Senate Bill No. 252–Committee on Commerce and Labor

 

February 26, 2001

____________

 

Referred to Committee on Commerce and Labor

 

SUMMARY—Makes changes concerning Nevada Life and Health Insurance Guaranty Association Act. (BDR 57‑683)

 

FISCAL NOTE:            Effect on Local Government: Yes.

                                    Effect on the State: No.

 

~

 

EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.

 

AN ACT relating to insurance; revising the Nevada Life and Health Insurance Guaranty Association Act to incorporate changes made in the model act; prohibiting certain acts; providing a penalty; and providing other matters properly relating thereto.

 

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN

SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

 

1-1    Section 1. NRS 681A.230 is hereby amended to read as follows:

1-2    681A.230  1.  Credit must be allowed as an asset or as a deduction

1-3  from liability to any ceding insurer for reinsurance lawfully ceded to an

1-4  assuming insurer qualified therefor pursuant to NRS 681A.110, 681A.150,

1-5  681A.160, 681A.170, 681A.180 or 681A.190, but no such credit may be

1-6  allowed unless the contract for reinsurance provides in substance that, in

1-7  the event of the insolvency of the ceding insurer, the reinsurance is payable

1-8  pursuant to a contract reinsured by the assuming insurer on the basis of

1-9  reported claims allowed in any liquidation proceedings, subject to court

1-10  approval, without diminution because of the insolvency of the ceding

1-11  insurer. [Such] Except as otherwise provided in section 14 of this act,

1-12  those payments must be made directly to the ceding insurer or to its

1-13  domiciliary liquidator unless:

1-14    (a) The contract of reinsurance or other written contract specifically

1-15  designates another payee of the payments in the event of the insolvency of

1-16  the ceding insurer; or

1-17    (b) The assuming insurer, with the consent of the persons directly

1-18  insured, has assumed the obligations from the policies issued by the ceding

1-19  insurer as direct obligations of the assuming insurer, and in substitution for

1-20  the obligations of the ceding insurer, to the payees under those policies.

1-21    2.  The domiciliary liquidator of an insolvent ceding insurer shall give

1-22  written notice to the assuming insurer of the pendency of any claim against

1-23  the ceding insurer on any contract reinsured within a reasonable time after

2-1  such a claim is filed in the liquidation proceeding. During the pendency of

2-2  the claim, the assuming insurer may investigate the claim and, at its own

2-3  expense, interpose in the proceeding in which the claim is to be adjudicated

2-4  any defense that the assuming insurer deems available to the ceding insurer

2-5  or its liquidator.

2-6    Sec. 2.  Chapter 686C of NRS is hereby amended by adding thereto

2-7  the provisions set forth as sections 3 to 20, inclusive, of this act.

2-8    Sec. 3.  “Authorized assessment” or “authorized” as used in the

2-9  context of assessments means or describes an assessment authorized by a

2-10  resolution of the board of directors of the association to be imposed

2-11  immediately or later on member insurers in a specified amount.

2-12    Sec. 4.  “Benefit plan” means a benefit plan for a specific employee,

2-13  union or association of natural persons.

2-14    Sec. 5.  “Called assessment” or “called” as used in the context of

2-15  assessments means or describes an authorized assessment required by a

2-16  notice mailed by the association to member insurers to be paid within the

2-17  time set forth in the notice.

2-18    Sec. 6.  “Extra-contractual claim” includes a claim relating to bad

2-19  faith in the payment of claims and a claim for punitive or exemplary

2-20  damages or for costs and attorney’s fees.

2-21    Sec. 7.  “Owner” of a policy or contract means the person who is

2-22  identified as the legal owner under the terms of the policy or contract or

2-23  who is otherwise vested with legal title to the policy or contract through a

2-24  valid assignment completed in accordance with the terms of the policy or

2-25  contract and properly recorded as the owner on the books of the issuer.

2-26    Sec. 8.  “Person” includes a government, governmental agency or

2-27  political subdivision of a government.

2-28    Sec. 9.  1.  “Principal place of business” of an organization means

2-29  the single state in which the natural persons who establish policy for the

2-30  direction, control and coordination of the operations of the organization

2-31  as a whole primarily perform that function, determined by the

2-32  association in its reasonable judgment by considering:

2-33    (a) The state in which the primary executive and administrative

2-34  headquarters of the organization is located;

2-35    (b) The state in which the principal office of the chief executive

2-36  officer of the organization is located;

2-37    (c) The state in which the board of directors, or similar governing

2-38  authority, of the organization conducts the majority of its meetings;

2-39    (d) The state in which the executive or managerial committee of the

2-40  board of directors, or similar governing authority, of the organization

2-41  conducts the majority of its meetings; and

2-42    (e) The state from which the management of the overall operations of

2-43  the organization is directed.

2-44    2.  “Principal place of business” of the sponsor of a benefit plan

2-45  means the principal place of business of the association, committee, joint

2-46  board of trustees or similar group of representatives of the parties who

2-47  establish or maintain the plan or, if that cannot be ascertained, of the

2-48  employer or the employee organization that has the largest investment in

2-49  the plan, except that in either case if more than half of the participants of

3-1  the plan are employed in one state, it means that state. In the case of a

3-2  benefit plan sponsored by affiliated companies comprising a consolidated

3-3  corporation, it means the state in which the holding company or

3-4  controlling affiliate has its principal place of business as determined by

3-5  using the factors set forth in subsection 1.

3-6    Sec. 10.  “State” means a state of the United States, the District of

3-7  Columbia, Puerto Rico, the United States Virgin Islands or any territory

3-8  or insular possession subject to the jurisdiction of the United States.

3-9    Sec. 11.  “Structured settlement annuity” means an annuity

3-10  purchased to fund periodic payments to a plaintiff or other claimant in

3-11  payment for or with respect to personal injury suffered by him.

3-12    Sec. 12.  Premiums due for coverage after entry of an order of

3-13  liquidation of an insolvent insurer belong to and are payable at the

3-14  direction of the association, and the association is liable for unearned

3-15  premiums due to owners of policies or contracts arising after the entry of

3-16  such an order.

3-17    Sec. 13.  A deposit in this state, held pursuant to law or required by

3-18  the commissioner for the benefit of creditors, including owners of

3-19  policies, not turned over to the domiciliary receiver upon the entry of a

3-20  final order of liquidation or order approving a plan of rehabilitation of

3-21  an insurer domiciled in this state or a reciprocal state pursuant to NRS

3-22  696B.290 or 696B.300 must be promptly paid to the association. The

3-23  association is entitled to retain a portion of an amount so paid to it that is

3-24  equal to the percentage determined by dividing the aggregate amount of

3-25  policy owners’ claims related to that insolvency for which the association

3-26  has provided statutory benefits by the aggregate amount of all policy

3-27  owners’ claims in this state related to that insolvency, and shall remit the

3-28  remainder to the domiciliary receiver. The amount so remitted is a

3-29  distribution of the assets of the insurer for the purposes of chapter 696B

3-30  of NRS.

3-31    Sec. 14.  1.  As used in this section, “coverage date” means the date

3-32  on which the association becomes liable for the obligations of a member

3-33  insurer.

3-34    2.  At any time after the coverage date, the association may elect to

3-35  succeed to the rights and obligations of the member insurer which accrue

3-36  on or after the coverage date and relate to contracts covered, in whole or

3-37  in part, by the association under any one or more agreements for

3-38  indemnity reinsurance entered into by the member insurer as ceding

3-39  insurer and selected by the association. However, the association may not

3-40  exercise its right of election with respect to an agreement for reinsurance

3-41  if the receiver, rehabilitator or liquidator of the member insurer has

3-42  previously expressly disaffirmed the agreement. The election must be

3-43  effected by a notice to the receiver, rehabilitator or liquidator and the

3-44  affected reinsurers. If the association makes such an election:

3-45    (a) The association is responsible for all unpaid premiums due under

3-46  each agreement for periods both before and after the coverage date, and

3-47  for the performance of all other obligations to be performed after the

3-48  coverage date, in each case which relates to a contract covered in whole

3-49  or in part by the association. The association may charge a contract

4-1  covered in part by it, through reasonable methods of allocation, for the

4-2  costs of reinsurance in excess of the obligations of the association.

4-3    (b) The association is entitled to any amount payable by the reinsurer

4-4  under each agreement with respect to losses or events that occur in

4-5  periods after the coverage date and relate to contracts covered in whole

4-6  or in part by the association, but upon receipt of any such amount, the

4-7  association is obligated to pay, to the beneficiary under the contract on

4-8  account of which the amount was paid, that portion of the amount

4-9  received by the association that exceeds the benefits paid by the

4-10  association on account of the contract less the retention by the impaired

4-11  or insolvent member insurer applicable to the loss or event.

