as introduced - 80th Legislature (1997 - 1998) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to insurance; regulating companies and 1.3 agents; providing immunity from suit and 1.4 indemnification for receivers and their employees; 1.5 regulating coverages; providing certain notices and 1.6 filing requirements; providing for a study; making 1.7 certain technical changes; amending Minnesota Statutes 1.8 1996, sections 60A.02, by adding a subdivision; 1.9 60A.052, subdivision 2, and by adding a subdivision; 1.10 60A.06, subdivision 2; 60A.075, subdivisions 1, 8, and 1.11 9; 60A.077, subdivisions 1, 2, 3, 5, 7, 8, and 10; 1.12 60A.092, subdivision 6; 60A.10, subdivision 1; 1.13 60A.111, subdivision 1; 60A.13, subdivision 1; 60A.19, 1.14 subdivision 1; 60B.04, by adding a subdivision; 1.15 60B.21, subdivision 2; 60B.25; 60B.44, subdivisions 3, 1.16 4, and 6; 60D.20, subdivision 2; 60K.02, subdivision 1.17 1; 60K.03, subdivisions 2 and 3; 60K.14, subdivision 1.18 4; 60K.19, subdivisions 7 and 8; 61A.28, subdivisions 1.19 6, 9a, and 12; 61A.60, subdivision 1; 61B.19, 1.20 subdivision 3; 62A.04, subdivision 3; 62A.135, 1.21 subdivision 5; 62A.50, subdivision 3; 62B.04, 1.22 subdivision 2; 65A.01, subdivision 3, and by adding 1.23 subdivisions; 65A.27, subdivision 4; 65B.48, 1.24 subdivision 5; 67A.231; 72A.20, subdivision 34; 1.25 72B.04, subdivision 10; 79A.01, subdivision 10; 1.26 79A.02, subdivisions 1 and 4; 79A.03, subdivisions 6, 1.27 7, 9, and by adding a subdivision; 79A.06, subdivision 1.28 5; 79A.20, subdivision 1; 79A.21, subdivision 2; 1.29 79A.22, subdivision 7, and by adding a subdivision; 1.30 79A.23, subdivisions 1 and 2; 79A.24, subdivisions 1, 1.31 2, and 4; 79A.26, subdivision 2; and 79A.31, 1.32 subdivision 1; proposing coding for new law in 1.33 Minnesota Statutes, chapters 60B; and 65B; repealing 1.34 Minnesota Statutes 1996, sections 60B.36; and 79A.04, 1.35 subdivision 8. 1.36 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.37 Section 1. Minnesota Statutes 1996, section 60A.02, is 1.38 amended by adding a subdivision to read: 1.39 Subd. 2b. [FILED.] In cases where a law requires documents 1.40 to be filed with the commissioner, the documents will be 2.1 considered filed when they are received by the department of 2.2 commerce. 2.3 Sec. 2. Minnesota Statutes 1996, section 60A.052, 2.4 subdivision 2, is amended to read: 2.5 Subd. 2. [SUSPENSION OR REVOCATION OF AUTHORITY OR 2.6 CENSURE.] If the commissioner determines that one of the 2.7 conditions listed in subdivision 1 exists, the commissioner may 2.8 issue an order requiring the insurance company to show cause why 2.9 any or all of the following should not occur: (1) revocation or 2.10 suspension of any or all certificates of authority granted to 2.11 the foreign or domestic insurance company or its agent; (2) 2.12 censuring of the insurance company;or(3) cancellation of all 2.13 or some of the company's insurance contracts then in force in 2.14 this state; or (4) the imposition of a civil penalty. The order 2.15 shall be calculated to give reasonable notice of the time and 2.16 place for hearing thereon, and shall state the reasons for the 2.17 entry of the order. All hearings shall be conducted in 2.18 accordance with chapter 14. The insurer may waive its right to 2.19 the hearing. If the insurer is under the supervision or control 2.20 of the insurance department of the insurer's state of domicile, 2.21 that insurance department, acting on behalf of the insurer, may 2.22 waive the insurer's right to the hearing. After the hearing, 2.23 the commissioner shall enter an order disposing of the matter as 2.24 the facts require. If the insurance company fails to appear at 2.25 a hearing after having been duly notified of it, the company 2.26 shall be considered in default, and the proceeding may be 2.27 determined against the company upon consideration of the order 2.28 to show cause, the allegations of which may be considered to be 2.29 true. 2.30 Sec. 3. Minnesota Statutes 1996, section 60A.052, is 2.31 amended by adding a subdivision to read: 2.32 Subd. 4a. [WITHDRAWAL OF INSURER FROM STATE.] No insurer 2.33 shall withdraw from this state until its direct liability to its 2.34 policyholders and obligees under all its insurance contracts 2.35 then in force in this state have been assumed by another 2.36 licensed insurer according to section 60A.09, subdivision 4a. 3.1 Sec. 4. Minnesota Statutes 1996, section 60A.06, 3.2 subdivision 2, is amended to read: 3.3 Subd. 2. [OTHER LINES.] Any insurance corporation or 3.4 association heretofore or hereafter licensed to transact within 3.5 the state any of the kinds or classes of insurance specifically 3.6 authorized under the laws of this state may, when authorized by 3.7 its charter, transact within and without the state any lines of 3.8 insurance germane to its charter powers and not specifically 3.9 provided for under the laws of this state when these lines, or 3.10 combinations of lines, of insurance are not in violation of the 3.11 constitution or the laws of the state and, in the opinion of the 3.12 commissioner, not contrary to public policy, provided the 3.13 company or association shall first obtain authority of the 3.14 commissioner and meetsuch requirements as tocapital or 3.15 surplus, or both,and other requirements as the commissioner 3.16 shall prescribe. These additional hazards may be insured 3.17 against by attachment to, or in extension of, any policy which 3.18 the company may be authorized to issue under the laws of this 3.19 state. This subdivision shall apply to companies operating upon 3.20 the stock or mutual plan, reciprocal or interinsurance exchanges. 