History: L. 1972, ch. 190, § 1; July 1.
(b) To provide this protection, an association of insurers is created to pay benefits and to continue coverages as limited herein, and members of the association are subject to assessment to provide funds to carry out the purpose of this act.
History: L. 1972, ch. 190, § 2; L. 1984, ch. 161, § 3; L. 1986, ch. 180, § 1; July 1.
(1) Persons who, regardless of where they reside, except for nonresident certificate holders under group policies or contracts, are the beneficiaries, assignees, payees or providers of the persons covered under paragraph (2); and
(2) persons who are owners of or certificate holders under such policies or contracts, and who:
(A) Are residents;
(B) are not residents, but only with respect to an annuity contract awarded pursuant to K.S.A. 60-3407 or 60-3409, and amendments thereto, an annuity contract for future economic loss procured pursuant to a settlement agreement in a medical malpractice liability action, as defined by K.S.A. 60-3401, and amendments thereto, or fixed-return accounts of the Kansas public employees deferred compensation plan under K.S.A. 75-5521 through 75-5529a[*] and amendments thereto; or
(C) are not residents, but only under all of the following conditions:
(i) The insurers which issued such policies or contracts are domiciled in this state;
(ii) such insurers never had a license or certificate of authority in the states in which such persons reside;
(iii) such states have associations similar to the association created by this act; and
(iv) such persons are not eligible for coverage by such associations.
(b) This act shall provide coverage to the persons specified in subsection (a) for direct, nongroup life, health, annuity and supplemental policies or contracts, unallocated annuity contracts covering individuals participating in a governmental deferred compensation plan established under section 457 of the U.S. internal revenue code pursuant to K.S.A. 75-5521 through 75-5529a[*], and amendments thereto, whether or not a resident, or the beneficiaries of each such individual if deceased, and for certificates under direct group policies and contracts issued by member insurers, except as limited by this act.
History: L. 1972, ch. 190, § 3; L. 1984, ch. 161, § 4; L. 1986, ch. 229, § 23; L. 1986, ch. 180, § 2; L. 1986, ch. 181, § 1; L. 1998, ch. 19, § 1; L. 2001, ch. 21, § 1; March 22.
History: L. 1972, ch. 190, § 4; July 1.
(a) "Account" means either of the three accounts created under K.S.A. 40-3006 and amendments thereto;
(b) "association" means the Kansas life and health insurance guaranty association created under K.S.A. 40-3006, and amendments thereto;
(c) "commissioner" means the commissioner of insurance of this state;
(d) "contractual obligation" means any obligation of a policy or contract or certificate under a group policy or contract, or portion thereof, for which coverage is provided under K.S.A. 40-3003 and amendments thereto;
(e) "covered policy" means any policy or contract within the scope of this act under K.S.A. 40-3003 and amendments thereto;
(f) "impaired insurer" means a member insurer which, after the effective date of this act, is not an insolvent insurer, and which: (1) Is deemed by the commissioner to be potentially unable to fulfill its contractual obligations; or
(2) is placed under an order of rehabilitation or conservation by a court of competent jurisdiction;
(g) "insolvent insurer" means a member insurer which, after the effective date of this act, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency;
(h) "member insurer" means any insurer licensed or holding a certificate of authority to transact in this state any kind of insurance for which coverage is provided under K.S.A. 40-3003 and amendments thereto, and includes any insurer whose license or certificate of authority in this state may have been suspended, revoked, nonrenewed or voluntarily withdrawn, but does not include: (1) A nonprofit hospital or medical service organization;
(2) a health maintenance organization;
(3) a fraternal benefit society;
(4) a mandatory state pooling plan;
(5) a mutual assessment company or any entity that operates on an assessment basis; or
(6) an insurance exchange, except a reciprocal or interinsurance exchange governed by the provisions of article 16 of chapter 40 of the Kansas Statutes Annotated, and amendments thereto;
(i) "Moody's corporate bond yield average" means the monthly average corporates as published by Moody's investors service, inc., or any successor thereto;
(j) "provider" means a person who is entitled to receive compensation for providing medical services to an insured covered under any health insurance contract or policy issued by a member insurer, regardless of whether the provider is obligated by statute or by agreement with the member insurer to hold any insured covered by any health insurance contract or policy harmless from liability for services;
(k) "premiums" means amounts received on covered policies or contracts less premiums, considerations and deposits returned thereon, and less dividends and experience credits thereon. Premiums does not include any amounts received for any policies or contracts or for the portions of any policies or contracts for which coverage is not provided under subsection (b) of K.S.A. 40-3003 and amendments thereto, except that assessable premiums shall not be reduced on accounts for subsection (n)(3) of K.S.A. 40-3008 and amendments thereto relating to interest limitations and subsection (o)(2) of K.S.A. 40-3008 and amendments thereto relating to limitations with respect to any one life and any one contract holder. Premiums shall not include any premiums on any unallocated annuity contract;
(l) "person" means any individual, corporation, partnership, association, voluntary organization or provider;
(m) "resident" means any person who resides in this state at the time a member insurer is determined to be an impaired or insolvent insurer and to whom a contractual obligation is owed. A person may be a resident of only one state which, in the case of a person other than a natural person, shall be its principal place of business;
(n) "unallocated annuity contract" means any annuity contract or group annuity certificate which is not issued to and owned by an individual, except to the extent of any annuity benefits guaranteed to an individual by an insurer under such contract or certificate; and
(o) "supplemental contract" means any agreement entered into for the distribution of policy or contract proceeds.
