(REPRINTED WITH ADOPTED AMENDMENTS)

 

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 2.5 to 20, inclusive, of this act.

2-8    Sec. 2.5 “Annuity” includes an agreement for allocated funding, a

2-9  structured settlement annuity and an immediate or deferred annuity.

2-10    Sec. 3.  “Authorized assessment” or “authorized” as used in the

2-11  context of assessments means or describes an assessment authorized by a

2-12  resolution of the board of directors of the association to be imposed

2-13  immediately or later on member insurers in a specified amount.

2-14    Sec. 4.  “Benefit plan” means a benefit plan for a specific employee,

2-15  union or association of natural persons.

2-16    Sec. 5.  “Called assessment” or “called” as used in the context of

2-17  assessments means or describes an authorized assessment required by a

2-18  notice mailed by the association to member insurers to be paid within the

2-19  time set forth in the notice.

2-20    Sec. 6.  “Extra-contractual claim” includes a claim relating to bad

2-21  faith in the payment of claims and a claim for punitive or exemplary

2-22  damages or for costs and attorney’s fees.

2-23    Sec. 7.  “Owner” of a policy or contract means the person who is

2-24  identified as the legal owner under the terms of the policy or contract or

2-25  who is otherwise vested with legal title to the policy or contract through a

2-26  valid assignment completed in accordance with the terms of the policy or

2-27  contract and properly recorded as the owner on the books of the issuer.

2-28    Sec. 8.  “Person” includes a government, governmental agency or

2-29  political subdivision of a government.

2-30    Sec. 9.  1.  “Principal place of business” of an organization means

2-31  the single state in which the natural persons who establish policy for the

2-32  direction, control and coordination of the operations of the organization

2-33  as a whole primarily perform that function, determined by the

2-34  association in its reasonable judgment by considering:

2-35    (a) The state in which the primary executive and administrative

2-36  headquarters of the organization is located;

2-37    (b) The state in which the principal office of the chief executive

2-38  officer of the organization is located;

2-39    (c) The state in which the board of directors, or similar governing

2-40  authority, of the organization conducts the majority of its meetings;

2-41    (d) The state in which the executive or managerial committee of the

2-42  board of directors, or similar governing authority, of the organization

2-43  conducts the majority of its meetings; and

2-44    (e) The state from which the management of the overall operations of

2-45  the organization is directed.

2-46    2.  “Principal place of business” of the sponsor of a benefit plan

2-47  means the principal place of business of the association, committee, joint

2-48  board of trustees or similar group of representatives of the parties who

2-49  establish or maintain the plan or, if that cannot be ascertained, of the

3-1  employer or the employee organization that has the largest investment in

3-2  the plan, except that in either case if more than half of the participants of

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

3-4  benefit plan sponsored by affiliated companies comprising a consolidated

3-5  corporation, it means the state in which the holding company or

3-6  controlling affiliate has its principal place of business as determined by

3-7  using the factors set forth in subsection 1.

3-8    Sec. 10.  “State” means a state of the United States, the District of

3-9  Columbia, Puerto Rico, the United States Virgin Islands or any territory

3-10  or insular possession subject to the jurisdiction of the United States.

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

3-12  purchased to fund periodic payments to a plaintiff or other claimant in

3-13  payment for or with respect to personal injury suffered by him.

3-14    Sec. 12.  Premiums due for coverage after entry of an order of

3-15  liquidation of an insolvent insurer belong to and are payable at the

3-16  direction of the association, and the association is liable for unearned

3-17  premiums due to owners of policies or contracts arising after the entry of

3-18  such an order.

3-19    Sec. 13.  A deposit in this state, held pursuant to law or required by

3-20  the commissioner for the benefit of creditors, including owners of

3-21  policies, not turned over to the domiciliary receiver upon the entry of a

3-22  final order of liquidation or order approving a plan of rehabilitation of

3-23  an insurer domiciled in this state or a reciprocal state pursuant to NRS

3-24  696B.290 or 696B.300 must be promptly paid to the association. The

3-25  association is entitled to retain a portion of an amount so paid to it that is

3-26  equal to the percentage determined by dividing the aggregate amount of

3-27  policy owners’ claims related to that insolvency for which the association

3-28  has provided statutory benefits by the aggregate amount of all policy

3-29  owners’ claims in this state related to that insolvency, and shall remit the

3-30  remainder to the domiciliary receiver. The amount so remitted is a

3-31  distribution of the assets of the insurer for the purposes of chapter 696B

3-32  of NRS.

3-33    Sec. 14.  1.  As used in this section, “coverage date” means the date

3-34  on which the association becomes liable for the obligations of a member

3-35  insurer.

3-36    2.  At any time after the coverage date, the association may elect to

3-37  succeed to the rights and obligations of the member insurer which accrue

3-38  on or after the coverage date and relate to contracts covered, in whole or

3-39  in part, by the association under any one or more agreements for

3-40  indemnity reinsurance entered into by the member insurer as ceding

3-41  insurer and selected by the association. However, the association may not

3-42  exercise its right of election with respect to an agreement for reinsurance

3-43  if the receiver, rehabilitator or liquidator of the member insurer has

3-44  previously expressly disaffirmed the agreement. The election must be

3-45  effected by a notice to the receiver, rehabilitator or liquidator and the

3-46  affected reinsurers. If the association makes such an election:

3-47    (a) The association is responsible for all unpaid premiums due under

3-48  each agreement for periods both before and after the coverage date, and

3-49  for the performance of all other obligations to be performed after the

4-1  coverage date, in each case which relates to a contract covered in whole

4-2  or in part by the association. The association may charge a contract

4-3  covered in part by it, through reasonable methods of allocation, for the

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

4-5    (b) The association is entitled to any amount payable by the reinsurer

4-6  under each agreement with respect to losses or events that occur in

4-7  periods after the coverage date and relate to contracts covered in whole

4-8  or in part by the association, but upon receipt of any such amount, the

4-9  association is obligated to pay, to the beneficiary under the contract on

4-10  account of which the amount was paid, that portion of the amount

4-11  received by the association that exceeds the benefits paid by the

4-12  association on account of the contract less the retention by the impaired

4-13  or insolvent member insurer applicable to the loss or event.

4-14    (c) The association and each reinsurer shall, within 30 days after the

4-15  election, calculate the net balance due to or from the association under

4-16  each agreement as of the date of the election, giving full credit for all

4-17  items paid by the member insurer or its receiver, rehabilitator or

4-18  liquidator, or the reinsurer, between the coverage date and the date of the

4-19  election. The association or the reinsurer shall pay the net balance

4-20  within 5 days after the completion of the calculation. If a receiver,

4-21  rehabilitator or liquidator has received any amount due the association

4-22  pursuant to paragraph (b), the recipient shall remit the amount to the

4-23  association as promptly as practicable.

4-24    (d) The reinsurer may not terminate an agreement for reinsurance

4-25  insofar as it relates to contracts covered by the association in whole or in

4-26  part, or set off any unpaid premium due for a period before the coverage

4-27  date against the amount due the association, if the association, within 60

4-28  days after the election, pays the premiums due for periods both before

4-29  and after the coverage date which relate to such contracts.

4-30    3.  If the association transfers its obligation to another insurer, and

4-31  the association and the other insurer so agree, the other insurer succeeds

4-32  to the rights and obligations of the association under subsection 2

4-33  effective as of the agreed date, whether or not the association has made

4-34  the election described in subsection 2, except that:

4-35    (a) An agreement for indemnity reinsurance automatically terminates

4-36  as to new reinsurance unless the reinsurer and the other insurer agree to

4-37  the contrary;

4-38    (b) The obligation of the association to the beneficiary under

4-39  paragraph (b) of subsection 2 ceases on the date of the transfer to the

4-40  other insurer; and

4-41    (c) This subsection does not apply if the association has previously

4-42  expressly determined in writing that it will not exercise its right of

4-43  election under subsection 2.

4-44    4.  The provisions of this section supersede an affected agreement for

4-45  reinsurance which provides for or requires payment of proceeds of

4-46  reinsurance, on account of a loss or event that occurs after the coverage

4-47  date, to the receiver, rehabilitator or liquidator of the insolvent member

4-48  insurer. The receiver, rehabilitator or liquidator remains entitled to any

4-49  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

5-48  by a statement in writing that the payment is made under protest and

5-49  setting forth briefly the grounds for the protest.

