Text: HSB00171                          Text: HSB00173
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Bills and Amendments: General Index     Bill History: General Index

House Study Bill 172

Conference Committee Text

PAG LIN
  1  1    Section 1.  Section 144C.4, Code 1995, is amended by adding
  1  2 the following new subsection:
  1  3    NEW SUBSECTION.  1A.  The commissioner or the
  1  4 commissioner's designee shall serve as an ex officio,
  1  5 nonvoting member of the board.
  1  6    Sec. 2.  Section 507.2, subsection 3, Code 1995, is amended
  1  7 to read as follows:
  1  8    3.  In lieu of an examination under this chapter of any
  1  9 foreign or alien insurer licensed in this state, the
  1 10 commissioner may accept an examination report on the company
  1 11 as prepared by the regulatory authority for insurance for the
  1 12 company's state of domicile or port-of-entry state until
  1 13 January 1, 1994.  Thereafter, such reports shall only be
  1 14 accepted if the regulatory authority was at the time of the
  1 15 examination accredited under the national association of
  1 16 insurance commissioners' financial regulation standards and
  1 17 accreditation program or the examination is performed under
  1 18 the supervision of an accredited regulatory authority or with
  1 19 the participation of one or more examiners who are employed by
  1 20 the accredited state and who, after a review of the
  1 21 examination work papers and report, state under oath that the
  1 22 examination was performed in a manner consistent with
  1 23 standards and procedures required by their insurance
  1 24 department.
  1 25    Sec. 3.  Section 507A.10, Code 1995, is amended to read as
  1 26 follows:
  1 27    507A.10  CEASE AND DESIST ORDER &endash; CIVIL PENALTY.
  1 28    The commissioner Upon a determination by the commissioner,
  1 29 after a hearing conducted pursuant to chapter 17A, that a
  1 30 person or insurer has violated a provision of this chapter,
  1 31 the commissioner shall reduce the findings of the hearing to
  1 32 writing and deliver a copy of the findings to the person or
  1 33 insurer, may issue an order requiring the person or insurer to
  1 34 cease and desist from engaging in the conduct resulting in the
  1 35 violation, and may assess a civil penalty of not more than
  2  1 fifty thousand dollars against a the person or insurer who has
  2  2 violated a provision of this chapter.
  2  3    Sec. 4.  Section 508.5, Code 1995, is amended to read as
  2  4 follows:
  2  5    508.5  CAPITAL AND SURPLUS REQUIRED.
  2  6    A stock life insurance company shall not be authorized to
  2  7 transact business under this chapter with less than two
  2  8 million five hundred thousand dollars capital stock fully paid
  2  9 for in cash and two million five hundred thousand dollars of
  2 10 surplus paid in cash or invested as provided by law.  A stock
  2 11 life insurance company shall not increase its capital stock
  2 12 unless the amount of the increase is fully paid in cash.  The
  2 13 stock shall be divided into shares of not less than one dollar
  2 14 par value each.  A stock life insurance company authorized to
  2 15 do business in Iowa that undergoes a change of control as
  2 16 regulated under chapter 521A shall maintain the minimum
  2 17 capital and surplus requirements mandated by this section.
  2 18    Sec. 5.  Section 508.9, Code 1995, is amended to read as
  2 19 follows:
  2 20    508.9  MUTUAL COMPANIES &endash; CONDITIONS.
  2 21    Level premium and natural premium life insurance companies
  2 22 organized under the laws of this state upon the mutual plan
  2 23 shall, before issuing policies, have actual applications on at
  2 24 least two hundred and fifty lives for an average amount of one
  2 25 thousand dollars each.  A list of the applications giving the
  2 26 name, age, residence, amount of insurance, and annual premium
  2 27 of each applicant shall be filed with the commissioner of
  2 28 insurance, and a deposit made with the commissioner of an
  2 29 amount equal to three-fifths of the whole annual premium on
  2 30 the applications, in cash or the securities required by
  2 31 section 508.5.  In addition, a deposit of cash or securities
  2 32 of the character provided by law for the investment of funds
  2 33 for life insurance companies in the sum of five million
  2 34 dollars shall be made with the commissioner, which shall
  2 35 constitute a security fund for the protection of
  3  1 policyholders.  The contribution to the security fund shall
  3  2 not give to contributors to the fund or to other persons any
  3  3 voting or other power in the management of the affairs of the
  3  4 company.  The security fund may be repaid to the contributors
  3  5 to the security fund with interest at six percent from the
  3  6 date of contribution, at any time, in whole or in part, if the
  3  7 repayment does not reduce the surplus of the company below the
  3  8 amount of five million dollars and then only if consent in
  3  9 writing for the repayment is obtained from the commissioner of
  3 10 insurance.  Upon compliance with this section, the
  3 11 commissioner shall issue to the mutual company the certificate
  3 12 prescribed in this chapter.  A mutual insurance company
  3 13 authorized to do business in Iowa that undergoes a change of
  3 14 control as defined in chapter 521A shall maintain the minimum
  3 15 surplus requirement mandated by this section.
  3 16    Sec. 6.  Section 513B.2, subsection 10, paragraph b, Code
  3 17 1995, is amended to read as follows:
  3 18    b.  "Health benefit plan" does not include accident-only,
  3 19 credit, dental, Medicare supplement, long-term care, or
  3 20 disability income insurance, coverage issued as a supplement
  3 21 to liability insurance, workers' compensation or similar
  3 22 insurance, or automobile medical-payment insurance.
  3 23    Sec. 7.  Section 514B.17, Code 1995, is amended to read as
  3 24 follows:
  3 25    514B.17  CANCELLATION OF ENROLLEES.
  3 26    1.  An enrollee enrolled in a prepaid individual plan shall
  3 27 not be canceled except for the failure to pay the charges
  3 28 permitted under section 514B.10 or for other reasons stated in
  3 29 the rules promulgated adopted by the commissioner and subject
  3 30 to review in accordance with chapter 17A.  No Except as
  3 31 provided in subsection 2 concerning prepaid group plans,
  3 32 notice of cancellation to an enrollee shall not be effective
  3 33 unless delivered to the enrollee by the health maintenance
  3 34 organization in a manner prescribed by the commissioner and at
  3 35 least thirty days before the effective date of cancellation
  4  1 and unless accompanied by a statement of reason for
  4  2 cancellation.  At any time before cancellation of the policy
  4  3 for nonpayment, the enrollee may pay to the health maintenance
  4  4 organization the full amount due, including court costs if
  4  5 any, and from the date of payment by the enrollee or the
  4  6 collection of the judgment, coverage shall revive and be in
  4  7 full force and effect.
  4  8    2.  The effect of cancellation of a prepaid group plan
  4  9 providing health care services to enrollees, and the duty to
  4 10 provide notice and liability for benefits, is the same as
  4 11 provided under section 509B.5, subsection 2, for the
  4 12 termination of accident or health insurance for employees or
  4 13 members.
  4 14    Sec. 8.  Section 514C.2, Code 1995, is amended to read as
  4 15 follows:
  4 16    514C.2  SKILLED NURSING CARE COVERED IN HOSPITALS.
  4 17    An insurer, a hospital service corporation, or a medical
  4 18 service corporation, which covers the costs of skilled nursing
  4 19 care under an individual or group policy of accident and
  4 20 health insurance regulated under chapter 509 or 514A, or under
  4 21 a nonprofit hospital or medical and surgical service plan
  4 22 regulated under chapter 514, or a health care service contract
  4 23 regulated under chapter 514B, shall also cover the costs of
  4 24 skilled nursing care in a hospital if the level of care needed
  4 25 by the insured or subscriber has been reclassified from acute
  4 26 care to skilled nursing care and no designated skilled nursing
  4 27 care beds or swing beds are available in the hospital or in
  4 28 another hospital or health care facility within a thirty-mile
  4 29 radius of the hospital.  The insurer or corporation shall
  4 30 reimburse the insured or subscriber based on the skilled
  4 31 nursing care rate.
