Regular Session 2019-2020 Senate Bill 1195 P.N. 2041

HOUSE AMENDED

PRIOR PRINTER'S NOS. 1762, 1821, 1825

PRINTER'S NO. 2041

THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

No.

1195

Session of

2020

INTRODUCED BY SCAVELLO AND STREET, JUNE 9, 2020

AS REPORTED FROM COMMITTEE ON INSURANCE, HOUSE OF

REPRESENTATIVES, AS AMENDED, SEPTEMBER 30, 2020

AN ACT

Amending the act of May 17, 1921 (P.L.682, No.284), entitled "An

act relating to insurance; amending, revising, and

consolidating the law providing for the incorporation of

insurance companies, and the regulation, supervision, and

protection of home and foreign insurance companies, Lloyds

associations, reciprocal and inter-insurance exchanges, and

fire insurance rating bureaus, and the regulation and

supervision of insurance carried by such companies,

associations, and exchanges, including insurance carried by

the State Workmen's Insurance Fund; providing penalties; and

repealing existing laws," in general provisions relating to

insurance companies, associations and exchanges, further

providing for Reinsurance Credits and providing for credit

for reinsurance and reciprocal jurisdictions; in Life and

Health Insurance Guaranty Association, further providing for

purpose, for definitions, for coverage and limitations, for

creation of association, for board of directors, for powers

and duties of association, for assessments, for plan of

operation, for powers and duties of the commissioner, for

prevention of insolvencies, for credits for assessments paid,

for miscellaneous provisions, for examination of the

association and annual report, for immunity, for stay of

proceedings and reopening default judgments, for prohibited

advertisement or Insurance Guaranty Association Act in

insurance sales and for prospective application.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. Section 319.1(a), (b) and (f) of the act of May

17, 1921 (P.L.682, No.284), known as The Insurance Company Law

of 1921, are amended and the section is amended by adding

subsections to read:

Section 319.1. Reinsurance Credits.--[(a) Unless an

unlicensed reinsurer is qualified or certified to accept

reinsurance from insurers licensed in this Commonwealth, no

credit shall be allowed as an admitted asset or as a reduction

of liability relative to risks ceded by such licensed insurers.

Qualified or certified reinsurers are those meeting the

conditions for reinsurers specified by the commissioner, in his

discretion, and included on a list of qualified or certified

reinsurers published and periodically reviewed by said

commissioner.]

(a.1) A domestic ceding insurer may take a credit for

reinsurance as either an asset or reduction from liability on

account of the reinsurance ceded if it meets the requirements

specified in this section.

(a.2) The following types of reinsurance arrangements are

permissible:

(1) Reinsurance ceded to an assuming insurer that is

licensed to transact insurance or reinsurance in this

Commonwealth in accordance with section 319(b).

(2) Reinsurance ceded to an insurer meeting the conditions

specified by the commissioner, in the commissioner's discretion,

and included on a list of qualified or certified reinsurers

published and periodically reviewed by the commissioner

including when the reinsurance is ceded to the following:

(i) An assuming foreign or alien insurer or group of

incorporated alien insurers under common administration that has

been deemed to be a qualified reinsurer by the commissioner in

accordance with the requirements of 31 Pa. Code Ch. 161

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(relating to requirements for qualified and certified

reinsurers).

(ii) An assuming insurer that has been certified by the

commissioner as a reinsurer in this Commonwealth in accordance

with the requirements of 31 Pa. Code Ch. 161, except that as of

the effective date of this subsection, the following shall

apply:

(A) Certified reinsurers not domiciled in the United States

must submit the most recent audited financial statements,

regulatory filings and actuarial opinions, as filed with the

certified reinsurer's supervisor, with a translation into

English, but shall not need to submit audited financial

statements on a United States generally accepted accounting

principles or international financial reporting standards

basis.

(B) Upon the initial application for certification pursuant

to 31 Pa. Code Ch. 161, the commissioner shall consider audited

financial statements for the last two years filed with the

certified reinsurer's supervisor.

(3) Reinsurance ceded to an assuming insurer meeting the

requirements of section 319.3.

(4) Reinsurance ceded to an assuming insurer that is

domiciled in, or for a United States branch of an alien assuming

insurer is entered through , a state that employs standards

regarding credit for reinsurance substantially similar to those

applicable under the law of this Commonwealth and the assuming

insurer or United States branch of an alien assuming insurer

meets both of the following:

(i) Maintains a surplus as regards policyholders in an

amount not less than $20,000,000, except with regard to

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reinsurance ceded and assumed pursuant to pooling arrangements

among insurers in the same holding company system.

(ii) Submits to the authority of the commissioner to examine

its books and records.

(b) A reduction from liability for the reinsurance ceded by

a domestic insurer to an assuming insurer [which is not a

qualified or certified reinsurer in accordance with this

section] not falling within one of the categories specified

under subsection (a.2) shall be allowed in an amount not

exceeding the liabilities carried by the ceding insurer and such

reduction shall be in the amount of funds held by or on behalf

of the ceding insurer, including funds held in trust for the

ceding insurer, under a reinsurance contract with such assuming

insurer as security for the payment of obligations thereunder,

if such security is held in the United States subject to

withdrawal solely by and under the exclusive control of the

ceding insurer or, in the case of a trust, held in a qualified

United States financial institution, as defined in subsection

(g)(2). This security may be in the form of:

(1) Cash.

(2) Securities listed by a securities valuation office of a

national association of insurance commissioners or any successor

thereto, including those exempted from filing under the Purposes

and Procedures Manual of the Securities Valuation Office of the

National Association of Insurance Commissioners, and

[qualifying] DETERMINED BY THE COMMISSIONER TO QUALIFY as

admitted assets.

(3) (i) Clean, irrevocable, unconditional and evergreen

letters of credit issued or confirmed by a qualified United

States financial institution, as defined in subsection (g)(1),

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effective no later than the thirty-first day of December in

respect of the year for which filing is being made and in the

possession of the ceding insurer on or before the filing date of

its annual statement.

(ii) Letters of credit meeting applicable standards of

issuer acceptability as of the dates of their issuance or

confirmation shall, notwithstanding the issuing or confirming

institution's subsequent failure to meet applicable standards of

issuer acceptability, continue to be acceptable as security

until their expiration, extension, renewal, modification or

amendment, whichever first occurs.

(4) Funds or letters of credit provided by a noninsurer

parent corporation of the ceding insurer, in lieu of the funds

to be withheld by the ceding insurer under a reinsurance

contract with such assuming insurer as security for payment of

obligations thereunder, if the following requirements are met:

(i) The funds or letters of credit are held subject to

withdrawal by and under the control of the ceding insurer.

(ii) The type, amount and form of the funds or letters of

credit receive the prior approval of the Insurance Commissioner.

(5) Any other form of security acceptable to the Insurance

Commissioner.

* * *

(f) The following shall apply:

(1) Notwithstanding the provisions of this section, the

Insurance Department may promulgate one or more regulations to

limit, prohibit or authorize the credit which a domestic insurer

may take as an admitted asset or as a reduction in liability

with respect to reinsurance ceded on any financial statements

filed with the Insurance Department.

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(2) In addition to and notwithstanding the commissioner's

regulatory authority under paragraph (1), the commissioner may

promulgate regulations as provided under this paragraph.

(i) A regulation promulgated under this paragraph shall

only apply to reinsurance relating to the following:

(A) Life insurance policies with guaranteed nonlevel gross

premiums or guaranteed nonlevel benefits.

(B) Universal life insurance policies with provisions

resulting in the ability of a policyholder to keep a policy in

force over a secondary guarantee period.

benefits.

(D) Long-term care insurance policies.

(E) Other life and health insurance and annuity products

related to credit for reinsurance.

(ii) A regulation promulgated under this paragraph may apply

to treaties entered into after the effective date of this

paragraph containing:

(A) policies issued after December 31, 2014;

(B) policies issued prior to January 1, 2015, if risk

pertaining to the policies is ceded in connection with the

treaty, in whole or in part, after December 31, 2014 ; or

and (B).

(iii) A regulation promulgated under this paragraph may not

apply to cessions to an assuming insurer if the assuming insurer

meets one of the following:

(A) Meets the requirements under section 319.3.

(B) Is certified in this Commonwealth.

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insurer maintains at least $250,000,000 (two hundred and fifty

million dollars) in capital and surplus and is either of the

following:

(I) licensed in at least 26 states; or

(II) licensed in at least ten states and licensed or

accredited in a total of at least 35 states.

* * *

Section 1.1. The act is amended by adding a section to read:

Section 319.3. Credit For Reinsurance And Reciprocal

Jurisdictions.--(a) The commissioner shall allow credit for

reinsurance ceded by a domestic insurer to an assuming insurer

that is licensed to write reinsurance by, and has its head

office or is domiciled in, a reciprocal jurisdiction that meets

the requirements of this section.

(b) (Reserved).

insurer domiciled in this Commonwealth to an assuming insurer

meeting each of the following conditions:

(1) The assuming insurer must be licensed to transact

reinsurance by and have its head office or be domiciled in a

reciprocal jurisdiction.

(2) The assuming insurer must have and maintain on an

ongoing basis minimum capital and surplus, or its equivalent,

calculated on at least an annual basis as of the preceding

December 31 or at the annual date otherwise statutorily reported

to the reciprocal jurisdiction, and confirmed as provided under

paragraph (7) according to the methodology of its domiciliary

jurisdiction in the following amounts, which may be modified by

the commissioner by regulation:

(i) at least $250,000,000; or

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(ii) if the assuming insurer is an association, including

incorporated and individual unincorporated underwriters:

(A) minimum capital and surplus equivalents, net of

liabilities, or own funds of the equivalent of at least

$250,000,000; and

(B) a central fund containing a balance of the equivalent of

at least $250,000,000.

(3) The assuming insurer must have and maintain, on an

ongoing basis, a minimum solvency or capital ratio, as follows:

(i) if the assuming insurer has its head office or is

domiciled in a reciprocal jurisdiction as provided under

paragraph (1) of the definition of "reciprocal jurisdiction,"

the ratio specified in the applicable covered agreement;

(ii) if the assuming insurer is domiciled in a reciprocal

jurisdiction under paragraph (2) of the definition of

"reciprocal jurisdiction", a risk-based capital ratio of 300% of

the authorized control level calculated in accordance with the

formula developed by the National Association of Insurance

Commissioners; or

(iii) if the assuming insurer is domiciled in a reciprocal

jurisdiction under paragraph (3) of the definition of

"reciprocal jurisdiction", after consultation with the

reciprocal jurisdiction and considering any recommendations

published through the National Association of Insurance

Commissioners committee process, the solvency or capital ratio

as the commissioner determines to be an effective measure of

solvency.

(4) The assuming insurer must agree to and provide adequate

assurance, by executing a form as prescribed by the

commissioner, of its agreement to the following:

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(i) The assuming insurer must agree to provide prompt

written notice and explanation to the commissioner if it falls

below the minimum requirements under paragraphs (2) and (3) , or

if any regulatory action is taken against it for serious

noncompliance with law.

(ii) The assuming insurer must consent in writing to the

jurisdiction of the courts of this Commonwealth and to the

appointment of the commissioner as agent for service of process.

(A) The commissioner may require that the consent be

provided and included in each reinsurance agreement under the

commissioner's jurisdiction.

(B) Nothing under this paragraph shall limit or alter the

capacity of a party to a reinsurance agreement to agree to

alternative dispute resolution mechanisms, except to the extent

the agreements are unenforceable under applicable insolvency or

delinquency laws.

(iii) The assuming insurer must consent in writing to pay

each final judgment, wherever enforcement is sought, obtained by

a ceding insurer, that have been declared unenforceable

ENFORCEABLE in the territory where the judgment was obtained.

(iv) Each reinsurance agreement must include a provision

requiring the assuming insurer to provide security in an amount

equal to one hundred percent (100%) of the assuming insurer's

liabilities attributable to reinsurance ceded pursuant to the

agreement if the assuming insurer resists enforcement of a final

judgment that is enforceable under the law of the jurisdiction

in which it was obtained or a properly enforceable arbitration

award, whether obtained by the ceding insurer or by its legal

successor on behalf of this estate, if applicable.

(v) The assuming insurer must:

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(A) Confirm that it is not presently participating in a

solvent scheme of arrangement, which involves this

Commonwealth's ceding insurers.

(B) Agree to notify the ceding insurer and the commissioner

if it enters into a solvent scheme of arrangement.

amount equal to 100% of the assuming insurer's liabilities to

the ceding insurer if the assuming insurer enters into a solvent

scheme of arrangement.

(D) Agree to provide security in a form consistent with all

of the following:

(I) The provisions of section 319.1(a.2)(2) applicable to

certified reinsurers.

(II) Section 319.1(b).

(III) 31 Pa.Code Ch. 163 (relating to requirements for funds

held as security for the payment of obligations of unlicensed,

unqualified reinsurers).

(E) For purposes of this subparagraph, the term "solvent

scheme of arrangement" means a foreign or alien statutory or

regulatory compromise procedure subject to requisite majority

creditor approval and judicial sanction in the assuming

insurer's home jurisdiction either to finally commute

liabilities of duly noticed class members or creditors of a

solvent debtor on a final basis, and which may be subject to

jurisdictional recognition and enforcement of the arrangement by

a governing authority outside the ceding insurer's home

jurisdiction.