6-1    2.  Within 60 days after the payment of an assessment under protest,

6-2  the association shall notify the member insurer in writing of the

6-3  determination of the association with respect to the protest, unless the

6-4  association notifies the member insurer that additional time is required

6-5  to resolve the issues raised by the protest.

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

6-7  notify the protesting member insurer in writing of the final decision.

6-8  Within 60 days after receipt of that notice, the protesting member insurer

6-9  may appeal the decision to the commissioner.

6-10    4.  As an alternative to making a final decision with respect to a

6-11  protest concerning the basis of assessment, the association may refer the

6-12  protest to the commissioner for a final decision, with or without a

6-13  recommendation from the association.

6-14    5.  If a protest or appeal is upheld, the amount paid in error or excess

6-15  must be returned to the member insurer. Interest must be paid on the

6-16  refund at the rate actually earned by the association.

6-17    Sec. 19.  The association may request information from member

6-18  insurers to aid in the exercise of its powers under this chapter, and each

6-19  member shall promptly comply with such a request.

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

6-21  insurer, or other person to make, publish, circulate or place before the

6-22  public, or cause any other person to do so, in any publication, notice,

6-23  circular, letter or poster, or over any radio or television station, any

6-24  advertisement or statement, written or oral, which uses the existence of

6-25  the association for the sale, solicitation or inducement to purchase any

6-26  form of insurance covered by the association. This section does not apply

6-27  to the association or any other person that does not sell or solicit

6-28  insurance.

6-29    Sec. 21.  NRS 686C.020 is hereby amended to read as follows:

6-30    686C.020  The purpose of this chapter is to protect , within certain

6-31  limits, the persons specified in [subsection] subsections 1 and 2 of NRS

6-32  686C.030 against failure in the performance of contractual obligations

6-33  under life and health insurance policies[, annuities and contracts] and

6-34  contracts, and annuities, specified in subsection [2] 4 of NRS 686C.030

6-35  because of the impairment or insolvency of [the] a member insurer issuing

6-36  such policies or contracts.

6-37    Sec. 22.  NRS 686C.030 is hereby amended to read as follows:

6-38    686C.030  1.  This chapter provides coverage for the policies or

6-39  contracts described in subsection [2] 4 to persons who are:

6-40    (a) Owners of or certificate holders under such policies or contracts,

6-41  other than structured settlement annuities, and who:

6-42      (1) Are residents of this state; or

6-43      (2) Are not residents, but only if:

6-44        (I) The [insurers which] insurer that issued the policies or

6-45  contracts [are] is domiciled in this state;

6-46        (II) [Those insurers did not hold at the time the policies or

6-47  contracts were issued a license or certificate of authority in the states in

6-48  which those persons reside;

7-1         (III)] The states in which the [nonresident] persons reside have

7-2  associations [for protection against impaired or insolvent insurers] similar

7-3  to the association created by this chapter; and

7-4         [(IV) Those]

7-5         (III) The persons are not eligible for coverage by [those] an

7-6  association in another state because the insurer was not authorized in the

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

7-8  associations; and

7-9    (b) Beneficiaries, assignees or payees of the persons covered under

7-10  paragraph (a), wherever they reside, except for nonresident certificate

7-11  holders under group policies or contracts.

7-12    2.  For structured settlement annuities, except as otherwise provided

7-13  in subsection 3, this chapter provides coverage to a payee under the

7-14  annuity, or beneficiary of a payee if the payee is deceased, if the payee or

7-15  beneficiary:

7-16    (a) Is a resident of this state, regardless of the residence of the owner

7-17  of the annuity; or

7-18    (b) Is not a resident of this state, but:

7-19      (1) The owner of the annuity is a resident of this state, or the issuer

7-20  of the annuity is domiciled in this state and the state in which the owner

7-21  resides has an association similar to the association created by this

7-22  chapter; and

7-23      (2) Neither the payee or beneficiary nor the owner of the annuity is

7-24  eligible for coverage by the association of the state in which the payee,

7-25  beneficiary or owner resides.

7-26    3.  This chapter does not provide coverage for a payee or beneficiary

7-27  of a structured settlement annuity if the owner of the annuity is a

7-28  resident of this state and the payee or beneficiary is afforded any

7-29  coverage by the association of another state. In determining the

7-30  application of the provisions of this chapter to a situation where a person

7-31  could be covered by the association of more than one state, this chapter

7-32  must be construed in conjunction with the laws of other states to result in

7-33  coverage by only one association.

7-34    4.  This chapter provides coverage to the persons described in

7-35  [subsection] subsections 1 and 2 for direct, nongroup life, health and

7-36  supplemental policies or contracts, and annuities, and certificates under

7-37  direct group policies and contracts, and annuities, [issued by member

7-38  insurers,] except as limited by this chapter.

7-39    Sec. 23.  NRS 686C.035 is hereby amended to read as follows:

7-40    686C.035  1.  This chapter does not provide coverage for:

7-41    (a) [Any] A portion of a policy or contract not guaranteed by the

7-42  insurer, or under which the risk is borne by the [holder] owner of the

7-43  policy or contract.

7-44    (b) [Any] A policy or contract of reinsurance unless assumption

7-45  certificates have been issued pursuant to that policy or contract.

7-46    (c) [Any] A portion of a policy or contract to the extent that the rate of

7-47  interest on which it is based [:] , or the interest rate, crediting rate or

7-48  similar factor determined by the use of an index or other external

8-1  reference stated in the policy or contract employed in calculating returns

8-2  or changes in value:

8-3       (1) [When averaged] Averaged over the period of 4 years before the

8-4  date on which the association becomes obligated with respect to the policy

8-5  or contract, [or averaged for the period since the policy or contract was

8-6  issued if it was issued less than 4 years before the association became

8-7  obligated,] exceeds the rate of interest determined by subtracting 2

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

8-9  for the same period[;] , or for the period between the date of issuance of

8-10  the policy or contract and the date the association became obligated,

8-11  whichever period is less; and

8-12      (2) On or after the date on which the association becomes obligated

8-13  with respect to the policy or contract, exceeds the rate of interest

8-14  determined by subtracting 3 percentage points from [the most recent]

8-15  Moody’s Corporate Bond Yield Average[.

8-16    (d) Any] as most recently available.

8-17    (d) A portion of a policy or contract issued to a plan or program of an

8-18  employer, association or other person to provide life, health or annuity

8-19  benefits to its employees, members or other persons to the extent that the

8-20  plan or program is self-funded or uninsured, including, but not limited to,

8-21  benefits payable by an employer, association or other person under:

8-22      (1) A multiple employer welfare arrangement [as defined] described

8-23  in 29 U.S.C. [§ 1002;] § 1144;

8-24      (2) A minimum-premium group insurance plan;

8-25      (3) A stop-loss group insurance plan; or

8-26      (4) A contract for administrative services only.

8-27    (e) [Any] A portion of a policy or contract to the extent that it provides

8-28  for dividends, credits for experience, voting rights or the payment of any

8-29  fee or allowance to any person, including the [holder] owner of a policy or

8-30  contract, for services or administration connected with the policy or

8-31  contract.

8-32    (f) [Any] A policy or contract issued in this state by a member insurer at

8-33  a time when the member insurer was not authorized to issue the policy or

8-34  contract in this state.

8-35    (g) A portion of a policy or contract to the extent that the assessments

8-36  required by NRS 686C.230 [for] with respect to the policy or contract are

8-37  preempted by federal law.

8-38    (h) An obligation that does not arise under the express written terms of

8-39  [a] the policy or contract issued by the insurer[.

8-40  (i)] , including:

8-41      (1) Claims based on marketing materials;

8-42      (2) Claims based on side letters or other documents that were issued

8-43  by the insurer without satisfying applicable requirements for filing or

8-44  approval of policy forms;

8-45      (3) Misrepresentations of or regarding policy benefits;

8-46      (4) Extra-contractual claims; or

8-47      (5) A claim for penalties or consequential or incidental damages.

8-48    (i) A contractual agreement that establishes the member insurer’s

8-49  obligation to provide a guarantee based on accounting at book value for

9-1  participants in a defined-contribution benefit plan by reference to a

9-2  portfolio of assets owned by the benefit plan or its trustee, which in each

9-3  case is not an affiliate of the member insurer.