History: L. 1972, ch. 190, § 5; L. 1986, ch. 180, § 3; L. 2001, ch. 21, § 2; March 22.
(2) the life insurance account; and
(3) the annuity account, excluding unallocated annuities.
(b) The association shall come under the immediate supervision of the commissioner and shall be subject to the applicable provisions of the insurance laws of this state. Meetings or records of the association may be opened upon majority vote of the board of directors of the association.
History: L. 1972, ch. 190, § 6; L. 1986, ch. 180, § 4; July 1.
(b) In approving selections or in appointing members to the board, the commissioner shall consider, among other things, whether all member insurers are fairly represented.
(c) Members of the board may be reimbursed from the assets of the association for expenses incurred by them as members of the board of directors but members of the board shall not otherwise be compensated by the association for their services.
History: L. 1972, ch. 190, § 7; L. 1986, ch. 180, § 5; July 1.
(1) Guarantee, assume or reinsure, or cause to be guaranteed, assumed or reinsured, any or all of the policies or contracts of the impaired insurer;
(2) provide such moneys, pledges, notes, guarantees or other means as are proper to effectuate the provisions of paragraph (1) of this subsection and assure payment of the contractual obligations of the impaired insurer pending action under paragraph (1); or
(3) lend money to the impaired insurer.
(b) (1) If a member insurer is an impaired insurer, whether domestic, foreign or alien, and the insurer is not paying claims timely, then subject to the preconditions specified in paragraph (2) of this subsection, the association shall, in its discretion, either: (A) Take any of the actions specified in subsection (a), subject to the conditions therein; or
(B) provide substitute benefits in lieu of the contractual obligations of the impaired insurer solely for health claims, periodic annuity benefit payments, death benefits, supplemental benefits and cash withdrawals for policy or contract owners who petition therefor under claims of emergency or hardship in accordance with standards proposed by the association and approved by the commissioner.
(2) The association shall be subject to the requirements of paragraph (1) of this subsection only if: (A) The laws of the impaired insurer's state of domicile provide that: (i) The delinquency proceeding shall not be dismissed;
(ii) neither the impaired insurer nor its assets shall be returned to the control of its shareholders or private management; and
(iii) it shall not be permitted to solicit or accept new business or have any suspended or revoked license restored; and until all payments of or on account of the impaired insurer's contractual obligations by all guaranty associations, along with all expenses thereof and interest on all such payments and expenses, shall have been repaid to the guaranty associations or a plan of repayment by the impaired insurer shall have been approved by the guaranty associations; and
(B) (i) with respect to the impaired insurer who is a domestic insurer, it has been placed under an order of rehabilitation by a court of competent jurisdiction in this state; or
(ii) with respect to the impaired insurer who is a foreign or alien insurer: (aa) It has been prohibited from soliciting or accepting new business in this state;
(bb) its certificate of authority has been suspended or revoked in this state; and
(cc) a petition for rehabilitation or liquidation has been filed in a court of competent jurisdiction in its state of domicile by the commissioner of the state.
(c) If a member insurer is an insolvent insurer, the association shall, in its discretion, either: (1) (A) Guarantee, assume or reinsure, or cause to be guaranteed, assumed or reinsured, the policies or contracts of the insolvent insurer;
(B) assure payment of the contractual obligations of the insolvent insurer; and
(C) provide such moneys, pledges, guarantees or other means as are reasonably necessary to discharge such duties; or
(2) with respect only to life and health policies, provide benefits and coverages in accordance with subsection (d).
