2006 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.
History: 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 an insurance producer licensed under sections 60K.30 to 60K.56 acting under express authority
from, and an appointment by, an insurer and on its behalf to solicit insurance, or to appoint
other insurance producers 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.
History: 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; 2001 c 117 art 2 s 3

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, the National Association
of Insurance Commissioners, the National Association of Securities Dealers, or any national
securities association registered under the Securities Exchange Act of 1934, 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.
History: 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; 2004 c 285
art 4 s 2; 2004 c 290 s 21

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 National Association of Securities Dealers, and any national securities
association registered under the Securities Exchange Act of 1934. 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.
History: 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; 2004 c 285 art 4 s 3; 2004 c 290 s 22

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.
History: 1969 c 7 s 1; 1986 c 444

60A.035 GOVERNMENT CONTROLLED OR OWNED COMPANY PROHIBITED
FROM TRANSACTING BUSINESS.
(a) No insurance company the voting control or ownership of which is held in whole or
substantial part by any government or governmental agency or entity having a tax exemption
under section 501(c)(27)(B) or 115 of the Internal Revenue Code of 1986 or which is operated
for or by any such government or agency or entity having a tax exemption under section
501(c)(27)(B) or 115 of the Internal Revenue Code of 1986 is authorized to transact insurance in
this state. Membership in a mutual company, subscribership in a reciprocal insurer, ownership
of stock of an insurer by the alien property custodian or similar official of the United States, or
supervision of an insurer by public insurance supervisory authority is not considered to be an
ownership, control, or operation of the insurer for the purposes of this section.
(b) This section does not apply to an insurance company if its sole insurance business in this
state is providing workers' compensation insurance and associated employers' liability coverage
to an employer principally located in the insurer's state of domicile whose employee may receive
benefits under section 176.041, subdivision 4, provided the operations of the employer are for
fewer than 30 consecutive days in this state and provided the employer has no other significant
contacts with this state.
(c) This section does not apply to a fund established under section 16B.85, subdivision 2.
History: 1Sp2003 c 1 art 4 s 1

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;
(c) impose a civil penalty as provided for in section 45.027, subdivision 6; or (d) under a written
agreement with the insurance company based upon the company's financial condition, impose
conditions or restrictions on the insurance company's authority to transact business in Minnesota.
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; (4) the
imposition of a civil penalty; or (5) under a written agreement with the insurance company based
upon the company's financial condition, imposition of conditions or restrictions on the insurance
company's authority to transact business in Minnesota. 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 .
History: 1992 c 564 art 3 s 2; 1994 c 425 s 1; 1994 c 485 s 6; 1999 c 177 s 3,4; 2000 c
483 s 2,3

60A.053 HOLOCAUST VICTIMS INSURANCE RELIEF.
    Subdivision 1. Definitions. For purposes of this section, the following terms have the
meanings given them in this subdivision unless the context clearly requires otherwise:
(a) "Holocaust survivor" or "Holocaust victim" means any person who was persecuted,
imprisoned or liable to imprisonment, or had property taken or confiscated during the period of
1933 to 1945, inclusive, by Nazi Germany, its allies, or sympathizers based on that person's
race, religion, ethnicity, physical or mental disability, sexual orientation, or similar class or
group-based animus;
(b) "related company" means an affiliate, as defined in section 60D.15, subdivision 2; a
successor in interest; or a managing general agent, of another company or insurer;
(c) "insurer" means an entity holding a certificate of authority or license to conduct the
business of insurance in this state, or whose contacts with this state satisfy the constitutional
requirements for jurisdiction, that sold Holocaust-related insurance policies, whether directly or
through or as result of sales by a related company, or is itself a related company to any person,
entity, or insurance company that sold such policies, whether the sale of the insurance occurred
before or after becoming related;
(d) "proceeds" means the face or other payout value of policies and annuities plus reasonable
interest to date of payments, without diminution for wartime or immediate postwar currency
devaluation, legally due under any insurance policy issued by an insurer or any related company;
(e) "international commission" means the International Commission on Holocaust Era
Insurance Claims, referenced in and established under a memorandum of understanding originally
dated April 8, 1998, between and among various state insurance regulators, various alien
insurance companies, and worldwide Jewish groups, which commission held its first meeting in
the state of New York on October 21, 1998, and any successor; and
(f) "Holocaust-related insurance policies" means life, property, liability, health, annuities,
dowry, educational, casualty, or any other type of insurance policies sold to persons in Europe,
that were in effect at any time between 1933 and 1945, regardless of when the policy was initially
purchased or written.
    Subd. 2. Assistance to Holocaust victims. (a) The commissioner shall assist residents of this
state who are Holocaust victims or heirs or beneficiaries of Holocaust victims to settle and resolve
claims and to recover proceeds from insurance policies that were improperly denied or processed.
(b) The commissioner may cooperate and exchange information with other states working on
the Holocaust survivor insurance claims issue and with the international commission, and may
enter into agreements whereby a single processing office may be established on behalf of, and to
provide services to the residents of, several states.
    Subd. 3. Holocaust Insurance Company Registry. (a) To facilitate the work of the
commissioner under this section, the commissioner may establish and maintain a central registry
to be known as the Holocaust Insurance Company Registry, containing records and information
relating to Holocaust-related insurance policies, provided by insurers as required in subdivision
4. The commissioner shall establish standards and procedures to make the information in the
registry available to the public to the extent necessary and appropriate to determine the existence
of insurance policies and to identify beneficiaries, successors in interest, or other persons entitled
to the proceeds of the policies, and to enable persons to claim proceeds to which they may be
entitled, while protecting the privacy of policyholders, their survivors, and their family members.
All information received by the Holocaust insurance company registry from any insurer, related
company, or foreign government or regulator is considered to be working papers or documents
obtained in the course of an examination that may be treated as confidential under section
60A.031, subdivision 4, paragraph (f). To the extent necessary and appropriate to secure access to
documents and information located in or subject to the jurisdiction of other states and countries,
the commissioner may enter into agreements or provide assurances that any or all documents
and information received from an entity regulated by or subject to the laws of such other state
or country, or received from any agency of the government of any state or country, will be
treated as confidential by the commissioner and will not be disclosed to any person except
with the approval of the appropriate authority of the state or country or except as permitted or
authorized by the laws of the state or country. Any such agreement is binding and enforceable.
To the extent necessary and appropriate to secure access to documents and information from or
in the possession of the international commission as to which the international commission has
given assurances of confidentiality or privacy, the commissioner may enter into agreements or to
provide assurances that the documents and information will be treated as confidential or protected
as nonpublic by the commissioner and will not be disclosed to any person except with the
approval of the international commission or as permitted by any agreement or assurances given
by the international commission, and any such agreement or assurance is binding and enforceable.
(b) The commissioner may cooperate and exchange information with other states establishing
similar registries and with the international commission, and may enter into agreements whereby
a single registry may be established on behalf of, and to provide services to the citizens and
residents of, several states.
    Subd. 4. Operations of Holocaust Insurance Company Registry. (a) Any insurer that sold
Holocaust-related insurance policies shall within 180 days following April 14, 2000, or a later
date the commissioner may establish, file or cause to be filed the following information with the
commissioner for entry into the Holocaust Insurance Company Registry:
(1) a list of the insurance policies and, for each policy, the names of the insureds and
beneficiaries and the face amount of the policy;
(2) for each policy, whichever of the following that applies:
(i) that the proceeds of the policy have been paid to the designated beneficiaries or their heirs
where that person or persons, after diligent search, could be located and identified;
(ii) that the proceeds of the policies where the beneficiaries or heirs could not, after diligent
search, be located or identified, have been distributed to Holocaust survivors or to qualified
charitable nonprofit organizations for the purpose of assisting Holocaust survivors;
(iii) that a court of law has approved in a legal proceeding resolving the rights of unpaid
policyholders, their heirs, and beneficiaries, a plan for the distribution of the proceeds; and
(iv) that the proceeds have not been distributed and the amount of those proceeds.
(b) An insurer currently doing business in this state that did not sell any Holocaust-related
insurance policies except through or as a result of sales by a related company is not subject to this
subdivision if a related company, whether or not authorized and currently doing business in this
state, has made a filing with the commissioner under this subdivision.
(c) The commissioner may fund the costs of operating the Holocaust Insurance Company
Registry by assessments upon those insurers providing information to the registry. The
commissioner shall allocate the assessments based upon the number of policies reported.
(d) The commissioner may conduct investigations and examinations of insurers for the
purpose of determining compliance with this section, verifying the accuracy and completeness of
any and all information furnished to the Holocaust Insurance Company Registry, and developing
and securing additional information as may be necessary or appropriate to determine those
entitled to payment under any policy and the proceeds to which the person may be entitled, if any.
An investigation under this paragraph is considered to be an examination under section 60A.031.
The costs of the examination must be borne by the insurer investigated, or the insurer to whom the
related company is related, pursuant to section 60A.031, subdivision 3. Examinations may be
conducted in this state, or in the state or country of residence of the insurer or related company, or
at the place or country where the records to be examined may be located.
(e) Notwithstanding the restrictions of section 60A.03, subdivision 9, or 60A.031,
subdivision 4 , the commissioner may cooperate with and exchange information with other states
with similar Holocaust insurance company registries, with the National Association of Insurance
Commissioners, with foreign countries, and with the international commission. The commissioner
may enter into agreements to handle the processing of claims and registry functions of other
states, and to have other states handle all or part of the registry and claims processing functions
for this state, as the commissioner may determine to be appropriate. The commissioner may
enter into agreements with other states and the international commission to treat and consider
information submitted to them as submitted to this state for the purpose of complying with this
section. As part of any such agreement, the commissioner may agree to reimburse any other state
for expenses or costs incurred and to accept reimbursement from any other state for services with
regard to residents of the other state.
(f) A finding by the commissioner that a claim subject to the provisions of this section should
be paid must be regarded by any court as highly persuasive evidence that the claim should be paid.
    Subd. 5. Suspension of certificate of authority for failure to comply with this section.
The commissioner may, in accordance with section 60A.052, suspend the certificate of authority
to conduct insurance business in the state of Minnesota of any insurer that has violated this
section, until the time that the insurer complies with this section. The suspension does not affect
or relieve the insurer from its obligations to service its existing insureds, and does not permit the
insurer to terminate its existing insureds, except pursuant to the terms of the insurance contract,
but does prohibit the insurer from writing new business in this state until the suspension is lifted
by the commissioner.
    Subd. 6. Cooperation with international commission. The commissioner may suspend the
application of this section to any insurer if the commissioner has determined, in consultation with
the international commission, that:
(1) the international commission has, by December 31, 2000, established and maintained a
mechanism to accomplish identification, adjudication, and payment of insurance policy claims
of Holocaust survivors or victims and their heirs or beneficiaries, within a reasonable period of
time; and
(2) the international commission's mechanism is functioning effectively; and
(3) the insurer is participating in the international commission in good faith and is working
through the international commission to resolve outstanding claims with offers of fair settlements
in a reasonable time frame.
    Subd. 7. Private rights of action preserved; venue. Any Holocaust survivor, or heir or
beneficiary of a Holocaust survivor or victim, who resides in this state and has a claim against an
insurer arising out of Holocaust-related insurance policies, may bring a legal action against that
insurer to recover on that claim in the district court of the county in which a plaintiff resides.
    Subd. 8. Extension of statute of limitations. An action brought by a Holocaust survivor or
the heir or beneficiary of a Holocaust survivor or victim, seeking proceeds of Holocaust-related
insurance policies, must not be dismissed for failure to comply with the applicable statute of
limitations, provided the action is commenced on or before December 31, 2010.
    Subd. 9. Title of act. This section may be known as the "Holocaust Victims Insurance
Relief Act of 2000."
    Subd. 10. Expiration. This section expires December 31, 2010.
History: 2000 c 367 s 1

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 , or chapter 62S.
    Subd. 4. Vicarious liability; punitive damages. Any insurance corporation or association
may insure against vicarious liability for punitive and exemplary damages within any of the kinds
of business pertaining to the issuance of liability insurance that the insurance corporation or
association is authorized to transact under subdivision 1 or 2.
History: 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; 2000 c 304 s 1; 2001 c 215 s 1

60A.07 AUTHORIZATION AND REQUIREMENTS.
    Subdivision 1. Incorporation. Three or more persons may form a domestic insurance
corporation for any of the purposes specified in subdivision 2 by applying to the Department of
Commerce and complying with all applicable organizational requirements and the conditions set
out in clauses (1) to (6). The incorporators must subscribe a certificate specifying:
(1) the corporation's name, which must distinguish it from all other corporations authorized to
do business in this state, and must contain the word "company," "corporation," or "incorporated";
(2) the general nature of the corporation's business and its principal place of business;
(3) the period of its duration, if limited;
(4) the names and places of residence of the incorporators;
(5) the board in which the management of the corporation will be vested, the date of the
initial annual meeting at which it will be elected, and the names and addresses of the board
members until the first election; and
(6) whether the corporation is organized on the stock plan, mutual plan, or otherwise; and,
if organized as a stock company, the amount of capital stock, how the capital stock is to be
paid in, the number of shares into which it is to be divided, and the par value of each share;
and, if there is to be more than one class, a description and the terms of issue of each class and
the method of voting on each class.
The certificate may contain any other lawful provision defining and regulating the powers and
business of the insurance corporation, its officers, directors, trustees, members, or stockholders.
A person doing business in this state may contest the subsequent registration of a name with
the Office of the Secretary of State as provided in section 5.22.
Domestic insurance corporations established in this manner are organized under and
governed by chapter 302A, except as otherwise provided in subdivision 1d and chapter 66A.
    Subd. 1a. Filing. The certificate of an insurance corporation must be filed for record with the
secretary of state. If the secretary of state finds that it conforms to law and that the required fee
has been paid, the secretary of state must record it and certify that fact on it. The secretary of
state may not accept a certificate for filing unless the certificate also contains the endorsement
of the commissioner of commerce.
    Subd. 1b. Certificate of authority. If the commissioner of commerce is satisfied that the
corporation has been organized for legitimate purposes, and under such conditions as to merit and
have public confidence, and that all provisions of law applicable to every branch of business in
which, by the terms of its certificate, it is authorized to engage, have been complied with, the
commissioner shall so certify. When the original certificate and the certificate of incorporation
from the secretary of state are filed with the commissioner of commerce, the commissioner shall,
within 60 days thereafter, execute and deliver to it a certificate of authority.
    Subd. 1c. Bylaws. Bylaws may be adopted by the insurance corporation in the manner set
forth in section 302A.181. Within 90 days after the adoption of the bylaws or any amendment
thereof, a certified copy of the same must be filed with the commissioner of commerce.
    Subd. 1d. Certificate of incorporation; amendments. The certificate of incorporation of an
insurance corporation organized and existing under the laws of this state may be amended in the
manner set forth in section 302A.135. Amendments must be filed with the secretary of state in the
manner set forth in section 302A.151, except the secretary of state may not accept a certificate of
filing unless the certificate also contains the endorsement of the commissioner of commerce.
    Subd. 1e. Application of business corporation act. The provisions of chapter 302A apply
to domestic stock corporations formed to carry on the business of insurance, except to the extent
those provisions are inconsistent with any provisions contained in this chapter or to the extent in
conflict with any provisions contained in chapters 60A to 79A. The provisions of chapter 302A
apply to domestic mutual corporations formed to carry on the business of insurance only to the
extent provided for in chapter 66A.
    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 (5)(a),		$500,000		$1,000,000
		Clause (5)(b),		$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 and sections 66A.32 and 66A.33, 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
and sections 66A.32 and 66A.33 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 and
sections 66A.32 and 66A.33, 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 and sections 66A.32 and 66A.33.
    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.[Repealed, 2005 c 69 art 2 s 19]
    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.[Clause (1) renumbered 66A.32]
[Clause (2) renumbered 66A.33]
    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.
History: 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;
2005 c 69 art 2 s 1-6, 18

60A.075 [Renumbered 66A.41]

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

60A.077 [Renumbered 66A.40]

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. The insurer must also post the current policy form on its Web site, or must inform the
policyholder annually in writing that a copy of the current policy form is available on request.
    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, insolvency, or dissolution 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, insolvency, or dissolution 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 annual aggregate limits of liability of at least
$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.
History: 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; 2001 c 215
s 2; 2005 c 74 s 1; 2006 c 202 s 2

