House Study Bill 125 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON SODERBERG) A BILL FOR An Act relating to various matters under the purview of the 1 insurance division of the department of commerce. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 2660YC (3) 84 av/sc

H.F. _____ Section 1. Section 502.604, subsections 2 and 4, Code 2011, 1 are amended to read as follows: 2 2. Summary process. An order under subsection 1 is 3 effective on the date of issuance. Upon issuance of the order, 4 the administrator shall promptly serve each person subject to 5 the order with a copy of the order and a notice that the order 6 has been entered. The order must include a statement of any 7 restitution order, civil penalty , or costs of investigation 8 the administrator will seek, a statement of the reasons for 9 the order, and notice that, within thirty days after receipt 10 of a request in a record from the person, the matter will be 11 scheduled for a hearing. If a person subject to the order does 12 not request a hearing and none is ordered by the administrator 13 within thirty days after the date of service of the order, 14 the order, including an order for restitution, the imposition 15 of a civil penalty , or a requirement for payment of costs of 16 investigation sought in the order, becomes final as to that 17 person by operation of law. If a hearing is requested or 18 ordered, the administrator, after notice of and opportunity 19 for hearing to each person subject to the order, may modify or 20 vacate the order or extend it until final determination. 21 4. Civil penalty —— restitution —— corrective action . In 22 a final order under subsection 3 , the administrator may 23 impose a civil penalty up to an amount not to exceed a 24 maximum of five thousand dollars for a single violation or 25 five hundred thousand dollars for more than one violation , 26 order restitution, or take other corrective action as the 27 administrator deems necessary and appropriate to accomplish 28 compliance with the laws of the state relating to all 29 securities business transacted in the state . 30 Sec. 2. Section 505.8, subsections 1 and 10, Code 2011, are 31 amended to read as follows: 32 1. The commissioner of insurance shall be the head of the 33 division, and shall have general control, supervision, and 34 direction over all insurance business transacted in the state, 35 -1- LSB 2660YC (3) 84 av/sc 1/ 31

H.F. _____ and shall enforce all the laws of the state relating to such 1 federal and state insurance business transacted in the state . 2 10. The commissioner may, after a hearing conducted 3 pursuant to chapter 17A , assess fines or penalties, assess 4 costs of an investigation or proceeding, order restitution, 5 or take other corrective action as the commissioner deems 6 necessary and appropriate to accomplish compliance with the 7 laws of the state relating to all insurance business transacted 8 in the state. 9 Sec. 3. Section 505.8, Code 2011, is amended by adding the 10 following new subsection: 11 NEW SUBSECTION . 19. The commissioner may adopt 12 administrative rules pursuant to chapter 17A as necessary to 13 effectuate the insurance provisions of the federal Patient 14 Protection and Affordable Care Act of 2010, or other applicable 15 federal laws. 16 Sec. 4. Section 505.18, subsection 2, unnumbered paragraph 17 1, Code 2011, is amended to read as follows: 18 The commissioner in collaboration with the consumer advocate 19 shall prepare and deliver a report to the governor and to the 20 general assembly no later than November 15 of each year that 21 provides findings regarding health spending costs for health 22 insurance plans carriers in the state for the previous fiscal 23 calendar year. The commissioner may contract with outside 24 vendors or entities to assist in providing the information 25 contained in the annual report. The report shall provide, at a 26 minimum, the following information: 27 Sec. 5. Section 505.18, subsection 2, paragraph d, Code 28 2011, is amended to read as follows: 29 d. A ranking and quantification of those factors that result 30 in higher costs and those factors that result in lower costs 31 for each health insurance plan offered carrier in the state. 32 Sec. 6. Section 505.19, subsection 3, Code 2011, is amended 33 to read as follows: 34 3. The consumer advocate shall solicit public comments on 35 -2- LSB 2660YC (3) 84 av/sc 2/ 31