(d) When proceeding under subsection (b)(1)(B) or (c)(2), the association shall, with respect only to life and health insurance policies: (1) Assure payment of benefits for premiums identical to the premiums and benefits, except for terms of conversion and renewability, that would have been payable under the policies of the insolvent insurer, for claims incurred: (A) With respect to group policies, not later than the earlier of the next renewal date under such policies or contracts or 45 days, but in no event less than 30 days, after the date on which the association becomes obligated with respect to such policies;
(B) with respect to individual policies, not later than the earlier of the next renewal date, if any, under such policies or one year, but in no event less than 30 days, from the date on which the association becomes obligated with respect to such policies;
(2) make diligent efforts to provide all known insureds or group policyholders with respect to group policies 30 days' notice of the termination of the benefits provided; and
(3) with respect to individual policies, make available to each known insured, or owner if other than the insured, and with respect to an individual formerly insured under a group policy who is not eligible for replacement group coverage, make available substitute coverage on an individual basis in accordance with the provisions of paragraph (4) of this subsection, if the insureds had a right under law or the terminated policy to convert coverage to individual coverage or to continue an individual policy in force until a specified age or for a specified time, during which the insurer had no right unilaterally to make changes in any provision of the policy or had a right only to make changes in premium by class;
(4) (A) in providing the substitute coverage required under paragraph (3) of this subsection, the association may offer either to reissue the terminated coverage or to issue an alternative policy;
(B) alternative or reissued policies shall be offered without requiring evidence of insurability, and shall not provide for any waiting period or exclusion that would not have applied under the terminated policy; and
(C) the association may reinsure any alternative or reissued policy;
(5) (A) alternative policies adopted by the association shall be subject to the approval of the commissioner. The association may adopt alternative policies of various types for future issuance without regard to any particular impairment or insolvency;
(B) alternative policies shall contain at least the minimum statutory provisions required in this state and provide benefits that shall not be unreasonable in relation to the premiums charged. The association shall set the premiums in accordance with a table of rates which it shall adopt. The premiums shall reflect the amount of insurance to be provided and the age and class of risk of each insured, but shall not reflect any changes in the health of the insured after the original policy was last underwritten;
(C) any alternative policy issued by the association shall provide coverage of a type similar to that of the policy issued by the impaired or insolvent insurer, as determined by the association;
(6) if the association elects to reissue the insured's terminated coverage at a premium rate different from that charged under the terminated policy, the premium shall be set by the association in accordance with the amount of insurance provided and the age and class of risk, subject to approval by the commissioner and by a court of competent jurisdiction;
(7) the association's obligations with respect to coverage under any policy of the impaired or insolvent insurer or under any reissued or alternative policy shall cease on the date such coverage or policy is replaced by another similar policy by the policyholder, the insured or the association.
(e) When proceeding under subsection (b)(1)(B) or (c) with respect to any policy or contract carrying guaranteed minimum interest rates, the association shall assure the payment or crediting of a rate of interest consistent with subsection (n)(3).
(f) Nonpayment of premiums within 31 days after the date required under the terms of any guaranteed, assumed, alternative or reissued policy or contract or substitute coverage shall terminate the association's obligations under such policy or coverage under this act with respect to such policy or coverage, except with respect to any claims incurred or any net cash surrender value which may be due in accordance with the provisions of this act.
(g) Premiums due after entry of an order of liquidation of an insolvent insurer shall belong to and be payable at the direction of the association, and the association shall be liable for unearned premiums due to policy or contract owners arising after the entry of such order.
(h) The protection provided by this act shall not apply where any guaranty protection is provided to residents of this state by the laws of the domiciliary state or jurisdiction of the impaired or insolvent insurer other than this state.
(i) In carrying out its duties under subsections (b) and (c), the association may, subject to approval by the court: (1) Impose permanent policy or contract liens in connection with any guarantee, assumption or reinsurance agreement, if the association finds that the amounts which can be assessed under this act are less than the amounts needed to assure full and prompt performance of the association's duties under this act, or that the economic or financial conditions as they affect member insurers are sufficiently adverse to render the imposition of such permanent policy or contract liens to be in the public interest; and
(2) impose temporary moratoriums or liens on payments of cash values and policy loans, or any other right to withdraw funds held in conjunction with policies or contracts, in addition to any contractual provisions for deferral of cash or policy loan value.
(j) If the association fails to act within a reasonable period of time as provided in subsections (b)(1)(B), (c) and (d) of this section, the commissioner shall have the powers and duties of the association under this act with respect to impaired or insolvent insurers.
(k) The association may render assistance and advice to the commissioner, upon request, concerning rehabilitation, payment of claims, continuance of coverage or the performance of other contractual obligations of any impaired or insolvent insurer.
