 commencement date of the public hearing. 

    Subd. 5.    Approval of the plan by the eligible members. 
  (a)    Notice.  Following approval or conditional approval 
 of the plan by the commissioner, all eligible members shall be 
 given notice of a regular or special meeting of the 
 policyholders called for the purpose of considering the plan and 
 any corporate actions that are a part of, or are reasonably 
 attendant to, the accomplishment of the plan. 

    (b)    Notice required.  A copy of the plan or a summary 
 of the plan must accompany the notice.  The notice must be 
 mailed to each eligible member's last known address, as shown on 
 the converting mutual company's records, within 45 days of the 
 commissioner's approval of the plan, unless the commissioner 
 directs an earlier date for mailing.  The meeting to vote upon 
 the plan must be set for a date no less than 45 days after the 
 date when the notice of the meeting is mailed by the converting 
 mutual company unless the commissioner directs an earlier date 
 for the meeting.  If the meeting to vote upon the plan is held 
 coincident with the converting mutual company's annual meeting 
 of policyholders, only one combined notice of meeting is 
 required. 

    (c)    Failure to give notice.  If the converting mutual 
 company complies substantially and in good faith with the notice 
 requirements of this section, the converting mutual company's 
 failure to give any member or members any required notice does 
 not impair the validity of any action taken under this section. 

    (d)    Voting.  (1) The plan must be adopted upon 
 receiving the affirmative vote of a majority of the votes cast 
 by eligible members. 

    (2) Eligible members may vote in person or by proxy.  The 
 form of any proxy must be filed with and approved by the 
 commissioner. 

    (3) The number of votes each eligible member may cast shall 
 be determined by the converting mutual company's bylaws.  If the 
 bylaws are silent, or if the commissioner determines that the 
 voting requirements under the bylaws would be unfair or would 
 prejudice the rights of the eligible members, each eligible 
 member may cast one vote. 

    Subd. 6.    Conversion.  (a)    Filing.  Following 
 approval by the members, the converting mutual company shall 
 file a copy of the company's amended or restated articles of 
 incorporation with the commissioner, together with a certified 
 copy of the minutes of the meeting at which the plan was adopted 
 and a certified copy of the plan.  The commissioner shall review 
 and, if appropriate, approve the amended or restated articles.  
 After approval by the commissioner, the converting mutual 
 company shall file the articles with the secretary of state as 
 provided by chapter 300. 

    (b)    Effective date.  Effective on the date of filing 
 an amendment or restatement of the articles of incorporation 
 with the secretary of state as provided by chapter 300, or on a 
 later date if the plan so specifies, the converting mutual 
 corporation shall become a stock corporation and shall no longer 
 be a mutual corporation. 

    Subd. 7.    Plan not unfair or inequitable.  A plan of 
 conversion shall not be unfair or inequitable to policyholders.  
 A plan of conversion is not unfair or inequitable if it 
 satisfies the conditions of subdivision 8, 9, or 10.  The 
 commissioner may determine that any other plan proposed by a 
 converting mutual company is not unfair or inequitable to 
 policyholders. 

    Subd. 8.    Share conversion.  A plan of conversion 
 under this subdivision shall provide for exchange of 
 policyholders' membership interests in return for shares in the 
 reorganized company, according to paragraphs (a) to (c). 

    (a) The policyholders' membership interests shall be 
 exchanged, in a manner that takes into account the estimated 
 proportionate contribution of equitable surplus of each class of 
 participating policies and contracts, for all of the common 
 shares of the reorganized company or common shares of its parent 
 company or a permitted issuer, or for a combination of the 
 common shares of the reorganized company or common shares of its 
 parent company or a permitted issuer. 

    (b) Unless the anticipated issuance within a shorter period 
 is disclosed in the plan of conversion, the issuer of common 
 shares shall not, within two years after the effective date of 
 reorganization, issue either of the following: 

    (1) any of its common shares or any securities convertible 
 with or without consideration into the common shares or carrying 
 any warrant to subscribe to or purchase common shares; and 

    (2) any warrant, right, or option to subscribe to or 
 purchase the common shares or other securities described in 
 paragraph (a), except for the issue of common shares to or for 
 the benefit of policyholders according to the plan of conversion 
 and the issue of nontransferable subscription rights for the 
 purchase of common shares being granted to officers, directors, 
 or a tax qualified employee benefit plan of the reorganized 
 company or its parent company, if any, or a permitted issuer, 
 according to subdivision 11. 

    (c) Unless the common shares have a public market when 
 issued, the issuer shall use its best efforts to encourage and 
 assist in the establishment of a public market for the common 
 shares within two years of the effective date of the conversion 
 or a longer period as disclosed in the plan of conversion.  
 Within one year after any offering of stock other than the 
 initial distribution, but no later than six years after the 
 effective date of the conversion, the reorganized company shall 
 offer to make available to policyholders who received and 
 retained shares of common stock or securities described in 
 paragraph (b), clause (1), a procedure to dispose of those 
 shares of stock at market value without brokerage commissions or 
 similar fees. 

    Subd. 9.    Surplus distribution.  A plan of conversion 
 under this subdivision shall provide for the exchange of the 
 policyholders' membership interests in return for the operation 
 of the converting mutual company's participating policies as a 
 closed block of business and for the distribution of the 
 company's equitable surplus to policyholders, and shall provide 
 for the issuance of new shares of the reorganized company or its 
 parent corporation, each according to paragraphs (a) to (i). 

    (a) The converting mutual company's participating business, 
 comprised of its participating policies and contracts in force 
 on the effective date of the conversion or other reasonable date 
 as provided in the plan, shall be operated by the reorganized 
 company as a closed block of participating business.  However, 
 at the option of the converting mutual company, group policies 
 and group contracts may be omitted from the closed block. 

    (b) Assets of the converting mutual company must be 
 allocated to the closed block of participating business in an 
 amount equal to the reserves and liabilities for the converting 
 mutual life insurer's participating policies and contracts in 
 force on the effective date of the conversion.  The plan must be 
 accompanied by an opinion of an independent qualified actuary 
 who meets the standards set forth in the insurance laws or 
 regulations for the submission of actuarial opinions as to the 
 adequacy of reserves or assets.  The opinion must relate to the 
 adequacy of the assets allocated to support the closed block of 
 business.  The actuarial opinion must be based on methods of 
 analysis considered appropriate for those purposes by the 
 Actuarial Standards Board. 

    (c) The reorganized company shall keep a separate 
 accounting for the closed block and shall make and include in 
 the annual statement to be filed with the commissioner each year 
 a separate statement showing the gains, losses, and expenses 
 properly attributable to the closed block. 

    (d) Notwithstanding the establishment of a closed block, 
 the entire assets of the reorganized company shall be available 
 for the payment of benefits to policyholders.  Payment must 
 first be made from the assets supporting the closed block until 
 exhausted, and then from the general assets of the reorganized 
 company. 

    (e) The converting mutual company's equitable surplus shall 
 be distributed to eligible participating policyholders in a form 
 or forms selected by the converting mutual company.  The form of 
 distribution may consist of cash, securities of the reorganized 
 company, securities of another institution, a certificate of 
 contribution, additional life insurance, annuity benefits, 
 increased dividends, reduced premiums, or other equitable 
 consideration or any combination of forms of consideration.  The 
 consideration, if any, given to a class or category of 
 policyholders may differ from the consideration given to another 
 class or category of policyholders.  A certificate of 
 contribution must be repayable in ten years, be equal to 100 
 percent of the value of the policyholders' membership interest, 
 and bear interest at the highest rate charged by the reorganized 
 company for policy loans on the effective date of the conversion.

    (f) The consideration must be allocated among the 
 policyholders in a manner that is fair and equitable to the 
 policyholders. 

    (g) The reorganized company or its parent corporation shall 
 issue and sell shares of one or more classes having a total 
 price equal to the estimated value in the market of the shares 
 on the initial offering date.  The estimated value must take 
 into account all of the following: 

    (1) the pro forma market value of the reorganized company; 

    (2) the consideration to be given to policyholders 
 according to paragraph (e); 

    (3) the proceeds of the sale of the shares; and 

    (4) any additional value attributable to the shares as a 
 result of a purchaser or a group of purchasers who acted in 
 concert to obtain shares in the initial offering, attaining, 
 through such purchase, control of the reorganized company or its 
 parent corporation. 

    (h) If a purchaser or a group of purchasers acting in 
 concert is to attain control in the initial offering, the mutual 
 company shall not, directly or indirectly, pay for any of the 
 costs or expenses of conversion of the mutual company, whether 
 or not the conversion is effected, except with permission of the 
 commissioner. 

    (i) Periodically, with the commissioner's approval, the 
 reorganized company may share in the profits of the closed block 
 of participating business for the benefit of stockholders if the 
 assets allocated to the closed block are in excess of those 
 necessary to support the closed block. 

    Subd. 10.    Subscription rights.  A plan of conversion 
 under this subdivision shall provide for exchange of the 
 policyholders' membership interests in return for the operation 
 of the converting mutual company's participating policies as a 
 closed block of business, for the creation of a liquidation 
 account to protect the interests of policyholders, and for the 
 issuance of subscription rights to eligible policyholders, and 
 shall provide for the issuance of shares by the reorganized 
 company, each according to paragraphs (a) to (j). 

    (a) The converting mutual company's participating business, 
 comprised of its participating policies and contracts in force 
 on the effective date of the conversion, or such other 
 reasonable date specified in the plan, and excluding at the 
 converting mutual company's option any group policies or group 
 contracts, shall be operated by the reorganized company as a 
 closed block of participating business according to subdivision 
 9, paragraphs (a) to (d). 

    (b) The reorganized company or its parent corporation or a 
 permitted issuer shall issue and sell shares of one or more 
 classes having a total price equal to the estimated value of the 
 shares in the market on the initial offering date taking into 
 account the proceeds of the sale of shares and the consideration 
 given to policyholders. 

    (c) The policyholders shall receive nontransferable 
 preemptive subscription rights to purchase all of the common 
 shares of the issuer according to paragraph (b). 

    (d) The preemptive subscription rights to purchase the 
 common shares must be allocated among the participating 
 policyholders in whole shares in a manner provided in the plan 
 that takes into account the estimated contribution of each class 
 of participating policies and contracts to the total amount of 
 the policyholders' consideration.  The plan must provide a fair 
 and equitable means for the allocation of shares in the event of 
 an oversubscription.  The plan must further provide that any 
 shares of capital stock not subscribed by eligible members must 
 be sold in a public offering through an underwriter, unless the 
 number of shares unsubscribed is so small in number so as not to 
 warrant the expense of a public offering, in which case the plan 
 may provide for the purchase of the unsubscribed shares by 
 private placement or through any fair and equitable alternative 
 means approved by the commissioner. 

    (e) The number of the common shares that a person, together 
 with any affiliates or group of persons acting in concert, may 
 subscribe or purchase in the reorganization, must be limited to 
 not more than five percent of the common shares.  For this 
 purpose, neither the members of the board of directors of the 
 reorganized company nor its parent corporation, if any, is 
 considered to be affiliates or a group of persons acting in 
 concert solely by reason of their board membership. 

    (f) Unless the common shares have a public market when 
 issued, officers and directors of the issuer and their 
 affiliates shall not, for at least three years after the date of 
 conversion, purchase common shares of the issuer, except with 
 the approval of the commissioner. 

    (g) Unless the common shares have a public market when 
 issued, the issuer shall use its best efforts to encourage and 
 assist in the establishment of a public market for the common 
 shares. 

    (h) The issuer shall not, for at least three years 
 following the conversion, repurchase any of its common shares 
 except according to a pro rata tender offer to all shareholders, 
 or with the approval of the commissioner. 

    (i) A liquidation account must be established for the 
 benefit of policyholders in the event of a complete liquidation 
 of the reorganized company.  The liquidation account must be 
 equal to the equitable surplus of the converting mutual company 
 as of the effective date of the conversion.  The function of the 
 liquidation account is solely to establish a priority on 
 liquidation and its existence does not restrict the use or 
 application of the surplus of the reorganized company except as 
 specified in paragraph (j).  The liquidation account must be 
 allocated equitably as of the effective date of conversion among 
 the then participating policyholders.  The amount allocated to a 
 policy or contract must not increase and must be reduced to zero 
 when the policy or contract terminates.  In the event of a 
 complete liquidation of the reorganized company, the 
 policyholders among which the liquidation account is allocated 
 are entitled to receive a liquidation distribution in the amount 
 of the liquidation account before any liquidation distribution 
 is made with respect to shares. 

    (j) Until the liquidation account has been reduced to zero, 
 the issuer shall not declare or pay a cash dividend on, or 
 repurchase any of, its common shares in an amount in excess of 
 its cumulative earned surplus generated after the conversion 
 determined according to statutory accounting principles, if the 
 effect would be to cause the amount of the statutory surplus of 
 the reorganized company to be reduced below the then amount of 
 the liquidation account. 

    Subd. 11.    Optional provisions.  A plan under 
 subdivision 8, 9, or 10 may include, with the approval of the 
 commissioner, any of the provisions in paragraphs (a) and (b). 

    (a) A plan may provide that any shares of the stock of the 
 reorganized company or its parent corporation or a permitted 
 issuer included in the policyholders' consideration must be 
 placed on the effective date of the conversion in a trust or 
 other entity existing for the exclusive benefit of the 
 participating policyholders and established solely for the 
 purposes of effecting the reorganization.  Under this option, 
 the shares placed in trust must be sold over a period of not 
 more than ten years and the proceeds of the shares must be 
 distributed using the distribution priorities prescribed in the 
 plan. 

    (b) A plan may provide that the directors and officers of 
 the converting mutual company shall receive, without payment, 
 nontransferable subscription rights to purchase capital stock of 
 the reorganized company, its parent, or a permitted issuer.  
 Those subscription rights must be allocated among the directors 
 and officers by a fair and equitable formula. 

    (1) The total number of shares that may be purchased under 
 this clause, may not exceed 35 percent of the total number of 
 shares to be issued in the case of a converting mutual company 
 with total assets of less than $50,000,000 or 25 percent of the 
 total shares to be issued in the case of a converting mutual 
 company with total assets of more than $500,000,000.  For 
 converting mutual companies with total assets between 
 $50,000,000 and $500,000,000, the total number of shares that 
 may be purchased may not exceed an interpolated percentage 
 between 25 and 35 percent. 

    (2) Stock purchased by a director or officer under clause 
 (1) may not be sold within one year following the effective date 
 of the conversion. 

    (3) The plan may also provide that a director or officer, 
 or person acting in concert with a director or officer of the 
 converting mutual company, may not acquire any capital stock of 
 the reorganized company for three years after the effective date 
 of the conversion, except through a licensed securities broker 
 or dealer, without the permission of the commissioner.  That 
 provision may not apply to prohibit the directors and officers 
 from purchasing stock through subscription rights received in 
 the plan under clause (1). 

    (c) A plan may allocate to a tax-qualified employee benefit 
 plan nontransferable subscription rights to purchase up to ten 
 percent of the capital stock of the reorganized company, its 
 parent, or a permitted issuer.  The employee benefit plan must 
 be entitled to exercise its subscription rights regardless of 
 the amount of shares purchased by other persons. 

    Subd. 12.    Alternative plan of conversion.  In lieu of 
 selecting a plan of conversion provided for in this section, the 
 converting mutual company may convert according to a plan 
 approved by the commissioner if the commissioner finds that the 
 plan does not prejudice the interests of the members, is fair 
 and equitable, and is based upon an independent appraisal of the 
 market value of the mutual company by a qualified person, and is 
 a fair and equitable allocation of any consideration to be given 
 eligible members.  The commissioner may retain, at the 
 converting mutual company's expense, any qualified expert not 
 otherwise a part of the commissioner's staff to assist in 
 reviewing whether the alternative plan may be approved and the 
 valuation of the company. 

    Subd. 13.    Effect of conversion.  (a) Upon the 
 conversion of a converting mutual company to a reorganized 
 company according to this section, the corporate existence of 
 the converting mutual company must be continued in the 
 reorganized company.  All the rights, franchises, and interests 
 of the converting mutual company in and to all property and 
 things in action belonging to this property, is considered 
 transferred to and vested in the reorganized company without any 
 deed or transfer.  Simultaneously, the reorganized company is 
 considered to have assumed all the obligations and liabilities 
 of the converting mutual company. 

    (b) The directors and officers of the converting mutual 
 company, unless otherwise specified in the plan of conversion, 
 shall serve as directors and officers of the reorganized company 
 until new directors and officers of the reorganized company are 
 duly elected according to the articles of incorporation and 
 bylaws of the reorganized company. 

    (c) All policies in force on the effective date of the 
 conversion continue to remain in force under the terms of those 
 policies, except that any voting rights of the policyholders 
 provided for under the policies are extinguished on the 
 effective date of the conversion. 

    Subd. 14.    Conflict of interest.  No director, 
 officer, agent, employee of the converting mutual company, or 
 any other person shall receive a fee, commission, or other 
 valuable consideration, other than the person's usual regular 
 salary and compensation, for in any manner aiding, promoting, or 
 assisting in the conversion except as set forth in the plan 
 approved by the commissioner.  This provision does not prohibit 
 the payment of reasonable fees and compensation to attorneys, 
 accountants, investment bankers, and actuaries for services 
 performed in the independent practice of their professions. 

    Subd. 15.    Costs and expenses.  All the costs and 
 expenses connected with a plan of conversion must be paid for or 
 reimbursed by the converting mutual company or the reorganized 
 company except where the plan provides otherwise. 

    Subd. 16.    Limitation of actions.  (a) An action 
 challenging the validity of or arising out of acts taken or 
 proposed to be taken according to this section must be commenced 
 within 180 days after the effective date of the conversion. 

    (b) The converting mutual company, the reorganized company, 
 or any defendant in an action described in paragraph (a), may 
 petition the court in the action to order a party to give 
 security for the reasonable attorney fees that may be incurred 
 by a party to the action.  The amount of security may be 
 increased or decreased in the discretion of the court having 
 jurisdiction if a showing is made that the security provided is 
 or may become inadequate or excessive. 

    Subd. 17.    Supervisory conversions.  The commissioner 
 may waive or alter any of the requirements of this section to 
 protect the interests of policyholders if the converting mutual 
 company is subject to the commissioner's administrative 
 supervision under chapter 60G or rehabilitation under chapter 
 60B. 

    Subd. 18.    Postconversion acquisition.  Prior to and 
 for a period of five years following the date when the 
 distribution of consideration to the eligible members in 
 exchange for their membership interests is completed under a 
 plan of conversion according to this section, no person other 
 than the reorganized company shall directly or indirectly 
 acquire or offer to acquire in any manner ownership or 
 beneficial ownership of ten percent or more of any class of 
 voting security of the reorganized company, or of any affiliate 
 of the reorganized company which controls, directly or 
 indirectly, a majority of the voting power of the reorganized 
 company, without the prior approval of the commissioner.  For 
 the purposes of this subdivision, the terms "affiliate" and 
 "person" have the meanings given in section 60D.15, and the term 
 "reorganized company" includes any successor of the reorganized 
 company. 

    HIST: 1996 c 446 art 2 s 3; 1997 c 231 art 15 s 1-3; 1999 c 
 177 s 7 

  60A.076 Repealed, 1991 c 325 art 4 s 10 

     60A.077 Mutual insurance holding companies. 

    Subdivision 1.    Formation.  (a) A domestic mutual 
 insurance company, upon approval of the commissioner, may 
 reorganize by forming an insurance holding company based upon a 
 mutual plan and continuing the corporate existence of the 
 reorganizing insurance company as a stock insurance company.  
 The commissioner, if satisfied that the interests of the 
 policyholders are properly protected and that the plan of 
 reorganization is fair and equitable to the policyholders, may 
 approve the proposed plan of reorganization and may require as a 
 condition of approval the modifications of the proposed plan of 
 reorganization as the commissioner finds necessary for the 
 protection of the policyholders' interests.  The commissioner 
 shall retain jurisdiction over the mutual insurance holding 
 company according to this section and chapter 60D to assure that 
 policyholder and member interests are protected. 

    (b) All of the initial voting shares of the capital stock 
 of the reorganized insurance company must be issued to the 
 mutual insurance holding company or to an intermediate stock 
 holding company.  The membership interests of the policyholders 
 of the reorganized insurance company become membership interests 
 in the mutual insurance holding company.  "Membership interests" 
 means those interests described in section 60A.075, subdivision 
 1, paragraph (h).  Policyholders of the reorganized insurance 
 company shall be members of the mutual insurance holding company 
 and their voting rights must be determined in accordance with 
 the articles of incorporation and bylaws of the mutual insurance 
 holding company.  The mutual insurance holding company shall, at 
 all times, directly or through one or more intermediate stock 
 holding companies, control a majority of the voting shares of 
 the capital stock of the reorganized insurance company, taking 
 into account any potential dilution resulting from convertible 
 securities. 

    (c) A majority of the board of directors of a mutual 
 insurance holding company must be disinterested directors.  For 
 purposes of this section, a director is disinterested if (i) the 
 director is not or has not within the past two years been an 
 officer or employee of the mutual insurance holding company or 
 any subsidiary or predecessor corporation, and (ii) the director 
 does not hold, directly or indirectly, a material ownership 
 interest in any subsidiary of the mutual insurance holding 
 company.  An ownership interest is material if it represents 
 more than one-half of one percent of the voting securities of 
 the issuer, or a larger percentage as the commissioner may 
 approve. 

    Subd. 2.    Merger.  (a) A domestic or foreign mutual 
 insurance company, upon the approval of the commissioner, may 
 reorganize by merging its policyholders' membership interests 
 into a mutual insurance holding company formed according to 
 subdivision 1 and continuing the corporate existence of the 
 reorganizing insurance company as a stock insurance company 
 subsidiary of the mutual insurance holding company or of an 
 intermediate stock holding company.  "Membership interests" 
 means those interests described in section 60A.075, subdivision 
 1, paragraph (h).  The commissioner, if satisfied that the 
 interests of the policyholders of the reorganizing company and 
 the interests of the existing members of the mutual insurance 
 holding company are properly protected and that the merger is 
 fair and equitable to those parties, may approve the proposed 
 merger and may require as a condition of approval the 
 modifications of the proposed merger as the commissioner finds 
 necessary for the protection of the policyholders' or members' 
 interests.  The commissioner shall retain jurisdiction, under 
 chapter 60D, over the mutual insurance holding company organized 
 according to this section to assure that policyholder and member 
 interests are protected. 

    (b) All of the initial voting shares of the capital stock 
 of the reorganized insurance company must be issued to the 
 mutual insurance holding company, or to an intermediate stock 
 holding company.  The membership interests of the policyholders 
 of the reorganized insurance company become membership interests 
 in the mutual insurance holding company.  Policyholders of the 
 reorganized insurance company shall be members of the mutual 
 insurance holding company and their voting rights must be 
 determined according to the articles of incorporation and bylaws 
 of the mutual insurance holding company.  The mutual insurance 
 holding company shall, at all times, directly or through one or 
 more intermediate stock holding companies, control a majority of 
 the voting shares of the capital stock of the reorganized 
 insurance company, taking into account any potential dilution 
 resulting from convertible securities. 

    (c) A domestic mutual insurance holding company may merge 
 with a domestic or foreign mutual insurance holding company in 
 the manner prescribed for the merger of insurance companies set 
 forth in section 60A.16, with any exceptions or modifications 
 the commissioner may approve. 

    Subd. 3.    Plan of reorganization; approval by 
 commissioner.  (a) A reorganizing or merging insurer or a 
 merging mutual insurance holding company shall, by the 
 affirmative vote of a majority of its board of directors, adopt 
 a plan of reorganization or merger consistent with the 
 requirements of this section and file the plan with the 
 commissioner.  At any time before the approval of a plan by the 
 commissioner, the company, by the affirmative vote of a majority 
 of its directors, may amend or withdraw the plan.  The plan must 
 provide for the following: 

    (1) in the case of a reorganization under subdivision 1, 
 establishing a mutual insurance holding company with at least 
 one stock insurance company subsidiary, or in the case of a 
 reorganization under subdivision 2, a description of the terms 
 and conditions of the proposed merger; 

    (2) analyzing the benefits and risks attendant to the 
 proposed reorganization, including the rationale for the 
 reorganization and analysis of the comparative benefits and 
 risks of a demutualization under section 60A.075; 

    (3) protecting the immediate and long-term interests of 
 existing policyholders; 

    (4) ensuring immediate membership in the mutual insurance 
 holding company of all existing policyholders of the 
 reorganizing domestic insurance company; 

    (5) describing a plan providing for membership interests of 
 future policyholders; 

    (6) describing the number of members of the board of 
 directors of the mutual insurance holding company required to be 
 policyholders; 

    (7) describing the mutual insurance holding company's plan 
 for distributions to members or other uses of accumulated mutual 
 holding company earnings; 

    (8) describing the nature and content of the annual report 
 and financial statement to be sent to each member; 

    (9) a copy of the proposed mutual insurance holding 
 company's articles of incorporation and bylaws specifying all 
 membership rights; 

    (10) the names, addresses, and occupational information of 
 all corporate officers and members of the proposed mutual 
 insurance holding company board of directors; 

    (11) information sufficient to demonstrate that the 
 financial condition of the reorganizing or merging company will 
 not be materially diminished upon reorganization, including 
 information concerning any subsidiaries of the reorganizing or 
 merging insurers that will become subsidiaries of the mutual 
 insurance holding company or an intermediate holding company as 
 part of the reorganization; 

    (12) a copy of the articles of incorporation and bylaws for 
 any proposed insurance company subsidiary or intermediate 
 holding company subsidiary; 

    (13) describing any plans for an initial sale or 
 subscription of stock or other securities of the reorganized 
 insurance company or any intermediate holding company; and 

    (14) any other information requested by the commissioner or 
 required by rule. 

    (b) The commissioner may approve the plan upon finding that 
 the requirements of this section have been fully met and the 
 plan will protect the immediate and long-term interests of 
 policyholders. 

    (c) The commissioner may retain, at the reorganizing or 
 merging mutual company's expense, any qualified experts not 
 otherwise a part of the commissioner's staff to assist in 
 reviewing the plan. 

    (d) The commissioner may, but need not, conduct a public 
 hearing regarding the proposed plan.  The hearing must be held 
 within 30 days after submission of a completed plan of 
 reorganization to the commissioner.  The commissioner shall give 
 the reorganizing mutual company at least 20 days' notice of the 
 hearing.  At the hearing, the reorganizing mutual company, its 
 policyholders, and any other person whose interest may be 
 affected by the proposed reorganization, may present evidence, 
 examine and cross-examine witnesses, and offer oral and written 
 arguments or comments according to the procedure for contested 
 cases under chapter 14.  The persons participating may conduct 
 discovery proceedings in the same manner as prescribed for the 
 district courts of this state.  All discovery proceedings must 
 be concluded no later than three days before the scheduled 
 commencement of the public hearing. 

    Subd. 4.    Approval by commissioner.  The plan by order 
 shall be approved, conditionally approved, or disapproved within 
 the later of 30 days from the date of the commissioner's receipt 
 of all required information or 30 days after the conclusion of 
 the public hearing.  An approval or conditional approval of a 
 plan of reorganization expires if the reorganization is not 
 completed within 180 days after the approval or conditional 
 approval unless the time period is extended by the commissioner 
 upon a showing of good cause. 

    Subd. 5.    Approval by members.  The plan shall be 
 approved as provided in section 60A.075, subdivision 5, by the 
 eligible members described in paragraphs (a) to (c).  

    (a) In the case of a formation under subdivision 1, the 
 plan must be approved by the eligible members of the 
 reorganizing insurance company. 

    (b) In the case of a merger under subdivision 2, paragraph 
 (a), the plan must be approved by the eligible members of the 
 merging insurance company and by the eligible members of the 
 mutual insurance holding company into which the policyholders' 
 membership interests are to be merged.  The vote of the eligible 
 members of the mutual insurance holding company is not required 
 if the commissioner determines that the merger would not be 
 material to the financial condition of the mutual insurance 
 holding company. 

    (c) In the case of a merger of two mutual insurance holding 
 companies under subdivision 2, paragraph (c), the plan must be 
 approved by the eligible members of both companies.  The vote of 
 the eligible members of the surviving mutual holding company is 
 not required if the commissioner determines that the merger 
 would not be material to the financial condition of the 
 surviving company. 

    Subd. 6.    Incorporation.  A mutual insurance holding 
 company shall be incorporated pursuant to chapter 300.  The 
 articles of incorporation and any amendments to the articles of 
 the mutual insurance holding company are subject to approval of 
 the commissioner in the same manner as those of an insurance 
 company.  Members of a mutual insurance holding company shall be 
 entitled to vote on all matters required to be submitted to 
 members under chapter 300 and shall additionally be treated as 
 shareholders for purposes of the voting approval requirements of 
 section 300.09. 

    Subd. 7.    Applicability of certain provisions.  (a) In 
 the event of the insolvency of a mutual insurance holding 
 company, the mutual insurance holding company is considered to 
 be an insurer subject to chapter 60B.  A mutual insurance 
 holding company shall not dissolve or liquidate without the 
 approval of the commissioner or as ordered by a court of 
 competent jurisdiction. 

    (b) A mutual insurance holding company is subject to 
 chapter 60D. 

    (c) As a condition to approval of the plan, the 
 commissioner may require the mutual insurance holding company to 
 comply with any provision of the insurance laws necessary to 
 protect the interests of the policyholders as if the mutual 
 insurance holding company were a domestic mutual insurance 
 company.  

    (d) No person or group of persons other than the chief 
 executive officer of a mutual insurance holding company, or the 
 chief executive officer's designee, shall seek to obtain proxies 
 from the members of the mutual insurance holding company for the 
 purposes of affecting a change of control of the mutual 
 insurance holding company unless that person or persons have 
 filed with the commissioner and have sent to the mutual 
 insurance holding company a statement containing the information 
 required by section 60D.17.  Section 60D.17, subdivisions 2 to 
 7, apply in the event of a proxy solicitation regulated by this 
 paragraph. 

    (e) For purposes of this subdivision, the term "control," 
 including the terms "controlling," "controlled by," and "under 
 common control with," means the possession, direct or indirect, 
 of the power to direct or cause the direction of the management 
 and policies of a person, whether through membership voting 
 interests, by contract other than a commercial contract for 
 goods or nonmanagement services, or otherwise, unless the power 
 is the result of an official position with, corporate office 
 held by, or court appointment of, the person.  Control is 
 presumed to exist if any person, directly or indirectly, owns, 
 controls, holds with the power to vote, or holds proxies 
 representing, ten percent or more of the membership voting 
 interests of the mutual insurance holding company.  This 
 presumption may be rebutted by a showing made in the manner 
 provided by section 60D.19, subdivision 11, that control does 
 not exist in fact.  The commissioner may determine after 
 furnishing all persons in interest notice and opportunity to be 
 heard and making specific findings of fact to support the 
 determination, that control exists in fact, notwithstanding the 
 absence of a presumption to that effect. 

    Subd. 8.    Applicability of demutualization provisions. 
  (a) Except as otherwise provided, section 60A.075 is not 
 applicable to a reorganization or merger according to this 
 section. 

    (b) Section 60A.075 is applicable to demutualization of a 
 mutual insurance holding company as if it were a mutual 
 insurance company. 

    (c) Section 60A.075, subdivisions 14 to 16, are applicable 
 to a reorganization or merger under this section. 

    Subd. 9.    Membership interests.  A membership interest 
 in a domestic mutual insurance holding company does not 
 constitute a security as defined in section 80A.14, subdivision 
 18.  No member of a mutual insurance holding company may 
 transfer or pledge membership in the mutual insurance holding 
 company or any right arising from the membership except as 
 attendant to the valid transfer or assignment of the member's 
 policy in any reorganized company that gave rise to the member's 
 membership interest.  A member of a mutual insurance holding 
 company is not, as a member, personally liable for the acts, 
 debts, liabilities, or obligations of the company.  No 
 assessments of any kind may be imposed upon the members of a 
 mutual insurance holding company by the directors or members, or 
 because of any liability of any company owned or controlled by 
 the mutual insurance holding company or because of any act, 
 debt, or liability of the mutual insurance holding company.  A 
 member's interest in the mutual insurance holding company shall 
 automatically terminate upon cancellation, nonrenewal, 
 expiration, or termination of the member's policy in any 
 insurance company that gave rise to the member's membership 
 interest. 

    Subd. 10.    Financial statement requirements.  (a) In 
 addition to any items required under chapter 60D, each mutual 
 insurance holding company shall file with the commissioner, by 
 April 1 of each year, an annual statement consisting of the 
 following: 

    (1) an income statement, balance sheet, and cash flow 
 statement prepared in accordance with generally accepted 
 accounting principles; 

    (2) complete information on the status of any closed block 
 formed as part of a plan of reorganization; 

    (3) an investment plan covering all assets; and 

    (4) a statement disclosing any intention to pledge, borrow 
 against, alienate, hypothecate, or in any way encumber the 
 assets of the mutual insurance holding company or an 
 intermediate stock holding company.  

    (b) The aggregate pledges and encumbrances of a mutual 
 insurance holding company's assets shall not affect more than 49 
 percent of the stock in ownership of any subsidiary insurance 
 holding company or subsidiary insurance company that resulted 
 from a reorganization or merger. 

    (c) At least 50 percent of the generally accepted 
 accounting principles (GAAP) net worth of a mutual insurance 
 holding company must be invested in insurance company 
 subsidiaries. 

    Subd. 11.    Sale of stock and payment of dividends.  
 (a) A reorganized insurance company and an intermediate stock 
 holding company may issue subscription rights and may issue or 
 grant any other securities, rights, options, and similar items 
 to the same extent as any business corporation organized under 
 chapter 302A.  However, except as provided in paragraphs (b) to 
 (d), no sale of securities of the reorganized insurance company, 
 or of an intermediate stock holding company that directly or 
 indirectly controls a majority of voting shares of the 
 reorganized insurance company, may be made without the 
 commissioner's prior written approval.  

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

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

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

    (e) The total number of shares of capital stock issued by 
 the reorganized insurance company or an intermediate holding 
 company that may be held by directors and officers of the mutual 
 insurance holding company, any intermediate holding company, and 
 of any reorganized insurance company, and acquired according to 
 subscription rights or stock option, incentive, and share 
 ownership plans, may not exceed the percentage limits set forth 
 in section 60A.075, subdivision 11, paragraph (b).  Subject to 
 the requirements of subdivision 1, paragraph (c), nothing in 
 this section prohibits the acquisition of any securities of a 
 reorganized insurance company or intermediate stock holding 
 company through a licensed securities broker-dealer by any 
 officer or director of the reorganized company, an intermediate 
 stock holding company, or the mutual insurance holding company. 

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

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

    Subd. 12.    Provisions in the event of insurer 
 insolvency.  (a) In the event of any insolvency proceeding 
 involving an insolvent stock subsidiary, the assets of the 
 mutual insurance holding company, together with any assets of 
 any intermediate holding company that directly or indirectly 
 controls the insolvent stock subsidiary, must be available to 
 satisfy the policyholder obligations of the insolvent stock 
 subsidiary in an amount determined by the commissioner, but in 
 no event more than the total amount of nonpolicyholder dividends 
 paid by the insolvent stock subsidiary to the mutual insurance 
 holding company, or any intermediate holding company that 
 controls the insolvent stock subsidiary, during the ten-year 
 period immediately preceding the date of insolvency. 

    (b) In determining the required contribution by the mutual 
 insurance holding company or any intermediate stock holding 
 company which controls the insolvent stock subsidiary, the 
 commissioner shall take into account among other factors: 

    (1) the possible direct or indirect negative effects of any 
 required contribution on any insurance company affiliate of the 
 insolvent stock subsidiary; and 

    (2) the possible direct or indirect, long-term, or 
 short-term negative effects on the members of the mutual 
 insurance holding company, other than those members who, are, or 
 were policyholders of the insolvent stock subsidiary. 

    Nothing in this subdivision limits the powers of the 
 commissioner or the liquidator under chapter 60B. 

    (c) For purposes of this subdivision, the following terms 
 have the meanings given: 

    (1) "date of insolvency" means, as to an insolvent stock 
 subsidiary, the date established in accordance with chapter 60B 
 or comparable statute of another state governing the 
 rehabilitation or liquidation of a foreign insolvent stock 
 subsidiary; 

    (2) "insolvency proceeding" means any proceeding under 
 chapter 60B or comparable statute of another state governing the 
 rehabilitation and liquidation of a foreign insolvent stock 
 subsidiary; 

    (3) "insolvent stock subsidiary" means any stock insurance 
 company subsidiary of a mutual insurance holding company that 
 resulted from the reorganization of a domestic or foreign mutual 
 insurance company according to subdivision 1 or 2, or any other 
 stock insurance company subsidiary that is subject to an 
 insolvency proceeding, which on the date of insolvency has in 
 force policies that have given rise to membership interests in 
 the mutual insurance holding company; 

    (4) "control" has the meaning given in section 60D.15, 
 subdivision 4; and 

    (5) "dividends" include distributions of cash or any other 
 assets. 

    HIST: 1996 c 446 art 2 s 4; 1997 c 231 art 15 s 4-14 

     60A.08 Contracts of insurance. 

    Subdivision 1.    Policy to contain entire contract.  A 
 statement in full of the conditions of insurance shall be 
 incorporated in or attached to every policy, and neither the 
 application of the insured nor the bylaws of the company shall 
 be considered as a warranty or a part of the contract, except in 
 so far as they are so incorporated or attached. 

    Subd. 2.    Corporate name; origin and financial 
 statements.  Every company, domestic or foreign, shall conduct 
 its business, display all signs and advertisements, and issue 
 all policies, circulars, and other documents and publications in 
 this state, in its own corporate name, and every foreign company 
 shall state conspicuously upon a sign at each agency the state 
 or country of its organization. When a company publishes its 
 assets, it shall in the same connection, and with equal 
 conspicuousness, publish its liabilities, computed on the basis 
 allowed for its annual statements; and any publication 
 purporting to show its capital shall state only the amount 
 thereof which has been actually paid in cash. 

    Subd. 3.    Renewal; new policy.  Any insurance policy 
 terminating by its provisions at a specified expiration date or 
 limited as to term by any statute and not otherwise renewable 
 may be renewed or extended at the option of the insurer, at the 
 premium rate then required therefor, for a specific additional 
 period or periods by a certificate, and without requiring the 
 issuance of a new policy more than once in any five-year period. 

    Subd. 4.    Contracts; application of Minnesota law; 
 prohibitions.  All contracts of insurance on property, lives, 
 or interests in this state, shall be deemed to be made in this 
 state. 

    It shall be unlawful for any person, firm, or corporation 
 to solicit or make, or aid in soliciting or making, any contract 
 of insurance not authorized by the laws of this state. 

    Subd. 5.    Signatures required.  All insurance policies 
 shall be signed by the secretary or an assistant secretary, and 
 by the president or vice-president, or in their absence, by two 
 directors of the insurer.  The signatures may be facsimile 
 signatures.  

    Subd. 6.    Bankruptcy or insolvency clause.  Every bond 
 or policy of insurance issued in this state insuring against 
 either actual loss suffered by the insured, and imposed by law 
 for damages on account of personal injury, death, or injury to 
 property caused by accident, or legal liability imposed upon the 
 insured by reason of such injuries or death, shall, 
 notwithstanding anything in the policy to the contrary, be 
 deemed to contain the following condition: 

    The bankruptcy or insolvency of the insured shall not 
 relieve the insurer of any of its obligations under this policy, 
 and in case an execution against the insured on a final judgment 
 is returned unsatisfied, then such judgment creditor shall have 
 a right of action on this policy against the company to the same 
 extent that the insured would have, had the insured paid the 
 final judgment. 

    Subd. 7.    Unsatisfied judgment.  When a judgment has 
 been rendered by any court in this state against any company 
 holding the commissioner's certificate, and an execution issued 
 thereon has been returned unsatisfied, in whole or in part, and 
 a certified transcript of the docket entry and the court 
 administrator's certificate of those facts is filed with the 
 commissioner, the commissioner shall forthwith revoke its 
 certificate and give one week's published notice thereof.  No 
 new certificate shall issue until such judgment has been fully 
 satisfied and proof thereof filed with the commissioner, and the 
 expenses and fees incurred are paid.  During this revocation 
 neither the company, nor any of its officers or agents, shall 
 issue any new policy, take any risk, or transact any business, 
 except such as is absolutely necessary in closing up its affairs 
 in this state. 

    Subd. 8.    Policies on which premiums are determined by 
 audits.  Any insurance company licensed to do business in this 
 state which issues policies of insurance in this state upon 
 which the premium is determined by means of an audit shall 
 within 60 days from the date of the expiration of any insurance 
 policy so issued request from the insured a statement of the 
 facts and figures necessary to determine the premium thereon.  
 The insured shall furnish such statement of facts and figures 
 within 60 days of the date of the request.  Upon failure of the 
 insured to comply within the time specified, then the provisions 
 of this subdivision shall not apply as to such insured.  Within 
 12 months from the date of the expiration of the policy, or 
 within such longer time as the commissioner of commerce may for 
 cause shown direct, the insurer unless it elects to accept the 
 insured's statement shall make a final audit.  Failure to make 
 such final audit within the time herein provided shall 
 constitute a waiver of the insurer's right to make such audit 
 and an election to accept the statement furnished by the insured 
 as a basis for determining the premium on such policy.  In the 
 event an audit discloses that the insured submitted to the 
 insurer a fraudulent statement of facts and figures, then the 
 insured shall be liable for three times the normal premium.  
 This subdivision shall not apply to policies issued covering 
 workers' compensation. 

    Subd. 9.    Misrepresentation by applicant.  No oral or 
 written misrepresentation made by the assured, or in the 
 assured's behalf, in the negotiation of insurance, shall be 
 deemed material, or defeat or avoid the policy, or prevent its 
 attaching, unless made with intent to deceive and defraud, or 
 unless the matter misrepresented increases the risk of loss. 

    This subdivision shall not apply to life insurance or 
 accident and health insurance. 

    Subd. 10.    Legal expense insurance.  No contract of 
 insurance written pursuant to the authority to transact the kind 
 of business enumerated in section 60A.06, subdivision 1, clause 
 (15) shall include any provision interfering with the 
 attorney-client relationship. 

    Subd. 11.    Directors' and officers' liability policies. 
  No misrepresentation or omission made in an application or 
 negotiation for any policy providing directors and officers 
 liability coverage for directors or officers of a corporation 
 shall defeat or avoid coverage or prevent the policy from 
 attaching for a director or officer unless the director or 
 officer has signed the application and has actual knowledge of 
 the facts misrepresented or omitted.  The application shall be 
 attached to and incorporated into the contract.  This 
 subdivision applies with respect to all policies governed by 
 this chapter or issued or renewed in this state. 

    Subd. 12.    Rented vehicles.  All commercial automobile 
 liability policies must provide coverage for rented vehicles as 
 required in chapter 65B. 

    This coverage can be excess over any and all specific motor 
 vehicle coverage that is applicable. 

    Subd. 13.    Reduction of limits by costs of defense 
 prohibited.  (a) No insurer shall issue or renew a policy of 
 liability insurance in this state that reduces the limits of 
 liability stated in the policy by the costs of legal defense. 

    (b) This subdivision does not apply to:  

    (1) professional liability insurance with limits of 
 liability greater than $100,000, including directors' and 
 officers' and errors and omissions liability insurance; 

    (2) environmental impairment liability insurance; 

    (3) insurance policies issued to large commercial risks; or 

    (4) coverages that the commissioner determines to be 
 appropriate which will be published in the manner prescribed for 
 surplus lines insurance in section 60A.201, subdivision 4.  

    (c) For purposes of this subdivision, "large commercial 
 risks" means an insured whose gross annual revenues in the 
 fiscal year preceding issuance of the policy were at least 
 $10,000,000. 

    Subd. 14.    Agreement to rescind policy or release bad 
 faith claim.  (a) If the insurer has knowledge of any claims 
 against the insured that would remain unsatisfied due to the 
 financial condition of the insured, the insurer and the insured 
 may not agree to: 

    (1) rescind the policy; or 

    (2) directly or indirectly transfer to, or release to, the 
 insurer the insured's claim or potential claim against the 
 insurer based upon the insurer's refusal to settle a claim 
 against the insured.  

    (b) Before entering into an agreement described in 
 paragraph (a), an insurer must make a good faith effort to 
 ascertain:  (1) the existence and identity of all claims against 
 the policy; and (2) the financial condition of the insured. 

    (c) The insured must provide reasonable financial 
 information upon request of the insurer. 

    (d) An agreement made in violation of this section is void 
 and unenforceable. 

    HIST: 1967 c 395 art 1 s 8; 1973 c 634 s 5; 1975 c 359 s 23; 
 1977 c 195 s 1; 1979 c 115 s 1; 1983 c 289 s 114 subd 1; 1984 c 
 655 art 1 s 92; 1985 c 251 s 1; 1986 c 444; 1Sp1986 c 3 art 1 s 
 82; 1988 c 611 s 1; 1989 c 260 s 2,3; 1991 c 131 s 1; 1996 c 446 
 art 1 s 1 

     60A.081 Aircraft insurance. 

    Subdivision 1.  No policy of insurance issued or delivered 
 in this state covering any loss, damage, expense, or liability 
 arising out of the ownership, maintenance, or use of an 
 aircraft, shall exclude or deny coverage because the aircraft is 
 operated in violation of federal or civil air regulations, state 
 law or rules, or local ordinances.  This section does not 
 prohibit the use of specific exclusions or conditions in the 
 policy which relate to: 

    (1) Certification of an aircraft in a stated category by 
 the federal aviation administration. 

    (2) Certification of a pilot in a stated category by the 
 federal aviation administration. 

    (3) Establishing requirements for pilot experience. 

    (4) Establishing limitations on the use of the aircraft. 

    Subd. 2.  Except as provided in subdivision 1, no policy of 
 insurance issued or delivered in this state covering an aircraft 
 equipped with passenger seats and covering liability hazards 
 shall be issued excluding coverage for injury to or death of 
 passengers or nonpassengers except as to a policy of insurance 
 exclusively covering "commercial operations" as defined by 
 section 360.013, subdivision 11, where the pilot of the aircraft 
 has in force a separate policy of insurance providing for 
 coverage on the aircraft as required by section 360.59, 
 subdivision 10. 

    Subd. 3.  The provisions of this section shall not apply as 
 to any policy issued covering aircraft being used in air 
 commerce as defined by section 360.511, subdivision 4. 

    HIST: 1969 c 629 s 1; 1976 c 241 s 1; 1985 c 248 s 70 

     60A.082 Group insurance; benefits continued if insurer 
  changed. 

    A person covered under group life, group accidental death 
 and dismemberment, group disability income or group medical 
 expense insurance, shall not be denied benefits to which the 
 person is otherwise entitled solely because of a change in the 
 insurance company writing the coverage or in the group contract 
 applicable to the person.  In the case of one or more carriers 
 replacing or remaining in place after one or more plans have 
 been discontinued, each carrier shall accept any person who was 
 covered under the discontinued plan or plans without denial of 
 benefits to which other persons in the group covered by that 
 carrier are entitled.  "Insurance company" shall include a 
 service plan corporation under chapter 62C or 62D.  

    For purposes of satisfying any preexisting condition 
 limitation, the insurance company shall credit the period of 
 time the person was covered by the prior plan, if the person has 
 maintained continuous coverage. 

    The commissioner shall promulgate rules to carry out this 
 section.  Nothing in this section shall preclude an employer, 
 union or association from reducing the level of benefits under 
 any group insurance policy or plan. 

    HIST: 1980 c 459 s 1; 1984 c 464 s 1; 1986 c 444; 1994 c 485 s 
 7 

     60A.084 Notification on group policies. 

    An employer providing life or health benefits may not 
 change benefits, limit coverage, or otherwise restrict 
 participation until the certificate holder or enrollee has been 
 notified of any changes, limitations, or restrictions.  Notice 
 in a format which meets the requirements of the Employee 
 Retirement Income Security Act, United States Code Annotated, 
 title 29, sections 1001 to 1461, is satisfactory for compliance 
 with this section. 

    HIST: 1987 c 337 s 3 

     60A.085 Cancellation of group coverage; notification to 
  covered persons. 

    (a) No cancellation of any group life, group accidental 
 death and dismemberment, group disability income, or group 
 medical expense policy, plan, or contract regulated under 
 chapter 62A or 62C is effective unless the insurer has made a 
 good faith effort to notify all covered persons of the 
 cancellation at least 30 days before the effective cancellation 
 date.  For purposes of this section, an insurer has made a good 
 faith effort to notify all covered persons if the insurer has 
 notified all the persons included on the list required by 
 paragraph (b) at the home address given and only if the list has 
 been updated within the last 12 months. 

    (b) At the time of the application for coverage subject to 
 paragraph (a), the insurer shall obtain an accurate list of the 
 names and home addresses of all persons to be covered.  

    (c) Paragraph (a) does not apply if the group policy, plan, 
 or contract is replaced, or if the insurer has reasonable 
 evidence to indicate that it will be replaced, by a 
 substantially similar policy, plan, or contract. 

    (d) In no event shall this section extend coverage under a 
 group policy, plan, or contract more than 120 days beyond the 
 date coverage would otherwise cancel based on the terms of the 
 group policy, plan, or contract.  

    (e) If coverage under the group policy, plan, or contract 
 is extended by this section, then the time period during which 
 affected members may exercise any conversion privilege provided 
 for in the group policy, plan, or contract is extended for the 
 same length of time, plus 30 days. 

    HIST: 1992 c 564 art 4 s 3; 1994 c 485 s 8; 1995 c 258 s 2 

     60A.086 Retroactive termination of coverage under group 
  policies prohibited. 

    Subdivision 1.    Applicability.  This section applies 
 to: 

    (1) health plans as defined in section 62A.011, issued to 
 groups; 

    (2) group accident and health insurance; 

    (3) group life insurance; 

    (4) group accidental death and dismemberment insurance; and 

    (5) group disability income insurance. 

    Subd. 2.    Requirement.  No plan of coverage described 
 in subdivision 1 shall permit the issuer to retroactively 
 cancel, retroactively rescind, or otherwise retroactively 
 terminate the coverage of an employee, dependent, or other 
 covered person under the group coverage, without the written 
 consent of that employee, dependent, or other covered person.  
 For purposes of this subdivision, "covered person" includes a 
 person on continuation coverage or eligible for continuation 
 coverage. 

    Subd. 3.    Nonapplicability.  (a) This section does not 
 apply where the group policy or contract is lawfully terminated 
 retroactively and not replaced with substantially similar 
 coverage. 

    (b) This section does not apply where the employee, 
 dependent, or other covered person committed fraud or 
 misrepresentation with respect to eligibility under the terms of 
 the group policy or contract or with respect to any other 
 material fact, but retroactive termination without written 
 consent must not be based upon the failure of the employee, 
 dependent, or other covered person to meet the group sponsor's 
 eligibility requirements, if the group sponsor requested the 
 issuer of the coverage to include the person as a covered person.

    (c) This section does not apply where the issuer of 
 coverage described in subdivision 1 retroactively terminates 
 coverage of an employee, dependent, or other covered person 
 solely because the group sponsor did not notify the issuer of 
 the coverage in advance of the employee's voluntary or 
 involuntary termination from employment, provided that the 
 retroactive termination of coverage is effective no earlier than 
 the end of the day of termination from employment.  This 
 paragraph does not affect continuation rights under federal or 
 state law and does not limit the effect of section 62Q.16. 

    HIST: 1996 c 304 s 1 

     60A.09 Limits of risk; reinsurance. 

    Subdivision 1.    Maximum risk.  No company other than a 
 company authorized to transact the kind of business specified in 
 section 60A.06, subdivision 1, clause (7), shall insure or 
 reinsure in a single risk a larger sum than one-tenth of its net 
 assets, and no company authorized to transact the kind of 
 business specified in section 60A.06, subdivision 1, clause (7), 
 shall insure or reinsure in a single risk a larger sum than 
 two-thirds of its net assets; provided, that in the case of a 
 company with net assets of more than $50,000, any portion of the 
 risk which has been reinsured, as authorized by the laws of this 
 state, shall be deducted before determining the limitation of 
 risk prescribed by this subdivision; and, provided, that a 
 mutual insurance company organized under clause (2)(a) of 
 section 66A.08, subdivision 2, may insure in a single risk, 
 consisting of a creamery or a cheese factory, a sum equal to one 
 percent of its insurance in force. 

    Subd. 2.    Reinsurance to be reported by companies other 
 than life.  If any company, other than life, shall, directly 
 or indirectly, effect the reinsurance of any risk taken by it, 
 or any part thereof, it shall make a sworn report thereof to the 
 commissioner, at the time of filing its annual statement, or at 
 such other time as the commissioner may request. 

    Subd. 3.    Penalty for violation.  Every company 
 effecting any reinsurance in violation of the foregoing 
 provisions, and every agent effecting or negotiating the same, 
 shall severally be guilty of a misdemeanor. 

    Subd. 4. Repealed, 1991 c 325 art 1 s 16 

    Subd. 4a.    Assumption transactions regulated.  No 
 company, whether domestic, foreign, or alien, shall perform an 
 assumption transaction, including an assumption reinsurance 
 agreement, with respect to a policy issued to a Minnesota 
 resident, unless: 

    (1) the assumption agreement has been filed with the 
 commissioner; 

    (2) the assumption agreement specifically provides that the 
 original insurer remains liable to the insured in the event the 
 assuming insurer is unable to fulfill its obligations or the 
 original insurer acknowledges in writing to the commissioner 
 that it remains liable to the insured in the event the assuming 
 insurer is unable to fulfill its obligations; 

    (3) the proposed certificate of assumption to be provided 
 to the policyholder has been filed with the commissioner for 
 review and approval as provided in section 61A.02; and 

    (4) the proposed certificate of assumption contains, in 
 bold face type, the following language: 

    "Policyholder:  Please be advised that you retain all 
 rights with respect to your policy against your original insurer 
 in the event the assuming insurer is unable to fulfill its 
 obligations.  In such event, your original insurer remains 
 liable to you notwithstanding the terms of its assumption 
 agreement." 

    With respect to residents of Minnesota, the notice to 
 policyholders shall also include a statement as to the effect on 
 guaranty fund coverage, if any, that will result from the 
 transfer. 

    Clauses (2) and (4) above do not apply if the policyholder 
 consents in a signed writing to a release of the original 
 insurer from liability and to a waiver of the protections 
 provided in clauses (2) and (4) after being informed in writing 
 by the insurer of the circumstances relating to and the effect 
 of the assumption, provided that the consent form signed by the 
 policyholder has been filed with and approved by the 
 commissioner. 

    If a company is deemed by the commissioner to be in a 
 hazardous condition or is under a court ordered supervision, 
 rehabilitation, liquidation, conservation or receivership, and 
 the transfer of policies is in the best interest of the 
 policyholders, as determined by the commissioner, a transfer may 
 be effected notwithstanding the provisions in this subdivision 
 by using a different form of consent by policyholders.  This may 
 include a form of implied consent and adequate notification to 
 the policyholder of the circumstances requiring the transfer as 
 approved by the commissioner.  This paragraph does not apply 
 when a policy is transferred to the Minnesota life and health 
 guaranty association or to the Minnesota insurance guaranty 
 association. 

    Subd. 5.    Reinsurance.  (1)    Definitions.  For 
 the purposes of this subdivision, the word "insurer" shall be 
 deemed to include the word "reinsurer," and the words "issue 
 policies of insurance" shall be deemed to include the words 
 "make contracts of reinsurance." 

    (2)    Reinsurance of more than 50 percent of insurance 
 liabilities.  Any contract of reinsurance whereby an insurer 
 cedes more than 50 percent of the total of its outstanding 
 insurance liabilities shall, if such insurer is incorporated by 
 or, if an insurer of a foreign country, has its principal office 
 in this state, be subject to the approval, in writing, by the 
 commissioner. 