9-4    (j) A portion of a policy or contract to the extent that it provides for

9-5  interest or other changes in value which are determined by the use of an

9-6  index or other external reference stated in the policy or contract, but

9-7  which have not been credited to the policy or contract, or as to which the

9-8  rights of the owner of the policy or contract are subject to forfeiture,

9-9  determined on the date the member insurer becomes an impaired or

9-10  insolvent insurer, whichever occurs first. If the interest or changes in

9-11  value of a policy or contract are credited less frequently than annually,

9-12  for the purpose of determining the values that have been credited and are

9-13  not subject to forfeiture, the interest or change in value determined by

9-14  using procedures stated in the policy or contract must be credited as if

9-15  the contractual date for crediting interest or changing values was the

9-16  date of the impairment or insolvency of the insured member, whichever

9-17  occurs first and is not subject to forfeiture.

9-18    (k) An unallocated annuity contract.

9-19    2.  As used in this section, “Moody’s Corporate Bond Yield Average”

9-20  means the monthly average for corporate bonds published by Moody’s

9-21  Investors Service, Inc., or any successor average.

9-22    Sec. 24.  NRS 686C.040 is hereby amended to read as follows:

9-23    686C.040  As used in this chapter, unless the context otherwise

9-24  requires, the words and terms defined in NRS 686C.045 to 686C.125,

9-25  inclusive, and sections 2.5 to 11, inclusive, of this act have the meanings

9-26  ascribed to them in those sections.

9-27    Sec. 25.  NRS 686C.070 is hereby amended to read as follows:

9-28    686C.070  “Contractual obligation” means any obligation under a

9-29  policy or contract or a certificate under a group policy or contract, or

9-30  portion thereof, for which coverage is provided under NRS 686C.030 . [,

9-31  and includes unearned premiums.]

9-32    Sec. 26.  NRS 686C.090 is hereby amended to read as follows:

9-33    686C.090  “Impaired insurer” means an insurer which is not an

9-34  insolvent insurer and[:

9-35    1.  Is] is placed under an order of rehabilitation or conservation by a

9-36  court of competent jurisdiction . [; or

9-37    2.  Is determined by the commissioner to be unable or potentially

9-38  unable to fulfill its contractual obligations.]

9-39    Sec. 27.  NRS 686C.100 is hereby amended to read as follows:

9-40    686C.100  “Member insurer” means [any] an insurer which is licensed

9-41  or holds a certificate of authority to transact in this state any kind of

9-42  insurance for which coverage is provided in this chapter and includes [any]

9-43  an insurer whose license or certificate of authority [to transact such

9-44  insurance] in this state has been suspended, revoked, not renewed or

9-45  voluntarily withdrawn. The term does not include:

9-46    1.  A [nonprofit] hospital or medical organization[;] , whether or not

9-47  for profit;

9-48    2.  A health maintenance organization;

9-49    3.  A fraternal benefit society;

10-1    4.  A mandatory state pooling plan;

10-2    5.  A mutual assessment company or [any entity] other person that

10-3  operates on the basis of assessments;

10-4    6.  An insurance exchange; [or

10-5    7.  Any other similar entity.]

10-6    7.  An organization that is authorized only to issue charitable gift

10-7  annuities under NRS 688A.281 to 688A.285, inclusive; or

10-8    8.  An organization similar to any of those listed in subsections 1 to 7,

10-9  inclusive.

10-10  Sec. 27.5 NRS 686C.110 is hereby amended to read as follows:

10-11  686C.110  “Premiums” means amounts received in any calendar year

10-12  on covered policies or contracts less premiums, considerations and deposits

10-13  returned thereon, and less dividends and credits for experience thereon.

10-14  The term does not include [any] :

10-15  1.  Any amounts received for policies or contracts or for the portions of

10-16  policies or contracts for which coverage is not provided under NRS

10-17  686C.030 except that the assessable premium is not reduced on account of

10-18  paragraph (c) of subsection 1 of NRS 686C.035 relating to limitations on

10-19  interest and subsection 2 or paragraph (b) of subsection 1 of NRS

10-20  686C.210 relating to limitations with respect to any one life.

10-21  2.  Premiums for an unallocated annuity contract.

10-22  3.  Premiums that exceed $5,000,000 for several nongroup policies of

10-23  life insurance owned by one owner, regardless of:

10-24  (a) Whether the owner is a natural person, firm, corporation or other

10-25  person;

10-26  (b) Whether any person insured under the policies is an officer,

10-27  manager, employee or other person; or

10-28  (c) The number of policies or contracts held by the owner.

10-29  Sec. 28.  NRS 686C.120 is hereby amended to read as follows:

10-30  686C.120  “Resident” means any person to whom a contractual

10-31  obligation is owed and who resides in this state [at the time] on the date of

10-32  entry of a court order that determines a member insurer [is determined] to

10-33  be impaired or insolvent [and to whom contractual obligations are owed.] ,

10-34  whichever determination is first made. A person may be a resident of but

10-35  one state, which in the case of a person other than a natural person is its

10-36  principal place of business. A citizen of the United States who is a resident

10-37  of a foreign country or of a territory or insular possession subject to the

10-38  jurisdiction of the United States which does not have an association

10-39  similar to the association created by this chapter shall be deemed to be a

10-40  resident of the state of domicile of the insurer that issued the policy or

10-41  contract.

10-42  Sec. 29.  NRS 686C.125 is hereby amended to read as follows:

10-43  686C.125  “Supplemental contract” means [an] a written agreement for

10-44  the distribution of proceeds from a [contract or policy.] life or health

10-45  insurance policy or an annuity.

10-46  Sec. 30.  NRS 686C.128 is hereby amended to read as follows:

10-47  686C.128  1.  The association shall prepare, and submit to the

10-48  commissioner for approval, a summary document describing the general

10-49  purposes[, exclusions] and current limitations of this chapter. [No insurer

11-1  may] After the expiration of 60 days after the approval of the summary

11-2  document by the commissioner, an insurer may not deliver a policy or

11-3  contract [described in NRS 686C.030 to an intended holder] to the owner

11-4  of the policy or contract unless the summary document is delivered to the

11-5  [intended holder before or] owner at the time of delivery of the policy or

11-6  contract. The document must also be available upon request by [a

11-7  policyholder.] the owner of a policy. The distribution, delivery, contents or

11-8  interpretation of this document [do not mean] does not guarantee that the

11-9  policy or the contract or [the holder thereof would be] its owner is covered

11-10  in the event of the impairment or insolvency of a member insurer. The

11-11  descriptive document must be revised by the association as amendments to

11-12  this chapter may require. Failure to receive this document does not give the

11-13  [holder] owner of a policy or contract, or an insured, any greater rights

11-14  than those stated in this chapter.

11-15  2.  The document prepared pursuant to subsection 1 must contain a

11-16  clear and conspicuous disclaimer on its face. The commissioner shall

11-17  establish the form and content of the disclaimer. The disclaimer must:

11-18  (a) State the name and address of the association and of the division;

11-19  (b) Prominently warn the owner of the policy or contract [holder] that

11-20  the association may not cover the policy or, if coverage is available, it will

11-21  be subject to substantial limitations and exclusions and conditioned on

11-22  continued residence in this state;

11-23  (c) State the types of policies for which guaranty funds will provide

11-24  coverage;

11-25  (d) State that the insurer and its agents are prohibited by law from using

11-26  the existence of the association for the purpose of sales, solicitation or

11-27  inducement to purchase any form of insurance;

11-28  [(d) Emphasize]

11-29  (e) State that the [holder] owner of a policy or contract should not rely

11-30  on coverage under the association when selecting an insurer; [and

11-31  (e)] (f) Explain the rights and procedures for filing a complaint to

11-32  allege a violation of any provision of this chapter; and

11-33  (g) Provide other information as directed by the commissioner[.] ,

11-34  including sources of information about the financial condition of

11-35  insurers, if the information is not proprietary and is subject to disclosure

11-36  under the law of the state in which the insurer is domiciled.

11-37  3.  A member insurer shall retain evidence of compliance with

11-38  subsection 1 while the policy or contract for which the notice is given

11-39  remains in effect.

11-40  Sec. 31.  NRS 686C.130 is hereby amended to read as follows:

11-41  686C.130  1.  There is hereby created a nonprofit[, unincorporated,]

11-42  legal entity to be known as the Nevada Life and Health Insurance Guaranty

11-43  Association. All member insurers shall be and remain members of the

11-44  association as a condition of their authority to transact insurance in this

11-45  state. The association shall perform its functions under the plan of

11-46  operation established and approved pursuant to NRS 686C.290 and shall

11-47  exercise its powers through a board of directors established pursuant to

11-48  NRS 686C.140.