  4 32    Sec. 9.  Section 514G.7, subsection 3, paragraphs a and b,
  4 33 Code 1995, are amended by striking the paragraphs and
  4 34 inserting in lieu thereof the following:
  4 35    a.  A long-term care insurance policy or certificate shall
  5  1 not use a definition of preexisting condition which is more
  5  2 restrictive than the following:  "Preexisting condition" means
  5  3 the existence of symptoms which would cause an ordinarily
  5  4 prudent person to seek diagnosis, care, or treatment, or a
  5  5 condition for which medical advice or treatment was
  5  6 recommended by or received from a provider of health care
  5  7 services within six months preceding the effective date of
  5  8 coverage of an insured person.
  5  9    b.  A long-term care insurance policy shall not exclude
  5 10 coverage for a loss or confinement which is the result of a
  5 11 preexisting condition unless the loss or confinement begins
  5 12 within six months following the effective date of coverage of
  5 13 an insured person.
  5 14    Sec. 10.  Section 514G.7, subsection 3, paragraph c, Code
  5 15 1995, is amended by striking the paragraph.
  5 16    Sec. 11.  Section 514G.7, subsection 6, Code 1995, is
  5 17 amended by striking the subsection and inserting in lieu
  5 18 thereof the following:
  5 19    6.  RIGHT TO RETURN AFTER EXAMINATION.  An individual long-
  5 20 term care insurance policyholder has the right to return the
  5 21 policy within thirty days of its delivery and to have the
  5 22 premium refunded if, after examination, the insured person is
  5 23 not satisfied for any reason.  Long-term care insurance
  5 24 policies must have a notice prominently printed on the first
  5 25 page or attached to the first page stating in substance that
  5 26 the policyholder has the right to return the policy within
  5 27 thirty days of its delivery and to have the premium refunded
  5 28 as provided in this subsection.
  5 29    Sec. 12.  Section 515.8, Code 1995, is amended to read as
  5 30 follows:
  5 31    515.8  PAID-UP CAPITAL REQUIRED.
  5 32    An insurance company other than a life insurance company
  5 33 shall not be incorporated to transact business upon the stock
  5 34 plan with less than two million five hundred thousand dollars
  5 35 capital, the entire amount of which shall be fully paid up in
  6  1 cash and invested as provided by law.  An insurance company
  6  2 other than a life insurance company shall not increase its
  6  3 capital stock unless the amount of the increase is fully paid
  6  4 up in cash.  The stock shall be divided into shares of not
  6  5 less than one dollar each.  An insurance company authorized to
  6  6 do business in Iowa that undergoes a change of control as
  6  7 regulated under chapter 521A shall maintain the minimum
  6  8 capital requirements mandated by this section.
  6  9    Sec. 13.  Section 515.10, Code 1995, is amended to read as
  6 10 follows:
  6 11    515.10  SURPLUS REQUIRED.
  6 12    An insurance company other than a life insurance company
  6 13 shall have, in addition to the required paid-up capital, a
  6 14 surplus in cash or invested in securities authorized by law of
  6 15 not less than two million five hundred thousand dollars.  An
  6 16 insurance company authorized to do business in Iowa that
  6 17 undergoes a change of control as regulated under chapter 521A
  6 18 shall maintain the minimum surplus requirements mandated by
  6 19 this section.
  6 20    Sec. 14.  Section 515.12, subsection 5, Code 1995, is
  6 21 amended to read as follows:
  6 22    5.  The mutual company shall have in cash or in securities
  6 23 in which insurance companies are authorized to invest, surplus
  6 24 in an amount not less than five million dollars.  The surplus
  6 25 so required may be advanced in accordance with section 515.19.
  6 26 A mutual company authorized to do business in Iowa that
  6 27 undergoes a change of control as regulated under chapter 521A
  6 28 shall maintain the minimum surplus requirements mandated by
  6 29 this section.
  6 30    However, the surplus requirements do not apply to a company
  6 31 which establishes and maintains a guaranty fund as provided by
  6 32 section 515.20.
  6 33    Sec. 15.  Section 515.94, Code 1995, is amended to read as
  6 34 follows:
  6 35    515.94  COPY OF APPLICATION &endash; DUTY TO ATTACH.
  7  1    All insurance companies or associations shall, upon the
  7  2 issue or renewal of any policy, attach to such policy, or
  7  3 endorse thereon provide to the insured, a true copy of any
  7  4 application or representation of the assured insured which, by
  7  5 the terms of such policy, is made a part thereof of the
  7  6 policy, or of the contract of insurance, or referred to
  7  7 therein in the contract of insurance, or which may in any
  7  8 manner affect the validity of such policy.
  7  9    Sec. 16.  Section 515.109, Code 1995, is amended to read as
  7 10 follows:
  7 11    515.109  FORMS OF POLICIES AND ENDORSEMENTS &endash; APPROVAL.
  7 12    1.  The form of all policies, and of applications, and of
  7 13 agreements or endorsements modifying the provisions of
  7 14 policies, and of all permits and riders used generally
  7 15 throughout the state, issued or proposed to be issued by any
  7 16 insurance company doing business in this state under the
  7 17 provisions of this chapter, shall first be examined and
  7 18 approved by the commissioner of insurance.
  7 19    2.  The commissioner, upon a determination that the
  7 20 examination required under subsection 1 is unnecessary to
  7 21 achieve the purposes of this section, may exempt either of the
  7 22 following:
  7 23    a.  Any specified person by order, or any class of persons
  7 24 by rule.
  7 25    b.  Any specified risk by order, or any line or kind or
  7 26 insurance or subdivision of insurance or any class of risk or
  7 27 combination of classes of risks by rule.
  7 28    Sec. 17.  Section 515A.15, Code 1995, is amended by
  7 29 striking the section and inserting in lieu thereof the
  7 30 following:
  7 31    515A.15  ASSIGNED RISKS.
  7 32    All insurers shall participate in a residual market
  7 33 mechanism.  Insurers shall enter into agreements among
  7 34 themselves with respect to the equitable apportionment among
  7 35 themselves of insurance which may be afforded to applicants
  8  1 who are in good faith entitled to, but who are unable to
  8  2 procure, such insurance through ordinary methods.  If an
  8  3 agreement cannot be reached among the insurers, the
  8  4 commissioner, by rule, shall establish the terms so that an
  8  5 equitable apportionment among all insurers is accomplished.
  8  6    Sec. 18.  Section 515.F.5, subsection 4, Code 1995, is
  8  7 amended to read as follows:
  8  8    4.  Under rules adopted under chapter 17A, the commissioner
  8  9 may, by written order, suspend or modify the requirement of
  8 10 filing as to any kind of insurance, or subdivision or
  8 11 combination of insurance, or as to classes of risks, which are
  8 12 unnecessary to achieve the purposes of this chapter and the
  8 13 rates for which cannot practicably be filed before they are
  8 14 used.  The commissioner may make an examination as the
  8 15 commissioner deems advisable to ascertain whether rates
  8 16 affected by the order meet the standards set forth in section
  8 17 515F.4.
  8 18    Sec. 19.  Section 518.14, Code 1995, is amended by striking
  8 19 the section and inserting in lieu thereof the following:
  8 20    518.14  INVESTMENTS.
  8 21    1.  GENERAL CONSIDERATIONS.  The following considerations
  8 22 apply in the interpretation of this section:
  8 23    a.  This section applies to the investments of county
  8 24 mutual insurance associations.