    (3)   Actual unearned premium reserve to be carried as 
 liability.  Nothing in this subdivision shall be deemed to 
 permit the ceding insurer to receive, through the cession of the 
 whole of any risk or risks, any advantage in respect to its 
 unearned premium reserve that would reduce the same below the 
 actual amount thereof. 

    (4)   Aircraft risks.  An insurer authorized to transact 
 the business specified in section 60A.06, subdivision 1, clauses 
 (4) and (5)(a), may through reinsurance assume any risk arising 
 from, related to, or incident to the manufacture, ownership, or 
 operation of aircraft and may retrocede any portion thereof; 
 provided, however, that no insurer may undertake any such 
 reinsurance business without the prior approval of the 
 commissioner and such reinsurance business shall be subject to 
 any regulations which may be promulgated by the commissioner.  
 Any such reinsurance business may be provided through pooling 
 arrangements with other insurers for purposes of spreading the 
 insurance risk. 

    Subd. 6.    Bulk reinsurance, regulation.  (1) No bulk 
 reinsurance agreement entered into by an insurance company, 
 other than life insurance companies, having a capital and 
 surplus or surplus of $5,000,000 or less, shall be used to 
 reduce the liabilities or expense of the reinsured company until 
 and unless the agreement has been filed with and approved by the 
 commissioner.  The commissioner will be deemed to have approved 
 any agreement filed unless the commissioner notifies the 
 insurance company of disapproval within 30 days or requests a 
 reasonable extension of time within such 30 days. 

    (2) No filing shall be made pursuant to the foregoing 
 clause (1) unless the reinsurance agreement be certified under 
 oath by responsible officers of the reinsurer and the reinsured 
 to contain the entire agreement between the parties to the 
 reinsurance agreement. 

    Misrepresentations contained in the reinsurance agreement 
 or in any information supplied to the commissioner relative 
 thereto shall be subject to the penalties for perjury. 

    (3) It shall be unlawful for any reinsurance agreement to 
 contain any provisions which have the effect of nullifying the 
 liability which the reinsurer purports to assume. 

    (4) For the purposes of this subdivision, "bulk 
 reinsurance" shall mean any quota share, surplus aid or 
 portfolio reinsurance agreement which, of itself or in 
 combination with other similar agreements, assumes 20 percent or 
 more of the liability of the reinsured company. 

    (5) Every company effecting any bulk reinsurance in 
 violation of the foregoing provisions, and every person 
 effecting or negotiating the same, shall severally be guilty of 
 a misdemeanor. 

    (6) Reinsurance agreements filed hereunder shall not be 
 matters of public record, but this shall not be construed to 
 limit the disclosure of reinsurance agreements in examination 
 reports. 

    Subd. 7.    Title insurance risks.  For a company 
 authorized to transact a kind of business specified in section 
 60A.06, subdivision 1, clause (7), the term "single risk" as 
 used in this section shall mean the insured amount of any policy 
 or contract unless two or more policies or contracts are 
 simultaneously issued on different estates in identical real 
 property, in which event, it means the sum of the insured 
 amounts of all such policies or contracts; provided, any policy 
 or contract that insures a mortgage interest that is excepted in 
 a fee or leasehold policy or contract, and which does not exceed 
 the insured amount of the fee or leasehold policy or contract, 
 shall be excluded in computing the amount of a single risk. 

    HIST: 1967 c 395 art 1 s 9; Ex1967 c 10 s 1-6; 1973 c 391 s 1; 
 1978 c 465 s 3; 1980 c 505 s 1,2; 1985 c 248 s 70; 1986 c 444; 
 1989 c 260 s 4; 1991 c 325 art 1 s 10; art 20 s 1; 1996 c 446 
 art 1 s 2 

     60A.091 Definition; qualified United States financial 
  institution. 

    For purposes of sections 60A.092 and 60A.093, "qualified 
 United States financial institution" means an institution that: 

    (1) is organized or, in the case of a United States office 
 of a foreign banking organization, licensed, under the laws of 
 the United States or any state; 

    (2) is regulated, supervised, and examined by federal or 
 state authorities having regulatory authority over banks and 
 trust companies; and 

    (3) is a member of the Federal Deposit Insurance 
 Corporation, or the National Credit Union Administration. 

    HIST: 1991 c 325 art 1 s 11 

     60A.092 Reinsurance credit allowed a domestic ceding 
  insurer. 

    Subdivision 1.    Credit allowed.  Credit for 
 reinsurance shall be allowed a domestic ceding insurer as either 
 an asset or a deduction from liability on account of reinsurance 
 ceded only when the reinsurance is ceded to an assuming insurer 
 which meets the requirements specified under this section. 

    Subd. 2.    Licensed assuming insurer.  Reinsurance is 
 ceded to an assuming insurer if the assuming insurer is licensed 
 to transact insurance or reinsurance in this state. 

    Subd. 3.    Accredited assuming insurer.  (a) 
 Reinsurance is ceded to an assuming insurer if the assuming 
 insurer is accredited as a reinsurer in this state.  An 
 accredited reinsurer is one which: 

    (1) files with the commissioner evidence of its submission 
 to this state's jurisdiction; 

    (2) submits to this state's authority to examine its books 
 and records; 

    (3) is licensed to transact insurance or reinsurance in at 
 least one state, or in the case of a United States branch of an 
 alien assuming insurer is entered through and licensed to 
 transact insurance or reinsurance in at least one state; 

    (4) files annually with the commissioner a copy of its 
 annual statement filed with the insurance department of its 
 state of domicile, a copy of its most recent audited financial 
 statement, and a filing fee of $225; and 

    (5)(i) maintains a surplus as regards policyholders in an 
 amount not less than $20,000,000 and whose accreditation has not 
 been denied by the commissioner within 90 days of its 
 submission, or maintains a surplus as regards policyholders in 
 an amount less than $20,000,000 and whose accreditation has been 
 approved by the commissioner; or 

    (ii) maintains a surplus as regards policyholders in an 
 amount not less than $50,000,000 for long-tail casualty 
 reinsurers.  For purposes of this section, "long-tail casualty 
 reinsurance" means insurance for medical or legal malpractice, 
 pollution liability, directors and officers liability, and 
 products liability.  The commissioner may determine that an 
 assuming insurer that maintains a surplus as regards 
 policyholders in an amount not less than $20,000,000 is 
 accredited as a reinsurer if there is no detriment to 
 policyholders and the interest of the public, and to not allow 
 accrediting would be a hardship or detriment to the reinsurer. 
 The commissioner shall report to the legislature on any 
 determination to allow accrediting to a long-term casualty 
 reinsurer maintaining a surplus in an amount less than 
 $50,000,000. 

    Clause (5) does not apply to reinsurance ceded and assumed 
 pursuant to pooling arrangements among insurers in the same 
 holding company system. 

    (b) No credit shall be allowed or continue to be allowed a 
 domestic ceding insurer if the assuming insurer's accreditation 
 has been revoked by the commissioner after receipt of a cease 
 and desist order pursuant to section 45.027, subdivision 5. 

    Subd. 4.    Similar state standards.  Reinsurance is 
 ceded to an assuming insurer if the assuming insurer is 
 domiciled and licensed in, or in the case of a United States 
 branch of an alien assuming insurer is entered through, a state 
 which employs standards regarding credit for reinsurance 
 substantially similar to those applicable under this chapter and 
 the assuming insurer or United States branch of an alien 
 assuming insurer (1) maintains a surplus as regards 
 policyholders in an amount not less than $20,000,000 or 
 maintains a surplus as regards policyholders in an amount not 
 less than $50,000,000 for long-tail casualty reinsurers as 
 provided under subdivision 3, paragraph (a), clause (5), and (2) 
 submits to the authority of this state to examine its books and 
 records.  

    Clause (1) does not apply to reinsurance ceded and assumed 
 pursuant to pooling arrangements among insurers in the same 
 holding company system. 

    Subd. 5.    Trust fund maintained.  The reinsurance is 
 ceded to an assuming insurer if the assuming insurer maintains a 
 trust fund in a qualified United States financial institution 
 for the payment of the valid claims, as determined by the 
 commissioner for the purpose of determining the sufficiency of 
 the trust fund, of its United States policyholders and ceding 
 insurers, their assigns and successors in interest.  The 
 assuming insurer shall report annually to the commissioner 
 information substantially the same as that required to be 
 reported on the National Association of Insurance Commissioners 
 annual statement form by licensed insurers to enable the 
 commissioner to determine the sufficiency of the trust fund.  

    Subd. 6.    Single assuming insurer; trust fund 
 requirements.  In the case of a single assuming insurer, the 
 trust shall consist of a trusteed account representing the 
 assuming insurer's liabilities attributable to business written 
 in the United States and, in addition, a trusteed surplus of not 
 less than $20,000,000 or an additional amount as the 
 commissioner considers necessary.  The assuming insurer shall 
 maintain its surplus as regards policyholders in an amount not 
 less than $50,000,000 for long-tail casualty reinsurers as 
 provided under subdivision 3, paragraph (a), clause (5). 

    Subd. 7.    Underwriters group; trust fund requirements. 
  In the case of a group including incorporated and individual 
 unincorporated underwriters, the trust shall consist of a 
 trusteed account representing the group's liabilities 
 attributable to business written in the United States.  The 
 group shall maintain a trusteed surplus of which $100,000,000 
 shall be held jointly for the benefit of United States ceding 
 insurers of any member of the group.  The incorporated members 
 of the group shall not be engaged in any business other than 
 underwriting as a member of the group and must be subject to the 
 same level of solvency regulation and control by the group's 
 domiciliary regulator as are the unincorporated members.  The 
 group shall make available to the commissioner an annual 
 certification by the group's domiciliary regulator and its 
 independent public accountants of the solvency of each 
 underwriter. 

    Subd. 8.    Incorporated insurers group; trust fund 
 requirements.  A group of incorporated insurers under common 
 administration must: 

    (1) comply with the filing requirements specified in 
 subdivision 7; 

    (2) be under the supervision of the Department of Trade and 
 Industry of the United Kingdom; 

    (3) submit to this state's authority to examine its books 
 and records; 

    (4) bear the expense of the examination; 

    (5) maintain an aggregate policyholders' surplus of 
 $10,000,000,000; 

    (6) maintain the trust in an amount equal to the group's 
 several liabilities attributable to business written in the 
 United States; and 

    (7) maintain a joint trusteed surplus of which $100,000,000 
 must be held jointly for the benefit of United States ceding 
 insurers of any member of the group. 

    Each member of the group shall make available to the 
 commissioner an annual certification by the member's domiciliary 
 regulator and its independent accountant of the member's 
 solvency. 

    Subd. 9.    Trust fund general requirements.  (a) The 
 trust must be established in a form approved by the commissioner 
 of commerce.  The trust instrument shall provide that contested 
 claims shall be valid and enforceable upon the final order of 
 any court of competent jurisdiction in the United States.  The 
 trust shall vest legal title to its assets in the trustees of 
 the trust for its United States policyholders and ceding 
 insurers, their assigns and successors in interest.  The trust 
 and the assuming insurer shall be subject to examination as 
 determined by the commissioner.  The trust must remain in effect 
 for as long as the assuming insurer shall have outstanding 
 obligations due under the reinsurance agreements subject to the 
 trust. 

    (b) No later than February 28 of each year the trustees of 
 the trust shall report to the commissioner in writing setting 
 forth the balance of the trust and listing the trust's 
 investments at the preceding year end and shall certify the date 
 of termination of the trust, if so planned, or certify that the 
 trust shall not expire prior to the next following December 31. 

    Subd. 10.    Other jurisdictions.  The reinsurance is 
 ceded to an assuming insurer not meeting the requirements of 
 subdivision 2, 3, 4, or 5, but only with respect to the 
 insurance of risks located in jurisdictions where the 
 reinsurance is required by applicable law or regulation of that 
 jurisdiction. 

    Subd. 11.    Reinsurance agreement requirements.  (a) If 
 the assuming insurer is not licensed or accredited to transact 
 insurance or reinsurance in this state, the credit authorized 
 under subdivisions 4 and 5 shall not be allowed unless the 
 assuming insurer agrees in the reinsurance agreements: 

    (1) that in the event of the failure of the assuming 
 insurer to perform its obligations under the terms of the 
 reinsurance agreement, the assuming insurer shall submit to the 
 jurisdiction of any court of competent jurisdiction in any state 
 of the United States, comply with all requirements necessary to 
 give the court jurisdiction, and abide by the final decision of 
 the court or of any appellate court in the event of an appeal; 
 and 

    (2) to designate the commissioner or a designated attorney 
 as its true and lawful attorney upon whom may be served any 
 lawful process in any action, suit, or proceeding instituted by 
 or on behalf of the ceding company. 

    (b) Paragraph (a) is not intended to conflict with or 
 override the obligation of the parties to a reinsurance 
 agreement to arbitrate their disputes, if an obligation to do so 
 is created in the agreement. 

    (c) Credit will not be granted, nor an asset or a reduction 
 from liability allowed, to a ceding insurer for reinsurance 
 effected with assuming insurers meeting the requirements of 
 subdivision 2, 3, 4, 5, 6, or 7, unless the reinsurance contract 
 provides that in the event of the insolvency of the ceding 
 insurer, the reinsurance will be payable under the contract 
 without diminution because of that insolvency. 

    Payments by the reinsurer must be made directly to the 
 ceding insurer or its receiver, except where the contract of 
 insurance or reinsurance specifically provides for another payee 
 for the reinsurance in the event of insolvency of the ceding 
 insurer according to the applicable requirements of statutes, 
 rules, or orders of the domiciliary state of the ceding insurer. 

    HIST: 1991 c 325 art 1 s 12; 1992 c 540 art 2 s 3; 1994 c 426 
 s 1; 1999 c 177 s 8,9 

     60A.093 Reduction from liability for reinsurance ceded 
  by a domestic insurer; collateral requirements. 

    Subdivision 1.    Reduction allowed.  A reduction from 
 liability for reinsurance ceded by a domestic insurer to an 
 assuming insurer not meeting the requirements of section 60A.092 
 shall be allowed in an amount not exceeding the liabilities 
 carried by the ceding insurer.  Such reduction shall be in the 
 amount of funds held by or on behalf of the ceding insurer, 
 including funds held in trust for the ceding insurer, as 
 security for the payment of obligations under the reinsurance 
 contract with the assuming insurer.  Such security must be held 
 in the United States subject to withdrawal solely by, and under 
 the exclusive control of, the ceding insurer; or, in the case of 
 a trust, held in a qualified United States financial 
 institution.  The funds held as security may be in any form of 
 security acceptable to the commissioner or in the form of: 

    (1) cash; 

    (2) securities listed by the securities valuation office of 
 the National Association of Insurance Commissioners and 
 qualifying as admitted assets and, with the exception of United 
 States treasury notes, readily marketable over a national 
 exchange or NASDAQ with maturity dates within one year; or 

    (3) clean, irrevocable, unconditional letters of credit 
 issued or confirmed by a qualified United States financial 
 institution no later than December 31 in respect of the year for 
 which filing is being made, and in the possession of the ceding 
 company on or before the filing date of its annual statement.  
 The financial institution must meet the standards of financial 
 condition and standing considered necessary and appropriate to 
 regulate the quality of financial institutions as determined by 
 either the commissioner or the securities valuation office of 
 the National Association of Insurance Commissioners, and the 
 financial institution's letters of credit must be acceptable to 
 the commissioner. 

    Subd. 2.    Letters of credit continued acceptance.  
 Letters of credit meeting applicable standards of issuer 
 acceptability as of the dates of their issuance or confirmation 
 must continue to be acceptable as security until their 
 expiration, extension, renewal, modification, or amendment, 
 whichever comes first. 

 The letter of credit of an institution failing the standards of 
 subdivision 1, clause (3) continues to be acceptable for no more 
 than 30 days. 

    HIST: 1991 c 325 art 1 s 13; 1995 c 214 s 4 

     60A.094 Rules. 

    The commissioner may adopt rules implementing the 
 provisions of sections 60A.091 to 60A.093. 

    HIST: 1991 c 325 art 1 s 14 

     60A.095 Reinsurance agreements affected. 

    Sections 60A.091 to 60A.093 apply to all cessions after 
 July 1, 1991, under reinsurance agreements that have had an 
 inception, anniversary, or renewal date not less than six months 
 after July 1, 1991. 

    HIST: 1991 c 325 art 1 s 15 

     60A.096 Qualifying letter of credit. 

    Subdivision 1.    Generally.  An admitted asset or a 
 reduction in liability for reinsurance ceded to an unauthorized 
 assuming insurer providing a letter of credit pursuant to 
 section 60A.093 shall only be allowed when the letter of credit 
 meets the requirements of this section. 

    Subd. 2.    Content.  The letter of credit must be 
 clean, irrevocable, and unconditional and issued or confirmed by 
 a qualified United States financial institution as defined in 
 section 60A.091.  The letter of credit must contain an issue 
 date and date of expiration and must stipulate that the 
 beneficiary need only draw a sight draft under the letter of 
 credit and present it to obtain funds and that no other document 
 need be presented.  The letter of credit must also state that it 
 is not subject to any condition or qualification outside of the 
 letter of credit.  In addition, the letter of credit must not 
 contain reference to any other agreements, documents, or 
 entities, except as provided in subdivision 10, paragraph (a).  

    As used in this section, "beneficiary" means the domestic 
 insurer for whose benefit the letter of credit has been 
 established and any successor of the beneficiary by operation of 
 law.  If a court of law appoints a successor in interest to the 
 named beneficiary, then the named beneficiary includes and is 
 limited to the court appointed domiciliary receiver, including 
 conservator, rehabilitator, or liquidator. 

    Subd. 3.    Form.  The heading of the letter of credit 
 may include a boxed section which contains the name of the 
 applicant and other appropriate notations to provide a reference 
 for the letter of credit.  The boxed section must be clearly 
 marked to indicate that the information is for internal 
 identification purposes only. 

    Subd. 4.    Reimbursement contingency prohibited.  The 
 letter of credit must contain a statement to the effect that the 
 obligation of the qualified United States financial institution 
 under the letter of credit is in no way contingent upon 
 reimbursement with respect to it. 

    Subd. 5.    Expiration.  The term of the letter of 
 credit must be for at least one year and must contain an 
 "evergreen clause" which prevents the expiration of the letter 
 of credit without due notice from the issuer.  The "evergreen 
 clause" must provide for a period of no less than 30 days' 
 notice before the expiration date or nonrenewal. 

    Subd. 6.    Governing law.  The letter of credit must 
 state whether it is subject to and governed by the laws of this 
 state or the Uniform Customs and Practice for Documentary 
 Credits of the International Chamber of Commerce (Publication 
 400), and that all drafts drawn under it shall be presentable at 
 an office in the United States of a qualified United States 
 financial institution. 

    Subd. 7.    Extensions.  If the letter of credit is made 
 subject to the Uniform Customs and Practice for Documentary 
 Credits of the International Chamber of Commerce (Publication 
 400), then the letter of credit must specifically address and 
 make provision for an extension of time to draw against the 
 letter of credit in the event that one or more of the 
 occurrences specified in Article 19 of Publication 400 occur. 

    Subd. 8.    Issuance or confirmation.  The letter of 
 credit must be issued or confirmed by a qualified United States 
 financial institution authorized to issue letters of credit 
 under section 60A.093. 

    Subd. 9.    Additional requirements.  If the letter of 
 credit is issued by a qualified United States financial 
 institution authorized to issue letters of credit, other than a 
 qualified United States financial institution as described in 
 subdivision 8, then the following additional requirements must 
 be met: 

    (1) the issuing qualified United States financial 
 institution shall formally designate the confirming qualified 
 United States financial institution as its agent for the receipt 
 and payment of the drafts; and 

    (2) the "evergreen clause" must provide for no less than 30 
 days' notice before the expiration date or nonrenewal. 

    Subd. 10.    Reinsurance agreements provisions.  (a) The 
 reinsurance agreement in conjunction with which the letter of 
 credit is obtained may contain provisions which: 

    (1) require the assuming insurer to provide letters of 
 credit to the ceding insurer and specify what they are to cover; 

    (2) stipulate that the assuming insurer and ceding insurer 
 agree that the letter of credit provided by the assuming insurer 
 pursuant to the provisions of the reinsurance agreement may be 
 drawn upon at any time, notwithstanding any other provisions in 
 the agreement, and must be utilized by the ceding insurer or its 
 successors in interest only for one or more of the following 
 reasons:  to reimburse the ceding insurer for the assuming 
 insurer's share of premiums returned to the owners of policies 
 reinsured under the reinsurance agreement on account of 
 cancellations of these policies; to reimburse the ceding insurer 
 for the assuming insurer's share of surrenders and benefits or 
 losses paid by the ceding insurer under the terms and provisions 
 of the policies reinsured under the reinsurance agreement; to 
 fund an account with the ceding insurer in an amount at least 
 equal to the deduction, for reinsurance ceded, from the ceding 
 insurer's liabilities for policies ceded under the agreement, 
 including but not limited to, amounts for policy reserves, 
 claims and losses incurred, and unearned premium reserves; and 
 to pay any other amounts the ceding insurer claims are due under 
 the reinsurance agreement; and 

    (3) provide that all of the provisions of this paragraph 
 should be applied without diminution because of insolvency of 
 the ceding insurer or assuming insurer. 

    (b) Nothing in this subdivision precludes the ceding 
 insurer and assuming insurer from providing for: 

    (1) an interest payment, at a rate not in excess of the 
 prime rate of interest, on the amounts held under paragraph (a), 
 clause (2); and 

    (2) the return of any amounts drawn down on the letters of 
 credit in excess of the actual amounts required or, in the case 
 of paragraph (a), clause (2), any amounts that are subsequently 
 determined not to be due. 

    (c) When a letter of credit is obtained in conjunction with 
 a reinsurance agreement covering risks other than life, 
 annuities, and health, where it is customary practice to provide 
 a letter of credit for a specific purpose, then the reinsurance 
 agreement may, in lieu of paragraph (a), clause (2), require 
 that the parties enter into a "trust agreement" which may be 
 incorporated into the reinsurance agreement or be a separate 
 document. 

    Subd. 11.    Limitation on use.  A letter of credit may 
 not be used to reduce any liability for reinsurance ceded to an 
 unauthorized assuming insurer in financial statements required 
 to be filed with the commissioner unless an acceptable letter of 
 credit with the filing ceding insurer as beneficiary has been 
 issued on or before the date of filing of the financial 
 statement.  Further, the reduction for the letter of credit may 
 be up to the amount available under the letter of credit but no 
 greater than the specific obligation under the reinsurance 
 agreement which the letter of credit was intended to secure. 

    Subd. 12.    Existing documents.  Notwithstanding the 
 effective date of this section (August 1, 1994), any letter of 
 credit or underlying reinsurance agreement in existence prior to 
 August 1, 1994, will continue to be acceptable until December 
 31, 1995, at which time the agreements will have to be in full 
 compliance with this section for the letter of credit to be 
 acceptable; provided however that the letter of credit or 
 underlying reinsurance agreement has been in compliance with 
 laws or regulations in existence immediately preceding August 1, 
 1994. 

    HIST: 1994 c 426 s 2 

     60A.097 Qualifying trust agreements. 

    Subdivision 1.    Requirements.  An admitted asset or a 
 reduction in liability for reinsurance ceded to an unauthorized 
 assuming insurer providing a trust fund pursuant to section 
 60A.093 shall only be allowed if the requirements of this 
 section are met. 

    Subd. 2.    Definitions.  As used in this section, the 
 following terms have the meanings given: 

    (a) "Beneficiary" means the entity for whose sole benefit 
 the trust has been established and any successor of the 
 beneficiary by operation of law.  If a court of law appoints a 
 successor in interest to the named beneficiary, the named 
 beneficiary includes and is limited to the court appointed 
 domiciliary receiver, including a conservator, rehabilitator, or 
 liquidator. 

    (b) "Grantor" means the entity that has established a trust 
 for the sole benefit of the beneficiary.  When established in 
 conjunction with a reinsurance agreement, the grantor is the 
 unlicensed, unaccredited assuming insurer. 

    (c) "Obligations" as used in subdivision 3, paragraph (k), 
 means: 

    (1) reinsured losses and allocated loss expenses paid by 
 the ceding company, but not recovered from the assuming insurer; 

    (2) reserves for reinsured losses reported and outstanding; 

    (3) reserves for reinsured losses incurred but not 
 reported; and 

    (4) reserves for allocated reinsured loss expenses and 
 unearned premiums.  

    Subd. 3.    Required conditions.  (a) The trust 
 agreement must be entered into between the beneficiary, the 
 grantor, and a trustee which must be a qualified United States 
 financial institution as defined in section 60A.091. 

    (b) The trust agreement must create a trust account into 
 which assets must be deposited. 

    (c) All assets in the trust account must be held by the 
 trustee at the trustee's office in the United States, except 
 that a bank may apply for the commissioner's permission to use a 
 foreign branch office of the bank as trustee for trust 
 agreements established pursuant to this section.  If the 
 commissioner approves the use of the foreign branch office as 
 trustee, then its use must be approved by the beneficiary in 
 writing and the trust agreement must provide that the written 
 notice described in paragraph (d), clause (1), must also be 
 presentable, as a matter of legal right, at the trustee's 
 principal office in the United States. 

    (d) The trust agreement must provide that: 

    (1) the beneficiary shall have the right to withdraw assets 
 from the trust account at any time, without notice to the 
 grantor, subject only to written notice from the beneficiary to 
 the trustee; 

    (2) no other statement or document is required to be 
 presented in order to withdraw assets, except that the 
 beneficiary may be required to acknowledge receipt of withdrawn 
 assets; 

    (3) it is not subject to any conditions or qualifications 
 outside of the trust agreement; and 

    (4) it shall not contain references to any other agreements 
 or documents except as provided for under paragraph (k).  

    (e) The trust agreement must be established for the sole 
 benefit of the beneficiary. 

    (f) The trust agreement must require the trustee to: 

    (1) receive assets and hold all assets in a safe place; 

    (2) determine that all assets are in such form that the 
 beneficiary, or the trustee upon direction by the beneficiary, 
 may whenever necessary negotiate the assets, without consent or 
 signature from the grantor or any other person or entity; 

    (3) furnish to the grantor and the beneficiary a statement 
 of all assets in the trust account upon its inception and at 
 intervals no less frequent than the end of each calendar 
 quarter; 

    (4) notify the grantor and the beneficiary within ten days 
 of any deposits to or withdrawals from the trust account; 

    (5) upon written demand of the beneficiary, immediately 
 take any and all steps necessary to transfer absolutely and 
 unequivocally all right, title, and interest in the assets held 
 in the trust account to the beneficiary and deliver physical 
 custody of the assets to the beneficiary; and 

    (6) allow no substitutions or withdrawals of assets from 
 the trust account, except on written instructions from the 
 beneficiary, except that the trustee may, without the consent of 
 but with notice to the beneficiary, upon call or maturity of any 
 trust asset, withdraw the asset upon condition that the proceeds 
 are paid into the trust account. 

    (g) The trust agreement must provide that at least 30 days, 
 but not more than 45 days, before termination of the trust 
 account, written notification of termination must be delivered 
 by the trustee to the beneficiary. 

    (h) The trust agreement must be made subject to and 
 governed by the laws of the state in which the trust is 
 established. 

    (i) The trust agreement must prohibit invasion of the trust 
 corpus for the purpose of paying compensation to, or reimbursing 
 the expenses of, the trustee. 

    (j) The trust agreement must provide that the trustee is 
 liable for its own negligence, willful misconduct, or lack of 
 good faith. 

    (k) Notwithstanding other provisions of this section, when 
 a trust agreement is established in conjunction with a 
 reinsurance agreement covering risks other than life, annuities, 
 and accident and health, where it is customary practice to 
 provide a trust agreement for a specific purpose, the trust 
 agreement may, notwithstanding any other conditions in this 
 section, provide that the ceding insurer must undertake to use 
 and apply amounts drawn upon the trust account, without 
 diminution because of the insolvency of the ceding insurer or 
 the assuming insurer for the following purposes: 

    (1) to pay or reimburse the ceding insurer for the assuming 
 insurer's share under the specific reinsurance agreement 
 regarding any losses and allocated loss expenses paid by the 
 ceding insurer, but not recovered from the assuming insurer, or 
 for unearned premiums due to the ceding insurer if not otherwise 
 paid by the assuming insurer; 

    (2) to make payment to the assuming insurer of any amounts 
 held in the trust account that exceed 102 percent of the actual 
 amount required to fund the assuming insurer's obligations under 
 the specific reinsurance agreement; or 

    (3) where the ceding insurer has received notification of 
 termination of the trust account and where the assuming 
 insurer's entire obligations under the specific reinsurance 
 agreement remain unliquidated and undischarged ten days before 
 the termination date, to withdraw amounts equal to the 
 obligations and deposit those amounts in a separate account, in 
 the name of the ceding insurer in any qualified United States 
 financial institution as defined in section 60A.091 apart from 
 its general assets, in trust for the uses and purposes specified 
 in paragraphs (1) and (2) that remain executory after the 
 withdrawal and for any period after the termination date. 

    (l) The reinsurance agreement entered into in conjunction 
 with the trust agreement may, but need not, contain the 
 provisions required by subdivision 5, paragraph (a), clause (2), 
 so long as these required conditions are included in the trust 
 agreement. 

    Subd. 4.    Permitted conditions.  (a) The trust 
 agreement may provide that the trustee may resign upon delivery 
 of a written notice of resignation, effective not less than 90 
 days after receipt by the beneficiary and grantor of the notice 
 and that the trustee may be removed by the grantor by delivery 
 to the trustee and the beneficiary of a written notice of 
 removal, effective not less than 90 days after receipt by the 
 trustee and the beneficiary of the notice.  No resignation or 
 removal is effective until a successor trustee has been 
 appointed and approved by the beneficiary and the grantor and 
 all assets in the trust have been duly transferred to the new 
 trustee. 

    (b) The grantor may have the full and unqualified right to 
 vote any shares or stock in the trust account and to receive 
 from time to time payment of any dividends or interest upon any 
 shares of stock or obligations included in the trust account.  
 Interest or dividends must be either forwarded promptly upon 
 receipt to the grantor or deposited in a separate account 
 established in the grantor's name. 

    (c) The trustee may be given authority to invest, and 
 accept substitutions of, any funds in the account.  No 
 investment or substitution must be made without prior approval 
 of the beneficiary, unless the trust specifies categories of 
 investments acceptable to the beneficiary and authorizes the 
 trustee to invest funds and to accept substitutions which the 
 trustee determines are at least equal in market value to the 
 assets withdrawn and that are consistent with the restrictions 
 in subdivision 5, paragraph (a), clause (2). 

    (d) The trust agreement may provide that the beneficiary 
 may at any time designate a party to which all or part of the 
 trust assets are to be transferred.  The transfer may be 
 conditioned upon the trustee receiving, prior to or 
 simultaneously, other specified assets. 

    (e) The trust agreement may provide that, upon termination 
 of the trust account, all assets not previously withdrawn by the 
 beneficiary shall, with written approval by the beneficiary, be 
 delivered to the grantor. 

    Subd. 5.    Additional conditions applicable to 
 reinsurance agreements.  (a) A reinsurance agreement, which is 
 entered into in conjunction with a trust agreement and the 
 establishment of a trust account, may contain provisions that: 

    (1) require the assuming insurer to enter into a trust 
 agreement and to establish a trust account for the benefit of 
 the ceding insurer, and specifying what the agreement is to 
 cover; 

    (2) stipulate that assets deposited in the trust account 
 must be valued according to their current fair market value and 
 must consist only of United States legal tender, certificates of 
 deposit issued by a United States bank and payable in United 
 States legal tender, and investments of the types permitted by 
 state insurance law or any combination of the above, if the 
 investments are issued by an institution that is not the parent, 
 subsidiary or affiliate of either the grantor or the 
 beneficiary.  The reinsurance agreement may further specify the 
 types of investments to be deposited.  Where a trust agreement 
 is entered into in conjunction with a reinsurance agreement 
 covering risks other than life, annuities, and accident and 
 health, then the trust agreement may contain the provisions in 
 this paragraph in lieu of including these provisions in the 
 reinsurance agreement; 

    (3) require the assuming insurer, before depositing assets 
 with the trustee, to execute assignments or endorsements in 
 blank, or to transfer legal title to the trustee of all shares, 
 obligations or any other assets requiring assignments, in order 
 that the ceding insurer, or the trustee upon the direction of 
 the ceding insurer, may whenever necessary negotiate these 
 assets without consent or signature from the assuming insurer or 
 any other entity; 

    (4) require that all settlements of account between the 
 ceding insurer and the assuming insurer be made in cash or its 
 equivalent; and 

    (5) stipulate that the assuming insurer and the ceding 
 insurer agree that the assets in the trust account, established 
 pursuant to the provisions of the reinsurance agreement, may be 
 withdrawn by the ceding insurer at any time, notwithstanding any 
 other provisions in the reinsurance agreement, and must be 
 utilized and applied by the ceding insurer or its successors in 
 interest by operation of law, including without limitation any 
 liquidator, rehabilitator, receiver or conservator of the 
 company, without diminution because of insolvency on the part of 
 the ceding insurer or the assuming insurer, only for the 
 following purposes: 

    (i) to reimburse the ceding insurer for the assuming 
 insurer's share of premiums returned to the owners of policies 
 reinsured under the reinsurance agreement because of 
 cancellations of the policies; 

    (ii) to reimburse the ceding insurer for the assuming 
 insurer's share of surrenders and benefits or losses paid by the 
 ceding insurer pursuant to the provisions of the policies 
 reinsured under the reinsurance agreement; 

    (iii) to fund an account with the ceding insurer in an 
 amount at least equal to the deduction, for reinsurance ceded, 
 from the ceding insurer liabilities for policies ceded under the 
 agreement.  The account must include, but not be limited to, 
 amounts for policy reserves, claims and losses incurred, 
 including losses incurred but not reported, loss adjustment 
 expenses, and unearned premium reserves; and 

    (iv) to pay any other amounts the ceding insurer claims are 
 due under the reinsurance agreement. 

    (b) The reinsurance agreement may also contain provisions 
 that: 

    (1) give the assuming insurer the right to seek approval 
 from the ceding insurer to withdraw from the trust account all 
 or any part of the trust assets and transfer those assets to the 
 assuming insurer, and provide that the ceding insurer shall not 
 unreasonably or arbitrarily withhold its approval, provided: 

    (i) the assuming insurer shall, at the time of withdrawal, 
 replace the withdrawn assets with other qualified assets having 
 a market value equal to the market value of the assets withdrawn 
 so as to maintain at all times the deposit in the required 
 amount; or 

    (ii) after withdrawal and transfer, the market value of the 
 trust account is no less than 102 percent of the required 
 amount; 

    (2) provide for: 

    (i) the return of any amount withdrawn in excess of the 
 actual amounts required for paragraph (a), clause (5), items 
 (i), (ii), and (iii), or in the case of paragraph (a), clause 
 (5), item (iv), any amounts that are subsequently determined not 
 to be due; and 

    (ii) interest payments, at a rate not in excess of the 
 prime rate of interest, on the amounts held pursuant to 
 paragraph (a), clause (5), item (iii); and 

    (3) permit the award by any arbitration panel or court of 
 competent jurisdiction of: 

    (i) interest at a rate different from that provided in 
 clause (2), item (ii); 

    (ii) court or arbitration costs; 

    (iii) attorney's fees; and 

    (iv) any other reasonable expenses. 

    Subd. 6.    Financial reporting.  A trust agreement may 
 be used to reduce any liability for reinsurance ceded to an 
 unauthorized assuming insurer in financial statements required 
 to be filed with the commissioner when established on or before 
 the date of filing of the financial statement of the ceding 
 insurer.  Further, the reduction for the existence of an 
 acceptable trust account may be up to the current fair market 
 value of acceptable assets available to be withdrawn from the 
 trust account at that time, but the reduction must be no greater 
 than the specific obligations under the reinsurance agreement 
 that the trust account was established to secure. 

    Subd. 7.    Existing agreements.  Notwithstanding the 
 effective date of this section (August 1, 1994), any trust 
 agreement or underlying reinsurance agreement in existence prior 
 to August 1, 1994, will continue to be acceptable until December 
 31, 1995, at which time the agreements will have to be in full 
 compliance with this section for the trust agreement to be 
 acceptable; provided however that the trust agreement or 
 underlying reinsurance agreement has been in compliance with 
 laws or regulations in existence immediately preceding August 1, 
 1994. 

    Subd. 8.    Effect of failure to identify beneficiary.  
 The failure of any trust agreement to specifically identify the 
 beneficiary, as defined in subdivision 2, paragraph (a), must 
 not be construed to affect any actions or rights which the 
 commissioner may take or possess pursuant to the laws of this 
 state. 

    HIST: 1994 c 426 s 3 

     60A.10 Deposits for protection of policyholders. 

    Subdivision 1.    Domestic companies.  (1)    Deposit 
 as security for all policyholders required.  No company in 
 this state, other than farmers' mutual, or real estate title 
 insurance companies, shall do business in this state unless it 
 has on deposit with the commissioner, for the protection of both 
 its resident and nonresident policyholders, securities to an 
 amount, the actual market value of which, exclusive of interest, 
 shall never be less than $500,000 or one-half the applicable 
 financial requirement set forth in section 60A.07, whichever is 
 less.  The securities shall be retained under the control of the 
 commissioner as long as any policies of the depositing company 
 remain in force. 

    (2)    Securities defined.  For the purpose of this 
 subdivision, the word "securities" means bonds or other 
 obligations of, or bonds or other obligations insured or 
 guaranteed by, the United States, any state of the United 
 States, any municipality of this state, or any agency or 
 instrumentality of the foregoing. 

    (3)    Protection of deposit from levy.  No judgment 
 creditor or other claimant may levy upon any securities held on 
 deposit with, or for the account of, the commissioner.  Upon the 
 entry of an order by a court of competent jurisdiction for the 
 rehabilitation, liquidation or conservation of any depositing 
 company as provided in chapter 60B, that company's deposit 
 together with any accrued income thereon shall be transferred to 
 the commissioner as rehabilitator, liquidator, or conservator. 

    Subd. 2.    Like requirement for foreign companies.  Any 
 insurance company of any other state of the United States may 
 file with the commissioner a certificate of the insurance 
 commissioner of the other state that, as such officer, there is 
 held in trust by the certifying commissioner and on deposit for 
 the benefit of all the policyholders of the company a deposit of 
 an amount not less than that required by subdivision 1 in par 
 value of such securities as are required or permitted to be 
 deposited by the laws of that state, these securities to be of 
 the character in which insurance companies are authorized to 
 invest under the laws of that state, stating the items of the 
 securities so held, and that the commissioner is satisfied that 
 these securities are worth the value so certified.  No deposit 
 shall be required in this state while the deposit, so certified, 
 remains. 

    Subd. 2a.    Special deposits.  The commissioner may 
 require a special deposit of an individual foreign insurer for 
 the protection of its Minnesota policyholders or claimants.  In 
 the event of the filing of a delinquency petition against the 
 insurer in Minnesota, the deposit is subject to chapters 60B, 
 60C, 61A, and 61B. 

    Subd. 3.    Deposits in compliance with other laws or of 
 foreign companies.  The commissioner shall receive and hold in 
 official trust deposits made by any domestic company in 
 compliance with the laws of any other state, to enable it to do 
 business in that state, and in like manner hold deposits made by 
 a foreign company under any law of this state.  The company 
 making the deposit shall be entitled to the income thereof and, 
 from time to time, with the commissioner's consent, when not 
 inconsistent with the law under which it was made, may exchange, 
 in whole or in part, the securities composing the deposit for 
 other approved securities of equal value.  Upon application by a 
 domestic company, the commissioner may return the whole or any 
 portion of the securities so deposited by it, if satisfied that 
 they are subject to no liability.  Upon like application, the 
 commissioner may return to a foreign company any deposit made by 
 it when it appears that the company has ceased to do business in 
 this state or the United States, and the commissioner is 
 satisfied that it is not subject to any liability in this state, 
 or upon the order of any court of competent jurisdiction.  A 
 foreign company which has made a deposit, its trustees, 
 receiver, resident manager, or any creditor or policyholder 
 thereof, may, at any time, institute in the district court of 
 Ramsey county an action against the state and other proper 
 parties to enforce and terminate the trust created by the 
 deposit.  The commissioner shall immediately notify the governor 
 of the action, and furnish the necessary information to answer 
 in behalf of the state, and shall carry out such order and 
 decree as the court shall make therein. 

    Subd. 4.    Safekeeping of securities on deposit.  No 
 later than July 1, 1975, all securities held on deposit with the 
 commissioner pursuant to the laws of this state, or in 
 accordance with an order of the commissioner, shall be deposited 
 for the account of the commissioner in such state or national 
 bank in this state as the depositing insurer may designate and 
 the commissioner may approve.  Said deposits shall be made and 
 maintained in accordance with a custodial agreement between the 
 bank and the depositing insurer in a form approved by the 
 commissioner which shall provide as a minimum that (1) the fees 
 of the custodian are to be the obligation of the depositing 
 insurer, and (2) there shall be no exchange, release or transfer 
 of any deposited security unless the commissioner has assented 
 thereto in writing.  Securities evidenced by the Federal Reserve 
 book entry system or held in a clearing corporation, as that 
 term is defined in section 60A.11, subdivision 10, must be 
 deposited through an approved custodian or the commissioner of 
 commerce for the account of the commissioner of commerce for the 
 benefit of all policyholders of the depositor. 

    Subd. 5.  Repealed, 1969 c 494 s 4 

    Subd. 6.    Rules.  The commissioner of commerce shall 
 have the power to make such rules as may be necessary for the 
 execution of the functions vested in the commissioner by this 
 section. 

    HIST: 1967 c 395 art 1 s 10; 1969 c 494 s 3; 1974 c 425 s 1-3; 
 1978 c 465 s 4; 1983 c 289 s 114 subd 1; 1984 c 655 art 1 s 92; 
 1Sp1985 c 10 s 50; 1986 c 444; 1986 c 455 s 5; 1991 c 325 art 10 
 s 5; 1992 c 540 art 2 s 4; 1999 c 177 s 10 

  60A.101 Repealed, 1988 c 674 s 22 

     60A.11 Investments permitted for domestic companies. 

    Subdivision 1.    Requirement for payment of capital 
 stock.  The capital of every stock company shall be paid in 
 full, in cash, within six months from the date of its 
 certificate of incorporation, and thereupon a majority of the 
 directors shall certify, under oath, to the commissioner that 
 such payment, in cash, has been made by the stockholders for 
 their respective shares, and is held as the capital of the 
 company, and until then no policy shall be issued. 

    Subd. 2. Repealed, 1981 c 211 s 42 

    Subd. 3. Repealed, 1981 c 211 s 42 

    Subd. 4. Repealed, 1981 c 211 s 42 

    Subd. 5. Repealed, 1981 c 211 s 42 

    Subd. 5a. Repealed, 1982 c 424 s 9 

    Subd. 5b. Repealed, 1982 c 424 s 9 

    Subd. 6. Repealed, 1981 c 211 s 42 

    Subd. 7.    Investments in name of company or nominee and 
 prohibitions.  No officer, director, or member of any 
 committee passing on investments shall borrow any of such funds, 
 or become, directly or indirectly, liable as a surety or 
 endorser for or on account of loans thereof to others, or 
 receive for personal use any fee, brokerage, commission, gift, 
 or other consideration for, or on account of, any loan made by 
 or on behalf of the company. 

    Subd. 8. Repealed, 1981 c 211 s 42 

    Subd. 9.    General considerations.  The following 
 considerations apply in the interpretation of this section: 

    (a) This section applies to the investments of insurance 
 companies other than life insurance companies; 

    (b) The purpose of this section is to protect and further 
 the interests of policyholders, claimants, creditors and the 
 public by providing standards for the development and 
 administration of programs for the investment of the assets of 
 domestic companies.  These standards and the investment programs 
 developed by companies must take into account the safety of 
 company's principal, investment yield and growth, stability in 
 the value of the investment, the liquidity necessary to meet the 
 company's expected business needs, and investment 
 diversification; 

    (c) All financial terms relating to insurance companies 
 have the meanings assigned to them under statutory accounting 
 methods.  All financial terms relating to noninsurance companies 
 have the meanings assigned to them under generally accepted 
 accounting principles; 

    (d) Investments must be valued in accordance with the 
 valuation procedures established by the National Association of 
 Insurance Commissioners, unless the commissioner requires or 
 finds another method of valuation reasonable under the 
 circumstances.  Another method of valuation permitted by the 
 commissioner must be at least as conservative as those 
 prescribed in the association's manual.  Other invested assets 
 must be valued according to the procedures promulgated by the 
 National Association of Insurance Commissioners, if not 
 addressed in another section, unless the commissioner requires 
 or finds another method of valuation reasonable under the 
 circumstances; 

    (e) A company may elect to hold an investment which 
 qualifies under more than one subdivision, under the subdivision 
 of its choice.  Nothing herein prevents a company from electing 
 to hold an investment under a subdivision different from the one 
 in which it previously held the investment; and 

    (f) An investment which qualifies under any provision of 
 the law governing investments of insurance companies when 
 acquired will continue to be a qualified investment for as long 
 as it is held by the insurance company. 

    Subd. 10.    Definitions.  The following terms have the 
 meaning assigned in this subdivision for purposes of this 
 section and section 60A.111: 

    (a) "Adequate evidence" means a written confirmation, 
 advice, or other verification issued by a depository, issuer, or 
 custodian bank which shows that the investment is held for the 
 company; 

    (b) "Adequate security" means a letter of credit qualifying 
 under subdivision 11, paragraph (f), cash, or the pledge of an 
 investment authorized by any subdivision of this section; 

    (c) "Admitted assets," for purposes of computing percentage 
 limitations on particular types of investments, means the assets 
 as shown by the company's annual statement, required by section 
 60A.13, as of the December 31 immediately preceding the date the 
 company acquires the investment; 

    (d) "Clearing corporation" means The Depository Trust 
 Company or any other clearing agency registered with the 
 securities and exchange commission pursuant to the Securities 
 Exchange Act of 1934, section 17A, Euro-clear Clearance System 
 Limited and CEDEL S.A., and, with the approval of the 
 commissioner, any other clearing corporation as defined in 
 section 336.8-102; 

    (e) "Control" has the meaning assigned to that term in, and 
 must be determined in accordance with, section 60D.15, 
 subdivision 4; 

    (f) "Custodian bank" means a bank or trust company or a 
 branch of a bank or trust company that is acting as custodian 
 and is supervised and examined by state or federal authority 
 having supervision over the bank or trust company or with 
 respect to a company's foreign investments only by the 
 regulatory authority having supervision over banks or trust 
 companies in the jurisdiction in which the bank, trust company, 
 or branch is located, and any banking institutions qualifying as 
 an "Eligible Foreign Custodian" under the Code of Federal 
 Regulations, section 270.17f-5, adopted under section 17(f) of 
 the Investment Company Act of 1940, and specifically including 
 Euro-clear Clearance System Limited and CEDEL S.A., acting as 
 custodians; 

    (g) "Evergreen clause" means a provision that automatically 
 renews a letter of credit for a time certain if the issuer of 
 the letter of credit fails to affirmatively signify its 
 intention to nonrenew upon expiration; 

    (h) "Government obligations" means direct obligations for 
 the payment of money, or obligations for the payment of money to 
 the extent guaranteed as to the payment of principal and 
 interest by any governmental issuer where the obligations are 
 payable from ad valorem taxes or guaranteed by the full faith, 
 credit, and taxing power of the issuer and are not secured 
 solely by special assessments for local improvements; 

    (i) "Noninvestment grade obligations" means obligations 
 which, at the time of acquisition, were rated below Baa/BBB or 
 the equivalent by a securities rating agency or which, at the 
 time of acquisition, were not in one of the two highest 
 categories established by the securities valuation office of the 
 National Association of Insurance Commissioners; 

    (j) "Issuer" means the corporation, business trust, 
 governmental unit, partnership, association, individual, or 
 other entity which issues or on behalf of which is issued any 
 form of obligation; 

    (k) "Licensed real estate appraiser" means a person who 
 develops and communicates real estate appraisals and who holds a 
 current, valid license under chapter 82B or a substantially 
 similar licensing requirement in another jurisdiction; 

    (l) "Member bank" means a national bank, state bank or 
 trust company which is a member of the Federal Reserve System; 

    (m) "National securities exchange" means an exchange 
 registered under section 6 of the Securities Exchange Act of 
 1934 or an exchange regulated under the laws of the Dominion of 
 Canada; 

    (n) "NASDAQ" means the reporting system for securities 
 meeting the definition of National Market System security as 
 provided under Part I to Schedule D of the National Association 
 of Securities Dealers Incorporated bylaws; 

    (o) "Obligations" include bonds, notes, debentures, 
 transportation equipment certificates, repurchase agreements, 
 bank certificates of deposit, time deposits, bankers' 
 acceptances, and other obligations for the payment of money not 
 in default as to payments of principal and interest on the date 
 of investment, whether constituting general obligations of the 
 issuer or payable only out of certain revenues or certain funds 
 pledged or otherwise dedicated for payment.  Leases are 
 considered obligations if the lease is assigned for the benefit 
 of the company and is nonterminable by the lessee or lessees 
 thereunder upon foreclosure of any lien upon the leased 
 property, and rental payments are sufficient to amortize the 
 investment over the primary lease term; 

    (p) "Qualified assets" means the sum of (1) all investments 
 qualified in accordance with this section other than investments 
 in affiliates and subsidiaries, (2) investments in obligations 
 of affiliates as defined in section 60D.15, subdivision 2, 
 secured by real or personal property sufficient to qualify the 
 investment under subdivision 19 or 23, (3) qualified investments 
 in subsidiaries, as defined in section 60D.15, subdivision 9, on 
 a consolidated basis with the insurance company without 
 allowance for goodwill or other intangible value, and (4) cash 
 on hand and on deposit, agent's balances or uncollected premiums 
 not due more than 90 days, assets held pursuant to section 
 60A.12, subdivision 2, investment income due and accrued, funds 
 due or on deposit or recoverable on loss payments under 
 contracts of reinsurance entered into pursuant to section 
 60A.09, premium bills and notes receivable, federal income taxes 
 recoverable, and equities and deposits in pools and 
 associations; 

    (q) "Qualified net earnings" means that the net earnings of 
 the issuer after elimination of extraordinary nonrecurring items 
 of income and expense and before income taxes and fixed charges 
 over the five immediately preceding completed fiscal years, or 
 its period of existence if less than five years, has averaged 
 not less than 1-1/4 times its average annual fixed charges 
 applicable to the period; 

    (r) "Required liabilities" means the sum of (1) total 
 liabilities as required to be reported in the company's most 
 recent annual report to the commissioner of commerce of this 
 state, (2) for companies operating under the stock plan, the 
 minimum paid-up capital and surplus required to be maintained 
 pursuant to section 60A.07, subdivision 5a, (3) for companies 
 operating under the mutual or reciprocal plan, the minimum 
 amount of surplus required to be maintained pursuant to section 
 60A.07, subdivision 5b, and (4) the amount, if any, by which the 
 company's loss and loss adjustment expense reserves exceed 350 
 percent of its surplus as it pertains to policyholders as of the 
 same date.  The commissioner may waive the requirement in clause 
 (4) unless the company's written premiums exceed 300 percent of 
 its surplus as it pertains to policyholders as of the same 
 date.  In addition to the required amounts pursuant to clauses 
 (1) to (4), the commissioner may require that the amount of any 
 apparent reserve deficiency that may be revealed by one to five 
 year loss and loss adjustment expense development analysis for 
 the five years reported in the company's most recent annual 
 statement to the commissioner be added to required liabilities; 

    (s) "Revenue obligations" means obligations for the payment 
 of money by a governmental issuer where the obligations are 
 payable from revenues, earnings, or special assessments on 
 properties benefited by local improvements of the issuer which 
 are specifically pledged therefor; 

    (t) "Security" has the meaning given in section 5 of the 
 Security Act of 1933 and specifically includes, but is not 
 limited to, stocks, stock equivalents, warrants, rights, 
 options, obligations, American Depository Receipts (ADR's), 
 repurchase agreements, and reverse repurchase agreements; and 

    (u) "Unrestricted surplus" means the amount by which 
 qualified assets exceed 110 percent of required liabilities.  

    Subd. 11.    Investments in name of company or nominee and 
 prohibitions.  A company's investments shall be held in its 
 own name or the name of its nominee, except that:  

    (a) Investments may be held in the name of a clearing 
 corporation or of a custodian bank or in the name of the nominee 
 of either on the following conditions:  

    (1) The clearing corporation, custodian bank, or nominee 
 must be legally authorized to hold the particular investment for 
 the account of others; 

    (2) Where the investment is evidenced by a certificate and 
 held in the name of a custodian bank or the nominee by a 
 custodian bank, a written agreement shall provide that 
 certificates so deposited shall at all times be kept separate 
 and apart from other deposits with the depository, so that at 
 all times they may be identified as belonging solely to the 
 company making the deposit; 

    (3) Where a clearing corporation is to act as depository, 
 the investment may be merged or held in bulk in the clearing 
 corporation's or its nominee name with other investments 
 deposited with the clearing corporation by any other person, if 
 a written agreement provides that adequate evidence of the 
 deposit is to be obtained and retained by the company or a 
 custodian bank; and 

    (4) The company shall monitor current publicly available 
 financial information and other pertinent data with respect to 
 the custodian banks.  

    (b) A company may loan securities held by it under this 
 chapter to a broker-dealer registered under the Securities and 
 Exchange Act of 1934 or a member bank.  The loan must be 
 evidenced by a written agreement which provides: 

    (1) That the loan will be fully collateralized by cash or 
 obligations issued or guaranteed by the United States or an 
 agency or an instrumentality thereof, and that the collateral 
 will be adjusted each business day during the term of the loan 
 to maintain the required collateralization in the event of 
 market value changes in the loaned securities or collateral; 

    (2) That the loan may be terminated by the company at any 
 time, and that the borrower will return the loaned securities or 
 their equivalent within five business days after termination; 

    (3) That the company has the right to retain the collateral 
 or use the collateral to purchase investments equivalent to the 
 loaned securities if the borrower defaults under the terms of 
 the agreement and that the borrower remains liable for any 
 losses and expenses incurred by the company due to default that 
 are not covered by the collateral. 

    (c) A company may participate through a member bank in the 
 Federal Reserve book-entry system, and the records of the member 
 bank shall at all times show that the investments are held for 
 the company or for specific accounts of the company. 

    (d) An investment may consist of an individual interest in 
 a pool of obligations or a fractional interest in a single 
 obligation if the certificate of participation or interest or 
 the confirmation of participation or interest in the investment 
 shall be issued in the name of the company or the name of the 
 custodian bank or the nominee of either and if the certificate 
 or confirmation must, if held by a custodian bank, be kept 
 separate and apart from the investments of others so that at all 
 times the participation may be identified as belonging solely to 
 the company making the investment.  

    (e) Except as provided in paragraph (c), where an 
 investment is not evidenced by a certificate, adequate evidence 
 of the company's investment shall be obtained from the issuer or 
 its transfer or recording agent and retained by the company, a 
 custodian bank, or clearing corporation.  Transfers of ownership 
 of investments held as described in paragraphs (a), clause (3), 
 (c) and (d) may be evidenced by bookkeeping entry on the books 
 of the issuer of the investment or its transfer or recording 
 agent or the clearing corporation without physical delivery of 
 certificates, if any, evidencing the company's investment.  

