Senate Bill 1204

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    Florida Senate - 1999                                  SB 1204

    By Senator Grant





    13-1167-99

  1                      A bill to be entitled

  2         An act relating to insurance receivership;

  3         creating the "Interstate Insurance Receivership

  4         Compact"; providing purposes; providing

  5         definitions; establishing the Interstate

  6         Insurance Receivership Commission; providing

  7         powers of the commission; providing for

  8         membership of the commission; providing for an

  9         executive director and staff; providing for

10         immunity from liability for the commission and

11         staff; providing for meetings; providing for

12         rulemaking functions; providing for oversight

13         and dispute resolution; providing procedures;

14         providing receivership functions; providing for

15         financing of commission expenses; authorizing

16         the commission to levy and collect an annual

17         assessment from member states and insurers;

18         specifying a rate of assessment; providing

19         limitations; exempting the commission from all

20         taxation; providing for effect of the compact;

21         providing for amendment of the compact;

22         providing for withdrawal from the compact;

23         providing consequences for default by a

24         compacting state; providing for dissolution of

25         the compact; providing severability and

26         construction; providing for binding effect of

27         the compact; providing an effective date.

28

29  Be It Enacted by the Legislature of the State of Florida:

30

31

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  1         Section 1.  The Interstate Insurance Receivership

  2  Compact is hereby enacted into law and entered into with all

  3  other jurisdictions legally joining therein in the form

  4  substantially as follows:

  5

  6                            ARTICLE I

  7

  8         PURPOSES.--The purposes of this compact are, through

  9  means of joint and cooperative action among the compacting

10  states:

11         (1)  To promote, develop, and facilitate orderly,

12  efficient, cost-effective, and uniform insurer receiverships

13  laws and operations.

14         (2)  To coordinate interaction between insurer

15  receivership and guaranty fund operations.

16         (3)  To create the Interstate Insurance Receivership

17  Commission.

18         (4)  To perform these and such other related functions

19  as may be consistent with the state regulation of the business

20  of insurance pursuant to the McCarran-Ferguson Act.

21

22                            ARTICLE II

23

24         DEFINITIONS.--As used in this compact, the term:

25         (1)  "Bylaws" means the bylaws established by the

26  commission for its governance, or for directing or controlling

27  the commission's actions or conduct.

28         (2)  "Compacting state" means any state which has

29  enacted enabling legislation for this compact.

30         (3)  "Commission" means the "Interstate Insurance

31  Receivership Commission."

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  1         (4)  "Commissioner" means the chief insurance

  2  regulatory official of a state.

  3         (5)  "Deputy receiver" means any person appointed or

  4  retained by a receiver and who is the receiver's duly

  5  authorized representative for administering one or more

  6  estates.

  7         (6)  "Domiciliary state" means the state in which an

  8  insurer is incorporated or organized or, in the case of an

  9  alien insurer, its state of entry, or, in the case of an

10  unauthorized insurer not incorporated, organized, or entered

11  in any state, a state where the insurer is engaged in or doing

12  business.

13         (7)  "Estate" means the assets and liabilities of any

14  insurer in receivership.

15         (8)  "Guaranty association" means an insurance guaranty

16  fund or association or any similar entity now or hereafter

17  created by statute in a compacting state, other than a

18  receivership, to pay or assume, in whole or in part, the

19  contractual claim obligations of insolvent insurers.

20         (9)  "Insuree" means any person who has engaged in,

21  purports to engage in, is engaging in, or is licensed to

22  engage in any insurance or reinsurance business, or is or has

23  been subject to the authority of, or to liquidation,

24  rehabilitation, supervision, conservation, or ancillary

25  receivership by, any commissioner.

26         (10)  "Member" means the commissioner of a compacting

27  state or his or her designee, who shall be a person officially

28  connected with the commissioner and who is wholly or

29  principally employed by the commissioner.

30         (11)  "Noncompacting state" means any state which has

31  not enacted the enabling legislation for this compact.

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  1         (12)  "Operating procedures" means procedures adopted

  2  by the commission implementing a rule, an existing law in a

  3  compacting state, or a provision of this compact.

  4         (13)  "Publication" means the act of publishing in the

  5  official state publication in a compacting state or in such

  6  other publication as may be established by the commission.

  7         (14)  "Receivee" means receiver, liquidator,

  8  rehabilitator, conservator, or ancillary receiver, as the

  9  context requires.

10         (15)  "Receivership" means any liquidation,

11  rehabilitation, conservation, or ancillary receivership

12  proceeding as the context requires.

13         (16)  "Rules" means acts of the commission, adopted

14  pursuant to Article VII, substantially affecting interested

15  parties in addition to the commission, which shall have the

16  force and effect of law in the compacting states.

17         (17)  "State" means any state, district, or territory

18  of the United States.

19

20                           ARTICLE III

21

22         ESTABLISHMENT OF THE COMMISSION AND VENUE.--

23         (1)  The compacting states hereby create and establish

24  an entity known as the "Interstate Insurance Receivership

25  Commission."

26         (2)  The commission is a body corporate of each

27  compacting state.