12-1    2.  For purposes of administration and assessment, the association shall

12-2  maintain two accounts:

12-3    (a) The account for health insurance; and

12-4    (b) The account for life insurance and annuities, which consists of:

12-5      (1) The subaccount for life insurance; and

12-6      (2) The subaccount for annuities[.] , including annuities owned by a

12-7  governmental retirement plan, or its trustees, established under section

12-8  401, 403(b) or 457 of the Internal Revenue Code, 26 U.S.C. §§ 401,

12-9  403(b) and 457.

12-10  3.  The association is under the immediate supervision of the

12-11  commissioner and is subject to the applicable provisions of the Nevada

12-12  Insurance Code. Meetings or records of the association may be opened to

12-13  the public by majority vote of the board of directors.

12-14  Sec. 32.  NRS 686C.140 is hereby amended to read as follows:

12-15  686C.140  1.  The board of directors of the association [shall consist]

12-16  consists of not less than five nor more than nine members, serving terms as

12-17  established in the plan of operation. The members of the board [shall] who

12-18  represent insurers must be selected by member insurers subject to the

12-19  approval of the commissioner. Two public representatives must be

12-20  appointed to the board by the commissioner. A public representative may

12-21  not be an officer, director or employee of an insurer or engaged in the

12-22  business of insurance. Vacancies on the board [shall] must be filled for

12-23  the remaining period of the term [in the manner described in the plan of

12-24  operation.] by majority vote of the members of the board, subject to the

12-25  approval of the commissioner, for members who represent insurers, and

12-26  by the commissioner for public representatives. To select the initial board

12-27  of directors, and initially organize the association, the commissioner shall

12-28  give notice to all member insurers of the time and place of the

12-29  organizational meeting. In determining voting rights at the organizational

12-30  meeting each member insurer [shall be] is entitled to one vote in person or

12-31  by proxy. If the board of directors is not selected within 60 days after

12-32  notice of the organizational meeting, the commissioner may appoint the

12-33  initial members[.] to represent insurers in addition to the public

12-34  representatives.

12-35  2.  In approving selections or in appointing members to the board, the

12-36  commissioner shall consider, among other things, whether all member

12-37  insurers are fairly represented.

12-38  3.  Members of the board may be reimbursed from the assets of the

12-39  association for expenses incurred by them as members of the board of

12-40  directors but members of the board [shall] may not otherwise be

12-41  compensated by the association for their services.

12-42  Sec. 33.  NRS 686C.150 is hereby amended to read as follows:

12-43  686C.150  If a [domestic] member insurer is an impaired insurer, the

12-44  association may, subject to any conditions it may impose which do not

12-45  impair the contractual obligations of the impaired insurer [,] and which are

12-46  approved by the commissioner : [, and, except in cases of court-ordered

12-47  conservation or rehabilitation, are approved by the impaired insurer:]

13-1    1.  Guarantee, assume or reinsure, or cause to be guaranteed, assumed

13-2  or reinsured, any or all of the covered policies or contracts of the impaired

13-3  insurer.

13-4    2.  Provide such money, pledges, loans, notes, guarantees or other

13-5  means as are proper to effectuate subsection 1, and assure payment of the

13-6  contractual obligations of the impaired insurer pending action under

13-7  subsection 1.

13-8    [3.  Lend money to the impaired insurer.]

13-9    Sec. 34.  NRS 686C.152 is hereby amended to read as follows:

13-10  686C.152  If a member insurer is an insolvent insurer, the association

13-11  shall:

13-12  1.  Guarantee, assume or reinsure, or cause to be guaranteed, assumed

13-13  or reinsured, the policies or contracts of the insolvent insurer; or

13-14  2.  Ensure payment of the contractual obligations of the insolvent

13-15  insurer and:

13-16  (a) Provide such money, pledges, loans, notes, guarantees or other

13-17  means as are reasonably necessary to discharge [such] its duties; or

13-18  (b) [With respect only to life and health insurance policies, provide]

13-19  Provide benefits and coverages in accordance with NRS 686C.153 and

13-20  686C.154.

13-21  Sec. 35.  NRS 686C.153 is hereby amended to read as follows:

13-22  686C.153  When proceeding pursuant to paragraph (b) of subsection [1

13-23  of NRS 686C.151 or paragraph (b) of subsection] 2 of NRS 686C.152, the

13-24  association shall [, with] :

13-25  1.  With respect to life and health insurance policies [only:

13-26  1.  Ensure] and annuities, ensure payment of benefits for premiums

13-27  identical to the premiums and benefits, except for terms of conversion and

13-28  renewability, which would have been payable under policies or contracts

13-29  of the insolvent insurer, for claims incurred with respect to:

13-30  (a) A group policy or contract, not later than the earlier of the next

13-31  renewal date under the policy or contract or 45 days, but in no event less

13-32  than 30 days, after the date when the association becomes obligated with

13-33  respect to that policy[.

13-34  (b) An individual policy,] or contract.

13-35  (b) A nongroup policy, contract or annuity, not later than the earlier of

13-36  the next renewal date, if any, under the policy , contract or annuity or 1

13-37  year, but in no event less than 30 days, after the date when the association

13-38  becomes obligated with respect to that policy[.] , contract or annuity.

13-39  2.  Make diligent efforts to provide all known insureds or

13-40  [policyholders] owners with respect to group policies or contracts, or

13-41  annuitants with respect to annuities, 30 days’ notice of termination of the

13-42  benefits provided[.

13-43  3.  Make] pursuant to subsection 1.

13-44  3.  With respect to nongroup life and health insurance policies and

13-45  annuities, make available substitute coverage on an individual basis, in

13-46  accordance with the provisions of subsection 4, to each known insured

13-47  [under an individual policy,] or annuitant, or owner if other than the

13-48  insured[,] or annuitant, and to each natural person formerly insured , or

13-49  formerly an annuitant, under a group policy who is not eligible for

14-1  replacement group coverage, if the insured or annuitant had a right under

14-2  law [to convert coverage under] or the terminated policy or annuity to

14-3  convert coverage to individual coverage or to continue an individual policy

14-4  or annuity in force until a specified age or for a specified period, during

14-5  which the insurer had no right unilaterally to make changes in any

14-6  provision of the policy or annuity or had a right only to make changes in

14-7  premium by class.

14-8    4.  In providing the substitute coverage required under subsection 3, the

14-9  association may offer to reissue the terminated coverage or to issue an

14-10  alternative policy that must be offered without requiring evidence of

14-11  insurability or a waiting period or exclusion that would not have applied

14-12  under the terminated policy, and may reinsure any alternative or reinsured

14-13  policy.

14-14  Sec. 36.  NRS 686C.154 is hereby amended to read as follows:

14-15  686C.154  1.  Alternative policies adopted by the association are

14-16  subject to the approval of the commissioner[.] and the court in the

14-17  insolvent or impaired insurer’s state which has jurisdiction over the

14-18  conservation, rehabilitation or liquidation of the insurer. The association

14-19  may adopt alternative policies of various types for future issuance without

14-20  regard to any particular impairment or insolvency.

14-21  2.  An alternative policy must contain at least the minimum statutory

14-22  provisions required in this state and provide benefits that are not

14-23  unreasonable in relation to the premium charged. The association shall set

14-24  the premium in accordance with a table of rates which it shall adopt. The

14-25  premium must reflect the amount of insurance to be provided and the age

14-26  and class of risk of each insured, but must not reflect any changes in the

14-27  health of the insured after the original policy was last underwritten.

14-28  3.  An alternative policy issued by the association must provide

14-29  coverage of a type similar to that of the policy issued by the impaired or

14-30  insolvent insurer, as determined by the association.

14-31  4.  If the association elects to reissue terminated coverage at a rate of

14-32  premium different from that charged under the terminated policy, the

14-33  premium must be set by the association in accordance with the amount of

14-34  insurance provided and the age and class of risk, subject to approval by the

14-35  commissioner [or by a court of competent jurisdiction.] and the court

14-36  described in subsection 1.

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

14-38  686C.155  When proceeding pursuant to paragraph (b) of subsection [1

14-39  of NRS 686C.151 or paragraph (b) of subsection] 2 of NRS 686C.152 with

14-40  respect to any policy or contract carrying guaranteed minimum interest

14-41  rates, the association shall ensure the payment or crediting of a rate of

14-42  interest consistent with paragraph (c) of subsection 1 of NRS 686C.035.