4-12    (c) The association and each reinsurer shall, within 30 days after the

4-13  election, calculate the net balance due to or from the association under

4-14  each agreement as of the date of the election, giving full credit for all

4-15  items paid by the member insurer or its receiver, rehabilitator or

4-16  liquidator, or the reinsurer, between the coverage date and the date of the

4-17  election. The association or the reinsurer shall pay the net balance

4-18  within 5 days after the completion of the calculation. If a receiver,

4-19  rehabilitator or liquidator has received any amount due the association

4-20  pursuant to paragraph (b), the recipient shall remit the amount to the

4-21  association as promptly as practicable.

4-22    (d) The reinsurer may not terminate an agreement for reinsurance

4-23  insofar as it relates to contracts covered by the association in whole or in

4-24  part, or set off any unpaid premium due for a period before the coverage

4-25  date against the amount due the association, if the association, within 60

4-26  days after the election, pays the premiums due for periods both before

4-27  and after the coverage date which relate to such contracts.

4-28    3.  If the association transfers its obligation to another insurer, and

4-29  the association and the other insurer so agree, the other insurer succeeds

4-30  to the rights and obligations of the association under subsection 2

4-31  effective as of the agreed date, whether or not the association has made

4-32  the election described in subsection 2, except that:

4-33    (a) An agreement for indemnity reinsurance automatically terminates

4-34  as to new reinsurance unless the reinsurer and the other insurer agree to

4-35  the contrary;

4-36    (b) The obligation of the association to the beneficiary under

4-37  paragraph (b) of subsection 2 ceases on the date of the transfer to the

4-38  other insurer; and

4-39    (c) This subsection does not apply if the association has previously

4-40  expressly determined in writing that it will not exercise its right of

4-41  election under subsection 2.

4-42    4.  The provisions of this section supersede an affected agreement for

4-43  reinsurance which provides for or requires payment of proceeds of

4-44  reinsurance, on account of a loss or event that occurs after the coverage

4-45  date, to the receiver, rehabilitator or liquidator of the insolvent member

4-46  insurer. The receiver, rehabilitator or liquidator remains entitled to any

4-47  amounts payable by the reinsurer under the agreement with respect to

5-1  losses or events that occur before the coverage date, subject to any

5-2  applicable setoff.

5-3    5.  Except as otherwise expressly provided, this section does not alter

5-4  or modify the terms or conditions of any agreement of the insolvent

5-5  insurer for reinsurance, abrogate or limit any right of a reinsurer to

5-6  rescind an agreement for reinsurance, or give an owner or beneficiary of

5-7  a policy an independent cause of action against a reinsurer under an

5-8  agreement for indemnity reinsurance that is not otherwise set forth in the

5-9  agreement.

5-10    Sec. 15.  1.  The board of directors of the association may exercise

5-11  reasonable business judgment to determine the means by which the

5-12  association is to provide the benefits of this chapter in an economical and

5-13  efficient manner.

5-14    2.  Where the association has arranged or offered to provide the

5-15  benefits of this chapter to a covered person under a plan or arrangement

5-16  that satisfies the obligations of the association under this chapter, the

5-17  covered person is not entitled to benefits from the association in addition

5-18  to or other than those provided under the plan or arrangement.

5-19    Sec. 16.  Venue in an action against the association arising under

5-20  this chapter lies in Washoe County. No appeal bond may be required of

5-21  the association in an appeal that relates to a cause of action arising

5-22  under this chapter.

5-23    Sec. 17.  In carrying out its duties in connection with guaranteeing,

5-24  assuming or reinsuring a policy or contract under NRS 686C.150 and

5-25  686C.152, the association, subject to the approval of the court in the

5-26  insolvent or impaired insurer’s state which has jurisdiction over the

5-27  conservation, rehabilitation or liquidation of the insurer, may issue

5-28  substitute coverage for a policy or contract that provides an interest rate,

5-29  crediting rate or similar factor determined by use of an index or other

5-30  external reference stated in the policy or contract employed in

5-31  calculating returns or changes in value by issuing an alternative policy

5-32  or contract if:

5-33    1.  In lieu of the index or other external reference stated in the

5-34  original policy or contract, the alternative policy or contract provides for

5-35  a fixed interest rate, payment of dividends guaranteed as to minimum

5-36  amount, or a different method of calculating interest or changes in

5-37  value;

5-38    2.  There is no requirement for evidence of insurability, waiting

5-39  period or other exclusion that would not have applied under the replaced

5-40  policy or contract; and

5-41    3.  The alternative policy or contract is substantially similar to the

5-42  replaced policy or contract in all other material terms.

5-43    Sec. 18.  1.  A member insurer that wishes to protest all or part of

5-44  an assessment shall pay the full amount of the assessment when due, as

5-45  set forth in the notice from the association. The payment may be used to

5-46  meet obligations of the association during the pendency of the

5-47  assessment and any subsequent appeal. Payment must be accompanied

6-1  by a statement in writing that the payment is made under protest and

6-2  setting forth briefly the grounds for the protest.

6-3    2.  Within 60 days after the payment of an assessment under protest,

6-4  the association shall notify the member insurer in writing of the

6-5  determination of the association with respect to the protest, unless the

6-6  association notifies the member insurer that additional time is required

6-7  to resolve the issues raised by the protest.

6-8    3.  Within 30 days after a final decision is made, the association shall

6-9  notify the protesting member insurer in writing of the final decision.

6-10  Within 60 days after receipt of that notice, the protesting member insurer

6-11  may appeal the decision to the commissioner.

6-12    4.  As an alternative to making a final decision with respect to a

6-13  protest concerning the basis of assessment, the association may refer the

6-14  protest to the commissioner for a final decision, with or without a

6-15  recommendation from the association.

6-16    5.  If a protest or appeal is upheld, the amount paid in error or excess

6-17  must be returned to the member insurer. Interest must be paid on the

6-18  refund at the rate actually earned by the association.

6-19    Sec. 19.  The association may request information from member

6-20  insurers to aid in the exercise of its powers under this chapter, and each

6-21  member shall promptly comply with such a request.

6-22    Sec. 20.  It is unlawful for an insurer, agent or affiliate of an

6-23  insurer, or other person to make, publish, circulate or place before the

6-24  public, or cause any other person to do so, in any publication, notice,

6-25  circular, letter or poster, or over any radio or television station, any

6-26  advertisement or statement, written or oral, which uses the existence of

6-27  the association for the sale, solicitation or inducement to purchase any

6-28  form of insurance covered by the association. This section does not apply

6-29  to the association or any other person that does not sell or solicit

6-30  insurance.

6-31    Sec. 21.  NRS 686C.020 is hereby amended to read as follows:

6-32    686C.020  The purpose of this chapter is to protect , within certain

6-33  limits, the persons specified in subsection 1 of NRS 686C.030 against

6-34  failure in the performance of contractual obligations under life and health

6-35  insurance policies[, annuities and contracts] and contracts, and annuities,

6-36  specified in subsection [2] 4 of NRS 686C.030 because of the impairment

6-37  or insolvency of [the] a member insurer issuing such policies or contracts.

6-38    Sec. 22.  NRS 686C.030 is hereby amended to read as follows:

6-39    686C.030  1.  This chapter provides coverage for the policies or

6-40  contracts described in subsection [2] 4 to persons who are:

6-41    (a) Owners of or certificate holders under such policies or contracts,

6-42  other than structured settlement annuities, and who:

6-43      (1) Are residents of this state; or

6-44      (2) Are not residents, but only if:

6-45        (I) The [insurers which] insurer that issued the policies or

6-46  contracts [are] is domiciled in this state;

7-1         (II) [Those insurers did not hold at the time the policies or

7-2  contracts were issued a license or certificate of authority in the states in

7-3  which those persons reside;

7-4         (III)] The states in which the [nonresident] persons reside have

7-5  associations [for protection against impaired or insolvent insurers] similar

7-6  to the association created by this chapter; and

7-7         [(IV) Those]

7-8         (III) The persons are not eligible for coverage by [those] an

7-9  association in another state because the insurer was not authorized in the

7-10  other state at the time specified in that state’s law governing guaranty

7-11  associations; and

7-12    (b) Beneficiaries, assignees or payees of the persons covered under

7-13  paragraph (a), wherever they reside, except for nonresident certificate

7-14  holders under group policies or contracts.

7-15    2.  For structured settlement annuities, except as otherwise provided

7-16  in subsection 3, this chapter provides coverage to a payee under the

7-17  annuity, or beneficiary of a payee if the payee is deceased, if the payee or

7-18  beneficiary:

7-19    (a) Is a resident of this state, regardless of the residence of the owner

7-20  of the annuity; or

7-21    (b) Is not a resident of this state, but:

7-22      (1) The owner of the annuity is a resident of this state, or the issuer

7-23  of the annuity is domiciled in this state and the state in which the owner

7-24  resides has an association similar to the association created by this

7-25  chapter; and

7-26      (2) Neither the payee or beneficiary nor the owner of the annuity is

7-27  eligible for coverage by the association of the state in which the payee,

7-28  beneficiary or owner resides.

