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S1030.......................................by COMMERCE AND HUMAN RESOURCES INSURERS - Amends the Idaho Life and Health Insurance Guaranty Association Act to revise application of the act; and to revise provisions applicable to assessments by the board of directors. 01/19 Senate intro - 1st rdg - to printing 01/20 Rpt prt - to Com/HuRes 02/04 Rpt out - rec d/p - to 2nd rdg 02/07 2nd rdg - to 3rd rdg 02/10 To 14th Ord 02/16 Rpt out w/o amen - to 3rd rdg 02/21 3rd rdg - PASSED - 31-0-4 AYES -- Andreason, Broadsword, Bunderson, Burkett, Burtenshaw, Cameron, Coiner, Corder, Darrington, Davis, Gannon, Geddes, Hill, Kelly, Keough, Langhorst, Little, Lodge, Malepeai, Marley, McGee, McKenzie, Noble, Pearce, Richardson, Schroeder, Stegner, Stennett, Sweet, Werk, Williams NAYS -- None Absent and excused -- Brandt, Compton, Goedde, Jorgenson Floor Sponsor - Stegner Title apvd - to House 02/22 House intro - 1st rdg - to Bus 03/04 Rpt out - rec d/p - to 2nd rdg 03/07 2nd rdg - to 3rd rdg 03/15 3rd rdg - PASSED - 67-0-3 AYES -- Anderson, Andrus, Barraclough, Barrett, Bastian, Bayer, Bedke, Bell, Bilbao, Black, Block, Boe, Bolz, Bradford, Cannon, Chadderdon, Clark, Collins, Crow, Deal, Denney, Edmunson, Ellsworth, Field(18), Field(23), Garrett, Hart(Jacobson), Harwood, Henbest, Henderson, Jaquet, Jones, Kemp, Lake, LeFavour, Loertscher, Martinez, Mathews, McGeachin, McKague, Miller, Mitchell, Moyle, Nielsen, Nonini, Pasley-Stuart, Pence, Ring, Ringo, Rusche, Rydalch, Sali, Sayler, Schaefer, Shepherd(2), Shepherd(8), Shirley, Skippen, Smith(30), Smith(24), Smylie, Snodgrass, Stevenson, Trail, Wills, Wood, Mr. Speaker NAYS -- None Absent and excused -- Eskridge, Raybould, Roberts Floor Sponsor - Nonini Title apvd - to Senate 03/16 To enrol 03/17 Rpt enrol - Pres signed 03/18 Sp signed 03/21 To Governor 03/23 Governor signed Session Law Chapter 108 Effective: 07/01/05
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]] Fifty-eighth Legislature First Regular Session - 2005IN THE SENATE SENATE BILL NO. 1030 BY COMMERCE AND HUMAN RESOURCES COMMITTEE 1 AN ACT 2 RELATING TO THE IDAHO LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION ACT; 3 AMENDING SECTION 41-4303, IDAHO CODE, TO REVISE APPLICATION OF THE CHAPTER 4 AND TO PROVIDE CORRECT TERMINOLOGY; AND AMENDING SECTION 41-4309, IDAHO 5 CODE, TO REVISE PROVISIONS APPLICABLE TO ASSESSMENTS BY THE BOARD OF 6 DIRECTORS AND TO PROVIDE CORRECT TERMINOLOGY. 7 Be It Enacted by the Legislature of the State of Idaho: 8 SECTION 1. That Section 41-4303, Idaho Code, be, and the same is hereby 9 amended to read as follows: 10 41-4303. APPLICATION OFACTCHAPTER. (1) Thisactchapter shall apply to 11 direct life insurance policies, contractual obligations of managed care plans 12 to members of such plans only, disability insurance policies, annuity con- 13 tracts, and contracts supplemental to life and disability insurance policies, 14 annuity contracts, and contracts supplemental to life and disability insurance 15 policies and annuity contracts issued by persons licensed to transact insur- 16 ance in this state at any time. Covered policies shall include annuities owned 17 by a trust for a money purchase pension plan, profit sharing plan, 401(k) 18 thrift plan or any other defined contribution plan, and annuities owned by a 19 custodian of an individual retirement account. 20 (2) Thisactchapter shall not apply to: 21 (a) That portion or part of a variable life insurance or variable annuity 22 contract not guaranteed by an insurer; 23 (b) That portion or part of any policy or contract under which the risk 24 is borne by the policyholder; 25 (c) Any policy or contract or part thereof assumed by the impaired or 26 insolvent insurer under a contract of reinsurance, other than reinsurance 27 for which assumption certificates have been issued; 28 (d) Any such policy or contract issued by a reciprocal insurer, mutual 29 benefit association, fraternal benefit society, hospital and medical ser- 30 vice corporation, limited managed care plan, or self-funded health care 31 plan;or32 (e) Any unallocated annuity contract, including an annuity owned by a 33 defined benefit pension plan or trust; 34 (f) A portion of a policy or contract to the extent that the rate of 35 interest on which it is based, or the interest rate, crediting rate or 36 similar factor determined by use of an index or other external reference 37 stated in the policy or contract employed in calculating returns or 38 exchanges in value: 39 (i) Averaged over the period of four (4) years prior to the date on 40 which the member insurer becomes an impaired or insolvent insurer 41 under this chapter, whichever is earlier, exceeds the rate of inter- 42 est determined by subtracting two (2) percentage points from Moody's 43 Corporate Bond Yield Average averaged for that same four (4) year 2 1 period or for such lesser period if the policy or contract was issued 2 less than four (4) years before the member insurer becomes an 3 impaired or insolvent insurer under this chapter, whichever is ear- 4 lier; and 5 (ii) On and after the date on which the member insurer becomes an 6 impaired or insolvent insurer under this chapter, whichever is ear- 7 lier, exceeds the rate of interest determined by subtracting three 8 (3) percentage points from Moody's Corporate Bond Yield Average as 9 most recently available. 