60A.081 AIRCRAFT INSURANCE.
    Subdivision 1. Compliance exclusions prohibited; exception. 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. Liability exclusions prohibited; exception. 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 45, 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. Nonapplication of section. 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 .
History: 1969 c 629 s 1; 1976 c 241 s 1; 1985 c 248 s 70

GROUP POLICIES

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.
History: 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.
History: 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.
History: 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.
History: 1996 c 304 s 1

FINANCIAL REGULATION

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 boldface 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) 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.
History: 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; 2002 c 336 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.
History: 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.
History: 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.
History: 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.
History: 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.
History: 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.
History: 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.
History: 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 sections 60A.07, 66A.32, and 66A.33, 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 made in compliance with other laws or by 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.
History: 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; 2005 c 69 art 2 s 18

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 meanings assigned in this subdivision
for purposes of this section:
(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) "Replicated investment position" means the statement value of the position reported under
the heading "Replicated (Synthetic) Asset" on Schedule DB, Part F, of the annual statement of the
insurer, or any successor provision;
(s) "Replication transaction" means a derivative transaction that is intended to replicate the
performance of one or more assets that an insurer is authorized to acquire under this section. A
derivative transaction that either is authorized by subdivision 18, clause (5), or by subdivision 24,
or is entered into as a hedging transaction shall not be considered a replication transaction;
(t) "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;
(u) "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;
(v) "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
(w) "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. In cases where the asset leased would otherwise be
nonadmitted, the asset or associated lease is nonadmitted.
    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. 25a. Replication transactions. An insurer engaging in replication transactions
shall include all replicated investment positions in calculating compliance with the limitations
on investments applicable to the insurer. Replication transactions are permitted only under
the authority of subdivision 25. An insurer may invest its unrestricted surplus in a replication
transaction only to the extent that the replicated investment position does not cause the total
positions represented by the unrestricted surplus to be greater than the total positions represented
by the unrestricted surplus as would be permitted in the absence of the replicated investment
position.
    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.
History: 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; 2000
c 350 s 1; 2001 c 131 s 1,2; 2001 c 215 s 3

60A.111 [Repealed, 2001 c 215 s 41]

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

60A.12 ASSETS AND LIABILITIES.
    Subdivision 1.[Repealed, 2000 c 350 s 16]
    Subd. 2.[Repealed, 1991 c 325 art 8 s 18]
    Subd. 3.[Repealed, 2000 c 350 s 16]
    Subd. 4.[Repealed, 2000 c 350 s 16]
    Subd. 5. Loss reserves. When, in the judgment of the commissioner, the loss reserves,
calculated in accordance with statutory accounting practices as set forth in the National
Association of Insurance Commissioners' accounting practices and procedures manual are
inadequate, the commissioner may require the corporation to maintain additional reserves.
    Subd. 6.[Repealed, 1978 c 465 s 15]
    Subd. 7.[Repealed, 2000 c 350 s 16]
    Subd. 8.[Repealed, 2000 c 350 s 16]
    Subd. 9.[Repealed, 2000 c 350 s 16]
    Subd. 10.[Repealed, 1993 c 299 s 33]
History: 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; 2000 c 350 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. 2a. Contractual terms. "Contractual terms" means the principal and interest payments
of the commercial mortgage loan as scheduled in the mortgage agreement.
    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 payments according to the contractual terms; 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. 10a. Permanently impaired. A commercial mortgage loan will be "permanently
impaired" when, based on current information and events, it is probable that an insurer will be
unable to collect all amounts due according to the contractual terms.
    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.
History: 1991 c 325 art 19 s 1; 2000 c 350 s 3-5

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.
History: 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 a valuation allowance or fair 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 fair value of its commercial mortgage loans which it classifies as distressed mortgage
loans. The fair 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 will determine the fair value of its distressed mortgage loans through an
evaluation of each specific distressed mortgage loan. The fair value must be based upon an
internal appraisal or an appraisal conducted by an independent appraiser.
(c) For distressed mortgage loans, the insurer shall measure impairment based on the fair
value of the collateral less estimated costs to obtain and sell. A valuation allowance should be
established for the difference between the adjusted fair value of the collateral 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 fair value of each delinquent mortgage loan. The fair 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 fair 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 fair value of each restructured mortgage loan. The fair 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 measure impairment based on the fair value of the collateral less
estimated costs to obtain and sell. The difference between the adjusted fair value of the collateral
and other assets received and the amortized acquisition cost of its restructured mortgage loans
must be recorded as a direct write-down and a new cost basis established.
    Subd. 6. Mortgage loan in foreclosure. (a) The insurer shall make an evaluation of the
appropriate fair value of each mortgage loan in foreclosure. The fair value must be based upon
an appraisal made by an independent appraiser and must be adjusted for additional expenses,
such as insurance, taxes, and legal fees that have been imposed to protect the investment or
to obtain clear title to the property to the extent these amounts are expected to be recoverable
from the disposition of the property.
(b) The insurer shall record as a direct write-down the difference between the fair 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
fair value of real estate owned. The fair value must be based upon an appraisal made by an
independent appraiser and must be adjusted for additional expenses, such as insurance, taxes, and
legal fees that have been imposed to protect the investment or to obtain clear title to the property
to the extent these amounts are expected to be recoverable from the disposition of the property.
(b) The insurer shall record as a direct write-down the difference between the fair value and
the amortized acquisition cost of real estate owned.
History: 1991 c 325 art 19 s 3; 2000 c 350 s 6

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.
History: 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.[Repealed, 2000 c 350 s 16]
History: 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.
History: 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. Record keeping; 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.
History: 1991 c 325 art 19 s 7

60A.128 [Repealed, 2000 c 350 s 16]

60A.1285 OTHER IMPAIRMENTS.
If distressed or delinquent mortgage loans being valued according to section 60A.123,
subdivisions 3 and 4 , are determined to be permanently impaired, a direct write-down must be
recognized as a realized loss, and a new cost basis established.
History: 2000 c 350 s 7

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 may be an employee
of the company but the commissioner may still require an independent actuarial certification as
described in subdivision 1. 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: "In my opinion, the
reserves described in this certification are consistent with reserves computed in accordance with
standards and principles established by the Actuarial Standards Board 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 may 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."
    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 National Association
of Insurance Commissioners Accounting Practices and Procedures Manual 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.
(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 sections 60A.07, 66A.32,
and 66A.33 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. An affiliated insurance company not meeting these requirements may be
included in the consolidated or combined audited financial statements, if the company's total
admitted assets are less than five percent of the consolidated group's total admitted assets. 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) Upon written application by a domestic insurer, the commissioner may authorize
the domestic insurer to include additional affiliated insurance companies in the consolidated
or combined audited financial statements. Foreign insurers must obtain the prior written
authorization of the commissioner of their state of domicile in order to submit an application for
authority to file consolidated or combined audited financial statements. This application shall be
for a specified period.
(c) 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.
History: 1993 c 299 s 3; 1994 c 426 s 4-6; 2000 c 350 s 8; 2000 c 483 s 4; 2001 c 131 s
3; 2001 c 215 s 4; 2004 c 285 art 3 s 1; 2005 c 69 art 2 s 18

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. The license issued by the commissioner is perpetual and is
considered renewed annually on June 1 upon payment of the renewal license fee, the annual filing
fee, and all other fees required by section 60A.14.
    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]
History: 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; 2005 c 118 s 10

60A.131 OTHER BUSINESS AND INSURANCE INTERESTS, DISCLOSURE.
(a) 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.
(b) 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.
(c) 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.
(d) 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 paragraph (c) as to its
principal management, directors and affected holders of its equity securities.
History: 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.
History: 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.
History: 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.
History: 1995 c 214 s 9

FEES

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 an application for an initial certification of authority to be admitted to transact
business in this state, $1,500;
(2) for filing certified copy of certificate of articles of incorporation, $100;
(3) for filing annual statement, $225;
(4) for filing certified copy of amendment to certificate or articles of incorporation, $100;
(5) for filing bylaws, $75 or amendments thereto, $75;
(6) 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, $10;
(7) for filing forms, rates, and compliance certifications under section 60A.315, $90 per
filing, or $75 per filing when submitted via electronic filing system. Filing fees may be paid on a
quarterly basis in response to an invoice. Billing and payment may be made electronically;
(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. This subdivision does not apply to agent
appointment fees required under subdivision 1, clause (6).
History: 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;
2001 c 117 art 2 s 4; 2001 c 215 s 5; 2002 c 330 s 1; 2002 c 336 s 3; 2005 c 74 s 2; 2005 c 132
s 1; 1Sp2005 c 1 art 4 s 4

60A.15 [Repealed, 2000 c 394 art 2 s 28]

60A.151 [Repealed, 1989 c 324 s 29]

60A.152 [Repealed, 2000 c 394 art 2 s 28]

MERGERS, CONSOLIDATIONS,

DOMESTICATIONS, AND CONVERSIONS

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, or reciprocal or interinsurance contract exchanges 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 66A.40, 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.
History: 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; 2001 c 215 s 6;
2005 c 69 art 2 s 18

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.
History: 1990 c 424 s 1

    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]

AGENCY AGREEMENTS

60A.171 REHABILITATION AND CANCELLATION OF INDEPENDENT AGENT
CONTRACTS BY INSURANCE COMPANIES.
    Subdivision 1. Termination rights and obligations. (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 provided written notice of termination to the agent at
least 60 days in advance of the effective date of the termination.
(b) The notice of termination must include the reasons for termination.
(c) 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.
(d) For purposes of this section, "fire or casualty loss insurance" means any line of insurance
which an insurance agent with a personal lines, property, or casualty license under sections
60K.30 to 60K.56 may write in this state.
    Subd. 2. Agent request to renew insurance contract. 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 18 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. The company
shall not reduce the agent's commissions, unless the company is reducing the commissions for
other appointed agents in the state at the same time.
    Subd. 3. Authority to write new contract limited. 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.MS 2004 [Repealed, 2005 c 74 s 13]
    Subd. 5.MS 1990 [Renumbered subd 6]
    Subd. 5. Earlier termination allowed. 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. Limitation on refusal to renew business during contract term. 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. Nonapplication of section. 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. Application to contract between agent and fire and casualty loss company. 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. Penalties. 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. Compliance relief. 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. Business solicitation in notice of nonrenewal prohibited. Upon termination of
an agency, a company is prohibited from soliciting business in the notice of nonrenewal required
by section 60A.37. If termination of an agency contract is the ground for nonrenewal of a policy
of homeowner's insurance, as defined in section 65A.27, subdivision 4, the company must provide
notice to the policyholder that the policy is not being renewed due to the termination of the
company's contract with the agency. If the agency is unable to replace the homeowner's insurance
policy with a suitable policy from another insurer, the agent must notify the policyholder of the
policyholder's right to renew with the company terminating the agency contract. The company
must renew the policy if the insured or the insured's agent makes a written request for the renewal
before the renewal date.
    Subd. 12. Cancellation of line of business as cancellation or termination of agency. 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.
History: 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; 2001 c 117 art 2 s 5; 2005 c 74 s 4,5; 2005 c 132 s 2

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.
History: 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.
History: 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.
History: 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.
History: 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.
History: 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.
History: 1990 c 457 s 2; 1991 c 207 s 2-5; 1992 c 379 s 2

LIFE OR HEALTH SALES QUOTAS

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.
History: 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.
History: 1996 c 446 art 1 s 6

VENDING MACHINE SALES

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.
History: 1967 c 395 art 1 s 18; 1984 c 592 s 37; 1985 c 248 s 70; 1986 c 444

FOREIGN COMPANIES

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) 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.
(2) 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 in the state must agree to file with
the commissioner of revenue all returns required under chapter 297I and pay to the commissioner
of revenue any amounts required to be paid under chapter 297I. Upon that agreement, the
commissioner of commerce shall issue a license, good for one year. Insurance procured under
the license is valid and the provisions of the policies are considered to be in accordance, and
construed as if identical in effect, with the standard policy prescribed by the laws of this state. The
insurers may enter the state to perform any act necessary or proper in the conduct of the business.
History: 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; 2000 c 394 art 2 s 4,5

SURPLUS LINES INSURANCE

60A.195 CITATION.
Sections 60A.195 to 60A.209 shall be known and may be cited as the Minnesota Surplus
Lines Insurance Act.
History: 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 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.
History: 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.
History: 1981 c 221 s 3

60A.198 TRANSACTION OF SURPLUS LINES INSURANCE.
    Subdivision 1. License required. A person, as defined in section 60A.02, subdivision 7,
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. A surplus lines license is not required for a
licensed resident agent who assists in the procurement of surplus lines insurance with a surplus
lines licensee pursuant to 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) agreeing to file with the commissioner of revenue all returns required by chapter 297I and
paying to the commissioner of revenue all amounts required under chapter 297I; and
(d) paying a fee as prescribed by section 60K.55.
    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.[Repealed, 2000 c 394 art 2 s 28]
History: 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; 2000 c 394
art 2 s 6; 2001 c 12 s 1; 2001 c 117 art 2 s 6

60A.199 EXAMINATIONS.
    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.[Repealed, 2000 c 394 art 2 s 28]
    Subd. 3.[Repealed, 2000 c 394 art 2 s 28]
    Subd. 4.[Repealed, 2000 c 394 art 2 s 28]
    Subd. 5.[Repealed, 2000 c 394 art 2 s 28]
    Subd. 6.[Repealed, 2000 c 394 art 2 s 28]
    Subd. 6a.[Repealed, 2000 c 394 art 2 s 28]
    Subd. 7.[Repealed, 2000 c 394 art 2 s 28]
    Subd. 8.[Repealed, 2000 c 394 art 2 s 28]
    Subd. 9.[Repealed, 2000 c 394 art 2 s 28]
    Subd. 10.[Repealed, 2000 c 394 art 2 s 28]
    Subd. 11.[Repealed, 2000 c 394 art 2 s 28]
History: 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.
History: 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.
History: 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.
History: 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.
History: 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.
History: 1981 c 221 s 10

60A.206 QUALIFICATION AS ELIGIBLE SURPLUS LINES INSURER.
    Subdivision 1. Insurers to be recognized by 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.
History: 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 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.
History: 1981 c 221 s 12; 2006 c 204 s 5

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 under chapter 297I.
(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.
History: 1981 c 221 s 13; 2000 c 394 art 2 s 7

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 must file with the commissioner of revenue all
returns and pay to the commissioner of revenue all amounts required under chapter 297I.
    Subd. 4.[Repealed, 2000 c 394 art 2 s 28]
    Subd. 5.[Repealed, 2000 c 394 art 2 s 28]
    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.
History: 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; 2000 c 394 art 2 s 8

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 99-563.
History: 1987 c 337 s 13

UNAUTHORIZED INSURERS PROCESS

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 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.
History: 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

MISCELLANEOUS

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 66A.36 to 66A.43.
History: 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; 2005 c 69 art 2 s 18

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 landowners, 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 $1,500 for the initial application and $1,500 for each three-year
renewal. All licenses are for a period of three 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.
No contract entered into after July 1, 2001, between a licensed vendor of risk management
services and a group authorized to self-insure for workers' compensation liabilities under section
79A.03, subdivision 6, may take effect until it has been filed with the commissioner, and either
(1) the commissioner has approved it or (2) 60 days have elapsed and the commissioner has not
disapproved it as misleading or violative of public policy.
(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.
History: 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; 2001 c 215 s 7; 2004 c 228 art 2 s 1; 2005 c 132 s 3

STOP LOSS CONTRACTS

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.
History: 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.
History: 1995 c 258 s 7

EXEMPTION FOR FRATERNALS

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.
History: 1967 c 395 art 1 s 24; 1985 c 49 s 41; 1992 c 564 art 1 s 54

INSOLVENCY, SUSPENSION, AND DISCIPLINE OF INSURERS

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."
History: 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.
History: 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. Requirement. 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. Penalty. 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.
History: 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

DOCUMENTS FILED WITH COMMISSIONER

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.
History: 1967 c 457 s 1; 1983 c 289 s 114 subd 1; 1984 c 655 art 1 s 92; 1986 c 444

NONPROFIT RISK INDEMNIFICATION

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.
History: 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]