7-29    3.  This chapter does not provide coverage for a payee or beneficiary

7-30  of a structured settlement annuity if the owner of the annuity is a

7-31  resident of this state and the payee or beneficiary is afforded any

7-32  coverage by the association of another state. In determining the

7-33  application of the provisions of this section to a situation where a person

7-34  could be covered by the association of more than one state, this chapter

7-35  must be construed in conjunction with the laws of other states to result in

7-36  coverage by only one association.

7-37    4.  This chapter provides coverage to the persons described in

7-38  subsection 1 for direct, nongroup life, health and supplemental policies or

7-39  contracts, and annuities, and certificates under direct group policies and

7-40  contracts, and annuities, [issued by member insurers,] except as limited by

7-41  this chapter. As used in this subsection, “annuity” includes an agreement

7-42  for allocated funding, a structured settlement annuity, and an immediate

7-43  or deferred annuity.

7-44    Sec. 23.  NRS 686C.035 is hereby amended to read as follows:

7-45    686C.035  1.  This chapter does not provide coverage for:

7-46    (a) [Any] A portion of a policy or contract not guaranteed by the

7-47  insurer, or under which the risk is borne by the [holder] owner of the

7-48  policy or contract.

8-1    (b) [Any] A policy or contract of reinsurance unless assumption

8-2  certificates have been issued pursuant to that policy or contract.

8-3    (c) [Any] A portion of a policy or contract to the extent that the rate of

8-4  interest on which it is based:

8-5       (1) [When averaged] Averaged over the period of 4 years before the

8-6  date on which the association becomes obligated with respect to the policy

8-7  or contract, [or averaged for the period since the policy or contract was

8-8  issued if it was issued less than 4 years before the association became

8-9  obligated,] exceeds the rate of interest determined by subtracting 2

8-10  percentage points from Moody’s Corporate Bond Yield Average averaged

8-11  for the same period[;] , or for the period between the date of issuance of

8-12  the policy or contract and the date the association became obligated,

8-13  whichever period is less; and

8-14      (2) On or after the date on which the association becomes obligated

8-15  with respect to the policy or contract, exceeds the rate of interest

8-16  determined by subtracting 3 percentage points from [the most recent]

8-17  Moody’s Corporate Bond Yield Average[.

8-18    (d) Any] as most recently available.

8-19    (d) A portion of a policy or contract issued to a plan or program of an

8-20  employer, association or other person to provide life, health or annuity

8-21  benefits to its employees, members or other persons to the extent that the

8-22  plan or program is self-funded or uninsured, including, but not limited to,

8-23  benefits payable by an employer, association or other person under:

8-24      (1) A multiple employer welfare arrangement [as defined] described

8-25  in 29 U.S.C. [§ 1002;] § 1144;

8-26      (2) A minimum-premium group insurance plan;

8-27      (3) A stop-loss group insurance plan; or

8-28      (4) A contract for administrative services only.

8-29    (e) [Any] A portion of a policy or contract to the extent that it provides

8-30  for dividends, credits for experience, voting rights or the payment of any

8-31  fee or allowance to any person, including the [holder] owner of a policy or

8-32  contract, for services or administration connected with the policy or

8-33  contract.

8-34    (f) [Any] A policy or contract issued in this state by a member insurer at

8-35  a time when the member insurer was not authorized to issue the policy or

8-36  contract in this state.

8-37    (g) A portion of a policy or contract to the extent that the assessments

8-38  required by NRS 686C.230 [for] with respect to the policy or contract are

8-39  preempted by federal law.

8-40    (h) An obligation that does not arise under the express written terms of

8-41  [a] the policy or contract issued by the insurer[.

8-42  (i)] , including:

8-43      (1) Claims based on marketing materials;

8-44      (2) Claims based on side letters, riders or other documents that were

8-45  issued by the insurer without satisfying applicable requirements for filing

8-46  or approval of policy forms;

8-47      (3) Misrepresentations of or regarding policy benefits;

8-48      (4) Extra-contractual claims; or

8-49      (5) A claim for penalties or consequential or incidental damages.

9-1    (i) A contractual agreement that establishes the member insurer’s

9-2  obligation to provide a guarantee based on accounting at book value for

9-3  participants in a defined-contribution benefit plan by reference to a

9-4  portfolio of assets owned by the benefit plan or its trustee, which in each

9-5  case is not an affiliate of the member insurer.

9-6    (j) An unallocated annuity contract.

9-7    2.  As used in this section, “Moody’s Corporate Bond Yield Average”

9-8  means the monthly average for corporate bonds published by Moody’s

9-9  Investors Service, Inc., or any successor average.

9-10    Sec. 24.  NRS 686C.040 is hereby amended to read as follows:

9-11    686C.040  As used in this chapter, unless the context otherwise

9-12  requires, the words and terms defined in NRS 686C.045 to 686C.125,

9-13  inclusive, and sections 3 to 11, inclusive, of this act have the meanings

9-14  ascribed to them in those sections.

9-15    Sec. 25.  NRS 686C.070 is hereby amended to read as follows:

9-16    686C.070  “Contractual obligation” means any obligation under a

9-17  policy or contract or a certificate under a group policy or contract, or

9-18  portion thereof, for which coverage is provided under NRS 686C.030 . [,

9-19  and includes unearned premiums.]

9-20    Sec. 26.  NRS 686C.090 is hereby amended to read as follows:

9-21    686C.090  “Impaired insurer” means an insurer which is not an

9-22  insolvent insurer and[:

9-23    1.  Is] is placed under an order of rehabilitation or conservation by a

9-24  court of competent jurisdiction . [; or

9-25    2.  Is determined by the commissioner to be unable or potentially

9-26  unable to fulfill its contractual obligations.]

9-27    Sec. 27.  NRS 686C.100 is hereby amended to read as follows:

9-28    686C.100  “Member insurer” means [any] an insurer which is licensed

9-29  or holds a certificate of authority to transact in this state any kind of

9-30  insurance for which coverage is provided in this chapter and includes [any]

9-31  an insurer whose license or certificate of authority [to transact such

9-32  insurance] in this state has been suspended, revoked, not renewed or

9-33  voluntarily withdrawn. The term does not include:

9-34    1.  A [nonprofit] hospital or medical organization[;] , whether or not

9-35  for profit;

9-36    2.  A health maintenance organization;

9-37    3.  A fraternal benefit society;

9-38    4.  A mandatory state pooling plan;

9-39    5.  A mutual assessment company or [any entity] other person that

9-40  operates on the basis of assessments;

9-41    6.  An insurance exchange; [or

9-42    7.  Any other similar entity.]

9-43    7.  An organization that is authorized only to issue charitable gift

9-44  annuities under NRS 688A.281 to 688A.285, inclusive; or

9-45    8.  An organization similar to any of those listed in subsections 1 to 7,

9-46  inclusive.

9-47    Sec. 28.  NRS 686C.120 is hereby amended to read as follows:

9-48    686C.120  “Resident” means any person to whom a contractual

9-49  obligation is owed and who resides in this state [at the time] on the date of

10-1  entry of a court order that determines a member insurer [is determined] to

10-2  be impaired or insolvent [and to whom contractual obligations are owed.] ,

10-3  whichever determination is first made. A person may be a resident of but

10-4  one state, which in the case of a person other than a natural person is its

10-5  principal place of business. A citizen of the United States who is a resident

10-6  of a foreign country or of a territory or insular possession subject to the

10-7  jurisdiction of the United States which does not have an association

10-8  similar to the association created by this chapter shall be deemed to be a

10-9  resident of the state of domicile of the insurer that issued the policy or

10-10  contract.

10-11  Sec. 29.  NRS 686C.125 is hereby amended to read as follows:

10-12  686C.125  “Supplemental contract” means [an] a written agreement for

10-13  the distribution of proceeds from a [contract or policy.] life or health

10-14  insurance policy or an annuity.

10-15  Sec. 30.  NRS 686C.128 is hereby amended to read as follows:

10-16  686C.128  1.  The association shall prepare, and submit to the

10-17  commissioner for approval, a summary document describing the general

10-18  purposes[, exclusions] and current limitations of this chapter. [No insurer

10-19  may] After the expiration of 60 days after the approval of the summary

10-20  document by the commissioner, an insurer may not deliver a policy or

10-21  contract [described in NRS 686C.030 to an intended holder] to the owner

10-22  of the policy or contract unless the summary document is delivered to the

10-23  [intended holder before or] owner at the time of delivery of the policy or

10-24  contract. The document must also be available upon request by [a

10-25  policyholder.] the owner of a policy. The distribution, delivery, contents or

10-26  interpretation of this document [do not mean] does not guarantee that the

10-27  policy or the contract or [the holder thereof would be] its owner is covered

10-28  in the event of the impairment or insolvency of a member insurer. The

10-29  descriptive document must be revised by the association as amendments to

10-30  this chapter may require. Failure to receive this document does not give the

10-31  [holder] owner of a policy or contract, or an insured, any greater rights

10-32  than those stated in this chapter.