  8 25    b.  The purpose of this section is to protect and further
  8 26 the interests of policyholders, claimants, creditors, and the
  8 27 public by providing standards for the development and
  8 28 administration of programs for the investment of the assets of
  8 29 associations organized under this chapter.  These standards,
  8 30 and the investment programs developed by associations, shall
  8 31 take into account the safety of the association's principal,
  8 32 investment yield and growth, stability in the value of the
  8 33 investment, and liquidity necessary to meet the association's
  8 34 expected business needs, and investment diversification.
  8 35    All investments made pursuant to this section shall have
  9  1 investment qualities and characteristics such that the
  9  2 speculative elements of the investments are not predominant.
  9  3    c.  Financial terms relating to county mutual insurance
  9  4 associations have the meanings assigned to them under
  9  5 statutory accounting methods.  Financial terms relating to
  9  6 companies or associations other than county mutual insurance
  9  7 associations have the meanings assigned to them under
  9  8 generally accepted accounting principles.
  9  9    d.  Investments shall be valued in accordance with the
  9 10 valuation procedures established by the national association
  9 11 of insurance commissioners, unless the commissioner requires
  9 12 or finds another method of valuation reasonable under the
  9 13 circumstances.
  9 14    e.  If an investment qualifies under more than one
  9 15 subsection, an association may elect to hold the investment
  9 16 under the subsection of its choice.  This section does not
  9 17 prevent an association from electing to hold an investment
  9 18 under a subsection different from the one under which it
  9 19 previously held the investment.
  9 20    2.  DEFINITIONS.  For purposes of this section:
  9 21    a.  "Admitted assets", for purposes of computing percentage
  9 22 limitations on particular types of investments, means the
  9 23 assets which are authorized to be shown on the commissioner's
  9 24 annual statement blank as admitted assets as of the December
  9 25 31 immediately preceding the date the association acquires the
  9 26 investment.
  9 27    b.  "Clearing corporation" means as defined in section
  9 28 554.8102.
  9 29    c.  "Custodian bank" means as defined in section 554.8102.
  9 30    d.  "Issuer" means as defined in section 554.8201.
  9 31    e.  "Member bank" means a national bank, state bank, or
  9 32 trust company which is a member of the United States federal
  9 33 reserve system.
  9 34    f.  "National securities exchange" means an exchange
  9 35 registered under section 6 of the federal Securities Exchange
 10  1 Act of 1934 or an exchange regulated under the laws of Canada.
 10  2    g.  "Obligations" includes bonds, notes, debentures,
 10  3 transportation equipment certificates, domestic repurchase
 10  4 agreements, and obligations for the payment of money not in
 10  5 default as to payments of principal and interest on the date
 10  6 of investment, which constitute general obligations of the
 10  7 issuer or payable only out of certain revenues or certain
 10  8 funds pledged or otherwise dedicated for payment of principal
 10  9 and interest on the obligations.  A lease is an obligation if
 10 10 the lease is assigned to the insurer and is nonterminable by
 10 11 the lessee upon foreclosure of any lien upon the leased
 10 12 property, and if rental payments are sufficient to amortize
 10 13 the investment over the primary lease term.
 10 14    3.  INVESTMENTS IN NAME OF ASSOCIATION OR NOMINEE AND
 10 15 PROHIBITIONS.
 10 16    a.  An association's investments shall be held in its own
 10 17 name or the name of its nominee, except as follows:
 10 18    (1)  Investments may be held in the name of a clearing
 10 19 corporation or of a custodian bank or in the name of the
 10 20 nominee of either on the following conditions:
 10 21    (a)  The clearing corporation, custodian bank, or nominee
 10 22 must be legally authorized to hold the particular investment
 10 23 for the account of others.
 10 24    (b)  When the investment is evidenced by a certificate and
 10 25 held in the name of a custodian bank or the nominee of a
 10 26 custodian bank, a written agreement shall provide that
 10 27 certificates so deposited shall at all times be kept separate
 10 28 and apart from other deposits with the depository, so that at
 10 29 all times they may be identified as belonging solely to the
 10 30 association making the deposit.
 10 31    (c)  If a clearing corporation is to act as depository, the
 10 32 investment may be merged or held in bulk in the name of the
 10 33 clearing corporation or its nominee with other investments
 10 34 deposited with the clearing corporation by any other person,
 10 35 if a written agreement between the clearing corporation and
 11  1 the association provides that adequate evidence of the deposit
 11  2 is to be obtained and retained by the association or a
 11  3 custodian bank.
 11  4    (2)  An association may loan stocks or obligations held by
 11  5 it under this chapter to a broker-dealer registered under the
 11  6 federal Securities Exchange Act of 1934 or to a member bank.
 11  7 The loan must be evidenced by a written agreement which
 11  8 provides all of the following:
 11  9    (a)  That the loan will be fully collateralized by cash or
 11 10 obligations issued or guaranteed by the United States or an
 11 11 agency or an instrumentality of the United States, and that
 11 12 the collateral will be adjusted as necessary each business day
 11 13 during the term of the loan to maintain the required
 11 14 collateralization in the event of market value changes in the
 11 15 loaned securities or collateral.
 11 16    (b)  That the loan may be terminated by the association at
 11 17 any time, and that the borrower will return the loaned stocks
 11 18 or obligations within five business days after termination.
 11 19    (c)  That the association has the right to retain the
 11 20 collateral or use the collateral to purchase investments
 11 21 equivalent to the loaned securities if the borrower defaults
 11 22 under the terms of the agreement, and that the borrower
 11 23 remains liable for any losses and expenses incurred by the
 11 24 association due to default that are not covered by the
 11 25 collateral.
 11 26    (3)  An association may participate through a member bank
 11 27 in the United States federal reserve book entry system, and
 11 28 the records of the member bank shall at all times show that
 11 29 the investments are held for the association or for specific
 11 30 accounts of the association.
 11 31    (4)  An investment may consist of an individual interest in
 11 32 a pool of obligations or a fractional interest in a single
 11 33 obligation if the certificate of participation or interest or
 11 34 the confirmation of participation or interest in the
 11 35 investment is issued in the name of the association, the name
 12  1 of the custodian bank, or the nominee of either, and, if the
 12  2 interest as evidenced by the certificate or confirmation is,
 12  3 if held by a custodian bank, kept separate and apart from the
 12  4 investments of others so that at all times the participation
 12  5 may be identified as belonging solely to the association
 12  6 making the investment.
 12  7    (5)  Transfers of ownership of investments held as
 12  8 described in paragraph "a", subparagraph (1), subparagraph
 12  9 subdivision (c), and subparagraphs (3) and (4), may be
 12 10 evidenced by bookkeeping entry on the books of the issuer of
 12 11 the investment, its transfer or recording agent, or the
 12 12 clearing corporation without physical delivery of a
 12 13 certificate evidencing the associations's investment.
 12 14    b.  Except as provided in paragraph "a", subparagraph (5),
 12 15 if an investment is not evidenced by a certificate, adequate
 12 16 evidence of the association's investment shall be obtained
 12 17 from the issuer or its transfer or recording agent and
 12 18 retained by the association, a custodian bank, or clearing
 12 19 corporation.  Adequate evidence, for purposes of this
 12 20 paragraph, means a written receipt or other verification
 12 21 issued by the depository or issuer or a custodian bank which
 12 22 shows that the investment is held for the association.
 12 23    4.  INVESTMENTS.  Except as otherwise permitted by this
 12 24 section, an association organized under this chapter shall
 12 25 only invest in the following:
 12 26    a.  UNITED STATES GOVERNMENT OBLIGATIONS.  Obligations
 12 27 issued or guaranteed by the United States or an agency or
 12 28 instrumentality of the United States.
 12 29    b.  CERTAIN DEVELOPMENT BANK OBLIGATIONS.  Obligations
 12 30 issued or guaranteed by the international bank for
 12 31 reconstruction and development, the Asian development bank,
 12 32 the inter-American development bank, the export-import bank,
 12 33 the world bank, or any United States government-sponsored
 12 34 organization of which the United States is a member, if the
 12 35 principal and interest is payable in United States dollars.