(vi) An assuming insurer shall agree in writing to meet the

applicable information filing requirements of paragraph (5) of

this subsection.

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(5) An assuming insurer or its legal successor shall

provide, if requested by the commissioner, on behalf of itself

and any legal predecessors, the following documentation to the

commissioner:

(i) for the two years preceding entry into the reinsurance

agreement and on an annual basis thereafter, the assuming

insurer's annual audited financial statements, in accordance

with the law of the jurisdiction of its head office or

domiciliary jurisdiction, as applicable, including the external

audit report;

(ii) for the two years preceding entry into the reinsurance

agreement, the solvency and financial condition report or

actuarial opinion, if filed with the assuming insurer's

supervisor;

(iii) prior to entry into the reinsurance agreement and not

more often than semi-annually thereafter, an updated list of

each disputed and overdue reinsurance claims outstanding for at

least 90 days, regarding reinsurance assumed from ceding

insurers domiciled in the United States; and

(iv) prior to entry into the reinsurance agreement and not

more often than semi-annually thereafter, information regarding

the assuming insurer's assumed reinsurance by ceding insurer,

ceded reinsurance by the assuming insurer and reinsurance

recoverable on paid and unpaid losses by the assuming insurer to

allow for the evaluation of the criteria under paragraph (6).

(6) The assuming insurer must maintain a practice of prompt

payment of claims under reinsurance agreements. The lack of

prompt payment shall be evidenced by any of the following

criteria:

(i) More than 15% of the reinsurance recoverables from the

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assuming insurer are overdue and in dispute as reported to the

commissioner.

(ii) More than 15% of the assuming insurer's reinsurance

recoverables on paid losses are at least 90 days overdue, are

not in dispute and exceed $100,000 for each ceding insurer or as

otherwise specified in a covered agreement.

(iii) The aggregate amount of reinsurance recoverable on

paid losses which are not in dispute, but are overdue by at

least 90 days, exceeds $50,000,000 or as otherwise specified in

a covered agreement.

(7) The assuming insurer's supervisor shall confirm, in

writing, to the commissioner on an annual basis, as of the

preceding December 31 or at the annual date otherwise

statutorily reported to the reciprocal jurisdiction that the

assuming insurer complies with the requirements under paragraphs

(2) and (3).

(8) Nothing under this subsection shall preclude an assuming

insurer from providing the commissioner with information on a

voluntary basis.

(c.1) The department shall publish the prescribed form under

subsection (c)(4) on the department's Internet website and

shall submit the form to the Legislative Reference Bureau for

publication in the Pennsylvania Bulletin.

(d) The commissioner shall timely create and publish a list

of reciprocal jurisdictions on the department's Internet website

and shall submit the list to the Legislative Reference Bureau

for publication in the Pennsylvania Bulletin. The following

shall apply:

(1) A list of reciprocal jurisdictions is published through

the National Association of Insurance Commissioners committee

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process. The commissioner shall include on the list any

reciprocal jurisdiction the meets the requirements of subsection

(k)(1) and (2).

(2) The commissioner shall consider any other reciprocal

jurisdiction that is included on the list of reciprocal

jurisdictions published through the National Association of

Insurance Commissioners committee process.

(3) The commissioner may approve a jurisdiction that does

not meet the requirements of subsection (k)(1) or (2) as

provided by law, regulation or in accordance with criteria

published through the National Association of Insurance

Commissioners committee process.

(4) The commissioner may remove a jurisdiction from the list

of reciprocal jurisdictions upon a determination that the

jurisdiction no longer meets the requirements of this section or

other law or regulation, or in accordance with a process

published through the National Association of Insurance

Commissioners committee process, except that the commissioner

may not remove a reciprocal jurisdiction that meets the

requirements of subsection (k)(1) or (2). Upon removal of a

reciprocal jurisdiction from the list, credit for reinsurance

ceded to an assuming insurer which has its home office or is

domiciled in a jurisdiction shall be allowed only if allowed

under section 319.1.

(e) The commissioner shall timely create and publish a list

of assuming insurers that have satisfied the conditions under

this section and to which cessions shall be granted credit. The

following shall apply:

(1) The commissioner shall create the list in accordance

with the following requirements:

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(i) The commissioner may add an assuming insurer to the list

if an National Association of Insurance Commissioners-accredited

jurisdiction has added the assuming insurer to a list of the

assuming insurers.

(ii) The commissioner may add an assuming insurer to the

list if, upon initial eligibility, the assuming insurer submits

the information to the commissioner as required under subsection

(c)(4) and complies with any additional requirements the

commissioner may impose by regulation, except to the extent that

the the additional requirements conflict with an applicable

covered agreement.

(iii) If a National Association of Insurance Commissioners-

accredited jurisdiction has determined that the conditions under

subsection (c) have been met, the commissioner may defer to the

jurisdiction's determination and add the assuming insurer to the

list of assuming insurers to which cessions shall be granted

credit in accordance with this subsection. The commissioner may

accept financial documentation filed with another National

Association of Insurance Commissioners-accredited jurisdiction

or with the National Association of Insurance Commissioners in

satisfaction of the requirements of subsection (c).

(iv) If requesting that the commissioner defer to another

National Association of Insurance Commissioners-accredited

jurisdiction's determination, the assuming insurer shall execute

the form under subsection (c)(4) and provide additional

information required by the commissioner. A state that has

received such a request must notify other state insurance

regulators through the National Association of Insurance

Commissioners committee process and provide the relevant

information with respect to the determination of eligibility.

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(2) If the commissioner determines that an assuming insurer

no longer meets one or more of the requirements under this

section, the commissioner may revoke or suspend the eligibility

of the assuming insurer for recognition under this section.

(i) While an assuming insurer's eligibility is suspended, a

reinsurance agreement issued, amended or renewed after the

effective date of the suspension may not qualify for credit

except to the extent that the assuming insurer's obligations

under the contract are secured in accordance with section

319.1(b).

(ii) If an assuming insurer's eligibility is revoked, a

credit for reinsurance may not be granted after the effective

date of the revocation with respect to any reinsurance

agreements entered into by the assuming insurer, including

reinsurance agreements entered into prior to the date of

revocation, except to the extent that the assuming insurer's

obligations under the contract are secured in a form acceptable

to the commissioner in accordance with section 319.1(b).

(f) Before denying statement credit or imposing a

requirement to post security under section 319.1(b)(2) or

adopting an similar requirement that will have substantially the

same regulatory impact on security, the commissioner shall:

(1) Communicate with the ceding insurer, the assuming

insurer and the assuming insurer's supervisor that the assuming

insurer no longer satisfies one of the conditions listed in

subsection (c).

(2) Provide the assuming insurer with 30 days from the

initial communication to submit a plan to remedy the defect and

90 days from the initial communication to remedy the defect

except in exceptional circumstances in which a shorter period is

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necessary for policyholder and consumer protection.

(3) After the expiration of the period under paragraph (2),

if the commissioner determines that no or insufficient action

was taken by the assuming insurer, the commissioner may take any

of the actions provided under this subsection.

(4) Provide a written explanation to the assuming insurer of

any of the requirements under this subsection.

(g) If subject to a legal process of rehabilitation,

liquidation or conservation, as applicable, the ceding insurer

or its representative may seek and, if determined appropriate by

the court in which the proceedings are pending, may obtain an

order requiring that the assuming insurer post security for all

outstanding ceded liabilities.

(h) Nothing under this subsection shall limit or alter the

capacity of a party to a reinsurance agreement to agree on

requirements for security or other terms in the reinsurance

agreement, except as expressly prohibited under section 319 or

other law or regulation.

(i) Credit may be taken under this section only for

reinsurance agreements entered into, amended or renewed on or

after the effective date of this section and only with respect

to losses incurred and reserves reported on or after the later

of the date on which the assuming insurer has met all

eligibility requirements under subsection (a), and the effective

date of the new reinsurance agreement, amendment or renewal. The

following shall apply:

(1) This subsection shall not alter or impair a ceding

insurer's right to take credit for reinsurance, to the extent

that credit is not available under this subsection, as long as

the reinsurance qualifies for credit under any other provision

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of section 319.1.

(2) Nothing under this subsection shall authorize an

assuming insurer to withdraw or reduce the security provided

under any reinsurance agreement except as permitted by the terms

of the agreement.

(3) Nothing under this subsection shall limit or alter the

capacity of a party to any reinsurance agreement to renegotiate

the agreement.

(j) The commissioner may promulgate regulations to carry out

the provisions of this section.

(k) For the purposes of this section, a "reciprocal

jurisdiction" means a jurisdiction, as designated by the

commissioner under subsection (d) that meets one of the

following requirements:

(1) A non-United States jurisdiction that is subject to an

in-force covered agreement with the United States, each within

its legal authority or, for a covered agreement between the

United States and European Union, is a member state of the

European Union. For purposes of this paragraph, a "covered

agreement" is an agreement entered into under 31 U.S.C. §§ 313

(relating to Federal Insurance Office) and 314 (relating to

covered agreements) that is currently in effect or in a period

of provisional application and addresses the elimination, under

specified conditions, of collateral requirements as a condition

for entering into any reinsurance agreement with a ceding

insurer domiciled in this Commonwealth or for allowing the

ceding insurer to recognize credit for reinsurance.

(2) A United States jurisdiction that meets the requirements

for accreditation under THE COMMISSIONER VERIFIES HAS BEEN

ACCREDITED PURSUANT TO the National Association of Insurance

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Commissioners financial standards and accreditation program.

(3) A qualified jurisdiction, as determined by the

commissioner under section 319.1(a.2)(2) which is not otherwise

described under paragraph (1) or (2) and which the commissioner

determines meets all of the following additional requirements:

(i) Provides that an insurer that has its head office or is

domiciled in the qualified jurisdiction shall receive credit for

reinsurance ceded to a United States-domiciled assuming insurer

in the same manner as credit for reinsurance is received for

reinsurance assumed by insurers domiciled in such qualified

jurisdictions.

(ii) Does not require a United States-domiciled assuming

insurer to establish or maintain a local presence as a condition

for entering into a reinsurance agreement with any ceding

insurer subject to regulation by the non-United States

jurisdiction or as a condition to allow the ceding insurer to

recognize credit for such reinsurance.

(iii) Recognizes the United States state regulatory approach

to group supervision and group capital by providing written

confirmation by a competent regulatory authority, in the

qualified jurisdiction, that insurers and insurance groups that

are domiciled or maintain their headquarters in this

Commonwealth or another jurisdiction accredited by the National

Association of Insurance Commissioners shall be subject only to

worldwide prudential insurance group supervision including

worldwide group governance, solvency and capital and reporting,

as applicable, by the commissioner or the commissioner of the

domiciliary state and will not be subject to group supervision

at the level of worldwide parent undertaking of the insurance or

reinsurance group by the qualified jurisdiction.

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(iv) Provides written confirmation by a competent regulatory

authority in the qualified jurisdiction that information

regarding insurers and their parent, subsidiary or affiliated

entities, if applicable, shall be provided to the commissioner

in accordance with a memorandum of understanding or similar

document between the commissioner and such qualified

jurisdiction, including, but not limited to, the international

association of insurance supervisors multilateral memorandum of

understanding or multilateral memoranda of understanding

coordinated by the National Association of Insurance

Commissioners.

(L) FOR PURPOSES OF THIS SECTION, A "QUALIFIED JURISDICTION"

MEANS A JURISDICTION THAT MEETS THE REQUIREMENTS OF SUBSECTION

(K).

Section 1.2. Sections 1701, 1702, 1703, 1704(a), 1705(a),

1706 and 1707 of the act are amended to read:

Section 1701. Purpose.--The purpose of this article is to

protect, subject to certain limitations, the persons specified

in section 1703(a) against failure in the performance of

contractual obligations, under life [and], health [insurance

policies] and annuity policies, plans or contracts specified in

section 1703(b), because of the impairment or insolvency of the

member insurer that issued the policies, plans or contracts. To

provide this protection, an association of member insurers is

created to pay benefits and to continue coverages as limited

herein, and [members] member insurers of the association are

subject to assessment to provide funds to carry out the purpose

of this article.

Section 1702. Definitions.--As used in this article the

following words and phrases shall have the meanings given to

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them in this section:

"Account." [Any] Either of the two accounts created under

section 1704.

"Association." The Pennsylvania Life and Health Insurance

Guaranty Association created under section 1704.

"Authorized assessment" or "authorized." The term when used

in the context of assessments means a resolution by the board of

directors has been passed whereby an assessment will be called

immediately or in the future from member insurers for a

specified amount. An assessment is authorized when the

resolution is passed.

"Benefit plan." A specific employee, union or association of

natural persons benefit plan.

"Called assessment" or "called." The term when used in the

context of assessments means that a notice has been issued by

the association to member insurers requiring that an authorized

assessment be paid within the time frame specified in the

notice. An authorized assessment becomes a called assessment

when notice is mailed by the association to member insurers.

"Commissioner." The Insurance Commissioner of the

Commonwealth.