10-33  2.  The document prepared pursuant to subsection 1 must contain a

10-34  clear and conspicuous disclaimer on its face. The commissioner shall

10-35  establish the form and content of the disclaimer. The disclaimer must:

10-36  (a) State the name and address of the association and of the division;

10-37  (b) Prominently warn the owner of the policy or contract [holder] that

10-38  the association may not cover the policy or, if coverage is available, it will

10-39  be subject to substantial limitations and exclusions and conditioned on

10-40  continued residence in this state;

10-41  (c) State the types of policies for which guaranty funds will provide

10-42  coverage;

10-43  (d) State that the insurer and its agents are prohibited by law from using

10-44  the existence of the association for the purpose of sales, solicitation or

10-45  inducement to purchase any form of insurance;

10-46  [(d) Emphasize]

10-47  (e) State that the [holder] owner of a policy or contract should not rely

10-48  on coverage under the association when selecting an insurer; [and

11-1    (e)] (f) Explain the rights and procedures for filing a complaint to

11-2  allege a violation of any provision of this chapter; and

11-3    (g) Provide other information as directed by the commissioner[.] ,

11-4  including sources of information about the financial condition of

11-5  insurers, if the information is not proprietary and is subject to disclosure

11-6  under the law of the state in which the insurer is domiciled.

11-7    3.  A member insurer shall retain evidence of compliance with

11-8  subsection 1 while the policy or contract for which the notice is given

11-9  remains in effect.

11-10  Sec. 31.  NRS 686C.130 is hereby amended to read as follows:

11-11  686C.130  1.  There is hereby created a nonprofit[, unincorporated,]

11-12  legal entity to be known as the Nevada Life and Health Insurance Guaranty

11-13  Association. All member insurers shall be and remain members of the

11-14  association as a condition of their authority to transact insurance in this

11-15  state. The association shall perform its functions under the plan of

11-16  operation established and approved pursuant to NRS 686C.290 and shall

11-17  exercise its powers through a board of directors established pursuant to

11-18  NRS 686C.140.

11-19  2.  For purposes of administration and assessment, the association shall

11-20  maintain two accounts:

11-21  (a) The account for health insurance; and

11-22  (b) The account for life insurance and annuities, which consists of:

11-23     (1) The subaccount for life insurance; and

11-24     (2) The subaccount for annuities[.] , including annuities owned by a

11-25  governmental retirement plan, or its trustees, established under section

11-26  401, 403(b) or 457 of the Internal Revenue Code, 26 U.S.C. §§ 401,

11-27  403(b) and 457.

11-28  3.  The association is under the immediate supervision of the

11-29  commissioner and is subject to the applicable provisions of the Nevada

11-30  Insurance Code. Meetings or records of the association may be opened to

11-31  the public by majority vote of the board of directors.

11-32  Sec. 32.  NRS 686C.140 is hereby amended to read as follows:

11-33  686C.140  1.  The board of directors of the association [shall consist]

11-34  consists of not less than five nor more than nine members, serving terms as

11-35  established in the plan of operation. The members of the board [shall] who

11-36  represent insurers must be selected by member insurers subject to the

11-37  approval of the commissioner. Two public representatives must be

11-38  appointed to the board by the commissioner. A public representative may

11-39  not be an officer, director or employee of an insurer or engaged in the

11-40  business of insurance. Vacancies on the board [shall] must be filled for

11-41  the remaining period of the term [in the manner described in the plan of

11-42  operation.] by majority vote of the members of the board, subject to the

11-43  approval of the commissioner, for members who represent insurers, and

11-44  by the commissioner for public representatives. To select the initial board

11-45  of directors, and initially organize the association, the commissioner shall

11-46  give notice to all member insurers of the time and place of the

11-47  organizational meeting. In determining voting rights at the organizational

11-48  meeting each member insurer [shall be] is entitled to one vote in person or

11-49  by proxy. If the board of directors is not selected within 60 days after

12-1  notice of the organizational meeting, the commissioner may appoint the

12-2  initial members[.] to represent insurers in addition to the public

12-3  representatives.

12-4    2.  In approving selections or in appointing members to the board, the

12-5  commissioner shall consider, among other things, whether all member

12-6  insurers are fairly represented.

12-7    3.  Members of the board may be reimbursed from the assets of the

12-8  association for expenses incurred by them as members of the board of

12-9  directors but members of the board [shall] may not otherwise be

12-10  compensated by the association for their services.

12-11  Sec. 33.  NRS 686C.150 is hereby amended to read as follows:

12-12  686C.150  If a [domestic] member insurer is an impaired insurer, the

12-13  association may, subject to any conditions it may impose which do not

12-14  impair the contractual obligations of the impaired insurer, are approved by

12-15  the commissioner, and, except in cases of court-ordered conservation or

12-16  rehabilitation, are approved by the impaired insurer:

12-17  1.  Guarantee, assume or reinsure, or cause to be guaranteed, assumed

12-18  or reinsured, any or all of the covered policies or contracts of the impaired

12-19  insurer.

12-20  2.  Provide such money, pledges, loans, notes, guarantees or other

12-21  means as are proper to effectuate subsection 1, and assure payment of the

12-22  contractual obligations of the impaired insurer pending action under

12-23  subsection 1.

12-24  [3.  Lend money to the impaired insurer.]

12-25  Sec. 34.  NRS 686C.152 is hereby amended to read as follows:

12-26  686C.152  If a member insurer is an insolvent insurer, the association

12-27  shall:

12-28  1.  Guarantee, assume or reinsure, or cause to be guaranteed, assumed

12-29  or reinsured, the policies or contracts of the insolvent insurer; or

12-30  2.  Ensure payment of the contractual obligations of the insolvent

12-31  insurer and:

12-32  (a) Provide such money, pledges, loans, notes, guarantees or other

12-33  means as are reasonably necessary to discharge [such] its duties; or

12-34  (b) [With respect only to life and health insurance policies, provide]

12-35  Provide benefits and coverages in accordance with NRS 686C.153 and

12-36  686C.154.

12-37  Sec. 35.  NRS 686C.153 is hereby amended to read as follows:

12-38  686C.153  When proceeding pursuant to paragraph (b) of subsection [1

12-39  of NRS 686C.151 or paragraph (b) of subsection] 2 of NRS 686C.152, the

12-40  association shall [, with] :

12-41  1.  With respect to life and health insurance policies [only:

12-42  1.  Ensure] and annuities, ensure payment of benefits for premiums

12-43  identical to the premiums and benefits, except for terms of conversion and

12-44  renewability, which would have been payable under policies or contracts

12-45  of the insolvent insurer, for claims incurred with respect to:

12-46  (a) A group policy or contract, not later than the earlier of the next

12-47  renewal date under the policy or contract or 45 days, but in no event less

12-48  than 30 days, after the date when the association becomes obligated with

12-49  respect to that policy[.

13-1    (b) An individual policy,] or contract.

13-2    (b) A nongroup policy, contract or annuity, not later than the earlier of

13-3  the next renewal date, if any, under the policy , contract or annuity or 1

13-4  year, but in no event less than 30 days, after the date when the association

13-5  becomes obligated with respect to that policy[.] , contract or annuity.

13-6    2.  Make diligent efforts to provide all known insureds or

13-7  [policyholders] owners with respect to group policies or contracts, or

13-8  annuitants with respect to annuities, 30 days’ notice of termination of the

13-9  benefits provided[.

13-10  3.  Make] pursuant to subsection 1.

13-11  3.  With respect to nongroup life and health insurance policies and

13-12  annuities, make available substitute coverage on an individual basis, in

13-13  accordance with the provisions of subsection 4, to each known insured

13-14  [under an individual policy,] or annuitant, or owner if other than the

13-15  insured[,] or annuitant, and to each natural person formerly insured , or

13-16  formerly an annuitant, under a group policy who is not eligible for

13-17  replacement group coverage, if the insured or annuitant had a right under

13-18  law [to convert coverage under] or the terminated policy or annuity to

13-19  convert coverage to individual coverage or to continue an individual policy

13-20  or annuity in force until a specified age or for a specified period, during

13-21  which the insurer had no right unilaterally to make changes in any

13-22  provision of the policy or annuity or had a right only to make changes in

13-23  premium by class.

