Senate Study Bill 1089 - Introduced SENATE/HOUSE FILE _____ BY (PROPOSED DEPARTMENT OF COMMERCE/INSURANCE DIVISION BILL) 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 1314DP (14) 84 av/sc

S.F. _____ H.F. _____ Section 1. Section 502.410, subsection 4, paragraph a, Code 1 2011, is amended to read as follows: 2 a. The fee for an individual is thirty forty dollars 3 when filing an application for registration as an investment 4 adviser representative, a fee of thirty forty dollars when 5 filing a renewal of registration as an investment adviser 6 representative, and a fee of thirty forty dollars when filing a 7 change of registration as an investment adviser representative. 8 If the filing results in a denial or withdrawal, the 9 administrator shall retain the fee. 10 Sec. 2. Section 502.604, subsections 2 and 4, Code 2011, are 11 amended to read as follows: 12 2. Summary process. An order under subsection 1 is 13 effective on the date of issuance. Upon issuance of the order, 14 the administrator shall promptly serve each person subject to 15 the order with a copy of the order and a notice that the order 16 has been entered. The order must include a statement of any 17 restitution order, civil penalty , or costs of investigation 18 the administrator will seek, a statement of the reasons for 19 the order, and notice that, within thirty days after receipt 20 of a request in a record from the person, the matter will be 21 scheduled for a hearing. If a person subject to the order does 22 not request a hearing and none is ordered by the administrator 23 within thirty days after the date of service of the order, 24 the order, including an order for restitution, the imposition 25 of a civil penalty , or a requirement for payment of costs of 26 investigation sought in the order, becomes final as to that 27 person by operation of law. If a hearing is requested or 28 ordered, the administrator, after notice of and opportunity 29 for hearing to each person subject to the order, may modify or 30 vacate the order or extend it until final determination. 31 4. Civil penalty —— restitution —— corrective action . In 32 a final order under subsection 3 , the administrator may 33 impose a civil penalty up to an amount not to exceed a 34 maximum of five thousand dollars for a single violation or 35 -1- LSB 1314DP (14) 84 av/sc 1/ 31

S.F. _____ H.F. _____ five hundred thousand dollars for more than one violation , 1 order restitution, or take other corrective action as the 2 administrator deems necessary and appropriate to accomplish 3 compliance with the laws of the state relating to all 4 securities business transacted in the state . 5 Sec. 3. Section 505.8, subsections 1 and 10, Code 2011, are 6 amended to read as follows: 7 1. The commissioner of insurance shall be the head of the 8 division, and shall have general control, supervision, and 9 direction over all insurance business transacted in the state, 10 and shall enforce all the laws of the state relating to such 11 federal and state insurance business transacted in the state . 12 10. The commissioner may, after a hearing conducted 13 pursuant to chapter 17A , assess fines or penalties, assess 14 costs of an investigation or proceeding, order restitution, 15 or take other corrective action as the commissioner deems 16 necessary and appropriate to accomplish compliance with the 17 laws of the state relating to all insurance business transacted 18 in the state. 19 Sec. 4. Section 505.8, Code 2011, is amended by adding the 20 following new subsection: 21 NEW SUBSECTION . 19. The commissioner may adopt 22 administrative rules pursuant to chapter 17A as necessary to 23 effectuate the insurance provisions of the federal Patient 24 Protection and Affordable Care Act of 2010, or other applicable 25 federal laws. 26 Sec. 5. Section 505.18, subsection 2, unnumbered paragraph 27 1, Code 2011, is amended to read as follows: 28 The commissioner in collaboration with the consumer advocate 29 shall prepare and deliver a report to the governor and to the 30 general assembly no later than November 15 of each year that 31 provides findings regarding health spending costs for health 32 insurance plans carriers in the state for the previous fiscal 33 calendar year. The commissioner may contract with outside 34 vendors or entities to assist in providing the information 35 -2- LSB 1314DP (14) 84 av/sc 2/ 31

