House Study Bill 697 - Introduced SENATE/HOUSE FILE _____ BY (PROPOSED DEPARTMENT OF COMMERCE/INSURANCE DIVISION BILL) A BILL FOR An Act relating to the Iowa life and health insurance guaranty 1 association regarding coverage, benefits, duties, powers, 2 rights, the operation of the Iowa life and health insurance 3 guaranty association, and the coordination of coverage and 4 benefits with those of similar associations of other states, 5 and to the Iowa insurance guaranty association with respect 6 to covered claims, benefits, limitations, duties, and powers 7 of the Iowa insurance guaranty association, and coordination 8 and cooperation by it with similar associations of other 9 states. 10 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 11 TLSB 5408XD (13) 83 av/rj

S.F. _____ H.F. _____ Section 1. Section 508C.3, subsection 1, paragraph b, Code 1 2009, is amended to read as follows: 2 b. Persons who are owners of the policies or contracts 3 specified in subsection 2, other than unallocated annuity 4 contracts and structured settlement annuities, or are insureds 5 or annuitants under the policies or contracts, and who are 6 either of the following: 7 (1) Residents of this state. 8 (2) Nonresidents of this state if all of the following 9 conditions are met: 10 (a) The state in which the person resides has an association 11 similar to the association created in this chapter. 12 (b) The person is not eligible for coverage by an 13 association described in subparagraph part (a) in any other 14 state due to the fact that the insurer was not licensed in 15 the state at the time specified in that state’s guaranty 16 association law . 17 (c) The insurer which issued the policy or contract never 18 held a license or certificate of authority in the state in 19 which the person resides. 20 (d) (c) The insurer is domiciled in this state. 21 Sec. 2. Section 508C.3, subsection 1, Code 2009, is amended 22 by adding the following new paragraphs: 23 NEW PARAGRAPH . c. Persons who are the owners of unallocated 24 annuity contracts if the contracts are issued to or in 25 connection with a specific benefit plan whose plan sponsor has 26 its principal place of business in this state. 27 NEW PARAGRAPH . d. (1) A payee, or the beneficiary of a 28 payee if the payee is deceased, of a structured settlement 29 annuity, if the payee or beneficiary of the structured 30 settlement annuity is either of the following: 31 (a) The payee or beneficiary of the structured settlement 32 annuity is a resident of this state regardless of where the 33 owner of the structured settlement annuity resides. 34 (b) The payee or beneficiary of the structured settlement 35 -1- LSB 5408XD (13) 83 av/rj 1/ 27

S.F. _____ H.F. _____ annuity is not a resident of this state and either of the 1 following conditions is met: 2 (i) The owner of the structured settlement annuity is a 3 resident of this state. 4 (ii) The owner of the structured settlement annuity is 5 not a resident of this state and both of the following are 6 applicable: 7 (A) The insurer that issued the structured settlement 8 annuity is domiciled in this state. 9 (B) The state in which the owner of the structured 10 settlement annuity resides has an association similar to the 11 association created by this chapter. 12 (2) Subparagraph (1), subparagraph division (b) shall 13 not be applicable if either the payee or beneficiary of the 14 payee if the payee is deceased, or the owner of the structured 15 settlement annuity is eligible for coverage by the association 16 of the state in which the payee, beneficiary, or owner resides. 17 e. Coverage under this chapter shall not be provided to any 18 of the following: 19 (1) A person who is a payee, or the beneficiary of a payee 20 if the payee is deceased, of a contract owner who is a resident 21 of this state, if the payee or the beneficiary of the payee is 22 provided any coverage by the association of another state. 23 (2) A person who is covered pursuant to paragraph “c” if 24 that person is provided any coverage by the association of 25 another state. 26 NEW PARAGRAPH . f. Coverage under this chapter shall be 27 provided to a person who is a resident of this state and, only 28 in special circumstances, to a nonresident. In order to avoid 29 duplicate coverage, if a person who would otherwise receive 30 coverage under this chapter is provided coverage under the laws 31 of any other state, that person shall not be provided coverage 32 under this chapter. In determining the application of the 33 provisions of this paragraph in situations where a person could 34 be provided coverage by the association of more than one state, 35 -2- LSB 5408XD (13) 83 av/rj 2/ 27