13-24  4.  In providing the substitute coverage required under subsection 3, the

13-25  association may offer to reissue the terminated coverage or to issue an

13-26  alternative policy that must be offered without requiring evidence of

13-27  insurability or a waiting period or exclusion that would not have applied

13-28  under the terminated policy, and may reinsure any alternative or reinsured

13-29  policy.

13-30  Sec. 36.  NRS 686C.154 is hereby amended to read as follows:

13-31  686C.154  1.  Alternative policies adopted by the association are

13-32  subject to the approval of the commissioner[.] and the court in the

13-33  insolvent or impaired insurer’s state which has jurisdiction over the

13-34  conservation, rehabilitation or liquidation of the insurer. The association

13-35  may adopt alternative policies of various types for future issuance without

13-36  regard to any particular impairment or insolvency.

13-37  2.  An alternative policy must contain at least the minimum statutory

13-38  provisions required in this state and provide benefits that are not

13-39  unreasonable in relation to the premium charged. The association shall set

13-40  the premium in accordance with a table of rates which it shall adopt. The

13-41  premium must reflect the amount of insurance to be provided and the age

13-42  and class of risk of each insured, but must not reflect any changes in the

13-43  health of the insured after the original policy was last underwritten.

13-44  3.  An alternative policy issued by the association must provide

13-45  coverage of a type similar to that of the policy issued by the impaired or

13-46  insolvent insurer, as determined by the association.

13-47  4.  If the association elects to reissue terminated coverage at a rate of

13-48  premium different from that charged under the terminated policy, the

13-49  premium must be set by the association in accordance with the amount of

14-1  insurance provided and the age and class of risk, subject to approval by the

14-2  commissioner [or by a court of competent jurisdiction.] and the court

14-3  described in subsection 1.

14-4    Sec. 37.  NRS 686C.155 is hereby amended to read as follows:

14-5    686C.155  When proceeding pursuant to paragraph (b) of subsection [1

14-6  of NRS 686C.151 or paragraph (b) of subsection] 2 of NRS 686C.152 with

14-7  respect to any policy or contract carrying guaranteed minimum interest

14-8  rates, the association shall ensure the payment or crediting of a rate of

14-9  interest consistent with paragraph (c) of subsection 1 of NRS 686C.035.

14-10  Sec. 38.  NRS 686C.160 is hereby amended to read as follows:

14-11  686C.160  In carrying out its responsibilities under NRS [686C.151

14-12  and] 686C.152, the association may, subject to approval by [the court, or

14-13  by the commissioner if there is no judicial proceeding:] a court of this

14-14  state:

14-15  1.  Impose permanent liens on policies and contracts in connection with

14-16  any guarantee, assumption or reinsurance if the association finds that the

14-17  amounts which can be assessed under this chapter are less than the amounts

14-18  needed to [assure] ensure full and prompt performance of the association’s

14-19  duties or that the economic or financial conditions as they affect member

14-20  insurers are sufficiently adverse that the imposition of such permanent liens

14-21  is in the public interest.

14-22  2.  Impose temporary moratoriums or liens on payments of cash values

14-23  and policy loans or any right to withdraw money held in conjunction with

14-24  policies or contracts, in addition to any contractual provisions for deferral

14-25  of paying cash value or lending against the policy. In addition, in the event

14-26  of a temporary moratorium or charge imposed by the court in the

14-27  insolvent or impaired insurer’s state which has jurisdiction over the

14-28  conservation, rehabilitation or liquidation of the insurer on such

14-29  payment or lending, or on any other right to withdraw money held in

14-30  conjunction with policies or contracts, the association may defer such

14-31  payment, lending or withdrawal for the period of the moratorium or

14-32  charge, except for claims covered by the association to be paid in

14-33  accordance with a procedure for cases of hardship established by the

14-34  liquidator or rehabilitator and approved by the court.

14-35  Sec. 39.  NRS 686C.170 is hereby amended to read as follows:

14-36  686C.170  The association is not liable under NRS [686C.151 or

14-37  686C.152 for any covered policy of a foreign or alien insurer] 686C.152

14-38  where a guaranty is provided to residents of this state by the laws of the

14-39  domiciliary state or jurisdiction of the impaired or insolvent insurer [.]

14-40  other than this state.

14-41  Sec. 40.  NRS 686C.180 is hereby amended to read as follows:

14-42  686C.180  The association may render assistance and advice to the

14-43  commissioner upon his request, concerning rehabilitation, payment of

14-44  claims, continuation of coverage or the performance of other contractual

14-45  obligations of [any impaired] an impaired or insolvent insurer.

14-46  Sec. 41.  NRS 686C.190 is hereby amended to read as follows:

14-47  686C.190  The association has standing:

14-48  1.  To appear or intervene before [any] a court or agency in this state

14-49  which has jurisdiction over an impaired or insolvent insurer concerning

15-1  which the association is or may become obligated under this chapter[.] or

15-2  over any person or property against whom or which the association may

15-3  have rights through subrogation or otherwise. Its standing extends to all

15-4  matters germane to the powers and duties of the association, including [but

15-5  not limited to] proposals for reinsuring , modifying or guaranteeing the

15-6  [covered] policies or contracts of the impaired or insolvent insurer and the

15-7  determination of the [covered] policies or contracts and contractual

15-8  obligations.

15-9    2.  To appear or intervene before a court or agency in another state

15-10  which has jurisdiction over an impaired or insolvent insurer for which the

15-11  association is or may become obligated, or over [a third party] any person

15-12  or property against whom or which the association may have rights

15-13  through subrogation [of the insurer’s policyholders.] or otherwise.

15-14  Sec. 42.  NRS 686C.200 is hereby amended to read as follows:

15-15  686C.200  1.  [Any] A person receiving benefits under this chapter

15-16  shall be deemed to have assigned his rights under, and any causes of action

15-17  against any person for losses arising under, resulting from or otherwise

15-18  relating to, the covered policy or contract to the association to the extent of

15-19  the benefits received because of this chapter , whether the benefits are

15-20  payments of or on account of contractual obligations, continuation of

15-21  coverage or provision of substitute or alternative coverages. The

15-22  association may require an assignment to it of those rights and causes of

15-23  action by any payee, owner of a policy or contract , [owner,] beneficiary,

15-24  insured or annuitant as a condition precedent to the receipt of any rights or

15-25  benefits conferred by this chapter upon that person.

15-26  2.  The rights of the association to subrogation under this subsection

15-27  have the same priority against the assets of the impaired or insolvent

15-28  insurer as that possessed by the person entitled to receive benefits under

15-29  this chapter.

15-30  3.  In addition to the rights provided under subsections 1 and 2, the

15-31  association has all rights of subrogation at common law and any other

15-32  equitable or legal remedy which would have been available to the impaired

15-33  or insolvent insurer or the [holder] owner, beneficiary or payee of a policy

15-34  or contract[,] with respect to the policy or contract[.] , including, in the

15-35  case of a structured settlement annuity, any rights of the owner,

15-36  beneficiary or payee of the annuity, to the extent of benefits received

15-37  under this chapter, against a person originally or by succession

15-38  responsible for the losses arising from the personal injury relating to the

15-39  annuity or payment for it, except any such person responsible solely by

15-40  reason of serving as an assignee under section 130 of the Internal

15-41  Revenue Code, 26 U.S.C. § 130.

15-42  4.  If the provisions of subsections 1, 2 and 3 are invalid or ineffective

15-43  with respect to any person or any claim for any reason, the amount

15-44  payable to the association with respect to the related covered obligations

15-45  is reduced by the amount realized by any other person with respect to the

15-46  person or claim which is attributable to the policies or portions thereof

15-47  covered by the association.

15-48  5.  If the association has provided benefits with respect to a covered

15-49  obligation and a person recovers amounts as to which the association has

16-1  rights under subsections 1 to 4, inclusive, he shall pay to the association

16-2  the portion of the recovery attributable to the policies or portions thereof

16-3  covered by the association.

16-4    Sec. 43.  NRS 686C.210 is hereby amended to read as follows:

16-5    686C.210  1.  [Unless further limited by subsection 2, the liability of

16-6  the association for benefits under this chapter is limited to] The benefits

16-7  that the association may become obligated to cover may not exceed the

16-8  lesser of:

16-9    (a) The contractual obligations for which the insurer is liable or would

16-10  have been liable if it were not an impaired or insolvent insurer; [or]

16-11  (b) With respect to [any] one life, regardless of the number of policies

16-12  or contracts:

16-13     (1) Three hundred thousand dollars in death benefits from life

16-14  insurance, but not more than $100,000 in net cash for surrender and

16-15  withdrawal for life insurance; or

16-16     (2) [One hundred thousand dollars in benefits from health insurance,

16-17  including any net cash for surrender and withdrawal; and

16-18     (3)] One hundred thousand dollars in the present value of benefits

16-19  from annuities, including net cash for surrender and withdrawal[.