    (f) A letter of credit may be accepted as a guaranty of 
 other investments, as collateral to secure loans, or in lieu of 
 cash to secure loans of securities, if it is issued by a member 
 bank or any of the 100 largest banks in the world ranked by 
 deposits in dollars or converted into dollar equivalents, as 
 compiled annually by the American Bankers Association or listed 
 in the annual publication of Moody's Bank &> Finance Manual and 
 meets the following requirements: 

    (1) has a long-term deposit rating or a long-term debt 
 rating of at least Aa2 as found in the current monthly 
 publication of Moody's Credit Opinions or its equivalent; and 

    (2) qualifies under the guidelines of the National 
 Association of Insurance Commissioners as a clean, irrevocable 
 letter of credit containing an evergreen clause or having a 
 maturity date subsequent to the maturity date of the underlying 
 investment or loan.  The company shall monitor current publicly 
 available financial information and other pertinent data with 
 respect to the banks issuing the letters of credit. 

    Subd. 11a.    Additional limitations.  Under the 
 standards and procedures in sections 60G.20 to 60G.22 for 
 individual insurers, the commissioner may impose additional 
 limitations on all insurers on the types and percentages of 
 investments as the commissioner determines necessary to protect 
 and ensure the safety of the general public. 

    Subd. 12.    Investments.  (a) A company must comply 
 with section 60A.112. 

    (b) A company's investments must be so diversified that the 
 securities of a single issuer, other than 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, shall 
 comprise no more than five percent of the company's admitted 
 assets, except where otherwise specified under this chapter.  In 
 the case of insurance companies which are subsidiaries of a 
 company, this diversification test must be applied to the assets 
 of the insurance company subsidiary in determining the company's 
 compliance. 

    (c) The investments authorized under subdivisions 12 to 26 
 shall constitute admitted assets for a company.  

    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.  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. 

    Subd. 14.    Certain bank obligations.  (a) Certificates 
 of deposits, time deposits, and bankers' acceptances issued by 
 and other obligations guaranteed by:  (i) any bank organized 
 under the laws of the United States or any state, commonwealth, 
 or territory thereof, including the District of Columbia, or of 
 the Dominion of Canada or any province thereof or (ii) any of 
 the 100 largest banks, not a subsidiary or a holding company 
 thereof, in the world ranked by deposits in dollars or converted 
 into dollar equivalents, as compiled annually by the American 
 Bankers Association or listed in the annual publication of 
 Moody's Bank &> Finance Manual, which also has a long-term 
 deposit rating or a long-term debt rating of at least Aa2 as 
 found in the current monthly publication of Moody's Credit 
 Opinions or its equivalent.  A company may not invest more than 
 five percent of its admitted assets in the obligations of any 
 one bank and may not hold at any time more than ten percent of 
 the outstanding obligations of any one bank.  

    (b) Obligations issued or guaranteed by the International 
 Bank for Reconstruction and Development, the Asian Development 
 Bank, the Inter-American Development Bank, the African 
 Development Bank, the Export-Import Bank, the World Bank or any 
 United States government sponsored organization of which the 
 United States is a member, if the principal and interest is 
 payable in United States dollars.  A company may not invest more 
 than five percent of its total admitted assets in the 
 obligations of any one of these banks or organizations, and may 
 not invest more than a total of 15 percent of its total admitted 
 assets in the obligations of all these banks and organizations.  

    Subd. 15.    State obligations.  (a) Government 
 obligations issued or guaranteed by any state, commonwealth, or 
 territory of the United States of America or by any political 
 subdivision thereof, including the District of Columbia, or by 
 any instrumentality of any state, commonwealth, territory, or 
 political subdivision thereof.  The diversification requirement 
 of subdivision 12, paragraph (b), does not apply to government 
 obligations under this paragraph. 

    (b) Revenue obligations issued by any state, commonwealth, 
 or territory of the United States of America or by any political 
 subdivision thereof, including the District of Columbia, or by 
 any instrumentality of any state, commonwealth, territory, or 
 political subdivision thereof.  The diversification requirement 
 of subdivision 12, paragraph (b), is applicable to revenue 
 obligations under this paragraph. 

    Subd. 16.    Canadian government obligations.  (a) 
 Obligations issued or guaranteed by the Dominion of Canada or by 
 any agency or instrumentality of the Dominion of Canada backed 
 by the full faith and credit of the issuer.  The diversification 
 requirement of subdivision 12, paragraph (b), does not apply to 
 government obligations under this paragraph. 

    (b) Obligations issued or guaranteed by an agency or 
 instrumentality of the Dominion of Canada other than those 
 backed by the full faith and credit of the issuer.  The 
 securities of a single issuer under this paragraph shall 
 comprise no more than 20 percent of the company's admitted 
 assets. 

    (c) Government obligations issued or guaranteed by a 
 province or territory of the Dominion of Canada or by a 
 political subdivision thereof, or by an instrumentality of a 
 province, territory, or political subdivision thereof.  The 
 diversification requirement of subdivision 12, paragraph (b), 
 does not apply to government obligations under this paragraph. 

    (d) Revenue obligations issued by a province or territory 
 of the Dominion of Canada or by a political subdivision thereof, 
 or by an instrumentality of a province, territory, or political 
 subdivision thereof.  The diversification requirement of 
 subdivision 12, paragraph (b), is applicable to revenue 
 obligations under this paragraph. 

    Subd. 17.    Corporate and business trust obligations.  
 Obligations issued, assumed or guaranteed by a corporation or 
 business trust organized under the laws of the United States of 
 America or any state, commonwealth, or territory of the United 
 States, including the District of Columbia, or the laws of the 
 Dominion of Canada or any province or territory of the Dominion 
 of Canada, or obligations traded on a national securities 
 exchange on the following conditions: 

    (a) A company may invest in any obligations traded on a 
 national securities exchange; 

    (b) A company may also invest in any obligations which are 
 secured by adequate security located in the United States or 
 Canada; 

    (c) A company may also invest in previously outstanding or 
 newly issued obligations not qualifying for investment under 
 paragraph (a) or (b) if the corporation or business trust has 
 qualified net earnings.  If the obligations are not newly 
 issued, neither principal nor interest payments on the 
 obligations shall have been in arrears (1) for an aggregate of 
 90 days during the three-year period preceding the date of 
 investment, or (2) where the obligations have been outstanding 
 for less than 90 days, during the period the obligations have 
 been outstanding; 

    (d) A company may invest no more than 15 percent of its 
 total admitted assets in noninvestment grade obligations; 

    (e) A company may invest in federal farm loan bonds and may 
 invest up to 20 percent of its total admitted assets in the 
 obligations of farm mortgage debenture companies; and 

    (f) A company may not invest more than five percent of its 
 admitted assets in the obligations of any one corporation or 
 business trust; provided, however, that a company may invest in 
 the obligations of a corporation without regard to this 
 paragraph or the subdivision 12, paragraph (b), diversification 
 requirement if:  (1) the company is wholly owned by the issuer 
 and affiliates of the issuer of the obligations; (2) the company 
 insures solely the issuer of the obligations and its affiliates; 
 (3) the issuer has a net worth, determined on a consolidated 
 basis, which equals or exceeds $100,000,000; and (4) the issuer 
 and its affiliates forego any and all claims they may have 
 against the Minnesota insurance guaranty association pursuant to 
 chapter 60C in the event of the insolvency of the company.  This 
 does not affect the rights of any unaffiliated third party 
 claimant under section 60C.09, subdivision 1. 

    Subd. 18.    Stocks and limited partnerships.  (a) 
 Stocks issued or guaranteed by any corporation incorporated 
 under the laws of the United States of America or any state, 
 commonwealth, or territory of the United States, including the 
 District of Columbia, or the laws of the Dominion of Canada or 
 any province or territory of Canada, or stocks or stock 
 equivalents, including American Depository Receipts or unit 
 investment trusts, listed or regularly traded on a national 
 securities exchange on the following conditions:  

    (1) A company may not invest more than a total of 25 
 percent of its total admitted assets in stocks, stock 
 equivalents, and convertible issues.  Not more than ten percent 
 of a company's total admitted assets may be invested in stocks, 
 stock equivalents, and convertible issues not traded or listed 
 on a national securities exchange or designated or approved for 
 designation upon notice of issuance on the NASDAQ/National 
 Market System.  This limitation does not apply to investments 
 under clause (4); 

    (2) A company may not invest in more than two percent of 
 its total admitted assets in preferred stocks of any corporation 
 which are traded on a national securities exchange and may also 
 invest in other preferred stocks if the issuer has qualified net 
 earnings and if current or cumulative dividends are not then in 
 arrears; 

    (3) A company may not invest in more than two percent of 
 its total admitted assets in common stocks, common stock 
 equivalents, or securities convertible into common stock or 
 common stock equivalents of any corporation or business trust 
 which are traded on a national securities exchange or designated 
 or approved for designation upon notice of issuance on the 
 NASDAQ/National Market System, and may also invest in other 
 common stocks, stock equivalents, and convertible issues subject 
 to the limitations specified in clause (1); 

    (4) A company may organize or acquire and hold voting 
 control of a corporation or business trust through its ownership 
 of common stock, common stock equivalents, or other securities, 
 provided the corporation or business trust is:  (a) a 
 corporation providing investment advisory, banking, management 
 or sale services to an investment company or to an insurance 
 company, (b) a data processing or computer service company, (c) 
 a mortgage loan corporation engaged in the business of making, 
 originating, purchasing or otherwise acquiring or investing in, 
 and servicing or selling or otherwise disposing of loans secured 
 by mortgages on real property, (d) a corporation if its business 
 is owning and managing or leasing personal property, (e) a 
 corporation providing securities underwriting services or acting 
 as a securities broker or dealer, (f) a real property holding, 
 developing, managing, brokerage or leasing corporation, (g) any 
 domestic or foreign insurance company, (h) any alien insurance 
 company, if the organization or acquisition and the holding of 
 the company is subject to the prior approval of the commissioner 
 of commerce, which approval must be given upon good cause shown 
 and is deemed to have been given if the commissioner does not 
 disapprove of the organization or acquisition within 30 days 
 after notification by the company, (i) an investment subsidiary 
 to acquire and hold investments which the company could acquire 
 and hold directly, if the investments of the subsidiary are 
 considered direct investments for purposes of this chapter and 
 are subject to the same percentage limitations, requirements and 
 restrictions as are contained herein, or (j) any corporation 
 whose business has been approved by the commissioner as 
 complementary or supplementary to the business of the company.  
 A company may invest up to an aggregate of ten percent of its 
 total admitted assets under subclauses (a) to (e) of this clause.
 The diversification requirement of subdivision 12, paragraph 
 (b), does not apply to this clause; 

    (5) A company may invest in warrants and rights granted by 
 an issuer to purchase securities of the issuer if that security 
 of the issuer, at the time of the acquisition of the warrant or 
 right to purchase, would qualify as an investment under 
 paragraph (a), clause (2) or (3), whichever is applicable, 
 provided that security meets the standards prescribed in the 
 clause at the time of acquisition of the securities; and 

    (6)(i) A company may invest in the securities of any face 
 amount certificate company, unit investment trust, or management 
 type investment company, registered or in the process of 
 registration under the Investment Company Act of 1940 as from 
 time to time amended, provided that the aggregate of all these 
 investments other than in securities of money market mutual 
 funds or mutual funds investing primarily in United States 
 government securities, determined at cost, shall not exceed five 
 percent of its total admitted assets; investments may be made 
 under this clause without regard to the percentage limitations 
 applicable to investments in voting securities. 

    (ii) A company may invest in any proportion of the shares 
 or investment units of an investment company or investment 
 trust, whether or not registered under the Investment Company 
 Act of 1940, which is managed by an insurance company, member 
 bank, trust company regulated by state or federal authority or 
 an investment manager or adviser registered under the Investment 
 Advisers Act of 1940 or qualified to manage the investments of 
 an investment company registered under the Investment Company 
 Act of 1940, provided that the investments of the investment 
 company or investment trust are qualified investments made under 
 this section and that the articles of incorporation, bylaws, 
 trust agreement, investment management agreement, or some other 
 governing instrument limits its investments to investments 
 qualified under this section.  

    (b) A company may invest in or otherwise acquire and hold a 
 limited partnership interest in any limited partnership formed 
 under the laws of any state, commonwealth, or territory of the 
 United States or under the laws of the United States of 
 America.  A company may invest in or otherwise acquire and hold 
 a member interest in any limited liability company formed under 
 the laws of any state, commonwealth, or territory of the United 
 States or under the laws of the United States.  No limited 
 partnership or limited liability company member interest shall 
 be acquired if the investment, valued at cost, exceeds two 
 percent of the admitted assets of the company or if the 
 investment, plus the book value on the date of the investment of 
 all limited partnership and limited liability company interests 
 then held by the company and held under the authority of this 
 subdivision, exceeds ten percent of the company's admitted 
 assets.  Limited partnership and limited liability company 
 interests traded on a national securities exchange must be 
 classified as stock equivalents and are not subject to the 
 percentage limitations contained in this paragraph. 

    Subd. 19.    Mortgages on real estate.  Up to 25 percent 
 of a company's total admitted assets may be invested in loans or 
 obligations secured by a mortgage or a trust deed on real estate 
 located in any state, commonwealth, or territory of the United 
 States, including the District of Columbia, or in any province 
 or territory of the Dominion of Canada, on the following 
 conditions:  

    (a) A leasehold estate constitutes real estate under this 
 section if its unexpired term on the date of investment is at 
 least five years longer than the term of the obligation secured 
 by it.  The obligation must be repayable within the leasehold 
 term in annual or more frequent installments, except that 
 obligations for commercial purposes may begin up to five years 
 after the date of the obligations.  The mortgage must entitle 
 the company upon default to be subrogated to all rights of the 
 lessor under the leasehold; 

    (b) The real estate to which the mortgage applies must be 
 (1) improved with permanent buildings, or (2) used for 
 agriculture or pasture, or (3) income-producing, including but 
 not limited to parking lots and leases, royalty or other mineral 
 interests in properties producing oil, gas or other minerals and 
 interests in properties for the harvesting of forest products, 
 or (4) subject to a definite plan for the commencement of 
 development within five years; 

    (c) The real estate to which the mortgage applies must be 
 otherwise unencumbered when the mortgage loan is funded except 
 as provided in paragraph (d) and except for encumbrances which 
 do not unreasonably interfere with the intended use of the real 
 estate as security; 

    (d) The real estate to which the mortgage applies may be 
 subject to a prior mortgage or trust deed if (1) the amount of 
 the obligation is equal to the sum of the company's loan and the 
 other outstanding indebtedness and (2) the company has control 
 over the payments under the prior mortgage or trust deed; 

    (e) The amount of the obligation may not exceed 80 percent 
 of the real estate.  If the amount of the obligation exceeds 
 66-2/3 percent of the market value of the real estate, principal 
 payments must commence within five years after the date of the 
 mortgage loan and principal and interest on the loan shall be 
 fully amortized by regular installments payable during the term 
 of the loan without irregular or balloon payments, unless the 
 schedule of irregular or balloon payments is more favorable to 
 the insurer than regular installments of equal amount would be.  
 The market value shall be established by the written 
 certification of a licensed real estate appraiser qualified to 
 appraise the particular type of real estate involved.  The 
 appraisal must be required at the time the loan is made; 

    (f) The maximum term of any obligation shall be 40 years, 
 except as provided in paragraph (g) and except for obligations 
 secured by a mortgage or trust deed which are or are to be 
 insured by a private mortgage insurance company approved by the 
 commissioner; 

    (g) The 25 percent of total admitted asset limitation in 
 the preamble of this subdivision and the maximum amount and term 
 limitations in paragraphs (e) and (f) shall not apply to 
 obligations secured by mortgage or trust deed which are insured 
 or guaranteed by the United States of America or any agency or 
 instrumentality of the United States; 

    (h) A company may invest in collateralized mortgage 
 obligations, mortgage participation certificates and pools 
 issued or administered by a bank or banks and secured by first 
 mortgages or trust deeds on improved real estate located in the 
 United States provided the private placement memorandum, 
 prospectus or other offering circular, or a written agreement 
 with the issuer of the collateralized mortgage obligations, 
 certificate or other pool interest provides that each loan meets 
 the requirements of this subdivision; 

    (i) Notwithstanding the restrictions in paragraph (e), if a 
 company disposes of real estate acquired by it under subdivision 
 20, it may take back a purchase money mortgage from its 
 purchaser in an amount up to 90 percent of the appraised value; 
 and 

    (j) The vendor's equity in a contract for deed shall be 
 treated as a mortgage for purposes of this subdivision.  

    Subd. 20.    Real estate.  (a) Except as provided in 
 paragraphs (b) to (d), a company may only acquire, hold, and 
 convey real estate which:  

    (1) has been mortgaged to it in good faith by way of 
 security for loans previously contracted, or for money due; 

    (2) has been conveyed to it in satisfaction of debts 
 previously contracted in the course of its dealings; 

    (3) has been purchased at sales on judgments, decrees or 
 mortgages obtained or made for the debts; and 

    (4) is subject to a contract for deed under which the 
 company holds the vendor's interest to secure the payments the 
 vendee is required to make thereunder.  

    All the real estate specified in clauses (1) to (3) must be 
 sold and disposed of within five years after the company has 
 acquired title to it, or within five years after it has ceased 
 to be necessary for the accommodation of the company's business, 
 and the company must not hold this property for a longer period 
 unless the company elects to hold the real estate under another 
 section, or unless it procures a certificate from the 
 commissioner of commerce that its interest will suffer 
 materially by the forced sale thereof, in which event the time 
 for the sale may be extended to the time the commissioner 
 directs in the certificate.  The market value of real estate 
 specified in clauses (1) to (3) must be established by the 
 written certification of a licensed real estate appraiser.  The 
 appraisal is required at the time the company elects to hold the 
 real estate under clauses (1) to (3).  

    (b) A company may acquire and hold real estate for the 
 convenient accommodation of its business.  

    (c) A company may acquire real estate or any interest in 
 real estate, including oil and gas and other mineral interests, 
 as an investment for the production of income, and may hold, 
 improve or otherwise develop, subdivide, lease, sell and convey 
 real estate so acquired directly or as a joint venture or 
 through a limited, limited liability, or general partnership in 
 which the company is a partner or through a limited liability 
 company in which the company is a member.  

    (d) A company may also hold real estate (1) if the purpose 
 of the acquisition is to enhance the sale value of real estate 
 previously acquired and held by the company under this section, 
 and (2) if the company expects the real estate so acquired to 
 qualify under paragraph (b) or (c) above within five years after 
 acquisition.  

    (e) A company may, after securing the approval of the 
 commissioner, acquire and hold real estate for the purpose of 
 providing necessary living quarters for its employees.  The 
 company must dispose of the real estate within five years after 
 it has ceased to be necessary for that purpose unless the 
 commissioner agrees to extend the holding period upon 
 application by the company.  

    (f) A company may not invest more than 25 percent of its 
 total admitted assets in real estate.  The cost of any parcel of 
 real estate held for both the accommodation of business and for 
 the production of income must be allocated between the two uses 
 annually.  No more than ten percent of a company's total 
 admitted assets may be invested in real estate held under 
 paragraph (b).  No more than 15 percent of a company's total 
 admitted assets may be invested in real estate held under 
 paragraph (c).  No more than three percent of its total admitted 
 assets may be invested in real estate held under paragraph (e).  
 Upon application by a company, the commissioner of commerce may 
 increase any of these limits up to an additional five percent. 

    Subd. 21.    Foreign investments.  Obligations of and 
 investments in foreign countries, on the following conditions:  

    (a) a company may acquire and hold any foreign investments 
 which are required as a condition of doing business in the 
 foreign country or necessary for the convenient accommodation of 
 its foreign business.  An investment is considered necessary for 
 the convenient accommodation of the insurance company's foreign 
 business only if it is demonstrably and directly related in size 
 and purpose to the company's foreign insurance operations; and 

    (b) a company may also invest not more than five percent of 
 its total admitted assets in any combination of:  

    (1) the obligations of foreign governments, corporations, 
 or business trusts; 

    (2) obligations of federal, provincial, or other political 
 subdivisions backed by the full faith and credit of the foreign 
 governmental unit; 

    (3) or in the stocks or stock equivalents or obligations of 
 foreign corporations or business trusts not qualifying for 
 investment under subdivision 12, if the obligations, stocks or 
 stock equivalents are listed or regularly traded on the London, 
 Paris, Zurich, or Tokyo stock exchange or any similar regular 
 securities exchange not disapproved by the commissioner within 
 30 days' following notice from the company of its intention to 
 invest in these securities. 

    Subd. 22.    Personal property under lease.  Personal 
 property for intended lease or rental in the United States or 
 Canada.  A company may not invest more than five percent of its 
 total admitted assets under this subdivision. 

    Subd. 23.    Collateral loans.  Obligations having 
 adequate security if:  

    (a) The collateral is legally assigned or delivered to the 
 company; 

    (b) The company has the right to declare the obligation 
 immediately due and payable if the security thereafter 
 depreciates to the point where the investment would not qualify 
 under paragraph (c); provided, that additional qualifying 
 security may be pledged to allow the investment to remain 
 qualified at its face value; 

    (c) The collateral must at the time of delivery or 
 assignment have a market value of at least, in the case of cash, 
 or a letter of credit meeting the requirements of subdivision 
 11, paragraph (f), equal to and, in all other cases, 1-1/4 times 
 the amount of the unpaid balance of the obligations.  

    A collateral loan made by a company to its parent 
 corporation or an affiliated party must be secured by 
 collateral:  (i) with a market value equal to the amount of the 
 unpaid balance of the obligations, and (ii) which is issued or 
 guaranteed by the United States of America or an agency or an 
 instrumentality thereof, or any state or territory thereof, and 
 is secured by the full faith and credit of the United States of 
 America or any state or territory thereof.  A company may not 
 invest more than five percent of its total admitted assets under 
 this subdivision. 

    Subd. 24.    Options.  (a) A company may sell 
 exchange-traded call options against stocks or other securities 
 owned by the company and may purchase exchange-traded call 
 options in a closing transaction against a call option 
 previously written by the company.  

    (b) A company may purchase or sell other exchange-traded 
 call options and may sell or purchase exchange-traded put 
 options only if, to the extent and on terms and conditions the 
 commissioner determines to be consistent with the purposes of 
 this section.  

    Subd. 24a. Repealed, 1999 c 177 s 88 

    Subd. 25.    Unrestricted surplus.  A company may invest 
 its unrestricted surplus, in securities or property of any kind, 
 without restriction or limitation except as may be imposed on 
 business corporations in general.  

    Subd. 26.    Rules.  (a) The commissioner may adopt 
 appropriate rules to carry out the purpose and provisions of 
 this section.  

    (b) A company may make qualified investments in any other 
 type of investment or exceeding any limitations of quality, 
 quantity, or percentage of admitted assets contained in this 
 section 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.  

    (c) Nothing authorized in this subdivision negates or 
 reduces the investment authority granted in subdivisions 1 to 25.

    HIST: 1967 c 395 art 1 s 11; 1969 c 7 s 14-16; 1969 c 494 s 
 5-11; 1974 c 64 s 4,5; 1978 c 465 s 5; 1981 c 211 s 9-26,42; 
 1Sp1981 c 4 art 4 s 6,7; 1982 c 424 s 10,11; 1982 c 622 s 1; 
 1983 c 289 s 114 subd 1; 1983 c 340 s 1-8; 1984 c 382 s 3; 1984 
 c 655 art 1 s 92; 1Sp1985 c 16 art 2 s 17; 1986 c 444; 1987 c 
 189 s 1,2; 1991 c 325 art 8 s 1-17; art 10 s 6; 1992 c 540 art 2 
 s 5,6; 1993 c 13 art 2 s 1; 1993 c 299 s 1; 1994 c 425 s 2; 1995 
 c 214 s 5,6; 1996 c 446 art 2 s 5 

     60A.111 Qualified assets to required liabilities; ratio. 

    Subdivision 1.    Report.  Annually, or more frequently 
 if determined by the commissioner to be necessary for the 
 protection of policyholders, each foreign and domestic insurance 
 company other than a life insurance company shall report to the 
 commissioner the ratio of its qualified assets to its required 
 liabilities.  

    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 qualified 
 assets to its required liabilities, expressed as a percentage, 
 up to at least 110 percent within a reasonable period, usually 
 not exceeding five years.  

    Subd. 3.    Power of commissioner.  If, following a 
 hearing on notice to the company, the commissioner determines 
 that a company's plan is inadequate or the insurer is not making 
 satisfactory progress toward increasing the ratio of its 
 qualified assets to its required liabilities and that no 
 satisfactory alternatives are available, the commissioner may 
 institute rehabilitation proceedings against a domestic company 
 under chapter 60B.  Where the company is not a domestic 
 insurance company, the commissioner may impose restrictions on 
 the company as a condition to the company obtaining a new or 
 renewal certificate of authority to transact business in this 
 state, and may where circumstances so justify revoke or rescind 
 any certificate previously issued.  

    Subd. 4. Repealed, 1983 c 340 s 18 

    Subd. 4a.    Prohibition.  If the commissioner 
 determines that the company does not have unrestricted surplus, 
 the commissioner may prohibit that company from purchasing any 
 asset which is not a qualified asset as defined in section 
 60A.11, unless a request is made of the commissioner and the 
 request is not denied within 15 days.  The commissioner may 
 exempt any insurer from the requirements of this subdivision.  

    Subd. 5.    Denial of certificate.  No insurer other 
 than a life insurer which does not have unrestricted surplus as 
 of December 31 of the immediately preceding year shall be issued 
 a certificate of authority.  

    Subd. 6.    Factors considered.  The commissioner, in 
 exercising discretion under this section, may take into 
 consideration the size, the lines of business, and the 
 dispersion of risks of the company, and the consolidated assets 
 and surplus as regards policyholders of the other insurers of 
 the insurance holding company system of which the company is a 
 member and any other factors deemed relevant by the commissioner.

    HIST: 1981 c 211 s 27; 1983 c 340 s 9-11; 1986 c 444; 1994 c 
 425 s 3; 1995 c 258 s 3; 1999 c 177 s 11 

     60A.112 Investment policy required. 

    Each domestic company must have a written investment 
 policy, designed to provide guidance for investment decisions by 
 management.  The policy must be approved by its board of 
 directors.  The policy must be reviewed by the company's board 
 of directors and reapproved no less often than once every 12 
 months.  The investment policy must address asset type 
 diversification, diversification within asset types, 
 concentration risks, interest rate risk, liquidity, foreign 
 investments, loans secured by real estate, and investment real 
 estate.  The policy must set forth, in detail, company practices 
 relating to internal controls regarding the delegation of 
 investment authority within the company. 

    The board of directors must also determine at least 
 annually the extent to which the company has complied with its 
 investment policy within the preceding 12 months and shall adopt 
 a written determination.  

    The company must file, as an attachment to its annual 
 statement, a certification that: 

    (1) the company has a written investment policy meeting the 
 requirements of this section; 

    (2) the company's board of directors has reviewed and 
 approved or reapproved the policy within the period covered by 
 the annual statement; and 

    (3) the company's board of directors performed the 
 compliance review and made the written determination required by 
 this section for the period covered by the annual statement. 

    A company's failure to meet the requirements of this 
 section does not affect its ability to enforce its legal or 
 equitable rights with respect to its investments. 

    HIST: 1991 c 325 art 18 s 1; 1992 c 540 art 2 s 7 

     60A.12 Assets and liabilities. 

    Subdivision 1.    Valuation and admissibility of life 
 company assets.  In valuing the assets which compose the legal 
 reserve of a life company, its real estate, stocks, and bonds 
 shall be so rated that the average annual income thereof shall 
 not be less than three percent, and if any asset produces less 
 it shall be rated at its value upon a three percent basis.  
 Loans and credits shall not be allowed for more than their face 
 value, nor shall any asset be appraised for more than its market 
 value.  Only such assets shall be allowed as are available for 
 payment of losses in this state, including an electronic 
 computer or data processing machine or system heretofore or 
 hereafter purchased for use in connection with the business of a 
 life company, provided such machine or system shall have an 
 original cost of not less than one hundred thousand dollars nor 
 more than three percent of the admitted assets of the company 
 and such cost shall be amortized in full over a period not to 
 exceed ten full calendar years.  Any deposit or fund set apart 
 as security for a particular liability may be set off to an 
 amount not exceeding such liability.  The amount of any interest 
 bearing lien against any policy or loan thereon, not exceeding 
 the net value or premium reserve of such policy, computed under 
 the provisions of this chapter, may likewise be allowed against 
 liability thereunder.  Stockholders' obligations of any 
 description shall not be rated as part of the assets of any 
 company, unless secured by sufficient approved collateral. 

    Subd. 2. Repealed, 1991 c 325 art 8 s 18 

    Subd. 3.    Valuation of evidences of indebtedness.  All 
 bonds or other evidences of debt, having a fixed term and rate, 
 held by an insurance company or fraternal benefit society 
 authorized to do business in this state may, if amply secured 
 and not in default as to principal and interest, be valued as 
 follows:  If purchased at par, at the par value; if purchased 
 above or below par, on the basis of the purchase price adjusted 
 so as to bring the value to par at maturity and so as to yield, 
 in the meantime, the effective rate of interest at which the 
 purchase was made; provided, that the purchase price shall in no 
 case be taken at a higher figure than the actual market value at 
 the time of purchase.  If the notes or bonds secured by mortgage 
 or trust deed in the nature thereof which the federal housing 
 administrator has insured, or made a commitment to insure, are 
 purchased above par, they may, if not in default as to principal 
 and interest, be valued during the first five years after 
 purchase on the basis of the purchase price adjusted in equal 
 annual installments to bring the value to par at the end of five 
 years. 

    Subd. 4.    Unearned premiums reserve.  (1)    For 
 companies other than life or title.  To determine the policy 
 liability of any company other than life or title insurance, and 
 the amount the company shall hold as reserve, the commissioner 
 shall take 50 percent of the aggregate premiums, on policies 
 running one year or less from date of policy, and a pro rata 
 rate amount on policies running more than one year from date of 
 policy, except upon inland and marine risks, which the 
 commissioner shall compute by charging 50 percent of the amount 
 of premium written in its policies upon yearly risks and upon 
 risks covering more than one passage not terminated, and the 
 full amount of premiums written in policies upon all other 
 inland and marine risks not terminated.  In case of any fire and 
 marine company with less than $200,000 capital admitted to 
 transact in this state fire business only, the full amount of 
 premiums written in its marine and inland navigation and 
 transportation policies shall be charged as liability. 

    (2)    Special provisions for mutual fire companies with a 
 contingent liability.  In case of a mutual fire insurance 
 company with a policyholders' contingent liability fixed by its 
 bylaws and in its policies as provided by law, to determine the 
 amount of this reinsurance reserve, the commissioner shall take 
 25 percent of the aggregate premiums running one year or less 
 from date of policy, and 50 percent of the pro rata amount on 
 policies running more than one year from date of policy. 

    (3)    Casualty companies writing liability or workers' 
 compensation.  In case of a casualty insurance company writing 
 insurance against loss or damage resulting from accident to or 
 injuries suffered by an employee or other person and for which 
 the insured is liable, and under insurance against loss from 
 liability on account of the death of or injury to an employee 
 not caused by the negligence of an employer, the commissioner 
 shall charge as a liability, in addition to the capital stock 
 and all other outstanding indebtedness of the corporation: 

    Notwithstanding any other provision of this subdivision, an 
 unearned premium reserve shall be required based only on the 
 timing and the amount of the recorded written premium.  

    (4)    Provision for annual payment term policies.  A 
 policy for a term of years on which the premium is payable 
 annually shall be considered a policy for one year. 

    Subd. 5.    Loss reserves.  (1)   For other than 
 liability and workers' compensation.  The reserve for 
 outstanding losses under policies other than workers' 
 compensation and liability policies shall be at least equal to 
 the aggregate estimated amounts due or to become due on account 
 of all the losses and claims of which the corporation has 
 received notice.  The loss reserve shall also include the 
 estimated liability on any notices received by the corporation 
 of the occurrence of any event which may result in a loss, and 
 the estimated liability for all losses which have occurred but 
 on which no notice has been received.  For the purpose of these 
 reserves, the corporation shall keep a complete and itemized 
 record showing all losses and claims on which it has received 
 notice, including all notices received by it of the occurrence 
 of any event which may result in a loss. 

    When, in the judgment of the commissioner, the loss 
 reserves, calculated in accordance with the foregoing 
 provisions, are inadequate, the commissioner may require the 
 corporation to maintain additional reserves. 

    (2)   For liability losses.  The reserve for outstanding 
 losses and loss expenses incurred under liability policies 
 during each of the three years immediately preceding the date of 
 the statement shall be not less than 60 percent of the earned 
 liability premium for each of the three corresponding years 
 immediately preceding the date of the statement, less all loss 
 and loss expense payments made under claims incurred during each 
 of those years. 

    (3)   For compensation claims.  The reserve for 
 outstanding losses and loss expenses incurred under workers' 
 compensation policies shall be at least equal to the following 
 amounts: 

    (a) For all compensation claims under policies written more 
 than three years prior to the date of the statement, the present 
 values, at four percent interest, of the determined and the 
 estimated future payments; 

    (b) For all compensation claims under policies written in 
 the three years immediately preceding the date of the statement, 
 the reserve shall be not less than 65 percent of the earned 
 compensation premiums for each of the three years, less all loss 
 and loss expense payments made in connection with the claims 
 under policies written in each of the corresponding years.  For 
 the first year of the three-year period, the reserve shall be 
 not less than the present value, at four percent interest, of 
 the determined and the estimated unpaid compensation claims 
 under policies written during that year. 

    Subd. 6.  Repealed, 1978 c 465 s 15 

    Subd. 7.    Liability and workers' compensation reserves 
 subject to increase.  When, in the judgment of the 
 commissioner, the liability or compensation loss reserves of any 
 supervised insurer, calculated in accordance with the foregoing 
 provisions, are inadequate, the commissioner may require such 
 insurer to maintain additional reserves based upon estimated 
 individual claims or otherwise. 

    Subd. 8.    Liability and workers' compensation experience 
 to be included in annual statement.  Each insurer that writes 
 liability or compensation policies shall include in the annual 
 statement required by law a schedule of its experience 
 thereunder in such form as the commissioner may prescribe. 

    Subd. 9.    Exemption.  This section shall not apply to 
 farmers' mutual insurance companies. 

    Subd. 10. Repealed, 1993 c 299 s 33 

    HIST: 1967 c 395 art 1 s 12; 1975 c 359 s 23; 1978 c 465 s 6; 
 1986 c 444; 1991 c 325 art 16 s 1; 1992 c 540 art 2 s 8; 1992 c 
 564 art 1 s 17,54; 1993 c 299 s 2 

     60A.121 Valuations; definitions. 

    Subdivision 1.    Application.  The definitions in this 
 section apply to sections 60A.121 to 60A.127. 

    Subd. 2.    Commercial mortgage loan.  "Commercial 
 mortgage loan" means a loan by an insurer secured by a mortgage 
 on commercial real estate.  "Commercial mortgage loan" does not 
 include loans secured by residential real estate containing four 
 or fewer dwelling units or agricultural real estate. 

    Subd. 3.    Delinquent mortgage loan.  "Delinquent 
 mortgage loan" means a loan 90 days delinquent on a required 
 payment of principal or interest. 

    Subd. 4.    Distressed mortgage loan.  "Distressed 
 mortgage loan" means a loan, other than a delinquent loan, that 
 is determined by the management of the insurer, in the exercise 
 of its prudent investment judgment, to involve circumstances 
 that create a reasonable probability that the loan may become a 
 delinquent mortgage loan or a mortgage loan in foreclosure. 

    Subd. 5.    Independent appraiser.  "Independent 
 appraiser" means a person not employed by the insurer, by an 
 affiliate of the insurer, or by an investment advisor to the 
 insurer who develops and communicates real estate appraisals and 
 holds a current, valid license issued under section 82B.02, or a 
 similar law enacted by another state. 

    Subd. 6.    Internal appraisal.  "Internal appraisal" 
 means an appraisal to determine current market value made by an 
 internal appraiser and based upon an evaluation of: 

    (1) the property based upon a physical inspection of the 
 premises; 

    (2) the current and expected stabilized cash flow generated 
 by the property; 

    (3) the current and expected stabilized market rents in the 
 geographic market where the property is located; and 

    (4) the current and stabilized occupancy rates for the 
 geographic market where the property is located. 

    Subd. 7.    Internal appraiser.  "Internal appraiser" 
 means an individual: 

    (1) employed by an insurer, by an affiliate of the insurer, 
 or by an investment advisor to an insurer; 

    (2) who has training and experience qualifying the 
 individual to appraise the value of commercial real estate; 

    (3) whose direct or indirect compensation is not dependent 
 upon the outcome of the appraisals performed under sections 
 60A.121 to 60A.126; and 

    (4) who has direct reporting access to the chief investment 
 officer of the insurer. 

    Subd. 8.    Insurer.  "Insurer" means a domestic 
 insurance company. 

    Subd. 9.    Mortgage loan in foreclosure.  "Mortgage 
 loan in foreclosure" means (1) a loan in the process of 
 foreclosure including the time required for expiration of any 
 equitable or statutory redemption rights; (2) a loan to a 
 mortgagor who is the subject of a bankruptcy petition and who is 
 not making regular monthly payments; or (3) a loan secured by a 
 mortgage on real estate that is subject to a senior mortgage or 
 other lien that is being foreclosed. 

    Subd. 10.    Performing mortgage loan.  "Performing 
 mortgage loan" means a mortgage loan current in payment and not 
 in distress. 

    Subd. 11.    Real estate owned.  "Real estate owned" 
 means real property owned and acquired by an insurer through or 
 in lieu of foreclosure and as to which all equitable or 
 statutory rights of redemption have expired. 

    Subd. 12.    Restructured mortgage loan.  "Restructured 
 mortgage loan" means a loan where: 

    (1) material delinquent payments or accrued interest are 
 capitalized and added to the balance of an outstanding loan; or 

    (2) the insurer has abated or reduced interest payments 
 below market rates existing at the date of restructuring. 

    HIST: 1991 c 325 art 19 s 1 

     60A.122 Required written procedures for valuations. 

    An insurer shall establish written procedures, approved by 
 the company's board of directors, for the valuation of 
 commercial mortgage loans and real estate owned.  The procedures 
 must be made available to the commissioner upon request.  The 
 commissioner shall review the insurer's compliance with the 
 procedures in any examination of the insurer under section 
 60A.031. 

    HIST: 1991 c 325 art 19 s 2 

     60A.123 Valuation procedure. 

    Subdivision 1.    Requirement.  An insurer shall value 
 its commercial mortgage loans and real estate acquired through 
 foreclosure of commercial mortgage loans as provided in this 
 section for the purpose of establishing reserves or carrying 
 values of the investments and for statutory accounting purposes. 

    Subd. 2.    Performing mortgage loan.  A performing 
 mortgage loan must be carried at its amortized acquisition cost. 

    Subd. 3.    Distressed mortgage loan.  (a) The insurer 
 shall make an evaluation of the appropriate carrying value of 
 its commercial mortgage loans which it classifies as distressed 
 mortgage loans.  The carrying value must be based upon one or 
 more of the following procedures: 

    (1) an internal appraisal; 

    (2) an appraisal made by an independent appraiser; 

    (3) the value of guarantees or other credit enhancements 
 related to the loan. 

    (b) The insurer may determine the carrying value of its 
 distressed mortgage loans through either an evaluation of each 
 specific distressed mortgage loan or by a sampling methodology.  
 Insurers using a sampling methodology shall identify a sampling 
 of its distressed mortgage loans that represents a cross section 
 of all of its distressed mortgage loans.  The insurer shall make 
 an evaluation of the appropriate carrying value for each sample 
 loan.  The carrying value of all of the insurer's distressed 
 mortgage loans must be the same percentage of their amortized 
 acquisition cost as the sample loans.  The carrying value must 
 be based upon an internal appraisal or an appraisal conducted by 
 an independent appraiser. 

    (c) The insurer shall either take a charge against its 
 surplus or establish a reserve for the difference between the 
 carrying value and the amortized acquisition cost of its 
 distressed mortgage loans. 

    Subd. 4.    Delinquent mortgage loan.  (a) The insurer 
 shall make an evaluation of the appropriate carrying value of 
 each delinquent mortgage loan.  The carrying value must be based 
 upon one or more of the following procedures: 

    (1) an internal appraisal; 

    (2) an appraisal by an independent appraiser; 

    (3) the value of guarantees or other credit enhancements 
 related to the loan. 

    (b) The insurer shall either take a charge against its 
 surplus or establish a reserve for the difference between the 
 carrying value and the amortized acquisition cost of its 
 delinquent mortgage loans. 

    Subd. 5.    Restructured mortgage loan.  (a) The insurer 
 shall make an evaluation of the appropriate carrying value of 
 each restructured mortgage loan.  The carrying value must be 
 based upon one or more of the following procedures: 

    (1) an internal appraisal; 

    (2) an appraisal by an independent appraiser; 

    (3) the value of guarantees or other credit enhancements 
 related to the loan. 

    (b) The insurer shall either take a charge against its 
 surplus or establish a reserve for the difference between the 
 carrying value and the amortized acquisition cost of its 
 restructured mortgage loans. 

    Subd. 6.    Mortgage loan in foreclosure.  (a) The 
 insurer shall make an evaluation of the appropriate carrying 
 value of each mortgage loan in foreclosure.  The carrying value 
 must be based upon an appraisal made by an independent appraiser.

    (b) The insurer shall take a charge against its surplus for 
 the difference between the carrying value and the amortized 
 acquisition cost of its mortgage loans in the process of 
 foreclosure. 

    Subd. 7.    Real estate owned.  (a) The insurer shall 
 make an evaluation of the appropriate carrying value of real 
 estate owned.  The carrying value must be based upon an 
 appraisal made by an independent appraiser. 

    (b) The insurer shall take a charge against its surplus for 
 the difference between the carrying value and the amortized 
 acquisition cost of real estate owned. 

    HIST: 1991 c 325 art 19 s 3 

     60A.124 Independent audit. 

    The audit report of the independent certified public 
 accountant that performs the audit of an insurer's annual 
 statement as required under section 60A.129, subdivision 3, 
 paragraph (a), should contain a statement as to whether 
 anything, in connection with their audit, came to their 
 attention that caused them to believe that the insurer failed to 
 adopt and consistently apply the valuation procedure as required 
 by sections 60A.122 and 60A.123. 

    HIST: 1991 c 325 art 19 s 4; 1992 c 540 art 2 s 9; 1995 c 258 
 s 4 

     60A.125 Appraisal by independent appraiser. 

    Subdivision 1.    Mortgage loans in the process of 
 foreclosure.  An insurer may rely upon an appraisal by an 
 independent appraiser to determine the carrying value of 
 mortgage loans in the process of foreclosure only if the date of 
 the appraisal is within six months of the date the foreclosure 
 procedure is begun.  If no appraisal exists, the insurer shall 
 acquire an appraisal within six months after the foreclosure 
 proceeding has begun. 

    Subd. 2.    Real estate owned.  An insurer may rely upon 
 an appraisal by an independent appraiser to determine the 
 carrying value of real estate owned only if the date of the 
 appraisal is within six months of the date when title to the 
 property was acquired.  If no appraisal exists, the insurer 
 shall acquire an appraisal within six months after title to the 
 property is acquired. 

    Subd. 3.    Charge taken.  An insurer shall take a 
 charge against the surplus for mortgage loans in the process of 
 foreclosure and real estate owned in the first calendar year in 
 which it holds a current appraisal made by an independent 
 appraiser as provided in this section. 

    HIST: 1991 c 325 art 19 s 5 

     60A.126 Reports to board; valuations. 

    The management of the insurer shall make periodic reports, 
 at least annually, to its board of directors, or an appropriate 
 committee of the board, as to the application of the insurer's 
 valuation procedures adopted under sections 60A.121 to 60A.127. 

    HIST: 1991 c 325 art 19 s 6 

     60A.127 Independent appraisals of certain properties. 

    Subdivision 1.    Random sample appraisal requirement.  
 Each domestic insurer that does not obtain independent 
 appraisals of all distressed, delinquent, and restructured 
 mortgage loans and use such appraisals to determine the carrying 
 values for its annual statement shall obtain independent 
 appraisals of a random sample of those loans for which it did 
 not obtain and use such appraisals.  The independent appraisals 
 must be obtained by the insurer no later than 60 days after the 
 filing of the insurer's annual statement.  The loans to be 
 sampled do not include loans for which the insurer determined 
 the carrying value on the basis of guarantees or other credit 
 enhancements.  

    Subd. 2.    Sampling procedure; rules.  The commissioner 
 may adopt rules specifying the percentage of distressed, 
 delinquent, and restructured loans for which the insurer must 
 obtain an independent appraisal.  The percentage may vary 
 between insurers or types of loans and may apply to the number 
 of loans, the dollar value of loans, or both.  The rules may 
 also specify a procedure for determining how to identify the 
 specific loans for which an appraisal is required.  The 
 commissioner may adopt under this subdivision only rules that 
 would require sampling no less extensive than that required by 
 subdivision 3.  

    Subd. 3.    Statutory sampling procedure.  (a) Unless 
 and until rules authorized by subdivision 2 are adopted, each 
 domestic insurer must: 

    (1) obtain an independent appraisal of five percent of its 
 distressed, delinquent, or restructured loans required to be 
 sampled under subdivision 1; and 

    (2) establish a uniform system of assigning sequential 
 numbers to its distressed, delinquent, or restructured loans 
 based upon the date on which a loan first enters one of those 
 categories, and then obtain an independent appraisal of every 
 20th loan required to be sampled under subdivision 1, beginning 
 with the tenth loan or with the loan having another number that 
 the commissioner may announce on or within five business days 
 after the due date for filing of the annual statement. 

    (b) A domestic insurer may use a sampling procedure 
 different from that described in paragraph (a) with the prior 
 approval of the commissioner.  The commissioner may grant such 
 approval only if the different procedure would result in a 
 sampling that is at least as accurate and as extensive under the 
 circumstances as the method required by paragraph (a). 

    Subd. 4.    Recordkeeping; reporting.  The independent 
 appraisals must be kept in the insurer's records and must be 
 available to the commissioner upon request.  Each insurer must 
 file with the commissioner an annual report listing each 
 mortgage loan for which the insurer obtained an independent 
 appraisal under this section and showing for each of those loans 
 the appraisal value, the carrying value determined by the 
 insurer, and other information required by the commissioner.  
 The report must be filed with the commissioner no later than 120 
 days after the filing of the annual report.  

    Subd. 5.    Additional requirements.  If the 
 commissioner determines, on the basis of the report of 
 independent appraisals required by subdivision 4, that the 
 carrying values shown on the annual statement, determined by 
 methods other than an independent appraisal, overstate the 
 market value of the loans required to be sampled, the 
 commissioner may require any of the following procedures: 

    (1) independent appraisals of additional loans from the 
 loans required to be sampled; 

    (2) filing of a supplement to, or a revision of, the annual 
 statement, showing revised carrying values for all or any 
 appropriate portion of the loans required to be sampled; and 

    (3) a second independent appraisal for any loan for which 
 an independent appraisal was obtained under this section. 

    Subd. 6.    Selection of independent appraiser.  The 
 insurer shall not obtain more than one-third of the independent 
 appraisals required under this section from any one appraiser or 
 from any one firm.  

    Subd. 7.    Powers in this section not limiting.  This 
 section does not limit any powers otherwise available to the 
 commissioner. 

    HIST: 1991 c 325 art 19 s 7 

     60A.128 Use of asset valuation reserve. 

    In computing reserves required to be held by an insurer 
 under the provisions of section 60A.123, subdivisions 3, 4, and 
 5, the commissioner may allow an insurer to take credit for any 
 reserves held by the insurer attributable to the assets as an 
 "asset valuation reserve" pursuant to the accounting and 
 reserving requirements of the National Association of Insurance 
 Commissioners.  Any charges against surplus taken under section 
 60A.123, subdivision 3, 4, 5, 6, or 7, may be taken against the 
 asset valuation reserve to the extent the asset valuation 
 reserve is sufficient and the charge is permitted by the NAIC.  
 To the extent the asset valuation reserve is not sufficient, or 
 if the charge is not permitted by the NAIC, the insurer shall 
 take a charge against its surplus. 

    HIST: 1991 c 325 art 19 s 8 

     60A.129 Loss reserve certification and annual audit. 

    Subdivision 1.    Definitions.  The definitions in this 
 subdivision apply to this section.  

    (a) "Qualified actuary," except as it relates to 
 subdivision 2, paragraph (c), for companies authorized to 
 provide life insurance coverage under section 60A.06, 
 subdivision 1, clause (4), is a person who is either: 

    (1) a member in good standing of the Casualty Actuarial 
 Society; or 

    (2) a member in good standing of the American Academy of 
 Actuaries who has been approved as qualified for signing 
 casualty loss reserve opinions by the Casualty Practice Council 
 of the American Academy of Actuaries; or 

    (3) a person who otherwise has competency in loss reserve 
 evaluation as demonstrated to the satisfaction of the insurance 
 regulatory official of the domiciliary state.  In such case, at 
 least 90 days prior to the filing of its annual statement, the 
 insurer must request approval that the person be deemed 
 qualified and that request must be approved or denied.  The 
 request must include the National Association of Insurance 
 Commissioners biographical form and a list of all loss reserve 
 opinions issued in the last three years by this person. 

    (b) For purposes of subdivision 2, paragraph (c), a 
 qualified actuary for companies authorized to write life 
 insurance coverage under section 60A.06, subdivision 1, clause 
 (4), shall be:  

    (1) a member in good standing of the American Academy of 
 Actuaries; 

    (2) qualified to sign statements of actuarial opinion for 
 life and health insurance company annual statements in 
 accordance with the American Academy of Actuaries qualification 
 standards for actuaries signing these statements; 

    (3) familiar with the valuation requirements applicable to 
 life and health insurance companies.  

    (c) A qualified actuary as defined by this subdivision is 
 an individual who:  

    (1) has not been found by the commissioner, or if so found 
 has subsequently been reinstated as a qualified actuary, 
 following appropriate notice and hearing to have:  

    (i) violated any provision of, or any obligation imposed 
 by, the state insurance law or other law in the course of the 
 actuary's dealings as a qualified actuary; 

    (ii) been found guilty of fraudulent or dishonest 
 practices; 

    (iii) demonstrated incompetency, lack of cooperation, or 
 untrustworthiness to act as a qualified actuary; or 

    (iv) submitted to the commissioner during the past five 
 years, pursuant to this chapter, an actuarial opinion that the 
 commissioner rejected because it did not meet the provisions of 
 this chapter including standards set by the actuarial standards 
 board; 

    (2) has resigned or been removed as an actuary within the 
 past five years as a result of acts or omissions indicated in 
 any adverse report on examination or as a result of failure to 
 adhere to generally acceptable actuarial standards of the 
 American Academy of Actuaries; and 

    (3) has not failed to notify the commissioner of any action 
 taken by any commissioner of any other state similar to that 
 under clause (1). 

    (d) "Accountant" and "independent public accountant" mean 
 an independent certified public accountant or accounting firm in 
 good standing with the American Institute of Certified Public 
 Accountants and in all states in which the accountant or firm is 
 licensed to practice.  For Canadian and British companies, the 
 term means a Canadian-chartered or British-chartered accountant. 

    Subd. 2.    Loss reserve certification.  (a) Each 
 domestic company engaged in providing the types of coverage 
 described in section 60A.06, subdivision 1, clause (1), (2), 
 (3), (5)(b), (6), (8), (9), (10), (11), (12), (13), or (14), 
 must have its loss reserves certified by a qualified actuary.  
 The company must file the certification with the commissioner 
 within 30 days of completion of the certification, but not later 
 than June 1.  The actuary providing the certification must not 
 be an employee of the company.  This subdivision does not apply 
 to township mutual companies, or to other domestic insurers 
 having less than $1,000,000 of premiums written in any year and 
 fewer than 1,000 policyholders.  The commissioner may allow an 
 exception to the stand alone certification where it can be 
 demonstrated that a company in a group has a pooling or 100 
 percent reinsurance agreement used in a group which 
 substantially affects the solvency and integrity of the reserves 
 of the company, or where it is only the parent company of a 
 group which is licensed to do business in Minnesota.  If these 
 circumstances exist, the company may file a written request with 
 the commissioner for an exception.  Companies writing 
 reinsurance alone are not exempt from this requirement.  The 
 certification must contain the following statement:  "The loss 
 reserves and loss expense reserves have been examined and found 
 to be calculated in accordance with generally accepted actuarial 
 principles and practices and are fairly stated."  

    (b) Each foreign company engaged in providing the types of 
 coverage described in section 60A.06, subdivision 1, clause (1), 
 (2), (3), (5)(b), (6), (8), (9), (10), (11), (12), (13), or 
 (14), required by this section to file an annual audited 
 financial report, whose total net earned premium for Schedule P, 
 Part 1A to Part 1H plus Part 1R, (Schedule P, Part 1A to Part 1H 
 plus Part 1R, Column 4, current year premiums earned, from the 
 company's most currently filed annual statement) is equal to 
 one-third or more of the company's total net earned premium 
 (Underwriting and Investment Exhibit, Part 2, Column 4, total 
 line, of the annual statement) must have a reserve certification 
 by a qualified actuary at least every three years.  In the year 
 that the certification is due, the company must file the 
 certification with the commissioner within 30 days of completion 
 of the certification, but not later than June 1.  The actuary 
 providing the certification must not be an employee of the 
 company.  Companies writing reinsurance alone are not exempt 
 from this requirement.  The certification must contain the 
 following statement:  "The loss reserves and loss expense 
 reserves have been examined and found to be calculated in 
 accordance with generally accepted actuarial principles and 
 practices and are fairly stated."  

    (c) Each company providing life and/or health insurance 
 coverages described in section 60A.06, subdivision 1, clause (4) 
 or (5)(a), required by this section to file an audited annual 
 financial report, whose premiums and annuity considerations (net 
 of reinsurance) from accident and health equal one-third or more 
 of the company's total premiums and annuity considerations (net 
 of reinsurance), as reported in the summary of operations, must 
 have its aggregate reserve for accident and health policies and 
 liability for policy and contract claims for accident and health 
 certified by a qualified actuary at least once every three 
 years.  The actuary providing the certification must not be an 
 employee of the company.  Companies writing reinsurance alone 
 are not exempt from this requirement.  The certification must 
 contain the following statement:  "The policy and contract 
 claims reserves for accident and health have been examined and 
 found to be calculated in accordance with generally accepted 
 actuarial principles and practices and are fairly stated." 

    Subd. 3.    Annual audit.  (a) Every insurance company 
 doing business in this state, including fraternal benefit 
 societies, reciprocal exchanges, service plan corporations 
 licensed pursuant to chapter 62C, and legal service plans 
 licensed pursuant to chapter 62G, unless exempted by the 
 commissioner pursuant to subdivision 5, paragraph (a), or by 
 subdivision 7, shall have an annual audit of the financial 
 activities of the most recently completed calendar year 
 performed by an independent certified public accountant, and 
 shall file the report of this audit with the commissioner on or 
 before June 1 for the immediately preceding year ending December 
 31.  The commissioner may require an insurer to file an audited 
 financial report earlier than June 1 with 90 days' advance 
 notice to the insurer. 

    Extensions of the June 1 filing date may be granted by the 
 commissioner for 30-day periods upon a showing by the insurer 
 and its independent certified public accountant of the reasons 
 for requesting the extension and a determination by the 
 commissioner of good cause for the extension.  

    The request for extension must be submitted in writing not 
 less than ten days before the due date in sufficient detail to 
 permit the commissioner to make an informed decision with 
 respect to the requested extension.  