"Contractual obligation." Any obligation under a policy or

contract or certificate under a group policy or contract or

portion thereof for which coverage is provided under section

1703.

"Covered [policy."] policy" or "covered contract." Any

policy or contract within the scope of this article under

section 1703.

"Department." The Insurance Department of the Commonwealth.

"Employee Retirement Income Security Act of 1974" or "ERISA."

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The Employee Retirement Income Security Act of 1974 (Public Law

93-406, 29 U.S.C. § 1001 et seq.).

"Extra contractual claims." The term shall include claims

relating to bad faith in the payment of claims, punitive or

exemplary damages or attorney costs and fees.

"Health benefit plan." Any hospital or medical expense

policy or certificate, RANLI PPO policy or subscriber contract,

hospital plan corporation, professional health services plan

corporation or health maintenance organization subscriber

contract or any other similar health contract. The term does not

include:

(1) Accident only insurance.

(2) Credit insurance.

(3) Dental only insurance.

(4) Vision only insurance.

(5) Medicare supplement insurance.

(6) Benefits for long-term care, home health care,

community-based care or any combination thereof.

(7) Disability income insurance.

(8) Coverage for on-site medical clinics.

(9) Specified disease, hospital confinement indemnity or

limited benefit health insurance if the types of coverage do not

provide coordination of benefits and are provided under separate

policies or certificates.

"Health maintenance organization." An organized system which

combines the delivery and financing of health care and which

provides basic health services to voluntarily enrolled

subscribers for a fixed prepaid fee as defined in the act of

December 29, 1972 (P.L.1701, No.364), known as the Health

Maintenance Organization Act.

20200SB1195PN2041 - 21 -

"Hospital plan corporation." A not-for-profit corporation

engaged in the business of maintaining and operating a nonprofit

hospital plan as defined in 40 Pa.C.S. Ch. 61 (relating to

hospital plan corporations).

"Impaired insurer." A member insurer which, after the

effective date of this article, is not an insolvent insurer and:

(1) is deemed by the Insurance Commissioner to be

potentially unable to fulfill its contractual obligations; or

(2) is placed under an order of rehabilitation or

conservation by a court of competent jurisdiction.

"Insolvent insurer." A member insurer which, after the

effective date of this article, is placed under an order of

liquidation by a court of competent jurisdiction with a finding

of insolvency.

"Internal Revenue Code of 1986." The Internal Revenue Code

of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.).

"Member insurer." Any insurer, RANLI PPO, hospital plan

corporation, professional health services plan corporation or

health maintenance organization licensed or which holds a

certificate of authority to transact in this Commonwealth any

kind of insurance, RANLI PPO business, hospital plan corporation

business, professional health services plan corporation business

or health maintenance organization business for which coverage

is provided under section 1703 and includes any insurer, RANLI

PPO, hospital plan corporation, professional health services

plan corporation or health maintenance organization whose

license or certificate of authority in this Commonwealth may

have been suspended, revoked, not renewed or voluntarily

withdrawn. The term does not include any of the following:

[(1) A nonprofit hospital or medical service organization.

20200SB1195PN2041 - 22 -

(2) A health maintenance organization.

(3)] (1) A fraternal benefit society.

[(4)] (2) A mandatory State pooling plan.

[(5)] (3) A mutual assessment company or any entity that

operates on an assessment basis.

[(6)] (4) An insurance exchange.

(5) An organization that is a qualified charity issuing only

qualified charitable gift annuities exempt from regulation under

the act of October 16, 1996 (P.L.712, No.127), known as the

Charitable Gift Annuity Exemption Act.

[(7)] (6) Any entity similar to any of the above.

"Moody's Corporate Bond Yield Average." The Monthly Average

Corporates as published by Moody's Investors Service, Inc., or

any successor thereto.

"Owner." The owner of a policy or contract. The terms

"policyholder," "contract holder" "policy owner" and "contract

owner" mean the person who is identified as the legal owner

under the terms of the policy or contract or who is otherwise

vested with legal title to the policy or contract through a

valid assignment completed in accordance with the terms of the

policy or contract and properly recorded as the owner on the

books of the member insurer. The terms "owner," "contract

owner," "policy owner," "policyholder" and "contract holder" do

not include persons with a mere beneficial interest in a policy

or contract.

"Person." Any individual, corporation, limited liability

company, partnership, association, governmental body or entity

or voluntary organization.

"Plan sponsor." The term includes:

(1) the employer in the case of a benefit plan established

20200SB1195PN2041 - 23 -

or maintained by a single employer;

(2) the employee organization in the case of a benefit plan

established or maintained by an employee organization; or

(3) in a case of a benefit plan established or maintained by

two (2) or more employers or jointly by one or more employers

and one or more employee organizations, the association,

committee, joint board of trustees or other similar group of

representatives of the parties that establish or maintain the

benefit plan.

"Premium or income tax." The tax imposed under Article IV or

IX of the act of March 4, 1971 (P.L.6, No.2), known as the Tax

Reform Code of 1971 .

"Premiums." The amounts received on covered policies or

contracts less premiums, considerations and deposits returned

thereon and less dividends and experience credits thereon. The

term does not include any amounts received for any policies or

contracts or for the portions of any policies or contracts for

which coverage is not provided under section 1703(b) except that

assessable premium shall not be reduced on account of sections

1703(b)(2)(iii) relating to interest limitations and 1703(c)(1)

(ii) relating to limitations with respect to any one individual,

any one participant and any one policy or contract holder. The

term does not include any premiums in excess of five million

($5,000,000) dollars on any unallocated annuity contract not

issued under a governmental retirement plan established under

section 401, 403(b) or 457 of the Internal Revenue Code of 1986

(Public Law 99-514, 26 U.S.C. § 1 et seq.). The term does not

include, with respect to multiple nongroup policies of life

insurance owned by one owner, whether the policy or contract

owner is an individual, firm, corporation or other person, and

20200SB1195PN2041 - 24 -

whether the persons insured are officers, managers, employees or

other persons, premiums in excess of five million ($5,000,000)

dollars with respect to these policies or contracts, regardless

of the number of policies or contracts held by the owner.

"Principal place of business." The following apply:

(1) The principal place of business of a plan sponsor or a

person other than a natural person means the single state in

which the natural persons who establish policy for the

direction, control and coordination of the operations of the

entity as a whole primarily exercise that function, determined

by the association in its reasonable judgment by considering all

the following factors:

(i) The state in which the primary executive and

administrative headquarters of the entity is located.

(ii) The state in which the principal office of the chief

executive officer of the entity is located.

(iii) The state in which the board of directors or similar

governing person or persons of the entity conducts the majority

of its meetings.

(iv) The state in which the executive or management

committee of the board of directors, or similar governing person

or persons, of the entity conducts the majority of its meetings.

(v) The state from which the management of the overall

operations of the entity is directed.

(vi) In the case of a benefit plan sponsored by affiliated

companies comprising a consolidated corporation, the state in

which the holding company or controlling affiliate has its

principal place of business as determined using the factors

under subparagraphs (i), (ii), (iii), (iv), (v) and (vi).

(2) If, in the case of a plan sponsor, more than fifty

20200SB1195PN2041 - 25 -

percent (50%) of the participants in the benefit plan are

employed in a single state, that state shall be deemed to be the

principal place of business of the plan sponsor.

(3) The principal place of business of a plan sponsor of a

benefit plan described in paragraph (3) under the definition of

plan sponsor in this section shall be deemed to be the principal

place of business of the association, committee, joint board of

trustees or other similar group of representatives of the

parties who establish or maintain the benefit plan that, in lieu

of a specific or clear designation of a principal place of

business, shall be deemed to be the principal place of business

of the employer or employee organization that has the largest

investment in the benefit plan in question.

"Professional health services plan corporation." A person

engaged in the business of maintaining and operating a nonprofit

health service plan as defined in 40 Pa.C.S. Ch. 63 (relating to

professional health services plan corporations).

"RANLI PPO." An entity not licensed as an insurance company

but assuming risk as defined in section 630.

"Receivership court." The court in the insolvent insurer's

or impaired insurer's state having jurisdiction over the

conservation, rehabilitation or liquidation of the member

insurer.

"Resident." Any person who resides in this Commonwealth at

the time a member insurer is determined to be an impaired or

insolvent insurer and to whom a contractual obligation is owed.

A person may be a resident of only one state, which, in the case

of a person other than a natural person, shall be its principal

place of business. Citizens of the United States who are

residents of foreign countries or residents of United States

20200SB1195PN2041 - 26 -

possessions, territories or protectorates that do not have an

association similar to the association created by this article

shall be deemed residents of the state of domicile of the member

insurer that issued the policies or contracts.

"Structured settlement annuity." An annuity purchased in

order to fund periodic payments for a plaintiff or other

claimant in payment for or with respect to personal injury

suffered by the plaintiff or other claimant.

"State." A state, the District of Columbia, Puerto Rico,

and a United States possession, territory or protectorate.

"Supplemental contract." Any agreement entered into for the

distribution of policy or contract proceeds.

"Unallocated annuity contract." Any annuity contract or

group annuity certificate which is not issued to and owned by an

individual, except to the extent of any annuity benefits

guaranteed to an individual by an insurer under such contract or

certificate.

Section 1703. Coverage and Limitations.--(a) This article

shall provide coverage to the following persons for the policies

and contracts specified in subsection (b):

(1) To persons who, regardless of where they reside, except

for nonresident certificate holders or enrollees under group

policies or contracts, are the beneficiaries, assignees or

payees, including health care providers rendering services

covered under health insurance policies or certificates of the

persons covered under paragraph (2).

(2) To persons who are owners of or certificate holders or

enrollees under these policies or contracts [or, in the case

of], other than unallocated annuity contracts[, to the persons

who are the contract holders] and structured settlement

20200SB1195PN2041 - 27 -

annuities, and who:

(i) are residents; or

(ii) are not residents, but only under all of the following

conditions:

(A) the [insurers which] member insurer that issued such

policies or contracts [are] is domiciled in this Commonwealth;

(B) [such insurers never held a license or certificate of

authority in the states in which such persons reside;] the

states in which the persons reside have associations similar to

the association created by this article; and

[(C) these states have associations similar to the

association created by this article; and

(D) these] (C) the persons are not eligible for coverage by

[those associations.] associations in any other state due to the

fact that such insurers, RANLI PPOs, hospital plan corporations,

professional health services plan corporations, or health

maintenance organizations were not licensed or did not hold a

certificate of authority in the states in which the persons

reside at the time specified in the state's guaranty association

law.

(3) For unallocated annuity contracts specified in

subsection (b), paragraphs (1) and (2) shall not apply, and this

article shall, except as provided in paragraphs (5) and (6),

provide coverage to:

(i) Persons who are the owners of the unallocated annuity

contracts if the contracts are issued to or in connection with a

specific benefit plan whose plan sponsor has its principal place

of business in this Commonwealth.

(ii) Persons who are owners of unallocated annuity contracts

issued to or in connection with government lotteries if the

20200SB1195PN2041 - 28 -

owners are residents.

(4) For structured settlement annuities specified in

subsection (b), paragraphs (1) and (2) shall not apply, and this

article shall, except as provided in paragraphs (5) and (6),

provide coverage to a person who is a payee under a structured

settlement annuity or beneficiary of a payee if the payee is

deceased, if the payee:

(i) is a resident, regardless of where the contract owner

resides; or

(ii) is not a resident, but only under both of the following

conditions:

(A) (I) the contract owner of the structured settlement

annuity is a resident; or

(II) the contract owner of the structured settlement annuity

is not a resident; but

(a) the member insurer that issued the structured settlement

annuity is domiciled in this Commonwealth; and

(b) the state in which the contract owner resides has an

association similar to the association created by this article;

and

(B) neither the payee or beneficiary nor the contract owner

is eligible for coverage by the association of the state in

which the payee or contract owner resides.

(5) This article shall not provide coverage to:

(i) a person who is a payee or beneficiary of a contract

owner resident of this Commonwealth, if the payee or beneficiary

is afforded any coverage by the association of another state;

(ii) a person covered under paragraph (3), if any coverage

is provided by the association of another state to the person;

20200SB1195PN2041 - 29 -

(iii) a person who acquires rights to receive payments

through a structured settlement factoring transaction as defined

in 26 U.S.C. 5891(c)(3)(A) (relating to the taxation of

structured settlement factoring transactions), regardless of

whether the transaction occurred before or after the section

became effective.

(6) This article is intended to provide coverage to a person

who is a resident of this Commonwealth and, in special

circumstances, to a nonresident. In order to avoid duplicate

coverage, if a person who would otherwise receive coverage under

this article is provided coverage under the laws of any other

state, the person shall not be provided coverage under this

article. In determining the application of the provisions of

this paragraph in situations where a person could be covered by

the association of more than one state, whether as an owner,

payee, enrollee, beneficiary or assignee, this article shall be

construed in conjunction with other state laws to result in

coverage by only one association.