H.F. _____ each proposed health insurance rate increase application if 1 the increase exceeds the average annual health spending growth 2 rate as provided in subsection 1 , and shall post without delay 3 during the normal business hours of the division, all comments 4 received on the insurance division’s internet site prior to 5 approval or disapproval of the proposed rate increase by the 6 commissioner. 7 Sec. 7. Section 507E.8, Code 2011, is amended to read as 8 follows: 9 507E.8 Peace Law enforcement officer status. 10 1. Bureau investigators shall have the power and status 11 of peace law enforcement officers who by the nature of their 12 duties may be required to perform the duties of a peace officer 13 when making arrests for criminal violations established as a 14 result of their investigations pursuant to this chapter . 15 2. The general laws applicable to arrests by peace law 16 enforcement officers of the state also apply to bureau 17 investigators. Bureau investigators shall have the power 18 to execute arrest warrants and search warrants for the 19 same criminal violations, serve subpoenas issued for the 20 examination, investigation, and trial of all offenses 21 identified through their investigations, and arrest upon 22 probable cause without warrant a person found in the act of 23 committing a violation of the provisions of this chapter . 24 Sec. 8. Section 508C.5, Code 2011, is amended by adding the 25 following new subsections: 26 NEW SUBSECTION . 2A. “Authorized assessment” , or the 27 term “authorized” when used in the context of an assessment, 28 means that a resolution has been passed by the board of 29 directors of the association whereby an assessment will be 30 called immediately or in the future from member insurers for 31 a specified amount. An assessment is authorized when the 32 resolution is passed. 33 NEW SUBSECTION . 2B. “Benefit plan” means a specific 34 employee, union, or association of natural persons benefit 35 -3- LSB 2660YC (3) 84 av/sc 3/ 31

H.F. _____ plan. 1 NEW SUBSECTION . 2C. “Called assessment” , or the term 2 “called” when used in the context of an assessment, means that 3 a notice has been issued by the association to member insurers 4 requiring that an authorized assessment be paid within the time 5 frame set forth within the notice. An authorized assessment 6 becomes a called assessment when notice is mailed by the 7 association to member insurers. 8 Sec. 9. Section 508C.5, subsection 5, Code 2011, is amended 9 to read as follows: 10 5. “Covered policy” means a policy or contract within the 11 scope of this chapter as or a portion of a policy or contract 12 for which coverage is provided under section 508C.3 . 13 Sec. 10. Section 508C.5, Code 2011, is amended by adding the 14 following new subsections: 15 NEW SUBSECTION . 12A. “Plan sponsor” means any of the 16 following: 17 a. The employer in the case of a benefit plan established or 18 maintained by a single employer. 19 b. The employee organization in the case of a benefit plan 20 established or maintained by an employee organization. 21 c. In the case of a benefit plan established or maintained 22 by two or more employers or jointly by one or more employers 23 and one or more employee organizations, the association, 24 committee, joint board of trustees, or other similar group of 25 representatives of the parties who establish or maintain the 26 benefit plan. 27 NEW SUBSECTION . 13A. “Principal place of business” of a 28 plan sponsor or a person other than a natural person means the 29 single state in which the natural persons who establish policy 30 for the direction, control, and coordination of the operations 31 of the entity as a whole primarily exercise that function as 32 determined pursuant to section 508C.8A. 33 NEW SUBSECTION . 13B. “Receivership court” means a court in 34 an insolvent or impaired insurer’s state having jurisdiction 35 -4- LSB 2660YC (3) 84 av/sc 4/ 31