14-43  Sec. 38.  NRS 686C.160 is hereby amended to read as follows:

14-44  686C.160  In carrying out its responsibilities under NRS [686C.151

14-45  and] 686C.152, the association may, subject to approval by [the court, or

14-46  by the commissioner if there is no judicial proceeding:] a court of this

14-47  state:

14-48  1.  Impose permanent liens on policies and contracts in connection with

14-49  any guarantee, assumption or reinsurance if the association finds that the

15-1  amounts which can be assessed under this chapter are less than the amounts

15-2  needed to [assure] ensure full and prompt performance of the association’s

15-3  duties or that the economic or financial conditions as they affect member

15-4  insurers are sufficiently adverse that the imposition of such permanent liens

15-5  is in the public interest.

15-6    2.  Impose temporary moratoriums or liens on payments of cash values

15-7  and policy loans or any right to withdraw money held in conjunction with

15-8  policies or contracts, in addition to any contractual provisions for deferral

15-9  of paying cash value or lending against the policy. In addition, in the event

15-10  of a temporary moratorium or charge imposed by the court in the

15-11  insolvent or impaired insurer’s state which has jurisdiction over the

15-12  conservation, rehabilitation or liquidation of the insurer on such

15-13  payment or lending, or on any other right to withdraw money held in

15-14  conjunction with policies or contracts, the association may defer such

15-15  payment, lending or withdrawal for the period of the moratorium or

15-16  charge, except for claims covered by the association to be paid in

15-17  accordance with a procedure for cases of hardship established by the

15-18  liquidator or rehabilitator and approved by the court.

15-19  Sec. 39.  NRS 686C.170 is hereby amended to read as follows:

15-20  686C.170  The association is not liable under NRS [686C.151 or

15-21  686C.152 for any covered policy of a foreign or alien insurer] 686C.152

15-22  where a guaranty is provided to residents of this state by the laws of the

15-23  domiciliary state or jurisdiction of the impaired or insolvent insurer [.]

15-24  other than this state.

15-25  Sec. 40.  NRS 686C.180 is hereby amended to read as follows:

15-26  686C.180  The association may render assistance and advice to the

15-27  commissioner upon his request, concerning rehabilitation, payment of

15-28  claims, continuation of coverage or the performance of other contractual

15-29  obligations of [any impaired] an impaired or insolvent insurer.

15-30  Sec. 41.  NRS 686C.190 is hereby amended to read as follows:

15-31  686C.190  The association has standing:

15-32  1.  To appear or intervene before [any] a court or agency in this state

15-33  which has jurisdiction over an impaired or insolvent insurer concerning

15-34  which the association is or may become obligated under this chapter[.] or

15-35  over any person or property against whom or which the association may

15-36  have rights through subrogation or otherwise. Its standing extends to all

15-37  matters germane to the powers and duties of the association, including [but

15-38  not limited to] proposals for reinsuring , modifying or guaranteeing the

15-39  [covered] policies or contracts of the impaired or insolvent insurer and the

15-40  determination of the [covered] policies or contracts and contractual

15-41  obligations.

15-42  2.  To appear or intervene before a court or agency in another state

15-43  which has jurisdiction over an impaired or insolvent insurer for which the

15-44  association is or may become obligated, or over [a third party] any person

15-45  or property against whom or which the association may have rights

15-46  through subrogation [of the insurer’s policyholders.] or otherwise.

15-47  Sec. 42.  NRS 686C.200 is hereby amended to read as follows:

15-48  686C.200  1.  [Any] A person receiving benefits under this chapter

15-49  shall be deemed to have assigned his rights under, and any causes of action

16-1  against any person for losses arising under, resulting from or otherwise

16-2  relating to, the covered policy or contract to the association to the extent of

16-3  the benefits received because of this chapter , whether the benefits are

16-4  payments of or on account of contractual obligations, continuation of

16-5  coverage or provision of substitute or alternative coverages. The

16-6  association may require an assignment to it of those rights and causes of

16-7  action by any payee, owner of a policy or contract , [owner,] beneficiary,

16-8  insured or annuitant as a condition precedent to the receipt of any rights or

16-9  benefits conferred by this chapter upon that person.

16-10  2.  The rights of the association to subrogation under this subsection

16-11  have the same priority against the assets of the impaired or insolvent

16-12  insurer as that possessed by the person entitled to receive benefits under

16-13  this chapter.

16-14  3.  In addition to the rights provided under subsections 1 and 2, the

16-15  association has all rights of subrogation at common law and any other

16-16  equitable or legal remedy which would have been available to the impaired

16-17  or insolvent insurer or the [holder] owner, beneficiary or payee of a policy

16-18  or contract[,] with respect to the policy or contract[.] , including, in the

16-19  case of a structured settlement annuity, any rights of the owner,

16-20  beneficiary or payee of the annuity, to the extent of benefits received

16-21  under this chapter, against a person originally or by succession

16-22  responsible for the losses arising from the personal injury relating to the

16-23  annuity or payment for it, except any such person responsible solely by

16-24  reason of serving as an assignee under section 130 of the Internal

16-25  Revenue Code, 26 U.S.C. § 130.

16-26  4.  If the provisions of subsections 1, 2 and 3 are invalid or ineffective

16-27  with respect to any person or any claim for any reason, the amount

16-28  payable to the association with respect to the related covered obligations

16-29  is reduced by the amount realized by any other person with respect to the

16-30  person or claim which is attributable to the policies or portions thereof

16-31  covered by the association.

16-32  5.  If the association has provided benefits with respect to a covered

16-33  obligation and a person recovers amounts as to which the association has

16-34  rights under subsections 1 to 4, inclusive, he shall pay to the association

16-35  the portion of the recovery attributable to the policies or portions thereof

16-36  covered by the association.

16-37  Sec. 43.  NRS 686C.210 is hereby amended to read as follows:

16-38  686C.210  1.  [Unless further limited by subsection 2, the liability of

16-39  the association for benefits under this chapter is limited to] The benefits

16-40  that the association may become obligated to cover may not exceed the

16-41  lesser of:

16-42  (a) The contractual obligations for which the insurer is liable or would

16-43  have been liable if it were not an impaired or insolvent insurer; [or]

16-44  (b) With respect to [any] one life, regardless of the number of policies

16-45  or contracts:

16-46     (1) Three hundred thousand dollars in death benefits from life

16-47  insurance, but not more than $100,000 in net cash for surrender and

16-48  withdrawal for life insurance; or

17-1      (2) [One hundred thousand dollars in benefits from health insurance,

17-2  including any net cash for surrender and withdrawal; and

17-3      (3)] One hundred thousand dollars in the present value of benefits

17-4  from annuities, including net cash for surrender and withdrawal[.

17-5    2.  The association is not liable to expend more than $300,000 in the

17-6  aggregate with] ;

17-7    (c) With respect to health insurance for any one natural person:

17-8      (1) One hundred thousand dollars for coverages other than

17-9  disability insurance, basic hospital, medical and surgical insurance or

17-10  major medical insurance, including any net cash for surrender or

17-11  withdrawal;

17-12     (2) Three hundred thousand dollars for disability insurance; or

17-13     (3) Five hundred thousand dollars for basic hospital, medical and

17-14  surgical insurance or major medical insurance; or

17-15  (d) With respect to each payee of a structured settlement annuity, or

17-16  beneficiary or beneficiaries of the payee if deceased, $100,000 in present

17-17  value of benefits from the annuity in the aggregate, including any net

17-18  cash for surrender or withdrawal.

17-19  2.  In no event is the association obligated to cover more than:

17-20  (a) With respect to any one life or person under [subparagraphs (1), (2)

17-21  and (3) of paragraph] paragraphs (b) and (c) of subsection 1[.] :

17-22     (1) An aggregate of $300,000 in benefits, excluding benefits for

17-23  basic hospital, medical and surgical insurance or major medical

17-24  insurance; or

17-25     (2) An aggregate of $500,000 in benefits, including benefits for

17-26  basic hospital, medical and surgical insurance or major medical

17-27  insurance.

17-28  (b) With respect to one owner of several nongroup policies of life

17-29  insurance, whether the owner is a natural person or an organization and

17-30  whether the persons insured are officers, managers, employees or other

17-31  persons, more than $5,000,000 in benefits, regardless of the number of

17-32  policies and contracts held by the owner.