EXPEDITED FORM AND RATE FILING

60A.315 EXPEDITED FORM AND RATE FILING.
    Subdivision 1. Authority. An insurer or rate service organization otherwise required to
file rates and forms may use the expedited filing procedure under this section for homeowner's
insurance as defined in section 65A.27, subdivision 4, and automobile insurance as governed
by chapter 65B.
    Subd. 2. Compliance certifications. An insurer or rate service organization shall file with
the Department of Commerce on a prescribed form a description of the policy, amendment, or
endorsement and a written certification signed by an officer of the insurer or the rate service
organization that the forms, policies, amendments, and endorsements comply with all applicable
Minnesota statutes, rules, and case law, and a copy of the policy, amendment, or endorsement. If
the filing will impact rates, the filing must comply with section 70A.06, subdivisions 1 and 1a.
Forms and rates filed under this procedure are effective upon receipt by the department. Anyone
using the expedited filing procedures authorized by this section must provide copies of the form
filings within 24 hours of receiving a request from the commissioner. Insurers may comply with
this requirement by providing the form filings in paper or electronic format.
    Subd. 3. Application of law. If an insurer uses the services of a rate service organization
for purposes of filing a certificate of compliance under this section, the certification by the rate
service organization under subdivision 2 does not excuse the insurer from its obligation to ensure
that its filing complies with all applicable Minnesota statutes, rules, and case law.
    Subd. 4. Fees. In order to be effective, the filing must be accompanied by payment of the
filing fee applicable to the policy, amendment, endorsement, or rate unless the fee is remitted in
accordance with an alternative procedure allowed under section 60A.14.
    Subd. 5. Record keeping. The insurer or rate service organization shall retain the policy,
amendment, or endorsement for at least five years after that policy, amendment, or endorsement
ceased providing coverage to any Minnesota policyholder, and shall provide to the Department of
Commerce upon request a copy of any form in use pursuant to these filing procedures.
    Subd. 6. Audits; penalties. The commissioner is authorized to conduct audits and
investigations under section 45.027 and this chapter to determine if the insurers are complying
with Minnesota law in the issuance of policies described under this section. If the policy filings
contain provisions that are inconsistent with or violate Minnesota law, the commissioner may take
action against the insurer under section 45.027. The commissioner shall assess the insurer for the
costs of the investigation performed by the department and shall deposit all such assessments into
the revolving fund established under section 60A.03.
History: 2005 c 74 s 3

CROP HAIL INSURANCE RATE FILING

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.
History: 1988 c 688 art 9 s 1; 1995 c 24 s 1; 1999 c 177 s 17

CANCELLATION AND RENEWAL OF COMMERCIAL

LIABILITY AND/OR PROPERTY POLICIES

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.
History: 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
section does not apply to ocean marine insurance, accident and health insurance, reinsurance,
and coverage under the federal Terrorism Risk Insurance Act.
This section does not apply if the change relates to guide "a" rates or excess rates also known
as "consent to rates" or if there has been any change in the risk insured.
History: 1986 c 455 s 58; 1987 c 337 s 21; 1994 c 485 s 65; 2002 c 330 s 2; 2005 c 74 s 6

60A.352 WORKERS' 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.
History: 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).
History: 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.
History: 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.
History: 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]

SUBROGATION AGAINST INSURED

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.
History: 1989 c 201 s 1; 1990 c 399 s 1

RISK-BASED CAPITAL FOR HEALTH ORGANIZATIONS

60A.50 DEFINITIONS.
    Subdivision 1. Scope. For purposes of sections 60A.50 to 60A.592 the terms in subdivisions
2 to 13 have the meanings given them.
    Subd. 2. Adjusted RBC report. "Adjusted RBC report" means an RBC report which has
been adjusted by the commissioner in accordance with section 60A.51, subdivision 3.
    Subd. 3. Commissioner. "Commissioner" means the commissioner of commerce or the
commissioner of health, whichever commissioner otherwise regulates the health organization.
    Subd. 4. Corrective order. "Corrective order" means an order issued by the commissioner
specifying corrective actions which the commissioner has determined are required.
    Subd. 5. Domestic health organization. "Domestic health organization" means a health
organization domiciled in this state.
    Subd. 6. Foreign health organization. "Foreign health organization" means a health
organization that is licensed to do business in this state but is not domiciled in this state.
    Subd. 7. NAIC. "NAIC" means the National Association of Insurance Commissioners.
    Subd. 8. Health organization. "Health organization" means an entity licensed under this
chapter or chapter 62C or 62D. This definition does not include an organization that is licensed or
regulated as either a life and health insurer or a property and casualty insurer that is otherwise
subject to either the life or property and casualty risk-based capital requirements.
    Subd. 9. RBC instructions. "RBC instructions" means the RBC report including risk-based
capital instructions adopted by the NAIC, as these RBC instructions may be amended by the
NAIC from time to time in accordance with the procedures adopted by the NAIC.
    Subd. 10. RBC level. "RBC level" means a health organization's company action level
RBC, regulatory action level RBC, authorized control level RBC, or mandatory control level
RBC where:
(1) "company action level RBC" means, with respect to any health organization, the product
of 2.0 and its authorized control level RBC;
(2) "regulatory action level RBC" means the product of 1.5 and its authorized control level
RBC;
(3) "authorized control level RBC" means the number determined under the risk-based
capital formula in accordance with the RBC instructions; and
(4) "mandatory control level RBC" means the product of .70 and the authorized control
level RBC.
    Subd. 11. RBC plan. "RBC plan" means a comprehensive financial plan containing the
elements specified in section 60A.52, subdivision 2. If the commissioner rejects the RBC plan,
and it is revised by the health organization, with or without the commissioner's recommendation,
the plan must be called the "revised RBC plan."
    Subd. 12. RBC report. "RBC report" means the report required in section 60A.51.
    Subd. 13. Total adjusted capital. "Total adjusted capital" means the sum of:
(1) a health organization's statutory capital and surplus as determined in accordance with the
statutory accounting applicable to the annual financial statements required to be filed; and
(2) such other items, if any, as the RBC instructions may provide.
History: 2004 c 285 art 1 s 1

60A.51 RBC REPORTS.
    Subdivision 1. Submissions. A domestic health organization shall, on or before each April 1,
prepare and submit to the commissioner a report of its RBC levels as of the end of the calendar
year just ended, in a form and containing the information required by the RBC instructions. In
addition, a domestic health organization shall file its RBC report:
(1) with the NAIC in accordance with the RBC instructions; and
(2) with the insurance commissioner in any state in which the health organization is
authorized to do business, if the insurance commissioner has notified the health organization of
its request in writing, in which case the health organization shall file its RBC report not later
than the later of:
(i) 15 days from the receipt of notice to file its RBC report with that state; or
(ii) the filing date.
    Subd. 2. Determination. A health organization's RBC must be determined in accordance
with the formula set forth in the RBC instructions. The formula must take the following into
account, and may adjust for the covariance between, determined in each case by applying the
factors in the manner set forth in the RBC instructions:
(1) asset risk;
(2) credit risk;
(3) underwriting risk; and
(4) all other business risks and such other relevant risks as are set forth in the RBC
instructions.
    Subd. 3. Adjusted report. If a domestic health organization files an RBC report that in the
judgment of the commissioner is inaccurate, then the commissioner shall adjust the RBC report to
correct the inaccuracy and shall notify the health organization of the adjustment. The notice must
contain a statement of the reason for the adjustment. An RBC report as so adjusted is referred to
as an "adjusted RBC report."
History: 2004 c 285 art 1 s 2

60A.52 COMPANY ACTION LEVEL EVENT.
    Subdivision 1. Definition. "Company action level event" means the following events:
(1) the filing of an RBC report by a health organization that indicates that the health
organization's total adjusted capital is greater than or equal to its regulatory action level RBC
but less than its company action level RBC;
(2) notification by the commissioner to the health organization of an adjusted RBC report
that indicates an event in clause (1), provided the health organization does not challenge the
adjusted RBC report under section 60A.56; or
(3) if, pursuant to section 60A.56, a health organization challenges an adjusted RBC
report that indicates the event in clause (1), the notification by the commissioner to the health
organization that the commissioner has, after a hearing, rejected the health organization's
challenge.
    Subd. 2. RBC plan required. In the event of a company action level event, the health
organization shall prepare and submit to the commissioner an RBC plan that:
(1) identifies the conditions that contribute to the company action level event;
(2) contains proposals of corrective actions that the health organization intends to take and
that would be expected to result in the elimination of the company action level event;
(3) provides projections of the health organization's financial results in the current year
and at least the two succeeding years, both in the absence of proposed corrective actions and
giving effect to the proposed corrective actions, including projections of statutory balance sheets,
operating income, net income, capital and surplus, and RBC levels. 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 health organization's projections and the
sensitivity of the projections to the assumptions; and
(5) identifies the quality of, and problems associated with, the health organization'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. RBC plan submission. The RBC plan must be submitted:
(1) within 45 days of the company action level event; or
(2) if the health organization challenges an adjusted RBC report pursuant to section 60A.56,
within 45 days after notification to the health organization that the commissioner has, after a
hearing, rejected the health organization's challenge.
    Subd. 4. RBC plan implementation. Within 60 days after the submission by a health
organization of an RBC plan to the commissioner, the commissioner shall notify the health
organization whether the RBC plan must be implemented or is, in the judgment of the
commissioner, unsatisfactory. If the commissioner determines the RBC plan is unsatisfactory,
the notification to the health organization must set forth the reasons for the determination, and
may set forth proposed revisions which will render the RBC plan satisfactory, in the judgment
of the commissioner. Upon notification from the commissioner, the health organization shall
prepare a revised RBC plan, which may incorporate by reference any revisions proposed by the
commissioner, and shall submit the revised RBC plan to the commissioner:
(1) within 45 days after the notification from the commissioner; or
(2) if the health organization challenges the notification from the commissioner under section
60A.56, within 45 days after a notification to the health organization that the commissioner has,
after a hearing, rejected the health organization's challenge.
    Subd. 5. Unsatisfactory plan. In the event of a notification by the commissioner to a health
organization that the health organization's RBC plan or revised RBC plan is unsatisfactory, the
commissioner may, at the commissioner's discretion, subject to the health organization's right
to a hearing under section 60A.56, specify in the notification that the notification constitutes a
regulatory action level event.
    Subd. 6. Additional filing. Every domestic health organization that files an RBC plan or
revised RBC plan with the commissioner shall file a copy of the RBC plan or revised RBC plan
with the insurance commissioner in any state in which the health organization is authorized to
do business if:
(1) the state has an RBC provision substantially similar in section 60A.57, subdivision 1; and
(2) the insurance commissioner of that state has notified the health organization of its request
for the filing in writing, in which case the health organization shall file a copy of the RBC plan or
revised RBC plan in that state no later than the later of:
(i) 15 days after the receipt of notice to file a copy of its RBC plan or revised RBC plan
with the state; or
(ii) the date on which the RBC plan or revised RBC plan is filed under subdivisions 3 and 4.
History: 2004 c 285 art 1 s 3

60A.53 REGULATORY ACTION LEVEL EVENT.
    Subdivision 1. Definition. "Regulatory action level event" means, with respect to a health
organization, any of the following events:
(1) the filing of an RBC report by the health organization that indicates that the health
organization's total adjusted capital is greater than or equal to its authorized control level RBC
but less than its regulatory action level RBC;
(2) notification by the commissioner to a health organization of an adjusted RBC report that
indicates the event in clause (1), provided the health organization does not challenge the adjusted
RBC report under section 60A.56;
(3) if, pursuant to section 60A.56, the health organization challenges an adjusted RBC
report that indicates the event in clause (1), the notification by the commissioner to the health
organization that the commissioner has, after a hearing, rejected the health organization's
challenge;
(4) the failure of the health organization to file an RBC report by the filing date, unless
the health organization has provided an explanation for the failure that is satisfactory to the
commissioner and has cured the failure within ten days after the filing date;
(5) the failure of the health organization to submit an RBC plan to the commissioner within
the time period set forth in section 60A.52, subdivision 3;
(6) notification by the commissioner to the health organization that:
(i) the RBC plan or revised RBC plan submitted by the health organization is, in the
judgment of the commissioner, unsatisfactory; and
(ii) notification constitutes a regulatory action level event with respect to the health
organization, provided the health organization has not challenged the determination under
section 60A.56;
(7) if, pursuant to section 60A.56, the health organization challenges a determination by the
commissioner under clause (6), the notification by the commissioner to the health organization
that the commissioner has, after a hearing, rejected the challenge;
(8) notification by the commissioner to the health organization that the health organization
has failed to adhere to its RBC plan or revised RBC plan, but only if the failure has a substantial
adverse effect on the ability of the health organization to eliminate the company action level
event in accordance with its RBC plan or revised RBC plan and the commissioner has so stated
in the notification, provided the health organization has not challenged the determination under
section 60A.50; or
(9) if, pursuant to section 60A.56, the health organization challenges a determination by the
commissioner under clause (8), the notification by the commissioner to the health organization
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 health organization to prepare and submit an RBC plan or, if applicable,
a revised RBC plan;
(2) perform any examination or analysis the commissioner considers necessary of the
assets, liabilities, and operations of the health organization, including a review of its RBC plan
or revised RBC plan; and
(3) after the examination or analysis, issue a corrective order specifying the corrective
actions the commissioner determines are required.
    Subd. 3. Corrective actions. In determining corrective actions, the commissioner may take
into account factors the commissioner considers relevant with respect to the health organization
based upon the commissioner's examination or analysis of the assets, liabilities, and operations of
the health organization, including, but not limited to, the results of any sensitivity tests undertaken
pursuant to the RBC instructions. The RBC plan or revised RBC plan must be submitted:
(1) within 45 days after the occurrence of the regulatory action level event;
(2) if the health organization challenges an adjusted RBC report pursuant to section 60A.56
and the challenge is not frivolous in the judgment of the commissioner within 45 days after the
notification to the health organization that the commissioner has, after a hearing, rejected the
health organization's challenge; or
(3) if the health organization challenges a revised RBC plan pursuant to section 60A.56
and the challenge is not frivolous in the judgment of the commissioner, within 45 days after
the notification to the health organization that the commissioner has, after a hearing, rejected
the health organization's challenge.
    Subd. 4. Consultants. The commissioner may retain actuaries and investment experts and
other consultants as may be necessary in the judgment of the commissioner to review the health
organization's RBC plan or revised RBC plan, examine or analyze the assets, liabilities, and
operations, including contractual relationships, of the health organization and formulate the
corrective order with respect to the health organization. The fees, costs, and expenses relating
to consultants must be borne by the affected health organization or such other party as directed
by the commissioner.
History: 2004 c 285 art 1 s 4

60A.54 AUTHORIZED CONTROL LEVEL EVENT.
    Subdivision 1. Definition. "Authorized control level event" means any of the following
events:
(1) the filing of an RBC report by the health organization that indicates that the health
organization's total adjusted capital is greater than or equal to its mandatory control level RBC
but less than its authorized control level RBC;
(2) the notification by the commissioner to the health organization of an adjusted RBC report
that indicates the event in clause (1), provided the health organization does not challenge the
adjusted RBC report under section 60A.56;
(3) if, pursuant to section 60A.56, the health organization challenges an adjusted RBC report
that indicates the event in clause (1), notification by the commissioner to the health organization
that the commissioner has, after a hearing, rejected the health organization's challenge;
(4) the failure of the health organization to respond, in a manner satisfactory to the
commissioner, to a corrective order, provided the health organization has not challenged the
corrective order under section 60A.56; or
(5) if the health organization has challenged a corrective order under section 60A.56 and the
commissioner has, after a hearing, rejected the challenge or modified the corrective order, the
failure of the health organization 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 a health organization, the commissioner shall:
(1) take such actions as are required under section 60A.53 regarding a health organization
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 health organization and of the public, take such actions as are necessary to cause
the health organization to be placed under regulatory control under chapter 60B. In the event the
commissioner takes such actions, the authorized control level event is considered sufficient
grounds for the commissioner to take action under chapter 60B, and the commissioner shall have
the rights, powers, and duties with respect to the health organization as are set forth in chapter
60B. In the event the commissioner takes actions under this clause pursuant to an adjusted RBC
report, the health organization is entitled to the protections afforded health organizations under
sections 60B.11 and 60B.13 pertaining to summary proceedings.
History: 2004 c 285 art 1 s 5