S.F. _____ H.F. _____ whether as an owner, payee, beneficiary, or assignee, this 1 chapter shall be construed in conjunction with other state laws 2 to result in coverage by the association of only one state. 3 Sec. 3. Section 508C.3, subsection 3, paragraphs a, b, and 4 d, Code 2009, are amended to read as follows: 5 a. Any portion of a policy or contract to the extent that 6 the rate of interest on which it is based or the interest 7 rate, crediting rate, or similar factor determined by use of 8 an index or other external reference stated in the policy or 9 contract and employed in calculating returns or changes in 10 value , averaged over the period of four years prior to the date 11 on which the association becomes obligated with respect to 12 the policy or contract, exceeds a rate of interest determined 13 by subtracting two percentage points from Moody’s corporate 14 bond yield average for the same four-year period or over such 15 lesser period if the policy or contract was issued less than 16 four years before the association became obligated; and on or 17 after the date on which the association becomes obligated with 18 respect to the policy or contract, exceeds the rate of interest 19 determined by subtracting three percentage points from Moody’s 20 corporate bond yield average as most recently available. 21 b. That portion or part of a policy or contract not 22 guaranteed by the insurer, or under which the risk is borne by 23 the policyholder. 24 d. An unallocated annuity contract issued to an employee 25 benefit plan protected under the federal pension benefit 26 guaranty corporation regardless of whether the federal pension 27 benefit guaranty corporation has yet become liable to make any 28 payments with respect to the benefit plan , or a portion of 29 an unallocated annuity contract which is not issued to or in 30 connection with a specific employee, union, or association of 31 natural persons, or any portion of a financial guarantee. 32 Sec. 4. Section 508C.3, subsection 3, paragraph g, Code 33 2009, is amended by striking the paragraph and inserting in 34 lieu thereof the following: 35 -3- LSB 5408XD (13) 83 av/rj 3/ 27

S.F. _____ H.F. _____ g. A charitable gift annuity under chapter 508F. 1 Sec. 5. Section 508C.3, subsection 3, paragraph j, Code 2 2009, is amended to read as follows: 3 j. An obligation that does not arise under the express 4 written terms of a covered policy . or contract issued by the 5 insurer to the policy or contract owner including without 6 limitation all of the following: 7 (1) Claims based on marketing materials. 8 (2) Claims based on side letters, riders, or other documents 9 that were issued by the insurer without meeting applicable 10 policy form filing or approval requirements. 11 (3) Misrepresentation of or regarding policy benefits. 12 (4) Extra-contractual claims. 13 (5) Claims for penalties, consequential, or incidental 14 damages. 15 Sec. 6. Section 508C.3, subsection 3, Code 2009, is amended 16 by adding the following new paragraphs: 17 NEW PARAGRAPH . m. A policy or contract issued in this state 18 by a member insurer at a time the insurer was not licensed or 19 did not have a certificate of authority to issue the policy or 20 contract in this state. 21 NEW PARAGRAPH . n. A portion of a policy or contract 22 issued to a plan or program of an employer, association, or 23 other person to provide life, health, or annuity benefits to 24 employees, members, or others, to the extent that the plan or 25 program is self-funded or uninsured, including but not limited 26 to benefits payable by an employer, association, or other 27 person under any of the following: 28 (1) A multiple employer welfare arrangement as defined in 29 section 3 of the federal Employee Retirement Income Security 30 Act of 1974, 29 U.S.C. § 1002, paragraph 40. 31 (2) A minimum premium group insurance plan. 32 (3) A stop-loss group insurance plan. 33 (4) An administrative services-only contract. 34 NEW PARAGRAPH . o. A portion of a policy or contract to the 35 -4- LSB 5408XD (13) 83 av/rj 4/ 27