16-20  2.  The association is not liable to expend more than $300,000 in the

16-21  aggregate with] ;

16-22  (c) With respect to health insurance for any one natural person:

16-23     (1) One hundred thousand dollars for coverages other than

16-24  disability insurance, basic hospital, medical and surgical insurance or

16-25  major medical insurance, including any net cash for surrender or

16-26  withdrawal;

16-27     (2) Three hundred thousand dollars for disability insurance; or

16-28     (3) Five hundred thousand dollars for basic hospital, medical and

16-29  surgical insurance or major medical insurance; or

16-30  (d) With respect to each payee of a structured settlement annuity, or

16-31  beneficiary or beneficiaries of the payee if deceased, $100,000 in present

16-32  value of benefits from the annuity in the aggregate, including any net

16-33  cash for surrender or withdrawal.

16-34  2.  In no event is the association obligated to cover more than:

16-35  (a) With respect to any one life or person under [subparagraphs (1), (2)

16-36  and (3) of paragraph] paragraphs (b) and (c) of subsection 1[.] :

16-37     (1) An aggregate of $300,000 in benefits, excluding benefits for

16-38  basic hospital, medical and surgical insurance or major medical

16-39  insurance; or

16-40     (2) An aggregate of $500,000 in benefits, including benefits for

16-41  basic hospital, medical and surgical insurance or major medical

16-42  insurance.

16-43  (b) With respect to one owner of several nongroup policies of life

16-44  insurance, whether the owner is a natural person or an organization and

16-45  whether the persons insured are officers, managers, employees or other

16-46  persons, more than $5,000,000 in benefits, regardless of the number of

16-47  policies and contracts held by the owner.

16-48  3.  The limitations set forth in this section are limitations on the

16-49  benefits for which the association is obligated before taking into account

17-1  its rights to subrogation or assignment or the extent to which those

17-2  benefits could be provided out of the assets of the impaired or insolvent

17-3  insurer attributable to covered policies. The cost of the association’s

17-4  obligations under this chapter may be met by the use of assets

17-5  attributable to covered policies, or reimbursed to the association

17-6  pursuant to its rights to subrogation or assignment.

17-7    4.  In performing its obligation to provide coverage under NRS

17-8  686C.150 and 686C.152, the association need not guarantee, assume,

17-9  reinsure or perform, or cause to be guaranteed, assumed, reinsured or

17-10  performed, the contractual obligations of the impaired or insolvent

17-11  insurer under a covered policy or contract which do not materially affect

17-12  the economic value or economic benefits of the covered policy or

17-13  contract.

17-14  Sec. 44.  NRS 686C.220 is hereby amended to read as follows:

17-15  686C.220  The association may:

17-16  1.  Enter into such contracts as are necessary or proper to carry out the

17-17  provisions and purposes of this chapter.

17-18  2.  Sue or be sued, including the taking of any legal action necessary or

17-19  proper for recovery of any unpaid assessments under NRS 686C.230 or to

17-20  settle claims or potential claims against it.

17-21  3.  Borrow money to effect the purposes of this chapter. Any notes or

17-22  other evidence of indebtedness of the association not in default are legal

17-23  investments for domestic insurers and may be carried as admitted assets.

17-24  4.  Employ or retain such persons as are necessary or appropriate to

17-25  handle the financial transactions of the association, and to perform such

17-26  other functions as become necessary or proper under this chapter.

17-27  5.  [Negotiate and contract with any liquidator, rehabilitator,

17-28  conservator or ancillary receiver to carry out the powers and duties of the

17-29  association.

17-30  6.] Take such legal action as may be necessary or appropriate to avoid

17-31  or recover payment of improper claims.

17-32  [7.] 6. Exercise, for the purposes of this chapter and to the extent

17-33  approved by the commissioner, the powers of a domestic life or health

17-34  insurer, but in no case may the association issue insurance policies or

17-35  annuities other than those issued to perform [the] its contractual obligations

17-36  [of the impaired insurer] under this chapter.

17-37  [8.] 7. Join an organization of one or more other state associations

17-38  having similar purposes, to further the purposes and administer the powers

17-39  and duties of the association.

17-40  8.  Organize itself as a corporation or in other legal form permitted by

17-41  the laws of this state.

17-42  9.  Request information from a person seeking coverage from the

17-43  association to aid the association in determining its obligations under

17-44  this chapter with respect to him, and the person shall promptly comply

17-45  with the request.

17-46  10.  Take other necessary or appropriate action to perform its duties

17-47  and discharge its obligations under this chapter or to exercise its power

17-48  under this chapter.

 

18-1    Sec. 45.  NRS 686C.230 is hereby amended to read as follows:

18-2    686C.230  1.  To provide the money necessary to carry out the powers

18-3  and duties of the association, the board of directors shall assess the

18-4  member insurers, separately for each account, at such times and for such

18-5  amounts as the board finds necessary. An assessment is due upon at least

18-6  30 days’ written notice to the member insurer and accrues interest after it is

18-7  due at the rate provided in NRS 99.040.

18-8    2.  There are two classes of assessments, as follows:

18-9    (a) Assessments in Class A must be [made] authorized and called for

18-10  the purpose of meeting administrative and legal costs and other expenses .

18-11  [, including those of examinations conducted pursuant to NRS 686C.310.]

18-12  An assessment in Class A need not be related to a particular impaired or

18-13  insolvent insurer.

18-14  (b) Assessments in Class B must be [made] authorized and called to the

18-15  extent necessary to carry out the powers and duties of the association under

18-16  NRS 686C.150 to 686C.220, inclusive, with regard to an impaired or

18-17  insolvent insurer.

18-18  Sec. 46.  NRS 686C.240 is hereby amended to read as follows:

18-19  686C.240  1.  The board of directors shall determine the amount of

18-20  each assessment in Class A and may, but need not, prorate it. If an

18-21  assessment is prorated, the board may provide that any surplus be credited

18-22  against future assessments in Class B. An assessment which is not prorated

18-23  must not exceed [$300] $150 for each member insurer for any one calendar

18-24  year.

18-25  2.  The board may allocate any assessment in Class B among the

18-26  accounts according to the premiums or reserves of the impaired or

18-27  insolvent insurer or any other standard which it considers fair and

18-28  reasonable under the circumstances.

18-29  3.  Assessments in Class B against member insurers for each account

18-30  and subaccount must be in the proportion that the premiums received on

18-31  business in this state by each assessed member insurer on policies or

18-32  contracts covered by each account or subaccount for the 3 most recent

18-33  calendar years for which information is available preceding the year in

18-34  which the insurer became impaired or insolvent bears to premiums

18-35  received on business in this state for those calendar years by all assessed

18-36  member insurers.

18-37  4.  Assessments for money to meet the requirements of the association

18-38  with respect to an impaired or insolvent insurer must not be [made]

18-39  authorized or called until necessary to carry out the purposes of this

18-40  chapter. Classification of assessments under subsection 2 of NRS

18-41  686C.230 and computation of assessments under this section must be made

18-42  with a reasonable degree of accuracy, recognizing that exact

18-43  determinations may not always be possible. The association shall notify

18-44  each member insurer of its anticipated prorated share of an assessment

18-45  authorized but not yet called within 180 days after it is authorized.

18-46  Sec. 47.  NRS 686C.250 is hereby amended to read as follows:

18-47  686C.250  1.  The association may abate or defer, in whole or in part,

18-48  the assessment of a member insurer if, in the opinion of the board[,] of

18-49  directors, payment of the assessment would endanger the ability of the

19-1  member insurer to fulfill its contractual obligations. If an assessment

19-2  against a member insurer is abated or deferred in whole or in part, the

19-3  amount by which that assessment is abated or deferred may be assessed

19-4  against the other member insurers in a manner consistent with the basis for

19-5  assessments set forth in this section. As soon as the conditions that caused

19-6  a deferral have been removed or rectified, the member insurer shall pay

19-7  all assessments that were deferred pursuant to a plan of repayment

19-8  approved by the association.

19-9    2.  [The] Except as otherwise provided in subsection 3, the total of all

19-10  assessments [upon] authorized by the association with respect to a

19-11  member insurer for:

19-12  (a) The account for life insurance and annuities and each of its

19-13  subaccounts; and

19-14  (b) The account for health insurance,

19-15  respectively must not in any 1 calendar year exceed 2 percent of the

19-16  insurer’s average annual premiums received in this state on the policies

19-17  and contracts covered by the subaccount or account during the 3 calendar

19-18  years preceding the year in which the [impairment or insolvency is

19-19  determined.] insurer became impaired or insolvent.