3.21 Sec. 5. Minnesota Statutes 1996, section 60A.075, 3.22 subdivision 1, is amended to read: 3.23 Subdivision 1. [DEFINITIONS.] For the purposes of this 3.24 section, the terms in this subdivision have the meanings given 3.25 them. 3.26 (a) "Eligible member" means a policyholder whose policy is 3.27 in force as of the record date, which is the date that the 3.28 mutual company's board of directors adopts a plan of conversion 3.29 or some other date specified as the record date in the plan of 3.30 conversion and approved by the commissioner. Unless otherwise 3.31 provided in the plan, a person insured under a group policy is 3.32 not an eligible member, unless on the record date: 3.33 (1) the person is insured or covered under a group life 3.34 policy or group annuity contract under which funds are 3.35 accumulated and allocated to the respective covered persons; 3.36 (2) the person has the right to direct the application of 4.1 the funds so allocated; 4.2 (3) the group policyholder makes no contribution to the 4.3 premiums or deposits for the policy or contract; and 4.4 (4) the converting mutual company has the names and 4.5 addresses of the persons covered under the group life policy or 4.6 group annuity contract. 4.7 (b) "Reorganized company" means a Minnesota domestic stock 4.8 insurance company that has converted from a Minnesota domestic 4.9 mutual insurance company according to this section. 4.10 (c) "Plan of conversion" or "plan" means a plan adopted by 4.11 a Minnesota domestic mutual insurance company's board of 4.12 directors under this section to convert the mutual company into 4.13 a Minnesota domestic stock insurance company. 4.14 (d) "Policy" means a policy or contract of insurance issued 4.15 by a converting mutual company, including an annuity contract. 4.16 (e) "Commissioner" means the commissioner of commerce. 4.17 (f) "Converting mutual company" means a Minnesota domestic 4.18 mutual insurance company seeking to convert to a Minnesota 4.19 domestic stock insurance company according to this section. 4.20 (g) "Effective date of a conversion" means the date 4.21 determined according to subdivision 6. 4.22 (h) "Membership interests" means all policyholders' rights 4.23 as members of the converting mutual company, including but not 4.24 limited to, rights to vote and to participate in any 4.25 distributions of surplus, whether or not incident to the 4.26 company's liquidation. 4.27 (i) "Equitable surplus" means the converting mutual 4.28 company's surplus as regards policyholders as of the effective 4.29 date of the conversion determined in a manner that is not unfair 4.30 or inequitable to policyholders. 4.31 (j) "Permitted issuer" means: (1) a corporation organized 4.32 and owned by the converting mutual company or by any other 4.33 insurance company or insurance holding company for the purpose 4.34 of purchasing and holdingall of the stocksecurities 4.35 representing majority of voting control of the reorganized 4.36 company; (2) a stock insurance company owned by the converting 5.1 mutual company or by any other insurance company or insurance 5.2 holding company into which the converting mutual company will be 5.3 merged; or (3) any other corporation approved by the 5.4 commissioner. 5.5 Sec. 6. Minnesota Statutes 1996, section 60A.075, 5.6 subdivision 8, is amended to read: 5.7 Subd. 8. [SHARE CONVERSION.] A plan of conversion under 5.8 this subdivision shall provide for exchange of policyholders' 5.9 membership interests in return for shares in the reorganized 5.10 company, according to paragraphs (a) to (c). 5.11 (a) The policyholders' membership interests shall be 5.12 exchanged, in a manner that takes into account the estimated 5.13 proportionate contribution of equitable surplus of each class of 5.14 participating policies and contracts, for all of the common 5.15 shares of the reorganized company or its parent company or a 5.16 permitted issuer, or for a combination of the common shares of 5.17 the reorganized company or common shares of its parent company 5.18 or a permitted issuer. 5.19 (b) Unless the anticipated issuance within a shorter period 5.20 is disclosed in the plan of conversion, the issuer of common 5.21 shares shall not, within two years after the effective date of 5.22 reorganization, issue either of the following: 5.23 (1) any of its common shares or any securities convertible 5.24 with or without consideration into the common shares or carrying 5.25 any warrant to subscribe to or purchase common shares; and 5.26 (2) any warrant, right, or option to subscribe to or 5.27 purchase the common shares or other securities described in 5.28 paragraph (a), except for the issue of common shares to or for 5.29 the benefit of policyholders according to the plan of conversion 5.30 and the issue ofoptionsnontransferable subscription rights for 5.31 the purchase of common shares being granted to officers, 5.32 directors, oremployeesa tax qualified employee benefit plan of 5.33 the reorganized company or its parent company, if any, or a 5.34 permitted issuer, according tothis sectionsubdivision 11. 5.35 (c) Unless the common shares have a public market when 5.36 issued, the issuer shall use its best efforts to encourage and 6.1 assist in the establishment of a public market for the common 6.2 shares within two years of the effective date of the conversion 6.3 or a longer period as disclosed in the plan of conversion. 6.4 Within one year after any offering of stock other than the 6.5 initial distribution, but no later than six years after the 6.6 effective date of the conversion, the reorganized company shall 6.7 offer to make available to policyholders who received and 6.8 retained shares of common stock or securities described in 6.9 paragraph (b), clause (1), a procedure to dispose of those 6.10 shares of stock at market value without brokerage commissions or 6.11 similar fees. 6.12 Sec. 7. Minnesota Statutes 1996, section 60A.075, 6.13 subdivision 9, is amended to read: 6.14 Subd. 9. [SURPLUS DISTRIBUTION.] A plan of conversion 6.15 under this subdivision shall provide for the exchange of the 6.16 policyholders' membership interests in return for the operation 6.17 of the converting mutual company's participating policies as a 6.18 closed block of business and for the distribution of the 6.19 company's equitable surplus to policyholders, and shall provide 6.20 for the issuance of new shares of the reorganized company or its 6.21 parent corporation, each according to paragraphs (a) to (i). 