H.F. _____ over the conservation, rehabilitation, or liquidation of the 1 insurer. 2 Sec. 11. Section 508C.5, subsection 14, Code 2011, is 3 amended to read as follows: 4 14. “Resident” means a person to whom a contractual 5 obligation is owed and who resides in a state on the date of 6 entry of a court order that determines a member insurer is an 7 impaired insurer or a court order that determines a member 8 insurer is an insolvent insurer , whichever occurs first . A 9 person may be a resident of only one state, which in the case of 10 a person other than a natural person shall be the state of that 11 person’s principal place of business. A citizen of the United 12 States who is a resident of a foreign country, or is a resident 13 of a United States possession, territory, or protectorate that 14 does not have an association similar to the association created 15 by this chapter , shall be deemed a resident of the state or 16 domicile of the insurer that issued the policy or contract. 17 Sec. 12. NEW SECTION . 508C.8A Principal place of business 18 —— determination. 19 1. The principal place of business of a plan sponsor or a 20 person other than a natural person shall be determined by the 21 association in its reasonable judgment by considering all of 22 the following factors: 23 a. The state in which the primary executive and 24 administrative headquarters of the entity is located. 25 b. The state in which the principal office of the chief 26 executive officer of the entity is located. 27 c. The state in which the board of directors or similar 28 governing person or persons of the entity conducts the majority 29 of its meetings. 30 d. The state in which the executive or management committee 31 of the board of directors or similar governing person or 32 persons of the entity conducts the majority of its meetings. 33 e. The state from which the management of the overall 34 operations of the entity is directed. 35 -5- LSB 2660YC (3) 84 av/sc 5/ 31

H.F. _____ 2. In the case of a benefit plan sponsored by affiliated 1 companies comprising a consolidated corporation, the principal 2 place of business of the entity shall be deemed to be the state 3 in which the holding company or controlling affiliate has its 4 principal place of business as determined by the association 5 using the factors enumerated in subsection 1. However, if more 6 than fifty percent of the participants in the benefit plan are 7 employed in a single state, that state shall be determined to 8 be the principal place of business of the entity. 9 3. In the case of a benefit plan established or maintained 10 by two or more employers, or jointly by one or more employers 11 and one or more employee organizations, the principal place 12 of business of the entity shall be deemed to be the principal 13 place of business of the association, committee, joint board 14 of trustees, or other similar group of representatives of 15 the parties who establish or maintain the benefit plan. In 16 lieu of a specific or clear designation of the principal 17 place of business of the entity under this subsection, the 18 principal place of business of the entity shall be deemed to 19 be the principal place of business of the employer or employee 20 organization that has the largest investment in the benefit 21 plan in question. 22 Sec. 13. Section 508C.9, subsections 2 through 6, Code 2011, 23 are amended to read as follows: 24 2. There are two classes of assessments as follows: 25 a. Class A assessments shall be made authorized and called 26 for the purpose of meeting administrative and legal costs and 27 other general expenses and examinations conducted under section 28 508C.12, subsection 5 , . Class A assessments may be authorized 29 and called whether or not related to a particular impaired or 30 insolvent insurer. 31 b. Class B assessments shall be made authorized and called 32 to the extent necessary to carry out the powers and duties of 33 the association under section 508C.8 with regard to an impaired 34 domestic insurer or an insolvent domestic, foreign, or alien 35 -6- LSB 2660YC (3) 84 av/sc 6/ 31

H.F. _____ insurer. 1 3. a. The amount of a class A assessment shall be 2 determined by the board and to the extent that class A 3 assessments do not exceed one hundred dollars per company 4 in any one calendar year may be made on a per capita basis 5 and may be authorized and called on a pro rata or non-pro 6 rata basis . If pro rata, the board may provide that the 7 assessment be credited against future class B assessments. 8 The total of all non-pro rata assessments shall not exceed 9 three hundred dollars per member insurer in any one calendar 10 year. The amount of a class B assessment shall be allocated 11 for assessment purposes among the accounts as the liabilities 12 and expenses of the association, either experienced or 13 reasonably expected, are attributable to those accounts, all 14 as determined by the association and on as equitable a basis 15 as is reasonably practical pursuant to an allocation formula 16 which may be based on the premiums or reserves of the impaired 17 or insolvent insurer or on any other standard deemed by the 18 board in its sole discretion as being fair and reasonable under 19 the circumstances . 20 b. Class A assessments in excess of one hundred dollars 21 per company per calendar year and class B assessments against 22 member insurers for each account shall be in the proportion 23 that the average of the aggregate premiums received on business 24 in this state by each assessed member insurer on policies or 25 contracts related to that covered by each account for the three 26 most recent calendar years for which information is available, 27 preceding the year in which the insurer became impaired or 28 insolvent, is or, in the case of an assessment with respect to 29 an impaired insurer, the three most recent calendar years for 30 which information is available preceding the year in which the 31 insurer became impaired, bears to the average of the aggregate 32 premiums received on business in this state for those calendar 33 years by all assessed member insurers on policies related to 34 that account for the three most recent calendar years for which 35 -7- LSB 2660YC (3) 84 av/sc 7/ 31