S.F. _____ H.F. _____ contained in the annual report. The report shall provide, at a 1 minimum, the following information: 2 Sec. 6. Section 505.18, subsection 2, paragraph d, Code 3 2011, is amended to read as follows: 4 d. A ranking and quantification of those factors that result 5 in higher costs and those factors that result in lower costs 6 for each health insurance plan offered carrier in the state. 7 Sec. 7. Section 505.19, subsection 3, Code 2011, is amended 8 to read as follows: 9 3. The consumer advocate shall solicit public comments on 10 each proposed health insurance rate increase application if 11 the increase exceeds the average annual health spending growth 12 rate as provided in subsection 1 , and shall post without delay 13 during the normal business hours of the division, all comments 14 received on the insurance division’s internet site prior to 15 approval or disapproval of the proposed rate increase by the 16 commissioner. 17 Sec. 8. Section 507E.8, Code 2011, is amended to read as 18 follows: 19 507E.8 Peace Law enforcement officer status. 20 1. Bureau investigators shall have the power and status 21 of peace law enforcement officers who by the nature of their 22 duties may be required to perform the duties of a peace officer 23 when making arrests for criminal violations established as a 24 result of their investigations pursuant to this chapter . 25 2. The general laws applicable to arrests by peace law 26 enforcement officers of the state also apply to bureau 27 investigators. Bureau investigators shall have the power 28 to execute arrest warrants and search warrants for the 29 same criminal violations, serve subpoenas issued for the 30 examination, investigation, and trial of all offenses 31 identified through their investigations, and arrest upon 32 probable cause without warrant a person found in the act of 33 committing a violation of the provisions of this chapter . 34 Sec. 9. Section 508C.5, Code 2011, is amended by adding the 35 -3- LSB 1314DP (14) 84 av/sc 3/ 31

S.F. _____ H.F. _____ following new subsections: 1 NEW SUBSECTION . 2A. “Authorized assessment” , or the 2 term “authorized” when used in the context of an assessment, 3 means that a resolution has been passed by the board of 4 directors of the association whereby an assessment will be 5 called immediately or in the future from member insurers for 6 a specified amount. An assessment is authorized when the 7 resolution is passed. 8 NEW SUBSECTION . 2B. “Benefit plan” means a specific 9 employee, union, or association of natural persons benefit 10 plan. 11 NEW SUBSECTION . 2C. “Called assessment” , or the term 12 “called” when used in the context of an assessment, means that 13 a notice has been issued by the association to member insurers 14 requiring that an authorized assessment be paid within the time 15 frame set forth within the notice. An authorized assessment 16 becomes a called assessment when notice is mailed by the 17 association to member insurers. 18 Sec. 10. Section 508C.5, subsection 5, Code 2011, is amended 19 to read as follows: 20 5. “Covered policy” means a policy or contract within the 21 scope of this chapter as or a portion of a policy or contract 22 for which coverage is provided under section 508C.3 . 23 Sec. 11. Section 508C.5, Code 2011, is amended by adding the 24 following new subsections: 25 NEW SUBSECTION . 12A. “Plan sponsor” means any of the 26 following: 27 a. The employer in the case of a benefit plan established or 28 maintained by a single employer. 29 b. The employee organization in the case of a benefit plan 30 established or maintained by an employee organization. 31 c. In the case of a benefit plan established or maintained 32 by two or more employers or jointly by one or more employers 33 and one or more employee organizations, the association, 34 committee, joint board of trustees, or other similar group of 35 -4- LSB 1314DP (14) 84 av/sc 4/ 31