(b) (1) This article shall provide coverage to the persons

specified in subsection (a) for policies or contracts of direct,

nongroup life insurance, health[, annuity] insurance, which for

the purposes of this article includes, RANLI PPO, hospital plan

corporation, professional health services plan corporation and

health maintenance organization subscriber policies, contracts,

and certificates, or annuities and supplemental [policies or]

contracts to any of these, for certificates under direct group

policies and contracts and for unallocated annuity contracts

issued by member insurers, except as limited by this article.

Annuity contracts and certificates under group annuity contracts

include, but are not limited to, guaranteed investment

20200SB1195PN2041 - 30 -

contracts, deposit administration contracts, unallocated funding

agreements, allocated funding agreements, structured settlement

[agreements, lottery contracts] annuities, annuities issued to

or in connection with government lotteries and any immediate or

deferred annuity contracts.

(2) [This] Except as otherwise provided in paragraph (3),

this article shall not provide coverage for any of the

following:

(i) Any portion of a policy or contract not guaranteed by

the member insurer or under which the risk is borne by the

policy or contract holder.

(ii) Any policy or contract of reinsurance, unless

assumption certificates have been issued.

(iii) Any portion of a policy or contract to the extent that

the rate of interest on which it is based[:], or the interest

rate, crediting rate or similar factor determined by use of an

index or other external reference stated in the policy or

contract employed in calculating returns or changes in value:

(A) averaged over the period of four (4) years prior to the

date on which the [association] member insurer becomes

[obligated with respect to such policy or contract] an impaired

or insolvent insurer under this article, whichever is earlier,

exceeds a rate of interest determined by subtracting two (2)

percentage points from Moody's Corporate Bond Yield Average

averaged for the same four-year period or for such lesser period

if the policy or contract was issued less than four (4) years

before the [association became obligated] member insurer becomes

an impaired or insolvent insurer under this article, whichever

is earlier; and

(B) on and after the date on which the [association] member

20200SB1195PN2041 - 31 -

insurer becomes [obligated with respect to such policy or

contract] an impaired or insolvent insurer under this article,

whichever is earlier, exceeds the rate of interest determined by

subtracting three (3) percentage points from Moody's Corporate

Bond Yield Average as most recently available.

(iv) Any portion of a policy or contract issued to a plan or

program of an employer, association or similar entity to provide

life, health or annuity benefits to its [employes or] employees,

members or others to the extent that such plan or program is

self-funded or uninsured, including, but not limited to,

benefits payable by an employer, association or similar entity

under:

(A) a Multiple Employer Welfare Arrangement as defined in

section [514] 3(40) of the Employee Retirement Income Security

Act of 1974 (Public Law 93-406, 29 U.S.C. § 1002(40));

(B) a minimum premium group insurance plan;

(D) an administrative services only contract.

(v) Any portion of a policy or contract to the extent that

it provides dividends or experience rating credits [or provides

that], voting rights or for the payment of any fees or

allowances [to be paid] to any person, including the

policyholder or contract holder, in connection with the service

to or administration of such policy or contract.

(vi) Any policy or contract issued in this Commonwealth by a

member insurer at a time when it was not licensed or did not

have a certificate of authority to issue such policy or contract

in this Commonwealth.

(vii) Any unallocated annuity contract issued to an

[employe] employee benefit plan protected under the Federal

20200SB1195PN2041 - 32 -

Pension Benefit Guaranty Corporation[.], regardless of whether

the Federal Pension Benefit Guaranty Corporation has yet become

liable to make any payments with respect to the benefit plan.

(viii) Any portion of any unallocated annuity contract which

is not issued to or in connection with a specific [employe]

employee, union or association of natural persons benefit plan

or a government lottery.

(ix) A portion of a policy or contract to the extent that

the assessments required by section 1707 with respect to the

policy or contract are preempted by Federal or State law.

(x) An obligation that does not arise under the express

written terms of the policy or contract issued by the member

insurer to the enrollee, certificate holder, contract owner or

policy owner, including, without limitation:

(A) claims based on marketing materials;

(B) claims based on side letters, riders or other documents

that were issued by the member insurer without meeting

applicable policy or contract form filing or approval

requirements;

benefits;

(D) extracontractual claims; or

(E) a claim for penalties or consequential or incidental

damages.

(xi) A contractual agreement that establishes the member

insurer's obligations to provide a book value accounting

guaranty for defined contribution benefit plan participants by

reference to a portfolio of assets that is owned by the benefit

plan or its trustee, which in each case is not an affiliate of

the member insurer.

20200SB1195PN2041 - 33 -

(xii) A portion of a policy or contract to the extent it

provides for interest or other changes in value to be determined

by the use of an index or other external reference stated in the

policy or contract, but which have not been credited to the

policy or contract, or as to which the policy or contract

owner's rights are subject to forfeiture, as of the date the

member insurer becomes an impaired or insolvent insurer under

this article, whichever is earlier. If a policy's or contract's

interest or changes in value are credited less frequently than

annually, then for purposes of determining the values that have

been credited and are not subject to forfeiture under this

subparagraph, the interest or change in value determined by

using the procedures defined in the policy or contract will be

credited as if the contractual date of crediting interest or

changing values was the date of impairment or insolvency,

whichever is earlier, and will not be subject to forfeiture.

(xiii) A policy or contract providing any hospital, medical,

prescription drug or other health care benefits under Part C or

Part D of Title XVIII of the Social Security Act (Public Law 74-

271, 42 U.S.C. § 1395 et seq.), Title XIX of the Social Security

Act (Public Law 74-271, 42 U.S.C. § 1396 et seq.), Article

XXIII-A or any regulations issued pursuant thereto.

(xiv) Structured settlement annuity benefits to which a

payee or beneficiary has transferred the payee's or

beneficiary's rights in a structured settlement factoring

transaction as defined in 26 U.S.C. § 5891(c)(3)(A) (relating to

the taxation of structured settlement factoring transactions),

regardless of whether the transaction occurred before or after

the section became effective.

(3) The exclusion from coverage referenced in paragraph (2)

20200SB1195PN2041 - 34 -

(iii) shall not apply to any portion of a policy or contract,

including a rider, that provides long-term care or any other

health insurance benefits.

liable shall in no event exceed the lesser of:

(i) the contractual obligations for which the member insurer

is liable or would have been liable if it were not an impaired

or insolvent insurer; or

(ii) (A) With respect to any one life, regardless of the

number of policies or contracts, the following shall apply:

(I) Three hundred thousand ($300,000) dollars [in] for life

insurance death benefits, but not more than one hundred thousand

($100,000) dollars in net cash surrender and net cash withdrawal

values for life insurance.

[(II) Three hundred thousand ($300,000) dollars in health

insurance benefits, including any net cash surrender and net

cash withdrawal values.

(III) Three hundred thousand ($300,000) dollars in annuity

benefits, including one hundred thousand ($100,000) dollars in

net cash surrender and net cash withdrawal values.

(IV) Three hundred thousand ($300,000) dollars in long-term

care insurance benefits, as defined under section 1103,

including any cash surrender and net cash withdrawal values.]

(II) For health insurance benefits:

(1) One hundred thousand ($100,000) dollars for coverages or

benefits not defined as disability income insurance as defined

by 31 Pa. Code § 88.167 (relating to disability income

protection coverage) , health benefit plans as defined by section

1702 of this article or long-term care insurance as defined in

section 1103, including any net cash surrender and net cash

20200SB1195PN2041 - 35 -

withdrawal values.

(2) Three hundred thousand ($300,000) dollars for disability

income insurance, as defined by 31 Pa. Code § 88.167, and long-

term care insurance benefits as defined under section 1103,

including any cash surrender and net cash withdrawal values.

(3) Five hundred thousand ($500,000) dollars for health

benefit plans.

(III) Two hundred fifty thousand ($250,000) dollars in the

present value of annuity benefits, including net cash surrender

and net cash withdrawal values.

(B) With respect to each individual participating in a

governmental retirement plan established under section 401,

403(b) or 457 of the Internal Revenue Code of 1986 covered by an

unallocated annuity contract or the beneficiaries of each such

individual if deceased, in the aggregate, [three hundred

thousand ($300,000)] two hundred fifty thousand ($250,000)

dollars in [annuity benefits, including one hundred thousand

($100,000) dollars in] present value annuity benefits, including

net cash surrender and net cash withdrawal values.

annuity, or beneficiary or beneficiaries of the payee if

deceased, two hundred fifty thousand ($250,000) dollars in

present value annuity benefits, in the aggregate, including net

cash surrender and net cash withdrawal values, if any.

[(C)] (D) With respect to [any] either one contract [holder

covered by any] owner provided coverage under subsection (a)(3)

(ii) or one plan sponsor whose plans own directly or in trust

one or more unallocated annuity [contract] contracts not

included in clause (B), five million ($5,000,000) dollars in

benefits, irrespective of the number of such contracts held by

20200SB1195PN2041 - 36 -

that contract [holder.] owner or plan sponsor. In the case where

one or more unallocated annuity contracts are covered contracts

under this article and are owned by a trust or other entity for

the benefit of two (2) or more plan sponsors, coverage shall be

afforded by the association if the largest interest in the trust

or entity owning the contract or contracts is held by a plan

sponsor whose principal place of business is in this

Commonwealth and in no event shall the association be obligated

to cover more than five million ($5,000,000) dollars in benefits

with respect to all these unallocated contracts.

[(2)] (E) The association shall not, however, be liable to

expend more than three hundred thousand ($300,000) dollars in

the aggregate with respect to any one individual under

subparagraph (ii)(A) [and (B)], (B) or (C) of paragraph (1)[.] ,

except with respect to benefits for health benefit plans under

subclause (II)(3) of clause (A), in which case the aggregate

liability of the association shall not exceed five hundred

thousand ($500,000) dollars with respect to any one individual,

or with respect to one owner of multiple nongroup policies of

life insurance, whether the policy or contract owner is an

individual, firm, corporation or other person, and whether the

persons insured are officers, managers, employees or other

persons, more than five million ($5,000,000) dollars in

benefits, regardless of the number of policies and contracts

held by the owner.

(F) The limitations specified in this section are

limitations on the benefits for which the association is

obligated before taking into account either the association's

subrogation and assignment rights or the extent to which those

benefits could be provided out of the assets of the impaired or

20200SB1195PN2041 - 37 -

insolvent insurer attributable to covered policies. The costs of

the association's obligations under this article may be met by

the use of assets attributable to covered policies or reimbursed

to the association pursuant to the association's subrogation and

assignment rights.

(G) For purposes of this article, benefits provided by a

long-term care rider to a life insurance policy or annuity

contract shall be considered the same type of benefits as the

base life insurance policy or annuity contract to which the

rider relates.

(d) In performing its obligations to provide coverage under

section 1706, the association shall not be required to

guarantee, assume, reinsure, reissue or perform, or cause to be

guaranteed, assumed, reinsured, reissued or performed, the

contractual obligations of the insolvent or impaired insurer

under a covered policy, that do not materially affect the

economic values or economic benefits of the covered policy.

Section 1704. Creation of Association.--(a) There is hereby

created a nonprofit, unincorporated association to be known as

the Pennsylvania Life and Health Insurance Guaranty Association.

All member insurers shall be and remain members of the

association as a condition of their license or authority to

transact insurance, RANLI PPO business, hospital plan

corporation business, professional health services plan

corporation business or health maintenance organization business

in this Commonwealth. The association shall perform its

functions under the plan of operation established and approved

under section 1708 and shall exercise its powers through a board

of directors established under section 1705. For purposes of

administration and assessment the association shall maintain two

20200SB1195PN2041 - 38 -

accounts:

(1) The life insurance and annuity account which includes

the following subaccounts:

(i) Life insurance account.

(ii) Annuity account[.], which shall include annuity

contracts owned by a governmental retirement plan or its trustee

established under section 401, 403(b) or 457 of the Internal

Revenue Code of 1986, but shall otherwise exclude unallocated

annuities.

(iii) Unallocated annuity account which shall [include]

exclude contracts [qualified under section] owned by a

governmental retirement benefit plan or its trustee under

section 401, 403(b) or 457 of the Internal Revenue Code of 1986.

(2) The health [insurance] account.

* * *

Section 1705. Board of Directors.--(a) The board of

directors of the association shall consist of not less than

[five (5)] seven (7) nor more than [nine (9)] eleven (11) member

insurers serving terms as established in the plan of operation.

The members of the board shall be selected by member insurers

subject to the approval of the commissioner. Vacancies on the

board shall be filled for the remaining period of the term by a

majority vote of the remaining board members, subject to the

approval of the commissioner. To select the initial board of

directors and initially organize the association, the

commissioner shall give notice to all member insurers of the

time and place of the organizational meeting. In determining

voting rights at the organizational meeting, each member insurer

shall be entitled to one (1) vote in person or by proxy. If the

board of directors is not selected within sixty (60) days after

20200SB1195PN2041 - 39 -

notice of the organizational meeting, the commissioner may

appoint the initial members.

* * *

Section 1706. Powers and Duties of Association.--(a) If a

member insurer is an impaired [domestic] insurer, the

association may, in its discretion and subject to any conditions

imposed by the association that do not impair the contractual

obligations of the impaired insurer that are approved by the

commissioner [and that are, except in cases of court-ordered

conservation or rehabilitation, also approved by the impaired

insurer]:

(1) guarantee, assume, reissue or reinsure or cause to be

guaranteed, assumed, reissued or reinsured any or all of the

policies or contracts of the impaired insurer; or

(2) provide such moneys, pledges, notes, guarantees or other

means as are proper to effectuate paragraph (1) and assure

payment of the contractual obligations of the impaired insurer

pending action under paragraph (1).[; or

(3) loan money to the impaired insurer.