17-33  3.  The limitations set forth in this section are limitations on the

17-34  benefits for which the association is obligated before taking into account

17-35  its rights to subrogation or assignment or the extent to which those

17-36  benefits could be provided out of the assets of the impaired or insolvent

17-37  insurer attributable to covered policies. The cost of the association’s

17-38  obligations under this chapter may be met by the use of assets

17-39  attributable to covered policies, or reimbursed to the association

17-40  pursuant to its rights to subrogation or assignment.

17-41  4.  In performing its obligation to provide coverage under NRS

17-42  686C.150 and 686C.152, the association need not guarantee, assume,

17-43  reinsure or perform, or cause to be guaranteed, assumed, reinsured or

17-44  performed, the contractual obligations of the impaired or insolvent

17-45  insurer under a covered policy or contract which do not materially affect

17-46  the economic value or economic benefits of the covered policy or

17-47  contract.

 

 

18-1    Sec. 44.  NRS 686C.220 is hereby amended to read as follows:

18-2    686C.220  The association may:

18-3    1.  Enter into such contracts as are necessary or proper to carry out the

18-4  provisions and purposes of this chapter.

18-5    2.  Sue or be sued, including the taking of any legal action necessary or

18-6  proper for recovery of any unpaid assessments under NRS 686C.230 or to

18-7  settle claims or potential claims against it.

18-8    3.  Borrow money to effect the purposes of this chapter. Any notes or

18-9  other evidence of indebtedness of the association not in default are legal

18-10  investments for domestic insurers and may be carried as admitted assets.

18-11  4.  Employ or retain such persons as are necessary or appropriate to

18-12  handle the financial transactions of the association, and to perform such

18-13  other functions as become necessary or proper under this chapter.

18-14  5.  [Negotiate and contract with any liquidator, rehabilitator,

18-15  conservator or ancillary receiver to carry out the powers and duties of the

18-16  association.

18-17  6.] Take such legal action as may be necessary or appropriate to avoid

18-18  or recover payment of improper claims.

18-19  [7.] 6. Exercise, for the purposes of this chapter and to the extent

18-20  approved by the commissioner, the powers of a domestic life or health

18-21  insurer, but in no case may the association issue insurance policies or

18-22  annuities other than those issued to perform [the] its contractual obligations

18-23  [of the impaired insurer] under this chapter.

18-24  [8.] 7. Join an organization of one or more other state associations

18-25  having similar purposes, to further the purposes and administer the powers

18-26  and duties of the association.

18-27  8.  Organize itself as a corporation or in other legal form permitted by

18-28  the laws of this state.

18-29  9.  Request information from a person seeking coverage from the

18-30  association to aid the association in determining its obligations under

18-31  this chapter with respect to him, and the person shall promptly comply

18-32  with the request.

18-33  10.  Take other necessary or appropriate action to perform its duties

18-34  and discharge its obligations under this chapter or to exercise its power

18-35  under this chapter.

18-36  Sec. 45.  NRS 686C.230 is hereby amended to read as follows:

18-37  686C.230  1.  To provide the money necessary to carry out the powers

18-38  and duties of the association, the board of directors shall assess the

18-39  member insurers, separately for each account, at such times and for such

18-40  amounts as the board finds necessary. An assessment is due upon at least

18-41  30 days’ written notice to the member insurer and accrues interest after it is

18-42  due at the rate provided in NRS 99.040.

18-43  2.  There are two classes of assessments, as follows:

18-44  (a) Assessments in Class A must be [made] authorized and called for

18-45  the purpose of meeting administrative and legal costs and other expenses .

18-46  [, including those of examinations conducted pursuant to NRS 686C.310.]

18-47  An assessment in Class A need not be related to a particular impaired or

18-48  insolvent insurer.

19-1    (b) Assessments in Class B must be [made] authorized and called to the

19-2  extent necessary to carry out the powers and duties of the association under

19-3  NRS 686C.150 to 686C.220, inclusive, with regard to an impaired or

19-4  insolvent insurer.

19-5    Sec. 46.  NRS 686C.240 is hereby amended to read as follows:

19-6    686C.240  1.  The board of directors shall determine the amount of

19-7  each assessment in Class A and may, but need not, prorate it. If an

19-8  assessment is prorated, the board may provide that any surplus be credited

19-9  against future assessments in Class B. An assessment which is not prorated

19-10  must not exceed [$300] $150 for each member insurer for any one calendar

19-11  year.

19-12  2.  The board may allocate any assessment in Class B among the

19-13  accounts according to the premiums or reserves of the impaired or

19-14  insolvent insurer or any other standard which it considers fair and

19-15  reasonable under the circumstances.

19-16  3.  Assessments in Class B against member insurers for each account

19-17  and subaccount must be in the proportion that the premiums received on

19-18  business in this state by each assessed member insurer on policies or

19-19  contracts covered by each account or subaccount for the 3 most recent

19-20  calendar years for which information is available preceding the year in

19-21  which the insurer became impaired or insolvent bears to premiums

19-22  received on business in this state for those calendar years by all assessed

19-23  member insurers.

19-24  4.  Assessments for money to meet the requirements of the association

19-25  with respect to an impaired or insolvent insurer must not be [made]

19-26  authorized or called until necessary to carry out the purposes of this

19-27  chapter. Classification of assessments under subsection 2 of NRS

19-28  686C.230 and computation of assessments under this section must be made

19-29  with a reasonable degree of accuracy, recognizing that exact

19-30  determinations may not always be possible. The association shall notify

19-31  each member insurer of its anticipated prorated share of an assessment

19-32  authorized but not yet called within 180 days after it is authorized.

19-33  Sec. 47.  NRS 686C.250 is hereby amended to read as follows:

19-34  686C.250  1.  The association may abate or defer, in whole or in part,

19-35  the assessment of a member insurer if, in the opinion of the board[,] of

19-36  directors, payment of the assessment would endanger the ability of the

19-37  member insurer to fulfill its contractual obligations. If an assessment

19-38  against a member insurer is abated or deferred in whole or in part, the

19-39  amount by which that assessment is abated or deferred may be assessed

19-40  against the other member insurers in a manner consistent with the basis for

19-41  assessments set forth in this section. As soon as the conditions that caused

19-42  a deferral have been removed or rectified, the member insurer shall pay

19-43  all assessments that were deferred pursuant to a plan of repayment

19-44  approved by the association.

19-45  2.  [The] Except as otherwise provided in subsection 3, the total of all

19-46  assessments [upon] authorized by the association with respect to a

19-47  member insurer for:

19-48  (a) The account for life insurance and annuities and each of its

19-49  subaccounts; and

20-1    (b) The account for health insurance,

20-2  respectively must not in any 1 calendar year exceed 2 percent of the

20-3  insurer’s average annual premiums received in this state on the policies

20-4  and contracts covered by the subaccount or account during the 3 calendar

20-5  years preceding the year in which the [impairment or insolvency is

20-6  determined.] insurer became impaired or insolvent.

20-7    3.  If two or more assessments are authorized in 1 calendar year with

20-8  respect to insurers that became impaired or insolvent in different

20-9  calendar years, the average annual premiums received for the purposes

20-10  of the limitation provided in subsection 2 are equal and limited to the

20-11  higher of the 3-year annual premiums for the applicable account or

20-12  subaccount as calculated pursuant to this section.

20-13  4.  If the maximum assessment, together with the other assets of the

20-14  association in [either] an account, does not provide in any 1 year in either

20-15  account an amount sufficient to carry out the responsibilities of the

20-16  association, the necessary additional money must be assessed as soon

20-17  thereafter as permitted by this chapter.

20-18  [4.  If an assessment of 1 percent for either]

20-19  5.  If the maximum assessment for a subaccount of the account for life

20-20  insurance and annuities in any 1 year does not provide an amount sufficient

20-21  to carry out the responsibilities of the association, then pursuant to

20-22  subsection 3 of NRS 686C.240, the board shall assess [both subaccounts]

20-23  the other subaccount for the necessary additional amount, subject to the

20-24  maximum stated in subsection 2.

20-25  [5.] 6. The board may provide in the plan of operation a method of

20-26  allocating funds among claims, whether relating to one or more impaired or

20-27  insolvent insurers, when the maximum assessment is insufficient to cover

20-28  anticipated claims.