19-20  3.  If two or more assessments are authorized in 1 calendar year with

19-21  respect to insurers that became impaired or insolvent in different

19-22  calendar years, the average annual premiums received for the purposes

19-23  of the limitation provided in subsection 2 are equal and limited to the

19-24  higher of the 3-year annual premiums for the applicable account or

19-25  subaccount as calculated pursuant to this section.

19-26  4.  If the maximum assessment, together with the other assets of the

19-27  association in [either] an account, does not provide in any 1 year in either

19-28  account an amount sufficient to carry out the responsibilities of the

19-29  association, the necessary additional money must be assessed as soon

19-30  thereafter as permitted by this chapter.

19-31  [4.  If an assessment of 1 percent for either]

19-32  5.  If the maximum assessment for a subaccount of the account for life

19-33  insurance and annuities in any 1 year does not provide an amount sufficient

19-34  to carry out the responsibilities of the association, then pursuant to

19-35  subsection 3 of NRS 686C.240, the board shall assess [both subaccounts]

19-36  the other subaccount for the necessary additional amount, subject to the

19-37  maximum stated in subsection 2.

19-38  [5.] 6. The board may provide in the plan of operation a method of

19-39  allocating funds among claims, whether relating to one or more impaired or

19-40  insolvent insurers, when the maximum assessment is insufficient to cover

19-41  anticipated claims.

19-42  Sec. 48.  NRS 686C.260 is hereby amended to read as follows:

19-43  686C.260  The board of directors may, by an equitable method as

19-44  established in the plan of operation, refund to member insurers, in

19-45  proportion to the contribution of each insurer to that account, the amount

19-46  by which the assets of the account exceed the amount the board finds is

19-47  necessary to carry out during the coming year the obligations of the

19-48  association with regard to that account, including assets accruing from

19-49  assignment, subrogation, net realized gains and income from investments.

20-1  A reasonable amount may be retained in any account to provide funds for

20-2  the continuing expenses of the association and for future [losses.] claims.

20-3    Sec. 49.  NRS 686C.280 is hereby amended to read as follows:

20-4    686C.280  1.  The association shall issue to each insurer paying an

20-5  assessment under this chapter , other than an assessment in Class A, a

20-6  certificate of contribution, in a form prescribed by the commissioner, for

20-7  the amount of the assessment so paid. All outstanding certificates are of

20-8  equal dignity and priority without reference to [the] amounts or dates of

20-9  issue. A member insurer may show a certificate of contribution as an asset

20-10  in its financial statement in such form, for such amount, if any, and for

20-11  such period as the commissioner may approve.

20-12  2.  A member insurer may offset against its liability for premium tax to

20-13  this state, accrued with respect to business transacted in a calendar year, an

20-14  amount equal to 20 percent of the amount certified pursuant to subsection 1

20-15  in each of the 5 calendar years following the year in which the assessment

20-16  was paid. If an insurer ceases to transact business, it may offset all

20-17  uncredited assessments against its liability for premium tax for the year in

20-18  which it so ceases.

20-19  3.  Any sum acquired by refund from the association pursuant to NRS

20-20  686C.260 which previously had been written off by the contributing

20-21  insurer and offset against premium taxes as provided in subsection 2 must

20-22  be paid to the department of taxation and deposited by it with the state

20-23  treasurer for credit to the state general fund. The association shall notify

20-24  the commissioner and the department of taxation of each refund made.

20-25  Sec. 50.  NRS 686C.290 is hereby amended to read as follows:

20-26  686C.290  1.  The association shall submit to the commissioner a plan

20-27  of operation and any amendments thereto necessary or suitable to [assure]

20-28  ensure the fair, reasonable and equitable administration of the association.

20-29  The plan of operation and any amendments thereto become effective upon

20-30  approval in writing by the commissioner, or 30 days after submission if he

20-31  has not disapproved them. All member insurers shall comply with the plan

20-32  of operation.

20-33  2.  If at any time the association fails to submit suitable amendments to

20-34  the plan, the commissioner shall adopt , after notice and hearing, such

20-35  reasonable regulations as are necessary or advisable to effectuate the

20-36  provisions of this chapter. The regulations continue in force until modified

20-37  by the commissioner or superseded by a plan submitted by the association

20-38  and approved by the commissioner.

20-39  3.  [The] In addition to satisfying the other requirements of this

20-40  chapter, the plan of operation must:

20-41  (a) Establish procedures for handling the assets of the association.

20-42  (b) Establish the amount and method of reimbursing members of the

20-43  board of directors under NRS 686C.140.

20-44  (c) Establish regular places and times for meetings of the board.

20-45  (d) Establish procedures for records to be kept of all financial

20-46  transactions of the association, its agents and the board.

20-47  (e) Establish the procedures whereby selections for the board will be

20-48  made and submitted to the commissioner.

21-1    (f) Establish any additional procedures for assessments under NRS

21-2  686C.230 to 686C.270, inclusive.

21-3    (g) Contain additional provisions necessary or proper for the execution

21-4  of the powers and duties of the association.

21-5    4.  The plan of operation may provide that any or all powers and duties

21-6  of the association, except those under subsection 3 of NRS 686C.220 and

21-7  NRS 686C.230 to 686C.280, inclusive, are delegated to a corporation,

21-8  association or other organization which performs or will perform functions

21-9  similar to those of this association , or its equivalent , in two or more states.

21-10  Such an organization must be reimbursed for any payments made on

21-11  behalf of the association and paid for its performance of any function of

21-12  the association. A delegation under this subsection takes effect only with

21-13  the approval of the board of directors and the commissioner, and may be

21-14  made only to an organization that extends protection not substantially

21-15  less favorable and effective than that provided by this chapter.

21-16  Sec. 51.  NRS 686C.300 is hereby amended to read as follows:

21-17  686C.300  1.  [The commissioner shall:

21-18  (a) Notify the board of the existence of an impaired insurer not later

21-19  than 3 days after a determination of impairment is made or he receives

21-20  notice of impairment.

21-21  (b) Upon] In addition to the duties and powers otherwise provided in

21-22  this chapter, the commissioner :

21-23  (a) Shall, upon request of the board[,] of directors, provide the

21-24  association with a statement of the premiums in this and any other

21-25  appropriate states for each member insurer.

21-26  [(c) When]

21-27  (b) Shall, when an impairment is declared and the amount of the

21-28  impairment is determined, serve a demand upon the impaired insurer to

21-29  make good the impairment within a reasonable time. Notice to the insurer

21-30  is notice to its stockholders, if any. The failure of the insurer to comply

21-31  with such demand promptly does not excuse the association from the

21-32  performance of its powers and duties under this chapter.

21-33  (c) Must, in any liquidation or rehabilitation involving a domestic

21-34  insurer, be appointed as the liquidator or rehabilitator.

21-35  2.  The commissioner may suspend or revoke, after notice and hearing,

21-36  the certificate of authority to transact insurance in this state of any member

21-37  insurer which fails to pay an assessment when due or fails to comply with

21-38  the plan of operation. As an alternative the commissioner may levy a

21-39  forfeiture on any member insurer which fails to pay an assessment when

21-40  due. [Such forfeiture shall] The forfeiture may not exceed 5 percent of the

21-41  unpaid assessment per month, but no forfeiture may be less than $100 per

21-42  month.

21-43  3.  [Any] A final action of the board of directors or the association may

21-44  be appealed to the commissioner by any member insurer if [such] the

21-45  appeal is taken within [30] 60 days after the insurer receives notice of the

21-46  final action . [being appealed. If a member insurer appeals from an

21-47  assessment, it shall pay the amount assessed to the association and that

21-48  amount is available to meet the obligations of the association during the

21-49  pendency of the appeal. If the assessment is annulled or reduced on appeal,

22-1  the amount paid, or the excess, must be refunded by the association to the

22-2  insurer. Any] A final action or order of the commissioner is subject to

22-3  judicial review in a court of competent jurisdiction[.] pursuant to the

22-4  procedure provided in chapter 233B of NRS for contested cases.

22-5    4.  The liquidator, rehabilitator or conservator of any impaired insurer

22-6  may notify all interested persons of the effect of this chapter.

22-7    Sec. 52.  NRS 686C.303 is hereby amended to read as follows:

22-8    686C.303  If the association fails to act within a reasonable time [to

22-9  carry out its duties pursuant to] with respect to an insolvent insurer, as

22-10  provided in NRS 686C.150 to 686C.155, inclusive, the commissioner may

22-11  exercise the powers and perform the duties of the association under this

22-12  chapter with respect to the insolvent insurer . [involved.]

