Assigned to FIN FOR
COMMITTEE
Assigned to FIN FOR
COMMITTEE
ARIZONA STATE SENATE
Fifty-Third Legislature, Second Regular Session
life and disability insurance; insolvencies
Purpose
Effective January 1, 2019, makes various changes to the Arizona Life and Disability Insurance Guaranty Fund (Guaranty Fund) and related statutes.
Background
Laws 1977, Chapter 136 established the Guaranty Fund within the Arizona Department of Insurance (DOI) to provide a safety net for consumers of life and disability insurance and annuity products from financial loss in the event of an insurer failing and being placed in liquidation. The Guaranty Fund is administered by a nine-member Guaranty Fund Board (Board), whose members are appointed by the Governor to three-year terms (A.R.S. §§ 20-683 and 20-684).
The Guaranty Fund is responsible for: 1) investigating, adjudicating and paying the claims of Arizona insureds or claimants in accordance with applicable insurance contracts, subject to certain legal limitations and exclusions; 2) coordinating with other states in administering multi‑state guaranty activities; and 3) levying assessments on insurers to pay for its obligations (DOI). Each insurer that pays an assessment is issued a certificate of contribution, entitling it to a credit to offset its premium tax liability (A.R.S. § 20-686).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Adds health care services organizations (HCSOs) to the Guaranty Fund membership and coverage statutes.
2. Increases, from 9 to 11, the number of Board members.
3. Specifies that rates for any of the following must be actuarially justified with prior approval from the Director of DOI:
a) terminated coverages reissued by the Guaranty Fund; or
b) alternative policies or contracts issued by the Guaranty Fund.
4. Allows the Guaranty Fund to file for actuarially justified rates or premium increases for any policies or contracts for which it provides coverage.
5. Removes approval by a court presiding over a delinquency proceeding as a requirement for the Guaranty Fund to issue substitute coverage for policies or contracts.
6. Requires the amount of the assessment for long-term term care insurance written by an impaired or insolvent insurer to be allocated according to a methodology included in the plan of operation and approved by the Director of DOI.
7. Requires the above methodology to provide for 50 percent of the assessment to be allocated to accident and disability member insurers and 50 percent to be allocated to life and annuity member insurers.
8. Defines health benefit plan.
9. Modifies the definition of member insurer to include an HCSO.
10. Repeals statutes pertaining to financial reserve and risk of insolvency plan requirements for HCSOs.
11. Makes technical and conforming changes.
12. Become effective on January 1, 2019.
House Action
BI 1/18/18 DP 7-0-0-1
3rd Read 2/6/18 58-0-1-0-1
Prepared by Senate Research
February 27, 2018
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