H.F. _____ information is available preceding the assessment . 1 c. Assessments for funds to meet the requirements of the 2 association with respect to an impaired or insolvent insurer 3 shall not be made authorized or called until necessary to 4 implement the purposes of this chapter . Classification 5 of assessments under this subsection 2 and computation 6 of assessments under this subsection shall be made with 7 a reasonable degree of accuracy, recognizing that exact 8 determinations may not always be possible. The association 9 shall notify each member insurer of its anticipated pro rata 10 share of an authorized assessment not yet called within one 11 hundred eighty days after the assessment is authorized. 12 4. The association may abate or defer, in whole or in part, 13 the assessment of a member insurer if, in the opinion of the 14 board, payment of the assessment would endanger the ability of 15 the member insurer to fulfill its contractual obligations. If 16 an assessment against a member insurer is abated or deferred, 17 in whole or in part, the amount by which the assessment is 18 abated or deferred may be assessed against the other member 19 insurers in a manner consistent with the basis for assessments 20 set forth in this section . Once the conditions that caused 21 an abatement or deferral have been removed or rectified, the 22 member insurer shall pay all assessments that were abated 23 or deferred pursuant to a repayment plan approved by the 24 association. 25 5. a. (1) The Subject to the provisions of subparagraph 26 (2) of this paragraph “a” , the total of all assessments upon 27 authorized by the association with respect to a member insurer 28 for each account of the accounts established pursuant to 29 section 508C.6, and designated as the health insurance account, 30 the life insurance account, the annuity account, and the 31 unallocated annuity contract account, shall not in any one 32 calendar year exceed two percent of the average of the that 33 member insurer’s average annual premiums received in this state 34 on the policies and contracts covered by the account during 35 -8- LSB 2660YC (3) 84 av/sc 8/ 31

H.F. _____ the three most recent calendar years for which information is 1 available, preceding the year in which the insurer becomes 2 impaired or insolvent , on the policies related to that account . 3 (2) However, if If two or more assessments are authorized 4 in one calendar year with respect to insurers that become 5 impaired or insolvent in different calendar years, the average 6 annual premiums for purposes of the aggregate assessment 7 percentage limitation referred to in subparagraph (1) of this 8 paragraph “a” shall be equal , and limited , to the higher of the 9 three-year average annual premiums for the applicable account 10 as calculated pursuant to this section . 11 (3) If the maximum assessment for an account , together 12 with the other assets of the association in the account, 13 does not provide in any one year in the either account an 14 amount sufficient to carry out the responsibilities of the 15 association, the necessary additional funds shall be assessed 16 for the account in succeeding years as soon as permitted by 17 this chapter . 18 b. The board may provide in its plan of operation a method 19 of allocating funds among claims, whether relating to one 20 or more impaired or insolvent insurers, when the maximum 21 assessment will be insufficient to cover anticipated claims. 22 b. c. If the maximum assessment under paragraph “a” for any 23 account, other than the health insurance account, either the 24 life insurance account, the annuity account, or the unallocated 25 annuity contract account in one year does not provide an amount 26 sufficient to carry out the responsibilities of the association 27 in any succeeding year , the board, pursuant to subsection 3 , 28 paragraph “a” “b” , shall assess access any of the other said 29 accounts for the necessary additional amount and allocate the 30 amount for assessment among the accounts, other than the health 31 insurance account, in the following sequence: from the life 32 insurance account, to the annuity account, to the unallocated 33 annuity contract account; from the annuity account, to the 34 unallocated annuity contract account, to the life insurance 35 -9- LSB 2660YC (3) 84 av/sc 9/ 31