6.22 (a) The converting mutual company's participating business, 6.23 comprised of its participating policies and contracts in force 6.24 on the effective date of the conversion or other reasonable date 6.25 as provided in the plan, shall be operated by the reorganized 6.26 company as a closed block of participating business. However, 6.27 at the option of the converting mutual company, group policies 6.28 and group contracts may be omitted from the closed block. 6.29 (b) Assets of the converting mutual company must be 6.30 allocated to the closed block of participating business in an 6.31 amount equal to the reserves and liabilities for the converting 6.32 mutual life insurer's participating policies and contracts in 6.33 force on the effective date of the conversion. The plan must be 6.34 accompanied by an opinion of an independent qualified actuary 6.35 who meets the standards set forth in the insurance laws or 6.36 regulations for the submission of actuarial opinions as to the 7.1 adequacy of reserves or assets. The opinion must relate to the 7.2 adequacy of the assets allocated to support the closed block of 7.3 business. The actuarial opinion must be based on methods of 7.4 analysis considered appropriate for those purposes by the 7.5 Actuarial Standards Board. 7.6 (c) The reorganized company shall keep a separate 7.7 accounting for the closed block and shall make and include in 7.8 the annual statement to be filed with the commissioner each year 7.9 a separate statement showing the gains, losses, and expenses 7.10 properly attributable to the closed block. 7.11 (d) Notwithstanding the establishment of a closed block, 7.12 the entire assets of the reorganized company shall be available 7.13 for the payment of benefits to policyholders. Payment must 7.14 first be made from the assets supporting the closed block until 7.15 exhausted, and then from the general assets of the reorganized 7.16 company. 7.17 (e) The converting mutual company's equitable surplus shall 7.18 be distributed to eligible participating policyholders in a form 7.19 or forms selected by the converting mutual company. The form of 7.20 distribution may consist of cash, securities of the reorganized 7.21 company, securities of another institution, a certificate of 7.22 contribution, additional life insurance, annuity benefits, 7.23 increased dividends, reduced premiums, or other equitable 7.24 consideration or any combination of forms of consideration. The 7.25 consideration, if any, given to a class or category of 7.26 policyholders may differ from the consideration given to another 7.27 class or category of policyholders. A certificate of 7.28 contribution must be repayable in ten years, be equal to 100 7.29 percent of the value of the policyholders' membership interest, 7.30 and bear interest at the highest rate charged by the reorganized 7.31 company for policy loans on the effective date of the conversion. 7.32 (f) The consideration must be allocated among the 7.33 policyholders in a manner that is fair and equitable to the 7.34 policyholders. 7.35 (g) The reorganized company or its parent corporation shall 7.36 issue and sell shares of one or more classes having a total 8.1 price equal to the estimated value in the market of the shares 8.2 on the initial offering date. The estimated value must take 8.3 into account all of the following: 8.4 (1) the pro forma market value of the reorganized company; 8.5 (2) the consideration to be given to policyholders 8.6 according to paragraph (e); 8.7 (3) the proceeds of the sale of the shares; and 8.8 (4) any additional value attributable to the shares as a 8.9 result of a purchaser or a group of purchasers who acted in 8.10 concert to obtain shares in the initial offering, attaining, 8.11 through such purchase, control of the reorganized company or its 8.12 parent corporation. 8.13 (h) If a purchaser or a group of purchasers acting in 8.14 concert is to attain control in the initial offering, the mutual 8.15 company shall not, directly or indirectly, pay for any of the 8.16 costs or expenses of conversion of the mutual company, whether 8.17 or not the conversion is effected, except with permission of the 8.18 commissioner. 8.19 (i) Periodically, with the commissioner's approval, the 8.20 reorganized company may share in the profits of the closed block 8.21 of participating business for the benefit of stockholders if the 8.22 assets allocated to the closed block are in excess of those 8.23 necessary to support the closed block. 8.24 Sec. 8. Minnesota Statutes 1996, section 60A.077, 8.25 subdivision 1, is amended to read: 8.26 Subdivision 1. [FORMATION.] (a) A domestic mutual 8.27 insurance company, upon approval of the commissioner, may 8.28 reorganize by forming an insurance holding company based upon a 8.29 mutual plan and continuing the corporate existence of the 8.30 reorganizing insurance company as a stock insurance company. 8.31 The commissioner, if satisfied that the interests of the 8.32 policyholders are properly protected and that the plan of 8.33 reorganization is fair and equitable to the policyholders, may 8.34 approve the proposed plan of reorganization and may require as a 8.35 condition of approval the modifications of the proposed plan of 8.36 reorganization as the commissioner finds necessary for the 9.1 protection of the policyholders' interests. The commissioner 9.2 shall retain jurisdiction over the mutual insurance holding 9.3 company according to this section and chapter 60D to assure that 9.4 policyholder interests are protected. 9.5 (b) All of the initial voting shares of the capital stock 9.6 of the reorganized insurance company must be issued to the 9.7 mutual insurance holding company or to an intermediate stock 9.8 holding companythat is wholly owned by the mutual insurance9.9holding company. For purposes of this section, "intermediate 9.10 stock holding company" means either a holding company wholly 9.11 owned by the mutual insurance holding company or a holding 9.12 company in which the mutual insurance holding company holds at 9.13 least 51 percent of the voting power. The membership interests 9.14 of the policyholders of the reorganized insurance company become 9.15 membership interests in the mutual insurance holding company. 