Texas 2009 - 81st Regular

Texas House Bill HB4477 Compare Versions

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1	1	By: Smithee H.B. No. 4477
2	2
3	3
4	4	A BILL TO BE ENTITLED
5	5	AN ACT
6	6	relating to assessments, coverage, deposits, and reinsurance of the
7	7	Texas Life, Accident, Health, and Hospital Service Insurance
8	8	Guaranty Association.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Chapter 463, Section 463.153(c), Insurance Code,
11	11	is amended to read as follows:
12	12	(c) The total amount of assessments on a member insurer for
13	13	each account under Section 463.105 may not exceed two percent of the
14	14	insurer's average annual premiums on the policies covered by the
15	15	account during the three calendar years preceding the year in which
16	16	the insurer became an impaired or insolvent insurer. If two or more
17	17	assessments are authorized in a calendar year with respect to
18	18	insurers that become impaired or insolvent in different calendar
19	19	years, the average annual premiums for purposes of the aggregate
20	20	assessment percentage limitation described by this subsection
21	21	shall be equal to the higher of the three-year average annual
22	22	premiums for the applicable subaccount or account as computed in
23	23	accordance with this section. If the maximum assessment and the
24	24	other assets of the association do not provide in a year an amount
25	25	sufficient to carry out the association's responsibilities, the
26	26	association shall make necessary additional assessments as soon as
27	27	this chapter permits.
28	28	SECTION 2. Chapter 463, Section 463.203(b), Insurance Code,
29	29	is amended by adding a new subsection (13) to read as follows:
30	30	(13) A policy or contract providing any hospital,
31	31	medical, prescription drug or other health care benefits pursuant
32	32	to Part C or Part D of Subchapter XVIII, Chapter 7 of Title 42 of the
33	33	United States Code (commonly known as Medicare Part C & D) or any
34	34	regulations issued pursuant thereto.
35	35	SECTION 3. Chapter 463, Section 463.204, Insurance Code, is
36	36	amended to read as follows:
37	37	Sec. 463.204. OBLIGATIONS EXCLUDED. A contractual
38	38	obligation does not include:
39	39	(1) death benefits in an amount in excess of $300,000
40	40	or a net cash surrender or net cash withdrawal value in an amount in
41	41	excess of $100,000 under one or more policies on a single life;
42	42	(2) (A) $250,000 [$100,000] in the present value under
43	43	one or more annuity contracts issued with respect to a single life
44	44	under individual annuity policies or group annuity policies; or
45	45	(B) $5 million in unallocated annuity contract
46	46	benefits with respect to a single contract owner regardless of the
47	47	number of those contracts;
48	48	(3) an amount in excess of the following amounts,
49	49	including any net cash surrender or cash withdrawal values, under
50	50	one or more accident, health, accident and health, or long-term
51	51	care insurance policies on a single life:
52	52	(A) $500,000 for basic hospital,
53	53	medical-surgical, or major medical insurance, as those terms are
54	54	defined by this code or rules adopted by the commissioner;
55	55	(B) $300,000 for disability and long-term care
56	56	insurance, as those terms are defined by this code or rules adopted
57	57	by the commissioner; or
58	58	(C) $200,000 for coverages that are not defined
59	59	as basic hospital, medical-surgical, major medical, disability, or
60	60	longterm care insurance;
61	61	(4) an amount in excess of $250,000 [$100,000] in
62	62	present value annuity benefits, in the aggregate, including any net
63	63	cash surrender and net cash withdrawal values, with respect to each
64	64	individual participating in a governmental retirement benefit plan
65	65	established under Section 401, 403(b), or 457, Internal Revenue
66	66	Code of 1986 (26 U.S.C. Sections 401, 403(b) and 457), covered by an
67	67	unallocated annuity contract or the beneficiary or beneficiaries of
68	68	the individual if the individual is deceased;
69	69	(5) an amount in excess of $250,000 [$100,000] in
70	70	present value annuity benefits, in the aggregate, including any net
71	71	cash surrender and net cash withdrawal values, with respect to each
72	72	payee of a structured settlement annuity or the beneficiary or
73	73	beneficiaries of the payee if the payee is deceased;
74	74	(6) aggregate benefits in an amount in excess of
75	75	$300,000 with respect to a single life, except with respect to:
76	76	(A) benefits paid under basic hospital, medical-
77	77	surgical, or major medical insurance policies, described by
78	78	Subdivision (3)(A), in which case the aggregate benefits are
79	79	$500,000; and
80	80	(B) benefits paid to one owner of multiple
81	81	nongroup policies of life insurance, whether the policy owner is an
82	82	individual, firm, corporation, or other person, and whether the
83	83	persons insured are officers, managers, employees, or other
84	84	persons, in which case the maximum benefits are $5 million
85	85	regardless of the number of policies and contracts held by the
86	86	owner;
87	87	(7) an amount in excess of $5 million in benefits, with
88	88	respect to either one plan sponsor whose plans own directly or in
89	89	trust one or more unallocated annuity contracts not included in
90	90	Subdivision (4) irrespective of the number of contracts with
91	91	respect to the contract owner or plan sponsor or one contract owner
92	92	provided coverage under Section 463.201 (a)(3)(B), except that, if
93	93	one or more unallocated annuity contracts are covered contracts
94	94	under this chapter and are owned by a trust or other entity for the
95	95	benefit of two or more plan sponsors, coverage shall be afforded by
96	96	the association if the largest interest in the trust or entity
97	97	owning the contract or contracts is held by a plan sponsor whose
98	98	principal place of business is in this state, and in no event shall
99	99	the association be obligated to cover more then $5 million in
100	100	benefits with respect to all these unallocated contracts;
101	101	(8) any contractual obligations of the insolvent or
102	102	impaired insurer under a covered policy or contract that do not
103	103	materially affect the economic value of economic benefits of the
104	104	covered policy or contract; or
105	105	(9) punitive, exemplary, extracontractual, or bad
106	106	faith damages, regardless of whether the damages are:
107	107	(A) agreed to or assumed by an insurer or
108	108	insured; or
109	109	(B) imposed by a court.