60A.55 MANDATORY CONTROL LEVEL EVENT.
    Subdivision 1. Definition. "Mandatory control level event" means any of the following
events:
(1) the filing of an RBC report which indicates that the health organization's total adjusted
capital is less than its mandatory control level RBC;
(2) notification by the commissioner to the health organization of an adjusted RBC report
that indicates the event in clause (1), provided the health organization does not challenge the
adjusted RBC report under section 60A.56; or
(3) if, pursuant to section 60A.56, the health organization challenges an adjusted RBC report
that indicates the event in clause (1), notification by the commissioner to the health organization
that the commissioner has, after a hearing, rejected the health organization's challenge.
    Subd. 2. Commissioner's duties. (a) In the event of a mandatory control level event, the
commissioner shall take such actions as are necessary to place the health organization under
regulatory control under section 60B.13. In that event, the mandatory control level event is
considered sufficient grounds for the commissioner to take action under section 60B.13, and the
commissioner shall have the rights, powers, and duties with respect to the health organization
as are set forth in section 60B.13. If the commissioner takes actions pursuant to an adjusted
RBC report, the health organization is entitled to the protections of sections 60B.11 and 60B.13
pertaining to summary proceedings.
(b) Notwithstanding paragraph (a), 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.
History: 2004 c 285 art 1 s 6

60A.56 HEARINGS.
Upon the occurrence of any of the following events, the health organization has the right
to a confidential departmental hearing, on a record, at which the health organization may
challenge any determination or action by the commissioner. The health organization 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 health organization's request
for a hearing, the commissioner shall set a date for the hearing, which must be no less than ten nor
more than 30 days after the date of the health organization's request. The events include:
(1) notification to a health organization by the commissioner of an adjusted RBC report;
(2) notification to a health organization by the commissioner that:
(i) the health organization's RBC plan or revised RBC plan is unsatisfactory; and
(ii) notification constitutes a regulatory action level event with respect to the health
organization;
(3) notification to a health organization by the commissioner that the health organization has
failed to adhere to its RBC plan or revised RBC plan and that the failure has a substantial adverse
effect on the ability of the health organization to eliminate the company action level event with
respect to the health organization in accordance with its RBC plan or revised RBC plan; or
(4) notification to a health organization by the commissioner of a corrective order with
respect to the health organization.
History: 2004 c 285 art 1 s 7

60A.57 ACCESS TO AND USE OF RBC INFORMATION.
    Subdivision 1. Confidentiality; prohibition on announcements. Section 60A.67,
subdivisions 1 and 2 , apply to sections 60A.50 to 60A.592.
    Subd. 2. Prohibition for rate making or premium setting. The RBC instructions, RBC
reports, adjusted RBC reports, RBC plans, and revised RBC plans are intended solely for use by
the commissioner in monitoring the solvency of health organizations and the need for possible
corrective action with respect to health organizations and shall not be used by the commissioner
for rate making nor considered or introduced as evidence in any rate proceeding nor used by the
commissioner to calculate or derive any elements of an appropriate premium level or rate of
return for any line of insurance that a health organization or any affiliate is authorized to write.
History: 2004 c 285 art 1 s 8

60A.58 SUPPLEMENTAL PROVISIONS.
    Subdivision 1. Effect. Sections 60A.50 to 60A.592 are supplemental to any other provisions
of the laws of this state, and must not preclude or limit any other powers or duties of the
commissioner under such laws, including, but not limited to, chapter 60B and sections 62D.041,
62D.042, 62D.18, and 62D.181.
    Subd. 2. Exemption. The commissioner may exempt from the application of sections
60A.50 to 60A.592 a domestic health organization that:
(1) writes direct business only in this state;
(2) assumes no reinsurance in excess of five percent of direct premium written; and
(3) writes direct annual premiums for comprehensive medical business of $2,000,000 or less.
History: 2004 c 285 art 1 s 9

60A.59 FOREIGN HEALTH ORGANIZATIONS.
    Subdivision 1. RBC report. (a) A foreign health organization shall, upon the written request
of the commissioner, submit to the commissioner an RBC report as of the end of the calendar
year just ended the later of:
(1) the date an RBC report would be required to be filed by a domestic health organization
under sections 60A.50 to 60A.592; or
(2) 15 days after the request is received by the foreign health organization.
(b) A foreign health organization shall, at the written request of the commissioner, promptly
submit to the commissioner a copy of any RBC plan that is filed with the insurance commissioner
of any other state.
    Subd. 2. RBC plan. In the event of a company action level event, regulatory action level
event, or authorized control level event with respect to a foreign health organization as determined
under the RBC statute applicable in the state of domicile of the health organization or, if no RBC
statute is in force in that state, under sections 60A.50 to 60A.592, if the insurance commissioner
of the state of domicile of the foreign health organization fails to require the foreign health
organization to file an RBC plan in the manner specified under that state's RBC statute or, if no
RBC statute is in force in that state, under section 60A.52, the commissioner may require the
foreign health organization to file an RBC plan with the commissioner. In such event, the failure
of the foreign health organization to file an RBC plan with the commissioner shall be grounds to
order the health organization 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 health organization, if no domiciliary receiver has been appointed with respect
to the foreign health organization under the rehabilitation and liquidation statute applicable in
the state of domicile of the foreign health organization, the commissioner may make application
to the district court permitted under chapter 60B with respect to the liquidation of property of
foreign health organizations found in this state, and the occurrence of the mandatory control level
event shall be considered adequate grounds for the application.
History: 2004 c 285 art 1 s 10

60A.591 IMMUNITY.
There is no liability on the part of, and no cause of action arises against, the commissioner
or the department or its employees or agents for any action taken by them in the performance
of their powers and duties under sections 60A.50 to 60A.592.
History: 2004 c 285 art 1 s 11

60A.592 NOTICES.
All notices by the commissioner to a health organization that may result in regulatory action
under sections 60A.50 to 60A.592 are effective upon dispatch if transmitted by registered or
certified mail, or in the case of any other transmission are effective upon the health organization's
receipt of notice.
History: 2004 c 285 art 1 s 12

REGULATION OF RISK-BASED CAPITAL

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 capital instructions" means the
risk-based capital report including risk-based capital instructions adopted by the NAIC, as
those risk-based instructions may be amended by the NAIC from time to time according to the
procedures adopted by the NAIC.
    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.
History: 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."
History: 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.
History: 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.
History: 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.
History: 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.
History: 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.
History: 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.
History: 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.
History: 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.
History: 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.
History: 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.
History: 1995 c 253 s 13

REINSURANCE INTERMEDIARY ACT

60A.70 TITLE.
Sections 60A.70 to 60A.756 may be cited as the Reinsurance Intermediary Act.
History: 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; RM. "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.
History: 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.
History: 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.
History: 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.
History: 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.
History: 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.
History: 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.
History: 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
Business Transacted With Producer Controlled Insurer Act, sections 60J.06 to 60J.11.
History: 1991 c 325 art 11 s 9; 1993 c 13 art 1 s 16; 2000 c 260 s 12

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.
History: 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.
History: 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.
History: 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.
History: 1991 c 325 art 11 s 13

MINIMUM STANDARD OF VALUATION FOR HEALTH INSURANCE

60A.76 PURPOSE AND SCOPE.
Sections 60A.76 to 60A.768 apply to all individual and group accident and health insurance
coverages as defined in section 60A.06, subdivision 1, paragraph (5)(a), including single premium
credit disability insurance. Other credit insurance is not subject to sections 60A.76 to 60A.768.
When an insurer determines that adequacy of its health insurance reserves requires reserves
in excess of the minimum standards specified in sections 60A.76 to 60A.768, the increased
reserves must be held and must be considered the minimum reserves for that insurer.
With respect to any block of contracts, or with respect to an insurer's health business as a
whole, a prospective gross premium valuation is the ultimate test of reserve adequacy as of
a given valuation date. The prospective gross premium valuation must take into account, for
contracts in force, in a claims status, or in a continuation of benefits status on the valuation date,
the present value as of the valuation date of: all expected benefits unpaid, all expected expenses
unpaid, and all unearned or expected premiums, adjusted for future premium increases reasonably
expected to be put into effect.
The prospective gross premium valuation must be performed whenever a significant doubt
exists as to reserve adequacy with respect to any major block of contracts, or with respect to the
insurer's health business as a whole. In the event inadequacy is found to exist, immediate loss
recognition must be made and the reserves restored to adequacy. Adequate reserves, inclusive of
claim, premium, and contract reserves, if any, must be held with respect to all contracts, regardless
of whether contract reserves are required for such contracts under sections 60A.76 to 60A.768.
Whenever minimum reserves, as defined in sections 60A.76 to 60A.768, exceed reserve
requirements as determined by a prospective gross premium valuation, such minimum reserves
remain the minimum requirement under sections 60A.76 to 60A.768.
History: 2004 c 285 art 2 s 1

60A.761 GLOSSARY OF TECHNICAL TERMS USED.
    Subdivision 1. Scope. As used in sections 60A.76 to 60A.768, the terms in subdivisions 2 to
21 have the meaning given them.
    Subd. 2. Annual claim cost. "Annual claim cost" means the net annual cost per unit of
benefit before the addition of expenses, including claim settlement expenses, and a margin for
profit or contingencies. For example, the annual claim cost for a $100 monthly disability benefit,
for a maximum disability benefit period of one year, with an elimination period of one week, with
respect to a male at age 35, in a certain occupation might be $12, while the gross premium for this
benefit might be $18. The additional $6 would cover expenses and profit or contingencies.
    Subd. 3. Claims accrued. "Claims accrued" means that portion of claims incurred on or
prior to the valuation date which result in liability of the insurer for the payment of benefits for
medical services which have been rendered on or before the valuation date, and for the payment
of benefits for days of hospitalization and days of disability which have occurred on or prior to
the valuation date, which the insurer has not paid as of the valuation date, but for which it is
liable, and will have to pay after the valuation date. This liability is sometimes referred to as a
liability for "accrued" benefits. A claim reserve, which represents an estimate of this accrued
claim liability, must be established.
    Subd. 4. Claims reported. "Claims reported" means when an insurer has been informed
that a claim has been incurred, if the date reported is on or before the valuation date, the claim is
considered as a reported claim for annual statement purposes.
    Subd. 5. Claims unaccrued. "Claims unaccrued" means that portion of claims incurred on
or before the valuation date which result in liability of the insurer for the payment of benefits for
medical services expected to be rendered after the valuation date, and for benefits expected to
be payable for days of hospitalization and days of disability occurring after the valuation date.
This liability is sometimes referred to as a liability for "unaccrued" benefits. A claim reserve,
which represents an estimate of the unaccrued claim payments expected to be made (which may
or may not be discounted with interest) must be established.
    Subd. 6. Claims unreported. "Claims unreported" means when an insurer has not been
informed, on or before the valuation date, concerning a claim that has been incurred on or prior to
the valuation date, the claim is considered as an unreported claim for annual statement purposes.
    Subd. 7. Date of disablement. "Date of disablement" means the earliest date the insured is
considered as being disabled under the definition of disability in the contract, based on a doctor's
evaluation or other evidence. Normally this date will coincide with the start of any elimination
period.
    Subd. 8. Elimination period. "Elimination period" means a specified number of days, weeks,
or months starting at the beginning of each period of loss, during which no benefits are payable.
    Subd. 9. Gross premium. "Gross premium" means the amount of premium charged by the
insurer. It includes the net premium (based on claim cost) for the risk, together with any loading
for expenses, profit, or contingencies.
    Subd. 10. Group insurance. "Group insurance" includes blanket insurance and franchise
insurance and any other forms of group insurance.
    Subd. 11. Level premium. "Level premium" means a premium calculated to remain
unchanged throughout either the lifetime of the policy, or for some shorter projected period of
years. The premium need not be guaranteed; in which case, although it is calculated to remain
level, it may be changed if any of the assumptions on which it was based are revised at a later time.
Generally, the annual claim costs are expected to increase each year and the insurer, instead
of charging premiums that correspondingly increase each year, charges a premium calculated
to remain level for a period of years or for the lifetime of the contract. In this case, the benefit
portion of the premium is more than needed to provide for the cost of benefits during the earlier
years of the policy and less than the actual cost in the later years. The building of a prospective
contract reserve is a natural result of level premiums.
    Subd. 12. Long-term care insurance. "Long-term care insurance" means a qualified
long-term care insurance policy or rider as defined in section 62S.01, subdivision 18, and a
nonqualified long-term insurance policy or rider as defined in section 62A.46, subdivision 2.
    Subd. 13. Modal premium. "Modal premium" refers to the premium paid on a contract
based on a premium term which could be annual, semiannual, quarterly, monthly, or weekly.
Thus if the annual premium is $100 and if, instead, monthly premiums of $9 are paid then the
modal premium is $9.
    Subd. 14. Negative reserve. "Negative reserve" means normally the terminal reserve is
a positive value. However, if the values of the benefits are decreasing with advancing age or
duration it could be a negative value, called a negative reserve.
    Subd. 15. Preliminary term reserve method. "Preliminary term reserve method" means
that under this method of valuation the valuation net premium for each year falling within the
preliminary term period is exactly sufficient to cover the expected incurred claims of that year,
so that the terminal reserves will be zero at the end of the year. As of the end of the preliminary
term period, a new constant valuation net premium (or stream of changing valuation premiums)
becomes applicable such that the present value of all such premiums is equal to the present value
of all claims expected to be incurred following the end of the preliminary term period.
    Subd. 16. Present value of amounts not yet due on claims. "Present value of amounts not
yet due on claims" means the reserve for "claims unaccrued" which may be discounted at interest.
    Subd. 17. Rating block. "Rating block" means a grouping of contracts determined by the
valuation actuary based on common characteristics, such as a policy form or forms having similar
benefit designs.
    Subd. 18. Reserve. "Reserve" includes all items of benefit liability, whether in the nature of
incurred claim liability or in the nature of contract liability relating to future periods of coverage,
and whether the liability is accrued or unaccrued.
An insurer under its contracts promises benefits, which result in:
(a) claims which have been incurred, that is, for which the insurer has become obligated
to make payment, on or prior to the valuation date. On these claims, payments expected to be
made after the valuation date for accrued and unaccrued benefits are liabilities of the insurer
which should be provided for by establishing claim reserves; or
(b) claims which are expected to be incurred after the valuation date. Any present liability
of the insurer for these future claims should be provided for by the establishment of contract
reserves and unearned premium reserves.
    Subd. 19. Terminal reserve. "Terminal reserve" means the reserve at the end of a contract
year, and is defined as the present value of benefits expected to be incurred after that contract
year minus the present value of future valuation net premiums.
    Subd. 20. Unearned premium reserve. "Unearned premium reserve" means that portion of
the premium paid or due to the insurer which is applicable to the period of coverage extending
beyond the valuation date. Thus if an annual premium of $120 was paid on November 1, $20
would be earned as of December 31 and the remaining $100 would be unearned. The unearned
premium reserve could be on a gross basis as in this example, or on a valuation net premium basis.
    Subd. 21. Valuation net modal premium. "Valuation net modal premium" means the modal
fraction of the valuation net annual premium that corresponds to the gross modal premium in
effect on any contract to which contract reserves apply. Thus if the mode of payment in effect
is quarterly, the valuation net modal premium is the quarterly equivalent of the valuation net
annual premium.
History: 2004 c 285 art 2 s 2

60A.762 CATEGORIES OF RESERVES.
The following sections set forth minimum standards for three categories of health insurance
reserves:
(1) section 60A.763, claim reserves;
(2) section 60A.764, premium reserves; and
(3) section 60A.765, contract reserves.
Adequacy of an insurer's health insurance reserves is to be determined on the basis of all
three categories combined. However, sections 60A.76 to 60A.768 emphasize the importance of
determining appropriate reserves for each of the three categories separately.
History: 2004 c 285 art 2 s 3