9.16 "Membership interests" means those interests described in 9.17 section 60A.075, subdivision 1, paragraph (h). Policyholders of 9.18 the reorganized insurance company shall be members of the mutual 9.19 insurance holding company and their voting rights must be 9.20 determined in accordance with the articles of incorporation and 9.21 bylaws of the mutual insurance holding company. The mutual 9.22 insurance holding company shall, at all times, directly or 9.23 through an intermediate stock holding company, control: (i) all 9.24 of the voting shares of the capital stock of the reorganized 9.25 insurance company; (ii) if the intermediate holding company is 9.26 not wholly owned by the mutual insurance holding company, the 9.27 percentage of the voting control of the reorganized insurance 9.28 company approved by the commissioner; or (iii) if the 9.29 intermediate holding company is wholly owned by the mutual 9.30 insurance holding company, a majority of the voting shares of 9.31 the capital stock of the reorganized insurance company. 9.32 Sec. 9. Minnesota Statutes 1996, section 60A.077, 9.33 subdivision 2, is amended to read: 9.34 Subd. 2. [MERGER.] (a) A domestic or foreign mutual 9.35 insurance company, upon the approval of the commissioner, may 9.36 reorganize by merging its policyholders' membership interests 10.1 into a mutual insurance holding company formed according to 10.2 subdivision 1 and continuing the corporate existence of the 10.3 reorganizing insurance company as a stock insurance company 10.4 subsidiary of the mutual insurance holding company. "Membership 10.5 interests" means those interests described in section 60A.075, 10.6 subdivision 1, paragraph (h). The commissioner, if satisfied 10.7 that the interests of thepolicyholderpolicyholders of the 10.8 reorganizing company and the interests of the existing members 10.9 of the mutual insurance holding company are properly protected 10.10 and that the merger is fair and equitable tothe policyholders10.11 those parties, may approve the proposed merger and may require 10.12 as a condition of approval the modifications of the proposed 10.13 merger as the commissioner finds necessary for the protection of 10.14 the policyholders' or members' interests. The commissioner 10.15 shall retain jurisdiction over the mutual insurance holding 10.16 company organized according to this section and according to 10.17 chapter 60D to assure that policyholder and member interests are 10.18 protected. 10.19 (b) All of the initial voting shares of the capital stock 10.20 of the reorganized insurance company must be issued to the 10.21 mutual insurance holding company, or to an intermediate stock 10.22 holding companythat is wholly owned by the mutual insurance10.23holding company. The membership interests of the policyholders 10.24 of the reorganized insurance company become membership interests 10.25 in the mutual insurance holding company. Policyholders of the 10.26 reorganized insurance company shall be members of the mutual 10.27 insurance holding company and their voting rights must be 10.28 determined according to the articles of incorporation and bylaws 10.29 of the mutual insurance holding company. 10.30 Sec. 10. Minnesota Statutes 1996, section 60A.077, 10.31 subdivision 3, is amended to read: 10.32 Subd. 3. [PLAN OF REORGANIZATION; APPROVAL BY 10.33 COMMISSIONER.] (a) The reorganizing or merging insurer shall 10.34 file a plan of reorganization, approved by the affirmative vote 10.35 of a majority of its board of directors, for review and approval 10.36 by the commissioner. The plan must provide for the following: 11.1 (1) establishing a mutual insurance holding company with at 11.2 least one stock insurance company subsidiary, the majority of 11.3 voting sharesof which, taking into account any dilution 11.4 resulting from convertible securities, must be owned, either 11.5 directly or through an intermediate stock holding company, by 11.6 the mutual insurance holding company; 11.7 (2) analyzing the benefits and risks attendant to the 11.8 proposed reorganization, including the rationale for the 11.9 reorganization and analysis of the comparative benefits and 11.10 risks of a demutualization under section 60A.075; 11.11 (3) protecting the immediate and long-term interests of 11.12 existing policyholders; 11.13 (4) ensuring immediate membership in the mutual insurance 11.14 holding company of all existing policyholders of the 11.15 reorganizing domestic insurance company; 11.16 (5) describing a plan providing for membership interests of 11.17 future policyholders; 11.18 (6) describing the number of members of the board of 11.19 directors of the mutual insurance holding company required to be 11.20 policyholders; 11.21 (7)ensuring that, in the event of proceedings under11.22chapter 60B involving a stock insurance company subsidiary of11.23the mutual insurance holding company that resulted from the11.24reorganization of a domestic mutual insurance company, the11.25assets of the mutual insurance holding company will be available11.26to satisfy the policyholder obligations of the stock insurance11.27company;11.28(8)for periodic distribution of accumulated holding 11.29 company earnings to members; 11.30(9)(8) describing the nature and content of the annual 11.31 report and financial statement to be sent to each member; 11.32(10)(9) a copy of the proposed mutual insurance holding 11.33 company's articles of incorporation and bylaws specifying all 11.34 membership rights; 11.35(11)(10) the names, addresses, and occupational 11.36 information of all corporate officers and members of the 12.1 proposed mutual insurance holding company board of directors; 12.2(12)(11) information sufficient to demonstrate that the 12.3 financial condition of the reorganizing or merging company will 12.4 not be diminished upon reorganization; 12.5(13)(12) a copy of the articles of incorporation and 12.6 bylaws for any proposed insurance company subsidiary or 12.7 intermediate holding company subsidiary; 12.8(14)(13) describing any plans for the initial sale of 12.9 stock for the reorganized insurance company; and 12.10(15)(14) any other information requested by the 12.11 commissioner or required by rule. 12.12 (b) The commissioner may approve the plan upon finding that 12.13 the requirements of this section have been fully met and the 12.14 plan will protect the immediate and long-term interests of 12.15 policyholders. 