28         (3)  The commission is a not-for-profit entity,

29  separate and distinct from the compacting states.

30         (4)  The commission is solely responsible for its

31  liabilities except as otherwise provided in this compact.

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  1         (5)  Except as otherwise specifically provided in state

  2  or federal law in the jurisdiction where the commission's

  3  principal office is located or where the commission is acting

  4  as receiver, venue is proper and judicial proceedings for or

  5  against the commission shall be brought in a court of

  6  competent jurisdiction where the commission's principal office

  7  is located.

  8

  9                            ARTICLE IV

10

11         POWERS OF THE COMMISSION.--The commission shall have

12  the following powers:

13         (1)  To promulgate rules which shall have the force and

14  effect of statutory law and shall be binding in the compacting

15  states to the extent and in the manner provided in this

16  compact.

17         (2)  To promulgate operating procedures which shall be

18  binding in the compacting states to the extent and in the

19  manner provided in this compact.

20         (3)  To oversee, supervise, and coordinate the

21  activities of receivers in compacting states.

22         (4)  To act as receiver of insurers organized under the

23  laws of, engaged in or doing the business of insurance in, a

24  compacting state upon the request of the commissioner of such

25  state or when grounds for receivership by the commission exist

26  under Article IX.

27         (5)  To act as deputy receiver of insurers organized

28  under the laws of, engaged in or doing the business of

29  insurance in, a noncompacting state in accordance with Article

30  IX.

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  1         (6)  To act as ancillary receiver in a compacting state

  2  of an insurer domiciled in a noncompacting state.

  3         (7)  To monitor the activities and functions of

  4  guaranty associations in the compacting states.

  5         (8)  To delegate its operating authority or functions,

  6  provided that its rulemaking authority under Article VII shall

  7  not be delegated.

  8         (9)  To bring or prosecute legal proceedings or actions

  9  in its name as the commission, or in the name of the

10  commission acting as receiver.

11         (10)  To bring or prosecute legal proceedings or

12  actions on behalf of an estate or its policyholders and

13  creditors, provided that any guaranty association's standing

14  to sue or be sued under applicable law shall not be affected.

15         (11)  To issue subpoenas requiring the attendance and

16  testimony of witnesses and the production of evidence.

17         (12)  To establish and maintain offices.

18         (13)  To purchase and maintain insurance and bonds.

19         (14)  To borrow, accept, or contract for services of

20  personnel, including, but not limited to, members and their

21  staff.

22         (15)  To elect or appoint such officers, attorneys,

23  employees, or agents, and to fix their compensation, define

24  their duties, and determine their qualifications, and to

25  establish the commission's personnel policies and programs

26  relating to conflicts of interest, rates of compensation, and

27  qualifications of personnel.

28         (16)  To accept any and all donations and grants of

29  money, equipment, supplies, materials, and services, and to

30  receive, utilize, and dispose of such money, equipment,

31  supplies, materials, and resources.

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  1         (17)  To lease, purchase, accept gifts or donations of,

  2  or otherwise to own, hold, improve, or use, any property,

  3  real, personal, or mixed.

  4         (18)  To sell, convey, mortgage, pledge, lease,

  5  exchange, abandon, or otherwise dispose of any property, real,

  6  personal, or mixed.

  7         (19)  To enforce compliance with commission rules,

  8  operating procedures, and bylaws.

  9         (20)  To provide for dispute resolution among

10  compacting states and receivers.

11         (21)  To represent and advise compacting states on

12  issues relating to insurers domiciled or doing business in

13  noncompacting jurisdictions, consistent with the purposes of

14  this compact.

15         (22)  To provide advice and training to receivership

16  personnel of compacting states, and to be a resource for

17  compacting states by maintaining a reference library of

18  relevant materials.

19         (23)  To establish a budget and make expenditures.

20         (24)  To borrow money.

21         (25)  To appoint committees, including, but not limited

22  to, an industry advisory committee and an executive committee

23  of members.

24         (26)  To provide and receive information relating to

25  receiverships and guaranty associations, and to cooperate with

26  law enforcement agencies.

27         (27)  To adopt and use a corporate seal.

28         (28)  To perform such other functions as may be

29  necessary or appropriate to achieve the purposes of this

30  compact as may be consistent with the state regulation of the

31  business of insurance pursuant to the McCarran-Ferguson Act.

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  1

  2                            ARTICLE V

  3

  4         ORGANIZATION OF THE COMMISSION.--

  5         (1)  Each compacting state shall have and be limited to

  6  one member. Each member shall be qualified to serve in such

  7  capacity under or pursuant to the applicable law of the

  8  compacting state. Each compacting state retains the

  9  discretionary right to determine the due election or

10  appointment and qualification of its own commissioner, and to

11  fill all vacancies of its member.

12         (2)  Each member shall be entitled to one vote.