60A.763 CLAIM RESERVES.
    Subdivision 1. Generally. (a) Claim reserves are required for all incurred but unpaid claims
on all health insurance policies.
(b) Appropriate claim expense reserves are required with respect to the estimated expense of
settlement of all incurred but unpaid claims.
(c) Claim reserves for prior valuation years are to be tested for adequacy and reasonableness
along the lines of claim runoff schedules in accordance with the statutory financial statement
including consideration of any residual unpaid liability.
    Subd. 2. Minimum standards for claim reserves for disability income. (a) The maximum
interest rate for claim reserves is specified in section 60A.768.
(b) Minimum standards with respect to morbidity are those specified in section 60A.768,
except that, at the option of the insurer:
(1) for claims with a duration from date of disablement of less than two years, reserves may
be based on the insurer's experience, if such experience is considered credible, or upon other
assumptions designed to place a sound value on the liabilities; and
(2) for group disability income claims with a duration from date of disablement of more than
two years but less than five years, reserves may, with the approval of the commissioner, be based
on the insurer's experience for which the insurer maintains underwriting and claim administration
control. The request for approval of a plan of modification to the reserve basis must include:
(i) an analysis of the credibility of the experience;
(ii) a description of how all of the insurer's experience is proposed to be used in setting
reserves;
(iii) a description and quantification of the margins to be included;
(iv) a summary of the financial impact that the proposed plan of modification would have
had on the insurer's last filed annual statement;
(v) a copy of the approval of the proposed plan of modification by the commissioner of
the state of domicile; and
(vi) any other information deemed necessary by the commissioner.
(c) For contracts with an elimination period, the duration of disablement must be measured
as dating from the time that benefits would have begun to accrue had there been no elimination
period.
    Subd. 3. Minimum standards for claim reserves for all other benefits. (a) The maximum
interest rate for claim reserves is specified in section 60A.768.
(b) The reserve must be based on the insurer's experience, if the experience is considered
credible, or upon other assumptions designed to place a sound value on the liabilities.
    Subd. 4. Claim reserve methods generally. A generally accepted actuarial reserving method
or other reasonable method if the method is approved by the commissioner before the statement
date, or a combination of methods as described in this section, may be used to estimate all claim
liabilities. The methods used for estimating liabilities generally may be aggregate methods,
or various reserve items may be separately valued. Approximations based on groupings and
averages may also be employed. Adequacy of the claim reserves, however, must be determined in
the aggregate.
History: 2004 c 285 art 2 s 4

60A.764 PREMIUM RESERVES.
    Subdivision 1. Generally. (a) Unearned premium reserves are required for all contracts with
respect to the period of coverage for which premiums, other than premiums paid in advance,
have been paid beyond the date of valuation.
(b) If premiums due and unpaid are carried as an asset, the premiums must be treated as
premiums in force, subject to unearned premium reserve determination. The value of unpaid
commissions, premium taxes, and the cost of collection associated with due and unpaid premiums
must be carried as an offsetting liability.
(c) The gross premiums paid in advance for a period of coverage beginning after the next
premium due date which follows the date of valuation may be appropriately discounted to the
valuation date and must be held either as a separate liability or as an addition to the unearned
premium reserve which would otherwise be required as a minimum.
    Subd. 2. Minimum standards for unearned premium reserves. (a) The minimum unearned
premium reserve with respect to a contract is the pro rata unearned modal premium that applies to
the premium period beyond the valuation date, with the premium determined on the basis of:
(1) the valuation net modal premium on the contract reserve basis applying to the contract; or
(2) the gross modal premium for the contract if no contract reserve applies.
(b) However, in no event may the sum of the unearned premium and contract reserves for
all contracts of the insurer subject to contract reserve requirements be less than the gross modal
unearned premium reserve on all such contracts, as of the date of valuation. The reserve must
never be less than the expected claims for the period beyond the valuation date represented by the
unearned premium reserve, to the extent not provided for elsewhere.
    Subd. 3. Premium reserve methods generally. The insurer may employ suitable
approximations and estimates, including, but not limited to, groupings, averages, and aggregate
estimation, in computing premium reserves. Approximations or estimates should be tested
periodically to determine the continuing adequacy and reliability.
History: 2004 c 285 art 2 s 5

60A.765 CONTRACT RESERVES REQUIRED.
(a) Contract reserves are required, unless otherwise specified in paragraph (b) for:
(1) all individual and group contracts with which level premiums are used; or
(2) all individual and group contracts with respect to which, due to the gross premium pricing
structure at issue, the value of the future benefits at any time exceeds the value of any appropriate
future valuation net premiums at that time. This evaluation may be applied on a rating block basis
if the total premiums for the block were developed to support the total risk assumed and expected
expenses for the block each year, and a qualified actuary certifies the premium development. The
actuary must state in the certification that premiums for the rating block were developed such
that each year's premium was intended to cover that year's costs without any prefunding. If the
premium is also intended to recover costs for any prior years, the actuary must also disclose the
reasons for and magnitude of the recovery. The values specified in this clause must be determined
on the basis specified in section 60A.766, subdivisions 1 to 4.
(b) Contracts not requiring a contract reserve are:
(1) contracts that cannot be continued after one year from issue; or
(2) contracts already in force on August 1, 2004, for which no contract reserve was required
under the immediately preceding standards.
(c) The contract reserve is in addition to claim reserves and premium reserves.
(d) The methods and procedures for contract reserves must be consistent with those for claim
reserves for a contract, or else appropriate adjustment must be made when necessary to assure
provision for the aggregate liability. The definition of the date of incurral must be the same in
both determinations.
History: 2004 c 285 art 2 s 6

60A.766 MINIMUM STANDARDS FOR CONTRACT RESERVES.
    Subdivision 1. Basis. (a) Minimum standards with respect to morbidity are those set forth
in section 60A.768. Valuation net premiums used under each contract must have a structure
consistent with the gross premium structure at issue of the contract as this relates to advancing
age of insured, contract duration, and period for which gross premiums have been calculated.
Contracts for which tabular morbidity standards are not specified in section 60A.768 must be
valued using tables established for reserve purposes by a qualified actuary and acceptable to the
commissioner. The morbidity tables must contain a pattern of incurred claims cost that reflects the
underlying morbidity and must not be constructed for the primary purpose of minimizing reserves.
(b) The maximum interest rate is specified in section 60A.768.
(c) Termination rates used in the computation of reserves must be on the basis of a mortality
table as specified in section 60A.768 except as noted in clauses (1) to (3):
(1) under contracts for which premium rates are not guaranteed, and where the effects of
insurer underwriting are specifically used by policy duration in the valuation morbidity standard or
for return of premium or other deferred cash benefits, total termination rates may be used at ages
and durations where these exceed specified mortality table rates, but not in excess of the lesser of:
(i) 80 percent of the total termination rate used in the calculation of the gross premiums; or
(ii) eight percent;
(2) for long-term care individual policies or group certificates issued after January 1, 1997,
the contract reserve may be established on a basis of separate:
(i) mortality as specified in section 60A.768; and
(ii) terminations other than mortality, where the terminations are not to exceed:
A. for policy years one through four, the lesser of 80 percent of the voluntary lapse rate used
in the calculation of gross premiums and eight percent;
B. for policy years five and later, the lesser of 100 percent of the voluntary lapse rate used in
the calculation of gross premiums and four percent;
(3) where a morbidity standard specified in section 60A.768 is on an aggregate basis, the
morbidity standard may be adjusted to reflect the effect of insurer underwriting by policy duration.
The adjustments must be appropriate to the underwriting and be acceptable to the commissioner.
    Subd. 2. Reserve method. (a) For insurance, except long-term care and return of premium
or other deferred cash benefits, the minimum reserve is the reserve calculated on the two-year
full preliminary term method; that is, under which the terminal reserve is zero at the first and
also the second contract anniversary.
(b) For long-term care insurance, the minimum reserve is the reserve calculated as follows:
(1) for individual policies and group certificates issued on or before December 31, 1991,
reserves calculated on the two-year full preliminary term methods;
(2) for individual policies and group certificates issued on or after January 1, 1992, reserves
calculated on the one-year full preliminary term method.
(c) For return of premium or other deferred cash benefits, the minimum reserve is the reserve
calculated as follows:
(1) on the one-year preliminary term method if the benefits are provided at any time before
the 20th anniversary;
(2) on the two-year preliminary term method if the benefits are only provided on or after
the 20th anniversary.
The preliminary term method may be applied only in relation to the date of issue of a contract.
Reserve adjustments introduced later, as a result of rate increases, revisions in assumptions, for
example projected inflation rates, or for other reasons, are to be applied immediately as of the
effective date of adoption of the adjusted basis.
    Subd. 3. Negative reserves. Negative reserves on any benefit may be offset against positive
reserves for other benefits in the same contract, but the total contract reserve with respect to all
benefits combined may not be less than zero.
    Subd. 4. Nonforfeiture benefits for long-term care insurance. The contract reserve on
a policy basis must not be less than the net single premium for the nonforfeiture benefits at
the appropriate policy duration, where the net single premium is computed according to the
specifications in this section. While the consideration for nonforfeiture benefits in this section is
specific to long-term care insurance, similar consideration may be applicable for other lines of
business.
    Subd. 5. Alternative valuation methods and assumptions generally. Provided the
contract reserve on all contracts to which an alternative method or basis is applied is not less in
the aggregate than the amount determined according to the applicable standards specified in
this section, an insurer may use any reasonable assumptions as to interest rates, termination
and mortality rates, and rates of morbidity or other contingency. Also, subject to the preceding
condition, the insurer may employ methods other than the methods stated in this section in
determining a sound value of its liabilities under such contracts, including, but not limited to, the
following: the net level premium method; the one-year full preliminary term method; prospective
valuation on the basis of actual gross premiums with reasonable allowance for future expenses;
the use of approximations such as those involving age groupings, groupings of several years of
issue, average amounts of indemnity, and grouping of similar contract forms; the computation
of the reserve for one contract benefit as a percentage of, or by other relation to, the aggregate
contract reserves exclusive of the benefit or benefits so valued; and the use of a composite annual
claim cost for all or any combination of the benefits included in the contracts valued.
    Subd. 6. Test for adequacy and reasonableness of contract reserves. Annually, an
appropriate review must be made of the insurer's prospective contract liabilities on contracts
valued by tabular reserves, to determine the continuing adequacy and reasonableness of the
tabular reserves giving consideration to future gross premiums. The insurer shall make appropriate
increments to such tabular reserves if such tests indicate that the basis of such reserves is no
longer adequate; subject, however, to the minimum standards of subdivisions 1 to 4.
In the event a company has a contract or a group of related similar contracts for which future
gross premiums will be restricted by contract, department rule, or for other reasons, such that
the future gross premiums reduced by expenses for administration, commissions, and taxes will
be insufficient to cover future claims, the company shall establish contract reserves for such
shortfall in the aggregate.
History: 2004 c 285 art 2 s 7

60A.767 REINSURANCE.
Increases to or credits against reserves carried, arising because of reinsurance assumed or
reinsurance ceded, must be determined in a manner consistent with sections 60A.76 to 60A.768
and with all applicable provisions of the reinsurance contracts which affect the insurer's liabilities.
History: 2004 c 285 art 2 s 8

60A.768 SPECIFIC STANDARDS FOR MORBIDITY, INTEREST, AND MORTALITY.
    Subdivision 1. Morbidity. A. Minimum morbidity standards for valuation of specified
individual contract health insurance benefits are as follows:
(1) Disability Income Benefits Due to Accident or Sickness.
(a) Contract Reserves:
Contracts issued on or after January 1, 2004:
The 1985 Commissioners Individual Disability Tables A (85CIDA); or
The 1985 Commissioners Individual Disability Tables B (85CIDB).
Each insurer shall elect, with respect to all individual contracts issued in any one statement
year, whether it will use Tables A or Tables B as the minimum standard. The insurer may,
however, elect to use the other tables with respect to any subsequent statement year.
(b) Claim Reserves:
For claims incurred on or after January 1, 2004:
The 1985 Commissioners Individual Disability Table A (85CIDA) with claim termination
rates multiplied by the following adjustment factors:

		Duration	Adjustment Factor	Adjusted Termination Rates*
	Week	1	0.366	0.04831
		2	0.366	0.04172
		3	0.366	0.04063
		4	0.366	0.04355
		5	0.365	0.04088
		6	0.365	0.04271
		7	0.365	0.04380
		8	0.365	0.04344
		9	0.370	0.04292
		10	0.370	0.04107
		11	0.370	0.03848
		12	0.370	0.03478
		13	0.370	0.03034
	Month	4	0.391	0.08758
		5	0.371	0.07346
		6	0.435	0.07531
		7	0.500	0.07245
		8	0.564	0.06655
		9	0.613	0.05520
		10	0.663	0.04705
		11	0.712	0.04486
		12	0.756	0.04309
		13	0.800	0.04080
		14	0.844	0.03882
		15	0.888	0.03730
		16	0.932	0.03448
		17	0.976	0.03026
		18	1.020	0.02856
		19	1.049	0.02518
		20	1.078	0.02264
		21	1.107	0.02104
		22	1.136	0.01932
		23	1.165	0.01865
		24	1.195	0.01792
	Year	3	1.369	0.16839
		4	1.204	0.10114
		5	1.199	0.07434
		6 and later	1.000	**

*The adjusted termination rates derived from the application of the adjustment factors to the
DTS Valuation Table termination rates shown in exhibits 3a, 3b, 3c, 4, and 5 (Transactions of the
Society of Actuaries (TSA) XXXVII, pages 457-463) is displayed. The adjustment factors for
age, elimination period, class, sex, and cause displayed in exhibits 3a, 3b, 3c, and 4 should be
applied to the adjusted termination rates shown in this table.
**Applicable DTS Valuation Table duration rate from exhibits 3c and 4 (TSA XXXVII,
pages 462-463).
The 85CIDA table so adjusted for the computation of claim reserves shall be known as
85CIDC (The 1985 Commissioners Individual Disability Table C).
(2) Hospital Benefits, Surgical Benefits, and Maternity Benefits (Scheduled benefits or fixed
time period benefits only).
(a) Contract Reserves.
Contracts issued on or after January 1, 1982:
The 1974 Medical Expense Tables, Table A, Transactions of the Society of Actuaries,
Volume XXX, page 63. Refer to the paper (in the same volume, page 9) to which this table is
appended, including its discussions, for methods of adjustment for benefits not directly valued in
Table A: "Development of the 1974 Medical Expense Benefits," Houghton and Wolf.
(b) Claim Reserves:
No specific standard. See (6).
(3) Cancer Expense Benefits (Scheduled benefits or fixed time period benefits only).
(a) Contract Reserves:
Contracts issued on or after January 1, 2004:
The 1985 NAIC Cancer Claim Cost Tables.
(b) Claim Reserves:
No specific standard. See (6).
(4) Accidental Death Benefits.
(a) Contract Reserves:
Contracts issued on or after January 1, 2004:
The 1959 Accidental Death Benefits Table.
(b) Claim Reserves:
Actual amount incurred.
(5) Single Premium Credit Disability.
(a) Contract Reserves:
(i) For contracts issued on or after January 1, 2004:
(I) For plans having less than a 30-day elimination period, the 1985 Commissioners
Individual Disability Table A (85CIDA) with claim incidence rates increased by 12 percent.
(ii)(II) For plans having a 30-day and greater elimination period, the 85CIDA for a 14-day
elimination period with the adjustment in item (I).
(b) Claim Reserves:
Claim reserves are to be determined as provided in section 60A.763.
(6) Other Individual Contract Benefits.
(a) Contract Reserves:
For all other individual contract benefits, morbidity assumptions are to be determined as
provided in section 60A.765.
(b) Claim Reserves:
For all benefits other than disability, claim reserves are to be determined as provided in
section 60A.763.
B. Minimum morbidity standards for valuation of specified group contract health insurance
benefits are as follows:
(1) Disability Income Benefits Due to Accident or Sickness.
(a) Contract Reserves:
Contracts issued on or after January 1, 2004:
The 1987 Commissioners Group Disability Income Table (87CGDT).
(b) Claim Reserves:
For claims incurred on or after January 1, 2004:
The 1987 Commissioners Group Disability Income Table (87CGDT);
(2) Single Premium Credit Disability
(a) Contract Reserves:
(i) For contracts issued on or after January 1, 2004:
(I) For plans having less than a 30-day elimination period, the 1985 Commissioners
Individual Disability Table A (85CIDA) with claim incidence rates increased by 12 percent.
(ii)(II) For plans having a 30-day and greater elimination period, the 85CIDA for a 14-day
elimination period with the adjustment in item (I).
(b) Claim Reserves:
Claim reserves are to be determined as provided in section 60A.763.
(3) Other Group Contract Benefits.
(a) Contract Reserves:
For all other group contract benefits, morbidity assumptions are to be determined as provided
in section 60A.765.
(b) Claim Reserves:
For all benefits other than disability, claim reserves are to be determined as provided in
section 60A.763.
    Subd. 2. Interest. A. For contract reserves the maximum interest rate is the maximum
rate permitted by law in the valuation of whole life insurance issued on the same date as the
health insurance contract.
B. For claim reserves on policies that require contract reserves, the maximum interest rate
is the maximum rate permitted by law in the valuation of whole life insurance issued on the
same date as the claim incurred date.
C. For claim reserves on policies not requiring contract reserves, the maximum interest rate
is the maximum rate permitted by law in the valuation of single premium immediate annuities
issued on the same date as the claim incurred date, reduced by 100 basis points.
    Subd. 3. Mortality. A. For individual long-term care insurance policies or group long-term
care insurance certificates issued on or after January 1, 2004, the mortality basis used must be
the 1983 Group Annuity Mortality Table without projection.
B. Other mortality tables adopted by the NAIC and adopted by the commissioner may be
used in the calculation of the minimum reserves if appropriate for the type of benefits and if
approved by the commissioner. The request for approval must include the proposed mortality
table and the reason that the standard specified in subsection A is inappropriate.
C. For single premium credit insurance using the 85CIDA table, no separate mortality
must be assumed.
History: 2004 c 285 art 2 s 9