12.16 (c) The commissioner may retain, at the reorganizing or 12.17 merging mutual company's expense, any qualified experts not 12.18 otherwise a part of the commissioner's staff to assist in 12.19 reviewing the plan. 12.20 (d) The commissioner may, but need not, conduct a public 12.21 hearing regarding the proposed plan. The hearing must be held 12.22 within 30 days after submission of a completed plan of 12.23 reorganization to the commissioner. The commissioner shall give 12.24 the reorganizing mutual company at least 20 days' notice of the 12.25 hearing. At the hearing, the reorganizing mutual company, its 12.26 policyholders, and any other person whose interest may be 12.27 affected by the proposed reorganization, may present evidence, 12.28 examine and cross-examine witnesses, and offer oral and written 12.29 arguments or comments according to the procedure for contested 12.30 cases under chapter 14. The persons participating may conduct 12.31 discovery proceedings in the same manner as prescribed for the 12.32 district courts of this state. All discovery proceedings must 12.33 be concluded no later than three days before the scheduled 12.34 commencement of the public hearing. 12.35 Sec. 11. Minnesota Statutes 1996, section 60A.077, 12.36 subdivision 5, is amended to read: 13.1 Subd. 5. [APPROVAL BY MEMBERS.] In the case of a formation 13.2 under subdivision 1, the plan shall be approved by the members 13.3 as provided in section 60A.075, subdivision 5. In the case of a 13.4 merger under subdivision 2, the plan must be approved by the 13.5 eligible members of the reorganizing insurance company and by 13.6 the eligible members of the mutual insurance holding company as 13.7 provided in section 60A.075, subdivision 5. 13.8 Sec. 12. Minnesota Statutes 1996, section 60A.077, 13.9 subdivision 7, is amended to read: 13.10 Subd. 7. [APPLICABILITY OF CERTAIN PROVISIONS.] (a) A 13.11 mutual insurance holding company is considered to be an insurer 13.12 subject to chapter 60B.and shall automatically be a party to13.13any proceeding under chapter 60B involving an insurance company13.14that, as a result of a reorganization according to subdivision 113.15or 2, is a subsidiary of the mutual insurance holding company.13.16In any proceeding under chapter 60B involving the reorganized13.17insurance company, the assets of the mutual insurance holding13.18company are considered to be assets of the estate of the13.19reorganized insurance company for purposes of satisfying the13.20claims of the reorganized insurance company's13.21policyholders.However, a mutual insurance holding company 13.22 shall not dissolve or liquidate without the approval of the 13.23 commissioner or as ordered bythe districta courtaccording to13.24chapter 60Bof competent jurisdiction. 13.25 (b) A mutual insurance holding company is subject to 13.26 chapter 60Dto the extent consistent with this section. 13.27 (c) As a condition to approval of the plan, the 13.28 commissioner may require the mutual insurance holding company to 13.29 comply with any provision of the insurance laws necessary to 13.30 protect the interests of the policyholders as if the mutual 13.31 insurance holding company were a domestic mutual insurance 13.32 company. 13.33 (d) No person or group of persons other than the chief 13.34 executive officer of a mutual insurance holding company, or the 13.35 chief executive officer's designee, shall seek to obtain proxies 13.36 from the members of the mutual insurance holding company for the 14.1 purposes of affecting a change of the membership of the board of 14.2 directors of the mutual insurance holding company unless that 14.3 person or persons have filed with the commissioner and have sent 14.4 to the mutual insurance holding company a statement containing 14.5 the information required by section 60D.17. Section 60D.17, 14.6 subdivisions 2 to 7, apply in the event of a proxy solicitation 14.7 regulated by this paragraph. 14.8 Sec. 13. Minnesota Statutes 1996, section 60A.077, 14.9 subdivision 8, is amended to read: 14.10 Subd. 8. [APPLICABILITY OF DEMUTUALIZATION PROVISIONS.] 14.11 (a) Except as otherwise provided, section 60A.075 is not 14.12 applicable to a reorganization or merger according to this 14.13 section,except forprovided, however, that section 60A.075, 14.14 subdivisions 14 to 16, apply to the reorganization or merger. 14.15 (b) Section 60A.075 is applicable to demutualization of a 14.16 mutual insurance holding company that resulted from the 14.17 reorganization of a domestic mutual insurance company organized 14.18 under chapter 300 as if it were a mutual insurance company. 14.19 Sec. 14. Minnesota Statutes 1996, section 60A.077, 14.20 subdivision 10, is amended to read: 14.21 Subd. 10. [FINANCIAL STATEMENT REQUIREMENTS.] (a) In 14.22 addition to any items required under chapter 60D, each mutual 14.23 insurance holding company shall file with the commissioner, by 14.24 April 1 of each year, an annual statement consisting of the 14.25 following: 14.26 (1) an income statement, balance sheet, and cashflow 14.27 statement prepared in accordance with generally accepted 14.28 accounting principles; 14.29 (2) complete information on the status of any closed block 14.30 formed as part of a plan of reorganization; 14.31 (3) an investment plan covering all assets; and 14.32 (4) a statement disclosing any intention to pledge, borrow 14.33 against, alienate, hypothecate, or in any way encumber the 14.34 assets of the mutual insurance holding company or an 14.35 intermediate stock holding company. Action taken according to 14.36 the statement is subject to the commissioner's prior written 15.1 approval. 15.2 (b) The aggregate pledges and encumbrances of a mutual 15.3 holding company's assets shall not affect more than 49 percent 15.4 of the company's stock in any subsidiary insurance holding 15.5 company or subsidiary insurance company that resulted from a 15.6 reorganization or merger. 