20-29  Sec. 48.  NRS 686C.260 is hereby amended to read as follows:

20-30  686C.260  The board of directors may, by an equitable method as

20-31  established in the plan of operation, refund to member insurers, in

20-32  proportion to the contribution of each insurer to that account, the amount

20-33  by which the assets of the account exceed the amount the board finds is

20-34  necessary to carry out during the coming year the obligations of the

20-35  association with regard to that account, including assets accruing from

20-36  assignment, subrogation, net realized gains and income from investments.

20-37  A reasonable amount may be retained in any account to provide funds for

20-38  the continuing expenses of the association and for future [losses.] claims.

20-39  Sec. 49.  NRS 686C.280 is hereby amended to read as follows:

20-40  686C.280  1.  The association shall issue to each insurer paying an

20-41  assessment under this chapter , other than an assessment in Class A, a

20-42  certificate of contribution, in a form prescribed by the commissioner, for

20-43  the amount of the assessment so paid. All outstanding certificates are of

20-44  equal dignity and priority without reference to [the] amounts or dates of

20-45  issue. A member insurer may show a certificate of contribution as an asset

20-46  in its financial statement in such form, for such amount, if any, and for

20-47  such period as the commissioner may approve.

20-48  2.  A member insurer may offset against its liability for premium tax to

20-49  this state, accrued with respect to business transacted in a calendar year, an

21-1  amount equal to 20 percent of the amount certified pursuant to subsection 1

21-2  in each of the 5 calendar years following the year in which the assessment

21-3  was paid. If an insurer ceases to transact business, it may offset all

21-4  uncredited assessments against its liability for premium tax for the year in

21-5  which it so ceases.

21-6    3.  Any sum acquired by refund from the association pursuant to NRS

21-7  686C.260 which previously had been written off by the contributing

21-8  insurer and offset against premium taxes as provided in subsection 2 must

21-9  be paid to the department of taxation and deposited by it with the state

21-10  treasurer for credit to the state general fund. The association shall notify

21-11  the commissioner and the department of taxation of each refund made.

21-12  Sec. 50.  NRS 686C.290 is hereby amended to read as follows:

21-13  686C.290  1.  The association shall submit to the commissioner a plan

21-14  of operation and any amendments thereto necessary or suitable to [assure]

21-15  ensure the fair, reasonable and equitable administration of the association.

21-16  The plan of operation and any amendments thereto become effective upon

21-17  approval in writing by the commissioner, or 30 days after submission if he

21-18  has not disapproved them. All member insurers shall comply with the plan

21-19  of operation.

21-20  2.  If at any time the association fails to submit suitable amendments to

21-21  the plan, the commissioner shall adopt , after notice and hearing, such

21-22  reasonable regulations as are necessary or advisable to effectuate the

21-23  provisions of this chapter. The regulations continue in force until modified

21-24  by the commissioner or superseded by a plan submitted by the association

21-25  and approved by the commissioner.

21-26  3.  [The] In addition to satisfying the other requirements of this

21-27  chapter, the plan of operation must:

21-28  (a) Establish procedures for handling the assets of the association.

21-29  (b) Establish the amount and method of reimbursing members of the

21-30  board of directors under NRS 686C.140.

21-31  (c) Establish regular places and times for meetings of the board.

21-32  (d) Establish procedures for records to be kept of all financial

21-33  transactions of the association, its agents and the board.

21-34  (e) Establish the procedures whereby selections for the board will be

21-35  made and submitted to the commissioner.

21-36  (f) Establish any additional procedures for assessments under NRS

21-37  686C.230 to 686C.270, inclusive.

21-38  (g) Contain additional provisions necessary or proper for the execution

21-39  of the powers and duties of the association.

21-40  4.  The plan of operation may provide that any or all powers and duties

21-41  of the association, except those under subsection 3 of NRS 686C.220 and

21-42  NRS 686C.230 to 686C.280, inclusive, are delegated to a corporation,

21-43  association or other organization which performs or will perform functions

21-44  similar to those of this association , or its equivalent , in two or more states.

21-45  Such an organization must be reimbursed for any payments made on

21-46  behalf of the association and paid for its performance of any function of

21-47  the association. A delegation under this subsection takes effect only with

21-48  the approval of the board of directors and the commissioner, and may be

22-1  made only to an organization that extends protection not substantially

22-2  less favorable and effective than that provided by this chapter.

22-3    Sec. 51.  NRS 686C.300 is hereby amended to read as follows:

22-4    686C.300  1.  [The commissioner shall:

22-5    (a) Notify the board of the existence of an impaired insurer not later

22-6  than 3 days after a determination of impairment is made or he receives

22-7  notice of impairment.

22-8    (b) Upon] In addition to the duties and powers otherwise provided in

22-9  this chapter, the commissioner :

22-10  (a) Shall, upon request of the board[,] of directors, provide the

22-11  association with a statement of the premiums in this and any other

22-12  appropriate states for each member insurer.

22-13  [(c) When]

22-14  (b) Shall, when an impairment is declared and the amount of the

22-15  impairment is determined, serve a demand upon the impaired insurer to

22-16  make good the impairment within a reasonable time. Notice to the insurer

22-17  is notice to its stockholders, if any. The failure of the insurer to comply

22-18  with such demand promptly does not excuse the association from the

22-19  performance of its powers and duties under this chapter.

22-20  (c) Must, in any liquidation or rehabilitation involving a domestic

22-21  insurer, be appointed as the liquidator or rehabilitator.

22-22  2.  The commissioner may suspend or revoke, after notice and hearing,

22-23  the certificate of authority to transact insurance in this state of any member

22-24  insurer which fails to pay an assessment when due or fails to comply with

22-25  the plan of operation. As an alternative the commissioner may levy a

22-26  forfeiture on any member insurer which fails to pay an assessment when

22-27  due. [Such forfeiture shall] The forfeiture may not exceed 5 percent of the

22-28  unpaid assessment per month, but no forfeiture may be less than $100 per

22-29  month.

22-30  3.  [Any] A final action of the board of directors or the association may

22-31  be appealed to the commissioner by any member insurer if [such] the

22-32  appeal is taken within [30] 60 days after the insurer receives notice of the

22-33  final action . [being appealed. If a member insurer appeals from an

22-34  assessment, it shall pay the amount assessed to the association and that

22-35  amount is available to meet the obligations of the association during the

22-36  pendency of the appeal. If the assessment is annulled or reduced on appeal,

22-37  the amount paid, or the excess, must be refunded by the association to the

22-38  insurer. Any] A final action or order of the commissioner is subject to

22-39  judicial review in a court of competent jurisdiction[.] pursuant to the

22-40  procedure provided in chapter 233B of NRS for contested cases.

22-41  4.  The liquidator, rehabilitator or conservator of any impaired insurer

22-42  may notify all interested persons of the effect of this chapter.

22-43  Sec. 52.  NRS 686C.303 is hereby amended to read as follows:

22-44  686C.303  If the association fails to act within a reasonable time [to

22-45  carry out its duties pursuant to] with respect to an insolvent insurer, as

22-46  provided in NRS 686C.150 to 686C.155, inclusive, the commissioner may

22-47  exercise the powers and perform the duties of the association under this

22-48  chapter with respect to the insolvent insurer . [involved.]

 

23-1    Sec. 53.  NRS 686C.306 is hereby amended to read as follows:

23-2    686C.306  1.  The commissioner shall notify the commissioners of

23-3  insurance of all the other states[, the territories of the United States, and

23-4  the District of Columbia when] within 30 days after he takes any of the

23-5  following actions against a member insurer:

23-6    (a) Revokes a member insurer’s license;

23-7    (b) Suspends a member insurer’s license; or

23-8    (c) Makes any formal order that a member insurer is to restrict its

23-9  premium writing, obtain additional contributions to surplus, withdraw from

23-10  the state, reinsure all or any part of its business, or increase capital, surplus,

23-11  or any other account for the security of [policyholders] the owners of its

23-12  policies or its creditors.

23-13  [This notice must be mailed to all commissioners within 30 days after the

23-14  action is taken.]

23-15  2.  The commissioner shall report to the board of directors when he has

23-16  taken any of the actions set forth in subsection 1, or has received a report

23-17  from any other commissioner indicating that any such action has been

23-18  taken in another state. The report to the board must contain all significant

23-19  details of the action taken or the report received from another

23-20  commissioner.

23-21  3.  The commissioner shall report to the board of directors when he

23-22  has reasonable cause to believe from an examination of a member

23-23  insurer, whether completed or in process, that the insurer may be

23-24  impaired or insolvent.