LIFE REINSURANCE AGREEMENTS

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 premiums allowed)		0	+	+	+	+	+

*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+CG) / (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.
History: 1994 c 426 s 9

INSURANCE REGULATORY INFORMATION SYSTEM

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.
History: 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.
History: 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.
History: 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.
History: 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.
History: 1991 c 325 art 12 s 5

INSURANCE FRAUD

60A.951 DEFINITIONS.
    Subdivision 1. Application. The definitions in this section apply to sections 60A.951 to
60A.956.
    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 Division of Insurance Fraud; 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. 4a. Insurance policy or policy. "Insurance policy" or "policy" means the written
instrument in which are set forth the terms of any certificate of insurance, binder of coverage, or
contract of insurance, including a certificate, binder, or contract issued by a state-assigned risk
plan; benefit plan; nonprofit hospital service plan; motor club service plan; or surety bond, cash
bond, or any other alternative to insurance authorized by the Minnesota Financial Responsibility
Act.
    Subd. 4b. Insurance professional. "Insurance professional" means sales agents, agencies,
managing general agents, brokers, producers, claims representatives, adjusters, and third-party
administrators.
    Subd. 4c. Insurance transaction. "Insurance transaction" means a transaction by, between,
or among:
(1) an insurer or a person who acts on behalf of an insurer; and
(2) an insured, claimant, applicant for insurance, public adjuster, insurance professional,
practitioner who performs professional services as defined by section 319B.02, subdivision 19,
attorney, or any person who acts on behalf of any of the foregoing for the purpose of obtaining
insurance or reinsurance, calculating insurance premiums, submitting a claim, negotiating or
adjusting a claim, or otherwise obtaining insurance, self-insurance, or reinsurance, or obtaining
the benefits or annuities thereof or therefrom.
    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. 5a. Person. "Person" means a natural person, company, corporation, unincorporated
association, partnership, professional corporation, and any other entity.
    Subd. 5b. Premium. "Premium" means consideration paid or payable for coverage under an
insurance policy. Premium includes any payment, whether due within the insurance policy term
or otherwise; any deductible payment, whether advanced by the insurer or insurance professional
and subject to reimbursement by the insured or otherwise; any self-insured retention or payment,
whether advanced by the insurer or insurance professional and subject to reimbursement by
the insured or otherwise; and any collateral or security to be provided to collateralize any such
obligations to pay.
    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.
History: 1994 c 574 s 1; 1995 c 258 s 9,10; 1997 c 225 art 2 s 1; 2002 c 331 s 2-8

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, insurance transaction, payment, or application, an insurer
must release to the authorized person all relevant information in the insurer's possession.
    Subd. 2. Notice to and cooperation with the Division of Insurance Fraud Prevention.
Any insurer or insurance professional that has reasonable belief that an act of insurance fraud
will be, is being, or has been committed, shall furnish and disclose all relevant information to the
Division of Insurance Fraud Prevention or to any authorized person and cooperate fully with any
investigation conducted by the Division of Insurance Fraud Prevention. Any person that has a
reasonable belief that an act of insurance fraud will be, is being, or has been committed, or any
person who collects, reviews, or analyzes information concerning insurance fraud may furnish
and disclose any information in its possession concerning the act to the Division of Insurance
Fraud Prevention, any authorized person, or to an authorized representative of an insurer that
requests the information for the purpose of detecting, prosecuting, or preventing insurance
fraud. The insurer may also release relevant information to any person authorized to receive the
information under section 72A.502, subdivision 2. If disclosure is made to an authorized person
other than the Division of Insurance Fraud Prevention, a copy of the disclosure must be sent to
the Division of Insurance Fraud Prevention.
    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.
    Subd. 4. Tolling of time periods. If an insurer has a reasonable or probable cause to believe
that an insurance fraud has been committed in connection with an insurance claim, and has
properly notified the Division of Insurance Fraud Prevention of its suspicions according to
subdivision 2, the notification tolls any applicable time period in any unfair claims practices
statute or related regulations, or any action on the claim against the insurer to whom the claim had
been presented for bad faith, until 30 days after determination by the Division of Insurance Fraud
Prevention and notice to the insurer that the division will not recommend action on the claim.
    Subd. 5. Reward for information. The Division of Insurance Fraud Prevention, in
cooperation with authorized insurers and insurance professionals, may establish a voluntary fund
to reward persons not connected with the insurance industry who provide information or furnish
evidence leading to the arrest and conviction of persons responsible for insurance fraud.
History: 1994 c 574 s 2; 2002 c 331 s 9-12

60A.953 ENFORCEMENT; REFUSAL TO COOPERATE WITH AN INVESTIGATION.
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. It is unlawful for any person to knowingly or
intentionally interfere with the enforcement of the provisions of sections 60A.951 to 60A.956 or
investigation of suspected or actual violations of sections 60A.951 to 60A.956 and is punishable
as a misdemeanor.
History: 1994 c 574 s 3; 2002 c 331 s 13

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.
History: 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.
History: 1994 c 574 s 5; 1995 c 258 s 12

60A.956 OTHER LAW ENFORCEMENT AUTHORITY.
Nothing in sections 60A.951 to 60A.956 preempts the authority of or relieves the duty of any
other law enforcement agencies to investigate and prosecute alleged violations of law, prevents
or prohibits a person from voluntarily disclosing any information concerning insurance fraud to
any law enforcement agency other than the Division of Insurance Fraud Prevention, or limits any
of the powers granted elsewhere by the laws of this state to the commissioner of commerce to
investigate alleged violations of law and to take appropriate action.
History: 2002 c 331 s 14

VIATICAL SETTLEMENTS

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.
History: 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.
History: 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.
History: 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.
History: 1995 c 151 s 5; 1999 c 250 art 3 s 6

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.
History: 1995 c 151 s 6

60A.966 APPROVAL OF VIATICAL SETTLEMENTS CONTRACT FORMS.
A viatical settlement provider or broker 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.
History: 1995 c 151 s 7; 2005 c 132 s 4

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.
History: 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.
History: 1995 c 151 s 9

60A.969 DISCLOSURE.
A viatical settlement provider or a broker shall disclose the following information to the
viator no later than the date an application is given to the viator:
(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.
History: 1995 c 151 s 10; 2005 c 132 s 5

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.
History: 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:

	Insured's Life Expectancy		Minimum Percentage of Face Value 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.
History: 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.
History: 1995 c 151 s 13; 1999 c 250 art 3 s 7

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.
History: 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.
History: 1995 c 151 s 15

STRUCTURED SETTLEMENT ANNUITIES

60A.975 DEFINITIONS.
    Subdivision 1. Application. For purposes of sections 60A.975 and 60A.976, the definitions
in this section have the meanings given them.
    Subd. 2. Annuity issuer. "Annuity issuer" means an insurer that issues an insurance contract
used to fund periodic payments under a structured settlement agreement.
    Subd. 3. Structured settlement. "Structured settlement" means an arrangement for periodic
payment of damages entered on behalf of a minor or incompetent person for personal injuries
established by settlement or judgment.
    Subd. 4. Structured settlement agreement. "Structured settlement agreement" means the
agreement, judgment, stipulation, or release embodying the terms of a structured settlement.
History: 2001 c 131 s 4

60A.976 ANNUITY ISSUERS FINANCIAL REQUIREMENTS.
An annuity purchased to finance a structured settlement agreement may be purchased only
from an annuity issuer with a financial rating equivalent to A.M. Best Company A+ Class 8 or
better; or a Standard & Poor's AA or better.
History: 2001 c 131 s 5

INFORMATION SECURITY PROGRAM

60A.98 DEFINITIONS.
    Subdivision 1. Scope. For purposes of sections 60A.98 and 60A.981, the terms defined in
this section have the meanings given them.
    Subd. 2. Customer. "Customer" means a consumer who has a continuing relationship with
a licensee under which the licensee provides one or more insurance products or services to the
consumer that are to be used primarily for personal, family, or household purposes.
    Subd. 3. Customer information. "Customer information" means nonpublic personal
information about a customer, whether in paper, electronic, or other form, that is maintained by or
on behalf of the licensee.
    Subd. 4. Customer information systems. "Customer information systems" means the
electronic or physical methods used to access, collect, store, use, transmit, protect, or dispose of
customer information.
    Subd. 5. Licensee. "Licensee" means all licensed insurers, producers, and other persons
licensed or required to be licensed, authorized or required to be authorized, or registered or
required to be registered pursuant to the insurance laws of this state, except that "licensee" does
not include a purchasing group or an ineligible insurer in regard to the surplus line insurance
conducted pursuant to sections 60A.195 to 60A.209. "Licensee" does not include producers
until January 1, 2007.
    Subd. 6. Nonpublic financial information. "Nonpublic financial information" means:
(1) personally identifiable financial information; and
(2) any list, description, or other grouping of consumers, and publicly available information
pertaining to them, that is derived using any personally identifiable financial information that is
not publicly available.
    Subd. 7. Nonpublic personal health information. "Nonpublic personal health information"
means health information:
(1) that identifies an individual who is the subject of the information; or
(2) with respect to which there is a reasonable basis to believe that the information could
be used to identify an individual.
    Subd. 8. Nonpublic personal information. "Nonpublic personal information" means
nonpublic financial information and nonpublic personal health information.
    Subd. 9. Personally identifiable financial information. "Personally identifiable financial
information" means any information:
(1) a consumer provides to a licensee to obtain an insurance product or service from the
licensee;
(2) about a consumer resulting from a transaction involving an insurance product or service
between a licensee and a consumer; or
(3) the licensee otherwise obtains about a consumer in connection with providing an
insurance product or service to that consumer.
    Subd. 10. Service provider. "Service provider" means a person that maintains, processes, or
otherwise is permitted access to customer information through its provision of services directly
to the licensee.
History: 2005 c 132 s 6

60A.981 INFORMATION SECURITY PROGRAM.
    Subdivision 1. General requirements. Each licensee shall implement a comprehensive
written information security program that includes administrative, technical, and physical
safeguards for the protection of customer information. The administrative, technical, and physical
safeguards included in the information security program must be appropriate to the size and
complexity of the licensee and the nature and scope of its activities.
    Subd. 2. Objectives. A licensee's information security program must be designed to:
(1) ensure the security and confidentiality of customer information;
(2) protect against any anticipated threats or hazards to the security or integrity of the
information; and
(3) protect against unauthorized access to or use of the information that could result in
substantial harm or inconvenience to any customer.
    Subd. 3. Examples of methods of development and implementation. The following
actions and procedures are examples of methods of implementation of the requirements of
subdivisions 1 and 2. These examples are nonexclusive illustrations of actions and procedures
that licensees may follow to implement subdivisions 1 and 2:
(1) the licensee:
(i) identifies reasonably foreseeable internal or external threats that could result in
unauthorized disclosure, misuse, alteration, or destruction of customer information or customer
information systems;
(ii) assesses the likelihood and potential damage of these threats, taking into consideration
the sensitivity of customer information; and
(iii) assesses the sufficiency of policies, procedures, customer information systems, and other
safeguards in place to control risks;
(2) the licensee:
(i) designs its information security program to control the identified risks, commensurate with
the sensitivity of the information, as well as the complexity and scope of the licensee's activities;
(ii) trains staff, as appropriate, to implement the licensee's information security program; and
(iii) regularly tests or otherwise regularly monitors the key controls, systems, and procedures
of the information security program. The frequency and nature of these tests or other monitoring
practices are determined by the licensee's risk assessment;
(3) the licensee:
(i) exercises appropriate due diligence in selecting its service providers; and
(ii) requires its service providers to implement appropriate measures designed to meet
the objectives of this regulation, and, where indicated by the licensee's risk assessment, takes
appropriate steps to confirm that its service providers have satisfied these obligations; and
(4) the licensee monitors, evaluates, and adjusts, as appropriate, the information security
program in light of any relevant changes in technology, the sensitivity of its customer information,
internal or external threats to information, and the licensee's own changing business arrangements,
such as mergers and acquisitions, alliances and joint ventures, outsourcing arrangements, and
changes to customer information systems.
History: 2005 c 132 s 7

60A.982 UNFAIR TRADE PRACTICES.
A violation of sections 60A.98 and 60A.981 is considered to be a violation of sections
72A.17 to 72A.32.
History: 2005 c 132 s 8

INTERSTATE INSURANCE PRODUCT REGULATION COMPACT

60A.99 INTERSTATE INSURANCE PRODUCT REGULATION COMPACT.
    Subdivision 1. Enactment and form. The Interstate Insurance Product Regulation Compact
is enacted into law and entered into with all other states legally joining in it in substantially
the following form:

Article I. Purposes

The purposes of this Compact are, through means of joint and cooperative action among the
Compacting States:
1. To promote and protect the interest of consumers of individual and group annuity, life
insurance, disability income and long-term care insurance products;
2. To develop uniform standards for insurance products covered under the Compact;
3. To establish a central clearinghouse to receive and provide prompt review of insurance
products covered under the Compact and, in certain cases, advertisements related thereto,
submitted by insurers authorized to do business in one or more Compacting States;
4. To give appropriate regulatory approval to those product filings and advertisements
satisfying the applicable uniform standard;
5. To improve coordination of regulatory resources and expertise between state insurance
departments regarding the setting of uniform standards and review of insurance products covered
under the Compact;
6. To create the Interstate Insurance Product Regulation Commission; and
7. To perform these and such other related functions as may be consistent with the state
regulation of the business of insurance.

Article II. Definitions

For purposes of this Compact:
1. "Advertisement" means any material designed to create public interest in a Product, or
induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace or retain a
policy, as more specifically defined in the Rules and Operating Procedures of the Commission.
2. "Bylaws" mean those bylaws established by the Commission for its governance, or for
directing or controlling the Commission's actions or conduct.
3. "Compacting State" means any State which has enacted this Compact legislation and
which has not withdrawn pursuant to Article XIV, Section 1, or been terminated pursuant to
Article XIV, Section 2.
4. "Commission" means the "Interstate Insurance Product Regulation Commission"
established by this Compact.
5. "Commissioner" means the chief insurance regulatory official of a State including, but not
limited to commissioner, superintendent, director or administrator.
6. "Domiciliary State" means the state in which an Insurer is incorporated or organized; or, in
the case of an alien Insurer, its state of entry.
7. "Insurer" means any entity licensed by a State to issue contracts of insurance for any
of the lines of insurance covered by this Act.
8. "Member" means the person chosen by a Compacting State as its representative to the
Commission, or his or her designee.
9. "Noncompacting State" means any State which is not at the time a Compacting State.
10. "Operating Procedures" mean procedures promulgated by the Commission implementing
a Rule, Uniform Standard, or a provision of this Compact.
11. "Product" means the form of a policy or contract, including any application, endorsement,
or related form which is attached to and made a part of the policy or contract, and any evidence of
coverage or certificate, for an individual or group annuity, life insurance, disability income or
long-term care insurance product that an Insurer is authorized to issue.
12. "Rule" means a statement of general or particular applicability and future effect
promulgated by the Commission, including a Uniform Standard developed pursuant to Article VII
of this Compact, designed to implement, interpret, or prescribe law or policy or describing the
organization, procedure, or practice requirements of the Commission, which shall have the force
and effect of law in the Compacting States.
13. "State" means any state, district, or territory of the United States of America.
14. "Third Party Filer" means an entity that submits a Product filing to the Commission on
behalf of an Insurer.
15. "Uniform Standard" means a standard adopted by the Commission for a Product line,
pursuant to Article VII of this Compact, and shall include all of the Product requirements in
aggregate; provided, that each Uniform Standard shall be construed, whether express or implied,
to prohibit the use of any inconsistent, misleading or ambiguous provisions in a Product and
the form of the Product made available to the public shall not be unfair, inequitable or against
public policy as determined by the Commission.