(b) (1) If a member insurer is an impaired insurer, whether

domestic, foreign or alien, and the insurer is not paying claims

timely, then subject to the preconditions specified in paragraph

(2), the association shall, in its discretion, either:

(i) take any of the actions specified in subsection (a),

subject to the conditions therein; or

(ii) provide substitute benefits in lieu of the contractual

obligations of the impaired insurer solely for health claims,

periodic annuity benefit payments, death benefits, supplemental

benefits and cash withdrawals for policy or contract owners who

petition therefor under claims of emergency or hardship in

20200SB1195PN2041 - 40 -

accordance with standards proposed by the association and

approved by the commissioner.

(2) The association shall be subject to the requirements of

paragraph (1) only if:

(i) the laws of its state of domicile provide that until all

payments of or on account of the impaired insurer's contractual

obligations by all guaranty associations, along with all

expenses thereof and interest on all such payments and expenses,

shall have been repaid to the guaranty associations or a plan of

repayment by the impaired insurer shall have been approved by

the guaranty associations:

(A) the delinquency proceeding shall not be dismissed;

(B) neither the impaired insurer nor its assets shall be

returned to the control of its shareholders or private

management;

business or have any suspended or revoked license restored;

(ii) in the case where the impaired insurer is a domestic

insurer, it has been placed under an order of rehabilitation by

a court of competent jurisdiction in this Commonwealth; or

(iii) in the case where the impaired insurer is a foreign or

alien insurer, it has been prohibited from soliciting or

accepting new business in this Commonwealth, its certificate of

authority has been suspended or revoked in this Commonwealth,

and a petition for rehabilitation or liquidation has been filed

in a court of competent jurisdiction in its state of domicile by

the commissioner of the state.]

[(c)] (b) If a member insurer is an insolvent insurer, the

association shall, in its discretion, either:

(1) (i) guarantee, assume, reissue or reinsure or cause to

20200SB1195PN2041 - 41 -

be guaranteed, assumed, reissued or reinsured the policies or

contracts of the insolvent insurer; or

[(2)] (ii) assure payment of the contractual obligations of

the insolvent insurer and provide such moneys, pledges,

guarantees or other means as are reasonably necessary to

discharge such duties; or

[(3) with respect only to life and health insurance

policies, provide] (2) Provide benefits and coverages in

accordance with [subsection (d).

(d) (1) When proceeding under subsection (b)(1)(ii) or (c)

(3), the association shall, with respect to only life and health

insurance policies, do all of the following:] the following

provisions:

(i) [Assure] With respect to policies and contracts, assure

payment of benefits [for premiums identical to the premiums and

benefits (except for terms of conversion and renewability)] that

would have been payable under the policies or contracts of the

insolvent insurer, for claims incurred as follows:

(A) With respect to group policies and contracts, not later

than the earlier of the next renewal date under such policies or

contracts or forty-five (45) days, but in no event less than

thirty (30) days, after the date on which the association

becomes obligated with respect to such policies or contracts.

(B) With respect to [individual] nongroup policies and

contracts and annuities, not later than the earlier of the next

renewal date (if any) under such policies or contracts or one

year, but in no event less than thirty (30) days, from the date

on which the association becomes obligated with respect to such

policies or contracts.

(ii) Make diligent efforts to provide all known insureds,

20200SB1195PN2041 - 42 -

enrollees, annuitants or group policyholders or contract holders

with respect to group policies or contracts thirty (30) days

notice of the termination of the benefits provided.

(iii) With respect to [individual] nongroup policies and

contracts, make available to each known insured, enrollee,

annuitant or owner if other than the insured, enrollee or

annuitant and with respect to an individual formerly an insured,

enrollee or annuitant under a group policy or contract who is

not eligible for replacement group coverage, make available

substitute coverage on an individual basis in accordance with

the provisions of [paragraph (2)] subparagraph (iv), if the

insureds, enrollees or annuitants had a right under law or the

terminated policy, contract or annuity to convert coverage to

individual coverage or to continue an individual policy,

contract or annuity in force until a specified age or for a

specified time, during which the insurer, RANLI PPO, hospital

plan corporation, professional health services plan corporation

or health maintenance organization had no right unilaterally to

make changes in any provision of the policy, contract or annuity

or had a right only to make changes in premium by class.

[(2) (i)] (iv) (A) (I) In providing the substitute

coverage required under [paragraph (1)(iii)] subparagraph (iii),

the association may offer either to reissue the terminated

coverage or to issue an alternative policy[.] or contract at

actuarially justified rates subject to prior approval of the

commissioner.

[(ii)] (II) Alternative or reissued policies or contracts

shall be offered without requiring evidence of insurability and

shall not provide for any waiting period or exclusion that would

not have applied under the terminated policy or contract.

20200SB1195PN2041 - 43 -

[(iii)] (III) The association may reinsure any alternative

or reissued policy or contract.

[(3) (i)] (B) (I) Alternative policies or contracts

adopted by the association shall be subject to the approval of

the commissioner. The association may adopt alternative policies

or contracts of various types for future issuance without regard

to any particular impairment or insolvency.

[(ii)] (II) Alternative policies or contracts shall contain

at least the minimum statutory provisions required in this

Commonwealth and provide benefits that shall not be unreasonable

in relation to the premium charged. The association shall set

the premium in accordance with a table of rates which it shall

adopt. The premium shall reflect the amount of insurance to be

provided and the age and class of risk of each insured, but

shall not reflect any changes in the health of the insured after

the original policy or contract was last underwritten.

[(iii)] (III) Any alternative policy or contract issued by

the association shall provide coverage of a type similar to that

of the policy or contract issued by the impaired or insolvent

insurer, as determined by the association.

[(4)] (v) If the association elects to reissue terminated

coverage at a premium rate different from that charged under the

terminated policy or contract, the premium shall be actuarially

justified and set by the association in accordance with the

amount of insurance or coverage provided and the age and class

of risk, subject to approval of the commissioner [or by a court

of competent jurisdiction].

[(5)] (vi) The association's obligations with respect to

coverage under any policy or contract of the impaired or

insolvent insurer or under any reissued or alternative policy or

20200SB1195PN2041 - 44 -

contract shall cease on the date such coverage or policy or

contract is replaced by another similar policy or contract by

the policyholder, contract holder, the insured, the enrollee or

the association.

[(e)] (c) When proceeding under subsection [(b)(1)(ii) or

(c)] (b)(2) with respect to any policy or contract carrying

guaranteed minimum interest rates, the association shall assure

the payment or crediting of a rate of interest consistent with

section 1703(b)(2)(iii).

[(f)] (d) Nonpayment of premiums within thirty-one (31) days

after the date required under the terms of any guaranteed,

assumed, alternative or reissued policy or contract or

substitute coverage shall terminate the association's

obligations under such policy, contract or coverage under this

article with respect to such policy, contract or coverage,

except with respect to any claims incurred or any net cash

surrender value which may be due in accordance with the

provisions of this article.

[(g)] (e) Premiums due for coverage after entry of an order

of liquidation of an insolvent insurer shall belong to and be

payable at the direction of the association, and the association

shall be liable for unearned premiums due to policy or contract

owners arising after the entry of such order.

[(h)] (f) The protection provided by this article shall not

apply where any guaranty protection is provided to residents of

this Commonwealth by the laws of the domiciliary state or

jurisdiction of the impaired or insolvent insurer other than

this Commonwealth.

[(i)] (g) In carrying out its duties under [subsections (b)

and (c)] subsection (b) and subject to approval by the court,

20200SB1195PN2041 - 45 -

the association may do the following:

(1) Impose permanent policy or contract liens in connection

with any guarantee, assumption or reinsurance agreement if the

association finds that the amounts which can be assessed under

this article are less than the amounts needed to assure full and

prompt performance of the association's duties under this [act]

article or that the economic or financial conditions as they

affect member insurers are sufficiently adverse to render the

imposition of such permanent policy or contract liens to be in

the public interest.

(2) Impose temporary moratoriums or liens on payments of

cash values and policy loans, or any other right to withdraw

funds held in conjunction with policies or contracts, in

addition to any contractual provisions for deferral of cash or

policy loan value. In addition, in the event of a temporary

moratorium or moratorium charge imposed by the receivership

court on payment of cash values or policy loans, or on any other

right to withdraw funds held in conjunction with policies or

contracts, out of the assets of the impaired or insolvent

insurer, the association may defer the payment of cash values,

policy loans or other rights by the association for the period

of the moratorium or moratorium charge imposed by the

receivership court, except for claims covered by the association

to be paid in accordance with a hardship procedure established

by the liquidator or rehabilitator and approved by the

receivership court.

(h) A deposit in this Commonwealth, held pursuant to law or

required by the commissioner for the benefit of creditors,

including policy or contract owners, not turned over to the

domiciliary liquidator upon the entry of a final order of

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liquidation or order approving a rehabilitation plan of a member

insurer domiciled in this Commonwealth or in a reciprocal State,

pursuant to Article IV of the act of May 17, 1921 (P.L.789,

No.285), known as The Insurance Department Act of 1921, shall be

promptly paid to the association. The association shall be

entitled to retain a portion of any amount so paid to it equal

to the percentage determined by dividing the aggregate amount of

policy or contract owners' claims related to that insolvency for

which the association has provided statutory benefits by the

aggregate amount of all policy or contract owners' claims in

this Commonwealth related to that insolvency and shall remit to

the domiciliary receiver the amount so paid to the association

less the amount retained pursuant to this subsection. Any amount

so paid to the association and retained by it shall be treated

as a distribution of estate assets pursuant to applicable

Commonwealth receivership law dealing with early access

disbursements.

[(j)] (i) If the association fails to act within a

reasonable period of time as provided in [subsections (b)(1)

(ii), (c) and (d)] subsection (b), the commissioner shall have

the powers and duties of the association under this article with

respect to impaired or insolvent insurers.

[(k)] (j) The association may render assistance and advice

to the commissioner, upon [his] the request of the commissioner,

concerning rehabilitation, payment of claims, continuance of

coverage or the performance of other contractual obligations of

any impaired or insolvent insurer.

[(l)] (k) The association shall have standing to appear or

intervene before any court or agency in this Commonwealth with

jurisdiction over an impaired or insolvent insurer concerning

20200SB1195PN2041 - 47 -

which the association is or may become obligated under this

article. Such standing shall extend to all matters germane to

the powers and duties of the association, including, but not

limited to, proposals for reinsuring, reissuing, modifying or

guaranteeing the policies or contracts of the impaired or

insolvent insurer and the determination of the policies or

contracts and contractual obligations. The association shall

also have the right to appear or intervene before a court or

agency in another state with jurisdiction over an impaired or

insolvent insurer for which the association is or may become

obligated or with jurisdiction over [a third party] any person

or property against whom the association may have rights through

subrogation [of the insurer's policyholders] or otherwise.

[(m)] (l) (1) Any person receiving benefits under this

article shall be deemed to have assigned the rights under and

any causes of action relating to the covered policy or contract

to the association to the extent of the benefits received

because of this article, whether the benefits are payments of or

on account of contractual obligations, continuation of coverage

or provision of substitute or alternative policies, contracts or

coverages. The association may require an assignment to it of

such rights and cause of action by any payee, policy or contract

owner, beneficiary, insured, enrollee or annuitant as a

condition precedent to the receipt of any rights or benefits

conferred by this article upon such person.

(2) The subrogation rights of the association under this

subsection shall have the same priority against the assets of

the impaired or insolvent insurer as that possessed by the

person entitled to receive benefits under this article.

(3) In addition to paragraphs (1) and (2), the association

20200SB1195PN2041 - 48 -

shall have all common law rights of subrogation and any other

equitable or legal remedy which would have been available to the

impaired or insolvent insurer or owner or holder, beneficiary,

enrollee or payee of a policy or contract with respect to such

policy or contracts[.] (including without limitation, in the

case of a structured settlement annuity, any rights of the

owner, beneficiary or payee of the annuity, to the extent of

benefits received pursuant to this article, against a person

originally or by succession responsible for the losses arising

from the personal injury relating to the annuity or payment

therefore), excepting any such person responsible solely by

reason of serving as an assignee in respect of a qualified

assignment under section 130 of the Internal Revenue Code of

1986.

(4) If the preceding provisions of this subsection are

invalid or ineffective with respect to any person or claim for

any reason, the amount payable by the association with respect

to the related covered obligations shall be reduced by the

amount realized by any other person with respect to the person

or claim that is attributable to the policies or contracts (or

portion thereof) covered by the association.

(5) If the association has provided benefits with respect to

a covered obligation and a person recovers amounts as to which

the association has rights as described in paragraphs (1), (2),

(3) and (4) the person shall pay to the association the portion

of the recovery attributable to the policies or contracts (or

portion thereof) covered by the association.

