1996 Alaska Statutes
TITLE 21 INSURANCE
Chapter 21.79. ALASKA LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION ACT
Sec. 21.79.060. Powers and duties of the association.

(a) If a domestic insurer becomes impaired, the association may, with the approval of the director,

(1) guarantee, assume, reinsure, or provide for the guarantee, assumption, or reinsurance of the policies or contracts of the impaired insurer;

(2) provide money, pledges, notes, guarantees, or other means that are necessary to act under (1) of this subsection and to assure payment of the contractual obligations of the impaired insurer until those obligations are guaranteed, reinsured, or assumed; or

(3) loan money to the impaired insurer.

(b) If a member insurer is an impaired insurer, and the insurer is not paying claims in a timely manner, the association may

(1) take any of the actions specified in (a) of this section; or

(2) provide a substitute benefit in lieu of the contractual obligation of the impaired insurer solely for a

(A) health insurance claim;

(B) periodic annuity benefit payment;

(C) death benefit;

(D) supplemental benefit; and

(E) cash withdrawal for a policy or contract owner who petitions under a claim of emergency or hardship under a standard proposed by the association and approved by the director.

(c) The actions specified in (b) of this section may not be taken unless

(1) the law of the impaired insurer's state of domicile provides that until all payments of or on account of a contractual obligation of the impaired insurer by a guaranty association, along with all expenses and interest on all payments and expenses, have been repaid to the guaranty association or a repayment plan by the impaired insurer has been approved by a guaranty association,

(A) a delinquency proceeding may not be dismissed;

(B) neither the impaired insurer nor its assets may be returned to the control of its shareholders or private management; and

(C) solicitation or acceptance of new business or restoration of a suspended or revoked license may not be permitted; and

(2) if the impaired insurer is a

(A) domestic insurer, the insurer has been placed under an order of rehabilitation by a superior court in this state; or

(B) foreign or alien insurer,

(i) the insurer has been prohibited from soliciting or accepting new business in this state;

(ii) the insurer's certificate of authority has been suspended or revoked in this state; and

(iii) a petition for rehabilitation or liquidation has been filed in a court of competent jurisdiction in the insurer's state of domicile by the insurance commissioner of that state.

(d) If a member insurer becomes insolvent, the association shall, with the approval of the director,

(1) guarantee, assume, reinsure, or provide for the guarantee, assumption, or reinsurance of the covered policies of the insolvent insurer held by residents;

(2) assure payment to residents of the contractual obligations of the insolvent insurer;

(3) provide money, pledges, notes, guarantees, or other means necessary to discharge the insurer's duties under this subsection; or

(4) with respect only to life and health insurance policies, provide benefits and coverages required under (e) of this section.

(e) When proceeding under (b)(2) or (d)(4) of this section, the association shall, with respect to a life or health insurance policy,

(1) assure payment of benefits, other than terms of conversion and renewability, for a premium identical to the premium that would have been payable under a policy of the insolvent insurer for claims incurred with respect to

(A) a group policy, not later than the earlier of the next renewal date under the policy or contract or 45 days, but in no event less than 30 days, after the date on which the association becomes obligated with respect to the policy;

(B) an individual policy, not later than the earlier of the next renewal date, if any, under the policy or one year, but in no event less than 30 days, from the date on which the association becomes obligated with respect to the policy;

(2) make a diligent effort to provide a known insured or a group policyholder, with respect to a group policy, 30 days notice of the termination of the benefits provided;

(3) with respect to an individual policy, make available to each known insured, or owner if other than the insured, and with respect to an individual formerly insured under a group policy who is not eligible for replacement group coverage, substitute coverage on an individual basis under the provisions of (f) of this section, if the insured had a right under law or the terminated policy to convert coverage to individual coverage, to continue an individual policy in force until a specified age, or for a specific time during which the insurer did not have the unilateral right to make changes in any provision of the policy or had a right only to make changes in premium by class.

(f) With respect to life and health insurance policies, the association

(1) in providing the substitute coverage under (e)(3) of this section, shall either offer to reissue the terminated coverage or to issue an alternate policy;

(2) shall offer alternative or reissued policies without requiring evidence of insurability, and may not provide for any waiting period or exclusion that would not have applied under the terminated policy; and

(3) may reinsure any alternative or reissued policy.

