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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 - 2005
IN 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 OF ACT CHAPTER. (1) This act chapter 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) This act chapter 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; or
32 (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 be three two (32) classes of assessments, as follows:
33 (a) Class A assessments shall be made authorized and called for the pur-
34 pose of meeting administrative costs and other general expenses. and exam-
35 inations conducted under the authority of subsection (5) of section
36 41-4312 and of section 41-4315, Idaho Code Class 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 be made authorized 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 insolvent domestic
42 insurer.
43 (c) Class C assessments shall be made to the extent necessary to carry
44 out the powers and duties of the association under section 41-4308, Idaho
45 Code, 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 be made authorized and called on a non pro rata basis. Such
48 assessment shall may be credited against future insolvency class B assess-
49 ments. The amount of any class B or C assessment shall be allocated for
50 assessment purposes among the accounts in the proportion that the premiums
51 received by the impaired or insolvent insurer on the policies covered by
52 each account for the last calendar year preceding the assessment in which
53 the impaired or insolvent insurer received premiums bears to the premiums
3
1 received by such insurer for such calendar year on all covered policies
2 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) Class C B 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 for
13 each state in which the impaired or insolvent domestic insurer was autho-
14 rized to transact insurance at any time, in the proportion that the pre-
15 miums received on business in such state by the impaired or insolvent
16 insurer on policies covered by such account for the last calendar year
17 preceding the assessment in which the impaired or insolvent insurer
18 received premiums bears to such premiums received in all such states for
19 such calendar year by the impaired or insolvent insurer. The assessments
20 against member insurers shall be in the proportion that the premiums
21 received on business in each such state by each assessed member insurer on
22 policies covered by each account for the calendar year preceding the
23 assessment bears to such premiums received on business in each state for
24 the 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 this act chapter. 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 B or class C assessment 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 assessments upon authorized by the associa-
47 tion with respect to a member insurer for each account shall not in any one
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 in either an account, does not provide in any
52 one year in either an 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 this act chapter.
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 this act chapter, to consider the amount reasonably necessary to meet its
11 assessment obligations under this act chapter.
12 (8) The association shall issue to each insurer paying an assessment
13 under this act chapter, 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