15.7 (c) At least 50 percent of the generally accepted 15.8 accounting principles (GAAP) net worth of a mutual insurance 15.9 holding company must be invested in insurance company 15.10 subsidiaries. 15.11 Sec. 15. Minnesota Statutes 1996, section 60A.092, 15.12 subdivision 6, is amended to read: 15.13 Subd. 6. [SINGLE ASSUMING INSURER; TRUST FUND 15.14 REQUIREMENTS.] In the case of a single assuming insurer, the 15.15 trust shall consist of a trusteed account representing the 15.16 assuming insurer's liabilities attributable to business written 15.17 in the United States and, in addition, the assuming insurer 15.18 shall maintain a trusteed surplus of not less than $20,000,000 15.19 or maintain a trusteed surplusas regards policyholders in an15.20amountof not less than $50,000,000 for long-tail casualty 15.21 reinsurers as provided under subdivision 3, paragraph (a), 15.22 clause (5). 15.23 Sec. 16. Minnesota Statutes 1996, section 60A.10, 15.24 subdivision 1, is amended to read: 15.25 Subdivision 1. [DOMESTIC COMPANIES.] (1) [DEPOSIT AS 15.26 SECURITY FOR ALL POLICYHOLDERS REQUIRED.] No company in this 15.27 state, other than farmers' mutual, or real estate title 15.28 insurance companies, shall do business in this state unless it 15.29 has on deposit with the commissioner, for the protection of both 15.30 its resident and nonresident policyholders, securities to an 15.31 amount, the actual market value of which, exclusive of interest, 15.32 shall never be less than$200,000 until July 1, 1986, $300,00015.33until July 1, 1987, $400,000 until July 1, 1988, and$500,000on15.34and after July 1, 1988or one-half the applicable financial 15.35 requirement set forth in section 60A.07, whichever is less. The 15.36 securities shall be retained under the control of the 16.1 commissioner as long as any policies of the depositing company 16.2 remain in force. 16.3 (2) [SECURITIES DEFINED.] For the purpose of this 16.4 subdivision, the word "securities" means bonds or other 16.5 obligations of, or bonds or other obligations insured or 16.6 guaranteed by, the United States, any state of the United 16.7 States, any municipality of this state, or any agency or 16.8 instrumentality of the foregoing. 16.9 (3) [PROTECTION OF DEPOSIT FROM LEVY.] No judgment 16.10 creditor or other claimant may levy upon any securities held on 16.11 deposit with, or for the account of, the commissioner. Upon the 16.12 entry of an order by a court of competent jurisdiction for the 16.13 rehabilitation, liquidation or conservation of any depositing 16.14 company as provided in chapter 60B, that company's deposit 16.15 together with any accrued income thereon shall be transferred to 16.16 the commissioner as rehabilitator, liquidator, or conservator. 16.17 Sec. 17. Minnesota Statutes 1996, section 60A.111, 16.18 subdivision 1, is amended to read: 16.19 Subdivision 1. [REPORT.] Annually, or more frequently if 16.20 determined by the commissioner to be necessary for the 16.21 protection of policyholders, each foreign, alienand domestic 16.22 insurance company other than a life insurance company shall 16.23 report to the commissioner the ratio of its qualified assets to 16.24 its required liabilities. 16.25 Sec. 18. Minnesota Statutes 1996, section 60A.13, 16.26 subdivision 1, is amended to read: 16.27 Subdivision 1. [ANNUAL STATEMENTS REQUIRED.] Every 16.28 insurance company, including fraternal benefit societies, and 16.29 reciprocal exchanges, doing business in this state, shall 16.30transmit tofile with the commissioner, annually, on or before 16.31 March 1, the appropriate verified National Association of 16.32 Insurance Commissioners' annual statement blank, prepared in 16.33 accordance with the association's instructions handbook and 16.34 following those accounting procedures and practices prescribed 16.35 by the association's accounting practices and procedures manual, 16.36 unless the commissioner requires or finds another method of 17.1 valuation reasonable under the circumstances. Another method of 17.2 valuation permitted by the commissioner must be at least as 17.3 conservative as those prescribed in the association's manual. 17.4 All companies required to file an annual statement under this 17.5 subdivision must also file with the commissioner a copy of their 17.6 annual statement on computer diskette. All Minnesota domestic 17.7 insurers required to file annual statements under this 17.8 subdivision must also file quarterly statements with the 17.9 commissioner for the first, second, and third calendar quarter 17.10 on or before 45 days after the end of the applicable quarter, 17.11 prepared in accordance with the association's instruction 17.12 handbook. All companies required to file quarterly statements 17.13 under this subdivision must also file a copy of their quarterly 17.14 statement on computer diskette. In addition, the commissioner 17.15 may require the filing of any other information determined to be 17.16 reasonably necessary for the continual enforcement of these 17.17 laws. The statement may be limited to the insurer's business 17.18 and condition in the United States unless the commissioner finds 17.19 that the business conducted outside the United States may 17.20 detrimentally affect the interests of policyholders in this 17.21 state. The statements shall also contain a verified schedule 17.22 showing all details required by law for assessment and 17.23 taxation. The statement or schedules shall be in the form and 17.24 shall contain all matters the commissioner may prescribe, and it 17.25 may be varied as to different types of insurers so as to elicit 17.26 a true exhibit of the condition of each insurer. 