[(n) The] (m) In addition to the rights and powers elsewhere

in this article, the association may do the following:

(1) Enter into such contracts as are necessary or proper to

20200SB1195PN2041 - 49 -

carry out the provisions and purposes of this article.

(2) Sue or be sued, including taking any legal actions

necessary or proper to recover any unpaid assessments under

section 1707 and to settle claims or potential claims against

it.

(3) Borrow money to effect the purposes of this article; any

notes or other evidence of indebtedness of the association not

in default shall be legal investments for domestic insurers or

member insurers and may be carried as admitted assets.

(4) Employ or retain such persons as are necessary to handle

the financial transactions of the association and perform such

other functions as become necessary or proper under this

article.

(5) Take such legal action as may be necessary to avoid

payment of improper claims.

(6) Exercise, for the purposes of this article and to the

extent approved by the commissioner, the powers of a domestic

life [or] insurer, health insurer, RANLI PPO, hospital plan

corporation, professional health services plan corporation or

health maintenance organization, but in no case may the

association issue [insurance] policies or [annuity] contracts

other than those issued to perform its obligations under this

article.

(7) Organize itself as a corporation or in other legal form

permitted by the laws of this Commonwealth.

(8) Request information from a person seeking coverage from

the association in order to aid the association in determining

its obligations under this article with respect to the person,

and the person shall promptly comply with the request.

(9) In accordance with the terms and conditions of the

20200SB1195PN2041 - 50 -

policy or contract, file for actuarially justified rate or

premium increases for any policy or contract for which it

provides coverage under this article.

(10) Take other necessary or appropriate action to discharge

its duties and obligations under this article or to exercise its

powers under this article.

[(o)] (n) The association may join an organization of one or

more other state associations of similar purposes, to further

the purposes and administer the powers and duties of the

association.

(o) (1) (i) At any time within one hundred eighty (180)

days of the date of the order of liquidation, the association

may elect to succeed to the rights and obligations of the ceding

member insurer that relate to policies, contracts, or annuities

covered, in whole or in part, by the association, in each case

under any one or more reinsurance contracts entered into by the

insolvent insurer and its reinsurers and selected by the

association. Any such assumption shall be effective as of the

date of the order of liquidation. The election shall be effected

by the association or the National Organization of Life and

Health Insurance Guaranty Associations (NOLHGA) on its behalf

sending written notice, return receipt requested, to the

affected reinsurers.

(ii) To facilitate the earliest practicable decision about

whether to assume any of the contracts of reinsurance, and in

order to protect the financial position of the estate, the

receiver and each reinsurer of the ceding member insurer shall

make available upon request to the association or to NOLHGA on

its behalf as soon as possible after commencement of formal

delinquency proceedings (A) copies of in-force contracts of

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reinsurance and all related files and records relevant to the

determination of whether such contracts should be assumed, and

(B) notices of any defaults under the reinsurance contacts or

any known event or condition which with the passage of time

could become a default under the reinsurance contracts.

(iii) The following clauses shall apply to reinsurance

contracts so assumed by the association:

(A) The association shall be responsible for all unpaid

premiums due under the reinsurance contracts for periods both

before and after the date of the order of liquidation, and shall

be responsible for the performance of all other obligations to

be performed after the date of the order of liquidation, in each

case which relate to policies, contracts or annuities covered,

in whole or in part, by the association. The association may

charge policies, contracts or annuities covered in part by the

association, through reasonable allocation methods, the costs

for reinsurance in excess of the obligations of the association

and shall provide notice and an accounting of these charges to

the liquidator.

(B) The association shall be entitled to any amounts payable

by the reinsurer under the reinsurance contracts with respect to

losses or events that occur in periods after the date of the

order of liquidation and that relate to policies, contracts or

annuities covered, in whole or in part, by the association,

provided that, upon receipt of any such amounts, the association

shall be obliged to pay to the beneficiary under the policy,

contract or annuity on account of which the amounts were paid a

portion of the amount equal to the lesser of:

(I) The amount received by the association; and

(II) The excess of the amount received by the association

20200SB1195PN2041 - 52 -

over the amount equal to the benefits paid by the association on

account of the policy, contract or annuity less the retention of

the member insurer applicable to the loss or event.

election date, the association and each reinsurer under

contracts assumed by the association shall calculate the net

balance due to or from the association under each reinsurance

contract as of the election date with respect to policies,

contracts or annuities covered, in whole or in part, by the

association, which calculation shall give full credit to all

items paid by either the member insurer or its receiver or the

reinsurer prior to the election date. The reinsurer shall pay

the receiver any amounts due for losses or events prior to the

date of the order of liquidation, subject to any set-off for

premiums unpaid for periods prior to the date, and the

association or reinsurer shall pay any remaining balance due the

other, in each case within five (5) days of the completion of

the aforementioned calculation. Any disputes over the amounts

due to either the association or the reinsurer shall be resolved

by arbitration pursuant to the terms of the affected reinsurance

contracts or, if the contract contains no arbitration clause, as

otherwise provided by law. If the receiver has received any

amounts due the association pursuant to subparagraph (iii)(B),

the receiver shall remit the same to the association as promptly

as practicable.

(D) If the association or receiver, on the association's

behalf, within sixty (60) days of the election date, pays the

unpaid premiums due for periods both before and after the

election date that relate to policies, contracts or annuities

covered, in whole or in part, by the association, the reinsurer

20200SB1195PN2041 - 53 -

shall not be entitled to terminate the reinsurance contracts for

failure to pay premium insofar as the reinsurance contracts

relate to policies, contracts or annuities covered, in whole or

in part, by the association, and shall not be entitled to set

off any unpaid amounts due under other contracts, or unpaid

amounts due from parties other than the association, against

amounts due the association.

(2) During the period from the date of the order of

liquidation until the election date or if the election date does

not occur, until one hundred eighty (180) days after the date of

the order of liquidation :

(i) (A) neither the association nor the reinsurer shall

have any rights or obligations under reinsurance contracts that

the association has the right to assume under paragraph (1),

whether for periods prior to or after the date of the order of

liquidation; and

(B) the reinsurer, the receiver and the association shall,

to the extent practicable, provide each other data and records

reasonably requested;

(ii) provided that once the association has elected to

assume a reinsurance contract, the parties' rights and

obligations shall be governed by paragraph (1).

(3) If the association does not elect to assume a

reinsurance contract by the election date pursuant to paragraph

(1), the association shall have no rights or obligations, in

each case for periods both before and after the date of the

order of liquidation, with respect to the reinsurance contract.

(4) When policies, contracts or annuities, or covered

obligations with respect thereto, are transferred to an assuming

insurer, reinsurance on the policies, contracts or annuities may

20200SB1195PN2041 - 54 -

also be transferred by the association, in the case of contracts

assumed under paragraph (1), subject to all the following:

(i) Unless the reinsurer and the assuming insurer agree

otherwise, the reinsurance contract transferred shall not cover

any new policies of insurance, contracts or annuities in

addition to those transferred.

(ii) The obligations described in paragraph (1) shall no

longer apply with respect to matters arising after the effective

date of the transfer.

(iii) Notice shall be given in writing, return receipt

requested, by the transferring party to the affected reinsurer

not less than thirty (30) days prior to the effective date of

the transfer.

(5) The provisions of this subsection shall supersede the

provisions of any state law or of any affected reinsurance

contract that provides for or requires any payment of

reinsurance proceeds, on account of losses or events that occur

in periods after the date of the order of liquidation, to the

receiver of the insolvent insurer or any other person. The

receiver shall remain entitled to any amounts payable by the

reinsurer under the reinsurance contracts with respect to losses

or events that occur in periods prior to the date of the order

of liquidation, subject to applicable setoff provisions.

(6) Except as otherwise provided in this section, nothing in

this subsection shall alter or modify the terms and conditions

of any reinsurance contract. Nothing in this section shall

abrogate or limit any rights of any reinsurer to claim that it

is entitled to rescind a reinsurance contract. Nothing in this

section shall give a policyholder, contract owner, enrollee,

certificate holder, or beneficiary an independent cause of

20200SB1195PN2041 - 55 -

action against a reinsurer that is not otherwise set forth in

the reinsurance contract. Nothing in this section shall limit or

affect the association's rights as a creditor of the estate

against the assets of the estate. Nothing in this section shall

apply to reinsurance agreements covering property or casualty

risks.

(7) For the purposes of this subsection, "election date"

shall mean the date of the association's election to succeed to

the rights and obligations of a ceding member insurer that

relate to policies, contracts or annuities covered, in whole or

in part, by the association, in each case under any one or more

reinsurance contracts entered into by the insolvent insurer and

its reinsurers and selected by the association.

(p) The board of directors of the association shall have

discretion and may exercise reasonable business judgment to

determine the means by which the association is to provide the

benefits of this article in an economical and efficient manner.

(q) Where the association has arranged or offered to provide

the benefits of this article to a covered person under a plan or

arrangement that fulfills the association's obligations under

this article, the person shall not be entitled to benefits from

the association in addition to or other than those provided

under the plan or arrangement.

(r) Venue in a suit against the association arising under

the article shall be in Dauphin County, Pennsylvania. The

association shall not be required to give an appeal bond in an

appeal that relates to a cause of action arising under this

article.

(s) In carrying out its duties in connection with

guaranteeing, assuming, reissuing, or reinsuring policies or

20200SB1195PN2041 - 56 -

contracts under subsection (a) or (b), the association may issue

substitute coverage for a policy or contract that provides an

interest rate, crediting rate or similar factor determined by

use of an index or other external reference stated in the policy

or contract employed in calculating returns or changes in value

by issuing an alternative policy or contract in accordance with

the following provisions:

(1) In lieu of the index or other external reference

provided for in the original policy or contract, the alternative

policy or contract provides for:

(i) a fixed interest rate;

(ii) payment of dividends with minimum guarantees; or

(iii) a different method for calculating interest or changes

in value.

(2) There is no requirement for evidence of insurability,

waiting period or other exclusion that would not have applied

under the replaced policy or contract.

(3) The alternative policy or contract is substantially

similar to the replaced policy or contract in all other material

terms.

Section 1707. Assessments.--(a) For the purpose of

providing the funds necessary to carry out the powers and duties

of the association, the board of directors shall assess the

member insurers, separately for each account, at such time and

for such amounts as the board finds necessary. Assessments shall

be due not less than thirty (30) days after prior written notice

to the member insurers and shall accrue interest at eight per

centum (8%) per annum on and after the due date.

(b) There shall be two classes of assessments, as follows:

(1) Class A assessments shall be made for the purpose of

20200SB1195PN2041 - 57 -

meeting administrative and legal costs and other expenses [and

examinations conducted under the authority of section 1710(e)].

Class A assessments may be [made] authorized and called whether

or not related to a particular impaired or insolvent insurer.

(2) Class B assessments shall be [made] authorized and

called to the extent necessary to carry out the powers and

duties of the association under section 1706 with regard to an

impaired or an insolvent insurer.

determined by the board and may be [made] authorized and called

on a pro rata or non-pro rata basis. If pro rata, the board may

provide that it be credited against future Class B assessments.

[A non-pro rata assessment shall not exceed two hundred ($200)

dollars per member insurer in any one calendar year.] The amount

of [any] a Class B assessment, except for assessments related to

long-term care insurance, shall be allocated for assessment

purposes [among] between the accounts and among the subaccounts

of the life insurance and annuity account, pursuant to an

allocation formula which may be based on the premiums or

reserves of the impaired or insolvent insurer or any other

standard deemed by the board in its sole discretion as being

fair and reasonable under the circumstances.

(2) The amount of the Class B assessment for long-term care

insurance written by the impaired or insolvent insurer shall be

allocated according to a methodology included in the plan of

operation and approved by the commissioner. The methodology

shall provide for 50% of the assessment to be allocated to

accident and health member insurers and 50% to be allocated to

life and annuity member insurers.

(3) For the purposes of the methodology in paragraph (2) and

20200SB1195PN2041 - 58 -

the formula in the plan of operation only, a "life and annuity

member insurer" means a member insurer for which (i) the sum of

its assessable life insurance premiums and annuity premiums is

greater than or equal to (ii) its assessable health insurance

premiums, which shall include its assessable RANLI PPO, hospital

plan corporation, professional health services plan corporation

and health maintenance organization premiums, but shall exclude

its assessable premiums written for disability income and long-

term care insurance. For purposes of this definition, assessable

premiums shall be measured within the Commonwealth. An "accident

and health member insurer" means any member insurer not defined

as a "life and annuity member insurer."

[(2)] (4) Class B assessments against member insurers for

each account and subaccount shall be in the proportion that the

premiums received on business in this Commonwealth by each

assessed member insurer for policies or contracts covered by

each account for the three (3) most recent calendar years for

which information is available preceding the year in which the

member insurer became [impaired or] insolvent[, as the case may

be,] (or, in the case of an assessment with respect to an

impaired insurer, the three (3) most recent calendar years for

which information is available preceding the year in which the

member insurer became impaired), bears to [such] premiums

received on business in this Commonwealth for [such] those

calendar years by all assessed member insurers.