(l) The association shall have standing to appear before any court in this state with jurisdiction over an impaired or insolvent insurer concerning which the association is or may become obligated under this act. Such standing shall extend to all matters germane to the powers and duties of the association, including, but not limited to, proposals for reinsuring or guaranteeing the covered policies of the impaired insurer and the determination of the covered policies or contracts and contractual obligations. The association shall also have the right to appear or intervene before a court in another state with jurisdiction over an impaired or insolvent insurer for which the association is or may become obligated or with jurisdiction over a third party against whom the association may have rights through subrogation of the insurer's policyholders.
(m) (1) Any person receiving benefits under this act shall be deemed to have assigned the rights under any cause of action relating to the covered policy or contract to the association to the extent of the benefits received because of this act, whether the benefits are payments of or on account of contractual obligations, continuation of coverage or provision of substitute or alternative coverages. The association may require an assignment to it of such rights and cause of action by any payee, policy or contract owner, beneficiary, insured or annuitant as a condition precedent to the receipt of any right or benefits conferred by this act upon such person.
(2) The subrogation rights of the association under this subsection shall have the same priority against the assets of the impaired or insolvent insurer as that possessed by the person entitled to receive benefits under this act.
(3) In addition to paragraphs (1) and (2), the association shall have all common-law rights of subrogation and any other equitable or legal remedy which would have been available to the impaired or insolvent insurer or holder of a policy or contract with respect to such policy or contracts.
(n) The contractual obligations of the impaired or insolvent insurer for which the association becomes, or may become, liable shall be as great as but no greater than the contractual obligations of the impaired or insolvent insurer would have been in the absence of an impairment or insolvency unless such obligations are reduced as permitted by subsection (e) but the association shall not provide coverage for: (1) Any portion of a policy or contract not guaranteed by the insurer, or under which the risk is borne by the policy or contract holder;
(2) any policy or contract of reinsurance, unless assumption certificates have been issued;
(3) any portion of a policy or contract to the extent that the rate of interest on which it is based: (A) Averaged over the period of four years prior to the date on which the association becomes obligated with respect to such policy or contract, exceeds a rate of interest determined by subtracting two percentage points from Moody's corporate bond yield average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years before the association became obligated; and
(B) on and after the date on which the association becomes obligated with respect to such policy or contract, exceeds the rate of interest determined by subtracting three percentage points from Moody's corporate bond yield average as most recently available;
(4) any plan or program of an employer, association or similar entity to provide life, health or annuity benefits to its employees or members to the extent that such plan or program is self-funded or uninsured, including but not limited, to benefits payable by an employer, association or similar entity under: (A) A multiple employer welfare arrangement as defined in section 514 of the employee retirement income security act of 1974, as amended;
(B) a minimum premium group insurance plan;
(C) a stop-loss group insurance plan; or
(D) an administrative services only contract;
(5) any portion of a policy or contract to the extent that it provides dividends or experience rating credits, or provides that any fees or allowances be paid to any person, including the policy or contract holder, in connection with the service to or administration of such policy or contract;
(6) any policy or contract issued in this state by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue such policy or contract in this state;
(7) any unallocated annuity contract, except as provided in subsection (b) of K.S.A. 40-3003 and amendments thereto; and
(8) a policy or contract providing any hospital, medical, prescription drug or other health care benefits pursuant to part C or part D of subchapter XVIII, chapter 7 of title 42 of the United States code (commonly known as medicare part C & D) or any regulations issued pursuant thereto.
(o) The benefits for which the association may become liable shall in no event exceed the lesser of: (1) The contractual obligations for which the insurer is liable or would have been liable if it were not an impaired or insolvent insurer; or
(2) with respect to any one life, regardless of the number of policies or contracts: (A) $300,000 in life insurance death benefits, but not more than $100,000 in net cash surrender and net cash withdrawal values for life insurance;
(B) $100,000 in health insurance benefits, including any net cash surrender and net cash withdrawal values; or
(C) $250,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values;
(D) In no event shall the association be liable to expend more than $300,000 in the aggregate with respect to any one life as provided in paragraph (A), (B) or (C) of this subsection.
(E) The guaranty association's limits of liability with respect to the obligations of any impaired or insolvent insurer shall be the limits of liability in effect under this act on the date the guaranty association became liable for that impaired or insolvent insurer.
The provisions of subsection (o) shall not apply to annuity contracts for future economic loss procured pursuant to a judgment or settlement agreement in a medical malpractice liability action.