H.F. _____ account; from the unallocated annuity contract account, to the 1 annuity account, to the life insurance account; provided that 2 no amount shall be allocated to an account for assessment until 3 the maximum amount has been allocated to the preceding account , 4 subject to the maximum assessments stated in paragraph “a” of 5 this subsection . 6 6. By an equitable method as established in the plan 7 of operation, the board may refund to member insurers, in 8 proportion to the contribution of each insurer to that account, 9 the amount by which the assets of the account, including assets 10 accruing from assignment, subrogation, net realized gains , and 11 income from investments, exceed the amount the board finds is 12 necessary to carry out during the coming year the obligations 13 of the association with regard to that account. A reasonable 14 amount may be retained in any account to provide funds for the 15 continuing expenses of the association and for future losses if 16 refunds are impractical claims . 17 Sec. 14. Section 508C.9, Code 2011, is amended by adding the 18 following new subsections: 19 NEW SUBSECTION . 9. a. A member insurer that wishes to 20 protest all or part of an assessment shall pay when due the 21 full amount of the assessment as set forth in the notice 22 provided by the association. The payment shall be made 23 available to meet association obligations during the pendency 24 of the protest or any subsequent appeal. The payment shall 25 be accompanied by a statement in writing that the payment is 26 made under protest and setting forth a brief statement of the 27 grounds for the protest. 28 b. Within sixty days following the payment of an assessment 29 under protest by a member insurer, the association shall 30 either notify the protesting member insurer in writing of 31 its determination with respect to the protest or notify the 32 protesting member insurer that additional time is required to 33 resolve the issues raised by the protest. 34 c. Within thirty days after a final decision has been made, 35 -10- LSB 2660YC (3) 84 av/sc 10/ 31

H.F. _____ the association shall notify the protesting member insurer in 1 writing of that final decision. Within sixty days of receipt 2 of notice of the final decision, the protesting member insurer 3 may appeal that final decision to the commissioner. 4 d. As an alternative to rendering a final decision with 5 respect to a protest of an assessment, the association may 6 refer the protest to the commissioner for a final decision, 7 with or without a recommendation from the association. 8 e. If a protest or subsequent appeal of an assessment is 9 upheld in favor of the protesting member insurer, the amount 10 paid in error or the excess shall be refunded to the member 11 insurer. Interest on a refund due a protesting member insurer 12 shall be paid at the rate actually earned by the association 13 during the pendency of the protest or any subsequent appeal. 14 NEW SUBSECTION . 10. The association may request 15 information from member insurers in order to aid in the 16 exercise of the association’s power under this section, and the 17 member insurers shall promptly comply with such a request. 18 Sec. 15. Section 508C.11, subsection 1, paragraph c, Code 19 2011, is amended by striking the paragraph. 20 Sec. 16. Section 508C.11, subsection 3, Code 2011, is 21 amended to read as follows: 22 3. An A final action of the board of directors or the 23 association may be appealed to the commissioner by a member 24 insurer if the appeal is taken within thirty sixty days of the 25 member insurer’s receipt of notice of the final action being 26 appealed. A final action or order of the commissioner is 27 subject to judicial review pursuant to chapter 17A in a court 28 of competent jurisdiction. 29 Sec. 17. Section 508C.12, subsection 1, paragraphs b 30 through d, Code 2011, are amended to read as follows: 31 b. Report to the board of directors when the commissioner 32 has taken any of the actions set forth in paragraph “a” or has 33 received a report from any other commissioner indicating that a 34 member insurer is impaired or insolvent such action has been 35 -11- LSB 2660YC (3) 84 av/sc 11/ 31