S.F. _____ H.F. _____ extent that it provides for any of the following: 1 (1) Dividends of experience rating credits. 2 (2) Voting rights. 3 (3) Payment of any fees or allowances to any person, 4 including the policy or contract owner, in connection with 5 service to or administration of the policy or contract. 6 NEW PARAGRAPH . p. A portion of a policy or contract to the 7 extent that the assessments authorized by section 508C.9 with 8 respect to the policy or contract are preempted by federal or 9 state law. 10 NEW PARAGRAPH . q. A policy or contract providing any 11 hospital, medical, prescription drug, or other health care 12 benefits pursuant to 42 U.S.C. ch. 7, subc. XVIII, Part C 13 or Part D, commonly known as Medicare Part C and D pursuant 14 to Tit. XVIII of the federal Social Security Act, or any 15 regulations issued pursuant thereto. 16 Sec. 7. Section 508C.3, Code 2009, is amended by adding the 17 following new subsection: 18 NEW SUBSECTION . 4. In performing its obligations to 19 provide coverage under this chapter, the association shall not 20 be required to guarantee, assume, reinsure, or perform, or 21 cause to be guaranteed, assumed, reinsured, or performed, the 22 contractual obligations of an insolvent or impaired insurer 23 under a covered policy or contract that do not materially 24 affect the economic values or economic benefits of the covered 25 policy or contract. 26 Sec. 8. Section 508C.5, subsection 4, Code 2009, is amended 27 to read as follows: 28 4. “Contractual obligation” means an obligation under a 29 covered policy or contract or a certificate under a group 30 policy or contract, or a portion thereof for which coverage is 31 provided under section 508C.3 . 32 Sec. 9. Section 508C.5, Code 2009, is amended by adding the 33 following new subsection: 34 NEW SUBSECTION . 5A. “Extra-contractual claim” means, 35 -5- LSB 5408XD (13) 83 av/rj 5/ 27

S.F. _____ H.F. _____ without limitation, a claim relating to bad faith in the 1 payment of claims, punitive or exemplary damages, or attorney 2 fees and costs. 3 Sec. 10. Section 508C.5, subsections 6, 7, and 8, Code 2009, 4 are amended to read as follows: 5 6. “Impaired insurer” means a member insurer which, after 6 July 1, 1987, is either of the following: 7 a. Deemed by the commissioner to be potentially unable to 8 fulfill its contractual obligations but is not an insolvent 9 insurer . 10 b. Placed but is placed under an order of rehabilitation or 11 conservation by a court of competent jurisdiction. 12 7. “Insolvent insurer” means a member insurer which, 13 after July 1, 1987, becomes insolvent and is placed under a 14 final an order of liquidation with a finding of insolvency by a 15 court of competent jurisdiction. 16 8. “Member insurer” means a person licensed or who holds 17 a certificate of authority to transact in this state any kind 18 of insurance to which this chapter applies for which coverage 19 is provided under section 508C.3, including a person whose 20 license or certificate of authority in this state has been 21 suspended, revoked, not renewed, or voluntarily withdrawn . but 22 not including any of the following: 23 a. An entity which is a licensed company specified in 24 section 508C.3, subsection 3, paragraph “e” or “f” . 25 b. A mandatory state pooling plan. 26 c. A mutual assessment company or other person which 27 operates on an assessment basis. 28 d. An insurance exchange. 29 e. An entity which issues a charitable gift annuity under 30 chapter 508F. 31 f. An entity similar to any of the entities enumerated in 32 this subsection. 33 Sec. 11. Section 508C.5, Code 2009, is amended by adding the 34 following new subsections: 35 -6- LSB 5408XD (13) 83 av/rj 6/ 27

S.F. _____ H.F. _____ NEW SUBSECTION . 8A. “Moody’s corporate bond yield average” 1 means the monthly average corporate bond yields published by 2 Moody’s investors service, inc., or any successor thereto. 3 NEW SUBSECTION . 8B. “Owner” of a policy of contract, 4 “policy owner” , or “contract owner” means the person who is 5 identified as the legal owner of a policy or contract under 6 the terms of the policy or contract or who is otherwise vested 7 with legal title to the policy or contract through a valid 8 assignment completed in accordance with the terms of the policy 9 or contract and properly recorded as the owner on the books 10 of the insurer. “Owner” , “policy owner” , or “contract owner” 11 does not include a person with a mere beneficial interest in a 12 policy or contract. 13 Sec. 12. Section 508C.5, subsection 9, Code 2009, is amended 14 to read as follows: 15 9. “Person” means an individual, corporation, limited 16 liability company, government or governmental subdivision 17 or agency, business trust, estate, trust, partnership, 18 association, or voluntary organization any other legal entity . 19 Sec. 13. Section 508C.5, subsections 10 and 11, Code 2009, 20 are amended by striking the subsections and inserting in lieu 21 thereof the following: 22 10. “Premium” means amounts or consideration, by whatever 23 name called, received on covered policies or contracts less 24 returned premiums, considerations, and deposits and less 25 dividends and experience credits. “Premium” does not include 26 amounts for consideration received for policies or contracts or 27 for the portions of policies or contracts for which coverage 28 is not provided under section 508C.3, subsection 3, except 29 that assessable premium shall not be reduced on account of the 30 provisions of section 508C.3, subsection 3, paragraph “a” , 31 relating to interest limitations and section 508C.8, subsection 32 8, paragraph “a” , subparagraph (2), subparagraph division (a), 33 relating to limitations with respect to one individual, one 34 participant, and one owner. “Premium” also does not include any 35 -7- LSB 5408XD (13) 83 av/rj 7/ 27