10 (iii) For purposes of this section, "Moody's Corporate Bond Yield 11 Average" means the monthly average corporates as published by Moody's 12 Investors Service, Inc., or any successor thereto; or 13 (g) An obligation that does not arise under the express written terms of 14 the policy or contract issued by the insurer to the contract owner or 15 policyowner, including without limitation: 16 (i) Claims based on marketing materials; 17 (ii) Claims based on side letters, riders or other documents that 18 were issued by the insurer without meeting applicable policy form 19 filing or approval requirements; 20 (iii) Misrepresentations of or regarding policy benefits; 21 (iv) Extra-contractual claims; or 22 (v) A claim for penalties or consequential or incidental damages. 23 SECTION 2. That Section 41-4309, Idaho Code, be, and the same is hereby 24 amended to read as follows: 25 41-4309. ASSESSMENTS. (1) For the purpose of providing the funds neces- 26 sary to carry out the powers and duties of the association, the board of 27 directors shall assess the member insurers, separately for each account, at 28 such time and for such amounts as the board finds necessary. Assessments shall 29 be due not less than thirty (30) days after prior written notice to the member 30 insurers and shall accrue interest at eight percent (8%) per annum on and 31 after the due date. 32 (2) There shall bethreetwo (32) classes of assessments, as follows: 33 (a) Class A assessments shall bemadeauthorized and called for the pur- 34 pose of meeting administrative costs and other general expenses.and exam-35inations conducted under the authority of subsection (5) of section3641-4312 and of section 41-4315, Idaho CodeClass A assessments may be 37 authorized and called whether or not they are related to a particular 38 impaired or insolvent insurer. 39 (b) Class B assessments shall bemadeauthorized and called to the extent 40 necessary to carry out the powers and duties of the association under sec- 41 tion 41-4308, Idaho Code, with regard to an impaired or insolventdomestic42 insurer. 43(c) Class C assessments shall be made to the extent necessary to carry44out the powers and duties of the association under section 41-4308, Idaho45Code, with regard to an insolvent foreign or alien insurer.46 (3) (a) The amount of any class A assessment shall be determined by the 47 board and may bemadeauthorized and called on a non pro rata basis. Such 48 assessmentshallmay be credited against futureinsolvencyclass B assess- 49 ments. The amount of anyclass Bor Cassessment shall be allocated for 50 assessment purposes among the accountsin the proportion that the premiums51received by the impaired or insolvent insurer on the policies covered by52each account for the last calendar year preceding the assessment in which53the impaired or insolvent insurer received premiums bears to the premiums3 1received by such insurer for such calendar year on all covered policies2 pursuant to an allocation formula which may be based on the premiums or 3 reserves of the impaired or insolvent insurer or any other standard deemed 4 by the board in its sole discretion as being fair and reasonable under the 5 circumstances. 6 (b) ClassCB assessments against member insurers for each account shall 7 be in the proportion that the premiums received on business in this state 8 by each assessed member insurer on policies covered by each account for 9 the calendar year preceding the assessments bears to such premiums 10 received on business in this state for the calendar year preceding the 11 assessment by all assessed member insurers. 12 (c)Class B assessments for each account shall be made separately for13each state in which the impaired or insolvent domestic insurer was autho-14rized to transact insurance at any time, in the proportion that the pre-15miums received on business in such state by the impaired or insolvent16insurer on policies covered by such account for the last calendar year17preceding the assessment in which the impaired or insolvent insurer18received premiums bears to such premiums received in all such states for19such calendar year by the impaired or insolvent insurer. The assessments20against member insurers shall be in the proportion that the premiums21received on business in each such state by each assessed member insurer on22policies covered by each account for the calendar year preceding the23assessment bears to such premiums received on business in each state for24the calendar year preceding assessment by all assessed member insurers.25(d)Assessments for funds to meet the requirements of the association 26 with respect to an impaired or insolvent insurer shall not be made until 27 necessary to implement the purposes of thisactchapter. Classification of 28 assessments under subsection (2) of this section and computation of 29 assessments under this subsection shall be made with a reasonable degree 30 of accuracy, recognizing that exact determinations may not always be pos- 31 sible. 