110	110	SECTION 4. Chapter 463, Section 463.263(b), Insurance Code,
111	111	is amended to read as follows:
112	112	(b) The association is entitled to retain a portion of any
113	113	amount paid to the association under this section equal to the
114	114	percentage determined by dividing the aggregate amount of policy
115	115	owners' claims related to that insolvency for which the association
116	116	has provided statutory benefits by the aggregate amount of all
117	117	policy owners' claims in this state related to that insolvency and
118	118	shall remit to the domiciliary receiver the amount paid to the
119	119	association less the amount [and] retained under this section.
120	120	SECTION 5. Chapter 463, Insurance Code is amended by adding
121	121	new section 463.264 to read as follows:
122	122	463.264. REINSURANCE
123	123	(a) At any time within 180 days of the date of the order of
124	124	liquidation, the Association may elect to succeed to the rights and
125	125	obligations of the ceding member insurer that relate to policies or
126	126	annuities covered, in whole or in part, by the Association, in each
127	127	case under any one or more contracts entered into by the insolvent
128	128	insurer and its reinsurers and selected by the Association. Any
129	129	such assumption shall be effective as of the date of the order of
130	130	liquidation. The election shall be effected by the Association or
131	131	the National Organization of Life and Health Insurance Guaranty
132	132	Associations (NOLHGA) on its behalf sending written notice, return
133	133	receipt requested, to the affected reinsurers.
134	134	(b) To facilitate the earliest practicable decision about
135	135	whether to assume any of the contracts of reinsurance, and in order
136	136	to protect the financial position of the estate, the receiver and
137	137	each reinsurer of the ceding member insurer shall make available
138	138	upon request to the Association or to NOLHGA on its behalf as soon
139	139	as possible after commencement of formal delinquency proceedings
140	140	(1) copies of in-force contracts of reinsurance and
141	141	all related files and records relevant to the determination of
142	142	whether such contracts should be assumed; and
143	143	(2) notices of any defaults under the reinsurance
144	144	contacts or any known event or condition which with the passage of
145	145	time could become a default under the reinsurance contracts.
146	146	(c) The following Subsections (1) through (4) below shall
147	147	apply with respect to the agreements selected to reinsurance
148	148	contracts assumed by the Association:
149	149	(1) The Association shall be responsible for all
150	150	unpaid premiums due under the reinsurance contracts for periods
151	151	both before and after the date of the order of liquidation, and
152	152	shall be responsible for the performance of all other obligations
153	153	to be performed after the date of the order of liquidation, in each
154	154	case which relate to policies or annuities covered, in whole or in
155	155	part, by the Association. The Association may charge policies or
156	156	annuities covered in part by the Association, through reasonable
157	157	allocation methods, the costs for reinsurance in excess of the
158	158	obligations of the Association and shall provide notice and an
159	159	accounting of these charges to the liquidator;
160	160	(2) The Association shall be entitled to any amounts
161	161	payable by the reinsurer under the reinsurance contracts with
162	162	respect to losses or events that occur in periods after the date of
163	163	the order of liquidation and that relate to policies or annuities
164	164	covered, in whole or in part, by the Association, provided that,
165	165	upon receipt of any such amounts, the Association shall be obliged
166	166	to pay to the beneficiary under the policy or annuity on account of
167	167	which the amounts were paid a portion of the amount equal to the
168	168	lesser of:
169	169	(A) The amount received by the Association; and
170	170	(B) The excess of the amount received by the
171	171	Association over the amount equal to the benefits paid by the
172	172	Association on account of the policy or annuity less the retention
173	173	of the insurer applicable to the loss or event.
174	174	(3) Within 30 days following the Association's
175	175	election (the "election date"), the Association and each reinsurer
176	176	under contracts assumed by the Association shall calculate the net
177	177	balance due to or from the Association under each reinsurance
178	178	contract as of the election date with respect to policies or
179	179	annuities covered, in whole or in part, by the Association, which
180	180	calculation shall give full credit to all items paid by either the
181	181	insurer or its receiver or the reinsurer prior to the election date.