13         (3)  The commission shall, by a majority of the

14  members, prescribe bylaws to govern its conduct as may be

15  necessary or appropriate to carry out the purposes of the

16  compact, including, but not limited to:

17         (a)  Establishing the fiscal year of the commission.

18         (b)  Providing reasonable standards and procedures for

19  the establishing committees and for governing any general or

20  specific delegation of any authority or function of the

21  commission.

22         (c)  Providing reasonable procedures for calling and

23  conducting meetings of the commission, and ensuring reasonable

24  notice of each such meeting.

25         (d)  Establishing the titles and responsibilities of

26  the officers of the commission.

27         (e)  Providing reasonable standards and procedures for

28  the establishment of the personnel policies and programs of

29  the commission. Notwithstanding any civil service or other

30  similar laws of any compacting state, the bylaws shall

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  1  exclusively govern the personnel policies and programs of the

  2  commission.

  3         (f)  Providing a mechanism for winding up the

  4  operations of the commission and the equitable return of any

  5  surplus funds that may exist after the termination of the

  6  compact after the payment or reserving of all of its debts and

  7  obligations.

  8         (4)  The commission shall, by a majority of the

  9  members, elect annually from among its members a chairperson

10  and a vice chairperson, each of whom shall have such

11  authorities and duties as may be specified in the bylaws. The

12  chairperson or, in his or her absence or disability, a member

13  designated in accordance with the bylaws, shall preside at all

14  meetings of the commission. The officers so elected shall

15  serve without compensation or remuneration from the

16  commission.  However, subject to the availability of budgeted

17  funds, the officers shall be reimbursed for any actual and

18  necessary costs and expenses incurred by them in the

19  performance of their duties and responsibilities as officers

20  of the commission.

21         (5)  The commission may, by a majority of the members,

22  appoint or retain an executive director for such period, upon

23  such terms and conditions, and for such compensation as the

24  commission may deem appropriate. The executive director shall

25  serve as secretary to the commission, but shall not be a

26  member of the commission. The executive director shall hire

27  and supervise such other staff as may be authorized by the

28  commission.

29         (6)  The commission shall maintain its corporate books

30  and records in accordance with the bylaws.

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  1         (7)  The members, officers, executive director, and

  2  employees of the commission shall be immune from suit and

  3  liability, either personally or in their official capacity,

  4  for any claim for damage to or loss of property or personal

  5  injury or other civil liability caused or arising out of any

  6  actual or alleged act, error, or omission that occurred, or

  7  that such person had a reasonable basis for believing occurred

  8  within the scope of commission employment, duties, or

  9  responsibilities, provided nothing in this subsection shall be

10  construed to protect any such person from suit or liability

11  for any damage, loss, injury, or liability caused by the

12  intentional or willful and wanton misconduct of any such

13  person, or to protect the commission acting as receiver under

14  Article IX.

15         (8)  The commission shall defend any commissioner of a

16  compacting state, or his or her representatives or employees,

17  or the commission's representatives or employees, in any civil

18  action seeking to impose liability, arising out of any actual

19  or alleged act, error, or omission that occurred within the

20  scope of commission employment, duties, or responsibilities,

21  or that the defendant had a reasonable basis for believing

22  occurred within the scope of commission employment, duties, or

23  responsibilities, provided the actual or alleged act, error,

24  or omission did not result from gross negligence or

25  intentional wrongdoing on the part of such person.

26         (9)  The commission shall indemnify and hold harmless

27  the commissioner of a compacting state, or his or her

28  representatives or employees, or the commission's

29  representatives or employees, in the amount of any settlement

30  or judgment obtained against such persons arising out of any

31  actual or alleged act, error, or omission that occurred within

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  1  the scope of commission employment, duties, or

  2  responsibilities, or that such persons had a reasonable basis

  3  for believing occurred within the scope of commission

  4  employment, duties, or responsibilities, provided the actual

  5  or alleged act, error, or omission did not result from gross

  6  negligence or intentional wrongdoing on the part of such

  7  person.

  8         (10)  The costs and expenses of defense and

  9  indemnification of the commission acting as receiver of an

10  estate shall be paid as administrative expenses from the

11  assets of that estate unless such costs and expenses are

12  covered by insurance maintained by the commission.

13

14                            ARTICLE VI

15

16         MEETINGS AND ACTS OF THE COMMISSION.--

17         (1)  The commission shall meet and take such actions as

18  are consistent with the provisions of this compact.

19         (2)  Except as otherwise provided in this compact and

20  unless a greater percentage is required by the bylaws, in

21  order to constitute an act of the commission, such act shall

22  have been taken at a meeting of the commission and shall have

23  received an affirmative vote of a majority of the members.

24         (3)  Each member of the commission shall have the right

25  and power to cast a vote to which that compacting state is

26  entitled and to participate in the business and affairs of the

27  commission. A member shall vote in person and shall not

28  delegate his or her vote to another member. The bylaws may

29  provide for members' participation in meetings by telephone or

30  other means of telecommunication.