32 (ed) Notwithstanding any other provision of this section, a managed care 33 organization shall not be subject to a class Bor class Cassessment for 34 any domestic, foreign or alien insurer that is declared insolvent by any 35 court prior to July 1, 2000. 36 (4) The association may abate or defer, in whole or in part, the assess- 37 ment of a member insurer if, in the opinion of the board, payment of the 38 assessment would endanger the ability of the member insurer to fulfill its 39 contractual obligations. In the event an assessment against a member insurer 40 is abated, or deferred in whole or in part, the amount by which such assess- 41 ment is abated or deferred may be assessed against the other member insurers 42 in a manner consistent with the basis for assessments set forth in this sec- 43 tion. Once the conditions that caused a deferral have been removed or recti- 44 fied, the member insurer shall pay all assessments that were deferred pursuant 45 to a repayment plan approved by the association. 46 (5) The total of all class B assessmentsuponauthorized by the associa- 47 tion with respect to a member insurer for each account shall not inanyone 48 (1) calendar year exceed two percent (2%) of such insurer's premiums received 49 in this state during the calendar year preceding the assessment on the poli- 50 cies covered by the account. If the maximum assessment, together with the 51 other assets of the association ineitheran account, does not provide in any 52 one year ineitheran account an amount sufficient to carry out the responsi- 53 bilities of the association, the necessary additional funds shall be assessed 54 as soon thereafter as permitted by thisactchapter. 55 (6) The board may, by an equitable method as established in the plan of 4 1 operation, refund to member insurers, in proportion to the contribution of 2 each insurer to that account, the amount by which the assets of the account 3 exceed the amount the board finds is necessary to carry out during the coming 4 year the obligations of the association with regard to that account, including 5 assets accruing from net realized gains and income from investments. A reason- 6 able amount may be retained in any account to provide funds for the continuing 7 expenses of the association and for future losses.if refunds are impractical.8 (7) It shall be proper for any member insurer, in determining its premium 9 rates and policyowner dividends as to any kind of insurance within the scope 10 of thisactchapter, to consider the amount reasonably necessary to meet its 11 assessment obligations under thisactchapter. 12 (8) The association shall issue to each insurer paying an assessment 13 under thisactchapter, other than a class A assessment, a certificate of con- 14 tribution, in a form prescribed by the director, for the amount of the assess- 15 ment so paid. All outstanding certificates shall be of equal dignity and pri- 16 ority without reference to amounts or dates of issue. A certificate of contri- 17 bution may be shown by the insurer in its financial statement as an asset in 18 such form and for such amount, if any, and period of time as the director may 19 approve.
STATEMENT OF PURPOSE RS 14513 The purpose of this legislation is to limit the rate of interest for which the Guaranty Association is obligated to pay and thereby make Idaho's law consistent with most of the other states. The legislation will also clarify that the Guaranty Association is not obligated to pay claims outside the express written terms of the contract issued by the insolvent insurer, which is also consistent with laws passed in most of the other states. In addition, the legislation would combine Class B and Class C assessments and clarify the Guaranty Association's options with regard to assessments and refunds. FISCAL IMPACT Retention of funds to pay ongoing expenses instead of making refunds and then making further assessments later may have a very minor effect on the General Fund in the short run in an amount that is difficult to estimate. However, over the long run, there should be no negative impact on the General Fund of the State of Idaho as a result of this legislation. To the extent payments to claimants are reduced by the limitation on the interest rate, offsets to the premium tax will be reduced, thereby increasing the State General Fund. There will be no effect on other state funds or expenditures on upon local government funds. Contact Name: Woody Richards, Idaho Life and Health Guaranty Association Phone: 208 345-8371 STATEMENT OF PURPOSE/FISCAL NOTE S 1030