S.F. _____ H.F. _____ representatives of the parties who establish or maintain the 1 benefit plan. 2 NEW SUBSECTION . 13A. “Principal place of business” of a 3 plan sponsor or a person other than a natural person means the 4 single state in which the natural persons who establish policy 5 for the direction, control, and coordination of the operations 6 of the entity as a whole primarily exercise that function as 7 determined pursuant to section 508C.8A. 8 NEW SUBSECTION . 13B. “Receivership court” means a court in 9 an insolvent or impaired insurer’s state having jurisdiction 10 over the conservation, rehabilitation, or liquidation of the 11 insurer. 12 Sec. 12. Section 508C.5, subsection 14, Code 2011, is 13 amended to read as follows: 14 14. “Resident” means a person to whom a contractual 15 obligation is owed and who resides in a state on the date of 16 entry of a court order that determines a member insurer is an 17 impaired insurer or a court order that determines a member 18 insurer is an insolvent insurer , whichever occurs first . A 19 person may be a resident of only one state, which in the case of 20 a person other than a natural person shall be the state of that 21 person’s principal place of business. A citizen of the United 22 States who is a resident of a foreign country, or is a resident 23 of a United States possession, territory, or protectorate that 24 does not have an association similar to the association created 25 by this chapter , shall be deemed a resident of the state or 26 domicile of the insurer that issued the policy or contract. 27 Sec. 13. NEW SECTION . 508C.8A Principal place of business 28 —— determination. 29 1. The principal place of business of a plan sponsor or a 30 person other than a natural person shall be determined by the 31 association in its reasonable judgment by considering all of 32 the following factors: 33 a. The state in which the primary executive and 34 administrative headquarters of the entity is located. 35 -5- LSB 1314DP (14) 84 av/sc 5/ 31

S.F. _____ H.F. _____ b. The state in which the principal office of the chief 1 executive officer of the entity is located. 2 c. The state in which the board of directors or similar 3 governing person or persons of the entity conducts the majority 4 of its meetings. 5 d. The state in which the executive or management committee 6 of the board of directors or similar governing person or 7 persons of the entity conducts the majority of its meetings. 8 e. The state from which the management of the overall 9 operations of the entity is directed. 10 2. In the case of a benefit plan sponsored by affiliated 11 companies comprising a consolidated corporation, the principal 12 place of business of the entity shall be deemed to be the state 13 in which the holding company or controlling affiliate has its 14 principal place of business as determined by the association 15 using the factors enumerated in subsection 1. However, if more 16 than fifty percent of the participants in the benefit plan are 17 employed in a single state, that state shall be determined to 18 be the principal place of business of the entity. 19 3. In the case of a benefit plan established or maintained 20 by two or more employers, or jointly by one or more employers 21 and one or more employee organizations, the principal place 22 of business of the entity shall be deemed to be the principal 23 place of business of the association, committee, joint board 24 of trustees, or other similar group of representatives of 25 the parties who establish or maintain the benefit plan. In 26 lieu of a specific or clear designation of the principal 27 place of business of the entity under this subsection, the 28 principal place of business of the entity shall be deemed to 29 be the principal place of business of the employer or employee 30 organization that has the largest investment in the benefit 31 plan in question. 32 Sec. 14. Section 508C.9, subsections 2 through 6, Code 2011, 33 are amended to read as follows: 34 2. There are two classes of assessments as follows: 35 -6- LSB 1314DP (14) 84 av/sc 6/ 31

S.F. _____ H.F. _____ a. Class A assessments shall be made authorized and called 1 for the purpose of meeting administrative and legal costs and 2 other general expenses and examinations conducted under section 3 508C.12, subsection 5 , . Class A assessments may be authorized 4 and called whether or not related to a particular impaired or 5 insolvent insurer. 6 b. Class B assessments shall be made authorized and called 7 to the extent necessary to carry out the powers and duties of 8 the association under section 508C.8 with regard to an impaired 9 domestic insurer or an insolvent domestic, foreign, or alien 10 insurer. 11 3. a. The amount of a class A assessment shall be 12 determined by the board and to the extent that class A 13 assessments do not exceed one hundred dollars per company 14 in any one calendar year may be made on a per capita basis 15 and may be authorized and called on a pro rata or non-pro 16 rata basis . If pro rata, the board may provide that the 17 assessment be credited against future class B assessments. 18 The total of all non-pro rata assessments shall not exceed 19 three hundred dollars per member insurer in any one calendar 20 year. The amount of a class B assessment shall be allocated 21 for assessment purposes among the accounts as the liabilities 22 and expenses of the association, either experienced or 23 reasonably expected, are attributable to those accounts, all 24 as determined by the association and on as equitable a basis 25 as is reasonably practical pursuant to an allocation formula 26 which may be based on the premiums or reserves of the impaired 27 or insolvent insurer or on any other standard deemed by the 28 board in its sole discretion as being fair and reasonable under 29 the circumstances . 30 b. Class A assessments in excess of one hundred dollars 31 per company per calendar year and class B assessments against 32 member insurers for each account shall be in the proportion 33 that the average of the aggregate premiums received on business 34 in this state by each assessed member insurer on policies or 35 -7- LSB 1314DP (14) 84 av/sc 7/ 31