S.F. _____ H.F. _____ of the following: 1 a. Premiums in excess of five million dollars on an 2 unallocated annuity contract not issued under a governmental 3 retirement plan, or its trustee, established under section 401, 4 403(b), or 457 of the United States Internal Revenue Code. 5 b. With respect to multiple nongroup policies of life 6 insurance owned by one owner, whether the policy owner is an 7 individual, firm, corporation, or other person, and whether 8 the persons insured are officers, managers, employees, or 9 other persons, premiums in excess of five million dollars with 10 respect to those polices or contracts, regardless of the number 11 of policies or contracts held by the owner. 12 11. “Resident” means a person to whom a contractual 13 obligation is owed and who resides in a state on the date of 14 entry of a court order that determines a member insurer is an 15 impaired insurer or a court order that determines a member 16 insurer is an insolvent insurer, whichever occurs first. A 17 person may be a resident of only one state, which in the case of 18 a person other than a natural person shall be the state of that 19 person’s principal place of business. A citizen of the United 20 States who is a resident of a foreign country, or is a resident 21 of a United States possession, territory, or protectorate that 22 does not have an association similar to the association created 23 by this chapter, shall be deemed a resident of the state or 24 domicile of the insurer that issued the policy or contract. 25 Sec. 14. Section 508C.5, Code 2009, is amended by adding the 26 following new subsections: 27 NEW SUBSECTION . 11A. “State” means a state, the District 28 of Columbia, Puerto Rico, or a United States possession, 29 territory, or protectorate. 30 NEW SUBSECTION . 11B. “Structured settlement annuity” means 31 an annuity purchased in order to fund periodic payments for a 32 plaintiff or other claimant in payment for or with respect to 33 personal injuries suffered by the plaintiff or other claimant. 34 Sec. 15. Section 508C.5, subsection 12, Code 2009, is 35 -8- LSB 5408XD (13) 83 av/rj 8/ 27

S.F. _____ H.F. _____ amended to read as follows: 1 12. “Supplemental contract” means an a written agreement 2 entered into for the distribution of policy or contract 3 proceeds under a life, health, or annuity policy or contract . 4 Sec. 16. Section 508C.8, subsection 1A, Code Supplement 5 2009, is amended by striking the subsection. 6 Sec. 17. Section 508C.8, subsection 2, Code Supplement 7 2009, is amended by striking the subsection and inserting in 8 lieu thereof the following: 9 2. If a member insurer is an insolvent insurer, the 10 association may in its discretion do any of the following: 11 a. The association may do either of the following: 12 (1) Guarantee, assume, or reinsure, or cause to be 13 guaranteed, assumed, or reinsured the covered policies or 14 contracts of an insolvent insurer. 15 (2) Assure payment of the contractual obligations of the 16 insolvent insurer. 17 b. Provide moneys, pledges, notes, guarantees, or other 18 means as reasonably necessary to discharge the duties described 19 in this subsection. 20 c. Provide benefits and coverages in accordance with all of 21 the following provisions: 22 (1) With respect to life and health insurance policies or 23 contracts and annuity contracts, assure payment of benefits 24 for premiums identical to the premiums and benefits, except 25 for conversion and renewability, that would have been payable 26 under the policies or contracts of the insolvent insurer for 27 the following claims incurred as follows: 28 (a) With respect to group policies or contracts, not later 29 than the earlier of the next renewal date under those policies 30 or contracts or forty-five days, but in no event less than 31 thirty days, after the date on which the association becomes 32 obligated with respect to those policies or contracts. 33 (b) With respect to nongroup policies or contracts not later 34 than the earlier of the next renewal date, if any, under those 35 -9- LSB 5408XD (13) 83 av/rj 9/ 27