182	182	The reinsurer shall pay the receiver any amounts due for losses or
183	183	events prior to the date of the order of liquidation, subject to any
184	184	set-off for premiums unpaid for periods prior to the date, and the
185	185	Association or reinsurer shall pay any remaining balance due the
186	186	other, in each case within 5 days of the completion of the
187	187	aforementioned calculation. Any disputes over the amounts due to
188	188	either the Association or the reinsurer shall be resolved by
189	189	arbitration pursuant to the terms of the affected reinsurance
190	190	contracts or, if the contract contains no arbitration clause, as
191	191	otherwise provided by law. If the receiver has received any amounts
192	192	due the Association pursuant to Subsection 463.264(c)(2), the
193	193	receiver shall remit the same to the Association as promptly as
194	194	practicable.
195	195	(4) If the Association or receiver, on the
196	196	Association's behalf, within 60 days of the election date, pays the
197	197	unpaid premiums due for periods both before and after the election
198	198	date that relate to policies or annuities covered, in whole or in
199	199	part, by the Association, the reinsurer shall not be entitled to
200	200	terminate the reinsurance contracts for failure to pay premium
201	201	insofar as the reinsurance contracts relate to policies or
202	202	annuities covered, in whole or in part, by the Association, and
203	203	shall not be entitled to set off any unpaid amounts due under other
204	204	contracts, or unpaid amounts due from parties other than the
205	205	Association, against amounts due the Association.
206	206	(d) During the period from the date of the order of
207	207	liquidation until the election date (or, if the election date does
208	208	not occur, until 180 days after the date of the order of
209	209	liquidation),
210	210	(1) Neither the Association nor the reinsurer shall
211	211	have any rights or obligations under reinsurance contracts that the
212	212	Association has the right to assume under Subsection 463.264(a),
213	213	whether for periods prior to or after the date of the order of
214	214	liquidation; and
215	215	(2) The reinsurer, the receiver and the Association
216	216	shall, to the extent practicable, provide each other data and
217	217	records reasonably requested;
218	218	(3) Provided that once the Association has elected to
219	219	assume a reinsurance contract, the parties' rights and obligations
220	220	shall be governed by Section 463.264.
221	221	(e) If the Association does not elect to assume a
222	222	reinsurance contract by the election date pursuant to Subsection
223	223	463.264(a), the Association shall have no rights or obligations, in
224	224	each case for periods both before and after the date of the order of
225	225	liquidation, with respect to the reinsurance contract.
226	226	(f) When policies or annuities, or covered obligations with
227	227	respect thereto, are transferred to an assuming insurer,
228	228	reinsurance on the policies or annuities may also be transferred by
229	229	the Association, in the case of contracts assumed under Subsection
230	230	463.264(a), subject to the following:
231	231	(1) Unless the reinsurer and the assuming insurer
232	232	agree otherwise, the reinsurance contract transferred shall not
233	233	cover any new policies of insurance or annuities in addition to
234	234	those transferred;
235	235	(2) The obligations described in this Subsection
236	236	463.264 shall no longer apply with respect to matters arising after
237	237	the effective date of the transfer; and
238	238	(3) Notice shall be given in writing, return receipt
239	239	requested, by the transferring party to the affected reinsurer not
240	240	less than 30 days prior to the effective date of the transfer.
241	241	(g) The provisions of Subsection 463.264 shall supersede
242	242	the provisions of any law or of any affected reinsurance contract
243	243	that provides for or requires any payment of reinsurance proceeds,
244	244	on account of losses or events that occur in periods after the date
245	245	of the order of liquidation, to the receiver of the insolvent
246	246	insurer or any other person. The receiver shall remain entitled to
247	247	any amounts payable by the reinsurer under the reinsurance
248	248	contracts with respect to losses or events that occur in periods
249	249	prior to the date of the order of liquidation, subject to applicable
250	250	setoff provisions.
251	251	(h) Except as otherwise provided in this section, nothing in
252	252	Subsection 463.264 shall alter or modify the terms and conditions
253	253	of any reinsurance contract. Nothing in this section shall
254	254	abrogate or limit any rights of any reinsurer to claim that it is
255	255	entitled to rescind a reinsurance contract. Nothing in this
256	256	section shall give a policyholder or beneficiary an independent
257	257	cause of action against a reinsurer that is not otherwise set forth
258	258	in the reinsurance contract. Nothing in this section shall limit or
259	259	affect the Association's rights as a creditor of the estate against
260	260	the assets of the estate. Nothing in this section shall apply to
261	261	reinsurance agreements covering property or casualty risks.
262	262	SECTION 6. The change in law made by this Act to section
263	263	463.153(c) applies to assessments authorized on or after October 1,
264	264	2008 with respect to an insurer that first became impaired or
265	265	insolvent after September 1, 2005; all other changes in law made by
266	266	this Act apply only to an insurer that first becomes an impaired or
267	267	insolvent insurer on or after the effective date of this Act. An
268	268	insurer that becomes an impaired or insolvent insurer before the
269	269	effective date of this Act is governed by the law as it existed
270	270	immediately before that date, and that law is continued in effect
271	271	for that purpose.
272	272	SECTION 7. This Act takes effect September 1, 2009.