S.F. _____ H.F. _____ contracts related to that covered by each account for the three 1 most recent calendar years for which information is available, 2 preceding the year in which the insurer became impaired or 3 insolvent, is or, in the case of an assessment with respect to 4 an impaired insurer, the three most recent calendar years for 5 which information is available preceding the year in which the 6 insurer became impaired, bears to the average of the aggregate 7 premiums received on business in this state for those calendar 8 years by all assessed member insurers on policies related to 9 that account for the three most recent calendar years for which 10 information is available preceding the assessment . 11 c. Assessments for funds to meet the requirements of the 12 association with respect to an impaired or insolvent insurer 13 shall not be made authorized or called until necessary to 14 implement the purposes of this chapter . Classification 15 of assessments under this subsection 2 and computation 16 of assessments under this subsection shall be made with 17 a reasonable degree of accuracy, recognizing that exact 18 determinations may not always be possible. The association 19 shall notify each member insurer of its anticipated pro rata 20 share of an authorized assessment not yet called within one 21 hundred eighty days after the assessment is authorized. 22 4. The association may abate or defer, in whole or in part, 23 the assessment of a member insurer if, in the opinion of the 24 board, payment of the assessment would endanger the ability of 25 the member insurer to fulfill its contractual obligations. If 26 an assessment against a member insurer is abated or deferred, 27 in whole or in part, the amount by which the assessment is 28 abated or deferred may be assessed against the other member 29 insurers in a manner consistent with the basis for assessments 30 set forth in this section . Once the conditions that caused 31 an abatement or deferral have been removed or rectified, the 32 member insurer shall pay all assessments that were abated 33 or deferred pursuant to a repayment plan approved by the 34 association. 35 -8- LSB 1314DP (14) 84 av/sc 8/ 31

S.F. _____ H.F. _____ 5. a. (1) The Subject to the provisions of subparagraph 1 (2) of this paragraph “a” , the total of all assessments upon 2 authorized by the association with respect to a member insurer 3 for each account of the accounts established pursuant to 4 section 508C.6, and designated as the health insurance account, 5 the life insurance account, the annuity account, and the 6 unallocated annuity contract account, shall not in any one 7 calendar year exceed two percent of the average of the that 8 member insurer’s average annual premiums received in this state 9 on the policies and contracts covered by the account during 10 the three most recent calendar years for which information is 11 available, preceding the year in which the insurer becomes 12 impaired or insolvent , on the policies related to that account . 13 (2) However, if If two or more assessments are authorized 14 in one calendar year with respect to insurers that become 15 impaired or insolvent in different calendar years, the average 16 annual premiums for purposes of the aggregate assessment 17 percentage limitation referred to in subparagraph (1) of this 18 paragraph “a” shall be equal , and limited , to the higher of the 19 three-year average annual premiums for the applicable account 20 as calculated pursuant to this section . 21 (3) If the maximum assessment for an account , together 22 with the other assets of the association in the account, 23 does not provide in any one year in the either account an 24 amount sufficient to carry out the responsibilities of the 25 association, the necessary additional funds shall be assessed 26 for the account in succeeding years as soon as permitted by 27 this chapter . 28 b. The board may provide in its plan of operation a method 29 of allocating funds among claims, whether relating to one 30 or more impaired or insolvent insurers, when the maximum 31 assessment will be insufficient to cover anticipated claims. 32 b. c. If the maximum assessment under paragraph “a” for any 33 account, other than the health insurance account, either the 34 life insurance account, the annuity account, or the unallocated 35 -9- LSB 1314DP (14) 84 av/sc 9/ 31