[(3)] (5) Assessments for funds to meet the requirements of

the association with respect to an impaired or insolvent insurer

shall not be [made] authorized or called until necessary to

implement the purposes of this article. Classification of

assessments under subsection (b) and computation of assessments

20200SB1195PN2041 - 59 -

under this subsection shall be made with a reasonable degree of

accuracy, recognizing that exact determinations may not always

be possible. The association shall notify each member insurer of

the member insurer's anticipated pro rata share of an authorized

assessment not yet called within one hundred eighty (180) days

after the assessment is authorized.

(d) The association may abate or defer, in whole or in part,

the assessment of a member insurer if, in the opinion of the

board, payment of the assessment would endanger the ability of

the member insurer to fulfill its contractual obligations. In

the event an assessment against a member insurer is abated, or

deferred in whole or in part, the amount by which such

assessment is abated or deferred may be assessed against the

other member insurers in a manner consistent with the basis for

assessments set forth in this section. Once the conditions that

caused a deferral have been removed or rectified, the member

insurer shall pay all assessments that were deferred pursuant to

a repayment plan approved by the association.

(e) (1) [The] (i) Subject to the provisions of

subparagraph (ii), the total of all assessments [upon a]

authorized by the association with respect to a member insurer

[for the life and annuity account and] for each subaccount

[thereunder] of the life insurance and annuity account and for

the health account shall not in any one (1) calendar year exceed

two per centum (2%) [and for the health account shall not in any

one (1) calendar year exceed two per centum (2%) of such] of

that member insurer's average annual premiums received in this

Commonwealth on the policies and contracts covered by the

subaccount or account during the three (3) calendar years

preceding the year in which the member insurer became an

20200SB1195PN2041 - 60 -

impaired or insolvent insurer. [If the maximum assessment,

together with the other assets of the association in any

account, does not provide in any one (1) year in either account

an amount sufficient to carry out the responsibilities of the

association, the necessary additional funds shall be assessed as

soon thereafter as permitted by this article.]

(ii) If two (2) or more assessments are authorized in one

(1) calendar year with respect to member insurers that become

impaired or insolvent in different calendar years, the average

annual premiums for purposes of the aggregate assessment

percentage limitation referenced in subparagraph (i) shall be

equal and limited to the higher of the three (3) year average

annual premiums for the applicable subaccount or account as

calculated pursuant to this section.

(iii) If the maximum assessment, together with the other

assets of the association in any account, does not provide in

any one (1) year in either account an amount sufficient to carry

out the responsibilities of the association, the necessary

additional funds shall be assessed as soon thereafter as

permitted by this article.

(2) The board may provide in the plan of operation a method

of allocating funds among claims, whether relating to one or

more impaired or insolvent insurers, when the maximum assessment

will be insufficient to cover anticipated claims.

(3) [If a one per centum (1%) assessment for any subaccount

of the life and annuity account in any one (1) year does not

provide an amount sufficient to carry out the responsibilities

of the association, then pursuant to subsection (c)(2), the

board shall access all subaccounts of the life and annuity

account for the necessary additional amount, subject to the

20200SB1195PN2041 - 61 -

maximum stated in subsection (e)(1).] If the maximum assessment

for a subaccount of the life and annuity account in one (1) year

does not provide an amount sufficient to carry out the

responsibilities of the association, then pursuant to subsection

(c)(2), the board shall access the other subaccounts of the life

and annuity account for the necessary additional amount, subject

to the maximum stated in paragraph (1).

(f) The board may, by an equitable method as established in

the plan of operation, refund to member insurers, in proportion

to the contribution of each member insurer to that account, the

amount by which the assets of the account exceed the amount the

board finds is necessary to carry out during the coming year the

obligations of the association with regard to that account,

including assets accruing from assignment, subrogation, net

realized gains and income from investments. A reasonable amount

may be retained in any account to provide funds for the

continuing expenses of the association and for future losses.

(g) It shall be proper for any member insurer, in

determining its premium rates and policyowner dividends as to

any kind of insurance, RANLI PPO business, hospital plan

corporation business, professional health services plan

corporation business or health maintenance organization business

within the scope of this article, to consider the amount

reasonably necessary to meet its assessment obligations under

this article, provided that such member insurer has not elected

to take tax credits as provided in section 1711(a).

(h) The association shall issue to each member insurer

paying an assessment under this article, other than class A

assessment, a certificate of contribution, in a form prescribed

by the commissioner, for the amount of the assessment so paid.

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All outstanding certificates shall be of equal dignity and

priority without reference to amounts or dates of issue. A

certificate of contribution may be shown by the member insurer

in its financial statement as an asset in such form and for such

amount, if any, and period of time as the commissioner may

approve.

(i) (1) A member insurer that wishes to protest all or part

of an assessment shall pay when due the full amount of the

assessment as set forth in the notice provided by the

association. The payment shall be available to meet association

obligations during the pendency of the protest or any subsequent

appeal. Payment shall be accompanied by a statement in writing

that the payment is made under protest and setting forth a brief

statement of the grounds for the protest.

(2) Within sixty (60) days following the payment of an

assessment under protest by a member insurer, the association

shall notify the member insurer in writing of its determination

with respect to the protest unless the association notifies the

member insurer that additional time is required to resolve the

issues raised by the protest.

(3) Within thirty (30) days after a final decision has been

made, the association shall notify the protesting member insurer

in writing of the final decision. Within sixty (60) days of

receipt of notice of the final decision, the protesting member

insurer may appeal that final action to the commissioner.

(4) In the alternative to rendering a final decision with

respect to a protest based on a question regarding the

assessment base, the association may refer protests to the

commissioner for a final decision, with or without a

recommendation from the association.

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(5) If the protest or appeal on the assessment is upheld,

the amount paid in error or excess shall be returned to the

member insurer. Interest on a refund due a protesting member

insurer shall be paid at the rate actually earned by the

association.

(j) The association may request information of member

insurers in order to aid in the exercise of its power under this

section and member insurers shall promptly comply with a

request.

Section 2. Section 1708(c) introductory paragraph and (d) of

the act are amended and subsection (c) is amended by adding

paragraphs to read:

Section 1708. Plan of Operation.--* * *

enumerated elsewhere in this article[, contain the following]:

* * *

(8) Establish procedures whereby a director may be removed

for cause, including in the case where a member insurer director

becomes an impaired or insolvent insurer.

(9) Require the board of directors to establish a policy and

procedures for addressing conflicts of interests.

(d) The plan of operation may provide that any or all powers

and duties of the association, except those under sections

[1706(n)(3)] 1706(m)(3) and 1707, are delegated to a

corporation, association or other organization which performs or

will perform functions similar to those of this association or

its equivalent in two or more states. Such a corporation,

association or organization shall be reimbursed for any payments

made on behalf of the association and shall be paid for its

performance of any function of the association. A delegation

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under this subsection shall take effect only with the approval

of both the board of directors and the commissioner and may be

made only to a corporation, association or organization which

extends protection not substantially less favorable and

effective than that provided by this article.

Section 3. Sections 1709, 1710, 1711, 1712, 1713, 1715,

1716, 1717 and 1718 of the act are amended to read:

Section 1709. Powers and Duties of the Commissioner.--(a)

In addition to the powers and duties enumerated elsewhere in

this article, the commissioner shall:

(1) Upon request of the board of directors, provide the

association with a statement of the premiums in this and any

other appropriate states for each member insurer.

(2) When an impairment is declared and the amount of the

impairment is determined, serve a demand upon the impaired

insurer to make good the impairment within a reasonable time;

notice to the impaired insurer shall constitute notice to its

shareholders, if any; the failure of the impaired insurer to

promptly comply with such demand shall not excuse the

association from the performance of its powers and duties under

this article.

[(3) In any liquidation or rehabilitation proceeding

involving a domestic insurer, be appointed as the liquidator or

rehabilitator.]

(b) The commissioner may suspend or revoke, after notice and

hearing, the license or certificate of authority to transact

[insurance] business in this Commonwealth of any member insurer

which fails to pay an assessment when due or fails to comply

with the plan of operation. As an alternative, the commissioner

may levy a forfeiture on any member insurer which fails to pay

20200SB1195PN2041 - 65 -

an assessment when due. Such forfeiture shall not exceed five

per centum (5%) of the unpaid assessment per month, but no

forfeiture shall be less than one hundred ($100) dollars per

month.

association may be appealed to the commissioner by any member

insurer if such appeal is taken within sixty (60) days of its

receipt of notice of the final action being appealed. [If a

member company is appealing an assessment, the amount assessed

shall be paid to the association and available to meet

association obligations during the pendency of an appeal. If the

appeal on the assessment is upheld, the amount paid in error or

excess shall be returned to the member company.] Any final

action or order of the commissioner shall be subject to judicial

review in a court of competent jurisdiction[.] in accordance

with the laws of this Commonwealth that apply to the actions or

orders of the commissioner.

(d) The liquidator, rehabilitator or conservator of any

impaired or insolvent insurer may notify all interested persons

of the effect of this article.

Section 1710. Prevention of Insolvencies.--(a) To aid in

the detection and prevention of member insurer insolvencies or

impairments, it shall be the duty of the commissioner:

(1) To notify the commissioners of all the other states,

territories of the United States and the District of Columbia

within thirty (30) days following the action taken or the date

the action occurs, when [he] the commissioner takes any of the

following actions against a member insurer:

(i) revocation of license or certificate of authority;

(ii) suspension of license or certificate of authority; or

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(iii) makes any formal order that such [company] member

insurer restrict its premium writing, obtain additional

contributions to surplus, withdraw from the Commonwealth,

reinsure all or any part of its business or increase capital,

surplus or any other account for the security of [policyholders]

policy owners, contract owners, certificate holders or

creditors.

[This notice shall be mailed to all commissioners within thirty

(30) days following the action taken or the date on which such

action occurs.]

(2) To report to the board of directors when [he] the

commissioner has taken any of the actions set forth in paragraph

(1) or has received a report from any other commissioner

indicating that any such action has been taken in another state.

Such report to the board of directors shall contain all

significant details of the action taken or the report received

from another commissioner.

(3) To report to the board of directors when [he] the

commissioner has reasonable cause to believe from any

examination, whether completed or in process, of any member

[company] insurer that such [company] member insurer may be an

impaired or insolvent insurer.

(4) To furnish to the board of directors the National

Association of Insurance Commissioners' (NAIC) Insurance

Regulatory Information System (IRIS) ratios and listing of

companies not included in the ratios developed by the National

Association of Insurance Commissioners, and the board may use

the information contained therein in carrying out its duties and

responsibilities under this section. Such report and the

information contained therein shall be kept confidential by the

20200SB1195PN2041 - 67 -

board of directors until such time as made public by the

commissioner or other lawful authority.

(b) The commissioner may seek the advice and recommendations

of the board of directors concerning any matter affecting [his]

the duties and responsibilities of the commissioner regarding

the financial condition of member insurers and [companies]

insurers, RANLI PPOs, hospital plan corporations, professional

health services plan corporations or health maintenance

organizations seeking admission to transact [insurance] business

in this Commonwealth.

reports and recommendations to the commissioner upon any matter

germane to the solvency, liquidation, rehabilitation or

conservation of any member insurer or germane to the solvency of

any [company] insurers, RANLI PPOs, hospital plan corporations,

professional health services plan corporations or health

maintenance organizations seeking to do [an insurance] business

in this Commonwealth. Such reports and recommendations shall not

be considered public documents.

(d) [It shall be the duty of the] The board of directors

may, upon majority vote, [to] notify the commissioner of any

information indicating [any] a member insurer may be an impaired

or insolvent insurer.

[(e) (1) The board of directors may, upon majority vote,

request that the commissioner order an examination of any member

insurer which the board in good faith believes may be an

impaired or insolvent insurer. Within thirty (30) days of the

receipt of such request, the commissioner shall begin such

examination. The examination may be conducted as a National

Association of Insurance Commissioners examination or may be

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conducted by such persons as the commissioner designates. The

cost of such examination shall be paid by the association, and

the examination report shall be treated as are other examination

reports. In no event shall such examination report be released

to the board of directors prior to its release to the public,

but this shall not preclude the commissioner from complying with

subsection (a).

(2) The commissioner shall notify the board of directors

when the examination is completed. The request for an

examination shall be kept on file by the commissioner, but it

shall not be open to public inspection prior to the release of

the examination report to the public.]

[(f)] (e) The board of directors may, upon majority vote,

make recommendations to the commissioner for the detection and

prevention of member insurer insolvencies.

[(g) The board of directors shall, at the conclusion of any

insurer insolvency in which the association was obligated to pay

covered claims, prepare a report to the commissioner containing

such information as it may have in its possession bearing on the

history and causes of such insolvency. The board shall cooperate

with the boards of directors of guaranty associations in other

states in preparing a report on the history and causes of

insolvency of a particular insurer, and may adopt by reference

any report prepared by such other associations.]

Section 1711. Credits for Assessments Paid.--(a) A member

insurer may offset against its premium or income tax liability

to this Commonwealth a proportionate part of the assessments

described in section 1707 to the extent of twenty per centum

(20%) of the amount of such assessment for each of the five (5)

calendar years following the year in which such assessment was

20200SB1195PN2041 - 69 -

paid. In the event a member insurer should cease doing business,

all uncredited assessments may be credited against its premium

or income tax liability for the year it ceases doing business.