    (b) Foreign and alien insurers filing audited financial 
 reports in another state under the other state's requirements of 
 audited financial reports which have been found by the 
 commissioner to be substantially similar to these requirements 
 are exempt from this subdivision if a copy of the audited 
 financial report, accountant's letter of qualifications, and 
 report on significant deficiencies in internal controls, which 
 are filed with the other state, are filed with the commissioner 
 in accordance with the filing dates specified in paragraphs (a) 
 and (l), (Canadian insurers may submit accountants' reports as 
 filed with the Canadian Dominion Department of Insurance); and a 
 copy of any notification of adverse financial condition report 
 filed with the other state is filed with the commissioner within 
 the time specified in paragraph (k).  This paragraph does not 
 prohibit or in any way limit the commissioner from ordering, 
 conducting, and performing examinations of insurers under the 
 authority of this chapter. 

    (c)(i) The annual audited financial report shall report, in 
 conformity with statutory accounting practices required or 
 permitted by the commissioner of insurance of the state of 
 domicile, the financial position of the insurer as of the end of 
 the most recent calendar year and the results of its operations, 
 cash flows, and changes in capital and surplus for the year 
 ended.  The annual audited financial report shall include a 
 report of an independent certified public accountant; a balance 
 sheet reporting admitted assets, liabilities, capital, and 
 surplus; a statement of operations; a statement of cash flows; a 
 statement of changes in capital and surplus; and notes to the 
 financial statements.  

    (ii) The notes required under item (i) shall be those 
 required by the appropriate National Association of Insurance 
 Commissioners annual statement instructions and any other notes 
 required by generally accepted accounting principles and shall 
 include reconciliation of differences, if any, between the 
 audited statutory financial statements and the annual statement 
 filed under section 60A.13, subdivision 1, with a written 
 description of the nature of these differences; and shall also 
 include a summary of ownership and relationships of the insurer 
 and all affiliated companies.  

    (iii) The financial statements included in the audited 
 financial report shall be prepared in a form and using language 
 and groupings substantially the same as the relevant sections of 
 the annual statement of the insurer filed with the 
 commissioner.  The financial statement shall be comparative, 
 presenting the amounts as of December 31 of the current year and 
 the amounts as of the immediately preceding December 31.  In the 
 first year in which an insurer is required to file an audited 
 financial report, the comparative data may be omitted.  The 
 amounts may be rounded to the nearest $1,000, and all 
 insignificant amounts may be combined.  

    (d) Each insurer required by this section to file an annual 
 audited financial report must notify the commissioner in writing 
 of the name and address of the independent certified public 
 accountant or accounting firm retained to conduct the annual 
 audit within 60 days after becoming subject to the annual audit 
 requirement.  The insurer shall obtain from the accountant a 
 letter which states that the accountant is aware of the 
 provisions that relate to accounting and financial matters in 
 the insurance laws and the rules of the insurance regulatory 
 authority of the state of domicile.  The letter shall affirm 
 that the accountant will express an opinion on the financial 
 statements in terms of their conformity to the statutory 
 accounting practices prescribed or otherwise permitted by that 
 insurance regulatory authority, specifying the exceptions 
 believed to be appropriate.  A copy of the accountant's letter 
 shall be filed with the commissioner.  

    (e) If an accountant who was the accountant for the 
 immediately preceding filed audited financial report is 
 dismissed or resigns, the insurer shall notify the commissioner 
 of this event within five business days.  Within ten business 
 days of this notification, the insurer shall also furnish the 
 commissioner with a separate letter stating whether in the 24 
 months preceding this event there were any disagreements with 
 the former accountant on any matter of accounting principles or 
 practices, financial statement disclosure, or auditing scope or 
 procedure, which, if not resolved to the satisfaction of the 
 former accountant, would have caused that person to make 
 reference to the subject matter of the disagreement in 
 connection with the opinion.  The disagreements required to be 
 reported in response to this paragraph include both those 
 resolved to the former accountant's satisfaction and those not 
 resolved to the former accountant's satisfaction.  Disagreements 
 contemplated by this section are those disagreements between 
 personnel of the insurer responsible for presentation of its 
 financial statements and personnel of the accounting firm 
 responsible for rendering its report.  The insurer shall also in 
 writing request the former accountant to furnish a letter 
 addressed to the insurer stating whether the accountant agrees 
 with the statements contained in the insurer's letter and, if 
 not, stating the reasons for any disagreement.  The insurer 
 shall furnish this responsive letter from the former accountant 
 to the commissioner together with its own. 

    (f) The commissioner shall not recognize any person or firm 
 as a qualified independent certified public accountant that is 
 not in good standing with the American Institute of Certified 
 Public Accountants and in all states in which the accountant is 
 licensed to practice, or for a Canadian or British company, that 
 is not a chartered accountant.  Except as otherwise provided, an 
 independent certified public accountant shall be recognized as 
 qualified as long as the person conforms to the standards of the 
 person's profession, as contained in the Code of Professional 
 Ethics of the American Institute of Certified Public Accountants 
 and the rules of professional conduct of the Minnesota board of 
 public accountancy or similar code.  

    (g) No partner or other person responsible for rendering a 
 report for calendar year 1997 and thereafter may act in that 
 capacity for more than seven consecutive years.  Following any 
 period of service, the person shall be disqualified from acting 
 in that or a similar capacity for the same company or its 
 insurance subsidiaries or affiliates for a period of two years.  
 An insurer may make application to the commissioner for relief 
 from the above rotation requirement on the basis of unusual 
 circumstances.  The commissioner may consider the number of 
 partners, the expertise of the partners or the number of 
 insurance clients in the currently registered firm, the premium 
 volume of the insurer, or the number of jurisdictions in which 
 the insurer transacts business in determining if the relief 
 should be granted. 

    (h) The commissioner shall not recognize as a qualified 
 independent certified public accountant, nor accept any audited 
 financial report, prepared in whole or in part by any natural 
 person who has been convicted of fraud, bribery, a violation of 
 the Racketeer Influenced and Corrupt Organizations Act, United 
 States Code, title 18, sections 1961 to 1968, or any dishonest 
 conduct or practices under federal or state law, has been found 
 to have violated the insurance laws of this state with respect 
 to any previous reports submitted under this section, or has 
 demonstrated a pattern or practice of failing to detect or 
 disclose material information in previous reports filed under 
 the provisions of this section. 

    (i) The commissioner, after notice and hearing under 
 chapter 14, may find that the accountant is not qualified for 
 purposes of expressing an opinion on the financial statements in 
 the annual audited financial report.  The commissioner may 
 require the insurer to replace the accountant with another whose 
 relationship with the insurer is qualified within the meaning of 
 this section. 

    (j) Financial statements furnished under paragraph (a), 
 shall be examined by an independent certified public 
 accountant.  The examination of the insurer's financial 
 statements shall be conducted in accordance with generally 
 accepted auditing standards and consideration should be given to 
 other procedures illustrated in the Financial Condition 
 Examiners Handbook, issued by the National Association of 
 Insurance Commissioners, as the independent certified public 
 accountant considers necessary.  

    (k) The insurer required to furnish the annual audited 
 financial report shall require the independent certified public 
 accountant to provide written notice within five business days 
 to the board of directors of the insurer or its audit committee 
 of any determination by that independent certified public 
 accountant that the insurer has materially misstated its 
 financial condition as reported to the commissioner as of the 
 balance sheet date currently under examination or that the 
 insurer does not meet the minimum capital and surplus 
 requirement of section 60A.07 as of that date.  An insurer 
 required to file an annual audited financial report who received 
 a notification of adverse financial condition from the 
 accountant shall file a copy of the notification with the 
 commissioner within five business days of the receipt of the 
 notification.  The insurer shall provide the independent 
 certified public accountant making the notification with 
 evidence of the report being furnished to the commissioner.  If 
 the independent certified public accountant fails to receive the 
 evidence within the required five-day period, the independent 
 certified public accountant shall furnish to the commissioner a 
 copy of the notification to the board of directors or its audit 
 committee within the next five business days.  No independent 
 certified public accountant shall be liable in any manner to any 
 person for any statement made in connection with this paragraph 
 if the statement is made in good faith in compliance with this 
 paragraph.  If the accountant becomes aware of facts which might 
 have affected the audited financial report after the date it was 
 filed under this section, the accountant shall take the action 
 prescribed by Professional Standards issued by the American 
 Institute of Certified Public Accountants. 

    (l) In addition to the annual audited financial statements, 
 each insurer shall furnish the commissioner with a written 
 report prepared by the accountant describing significant 
 deficiencies in the insurer's internal control structure noted 
 by the accountant during the audit.  The accountant shall follow 
 the professional standards issued by the American Institute of 
 Certified Public Accountants, which require an accountant to 
 communicate significant deficiencies, known as reportable 
 conditions, noted during a financial statement audit, to the 
 appropriate parties within an entity.  No report shall be issued 
 if the accountant does not identify significant deficiencies.  
 Any such report by the accountant describing significant 
 deficiencies in the insurer's internal control structure, shall 
 be filed annually by the insurer with the commissioner within 60 
 days after the filing of the annual audited financial 
 statements.  This report on internal control shall be in the 
 form prescribed by generally accepted auditing standards.  The 
 insurer shall provide the commissioner with a description of 
 remedial actions taken or proposed to correct significant 
 deficiencies, if those actions are not described in the 
 accountant's report. 

    (m) The accountant shall furnish the insurer in connection 
 with, and for inclusion in, the filing of the annual audited 
 financial report, a letter stating that the accountant is 
 independent with respect to the insurer and conforms to the 
 standards of the accountant's profession as contained in the 
 Code of Professional Ethics of the American Institute of 
 Certified Public Accountants and the rules of professional 
 conduct of the Minnesota board of accountancy or similar code; 
 the background and experience in general, and the experience in 
 audits of insurers of the staff assigned to the engagement and 
 whether each is an independent certified public accountant; that 
 the accountant understands that the annual audited financial 
 report and the opinion thereon will be filed in compliance with 
 this statute and that the commissioner will be relying on this 
 information in the monitoring and regulation of the financial 
 position of insurers; that the accountant consents to the 
 requirements of paragraph (n) and that the accountant consents 
 and agrees to make available for review by the commissioner, or 
 the commissioner's designee or appointed agent, the workpapers, 
 as defined in paragraph (n); a representation that the 
 accountant is properly licensed by the appropriate state 
 licensing authority and is a member in good standing in the 
 American Institute of Certified Public Accountants; and, a 
 representation that the accountant complies with paragraph (f).  
 Nothing in this section shall be construed as prohibiting the 
 accountant from utilizing staff the accountant deems appropriate 
 where use is consistent with the standards prescribed by 
 generally accepted auditing standards. 

    (n) Workpapers are the records kept by the independent 
 certified public accountant of the procedures followed, tests 
 performed, information obtained, and conclusions reached 
 pertinent to the independent certified public accountant's 
 examination of the financial statements of an insurer.  
 Workpapers may include audit planning documents, work programs, 
 analyses, memoranda, letters of confirmation and representation, 
 management letters, abstracts of company documents, and 
 schedules or commentaries prepared or obtained by the 
 independent certified public accountant in the course of the 
 examination of the financial statements of an insurer and that 
 support the accountant's opinion.  Every insurer required to 
 file an audited financial report shall require the accountant, 
 through the insurer, to make available for review by the 
 examiners the workpapers prepared in the conduct of the 
 examination and any communications related to the audit between 
 the accountant and the insurer.  The workpapers shall be made 
 available at the offices of the insurer, at the offices of the 
 commissioner, or at any other reasonable place designated by the 
 commissioner.  The insurer shall require that the accountant 
 retain the audit workpapers and communications until the 
 commissioner has filed a report on examination covering the 
 period of the audit but no longer than seven years after the 
 period reported upon.  In the conduct of the periodic review by 
 the examiners, it shall be agreed that photocopies of pertinent 
 audit workpapers may be made and retained by the commissioner.  
 These copies shall be part of the commissioner's workpapers and 
 shall be given the same confidentiality as other examination 
 workpapers generated by the commissioner. 

    (o)(i) In the case of Canadian and British insurers, the 
 annual audited financial report means the annual statement of 
 total business on the form filed by these companies with their 
 domiciliary supervision authority and duly audited by an 
 independent chartered accountant. 

    (ii) For these insurers, the letter required in paragraph 
 (d), shall state that the accountant is aware of the 
 requirements relating to the annual audited statement filed with 
 the commissioner under paragraph (a), and shall affirm that the 
 opinion expressed is in conformity with those requirements. 

    (p) The audit report of the independent certified public 
 accountant that performs the audit of an insurer's annual 
 statement as required under paragraph (a), shall contain a 
 statement as to whether anything, in connection with the audit, 
 came to the accountant's attention that caused the accountant to 
 believe that the insurer failed to adopt and consistently apply 
 the valuation procedures as required by sections 60A.122 and 
 60A.123. 

    Subd. 4.    Examinations.  (a) The commissioner or a 
 designated representative shall determine the nature, scope, and 
 frequency of examinations under this section conducted by 
 examiners under section 60A.031.  These examinations may cover 
 all aspects of the insurer's assets, condition, affairs, and 
 operations and may include and be supplemented by audit 
 procedures performed by independent certified public 
 accountants.  Scheduling of examinations will take into account 
 all relevant matters with respect to the insurer's condition, 
 including results of the National Association of Insurance 
 Commissioners, Insurance Regulatory Information Systems, changes 
 in management, results of market conduct examinations, and 
 audited financial reports.  The type of examinations performed 
 by examiners under this section shall be compliance 
 examinations, targeted examinations, and comprehensive 
 examinations. 

    (b) Compliance examinations will consist of a review of the 
 accountant's workpapers defined under this section and a general 
 review of the insurer's corporate affairs and insurance 
 operations to determine compliance with the Minnesota insurance 
 laws and the rules of the department of commerce.  The examiners 
 may perform alternative or additional examination procedures to 
 supplement those performed by the accountant when the examiners 
 determine that the procedures are necessary to verify the 
 financial condition of the insurer. 

    (c) Targeted examinations may cover limited areas of the 
 insurer's operations as the commissioner may deem appropriate. 

    (d) Comprehensive examinations will be performed when the 
 report of the accountant as provided for in subdivision 3, 
 paragraph (g), the notification required by subdivision 3, 
 paragraph (h), the results of compliance or targeted 
 examinations, or other circumstances indicate in the judgment of 
 the commissioner or a designated representative that a complete 
 examination of the condition and affairs of the insurer is 
 necessary. 

    (e) Upon completion of each targeted, compliance, or 
 comprehensive examination, the examiner appointed by the 
 commissioner shall make a full and true report on the results of 
 the examination.  Each report shall include a general 
 description of the audit procedures performed by the examiners 
 and the procedures of the accountant that the examiners may have 
 utilized to supplement their examination procedures and the 
 procedures that were performed by the registered independent 
 certified public accountant if included as a supplement to the 
 examination. 

    Subd. 5.    Consolidated filing.  (a) The commissioner 
 may allow an insurer to file a consolidated loss reserve 
 certification required by subdivision 2, in lieu of separate 
 loss certifications and may allow an insurer to file 
 consolidated or combined audited financial statements required 
 by subdivision 3, paragraph (a), in lieu of separate annual 
 audited financial statements, where it can be demonstrated that 
 an insurer is part of a group of insurance companies that has a 
 pooling or 100 percent reinsurance agreement which substantially 
 affects the solvency and integrity of the reserves of the 
 insurer and the insurer cedes all of its direct and assumed 
 business to the pool.  If these circumstances exist, then the 
 company may file a written application to file a consolidated 
 loss reserve certification and/or consolidated or combined 
 audited financial statements.  This application shall be for a 
 specified period. 

    (b) A consolidated annual audit filing shall include a 
 columnar consolidated or combining worksheet.  Amounts shown on 
 the audited consolidated or combined financial statement shall 
 be shown on the worksheet.  Amounts for each insurer shall be 
 stated separately.  Noninsurance operations may be shown on the 
 worksheet on a combined or individual basis.  Explanations of 
 consolidating or eliminating entries shall be shown on the 
 worksheet.  A reconciliation of any differences between the 
 amounts shown in the individual insurer columns of the worksheet 
 and comparable amounts shown on the annual statement of the 
 insurers shall be included on the worksheet. 

    Subd. 6.    Penalties.  No annual statement, report, or 
 document related to the business of insurance shall be filed 
 with the commissioner or issued to the public if it is signed by 
 anyone who is represented in the instrument as an "actuary" or 
 "accountant," unless the person is qualified as defined by this 
 section.  A violation of this subdivision is a violation of 
 section 72A.19 and punishable in accordance with section 72A.25. 

    Subd. 7.    Exemptions.  (a) Upon written application of 
 any insurer, the commissioner may grant an exemption from 
 compliance with the provisions of this section.  In order to 
 receive an exemption, an insurer must demonstrate to the 
 satisfaction of the commissioner that compliance would 
 constitute a financial or organizational hardship upon the 
 insurer.  An exemption may be granted at any time and from time 
 to time for specified periods.  Within ten days from the denial 
 of an insurer's written request for an exemption, the insurer 
 may request in writing a hearing on its application for an 
 exemption.  This hearing shall be held in accordance with 
 chapter 14.  Upon written application of any insurer, the 
 commissioner may permit an insurer to file annual audited 
 financial reports on some basis other than a calendar year basis 
 for a specified period.  No exemption shall be granted until the 
 insurer presents an alternative method satisfying the purposes 
 of this section.  Within ten days from a denial of a written 
 request for an exemption, the insurer may request in writing a 
 hearing on its application.  The hearing shall be held in 
 accordance with chapter 14. 

    (b) This section applies to all insurers, unless otherwise 
 indicated, required to file an annual audit by subdivision 3, 
 paragraph (a), except insurers having less than $1,000,000 of 
 direct written premiums in this state in any calendar year and 
 fewer than 1,000 policyholders or certificate holders of 
 directly written policies nationwide at the end of the calendar 
 year, are exempt from this section for that year, unless the 
 commissioner makes a specific finding that compliance is 
 necessary for the commissioner to carry out statutory 
 responsibilities, except that insurers having assumed premiums 
 from reinsurance contracts or treaties of $1,000,000 or more are 
 not exempt. 

    HIST: 1993 c 299 s 3; 1994 c 426 s 4-6 

     60A.13 Annual statement, inquiries, renewal licenses. 

    Subdivision 1.    Annual statements required.  Every 
 insurance company, including fraternal benefit societies, and 
 reciprocal exchanges, doing business in this state, shall file 
 with the commissioner, annually, on or before March 1, the 
 appropriate verified National Association of Insurance 
 Commissioners' annual statement blank, prepared in accordance 
 with the association's instructions handbook and following those 
 accounting procedures and practices prescribed by the 
 association's accounting practices and procedures manual, unless 
 the commissioner requires or finds another method of valuation 
 reasonable under the circumstances.  Another method of valuation 
 permitted by the commissioner must be at least as conservative 
 as those prescribed in the association's manual.  All companies 
 required to file an annual statement under this subdivision may 
 also be required to file with the commissioner and the National 
 Association of Insurance Commissioners a copy of their annual 
 statement in an electronic form prescribed by the commissioner.  
 All Minnesota domestic insurers required to file annual 
 statements under this subdivision must also file quarterly 
 statements with the commissioner for the first, second, and 
 third calendar quarter on or before 45 days after the end of the 
 applicable quarter, prepared in accordance with the 
 association's instruction handbook.  All companies required to 
 file quarterly statements under this subdivision may also be 
 required to file the quarterly statements with the commissioner 
 and the National Association of Insurance Commissioners in an 
 electronic form prescribed by the commissioner.  In addition, 
 the commissioner may require the filing of any other information 
 determined to be reasonably necessary for the continual 
 enforcement of these laws.  The statement may be limited to the 
 insurer's business and condition in the United States unless the 
 commissioner finds that the business conducted outside the 
 United States may detrimentally affect the interests of 
 policyholders in this state.  The statements shall also contain 
 a verified schedule showing all details required by law for 
 assessment and taxation.  The statement or schedules shall be in 
 the form and shall contain all matters the commissioner may 
 prescribe, and it may be varied as to different types of 
 insurers so as to elicit a true exhibit of the condition of each 
 insurer. 

    Subd. 1a. Repealed, 1993 c 375 art 2 s 36 

    Subd. 2.    Commissioner may inquire and require reply 
 under oath.  The commissioner may also address to any 
 insurer, including fraternal benefit societies, township mutuals 
 and interinsurance exchanges, or its officers, any inquiry in 
 relation to its transactions or conditions, or any matter 
 connected therewith.  Every insurer, or person so addressed, 
 shall reply in writing to such inquiry promptly and truthfully, 
 and such reply shall be verified, if required by the 
 commissioner, by such individual or by such officer or officers 
 of an insurer as the commissioner shall designate. 

    Subd. 3.  Repealed, 1978 c 793 s 98 

    Subd. 3a. Repealed, 1993 c 299 s 33 

    Subd. 4.  Repealed, 1978 c 793 s 98 

    Subd. 4a.    Rules.  The commissioner shall promulgate 
 any rules which may be necessary to administer subdivision 3a.  

    Subd. 5.    Renewal license based on approved statement.  
  Upon the approval of the statement the commissioner shall 
 issue a renewal license for the succeeding year beginning June 
 first.  Any license to a company or its agent, issued after the 
 approval of the statement, shall expire May thirty-first of the 
 year following. 

    Subd. 6.    Company or agent cannot continue business 
 unless statement is filed.  No company shall transact any new 
 business in this state after May 31 in any year unless it shall 
 have previously transmitted its annual statement to the 
 commissioner and filed a copy of its statement with the National 
 Association of Insurance Commissioners.  The commissioner may by 
 order annually require that each insurer pay the required fee to 
 the National Association of Insurance Commissioners for the 
 filing of annual statements, but the fee shall not be more than 
 50 percent greater than the fee set by the National Association 
 of Insurance Commissioners.  Failure to file the annual 
 statement with the commissioner or the National Association of 
 Insurance Commissioners is a violation of section 72A.061, 
 subdivision 1.  The fee shall be based on the relative premium 
 volume of each insurer.  

    Subd. 7.    Exceptions.  To file statement.  No 
 fraternal benefit society, nor any social corporation paying 
 only sick benefits not exceeding $250 in any one year, or 
 funeral benefits, or aiding those dependent on a member not more 
 than $350, nor any subordinate lodge or council which is, or 
 whose members are, assessed for benefits which are payable by a 
 grand body, shall be required to make such statements. 

    Subd. 8. Repealed, 1996 c 446 art 2 s 11 

    HIST: 1967 c 395 art 1 s 13; 1978 c 793 s 58; 1981 c 211 s 
 28-31; 1984 c 592 s 7,8; 1985 c 210 art 1 s 1; 1986 c 444; 1986 
 c 455 s 6; 1991 c 199 art 1 s 9; 1991 c 325 art 10 s 7; 1992 c 
 564 art 1 s 18,54; 1993 c 299 s 4,5; 1994 c 425 s 4; 1994 c 426 
 s 7; 1997 c 187 art 3 s 13; 1999 c 177 s 12 

     60A.131 Other business and insurance interests, 
  disclosure. 

    Subdivision 1.  If requested by the commissioner, an 
 insurance company authorized to do business in this state shall 
 disclose to the commissioner any changes in the principal 
 management and directors of the company from that listed on page 
 one of the annual statement within ten days of such change.  

    Subd. 2.  Every insurance company authorized to do business 
 in this state shall notify the commissioner within ten days 
 after receipt of notice of any acquisition by any person, 
 association or corporation of stock or other equity security in 
 said insurer where such transaction, directly or indirectly, 
 either involves five percent or more of any class of any equity 
 security of said insurer, or such acquisition results in 
 ownership of five percent or more of any equity security of said 
 insurer.  

    Subd. 3.  All principal management and directors of the 
 company as listed on page one of its annual statement, and any 
 person, association or corporation or any person or persons 
 managing such company under a management contract, who are 
 directly or indirectly the beneficial owners of more than five 
 percent of any class of any equity security of a stock insurer 
 or guaranty fund of a mutual insurer, shall disclose all other 
 interests in excess of five percent which they may have in 
 insurance agencies, other insurance companies, premium finance 
 companies and any other companies whose principal business 
 relates directly to the writing of insurance or the handling of 
 claims, within 30 days following May 21, 1967.  Any such 
 interests acquired after May 21, 1967, shall be reported to the 
 commissioner within 30 days after acquisition thereof.  

    Subd. 4.  Every company applying for an initial certificate 
 of authority to do business in this state shall file with the 
 application a statement giving the information required in 
 subdivision 3 as to its principal management, directors and 
 affected holders of its equity securities.  

    HIST: 1967 c 609 s 1-4; 1Sp1985 c 10 s 51 

     60A.135 Report; certain transactions. 

    Subdivision 1.    Requirement.  Every insurer domiciled 
 in this state shall file a report with the commissioner 
 disclosing material acquisitions and dispositions of assets or 
 material nonrenewals, cancellations, or revisions of ceded 
 reinsurance agreements unless the acquisitions and dispositions 
 of assets or material nonrenewals, cancellations, or revisions 
 of ceded reinsurance agreements have been submitted to the 
 commissioner for review, approval, or information purposes 
 pursuant to other provisions of law, rule, or other requirements.

    Subd. 2.    Date due.  The report required in 
 subdivision 1 is due within 15 days after the end of the 
 calendar month in which the transactions occur. 

    Subd. 3.    Filing.  One complete copy of the report, 
 including exhibits or other attachments filed as part of it, 
 must be filed with the National Association of Insurance 
 Commissioners. 

    Subd. 4.    Confidentiality.  Reports filed with the 
 commissioner pursuant to sections 60A.135 to 60A.137 must be 
 held as nonpublic data as defined in section 13.02, are not 
 subject to subpoena, and may not be made public by the 
 commissioner, the National Association of Insurance 
 Commissioners, or other person, except to insurance departments 
 of other states, without the prior written consent of the 
 insurer to which it pertains.  However, the commissioner may 
 publish all or part of a report in the manner the commissioner 
 considers appropriate if, after giving the affected insurer 
 notice and an opportunity to be heard, the commissioner 
 determines that the interest of policyholders, shareholders, or 
 the public will be served by the publication. 

    HIST: 1995 c 214 s 7 

     60A.136 Acquisitions and dispositions of assets. 

    Subdivision 1.    Materiality.  No acquisitions or 
 dispositions of assets need be reported pursuant to section 
 60A.135 if the acquisitions or dispositions are not material.  
 For purposes of sections 60A.135 to 60A.137, a material 
 acquisition (or the aggregate of any series of related 
 acquisitions during any 30-day period) or disposition (or the 
 aggregate of any series of related dispositions during any 
 30-day period) is one that is nonrecurring and not in the 
 ordinary course of business and involves more than five percent 
 of the reporting insurer's total admitted assets as reported in 
 its most recent statutory statement filed with the commissioner 
 of commerce. 

    Subd. 2.    Scope.  (a) Asset acquisitions subject to 
 sections 60A.135 to 60A.137 include every purchase, lease, 
 exchange, merger, consolidation, succession, or other 
 acquisition other than the construction or development of real 
 property by or for the reporting insurer or the acquisition of 
 materials for this purpose. 

    (b) Asset dispositions subject to sections 60A.135 to 
 60A.137 include every sale, lease, exchange, merger, 
 consolidation, mortgage, hypothecation, assignment (whether for 
 the benefit of creditors or otherwise), abandonment, 
 destruction, or other disposition. 

    Subd. 3.    Information to be reported.  (a) The 
 following information is required to be disclosed in a report of 
 a material acquisition or disposition of assets: 

    (1) date of the transaction; 

    (2) manner of acquisition or disposition; 

    (3) description of the assets involved; 

    (4) nature and amount of the consideration given or 
 received; 

    (5) purpose of, or reason for, the transaction; 

    (6) manner by which the amount of consideration was 
 determined; 

    (7) gain or loss recognized or realized by the insurer as a 
 result of the transaction; and 

    (8) name of each person from whom the assets were acquired 
 or to whom they were disposed. 

    (b) Insurers are required to report material acquisitions 
 and dispositions on a nonconsolidated basis unless the insurer 
 is part of a consolidated group of insurers that uses a pooling 
 arrangement or 100 percent reinsurance agreement that affects 
 the solvency and integrity of the insurer's reserves and the 
 insurer ceded substantially all of its direct and assumed 
 business to the pool.  An insurer is considered to have ceded 
 substantially all of its direct and assumed business to a pool 
 if the insurer has less than $1,000,000 total direct plus 
 assumed written premiums during a calendar year that are not 
 subject to a pooling arrangement and the net income of the 
 business not subject to the pooling arrangement represents less 
 than five percent of the insurer's capital and surplus. 

    HIST: 1995 c 214 s 8 

     60A.137 Nonrenewals, cancellations, or revisions of 
  ceded reinsurance agreements. 

    Subdivision 1.    Materiality.  (a) No nonrenewals, 
 cancellations, or revisions of ceded reinsurance agreements need 
 be reported pursuant to section 60A.135 if the nonrenewals, 
 cancellations, or revisions are not material.  For purposes of 
 sections 60A.135 to 60A.137, a material nonrenewal, 
 cancellation, or revision for: 

    (1) property and casualty business, including accident and 
 health business when written by a property and casualty insurer 
 is one that affects: 

    (i) more than 50 percent of an insurer's ceded written 
 premium; or 

    (ii) more than 50 percent of the insurer's total ceded 
 indemnity and loss adjustment reserves; and 

    (2) life, annuity, and accident and health business, is one 
 that affects more than 50 percent of the total reserve credit 
 taken for business ceded, on an annualized basis as indicated in 
 the insurer's most recently filed statutory statement.  

    (b) With respect to either property and casualty or life, 
 annuity, and accident and health business, either of the 
 following events constitute a material revision that must be 
 reported under section 60A.135: 

    (1) an authorized reinsurer representing more than ten 
 percent of a total cession is replaced by one or more 
 unauthorized reinsurers; or 

    (2) previously established collateral requirements have 
 been reduced or waived for one or more unauthorized reinsurers 
 representing collectively more than ten percent of a total 
 cession. 

    (c) Notwithstanding paragraphs (a) and (b), no filing is 
 required: 

    (1) for property and casualty business, including accident 
 and health business written by a property and casualty insurer 
 if the insurer's total ceded written premium represents, on an 
 annualized basis, less than ten percent of its total written 
 premium for direct and assumed business; or 

    (2) for life, annuity, and accident and health business if 
 the total reserve credit taken for business ceded represents, on 
 an annualized basis, less than ten percent of the statutory 
 reserve requirement before any cession. 

    Subd. 2.    Information to be reported.  (a) The 
 following information is required to be disclosed in a report of 
 a material nonrenewal, cancellation, or revision of ceded 
 reinsurance agreements: 

    (1) effective date of the nonrenewal, cancellation, or 
 revision; 

    (2) the description of the transaction with an 
 identification of the initiating entity; 

    (3) purpose of, or reason for, the transaction; and 

    (4) if applicable, the identity of the replacement 
 reinsurers. 

    (b) Insurers are required to report all material 
 nonrenewals, cancellations, or revisions of ceded reinsurance 
 agreements on a nonconsolidated basis unless the insurer is part 
 of a consolidated group of insurers that utilizes a pooling 
 arrangement or 100 percent reinsurance agreement that affects 
 the solvency and integrity of the insurer's reserves and the 
 insurer ceded substantially all of its direct and assumed 
 business to the pool.  An insurer is considered to have ceded 
 substantially all of its direct and assumed business to a pool 
 if the insurer has less than $1,000,000 total direct plus 
 assumed written premiums during a calendar year that are not 
 subject to a pooling arrangement and the net income of the 
 business not subject to the pooling arrangement represents less 
 than five percent of the insurer's capital and surplus. 

    HIST: 1995 c 214 s 9 

     60A.14 Fees. 

    Subdivision 1.    Fees other than examination fees.  In 
 addition to the fees and charges provided for examinations, the 
 following fees must be paid to the commissioner for deposit in 
 the general fund: 

    (a) by township mutual fire insurance companies: 

    (1) for filing certificate of incorporation $25 and 
 amendments thereto, $10; 

    (2) for filing annual statements, $15; 

    (3) for each annual certificate of authority, $15; 

    (4) for filing bylaws $25 and amendments thereto, $10. 

    (b) by other domestic and foreign companies including 
 fraternals and reciprocal exchanges: 

    (1) for filing certified copy of certificate of articles of 
 incorporation, $100; 

    (2) for filing annual statement, $225; 

    (3) for filing certified copy of amendment to certificate 
 or articles of incorporation, $100; 

    (4) for filing bylaws, $75 or amendments thereto, $75; 

    (5) for each company's certificate of authority, $575, 
 annually. 

    (c) the following general fees apply: 

    (1) for each certificate, including certified copy of 
 certificate of authority, renewal, valuation of life policies, 
 corporate condition or qualification, $25; 

    (2) for each copy of paper on file in the commissioner's 
 office 50 cents per page, and $2.50 for certifying the same; 

    (3) for license to procure insurance in unadmitted foreign 
 companies, $575; 

    (4) for valuing the policies of life insurance companies, 
 one cent per $1,000 of insurance so valued, provided that the 
 fee shall not exceed $13,000 per year for any company.  The 
 commissioner may, in lieu of a valuation of the policies of any 
 foreign life insurance company admitted, or applying for 
 admission, to do business in this state, accept a certificate of 
 valuation from the company's own actuary or from the 
 commissioner of insurance of the state or territory in which the 
 company is domiciled; 

    (5) for receiving and filing certificates of policies by 
 the company's actuary, or by the commissioner of insurance of 
 any other state or territory, $50; 

    (6) for each appointment of an agent filed with the 
 commissioner, a domestic insurer shall remit $5 and all other 
 insurers shall remit $3; 

    (7) for filing forms and rates, $75 per filing; 

    (8) for annual renewal of surplus lines insurer license, 
 $300. 

    The commissioner shall adopt rules to define filings that 
 are subject to a fee. 

    Subd. 2.    Retaliatory provisions.  When, by the laws 
 of any other state or nation, any fines, penalties, licenses, or 
 fees additional to, or in excess of, those imposed by this 
 section upon foreign insurance companies and their agents, are 
 imposed upon insurance companies of this state or their agents 
 doing business in such state, the same fines, penalties, 
 licenses, and fees shall be imposed upon all insurance companies 
 of that state and their agents doing business in this state, so 
 long as such laws of such other state remain in force. 

    HIST: 1967 c 395 art 1 s 14; 1969 c 7 s 17; 1969 c 291 s 4; 
 1974 c 5 s 1; 1978 c 470 s 2; 1978 c 793 s 59; 1981 c 307 s 2; 
 1983 c 289 s 114 subd 1; 1983 c 328 s 3; 1984 c 592 s 9; 1984 c 
 655 art 1 s 92; 1987 c 358 s 94; 1Sp1989 c 1 art 10 s 2; 1991 c 
 233 s 42; 1991 c 325 art 10 s 8; 1992 c 513 art 3 s 24; 1994 c 
 485 s 9; 1994 c 632 art 4 s 23; 1999 c 223 art 2 s 4 

     60A.15 Taxation of insurance companies. 

    Subdivision 1.    Domestic and foreign companies.  (a) 
 On or before April 1, June 1, and December 1 of each year, every 
 domestic and foreign company, including town and farmers' mutual 
 insurance companies, domestic mutual insurance companies, marine 
 insurance companies, health maintenance organizations, community 
 integrated service networks, and nonprofit health service plan 
 corporations, shall pay to the commissioner of revenue 
 installments equal to one-third of the insurer's total estimated 
 tax for the current year.  Except as provided in paragraphs (d), 
 (e), (h), and (i), installments must be based on a sum equal to 
 two percent of the premiums described in paragraph (b). 

    (b) Installments under paragraph (a), (d), or (e) are 
 percentages of gross premiums less return premiums on all direct 
 business received by the insurer in this state, or by its agents 
 for it, in cash or otherwise, during such year. 

    (c) Failure of a company to make payments of at least 
 one-third of either (1) the total tax paid during the previous 
 calendar year or (2) 80 percent of the actual tax for the 
 current calendar year shall subject the company to the penalty 
 and interest provided in this section, unless the total tax for 
 the current tax year is $500 or less. 

    (d) For health maintenance organizations, nonprofit health 
 service plan corporations, and community integrated service 
 networks, the installments must be based on an amount determined 
 under paragraph (h) or (i). 

    (e) For purposes of computing installments for town and 
 farmers' mutual insurance companies and for mutual property 
 casualty companies with total assets on December 31, 1989, of 
 $1,600,000,000 or less, the following rates apply: 

    (1) for all life insurance, two percent; 

    (2) for town and farmers' mutual insurance companies and 
 for mutual property and casualty companies with total assets of 
 $5,000,000 or less, on all other coverages, one percent; and 

    (3) for mutual property and casualty companies with total 
 assets on December 31, 1989, of $1,600,000,000 or less, on all 
 other coverages, 1.26 percent. 

    (f) If the aggregate amount of premium tax payments under 
 this section and the fire marshal tax payments under section 
 299F.21 made during a calendar year is equal to or exceeds 
 $120,000, all tax payments in the subsequent calendar year must 
 be paid by means of a funds transfer as defined in section 
 336.4A-104, paragraph (a).  The funds transfer payment date, as 
 defined in section 336.4A-401, must be on or before the date the 
 payment is due.  If the date the payment is due is not a funds 
 transfer business day, as defined in section 336.4A-105, 
 paragraph (a), clause (4), the payment date must be on or before 
 the funds transfer business day next following the date the 
 payment is due.  

    (g) Premiums under medical assistance, general assistance 
 medical care, the MinnesotaCare program, and the Minnesota 
 comprehensive health insurance plan and all payments, revenues, 
 and reimbursements received from the federal government for 
 Medicare-related coverage as defined in section 62A.31, 
 subdivision 3, paragraph (e), are not subject to tax under this 
 section. 

    (h) For calendar years 1997, 1998, and 1999, the 
 installments for health maintenance organizations, community 
 integrated service networks, and nonprofit health service plan 
 corporations must be based on an amount equal to one percent of 
 premiums described under paragraph (b).  Health maintenance 
 organizations, community integrated service networks, and 
 nonprofit health service plan corporations that have met the 
 cost containment goals established under section 62J.04 in the 
 individual and small employer market for calendar year 1996 are 
 exempt from payment of the tax imposed under this section for 
 premiums paid after March 30, 1997, and before April 1, 1998.  
 Health maintenance organizations, community integrated service 
 networks, and nonprofit health service plan corporations that 
 have met the cost containment goals established under section 
 62J.04 in the individual and small employer market for calendar 
 year 1997 are exempt from payment of the tax imposed under this 
 section for premiums paid after March 30, 1998, and before April 
 1, 1999.  Health maintenance organizations, community integrated 
 service networks, and nonprofit health service plan corporations 
 that have met the cost containment goals established under 
 section 62J.04 in the individual and small employer market for 
 calendar year 1998 are exempt from payment of the tax imposed 
 under this section for premiums paid after March 30, 1999, and 
 before January 1, 2000.  

    (i) For calendar years after 1999, the commissioner of 
 finance shall determine the balance of the health care access 
 fund on September 1 of each year beginning September 1, 1999.  
 If the commissioner determines that there is no structural 
 deficit for the next fiscal year, no tax shall be imposed under 
 paragraph (d) for the following calendar year.  If the 
 commissioner determines that there will be a structural deficit 
 in the fund for the following fiscal year, then the 
 commissioner, in consultation with the commissioner of revenue, 
 shall determine the amount needed to eliminate the structural 
 deficit and a tax shall be imposed under paragraph (d) for the 
 following calendar year.  The commissioner shall determine the 
 rate of the tax as either one-quarter of one percent, one-half 
 of one percent, three-quarters of one percent, or one percent of 
 premiums described in paragraph (b), whichever is the lowest of 
 those rates that the commissioner determines will produce 
 sufficient revenue to eliminate the projected structural 
 deficit.  The commissioner of finance shall publish in the State 
 Register by October 1 of each year the amount of tax to be 
 imposed for the following calendar year.  In determining the 
 structural balance of the health care access fund for fiscal 
 years 2000 and 2001, the commissioner shall disregard the 
 transfer amount from the health care access fund to the general 
 fund for expenditures associated with the services provided to 
 pregnant women and children under the age of two enrolled in the 
 MinnesotaCare program.  

    (j) In approving the premium rates as required in sections 
 62L.08, subdivision 8, and 62A.65, subdivision 3, the 
 commissioners of health and commerce shall ensure that any 
 exemption from the tax as described in paragraphs (h) and (i) is 
 reflected in the premium rate. 

    Subd. 1a.    Addition to the tax.  In case of any 
 underpayment of installments by an insurer, there shall be added 
 to the tax for the taxable year an amount determined at the rate 
 specified in section 270.75 upon the amount of underpayment.  

    Subd. 1b.    Amount of underpayment.  For purposes of 
 subdivision 1a, the amount of the underpayment shall be the 
 excess of:  (1) the amount of the installment; over (2) the 
 amount, if any, of the installment paid on or before the last 
 date prescribed for payment.  

    Subd. 1c.    Period of underpayment.  The period of the 
 underpayment shall run from the date the installment was 
 required to be paid to whichever of the following dates is the 
 earlier:  

    (1) on March 1 following the close of the taxable year; 

    (2) with respect to any portion of the underpayment, the 
 date on which that portion is paid.  For purposes of this 
 clause, a payment of estimated tax on any installment date shall 
 be considered a payment of any previous underpayment only to the 
 extent the payment exceeds the amount of the installment 
 determined under subdivision 1c, clause (1) for the installment 
 date.  

    Subd. 1d.    Definition of tax.  The term "tax" means 
 the tax imposed by this chapter.  

    Subd. 1e.    Failure to file an estimate.  In the case 
 of an insurer which fails to file an estimated tax for a taxable 
 year when one is required, the period of the underpayment shall 
 run from the installment dates as set forth in subdivision 1 or 
 2 to whichever of the periods set forth in subdivision 1c is the 
 earlier.  

    Subd. 2. Repealed, 1987 c 268 art 2 s 38 

    Subd. 2a.    Procedure for filing and adjustment of 
 statements and taxes.  (a) Every insurer required to pay a 
 premium tax in this state shall make and file a statement of 
 estimated premium taxes for the period covered by the 
 installment tax payment.  Such statement shall be in the form 
 prescribed by the commissioner of revenue. 

    (b) On or before March 1, annually every insurer subject to 
 taxation under this section shall make an annual return for the 
 preceding calendar year setting forth such information as the 
 commissioner of revenue may reasonably require on forms 
 prescribed by the commissioner of revenue. 

    (c) On March 1, the insurer shall pay any additional amount 
 due for the preceding calendar year; if there has been an 
 overpayment, such overpayment may be credited without interest 
 on the estimated tax due April 1. 

    (d) If unpaid by this date, penalties as provided in 
 section 289A.60, subdivision 1, as it relates to withholding and 
 sales or use taxes, shall be imposed.  

    Subd. 3.  Repealed, 1969 c 1001 s 11 

    Subd. 4.    Return premiums defined.  "Return 
 premiums," as used in this section, means any dividend or any 
 unused or unabsorbed portion of premium deposit or assessment 
 that shall be applied toward the payment of any premium, premium 
 deposit, or assessment due from the policyholder or member upon 
 a continuance or renewal of the insurance on account of which 
 such dividend was earned or premium deposit or assessment paid 
 and any portion of premium returned by the company upon 
 cancellation or termination of a policy or membership, except 
 surrender values paid upon the cancellation and surrender of 
 policies or certificates of life insurance. 

    Subd. 5.    Municipality defined.  As used in this 
 section "municipality" means a city of any class, a town, or a 
 township. 

    Subd. 6. Repealed, 1992 c 511 art 6 s 20 

    Subd. 7. Repealed, 1995 c 264 art 17 s 10 

    Subd. 8.    Examination of returns; assessments; refunds. 
  The commissioner of revenue shall, as soon as practicable 
 after a return required by this section is filed, examine the 
 same and make any investigation or examination of the company's 
 records and accounts that the commissioner of revenue may deem 
 necessary for determining the correctness of the return.  The 
 tax computed by the commissioner of revenue on the basis of such 
 examination and investigation shall be the tax to be paid by 
 such company.  If the tax found due shall be greater than the 
 amount reported as due on the company's return, the commissioner 
 of revenue shall assess a tax in the amount of such excess and 
 the whole amount of such excess shall be paid to the 
 commissioner of revenue within 60 days after notice of the 
 amount and demand for its payment shall have been mailed to the 
 company by the commissioner of revenue.  If the understatement 
 of the tax on the return was false and fraudulent with intent to 
 evade the tax, the installments of the tax shown by the company 
 on its return which have not yet been paid shall be paid to the 
 state treasurer within 30 days after notice of the amount 
 thereof and demand for payment shall have been mailed to the 
 company by the commissioner of revenue.  If the amount of the 
 tax found due by the commissioner of revenue shall be less than 
 that reported as due on the company's return, the excess shall 
 be refunded to the company in the manner provided by subdivision 
 12, (except that no demand therefor shall be necessary), if they 
 have already paid the whole of such tax, or credited against any 
 unpaid installment thereof; provided, that no refundment shall 
 be made except as provided in subdivision 12, after the 
 expiration of 3-1/2 years after the filing of the return. 

    If the commissioner of revenue examines returns of a 
 company for more than one year, the commissioner of revenue may 
 issue one order covering the several years under consideration 
 reflecting the aggregate refund or additional tax due. 

    The notices and demands provided for by subdivisions 8 to 
 10, shall be in such form as the commissioner of revenue may 
 determine (including a statement) and shall contain a brief 
 explanation of the computation of the tax and shall be sent by 
 mail to the company at the address given in its return, if any, 
 and if no such address is given, then to the last known address. 

    Subd. 9.    Failure to file return, false or fraudulent 
 return filed.  If any company required by this section to file 
 any return shall fail to do so within the time prescribed or 
 shall make, willfully or otherwise, an incorrect, false, or 
 fraudulent return, it shall, on the written demand of the 
 commissioner of revenue, file such return, or corrected return, 
 within 60 days after the mailing of such written demand and at 
 the same time pay the whole tax, or additional tax, due on the 
 basis thereof.  If such company shall fail within that time to 
 file such return, or corrected return, the commissioner of 
 revenue shall make for it a return, or corrected return, from 
 personal knowledge and from such information as the commissioner 
 of revenue can obtain through testimony, or otherwise, and 
 assess a tax on the basis thereof, which tax (less any payments 
 theretofore made on account of the tax for the taxable year 
 covered by such return) shall be paid within 60 days after the 
 commissioner of revenue has mailed to such company a written 
 notice of the amount thereof and demand for its payment.  Any 
 such return or assessment made by the commissioner of revenue on 
 account of the failure of the company to make a return, or a 
 corrected return, shall be prima facie correct and valid, and 
 the company shall have the burden of establishing its 
 incorrectness or invalidity in any action or proceeding in 
 respect thereto. 

    Subd. 9a.    Failure to file; penalties and interest.  
 In case of any failure to make and file a return as required by 
 this chapter within the time prescribed by law or prescribed by 
 the commissioner of revenue in pursuance of law there shall be 
 added to the tax penalties as provided in section 289A.60, 
 subdivision 2, as it relates to withholding and sales or use 
 taxes.  

    Subd. 9b.    Intent to evade tax; penalty.  If any 
 company, with intent to evade the tax imposed by this chapter, 
 fails to file any return required by this chapter or with such 
 intent files a false or fraudulent return there shall also be 
 imposed on it a penalty as provided in section 289A.60, 
 subdivision 6.  

    Subd. 9c.    Negligence or intentional disregard; penalty. 
  If any part of any additional assessment is due to negligence 
 or intentional disregard of the statute or a rule (but without 
 intent to defraud), there shall be added to the tax a penalty as 
 provided in section 289A.60, subdivision 5. 

    Subd. 9d.    Criminal provisions.  In addition to the 
 penalties hereinbefore prescribed, the provisions of section 
 289A.63, subdivisions 1 and 3, shall apply to persons required 
 by chapter 60A to make a return.  

    Subd. 9e.    Penalty for repeated failures to file returns 
 or pay taxes.  If there is a pattern by a person of repeated 
 failures to timely file returns or timely pay taxes, and written 
 notice is given that a penalty will be imposed if such failures 
 continue, a penalty of 25 percent of the amount of tax not 
 timely paid as a result of each such subsequent failure is added 
 to the tax.  The penalty can be abated under the abatement 
 authority in section 270.07, subdivisions 1, paragraph (e), and 
 6.  

    Subd. 10.    Collection of tax.  The tax required to be 
 paid by this section may be collected in an ordinary action at 
 law by the commissioner of revenue against the company.  In any 
 action commenced pursuant to this section, upon the filing of an 
 affidavit of default, the court administrator of the district 
 court wherein the action was commenced shall enter judgment for 
 the state for the amount demanded in the complaint together with 
 costs and disbursements. 

    Subd. 11.    Appeals.  Either party to an action or a 
 judgment for the recovery of any taxes, interest, or penalties 
 under subdivision 10, may appeal as in other civil cases. 

    Subd. 12.    Overpayments, claims for refund.  (1)   
 Procedure, time limit, appropriation.  A company who has paid, 
 voluntarily or otherwise, or from whom there has been collected 
 an amount of tax for any year in excess of the amount legally 
 due for that year, may file with the commissioner of revenue a 
 claim for a refund of the excess.  Except as provided in 
 subdivision 11, no claim or refund shall be allowed or made 
 after the period prescribed in section 289A.40, subdivision 1. 
 For this purpose, a return or amended return claiming an 
 overpayment constitutes a claim for refund. 

    Upon the filing of a claim, the commissioner of revenue 
 shall examine it, shall make and file written findings denying 
 or allowing the claim in whole or in part, and shall mail a 
 notice thereof to the company at the address stated upon the 
 return.  If the claim is allowed in whole or in part, the 
 commissioner of revenue shall issue a certificate for the 
 refundment of the excess paid by the company, with interest at 
 the rate specified in section 270.76 computed from the date of 
 the payment of the tax until the date the refund is paid or the 
 credit is made to the company.  The commissioner of finance 
 shall pay the refund out of the proceeds of the taxes imposed by 
 this section, as other state moneys are expended.  As much of 
 the proceeds of the taxes as necessary are appropriated for that 
 purpose. 

    (2)    Denial of claim, court proceedings.  If the claim 
 is denied in whole or in part, the commissioner of revenue shall 
 mail an order of denial to the company in the manner prescribed 
 in subdivision 8.  An appeal from this order may be taken to the 
 Minnesota tax court in the manner prescribed in section 271.06, 
 or the company may commence an action against the commissioner 
 of revenue to recover the denied overpayment.  The action may be 
 brought in the district court of the district in the county of 
 its principal place of business, or in the district court for 
 Ramsey county.  The action in the district court must be 
 commenced within 18 months following the mailing of the order of 
 denial to the company.  If a claim for refund is filed by a 
 company and no order of denial is issued within six months of 
 the filing, the company may commence an action in the district 
 court as in the case of a denial, but the action must be 
 commenced within two years of the date that the claim for refund 
 was filed. 

    (3)    Consent to extend time.  If the commissioner of 
 revenue and the company have, within the periods prescribed in 
 clause (1), consented in writing to any extension of time for 
 the assessment of the tax, the period within which a claim for 
 refund may be filed, or a refund may be made or allowed, if no 
 claim is filed, shall be the period within which the 
 commissioner of revenue and the company have consented to an 
 extension for the assessment of the tax and six months 
 thereafter.  

    (4)    Overpayments; refunds.  If the amount determined 
 to be an overpayment exceeds the taxes imposed by this section, 
 the amount of excess shall be considered an overpayment.  An 
 amount paid as tax constitutes an overpayment even if in fact 
 there was no tax liability with respect to which the amount was 
 paid. 

    Notwithstanding any other provision of law to the contrary, 
 in the case of any overpayment, the commissioner of revenue, 
 within the applicable period of limitations, shall refund any 
 balance of more than one dollar to the company if the company 
 requests the refund. 

    Subd. 13.    No liability in case of compliance with laws 
 of other states.  Each domestic insurance company, and its 
 officers, directors, and trustees, may comply with any law of 
 any state, territory, or political subdivision of either, which 
 imposes any license, or tax, and pay same, unless, prior to such 
 payment, such law is expressly held invalid by the United States 
 Supreme Court.  No such company, officer, director, or trustee 
 shall be subject to liability by reason of any such compliance 
 or payment either heretofore or hereafter made. 

    Subd. 14. Repealed, 1Sp1985 c 10 s 123 

    Subd. 15.    Guaranty association assessment offset.  An 
 insurance company may offset against its premium tax liability 
 to this state any amount paid pursuant to assessments made for 
 insolvencies which occur after July 31, 1994, under sections 
 60C.01 to 60C.22, and any amount paid pursuant to assessments 
 made after July 31, 1994, under Minnesota Statutes 1992, 
 sections 61B.01 to 61B.16, or sections 61B.18 to 61B.32 as 
 follows: 

    (a) Each such assessment shall give rise to an amount of 
 offset equal to 20 percent of the amount of the assessment for 
 each of the five calendar years following the year in which the 
 assessment was paid. 

    (b) The amount of offset initially determined for each 
 taxable year is the sum of the amounts determined under 
 paragraph (a) for that taxable year. 

    (c) Each year the commissioner of revenue shall compare 
 total guaranty association assessments levied over the preceding 
 five calendar years to the sum of all premium tax and corporate 
 franchise tax revenues collected from insurance companies, 
 without reduction for any guaranty association assessment offset 
 in the preceding calendar year, referred to in this subdivision 
 as "preceding year insurance tax revenues."  If total guaranty 
 association assessments levied over the preceding five years 
 exceed the preceding year insurance tax revenues, insurance 
 companies shall be allowed only a proportionate part of the 
 premium tax offset calculated under paragraph (b) for the 
 current calendar year.  The proportionate part of the premium 
 tax offset allowed in the current calendar year is determined by 
 multiplying the amount calculated under paragraph (b) by a 
 fraction, the numerator of which equals the preceding year 
 insurance tax revenues and the denominator of which equals total 
 guaranty association assessments levied over the preceding 
 five-year period.  The proportionate part of the premium tax 
 offset that is not allowed shall be carried forward to 
 subsequent tax years and added to the amount of premium tax 
 offset calculated under paragraph (b) prior to application of 
 the limitation imposed by this paragraph.  Any amount carried 
 forward from prior years must be allowed before allowance of the 
 offset for the current year calculated under paragraph (b).  The 
 premium tax offset limitation must be calculated separately for 
 (1) insurance companies subject to assessment under sections 
 60C.01 to 60C.22, and (2) insurance companies subject to 
 assessment under Minnesota Statutes 1992, sections 61B.01 to 
 61B.16, or sections 61B.18 to 61B.32.  When the premium tax 
 offset is limited by this provision, the commissioner of revenue 
 shall notify affected insurance companies on a timely basis for 
 purposes of completing premium and corporate franchise tax 
 returns.  The guaranty associations created under sections 
 60C.01 to 60C.22, Minnesota Statutes 1992, sections 61B.01 to 
 61B.16, and sections 61B.18 to 61B.32, shall provide the 
 commissioner of revenue with the necessary information on 
 guaranty association assessments.  The limitation in this 
 paragraph is effective for offsets allowable in 1999 and 
 thereafter. 