S.F. _____ H.F. _____ annuity contract account in one year does not provide an amount 1 sufficient to carry out the responsibilities of the association 2 in any succeeding year , the board, pursuant to subsection 3 , 3 paragraph “a” “b” , shall assess access any of the other said 4 accounts for the necessary additional amount and allocate the 5 amount for assessment among the accounts, other than the health 6 insurance account, in the following sequence: from the life 7 insurance account, to the annuity account, to the unallocated 8 annuity contract account; from the annuity account, to the 9 unallocated annuity contract account, to the life insurance 10 account; from the unallocated annuity contract account, to the 11 annuity account, to the life insurance account; provided that 12 no amount shall be allocated to an account for assessment until 13 the maximum amount has been allocated to the preceding account , 14 subject to the maximum assessments stated in paragraph “a” of 15 this subsection . 16 6. By an equitable method as established in the plan 17 of operation, the board may refund to member insurers, in 18 proportion to the contribution of each insurer to that account, 19 the amount by which the assets of the account, including assets 20 accruing from assignment, subrogation, net realized gains , and 21 income from investments, exceed the amount the board finds is 22 necessary to carry out during the coming year the obligations 23 of the association with regard to that account. A reasonable 24 amount may be retained in any account to provide funds for the 25 continuing expenses of the association and for future losses if 26 refunds are impractical claims . 27 Sec. 15. Section 508C.9, Code 2011, is amended by adding the 28 following new subsections: 29 NEW SUBSECTION . 9. a. A member insurer that wishes to 30 protest all or part of an assessment shall pay when due the 31 full amount of the assessment as set forth in the notice 32 provided by the association. The payment shall be made 33 available to meet association obligations during the pendency 34 of the protest or any subsequent appeal. The payment shall 35 -10- LSB 1314DP (14) 84 av/sc 10/ 31

S.F. _____ H.F. _____ be accompanied by a statement in writing that the payment is 1 made under protest and setting forth a brief statement of the 2 grounds for the protest. 3 b. Within sixty days following the payment of an assessment 4 under protest by a member insurer, the association shall 5 either notify the protesting member insurer in writing of 6 its determination with respect to the protest or notify the 7 protesting member insurer that additional time is required to 8 resolve the issues raised by the protest. 9 c. Within thirty days after a final decision has been made, 10 the association shall notify the protesting member insurer in 11 writing of that final decision. Within sixty days of receipt 12 of notice of the final decision, the protesting member insurer 13 may appeal that final decision to the commissioner. 14 d. As an alternative to rendering a final decision with 15 respect to a protest of an assessment, the association may 16 refer the protest to the commissioner for a final decision, 17 with or without a recommendation from the association. 18 e. If a protest or subsequent appeal of an assessment is 19 upheld in favor of the protesting member insurer, the amount 20 paid in error or the excess shall be refunded to the member 21 insurer. Interest on a refund due a protesting member insurer 22 shall be paid at the rate actually earned by the association 23 during the pendency of the protest or any subsequent appeal. 24 NEW SUBSECTION . 10. The association may request 25 information from member insurers in order to aid in the 26 exercise of the association’s power under this section, and the 27 member insurers shall promptly comply with such a request. 28 Sec. 16. Section 508C.11, subsection 1, paragraph c, Code 29 2011, is amended by striking the paragraph. 30 Sec. 17. Section 508C.11, subsection 3, Code 2011, is 31 amended to read as follows: 32 3. An A final action of the board of directors or the 33 association may be appealed to the commissioner by a member 34 insurer if the appeal is taken within thirty sixty days of the 35 -11- LSB 1314DP (14) 84 av/sc 11/ 31