(b) The proportionate part of an assessment which may be

offset against a member [company's] insurer's premium or income

tax liability to the Commonwealth shall be determined according

to a fraction of which the denominator is the total premiums (in

the category assessed) received by the [company] member insurer

during the calendar year immediately preceding the year in which

the assessment is paid and the numerator is that portion of the

premiums received during such year on account of policies or

contracts of life insurance (including or limited to annuities

and unallocated annuities per account or subaccount, as

applicable per the assessment), or health and accident insurance

(including RANLI PPO, hospital plan corporation, professional

health services plan corporation and health maintenance

organization subscriber policies, contracts and certificates),

in which the premium rates are guaranteed during the continuance

of the respective policies or contracts without a right

exercisable by the [company] member insurer to increase said

premium rates.

subsection (a) may recoup its assessments by assigning available

offsets (as calculated under subsection (b)) to a taxable member

or members of its controlled group, as the term is defined under

section 1563(a) of the Internal Revenue Code of 1986. Such

assigned offsets may be utilized by the taxable member or

members in the manner provided under subsection (a).

(d) A member insurer that is exempt from taxes referenced in

subsection (a) and has no taxable members of a controlled group

20200SB1195PN2041 - 70 -

as referenced in subsection (c) may recoup its assessments by a

surcharge on its premiums in a sum reasonably calculated to

recoup the assessments over a reasonable period of time, as

approved by the commissioner. Amounts recouped shall not be

considered premiums for any other purpose, including the

computation of gross premium tax, the medical loss ratio or

agent commission. If a member insurer collects excess

surcharges, the member insurer shall remit the excess amount to

the association, and the excess amount shall be applied to

reduce future assessments in the appropriate account.

(e) Any sums which are acquired by refund, pursuant to

section 1707(f), from the association by member insurers, and

which have theretofore been offset against premium or income

taxes as provided in this section and are not then needed for

the purposes of this [act] article, shall be paid by such member

insurers to this Commonwealth in such manner as the tax

authorities may require. The association shall notify the

commissioner that such refunds have been made.

[(d)] (f) No offset against premium or income tax liability

shall be permitted to the extent that a member insurer's rates

or policyholder dividends have been adjusted as permitted in

section 1707.

Section 1712. Miscellaneous Provisions.--(a) Nothing in

this article shall be construed to reduce the liability for

unpaid assessments of the insureds of an impaired or insolvent

insurer operating under a plan with assessment liability.

(b) Records shall be kept of all [negotiations and] meetings

[in which the association or its representatives are involved]

of the board of directors to discuss the activities of the

association in carrying out its powers and duties under section

20200SB1195PN2041 - 71 -

1706. [Records] The records of [such negotiations or meetings]

the association with respect to an impaired or insolvent insurer

shall [be made public only upon] not be disclosed prior to the

termination of a liquidation, rehabilitation or conservation

proceeding involving the impaired or insolvent insurer, except

(i) upon the termination of the impairment or insolvency of the

member insurer, or (ii) upon the order of a court of competent

jurisdiction. Nothing in this subsection shall limit the duty of

the association to render a report of its activities under

section 1713.

this article, the association shall be deemed to be a creditor

of the impaired or insolvent insurer to the extent of assets

attributable to covered policies reduced by any amounts to which

the association is entitled as subrogee pursuant to section

1706. Assets of the impaired or insolvent insurer attributable

to covered policies shall be used to continue all covered

policies and pay all contractual obligations of the impaired or

insolvent insurer as required by this article. Assets

attributable to covered policies, as used in this subsection,

are that proportion of the assets which the reserves that should

have been established for such policies or contracts bear to the

reserves that should have been established for all policies of

insurance or health benefit plans written by the impaired or

insolvent insurer.

(d) As a creditor of the impaired or insolvent insurer as

established in subsection (c) and consistent with section 536 of

the act of May 17, 1921 (P.L.789, No.285), known as The

Insurance Department Act of 1921 , the association and other

similar associations shall be entitled to receive a disbursement

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of assets out of the marshaled assets, from time to time as the

assets become available to reimburse it, as a credit against

contractual obligations under this article. If the liquidator

has not, within one hundred twenty (120) days of a final

determination of insolvency of a member insurer by the

receivership court, made an application to the court for the

approval of a proposal to disburse assets out of marshaled

assets to guaranty associations having obligations because of

the insolvency, then the association shall be entitled to make

application to the receivership court for approval of its own

proposal to disburse these assets.

[(d)] (e) (1) Prior to the termination of any liquidation,

rehabilitation or conservation proceeding, the court may take

into consideration the contributions of the respective parties,

including the association, the shareholders, contract owners,

certificate holders, enrollees and [policyowners] policy owners

of the insolvent insurer, and any other party with a bona fide

interest, in making an equitable distribution of the ownership

rights of such insolvent insurer. In such a determination,

consideration shall be given to the welfare of the

[policyholders] policy owners, contract owners, certificate

holders and enrollees of the continuing or successor member

insurer.

(2) No distribution to stockholders, if any, of an impaired

or insolvent insurer shall be made until and unless the total

amount of valid claims of the association with interest thereon

for funds expended in carrying out its powers and duties under

section 1706 with respect to such member insurer have been fully

recovered by the association.

[(e)] (f) (1) If an order for liquidation or rehabilitation

20200SB1195PN2041 - 73 -

of [an] a member insurer domiciled in this Commonwealth has been

entered, the receiver appointed under such order shall have a

right to recover on behalf of the member insurer, from any

affiliate that controlled it, the amount of distributions, other

than stock dividends paid by the member insurer on its capital

stock, made at any time during the five (5) years preceding the

petition for liquidation or rehabilitation subject to the

limitations of paragraphs (2) to (4).

(2) No such distribution shall be recoverable if the member

insurer shows that when paid the distribution was lawful and

reasonable and that the member insurer did not know and could

not reasonably have known that the distribution might adversely

affect the ability of the member insurer to fulfill its

contractual obligations.

(3) Any person who was an affiliate that controlled the

member insurer at the time the distributions were paid shall be

liable up to the amount of distributions he received. Any person

who was an affiliate that controlled the member insurer at the

time the distributions were declared shall be liable up to the

amount of distributions he would have received if they had been

paid immediately. If two or more persons are liable with respect

to the same distributions, they shall be jointly and severally

liable.

(4) The maximum amount recoverable under this subsection

shall be the amount needed in excess of all other available

assets of the insolvent insurer to pay the contractual

obligations of the insolvent insurer.

(5) If any person liable under paragraph (3) is insolvent,

all its affiliates that controlled it at the time distribution

was paid shall be jointly and severally liable for any resulting

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deficiency in the amount recovered from the insolvent affiliate.

Section 1713. Examination of the Association and Annual

Report.--The association shall be subject to examination and

regulation by the commissioner. The board of directors shall

submit to the commissioner each year, not later than one hundred

twenty (120) days after the association's fiscal year, a

financial report in a form approved by the commissioner and a

report of its activities during the preceding fiscal year. Upon

the request of a member insurer, the association shall provide

the member insurer with a copy of the report.

Section 1715. Immunity.--There shall be no liability on the

part of and no cause of action of any nature shall arise against

any member insurer or its agents or [employes] employees, the

association or its agents or [employes] employees, members of

the board of directors or the commissioner or [his]

representatives of the commissioner for any action or omission

by them in the performance of their powers and duties under this

article. Such immunity shall extend to the participation in any

organization of one or more other state associations of similar

purposes and to any such organization and its agents or

[employes] employees.

Section 1716. Stay of Proceedings and Reopening Default

Judgments.--All proceedings in which the insolvent insurer is a

party in any court in this Commonwealth shall be stayed [sixty

(60)] one hundred eighty (180) days from the date an order of

liquidation, rehabilitation or conservation is final to permit

proper legal action by the association on any matters germane to

its powers or duties. As to judgment under any decision, order,

verdict or finding based on default, the association may apply

to have such judgment set aside by the same court that made such

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judgment and shall be permitted to defend against such suit on

the merits.

Section 1717. Prohibited Advertisement [or] of Insurance

Guaranty Association [Act] Article in Insurance and Other

Coverage Sales.--(a) No person, including [an] a member

insurer, agent or affiliate of [an] a member insurer, shall

make, publish, disseminate, circulate or place before the

public, or cause, directly or indirectly, to be made, published,

disseminated, circulated or placed before the public, in any

newspaper, magazine or other publication, or in the form of a

notice, circular, pamphlet, letter or poster, or over any radio

station or television station, or in any other way, any

advertisement, announcement or statement, written or oral, which

uses the existence of the association for the purpose of sales,

solicitation or inducement to purchase any form of insurance or

other coverage covered by this article, provided, however, that

this section shall not apply to the association or any other

entity which does not sell or solicit insurance[.], or coverage

by a RANLI PPO, hospital plan corporation, professional health

services plan corporation or health maintenance organization.

(b) Within one hundred eighty (180) days of the effective

date of this article, the association shall prepare a summary

document describing the general purposes and current limitations

of the article and complying with subsection (c). This summary

document [should] shall be submitted to the commissioner for

approval. Sixty (60) days after receiving such approval, no

member insurer may deliver a policy or contract [described in

section 1703(b)(1)] to a [policyholder or contract holder]

policy owner, contract owner, certificate holder or enrollee

unless the summary document is delivered to the [policyholder or

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contract holder] policy owner, contract owner, certificate

holder or enrollee prior to or at the time of delivery of the

policy or contract [except if subsection (d) applies]. The

summary document [should] shall also be available upon request

by a [policyholder] policy owner, contract owner, certificate

holder or enrollee. The distribution, delivery or contents or

interpretation of [this] the summary document shall not mean

that either the policy or the contract or the [holder] policy

owner, contract owner, certificate holder or enrollee thereof

would be covered in the event of the impairment or insolvency of

a member insurer. The [description] summary document shall be

revised by the association as amendments to the article may

require. Failure to receive [this] the summary document does not

give the [policyholder, contract holder,] policy owner, contract

owner, certificate holder, enrollee or insured any greater

rights than those stated in this article.

contain a clear and conspicuous disclaimer on its face. The

commissioner shall promulgate a regulation establishing the form

and content of the disclaimer. The disclaimer shall:

(1) State the name and address of the association and

department.

(2) Prominently warn the [policyholder or contract holder]

policy owner, contract owner, certificate holder or enrollee

that the association may not cover the policy or contract or, if

coverage is available, it will be subject to substantial

limitations and exclusions and conditioned on continued

residence in this Commonwealth.

(3) State the types of policies or contracts for which

guaranty funds will provide coverage.

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[(3)] (4) State that the member insurer and its agents are

prohibited by law from using the existence of the association

for the purpose of sales, solicitation or inducement to purchase

any form of insurance[.] or coverage by a RANLI PPO, hospital

plan corporation, professional health services plan corporation

or health maintenance organization.

[(4)] (5) Emphasize that the [policyholder or contract

holder] policy owner, contract owner, certificate holder or

enrollee should not rely on coverage under the association when

selecting an insurer[.], RANLI PPO, hospital plan corporation,

professional health services plan corporation or health

maintenance organization.

(6) Explain rights available and procedures for filing a

complaint to allege a violation of any provisions of this

article.

[(5)] (7) Provide other information as directed by the

commissioner[.], including, but not limited to, sources for

information about the financial condition of insurers, RANLI

PPOs, hospital plan corporations, professional health services

plan corporations or health maintenance organizations provided

that the information is not proprietary and is subject to

disclosure under that state's public records law.

(d) [No insurer or agent may deliver a policy or contract

described in section 1703(b)(1) and excluded under section

1703(b)(2) from coverage under this article unless the insurer

or agent, prior to or at the time of delivery, gives the

policyholder or contract holder a separate written notice which

clearly and conspicuously discloses that the policy or contract

is not covered by the association. The commissioner shall by

regulation specify the form and content of the notice.] A member

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insurer shall retain evidence of compliance with subsection (b)

for so long as the policy or contract for which the notice is

given remains in effect.

[Section 1718. Prospective Application.--This article shall

not apply to any insurer which was declared insolvent before the

effective date of this article.]

Section 4. The following shall apply:

(1) The amendment or addition of sections 1701, 1702,

1703, 1704(a), 1705(a), 1706, 1707, 1708(c) introductory

paragraph, (8) and (9) and (d), 1709, 1710, 1711, 1712, 1713,

1715, 1716, 1717 and 1718 of the act shall apply with respect

to a member insurer:

(i) that on or after the effective date of this

section is placed under an order of liquidation by a

court of competent jurisdiction with a finding of

insolvency; or

(ii) for which the association elects to exercise

its power and duties under section 1706(a) on or after

the effective date of this section.

(2) All matters relating to the insolvency or impairment

of any member insurer placed under an order of liquidation by

a court of competent jurisdiction with a finding of

insolvency before the effective date of this section, or for

which the association otherwise exercises its powers and

duties under section 1706(a) or (b) before the effective date

of this section, including past, present and future

assessments and credits, shall be governed by the provisions

of Article XVII in effect before the effective date of this

section.

Section 5. This act shall take effect immediately.

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