S.F. _____ H.F. _____ policies or contracts or one year, but in no event less than 1 thirty days, from the date on which the association becomes 2 obligated with respect to the policies or contracts. 3 (2) Make diligent efforts to provide all known insureds 4 or annuitants, for nongroup policies or contracts, or group 5 policy owners, with respect to group policies or contracts, 6 thirty days’ notice of the termination of the benefits provided 7 pursuant to subparagraph (1). 8 (3) With respect to nongroup life and health insurance 9 policies or contracts covered by the association, make 10 available to each known insured or annuitant, or owner if 11 other than the insured or annuitant, and with respect to an 12 individual formerly insured or formerly an annuitant under a 13 group policy or contract who is not eligible for replacement 14 group coverage, substitute coverage on an individual basis in 15 accordance with the provisions of subparagraph (4), if the 16 insureds or annuitants had a right under law or under the 17 terminated policy or contract to convert coverage to individual 18 coverage or to continue an individual policy or contract in 19 force until a specified age or for a specified time, during 20 which the insurer had no right to unilaterally make changes in 21 any provision of the policy or contract or had a right only to 22 make changes in premium by class. 23 (4) In providing the substitute coverage required under 24 subparagraph (3), the association may offer either to reissue 25 the terminated coverage or to issue an alternative policy or 26 contract. 27 (a) Reissued or alternative policies or contracts shall be 28 offered without requiring evidence of insurability, and shall 29 not provide for any waiting period or exclusion that would not 30 have applied under the terminated policy or contract. 31 (b) The association may reinsure any reissued or 32 alternative policy or contract. 33 (5) Alternative policies or contracts adopted by the 34 association shall be subject to the approval of the domiciliary 35 -10- LSB 5408XD (13) 83 av/rj 10/ 27

S.F. _____ H.F. _____ insurance commissioner and the receivership court. The 1 association may adopt alternative policies or contracts 2 of various types for future issuance without regard to any 3 particular impairment or insolvency of an insurer. 4 (a) Alternative policies or contracts shall contain 5 at least the minimum statutory provisions required in this 6 state and shall provide benefits that are not unreasonable 7 in relation to the premium charged. The association shall 8 set the premium in accordance with a table of rates that the 9 association shall adopt. The premium shall reflect the amount 10 of insurance to be provided and the age and class of risk of 11 each insured, but shall not reflect any changes in the health 12 of the insured after the original policy or contract was last 13 underwritten. 14 (b) Any alternative policy or contract issued by the 15 association shall provide coverage of a type similar to that 16 of the policy or contract issued by the impaired or insolvent 17 insurer, as determined by the association. 18 (6) If the association elects to reissue terminated 19 coverage at a premium rate different from that charged under 20 the terminated policy or contract the premium shall be set by 21 the association in accordance with the amount of insurance 22 provided and the age and class of risk, subject to approval of 23 the domiciliary insurance commissioner and the receivership 24 court. 25 (7) The association’s obligations with respect to coverage 26 under any policy or contract of an impaired or insolvent 27 insurer or under any reissued or alternative policy or 28 contract, shall cease on the date the coverage, or policy or 29 contract, is replaced by another similar policy or contract by 30 the policy or contract owner, or the association. 31 (8) When proceeding under this paragraph “c” with respect 32 to a policy or contract carrying guaranteed minimum interest 33 rates, the association shall assure the payment or crediting of 34 a rate of interest consistent with section 508C.3, subsection 35 -11- LSB 5408XD (13) 83 av/rj 11/ 27