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  1         (4)  The commission shall meet at least once during

  2  each calendar year. The chairperson of the commission may call

  3  additional meetings at any time and, upon the request of a

  4  majority of the members, shall call additional meetings.

  5         (5)  Commission rules shall establish conditions and

  6  procedures under which the commission shall make its

  7  information and official records available to the public for

  8  inspection or copying. The commission may exempt from

  9  disclosure any information or official records to the extent

10  they would adversely affect personal privacy rights or

11  proprietary interests. In adopting such rules, the commission

12  may consider any special circumstances pertaining to insurer

13  insolvencies, but shall be guided by the principles embodied

14  in state and federal freedom-of-information laws. The

15  commission may adopt additional rules under which it may make

16  available to law enforcement agencies records and information

17  otherwise exempt from disclosure, and may enter into

18  agreements with law enforcement agencies to receive or

19  exchange information or records subject to nondisclosure and

20  confidentiality provisions.

21         (6)  Public notice shall be given of all meetings and

22  all meetings shall be open to the public, except as set forth

23  in the rules or as otherwise provided in this compact. The

24  commission shall adopt rules consistent with the principles

25  contained in the "Government in Sunshine Act," 5 U.S.C.

26  Section, 552(b), as amended. The commission and any of its

27  committees may close a meeting to the public when it

28  determines by two-thirds vote that an open meeting would be

29  likely to:

30         (a)  Relate solely to the commission's internal

31  personnel practices and procedures;

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  1         (b)  Disclose matters specifically exempted from

  2  disclosure by statute;

  3         (c)  Disclose trade secrets or commercial or financial

  4  information that is privileged or confidential;

  5         (d)  Involve accusing any person of a crime, or

  6  formally censuring any person;

  7         (e)  Disclose information of a personal nature when

  8  disclosure would constitute a clearly unwarranted invasion of

  9  personal privacy;

10         (f)  Disclose investigatory records compiled for law

11  enforcement purposes;

12         (g)  Disclose information contained in or related to

13  examination, operating, or condition reports prepared by, or

14  on behalf of, or for the use of the commission with respect to

15  a regulated entity for the purpose of regulation or

16  supervision of such entity;

17         (h)  Disclose information the premature disclosure of

18  which would significantly endanger the stability of a

19  regulated entity; or

20         (i)  Specifically relate to the commission's issuance

21  of a subpoena, or its participation in a civil action or

22  proceeding.

23         (7)  For every meeting closed pursuant to subsection

24  (6), the commission's chief legal officer shall publicly

25  certify that, in his or her opinion, the meeting may be closed

26  to the public, and shall reference each relevant exemptive

27  provision. The commission shall keep minutes that fully and

28  clearly describe all matters discussed in any meeting and

29  shall provide a full and accurate summary of any actions

30  taken, and the reasons therefor, including a description of

31  each of the views expressed on any item and the record of any

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  1  roll call vote reflected in the vote of each member on the

  2  question.  All documents considered in connection with any

  3  action shall be identified in such minutes.

  4

  5                           ARTICLE VII

  6

  7         RULEMAKING FUNCTIONS OF THE COMMISSION.--

  8         (1)  The commission shall adopt rules and operating

  9  procedures in order to effectively and efficiently achieve the

10  purpose of this compact, provided that the commission shall

11  not adopt any rules directly relating to guaranty association,

12  including, but not limited to, rules governing coverage,

13  funding, or assessment mechanisms, or, except pursuant to

14  rules adopted under subsection (3), altering the statutory

15  priorities for distributing assets out of an estate.

16         (2)  Rulemaking shall occur pursuant to the criteria

17  set forth in this article and the rules and operating

18  procedures adopted pursuant thereto.  Such rulemaking shall

19  substantially conform to the principles of the federal

20  Administrative Procedure Act, 5 U.S.C.S. section 551 et seq.,

21  and the Federal Advisory Committee Act, 5 U.S.C.S. app. 2,

22  section 1 et seq., as amended.

23         (3)  Other than the adoption of such rules as are

24  necessary for the orderly operation of the commission, the

25  first rule to be considered by the commission shall be uniform

26  provisions governing insurer receiverships including, but not

27  limited to, provisions requiring compacting states to

28  implement, execute, and administer in a fair, just, effective,

29  and efficient manner rules and operating procedures relating

30  to receiverships. The commission shall, within 3 years after

31  the adoption of this compact by two or more states, adopt such

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  1  uniform provisions through the rulemaking process. Such

  2  uniform provisions shall become law in all of the compacting

  3  states upon legislative enactment in a majority of the

  4  compacting states.

  5         (4)  All rules and amendments shall become binding as

  6  of the date specified in each rule or amendment, provided, if

  7  a compacting state expressly rejects such rule or amendment

  8  through legislative enactment as of the expiration of the

  9  second full calendar year after such rule is adopted, such

10  rule or amendment shall have no further force and effect in

11  the rejecting compacting state. If a majority of compacting

12  states reject a rule, then such rule shall have no further

13  force and effect in any compacting state.