S.F. _____ H.F. _____ member insurer’s receipt of notice of the final action being 1 appealed. A final action or order of the commissioner is 2 subject to judicial review pursuant to chapter 17A in a court 3 of competent jurisdiction. 4 Sec. 18. Section 508C.12, subsection 1, paragraphs b 5 through d, Code 2011, are amended to read as follows: 6 b. Report to the board of directors when the commissioner 7 has taken any of the actions set forth in paragraph “a” or has 8 received a report from any other commissioner indicating that a 9 member insurer is impaired or insolvent such action has been 10 taken in another state . Reports to the board of directors 11 shall contain all significant details of the action taken or 12 the report received from another commissioner. 13 c. Report to the board of directors when there is reasonable 14 cause to believe from an examination, whether completed or in 15 process, of a member company insurer that the company insurer 16 may be an impaired or insolvent insurer. 17 d. Furnish to the board of directors the national 18 association of insurance commissioners’ early warning tests. 19 The insurance regulatory information system ratios, and 20 listing of insurers not included in the ratios, developed 21 by the national association of insurance commissioners, and 22 the board may use the information in carrying out its duties 23 and responsibilities under this section . The report and the 24 information contained in the report shall be kept confidential 25 by the board of directors until such time as it is made public 26 by the commissioner or other lawful authority. 27 Sec. 19. Section 508C.12, subsection 2, Code 2011, is 28 amended to read as follows: 29 2. The commissioner may seek the advice and recommendations 30 of the board of directors concerning any matter affecting 31 the commissioner’s duties and responsibilities regarding the 32 financial condition of member companies insurers and companies 33 seeking admission to transact insurance business in this state. 34 Sec. 20. Section 508C.12, subsection 7, Code 2011, is 35 -12- LSB 1314DP (14) 84 av/sc 12/ 31

S.F. _____ H.F. _____ amended by striking the subsection. 1 Sec. 21. Section 508C.16, Code 2011, is amended to read as 2 follows: 3 508C.16 Immunity —— indemnification. 4 1. A member insurer and its agents and employees, the 5 association and its agents and employees, members of the board 6 of directors, and the commissioner and the commissioner’s 7 representatives are not liable for any action taken by them 8 or omission by them while acting within the scope of their 9 employment and in the performance of their powers and duties 10 under this chapter and such immunity granted under this section 11 shall extend to their participation in any organization of one 12 or more state associations of similar purposes and to that 13 organization and its agents and employees . 14 2. Sections 490.850 through 490.859 apply to the 15 association. 16 Sec. 22. Section 508C.17, Code 2011, is amended to read as 17 follows: 18 508C.17 Stay of proceedings —— reopening default judgments. 19 Proceedings in which the insolvent insurer is a party in a 20 court in this state shall be stayed sixty one hundred eighty 21 days from the date an order of liquidation, rehabilitation, 22 or conservation is final to permit proper legal action by the 23 association on matters germane to its powers or duties. The 24 association may apply to have a judgment under a decision, 25 order, verdict, or finding based on default, set aside by the 26 same court that entered the judgment, and shall be permitted to 27 defend against the suit on the merits. 28 Sec. 23. Section 508C.18, Code 2011, is amended to read as 29 follows: 30 508C.18 Prohibited advertisements. 31 A person, including an insurer, agent or affiliate of an 32 insurer , shall not make, publish, disseminate, circulate, or 33 place before the public, or cause directly or indirectly, to 34 be made, published, disseminated, circulated, or placed before 35 -13- LSB 1314DP (14) 84 av/sc 13/ 31