S.F. _____ H.F. _____ 3, paragraph “a” . 1 Sec. 18. Section 508C.8, subsections 6 and 7, Code 2 Supplement 2009, are amended to read as follows: 3 6. a. The association has shall have standing to appear 4 or intervene before any court or agency in this state with 5 jurisdiction over an impaired or insolvent insurer concerning 6 which the association is or may become obligated under this 7 chapter or with jurisdiction over any person or property 8 against which the association may have rights through 9 subrogation or otherwise . Standing shall extend to all 10 matters germane to the powers and duties of the association 11 including , but not limited to , proposals for reinsuring , 12 modifying, or guaranteeing the covered policies or contracts of 13 the impaired or insolvent insurer and the determination of the 14 covered policies or contracts, and contractual obligations. 15 The association shall also have the right to appear or 16 intervene before any court or agency in another state with 17 jurisdiction over an impaired or insolvent insurer for which 18 the association is or may become obligated or with jurisdiction 19 over any person or property against whom the association may 20 have rights through subrogation or otherwise. 21 b. As a creditor of an impaired or insolvent insurer as 22 provided under section 508C.13, subsection 3, and consistent 23 with the provisions of section 507C.34, the association and 24 other similar associations shall be entitled to receive a 25 disbursement of assets out of the marshaled assets, from 26 time to time as the assets become available to reimburse 27 the association or similar associations, as a credit 28 against contractual obligations under this chapter. If the 29 liquidator has not, within one hundred twenty days of a final 30 determination of insolvency of an insurer by the receivership 31 court, made an application to the court for the approval of a 32 proposal to disburse assets out of marshaled assets to guaranty 33 associations having obligations because of the insolvency, the 34 association or similar associations shall be entitled to make 35 -12- LSB 5408XD (13) 83 av/rj 12/ 27

S.F. _____ H.F. _____ application to the receivership court for approval of its own 1 proposal to disburse these assets. 2 7. a. A person receiving benefits under this chapter is 3 deemed to have assigned the rights under any causes of action 4 against any person for losses arising under, resulting from, 5 or otherwise relating to the covered policy or contract to the 6 association to the extent of the benefits received under this 7 chapter, whether the benefits are payments of or on account 8 of contractual obligations , or a continuation of coverage , or 9 the provision of substitute or alternative coverages . The 10 association may require an assignment to the association of 11 the rights and causes of action by a any payee, policyholder 12 or contract owner, beneficiary, insured, or annuitant as a 13 condition precedent to the receipt of any rights or benefits 14 conferred by this chapter upon the person. The association 15 shall be subrogated to these rights against the assets of the 16 impaired or insolvent insurer. 17 b. The subrogation rights of the association under this 18 subsection have the same priority against the assets of the 19 impaired or insolvent insurer as that possessed by the person 20 entitled to receive benefits under this chapter. 21 c. In addition to the rights pursuant to subsection 22 3, paragraphs “a” and “b” , the association shall have all 23 common law rights of subrogation and any other equitable 24 or legal remedy which would have been available to the 25 impaired or insolvent insurer or holder owner, beneficiary, 26 or payee of a covered policy or contract with respect to 27 the policy or contract, including without limitation, in the 28 case of a structured settlement annuity, any rights of the 29 owner, beneficiary, or payee of the annuity, to the extent of 30 benefits received pursuant to this chapter, against the person 31 originally or by succession responsible for the losses arising 32 from the personal injury relating to the annuity or payment 33 for the annuity, excepting any such person responsible solely 34 by reason of serving as an assignee in respect of a qualified 35 -13- LSB 5408XD (13) 83 av/rj 13/ 27