(p) The association may: (1) Enter into such contracts as are necessary or proper to carry out the provisions and purposes of this act;
(2) sue or be sued, including taking any legal actions necessary or proper to recover any unpaid assessments under K.S.A. 40-3009 and amendments thereto, and to settle claims or potential claims against it;
(3) borrow money to effect the purposes of this act. Any notes or other evidence of indebtedness of the association not in default shall be legal investments for domestic insurers and may be carried as admitted assets;
(4) employ or retain such persons as are necessary to handle the financial transactions of the association, and to perform such other functions as become necessary or proper under this act;
(5) take such legal action as may be necessary to avoid payment of improper claims; or
(6) exercise, for the purposes of this act and to the extent approved by the commissioner, the powers of a domestic life or health insurer, but in no case may the association issue insurance policies or annuity contracts other than those issued to perform its obligations under this act.
(q) The association may join an organization of one or more other state associations of similar purposes to further the purposes and administer the powers and duties of the association.
(r) The association shall pay any and all persons who, as a provider, may have claims as a result of a member insurer being found insolvent between March 1, 1999 and June 1, 1999.
History: L. 1972, ch. 190, § 8; L. 1986, ch. 180, § 6; L. 1993, ch. 130, § 1; L. 1998, ch. 19, § 2; L. 2001, ch. 21, § 3; L. 2009, ch. 83, § 26; Jan. 1, 2010.
(b) There shall be two classes of assessments, as follows: (1) Class A assessments shall be made for the purpose of meeting administrative and legal costs and other expenses and examinations conducted under the authority of subsection (e) of K.S.A. 40-3012 and amendments thereto. Class A assessments may be made whether or not related to a particular impaired or insolvent insurer.
(2) Class B assessments shall be made to the extent necessary to carry out the powers and duties of the association under K.S.A. 40-3008 and amendments thereto with regard to an impaired or an insolvent insurer.
(c) (1) The amount of any class A assessment shall be determined by the board and may be made on a pro rata or non-pro rata basis. If pro rata, the board may provide that it be credited against future class B assessments. A non-pro rata assessment shall not exceed $150 per member insurer in any one calendar year. The amount of any class B assessment shall be allocated for assessment purposes among the accounts pursuant to an allocation formula which may be based on the premiums or reserves of the impaired or insolvent insurer or any other standard deemed by the board in its sole discretion as being fair and reasonable under the circumstances.
(2) Class B assessments against member insurers for each account shall be in the proportion that the premiums received on business in this state by each assessed member insurer on policies or contracts covered by each account for the three most recent calendar years for which information is available preceding the year in which the insurer became impaired or insolvent, as the case may be, bears to such premiums received on business in this state for such calendar years by all assessed member insurers.
(3) Assessments for funds to meet the requirements of the association with respect to an impaired or insolvent insurer shall not be made until necessary to implement the purposes of this act. Classification of assessments under subsection (b) and computation of assessments under this subsection shall be made with a reasonable degree of accuracy, recognizing that exact determinations may not always be possible.
(d) The association may abate or defer, in whole or in part, the assessment of a member insurer if, in the opinion of the board, payment of the assessment would endanger the ability of the member insurer to fulfill its contractual obligations. In the event an assessment against a member insurer is abated, or deferred in whole or in part, the amount by which such assessment is abated or deferred may be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this section.
(e) The total of all assessments upon a member insurer for each account shall not in any one calendar year exceed 2% of such insurer's average premiums received in this state on the policies and contracts covered by the account during the three calendar years preceding the years in which the insurer became an impaired or insolvent insurer.
If the maximum assessment, together with the other assets of the association in any account does not provide in any one year in either account an amount sufficient to carry out the responsibilities of the association, the necessary additional funds shall be assessed as soon thereafter as permitted by this act.
The board may provide in the plan of operation a method of allocating funds among claims, whether relating to one or more impaired or insolvent insurers, when the maximum assessment will be insufficient to cover anticipated claims.
(f) The board, by an equitable method as established in the plan of operation, may refund to member insurers, in proportion to the contribution of each insurer to that account, the amount by which the assets of the account exceed the amount the board finds is necessary to carry out during the coming year the obligations of the association with regard to that account, including assets accruing from assignment, subrogation, net realized gains and income from investments. A reasonable amount may be retained in any account to provide funds for the continuing expenses of the association and for future losses.
(g) It shall be proper for any member insurer, in determining its premium rates and policyowner dividends as to any kind of insurance within the scope of this act, to consider the amount reasonably necessary to meet its assessment obligations under this act.