14         (5)  When prescribing a rule or operating procedure,

15  the commission shall:

16         (a)  Effect publication of the proposed rulemaking,

17  stating with particularity the text of the rule or operating

18  procedure which is proposed and the reason for the proposed

19  rule or operating procedure.

20         (b)  Allow persons to submit written data, facts,

21  opinions, and arguments, which information shall be publicly

22  available.

23         (c)  Provide an opportunity for an informal hearing.

24         (d)  Adopt a final rule or operating procedure and its

25  effective date, if appropriate, based on the rulemaking

26  record.

27         (6)  Not later than 60 days after a rule or operating

28  procedure is adopted, any interested person may file a

29  petition in a court of competent jurisdiction where the

30  commission's principal office is located for judicial review

31  of such rule or operating procedure. If the court finds that

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  1  the commission's action is not supported by substantial

  2  evidence in the rulemaking record, the court shall hold the

  3  rule unlawful and set it aside.

  4

  5                           ARTICLE VIII

  6

  7         OVERSIGHT AND DISPUTE RESOLUTION BY THE COMMISSION.--

  8         (1)  The commission shall oversee the administration

  9  and operations of receiverships in compacting states, and

10  shall monitor receiverships being administered in

11  noncompacting states which may significantly affect compacting

12  states.

13         (2)  To aid its monitoring, oversight, and coordination

14  responsibilities, the commission shall establish operating

15  procedures requiring each member to submit written reports to

16  the commission as follows:

17         (a)  An initial report to the commission upon a finding

18  or other official action by the compacting state that grounds

19  exist for receivership of an insurer doing business in more

20  than one state. Thereafter, reports shall be submitted

21  periodically and as otherwise required pursuant to the

22  commission's operating procedures. The commission shall be

23  entitled to receive notice of, and shall have standing to

24  appear in, compacting states' receiverships.

25         (b)  An initial report of the status of any insurer

26  within a reasonable time after the initiation of a

27  receivership.

28         (3)  The commission shall adopt operating procedures

29  requiring receivers to submit to the commission periodic

30  written reports and such additional information and

31  documentation as the commission may reasonably request. Each

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  1  compacting state's receivers shall establish the capability to

  2  obtain and provide all records, data, and information required

  3  by the commission in accordance with the commission's

  4  operating procedures.

  5         (4)  Except as to privileged records, data, and

  6  information, the laws of any compacting state pertaining to

  7  confidentiality or nondisclosure shall not relieve any

  8  compacting state commissioner of the responsibility to

  9  disclose any relevant records, data, or information to the

10  commission, provided disclosure to the commission shall not be

11  deemed to waive or otherwise affect any confidentiality

12  requirement, and further provided the commission shall be

13  subject to the compacting state's laws pertaining to

14  confidentiality and nondisclosure with respect to all records,

15  data, and information in its possession.

16         (5)  The courts and executive agencies in each

17  compacting state shall enforce this compact and shall take all

18  actions necessary and appropriate to effectuate the compact's

19  purposes and intent. In any receivership or other judicial or

20  administrative proceeding in a compacting state pertaining to

21  the subject matter of this compact which may affect the

22  powers, responsibilities, or actions of the commission, the

23  commission shall be entitled to receive all service of process

24  in any such proceeding, and shall have standing to intervene

25  in the receivership or proceeding for all purposes.

26         (6)  The commission shall analyze and correlate

27  records, data, information, and reports received from

28  receivers and guaranty associations and shall make

29  recommendations for improving their performance to the

30  compacting states. The commission shall include summary

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  1  information and data regarding its oversight functions in its

  2  annual report.

  3         (7)  The commission shall attempt, upon the request of

  4  a member, to resolve any disputes or other issues which are

  5  subject to this compact and which may arise among compacting

  6  states and noncompacting states.

  7         (8)  The compacting states shall report to the

  8  commission on issues or activities of concern to them, and

  9  cooperate with and support the commission in the discharge of

10  its duties and responsibilities.

11         (9)  The commission shall adopt an operating procedure

12  providing for binding dispute resolution for disputes among

13  receivers.

14         (10)  The commission shall facilitate voluntary dispute

15  resolution for disputes among guaranty associations and

16  receivers.

17

18                            ARTICLE IX

19

20         RECEIVERSHIP FUNCTIONS OF THE COMMISSION.--

21         (1)  The commission has authority to act as receiver of

22  any insurer domiciled, engaged in, or doing business in a

23  compacting state upon the request of the commissioner of such

24  compacting state, or as otherwise provided in this compact.

25         (a)  The commission as receiver shall have all powers

26  and duties pursuant to the receivership laws of the

27  domiciliary state.

28         (b)  The commission shall maintain accounts of receipts

29  and disbursements of the estates consistent with the

30  accounting practices and procedures set forth in the bylaws.