17.27 Sec. 19. Minnesota Statutes 1996, section 60A.19, 17.28 subdivision 1, is amended to read: 17.29 Subdivision 1. [REQUIREMENTS.] Any insurance company of 17.30 another state, upon compliance with all laws governing such 17.31 corporations in general and with the foregoing provisions so far 17.32 as applicable and the following requirements, shall be admitted 17.33 to do business in this state: 17.34 (1) It shall deposit with the commissioner a certified copy 17.35 of its charter or certificate of incorporation and its bylaws, 17.36 and a statement showing its financial condition and business, 18.1 verified by its president and secretary or other proper 18.2 officers; 18.3 (2) It shall furnish the commissioner satisfactory evidence 18.4 of its legal organization and authority to transact the proposed 18.5 business and that its capital, assets, deposits with the proper 18.6 official of its own state, amount insured, number of risks, 18.7 reserve and other securities, and guaranties for protection of 18.8 policyholders, creditors, and the public, comply with those 18.9 required of like domestic companies; 18.10 (3) By a duly executed instrument filed in the office of 18.11 the commissioner, it shall appoint the commissioner and 18.12 successors in office its lawful attorneys in fact and therein 18.13 irrevocably agree that legal process in any action or proceeding 18.14 against it may be served upon them with the same force and 18.15 effect as if personally served upon it, so long as any of its 18.16 liability exists in this state; 18.17 (4) It shall appoint, as its agents in this state, 18.18 residents thereof, and obtain from the commissioner a license to 18.19 transact business; 18.20 (5) Regardless of what lines of business an insurer of 18.21 another state is seeking to write in this state, the lines of 18.22 business it is licensed to write in its state of incorporation 18.23 shall be the basis for establishing the financial requirements 18.24 it must meet for admission in this state or for continuance of 18.25 its authority to write business in this state; 18.26 (6) No insurer of another state shall be admitted to do 18.27 business in this state for a line of business that it is not 18.28 authorized to write in its state of incorporation, unless the 18.29 statutes of that state prohibit all insurers from writing that 18.30 line of business. 18.31 Sec. 20. Minnesota Statutes 1996, section 60B.04, is 18.32 amended by adding a subdivision to read: 18.33 Subd. 7. [JURISDICTION.] If there is a delinquency 18.34 proceeding under this chapter, the provisions of this chapter 18.35 govern those proceedings, and all conflicting contractual 18.36 provisions contained in a contract between the insurer that is 19.1 subject to the delinquency proceeding and a third party, 19.2 including, but not limited to, the choice of law or arbitration 19.3 provisions, are subordinated to the provisions of this chapter. 19.4 Sec. 21. [60B.085] [IMMUNITY AND INDEMNIFICATION OF THE 19.5 RECEIVER AND EMPLOYEES.] 19.6 Subdivision 1. [SCOPE.] The persons entitled to protection 19.7 under this section are: 19.8 (1) all receivers responsible for the conduct of a 19.9 delinquency proceeding under this chapter, including present and 19.10 former receivers; and 19.11 (2) their employees, meaning all present and former special 19.12 deputies and assistant special deputies and assistant special 19.13 deputies appointed by the commissioner, and all persons whom the 19.14 commissioner, special deputies, or assistant special deputies 19.15 have employed to assist in a delinquency proceeding under this 19.16 chapter. Attorneys, accountants, auditors, and other 19.17 professional persons or firms, who are retained by the receiver 19.18 as independent contractors and their employees shall not be 19.19 considered employees of the receiver for purposes of this 19.20 section. 19.21 Subd. 2. [IMMUNITY FROM LIABILITY.] The receiver and the 19.22 receiver's employees shall have official immunity and shall be 19.23 immune from suit and liability, both personally and in their 19.24 official capacities, for a claim for damage to or loss of 19.25 property or personal injury or other civil liability caused by 19.26 or resulting from an alleged act, error, or omission of the 19.27 receiver or an employee arising out of or by reason of their 19.28 duties or employment. Nothing in this subdivision shall be 19.29 construed to hold the receiver or an employee immune from suit 19.30 or liability for damage, loss, injury, or liability caused by 19.31 the intentional or willful and wanton misconduct of the receiver 19.32 or an employee. 19.33 Subd. 3. [INDEMNIFICATION.] If a legal action is commenced 19.34 against the receiver or any employee, whether against the 19.35 receiver or employee personally or in their official capacity, 19.36 alleging property damage, property loss, personal injury, or 20.1 other civil liability caused by or resulting from an alleged 20.2 act, error, or omission of the receiver or an employee arising 20.3 out of or by reason of their duties or employment, the receiver 20.4 and employee must be indemnified from the assets of the insurer 20.5 for all expenses, attorneys' fees, judgments, settlements, 20.6 decrees, or amounts due and owing or paid in satisfaction or 20.7 incurred in the defense of the legal action unless it is 20.8 determined upon a final adjudication on the merits that the 20.9 alleged act, error, or omission of the receiver or employee 20.10 giving rise to the claim did not arise out of or by reason of 20.11 the receiver's or employee's duties or employment, or was caused 20.12 by intentional or willful and wanton misconduct. 20.13 (a) Attorney's fees and related expenses incurred in 20.14 defending a legal action for which immunity or indemnity is 20.15 available under this section must be paid from the assets of the 20.16 insurer, as they are incurred, in advance of the final 20.17 disposition of the action upon receipt of an undertaking by or 20.18 on behalf of the receiver or employee to repay the attorneys' 20.19 fees and expenses if it is ultimately determined upon a final 20.20 adjudication on the merits that the receiver or employee is not 20.21 entitled to immunity or indemnity under this section. 20.22 (b) Indemnification for expense payments, judgments, 20.23 settlements, decrees, attorneys' fees, surety bond premiums, or 20.24 other amounts paid or to be paid from the insurer's assets 20.25 according to this section is an administrative expense of the 20.26 insurer. 