(h) The association shall issue to each insurer paying an assessment under this act, other than a class A assessment, a certificate of contribution, in a form prescribed by the commissioner, for the amount of the assessment paid. All outstanding certificates shall be of equal dignity and priority without reference to amounts or dates of issue. A certificate of contribution may be shown by the insurer in its financial statement as an asset in such form and for such amount, if any, and period of time as the commissioner may approve.
History: L. 1972, ch. 190, § 9; L. 1986, ch. 180, § 7; July 1.
(2) If the association fails to submit a suitable plan of operation within 120 days following the effective date of this act, or, if at any time thereafter the association fails to submit suitable amendments to the plan, the commissioner, after notice and hearing, shall adopt and promulgate such reasonable rules and regulations as are necessary or advisable to effectuate the provisions of this act. Such rules and regulations shall continue in force until modified by the commissioner or superseded by a plan submitted by the association and approved by the commissioner.
(b) All member insurers shall comply with the plan of operation.
(c) The plan of operation shall, in addition to requirements enumerated elsewhere in this act:
(1) Establish procedures for handling the assets of the association;
(2) establish the amount and method of reimbursing members of the board of directors under K.S.A. 40-3007 and amendments thereto;
(3) establish regular places and times for meetings, including telephone conference calls, of the board of directors;
(4) establish procedures for records to be kept of all financial transactions of the association, its agents and the board of directors;
(5) establish the procedures whereby selections for the board of directors will be made and submitted to the commissioner;
(6) establish any additional procedures for assessments under K.S.A. 40-3009 and amendments thereto; and
(7) contain additional provisions necessary or proper for the execution of the powers and duties of the association.
(d) The plan of operation may provide that any or all powers and duties of the association, except those under subsection (p)(3) of K.S.A. 40-3008 and 40-3009 and amendments thereto, are delegated to a corporation, association or other organization which performs or will perform functions similar to those of this association, or its equivalent, in two or more states. Such a corporation, association or organization shall be reimbursed for any payments made on behalf of the association and shall be paid for its performance of any function of the association. A delegation under this subsection shall take effect only with the approval of both the board of directors and the commissioner, and may be made only to a corporation, association or organization which extends protection not substantially less favorable and effective than that provided by this act.
History: L. 1972, ch. 190, § 10; L. 1986, ch. 180, § 8; July 1.
(2) when an impairment is declared and the amount of the impairment is determined, serve a demand upon the impaired insurer to make good the impairment within a reasonable time; notice to the impaired insurer shall constitute notice to its shareholders, if any; the failure of the insurer to promptly comply with such demand shall not excuse the association from the performance of its powers and duties under this act;
(3) in any liquidation or rehabilitation proceeding involving a domestic insurer, be appointed as the liquidator or rehabilitator.
(b) The commissioner may suspend or revoke, after notice and hearing in accordance with the provisions of the Kansas administrative procedure act, the certificate of authority to transact insurance in this state of any member insurer which fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative the commissioner may levy a forfeiture on any member insurer which fails to pay an assessment when due. Such forfeiture shall not exceed 5% of the unpaid assessment per month, but no forfeiture shall be less than $100 per month.
(c) Any action of the board of directors or the association may be appealed to the commissioner by any member insurer if such appeal is taken within 60 days of the final action being appealed. If a member company is appealing an assessment, the amount assessed shall be paid to the association and available to meet association obligations during the pendancy of an appeal. If the appeal on the assessment is upheld, the amount paid in error shall be returned to the member insurer.
(d) The liquidator, rehabilitator or conservator of any impaired insurer may notify all interested persons of the effect of this act.
History: L. 1972, ch. 190, § 11; L. 1986, ch. 180, § 9; L. 1986, ch. 318, § 42; L. 1988, ch. 356, § 115; July 1, 1989.
(1) Notify the commissioners of all other states, territories of the United States and the District of Columbia when the commissioner takes any of the following actions against a member insurer:
(A) Revocation of license;
(B) suspension of license; or
(C) makes any formal order that such company restricts its premium writing, obtain additional contributions to surplus, withdraw from the state, reinsure all or any part of its business, or increase capital, surplus or any other account for the security of policyholders or creditors.