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  1         (c)  The commission shall cause an annual audit of each

  2  estate for which it is acting as receiver to be conducted by

  3  an independent certified public accountant. The costs and

  4  expenses of such audit shall be paid as administrative

  5  expenses from the assets of the estate. The commission shall

  6  not cause an annual audit to be conducted of any estate which

  7  lacks sufficient assets to conduct such audit.

  8         (d)  The commission as receiver is authorized to

  9  delegate its receivership duties and functions and to

10  effectuate such delegation through contracts with others.

11         (2)  The commission shall act as receiver of any

12  insurer domiciled or doing business in a compacting state in

13  the event that the member acting as receiver in that

14  compacting state fails to comply with adopted commission rules

15  or operating procedures. The commission shall notify such

16  member in writing of his or her noncompliance with commission

17  rules or operating procedures and, if the member acting as

18  receiver fails to remedy such noncompliance within 10 days

19  after his or her receipt of such notification, the commission

20  may petition the supervising court before which such

21  receivership is pending for an order substituting and

22  appointing the commission as receiver of the estate.

23         (3)  The commission shall not act as receiver of an

24  estate which appears to lack sufficient assets to fund such

25  receivership unless the compacting state makes provisions for

26  the payment of the estate's administrative expenses

27  satisfactory to the commission.

28         (4)  The commission may act as deputy receiver for any

29  insurer domiciled or doing business in a noncompacting state

30  in accordance with such state's laws, upon request of that

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  1  noncompacting state's commissioner and approval of the

  2  commission.

  3         (5)  With respect to receiverships pending in a

  4  compacting state on the effective date of the enactment of

  5  this compact by the compacting state:

  6         (a)  The commission may act as receiver of an insurer

  7  upon the request of that compacting state's member and

  8  approval of the commission.

  9         (b)  The commission shall oversee, monitor, and

10  coordinate the activities of all receiverships pending in that

11  compacting state regardless of whether the commission is

12  acting as receiver of estates in the compacting state.

13

14                            ARTICLE X

15

16         FINANCE.--

17         (1)  The commission shall pay or provide for the

18  payment of the reasonable expenses of its establishment and

19  organization.

20         (2)  Except as otherwise provided in this compact or by

21  act of the commission, the costs and expenses of each

22  compacting state shall be the sole and exclusive

23  responsibility of the respective compacting state. The

24  commission may pay or provide for actual and necessary costs

25  and expenses for attendance of its members at official

26  meetings of the commission or its designated committees.

27         (3)  The commission shall levy on and collect an annual

28  assessment from each compacting state and each insurer

29  authorized to do business in a compacting state and writing

30  direct insurance to cover the cost of the internal operations

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  1  and activities of the commission and its staff in a total

  2  amount sufficient to cover the commission's annual budget.

  3         (a)  The aggregate annual assessment amount shall be

  4  allocated 75 percent to insurers, hereinafter referred to as

  5  the insurers' portion, and 25 percent to compacting states,

  6  hereinafter referred to as the compacting states' portion. The

  7  insurers' portion shall be allocated to each insurer by the

  8  percentage derived from a fraction, the numerator of which

  9  shall be the gross direct written premium received on that

10  insurer's business in all compacting states and the

11  denominator of which shall be the gross direct written premium

12  received by all insurers on business in all compacting states.

13  The compacting states' portion shall be allocated to each

14  compacting state by the percentage derived from a fraction,

15  the numerator of which shall be the gross direct written

16  premium received by all insurers on business in that

17  compacting state and the denominator shall be the gross direct

18  written premium received on all insurers on business in all

19  compacting states. Each compacting state's portion shall be

20  funded as provided by the legislature of that compacting

21  state. In no event shall an insurer's assessment be less than

22  $50 or more than $25,000; provided, that affiliated insurers'

23  combined assessments shall not exceed $50,000. Upon the

24  request of an insurer, the commission may exempt or defer the

25  assessment of any insurer, if such assessment would cause the

26  insurer's financial impairment.

27         (b)  These assessments shall not be used to pay any

28  costs or expenses incurred by the commission and its staff

29  acting as receiver of estates. Such costs and expenses shall

30  be payable from the assets of the estates as provided by law,

31  except as otherwise provided in this compact.

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  1         (c)  Each insurer authorized to do business in a

  2  compacting state shall timely pay assessments to the

  3  commission. Failure to pay such assessments shall not be

  4  grounds for the revocation, suspension, or denial of an

  5  insurer's authority to do business but shall subject the

  6  insurer to suit by the commission for recovery of any

  7  assessment due, attorney's fees, and costs, together with

  8  interest from the date the assessment is due at a rate of 10

  9  percent per annum, and to civil forfeiture in an amount to be

10  determined by the commissioner of that compacting state in

11  which the insurer received the greatest premium in the year

12  next preceding the first year for which the insurer shall be

13  delinquent in payment of assessments.

14         (4)  The commission shall be reimbursed in the

15  following manner for the costs and expenses incurred by the

16  commission and its staff acting as receiver of estates to the

17  extent that an insurer's assets may be insufficient for the

18  effective administration of its estate:

19         (a)  If the insurer is domiciled in a compacting state,

20  the estate shall be closed unless that compacting state makes

21  provisions for reimbursing the commission.