S.F. _____ H.F. _____ assignment under section 130 of the Internal Revenue Code . 1 d. If the provisions of paragraphs “a” through “c” are 2 invalid or ineffective with respect to any person or claim for 3 any reason, the amount payable by the association with respect 4 to the related covered obligations shall be reduced by the 5 amount realized by any other person with respect to the person 6 or claim that is attributable to the policies or contracts, or 7 portion thereof, covered by the association. 8 e. If the association has provided benefits with respect 9 to a covered obligation and a person recovers amounts as to 10 which the association has rights as described in paragraphs 11 “a” through “d” , the person shall pay to the association 12 the portion of the recovery attributable to the policies or 13 contracts, or portion thereof, covered by the association. 14 Sec. 19. Section 508C.8, subsection 8, paragraph a, 15 subparagraph (2), subparagraph division (a), subparagraph 16 subdivisions (i) and (ii), Code Supplement 2009, are amended 17 to read as follows: 18 (i) Three hundred thousand dollars in life insurance death 19 benefits, but not more than one hundred thousand dollars in 20 net cash surrender and net cash withdrawal values for life 21 insurance , or three hundred fifty thousand dollars in the 22 aggregate . 23 (ii) Three Five hundred thousand dollars for health 24 insurance benefits which are basic hospital expense coverage, 25 basic medical-surgical expense coverage, or major medical 26 expense coverage as defined by the commissioner by rule 27 pursuant to section 514D.4; three hundred thousand dollars 28 for health insurance benefits which are disability income 29 protection as defined by the commissioner by rule pursuant to 30 section 514D.4; three hundred thousand dollars for long-term 31 care insurance as defined in section 514G.103; or one hundred 32 thousand dollars for other health insurance benefits including 33 any net cash surrender and net cash withdrawal values. 34 Sec. 20. Section 508C.8, subsection 8, paragraph a, 35 -14- LSB 5408XD (13) 83 av/rj 14/ 27

S.F. _____ H.F. _____ subparagraph (2), subparagraph division (a), Code Supplement 1 2009, is amended by adding the following new subparagraph 2 subdivision: 3 NEW SUBPARAGRAPH SUBDIVISION . (iv) With respect to each 4 payee of a structured settlement annuity, or the beneficiary 5 or beneficiaries of the payee if the payee is deceased, 6 two hundred fifty thousand dollars in present value annuity 7 benefits, in the aggregate, including net cash surrender and 8 net cash withdrawal values. 9 Sec. 21. Section 508C.8, subsection 8, paragraph a, 10 subparagraph (2), subparagraph division (b), Code Supplement 11 2009, is amended to read as follows: 12 (b) (i) With respect to each individual participating in 13 a benefit plan established under section 401, 403(b), or 457 of 14 the United States Internal Revenue Code, or each unallocated 15 annuity contract account, excluding a plan established under 16 section 401, 403(b), or 457 of the United States Internal 17 Revenue Code, not more than two hundred fifty thousand dollars 18 in the aggregate, in present value annuity benefits, including 19 net cash surrender and net cash withdrawal values for the 20 beneficiaries of the deceased individual. 21 (ii) However, the association shall not in any event be 22 obligated to cover more than an aggregate of three hundred 23 fifty thousand dollars in benefits with respect to any one life 24 under subparagraph division (a) and this subparagraph division 25 (b), except with respect to benefits for basic hospital expense 26 coverage, basic medical-surgical expense coverage, or major 27 medical expense coverage under subparagraph division (a), 28 subparagraph subdivision (ii), in which case the aggregate 29 liability of the association shall not exceed five hundred 30 thousand dollars with respect to any one individual, or more 31 than five million dollars in benefits to one owner of multiple 32 nongroup policies of life insurance regardless of whether the 33 policy owner is an individual, firm, corporation, or other 34 person, and whether the persons insured are officers, managers, 35 -15- LSB 5408XD (13) 83 av/rj 15/ 27

S.F. _____ H.F. _____ employees, or other persons, and regardless of the number of 1 policies and contracts held by the owner. 2 Sec. 22. Section 508C.8, Code Supplement 2009, is amended by 3 adding the following new subsections: 4 NEW SUBSECTION . 11. a. (1) At any time within one 5 hundred eighty days of the date of an order of liquidation, the 6 association may elect to succeed to the rights and obligations 7 of a ceding member insurer that relate to policies or contracts 8 covered, in whole or in part, by the association in each case 9 under any reinsurance contract entered into by the insolvent 10 insurer and its reinsurers, selected by the association. Any 11 such assumption of rights and obligations shall be effective 12 as of the date of the order of liquidation. The election shall 13 be effected by the association or by the national organization 14 of life and health insurance guaranty associations on its 15 behalf by sending written notices, return receipt requested, 16 to the affected reinsurers. As used in this subsection, “date 17 of election” means the date of the election of the association 18 to succeed to the rights and obligations of the ceding member 19 insurer as provided in this subparagraph. 20 (2) To facilitate the earliest practicable decision about 21 whether to assume any of the contracts of reinsurance of the 22 ceding member insurer, and in order to protect the financial 23 position of the state, the receiver and each reinsurer of the 24 ceding member insurer shall make available upon request to the 25 association, or to the national organization of life and health 26 insurance guaranty associations on its behalf, as soon as 27 possible after commencement of formal delinquency proceedings 28 all of the following: 29 (a) Copies of in-force contracts of reinsurance and all 30 related files and records relevant to the determination of 31 whether such contracts should be assumed. 32 (b) Notices of any defaults under the reinsurance contracts 33 or any known event or condition which with the passage of time 34 could become a default under the reinsurance contract. 35 -16- LSB 5408XD (13) 83 av/rj 16/ 27