23-25  4.  The commissioner shall furnish to the board the ratios of the

23-26  “insurance regulatory information system” developed by the National

23-27  Association of Insurance Commissioners and [reports of examinations and]

23-28  listings of companies not included in those ratios, and the board may use

23-29  the information contained therein in carrying out its duties and

23-30  responsibilities under this chapter. Such reports and the information

23-31  contained therein must be kept confidential by the board until such time as

23-32  made public by the commissioner or other lawful authority.

23-33  [4.  The board shall, at the conclusion of any insolvency of an insurer

23-34  in which the association was obligated to pay covered claims, prepare a

23-35  report to the commissioner containing such information as it may have in

23-36  its possession bearing on the history and causes of the insolvency. The

23-37  board shall cooperate with the boards of directors of guaranty associations

23-38  in other states in preparing a report on the history and causes of insolvency

23-39  of a particular insurer, and may adopt by reference any report prepared by

23-40  one or more other associations.]

23-41  Sec. 54.  NRS 686C.310 is hereby amended to read as follows:

23-42  686C.310  [To aid in the detection and prevention of the impairment or

23-43  insolvency of insurers:]

23-44  1.  The board [shall,] of directors may, upon majority vote, notify the

23-45  commissioner of any information indicating any member insurer may be

23-46  impaired or insolvent. [The commissioner shall report to the board when he

23-47  has reasonable cause to believe from any examination, whether or not

23-48  completed, that any member insurer may be impaired or insolvent.

24-1    2.  The board may, upon majority vote, request that the commissioner

24-2  order an examination of any member insurer which the board in good faith

24-3  believes may be impaired or insolvent. The commissioner shall begin the

24-4  examination within 30 days after receiving the request. The examination

24-5  may be conducted by the National Association of Insurance

24-6  Commissioners or by such persons as the commissioner designates. The

24-7  cost of the examination must be paid by the association and the report

24-8  treated as are other reports of examinations. The report must not be

24-9  released to the board before its release to the public, but this does not

24-10  excuse the commissioner from his obligation to comply with subsection 1.

24-11  The commissioner shall notify the board when the examination is

24-12  completed. The request for an examination must be kept on file by the

24-13  commissioner but it is not open to public inspection before the release of

24-14  the report of the examination to the public and may be released at that time

24-15  only if the examination discloses that the examined insurer is impaired or

24-16  insolvent.

24-17  3.] 2. The board may, upon majority vote, make reports and

24-18  recommendations to the commissioner upon any matter germane to the

24-19  solvency, liquidation, rehabilitation or conservation of any member insurer

24-20  or germane to the solvency of any person seeking admission to transact

24-21  insurance in this state. These reports and recommendations are not open to

24-22  public inspection.

24-23  [4.] 3. The commissioner may seek the advice and recommendations

24-24  of the board concerning any matter affecting his duties and responsibilities

24-25  regarding the financial condition of member insurers and of persons

24-26  seeking admission to transact insurance in this state.

24-27  [5.] 4. The board may, upon majority vote, make recommendations to

24-28  the commissioner for the detection and prevention of the insolvency of

24-29  insurers.

24-30  Sec. 55.  NRS 686C.330 is hereby amended to read as follows:

24-31  686C.330  1.  This chapter does not reduce the liability for unpaid

24-32  assessments of the insureds of an impaired insurer operating under a plan

24-33  with liability for assessments.

24-34  2.  Records must be kept of all [negotiations and meetings in which the

24-35  association or its representatives are involved] meetings of the board of

24-36  directors to discuss the activities of the association in carrying out its

24-37  powers and duties under NRS 686C.150 to 686C.220, inclusive. [Records

24-38  of such negotiations or meetings must be made public upon a majority vote

24-39  of the board, upon] The records of the association with respect to an

24-40  impaired or insolvent insurer may not be disclosed before the termination

24-41  of a proceeding for liquidation, rehabilitation or conservation involving the

24-42  impaired or insolvent insurer[, upon] or the termination of the impairment

24-43  or insolvency of the insurer, [or] except upon the order of a court of

24-44  competent jurisdiction. This subsection does not limit the duty of the

24-45  association to render a report of its activities under NRS 686C.350.

24-46  3.  For the purpose of carrying out its obligations under this chapter, the

24-47  association shall be deemed to be a creditor of the impaired or insolvent

24-48  insurer to the extent of assets attributable to covered policies reduced by

24-49  any amounts to which the association is entitled as subrogee pursuant to

25-1  NRS 686C.200. Assets of the impaired or insolvent insurer attributable to

25-2  covered policies must be used to continue all covered policies and pay all

25-3  contractual obligations of the impaired or insolvent insurer as required by

25-4  this chapter. Assets attributable to covered policies, as used in this

25-5  subsection, are that proportion of the assets which the reserves that should

25-6  have been established for covered policies bear to the reserves that should

25-7  have been established for all policies of insurance written by the impaired

25-8  or insolvent insurer.

25-9    4.  As a creditor of the impaired or insolvent insurer under subsection

25-10  3 and consistent with NRS 696B.415, the association and other similar

25-11  associations are entitled to receive a disbursement out of the marshaled

25-12  assets, from time to time as the assets become available to reimburse it, as

25-13  a credit against contractual obligations under this chapter. If the

25-14  liquidator has not, within 120 days after a final determination of

25-15  insolvency of an insurer by the court in the insolvent or impaired

25-16  insurer’s state which has jurisdiction over the conservation,

25-17  rehabilitation or liquidation of the insurer, made an application to the

25-18  court for the approval of a proposal to disburse assets out of marshaled

25-19  assets to guaranty associations having obligations because of the

25-20  insolvency, the association is entitled to make application to the court for

25-21  approval of its own proposal to disburse those assets.

25-22  5.  Before the termination of any proceeding for liquidation,

25-23  rehabilitation or conservation, the court may take into consideration the

25-24  contributions of the respective parties, including the association, the

25-25  shareholders and [policyholders] owners of policies and contracts of the

25-26  impaired or insolvent insurer, and any other party with a bona fide interest,

25-27  in making an equitable distribution of the ownership of the impaired or

25-28  insolvent insurer. In making such a determination, consideration must be

25-29  given to the welfare of the [policyholders of] owners of policies issued by

25-30  the continuing or successor insurer. No distribution to stockholders, if any,

25-31  of an impaired or insolvent insurer may be made until [and unless] the total

25-32  amount of valid claims of the association, with interest thereon, for money

25-33  expended in exercising its powers and performing its duties under NRS

25-34  686C.150 to 686C.155, inclusive, with respect to that insurer have been

25-35  fully recovered by the association.

25-36  Sec. 56.  NRS 686C.350 is hereby amended to read as follows:

25-37  686C.350  The association is subject to examination and regulation by

25-38  the commissioner. The board of directors shall submit to the

25-39  commissioner, not later than 120 days after the end of its fiscal year, a

25-40  financial report in a form approved by the commissioner and a report of its

25-41  activities during the preceding fiscal year. Upon the request of a member

25-42  insurer, the association shall provide the insurer with a copy of the

25-43  report.

25-44  Sec. 56.5. The amendatory provisions of this act:

25-45  1.  Apply to the powers and duties of the Nevada Life and Health

25-46  Insurance Guaranty Association relating to any member insurer that

25-47  becomes an impaired or insolvent insurer on or after January 1, 2002;

25-48  2.  Do not require the Nevada Life and Health Insurance Guaranty

25-49  Association to recalculate the assessment bases for any year before

 

26-1  January 1, 2002, and any assessments based on any such year must be

26-2  authorized on the basis of the premium data previously collected from or

26-3  reported by member insurers relating to those years; and

26-4    3.  Must not be construed to affect any interpretation of any provision

26-5  of chapter 686C of NRS that was in effect before January 1, 2002.

26-6    Sec. 57.  NRS 686C.151, 686C.320, 686C.336 and 686C.345 are

26-7  hereby repealed.

26-8    Sec. 58. This act becomes effective on January 1, 2002.

 

26-9  LEADLINES OF REPEALED SECTIONS

 

26-10  686C.151  Duties regarding impaired insurers not making timely

26-11   payment of claims; conditions.

26-12  686C.320  Association may nominate special deputy.

26-13  686C.336  Liquidation of insolvent insurers: Responsibility for due

26-14   and unearned premiums.

26-15  686C.345  Restrictions on insurer pending repayment or approval

26-16   of plan for repayment of guaranty associations.

 

26-17  H