22         (b)  If the insurer is unauthorized to do business in a

23  compacting state or if the insurer is domiciled in a

24  noncompacting state and subject to ancillary receivership, the

25  commission and such state shall make provisions for

26  reimbursing the commission prior to the commission becoming

27  receiver of such insurer.

28         (5)  To fund the cost of the initial operations of the

29  commission until its first annual budget is adopted and

30  related assessments have been made, contributions from

31  compacting states and others may be accepted and a one-time

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  1  assessment on insurers doing a direct insurance business in

  2  the compacting states may be made not to exceed $450 per

  3  insurer.

  4         (6)  The commission's adopted budget for a fiscal year

  5  shall not be approved until it has been subject to notice and

  6  comment as set forth in Article VII. The budget shall

  7  determine the amount of the annual assessment. The commission

  8  may accumulate a net worth not to exceed 30 percent of its

  9  then annual cost of operation to provide for contingencies and

10  events not contemplated. These accumulated funds shall be held

11  separately and shall not be used for any other purpose. The

12  commission's budget may include a provision for a contribution

13  to the commission's net worth.

14         (7)  The commission shall be exempt from all taxation

15  in and by the compacting states.

16         (8)  The commission shall not pledge the credit of any

17  compacting state, except by and with the appropriate legal

18  authority of that compacting state.

19         (9)  The commission shall keep complete and accurate

20  accounts of all its internal receipts, including grants and

21  donations, and disbursements of all funds, other than

22  receivership assets, under its control. The internal financial

23  accounts of the commission shall be subject to the accounting

24  procedures established under its bylaws. The financial

25  accounts and reports, including the system of internal

26  controls and procedures, of the commission shall be audited

27  annually by an independent certified public accountant. Upon

28  the determination of the commission, but no less frequently

29  than every 3 years, the review of such independent auditor

30  shall include a management and performance audit of the

31  commission. The report of such independent audit shall be made

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  1  available to the public and shall be included in and become

  2  part of the annual report of the commission to the Governors

  3  and legislatures of the compacting states. The commission's

  4  internal accounts, any workpapers related to any internal

  5  audit, and any workpapers related to the independent audit

  6  shall be confidential, provided such materials shall be made

  7  available, in compliance with the order of any court of

  8  competent jurisdiction and pursuant to such reasonable rules

  9  as the commission shall adopt, to any commissioner or Governor

10  of a compacting state, or their duly authorized

11  representatives.

12         (10)  No compacting state shall have any claim to or

13  ownership of any property held by or vested in the commission

14  or the commission acting as receiver or to any other

15  commission funds held pursuant to the provisions of this

16  compact.

17

18                            ARTICLE XI

19

20         COMPACTING STATES; EFFECTIVE DATE AND AMENDMENT.--

21         (1)  Any state is eligible to become a compacting

22  state.

23         (2)  The compact shall become effective and binding

24  upon legislative enactment of the compact into law by two

25  compacting states. Thereafter, it shall become effective and

26  binding as to any other compacting state upon enactment of the

27  compact into law by that state.

28         (3)  Amendments to the compact may be proposed by the

29  commission for enactment by the compacting states. No

30  amendment shall become effective and binding upon the

31  commission and the compacting states unless and until it is

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  1  enacted into law by unanimous consent of the compacting

  2  states.

  3

  4                           ARTICLE XII

  5

  6         WITHDRAWAL, DEFAULT, AND TERMINATION.--

  7         (1)  Once effective, the compact shall continue in

  8  force and remain binding upon each and every compacting state,

  9  provided that a compacting state may withdraw from the compact

10  by enacting a law specifically repealing the statute which

11  enacted the compact into law in such state.

12         (2)  The effective date of withdrawal is the effective

13  date of the repeal, provided that the repeal shall not apply

14  to any receiverships, for which the commission is acting as

15  receiver, pending on the date of the repeal except by mutual

16  agreement of the commission and the withdrawing state.

17         (3)  The withdrawing state shall immediately notify the

18  chairperson of the commission in writing upon the introduction

19  of legislation repealing this compact in the withdrawing

20  state.

21         (4)  The commission shall notify the other compacting

22  states of the withdrawing state's intent to withdraw within 60

23  days after its receipt thereof.

24         (5)  The withdrawing state is responsible for all

25  assessments, obligations, and liabilities incurred through the

26  effective date of withdrawal, including any obligations, the

27  performance of which extend beyond the effective date of

28  withdrawal, except to the extent those obligations may have

29  been released or relinquished by mutual agreement of the

30  commission and the withdrawing state. Notwithstanding the

31  foregoing, the withdrawing state is responsible for the costs

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  1  and expenses of its estates subject to this compact pending on

  2  the date of repeal.  The commission and the other estates

  3  subject to this compact shall not bear any costs and expenses

  4  related to the withdrawing state's estates unless otherwise

  5  mutually agreed upon between the commission and the

  6  withdrawing state.