S.F. _____ H.F. _____ (3) The following provisions shall apply to reinsurance 1 contracts so assumed by the association: 2 (a) The association shall be responsible for all unpaid 3 premiums due under the reinsurance contracts for periods both 4 before and after the date of the order of liquidation and shall 5 be responsible for the performance of all other obligations 6 to be performed after the date of the order of liquidation, 7 in each case which relate to policies or contracts covered, 8 in whole or in part, by the association. The association 9 may charge policies or contracts covered in part by the 10 association, through reasonable allocation methods, the cost 11 for reinsurance in excess of the obligations of the association 12 and shall provide notice and an accounting of these charges to 13 the liquidator. 14 (b) The association shall be entitled to any amounts payable 15 by the reinsurer under the reinsurance contracts with respect 16 to losses or events that occur in periods after the date of the 17 order of liquidation and that relate to policies or contracts 18 covered, in whole or in part, by the association, provided 19 that, upon receipt of any such amounts, the association shall 20 be obliged to pay to the beneficiary under the policy or 21 contract on account of which the amounts were paid, a portion 22 of the amount equal to the lesser of any of the following: 23 (i) The amount received by the association. 24 (ii) The excess of the amount received by the association 25 over the amount equal to the benefits paid by the association 26 on account of the policy or contract less the retention of the 27 insurer applicable to the loss or event. 28 (c) Within thirty days following the date of election, the 29 association and each reinsurer under reinsurance contracts 30 assumed by the association shall calculate the net balance due 31 to or from the association under each reinsurance contract as 32 of the date of election with respect to policies or contracts 33 covered, in whole or in part, by the association, which 34 calculation shall give full credit to all items paid by either 35 -17- LSB 5408XD (13) 83 av/rj 17/ 27

S.F. _____ H.F. _____ the insurer or its receiver or the reinsurer prior to the date 1 of election. The reinsurer shall pay the receiver any amounts 2 due for losses or events prior to the date of the order of 3 liquidation, subject to any setoff for premiums unpaid for 4 periods prior to the date, and the association or reinsurer 5 shall pay any remaining balance due the other, in each case 6 within five days of the completion of the aforementioned 7 calculation. Any disputes over the amounts due to either the 8 association or the reinsurer shall be resolved by arbitration 9 pursuant to the terms of the affected reinsurance contracts or, 10 if the contract contains no arbitration clause, as otherwise 11 provided by law. If the receiver has received any amounts due 12 the association pursuant to subparagraph division (b), the 13 receiver shall remit the same to the association as promptly 14 as practicable. 15 (d) If the association or receiver, on the association’s 16 behalf, within sixty days of the date of election, pays the 17 unpaid premiums due for periods both before and after the date 18 of election that relate to policies or contracts covered, in 19 whole or in part, by the association, the reinsurer shall 20 not be entitled to terminate the reinsurance contracts for 21 failure to pay premiums insofar as the reinsurance contracts 22 relate to policies or contracts covered, in whole or in part, 23 by the association, and shall not be entitled to set off any 24 unpaid amounts due under other policies or contracts, or unpaid 25 amounts due from parties other than the association, against 26 amounts due the association. 27 b. During the period from the date of the order of 28 liquidation, until the date of election or, if the association 29 does not elect to succeed to the rights and obligations 30 of the ceding member insurer as provided in paragraph “a” , 31 subparagraph (1), until one hundred eighty days after the date 32 of the order of liquidation all of the following provisions are 33 applicable: 34 (1) The association and the reinsurer shall not have any 35 -18- LSB 5408XD (13) 83 av/rj 18/ 27