Such notice shall be mailed to all commissioners within 30 days following the action taken or the date on which such action occurs;
(2) report to the board of directors when the commissioner has taken any of the actions set forth in paragraph (1) of this subsection or has received a report from any other commissioner indicating that any such action has been taken in another state. Such report to the board of directors shall contain all significant details of the action taken or the report received from another commissioner;
(3) report to the board of directors when the commissioner has reasonable cause to believe from any examination, whether completed or in process, of any member company that such company may be an impaired or insolvent insurer. Such report and information shall be kept confidential by the board of directors until such time as made public by the commissioner or other lawful authority;
(4) furnish to the board of directors the national association of insurance commissioners' insurance regulatory information system ratios and listings of companies not included in the ratios developed by the national association of insurance commissioners, and the board may use the information contained therein in carrying out its duties and responsibilities under this section. Such report and the information contained therein shall be kept confidential by the board of directors until such time as made public by the commissioner or other lawful authority.
(b) The commissioner may seek the advice and recommendations of the board of directors concerning any matter affecting the commissioner's duties and responsibilities regarding the financial condition of member insurers and companies seeking admission to transact insurance business in this state.
(c) The board of directors, upon majority vote, may make reports and recommendations to the commissioner upon any matter germane to the solvency, liquidation, rehabilitation or conservation of any member insurer or germane to the solvency of any company seeking to do any insurance business in this state. Such reports and recommendations shall not be considered public documents.
(d) It shall be the duty of the board of directors, upon majority vote, to notify the commissioner of any information indicating any member insurer may be an impaired or insolvent insurer.
(e) The board of directors, upon majority vote, may request that the commissioner order an examination of any member insurer which the board in good faith believes may be an impaired or insolvent insurer. The examination may be conducted as a national association of insurance commissioners' examination or may be conducted by such persons as the commissioner designates. The cost of such examination shall be paid by the association and the examination report shall be treated as are other examination reports. In no event shall such examination report be released to the board of directors prior to its release to the public, but this shall not preclude the commissioner from complying with subsection (a).
The commissioner shall notify the board of directors when the examination is completed. The request for an examination shall be kept on file by the commissioner but it shall not be open to public inspection prior to the release of the examination report to the public.
(f) The board of directors, upon majority vote, may make recommendations to the commissioner for the detection and prevention of insurer insolvencies.
(g) The board of directors, at the conclusion of any insurer insolvency in which the association was obligated to pay covered claims, shall prepare a report to the commissioner containing such information as it may have in its possession bearing on the history and causes of such insolvency. The board shall cooperate with the board of directors of guaranty associations in other states in preparing a report on the history and causes of insolvency of a particular insurer and may adopt, by reference, any report prepared by such other associations.
History: L. 1972, ch. 190, § 12; L. 1986, ch. 180, § 10; July 1.
(b) Records shall be kept of all negotiations and meetings in which the association or its representatives are involved to discuss the activities of the association in carrying out its powers and duties under K.S.A. 40-3008 and amendments thereto. Records of such negotiations or meetings shall be made public only upon the termination of a liquidation, rehabilitation or conservation proceeding involving the impaired or insolvent insurer, upon the termination of the impairment or insolvency of the insurer, or upon the order of a court of competent jurisdiction. Nothing in this subsection shall limit the duty of the association to render a report of its activities under K.S.A. 40-3014 and amendments thereto.
(c) For the purpose of carrying out its obligations under this act, the association shall be deemed to be a creditor of the impaired or insolvent insurer to the extent of assets attributable to covered policies reduced by any amounts to which the association is entitled as subrogee pursuant to subsection (l) of K.S.A. 40-3008 and amendments thereto. Assets of the impaired or insolvent insurer attributable to covered policies shall be used to continue all covered policies and pay all contractual obligations of the impaired or insolvent insurer as required by this act. Assets attributable to covered policies, as used in this subsection, are that proportion of the assets which the reserves that should have been established for such policies bear to the reserve that should have been established for all policies of insurance written by the impaired or insolvent insurer.
(d) (1) Prior to the termination of any liquidation, rehabilitation, or conservation proceeding, the court may take into consideration the contributions of the respective parties, including the association, the shareholders and policyowners of the insolvent insurer, and any other party with a bona fide interest, in making an equitable distribution of the ownership rights of such insolvent insurer. In such a determination, consideration shall be given to the welfare of the policyholders of the continuing or successor insurer.
(2) No distribution to stockholders, if any, of an impaired or insolvent insurer shall be made until and unless the total amount of valid claims of the association with interest thereon for funds expended in carrying out its powers and duties under K.S.A. 40-3008 and amendments thereto with respect to such insurer have been fully recovered by the association.
(e) (1) If an order for liquidation or rehabilitation of an insurer domiciled in this state has been entered, the receiver appointed under such order shall have a right to recover on behalf of the insurer, from any affiliate that controlled it, the amount of distributions, other than stock dividends paid by the insurer on its capital stock, made at any time during the five years preceding the petition for liquidation or rehabilitation subject to the limitations of subsections (2) to (4), inclusive.