S.F. _____ H.F. _____ the public in a newspaper, magazine, or other publication, 1 or in the form of a notice, circular, pamphlet, letter, or 2 poster, or over a radio station or television station, or in 3 any other way, an advertisement, announcement, or statement , 4 written or oral, which uses the existence of the insurance 5 guaranty association of this state for the purpose of sales, 6 solicitation, or inducement to purchase any form of insurance 7 covered by this chapter . However, this section does not apply 8 to the association or any other entity which does not sell or 9 solicit insurance. 10 Sec. 24. NEW SECTION . 508C.18A Notice to policyholders —— 11 summary of chapter and disclosure. 12 1. a. Within one hundred eighty days after enactment of 13 this section, the association shall prepare a summary document 14 describing the general purposes and current provisions of 15 this chapter and containing a disclosure in compliance with 16 subsection 2. This summary document shall be submitted to the 17 commissioner for approval. The approved summary document and 18 disclosure shall be delivered to the owner of an insurance 19 policy or contract as provided in this section. 20 b. This subsection is repealed July 1, 2012. 21 2. a. On or after March 1, 2012, an insurer shall not 22 deliver an insurance policy or contract in Iowa to the owner 23 of the policy or contract unless a summary document describing 24 the general purposes and current provisions of this chapter 25 and containing a disclosure in compliance with subsection 3 is 26 delivered to the policy or contract owner at the same time. 27 b. The summary document shall also be available upon request 28 by an insurance policy or contract owner. 29 c. The distribution, delivery, contents, or interpretation 30 of this summary document does not guarantee that either 31 the insurance policy or contract or the owner of the policy 32 or contract is covered in the event of the impairment or 33 insolvency of a member insurer. 34 d. The summary document shall be revised by the association 35 -14- LSB 1314DP (14) 84 av/sc 14/ 31

S.F. _____ H.F. _____ and approved by the commissioner as amendments to this chapter 1 may require. Failure to receive a summary document does not 2 give the insurance policy or contract owner, certificate 3 holder, or insured any greater rights than those stated in this 4 chapter. 5 3. The summary document prepared pursuant to this section 6 shall contain a clear and conspicuous disclosure on its face. 7 The commissioner shall establish the form and content of the 8 disclosure which shall do all of the following: 9 a. State the name and address of the association and the 10 Iowa insurance division. 11 b. Prominently warn the insurance policy or contract owner 12 that the association may not cover the policy or contract or, 13 if coverage is available, it will be subject to substantial 14 limitations and exclusions and conditioned on continued 15 residence in this state. 16 c. State the types of insurance policies and contracts for 17 which the association will provide coverage. 18 d. State that the insurer and its agents are prohibited by 19 law from using the existence of the association for the purpose 20 of sales, solicitation, or inducement to purchase any form of 21 insurance. 22 e. State that the insurance policy or contract owner should 23 not rely on coverage from the association when selecting an 24 insurer. 25 f. Explain rights available and procedures for filing a 26 complaint to allege a violation of any provisions of this 27 chapter. 28 g. Provide other information as directed by the 29 commissioner, including but not limited to sources for 30 information about the financial condition of an insurer 31 provided that the information is not proprietary and is subject 32 to disclosure under chapter 22. 33 4. A member insurer shall retain evidence of compliance with 34 the provisions of this section for as long as the insurance 35 -15- LSB 1314DP (14) 84 av/sc 15/ 31

S.F. _____ H.F. _____ policy or contract for which the notice is given remains in 1 effect. 2 Sec. 25. Section 511.8, subsection 16, Code 2011, is amended 3 by adding the following new paragraph: 4 NEW PARAGRAPH . h. Financial instruments used in hedging 5 transactions, and securities pledged as collateral for 6 financial instruments used in highly effective hedging 7 transactions, eligible for inclusion in the legal reserve under 8 subsection 22 may be made a part of the deposit by filing a 9 verified statement of the financial instruments or securities 10 pursuant to the terms and conditions of the applicable hedging 11 transaction agreement or of the applicable collateral agreement 12 or other credit support agreement. 13 Sec. 26. Section 511.8, subsection 22, Code 2011, is amended 14 by adding the following new paragraph: 15 NEW PARAGRAPH . i. Securities held in the legal reserve of 16 a life insurance company or association pledged as collateral 17 for financial instruments used in highly effective hedging 18 transactions as defined in the national association of 19 insurance commissioners’ Statement of Statutory Accounting 20 Principles No. 86 shall continue to be eligible for inclusion 21 on the legal reserve of the life insurance company or 22 association subject to all of the following: 23 (1) The life insurance company or association does not 24 include the financial instruments used in highly effective 25 hedging transactions for which the securities are pledged as 26 collateral in the legal reserve of the life insurance company 27 or association, provided, however, that this subparagraph 28 shall not exclude securities pledged to a counterparty, 29 clearing organization, or clearinghouse on an upfront basis 30 in the form of initial margin, independent amount, or other 31 securities pledged as a precondition of entering into financial 32 instruments used in highly effective hedging transactions from 33 inclusion in the legal reserve of the life insurance company 34 or association. 35 -16- LSB 1314DP (14) 84 av/sc 16/ 31