H.F. _____ taken in another state . Reports to the board of directors 1 shall contain all significant details of the action taken or 2 the report received from another commissioner. 3 c. Report to the board of directors when there is reasonable 4 cause to believe from an examination, whether completed or in 5 process, of a member company insurer that the company insurer 6 may be an impaired or insolvent insurer. 7 d. Furnish to the board of directors the national 8 association of insurance commissioners’ early warning tests. 9 The insurance regulatory information system ratios, and 10 listing of insurers not included in the ratios, developed 11 by the national association of insurance commissioners, and 12 the board may use the information in carrying out its duties 13 and responsibilities under this section . The report and the 14 information contained in the report shall be kept confidential 15 by the board of directors until such time as it is made public 16 by the commissioner or other lawful authority. 17 Sec. 18. Section 508C.12, subsection 2, Code 2011, is 18 amended to read as follows: 19 2. The commissioner may seek the advice and recommendations 20 of the board of directors concerning any matter affecting 21 the commissioner’s duties and responsibilities regarding the 22 financial condition of member companies insurers and companies 23 seeking admission to transact insurance business in this state. 24 Sec. 19. Section 508C.12, subsection 7, Code 2011, is 25 amended by striking the subsection. 26 Sec. 20. Section 508C.16, Code 2011, is amended to read as 27 follows: 28 508C.16 Immunity —— indemnification. 29 1. A member insurer and its agents and employees, the 30 association and its agents and employees, members of the board 31 of directors, and the commissioner and the commissioner’s 32 representatives are not liable for any action taken by them 33 or omission by them while acting within the scope of their 34 employment and in the performance of their powers and duties 35 -12- LSB 2660YC (3) 84 av/sc 12/ 31

H.F. _____ under this chapter and such immunity granted under this section 1 shall extend to their participation in any organization of one 2 or more state associations of similar purposes and to that 3 organization and its agents and employees . 4 2. Sections 490.850 through 490.859 apply to the 5 association. 6 Sec. 21. Section 508C.17, Code 2011, is amended to read as 7 follows: 8 508C.17 Stay of proceedings —— reopening default judgments. 9 Proceedings in which the insolvent insurer is a party in a 10 court in this state shall be stayed sixty one hundred eighty 11 days from the date an order of liquidation, rehabilitation, 12 or conservation is final to permit proper legal action by the 13 association on matters germane to its powers or duties. The 14 association may apply to have a judgment under a decision, 15 order, verdict, or finding based on default, set aside by the 16 same court that entered the judgment, and shall be permitted to 17 defend against the suit on the merits. 18 Sec. 22. Section 508C.18, Code 2011, is amended to read as 19 follows: 20 508C.18 Prohibited advertisements. 21 A person, including an insurer, agent or affiliate of an 22 insurer , shall not make, publish, disseminate, circulate, or 23 place before the public, or cause directly or indirectly, to 24 be made, published, disseminated, circulated, or placed before 25 the public in a newspaper, magazine, or other publication, 26 or in the form of a notice, circular, pamphlet, letter, or 27 poster, or over a radio station or television station, or in 28 any other way, an advertisement, announcement, or statement , 29 written or oral, which uses the existence of the insurance 30 guaranty association of this state for the purpose of sales, 31 solicitation, or inducement to purchase any form of insurance 32 covered by this chapter . However, this section does not apply 33 to the association or any other entity which does not sell or 34 solicit insurance. 35 -13- LSB 2660YC (3) 84 av/sc 13/ 31

H.F. _____ Sec. 23. NEW SECTION . 508C.18A Notice to policyholders —— 1 summary of chapter and disclosure. 2 1. a. Within one hundred eighty days after enactment of 3 this section, the association shall prepare a summary document 4 describing the general purposes and current provisions of 5 this chapter and containing a disclosure in compliance with 6 subsection 2. This summary document shall be submitted to the 7 commissioner for approval. The approved summary document and 8 disclosure shall be delivered to the owner of an insurance 9 policy or contract as provided in this section. 10 b. This subsection is repealed July 1, 2012. 11 2. a. On or after March 1, 2012, an insurer shall not 12 deliver an insurance policy or contract in Iowa to the owner 13 of the policy or contract unless a summary document describing 14 the general purposes and current provisions of this chapter 15 and containing a disclosure in compliance with subsection 3 is 16 delivered to the policy or contract owner at the same time. 17 b. The summary document shall also be available upon request 18 by an insurance policy or contract owner. 19 c. The distribution, delivery, contents, or interpretation 20 of this summary document does not guarantee that either 21 the insurance policy or contract or the owner of the policy 22 or contract is covered in the event of the impairment or 23 insolvency of a member insurer. 24 d. The summary document shall be revised by the association 25 and approved by the commissioner as amendments to this chapter 26 may require. Failure to receive a summary document does not 27 give the insurance policy or contract owner, certificate 28 holder, or insured any greater rights than those stated in this 29 chapter. 30 3. The summary document prepared pursuant to this section 31 shall contain a clear and conspicuous disclosure on its face. 32 The commissioner shall establish the form and content of the 33 disclosure which shall do all of the following: 34 a. State the name and address of the association and the 35 -14- LSB 2660YC (3) 84 av/sc 14/ 31