Article III. Establishment of the Commission and Venue

1. The Compacting States hereby create and establish a joint public agency known as the
"Interstate Insurance Product Regulation Commission." Pursuant to Article IV, the Commission
will have the power to develop Uniform Standards for Product lines, receive and provide prompt
review of Products filed therewith, and give approval to those Product filings satisfying applicable
Uniform Standards; provided, it is not intended for the Commission to be the exclusive entity for
receipt and review of insurance product filings. Nothing herein shall prohibit any Insurer from
filing its product in any State wherein the Insurer is licensed to conduct the business of insurance;
and any such filing shall be subject to the laws of the State where filed.
2. The Commission is a body corporate and politic, and an instrumentality of the Compacting
States.
3. The Commission is solely responsible for its liabilities except as otherwise specifically
provided in this Compact.
4. Venue is proper and judicial proceedings by or against the Commission shall be brought
solely and exclusively in a Court of competent jurisdiction where the principal office of the
Commission is located.

Article IV. Powers of the Commission

The Commission shall have the following powers:
1. To promulgate Rules, pursuant to Article VII of this Compact, which shall have the force
and effect of law and shall be binding in the Compacting States to the extent and in the manner
provided in this Compact;
2. To exercise its rulemaking authority and establish reasonable Uniform Standards for
Products covered under the Compact, and Advertisement related thereto, which shall have the
force and effect of law and shall be binding in the Compacting States, but only for those Products
filed with the Commission, provided, that a Compacting State shall have the right to opt out of
such Uniform Standard pursuant to Article VII, to the extent and in the manner provided in this
Compact, and, provided further, that any Uniform Standard established by the Commission for
long-term care insurance products may provide the same or greater protections for consumers
as, but shall not provide less than, those protections set forth in the National Association of
Insurance Commissioners' Long-Term Care Insurance Model Act and Long-Term Care Insurance
Model Regulation, respectively, adopted as of 2001. The Commission shall consider whether any
subsequent amendments to the NAIC Long-Term Care Insurance Model Act or Long-Term Care
Insurance Model Regulation adopted by the NAIC require amending of the Uniform Standards
established by the Commission for long-term care insurance products;
3. To receive and review in an expeditious manner Products filed with the Commission, and
rate filings for disability income and long-term care insurance Products, and give approval of
those Products and rate filings that satisfy the applicable Uniform Standard, where such approval
shall have the force and effect of law and be binding on the Compacting States to the extent
and in the manner provided in the Compact;
4. To receive and review in an expeditious manner Advertisement relating to long-term care
insurance products for which Uniform Standards have been adopted by the Commission, and give
approval to all Advertisement that satisfies the applicable Uniform Standard. For any product
covered under this Compact, other than long-term care insurance products, the Commission
shall have the authority to require an insurer to submit all or any part of its Advertisement with
respect to that product for review or approval prior to use, if the Commission determines that
the nature of the product is such that an Advertisement of the product could have the capacity or
tendency to mislead the public. The actions of the Commission as provided in this section shall
have the force and effect of law and shall be binding in the Compacting States to the extent
and in the manner provided in the Compact;
5. To exercise its rulemaking authority and designate Products and Advertisement that may
be subject to a self-certification process without the need for prior approval by the Commission;
6. To promulgate Operating Procedures, pursuant to Article VII of this Compact, which shall
be binding in the Compacting States to the extent and in the manner provided in this compact;
7. To bring and prosecute legal proceedings or actions in its name as the Commission;
provided, that the standing of any state insurance department to sue or be sued under applicable
law shall not be affected;
8. To issue subpoenas requiring the attendance and testimony of witnesses and the production
of evidence;
9. To establish and maintain offices;
10. To purchase and maintain insurance and bonds;
11. To borrow, accept or contract for services of personnel, including, but not limited to,
employees of a Compacting State;
12. To hire employees, professionals or specialists, and elect or appoint officers, and to
fix their compensation, define their duties and give them appropriate authority to carry out the
purposes of the Compact, and determine their qualifications; and to establish the Commission's
personnel policies and programs relating to, among other things, conflicts of interest, rates of
compensation and qualifications of personnel;
13. To accept any and all appropriate donations and grants of money, equipment, supplies,
materials and services, and to receive, utilize and dispose of the same; provided that at all times
the Commission shall strive to avoid any appearance of impropriety;
14. To lease, purchase, accept appropriate gifts or donations of, or otherwise to own, hold,
improve or use, any property, real, personal or mixed; provided that at all times the Commission
shall strive to avoid any appearance of impropriety;
15. To sell, convey, mortgage, pledge, lease, exchange, abandon or otherwise dispose of any
property, real, personal or mixed;
16. To remit filing fees to Compacting States as may be set forth in the Bylaws, Rules
or Operating Procedures;
17. To enforce compliance by Compacting States with Rules, Uniform Standards, Operating
Procedures and Bylaws;
18. To provide for dispute resolution among Compacting States;
19. To advise Compacting States on issues relating to Insurers domiciled or doing business in
Noncompacting jurisdictions, consistent with the purposes of this Compact;
20. To provide advice and training to those personnel in state insurance departments
responsible for product review, and to be a resource for state insurance departments;
21. To establish a budget and make expenditures;
22. To borrow money;
23. To appoint committees, including advisory committees comprising Members, state
insurance regulators, state legislators or their representatives, insurance industry and consumer
representatives, and such other interested persons as may be designated in the Bylaws;
24. To provide and receive information from, and to cooperate with law enforcement
agencies;
25. To adopt and use a corporate seal; and
26. To perform such other functions as may be necessary or appropriate to achieve the
purposes of this Compact consistent with the state regulation of the business of insurance.

Article V. Organization of the Commission

1. Membership, Voting and Bylaws
a. Each Compacting State shall have and be limited to one Member. Each Member shall
be qualified to serve in that capacity pursuant to applicable law of the Compacting State. Any
Member may be removed or suspended from office as provided by the law of the State from
which he or she shall be appointed. Any vacancy occurring in the Commission shall be filled in
accordance with the laws of the Compacting State wherein the vacancy exists. Nothing herein
shall be construed to affect the manner in which a Compacting State determines the election or
appointment and qualification of its own Commissioner.
b. Each Member shall be entitled to one vote and shall have an opportunity to participate in
the governance of the Commission in accordance with the Bylaws. Notwithstanding any provision
herein to the contrary, no action of the Commission with respect to the promulgation of a Uniform
Standard shall be effective unless two-thirds of the Members vote in favor thereof.
c. The Commission shall, by a majority of the Members, prescribe Bylaws to govern its
conduct as may be necessary or appropriate to carry out the purposes, and exercise the powers, of
the Compact, including, but not limited to:
i. Establishing the fiscal year of the Commission;
ii. Providing reasonable procedures for appointing and electing members, as well as holding
meetings, of the Management Committee;
iii. Providing reasonable standards and procedures: (i) for the establishment and meetings
of other committees, and (ii) governing any general or specific delegation of any authority or
function of the Commission;
iv. Providing reasonable procedures for calling and conducting meetings of the Commission
that consist of a majority of Commission members, ensuring reasonable advance notice of each
such meeting and providing for the right of citizens to attend each such meeting with enumerated
exceptions designed to protect the public's interest, the privacy of individuals, and insurers'
proprietary information, including trade secrets. The Commission may meet in camera only
after a majority of the entire membership votes to close a meeting en toto or in part. As soon as
practicable, the Commission must make public (i) a copy of the vote to close the meeting revealing
the vote of each Member with no proxy votes allowed, and (ii) votes taken during such meeting;
v. Establishing the titles, duties and authority and reasonable procedures for the election
of the officers of the Commission;
vi. Providing reasonable standards and procedures for the establishment of the personnel
policies and programs of the Commission. Notwithstanding any civil service or other similar
laws of any Compacting State, the Bylaws shall exclusively govern the personnel policies and
programs of the Commission;
vii. Promulgating a code of ethics to address permissible and prohibited activities of
commission members and employees; and
viii. Providing a mechanism for winding up the operations of the Commission and the
equitable disposition of any surplus funds that may exist after the termination of the Compact
after the payment and/or reserving of all of its debts and obligations.
d. The Commission shall publish its bylaws in a convenient form and file a copy thereof
and a copy of any amendment thereto, with the appropriate agency or officer in each of the
Compacting States.
2. Management Committee, Officers and Personnel
a. A Management Committee comprising no more than 14 members shall be established
as follows:
i. One member from each of the six Compacting States with the largest premium volume for
individual and group annuities, life, disability income and long-term care insurance products,
determined from the records of the NAIC for the prior year;
ii. Four members from those Compacting States with at least two percent of the market based
on the premium volume described above, other than the six Compacting States with the largest
premium volume, selected on a rotating basis as provided in the Bylaws; and
iii. Four members from those Compacting States with less than two percent of the market,
based on the premium volume described above, with one selected from each of the four zone
regions of the NAIC as provided in the Bylaws.
b. The Management Committee shall have such authority and duties as may be set forth
in the Bylaws, including but not limited to:
i. Managing the affairs of the Commission in a manner consistent with the Bylaws and
purposes of the Commission;
ii. Establishing and overseeing an organizational structure within, and appropriate procedures
for, the Commission to provide for the creation of Uniform Standards and other Rules, receipt
and review of product filings, administrative and technical support functions, review of decisions
regarding the disapproval of a product filing, and the review of elections made by a Compacting
State to opt out of a Uniform Standard; provided that a Uniform Standard shall not be submitted
to the Compacting States for adoption unless approved by two-thirds of the members of the
Management Committee;
iii. Overseeing the offices of the Commission; and
iv. Planning, implementing, and coordinating communications and activities with other state,
federal and local government organizations in order to advance the goals of the Commission.
c. The Commission shall elect annually officers from the Management Committee, with each
having such authority and duties, as may be specified in the Bylaws.
d. The Management Committee may, subject to the approval of the Commission, appoint
or retain an executive director for such period, upon such terms and conditions and for such
compensation as the Commission may deem appropriate. The executive director shall serve as
secretary to the Commission, but shall not be a Member of the Commission. The executive
director shall hire and supervise such other staff as may be authorized by the Commission.
3. Legislative and Advisory Committees
a. A legislative committee comprising state legislators or their designees shall be established
to monitor the operations of, and make recommendations to, the Commission, including the
Management Committee; provided that the manner of selection and term of any legislative
committee member shall be as set forth in the Bylaws. Prior to the adoption by the Commission
of any Uniform Standard, revision to the Bylaws, annual budget or other significant matter as
may be provided in the Bylaws, the Management Committee shall consult with and report to
the legislative committee.
b. The Commission shall establish two advisory committees, one of which shall comprise
consumer representatives independent of the insurance industry, and the other comprising
insurance industry representatives.
c. The Commission may establish additional advisory committees as its Bylaws may provide
for the carrying out of its functions.
4. Corporate Records of the Commission
The Commission shall maintain its corporate books and records in accordance with the
Bylaws.
5. Qualified Immunity, Defense, and Indemnification
a. The Members, officers, executive director, employees, and representatives of the
Commission shall be immune from suit and liability, either personally or in their official capacity,
for any claim for damage to or loss of property or personal injury or other civil liability caused
by or arising out of any actual or alleged act, error or omission that occurred, or that the person
against whom the claim is made had a reasonable basis for believing occurred within the scope of
Commission employment, duties or responsibilities; provided, that nothing in this paragraph shall
be construed to protect any such person from suit and/or liability for any damage, loss, injury or
liability caused by the intentional or willful and wanton misconduct of that person.
b. The Commission shall defend any Member, officer, executive director, employee, or
representative of the Commission in any civil action seeking to impose liability arising out of
any actual or alleged act, error, or omission that occurred within the scope of Commission
employment, duties, or responsibilities, or that the person against whom the claim is made had a
reasonable basis for believing occurred within the scope of Commission employment, duties,
or responsibilities; provided, that nothing herein shall be construed to prohibit that person from
retaining his or her own counsel; and provided further, that the actual or alleged act, error, or
omission did not result from that person's intentional or willful and wanton misconduct.
c. The Commission shall indemnify and hold harmless any Member, officer, executive
director, employee, or representative of the Commission for the amount of any settlement or
judgment obtained against that person arising out of any actual or alleged act, error, or omission
that occurred within the scope of Commission employment, duties, or responsibilities, or that
such person had a reasonable basis for believing occurred within the scope of Commission
employment, duties, or responsibilities, provided, that the actual or alleged act, error, or omission
did not result from the intentional or willful and wanton misconduct of that person.

Article VI. Meetings and Acts of the Commission

1. The Commission shall meet and take such actions as are consistent with the provisions of
this Compact and the Bylaws.
2. Each Member of the Commission shall have the right and power to cast a vote to which that
Compacting State is entitled and to participate in the business and affairs of the Commission. A
Member shall vote in person or by such other means as provided in the Bylaws. The Bylaws may
provide for Members' participation in meetings by telephone or other means of communication.
3. The Commission shall meet at least once during each calendar year. Additional meeting
shall be held as set forth in the Bylaws.