    (d) If the offset determined by the application of 
 paragraphs (a) to (c) exceeds the greater of the insurance 
 company's premium tax liability under this section or its 
 corporate franchise tax liability under chapter 290 prior to 
 allowance of the credit for premium taxes, then the insurance 
 company may carry forward the excess, referred to in this 
 subdivision as the "carryforward credit," to subsequent taxable 
 years.  The carryforward credit shall be allowed as an offset 
 against premium tax liability for the first succeeding year to 
 the extent that the premium tax liability for that year exceeds 
 the amount of the allowable offset for the year determined under 
 paragraphs (a) to (c).  The carryforward credit shall be 
 reduced, but not below zero, by the greater of the amount of the 
 carryforward credit allowed as an offset against the premium tax 
 under this paragraph or the amount of the carryforward credit 
 allowed as an offset against the insurance company's corporate 
 franchise tax liability under section 290.35, subdivision 6, 
 paragraph (d).  The remainder, if any, of the carryforward 
 credit must be carried forward to succeeding taxable years until 
 the entire carryforward credit has been credited against the 
 insurance company's liability for premium tax under this chapter 
 and corporate franchise tax under chapter 290 if applicable for 
 that taxable year. 

    (e) A refund paid by the Minnesota life and health 
 insurance guaranty association to member insurers under 
 Minnesota Statutes 1992, section 61B.07, subdivision 6, or 
 section 61B.24, subdivision 6, with respect to an assessment 
 payment which has been offset against taxes shall reduce the 
 carryforward credit determined under paragraph (d).  If the 
 refund exceeds the amount of the carryforward credit, it shall 
 be repaid by the insurers to the extent of the offset to the 
 state in the manner the commissioner of revenue requires. 

    HIST: 1967 c 395 art 1 s 15; 1969 c 1001 s 1; 1971 c 575 s 
 1-3; 1973 c 123 art 5 s 7; 1973 c 492 s 14; 1981 c 356 s 272; 
 1983 c 247 s 29,30; 1984 c 558 art 1 s 1-7; 1984 c 592 s 10-26; 
 1Sp1985 c 14 art 15 s 1; 1986 c 444; 1Sp1986 c 1 art 7 s 1; 
 1Sp1986 c 3 art 1 s 82; 1987 c 268 art 2 s 1; art 17 s 41; 1988 
 c 719 art 2 s 1; 1Sp1989 c 1 art 10 s 3; 1990 c 480 art 1 s 46; 
 art 6 s 1; 1990 c 604 art 2 s 1; 1992 c 511 art 6 s 1; 1992 c 
 549 art 9 s 2; 1993 c 375 art 10 s 1-3; 1994 c 587 art 1 s 2; 
 1994 c 625 art 8 s 2; 1995 c 264 art 9 s 3; art 13 s 1; 1996 c 
 446 art 1 s 3; 1997 c 7 art 1 s 17; 1997 c 31 art 2 s 1; 1997 c 
 84 art 6 s 2; 1997 c 225 art 3 s 2; 1998 c 389 art 16 s 10; 1998 
 c 407 art 5 s 1 

  60A.151 Repealed, 1989 c 324 s 29 

     60A.152 Insurance premium tax equivalent payment by 
  automobile risk self-insurers. 

    Subdivision 1.    Definitions.  (a)    Application.  
 For purposes of this section, the definitions in paragraphs (b) 
 to (f) apply. 

    (b)    Automobile risks.  "Automobile risks" means the 
 risk of providing no-fault insurance under sections 65B.41 to 
 65B.71. 

    (c)    Motor vehicle.  "Motor vehicle" has the meaning 
 given in section 65B.43, subdivision 2. 

    (d)    Person.  "Person" means an owner, as defined in 
 section 65B.43, subdivision 4, but does not include the state or 
 a political subdivision as defined in section 65B.43, 
 subdivision 20. 

    (e)    Self-insurance.  "Self-insurance" means the 
 condition of qualifying as a self-insurer by complying with 
 section 65B.48, subdivisions 3 and 3a. 

    (f)    Self-insurer.  "Self-insurer" means a person who 
 has arranged self-insurance for the automobile risks associated 
 with the person's motor vehicle. 

    Subd. 2.    Premium tax amount.  Every self-insurer who 
 owns, leases, or operates a motor vehicle required to be 
 registered or licensed in this state or principally garaged in 
 this state for at least two months in the applicable calendar 
 year shall pay an annual amount for each vehicle of: 

    (1) $15 for a private passenger vehicle as defined in 
 section 65B.001, subdivision 3, or a utility vehicle as defined 
 in section 65B.001, subdivision 4, not including a taxi; or 

    (2) $25 for a taxi or any other self-insured vehicle not 
 covered by clause (1). 

    The amount required under this subdivision is payable no 
 later than July 1, annually, to the commissioner of revenue.  A 
 late payment penalty of $10 a vehicle is assessed if the amount 
 is not paid on or before July 1, and an additional amount equal 
 to the original payment amount if the total amount is not paid 
 until after December 1 of the same year.  A self-insurer who is 
 more than six months delinquent in paying the amount due must be 
 referred to the commissioner of commerce for action, which may 
 include revocation of the self-insured's self-insurer status. 

    Subd. 3.    Deposit of payment amount.  The amounts paid 
 under subdivision 2 must be deposited in the general fund to the 
 credit of the account from which the police state aid provided 
 for in sections 69.011 to 69.051 is payable. 

    Subd. 4.    Rules authorized.  The commissioner of 
 revenue and the commissioner of commerce are authorized to make 
 rules to permit the administration of this section. 

    HIST: 1992 c 487 s 1; 1992 c 511 art 6 s 2 

     60A.16 Mergers and consolidations. 

    Subdivision 1.    Scope.  (1)   Domestic insurance 
 corporations.  Any two or more domestic insurance 
 corporations, formed for any of the purposes for which stock, 
 mutual, or stock and mutual insurance corporations might be 
 formed under the laws of this state, may be 

    (a) merged into one of such domestic insurance 
 corporations, or 

    (b) consolidated into a new insurance corporation to be 
 formed under the laws of this state. 

    (2)   Domestic and foreign insurance corporations.  Any 
 such domestic insurance corporations and any foreign insurance 
 corporations formed to carry on any insurance business for the 
 conduct of which an insurance corporation might be organized 
 under the laws of this state, may be 

    (a) merged into one of such domestic insurance 
 corporations, or 

    (b) merged into one of such foreign insurance corporations, 
 or 

    (c) consolidated into a new insurance corporation to be 
 formed under the laws of this state, or 

    (d) consolidated into a new insurance corporation to be 
 formed under the laws of the government under which one of such 
 foreign insurance corporations was formed, provided that each of 
 such foreign insurance corporations is authorized by the laws of 
 the government under which it was formed to effect such merger 
 or consolidation. 

    Subd. 2.    Procedure to be followed.  (1)    Plan of 
 merger.  The merger or consolidation of insurance corporations 
 can be effected only as a result of a plan of merger adopted, 
 approved, and filed as follows: 

    (a) A resolution containing the plan of merger shall be 
 approved by the affirmative vote of a majority of the directors 
 of the board of each constituent corporation.  The plan of 
 merger shall prescribe the terms and conditions of merger or 
 consolidation, and the mode of carrying the same into effect, 
 with such other details and provisions as are deemed necessary.  
 In the case of merging or consolidating stock insurance 
 corporations or stock and mutual insurance corporations, such 
 plan of merger may prescribe that stock of one or more of such 
 corporations shall be converted, in whole or in part, into stock 
 or other securities of a corporation which is not a merging or 
 consolidating corporation or into cash. 

    (b) The plan of merger, or a summary of the plan approved 
 by the commissioner, shall be submitted to the respective 
 shareholders or members, as the case may be, of each constituent 
 corporation, for consideration at a regular meeting or at a 
 special meeting duly called for the purpose of considering and 
 acting upon the plan.  Written notice of the meeting, which 
 shall state that the purpose of the meeting is to consider the 
 proposed plan of merger, shall be given to each shareholder or 
 member entitled to vote upon the plan of merger not less than 30 
 nor more than 60 days before the meeting.  The plan of merger 
 must be approved by the affirmative vote of the holders of 
 two-thirds of the voting power of the shareholders or members 
 present or represented at the meeting of each constituent 
 corporation; provided, however, that in the case of a merger, 
 except one in which any shares of the surviving insurance 
 corporation are to be converted into shares or other securities 
 of another corporation or into cash, the agreement need not be 
 submitted to the shareholders or members of that one of the 
 insurance corporations into which it has been agreed the others 
 shall be merged.  Upon receiving the approval of the 
 shareholders or members of each constituent corporation, 
 articles of merger shall be prepared that contain the plan of 
 merger and a statement that the plan has been approved by each 
 corporation under this section. 

    (c) The articles of merger shall be delivered to the 
 commissioner of commerce, who, if the plan of merger is 
 reasonable and if the provisions thereof providing for any 
 transfer of assets and assumption of liabilities are fair and 
 equitable to the claimants and policyholders, shall place a 
 certificate of approval on the articles of merger and shall file 
 the articles in the commissioner's office, and copies of the 
 articles, certified by the commissioner of commerce, shall be 
 filed for record in the office of the secretary of state and 
 delivered to the surviving corporation or its legal 
 representative. 

    (2)    Articles of incorporation of new company.  (a) If 
 the plan of merger is for a consolidation into a new insurance 
 corporation to be formed under any law or laws of this state, 
 articles of incorporation for such new insurance corporation 
 shall be prepared and delivered to the commissioner of commerce 
 together with the articles of merger as provided in clause (1) 
 hereof. 

    (b) Such articles shall be prepared, executed, approved, 
 filed and recorded in the form and manner prescribed in, or 
 applicable to, the particular law or laws under which the new 
 insurance corporation is to be formed. 

    (3)    Abandonment.  A proposed merger or consolidation 
 may be abandoned at any time prior to approval by the 
 commissioner under the provision for abandonment, if any, set 
 forth in the plan of merger. 

    (4)    Mutual insurance holding companies.  In the case 
 of a merger of two mutual insurance holding companies under 
 section 60A.077, subdivision 2, paragraph (c), the procedures 
 set forth in subdivisions 1, 2, 3, 4, and 6 shall apply, subject 
 to the following: 

    (a) the plan of merger must be fair and reasonable to the 
 members of each constituent corporation; 

    (b) no member of either constituent corporation on the 
 effective date of the merger shall lose membership solely on 
 account of the merger; 

    (c) membership and voting rights in each respective 
 constituent corporation for purposes of the meeting of the 
 members held to consider the plan of merger shall be determined 
 in accordance with the articles and bylaws of that constituent 
 corporation as of a record date established in the plan of 
 merger; and 

    (d) the commissioner may require changes to the plan or 
 require certain undertakings from the surviving corporation to 
 assure compliance with this clause. 

    Subd. 3.    Consummation of merger.  (1) A merger of one 
 or more insurance corporations into a domestic insurance 
 corporation shall be effective when the articles of merger have 
 been approved and filed in the office of the commissioner of 
 commerce, or at a later date specified in the articles of merger.

    (2) A consolidation of insurance corporations into a new 
 domestic insurance corporation shall be effective when the 
 articles of merger and the new articles of incorporation have 
 been approved and filed in the office of the commissioner of 
 commerce, or at a later date as specified in the plan of merger. 

    (3) A merger or consolidation of one or more domestic 
 insurance corporations into a foreign insurance corporation 
 shall be effective according to the provisions of law of the 
 jurisdiction in which the foreign insurance corporation was 
 formed, but not until the articles of merger have been filed in 
 accordance with subdivision 2, clause (1). 

    Subd. 4.    Effect of merger or consolidation.  Upon the 
 consummation of the merger or consolidation as provided in 
 subdivision 3, the effect of the merger or consolidation shall 
 be: 

    (1) That the several corporate parties to the plan of 
 merger shall be one insurance corporation, which shall be 

    (a) in the case of a merger, that one of the constituent 
 insurance corporations into which it has been agreed the others 
 shall be merged and which shall survive the merger for that 
 purpose, or 

    (b) in the case of a consolidation, the new insurance 
 corporation into which it has been agreed the others shall be 
 consolidated; 

    (2) The separate existence of the constituent insurance 
 corporations shall cease, except that of the surviving insurance 
 corporation in the case of a merger; 

    (3) The surviving or new insurance corporation, as the case 
 may be, shall possess all the rights, privileges and franchises 
 possessed by each of the former insurance corporations so merged 
 or consolidated except that such surviving or new corporation 
 shall not thereby acquire authority to engage in any insurance 
 business or exercise any right which an insurance corporation 
 may not be formed under the laws of this state to engage in or 
 exercise; 

    (4) All the property, real, personal and mixed, of each of 
 the constituent insurance corporations, and all debts due on 
 whatever account to any of them, including without limitation 
 subscriptions for shares, premiums on existing policies, and 
 other choses in action belonging to any of them, shall be taken 
 and be deemed to be transferred to and invested in such 
 surviving or new insurance corporation, as the case may be, 
 without further act or deed; 

    (5) The surviving or new insurance corporation shall be 
 responsible for all the liabilities and obligations of each of 
 the insurance corporations merged or consolidated, in accordance 
 with the terms of the agreement for merger or consolidation; but 
 the rights of the creditors of the constituent insurance 
 corporations, or of any persons dealing with such insurance 
 corporations shall not be impaired by such merger or 
 consolidation, and any claim existing or action or proceeding 
 pending by or against any of the constituent insurance 
 corporations may be prosecuted to judgment as if the merger or 
 consolidation had not taken place, or the surviving or new 
 insurance corporation may be proceeded against or substituted in 
 its place. 

    Subd. 5.    Nonconsenting shareholders.  (1) When an 
 insurance corporation having capital stock has become a party to 
 a merger or consolidation agreement, as hereinbefore provided, 
 any shareholder of such an insurance corporation who voted 
 against the merger or consolidation at the meeting at which it 
 was authorized, may, at any time within 20 days after such 
 authorization was given, object thereto in writing and demand 
 payment for the shares held. 

    (2) If, after such a demand by a shareholder, the insurance 
 corporation and the shareholder cannot agree upon the value of 
 the shares at the time the merger or consolidation was 
 authorized, such value shall be ascertained by three 
 disinterested persons, one of whom shall be named by the 
 shareholder, another by the insurance corporation and the third 
 by the two thus chosen.  The finding of the appraisers shall be 
 final, and if their award is not paid by the insurance 
 corporation within 30 days after it is made, it may be recovered 
 in an action by the shareholder against the insurance 
 corporation.  The liability of the insurance corporation to the 
 dissenting shareholder for the value of the shares so agreed 
 upon or awarded shall also be a liability of the surviving or 
 new insurance corporation, as the case may be.  Upon payment by 
 the insurance corporation or by the surviving or new corporation 
 to the shareholder of the agreed or awarded price of the shares, 
 the shareholder shall forthwith transfer and assign the shares 
 held at, and in accordance with, the request of the corporation. 

    (3) A shareholder shall not be entitled to payment for 
 shares under the provisions of this subdivision unless the value 
 of the corporate assets which would remain after such payment 
 would be at least equal to the aggregate amount of its debts and 
 liabilities including outstanding capital stock. 

    Subd. 6.    Disclosure of expenses; prohibitions and 
 penalty.  All actual expenses and costs incident to 
 proceedings under the provisions of this section shall be paid 
 by the surviving or new company and an itemized statement of the 
 expenses and costs shall be filed with the commissioner prior to 
 formal approval.  No officer of any such company or employee of 
 the department of commerce, shall receive any compensation, 
 gratuity or otherwise, directly or indirectly, for in any manner 
 aiding, promoting, or assisting in such consolidation or merger. 

    Any officer, director, or stockholder of any company, or 
 any employee of the state, violating, or consenting to the 
 violation of, the provisions of this subdivision shall be 
 punished by a fine of not less than $20,000 and by imprisonment 
 for not less than one year. 

    HIST: 1967 c 395 art 1 s 16; 1973 c 521 s 1; 1976 c 181 s 2; 
 1983 c 289 s 114 subd 1; 1984 c 628 art 3 s 11; 1984 c 655 art 1 
 s 92; 1986 c 444; 1999 c 177 s 13-15 

     60A.161 Insurer domestication and conversion. 

    Subdivision 1.    Approval as a domestic insurer.  Any 
 insurer that is organized under the laws of any other state and 
 is admitted to do business in this state for the purpose of 
 writing insurance may become a domestic insurer of this state by 
 complying with all of the requirements of law relative to the 
 organization and licensing of a domestic insurer of the same 
 type and by designating its principal place of business at a 
 place in this state.  The domestic insurer will be entitled to 
 like certificates and licenses to transact business in this 
 state and is subject to the authority and jurisdiction of this 
 state. 

    Subd. 2.    Conversion to foreign insurer.  A domestic 
 insurer of this state may, upon the approval of the 
 commissioner, transfer its domicile to any other state in which 
 it is admitted to transact the business of insurance, and upon 
 the transfer shall cease to be a domestic insurer and shall be 
 admitted to this state if qualified as a foreign insurer.  The 
 commissioner shall approve any proposed transfer unless the 
 commissioner determines that the transfer is not in the interest 
 of the policyholders of this state. 

    Subd. 3.    Effects.  The certificate of authority, 
 agents appointments and licenses, rates, policy forms, and other 
 items which the commissioner of commerce allows, in the 
 commissioner's discretion, which are in existence at the time 
 any insurer licensed to transact the business of insurance in 
 this state transfers its corporate domicile to this or any other 
 state by redomestication, merger, consolidation, or any other 
 lawful method shall continue in full force and effect upon such 
 transfer if such insurer remains duly qualified to transact the 
 business of insurance in this state.  All outstanding policies 
 of any transferring insurer remain in full force and effect and 
 need not be endorsed as to the new name of the company or its 
 new location unless so ordered by the commissioner.  However, 
 every transferring insurer shall notify the commissioner of the 
 details of the proposed transfer and shall file promptly 
 resulting amendments to corporate documents filed or required to 
 be filed with the commissioner. 

    Subd. 4.    Authority to adopt rules.  The commissioner 
 of commerce may adopt rules to carry out the purposes of this 
 section. 

    HIST: 1990 c 424 s 1 

    60A.17 Subdivision 1.  Repealed, 1992 c 564 art 3 s 
 30 

    Subd. 1a.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 1b.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 1c.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 1d.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 2.  Repealed, 1981 c 307 s 22 

    Subd. 2a.  Repealed, 1981 c 307 s 22 

    Subd. 2b.  Repealed, 1981 c 307 s 22 

    Subd. 2c.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 2d.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 3.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 4.  Repealed, 1981 c 307 s 22 

    Subd. 5.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 5a.  Repealed, 1981 c 307 s 22 

    Subd. 5b.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 6.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 6a.  Repealed, 1981 c 307 s 22 

    Subd. 6b.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 6c.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 6d.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 7.  Repealed, 1981 c 307 s 22 

    Subd. 7a.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 8.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 8a.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 9.  Repealed, 1981 c 307 s 22 

    Subd. 9a.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 10.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 11.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 12.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 13.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 14.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 15.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 16.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 17.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 18.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 19.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 20.  Repealed, 1992 c 564 art 3 s 30 

    Subd. 21.  Repealed, 1992 c 564 art 3 s 30 

  60A.1701 Renumbered 60K.19 

     60A.171 Rehabilitation and cancellation of independent 
  agent contracts by insurance companies. 

    Subdivision 1.  (a) After an agency contractual 
 relationship has been in effect for a period of three years, an 
 insurance company writing fire or casualty loss insurance in 
 this state may not terminate the agency contractual relationship 
 with any appointed agent unless the company has attempted to 
 rehabilitate the agent as provided in subdivision 4.  The 
 insurer shall provide written notice of intent to rehabilitate. 

    (b) If the agent and company are not able to reach a 
 mutually acceptable plan of rehabilitation, the company may 
 terminate the agency contractual relationship after providing 
 written notice of termination to the agent at least 90 days in 
 advance. 

    (c) The notice of termination must include the reasons for 
 termination and a copy of the notice of intent to rehabilitate. 

    (d) An insurance company may not terminate an agency 
 contract based upon any of the following: 

    (1) an adverse loss experience for a single year; 

    (2) the geographic location of the agent's auto and 
 homeowners insurance business; or 

    (3) the performance of obligations required of an insurer 
 under Minnesota Statutes. 

    Subd. 2.  The company shall at the request of the agent 
 renew any insurance contract written by the agent for the 
 company for not more than one year for fire or casualty loss 
 insurance during a period of nine months after the effective 
 date of the termination, but in the event any risk does not meet 
 current underwriting standards of the company, the company may 
 decline its renewal, provided that the company shall give the 
 agent not less than 60 days' notice of its intention not to 
 renew the contract of insurance. 

    Subd. 3.  No new insurance or bond contract shall be 
 written by the agent for the company after the effective date of 
 the termination without the written approval of the company.  
 The agent may increase liability on renewal or in force business 
 for not more than one year for the insured after the effective 
 date of the termination if the increased liability meets the 
 current underwriting standards of the company. 

    Subd. 3a.  Renumbered subd 4 

    Subd. 4.  MS 1990 Renumbered subd 5 

    Subd. 4.  (a) Before notice of termination of the agency 
 contract, the company shall negotiate in good faith in an effort 
 to reach mutual agreement with the agent on a written plan for 
 rehabilitation. 

    (b)  The rehabilitation plan must be in writing and must 
 contain the following elements: 

    (1) identification by the company of the problem areas 
 which need rehabilitation; 

    (2) what the agent must do to avoid termination; 

    (3) how the company intends to assist the agent to avoid 
 termination; 

    (4) the mutually agreed upon corrective action to be 
 undertaken by the agent and the specific target dates for 
 accomplishment; 

    (5) periodic meeting dates at which the status of 
 rehabilitation will be reviewed; and 

    (6) the term of the written plan which must extend for at 
 least one year. 

    (c) All agency contracts in existence on May 13, 1987, are 
 subject to the rehabilitation requirement under subdivision 1.  
 The rehabilitation plan need not be incorporated into the agency 
 contract. 

    Subd. 5.  MS 1990 Renumbered subd 6 

    Subd. 5.  Nothing contained in this section prohibits the 
 earlier termination of an amendment or addendum subsequent to 
 the inception date of the original agency agreement provided 
 that the subsequent amendment or addendum provides for 
 termination on shorter notice and the agent agrees in writing to 
 the earlier termination. 

    Subd. 6.  MS 1990 Renumbered subd 7 

    Subd. 6.  During the term of the contract the company shall 
 not refuse to renew such business from the agent as would be in 
 accordance with the company's current underwriting standards. 

    Subd. 7.  MS 1990 Renumbered subd 8 

    Subd. 7.  The provisions of this section do not apply to 
 the termination of an agent's contract for insolvency, 
 abandonment, gross and willful misconduct, or failure to pay 
 over to the company money due to the company after receipt by 
 the agent of a written demand therefor, or after revocation of 
 the agent's license by the commissioner of commerce.  This 
 section does not apply to the termination of an agent's contract 
 if the agent is directly employed by the company or if the agent 
 writes 80 percent or more of the agent's gross annual insurance 
 business for one company or any or all of its subsidiaries. 

    Subd. 8.  MS 1990 Renumbered subd 9 

    Subd. 8.  All future and presently existing agency 
 contractual relationships between an agent and a company writing 
 fire or casualty loss insurance in this state are subject to the 
 provisions of this section. 

    Subd. 9.  If it is found, after notice and an opportunity 
 to be heard as determined by the commissioner of commerce, that 
 an insurance company has violated this section, the insurance 
 company shall be subject to a civil action by the agent for 
 actual damages suffered because of the premature termination of 
 the contract by the company.  The commissioner of commerce shall 
 employ the department's investigative and enforcement authority 
 if the commissioner has a reason to believe that an insurer has 
 violated this section.  An insurer found in violation of this 
 section is subject to a civil penalty imposed by the 
 commissioner not to exceed $10,000 per violation. 

    Subd. 10.  In the event that a company's compliance with 
 this section is demonstrated to the satisfaction of the 
 commissioner to represent a hazard or potential hazard to the 
 financial integrity of the company, the commissioner may, after 
 a hearing, issue an order relieving the company from its 
 obligation to provide the renewal policies otherwise required by 
 this section. 

    Subd. 11.  Upon termination of an agency, a company is 
 prohibited from soliciting business in the notice of nonrenewal 
 required by section 60A.37. 

    Subd. 12.  For purposes of this section, a cancellation or 
 termination of an agent's contract is considered to have 
 occurred if the company cancels a line of insurance business or 
 a volume of insurance business that equals or exceeds 75 percent 
 of the insurance business placed by that agent with the company. 

    HIST: 1977 c 287 s 1; 1983 c 289 s 114 subd 1; 1984 c 655 art 
 1 s 92; 1986 c 444; 1987 c 92 s 1-3; 1991 c 39 s 1; 1996 c 446 
 art 1 s 4,5 

     60A.172 Insurance agency contracts; cancellation. 

    (a) An insurer may not cancel a written agreement with an 
 agent or reduce or restrict an agent's underwriting authority 
 with respect to property or casualty insurance, based solely on 
 the loss ratio experience on that agent's book of business, if:  
 the insurer required the agent to submit the application for 
 underwriting approval, all material information on the 
 application was fully completed, and the agent has not omitted 
 or altered any information provided by the applicant. 

    (b) For purposes of this section, "loss ratio experience" 
 means the ratio of claims paid divided by the premiums paid. 

    (c) This section applies only to agents who write 80 
 percent or more of their gross annual insurance business for one 
 company or any or all of its subsidiaries, and are not in the 
 direct employ of the company. 

    HIST: 1987 c 288 s 1; 1989 c 170 s 1; 1992 c 379 s 1 

     60A.173 Effective date. 

    Section 60A.172 is effective January 1, 1987, and applies 
 to cancellations begun as of that date.  As a condition of doing 
 business in the state of Minnesota, an insurer shall promptly 
 reinstate any agreements canceled under section 60A.172 and 
 shall restore any authority reduced or restricted under section 
 60A.172 from January 1, 1987, until May 29, 1987. 

    HIST: 1987 c 288 s 2 

     60A.174 Severability. 

    If section 60A.173 is determined by a final, nonappealable 
 order of any Minnesota or federal court of competent 
 jurisdiction to be invalid or unconstitutional, section 60A.172 
 is effective May 29, 1987. 

    HIST: 1987 c 288 s 3 

     60A.175 Agent commissions. 

    (a) An insurer that cancels a written agreement with an 
 agent under section 60A.171 or 60A.172 or cancels a line of 
 business sold by the agent must pay to the agent all 
 commissions, bonuses, and other compensation earned by that 
 agent prior to or after termination.  The commission rate must 
 be the rate in effect at the time of the notice of termination. 

    (b) An insurer may not reduce agent commissions, bonuses, 
 or other compensation contained in written agreements without 
 first providing written notice of the change to the agent at 
 least 180 days before its effective date. 

    HIST: 1989 c 170 s 2; 1991 c 39 s 2 

     60A.176 Definitions. 

    Subdivision 1.    Application.  The definitions in this 
 section apply to this section and section 60A.177. 

    Subd. 2. Repealed, 1991 c 207 s 8 

    Subd. 3.    Agent.  "Agent" means an agent who is not an 
 employee of the insurer, who has an agency contractual 
 relationship that has been in effect for five or more years, and 
 who writes 80 percent or more of the agent's business through 
 one insurer or its subsidiaries. 

    Subd. 4.    Insurer.  "Insurer" means an insurance 
 company writing property or casualty loss insurance in this 
 state through agents. 

    HIST: 1990 c 457 s 1; 1991 c 207 s 1 

     60A.177 Involuntary termination of an agent by the 
  insurer. 

    Subdivision 1.    Termination review process.  An 
 insurer shall establish a termination review process for an 
 agent involuntarily terminated by the insurer.  The review 
 process is available for use at the option of the agent.  The 
 review process must be completed within 15 days of the request 
 or before the date of termination, whichever is later. 

    Subd. 2.    Notice; hearing.  If an agent is terminated 
 by an insurer, the agent may request a hearing before the board 
 of review.  If an insurer initiates the termination of an 
 agent's agreement, the written notice of termination must advise 
 the agent of the agent's right to a hearing before the board of 
 review.  Upon receipt of an agent's request for a hearing, the 
 commissioner shall establish a hearing date within 30 days of 
 the request or longer with the approval of the agent and the 
 insurer.  The agent and the insurer shall be notified in writing 
 of the date, time, and place of the hearing.  The hearing 
 provided for under this section is not subject to chapter 14.  
 The review board shall provide the parties to the hearing with 
 an opportunity to present evidence and arguments in support of 
 their respective positions. 

    Subd. 3.    Board of review.  A three-member board of 
 review shall be selected from a list of ten agents and ten 
 insurer representatives compiled by the commissioner.  One 
 member shall be selected by the agent and one by the insurer.  
 The third member shall be mutually agreed upon by both parties.  
 If the parties do not agree upon a third member, the 
 commissioner shall request the American Arbitration Association 
 to provide the commissioner with three names of potential 
 members.  If the American Arbitration Association declines to 
 provide the names, the commissioner of the bureau of mediation 
 services shall provide the names.  The agent member and the 
 insurer member shall each strike one person from the list.  The 
 remaining person shall be selected as the third member of the 
 review board.  The insurer and the agent shall each pay one-half 
 of the fee charged by the third member.  The board member 
 selected by the agent may not be a relative of the agent.  The 
 board members selected by the agent and insurer may not be 
 presently or formerly associated with an insurer represented by 
 the agent.  An insurer is immune from civil liability to the 
 agent for disclosures made at the hearing.  This immunity does 
 not extend to disclosures made in bad faith or with knowledge of 
 their falseness. 

    Subd. 4.    Board's determination.  Upon completion of 
 the hearing, the board of review shall determine if the 
 termination of the agent's agreement is justified.  If in the 
 opinion of the board of review an involuntary termination is not 
 justified, and in the absence of a reasonable contractual 
 financial provision for termination as determined by the board, 
 the board shall order the insurer to pay an amount of 
 compensation that the board considers appropriate to the agent. 

    If in the opinion of the board of review a voluntary 
 termination was not voluntary and the insurer is not justified 
 in terminating the agent's agreement, and in the absence of a 
 reasonable contractual financial provision for termination as 
 determined by the board, the board shall order the insurer to 
 pay an amount of compensation that the board considers 
 appropriate to the agent. 

    Subd. 5.    Appeal.  A final determination of the board 
 of review under subdivision 4 may be appealed to district court 
 by either party for a trial de novo.  If the insurer appeals and 
 the agent prevails, the insurer is responsible for the agent's 
 legal fees as approved by the court. 

    Subd. 6.    Civil penalty.  A person who intimidates or 
 coerces a member of the board of review is subject to a civil 
 penalty imposed by the commissioner in an amount not to exceed 
 $25,000. 

    Subd. 7.    Exemption.  This section does not apply to 
 an agent whose license has expired, is revoked, or is currently 
 under suspension. 

    Subd. 8.    Administrative penalties.  Failure to comply 
 with a final order or determination of the review board 
 constitutes a basis for disciplinary action under section 
 45.027, subdivision 7. 

    HIST: 1990 c 457 s 2; 1991 c 207 s 2-5; 1992 c 379 s 2 

     60A.178 Life or health insurance sales quotas. 

    No insurer, its officers, or managers shall require 
 licensed property and casualty agents to sell a specified number 
 of life or health insurance policies or a specified dollar 
 amount of life and health insurance as a condition of selling 
 property-casualty insurance.  No insurer, its officers, or 
 managers may reduce or restrict an agent's underwriting 
 authority on property-casualty insurance policies based upon the 
 sale of life or health insurance.  The provisions of this 
 section do not apply to agents who are directly employed by the 
 insurer or who write 80 percent or more of their gross annual 
 insurance business for one company or any or all of its 
 subsidiaries. 

    HIST: 1995 c 152 s 1 

     60A.179 Life or health insurance sales quotas for 
  exclusive agents. 

    Subdivision 1.    Application.  This section applies to 
 licensed insurance agents as defined by section 60A.176. 

    Subd. 2.    Prohibited practice.  No insurer shall 
 require an agent who has been licensed as an agent three years 
 or more to sell a specified number of life or health insurance 
 policies or a specified dollar amount of life and health 
 insurance in relation to the sale of other insurance products.  
 No insurer may terminate an agent's contract or reduce or 
 restrict an agent's underwriting authority on property and 
 casualty insurance policies based upon the sale of life or 
 health insurance. 

    HIST: 1996 c 446 art 1 s 6 

     60A.18 Sale by vending machines; scope and requirements. 

    Subdivision 1.    General requirement.  No insurance 
 shall be offered for sale, issued or sold by or from any vending 
 machine or appliance or any other medium, device or object 
 designed or used for vending purposes, herein called a device, 
 except as provided in this section.  

    Subd. 2.    Conditions.  Resident insurance agents and 
 solicitors licensed under this section to solicit for and to 
 sell policies of personal travel accident insurance providing 
 benefits for accidental bodily injury or accidental death may 
 also solicit applications for and issue or sell such insurance 
 by means of devices supervised by them and placed in locations 
 for convenience of the traveling public, upon the following 
 conditions only: 

    (1) That each policy to be sold by or from a device is 
 reasonably suited for sale and issuance through a device, and 
 that use of such device therefor in a particular proposed 
 location would be of material convenience to the traveling 
 public; 

    (2) That the type of device proposed to be used is 
 reasonably suitable and practical for the purpose; 

    (3) That reasonable means, as determined by the 
 commissioner, are provided for informing the prospective 
 purchaser of any such policy of the benefits, limitations and 
 exclusions of the policy, the premium rates therefor, the name 
 and address of the agent and the name and home office address of 
 the insuring company; 

    (4) That such device shall be so constructed and operated 
 that it shall retain, or shall be provided with a suitable place 
 for deposit and safe keeping of, a copy of the application, 
 which shall show the date of the application, name and address 
 of the applicant and the beneficiary, and the amount of 
 insurance; 

    (5) That no policy of insurance sold by or from a device 
 shall be for a period of time longer than the duration of a 
 specified one-way trip or round trip of not to exceed 180 days; 

    (6) That such device shall have provided on it or 
 immediately adjacent thereto, in a prominent location, adequate 
 envelopes for use of purchasers in mailing policies vended 
 through such device, or that the policy itself, if designed to 
 permit such procedure, may be mailed without an envelope; 
 provided, however, the commissioner may in writing delivered to 
 the agent modify or waive these requirements; 

    (7) That each such device shall be supervised, inspected 
 and tested by the agent with such frequency as may reasonably be 
 necessary or as may reasonably be required by the commissioner, 
 and should any device not be in good working condition the agent 
 shall promptly cause a notice to be displayed thereon that the 
 same is out of order, and cause said device to be promptly 
 removed from service until it is in proper working order; 

    (8) That prompt refund by the agent is provided to each 
 applicant or prospective applicant of money deposited in any 
 defective device and for which no insurance, or a less amount 
 than paid for, is actually received; 

    (9) In addition to, and without limiting the general powers 
 of the commissioner to regulate and supervise insurance business 
 in this state, the commissioner may establish such other and 
 additional rules for types and locations of devices authorized 
 hereunder, their maintenance and operation and the methods to be 
 used by the agent in the solicitation and sale of insurance by 
 means of such devices as shall be reasonable and necessary.  

    Subd. 3.    License, application, contents.  The 
 application for a license for each device to be used shall be 
 made by the agent in such form and with such information as 
 shall be prescribed by the commissioner.  A fee of $20 for each 
 device shall be paid at the time of making application.  Upon 
 approval of the application, the commissioner shall issue to the 
 agent a special vending machine license.  The license shall 
 apply to a specific device or to any device of identical type 
 which, after written notice by the agent to the commissioner, is 
 substituted for it.  The license shall specify the name and 
 address of the agent, the name and home office address of the 
 insuring company, the name or other identifying information of 
 the policy or policies to be sold, the serial number or other 
 identification of the device and the address, including the 
 location on the premises, where the device is to be in 
 operation; provided, however, that a device for which a license 
 has been issued for operation at a specific address may be 
 transferred to a different address during the license year upon 
 written notice to the commissioner at the time of such 
 transfer.  The license for each device shall expire on May 31st 
 of each year, but may be renewed from year to year by the 
 commissioner upon approval of the application by the agent and 
 the furnishing of such information as shall be requested by the 
 commissioner, and the payment of $20 for each license year or 
 part thereof for each device.  Proof of the existence of a 
 subsisting license shall be displayed on or about each such 
 device in use in such manner as the commissioner may reasonably 
 require.  

    Subd. 4.    Suspension or revocation of license.  The 
 license for each device shall be subject to expiration, 
 suspension or revocation coincidentally with that of the agent 
 or the insuring company.  The commissioner also may suspend or 
 revoke the license as to any device concerning which the 
 commissioner finds any conditions upon which the device was 
 licensed as referred to in subdivision 2 have been violated, or 
 no longer exist, or that the device is being used or operated by 
 the agent in violation of the laws of this state; provided, that 
 before suspending or revoking a license for a device, the 
 commissioner shall conduct a hearing in the manner prescribed in 
 chapter 72A, and shall make a determination upon the basis of 
 the standards, conditions and requirements of this section.  

    HIST: 1967 c 395 art 1 s 18; 1984 c 592 s 37; 1985 c 248 s 70; 
 1986 c 444 

     60A.19 Foreign companies. 

    Subdivision 1.    Requirements.  Any insurance company 
 of another state, upon compliance with all laws governing such 
 corporations in general and with the foregoing provisions so far 
 as applicable and the following requirements, shall be admitted 
 to do business in this state: 

    (1) It shall deposit with the commissioner a certified copy 
 of its charter or certificate of incorporation and its bylaws, 
 and a statement showing its financial condition and business, 
 verified by its president and secretary or other proper 
 officers; 

    (2) It shall furnish the commissioner satisfactory evidence 
 of its legal organization and authority to transact the proposed 
 business and that its capital, assets, deposits with the proper 
 official of its own state, amount insured, number of risks, 
 reserve and other securities, and guaranties for protection of 
 policyholders, creditors, and the public, comply with those 
 required of like domestic companies; 

    (3) By a duly executed instrument filed in the office of 
 the commissioner, it shall appoint the commissioner and 
 successors in office its lawful attorneys in fact and therein 
 irrevocably agree that legal process in any action or proceeding 
 against it may be served upon them with the same force and 
 effect as if personally served upon it, so long as any of its 
 liability exists in this state; 

    (4) It shall appoint, as its agents in this state, 
 residents thereof, and obtain from the commissioner a license to 
 transact business; 

    (5) Regardless of what lines of business an insurer of 
 another state is seeking to write in this state, the lines of 
 business it is licensed to write in its state of incorporation 
 shall be the basis for establishing the financial requirements 
 it must meet for admission in this state or for continuance of 
 its authority to write business in this state; 

    (6) No insurer of another state shall be admitted to do 
 business in this state for a line of business that it is not 
 authorized to write in its state of incorporation, unless the 
 statutes of that state prohibit all insurers from writing that 
 line of business. 

    Subd. 2.    Service of garnishee process.  When 
 garnishee process is served upon the commissioner, as attorney 
 for any insurance company, no garnishee fee shall be paid the 
 commissioner.  After the receipt of copy of the process the 
 insurance company may demand of the attorney of the person 
 making the garnishee the proper fees, and if the demand is not 
 complied with before the day fixed for the disclosure of the 
 garnishee, the proceeding may be dismissed. 

    Subd. 3.    Commissioner appointed attorney for service of 
 process.  Before any corporation, association, or company 
 issuing policies of insurance of any character and not organized 
 or existing pursuant to the laws of this state is admitted to or 
 authorized to transact the business of insurance in this state, 
 it shall, by a duly executed instrument to be filed in the 
 office of the commissioner, constitute and appoint the 
 commissioner and successors in office its true and lawful 
 attorney, upon whom proofs of loss, any notice authorized or 
 required by any contract with the company to be served on it, 
 summonses and all lawful processes in any action or legal 
 proceeding against it may be served, and that the authority 
 thereof shall continue in force irrevocable so long as any 
 liability of the company remains outstanding in this state. 

    This instrument shall contain a provision and agreement 
 declaring that the company, association, or corporation desires 
 to transact the business of insurance in this state, and that it 
 will accept a license therefor according to the laws of this 
 state. 

    In case of the failure of any such insurance company to 
 comply with any of the provisions of this subdivision and 
 subdivision 4, or if it shall violate any of the conditions or 
 agreements contained in the instrument filed, its right to 
 transact insurance business in this state shall cease and it 
 shall be the duty of the commissioner to immediately declare its 
 license revoked; and, in case of revocation, the company shall 
 not be again licensed to transact business in this state for the 
 period of one year from date of the revocation. 

    Subd. 4.    Service of process.  The service of process 
 authorized by this section shall be made in compliance with 
 section 45.028, subdivision 2.  

    Subd. 5.    Provision as to alien companies.  (1)   
 Deposit.  Such company of any foreign country, except 
 fraternal benefit societies, shall not be admitted until, 
 besides complying with the foregoing requirements, it has made a 
 deposit with the commissioner in accordance with section 60A.10, 
 subdivision 4, or with the proper officer of some other state of 
 the United States, of a sum not less than the deposit required 
 of a like company by the laws of this state and this deposit 
 shall be of the same class of securities and subject to the same 
 limitations required for the deposit of domestic companies that 
 must by law maintain a deposit. 

    This deposit shall be in exclusive trust for all its 
 policyholders and creditors in the United States, and for all 
 purposes of the insurance laws shall be deemed assets of the 
 company. 

    (2)   Trustees, investments and funds.  Any company of 
 a foreign country may duly appoint one or more citizens of the 
 United States, approved by the commissioner, to hold funds or 
 other property for the benefit of its policyholders and 
 creditors therein.  A certified copy of their appointment and of 
 the instrument of trust shall be filed with the commissioner, 
 who shall have the same authority in the premises as in the case 
 of the affairs of all companies. These funds shall be invested 
 in the same securities as required of other insurance companies 
 and, together with the deposits required, shall constitute the 
 assets of the company in respect to its policyholders and 
 creditors in the United States. 

    Subd. 6.    Retaliatory provisions.  (1) When by the 
 laws of any other state or country any taxes, fines, deposits, 
 penalties, licenses, or fees, in addition to or in excess of 
 those imposed by the laws of this state upon foreign insurance 
 companies and their agents doing business in this state, are 
 imposed on insurance companies of this state and their agents 
 doing business in that state or country, or when any conditions 
 precedent to the right to do business in that state are imposed 
 by the laws thereof, beyond those imposed upon these foreign 
 companies by the laws of this state, the same taxes, fines, 
 deposits, penalties, licenses, fees, and conditions precedent 
 shall be imposed upon every similar insurance company of that 
 state or country and their agents doing or applying to do 
 business in this state so long as these foreign laws remain in 
 force.  Special purpose obligations or assessments, including 
 assessments by an insurance guaranty association, joint 
 underwriting association or similar organization, or assessments 
 imposed in connection with particular kinds of insurance, are 
 not taxes, licenses, or fees as these terms are used in this 
 section. 

    (2) In the event that a domestic insurance company, after 
 complying with all reasonable laws and rulings of any other 
 state or country, is refused permission by that state or country 
 to transact business therein after the commissioner of commerce 
 of Minnesota has determined that that company is solvent and 
 properly managed and after the commissioner has so certified to 
 the proper authority of that other state or country, then, and 
 in every such case, the commissioner may forthwith suspend or 
 cancel the certificate of authority of every insurance company 
 organized under the laws of that other state or country to the 
 extent that it insures, or seeks to insure, in this state 
 against any of the risks or hazards which that domestic company 
 seeks to insure against in that other state or country.  Without 
 limiting the application of the foregoing provision, it is 
 hereby determined that any law or ruling of any other state or 
 country which prescribes to a Minnesota domestic insurance 
 company the premium rate or rates for life insurance issued or 
 to be issued outside that other state or country shall not be 
 reasonable. 

    (3) This section does not apply to insurance companies 
 organized or domiciled in a state or country, the laws of which 
 do not impose retaliatory taxes, fines, deposits, penalties, 
 licenses, or fees or which grant, on a reciprocal basis, 
 exemptions from retaliatory taxes, fines, deposits, penalties, 
 licenses, or fees to insurance companies domiciled in this state.

    Subd. 7.    Policy not invalidated by occurrence of 
 hostilities.  No policy of insurance issued to a resident of 
 this state shall be invalidated by the occurrence of hostilities 
 between any foreign country and the United States. 

    Subd. 8.    Insurance from unlicensed foreign companies. 
  Any person, firm, or corporation desiring to obtain insurance 
 upon any property, interests, or risks of any nature other than 
 life insurance in this state in companies not authorized to do 
 business therein shall give bond to the commissioner of commerce 
 in such sum as the commissioner shall deem reasonable, with 
 satisfactory resident sureties, conditioned that the obligors, 
 on the expiration of a license to obtain such insurance, shall 
 pay to the commissioner of revenue, for the use of the state, a 
 tax of two percent upon the gross premiums paid by the 
 licensee.  Thereupon the commissioner of commerce shall issue 
 such license, good for one year, and all insurance procured 
 thereunder shall be lawful and valid and the provisions of all 
 policies thereof shall be deemed in accordance, and construed as 
 if identical in effect, with the standard policy prescribed by 
 the laws of this state and the insurers may enter the state to 
 perform any act necessary or proper in the conduct of the 
 business.  This bond may be enforced by the commissioner of 
 commerce in the commissioner's name in any district court.  The 
 licensee shall file with the commissioner of commerce on June 30 
 and December 31 annually a verified statement of the aggregate 
 premiums paid and returned premiums received on account of such 
 insurance. 

    The commissioner of revenue, or duly authorized agents, may 
 conduct investigations, inquiries, and hearings to enforce the 
 tax imposed by this subdivision and, in connection with those 
 investigations, inquiries, and hearings, the commissioner and 
 duly authorized agents have all the powers conferred by section 
 270.06. 

    HIST: 1967 c 395 art 1 s 19; 1969 c 291 s 3; 1971 c 145 s 21; 
 1974 c 425 s 4; 1977 c 195 s 2; 1978 c 465 s 7; 1983 c 289 s 114 
 subd 1; 1984 c 592 s 38,39; 1984 c 609 s 3; 1984 c 655 art 1 s 
 92; 1986 c 444; 1Sp1989 c 1 art 10 s 4; 1991 c 291 art 9 s 2; 
 1992 c 511 art 7 s 2; 1992 c 564 art 1 s 54; art 2 s 3; 1994 c 
 485 s 10; 1994 c 632 art 4 s 24; 1999 c 177 s 16; 1999 c 243 art 
 7 s 1 

     60A.195 Citation. 

    Sections 60A.195 to 60A.209 shall be known and may be cited 
 as the Minnesota Surplus Lines Insurance Act.  

    HIST: 1981 c 221 s 1 

     60A.196 Definitions. 

    Unless the context otherwise requires, the following terms 
 have the meanings given them for the purposes of sections 
 60A.195 to 60A.209: 

    (a) "Surplus lines insurance" means insurance placed with 
 an insurer permitted to transact the business of insurance in 
 this state only pursuant to sections 60A.195 to 60A.209. 

    (b) "Eligible surplus lines insurer" means an insurer 
 recognized as eligible to write insurance business under 
 sections 60A.195 to 60A.209 but not licensed by any other 
 Minnesota law to transact the business of insurance.  

    (c) "Ineligible surplus lines insurer" means an insurer not 
 recognized as an eligible surplus lines insurer pursuant to 
 sections 60A.195 to 60A.209 and not licensed by any other 
 Minnesota law to transact the business of insurance.  
 "Ineligible surplus lines insurer" includes a risk retention 
 group as defined under the Liability Risk Retention Act, Public 
 Law Number 99-563. 

    (d) "Surplus lines licensee" or "licensee" means a person 
 licensed under sections 60A.195 to 60A.209 to place insurance 
 with an eligible or ineligible surplus lines insurer.  

    (e) "Association" means an association registered under 
 section 60A.208.  

    (f) "Alien insurer" means any insurer which is incorporated 
 or otherwise organized outside of the United States.  

    (g) "Insurance laws" means chapters 60 to 79 inclusive.  

    HIST: 1981 c 221 s 2; 1987 c 337 s 11 

     60A.197 Rates and forms. 

    (a) Rates used by eligible and ineligible surplus lines 
 insurers shall not be subject to the insurance laws except that 
 a rate shall not be unfairly discriminatory.  

    (b) Forms used by eligible and ineligible surplus lines 
 insurers pursuant to sections 60A.195 to 60A.209 shall not be 
 subject to the insurance laws, except that a policy shall not 
 contain language which misrepresents the true nature of the 
 policy or class of policies.  

    HIST: 1981 c 221 s 3 

     60A.198 Transaction of surplus lines insurance. 

    Subdivision 1.    License required.  A person shall not 
 act in any other manner as an agent or broker in the transaction 
 of surplus lines insurance unless licensed under sections 
 60A.195 to 60A.209.  

    Subd. 2.    Compliance with statutory provisions.  A 
 person shall not offer, solicit, make a quotation on, sell, or 
 issue a policy of insurance, binder, or any other evidence of 
 insurance with an eligible or ineligible surplus lines insurer, 
 except in compliance with sections 60A.195 to 60A.209.  

    Subd. 3.    Procedure for obtaining license.  A person 
 licensed as an agent in this state pursuant to other law may 
 obtain a surplus lines license by doing the following:  

    (a) filing an application in the form and with the 
 information the commissioner may reasonably require to determine 
 the ability of the applicant to act in accordance with sections 
 60A.195 to 60A.209; 

    (b) maintaining an agent's license in this state; 

    (c) delivering to the commissioner a financial guarantee 
 bond from a surety acceptable to the commissioner for the 
 greater of the following:  

    (1) $5,000; or 

    (2) the largest semiannual surplus lines premium tax 
 liability incurred by the applicant in the immediately preceding 
 five years; 

    (d) agreeing to file with the commissioner of revenue no 
 later than February 15 and August 15 annually, a sworn statement 
 of the charges for insurance procured or placed and the amounts 
 returned on the insurance canceled under the license for the 
 preceding six-month period ending December 31 and June 30 
 respectively, and at the time of the filing of this statement, 
 paying the commissioner a tax on premiums equal to three percent 
 of the total written premiums less cancellations; 

    (e) paying a fee as prescribed by section 60K.06, 
 subdivision 2, paragraph (a), clause (4); and 

    (f) paying penalties imposed under section 289A.60, 
 subdivision 1, as it relates to withholding and sales or use 
 taxes, if the tax due under clause (d) is not timely paid. 

    Subd. 4.    Licensee's powers.  A surplus lines licensee 
 may do any or all of the following:  

    (a) Place insurance on risks in this state with eligible 
 surplus lines insurers; 

    (b) Place insurance on risks in this state with ineligible 
 surplus lines insurers in strict compliance with section 
 60A.209.  If the insurance is provided through the participation 
 of several surplus lines insurers and the licensee has reason to 
 believe that a substantial portion of the insurance would be 
 assumed by eligible surplus lines insurers, then with respect to 
 the ineligible surplus lines insurers, the insured or the 
 insured's representative shall be informed as provided in 
 section 60A.209, subdivision 1, clause (a); or 

    (c) Engage in any other acts expressly or implicitly 
 authorized by sections 60A.195 to 60A.209 and the other 
 insurance laws.  

    Subd. 5.    Disclosures.  Before placement of insurance 
 with an eligible surplus lines insurer, a surplus lines licensee 
 shall inform an insured or the insured's representative that 
 coverage may be placed in conformance with sections 60A.195 to 
 60A.209 with an insurer not licensed in this state and that 
 payment of loss is not guaranteed in the event of insolvency of 
 the eligible surplus lines insurer.  

    Subd. 6.    Allocation of premiums according to location 
 of subject matter.  If the insurance described in subdivision 
 4 also covers a subject of insurance residing, located, or to be 
 performed outside this state, for the purposes of this section, 
 a proper pro rata portion of the entire premium payable for all 
 of that insurance must be allocated according to the subjects of 
 insurance residing, located, or to be performed in this state. 

    HIST: 1981 c 221 s 4; 1983 c 328 s 7; 1984 c 592 s 40; 1986 c 
 444; 1987 c 337 s 12; 1989 c 260 s 6; 1990 c 480 art 6 s 2; 1993 
 c 375 art 10 s 4; 1994 c 632 art 4 s 25 

     60A.199 Examinations; payment of taxes. 

    Subdivision 1.    Examination of books and records.  If 
 the commissioner considers it necessary, the commissioner may 
 examine the books and records of a surplus lines licensee to 
 determine whether the licensee is conducting business in 
 accordance with sections 60A.195 to 60A.209.  For the purposes 
 of facilitating examinations, the licensee shall allow the 
 commissioner free access at reasonable times to all of the 
 licensee's books and records relating to the transactions to 
 which sections 60A.195 to 60A.209 apply.  If an examination is 
 conducted, the cost of the examination shall be paid by the 
 surplus line agent or agency. 

    Subd. 2.    Examination of returns; assessment; refunds. 
  The commissioner of revenue shall, as soon as practicable 
 after a return required by section 60A.198 is filed, examine it 
 and make any investigation or examination of the licensee's 
 records and accounts that the commissioner deems necessary for 
 determining the correctness of the return.  The tax computed by 
 the commissioner on the basis of the examination and 
 investigation is the tax to be paid by the licensee.  If the tax 
 found due is greater than the amount reported due on the 
 licensee's return, the commissioner shall assess a tax in the 
 amount of the excess and the whole amount of the excess shall be 
 paid to the commissioner within 60 days after notice of the 
 amount and demand for its payment is mailed to the licensee by 
 the commissioner.  If the amount of the tax found due by the 
 commissioner is less than that reported due on the licensee's 
 return, the excess shall be refunded to the licensee in the 
 manner provided by this section.  No refund shall be made except 
 as provided in this section after the expiration of 3-1/2 years 
 after the filing of the return.  

    If the commissioner examines returns of a licensee for more 
 than one year, the commissioner may issue one order covering the 
 several years under consideration reflecting the aggregate 
 refund or additional tax due.  

    The notices and demands provided for by this section shall 
 be in the form the commissioner determines, including a 
 statement, and shall contain a brief explanation of the 
 computation of the tax and shall be sent by mail to the licensee 
 at the address given on the return.  If the address is not 
 given, then they will be sent to the last known address. 

    At the request of the commissioner of revenue, the 
 commissioner of commerce may examine and investigate the returns 
 under section 60A.198 that the commissioner of revenue 
 designates.  The commissioner of commerce shall report to the 
 commissioner of revenue the results of the examination in the 
 manner required by the commissioner of revenue. 

    Subd. 3.    Failure to file; false or fraudulent return. 
  If any licensee required by section 60A.198 to file any 
 return fails to do so within the time prescribed or makes, 
 willfully or otherwise, an incorrect, false, or fraudulent 
 return, the licensee must, on the written demand of the 
 commissioner of revenue, file the return, or corrected return, 
 within 60 days after the mailing of the written demand and at 
 the same time pay the whole tax, or additional tax, due on the 
 basis thereof.  If the licensee fails within that time to file 
 the return, or corrected return, the commissioner shall make a 
 return, or corrected return, from personal knowledge and from 
 the information obtainable through testimony, or otherwise, and 
 assess a tax on the basis thereof.  The tax assessed, less any 
 payments theretofore made on account of the tax for the taxable 
 year covered by the return, must be paid within 60 days after 
 the commissioner has mailed to the licensee a written notice of 
 the amount thereof and demand for payment.  Any return or 
 assessment made by the commissioner on account of the failure of 
 the licensee to make a return, or a corrected return, is prima 
 facie correct and valid, and the licensee has the burden of 
 establishing its incorrectness or invalidity in any action or 
 proceeding in respect thereto.  

    Subd. 4.    Failure to file; penalties and interest.  In 
 case of any failure to make and file a return as required by 
 this chapter within the time prescribed by law or prescribed by 
 the commissioner in pursuance of law there shall be added to the 
 tax penalties as provided in section 289A.60, subdivision 2, as 
 it relates to withholding and sales or use taxes.  