H.F. _____ Iowa insurance division. 1 b. Prominently warn the insurance policy or contract owner 2 that the association may not cover the policy or contract or, 3 if coverage is available, it will be subject to substantial 4 limitations and exclusions and conditioned on continued 5 residence in this state. 6 c. State the types of insurance policies and contracts for 7 which the association will provide coverage. 8 d. State that the insurer and its agents are prohibited by 9 law from using the existence of the association for the purpose 10 of sales, solicitation, or inducement to purchase any form of 11 insurance. 12 e. State that the insurance policy or contract owner should 13 not rely on coverage from the association when selecting an 14 insurer. 15 f. Explain rights available and procedures for filing a 16 complaint to allege a violation of any provisions of this 17 chapter. 18 g. Provide other information as directed by the 19 commissioner, including but not limited to sources for 20 information about the financial condition of an insurer 21 provided that the information is not proprietary and is subject 22 to disclosure under chapter 22. 23 4. A member insurer shall retain evidence of compliance with 24 the provisions of this section for as long as the insurance 25 policy or contract for which the notice is given remains in 26 effect. 27 Sec. 24. Section 511.8, subsection 16, Code 2011, is amended 28 by adding the following new paragraph: 29 NEW PARAGRAPH . h. Financial instruments used in hedging 30 transactions, and securities pledged as collateral for 31 financial instruments used in highly effective hedging 32 transactions, eligible for inclusion in the legal reserve under 33 subsection 22 may be made a part of the deposit by filing a 34 verified statement of the financial instruments or securities 35 -15- LSB 2660YC (3) 84 av/sc 15/ 31

H.F. _____ pursuant to the terms and conditions of the applicable hedging 1 transaction agreement or of the applicable collateral agreement 2 or other credit support agreement. 3 Sec. 25. Section 511.8, subsection 22, Code 2011, is amended 4 by adding the following new paragraph: 5 NEW PARAGRAPH . i. Securities held in the legal reserve of 6 a life insurance company or association pledged as collateral 7 for financial instruments used in highly effective hedging 8 transactions as defined in the national association of 9 insurance commissioners’ Statement of Statutory Accounting 10 Principles No. 86 shall continue to be eligible for inclusion 11 on the legal reserve of the life insurance company or 12 association subject to all of the following: 13 (1) The life insurance company or association does not 14 include the financial instruments used in highly effective 15 hedging transactions for which the securities are pledged as 16 collateral in the legal reserve of the life insurance company 17 or association, provided, however, that this subparagraph 18 shall not exclude securities pledged to a counterparty, 19 clearing organization, or clearinghouse on an upfront basis 20 in the form of initial margin, independent amount, or other 21 securities pledged as a precondition of entering into financial 22 instruments used in highly effective hedging transactions from 23 inclusion in the legal reserve of the life insurance company 24 or association. 25 (2) Securities pledged as collateral for financial 26 instruments used in highly effective hedging transactions are 27 not eligible in excess of ten percent of the legal reserve of 28 the life insurance company or association, less any financial 29 instruments used in hedging transactions held in the legal 30 reserve under this subsection. 31 (3) Securities pledged to a counterparty, clearing 32 organization, or clearinghouse on an upfront basis in 33 the form of initial margin, independent amount, or other 34 securities pledged as a precondition of entering into financial 35 -16- LSB 2660YC (3) 84 av/sc 16/ 31