Article VII. Rules and Operating Procedures: Rulemaking Functions

of the Commission and Opting Out of Uniform Standards

1. Rulemaking Authority. The Commission shall promulgate reasonable Rules, including
Uniform Standards, and Operating Procedures in order to effectively and efficiently achieve
the purposes of this Compact. Notwithstanding the foregoing, in the event the Commission
exercises its rulemaking authority in a manner that is beyond the scope of the purposes of this
Act, or the powers granted hereunder, then such an action by the Commission shall be invalid
and have no force and effect.
2. Rulemaking Procedure. Rules and Operating Procedures shall be made pursuant to a
rulemaking process that conforms to the Model State Administrative Procedure Act of 1981 as
amended, as may be appropriate to the operations of the Commission. Before the Commission
adopts a Uniform Standard, the Commission shall give written notice to the relevant state
legislative committee(s) in each Compacting State responsible for insurance issues of its intention
to adopt the Uniform Standard. The Commission in adopting a Uniform Standard shall consider
fully all submitted materials and issue a concise explanation of its decision.
3. Effective Date and Opt Out of a Uniform Standard. A Uniform Standard shall become
effective 90 days after its promulgation by the Commission or such later date as the Commission
may determine; provided, however, that a Compacting State may opt out of a Uniform Standard
as provided in this Article. "Opt out" shall be defined as any action by a Compacting State to
decline to adopt or participate in a promulgated Uniform Standard. All other Rules and Operating
Procedures, and amendments thereto, shall become effective as of the date specified in each
Rule, Operating Procedure, or amendment.
4. Opt Out Procedure. A Compacting State may opt out of a Uniform Standard, either by
legislation or regulation duly promulgated by the Insurance Department under the Compacting
State's Administrative Procedure Act. If a Compacting State elects to opt out of a Uniform
Standard by regulation, it must (a) give written notice to the Commission no later than ten
business days after the Uniform Standard is promulgated, or at the time the State becomes a
Compacting State and (b) find that the Uniform Standard does not provide reasonable protections
to the citizens of the State, given the conditions in the State. The Commissioner shall make
specific findings of fact and conclusions of law, based on a preponderance of the evidence,
detailing the conditions in the State which warrant a departure from the Uniform Standard and
determining that the Uniform Standard would not reasonably protect the citizens of the State. The
Commissioner must consider and balance the following factors and find that the conditions in the
State and needs of the citizens of the State outweigh: (i) the intent of the legislature to participate
in, and the benefits of, an interstate agreement to establish national uniform consumer protections
for the Products subject to this Act; and (ii) the presumption that a Uniform Standard adopted by
the Commission provides reasonable protections to consumers of the relevant Product.
Notwithstanding the foregoing, a Compacting State may, at the time of its enactment of this
Compact, prospectively opt out of all Uniform Standards involving long-term care insurance
products by expressly providing for such opt out in the enacted Compact, and such an opt out
shall not be treated as a material variance in the offer or acceptance of any State to participate in
this Compact. Such an opt out shall be effective at the time of enactment of this Compact by the
Compacting State and shall apply to all existing Uniform Standards involving long-term care
insurance products and those subsequently promulgated.
5. Effect of Opt Out. If a Compacting State elects to opt out of a Uniform Standard, the
Uniform Standard shall remain applicable in the Compacting State electing to opt out until such
time the opt out legislation is enacted into law or the regulation opting out becomes effective.
Once the opt out of a Uniform Standard by a Compacting State becomes effective as
provided under the laws of that State, the Uniform Standard shall have no further force and effect
in that State unless and until the legislation or regulation implementing the opt out is repealed or
otherwise becomes ineffective under the laws of the State. If a Compacting State opts out of a
Uniform Standard after the Uniform Standard has been made effective in that State, the opt out
shall have the same prospective effect as provided under Article XIV for withdrawals.
6. Stay of Uniform Standard. If a Compacting State has formally initiated the process of
opting out of a Uniform Standard by regulation, and while the regulatory opt out is pending,
the Compacting State may petition the Commission, at least 15 days before the effective date
of the Uniform Standard, to stay the effectiveness of the Uniform Standard in that State. The
Commission may grant a stay if it determines the regulatory opt out is being pursued in a
reasonable manner and there is a likelihood of success. If a stay is granted or extended by the
Commission, the stay or extension thereof may postpone the effective date by up to 90 days,
unless affirmatively extended by the Commission; provided, a stay may not be permitted to
remain in effect for more than one year unless the Compacting State can show extraordinary
circumstances which warrant a continuance of the stay, including, but not limited to, the existence
of a legal challenge which prevents the Compacting State from opting out. A stay may be
terminated by the Commission upon notice that the rulemaking process has been terminated.
7. Not later than 30 days after a Rule or Operating Procedure is promulgated, any person
may file a petition for judicial review of the Rule or Operating Procedure; provided, that the
filing of such a petition shall not stay or otherwise prevent the Rule or Operating Procedure
from becoming effective unless the court finds that the petitioner has a substantial likelihood
of success. The court shall give deference to the actions of the Commission consistent with
applicable law and shall not find the Rule or Operating Procedure to be unlawful if the Rule or
Operating Procedure represents a reasonable exercise of the Commission's authority.

Article VIII. Commission Records and Enforcement

1. The Commission shall promulgate Rules establishing conditions and procedures for public
inspection and copying of its information and official records, except such information and
records involving the privacy of individuals and insurers' trade secrets. The Commission may
promulgate additional Rules under which it may make available to federal and state agencies,
including law enforcement agencies, records and information otherwise exempt from disclosure,
and may enter into agreements with such agencies to receive or exchange information or records
subject to nondisclosure and confidentiality provisions.
2. Except as to privileged records, data and information, the laws of any Compacting
State pertaining to confidentiality or nondisclosure shall not relieve any Compacting State
Commissioner of the duty to disclose any relevant records, data or information to the Commission;
provided, that disclosure to the Commission shall not be deemed to waive or otherwise affect any
confidentiality requirement; and further provided, that, except as otherwise expressly provided
in this Act, the Commission shall not be subject to the Compacting State's laws pertaining to
confidentiality and nondisclosure with respect to records, data and information in its possession.
Confidential information of the Commission shall remain confidential after such information
is provided to any Commissioner.
3. The Commission shall monitor Compacting States for compliance with duly adopted
Bylaws, Rules, including Uniform Standards, and Operating Procedures. The Commission shall
notify any noncomplying Compacting State in writing of its noncompliance with Commission
Bylaws, Rules or Operating Procedures. If a noncomplying Compacting State fails to remedy its
noncompliance within the time specified in the notice of noncompliance, the Compacting State
shall be deemed to be in default as set forth in Article XIV.
4. The Commissioner of any State in which an Insurer is authorized to do business, or is
conducting the business of insurance, shall continue to exercise his or her authority to oversee
the market regulation of the activities of the Insurer in accordance with the provisions of the
State's law. The Commissioner's enforcement of compliance with the Compact is governed by
the following provisions:
a. With respect to the Commissioner's market regulation of a Product or Advertisement that
is approved or certified to the Commission, the content of the Product or Advertisement shall not
constitute a violation of the provisions, standards or requirements of the Compact except upon a
final order of the Commission, issued at the request of a Commissioner after prior notice to the
Insurer and an opportunity for hearing before the Commission.
b. Before a Commissioner may bring an action for violation of any provision, standard or
requirement of the Compact relating to the content of an Advertisement not approved or certified
to the Commission, the Commission, or an authorized Commission officer or employee, must
authorize the action. However, authorization pursuant to this paragraph does not require notice
to the Insurer, opportunity for hearing or disclosure of requests for authorization or records
of the Commission's action on such requests.

Article IX. Dispute Resolution

The Commission shall attempt, upon the request of a Member, to resolve any disputes
or other issues that are subject to this Compact and which may arise between two or more
Compacting States, or between Compacting States and Noncompacting States, and the
Commission shall promulgate an Operating Procedure providing for resolution of such disputes.

Article X. Product Filing and Approval

1. Insurers and Third Party Filers seeking to have a Product approved by the Commission
shall file the Product with, and pay applicable filing fees to, the Commission. Nothing in this Act
shall be construed to restrict or otherwise prevent an insurer from filing its Product with the
insurance department in any State wherein the insurer is licensed to conduct the business of
insurance, and such filing shall be subject to the laws of the States where filed.
2. The Commission shall establish appropriate filing and review processes and procedures
pursuant to Commission Rules and Operating Procedures. Notwithstanding any provision herein
to the contrary, the Commission shall promulgate Rules to establish conditions and procedures
under which the Commission will provide public access to Product filing information. In
establishing such Rules, the Commission shall consider the interests of the public in having access
to such information, as well as protection of personal medical and financial information and trade
secrets, that may be contained in a Product filing or supporting information.
3. Any Product approved by the Commission may be sold or otherwise issued in those
Compacting States for which the Insurer is legally authorized to do business.

Article XI. Review of Commission Decisions Regarding Filings

1. Not later than 30 days after the Commission has given notice of a disapproved Product
or Advertisement filed with the Commission, the Insurer or Third Party Filer whose filing was
disapproved may appeal the determination to a review panel appointed by the Commission. The
Commission shall promulgate Rules to establish procedures for appointing such review panels
and provide for notice and hearing. An allegation that the Commission, in disapproving a Product
or Advertisement filed with the Commission, acted arbitrarily, capriciously, or in a manner that is
an abuse of discretion or otherwise not in accordance with the law, is subject to judicial review in
accordance with Article III, Section 4.
2. The Commission shall have authority to monitor, review and reconsider Products and
Advertisement subsequent to their filing or approval upon a finding that the product does not meet
the relevant Uniform Standard. Where appropriate, the Commission may withdraw or modify its
approval after proper notice and hearing, subject to the appeal process in Section 1 above.

Article XII. Finance

1. The Commission shall pay or provide for the payment of the reasonable expenses of its
establishment and organization. To fund the cost of its initial operations, the Commission may
accept contributions and other forms of funding from the National Association of Insurance
Commissioners, Compacting States, and other sources. Contributions and other forms of funding
from other sources shall be of such a nature that the independence of the Commission concerning
the performance of its duties shall not be compromised.
2. The Commission shall collect a filing fee from each Insurer and Third Party Filer filing a
product with the Commission to cover the cost of the operations and activities of the Commission
and its staff in a total amount sufficient to cover the Commission's annual budget.
3. The Commission's budget for a fiscal year shall not be approved until it has been subject
to notice and comment as set forth in Article VII of this Compact.
4. The Commission shall be exempt from all taxation in and by the Compacting states.
5. The Commission shall not pledge the credit of any Compacting State, except by and with
the appropriate legal authority of that Compacting State.
6. The Commission shall keep complete and accurate accounts of all its internal receipts,
including grants and donations, and disbursements of all funds under its control. The internal
financial accounts of the Commission shall be subject to the accounting procedures established
under its Bylaws. The financial accounts and reports including the system of internal controls
and procedures of the Commission shall be audited annually by an independent certified public
accountant. Upon the determination of the Commission, but no less frequently than every three
years, the review of the independent auditor shall include a management and performance
audit of the Commission. The Commission shall make an Annual Report to the Governor and
legislature of the Compacting States, which shall include a report of the independent audit. The
Commission's internal accounts shall not be confidential and such materials may be shared with
the Commissioner of any Compacting State upon request provided, however, that any work
papers related to any internal or independent audit and any information regarding the privacy of
individuals and insurers' proprietary information, including trade secrets, shall remain confidential.
7. No Compacting State shall have any claim to or ownership of any property held by or
vested in the Commission or to any Commission funds held pursuant to the provisions of this
Compact.

Article XIII. Compacting States, Effective Date and Amendment

1. Any State is eligible to become a Compacting State.
2. The Compact shall become effective and binding upon legislative enactment of the
Compact into law by two Compacting States; provided, the Commission shall become effective
for purposes of adopting Uniform Standards for, reviewing, and giving approval or disapproval
of, Products filed with the Commission that satisfy applicable Uniform Standards only after 26
States are Compacting States or, alternatively, by States representing greater than 40 percent of
the premium volume for life insurance, annuity, disability income and long-term care insurance
products, based on records of the NAIC for the prior year. Thereafter, it shall become effective and
binding as to any other Compacting State upon enactment of the Compact into law by that State.
3. Amendments to the Compact may be proposed by the Commission for enactment by the
Compacting States. No amendment shall become effective and binding upon the Commission and
the Compacting States unless and until all Compacting States enact the amendment into law.

Article XIV. Withdrawal, Default and Termination

1. Withdrawal
a. Once effective, the Compact shall continue in force and remain binding upon each and
every Compacting State; provided, that a Compacting State may withdraw from the Compact
("Withdrawing State") by enacting a statute specifically repealing the statute which enacted
the Compact into law.
b. The effective date of withdrawal is the effective date of the repealing statute. However, the
withdrawal shall not apply to any product filings approved or self-certified, or any Advertisement
of such products, on the date the repealing statute becomes effective, except by mutual
agreement of the Commission and the Withdrawing State unless the approval is rescinded by the
Withdrawing State as provided in Paragraph e of this section.
c. The Commissioner of the Withdrawing State shall immediately notify the Management
Committee in writing upon the introduction of legislation repealing this Compact in the
Withdrawing State.
d. The Commission shall notify the other Compacting States of the introduction of such
legislation within ten days after its receipt of notice thereof.
e. The Withdrawing State is responsible for all obligations, duties and liabilities incurred
through the effective date of withdrawal, including any obligations, the performance of which
extend beyond the effective date of withdrawal, except to the extent those obligations may have
been released or relinquished by mutual agreement of the Commission and the Withdrawing
State. The Commission's approval of Products and Advertisement prior to the effective date of
withdrawal shall continue to be effective and be given full force and effect in the Withdrawing
State, unless formally rescinded by the Withdrawing State in the same manner as provided by
the laws of the Withdrawing State for the prospective disapproval of products or advertisement
previously approved under state law.
f. Reinstatement following withdrawal of any Compacting State shall occur upon the
effective date of the Withdrawing State reenacting the Compact.
2. Default
a. If the Commission determines that any Compacting State has at any time defaulted
("Defaulting State") in the performance of any of its obligations or responsibilities under this
Compact, the Bylaws or duly promulgated Rules or Operating Procedures, then, after notice and
hearing as set forth in the Bylaws, all rights, privileges and benefits conferred by this Compact
on the Defaulting State shall be suspended from the effective date of default as fixed by the
Commission. The grounds for default include, but are not limited to, failure of a Compacting State
to perform its obligations or responsibilities, and any other grounds designated in Commission
Rules. The Commission shall immediately notify the Defaulting State in writing of the Defaulting
State's suspension pending a cure of the default. The Commission shall stipulate the conditions
and the time period within which the Defaulting State must cure its default. If the Defaulting State
fails to cure the default within the time period specified by the Commission, the Defaulting State
shall be terminated from the Compact and all rights, privileges and benefits conferred by this
Compact shall be terminated from the effective date of termination.
b. Product approvals by the Commission or product self-certifications, or any Advertisement
in connection with such product, that are in force on the effective date of termination shall remain
in force in the Defaulting State in the same manner as if the Defaulting State had withdrawn
voluntarily pursuant to Section 1 of this article.
c. Reinstatement following termination of any Compacting State requires a reenactment
of the Compact.
3. Dissolution of Compact
a. The Compact dissolves effective upon the date of the withdrawal or default of the
Compacting State which reduces membership in the Compact to one Compacting State.
b. Upon the dissolution of this Compact, the Compact becomes null and void and shall be of
no further force or effect, and the business and affairs of the Commission shall be wound up and
any surplus funds shall be distributed in accordance with the Bylaws.

Article XV. Severability and Construction

1. The provisions of this Compact shall be severable; and if any phrase, clause, sentence, or
provision is deemed unenforceable, the remaining provisions of the Compact shall be enforceable.
2. The provisions of this Compact shall be liberally construed to effectuate its purposes.

Article XVI. Binding Effect of Compact and Other Laws

1. Other Laws
a. Nothing herein prevents the enforcement of any other law of a Compacting State, except
as provided in Paragraph b of this section.
b. For any Product approved or certified to the Commission, the Rules, Uniform Standards,
and any other requirements of the Commission shall constitute the exclusive provisions applicable
to the content, approval, and certification of such Products. For Advertisement that is subject to
the Commission's authority, any Rule, Uniform Standard, or other requirement of the Commission
which governs the content of the Advertisement shall constitute the exclusive provision that a
Commissioner may apply to the content of the Advertisement. Notwithstanding the foregoing, no
action taken by the Commission shall abrogate or restrict: (i) the access of any person to state
courts; (ii) remedies available under state law related to breach of contract, tort, or other laws not
specifically directed to the content of the Product; (iii) state law relating to the construction of
insurance contracts; or (iv) the authority of the attorney general of the state, including but not
limited to maintaining any actions or proceedings, as authorized by law.
c. All insurance products filed with individual States shall be subject to the laws of those
States.
2. Binding Effect of this Compact
a. All lawful actions of the Commission, including all Rules and Operating Procedures
promulgated by the Commission, are binding upon the Compacting States.
b. All agreements between the Commission and the Compacting States are binding in
accordance with their terms.
c. Upon the request of a party to a conflict over the meaning or interpretation of Commission
actions, and upon a majority vote of the Compacting States, the Commission may issue advisory
opinions regarding the meaning or interpretation in dispute.
d. In the event any provision of this Compact exceeds the constitutional limits imposed on
the legislature of any Compacting State, the obligations, duties, powers or jurisdiction sought to
be conferred by that provision upon the Commission shall be ineffective as to that Compacting
State, and those obligations, duties, powers, or jurisdiction shall remain in the Compacting State
and shall be exercised by the agency thereof to which those obligations, duties, powers, or
jurisdiction are delegated by law in effect at the time this Compact becomes effective.
    Subd. 2. Commission representative. The commissioner of commerce is the representative
of this state to the commission.
History: 2006 c 255 s 3

60A.991 INTERSTATE INSURANCE PRODUCT REGULATION COMPACT OPT OUT
ADMINISTRATION.
    Subdivision 1. Access to courts. The commissioner must opt out by regulation of any
uniform standard that permits a product to deny a consumer's access to the courts to resolve a
dispute related to the product. In addition to opting out, the commissioner must petition the
commission for a stay of the effective date of the standard.
    Subd. 2. Deference by courts. A decision by the commissioner to opt out by regulation shall
be given deference by the courts.
History: 2006 c 255 s 4