 13  1 An association shall not invest more than five percent of its
 13  2 total admitted assets in the obligations of any one of these
 13  3 banks or organizations, and shall not invest more than a total
 13  4 of ten percent of its total admitted assets in the obligations
 13  5 authorized by this paragraph.
 13  6    c.  STATE OBLIGATIONS.  Obligations issued or guaranteed by
 13  7 a state, a political subdivision of a state, or an
 13  8 instrumentality of a state.
 13  9    d.  CANADIAN GOVERNMENT OBLIGATIONS.  Obligations issued or
 13 10 guaranteed by Canada, by an agency or province of Canada, by a
 13 11 political subdivision of such province, or by an
 13 12 instrumentality of any of those provinces or political
 13 13 subdivisions.
 13 14    e.  CORPORATE AND BUSINESS TRUST OBLIGATIONS.  Obligations
 13 15 issued, assumed, or guaranteed by a corporation or business
 13 16 trust organized under the laws of the United States or a
 13 17 state, or the laws of Canada or a province of Canada, provided
 13 18 that an association shall not invest more than five percent of
 13 19 its admitted assets in the obligations of any one corporation
 13 20 or business trust.  Investments shall be made only in
 13 21 investment grade bonds.
 13 22    f.  STOCKS.  Common stocks, common stock equivalents,
 13 23 mutual fund shares, securities convertible into common stocks
 13 24 or common stock equivalents, or preferred stocks issued or
 13 25 guaranteed by a corporation incorporated under the laws of the
 13 26 United States or a state, or the laws of Canada or a province
 13 27 of Canada.  Aggregate investments in nondividend paying stocks
 13 28 shall not exceed five percent of surplus.
 13 29    (1)  Stocks purchased under this lettered paragraph shall
 13 30 not exceed fifty percent of surplus.  With the approval of the
 13 31 commissioner, an association may invest any amount in common
 13 32 stocks, preferred stocks, or other securities of one or more
 13 33 subsidiaries provided that after such investments the
 13 34 association's surplus as regards policyholders will be
 13 35 reasonable in relation to the association's outstanding
 14  1 liabilities and adequate to its financial needs.
 14  2    (2)  An association shall not invest more than ten percent
 14  3 of its surplus in the stocks of any one corporation.
 14  4    g.  HOME OFFICE REAL ESTATE.  Funds may be invested in a
 14  5 home office building, at the direction of the board of
 14  6 directors and with the prior approval of the commissioner of
 14  7 insurance.  An association shall not invest more than twenty-
 14  8 five percent of its total admitted assets in such real estate.
 14  9 With the prior approval of the commissioner, an association
 14 10 may exceed the real estate investment limitation to effectuate
 14 11 a merger with, or the acquisition of, another association.
 14 12    Sec. 20.  Section 518.16, Code 1995, is amended by striking
 14 13 the section and inserting in lieu thereof the following:
 14 14    518.16  QUALIFICATION OF AGENTS.
 14 15    A person shall not solicit any application for insurance
 14 16 for an association in this state without having procured from
 14 17 the commissioner of insurance a license authorizing the person
 14 18 to act as an agent pursuant to chapter 522.
 14 19    Sec. 21.  NEW SECTION.  518.26  LOANS TO OFFICERS
 14 20 PROHIBITED.
 14 21    Assets or other funds shall not be loaned directly or
 14 22 indirectly to an officer, director, or employee of the
 14 23 association, or directly or indirectly to a relative of an
 14 24 officer, director, or an employee of the association.
 14 25    Sec. 22.  NEW SECTION.  518.27  FORM &endash; APPROVAL.
 14 26    The form of all policies, applications, agreements, and
 14 27 endorsements modifying the provisions of policies, and all
 14 28 permits and riders used in this state, issued or proposed to
 14 29 be issued by a county mutual insurance association doing
 14 30 business in this state under the provisions of this chapter,
 14 31 shall first be examined and approved by the commissioner of
 14 32 insurance.
 14 33    Sec. 23.  NEW SECTION.  518.28  FAILURE TO FILE COPY.
 14 34    Upon the failure of a county mutual association to file a
 14 35 copy of its forms of policies or contracts pursuant to section
 15  1 518.27, the commissioner of insurance may suspend its
 15  2 authority to transact business within the state until such
 15  3 forms of policies or contracts have been filed and approved.
 15  4    Sec. 24.  NEW SECTION.  518.29  DISAPPROVAL OF FILINGS.
 15  5    If the commissioner finds that a filing does not meet the
 15  6 requirements of this chapter, written notice of disapproval
 15  7 shall be sent to the county mutual insurance association
 15  8 specifying in what respect the filing fails to meet the
 15  9 requirements of this chapter and stating that the filing is
 15 10 not effective.  If a filing is disapproved by the
 15 11 commissioner, the association may request a hearing on the
 15 12 disapproval within thirty days.  The association bears the
 15 13 burden of proving compliance with the standards established by
 15 14 this chapter.
 15 15    If, at any time after a form has been approved, the
 15 16 commissioner finds that the form no longer meets the
 15 17 requirements of this chapter, the commissioner may order the
 15 18 discontinuance of the use of the form.  The order of
 15 19 discontinuance shall be in writing and may be issued only
 15 20 after a hearing with at least ten days' prior notice to all
 15 21 county mutuals affected by the order.  The order shall state
 15 22 the grounds upon which the order is based and when the order
 15 23 of discontinuance is effective.
 15 24    Sec. 25.  NEW SECTION.  518.30  CERTIFICATE REFUSED &endash;
 15 25 ADMINISTRATIVE PENALTY.
 15 26    The commissioner of insurance may suspend a county mutual
 15 27 insurance association's certificate of authority to do
 15 28 business if the association neglects or fails to comply with
 15 29 this chapter.  In addition, an association organized or
 15 30 authorized under this chapter which fails to file the annual
 15 31 statement referred to in section 518.15 in the time required
 15 32 shall pay an administrative penalty in an amount of three
 15 33 hundred dollars to be collected in the name of the state for
 15 34 deposit in the general fund of the state.  The commissioner
 15 35 may give notice to a county mutual insurance association which
 16  1 has failed to file within the time required that the
 16  2 association is in violation of section 518.15 and this
 16  3 section.  If the association fails to file the statement
 16  4 within ten days of the date of the notice, the association
 16  5 shall pay an additional sum of fifty dollars for each day the
 16  6 failure continues, to be paid into the general fund of the
 16  7 state.
 16  8    Sec. 26.  Section 518A.12, Code 1995, is amended by
 16  9 striking the section and inserting in lieu thereof the
 16 10 following:
 16 11    518A.12  INVESTMENTS.
 16 12    1.  GENERAL CONSIDERATIONS.  The following considerations
 16 13 apply in the interpretation of this section:
 16 14    a.  This section applies to the investments of mutual
 16 15 casualty assessment insurance associations.
 16 16    b.  The purpose of this section is to protect and further
 16 17 the interests of policyholders, claimants, creditors, and the
 16 18 public by providing standards for the development and
 16 19 administration of programs for the investment of the assets of
 16 20 associations organized under this chapter.  These standards,
 16 21 and the investment programs developed by companies, shall take
 16 22 into account the safety of the association's principal,
 16 23 investment yield and growth, stability in the value of the
 16 24 investment, and liquidity necessary to meet the association's
 16 25 expected business needs, and investment diversification.
 16 26    All investments made pursuant to this section shall have
 16 27 investment qualities and characteristics such that the
 16 28 speculative elements of the investments are not predominant.
 16 29    c.  Financial terms relating to mutual casualty assessment
 16 30 insurance associations have the meanings assigned to them
 16 31 under statutory accounting methods.  Financial terms relating
 16 32 to companies other than mutual casualty assessment insurance
 16 33 associations have the meanings assigned to them under
 16 34 generally accepted accounting principles.