H.F. _____ instruments used in highly effective hedging transactions are 1 not eligible in excess of one percent of the legal reserve of 2 the life insurance company or association. 3 Sec. 26. Section 514C.18, subsection 1, paragraph a, Code 4 2011, is amended by striking the paragraph and inserting in 5 lieu thereof the following: 6 a. Equipment and supplies. 7 Sec. 27. Section 515.125, subsection 1, Code 2011, is 8 amended to read as follows: 9 1. Unless otherwise provided in section 515.127 , 515.128 , 10 515.129 , 515.129A , 515.129B , or 515.129C , a policy or contract 11 of insurance provided for in this chapter shall not be 12 forfeited, suspended, or canceled except by notice to the 13 insured as provided in this chapter . A notice of cancellation 14 is not effective unless mailed or delivered by the insurer to 15 the named insured at least thirty days before the effective 16 date of cancellation or, where cancellation is for nonpayment 17 of a premium, assessment, or installment provided for in the 18 policy, or in a note or contract for the payment thereof, at 19 least ten days prior to the date of cancellation. The notice 20 may be made in person, or by sending by mail a letter addressed 21 to the insured at the insured’s address as given in or upon 22 the policy, anything in the policy, application, or a separate 23 agreement to the contrary notwithstanding. 24 Sec. 28. Section 515.126, Code 2011, is amended to read as 25 follows: 26 515.126 Cancellation of policy —— notice to insured or 27 mortgagee. 28 1. Unless otherwise provided in section 515.127 or , 29 515.128 , 515.129 , 515.129A , 515.129B , or 515.129C , at any time 30 after the maturity of a premium, assessment, or installment 31 provided for in the policy, or a note or contract for the 32 payment thereof, or after the suspension, forfeiture, or 33 cancellation of a policy or contract of insurance, the insured 34 may pay to the company the customary short rates and costs of 35 -17- LSB 2660YC (3) 84 av/sc 17/ 31

H.F. _____ action, if one has been commenced or judgment rendered thereon, 1 and may, if the insured so elects, have the policy and all 2 contracts or obligations connected with the policy, whether 3 in judgment or otherwise, canceled, and all such policy and 4 contracts shall be void; and in case of suspension, forfeiture, 5 or cancellation of a policy or contract of insurance, the 6 insured is not liable for a greater amount than the short 7 rates earned at the date of the suspension, forfeiture, or 8 cancellation and the costs of action provided for in this 9 section . 10 2. If the policy is canceled by the insurance company, 11 the insurer may retain only the pro rata premium, and if the 12 initial cash premium, or any part of the premium, has not been 13 paid, the policy may be canceled by the insurance company by 14 giving notice to the insured as provided in section 515.125 15 and ten days’ notice to the mortgagee, or other person to whom 16 the policy is made payable, if any, without tendering any 17 part of the premium, anything to the contrary in the policy 18 notwithstanding. 19 Sec. 29. Section 515D.5, subsection 1, Code 2011, is amended 20 to read as follows: 21 1. a. Notwithstanding the provisions of sections 22 515.125 through 515.127 , 515.126 , and 515.129A , a notice of 23 cancellation of a policy shall not be effective unless mailed 24 or delivered by the insurer to the named insured at least 25 thirty days prior to the effective date of cancellation, 26 or, where the cancellation is for nonpayment of premium 27 notwithstanding the provisions of sections 515.125 and 515.127 28 515.126 , at least ten days prior to the date of cancellation. 29 A post office department certificate of mailing to the named 30 insured at the address shown in the policy shall be proof 31 of receipt of such mailing. Unless the reason accompanies 32 the notice of cancellation, the notice shall state that upon 33 written request of the named insured, mailed or delivered 34 to the insurer not less than fifteen days prior to the 35 -18- LSB 2660YC (3) 84 av/sc 18/ 31