    Subd. 5.    Intent to evade tax; penalty.  If any 
 licensee with intent to evade the tax imposed by this chapter, 
 fails to file any return required by this chapter or with such 
 intent files a false or fraudulent return there shall also be 
 imposed on it a penalty as provided in section 289A.60, 
 subdivision 6.  

    Subd. 6.    Negligence or intentional disregard; penalty. 
  If any part of any additional assessment is due to negligence 
 or intentional disregard of the statute or a rule (but without 
 intent to defraud), there shall be added to the tax a penalty as 
 provided in section 289A.60, subdivision 5.  

    Subd. 6a.    Penalty for repeated failures to file returns 
 or pay taxes.  If there is a pattern by a person of repeated 
 failures to timely file returns or timely pay taxes, and written 
 notice is given that a penalty will be imposed if such failures 
 continue, a penalty of 25 percent of the amount of tax not 
 timely paid as a result of each such subsequent failure is added 
 to the tax.  The penalty can be abated under the abatement 
 authority in section 270.07, subdivisions 1, paragraph (e), and 
 6. 

    Subd. 7.    Collection of tax.  The tax required to be 
 paid by section 60A.198 may be collected in any ordinary action 
 at law by the commissioner of revenue against the licensee.  In 
 any action commenced pursuant to this section, upon the filing 
 of an affidavit of default, the court administrator of the 
 district court wherein the action was commenced shall enter 
 judgment for the state for the amount demanded in the complaint 
 together with costs and disbursements. 

    Subd. 8.    Refund procedure; time limit; appropriation. 
  A licensee which has paid, voluntarily or otherwise, or from 
 which there was collected an amount of tax for any year in 
 excess of the amount legally due for that year, may file with 
 the commissioner of revenue a claim for a refund of the excess. 
 Except as provided in subdivision 3, no claim or refund shall be 
 allowed or made after the period prescribed in section 289A.40, 
 subdivision 1.  For this purpose, a return or amended return 
 claiming an overpayment constitutes a claim for refund.  

    Upon the filing of a claim the commissioner shall examine 
 it, shall make written findings thereon denying or allowing the 
 claim in whole or in part, and shall mail a notice thereof to 
 the licensee at the address stated upon the return.  If the 
 claim is allowed in whole or in part, the commissioner shall 
 issue a certificate for a refund of the excess paid by the 
 licensee, with interest at the rate specified in section 270.76 
 computed from the date of the payment of the tax until the date 
 the refund is paid or credit is made to the licensee.  The 
 commissioner of finance shall cause the refund to be paid as 
 other state moneys are expended.  So much of the proceeds of the 
 taxes as is necessary are appropriated for that purpose.  

    Subd. 9.    Denial of claim; court proceedings.  If the 
 claim is denied in whole or in part, the commissioner shall mail 
 an order of denial to the licensee in the manner prescribed in 
 this section.  An appeal from this order may be taken to the 
 Minnesota tax court in the manner prescribed in section 271.06, 
 or the licensee may commence an action against the commissioner 
 to recover the denied overpayment.  The action may be brought in 
 the district court of the district in which lies the county of 
 its principal place of business, or in the district court for 
 Ramsey county.  The action in the district court shall be 
 commenced within 18 months following the mailing of the order of 
 denial to the licensee.  If a claim for refund is filed by a 
 licensee and no order of denial is issued within six months of 
 the filing, the licensee may commence an action in the district 
 court as in the case of a denial, but the action must be 
 commenced within two years of the date that the claim for refund 
 was filed.  

    Subd. 10.    Consent to extend time.  If the 
 commissioner and the licensee have, within the periods 
 prescribed by this section, consented in writing to any 
 extension of time for the assessment of the tax, the period 
 within which a claim for refund may be filed, or a refund may be 
 made or allowed, if no claim is filed, is the period within 
 which the commissioner and the licensee have consented to an 
 extension for the assessment of the tax and six months 
 thereafter. 

    Subd. 11.    Overpayment; refunds.  If the amount 
 determined to be an overpayment exceeds the taxes imposed by 
 section 60A.198, the amount of excess shall be considered an 
 overpayment.  An amount paid as tax shall constitute an 
 overpayment even if in fact there was no tax liability with 
 respect to which the amount was paid.  

    Notwithstanding any other provision of law to the contrary, 
 in the case of any overpayment the commissioner, within the 
 applicable period of limitations, shall refund any balance of 
 more than $10 if the licensee so requests.  

    HIST: 1981 c 221 s 5; 1984 c 592 s 41; 1Sp1985 c 14 art 15 s 
 2; 1986 c 444; 1Sp1986 c 3 art 1 s 82; 1987 c 268 art 2 s 2-10; 
 art 17 s 41; 1990 c 480 art 1 s 46; 1993 c 375 art 10 s 5,6; 
 1995 c 264 art 13 s 2,3 

  60A.20 Repealed, 1981 c 221 s 15 

     60A.201 Placement of insurance by licensee. 

    Subdivision 1.    Restrictions.  Insurance shall not be 
 placed by the surplus lines licensee with an eligible or 
 ineligible surplus lines insurer when coverage is available from 
 a licensed insurer.  

    Subd. 2.    Availability of other coverage; presumption. 
  There shall be a rebuttable presumption that the following 
 coverages are available from a licensed insurer:  

    (a) All mandatory automobile insurance coverages required 
 by chapter 65B; 

    (b) Private passenger automobile physical damage coverage; 

    (c) Homeowners and property insurance on owner occupied 
 dwellings whose value is less than $500,000.  This figure shall 
 be changed annually by the commissioner by the same percentage 
 as the consumer price index for the Minneapolis-St. Paul 
 metropolitan area is changed; 

    (d) Any coverage readily available from three or more 
 licensed insurers unless the licensed insurers quote a premium 
 and terms not competitive with a premium and terms quoted by an 
 eligible surplus lines insurer; and 

    (e) Workers' compensation insurance, except excess workers' 
 compensation insurance which is not available from the workers' 
 compensation reinsurance association.  

    Subd. 3.    Unavailability of other coverage; presumption. 
  There shall be a rebuttable presumption that the following 
 coverages are unavailable from a licensed insurer:  

    (a) Coverages on a list of unavailable coverages maintained 
 by the commissioner pursuant to subdivision 4; 

    (b) Coverages where one portion of the risk is acceptable 
 to licensed insurers but another portion of the same risk is not 
 acceptable.  The entire coverage may be placed with eligible 
 surplus lines insurers if it can be shown that the eligible 
 surplus lines insurer will accept the entire coverage but not 
 the rejected portion alone; and 

    (c) Any coverage that the licensee is unable to procure 
 after diligent search among licensed insurers.  

    Subd. 4.    Lists of unavailable lines of insurance; 
 maintenance.  The commissioner shall maintain on a current 
 basis a list of those lines of insurance for which coverages are 
 believed by the commissioner to be generally unavailable from 
 licensed insurers.  The commissioner shall republish a list and 
 make it available to all licensees at least annually.  Any 
 person may request in writing that the commissioner add or 
 remove coverage from the current list at the next publication of 
 the list.  The commissioner's determinations of coverages to be 
 added to or removed from the list shall not be subject to the 
 Administrative Procedure Act but prior to making determinations 
 the commissioner shall provide opportunity for comment from 
 interested parties.  

    HIST: 1981 c 221 s 6; 1992 c 564 art 1 s 21 

     60A.202 Evidence of placement of insurance by licensee. 

    Subdivision 1.    Restriction.  Only a surplus lines 
 licensee shall issue evidence of placement of insurance with an 
 eligible or ineligible surplus lines insurer.  

    Subd. 2.    Written communication of coverage to be 
 delivered.  A licensee shall, within seven working days after 
 the date on which the risk was bound or the insured or applicant 
 was advised that coverage has been or will be obtained, deliver 
 to the insured or the insured's representative a policy, a 
 written binder, a certificate or other written evidence of 
 insurance placed with an eligible or ineligible surplus lines 
 insurer.  

    Subd. 3.    Contents of written communication.  The 
 written communication showing that insurance has been obtained 
 shall identify all known surplus lines insurers directly 
 assuming any risk of loss.  If there is more than one surplus 
 lines insurer, any document issued or certified by the licensee 
 pursuant to subdivision 2 shall specify, to the extent known by 
 the licensee, whether the obligation is joint or several, and if 
 the obligation is several, the proportion of the obligation 
 assumed by each insurer.  

    HIST: 1981 c 221 s 7 

     60A.203 Retention of records. 

    Each surplus lines licensee shall keep a separate account 
 of each transaction entered into pursuant to sections 60A.195 to 
 60A.209.  Evidence of these transactions shall be documented in 
 the form and manner designated by the commissioner and retained 
 by the licensee for a minimum of five years.  The forms must be 
 readily available for review and audit by the commissioner.  

    HIST: 1981 c 221 s 8; 1992 c 564 art 1 s 22 

     60A.204 Additional charges and fees. 

    Subdivision 1.    Placement fees.  A surplus lines 
 licensee may charge, in addition to the premium charged by an 
 eligible or ineligible surplus lines insurer, a fee to cover the 
 cost incurred in the placement of the policy which exceeds $25, 
 but only to the extent that the actual additional cost incurred 
 for services performed by persons or entities unrelated to the 
 licensee exceeds that amount.  

    Subd. 2.    Regulation of fees.  A fee charged pursuant 
 to subdivision 1 shall not be excessive or discriminatory.  The 
 licensee shall maintain complete documentation of all fees 
 charged.  Those fees shall not be included as part of the 
 premium for purposes of the computation of the premium taxes.  

    Subd. 3.    Commission charges.  Notwithstanding the 
 provisions of subdivision 1, a licensee may add a commission 
 charge if the insurer quotes a rate net of commission and the 
 commission is not excessive or discriminatory.  

    HIST: 1981 c 221 s 9 

     60A.205 Compensation. 

    Subdivision 1.    Authorization.  A surplus lines 
 licensee may be compensated by an eligible surplus lines insurer 
 and the licensee may compensate a licensed resident agent in 
 this state for obtaining surplus lines insurance business.  A 
 licensed resident agent authorized by the licensee may collect a 
 premium on behalf of the licensee, and as between the insured 
 and the licensee, the licensee shall be considered to have 
 received the premium if the premium payment has been made to the 
 agent.  

    Subd. 2.    Consequences of receipt.  If an eligible 
 surplus lines insurer has assumed a risk, and if the premium for 
 that risk has been received by the licensee who placed the 
 insurance, then as between the insurer and the insured, the 
 insurer shall be considered to have received the premium due to 
 it for the coverage and shall be liable to the insured for any 
 loss covered by the insurance and for the unearned premium upon 
 cancellation of the insurance, regardless of whether the 
 licensee is indebted to the insurer.  

    HIST: 1981 c 221 s 10 

     60A.206 Qualification as eligible surplus lines insurer. 

    Subdivision 1.    Insurers to be recognized by the 
 commissioner.  A surplus lines licensee shall place surplus 
 lines insurance only with insurers which are in a stable and 
 unimpaired financial condition.  An insurer recognized by the 
 commissioner as an eligible surplus lines insurer pursuant to 
 subdivision 2 shall be considered to meet the requirements of 
 this subdivision.  Recognition as an eligible surplus lines 
 insurer shall be conditioned upon the insurers continued 
 compliance with sections 60A.195 to 60A.209.  

    Subd. 2.    Application for recognition.  An insurer not 
 otherwise licensed to engage in the business of insurance in 
 Minnesota may apply for recognition as an eligible surplus lines 
 insurer by filing an application in the form and with the 
 information as reasonably required by the commissioner regarding 
 the insurer's financial stability, reputation, integrity and 
 operating plans, accompanied by a license fee of $500.  The 
 commissioner may delegate to an association the power to process 
 and make recommendations on applications for recognition as an 
 eligible surplus lines insurer.  Notwithstanding delegation by 
 the commissioner, an applicant may file an application directly 
 with the commissioner. 

    Subd. 3.    Standards to be met by insurers.  (a) The 
 commissioner shall recognize the insurer as an eligible surplus 
 lines insurer when satisfied that the insurer is in a stable, 
 unimpaired financial condition and that the insurer is qualified 
 to provide coverage in compliance with sections 60A.195 to 
 60A.209.  If filed with full supporting documentation before 
 July 1 of any year, applications submitted under subdivision 2 
 shall be acted upon by the commissioner before December 31 of 
 the year of submission.  

    (b) The commissioner shall not authorize an insurer as an 
 eligible surplus lines insurer unless the insurer continuously 
 maintains capital and surplus of at least $3,000,000 and 
 transaction of business by the insurer is not hazardous, 
 financially or otherwise, to its policyholders, its creditors, 
 or the public.  Each alien surplus lines insurer shall have 
 current financial data filed with the National Association of 
 Insurance Commissioners Nonadmitted Insurers Information Office. 

    (c) Eligible surplus lines insurers domiciled within the 
 United States shall file an annual statement and an annual 
 financial audit, under the terms and conditions of section 
 60A.13, subdivisions 1, 3a, and 6, and are subject to the 
 penalties of section 72A.061, and are subject to section 60A.03, 
 subdivision 5, in regard to those requirements.  The 
 commissioner also has the powers provided in section 60A.13, 
 subdivision 2, in regard to eligible surplus lines insurers.  

    (d) Eligible surplus lines insurers domiciled outside the 
 United States shall file an annual statement on the standard 
 nonadmitted insurers information office financial reporting 
 format as prescribed by the National Association of Insurance 
 Commissioners and an annual financial audit performed by an 
 independent accounting firm. 

    Subd. 4.    Removal of insurers.  When the commissioner 
 considers it necessary, the commissioner may request information 
 about or examine the affairs of any eligible surplus lines 
 insurer at the expense of the insurer, to determine whether the 
 insurer should continue to remain on the list of eligible 
 surplus lines insurers.  If the commissioner determines that it 
 is in the public interest to remove an insurer from the list 
 because the insurer no longer meets the requirements of sections 
 60A.195 to 60A.209, or is no longer qualified to provide 
 coverage under sections 60A.195 to 60A.209, the commissioner 
 shall do so.  If an insurer removed from the list desires a 
 hearing pursuant to the Administrative Procedure Act, the 
 hearing shall be scheduled within 30 days following request for 
 the hearing.  

    Subd. 5.    Trust fund to be maintained.  Before 
 recognition as an eligible surplus lines insurer in this state, 
 an alien insurer shall maintain a trust fund in the United 
 States in cash, marketable securities, or other substantially 
 equivalent instruments of at least $1,500,000 with a United 
 States bank which is a member of the Federal Reserve System or 
 which is on deposit with regulatory authorities in this or 
 another state for the benefit of all United States policyholders 
 and beneficiaries.  A trust fund required under this subdivision 
 shall not have an expiration date which is at any time less than 
 five years in the future, on a continuing basis.  

    Subd. 6.    Alternative means of compliance.  
 Subdivisions 3 and 5 shall not apply to a group including 
 incorporated and unincorporated, individual alien insurers 
 which, in place of the requirements prescribed in subdivisions 3 
 and 5, maintain assets as provided in subdivision 3 and hold in 
 trust for all policyholders and beneficiaries in the United 
 States not less than $50,000,000 in the aggregate.  The 
 incorporated members of the group shall not be engaged in any 
 business other than underwriting as a member of the group and 
 must be subject to the same level of solvency regulation and 
 control by the group's domiciliary regulator as are the 
 unincorporated members. 

    Subd. 7.    Appointment of agent for service of process. 
  Each eligible surplus lines insurer shall appoint the 
 commissioner as its resident agent, for purposes of service of 
 process.  

    HIST: 1981 c 221 s 11; 1986 c 444; 1987 c 358 s 95; 1992 c 564 
 art 1 s 23; 1994 c 426 s 8; 1994 c 485 s 11 

     60A.207 Policies to include notice. 

    Each policy, cover note, or instrument evidencing surplus 
 lines insurance from an eligible surplus lines insurer which is 
 delivered to an insured or a representative of an insured shall 
 have printed, typed, or stamped in red ink upon its face in not 
 less than 10 point type, the following notice:  "THIS INSURANCE 
 IS ISSUED PURSUANT TO THE MINNESOTA SURPLUS LINES INSURANCE 
 ACT.  THE INSURER IS AN ELIGIBLE SURPLUS LINES INSURER BUT IS 
 NOT OTHERWISE LICENSED BY THE STATE OF MINNESOTA.  IN CASE OF 
 INSOLVENCY, PAYMENT OF CLAIMS IS NOT GUARANTEED." This notice 
 shall not be covered or concealed in any manner.  

    HIST: 1981 c 221 s 12 

     60A.208 Licensee association. 

    Subdivision 1.    Licensee's right to associate.  
 Surplus lines licensees may associate and the commissioner may 
 register the association for one or more of the following 
 purposes:  

    (a) Advising the commissioner as to the availability of 
 surplus lines coverage and market practices and standards for 
 surplus lines insurers and licensees; 

    (b) Collecting and furnishing records and statistics; or 

    (c) Submitting recommendations regarding administration of 
 sections 60A.195 to 60A.209.  

    Subd. 2.    Filing requirements.  (a) Each association 
 shall file with the commissioner for approval all of the 
 following:  

    (1) A copy of the association's constitution and articles 
 of agreement or association, or the association's certificate of 
 incorporation and bylaws and any rules governing the 
 association's activities; and 

    (2) An agreement that, as a condition of continued 
 registration under subdivision 1, the commissioner may examine 
 the association.  

    (b) Each association shall file with the commissioner and 
 keep current all of the following:  

    (1) A list of members; and 

    (2) The name and address of a resident of this state upon 
 whom notices or orders of the commissioner or process issued by 
 the commissioner may be served.  

    Subd. 3.    Commissioner's powers; suspension of 
 registration.  The commissioner may refuse to register, or may 
 suspend or revoke the registration of an association for any of 
 the following reasons:  

    (a) It reasonably appears that the association will not be 
 able to carry out the purposes of sections 60A.195 to 60A.209; 

    (b) The association fails to maintain and enforce rules 
 which will assure that members of the association and persons 
 associated with those members comply with sections 60A.195 to 
 60A.209, other applicable chapters of the insurance laws and 
 rules promulgated under either; 

    (c) The rules of the association do not assure a fair 
 representation of its members in the selection of directors and 
 in the administration of its affairs; 

    (d) The rules of the association do not provide for an 
 equitable allocation of reasonable dues, fees, and other charges 
 among members; 

    (e) The rules of the association impose a burden on 
 competition; or 

    (f) The association fails to meet other applicable 
 requirements prescribed in sections 60A.195 to 60A.209.  

    Subd. 4.    Membership limited to licensees.  An 
 association shall deny membership to any person who is not a 
 licensee.  

    Subd. 5.    Association is voluntary.  No licensee may 
 be compelled to join an association as a condition of receiving 
 a license or continuing to be licensed under sections 60A.195 to 
 60A.209.  

    Subd. 6.    Financial statement to be filed.  Each 
 association shall annually file a certified audited financial 
 statement.  

    Subd. 7.    Reports and recommendations by the 
 association.  An association may submit reports and make 
 recommendations to the commissioner regarding the financial 
 condition of any eligible surplus lines insurer.  These reports 
 and recommendations shall not be considered to be public 
 information.  There shall not be liability on the part of, or a 
 cause of action of any nature shall not arise against, eligible 
 surplus lines insurers, the association or its agents or 
 employees, the directors, or the commissioner or authorized 
 representatives of the commissioner, for statements made by them 
 in any reports or recommendations made under this subdivision.  

    Subd. 8.    Operating assessment.  (a) Upon request from 
 the association, the commissioner may approve the levy of an 
 assessment of not more than one-half of one percent of premiums 
 charged pursuant to sections 60A.195 to 60A.209 for operation of 
 the association to the extent that the operation relieves the 
 commissioner of duties otherwise required of the commissioner 
 pursuant to sections 60A.195 to 60A.209.  Any assessment so 
 approved may be subtracted from the premium tax owed by the 
 licensee.  

    (b) The association may revoke the membership and the 
 commissioner may revoke the license in this state, of any 
 licensee who fails to pay an assessment when due, if the 
 assessment has been approved by the commissioner.  

    HIST: 1981 c 221 s 13 

     60A.209 Insurance procured from ineligible insurers. 

    Subdivision 1.    Authorization; regulation.  A resident 
 of this state may obtain insurance from an ineligible surplus 
 lines insurer in this state through a surplus lines licensee.  
 The licensee shall first attempt to place the insurance with a 
 licensed insurer, or if that is not possible, with an eligible 
 surplus lines insurer.  If coverage is not obtainable from a 
 licensed insurer or an eligible surplus lines insurer, the 
 licensee shall certify to the commissioner, on a form prescribed 
 by the commissioner, that these attempts were made.  Upon 
 obtaining coverage from an ineligible surplus lines insurer, the 
 licensee shall:  

    (a) Have printed, typed, or stamped in red ink upon the 
 face of the policy in not less than 10-point type the following 
 notice:  "THIS INSURANCE IS ISSUED PURSUANT TO THE MINNESOTA 
 SURPLUS LINES INSURANCE ACT.  THIS INSURANCE IS PLACED WITH AN 
 INSURER THAT IS NOT LICENSED BY THE STATE NOR RECOGNIZED BY THE 
 COMMISSIONER OF COMMERCE AS AN ELIGIBLE SURPLUS LINES INSURER.  
 IN CASE OF ANY DISPUTE RELATIVE TO THE TERMS OR CONDITIONS OF 
 THE POLICY OR THE PRACTICES OF THE INSURER, THE COMMISSIONER OF 
 COMMERCE WILL NOT BE ABLE TO ASSIST IN THE DISPUTE.  IN CASE OF 
 INSOLVENCY, PAYMENT OF CLAIMS IS NOT GUARANTEED."  The notice 
 may not be covered or concealed in any manner; and 

    (b) Collect from the insured appropriate premium taxes and 
 report the transaction to the commissioner of revenue on a form 
 prescribed by the commissioner.  If the insured fails to pay the 
 taxes when due, the insured shall be subject to a civil fine of 
 not more than $3,000, plus accrued interest from the inception 
 of the insurance.  

    Subd. 2.    Penalty.  Except as provided in this 
 section, a person who assists or in any manner aids directly or 
 indirectly in the procurement of insurance from an ineligible 
 surplus lines insurer in this state is guilty of a misdemeanor, 
 punishable by imprisonment for not more than one year, or by a 
 fine of not more than $1,000, or both.  

    Subd. 3.    Duty to report.  Each insured in this state 
 who procures, causes to be procured, or continues or renews 
 insurance with an ineligible surplus lines insurer or any 
 self-insurer in this state who procures or continues excess of 
 loss, catastrophe, or other insurance upon a subject of 
 insurance resident, located, or to be performed within this 
 state, other than insurance procured pursuant to section 60A.201 
 or subdivision 1 shall file a written report regarding the 
 insurance with the commissioner of revenue on forms prescribed 
 by the commissioner of revenue and furnished to the insured upon 
 request.  The report shall be filed within 30 days after the 
 date the insurance was procured, continued, or renewed and shall 
 be accompanied by the tax on the premiums of two percent.  The 
 report shall show all of the following:  

    (a) The name and address of the insured; 

    (b) The name and address of the insurer; 

    (c) The subject of the insurance; 

    (d) A general description of the coverage; 

    (e) The amount of premium currently charged for the 
 insurance; and 

    (f) Any additional pertinent information reasonably 
 requested by the commissioner of revenue. 

    Subd. 4.    Allocation of premiums according to location 
 of subject matter.  If the insurance described in subdivision 
 1 also covers a subject of insurance residing, located, or to be 
 performed outside this state, for the purposes of this section, 
 a proper pro rata portion of the entire premium payable for all 
 of that insurance shall be allocated according to the subjects 
 of insurance residing, located, or to be performed in this state.

    Subd. 5.    Acts constituting procurement of insurance in 
 the state.  Any insurance placed with an ineligible surplus 
 lines insurer procured through negotiations or an application in 
 whole or in part occurring or made within or from without this 
 state, or for which premiums in whole or in part are remitted 
 directly or indirectly from within this state, shall be 
 considered to be insurance procured, continued, or renewed in 
 this state under subdivision 3.  

    Subd. 6.    Ineligible surplus lines insurers; liability 
 on policies or contracts.  Except with respect to placement 
 pursuant to section 60A.198, subdivision 4, if an ineligible 
 insurer offering benefits under a written contract which 
 constitutes the transaction of insurance or which offers 
 benefits substantially similar to benefits under policies of 
 insurance, whether or not the benefits are identified or 
 described as insurance, fails to pay a claim or loss within the 
 provision of the contract, any person who assisted or aided, 
 directly or indirectly, in the procurement of the contract shall 
 be liable to the person to whom the obligations are owed for the 
 full amount of the claim or loss, in the manner provided by the 
 contract.  

    HIST: 1981 c 221 s 14; 1983 c 289 s 114 subd 1; 1984 c 628 art 
 3 s 11; 1984 c 655 art 1 s 92; 1987 c 268 art 2 s 11,12 

     60A.2095 Construction. 

    Nothing in sections 60A.195 to 60A.209 shall be construed 
 to permit the state to impose requirements beyond those granted 
 by the Liability Risk Retention Act, Public Law Number 99-563.  

    HIST: 1987 c 337 s 13 

     60A.21 Unauthorized Insurers Process Act. 

    Subdivision 1.    Purpose.  The purpose of the 
 Unauthorized Insurers Process Act is to subject certain insurers 
 to the jurisdiction of courts of this state in suits by or on 
 behalf of insureds or beneficiaries under insurance contracts. 

    The legislature declares that it is a subject of concern 
 that many residents of this state hold policies of insurance 
 issued or delivered in this state by insurers while not 
 authorized to do business in this state, thus presenting to such 
 residents the often insuperable obstacle of resorting to distant 
 forums for the purpose of asserting legal rights under such 
 policies.  In furtherance of such state interest the legislature 
 herein provides a method of substituted service of process upon 
 such insurers and declares that in so doing it exercises its 
 power to protect its residents and to define for the purpose of 
 this statute what constitutes doing business in this state and 
 also exercises powers and privileges available to the state by 
 virtue of Public Law Number 15, 79th Congress of the United 
 States, chapter 20, 1st Session, section 340, which declares 
 that the business of insurance and every person engaged therein 
 shall be subject to the laws of the several states. 

    Subd. 2.    Service of process upon unauthorized insurer. 
  (1) Any of the following acts in this state effected by mail 
 or otherwise by an unauthorized foreign or alien insurer:  (a) 
 the issuance or delivery of contracts of insurance to residents 
 of this state or to corporations authorized to do business 
 therein; (b) the solicitation of applications for such 
 contracts; (c) the collection of premiums, membership fees, 
 assessments, or other considerations for such contracts; or (d) 
 any other transaction of insurance business, is equivalent to 
 and shall constitute an appointment by such insurer of the 
 commissioner of commerce and the commissioner's successor or 
 successors in office to be its true and lawful attorney upon 
 whom may be served all lawful process in any action, suit, or 
 proceeding instituted by or on behalf of an insured or 
 beneficiary arising out of any such contract of insurance and 
 any such act shall be signification of its agreement that such 
 service of process is of the same legal force and validity as 
 personal service of process in this state upon such insurer. 

    (2) Such service of process shall be made in compliance 
 with section 45.028, subdivision 2.  

    (3) Service of process in any such action, suit, or 
 proceeding shall in addition to the manner provided in clause 
 (2) of this subdivision be valid if served upon any person 
 within this state who, in this state on behalf of such insurer, 
 is:  (a) soliciting insurance, or (b) making, issuing, or 
 delivering any contract of insurance, or (c) collecting or 
 receiving any premium, membership fee, assessment, or other 
 consideration for insurance; and if a copy of such process is 
 sent within ten days thereafter by certified mail by the 
 plaintiff or plaintiff's attorney to the defendant at the last 
 known principal place of business of the defendant and the 
 defendant's receipt, or the receipt issued by the post office 
 with which the letter is certified showing the name of the 
 sender of the letter and the name and address of the person to 
 whom the letter is addressed, and the affidavit of the plaintiff 
 or plaintiff's attorney showing a compliance herewith are filed 
 with the administrator of the court in which such action is 
 pending on or before the date the defendant is required to 
 appear or within such further time as the court may allow. 

    (4) No plaintiff or complainant shall be entitled to a 
 judgment by default under this subdivision until the expiration 
 of 30 days from the date of the filing of the affidavit of 
 compliance. 

    (5) Nothing in this subdivision contained shall limit or 
 abridge the right to serve any process, notice, or demand upon 
 any insurer in any other manner now or hereafter permitted by 
 law. 

    (6) The provisions of this section shall not apply to 
 surplus line insurance lawfully effectuated under Minnesota law, 
 or to reinsurance, nor to any action or proceeding against an 
 unauthorized insurer arising out of: 

    (a) Wet marine and transportation insurance; 

    (b) Insurance on or with respect to subjects located, 
 resident, or to be performed wholly outside this state, or on or 
 with respect to vehicles or aircraft owned and principally 
 garaged outside this state; 

    (c) Insurance on property or operations of railroads 
 engaged in interstate commerce; or 

    (d) Insurance on aircraft or cargo of such aircraft, or 
 against liability, other than employer's liability, arising out 
 of the ownership, maintenance, or use of such aircraft, where 
 the policy or contract contains a provision designating the 
 commissioner as its attorney for the acceptance of service of 
 lawful process in any action or proceeding instituted by or on 
 behalf of an insured or beneficiary arising out of any such 
 policy, or where the insurer enters a general appearance in any 
 such action. 

    Subd. 3.    Defense of action by unauthorized insurer.  
 (1) Before any unauthorized foreign or alien insurer shall file 
 or cause to be filed any pleading in any action, suit, or 
 proceeding instituted against it such unauthorized insurer 
 shall:  (a) Deposit with the administrator of the court in which 
 such action, suit, or proceeding is pending cash or securities 
 or file with such administrator a bond with good and sufficient 
 sureties to be approved by the court in an amount to be fixed by 
 the court sufficient to secure the payment of any final judgment 
 which may be rendered in such action; or (b) procure a 
 certificate of authority to transact the business of insurance 
 in this state. 

    (2) The court in any action, suit, or proceeding in which 
 service is made in the manner provided in clauses (2) or (3) of 
 subdivision 2 hereof, may, in its discretion, order such 
 postponement as may be necessary to afford the defendant 
 reasonable opportunity to comply with the provisions of clause 
 (1) of this subdivision and to defend such action. 

    (3) Nothing in clause (1) is to be construed to prevent an 
 unauthorized foreign or alien insurer from filing a motion to 
 quash a writ or to set aside service thereof made in the manner 
 provided in clauses (2) and (3) of subdivision 2 hereof on the 
 ground either (a) that such unauthorized insurer has not done 
 any of the acts enumerated in clause (1) of subdivision 2 
 hereof, or (b) that the person on whom service was made pursuant 
 to clause (3) of subdivision 2 hereof, was not doing any of the 
 acts therein enumerated. 

    Subd. 4.    Attorney fees and judgment.  In any action 
 hereunder against an unauthorized foreign or alien insurer upon 
 a contract of insurance issued or delivered in this state to a 
 resident thereof or to a corporation authorized to do business 
 therein, if the insurer has failed for 30 days after demand 
 prior to the commencement of the action to make payment in 
 accordance with the terms of the contract and it appears to the 
 court that such refusal was vexatious and without reasonable 
 cause, the court may allow to the plaintiff a reasonable 
 attorney fee and include such fee in any judgment that may be 
 rendered in such action. Failure of an insurer to defend any 
 such action shall be deemed prima facie evidence that its 
 failure to make payment was vexatious and without reasonable 
 cause. 

    Subd. 5.    Constitutionality.  If any provision of 
 this section or the application thereof to any person or 
 circumstances is held invalid such invalidity shall not affect 
 other provisions or applications of the act which can be given 
 effect without the invalid provision or application and to this 
 end the provisions of this section are declared to be severable. 

    Subd. 6.    Citation.  This section may be cited as the 
 Unauthorized Insurers Process Act. 

    HIST: 1967 c 395 art 1 s 21; 1978 c 674 s 60; 1983 c 289 s 114 
 subd 1; 1984 c 592 s 42; 1984 c 655 art 1 s 92; 1986 c 444; 
 1Sp1986 c 3 art 1 s 82; 1992 c 564 art 2 s 4; 1994 c 485 s 12; 
 1994 c 632 art 4 s 26 

     60A.22 Special provisions as to stock companies; 
  stockholders, officers, directors and investors.  

    Subdivision 1.    Shareholders' rights.  (1) If an 
 insurance corporation has given notice to shareholders of a 
 proposal to amend the articles of incorporation, which proposed 
 amendment would substantially change the corporate purposes or 
 would extend the duration of the corporation, a shareholder may, 
 at any time prior to the date of the meeting at which such 
 proposed amendment is to be voted upon, file a written objection 
 to such amendment in the office of the secretary or president of 
 the corporation and demand payment for shares held; provided, 
 that such demand shall be of no force and effect if such 
 shareholder votes in favor of the amendment, or at any time 
 consents thereto in writing, or if the proposed amendment be not 
 in fact effected.  

    (2) If, after such a demand by a shareholder, the 
 corporation and the shareholder cannot agree upon the fair cash 
 value of the shares at the time such amendment was authorized, 
 such value shall be determined by three disinterested 
 appraisers, one of whom shall be named by the shareholder, 
 another by the corporation, and the third by the two thus 
 chosen.  The determination of a majority of the appraisers in 
 good faith made shall be final, and if the amount so determined 
 is not paid by the corporation within 30 days after it is made, 
 such amount may be recovered in an action by the shareholder 
 against the corporation.  The corporation shall not be required 
 to make payment of such amount except upon transfer to it of the 
 shares for which such payment was demanded and upon surrender of 
 the certificate or certificates evidencing the same.  

    (3) A shareholder shall not be entitled to payment for 
 shares under the provisions of this subdivision unless the value 
 of the corporate assets which would remain after such payment 
 would be at least equal to the aggregate amount of its debts and 
 liabilities exclusive of stated capital.  

    Subd. 2.    Transactions of principal stockholders, 
 directors, and officers in equity securities.  (1) Every 
 person who is directly or indirectly the beneficial owner of 
 more than ten percent of any class of any equity security of a 
 domestic stock insurance company, or who is a director or an 
 officer of such company, shall file in the office of the 
 commissioner of commerce on or before January 31, 1966, or 
 within ten days after becoming such beneficial owner, director, 
 or officer, a statement, in such form as the commissioner of 
 commerce may prescribe, of the amount of all equity securities 
 of such company of which that person is the beneficial owner, 
 and within ten days after the close of each calendar month 
 thereafter, if there has been a change in such ownership during 
 such month, shall file in the office of the commissioner of 
 commerce a statement, in such form as the commissioner of 
 commerce may prescribe, indicating ownership at the close of the 
 calendar month and such changes in ownership as may have 
 occurred during such calendar month.  

    (2) For the purpose of preventing the unfair use of 
 information which may have been obtained by such beneficial 
 owner, director, or officer by reason of that person's 
 relationship to such company, any profit realized by that person 
 from any purchase and sale, or any sale and purchase, of any 
 equity security of such company within any period of less than 
 six months, unless such security was acquired in good faith in 
 connection with a debt previously contracted, shall inure to and 
 be recoverable by the company, irrespective of any intention on 
 the part of such beneficial owner, director, or officer in 
 entering into such transaction of holding the security purchased 
 or of not repurchasing the security sold for a period exceeding 
 six months.  Suit to recover such profit may be instituted at 
 law or in equity in any court of competent jurisdiction by the 
 company, or by the owner of any security of the company in the 
 name and in behalf of the company if the company shall fail or 
 refuse to bring such suit within 60 days after request or shall 
 fail diligently to prosecute the same thereafter; but no such 
 suit shall be brought more than two years after the date such 
 profit was realized.  This clause shall not be construed to 
 cover any transaction where such beneficial owner was not such 
 both at the time of the purchase and sale, or the sale and 
 purchase, of the security involved, or any transaction or 
 transactions which the commissioner of commerce by rules may 
 exempt as not comprehended within the purpose of this clause.  

    (3) It shall be unlawful for any such beneficial owner, 
 director, or officer, directly or indirectly, to sell any equity 
 security of such company if the person selling the security or 
 that person's principal (a) does not own the security sold, or 
 (b) if owning the security, does not deliver it against such 
 sale within 20 days thereafter, or does not within five days 
 after such sale deposit it in the mails or other usual channels 
 of transportation; but no person shall be deemed to have 
 violated this clause on proving, notwithstanding the exercise of 
 good faith , the inability to make such delivery or deposit 
 within such time, or without causing undue inconvenience or 
 expense. 

    (4) The provisions of clause (2) shall not apply to any 
 purchase and sale, or sale and purchase, and the provisions of 
 clause (3) shall not apply to any sale, of any equity security 
 of a domestic stock insurance company not then or theretofore 
 held by the person in an investment account, by a dealer in the 
 ordinary course of business and incident to the establishment or 
 maintenance by the person of a primary or secondary market, 
 otherwise than on an exchange as defined in the federal 
 Securities Exchange Act of 1934, for such security.  The 
 commissioner of commerce may, by such rules as the commissioner 
 deems necessary or appropriate in the public interest, define 
 and prescribe terms and conditions with respect to securities 
 held in an investment account and transactions made in the 
 ordinary course of business and incident to the establishment or 
 maintenance of a primary or secondary market.  

    (5) The provisions of this subdivision shall not apply to 
 foreign or domestic arbitrage transactions unless made in 
 contravention of such rules as the commissioner of commerce may 
 adopt in order to carry out the purposes of this subdivision.  

    Subd. 3.    Regulation of proxies, consents and 
 authorizations.  (1) It shall be unlawful for any person, in 
 contravention of such rules as the commissioner of commerce may 
 prescribe as necessary or appropriate in the public interest or 
 for the protection of investors, to solicit or to permit the use 
 of that person's name to solicit any proxy or consent or 
 authorization in respect of any equity security of a domestic 
 stock insurance company.  

    (2) Unless proxies, consents, or authorizations in respect 
 of an equity security of a domestic stock insurance company are 
 solicited by or on behalf of the management of such company from 
 the holders of record of such security in accordance with the 
 rules prescribed under clause (1), prior to any annual or other 
 meeting of the holders of such security, such company shall, in 
 accordance with such rules as the commissioner of commerce may 
 prescribe as necessary or appropriate in the public interest or 
 for the protection of investors, if required thereby, file with 
 the commissioner of commerce and transmit to all holders of 
 record of such security information substantially equivalent to 
 the information which would be required to be transmitted if a 
 solicitation were made.  

    Subd. 4.    Securities excepted.  The provisions of 
 subdivisions 2 and 3 hereof shall not apply to equity securities 
 of a domestic stock insurance company if (a) any equity security 
 of such company shall be registered, or shall be required to be 
 registered, pursuant to section 12 of the federal Securities 
 Exchange Act of 1934, or if (b) such company shall not have 
 equity securities held of record by 100 or more persons on the 
 last day of the year next preceding the year in which the 
 provisions of subdivisions 2 and 3 hereof would apply except for 
 the provisions of this clause (b).  

    Subd. 5.    Rules.  The commissioner of commerce shall 
 have the power to make such rules as may be necessary for the 
 execution of the functions vested in the commissioner by 
 subdivisions 2 and 3 hereof, and may for such purpose classify 
 domestic stock insurance companies, securities, and other 
 persons or matters within the commissioner's jurisdiction.  No 
 provision of subdivisions 2 and 3 hereof imposing any liability 
 shall apply to any act done or omitted in good faith in 
 conformity with any rule of the commissioner of commerce, 
 notwithstanding that such rule may, after such act or omission, 
 be amended or rescinded or determined by judicial or other 
 authority to be invalid for any reason.  

    Subd. 6.    Definitions.  (1) The term "equity 
 security" when used in this section means any stock or similar 
 security; or any security convertible, with or without 
 consideration, into such a security, or carrying any warrant or 
 right to subscribe to or purchase such a security; or any such 
 warrant or right; or any other security which the commissioner 
 of commerce shall deem to be of similar nature and consider 
 necessary or appropriate, by such rules as the commissioner may 
 prescribe in the public interest or for the protection of 
 investors, to treat as an equity security.  

    (2) The term "domestic stock insurance company" when used 
 in this section includes a domestic stock and mutual insurance 
 company as defined in sections 61A.33 to 61A.38.  

    HIST: 1967 c 395 art 1 s 22; 1983 c 289 s 114 subd 1; 1984 c 
 655 art 1 s 92; 1985 c 248 s 70; 1986 c 444 

     60A.23 Miscellaneous. 

    Subdivision 1.    Liability of directors and officers 
 generally.  If a company be at any time under liability for 
 losses exceeding its net assets, and the president and 
 directors, or any of them, knowing it, directly or indirectly, 
 issue or consent to the issue of further insurance, each shall 
 be personally liable for any loss under this insurance; and if 
 any of them insures or allows to be insured on a single risk a 
 larger sum than is authorized by law, that person shall be 
 personally liable for any loss thereon above the amount which 
 might lawfully be insured. 

    Subd. 2.    Liability of directors and officers of mutual 
 company.  No director or other officer of any mutual company 
 shall, officially or privately, guarantee a policyholder thereof 
 against an assessment to which the policyholder would otherwise 
 be liable.  When the directors of any mutual company fail for 30 
 days after entry of any judgment, or for six months after the 
 accruing of any other indebtedness against it, to levy and 
 deliver for collection any assessment required by law for 
 payment thereof, or to apply the proceeds thereof in either 
 case, each shall be personally liable for the amount thereof, 
 and for all debts and claims then outstanding or which may 
 accrue until the assessment shall be levied and put in process 
 of collection. When the treasurer unreasonably fails to collect 
 and properly apply the proceeds of any such assessment the 
 treasurer shall be personally liable, not exceeding the total 
 assessment, to any person entitled thereto, and shall be repaid 
 only out of funds thereafter collected thereon. 

    Subd. 3.    Conflict of interest and compensation in 
 mutual fire company.  No officer or other person employed to 
 determine the character of a risk, and decide the question of 
 its acceptance by any mutual fire company other than a town or 
 farmers company, shall receive a commission or other payment 
 therefrom, but that person's compensation shall be by fixed 
 salary and such share, if any, of the net profits as the 
 directors may determine; and such officer or person shall not be 
 an employee of any other officer or agent of the company, nor 
 interested in the officer's or agent's business. 

    Subd. 4.    Dividends; limitations.  Domestic stock 
 companies shall follow the dividend limitation and reporting 
 requirements set forth in chapter 60D. 

    Subd. 5.    Provisions as to fidelity and surety 
 companies.  (1)   Requirements and acceptability.  No 
 company for guaranteeing the fidelity of persons in fiduciary 
 positions, public or private, or for acting as surety, shall 
 transact any business in this state until it shall have 
 satisfied the commissioner that it has complied with all the 
 provisions of law and obtained the commissioner's certificate to 
 that effect.  Thereupon it shall be authorized to execute as 
 sole or joint surety any bond, undertaking, or recognizance 
 which, by any municipal or other law, or by the rules or 
 regulations of any municipal or other board, body, organization, 
 or officer, is required or permitted to be made, given, 
 tendered, or filed for the security or protection of any person, 
 corporation, or municipality, or any department thereof, or of 
 any other organization, conditioned for the doing or omitting of 
 anything in such bond or other instrument specified or provided; 
 and any and all courts, judges, officers, and heads of 
 departments, boards, and municipalities required or permitted to 
 accept or approve of the sufficiency of any such bond or 
 instrument may in their discretion accept the same when 
 executed, or the conditions thereof guaranteed solely or jointly 
 by any such company, and the same shall be in all respects full 
 compliance with every law or other provisions for the execution 
 or guaranty by one surety or by two or more sureties, or that 
 sureties shall be residents or householders, or freeholders, or 
 all or either. 

    (2)   Limits of risk.  No fidelity or surety company 
 shall insure or reinsure in a single risk, less any portion 
 thereof reinsured, a larger sum than one-tenth of its net assets.

    Subd. 6.    Company's principal place of business to be 
 designated.  When a company establishes any agency in a place 
 other than that of its principal place of business, all signs, 
 cards, pamphlets, or other printed matter issued shall designate 
 such principal place. 

    Subd. 7. Repealed, 1989 c 330 s 37 

    Subd. 8.    Self-insurance or insurance plan 
 administrators who are vendors of risk management services.  
 (1)    Scope.  This subdivision applies to any vendor of risk 
 management services and to any entity which administers, for 
 compensation, a self-insurance or insurance plan.  This 
 subdivision does not apply (a) to an insurance company 
 authorized to transact insurance in this state, as defined by 
 section 60A.06, subdivision 1, clauses (4) and (5); (b) to a 
 service plan corporation, as defined by section 62C.02, 
 subdivision 6; (c) to a health maintenance organization, as 
 defined by section 62D.02, subdivision 4; (d) to an employer 
 directly operating a self-insurance plan for its employees' 
 benefits; (e) to an entity which administers a program of health 
 benefits established pursuant to a collective bargaining 
 agreement between an employer, or group or association of 
 employers, and a union or unions; or (f) to an entity which 
 administers a self-insurance or insurance plan if a licensed 
 Minnesota insurer is providing insurance to the plan and if the 
 licensed insurer has appointed the entity administering the plan 
 as one of its licensed agents within this state. 

    (2)    Definitions.  For purposes of this subdivision 
 the following terms have the meanings given them. 

    (a) "Administering a self-insurance or insurance plan" 
 means (i) processing, reviewing or paying claims, (ii) 
 establishing or operating funds and accounts, or (iii) otherwise 
 providing necessary administrative services in connection with 
 the operation of a self-insurance or insurance plan. 

    (b) "Employer" means an employer, as defined by section 
 62E.02, subdivision 2. 

    (c) "Entity" means any association, corporation, 
 partnership, sole proprietorship, trust, or other business 
 entity engaged in or transacting business in this state. 

    (d) "Self-insurance or insurance plan" means a plan 
 providing life, medical or hospital care, accident, sickness or 
 disability insurance for the benefit of employees or members of 
 an association, or a plan providing liability coverage for any 
 other risk or hazard, which is or is not directly insured or 
 provided by a licensed insurer, service plan corporation, or 
 health maintenance organization. 

    (e) "Vendor of risk management services" means an entity 
 providing for compensation actuarial, financial management, 
 accounting, legal or other services for the purpose of designing 
 and establishing a self-insurance or insurance plan for an 
 employer. 

    (3)    License.  No vendor of risk management services 
 or entity administering a self-insurance or insurance plan may 
 transact this business in this state unless it is licensed to do 
 so by the commissioner.  An applicant for a license shall state 
 in writing the type of activities it seeks authorization to 
 engage in and the type of services it seeks authorization to 
 provide.  The license may be granted only when the commissioner 
 is satisfied that the entity possesses the necessary 
 organization, background, expertise, and financial integrity to 
 supply the services sought to be offered.  The commissioner may 
 issue a license subject to restrictions or limitations upon the 
 authorization, including the type of services which may be 
 supplied or the activities which may be engaged in.  The license 
 fee is $1,000 for the initial application and $1,000 for each 
 two-year renewal.  All licenses are for a period of two years. 

    (4)    Regulatory restrictions; powers of the 
 commissioner.  To assure that self-insurance or insurance 
 plans are financially solvent, are administered in a fair and 
 equitable fashion, and are processing claims and paying benefits 
 in a prompt, fair, and honest manner, vendors of risk management 
 services and entities administering insurance or self-insurance 
 plans are subject to the supervision and examination by the 
 commissioner.  Vendors of risk management services, entities 
 administering insurance or self-insurance plans, and insurance 
 or self-insurance plans established or operated by them are 
 subject to the trade practice requirements of sections 72A.19 to 
 72A.30.  In lieu of an unlimited guarantee from a parent 
 corporation for a vendor of risk management services or an 
 entity administering insurance or self-insurance plans, the 
 commissioner may accept a surety bond in a form satisfactory to 
 the commissioner in an amount equal to 120 percent of the total 
 amount of claims handled by the applicant in the prior year.  If 
 at any time the total amount of claims handled during a year 
 exceeds the amount upon which the bond was calculated, the 
 administrator shall immediately notify the commissioner.  The 
 commissioner may require that the bond be increased accordingly. 

    (5)    Rulemaking authority.  To carry out the purposes 
 of this subdivision, the commissioner may adopt rules pursuant 
 to sections 14.001 to 14.69.  These rules may: 

    (a) establish reporting requirements for administrators of 
 insurance or self-insurance plans; 

    (b) establish standards and guidelines to assure the 
 adequacy of financing, reinsuring, and administration of 
 insurance or self-insurance plans; 

    (c) establish bonding requirements or other provisions 
 assuring the financial integrity of entities administering 
 insurance or self-insurance plans; or 

    (d) establish other reasonable requirements to further the 
 purposes of this subdivision. 

    HIST: 1967 c 395 art 1 s 23; Ex1967 c 1 s 6; 1969 c 497 s 1; 
 1975 c 145 s 1; 1975 c 271 s 6; 1975 c 359 s 23; 1976 c 134 s 
 78; 1978 c 465 s 8; 1980 c 528 s 1; 1Sp1981 c 4 art 2 s 44,45; 
 1982 c 424 s 130; 1983 c 154 s 1; 1983 c 289 s 114 subd 1; 1983 
 c 328 s 8; 1984 c 592 s 43; 1984 c 655 art 1 s 92; 1986 c 444; 
 1987 c 337 s 14; 1987 c 358 s 96; 1990 c 422 s 10; 1992 c 564 
 art 4 s 4; 1993 c 299 s 6; 1994 c 425 s 5; 1995 c 233 art 2 s 
 56; 1995 c 258 s 5; 1997 c 200 art 1 s 41; 1999 c 223 art 2 s 5 

     60A.235 Standards for determining whether contracts are 
  health plan contracts or stop loss contracts. 

    Subdivision 1.    Findings and purpose.  The purpose of 
 this section is to establish a standard for the determination of 
 whether an insurance policy or other evidence or coverage should 
 be treated as a policy of accident and sickness insurance or a 
 stop loss policy for the purpose of the regulation of the 
 business of insurance.  The laws regulating the business of 
 insurance in Minnesota impose distinctly different requirements 
 upon accident and sickness insurance policies and stop loss 
 policies.  In particular, the regulation of accident and 
 sickness insurance in Minnesota includes measures designed to 
 reform the health insurance market, to minimize or prohibit 
 selective rating or rejection of employee groups or individual 
 group members based upon health conditions, and to provide 
 access to affordable health insurance coverage regardless of 
 preexisting health conditions.  The health care reform 
 provisions enacted in Minnesota will only be effective if they 
 are applied to all insurers and health carriers who in 
 substance, regardless of purported form, engage in the business 
 of issuing health insurance coverage to employees of an employee 
 group.  This section applies to insurance companies and health 
 carriers and the policies or other evidence of coverage that 
 they issue.  This section does not apply to employers or the 
 benefit plans they establish for their employees. 

    Subd. 2.    Definitions.  For purposes of this section, 
 the terms defined in this subdivision have the meanings given. 

    (a) "Attachment point" means the claims amount beyond which 
 the insurance company or health carrier incurs a liability for 
 payment. 

    (b) "Direct coverage" means coverage under which an 
 insurance company or health carrier assumes a direct obligation 
 to an individual, under the policy or evidence of coverage, with 
 respect to health care expenses incurred by the individual or a 
 member of the individual's family. 

    (c) "Expected claims" means the amount of claims that, in 
 the absence of a stop loss policy or other insurance or evidence 
 of coverage, are projected to be incurred under an 
 employer-sponsored plan covering health care expenses. 

    (d) "Expected plan claims" means the expected claims less 
 the projected claims in excess of the specific attachment point, 
 adjusted to be consistent with the employer's aggregate contract 
 period. 

    (e) "Health plan" means a health plan as defined in section 
 62A.011 and includes group coverage regardless of the size of 
 the group. 

    (f) "Health carrier" means a health carrier as defined in 
 section 62A.011. 

    Subd. 3.    Health plan policies issued as stop loss 
 coverage.  (a) An insurance company or health carrier issuing 
 or renewing an insurance policy or other evidence of coverage, 
 that provides coverage to an employer for health care expenses 
 incurred under an employer-sponsored plan provided to the 
 employer's employees, retired employees, or their dependents, 
 shall issue the policy or evidence of coverage as a health plan 
 if the policy or evidence of coverage: 

    (1) has a specific attachment point for claims incurred per 
 individual that is lower than $10,000; or 

    (2) has an aggregate attachment point that is lower than 
 the sum of: 

    (i) 140 percent of the first $50,000 of expected plan 
 claims; 

    (ii) 120 percent of the next $450,000 of expected plan 
 claims; and 

    (iii) 110 percent of the remaining expected plan claims. 

    (b) Where the insurance policy or evidence of coverage 
 applies to a contract period of more than one year, the dollar 
 amounts set forth in paragraph (a), clauses (1) and (2), must be 
 multiplied by the length of the contract period expressed in 
 years. 

    (c) The commissioner may adjust the constant dollar amounts 
 provided in paragraph (a), clauses (1) and (2), on January 1 of 
 any year, based upon changes in the medical component of the 
 Consumer Price Index (CPI).  Adjustments must be in increments 
 of $100 and must not be made unless at least that amount of 
 adjustment is required.  The commissioner shall publish any 
 change in these dollar amounts at least three months before 
 their effective date. 

    (d) A policy or evidence of coverage issued by an insurance 
 company or health carrier that provides direct coverage of 
 health care expenses of an individual including a policy or 
 evidence of coverage administered on a group basis is a health 
 plan regardless of whether the policy or evidence of coverage is 
 denominated as stop loss coverage. 

    Subd. 4.    Compliance.  (a) An insurance company or 
 health carrier that is required to issue a policy or evidence of 
 coverage as a health plan under this section shall, even if the 
 policy or evidence of coverage is denominated as stop loss 
 coverage, comply with all the laws of this state that apply to 
 the health plan, including, but not limited to, chapters 62A, 
 62C, 62D, 62E, 62L, and 62Q. 

    (b) With respect to an employer who had been issued a 
 policy or evidence of coverage denominated as stop loss coverage 
 before June 2, 1995, compliance with this section is required as 
 of the first renewal date occurring on or after June 2, 1995. 

    HIST: 1995 c 258 s 6 

     60A.236 Stop loss regulation; small employer coverage. 

    A contract providing stop loss coverage, issued or renewed 
 to a small employer, as defined in section 62L.02, subdivision 
 26, or to a plan sponsored by a small employer, must include a 
 claim settlement period no less favorable to the small employer 
 or plan than coverage of all claims incurred during the contract 
 period regardless of when the claims are paid. 

    HIST: 1995 c 258 s 7 

     60A.24 Exemptions from insurance laws of this state.  

    The following are exempt from all insurance laws of the 
 state:  All organizations listed in section 64B.38 of the laws 
 relating to fraternal benefit societies.  

    HIST: 1967 c 395 art 1 s 24; 1985 c 49 s 41; 1992 c 564 art 1 
 s 54 

     60A.25 Insolvent companies. 

    Subdivision 1.    Notification of policyholders.  
 Whenever any foreign or domestic insurance company authorized to 
 transact the business of insurance in Minnesota is adjudicated 
 insolvent, or whenever its policies are declared null and void 
 by court order, the commissioner of commerce shall ascertain the 
 names and last known addresses of all Minnesota policyholders of 
 said company, and shall notify all Minnesota policyholders 
 within 30 days of such adjudication or court order.  In the case 
 of foreign insurers authorized to do business in this state, the 
 commissioner of commerce may elect to notify all of the 
 company's licensed agents in Minnesota with a directive that the 
 agents notify all insureds of the company's insolvency or that 
 its policies have been declared null and void. 