(g) An alternative life or health insurance policy must,

(1) if adopted by the association, be subject to the approval of the director; the association may adopt alternative policies of various types for future issuance without regard to a particular impairment or insolvency;

(2) contain at least the minimum statutory provisions required in this state and provide benefits that may not be unreasonable in relation to the premium charged; the association shall set the premium under a table of rates that it shall adopt; the premium must reflect the amount of insurance to be provided and the age and class of risk of each insured, but may not reflect changes in the health of the insured after the original policy was last underwritten;

(3) if issued by the association, provide coverage of a type similar to that of the policy issued by the impaired or insolvent insurer, as determined by the association.

(h) If the association elects to reissue terminated coverage at a premium rate different from that charged under the terminated policy, the premium shall be set by the association according to the amount of insurance provided, the age and class of risk, and is subject to the approval of the director or by a court of competent jurisdiction.

(i) The association's obligations with respect to coverage under a policy of an impaired or insolvent insurer or under any reissue or alternative policy cease on the date the coverage or policy is replaced by another similar policy by the policyholder, the insured, or the association.

(j) When proceeding under (b)(2) or (d) of this section with respect to a policy or contract carrying guaranteed minimum interest rates, the association shall assure the payment or crediting of a rate of interest consistent with AS 21.79.020 (c)(4).

(k) Nonpayment of a premium within 31 days after the date required under the terms of a guaranteed, assumed, alternative or reissued policy or contract or substitute coverage terminates the obligations of the association under the policy or coverage except with respect to the claims incurred or the net cash surrender value that may be due under the provisions of this chapter.

(l) A premium due for coverage after entry of an order of liquidation of an insolvent insurer belongs to and is payable at the direction of the association, and the association is liable for unearned premiums due to a policy or contract owner arising after the entry of the order.

(m) The protection provided by this chapter does not apply if guaranty protection is provided to residents of this state by the laws of another state or jurisdiction that is the domicile of the impaired or insolvent insurer.

(n) In carrying out its duties under (b), (c), and (d) of this section, the association may impose a permanent policy or contract lien under a guarantee, assumption, or reinsurance agreement, if the policy or contract lien is approved by a court, and the court finds that

(1) the amount that may be assessed under this chapter is less than the amount needed to assure full and prompt performance of the insolvent insurer's contractual obligations; or

(2) the economic or financial condition that affects member insurers is sufficiently adverse that the imposition of a policy or contract lien is in the public interest.

(o) Before taking action under (b) - (e) of this section, the association may request the superior court to impose an injunction against the payment of a cash value and policy loan, or the exercise of another right to withdraw funds held in connection with a policy or contract, in addition to a contractual provision for deferral of a cash or policy loan value.

(p) If the association fails to take action under (b) - (e) of this section within a reasonable period of time after a member insurer becomes insolvent, the director shall assume the powers of the association under (b) - (e) of this section.

(q) If requested by the director, the association may assist and advise the director concerning rehabilitation, payment of claims, continuance of coverage, or the performance of other contractual obligations of an impaired or insolvent insurer.

(r) The association is entitled to appear in a court proceeding in the state involving an impaired or insolvent insurer. The standing conferred by this subsection extends to all matters germane to the powers and duties of the association, including proposals to reinsure or guarantee a covered policy of the impaired or insolvent insurer and the determination of a covered policy and a contractual obligation.

(s) A person who receives benefits under this chapter is considered to have assigned the rights under the covered policy to the association to the extent of the benefits received under this chapter. The association may require an assignment to the association of those rights by the payees, policy or contract owner, beneficiary, insured, or annuitant before a person receives the rights or benefits conferred by this chapter. The association is subrogated to these rights against the assets of an insolvent insurer. The priority of the association's subrogation right to the assets of the insolvent insurer is the same as the priority of the person entitled to benefits under this chapter.

(t) The association may

(1) enter into contracts that are necessary or proper to carry out the provisions of this chapter;

(2) sue or be sued, and take legal action necessary or proper for recovery of an unpaid assessment under AS 21.79.070 ;

(3) borrow money to carry out the purposes of this chapter;

(4) employ or retain those persons necessary to handle the financial transactions of the association and other functions under this chapter;

(5) negotiate and contract with a liquidator, rehabilitator, conservator, or ancillary receiver to carry out the powers and duties of the association;

(6) exercise, for the purposes of this chapter and to the extent approved by the director, the powers of a domestic life or health insurer; however, the association may not issue insurance policies or annuity contracts other than those issued to perform the contractual obligations of an impaired or insolvent insurer;

(7) take legal action to prevent the payment of improper claims;

(8) join an organization of one or more other state associations with similar purposes; and

(9) perform all other acts necessary or proper to implement this chapter.