  7         (6)  Reinstatement following withdrawal of any

  8  compacting state shall occur upon the withdrawing state

  9  reenacting the compact or upon such later date as determined

10  by the commission.

11         (7)  If the commission determines that any compacting

12  state has at any time defaulted in the performance of any of

13  its obligations or responsibilities under this compact, or the

14  bylaws and adopted rules, all rights, privileges, and benefits

15  conferred by this compact and any agreements entered into

16  pursuant to this compact shall be suspended from the effective

17  date of default as fixed by the commission. The grounds for

18  default include, but are not limited to, failure of a

19  compacting state to perform such obligations or

20  responsibilities and any other grounds designated in

21  commission rules. The commission shall immediately notify the

22  defaulting state in writing of the defaulting state's

23  suspension pending a cure of the default. The commission shall

24  stipulate the conditions and the time period within which the

25  defaulting state must cure its default. If the defaulting

26  state fails to cure the default within the time period

27  specified by the commission, the defaulting state shall be

28  terminated from the compact upon an affirmative vote of a

29  majority of the compacting states and all rights, privileges,

30  and benefits conferred by this compact shall be terminated

31  from the effective date of termination.

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  1         (8)  Within 60 days after the effective date of

  2  termination of a defaulting state, the commission shall notify

  3  the Governor and the majority and minority leaders of the

  4  defaulting state's legislature of such termination.

  5         (9)  The termination of a defaulting state shall apply

  6  to all receiverships, for which the commission is acting as

  7  receiver, pending on the effective date of termination except

  8  by mutual agreement of the commission and the defaulting

  9  state.

10         (10)  The defaulting state is responsible for all

11  assessments, obligations, and liabilities incurred through the

12  effective date of termination and is responsible for the costs

13  and expenses relating to its estates subject to this compact

14  pending on the date of the termination. The commission and the

15  other estates subject to this compact shall not bear any costs

16  relating to the defaulting state's estates unless otherwise

17  mutually agreed upon between the commission and the defaulting

18  state.

19         (11)  Reinstatement following termination of any

20  compacting state requires both a reenactment of the compact by

21  the defaulting state and the approval of the commission

22  pursuant to the rules.

23         (12)  The compact dissolves effective upon the date of

24  the withdrawal or default of the compacting state which

25  reduces membership in the compact to one compacting state.

26         (13)  Upon the dissolution of this compact, the compact

27  becomes null and void and shall be of no further force or

28  effect, and the business and affairs of the commission shall

29  be wound up and any surplus funds shall be distributed in

30  accordance with the bylaws.

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  1                           ARTICLE XIII

  2

  3         SEVERABILITY AND CONSTRUCTION.--

  4         (1)  The provisions of this compact are severable, and

  5  if any phrase, clause, sentence or provision is deemed

  6  unenforceable, the remaining provisions of the compact shall

  7  be enforceable.

  8         (2)  The provisions of this compact shall be liberally

  9  construed to effectuate its purposes.

10

11                           ARTICLE XIV

12

13         BINDING EFFECT OF COMPACT AND OTHER LAWS.--

14         (1)  Nothing herein prevents the enforcement of any

15  other law of a compacting state that is not inconsistent with

16  this compact.

17         (2)  All compacting states' laws conflicting with this

18  compact are superseded to the extent of the conflict.

19         (3)  All lawful actions of the commission, including

20  all rules and operating procedures adopted by the commission,

21  are binding upon the compacting states.

22         (4)  All agreements between the commission and the

23  compacting states are binding in accordance with their terms.

24         (5)  Upon the request of a party to a conflict over

25  meaning or interpretation of commission actions, and upon a

26  majority vote of the compacting states, the commission may

27  issue advisory opinions regarding such meaning or

28  interpretation.

29         (6)  If any provision of this compact exceeds the

30  constitutional limits imposed on the legislature of any

31  compacting state, the obligations, duties, powers, or

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  1  jurisdiction sought to be conferred by such provision upon the

  2  commission shall be ineffective and such obligations, duties,

  3  powers, or jurisdiction shall remain in the compacting state

  4  and shall be exercised by the agency thereof to which such

  5  obligations, duties, powers, or jurisdiction are delegated

  6  bylaw in effect at the time this compact becomes effective. 

  7         Section 2.  This act shall take effect October 1, 1999.

  8

  9            *****************************************

10                       LEGISLATIVE SUMMARY

11
      Enacts the Interstate Insurance Receivership Compact to
12    promote, develop, and facilitate orderly, efficient, cost
      effective, and uniform insurer receiverships laws and
13    operations among compacting states and to coordinate
      interaction between insurer receivership and guaranty
14    fund operations.  Creates the Interstate Insurance
      Receivership Commission.  Provides for the performance of
15    related functions which are consistent with the state
      regulation of the business of insurance pursuant to the
16    McCarran-Ferguson Act. (See bill for details.)

17

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