    Subd. 2.    Remittance of premiums.  Every agency 
 contract written by an insurance company writing property and 
 casualty insurance in Minnesota shall contain or be construed to 
 contain the following provision:  "Notwithstanding any other 
 provision of this contract, the obligation of the agent to remit 
 written premiums to the company shall be changed upon the 
 commencement of any administrative or legal proceeding by any 
 state against the carrier regarding its financial condition.  
 After the commencement of the proceedings, the obligation of the 
 agent to remit premiums shall be confined to the premiums earned 
 before the commencement of the proceedings.  The agent shall not 
 owe or remit to the company or to the liquidator or receiver any 
 premiums that are unearned as of the date of the commencement of 
 the delinquency proceedings, and any unearned premiums in the 
 possession of the agent on the date shall be returned promptly 
 by the agent to the insured or, with the approval of the 
 insured, be used to purchase new coverage for the insured with a 
 different insurer." 

    HIST: 1967 c 368 s 1; 1971 c 527 s 1; 1983 c 289 s 114 subd 1; 
 1984 c 655 art 1 s 92; 1986 c 455 s 7 

     60A.26 Suspension of insurers; notifications and reports.

    Subdivision 1.    Other states.  The commissioner of 
 commerce shall notify the insurance departments of all other 
 states whenever, under any law then in effect, the commissioner 
 suspends the right of a foreign or domestic insurer to transact 
 business in this state.  

    Subd. 2.    NAIC.  The commissioner of commerce shall 
 report public regulatory actions, investigative information, and 
 complaints to the appropriate reporting system or database of 
 the National Association of Insurance Commissioners. 

    HIST: 1967 c 369 s 1; 1983 c 289 s 114 subd 1; 1984 c 655 art 
 1 s 92; 1986 c 444; 1995 c 258 s 8 

     60A.27 Discipline of insurer by another state; notice to 
  commissioner. 

    Subdivision 1.  An insurance company licensed to transact 
 business in this state is hereby required to notify the 
 commissioner of commerce within ten business days of the 
 happening of any one or more of the following: 

    (1) the suspension or revocation of its right to transact 
 business in another state; 

    (2) the receipt by the insurance company of an order to 
 show why its license should not be suspended or revoked; or 

    (3) the imposition of a penalty by any other state for any 
 violation of the insurance laws of such other state.  

    Subd. 2.  Any insurance company which fails to notify the 
 commissioner of commerce within the time period specified in 
 subdivision 1 is subject to a penalty of not more than $500, or 
 suspension, or both. 

    HIST: 1967 c 448 s 1,2; 1983 c 289 s 114 subd 1; 1984 c 655 
 art 1 s 92; 1991 c 325 art 21 s 1 

     60A.28 Documents filed with commissioner, verification.  

    The commissioner of commerce may require that any document 
 required by law to be filed with the commissioner, be 
 accompanied by a sworn verification of its contents by a 
 responsible officer of the corporation filing it.  The 
 commissioner shall prescribe the form of the verification by 
 rule.  

    HIST: 1967 c 457 s 1; 1983 c 289 s 114 subd 1; 1984 c 655 art 
 1 s 92; 1986 c 444 

     60A.29 Nonprofit Risk Indemnification Trust Act. 

    Subdivision 1.    Title.  This section may be cited as 
 the "Nonprofit Risk Indemnification Trust Act."  

    Subd. 2.    Purpose.  The purpose of this section is to 
 authorize the establishment of trust funds for the purpose of 
 indemnifying nonprofit beneficiary organizations and their 
 officers, directors, and agents for financial loss due to the 
 imposition of legal liability or for damage or destruction of 
 property, and to regulate the operation of trust funds 
 established under this section.  

    Subd. 3.    Approval of commissioner.  No trust fund 
 with the purpose of indemnifying multiple nonprofit beneficiary 
 organizations shall be established without the prior approval of 
 the commissioner of the department of commerce.  The 
 commissioner shall withhold approval of any trust fund that 
 fails to comply with the provisions and requirements of this 
 section. 

    Subd. 4.    Eligible beneficiaries.  No organization, 
 corporation, agency, or program shall be a beneficiary of any 
 trust fund established under this section unless it is exempt 
 from taxation under section 501(c)(3) of the Internal Revenue 
 Code of 1954, as amended through December 30, 1985.  No trust 
 fund established under this section shall agree to indemnify the 
 state of Minnesota, any political subdivision of the state, or 
 any hospital licensed pursuant to section 144.55.  No trust fund 
 established under this section shall indemnify any beneficiary 
 for loss or damage to property permanently located outside the 
 boundaries of this state or for legal liabilities arising from 
 operations or activities occurring outside this state, except 
 where those operations or activities are of a nonroutine nature; 
 provided, however, that this restriction shall not apply to a 
 beneficiary which is incorporated under the laws of this state 
 and has its principal office located in this state.  

    Subd. 5.    Ineligible risks.  No trust fund established 
 under this section shall indemnify any beneficiary for 
 liabilities incurred under the Workers' Compensation Act, or for 
 benefits provided to employees pursuant to any medical, dental, 
 life, or disability income protection plan. 

    Subd. 6.    Benefit schedules.  Every trust fund 
 established under this section shall establish in its bylaws or 
 plan of operation a schedule of benefits, to be approved by the 
 commissioner, governing the indemnification of beneficiaries of 
 the trust.  The schedule of benefits shall include all 
 conditions, limitations, and exclusions relevant to 
 indemnification.  

    Subd. 7.    Indemnification agreements.  Every trust 
 fund established under this section shall provide each of its 
 beneficiaries with a written indemnification agreement 
 specifying the rights and obligations of the trust fund and the 
 beneficiary under the agreement.  Each form of indemnification 
 agreement shall be filed with and approved by the commissioner.  

    Subd. 8.    Contributions.  The trust fund shall 
 establish contributions required of beneficiaries necessary to 
 fund the operations of the fund.  All contribution schedules 
 shall be filed with and approved by the commissioner prior to 
 use.  Contributions must be based on sound actuarial principles 
 and be adequate to fund the operation of the trust fund.  
 Contributions may not be excessive, in relation to the benefits 
 provided, or unfairly discriminatory.  

    Subd. 9.    Multiple trust agreements prohibited.  No 
 trust fund established under this section shall enter into an 
 agreement with any other trust fund whereby the risks assumed by 
 each are pooled or shared.  

    Subd. 10.    Board of trustees.  Every trust fund 
 established under this section shall be governed by a board of 
 no fewer than five trustees.  The initial trustees need not be 
 appointed or elected by the beneficiaries of the trust fund.  
 During the second year following the creation of an authorized 
 trust fund, at least one-fourth of all its trustees in office 
 shall have been elected or appointed by the beneficiaries.  
 After the end of the second year following the creation of an 
 authorized trust fund, a majority of all trustees in office 
 shall have been elected or appointed by the beneficiaries.  All 
 trustees serving during the first two years following the 
 creation of an authorized trust fund shall be elected or 
 appointed for one-year terms.  All trustees serving thereafter 
 shall be elected or appointed for two-year terms, provided that 
 the trustees may be elected or appointed for one-year terms to 
 the extent necessary in order to create staggered terms.  Any 
 trustee may be removed at any time, with or without cause, by a 
 majority vote of the beneficiaries.  The board of trustees shall 
 meet no fewer than four times each year.  

    Subd. 11.    Trustees; compensation.  No trustee shall 
 be paid a salary or receive other compensation for service as a 
 trustee, except that the bylaws or plan of operation may provide 
 for reimbursement for actual expenses incurred on behalf of the 
 trust fund and for the payment of a reasonable per diem amount 
 for attendance at meetings of the board.  

    Subd. 12.    Bylaws; plan of operation.  The trustees of 
 each trust fund authorized under this section shall cause to be 
 adopted a set of bylaws or plan of operation which shall govern 
 the operation of the trust fund.  All bylaws or plans of 
 operation or amendments to them are subject to prior approval by 
 the commissioner.  The commissioner shall adopt rules governing 
 the content and approval of bylaws or plans of operation.  

    Subd. 13.    Financial statement; report on operations.  
 Every trust fund authorized under this section shall, by June 1 
 of every year, file with the commissioner a financial statement 
 for the previous year's operations.  The financial statement 
 must include the opinion of a certified public accountant that 
 the statement was prepared in conformity with generally accepted 
 accounting principles.  Also by June 1 of every year, every 
 trust fund must file with the commissioner, on forms provided by 
 the department, a report summarizing the trust fund's operations 
 during the previous year.  

    Subd. 14.    Financial standards.  Every authorized 
 trust fund shall have and maintain financial assets sufficient 
 to satisfy all current and future financial obligations and 
 responsibilities to beneficiaries.  The commissioner shall adopt 
 rules establishing minimum financial standards for authorized 
 trust funds.  

    Subd. 15.    Contracts; fees.  Authorized trust funds 
 may enter into contracts with risk management service providers, 
 actuarial consultants, or other vendors as are necessary to 
 ensure the effective and efficient operation of the trust fund.  
 Fees paid to vendors for services provided must not be excessive.

    Subd. 16.    Reinsurance.  Authorized trust funds may 
 insure or reinsure their obligations and liabilities with: 

    (1) insurance companies authorized to do business in 
 Minnesota, pursuant to section 60A.06; 

    (2) insurance companies similarly authorized in any other 
 state of the United States; 

    (3) insurance companies not authorized in Minnesota or any 
 other state if the unauthorized insurance company establishes 
 reinsurance security in favor of the ceding trust fund 
 conforming to the general rules for allowance of reinsurance 
 credits stated in the Financial Condition Examiners Handbook 
 adopted by the National Association of Insurance Commissioners; 
 or 

    (4) other trust funds organized under this section or under 
 similar laws of any other state if the reinsuring trust fund 
 establishes reinsurance security as specified in clause (3) in 
 favor of the ceding trust fund. 

    Subd. 17.    Interbeneficiary cause of action.  No 
 beneficiary shall have any cause of action against any other 
 beneficiary arising solely out of the insolvency or inability of 
 the trust fund to meet its obligations.  

    Subd. 18.    Examination.  The commissioner may examine 
 authorized trust funds to the same extent and with the same 
 purpose as is provided, with respect to insurance companies, by 
 section 60A.031.  

    Subd. 19.    Security deposit.  As a condition of 
 authorization, every trust fund shall deposit with the 
 commissioner an acceptable security of a value equal to not less 
 than $500,000.  In the event that a trust fund fails to honor 
 the obligations assumed by it under trust agreements issued to 
 its beneficiaries, use of the security deposit shall revert to 
 the commissioner for the purpose of executing the trust fund's 
 obligations to its beneficiaries.  The commissioner shall adopt 
 rules governing the amount of security required and the 
 acceptable forms of security.  

    Subd. 20.    Rules.  The commissioner may adopt rules to 
 enforce and administer the requirements of this section.  

    Subd. 21.    Trust funds not subject to insurance rules. 
  Trust funds established under this section shall not be 
 considered insurance companies or to be in the business of 
 insurance nor shall they be subject to regulation by the 
 commissioner, except as provided for in this section. 

    Subd. 22.    Foreign trust funds.  A trust fund 
 organized and existing under the laws of another state for the 
 sole purpose of indemnifying nonprofit beneficiary organizations 
 and their officers, directors, and agents for financial loss due 
 to the imposition of legal liability or for damage or 
 destruction of property, as provided in subdivisions 2 and 4, 
 may apply to the commissioner for authority to operate within 
 this state, provided that: 

    (1) the trust fund has been continuously in operation for a 
 period of not less than five years prior to the date it applies 
 for authorization under this subdivision, during which period it 
 must have issued only nonassessable indemnification agreements 
 to its beneficiaries, and during each of those years the trust 
 fund received not less than $1,000,000 in contributions from 
 beneficiaries for protections afforded by the trust fund; 

    (2) the trust fund has been authorized by and is subject to 
 regulation and examination by the department of insurance of its 
 domiciliary state; 

    (3) the trust fund must file with the commissioner its 
 trust agreement, bylaws or plan of operation, schedule of 
 benefits, forms of indemnification agreements, and contribution 
 schedules applicable to beneficiaries in this state; 

    (4) the trust fund must be governed by a board of not fewer 
 than five trustees, all of whom must be elected by the 
 beneficiaries of the trust fund, and none of whom may receive 
 compensation for service as a trustee; 

    (5) the trust fund has, as of the last day of the calendar 
 year immediately prior to its application for authority, a net 
 fund balance surplus of not less than $1,000,000, as evidenced 
 by its financial statements certified by an independent 
 certified public accountant in accordance with generally 
 accepted accounting principles consistently applied; and 

    (6) the trust fund must, upon and at all times after 
 authorization by the commissioner, maintain a registered office 
 within this state. 

    Subd. 23.    Standards for authorization.  Within 60 
 days after receipt of the documents specified under subdivision 
 22 and supporting evidence which establishes compliance with the 
 standards set forth under that subdivision, the commissioner 
 shall grant to the trust fund a certificate of authority to 
 conduct operations in this state.  The operations in this state 
 are subject to the limitations and standards set forth in 
 subdivisions 4 to 22.  In the event an authorized foreign trust 
 fund violates one of those subdivisions or the rules of the 
 commissioner applicable to foreign trust funds, the commissioner 
 may suspend or revoke the certificate of authority. 

    Subd. 24.    Rules.  The commissioner may adopt rules to 
 enforce and administer requirements of subdivisions 22 and 23. 

    HIST: 1985 c 248 s 70; 1986 c 455 s 8; 1987 c 337 s 15-20 

  60A.30 Renumbered 60A.351 

  60A.31 Renumbered 60A.352 

     60A.32 Rate filing for crop hail insurance. 

    An insurer issuing policies of insurance against crop 
 damage by hail in this state shall file its insurance rates with 
 the commissioner.  The insurance rates must be filed before 
 February 1 of the year in which a policy is issued. 

    HIST: 1988 c 688 art 9 s 1; 1995 c 24 s 1; 1999 c 177 s 17 

     60A.35 Scope. 

    Except as specifically limited in section 60A.351, sections 
 60A.35 to 60A.38 apply to all commercial liability and/or 
 property insurance policies issued by companies licensed to do 
 business in this state except ocean marine insurance, accident 
 and health insurance, excess insurance, surplus lines insurance, 
 and reinsurance.  

    HIST: 1987 c 337 s 23; 1994 c 485 s 65 

     60A.351 Renewal of insurance policy with altered rates. 

    If an insurance company licensed to do business in this 
 state offers or purports to offer to renew any commercial 
 liability and/or property insurance policy at less favorable 
 terms as to the dollar amount of coverage or deductibles, higher 
 rates, and/or higher rating plan, the new terms, the new rates 
 and/or rating plan may take effect on the renewal date of the 
 policy if the insurer has sent to the policyholder notice of the 
 new terms, new rates and/or rating plan at least 60 days prior 
 to the expiration date.  If the insurer has not so notified the 
 policyholder, the policyholder may elect to cancel the renewal 
 policy within the 60-day period after receipt of the notice.  
 Earned premium for the period of coverage, if any, shall be 
 calculated pro rata upon the prior rate.  This subdivision does 
 not apply to ocean marine insurance, accident and health 
 insurance, and reinsurance. 

    This section does not apply if the change relates to guide 
 "a" rates or excess rates also known as "consent to rates."  

    HIST: 1986 c 455 s 58; 1987 c 337 s 21; 1994 c 485 s 65 

     60A.352 Worker's compensation insurance. 

    In addition to the requirements of Minnesota Statutes 1984, 
 section 176.185, subdivision 1, a policy of insurance issued to 
 cover the liability to pay compensation under Minnesota Statutes 
 1984, chapter 176, shall comply with sections 60A.35 to 60A.38. 

    HIST: 1986 c 455 s 59; 1987 c 337 s 22; 1994 c 485 s 65 

     60A.36 Midterm cancellation. 

    Subdivision 1.    Reason for cancellation.  No insurer 
 may cancel a policy of commercial liability and/or property 
 insurance during the term of the policy, except for one or more 
 of the following reasons:  

    (1) nonpayment of premium; 

    (2) misrepresentation or fraud made by or with the 
 knowledge of the insured in obtaining the policy or in pursuing 
 a claim under the policy; 

    (3) actions by the insured that have substantially 
 increased or substantially changed the risk insured; 

    (4) refusal of the insured to eliminate known conditions 
 that increase the potential for loss after notification by the 
 insurer that the condition must be removed; 

    (5) substantial change in the risk assumed, except to the 
 extent that the insurer should reasonably have foreseen the 
 change or contemplated the risk in writing the contract; 

    (6) loss of reinsurance by the insurer which provided 
 coverage to the insurer for a significant amount of the 
 underlying risk insured.  A notice of cancellation under this 
 clause shall advise the policyholder that the policyholder has 
 ten days from the date of receipt of the notice to appeal the 
 cancellation to the commissioner of commerce and that the 
 commissioner will render a decision as to whether the 
 cancellation is justified because of the loss of reinsurance 
 within 30 business days after receipt of the appeal; 

    (7) a determination by the commissioner that the 
 continuation of the policy could place the insurer in violation 
 of the insurance laws of this state; or 

    (8) nonpayment of dues to an association or organization, 
 other than an insurance association or organization, where 
 payment of dues is a prerequisite to obtaining or continuing the 
 insurance.  This provision for cancellation for failure to pay 
 dues does not apply to persons who are retired at 62 years of 
 age or older or who are disabled according to social security 
 standards.  

    Subd. 2.    Notice.  Cancellation under subdivision 1, 
 clauses (2) to (8), shall not be effective before 60 days after 
 notice to the policyholder.  The notice of cancellation shall 
 contain a specific reason for cancellation as provided in 
 subdivision 1.  

    A policy shall not be canceled for nonpayment of premium 
 pursuant to subdivision 1, clause (1), unless the insurer, at 
 least ten days before the effective cancellation date, has given 
 notice to the policyholder of the amount of premium due and the 
 due date.  The notice shall state the effect of nonpayment by 
 the due date.  No cancellation for nonpayment of premium shall 
 be effective if payment of the amount due is made before the 
 effective date in the notice.  

    Subd. 3.    New policies.  Subdivisions 1 and 2 do not 
 apply to any insurance policy that has not been previously 
 renewed if the policy has been in effect less than 90 days at 
 the time the notice of cancellation is mailed or delivered.  No 
 cancellation under this subdivision is effective until at least 
 ten days after the written notice to the policyholder.  

    Subd. 4.    Longer term policies.  A policy may be 
 issued for a term longer than one year or for an indefinite term 
 with a clause providing for cancellation by the insurer for the 
 reasons stated in subdivision 1 by giving notice as required by 
 subdivision 2 at least 60 days before any anniversary date.  

    Subd. 5.    Rescission.  (a) No insurer may rescind or 
 void a contract of liability or property insurance unless there 
 was material misrepresentation, material omission, or fraud made 
 by or with the knowledge of the insured in obtaining the 
 contract or in pursuing a claim under the policy. 

    (b) No misrepresentation or omission shall be material 
 unless knowledge by the insurer of the facts misrepresented or 
 omitted would have led to a refusal by the insurer to make such 
 a contract.  In determining the question of materiality, 
 evidence of the practice of the insurer with respect to the 
 acceptance or rejection of similar risks shall be admissible. 

    (c) For purposes of this section, a representation is a 
 statement as to past or present fact, made to an insurer or the 
 insurer's agent by the applicant as an inducement for issuing a 
 contract of commercial liability or property insurance.  A 
 misrepresentation is a false representation, and the facts 
 misrepresented are those facts which make the representation 
 false. 

    (d) This subdivision does not limit the right to cancel the 
 policy prospectively for the reasons stated in subdivision 1, 
 clause (2). 

    HIST: 1987 c 337 s 24; 1994 c 485 s 13; 1996 c 446 art 1 s 7 

     60A.37 Nonrenewal. 

    Subdivision 1.    Notice required.  At least 60 days 
 before the date of expiration provided in the policy, a notice 
 of intention not to renew the policy beyond the agreed 
 expiration date must be made to the policyholder by the 
 insurer.  If the notice is not given at least 60 days before the 
 date of expiration provided in the policy, the policy shall 
 continue in force until 60 days after a notice of intent not to 
 renew is received by the policyholder.  

    Subd. 2.    Exceptions.  This section does not apply if 
 the policyholder has insured elsewhere, has accepted replacement 
 coverage, or has requested or agreed to nonrenewal.  

    HIST: 1987 c 337 s 25 

     60A.38 Interpretation and penalties. 

    Subdivision 1.    Sections not exclusive.  Sections 
 60A.35 to 60A.38 are not exclusive, and the commissioner may 
 also consider other provisions of Minnesota law to be applicable 
 to the circumstances or situations addressed by sections 60A.35 
 to 60A.38.  The rights provided by sections 60A.35 to 60A.38 are 
 in addition to and do not prejudice any other rights the 
 policyholder may have at common law, under statute, or rules.  

    Subd. 2.    Penalties.  A violation of any provisions of 
 sections 60A.35 to 60A.38 shall be deemed to be an unfair trade 
 practice in the business of insurance and shall subject the 
 violator to the penalties provided by sections 72A.17 to 72A.32 
 in addition to any other penalty provided by law.  

    Subd. 3.    Notices required.  All notices required by 
 sections 60A.35 to 60A.38 shall only be made by first class mail 
 addressed to the policyholder's last known address or by 
 delivery to the policyholder's last known address.  Notice by 
 first class mail is effective upon deposit in the United States 
 mail.  In addition to giving notice to the policyholder, the 
 insurer must also give notice to the agent of record, if any, in 
 the manner specified for the policyholder.  

    Subd. 4.    Proof of mailing notice.  Unless otherwise 
 specifically required, United States Postal Service proof of 
 mailing of the notice of cancellation, reduction in the limits 
 of liability of coverage, or nonrenewal of an insurance policy 
 is sufficient proof the proper notice has been given. 

    HIST: 1987 c 337 s 26; 1990 c 475 s 1 

  60A.40 Repealed, 1996 c 446 art 1 s 72; 1998 c 339 s 72 

     60A.41 Subrogation against insureds prohibited. 

    (a) An insurance company providing insurance coverage or 
 its reinsurer for that underlying insurance coverage may not 
 proceed against its insured in a subrogation action where the 
 loss was caused by the nonintentional acts of the insured. 

    (b) An insurance company providing insurance coverage or 
 its reinsurer for that underlying insurance coverage may not 
 subrogate itself to the rights of its insured to proceed against 
 another person if that other person is insured for the same 
 loss, by the same company.  This provision applies only if the 
 loss was caused by the nonintentional acts of the person against 
 whom subrogation is sought. 

    (c) This provision does not apply to or affect claims of a 
 surety against its principal. 

    (d) Nothing in this section prevents an insurer from 
 allocating the loss internally to the at-fault insured for 
 purposes of underwriting, agency, and claims information. 

    HIST: 1989 c 201 s 1; 1990 c 399 s 1 

     60A.60 Definitions. 

    Subdivision 1.    Scope.  For the purposes of sections 
 60A.60 to 60A.696, the terms defined in this section have the 
 meanings given them. 

    Subd. 2.    Adjusted risk-based capital report.  
 "Adjusted risk-based capital report" means a risk-based capital 
 report that has been adjusted by the commissioner according to 
 section 60A.61, subdivision 5. 

    Subd. 3.    Corrective order.  "Corrective order" means 
 an order issued by the commissioner specifying corrective 
 actions that the commissioner has determined are required. 

    Subd. 4.    Domestic insurer.  "Domestic insurer" means 
 an insurance company incorporated or organized in this state. 

    Subd. 5.    Foreign insurer.  "Foreign insurer" means an 
 insurance company that is admitted to do business in this state 
 under section 60A.19 but is not incorporated or organized in 
 this state. 

    Subd. 6.    NAIC.  "NAIC" means the National Association 
 of Insurance Commissioners. 

    Subd. 7.    Life and/or health insurer.  "Life and/or 
 health insurer" means an insurance company authorized to 
 transact business under section 60A.06, subdivision 1, clause 
 (4), or a property and casualty insurer transacting business 
 only under section 60A.06, subdivision 1, clause (5)(a). 

    Subd. 8.    Property and casualty insurer.  "Property 
 and casualty insurer" means an insurance company authorized to 
 transact business under section 60A.06, subdivision 1, clauses 
 (1), (2), (3), (5), (6), (8), (9), (10), (11), (12), (13), (14), 
 and (15), but does not include monoline mortgage guaranty 
 insurers, and financial guaranty insurers. 

    Subd. 9.    Negative trend.  "Negative trend" means, 
 with respect to a life and/or health insurer, negative trend 
 over a period of time, as determined according to the "trend 
 test calculation" included in the risk-based capital 
 instructions. 

    Subd. 10.    Risk-based capital instructions.  
 "Risk-based instructions" means the risk-based capital report 
 including risk-based capital instructions adopted by the NAIC, 
 as those risk-based instructions may be amended by the NAIC from 
 time to time according to the procedures adopted by the NAIC. 

    Subd. 11.    Risk-based capital level.  "Risk-based 
 capital level" means an insurer's company action level 
 risk-based capital, regulatory action level risk-based capital, 
 authorized control level risk-based capital, or mandatory 
 control level risk-based capital where: 

    (1) "company action level risk-based capital" means, with 
 respect to an insurer, the product of 2.0 and its authorized 
 control level risk-based capital; 

    (2) "regulatory action level risk-based capital" means the 
 product of 1.5 and its authorized control level risk-based 
 capital; 

    (3) "authorized control level risk-based capital" means the 
 number determined under the risk-based capital formula according 
 to the risk-based capital instructions; 

    (4) "mandatory control level risk-based capital" means the 
 product of .70 and the authorized control level risk-based 
 capital. 

    Subd. 12.    Risk-based capital plan.  "Risk-based 
 capital plan" means a comprehensive financial plan containing 
 the elements specified in section 60A.62, subdivision 2.  If the 
 commissioner rejects the risk-based capital plan, and it is 
 revised by the insurer, with or without the commissioner's 
 recommendation, the plan must be called the "revised risk-based 
 capital plan." 

    Subd. 13.    Risk-based capital report.  "Risk-based 
 capital report" means the report required in section 60A.61. 

    Subd. 14.    Total adjusted capital.  "Total adjusted 
 capital" means the sum of: 

    (1) an insurer's statutory capital and surplus as 
 determined in accordance with statutory accounting applicable to 
 the annual statement required to be filed under section 60A.13; 
 and 

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

    HIST: 1995 c 253 s 2 

     60A.61 Risk-based capital reports. 

    Subdivision 1.    General requirements.  Every domestic 
 insurer shall, on or before each March 1, prepare and submit to 
 the commissioner a report of its risk-based capital levels as of 
 the end of the calendar year just ended, in a form and 
 containing the information required by the risk-based capital 
 instructions.  In addition, every domestic insurer shall file 
 its risk-based capital report: 

    (1) with the NAIC according to the risk-based capital 
 instructions; and 

    (2) with the insurance commissioner in a state in which the 
 insurer is authorized to do business, if the insurance 
 commissioner has notified the insurer of its request in writing, 
 in which case the insurer shall file its risk-based capital 
 report not later than the later of: 

    (i) 15 days from the receipt of notice to file its 
 risk-based capital report with that state; or 

    (ii) March 1. 

    Subd. 2.    Life and/or health insurers.  A life and/or 
 health insurer's risk-based capital must be determined according 
 to the formula set forth in the risk-based capital 
 instructions.  The formula must take into account, and may 
 adjust for the covariance between: 

    (1) the risk with respect to the insurer's assets; 

    (2) the risk of adverse insurance experience with respect 
 to the insurer's liabilities and obligations; 

    (3) the interest rate risk with respect to the insurer's 
 business; and 

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

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

    Subd. 3.    Property and casualty insurers.  A property 
 and casualty insurer's risk-based capital must be determined 
 according to the formula set forth in the risk-based capital 
 instructions.  The formula must take into account, and may 
 adjust for the covariance between: 

    (1) asset risk; 

    (2) credit risk; 

    (3) underwriting risk; and 

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

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

    Subd. 4.    Maintaining additional capital.  An excess 
 of capital over the amount produced by the risk-based capital 
 requirements contained in sections 60A.60 to 60A.696 and the 
 formulas, schedules, and instructions referenced in sections 
 60A.60 to 60A.696 is desirable in the business of insurance.  
 Accordingly, insurers should seek to maintain capital above the 
 risk-based capital levels required by sections 60A.60 to 60A.696.
 Additional capital is used and useful in the insurance business 
 and helps to secure an insurer against various risks inherent 
 in, or affecting, the business of insurance and not accounted 
 for or only partially measured by the risk-based capital 
 requirements contained in sections 60A.60 to 60A.696. 

    Subd. 5.    Adjusted risk-based capital report.  If a 
 domestic insurer files a risk-based capital report that in the 
 judgment of the commissioner is inaccurate, then the 
 commissioner shall adjust the risk-based capital report to 
 correct the inaccuracy and shall notify the insurer of the 
 adjustment.  The notice must contain a statement of the reason 
 for the adjustment.  A risk-based capital report as so adjusted 
 is referred to as an "adjusted risk-based capital report." 

    HIST: 1995 c 253 s 3 

     60A.62 Company action level event. 

    Subdivision 1.    Definition.  "Company action level 
 event" means any of the following events: 

    (1) the filing of a risk-based capital report by an insurer 
 which indicates that: 

    (i) the insurer's total adjusted capital is greater than or 
 equal to its regulatory action level risk-based capital but less 
 than its company action level risk-based capital; or 

    (ii) if a life and/or health insurer, the insurer has total 
 adjusted capital that is greater than or equal to its company 
 action level risk-based capital but less than the product of its 
 authorized control level risk-based capital and 2.5 and has a 
 negative trend; 

    (2) the notification by the commissioner to the insurer of 
 an adjusted risk-based capital report that indicates an event in 
 clause (1), provided the insurer does not challenge the adjusted 
 risk-based report under section 60A.66; or 

    (3) if, pursuant to section 60A.66, an insurer challenges 
 an adjusted risk-based capital report that indicates the event 
 in clause (1), the notification by the commissioner to the 
 insurer that the commissioner has, after a hearing, rejected the 
 insurer's challenge. 

    Subd. 2.    Plan.  In the event of a company action 
 level event, the insurer shall prepare and submit to the 
 commissioner a risk-based capital plan that: 

    (1) identifies the conditions that contribute to the 
 company action level event; 

    (2) contains proposals of corrective actions that the 
 insurer intends to take and would be expected to result in the 
 elimination of the company action level event; 

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

    (4) identifies the key assumptions impacting the insurer's 
 projections and the sensitivity of the projections to the 
 assumptions; and 

    (5) identifies the quality of, and problems associated 
 with, the insurer's business, including, but not limited to, its 
 assets, anticipated business growth and associated surplus 
 strain, extraordinary exposure to risk, mix of business, and use 
 of reinsurance, if any, in each case. 

    Subd. 3.    Submission.  The risk-based capital plan 
 must be submitted: 

    (1) within 45 days of the company action level event; or 

    (2) if the insurer challenges an adjusted risk-based 
 capital report pursuant to section 60A.66, within 45 days after 
 notification to the insurer that the commissioner has, after a 
 hearing, rejected the insurer's challenge. 

    Subd. 4.    Notification by commissioner.  Within 60 
 days after the submission by an insurer of a risk-based capital 
 plan to the commissioner, the commissioner shall notify the 
 insurer whether the risk-based capital plan must be implemented 
 or is, in the judgment of the commissioner, unsatisfactory.  If 
 the commissioner determines the risk-based capital plan is 
 unsatisfactory, the notification to the insurer must set forth 
 the reasons for the determination, and may set forth proposed 
 revisions that will render the risk-based capital plan 
 satisfactory, in the judgment of the commissioner.  Upon 
 notification from the commissioner, the insurer shall prepare a 
 revised risk-based capital plan, that may incorporate by 
 reference any revisions proposed by the commissioner, and shall 
 submit the revised risk-based capital plan to the commissioner: 

    (1) within 45 days after the notification from the 
 commissioner; or 

    (2) if the insurer challenges the notification from the 
 commissioner under section 60A.66, within 45 days after a 
 notification to the insurer that the commissioner has, after a 
 hearing, rejected the insurer's challenge. 

    Subd. 5.    Unsatisfactory plan.  In the event of a 
 notification by the commissioner to an insurer that the 
 insurer's risk-based capital plan or revised risk-based capital 
 plan is unsatisfactory, the commissioner may at the 
 commissioner's discretion, subject to the insurer's right to a 
 hearing under section 60A.66, specify in the notification that 
 the notification constitutes a regulatory action level event. 

    Subd. 6.    Filings to other states.  Every domestic 
 insurer that files a risk-based capital plan or revised 
 risk-based capital plan with the commissioner shall file a copy 
 of the risk-based capital plan or revised risk-based capital 
 plan with the insurance commissioner in any state in which the 
 insurer is authorized to do business if: 

    (1) the state has a risk-based capital provision 
 substantially similar to section 60A.67, subdivision 1; and 

    (2) the insurance commissioner of that state has notified 
 the insurer of its request for the filing in writing, in which 
 case the insurer shall file a copy of the risk-based capital 
 plan or revised risk-based capital plan in that state no later 
 than the later of: 

    (i) 15 days after the receipt of notice to file a copy of 
 its risk-based capital plan or revised risk-based plan with the 
 state; or 

    (ii) the date on which the risk-based capital plan or 
 revised risk-based capital plan is filed under section 60A.62, 
 subdivisions 3 and 4. 

    HIST: 1995 c 253 s 4 

     60A.63 Regulatory action level event. 

    Subdivision 1.    Definition.  "Regulatory action level 
 event" means, with respect to an insurer, any of the following 
 events: 

    (1) the filing of a risk-based capital report by the 
 insurer that indicates that the insurer's total adjusted capital 
 is greater than or equal to its authorized control level 
 risk-based capital but less than its regulatory action level 
 risk-based capital; 

    (2) the notification by the commissioner to an insurer of 
 an adjusted risk-based capital report that indicates the event 
 in clause (1), provided the insurer does not challenge the 
 adjusted risk-based capital report under section 60A.66; 

    (3) if, pursuant to section 60A.66, the insurer challenges 
 an adjusted risk-based capital report that indicates the event 
 in clause (1), the notification by the commissioner to the 
 insurer that the commissioner has, after a hearing, rejected the 
 insurer's challenge; 

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

    (5) the failure of the insurer to submit a risk-based 
 capital plan to the commissioner within the time period set 
 forth in section 60A.62, subdivision 3; 

    (6) notification by the commissioner to the insurer that: 

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

    (ii) the notification constitutes a regulatory action level 
 event with respect to the insurer, provided the insurer has not 
 challenged the determination under section 60A.66; 

    (7) if, pursuant to section 60A.66, the insurer challenges 
 a determination by the commissioner under clause (6), the 
 notification by the commissioner to the insurer that the 
 commissioner has, after a hearing, rejected the challenge; 

    (8) notification by the commissioner to the insurer that 
 the insurer has failed to adhere to its risk-based capital plan 
 or revised risk-based capital plan, but only if the failure has 
 a substantial adverse effect on the ability of the insurer to 
 eliminate the company action level event according to its 
 risk-based capital plan or revised risk-based capital plan and 
 the commissioner has so stated in the notification, provided the 
 insurer has not challenged the determination under section 
 60A.66; or 

    (9) if, pursuant to section 60A.66, the insurer challenges 
 a determination by the commissioner under clause (8), the 
 notification by the commissioner to the insurer that the 
 commissioner has, after a hearing, rejected the challenge. 

    Subd. 2.    Commissioner's duties.  In the event of a 
 regulatory action level event, the commissioner shall: 

    (1) require the insurer to prepare and submit a risk-based 
 capital plan, or, if applicable, a revised risk-based capital 
 plan; 

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

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

    Subd. 3.    Corrective action.  In determining 
 corrective actions, the commissioner may take into account 
 factors considered relevant with respect to the insurer based 
 upon the commissioner's examination or analysis of the assets, 
 liabilities and operations of the insurer, including, but not 
 limited to, the results of any sensitivity tests undertaken 
 pursuant to the risk-based capital instructions.  The risk-based 
 capital plan or revised risk-based capital plan must be 
 submitted: 

    (1) within 45 days after the occurrence of the regulatory 
 action level event; 

    (2) if the insurer challenges an adjusted risk-based 
 capital report pursuant to section 60A.66 and the challenge is 
 not frivolous in the judgment of the commissioner, within 45 
 days after the notification to the insurer that the commissioner 
 has, after a hearing, rejected the insurer's challenge; or 

    (3) if the insurer challenges a revised risk-based capital 
 plan pursuant to section 60A.66 and the challenge is not 
 frivolous in the judgment of the commissioner, within 45 days 
 after the notification to the insurer that the commissioner has, 
 after a hearing, rejected the insurer's challenge. 

    Subd. 4.    Examination and review.  The commissioner 
 may retain actuaries and investment experts and other 
 consultants as may be necessary in the judgment of the 
 commissioner to review the insurer's risk-based capital plan or 
 revised risk-based capital plan, examine or analyze the assets, 
 liabilities, and operations of the insurer and formulate the 
 corrective order with respect to the insurer.  The fees, costs, 
 and expenses relating to consultants shall be borne by the 
 affected insurer or other party as directed by the commissioner. 

    HIST: 1995 c 253 s 5 

     60A.64 Authorized control level event. 

    Subdivision 1.    Definition.  "Authorized control level 
 event" means any of the following events: 

    (1) the filing of a risk-based capital report by the 
 insurer that indicates that the insurer's total adjusted capital 
 is greater than or equal to its mandatory control level 
 risk-based capital but less than its authorized control level 
 risk-based capital; 

    (2) the notification by the commissioner to the insurer of 
 an adjusted risk-based capital report that indicates the event 
 in clause (1), provided the insurer does not challenge the 
 adjusted risk-based capital report under section 60A.66; 

    (3) if, pursuant to section 60A.66, the insurer challenges 
 an adjusted risk-based capital report that indicates the event 
 in clause (1), notification by the commissioner to the insurer 
 that the commissioner has, after a hearing, rejected the 
 insurer's challenge; 

    (4) the failure of the insurer to respond, in a manner 
 satisfactory to the commissioner, to a corrective order, 
 provided the insurer has not challenged the corrective order 
 under section 60A.66; or 

    (5) if the insurer has challenged a corrective order under 
 section 60A.66 and the commissioner has, after a hearing, 
 rejected the challenge or modified the corrective order, the 
 failure of the insurer to respond, in a manner satisfactory to 
 the commissioner, to the corrective order subsequent to 
 rejection or modification by the commissioner. 

    Subd. 2.    Commissioner's duties.  In the event of an 
 authorized control level event with respect to an insurer, the 
 commissioner shall: 

    (1) take the actions required under section 60A.63 
 regarding an insurer with respect to which a regulatory action 
 level event has occurred; or 

    (2) if the commissioner considers it to be in the best 
 interests of the policyholders and creditors of the insurer and 
 of the public, take the actions necessary to cause the insurer 
 to be placed under regulatory control under chapter 60B.  In the 
 event the commissioner takes these actions, the authorized 
 control level event is considered sufficient grounds for the 
 commissioner to take action under chapter 60B, and the 
 commissioner has the rights, powers, and duties with respect to 
 the insurer set forth in chapter 60B.  In the event the 
 commissioner takes actions under this clause pursuant to an 
 adjusted risk-based capital report, the insurer is entitled to 
 the protections afforded to insurers under section 60B.11 
 pertaining to summary proceedings. 

    HIST: 1995 c 253 s 6 

     60A.65 Mandatory control level event. 

    Subdivision 1.    Definition.  "Mandatory control level 
 event" means any of the following events: 

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

    (2) notification by the commissioner to the insurer of an 
 adjusted risk-based capital report that indicates the event in 
 clause (1), provided the insurer does not challenge the adjusted 
 risk-based capital report under section 60A.66; or 

    (3) if, pursuant to section 60A.66, the insurer challenges 
 an adjusted risk-based capital report that indicates the event 
 in clause (1), notification by the commissioner to the insurer 
 that the commissioner has, after a hearing, rejected the 
 insurer's challenge. 

    Subd. 2.    Commissioner's duties.  In the event of a 
 mandatory control level event: 

    (1) with respect to a life and/or health insurer, the 
 commissioner shall take the actions necessary to place the 
 insurer under regulatory control under chapter 60B.  In that 
 event, the mandatory control level event is considered 
 sufficient grounds for the commissioner to take action under 
 chapter 60B, and the commissioner has the rights, powers, and 
 duties with respect to the insurer set forth in chapter 60B.  If 
 the commissioner takes actions pursuant to an adjusted 
 risk-based capital report, the insurer is entitled to the 
 protections of section 60B.11 pertaining to summary 
 proceedings.  However, the commissioner may forego action for up 
 to 90 days after the mandatory control level event if the 
 commissioner finds there is a reasonable expectation that the 
 mandatory control level event may be eliminated within the 
 90-day period; and 

    (2) with respect to a property and casualty insurer, the 
 commissioner shall take the actions necessary to place the 
 insurer under regulatory control under chapter 60B, or, in the 
 case of an insurer that is writing no business and that is 
 running off its existing business, may allow the insurer to 
 continue its run-off under the supervision of the commissioner.  
 In either event, the mandatory control level event is sufficient 
 grounds for the commissioner to take action under chapter 60B, 
 and the commissioner has the rights, powers, and duties with 
 respect to the insurer set forth in chapter 60B.  If the 
 commissioner takes actions pursuant to an adjusted risk-based 
 capital report, the insurer is entitled to the protections of 
 section 60B.11 pertaining to summary proceedings.  However, the 
 commissioner may forego action for up to 90 days after the 
 mandatory control level event if the commissioner finds there is 
 a reasonable expectation that the mandatory control level event 
 may be eliminated within the 90-day period. 

    HIST: 1995 c 253 s 7 

     60A.66 Hearings. 

    Upon: 

    (1) notification to an insurer by the commissioner of an 
 adjusted risk-based report; 

    (2) notification to an insurer by the commissioner that: 

    (i) the insurer's risk-based capital plan or revised 
 risk-based capital plan is unsatisfactory; and 

    (ii) the notification constitutes a regulatory action level 
 event with respect to the insurer; 

    (3) notification to an insurer by the commissioner that the 
 insurer has failed to adhere to its risk-based capital plan or 
 revised risk-based capital plan and that the failure has 
 substantial adverse effect on the ability of the insurer to 
 eliminate the company action level event with respect to the 
 insurer according to its risk-based capital plan or revised 
 risk-based capital plan; or 

    (4) notification to an insurer by the commissioner of a 
 corrective order with respect to the insurer, 

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

    HIST: 1995 c 253 s 8 

     60A.67 Confidentiality. 

    Subdivision 1.    Generally.  All risk-based capital 
 reports, to the extent the information in them is not required 
 to be set forth in a publicly available annual statement 
 schedule, and risk-based capital plans, including the results or 
 report of an examination or analysis of an insurer performed 
 pursuant to sections 60A.60 to 60A.696, and any corrective order 
 issued by the commissioner pursuant to an examination or 
 analysis, with respect to a domestic insurer or foreign insurer 
 that are filed with the commissioner constitute information that 
 might be damaging to the insurer if made available to its 
 competitors, and shall be maintained by the commissioner as 
 nonpublic data as defined in section 13.02, subdivision 9.  This 
 information is not subject to subpoena, other than by the 
 commissioner and then only for the purpose of enforcement 
 actions taken by the commissioner pursuant to sections 60A.60 to 
 60A.696 or other provision of the insurance laws of this state. 

    Subd. 2.    Prohibition on announcements.  The 
 comparison of an insurer's total adjusted capital to any of its 
 risk-based capital levels is a regulatory tool that may indicate 
 the need for possible corrective action with respect to the 
 insurer and is not intended as a means to rank insurers 
 generally.  Except as otherwise required under sections 60A.60 
 to 60A.696, the making, publishing, dissemination, circulating, 
 or placing before the public, or causing, directly or indirectly 
 to be made, published, disseminated, circulated, or placed 
 before the public, in a newspaper, magazine, or other 
 publication, or in the form of a notice, circular, pamphlet, 
 letter, or poster, or over any radio or television station, or 
 in any other way, an advertisement, announcement, or statement 
 containing an assertion, representation, or statement with 
 regard to the risk-based capital levels of an insurer, or of any 
 component derived in the calculation, by an insurer, agent, 
 broker, or other person engaged in any manner in the insurance 
 business would be misleading and is prohibited.  However, if a 
 materially false statement with respect to the comparison 
 regarding an insurer's total adjusted capital to its risk-based 
 capital levels, or any of them, or an inappropriate comparison 
 of any other amount to the insurer's risk-based capital levels 
 is published in a written publication and the insurer is able to 
 demonstrate to the commissioner with substantial proof the 
 falsity of the statement, or the inappropriateness, as the case 
 may be, then the insurer may publish an announcement in a 
 written publication if the sole purpose of the announcement is 
 to rebut the materially false statement.  This subdivision does 
 not prohibit an insurance company or its holding company from 
 disclosing information about its risk-based capital levels in 
 the notes to its financial statements if required by 
 pronouncements of the American Institute of Certified Public 
 Accountants or the Financial Accounting Standards Board, or 
 making this disclosure as required by other governmental 
 regulatory agencies. 

    Subd. 3.    Prohibition on use in ratemaking.  The 
 risk-based capital instructions, risk-based capital reports, 
 adjusted risk-based capital reports, risk-based capital plans, 
 and revised risk-based capital plans are intended solely for use 
 by the commissioner in monitoring the solvency of insurers and 
 the need for possible corrective action with respect to insurers.
 This information shall not be used by the commissioner for 
 ratemaking nor considered or introduced as evidence in a rate 
 proceeding nor used by the commissioner to calculate or derive 
 any elements of an appropriate premium level or rate of return 
 for a line of insurance that an insurer or an affiliate is 
 authorized to write. 

    HIST: 1995 c 253 s 9; 1996 c 446 art 2 s 6 

     60A.68 Supplemental provisions; rules; exemption. 

    (a) Sections 60A.60 to 60A.696 are supplemental to other 
 laws of this state and do not preclude or limit other powers or 
 duties of the commissioner under those laws, including, but not 
 limited to, chapters 60B and 60G. 

    (b) The commissioner may exempt from the application of 
 sections 60A.60 to 60A.696 a domestic property and casualty 
 insurer that: 

    (1) writes direct business only in this state; 

    (2) writes direct annual premiums of $2,000,000 or less; 
 and 

    (3) assumes no reinsurance in excess of five percent of 
 direct premium written. 

    HIST: 1995 c 253 s 10 

     60A.69 Foreign insurers. 

    Subdivision 1.    Reporting requirements.  A foreign 
 insurer shall, upon the written request of the commissioner, 
 submit to the commissioner a risk-based capital report as of the 
 end of the calendar year just ended not later than the later of: 

    (1) the date a risk-based capital report would be required 
 to be filed by a domestic insurer under sections 60A.60 to 
 60A.696; or 

    (2) fifteen days after the request is received by the 
 foreign insurer. 

    A foreign insurer shall, at the written request of the 
 commissioner, promptly submit to the commissioner copies of all 
 risk-based capital plans that are filed by the insurer with the 
 insurance commissioners of other states. 

    Subd. 2.    A risk-based capital plan requirement.  In 
 the event of a company action level event, regulatory action 
 level event, or authorized control level event with respect to a 
 foreign insurer as determined under the risk-based capital 
 statute applicable in the state of domicile of the insurer, or, 
 if no risk-based capital statute is in force in that state, 
 under sections 60A.60 to 60A.696, if the insurance commissioner 
 of the state of domicile of the foreign insurer fails to require 
 the foreign insurer to file a risk-based capital plan in the 
 manner specified under that state's risk-based capital statute, 
 or, if no risk-based capital statute is in force in that state, 
 under section 60A.62, the commissioner may require the foreign 
 insurer to file a risk-based capital plan with the 
 commissioner.  In this event, the failure of the foreign insurer 
 to file a risk-based capital plan with the commissioner shall be 
 grounds to order the insurer to cease and desist from writing 
 new insurance business in this state.  This section does not 
 limit the commissioner's authority to require a foreign insurer 
 to file a copy of the risk-based capital plan submitted to the 
 commissioner in the state of domicile. 

    Subd. 3.    Liquidation of property.  In the event of a 
 mandatory control level event with respect to a foreign insurer, 
 if no domiciliary receiver has been appointed with respect to 
 the foreign insurer under the rehabilitation and liquidation 
 statute applicable in the state of domicile of the foreign 
 insurer, the commissioner may make application to the district 
 court permitted under chapter 60B with respect to the 
 liquidation of property of foreign insurers found in this state, 
 and the occurrence of the mandatory control level event is 
 adequate grounds for the application. 

    HIST: 1995 c 253 s 11 

     60A.695 Immunity. 

    There is no liability on the part of, and no cause of 
 action arises against, the commissioner or the commerce 
 department or its employees or agents for an action taken by 
 them in the performance of their powers and duties under 
 sections 60A.60 to 60A.696. 

    HIST: 1995 c 253 s 12 

     60A.696 Notices. 

    All notices by the commissioner to an insurer that may 
 result in regulatory action under sections 60A.60 to 60A.696 are 
 effective upon dispatch if transmitted by registered or 
 certified mail, or in the case of other transmission is 
 effective upon the insurer's receipt of the notice. 

    HIST: 1995 c 253 s 13 

     60A.70 Title. 

    Sections 60A.70 to 60A.756 may be cited as the Reinsurance 
 Intermediary Act. 

    HIST: 1991 c 325 art 11 s 1 

     60A.705 Definitions. 

    Subdivision 1.    Terms.  For purposes of sections 
 60A.70 to 60A.756, the terms defined in this section have the 
 meanings given them. 

    Subd. 2.    Actuary.  "Actuary" means a person who is a 
 member in good standing of the American Academy of Actuaries. 

    Subd. 3.    Controlling person.  "Controlling person" 
 means a person, firm, association, or corporation who directly 
 or indirectly has the power to direct or cause to be directed, 
 the management, control, or activities of the reinsurance 
 intermediary. 

    Subd. 4.    Insurer.  "Insurer" means any person, firm, 
 association, or corporation duly licensed in this state pursuant 
 to the applicable provisions of the insurance law as an insurer. 

    Subd. 5.    Licensed producer.  "Licensed producer" 
 means an agent, broker, or reinsurance intermediary licensed 
 pursuant to the applicable provision of the insurance law. 

    Subd. 6.    Reinsurance intermediary.  "Reinsurance 
 intermediary" means a reinsurance intermediary-broker or a 
 reinsurance intermediary-manager.  

    Subd. 7.    Reinsurance intermediary-broker.  
 "Reinsurance intermediary-broker" or "RB" means any person, 
 other than an officer or employee of the ceding insurer, firm, 
 association, or corporation who solicits, negotiates, or places 
 reinsurance cessions or retrocessions on behalf of a ceding 
 insurer without the authority or power to bind reinsurance on 
 behalf of this insurer. 

    Subd. 8.    Reinsurance intermediary-manager.  
 "Reinsurance intermediary-manager" or "RM" means any person, 
 firm, association, or corporation who has authority to bind or 
 manages all or part of the assumed reinsurance business of a 
 reinsurer, including the management of a separate division, 
 department, or underwriting office, and acts as an agent for 
 that reinsurer whether known as an RM, manager, or other similar 
 term.  However, the following persons are not considered an RM, 
 with respect to that reinsurer, for the purposes of sections 
 60A.70 to 60A.756: 

    (1) an employee of the reinsurer; 

    (2) a United States manager of the United States branch of 
 an alien reinsurer; 

    (3) an underwriting manager which, pursuant to contract, 
 manages all or part of the reinsurance operations of the 
 reinsurer, is under common control with the reinsurer, subject 
 to the Holding Company Act, and whose compensation is not based 
 on the volume of premiums written; or 

    (4) the manager of a group, association, pool, or 
 organization of insurers which engage in joint underwriting or 
 joint reinsurance and who are subject to examination by the 
 insurance commissioner of the state in which the manager's 
 principal business office is located. 

    Subd. 9.    Reinsurer.  "Reinsurer" means a person, 
 firm, association, or corporation licensed in this state as an 
 insurer with the authority to assume reinsurance. 

    Subd. 10.    To be in violation.  "To be in violation" 
 means that the reinsurance intermediary, insurer, or reinsurer 
 for whom the reinsurance intermediary was acting failed to 
 substantially comply with the provisions of sections 60A.70 to 
 60A.756. 

    Subd. 11.    Qualified United States financial 
 institution.  "Qualified United States financial institution" 
 means an institution that: 

    (1) is organized, or in the case of a United States office 
 of a foreign banking organization, is licensed, under the laws 
 of the United States or any state; 

    (2) is regulated, supervised, and examined by United States 
 federal or state authorities having regulatory authority over 
 banks and trust companies; and 

    (3) has been determined by either the commissioner, or the 
 securities valuation office of the National Association of 
 Insurance Commissioners, to meet the standards of financial 
 condition and standing considered necessary and appropriate to 
 regulate the quality of financial institutions whose letters of 
 credit will be acceptable to the commissioner. 

    HIST: 1991 c 325 art 11 s 2; 1995 c 214 s 10 

     60A.71 Licensure. 

    Subdivision 1.    Reinsurance intermediary-broker 
 requirements.  No person, firm, association, or corporation 
 shall act as an RB in this state if the RB maintains an office 
 either directly or as a member or employee of a firm or 
 association, or an officer, director, or employee of a 
 corporation: 

    (1) in this state, unless the RB is a licensed producer in 
 this state; or 

    (2) in another state, unless the RB is a licensed producer 
 in this state or another state having a law substantially 
 similar to this law or the RB is licensed in this state as a 
 nonresident reinsurance intermediary. 

    Subd. 2.    Reinsurance intermediary-manager requirements. 
  No person, firm, association, or corporation shall act as a 
 RM: 

    (1) for a reinsurer domiciled in this state, unless the RM 
 is a licensed producer in this state; 

    (2) in this state, if the RM maintains an office either 
 directly or as a member or employee of a firm or association, or 
 an officer, director, or employee of a corporation in this 
 state, unless the RM is a licensed producer in this state; or 

    (3) in another state for a nondomestic insurer, unless the 
 RM is a licensed producer in this state or another state having 
 a law substantially similar to this law or the person is 
 licensed in this state as a nonresident reinsurance intermediary.

    Subd. 3.    Bond and insurance requirements for 
 reinsurance intermediary-manager.  The commissioner may 
 require an RM subject to subdivision 2 to: 

    (1) file a bond in an amount from an insurer acceptable to 
 the commissioner for the protection of the reinsurer; and 

    (2) maintain an errors and omissions policy in an amount 
 acceptable to the commissioner. 

    Subd. 4.    Terms.  (a) The commissioner may issue a 
 reinsurance intermediary license to any person, firm, 
 association, or corporation who has complied with the 
 requirements of sections 60A.70 to 60A.756.  The license issued 
 to a firm or association will authorize all the members of the 
 firm or association and any designated employees to act as 
 reinsurance intermediaries under the license, and these persons 
 shall be named in the application and any supplements to it.  
 The license issued to a corporation shall authorize all of the 
 officers, and any designated employees and directors of the 
 corporation to act as reinsurance intermediaries on behalf of 
 the corporation, and all these persons shall be named in the 
 application and any supplements to it.  

    (b) If the applicant for a reinsurance intermediary license 
 is a nonresident, the applicant, as a condition precedent to 
 receiving or holding a license, shall designate the commissioner 
 as agent for service of process in the manner, and with the same 
 legal effect, provided for by sections 60A.70 to 60A.756 for 
 designation of service of process upon unauthorized insurers.  
 The applicant shall also furnish the commissioner with the name 
 and address of a resident of this state upon whom notices or 
 orders of the commissioner or process affecting the nonresident 
 reinsurance intermediary may be served.  The licensee shall 
 promptly notify the commissioner in writing of every change in 
 its designated agent for service of process, and the change 
 shall not become effective until acknowledged by the 
 commissioner. 