 16 35    d.  Investments shall be valued in accordance with the
 17  1 valuation procedures established by the national association
 17  2 of insurance commissioners, unless the commissioner requires
 17  3 or finds another method of valuation reasonable under the
 17  4 circumstances.
 17  5    e.  If an investment qualifies under more than one
 17  6 subsection, an association may elect to hold the investment
 17  7 under the subsection of its choice.  This section does not
 17  8 prevent an association from electing to hold an investment
 17  9 under a subsection different from the one under which it
 17 10 previously held the investment.
 17 11    2.  DEFINITIONS.  For purposes of this section:
 17 12    a.  "Admitted assets", for purposes of computing percentage
 17 13 limitations on particular types of investments, means the
 17 14 assets which are authorized to be shown on the national
 17 15 association of insurance commissioner's annual statement blank
 17 16 as admitted assets as of the December 31 immediately preceding
 17 17 the date the association acquires the investment.
 17 18    b.  "Clearing corporation" means as defined in section
 17 19 554.8102.
 17 20    c.  "Custodian bank" means as defined in section 554.8102.
 17 21    d.  "Issuer" means as defined in section 554.8201.
 17 22    e.  "Member bank" means a national bank, state bank, or
 17 23 trust company which is a member of the United States federal
 17 24 reserve system.
 17 25    f.  "National securities exchange" means an exchange
 17 26 registered under section 6 of the federal Securities Exchange
 17 27 Act of 1934 or an exchange regulated under the laws of Canada.
 17 28    g.  "Obligations" includes bonds, notes, debentures,
 17 29 transportation equipment certificates, domestic repurchase
 17 30 agreements, and obligations for the payment of money not in
 17 31 default as to payments of principal and interest on the date
 17 32 of investment, which constitute general obligations of the
 17 33 issuer or payable only out of certain revenues or certain
 17 34 funds pledged or otherwise dedicated for payment of principal
 17 35 and interest on the obligations.  A lease is an obligation if
 18  1 the lease is assigned to the insurer and is nonterminable by
 18  2 the lessee upon foreclosure of any lien upon the leased
 18  3 property, and if rental payments are sufficient to amortize
 18  4 the investment over the primary lease term.
 18  5    3.  INVESTMENTS IN NAME OF ASSOCIATION OR NOMINEE AND
 18  6 PROHIBITIONS.
 18  7    a.  An association's investments shall be held in its own
 18  8 name or the name of its nominee, except as follows:
 18  9    (1)  Investments may be held in the name of a clearing
 18 10 corporation or of a custodian bank or in the name of the
 18 11 nominee of either on the following conditions:
 18 12    (a)  The clearing corporation, custodian bank, or nominee
 18 13 must be legally authorized to hold the particular investment
 18 14 for the account of others.
 18 15    (b)  When the investment is evidenced by a certificate and
 18 16 held in the name of a custodian bank or the nominee of a
 18 17 custodian bank, a written agreement shall provide that
 18 18 certificates so deposited shall at all times be kept separate
 18 19 and apart from other deposits with the depository, so that at
 18 20 all times they may be identified as belonging solely to the
 18 21 association making the deposit.
 18 22    (c)  If a clearing corporation is to act as depository, the
 18 23 investment may be merged or held in bulk in the name of the
 18 24 clearing corporation or its nominee with other investments
 18 25 deposited with the clearing corporation by any other person,
 18 26 if a written agreement between the clearing corporation and
 18 27 the association provides that adequate evidence of the deposit
 18 28 is to be obtained and retained by the association or a
 18 29 custodian bank.
 18 30    (2)  An association may loan stocks or obligations held by
 18 31 it under this chapter to a broker-dealer registered under the
 18 32 federal Securities Exchange Act of 1934 or to a member bank.
 18 33 The loan must be evidenced by a written agreement which
 18 34 provides all of the following:
 18 35    (a)  That the loan will be fully collateralized by cash or
 19  1 obligations issued or guaranteed by the United States or an
 19  2 agency or an instrumentality of the United States, and that
 19  3 the collateral will be adjusted as necessary each business day
 19  4 during the term of the loan to maintain the required
 19  5 collateralization in the event of market value changes in the
 19  6 loaned securities or collateral.
 19  7    (b)  That the loan may be terminated by the association at
 19  8 any time, and that the borrower will return the loaned stocks
 19  9 or obligations within five business days after termination.
 19 10    (c)  That the association has the right to retain the
 19 11 collateral or use the collateral to purchase investments
 19 12 equivalent to the loaned securities if the borrower defaults
 19 13 under the terms of the agreement, and that the borrower
 19 14 remains liable for any losses and expenses incurred by the
 19 15 association due to default that are not covered by the
 19 16 collateral.
 19 17    (3)  An association may participate through a member bank
 19 18 in the United States federal reserve book entry system, and
 19 19 the records of the member bank shall at all times show that
 19 20 the investments are held for the association or for specific
 19 21 accounts of the association.
 19 22    (4)  An investment may consist of an individual interest in
 19 23 a pool of obligations or a fractional interest in a single
 19 24 obligation if the certificate of participation or interest or
 19 25 the confirmation of participation or interest in the
 19 26 investment is issued in the name of the association, the name
 19 27 of the custodian bank, or the nominee of either, and, if the
 19 28 interest as evidenced by the certificate or confirmation is,
 19 29 if held by a custodian bank, kept separate and apart from the
 19 30 investments of others so that at all times the participation
 19 31 may be identified as belonging solely to the association
 19 32 making the investment.
 19 33    (5)  Transfers of ownership of investments held as
 19 34 described in paragraph "a", subparagraph (1), subparagraph
 19 35 subdivision (c), and subparagraphs (3) and (4), may be
 20  1 evidenced by bookkeeping entry on the books of the issuer of
 20  2 the investment, its transfer or recording agent, or the
 20  3 clearing corporation without physical delivery of a
 20  4 certificate evidencing the associations's investment.
 20  5    b.  Except as provided in paragraph "a", subparagraph (5),
 20  6 if an investment is not evidenced by a certificate, adequate
 20  7 evidence of the association's investment shall be obtained
 20  8 from the issuer or its transfer or recording agent and
 20  9 retained by the association, a custodian bank, or clearing
 20 10 corporation.  Adequate evidence, for purposes of this
 20 11 paragraph, means a written receipt or other verification
 20 12 issued by the depository or issuer or a custodian bank which
 20 13 shows that the investment is held for the association.
 20 14    4.  INVESTMENTS.  Except as otherwise permitted by this
 20 15 section, an association organized under this chapter shall
 20 16 only invest in the following:
 20 17    a.  UNITED STATES GOVERNMENT OBLIGATIONS.  Obligations
 20 18 issued or guaranteed by the United States or an agency or
 20 19 instrumentality of the United States.
 20 20    b.  CERTAIN DEVELOPMENT BANK OBLIGATIONS.  Obligations
 20 21 issued or guaranteed by the international bank for
 20 22 reconstruction and development, the Asian development bank,
 20 23 the inter-American development bank, the export-import bank,
 20 24 the world bank, or any United States government-sponsored
 20 25 organization of which the United States is a member, if the
 20 26 principal and interest is payable in United States dollars.
 20 27 An association shall not invest more than five percent of its
 20 28 total admitted assets in the obligations of any one of these
 20 29 banks or organizations, and shall not invest more than a total
 20 30 of ten percent of its total admitted assets in the obligations
 20 31 authorized by this paragraph.
 20 32    c.  STATE OBLIGATIONS.  Obligations issued or guaranteed by
 20 33 a state, a political subdivision of a state, or an
 20 34 instrumentality of a state.
 20 35    d.  CANADIAN GOVERNMENT OBLIGATIONS.  Obligations issued or
 21  1 guaranteed by Canada, by an agency or province of Canada, by a
 21  2 political subdivision of such province, or by an
 21  3 instrumentality of any of those provinces or political
 21  4 subdivisions.