22-13  Sec. 53.  NRS 686C.306 is hereby amended to read as follows:

22-14  686C.306  1.  The commissioner shall notify the commissioners of

22-15  insurance of all the other states[, the territories of the United States, and

22-16  the District of Columbia when] within 30 days after he takes any of the

22-17  following actions against a member insurer:

22-18  (a) Revokes a member insurer’s license;

22-19  (b) Suspends a member insurer’s license; or

22-20  (c) Makes any formal order that a member insurer is to restrict its

22-21  premium writing, obtain additional contributions to surplus, withdraw from

22-22  the state, reinsure all or any part of its business, or increase capital, surplus,

22-23  or any other account for the security of [policyholders] the owners of its

22-24  policies or its creditors.

22-25  [This notice must be mailed to all commissioners within 30 days after the

22-26  action is taken.]

22-27  2.  The commissioner shall report to the board of directors when he has

22-28  taken any of the actions set forth in subsection 1, or has received a report

22-29  from any other commissioner indicating that any such action has been

22-30  taken in another state. The report to the board must contain all significant

22-31  details of the action taken or the report received from another

22-32  commissioner.

22-33  3.  The commissioner shall report to the board of directors when he

22-34  has reasonable cause to believe from an examination of a member

22-35  insurer, whether completed or in process, that the insurer may be

22-36  impaired or insolvent.

22-37  4.  The commissioner shall furnish to the board the ratios of the

22-38  “insurance regulatory information system” developed by the National

22-39  Association of Insurance Commissioners and [reports of examinations and]

22-40  listings of companies not included in those ratios, and the board may use

22-41  the information contained therein in carrying out its duties and

22-42  responsibilities under this chapter. Such reports and the information

22-43  contained therein must be kept confidential by the board until such time as

22-44  made public by the commissioner or other lawful authority.

22-45  [4.  The board shall, at the conclusion of any insolvency of an insurer

22-46  in which the association was obligated to pay covered claims, prepare a

22-47  report to the commissioner containing such information as it may have in

22-48  its possession bearing on the history and causes of the insolvency. The

22-49  board shall cooperate with the boards of directors of guaranty associations

23-1  in other states in preparing a report on the history and causes of insolvency

23-2  of a particular insurer, and may adopt by reference any report prepared by

23-3  one or more other associations.]

23-4    Sec. 54.  NRS 686C.310 is hereby amended to read as follows:

23-5    686C.310  [To aid in the detection and prevention of the impairment or

23-6  insolvency of insurers:]

23-7    1.  The board [shall,] of directors may, upon majority vote, notify the

23-8  commissioner of any information indicating any member insurer may be

23-9  impaired or insolvent. [The commissioner shall report to the board when he

23-10  has reasonable cause to believe from any examination, whether or not

23-11  completed, that any member insurer may be impaired or insolvent.

23-12  2.  The board may, upon majority vote, request that the commissioner

23-13  order an examination of any member insurer which the board in good faith

23-14  believes may be impaired or insolvent. The commissioner shall begin the

23-15  examination within 30 days after receiving the request. The examination

23-16  may be conducted by the National Association of Insurance

23-17  Commissioners or by such persons as the commissioner designates. The

23-18  cost of the examination must be paid by the association and the report

23-19  treated as are other reports of examinations. The report must not be

23-20  released to the board before its release to the public, but this does not

23-21  excuse the commissioner from his obligation to comply with subsection 1.

23-22  The commissioner shall notify the board when the examination is

23-23  completed. The request for an examination must be kept on file by the

23-24  commissioner but it is not open to public inspection before the release of

23-25  the report of the examination to the public and may be released at that time

23-26  only if the examination discloses that the examined insurer is impaired or

23-27  insolvent.

23-28  3.] 2. The board may, upon majority vote, make reports and

23-29  recommendations to the commissioner upon any matter germane to the

23-30  solvency, liquidation, rehabilitation or conservation of any member insurer

23-31  or germane to the solvency of any person seeking admission to transact

23-32  insurance in this state. These reports and recommendations are not open to

23-33  public inspection.

23-34  [4.] 3. The commissioner may seek the advice and recommendations

23-35  of the board concerning any matter affecting his duties and responsibilities

23-36  regarding the financial condition of member insurers and of persons

23-37  seeking admission to transact insurance in this state.

23-38  [5.] 4. The board may, upon majority vote, make recommendations to

23-39  the commissioner for the detection and prevention of the insolvency of

23-40  insurers.

23-41  Sec. 55.  NRS 686C.330 is hereby amended to read as follows:

23-42  686C.330  1.  This chapter does not reduce the liability for unpaid

23-43  assessments of the insureds of an impaired insurer operating under a plan

23-44  with liability for assessments.

23-45  2.  Records must be kept of all [negotiations and meetings in which the

23-46  association or its representatives are involved] meetings of the board of

23-47  directors to discuss the activities of the association in carrying out its

23-48  powers and duties under NRS 686C.150 to 686C.220, inclusive. [Records

23-49  of such negotiations or meetings must be made public upon a majority vote

24-1  of the board, upon] The records of the association with respect to an

24-2  impaired or insolvent insurer may not be disclosed before the termination

24-3  of a proceeding for liquidation, rehabilitation or conservation involving the

24-4  impaired or insolvent insurer[, upon] or the termination of the impairment

24-5  or insolvency of the insurer, [or] except upon the order of a court of

24-6  competent jurisdiction. This subsection does not limit the duty of the

24-7  association to render a report of its activities under NRS 686C.350.

24-8    3.  For the purpose of carrying out its obligations under this chapter, the

24-9  association shall be deemed to be a creditor of the impaired or insolvent

24-10  insurer to the extent of assets attributable to covered policies reduced by

24-11  any amounts to which the association is entitled as subrogee pursuant to

24-12  NRS 686C.200. Assets of the impaired or insolvent insurer attributable to

24-13  covered policies must be used to continue all covered policies and pay all

24-14  contractual obligations of the impaired or insolvent insurer as required by

24-15  this chapter. Assets attributable to covered policies, as used in this

24-16  subsection, are that proportion of the assets which the reserves that should

24-17  have been established for covered policies bear to the reserves that should

24-18  have been established for all policies of insurance written by the impaired

24-19  or insolvent insurer.

24-20  4.  As a creditor of the impaired or insolvent insurer under subsection

24-21  3 and consistent with NRS 696B.415, the association and other similar

24-22  associations are entitled to receive a disbursement out of the marshaled

24-23  assets, from time to time as the assets become available to reimburse it, as

24-24  a credit against contractual obligations under this chapter. If the

24-25  liquidator has not, within 120 days after a final determination of

24-26  insolvency of an insurer by the court in the insolvent or impaired

24-27  insurer’s state which has jurisdiction over the conservation,

24-28  rehabilitation or liquidation of the insurer, made an application to the

24-29  court for the approval of a proposal to disburse assets out of marshaled

24-30  assets to guaranty associations having obligations because of the

24-31  insolvency, the association is entitled to make application to the court for

24-32  approval of its own proposal to disburse those assets.

24-33  5.  Before the termination of any proceeding for liquidation,

24-34  rehabilitation or conservation, the court may take into consideration the

24-35  contributions of the respective parties, including the association, the

24-36  shareholders and [policyholders] owners of policies and contracts of the

24-37  impaired or insolvent insurer, and any other party with a bona fide interest,

24-38  in making an equitable distribution of the ownership of the impaired or

24-39  insolvent insurer. In making such a determination, consideration must be

24-40  given to the welfare of the [policyholders of] owners of policies issued by

24-41  the continuing or successor insurer. No distribution to stockholders, if any,

24-42  of an impaired or insolvent insurer may be made until [and unless] the total

24-43  amount of valid claims of the association, with interest thereon, for money

24-44  expended in exercising its powers and performing its duties under NRS

24-45  686C.150 to 686C.155, inclusive, with respect to that insurer have been

24-46  fully recovered by the association.

24-47  Sec. 56.  NRS 686C.350 is hereby amended to read as follows:

24-48  686C.350  The association is subject to examination and regulation by

24-49  the commissioner. The board of directors shall submit to the

25-1  commissioner, not later than 120 days after the end of its fiscal year, a

25-2  financial report in a form approved by the commissioner and a report of its

25-3  activities during the preceding fiscal year. Upon the request of a member

25-4  insurer, the association shall provide the insurer with a copy of the

25-5  report.

25-6    Sec. 57.  NRS 686C.151, 686C.320, 686C.336 and 686C.345 are

25-7  hereby repealed.

 

25-8  LEADLINES OF REPEALED SECTIONS

 

25-9    686C.151  Duties regarding impaired insurers not making timely

25-10   payment of claims; conditions.

25-11  686C.320  Association may nominate special deputy.

25-12  686C.336  Liquidation of insolvent insurers: Responsibility for due

25-13   and unearned premiums.

25-14  686C.345  Restrictions on insurer pending repayment or approval

25-15   of plan for repayment of guaranty associations.

 

25-16  H