    Subd. 5.    Refusal to issue.  The commissioner may 
 refuse to issue a reinsurance intermediary license if, in the 
 commissioner's judgment, the applicant, anyone named on the 
 application, or any member, principal, officer, or director of 
 the applicant, is not trustworthy, or that any controlling 
 person of the applicant is not trustworthy to act as a 
 reinsurance intermediary, or that any of the foregoing has given 
 cause for revocation or suspension of the license, or has failed 
 to comply with any prerequisite for the issuance of the 
 license.  Upon written request, the commissioner will furnish a 
 summary of the basis for refusal to issue a license.  This 
 document is privileged and not subject to chapter 13.  

    Subd. 6.    Attorneys exemption.  Licensed attorneys at 
 law of this state when acting in their professional capacity as 
 such are exempt from this section. 

    Subd. 7.    Fees.  Each applicant for a reinsurance 
 intermediary license shall pay to the commissioner a fee of $200 
 for an initial two-year license and a fee of $150 for each 
 renewal.  Applications shall be submitted on forms prescribed by 
 the commissioner. 

    HIST: 1991 c 325 art 11 s 3; 1997 c 200 art 1 s 42; 1999 c 223 
 art 2 s 6 

     60A.715 Required contract provisions; reinsurance 
  intermediary-brokers. 

    Transactions between a RB and the insurer it represents in 
 this capacity shall only be entered into pursuant to a written 
 authorization, specifying the responsibilities of each party.  
 The authorization must, at a minimum, provide that: 

    (1) the insurer may terminate the RB's authority at any 
 time; 

    (2) the RB will render accounts to the insurer accurately 
 detailing all material transactions, including information 
 necessary to support all commissions, charges, and other fees 
 received by, or owing to the RB, and remit all funds due to the 
 ceding insurer or the assuming reinsurer within 30 days of the 
 month of receipt; 

    (3) all funds collected for the ceding insurer's or the 
 assuming reinsurer's account will be held by the RB in a 
 fiduciary capacity: 

    (i) in a bank that is a qualified United States financial 
 institution; or 

    (ii) in direct obligations of, or obligations guaranteed or 
 insured by, the United States, its agencies, or its 
 instrumentalities, excluding mortgage-backed securities, or in 
 obligations described in section 60A.11, subdivision 17, 
 paragraphs (a) and (b). 

    Investments made under item (ii) must be traded on a 
 national securities exchange, and shall be restricted to the 
 following:  direct obligations of the United States government 
 or an agency of the United States government, municipal bonds or 
 corporate bonds or notes with credit ratings of at least AA by 
 Standard &> Poors or equivalent ratings from a comparable rating 
 service, or commercial paper with a short-term rating of at 
 least A-1 by Standard &> Poors or an equivalent rating from a 
 comparable rating service, but in no event shall the obligations 
 be rated other than in the highest category established by the 
 securities valuation office of the National Association of 
 Insurance Commissioners.  The RB shall invest fiduciary funds 
 under item (ii) only if authorized in writing by the ceding 
 insurer or assuming reinsurer in whose account the funds are 
 held, shall secure the investments with security acceptable to 
 the ceding insurer or assuming reinsurer on whose account the 
 funds are held, and shall be responsible for any losses on 
 investments made pursuant to item (ii). 

    At least 50 percent of the funds invested under clause (3), 
 based on the prior 30 days' average balance, must be invested in 
 instruments that mature in no more than 120 days.  In no case 
 shall an investment mature in greater than three years from the 
 date of purchase.  Investments made pursuant to clause (3) 
 should emphasize safety, liquidity, and diversification.  The RB 
 is required to structure those investments so that funds are 
 available to remit on a timely basis to the ceding insurer or 
 the assuming reinsurer in accordance with clause (2); 

    (4) the RB will comply with section 60A.72; 

    (5) the RB will comply with the written standards 
 established by the insurer for the cession or retrocession of 
 all risks; and 

    (6) the RB will disclose to the insurer any relationship 
 with any reinsurer to which business will be ceded or retroceded.

    HIST: 1991 c 325 art 11 s 4; 1995 c 163 s 1; 1998 c 323 s 1 

     60A.72 Books and records; reinsurance 
  intermediary-brokers. 

    Subdivision 1.    Records of transactions.  For at least 
 ten years after expiration of each contract of reinsurance 
 transacted by the RB, the RB will keep a complete record for 
 each transaction showing: 

    (1) the type of contract, limits, underwriting 
 restrictions, classes or risks, and territory; 

    (2) period of coverage, including effective and expiration 
 dates, cancellation provisions, and notice required of 
 cancellation; 

    (3) reporting and settlement requirements of balances; 

    (4) rate used to compute the reinsurance premium; 

    (5) names and addresses of assuming reinsurers; 

    (6) rates of all reinsurance commissioners, including the 
 commissions on any retrocessions handled by the RB; 

    (7) related correspondence and memoranda; 

    (8) proof of placement; 

    (9) details regarding retrocessions handled by the RB 
 including the identity of retrocessionaires and percentage of 
 each contract assumed or ceded; 

    (10) financial records, including, but not limited to, 
 premium and loss accounts; and 

    (11) when the RB procures a reinsurance contract on behalf 
 of a licensed ceding insurer: 

    (i) directly from any assuming reinsurer, written evidence 
 that the assuming reinsurer has agreed to assume the risk; or 

    (ii) if placed through a representative of the assuming 
 reinsurer, other than an employee, written evidence that such 
 reinsurer has delegated binding authority to the representative. 

    Subd. 2.    Access by insurer.  The insurer will have 
 access and the right to copy and audit all accounts and records 
 maintained by the RB related to its business in a form usable by 
 the insurer. 

    HIST: 1991 c 325 art 11 s 5 

     60A.725 Duties of insurers utilizing the services of a 
  reinsurance intermediary-broker. 

    (a) An insurer shall not engage the services of a person, 
 firm, association, or corporation to act as an RB on its behalf 
 unless the person is licensed as required by section 60A.71, 
 subdivision 1.  

    (b) An insurer may not employ an individual who is employed 
 by an RB with which it transacts business, unless the RB is 
 under common control with the insurer and subject to chapter 60D.

    (c) The insurer shall annually obtain a copy of statements 
 of the financial condition of each RB with which it transacts 
 business. 

    HIST: 1991 c 325 art 11 s 6 

     60A.73 Required contract provisions; reinsurance 
  intermediary-managers. 

    Subdivision 1.    Approval by commissioner.  
 Transactions between an RM and the reinsurer it represents in 
 this capacity must only be entered into pursuant to a written 
 contract, specifying the responsibilities of each party.  The 
 contract shall be approved by the reinsurer's board of 
 directors.  At least 30 days before the reinsurer assumes or 
 cedes business through this producer, a true copy of the 
 approved contract must be filed with the commissioner for 
 approval.  The contract must, at a minimum, contain the 
 provisions in subdivisions 2 to 14. 

    Subd. 2.    Terminations.  The reinsurer may terminate 
 the contract for cause upon written notice to the RM.  The 
 reinsurer may immediately suspend the authority of the RM to 
 assume or cede business during the pendency of any dispute 
 regarding the cause for termination. 

    Subd. 3.    Periodic accounting.  The RM will render 
 accounts to the reinsurer accurately detailing all material 
 transactions, including information necessary to support all 
 commissions, charges, and other fees received by, or owing to 
 the RM, and remit all funds due under the contract to the 
 reinsurer on not less than a monthly basis. 

    Subd. 4.    Handling of funds.  All funds collected for 
 the reinsurer's account will be held by the RM in a fiduciary 
 capacity in a bank which is a qualified United States financial 
 institution as defined herein and may be invested in direct 
 obligations of, or obligations guaranteed or insured by, the 
 United States, its agencies, or its instrumentalities, excluding 
 mortgage-backed securities.  These funds may not be invested in 
 obligations whose maturities exceed 90 days.  The RM may retain 
 no more than three months estimated claims payments and 
 allocated loss adjustment expenses.  The RM shall maintain a 
 separate account for each reinsurer that it represents. 

    Subd. 5.    Business records.  For at least ten years 
 after expiration of each contract of reinsurance transacted by 
 the RM, the RM will keep a complete record for each transaction 
 showing: 

    (1) the type of contract, limits, underwriting 
 restrictions, classes or risks, and territory; 

    (2) period of coverage, including effective and expiration 
 dates, cancellation provisions and notice required of 
 cancellation, and disposition of outstanding reserves on covered 
 risks; 

    (3) reporting and settlement requirements of balances; 

    (4) rate used to compute the reinsurance premium; 

    (5) names and addresses of reinsurers; 

    (6) rates of all reinsurance commissions, including the 
 commissions on any retrocessions handled by the RM; 

    (7) related correspondence and memoranda; 

    (8) proof of placement; 

    (9) details regarding retrocessions handled by the RM, as 
 permitted by section 60A.74, subdivision 4, including the 
 identity of retrocessionaires and percentage of each contract 
 assumed or ceded; 

    (10) financial records, including, but not limited to, 
 premium and loss accounts; and 

    (11) when the RM places a reinsurance contract on behalf of 
 a ceding insurer: 

    (i) directly from any assuming reinsurer, written evidence 
 that the assuming reinsurer has agreed to assume the risk; or 

    (ii) if placed through a representative of the assuming 
 reinsurer, other than an employee, written evidence that the 
 reinsurer has delegated binding authority to the representative. 

    Subd. 6.    Reinsurer access to records.  The reinsurer 
 will have access and the right to copy all accounts and records 
 maintained by the RM related to its business in a form usable by 
 the reinsurer. 

    Subd. 7.    Nonassignment of contract.  The contract 
 cannot be assigned in whole or in part by the RM. 

    Subd. 8.    Underwriting and rating standards.  The RM 
 will comply with the written underwriting and rating standards 
 established by the insurer for the acceptance, rejection, or 
 cession of all risks. 

    Subd. 9.    Charges and commissions.  The rates, terms 
 and purposes of commission, charges, and other fees which the RM 
 may levy against the reinsurer will be specified in the contract.

    Subd. 10.    Claims settlement.  If the contract permits 
 the RM to settle claims on behalf of the reinsurer, the contract 
 will specify that: 

    (1) all claims will be reported to the reinsurer in a 
 timely manner; 

    (2) a copy of the claim file will be sent to the reinsurer 
 at its request or as soon as it becomes known that the claim: 

    (i) has the potential to exceed the lesser of an amount 
 determined by the commissioner or the limit set by the 
 reinsurer; 

    (ii) involves a coverage dispute; 

    (iii) may exceed the RM's claims settlement authority; 

    (iv) is open for more than six months; or 

    (v) is closed by payment of the lesser of an amount set by 
 the commissioner or an amount set by the reinsurer; 

    (3) all claim files will be the joint property of the 
 reinsurer and RM.  However, upon an order of liquidation of the 
 reinsurer the files become the sole property of the reinsurer or 
 its estate.  The RM shall have reasonable access to and the 
 right to copy the files on a timely basis; and 

    (4) settlement authority granted to the RM may be 
 terminated for cause upon the reinsurer's written notice to the 
 RM or upon the termination of the contract.  The reinsurer may 
 suspend the settlement authority during the pendency of the 
 dispute regarding the cause of termination. 

    Subd. 11.    Interim profits.  If the contract provides 
 for a sharing of interim profits by the RM, interim profits will 
 not be paid until one year after the end of each underwriting 
 period for property business and five years after the end of 
 each underwriting period for casualty business, or a later 
 period set by the commissioner for specified lines of insurance, 
 and not until the adequacy of reserves on remaining claims has 
 been verified pursuant to section 60A.74, subdivision 3. 

    Subd. 12.    Certified financial statement.  The RM will 
 annually provide the reinsurer with a statement of its financial 
 condition prepared by an independent certified accountant. 

    Subd. 13.    On-site review by reinsurer.  The reinsurer 
 shall periodically, at least semiannually, conduct an on-site 
 review of the underwriting and claims processing operations of 
 the RM. 

    Subd. 14.    Disclosure of insurer relationship.  The RM 
 will disclose to the reinsurer any relationship it has with any 
 insurer before ceding or assuming any business with the insurer 
 pursuant to this contract. 

    Subd. 15.    Responsibility of reinsurer.  Within the 
 scope of its actual or apparent authority, the acts of the RM 
 are considered to be the acts of the reinsurer on whose behalf 
 it is acting. 

    HIST: 1991 c 325 art 11 s 7; 1995 c 163 s 2 

     60A.735 Prohibited acts. 

    The RM shall not: 

    (1) cede retrocessions on behalf of the reinsurer, except 
 that the RM may cede facultative retrocessions pursuant to 
 obligatory facultative agreements if the contract with the 
 reinsurer contains reinsurance underwriting guidelines for these 
 retrocessions.  These guidelines must include a list of 
 reinsurers with which these automatic agreements are in effect, 
 and for each reinsurer, the coverages and amounts or percentages 
 that may be reinsured, and commission schedules; 

    (2) commit the reinsurer to participate in reinsurance 
 syndicates; 

    (3) appoint any producer without assuring that the producer 
 is lawfully licensed to transact the type of reinsurance for 
 which the producer is appointed; 

    (4) without prior approval of the reinsurer, pay or commit 
 the reinsurer to pay a claim, net of retrocessions, that exceeds 
 the lesser of an amount specified by the reinsurer or one 
 percent of the reinsurer's policyholder's surplus as of December 
 31 of the last complete calendar year; 

    (5) collect any payment from a retrocessionaire or commit 
 the reinsurer to any claim settlement with a retrocessionaire, 
 without prior approval of the reinsurer.  If prior approval is 
 given, a report must be promptly forwarded to the reinsurer; 

    (6) jointly employ an individual who is employed by the 
 reinsurer unless such RM is under common control with the 
 reinsurer subject to chapter 60D; 

    (7) appoint a sub-RM. 

    HIST: 1991 c 325 art 11 s 8 

     60A.74 Duties of reinsurer utilizing the services of a 
  reinsurance intermediary-manager. 

    Subdivision 1.    Licensed persons to be used.  A 
 reinsurer shall not engage the services of any person, firm, 
 association, or corporation to act as an RM on its behalf unless 
 the person is licensed as required by section 60A.71, 
 subdivision 2. 

    Subd. 2.    Annual financial statements to be obtained.  
 The reinsurer shall annually obtain a copy of statements of the 
 financial condition of each RM which the reinsurer has engaged 
 prepared by an independent certified accountant in a form 
 acceptable to the commissioner. 

    Subd. 3.    Loss reserve opinions.  If an RM establishes 
 loss reserves, the reinsurer shall annually obtain the opinion 
 of an actuary attesting to the adequacy of loss reserves 
 established for losses incurred and outstanding on business 
 produced by the RM.  This opinion must be in addition to any 
 other required loss reserve certification. 

    Subd. 4.    Binding authority.  Binding authority for 
 all retrocessional contracts or participation in reinsurance 
 syndicates shall rest with an officer of the reinsurer who shall 
 not be affiliated with the RM. 

    Subd. 5.    Notification of termination.  Within 30 days 
 of termination of a contract with an RM, the reinsurer shall 
 provide written notification of the termination to the 
 commissioner. 

    Subd. 6.    Restriction on board appointments.  A 
 reinsurer shall not appoint to its board of directors, any 
 officer, director, employee, controlling shareholder, or 
 subproducer of its RM.  This subdivision does not apply to 
 relationships governed by chapter 60D or, if applicable, the 
 Producer Controlled Property/Casualty Insurer Act, sections 
 60J.06 to 60J.11. 

    HIST: 1991 c 325 art 11 s 9; 1993 c 13 art 1 s 16 

     60A.745 Examination authority; reinsurance intermediary -
  broker. 

    (a) A reinsurance intermediary is subject to examination by 
 the commissioner.  The commissioner shall have access to all 
 books, bank accounts, and records of the reinsurance 
 intermediary in a form usable to the commissioner. 

    (b) An RM may be examined as if it were the reinsurer. 

    HIST: 1991 c 325 art 11 s 10 

     60A.75 Violations. 

    Subdivision 1.    Administrative and civil penalties and 
 liabilities.  A reinsurance intermediary, insurer, or 
 reinsurer found by the commissioner, after a hearing conducted 
 in accordance with chapter 14, to be in violation of any 
 provision of sections 60A.70 to 60A.756, shall: 

    (1) for each separate violation, pay a penalty in an amount 
 not exceeding $5,000; and 

    (2) be subject to revocation or suspension of its license. 

    Subd. 2.    Civil remedies.  (a) If it was found that 
 because of the violation the insurer or reinsurer has suffered 
 loss or damage, the commissioner may maintain a civil action for 
 recovery of compensatory damages for the benefit of the 
 reinsurer or insurer and its policyholders and creditors or seek 
 other appropriate relief. 

    (b) If an order of rehabilitation or liquidation of the 
 insurer has been entered pursuant to chapter 60B, and the 
 receiver appointed under that order determines that the 
 reinsurance intermediary or any other person has violated 
 sections 60A.70 to 60A.756, or any rule or order adopted under 
 those sections, and the insurer suffered any loss or damage, the 
 receiver may maintain a civil action for recovery of damages or 
 other appropriate sanctions for the benefit of the insurer. 

    Subd. 3.    Judicial review.  The decision, 
 determination, or order of the commissioner pursuant to 
 subdivision 1 is subject to judicial review pursuant to chapter 
 14.  

    Subd. 4.    Other penalties.  Nothing contained in this 
 section affects the right of the commissioner to impose any 
 other penalties provided in the insurance laws. 

    HIST: 1991 c 325 art 11 s 11; 1995 c 214 s 11 

     60A.755 Scope. 

    Nothing contained in sections 60A.70 to 60A.756 is intended 
 to or shall in any manner limit or restrict the rights of 
 policyholders, claimants, creditors, or other third parties or 
 confer any rights to these persons. 

    HIST: 1991 c 325 art 11 s 12 

     60A.756 Rules. 

    The commissioner may adopt rules for the implementation and 
 administration of sections 60A.70 to 60A.756. 

    HIST: 1991 c 325 art 11 s 13 

  60A.80 Repealed, 1994 c 426 s 14 

  60A.801 Repealed, 1994 c 426 s 14 

  60A.802 Repealed, 1994 c 426 s 14 

     60A.803 Life and health reinsurance agreements. 

    Subdivision 1.    Scope.  This section applies to:  

    (1) all domestic life and accident and sickness insurers; 

    (2) all other licensed life and accident and sickness 
 insurers which are not subject to a substantially similar 
 regulation in their domiciliary state; and 

    (3) licensed insurers with respect to their accident and 
 sickness business.  

 This section does not apply to assumption reinsurance, yearly 
 renewable term reinsurance, or certain nonproportional 
 reinsurance such as stop loss or catastrophe reinsurance.  

    Subd. 2.    Accounting requirements.  No insurer subject 
 to this section shall, for reinsurance ceded, reduce any 
 liability or establish any asset in any financial statement 
 filed with the commissioner if, by the terms of the reinsurance 
 agreement, in substance or effect, any of the conditions in 
 paragraphs (a) to (k) exist: 

    (a) The renewal expense allowances provided or to be 
 provided to the ceding insurer by the reinsurer in any 
 accounting period, are not sufficient to cover anticipated 
 allocable renewal expenses of the ceding insurer on the portion 
 of the business reinsured, unless a liability is established for 
 the present value of the shortfall, using assumptions equal to 
 the applicable statutory reserve basis on the business 
 reinsured.  Those expenses include commissions, premium taxes, 
 and direct expenses including, but not limited to, billing, 
 valuation, claims, and maintenance expected by the company at 
 the time the business is reinsured. 

    (b) The ceding insurer can be deprived of surplus or assets 
 at the reinsurer's option or automatically upon the occurrence 
 of some event, such as the insolvency of the ceding insurer, 
 except that termination of the reinsurance agreement by the 
 reinsurer for nonpayment of reinsurance premiums or other 
 amounts due, such as modified coinsurance reserve adjustments, 
 interest and adjustments on funds withheld, and tax 
 reimbursements, shall not be considered to be a deprivation of 
 surplus or assets. 

    (c) The ceding insurer is required to reimburse the 
 reinsurer for negative experience under the reinsurance 
 agreement, except that neither offsetting experience refunds 
 against current and prior years' losses under the agreement nor 
 payment by the ceding insurer of an amount equal to the current 
 and prior years' losses under the agreement upon voluntary 
 termination of in force reinsurance by the ceding insurer is 
 considered such a reimbursement to the reinsurer for negative 
 experience.  Voluntary termination does not include situations 
 where termination occurs because of unreasonable provisions 
 which allow the reinsurer to reduce its risk under the 
 agreement.  An example of such a provision is the right of the 
 reinsurer to increase reinsurance premiums or risk and expense 
 charges to excessive levels forcing the ceding company to 
 prematurely terminate the reinsurance treaty. 

    (d) The ceding insurer must, at specific points in time 
 scheduled in the agreement, terminate or automatically recapture 
 all or part of the reinsurance ceded. 

    (e) The reinsurance agreement involves the possible payment 
 by the ceding insurer to the reinsurer of amounts other than 
 from income realized from the reinsured policies.  It is 
 improper for a ceding company to pay reinsurance premiums, or 
 other fees or charges to a reinsurer, which are greater than the 
 direct premiums collected by the ceding company. 

    (f) The reinsurance agreement does not transfer all of the 
 significant risk inherent in the business being reinsured.  The 
 following table identifies, for a representative sampling of 
 products or type of business, the risks that are considered to 
 be significant.  For products not specifically included, the 
 risks determined to be significant must be consistent with this 
 table. 

    Risk categories:  

    (1) morbidity; 

    (2) mortality; 

    (3) lapse, which is the risk that a policy will voluntarily 
 terminate prior to the recoupment of a statutory surplus strain 
 experienced at issue of the policy; 

    (4) credit quality (C1), which is the risk that invested 
 assets supporting the reinsured business will decrease in 
 value.  The main hazards are that assets will default or that 
 there will be a decrease in earning power.  It excludes market 
 value declines due to changes in interest rate; 

    (5) reinvestment (C3), which is the risk that interest 
 rates will fall and funds reinvested (coupon payments or money 
 received upon asset maturity or call) will therefore earn less 
 than expected.  If asset durations are less than liability 
 durations, the mismatch will increase; and 

    (6) disintermediation (C3), which is the risk that interest 
 rates rise and policy loans and surrenders increase or maturing 
 contracts do not renew at anticipated rates of renewal.  If 
 asset durations are greater than the liability durations, the 
 mismatch will increase.  Policyholders will move their funds 
 into new products offering higher rates.  The company may have 
 to sell assets at a loss to provide for these withdrawals. 

                          RISK CATEGORY 

 + = Significant 

 0 = Insignificant 

                                              1 2 3 4 5 6
 Health Insurance - other than LTC/LTD*       + 0 + 0 0 0
 Health Insurance - LTC/LTD*                  + 0 + + + 0
 Immediate Annuities                          0 + 0 + + 0
 Single Premium Deferred Annuities            0 0 + + + +
 Flexible Premium Deferred Annuities          0 0 + + + +
 Guaranteed Interest Contracts                0 0 0 + + +
 Other Annuity Deposit Business               0 0 + + + +
 Single Premium Whole Life                    0 + + + + +
 Traditional Nonpar Permanent                 0 + + + + +
 Traditional Nonpar Term                      0 + + 0 0 0
 Traditional Par Permanent                    0 + + + + +
 Traditional Par Term                         0 + + 0 0 0
 Adjustable Premium Permanent                 0 + + + + +
 Indeterminate Premium Permanent              0 + + + + +
 Universal Life Flexible Premium              0 + + + + +
 Universal Life Fixed Premium                 0 + + + + +
 Universal Life Fixed Premium (dump-in        0 + + + + +
   premiums allowed)

 *LTC = Long Term Care Insurance 

 LTD = Long Term Disability Insurance 

    (g)(1) The credit quality, reinvestment, or 
 disintermediation risk is significant for the business reinsured 
 and the ceding company does not, other than for the classes of 
 business excepted in clause (2), either transfer the underlying 
 assets to the reinsurer or legally segregate such assets in a 
 trust or escrow account or otherwise establish a mechanism 
 satisfactory to the commissioner that legally segregates, by 
 contract or contract provision, the underlying assets. 

    (2) Notwithstanding the requirements of clause (1), the 
 assets supporting the reserves for the following classes of 
 business and any classes of business that do not have a 
 significant credit quality, reinvestment or disintermediation 
 risk, may be held by the ceding company without segregation of 
 the assets: 

    (i) Health Insurance - LTC/LTD; 

    (ii) Traditional Nonpar Permanent; 

    (iii) Traditional Par Permanent; 

    (iv) Adjustable Premium Permanent; 

    (v) Indeterminate Premium Permanent; and/or 

    (vi) Universal Life Fixed Premium (no dump-in premiums 
 allowed). 

    The associated formula for determining the reserve interest 
 rate adjustment must reflect the ceding company's investment 
 earnings and incorporate all realized and unrealized gains and 
 losses reflected in the statutory statement.  The following is 
 an acceptable formula: 

    Rate = 2(I G) / (X + Y - I - CG) 

 Where:       I is the net investment income
              CG is capital gains less capital losses
              X is the current year cash and invested assets plus
              investment income due and accrued less borrowed
              money
              Y is the same as X but for the prior year

    (h) Settlements are made less frequently than quarterly or 
 payments due from the reinsurer are not made in cash within 90 
 days of the settlement date. 

    (i) The ceding insurer is required to make representations 
 or warranties not reasonably related to the business being 
 reinsured. 

    (j) The ceding insurer is required to make representations 
 or warranties about future performance of the business being 
 reinsured. 

    (k) The reinsurance agreement is entered into for the 
 principal purpose of producing significant surplus aid for the 
 ceding insurer, typically on a temporary basis, while not 
 transferring all of the significant risks inherent in the 
 business reinsured and, in substance or effect, the expected 
 potential liability to the ceding insurer remains basically 
 unchanged. 

    Subd. 3.    Commissioner approval.  Notwithstanding 
 subdivision 2, an insurer subject to this section may, with the 
 prior approval of the commissioner, take such reserve credit or 
 establish such asset as the commissioner deems consistent with 
 state insurance law or rules. 

    Subd. 4.    Filing.  (a) Agreements entered into after 
 August 1, 1994, that involve the reinsurance of business issued 
 prior to the effective date of the agreements, along with any 
 subsequent amendments thereto, shall be filed by the ceding 
 company with the commissioner within 30 days from their date of 
 execution.  Each filing shall include data detailing the 
 financial impact of the transaction.  The ceding insurer's 
 actuary who signs the financial statement actuarial opinion with 
 respect to valuation of reserves shall consider this section and 
 any applicable actuarial standards of practice when determining 
 the proper credit in financial statements filed with the 
 commissioner.  The actuary shall maintain adequate documentation 
 and be prepared upon request to describe the actuarial work 
 performed for inclusion in the financial statements and to 
 demonstrate that the work conforms to this section. 

    (b) Any increase in surplus net of federal income tax 
 resulting from arrangements described in paragraph (a) must be 
 identified separately on the insurer's statutory financial 
 statement as a surplus item (aggregate write-ins for gains and 
 losses in surplus in the capital and surplus account of the 
 annual statement) and recognition of the surplus increase as 
 income must be reflected on a net of tax basis in the 
 "Reinsurance ceded" line of the annual statement as earnings 
 emerge from the business reinsured. 

    Subd. 5.    Written agreements.  No reinsurance 
 agreement or amendment to any agreement may be used to reduce 
 any liability or to establish any asset in any financial 
 statement filed with the commissioner, unless the agreement, 
 amendment, or a binding letter or intent has been duly executed 
 by both parties no later than the "as of date" of the financial 
 statement.  In the case of a letter of intent, a reinsurance 
 agreement or an amendment to a reinsurance agreement must be 
 executed within a reasonable period of time, not exceeding 90 
 days from the execution date of the letter of intent, in order 
 for credit to be granted for the reinsurance ceded.  The 
 reinsurance agreement must provide that: 

    (1) the agreement constitutes the entire agreement between 
 the parties with respect to the business being reinsured under 
 it and that there are no understandings between the parties 
 other than as expressed in the agreement; and 

    (2) any change or modification to the agreement is null and 
 void unless made by amendment to the agreement and signed by 
 both parties. 

    Subd. 6.    Reserve credits.  Insurers subject to this 
 section shall reduce to zero by December 31, 1995, any reserve 
 credits or assets established with respect to reinsurance 
 agreements entered into prior to August 1, 1994, that under the 
 provisions of this section would not be entitled to recognition 
 of the reserve credits or assets; provided, however, that the 
 reinsurance agreements have been in compliance with laws or 
 regulations in existence immediately preceding August 1, 1994. 

    HIST: 1994 c 426 s 9 

     60A.90 Scope. 

    Sections 60A.90 to 60A.94 apply to all domestic, foreign, 
 and alien insurers who are authorized to transact business in 
 this state. 

    HIST: 1991 c 325 art 12 s 1 

     60A.91 Filing requirements. 

    (a) A domestic, foreign, and alien insurer who is 
 authorized to transact insurance in this state shall annually on 
 or before March 1 of each year, file with the National 
 Association of Insurance Commissioners (NAIC) a copy of its 
 annual statement convention blank, along with additional filings 
 prescribed by the commissioner for the preceding year.  The 
 information filed with the National Association of Insurance 
 Commissioners must be in the same format and scope as that 
 required by the commissioner and must include the signed jurat 
 page and the actuarial certification.  Amendments and addenda to 
 the annual statement filing subsequently filed with the 
 commissioner must also be filed with the NAIC. 

    (b) Foreign insurers that are domiciled in a state that has 
 a law substantially similar to paragraph (a) is considered to be 
 in compliance with this section. 

    HIST: 1991 c 325 art 12 s 2 

     60A.92 Immunity. 

    In the absence of actual malice, members of the NAIC, their 
 duly authorized committees, subcommittees, and task forces, 
 their delegates, NAIC employees, and all others charged with the 
 responsibility of collecting, reviewing, analyzing, and 
 disseminating the information developed from the filing of the 
 annual statement convention blanks are acting as agents of the 
 commissioner under the authority of sections 60A.90 to 60A.94 
 and are not subject to civil liability for libel, slander, or 
 any other cause of action by virtue of their collection, review, 
 and analysis or dissemination of the data and information 
 collected from the filings required under sections 60A.90 to 
 60A.94. 

    HIST: 1991 c 325 art 12 s 3 

     60A.93 Confidentiality. 

    All financial analysis ratios and examination synopses 
 concerning insurance companies that are submitted to the 
 department by the National Association of Insurance 
 Commissioners' Insurance Regulatory Information System are 
 confidential and may not be disclosed by the department. 

    HIST: 1991 c 325 art 12 s 4 

     60A.94 Revocation of certificate of authority. 

    The commissioner may suspend, revoke, or refuse to renew 
 the certificate of authority of an insurer failing to file its 
 annual statement when due or within any extension of time that 
 the commissioner, for good cause, may have granted. 

    HIST: 1991 c 325 art 12 s 5 

     60A.951 Definitions. 

    Subdivision 1.    Application.  The definitions in this 
 section apply to sections 60A.951 to 60A.955. 

    Subd. 2.    Authorized person.  "Authorized person" 
 means the county attorney, sheriff, or chief of police 
 responsible for investigations in the county where the suspected 
 insurance fraud occurred; the superintendent of the bureau of 
 criminal apprehension; the commissioner of commerce; the 
 commissioner of labor and industry; the attorney general; or any 
 duly constituted criminal investigative department or agency of 
 the United States. 

    Subd. 3.    Commissioner.  "Commissioner" means the 
 commissioner of commerce for insurers regulated by the 
 commissioner of commerce, and means the commissioner of health 
 for insurers regulated by the commissioner of health. 

    Subd. 4.    Insurance fraud.  "Insurance fraud" occurs 
 when a person presents or causes to be presented to any insurer, 
 or prepares with knowledge or belief that it will be so 
 presented, a written or oral statement, including a 
 computer-generated document, an electronic claim filing, or 
 other electronic transmission, that contains materially false or 
 misleading information, or a material and misleading omission, 
 concerning: 

    (1) an application for the issuance of an insurance policy; 

    (2) the rating of an insurance policy; 

    (3) a claim for payment, reimbursement, or benefits payable 
 under an insurance policy to an insured, a beneficiary, or a 
 third party; 

    (4) premiums on an insurance policy; or 

    (5) payments made in accordance with the terms of an 
 insurance policy. 

    Subd. 5.    Insurer.  "Insurer" means insurance company, 
 risk retention group as defined in section 60E.02, service plan 
 corporation as defined in section 62C.02, health maintenance 
 organization as defined in section 62D.02, community integrated 
 service network as defined in section 62N.02, fraternal benefit 
 society regulated under chapter 64B, township mutual company 
 regulated under chapter 67A, joint self-insurance plan or 
 multiple employer trust regulated under chapter 60F, 62H, or 
 section 471.617, subdivision 2, persons administering a 
 self-insurance plan as defined in section 60A.23, subdivision 8, 
 clause (2), paragraphs (a) and (d), and the workers' 
 compensation reinsurance association established in section 
 79.34. 

    Subd. 6.    Relevant information.  "Relevant information"
 includes, but is not limited to: 

    (1) pertinent insurance policy information, including the 
 application for a policy; 

    (2) policy premium payment records; 

    (3) a history of previous claims made by the insured 
 including, where the insured is a corporation, limited liability 
 company, or partnership, a history of claims by a subsidiary or 
 any affiliates, and a history of claims of any other business 
 association in which individual officers or partners or their 
 family members are known to be involved; 

    (4) material relating to the investigation, including the 
 statement of any person and the proof of loss; 

    (5) billing records; and 

    (6) any other information which an authorized person 
 identifies and which appears reasonably related to the 
 investigation. 

    HIST: 1994 c 574 s 1; 1995 c 258 s 9,10; 1997 c 225 art 2 s 1 

     60A.952 Disclosure of information. 

    Subdivision 1.    Request.  After receiving a written 
 request from an authorized person stating that the authorized 
 person has reason to believe that a crime or civil fraud has 
 been committed in connection with an insurance claim, payment, 
 or application, an insurer must release to the authorized person 
 all relevant information in the insurer's possession.  

    Subd. 2.    Notification by insurer required.  If an 
 insurer has reason to believe that an insurance fraud has been 
 committed, the insurer shall, in writing, notify an authorized 
 person and provide the authorized person with all relevant 
 information in the insurer's possession.  It is sufficient for 
 the purpose of this subdivision if an insurer notifies and 
 provides relevant information to one authorized person.  The 
 insurer may also release relevant information to any person 
 authorized to receive the information under section 72A.502, 
 subdivision 2. 

    Subd. 3.    Immunity from liability.  If insurers, 
 agents acting on the insurers' behalf, or authorized persons 
 release information in good faith under this section, whether 
 orally or in writing, they are immune from any liability, civil 
 or criminal, for the release or reporting of the information. 

    HIST: 1994 c 574 s 2 

     60A.953 Enforcement. 

    The intentional failure to provide relevant information as 
 required by section 60A.952, subdivision 1, or to provide 
 notification of insurance fraud as required by section 60A.952, 
 subdivision 2, is punishable as a misdemeanor. 

    HIST: 1994 c 574 s 3 

     60A.954 Insurance antifraud plan. 

    Subdivision 1.    Establishment.  An insurer shall 
 institute, implement, and maintain an antifraud plan.  For the 
 purpose of this section, the term insurer does not include 
 reinsurers, the workers' compensation reinsurance association, 
 self-insurers, and excess insurers.  Within 30 days after 
 instituting or modifying an antifraud plan, the insurer shall 
 notify the commissioner in writing.  The notice must include the 
 name of the person responsible for administering the plan.  An 
 antifraud plan shall establish procedures to: 

    (1) prevent insurance fraud, including:  internal fraud 
 involving the insurer's officers, employees, or agents; fraud 
 resulting from misrepresentations on applications for insurance; 
 and claims fraud; 

    (2) report insurance fraud to appropriate law enforcement 
 authorities; and 

    (3) cooperate with the prosecution of insurance fraud cases.

    Subd. 2.    Review.  The commissioner may review each 
 insurer's antifraud plan to determine whether it complies with 
 the requirements of this section.  If the commissioner finds 
 that an insurer's antifraud plan does not comply with the 
 requirements of this section, the commissioner shall disapprove 
 the plan and send a notice of disapproval, along with the 
 reasons for disapproval, to the insurer.  An insurer whose 
 antifraud plan has been disapproved by the commissioner shall 
 submit a new plan to the commissioner within 60 days after the 
 plan was disapproved.  The commissioner may examine an insurer's 
 procedures to determine whether the insurer is complying with 
 its antifraud plan.  The commissioner shall withhold from public 
 inspection any part of an insurer's antifraud plan for so long 
 as the commissioner deems the withholding to be in the public 
 interest. 

    HIST: 1994 c 574 s 4; 1995 c 258 s 11 

     60A.955 Claim forms to contain fraud warning. 

    All insurance claim forms issued by an insurer for use in 
 submitting a claim for payment or a claim for any other benefit 
 pursuant to a policy shall clearly contain a warning 
 substantially as follows:  "A person who files a claim with 
 intent to defraud or helps commit a fraud against an insurer is 
 guilty of a crime."  An insurer may comply with this section by 
 including the warning on an addendum attached to the claim 
 form.  The absence of the required warning does not constitute a 
 defense in a prosecution for a violation of chapter 609 or any 
 other chapter of Minnesota Statutes. 

    HIST: 1994 c 574 s 5; 1995 c 258 s 12 

     60A.961 Definitions. 

    Subdivision 1.    Application.  For the purposes of 
 sections 60A.961 to 60A.974, the definitions in this section 
 have the meanings given them. 

    Subd. 2.    Person.  "Person" means a natural or 
 artificial entity, including individuals, partnerships, 
 associations, trusts, limited liability companies, or 
 corporations. 

    Subd. 3.    Viatical settlement broker.  "Viatical 
 settlement broker" means an individual, partnership, limited 
 liability company, corporation, or other entity who or which for 
 another and for a fee, commission, or other valuable 
 consideration, offers or advertises the availability of viatical 
 settlements, introduces viators to viatical settlement 
 providers, or offers or attempts to negotiate viatical 
 settlements between a viator and one or more viatical settlement 
 providers.  "Viatical settlement broker" does not include an 
 attorney, accountant, or financial planner retained to represent 
 the viator whose compensation is not paid by the viatical 
 settlement provider. 

    Subd. 4.    Viatical settlement contract.  "Viatical 
 settlement contract" means a written agreement entered into 
 between a viatical settlement provider and a person owning a 
 life insurance policy or who owns or is covered under a group 
 policy insuring the life of a person who has a catastrophic or 
 life threatening illness or condition.  The agreement must 
 establish the terms under which the viatical settlement provider 
 will pay compensation or anything of value, which compensation 
 or value is less than the expected death benefit of the 
 insurance policy or certificate, in return for the policy 
 owner's assignment, transfer, sale, devise, or bequest of the 
 death benefit or ownership of the insurance policy or 
 certificate to the viatical settlement provider. 

    Subd. 5.    Viatical settlement provider.  "Viatical 
 settlement provider" means an individual, partnership, limited 
 liability company, corporation, or other entity that enters into 
 an agreement with a person owning a life insurance policy or who 
 owns or is covered under a group policy insuring the life of a 
 person who has a catastrophic or life threatening illness or 
 condition, under the terms of which the viatical settlement 
 provider pays compensation or anything of value, which 
 compensation or value is less than the expected death benefit of 
 the insurance policy or certificate, in return for the policy 
 owner's assignment, transfer, sale, devise, or bequest of the 
 death benefit or ownership of the insurance policy or 
 certificate to the viatical settlement provider.  Viatical 
 settlement provider does not include: 

    (1) a bank, savings bank, savings association, credit 
 union, or other licensed lending institution that takes an 
 assignment of a life insurance policy as collateral for a loan; 

    (2) the issuer of a life insurance policy providing 
 accelerated benefits under section 61A.072; or 

    (3) a natural person who enters into no more than one 
 agreement in a calendar year for the transfer of life insurance 
 policies for any value less than the expected death benefit. 

    Subd. 6.    Viator.  "Viator" means the owner or 
 certificate holder of a life insurance policy insuring the life 
 of a person with a catastrophic or life threatening illness or 
 condition who enters into an agreement under which the viatical 
 settlement provider will pay compensation or anything of value, 
 which compensation or value is less than the expected death 
 benefit of the insurance policy or certificate, in return for 
 the viator's assignment, transfer, sale, devise, or bequest of 
 the death benefit or ownership of the insurance policy or 
 certificate to the viatical settlement provider. 

    HIST: 1995 c 151 s 2 

     60A.962 License requirements. 

    Subdivision 1.    License.  No individual, partnership, 
 limited liability company, corporation, or other entity may act 
 as a viatical settlement provider or enter into or solicit a 
 viatical settlement contract without first having obtained a 
 license from the commissioner of commerce. 

    Subd. 2.    Form.  An applicant for a viatical 
 settlement provider license shall submit an application to the 
 commissioner of commerce on a form prescribed by the 
 commissioner. 

    Subd. 3.    Contents.  The applicant shall provide 
 information that the commissioner requires on forms prepared by 
 the commissioner.  The commissioner may, at any time, require 
 the applicant to fully disclose the identity of all 
 shareholders, members, partners, officers, and employees.  The 
 commissioner may, in the exercise of discretion, refuse to issue 
 a license in the name of a firm, partnership, limited liability 
 company, or corporation if not satisfied that an officer, 
 employee, shareholder, member, or partner who may materially 
 influence the applicant's conduct meets the requirements of 
 sections 60A.961 to 60A.974. 

    Subd. 4.    Named persons.  A license issued to a 
 partnership, limited liability company, corporation, or other 
 entity authorizes all members, officers, partners, and 
 designated employees to act as viatical settlement providers 
 under the license, and all those persons must be named in the 
 application and any supplements to the application. 

    Subd. 5.    Investigation.  Upon the filing of an 
 application and the payment of the license fee, the commissioner 
 shall investigate each applicant and may issue a license if the 
 commissioner finds that the applicant: 

    (1) has provided a detailed plan of operation; 

    (2) is competent and trustworthy and intends to act in good 
 faith in the capacity involved in the license applied for; 

    (3) has a good business reputation and has had experience, 
 training, or education so as to be qualified in the business for 
 which the license is applied for; and 

    (4) if a corporation is a corporation incorporated under 
 the laws of this state or a foreign corporation authorized to 
 transact business in this state. 

    HIST: 1995 c 151 s 3 

     60A.963 Service of process; nonresident licensing. 

    Subdivision 1.    License.  A nonresident of this state 
 may be licensed as a viatical settlement provider upon 
 compliance with all provisions of sections 60A.961 to 60A.974. 

    Subd. 2.    Service of process.  Section 45.028 applies 
 to service of process upon a viatical settlement provider. 

    HIST: 1995 c 151 s 4 

     60A.964 Fees. 

    Subdivision 1.    Amount.  The licensing fee for a 
 viatical settlement provider license is $750 for initial 
 licensure and $250 for each annual renewal.  The fees must be 
 limited to the cost of license administration and enforcement 
 and must be deposited in the state treasury, credited to a 
 special account, and appropriated to the commissioner. 

    Subd. 2.    Automatic revocation.  A license is 
 automatically revoked for failure to pay the licensing fee 
 within the terms prescribed by the commissioner. 

    HIST: 1995 c 151 s 5; 1999 c 250 art 3 s 6 

*   NOTE:  The amendment to subdivision 1 by Laws 1999, chapter 
*250, article 3, section 6, is effective July 1, 2001.  Laws 
*1999, chapter 250, article 3, section 29.

     60A.965 License revocation. 

    Subdivision 1.    Revocation.  The commissioner may 
 suspend, revoke, or refuse to renew the license of a viatical 
 settlement provider if the commissioner finds that: 

    (1) there was any misrepresentation in the application for 
 the license; 

    (2) the holder of the license has been found guilty of 
 fraudulent or dishonest practices, is subject to a final 
 administrative action or is otherwise shown to be untrustworthy 
 or incompetent to act as a viatical settlement provider; 

    (3) the licensee demonstrates a pattern of unreasonable 
 payments to policy owners; 

    (4) the licensee has been convicted of a felony or a 
 misdemeanor of which criminal fraud is an element; or 

    (5) the licensee has violated any of the provisions of 
 sections 60A.961 to 60A.974. 

    Subd. 2.    Administrative action.  Section 45.027 
 applies to any action taken by the commissioner in connection 
 with the administration of sections 60A.961 to 60A.974. 

    HIST: 1995 c 151 s 6 

     60A.966 Approval of viatical settlements contract forms. 

    A viatical settlement provider may not use a viatical 
 settlement contract form in this state unless it has been filed 
 with and approved by the commissioner.  A viatical settlement 
 contract form filed with the commissioner is considered to have 
 been approved if it has not been disapproved within 60 days of 
 the filing.  The commissioner shall disapprove a viatical 
 settlement contract form if, in the commissioner's opinion, the 
 contract or contract provisions are unreasonable, contrary to 
 the interests of the public, or otherwise misleading or unfair 
 to the policy owner.  

    HIST: 1995 c 151 s 7 

     60A.967 Reporting requirements. 

    Each licensee shall file with the commissioner on or before 
 March 1 of each year an annual statement containing the 
 following information for the previous calendar year: 

    (1) for each policy viaticated, the date that the viatical 
 settlement was entered into; the life expectancy of the viator 
 at the time of the contract; the face amount of the policy; the 
 amount paid by the viatical settlement provider to viaticate the 
 policy; and if the viator has died, the date of death and the 
 total insurance premiums paid by the viatical settlement 
 provider to maintain the policy in force; 

    (2) a breakdown of applications received, accepted, and 
 rejected, by disease category; 

    (3) a breakdown of policies viaticated by issuer and policy 
 type; 

    (4) the number of secondary market versus primary market 
 transactions; 

    (5) the portfolio size; and 

    (6) the amount of outside borrowings. 

    HIST: 1995 c 151 s 8 

     60A.968 Examination. 

    Subdivision 1.    Authorization.  The commissioner may, 
 when the commissioner considers it reasonably necessary to 
 protect the interests of the public, examine the business and 
 affairs of a licensee or applicant for a license.  The 
 commissioner may order a licensee or applicant to produce 
 records, books, files, or other information reasonably necessary 
 to determine whether or not the licensee or applicant is acting 
 or has acted in violation of the law or otherwise contrary to 
 the interests of the public.  The licensee or applicant shall 
 pay the expenses incurred in conducting an examination. 

    Subd. 2.    Private data.  Names and individual 
 identification data for all viators is private and confidential 
 information and must not be disclosed by the commissioner, 
 unless required by law. 

    Subd. 3.    Records.  The licensee shall maintain 
 records of all transactions of viatical settlement contracts and 
 shall make them available to the commissioner for inspection 
 during reasonable business hours. 

    HIST: 1995 c 151 s 9 

     60A.969 Disclosure. 

    A viatical settlement provider shall disclose the following 
 information to the viator no later than the date the viatical 
 settlement contract is signed by all parties: 

    (1) possible alternatives to viatical settlement contracts 
 for persons with catastrophic or life threatening illnesses, 
 including accelerated benefits offered by the issuer of the life 
 insurance policy; 

    (2) the fact that some or all of the proceeds of the 
 viatical settlement may be taxable and that assistance should be 
 sought from a personal tax advisor; 

    (3) the fact that the viatical settlement may be subject to 
 the claims of creditors; 

    (4) the fact that receipt of a viatical settlement may 
 adversely affect the recipients' eligibility for Medicaid or 
 other government benefits or entitlements and that advice should 
 be obtained from the appropriate agencies; 

    (5) the policy owner's right to rescind a viatical 
 settlement contract within 30 days of the date it is executed by 
 all parties or 15 days of the receipt of the viatical settlement 
 proceeds by the viator, whichever is less, as provided in 
 section 60A.970, subdivision 3; and 

    (6) the date by which the funds will be available to the 
 viator and the source of the funds. 

    HIST: 1995 c 151 s 10 

     60A.970 General requirements. 

    Subdivision 1.    Required documents.  A viatical 
 settlement provider entering into a viatical settlement contract 
 with a person with a catastrophic or life threatening illness or 
 condition shall first obtain: 

    (1) a written statement from a licensed attending physician 
 that the person is of sound mind and under no constraint or 
 undue influence; and 

    (2) a witnessed document in which the person consents to 
 the viatical settlement contract, acknowledges the catastrophic 
 or life threatening illness, represents that the person has a 
 full and complete understanding of the viatical settlement 
 contract, acknowledges that the person has a full and complete 
 understanding of the benefits of the life insurance policy, 
 releases the person's medical records, and acknowledges that the 
 person has entered into the viatical settlement contract freely 
 and voluntarily. 

    Subd. 2.    Confidentiality of medical information.  All 
 medical information solicited or obtained by a licensee is 
 subject to the applicable provisions of state law relating to 
 confidentiality of medical information. 

    Subd. 3.    Unconditional refund provision.  All 
 viatical settlement contracts entered into in this state must 
 contain an unconditional refund provision of at least 30 days 
 from the date that the viator signs an agreement to transfer an 
 insurance policy or 15 days of the receipt of the viatical 
 settlement proceeds, whichever is less. 

    Subd. 4.    Payment of proceeds.  Immediately upon 
 receipt from the viator of documents to effect the transfer of 
 the insurance policy, the viatical settlement provider shall pay 
 the proceeds of the settlement to an escrow or trust account 
 managed by a trustee or escrow agent in a bank approved by the 
 commissioner, pending acknowledgment of the transfer by the 
 issuer of the policy.  The trustee or escrow agent must transfer 
 the proceeds due to the viator immediately upon receipt of 
 acknowledgment of the transfer from the insurer.  Payment of the 
 proceeds must be made by means of wire transfer to the viator or 
 by certified check or cashier's check. 

    Subd. 5.    Lump sum payment.  Payment of the proceeds 
 under a viatical settlement must be made in a lump sum.  
 Retention of a portion of the proceeds by the viatical 
 settlement provider or escrow agent is not permissible.  Payment 
 must not be made by installments unless the viatical settlement 
 company has purchased an annuity or similar financial instrument 
 issued by a licensed insurance company or bank. 

    Subd. 6.    Additional payment.  With respect to 
 policies containing a provision for double or other additional 
 indemnity for accidental death, the additional payment must 
 remain payable to the beneficiary last named by the viator 
 before entering into the viatical settlement agreement, or to a 
 beneficiary designated by the viator, other than the viatical 
 settlement provider, or in the absence of a designation, to the 
 estate of the viator. 

    Subd. 7.    Prohibited payments.  A viatical settlement 
 provider or broker must not pay or offer to pay a finder's fee, 
 commission, or other compensation to a viator's physician, 
 attorney, accountant, or other person providing medical, legal, 
 or financial planning services to the viator, or to any other 
 person acting as an agent of the viator with respect to the 
 viatical settlement. 

    Subd. 8.    Discrimination prohibited.  A viatical 
 settlement provider or broker must not discriminate in the 
 making of viatical settlements on the basis of race, age, sex, 
 national origin, creed, religion, occupation, marital or family 
 status, or sexual orientation, or discriminate between viators 
 with dependents and without. 

    Subd. 9.    Health status contacts.  Contacts for the 
 purpose of determining the health status of the viator by the 
 viatical settlement provider or broker after the viatical 
 settlement has occurred must not exceed one every three months 
 for viators with a life expectancy of more than one year and 
 must not exceed one per month for viators with a life expectancy 
 of one year or less.  The provider or broker must explain the 
 procedure for these contacts at the time the viatical settlement 
 contract is entered into.  

    Subd. 10.    Prohibited investor solicitation.  Viatical 
 settlement providers and brokers shall not solicit investors who 
 may influence the treatment of the illness of the viators whose 
 coverage is the subject of the investment. 

    Subd. 11.    Contract null and void.  Failure to tender 
 the viatical settlement by the date disclosed to the viator 
 renders the contract null and void. 

    HIST: 1995 c 151 s 11 

     60A.971 Standards for evaluation of reasonable payments. 

    In order to assure that viators receive a reasonable return 
 for viaticating an insurance policy, the following are the 
 minimum permitted discounts: 

                                       Minimum Percentage

                                         of Face Value

 Insured's Life Expectancy          Less Outstanding Loans

                                      Received by Viator

 Less than 6 months                           80%

 At least 6 but less than 12 months           70%

 At least 12 but less than 18 months          65%

 At least 18 but less than 24 months          60%

 Twenty-four months or more                   50%

    The percentage may be reduced by five percent for 
 viaticating a policy written by an insurer rated lower than the 
 highest four categories by A.M. Best, or a comparable rating by 
 another rating agency. 

    HIST: 1995 c 151 s 12 

     60A.972 Viatical settlement brokers. 

    Subdivision 1.    License.  A viatical settlement broker 
 may not solicit a viatical settlement contract without first 
 obtaining a license from the commissioner of commerce. 

    Subd. 2.    Form.  An applicant for a viatical 
 settlement broker license shall submit an application to the 
 commissioner on a form prescribed by the commissioner. 

    Subd. 3.    Fees.  The licensing fee for a viatical 
 settlement broker is $750 for initial licensure and $250 for 
 each annual renewal.  Failure to pay the renewal fee within the 
 time required by the commissioner results in an automatic 
 revocation of the license.  The fees must be limited to the cost 
 of license administration and enforcement and must be deposited 
 in the state treasury, credited to a special account, and 
 appropriated to the commissioner. 

    Subd. 4.    License limitation.  The license is a 
 limited license which allows solicitation only of viatical 
 settlements. 

    Subd. 5.    License revocation.  The commissioner may 
 suspend, revoke, or refuse to renew the license of a viatical 
 settlement broker if the commissioner finds that: 

    (1) there was any misrepresentation in the application for 
 a license; 

    (2) the broker has been found guilty of fraudulent or 
 dishonest practices, has been found guilty of a felony or a 
 misdemeanor of which criminal fraud is an element, or is 
 otherwise shown to be untrustworthy or incompetent; 

    (3) the licensee has placed or attempted to place a 
 viatical settlement with a viatical settlement provider not 
 licensed in this state; or 

    (4) the licensee has violated any of the provisions of 
 sections 60A.961 to 60A.974. 

    Subd. 6.    Agent.  In the absence of a written 
 agreement making the broker the viator's agent, viatical 
 settlement brokers are presumed to be agents of viatical 
 settlement providers. 

    Subd. 7.    Compensation prohibited.  A viatical 
 settlement broker must not, without the written agreement of the 
 viator obtained before performing any services in connection 
 with a viatical settlement, seek or obtain any compensation from 
 the viator. 

    HIST: 1995 c 151 s 13; 1999 c 250 art 3 s 7 

*   NOTE:  The amendment to subdivision 3 by Laws 1999, chapter 
*250, article 3, section 7, is effective July 1, 2001.  Laws 
*1999, chapter 250, article 3, section 29.

     60A.973 Advertising standards. 

    Subdivision 1.    Generally.  Advertising by viatical 
 settlement providers or brokers must be truthful and not 
 misleading by fact or implication. 

    Subd. 2.    Average time.  If the advertiser emphasizes 
 the speed with which the viatication will occur, the advertising 
 must disclose the average time frame from completed application 
 to the date of offer and from acceptance of the offer to receipt 
 of the funds by the viator. 

    Subd. 3.    Average purchase price.  If the advertising 
 emphasizes the dollar amounts available to viators, the 
 advertising shall disclose the average purchase prices as a 
 percent of face value obtained by viators contracting with the 
 advertiser during the previous six months. 

    HIST: 1995 c 151 s 14 

     60A.974 Unfair trade practices. 

    A violation of sections 60A.961 to 60A.974 is an unfair 
 trade practice under chapter 72A. 

    HIST: 1995 c 151 s 15