 21  5    e.  CORPORATE AND BUSINESS TRUST OBLIGATIONS.  Obligations
 21  6 issued, assumed, or guaranteed by a corporation or business
 21  7 trust organized under the laws of the United States or a
 21  8 state, or the laws of Canada or a province of Canada, provided
 21  9 that an association shall not invest more than five percent of
 21 10 its admitted assets in the obligations of any one corporation
 21 11 or business trust.  Investments shall be made only in
 21 12 investment grade bonds.
 21 13    f.  STOCKS.  Common stocks, common stock equivalents,
 21 14 mutual fund shares, securities convertible into common stocks
 21 15 or common stock equivalents, or preferred stocks issued or
 21 16 guaranteed by a corporation incorporated under the laws of the
 21 17 United States or a state, or the laws of Canada or a province
 21 18 of Canada.  Aggregate investments in nondividend paying stocks
 21 19 shall not exceed five percent of surplus.
 21 20    (1)  Stocks purchased under this lettered paragraph shall
 21 21 not exceed fifty percent of surplus.  With the approval of the
 21 22 commissioner, an association may invest any amount in common
 21 23 stocks, preferred stocks, or other securities of one or more
 21 24 subsidiaries provided that after such investments the
 21 25 association's surplus as regards policyholders will be
 21 26 reasonable in relation to the association's outstanding
 21 27 liabilities and adequate to its financial needs.
 21 28    (2)  An association shall not invest more than ten percent
 21 29 of its surplus in the stocks of any one corporation.
 21 30    g.  HOME OFFICE REAL ESTATE.  Funds may be invested in a
 21 31 home office building, at the direction of the board of
 21 32 directors and with the prior approval of the commissioner of
 21 33 insurance.  An association shall not invest more than twenty-
 21 34 five percent of its total admitted assets in such real estate.
 21 35 With the prior approval of the commissioner, an association
 22  1 may exceed the real estate investment limitation to effectuate
 22  2 a merger with, or the acquisition of, another association.
 22  3    Sec. 27.  Section 518A.17, unnumbered paragraph 3, Code
 22  4 1995, is amended to read as follows:
 22  5    Not less than fifty percent of such aggregate amount of
 22  6 assessments, and other sums paid by the members shall be
 22  7 returned to the members, either through the payment of losses
 22  8 or through discounts, credits, or dividends, to be credited on
 22  9 the assessments required for the current or succeeding year,
 22 10 or, at the discretion of the board of directors, may be set
 22 11 aside in the emergency fund as defined in section 518A.12 as
 22 12 surplus to policyholders, but no sum less than forty percent
 22 13 of such aggregate assessments, and other sums paid by the
 22 14 members, shall be returned to the members through payment of
 22 15 such losses or through discounts, credits, or dividends during
 22 16 the current or succeeding year.
 22 17    Sec. 28.  NEW SECTION.  518A.44  LIMITATION ON RISKS.
 22 18    An association shall not expose itself to loss on any one
 22 19 risk or hazard to an amount exceeding ten percent of its
 22 20 surplus to policyholders unless one of the following applies:
 22 21    1.  The excess is reinsured in some other good and reliable
 22 22 company licensed to sell insurance in this state.
 22 23    2.  The excess is reinsured by a group of incorporated or
 22 24 individual unincorporated insurers who are authorized to sell
 22 25 insurance in at least one state of the United States and who
 22 26 possess assets which are held in trust for the benefit of the
 22 27 American policyholders in the sum of not less than fifty
 22 28 million dollars, and a certificate of such reinsurance shall
 22 29 be furnished to the insured.
 22 30    3.  The excess is reinsured with a company which has, with
 22 31 respect to the ceding insurer, created a trust fund, made a
 22 32 deposit, or obtained letters of credit, on terms satisfactory
 22 33 to the commissioner.
 22 34    Sec. 29.  NEW SECTION.  518A.51  LOANS TO OFFICERS
 22 35 PROHIBITED.
 23  1    Assets or other funds shall not be loaned directly or
 23  2 indirectly to an officer, director, or employee of the
 23  3 association, or directly or indirectly to a relative of an
 23  4 officer, director, or employee of the association.
 23  5    Sec. 30.  NEW SECTION.  518A.52  FORM &endash; APPROVAL.
 23  6    The form of all policies, applications, agreements, and
 23  7 endorsements modifying the provisions of policies, and all
 23  8 permits and riders used in this state, issued or proposed to
 23  9 be issued by a mutual casualty assessment insurance
 23 10 association doing business in this state under the provisions
 23 11 of this chapter, shall first be examined and approved by the
 23 12 commissioner of insurance.
 23 13    Sec. 31.  NEW SECTION.  518A.53  FAILURE TO FILE COPY.
 23 14    Upon the failure of a mutual casualty assessment insurance
 23 15 association to file a copy of its forms of policies or
 23 16 contracts pursuant to section 518A.52, the commissioner of
 23 17 insurance may suspend its authority to transact business
 23 18 within the state until such forms of policies or contracts
 23 19 have been filed and approved.
 23 20    Sec. 32.  NEW SECTION.  518A.54  DISAPPROVAL OF FILINGS.
 23 21    If the commissioner finds that a filing does not meet the
 23 22 requirements of this chapter, written notice of disapproval
 23 23 shall be sent to the mutual casualty assessment insurance
 23 24 association specifying in what respect the filing fails to
 23 25 meet the requirements of this chapter and stating that the
 23 26 filing is not effective.  If a filing is disapproved by the
 23 27 commissioner, the association may request a hearing on the
 23 28 disapproval within thirty days.  The association bears the
 23 29 burden of proving compliance with the standards established by
 23 30 this chapter.
 23 31    If, at any time after a form has been approved, the
 23 32 commissioner finds that the form no longer meets the
 23 33 requirements of this chapter, the commissioner may order the
 23 34 discontinuance of the use of the form.  The order of
 23 35 discontinuance shall be in writing and may be issued only
 24  1 after a hearing with at least ten days' prior notice to all
 24  2 mutual casualty assessment insurance associations affected by
 24  3 the order.  The order shall state the grounds upon which the
 24  4 order is based and when the order of discontinuance is
 24  5 effective.
 24  6    Sec. 33.  NEW SECTION.  518A.55  CERTIFICATE REFUSED &endash;
 24  7 ADMINISTRATIVE PENALTY.
 24  8    The commissioner of insurance may suspend a mutual casualty
 24  9 assessment insurance association's certificate of authority to
 24 10 do business if the association neglects or fails to comply
 24 11 with this chapter.  In addition, an association organized or
 24 12 authorized under this chapter which fails to file the annual
 24 13 statement referred to in section 518A.18 in the time required
 24 14 shall pay an administrative penalty in an amount of three
 24 15 hundred dollars to be collected in the name of the state for
 24 16 deposit in the general fund of the state.  The commissioner
 24 17 may give notice to a mutual casualty assessment insurance
 24 18 association which has failed to file within the time required
 24 19 that the association is in violation of section 518A.18 and
 24 20 this section.  If the association fails to file the statement
 24 21 within ten days of the date of the notice the association
 24 22 shall pay an additional sum of fifty dollars for each day the
 24 23 failure continues, to be paid to the general fund of the
 24 24 state.
 24 25    Sec. 34.  Section 521.1, Code 1995, is amended to read as
 24 26 follows:
 24 27    521.1  DEFINITIONS.
 24 28    "Company" or "companies" when used in this chapter means a
 24 29 company or association organized under chapter 508, 511, 515,
 24 30 518, 518A, or 520, except county mutuals.
 24 31    Sec. 35.  Section 521.2, Code 1995, is amended to read as
 24 32 follows:
 24 33    521.2  LIFE COMPANIES &endash; CONSOLIDATION AND REINSURANCE.