S.F. _____ H.F. _____ (2) Securities pledged as collateral for financial 1 instruments used in highly effective hedging transactions are 2 not eligible in excess of ten percent of the legal reserve of 3 the life insurance company or association, less any financial 4 instruments used in hedging transactions held in the legal 5 reserve under this subsection. 6 (3) Securities pledged to a counterparty, clearing 7 organization, or clearinghouse on an upfront basis in 8 the form of initial margin, independent amount, or other 9 securities pledged as a precondition of entering into financial 10 instruments used in highly effective hedging transactions are 11 not eligible in excess of one percent of the legal reserve of 12 the life insurance company or association. 13 Sec. 27. Section 514C.18, subsection 1, paragraph a, Code 14 2011, is amended by striking the paragraph and inserting in 15 lieu thereof the following: 16 a. Equipment and supplies. 17 Sec. 28. Section 515.125, subsection 1, Code 2011, is 18 amended to read as follows: 19 1. Unless otherwise provided in section 515.127 , 515.128 , 20 515.129 , 515.129A , 515.129B , or 515.129C , a policy or contract 21 of insurance provided for in this chapter shall not be 22 forfeited, suspended, or canceled except by notice to the 23 insured as provided in this chapter . A notice of cancellation 24 is not effective unless mailed or delivered by the insurer to 25 the named insured at least thirty days before the effective 26 date of cancellation or, where cancellation is for nonpayment 27 of a premium, assessment, or installment provided for in the 28 policy, or in a note or contract for the payment thereof, at 29 least ten days prior to the date of cancellation. The notice 30 may be made in person, or by sending by mail a letter addressed 31 to the insured at the insured’s address as given in or upon 32 the policy, anything in the policy, application, or a separate 33 agreement to the contrary notwithstanding. 34 Sec. 29. Section 515.126, Code 2011, is amended to read as 35 -17- LSB 1314DP (14) 84 av/sc 17/ 31

S.F. _____ H.F. _____ follows: 1 515.126 Cancellation of policy —— notice to insured or 2 mortgagee. 3 1. Unless otherwise provided in section 515.127 or , 4 515.128 , 515.129 , 515.129A , 515.129B , or 515.129C , at any time 5 after the maturity of a premium, assessment, or installment 6 provided for in the policy, or a note or contract for the 7 payment thereof, or after the suspension, forfeiture, or 8 cancellation of a policy or contract of insurance, the insured 9 may pay to the company the customary short rates and costs of 10 action, if one has been commenced or judgment rendered thereon, 11 and may, if the insured so elects, have the policy and all 12 contracts or obligations connected with the policy, whether 13 in judgment or otherwise, canceled, and all such policy and 14 contracts shall be void; and in case of suspension, forfeiture, 15 or cancellation of a policy or contract of insurance, the 16 insured is not liable for a greater amount than the short 17 rates earned at the date of the suspension, forfeiture, or 18 cancellation and the costs of action provided for in this 19 section . 20 2. If the policy is canceled by the insurance company, 21 the insurer may retain only the pro rata premium, and if the 22 initial cash premium, or any part of the premium, has not been 23 paid, the policy may be canceled by the insurance company by 24 giving notice to the insured as provided in section 515.125 25 and ten days’ notice to the mortgagee, or other person to whom 26 the policy is made payable, if any, without tendering any 27 part of the premium, anything to the contrary in the policy 28 notwithstanding. 29 Sec. 30. Section 515D.5, subsection 1, Code 2011, is amended 30 to read as follows: 31 1. a. Notwithstanding the provisions of sections 32 515.125 through 515.127 , 515.126 , and 515.129A , a notice of 33 cancellation of a policy shall not be effective unless mailed 34 or delivered by the insurer to the named insured at least 35 -18- LSB 1314DP (14) 84 av/sc 18/ 31