(2) No such distribution shall be recoverable if the insurer shows that when paid the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.
(3) Any person who was an affiliate that controlled the insurer at the time the distributions were paid shall be liable up to the amount of distributions such person received. Any person who was an affiliate that controlled the insurer at the time the distributions were declared, shall be liable up to the amount of distributions such person would have received if such person had been paid immediately. If two or more persons are liable with respect to the same distributions, such person shall be jointly and severally liable.
(4) The maximum amount recoverable under this subsection shall be the amount needed in excess of all other available assets of the insolvent insurer to pay the contractual obligations of the insolvent insurer.
(5) If any person liable under subsection (3) is insolvent, all its affiliates that controlled it at the time the distribution was paid, shall be jointly and severally liable for any resulting deficiency in the amount recovered from the insolvent affiliate.
History: L. 1972, ch. 190, § 13; L. 1986, ch. 180, § 11; July 1.
(b) Within 180 days of the effective date of this act, the association shall prepare a summary document describing the general purposes and current limitations of this act in complying with subsection (c). This document should be submitted to the commissioner for approval. Sixty days after receiving such approval, no insurer may deliver a policy or contract described in subsection (b) of K.S.A. 40-3003 and amendments thereto to a policy or contract holder unless the document is delivered to the policy or contract holder prior to or at the time of delivery of the policy or contract except if subsection (d) applies. The document should also be available upon request by a policyholder. The distribution, delivery or contents or interpretation of this document shall not mean that either the policy or the contract or the holder thereof would be covered in the event of the impairment or insolvency of a member insurer. The description document shall be revised by the association as amendments to this act may require. Failure to receive this document does not give the policyholder, contract holder, certificate holder or insured any greater rights than those stated in this act.
(c) The document prepared under subsection (b) shall contain a clear and conspicuous disclaimer on its face. The commissioner shall promulgate a rule establishing the form and content of the disclaimer. The disclaimer shall:
(1) State the name and address of the life and health insurance guaranty association and insurance department;
(2) prominently warn the policy or contract holder that the life and health insurance guaranty association may not cover the policy or, if coverage is available, it will be subject to substantial limitations, exclusions and conditioned on continued residence in the state;
(3) state that the insurer and its agents are prohibited by law from using the existence of the life and health insurance guaranty association for the purpose of sales, solicitation or inducement to purchase any form of insurance;
(4) emphasize that the policy or contract holder should not rely on coverage under the life and health insurance guaranty association when selecting an insurer; and
(5) provide other information as directed by the commissioner.
(d) No insurer or agent may deliver a policy or contract described in subsection (b) of K.S.A. 40-3003 and amendments thereto and excluded under subsection (n)(1) of K.S.A. 40-3008 and amendments thereto from coverage under this act unless the insurer or agent, prior to or at the time of delivery, gives the policy or contract holder a separate written notice which clearly and conspicuously discloses that the policy or contract is not covered by the life and health insurance guaranty association. The commissioner, by rule, shall specify the form and content of the notice.
History: L. 1986, ch. 180, § 15; July 1.
History: L. 1972, ch. 190, § 14; L. 1986, ch. 180, § 12; July 1.
History: L. 1972, ch. 190, § 15; July 1.
(1) One hundred percent for the calendar year of issuance;
(2) eighty percent for the first calendar year after the year of issuance;
(3) sixty percent for the second calendar year after the year of issuance;
(4) forty percent for the third calendar year after the year of issuance;
(5) twenty percent for the fourth calendar year after the year of issuance.
(b) The insurer may offset the amount written off by it in a calendar year under subsection (a) above, against its premium tax liability to this state accrued with respect to business transacted in such year.
(c) Any sums acquired by refund, pursuant to subsection (f) of K.S.A. 40-3009, and amendments thereto, from the association which have theretofore been written off by contributing insurers and offset against premium taxes as provided in subsection (b) above, and is not then needed for purposes of this act, shall be paid by the association to the commissioner and the commissioner shall remit such moneys to the state treasurer in accordance with the provisions of K.S.A. 75-4215, and amendments thereto. Upon receipt of each such remittance, the state treasurer shall deposit the entire amount in the state treasury to the credit of the state general fund.
History: L. 1972, ch. 190, § 16; L. 2001, ch. 5, § 122; July 1.
History: L. 1972, ch. 190, § 17; L. 1986, ch. 180, § 13; July 1.
History: L. 1972, ch. 190, § 18; L. 1986, ch. 180, § 14; July 1.