 24 34    No A company organized under the laws of this state to do
 24 35 the business of life insurance, either on the stock, mutual,
 25  1 stipulated premium, or assessment plan, shall not consolidate
 25  2 with any other company or reinsure its risks, or any part
 25  3 thereof of such risks, with any other company, or assume or
 25  4 reinsure the whole or any part of the risks of any other
 25  5 company, except as hereinafter provided; provided that nothing
 25  6 contained in this chapter.  However, this chapter shall not be
 25  7 construed to prevent any company, as defined in section 521.1,
 25  8 from reinsuring a fractional part of any single risk.
 25  9    Chapter 521A is applicable to a merger or consolidation
 25 10 made pursuant to this chapter, and the provisions of chapter
 25 11 521A and this chapter shall apply exclusively with respect to
 25 12 such merger or consolidation.
 25 13    Sec. 36.  Section 521B.2, subsection 4, paragraph a, Code
 25 14 1995, is amended to read as follows:
 25 15    a.  Credit is allowed if the reinsurance is ceded to an
 25 16 assuming insurer which maintains a trust fund in a qualified
 25 17 United States financial institution, as defined in section
 25 18 521B.4, subsection 2, for the payment of the valid claims of
 25 19 its United States policyholders and ceding insurers, their
 25 20 assigns, and successors in interest.  The assuming insurer
 25 21 shall report annually to the commissioner information
 25 22 substantially the same as that required to be reported on the
 25 23 national association of insurance commissioners' annual
 25 24 statement form by licensed insurers to enable the commissioner
 25 25 to determine the sufficiency of the trust fund.  In the case
 25 26 of a single assuming insurer, the trust shall consist of a
 25 27 trusted account representing the liabilities of the assuming
 25 28 insurer attributable to business written in the United States
 25 29 and, in addition, the assuming insurer shall maintain a
 25 30 trusted surplus of not less than twenty million dollars.  In
 25 31 the case of a group of including individual unincorporated and
 25 32 incorporated underwriters, the trust shall consist of a
 25 33 trusted account representing the liabilities of the group
 25 34 attributable to business written in the United States and, in
 25 35 addition, the group shall maintain a trusted surplus of which
 26  1 one hundred million dollars shall be held jointly for the
 26  2 benefit of United States ceding insurers of any member of the
 26  3 group.  The incorporated members of the group shall not engage
 26  4 in any business other than underwriting as a member of the
 26  5 group and shall be subject to the same level of solvency
 26  6 regulation and control by the group's domiciliary regulator as
 26  7 are the unincorporated members.  The group shall make
 26  8 available to the commissioner an annual certification of the
 26  9 solvency of each underwriter by the group's domiciliary
 26 10 regulator and its independent public accountants.
 26 11    Sec. 37.  1994 Iowa Acts, chapter 1072, section 9, is
 26 12 amended to read as follows:
 26 13    SEC. 9.  CREATION OF INSURANCE FRAUD BUREAU CONTINGENT UPON
 26 14 FUNDING.  The creation of an insurance fraud bureau within the
 26 15 insurance division shall only be implemented, and sections
 26 16 507E.2, 507E.4, 507E.5, 507E.6, and 507E.8 of this Act shall
 26 17 only be effective, if the state receives a federal grant for
 26 18 its implementation and the general assembly appropriates
 26 19 matching funds from the general fund of the state for its
 26 20 implementation.
 26 21    Sec. 38.  Sections 518A.33, 518A.34, and 518A.42, Code
 26 22 1995, are repealed.  
 26 23                           EXPLANATION
 26 24    Section 144C.4, which establishes the community health
 26 25 management information system governing board, is amended to
 26 26 add the insurance commissioner or the commissioner's designee
 26 27 as an ex officio, nonvoting member.
 26 28    Section 507.2, subsection 3, is amended to provide that the
 26 29 commissioner may accept an examination report on a foreign or
 26 30 alien insurance company prepared by the regulatory authority
 26 31 for the company's state of domicile or port-of-entry state in
 26 32 lieu of an examination.  Currently, such reports were only
 26 33 accepted until January 1, 1994, after which an examination
 26 34 report can only be accepted if the regulatory authority was at
 26 35 the time of examination accredited under the national
 27  1 association of insurance commissioners.
 27  2    Section 507A.10 is amended to provide that in addition to
 27  3 the assessment of a civil penalty, the commissioner may, after
 27  4 conducting a hearing pursuant to chapter 17A, issue a cease
 27  5 and desist order requiring a person or insurer from engaging
 27  6 in an activity found to violate chapter 507A.
 27  7    Section 508.5 is amended to provide that a stock life
 27  8 insurance company that undergoes a change of control pursuant
 27  9 to chapter 521A, relating to insurance holding company
 27 10 systems, must maintain the minimum capital and surplus
 27 11 requirements mandated under section 508.5.
 27 12    Section 508.9 is amended to provide that a mutual insurance
 27 13 company that undergoes a change of control pursuant to chapter
 27 14 521A must maintain the minimum surplus requirements mandated
 27 15 under section 508.9.
 27 16    Section 513B.2, subsection 10, paragraph "b", is amended to
 27 17 provide that a health benefit plan does not include Medicare
 27 18 supplement or long-term care insurance for purposes of small
 27 19 group health benefit plans.
 27 20    Section 514B.17 is amended to provide that the effect of
 27 21 cancellation of a prepaid group plan providing health care
 27 22 services to health maintenance organization enrollees, and the
 27 23 duty to provide notice concerning cancellation, is the same as
 27 24 is provided for the termination of accident or health
 27 25 insurance pursuant to section 509B.5, subsection 2.  That
 27 26 section provides that the employer or group policyholder must
 27 27 notify the employees or members of the termination.
 27 28    Section 514C.2 is amended to provide that skilled nursing
 27 29 care in a hospital is to be covered under a health service
 27 30 contract issued pursuant to chapter 514B, relating to health
 27 31 maintenance organizations.
 27 32    Section 514G.7, subsection 3, is amended to provide that a
 27 33 long-term care insurance policy shall not define preexisting
 27 34 condition more restrictively than the existence of symptoms
 27 35 which would cause an ordinarily prudent person to seek
 28  1 diagnosis, care, or treatment, or a condition for which
 28  2 medical advice or treatment was recommended by or received
 28  3 from a provider of health care services within six months
 28  4 preceding the effective date of coverage of an insured person.
 28  5 The subsection is amended to provided that a long-term care
 28  6 policy shall not exclude coverage for a loss or confinement
 28  7 which results from a preexisting condition unless the loss or
 28  8 confinement begins within six months after coverage is
 28  9 effective.  The subsection is also amended to strike paragraph
 28 10 "c", which grants the commissioner discretionary authority to
 28 11 extend the limitation periods, relating to preexisting
 28 12 conditions, to specific age group categories in specific
 28 13 policy forms upon a finding that such extension is in the best
 28 14 interest of the public.
 28 15    Section 514G.7, subsection 6, is rewritten to provide that
 28 16 an individual has the right to return an individual long-term
 28 17 care insurance policy within 30 days after its delivery.
 28 18    Sections 515.8, 515.10, and 515.12 are amended to provide
 28 19 that an insurance company or mutual company which undergoes a
 28 20 change of control under chapter 521A must still maintain
 28 21 minimum capital or surplus reserves, as applicable, as
 28 22 provided in the amended sections.
 28 23    Section 515.94 is amended to provide that an insurance
 28 24 company or association, upon the issue or renewal of a policy,
 28 25 must provide to the insured a copy of any application or
 28 26 representation of the insured related to the policy.
 28 27 Currently, that section provides that such application or
 28 28 representation must be attached to or endorsed on the policy.
 28 29    Section 515.109 is amended to provide that the commissioner
 28 30 may exempt any specified person by order, or any class of
 28 31 persons by rule, or any specified risk by order, or any line
 28 32 or kind of insurance or any class of risk or combination of
 28 33 classes of risks by rule from the requirement that the forms
 28 34 related to such persons or risks be examined and approved if
 28 35 the commissioner determines that the examination is
 29  1 unnecessary to achieve the purposes of this section.
 29  2    Section 515A.15 is amended to require that all insurers
 29  3 participate in a residual market mechanism for assigned risks,
 29  4 and enter into an agreement among themselves to equitably
 29  5 apportion insurance to be afforded to applicants who are in
 29  6 good faith entitled to, but who are unable to procure, such
 29  7 insurance through ordinary methods.  If an agreement is not
 29  8 reached, the commissioner, by rule, is to establish the terms
 29  9 so that an equitable apportionment among all insurers is
 29 10 accomplished.
 29 11    Section 515F.5 is amended to provide that the commissioner
 29 12 may suspend the requirement that an insurer file rates or
 29 13 rating plans with respect to casualty insurance if the
 29 14 commissioner determines that the filing is unnecessary to
 29 15 achieve the purposes of chapter 515F.
 29 16    Section 518.14 is stricken and replaced with language which
 29 17 applies similar investment requirements provided for in
 29 18 chapter 515 with respect to insurance companies other than
 29 19 life insurance companies, to county mutual insurance
 29 20 associations.
 29 21    Section 518.16, which relates to the qualification of
 29 22 producers for county mutual insurance associations, is amended
 29 23 to provide that an agent for a county mutual insurance
 29 24 association must be licensed pursuant to chapter 522, which
 29 25 generally relates to the licensing of insurance agents.
 29 26    New section 518.26 is created which prohibits an
 29 27 association from loaning assets or other funds to an officer,
 29 28 director, or employee of the association, or a relative of an
 29 29 officer or director.
 29 30    New section 518.27 is created and requires all policies,
 29 31 applications, and agreements and endorsements to be filed with
 29 32 the insurance commissioner.  The forms must be examined and
 29 33 approved prior to their use.
 29 34    New section 518.28 is created and provides that the
 29 35 commissioner may suspend a county mutual association's
 30  1 authority to transact business in this state for failure to
 30  2 file the forms as required.
 30  3    New section 518.29 is created and provides that upon the
 30  4 commissioner's disapproval of a filing by the association,
 30  5 written notice is to be provided to the association specifying
 30  6 the reason for the disapproval.  The association may request a
 30  7 hearing on the disapproval within 30 days.
 30  8    New section 518.30 is created and provides that the
 30  9 insurance commissioner may withhold a certificate of authority
 30 10 to transact business from an association failing to comply
 30 11 with the provisions of chapter 518.  An administrative penalty
 30 12 of $300 may be assessed against an association for failure to
 30 13 file an annual statement as required in section 518.15.  If
 30 14 the association fails to file the statement within 10 days of
 30 15 the date of the notice, the association shall pay an
 30 16 additional sum of $50 for each day the failure continues, to
 30 17 be paid to the state general fund.
 30 18    Section 518A.12 is amended to strike language relating to
 30 19 the emergency fund for mutual casualty assessment insurance
 30 20 associations and substitutes language which applies similar
 30 21 investment requirements provided for in chapter 515 with
 30 22 respect to insurance companies other than life insurance
 30 23 companies, to mutual casualty assessment insurance
 30 24 associations.
 30 25    Section 518A.17 is amended to provide that 50 percent of
 30 26 the aggregate amount of assessments collected by an
 30 27 association engaged in writing hail insurance may be set aside
 30 28 as surplus to policyholders.  Currently, that amount may be
 30 29 set aside in an emergency fund.
 30 30    New section 518A.44 is created to provide that a mutual
 30 31 casualty assessment insurance association is not to expose
 30 32 itself to loss on any single risk in an amount exceeding 10
 30 33 percent of surplus, except as allowed under that section.
 30 34 This language applies the same standard which currently
 30 35 applies to nonlife companies under chapter 515.
 31  1    New section 518A.51 is created which prohibits an
 31  2 association from loaning assets or other funds to an officer,
 31  3 director, or employee of the association, or a relative of an
 31  4 officer or director.
 31  5    New section 518A.52 is created and requires all policies,
 31  6 applications, and agreements and endorsements to be filed with
 31  7 the insurance commissioner.  The forms must be examined and
 31  8 approved prior to their use.
 31  9    New section 518A.53 is created and provides that the
 31 10 commissioner may suspend a mutual casualty assessment
 31 11 association's authority to transact business in this state for
 31 12 failure to file the forms as required.
 31 13    New section 518A.54 is created and provides that upon the
 31 14 commissioner's disapproval of a filing by the association,
 31 15 written notice is to be provided to the association specifying
 31 16 the reason for the disapproval.  The association may request a
 31 17 hearing on the disapproval within 30 days.
 31 18    New section 518A.55 is created and provides that the
 31 19 insurance commissioner may suspend a certificate of authority
 31 20 to transact business from an association failing to comply
 31 21 with the provisions of chapter 518A.  An administrative
 31 22 penalty of $300 may be assessed against an association for
 31 23 failure to file an annual statement as required in section
 31 24 518A.18.  If the association fails to file the statement
 31 25 within 10 days of the date of the notice the association shall
 31 26 pay an additional sum of $50 for each day the failure
 31 27 continues, to be paid to the state general fund.
 31 28    Section 521.1 is amended to include county mutual insurance
 31 29 associations in the definition of "company" for the purpose of
 31 30 chapter 521, which relates to consolidations and reinsurance.
 31 31    Section 521.2 is amended to provide that chapter 521A is
 31 32 applicable to a merger or consolidation of insurance companies
 31 33 pursuant to chapter 521, and that chapters 521A and 521 are
 31 34 exclusive with respect to the merger or consolidation.
 31 35    Section 521B.2 is amended to provide that incorporated
 32  1 underwriters are not to engage in any business other than
 32  2 underwriting as a member of a group to which reinsurance is
 32  3 ceded, and that such underwriters are subject to the same
 32  4 level of solvency regulation as unincorporated members.
 32  5    1994 Iowa Acts, chapter 1072, section 9, which provides
 32  6 that the establishment of a fraud bureau within the insurance
 32  7 division and that the Act is only effective if the state
 32  8 receives a federal grant, is amended to provide that only the
 32  9 effectiveness of the establishment of the fraud bureau and
 32 10 sections directly related to the bureau is subject to the
 32 11 receipt of a federal grant.  Section 507E.3, which relates to
 32 12 fraudulent statements and establishes a penalty, and section
 32 13 507E.7, which provides immunity from liability to persons
 32 14 alleging acts in violation of this chapter in good faith, are
 32 15 to become effective irrespective of the receipt of a federal
 32 16 grant.
 32 17    Sections 518A.33, 518A.34, and 518A.42 are repealed.
 32 18 Sections 518A.33 and 518A.34 relate to the bond and additional
 32 19 security required of the secretary and treasurer of a mutual
 32 20 casualty assessment insurance association.  Section 518A.42
 32 21 provides that the commissioner is to issue an agent's license
 32 22 to a person as requested by such association upon the payment
 32 23 of 50 cents.  
 32 24                      BACKGROUND STATEMENT
 32 25                     SUBMITTED BY THE AGENCY
 32 26    The insurance division's departmental bill contains
 32 27 amendments to several chapters dealing with insurance company
 32 28 regulation.  The majority of the sections in the bill provide
 32 29 changes to the Code chapters regulating county and state
 32 30 mutual associations, and contain clarifications with regard to
 32 31 association investment standards and administration.  
 32 32 LSB 1176DP 76
 32 33 mj/jj/8.1

Text: HSB00171                          Text: HSB00173
Text: HSB00100 - HSB00199               Text: HSB Index
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