20.27 (c) In the event of an actual or threatened litigation 20.28 against a receiver or an employee for which immunity or 20.29 indemnity may be available under this section, a reasonable 20.30 amount of funds which in the judgment of the commissioner may be 20.31 needed to provide immunity or indemnity must be segregated and 20.32 reserved from the assets of the insurer as security for the 20.33 payment of indemnity until all applicable statutes of limitation 20.34 have run and all actual or threatened actions against the 20.35 receiver or an employee have been completely and finally 20.36 resolved, and all obligations of the insurer and the 21.1 commissioner under this section have been satisfied. 21.2 (d) In lieu of segregation and reserving of funds, the 21.3 commissioner may, in the commissioner's discretion, obtain a 21.4 surety bond or make other arrangements that will enable the 21.5 commissioner to fully secure the payment of all obligations 21.6 under this section. 21.7 Subd. 4. [SETTLEMENT COVERAGE.] If a legal action against 21.8 an employee for which indemnity may be available under this 21.9 section is settled before final adjudication on the merits, the 21.10 insurer must pay the settlement amount on behalf of the 21.11 employee, or indemnify the employee for the settlement amount, 21.12 unless the commissioner determines: 21.13 (1) that the claim did not arise out of or by reason of the 21.14 employee's duties or employment; or 21.15 (2) that the claim was caused by the intentional or willful 21.16 and wanton misconduct of the employee. 21.17 Subd. 5. [SETTLEMENT APPROVAL.] In a legal action in which 21.18 the receiver is a defendant, that portion of a settlement 21.19 relating to the alleged act, error, or omission of the receiver 21.20 is subject to the approval of the court before which the 21.21 delinquency proceeding is pending. The court shall not approve 21.22 that portion of the settlement if it determines: 21.23 (1) that the claim did not arise out of or by reason of the 21.24 receiver's duties or employment; or 21.25 (2) that the claim was caused by the intentional or willful 21.26 and wanton misconduct of the receiver. 21.27 Subd. 6. [CONSTRUCTION.] Nothing contained or implied in 21.28 this section operates, or shall be construed or applied, to 21.29 deprive the receiver or an employee of immunity, indemnity, 21.30 benefits of law, rights, or any defense otherwise available. 21.31 Sec. 22. Minnesota Statutes 1996, section 60B.21, 21.32 subdivision 2, is amended to read: 21.33 Subd. 2. [FIXING OF RIGHTS.] Upon issuance of the order, 21.34 the rights and liabilities of any such insurer and of its 21.35 creditors, policyholders, shareholders, members, and all other 21.36 persons interested in its estate are fixed as of the date of 22.1 filing of the petition for liquidation, except as provided in 22.2 sections 60B.22, 60B.25, clause (22), and 60B.39. 22.3 Sec. 23. Minnesota Statutes 1996, section 60B.25, is 22.4 amended to read: 22.5 60B.25 [POWERS OF LIQUIDATOR.] 22.6 The liquidator shall report to the court monthly, or at 22.7 other intervals specified by the court, on the progress of the 22.8 liquidation in whatever detail the court orders. The liquidator 22.9 shall coordinate activities with those of each guaranty 22.10 association having an interest in the liquidation and shall 22.11 submit a report detailing how coordination will be achieved to 22.12 the court for its approval within 30 days following appointment, 22.13 or within the time which the court, in its discretion, may 22.14 establish. Subject to the court's control, the liquidator may: 22.15 (1) Appoint a special deputy to act under sections 60B.01 22.16 to 60B.61 and determine the deputy's compensation. The special 22.17 deputy shall have all powers of the liquidator granted by this 22.18 section. The special deputy shall serve at the pleasure of the 22.19 liquidator. 22.20 (2) Appoint or engage employees and agents, actuaries, 22.21 accountants, appraisers, consultants, and other personnel deemed 22.22 necessary to assist in the liquidation without regard to chapter 22.23 14. 22.24 (3) Fix the compensation of persons under clause (2), 22.25 subject to the control of the court. 22.26 (4) Defray all expenses of taking possession of, 22.27 conserving, conducting, liquidating, disposing of, or otherwise 22.28 dealing with the business and property of the insurer. If the 22.29 property of the insurer does not contain sufficient cash or 22.30 liquid assets to defray the costs incurred, the liquidator may 22.31 advance the costs so incurred out of the appropriation made to 22.32 the department of commerce. Any amounts so paid shall be deemed 22.33 expense of administration and shall be repaid for the credit of 22.34 the department of commerce out of the first available money of 22.35 the insurer. 22.36 (5) Hold hearings, subpoena witnesses and compel their 23.1 attendance, administer oaths, examine any person under oath and 23.2 compel any person to subscribe to testimony after it has been 23.3 correctly reduced to writing, and in connection therewith 23.4 require the production of any books, papers, records, or other 23.5 documents which the liquidator deems relevant to the inquiry. 23.6 (6) Collect all debts and money due and claims belonging to 23.7 the insurer, wherever located, and for this purpose institute 23.8 timely action in other jurisdictions, in order to forestall 23.9 garnishment and attachment proceedings against such debts; do 23.10 such other acts as are necessary or expedient to collect, 23.11 conserve, or protect its assets or property, including sell, 23.12 compound, compromise, or assign for purposes of collection, upon 23.13 such terms and conditions as the liquidator deems best, any bad 23.14 or doubtful debts; and pursue any creditor's remedies available 23.15 to enforce claims. 23.16 (7) Conduct public and private sales of the property of the 23.17 insurer in a manner prescribed by the court. 23.18 (8) Use assets of the estate to transfer coverage 23.19 obligations to a solvent assuming insurer, if the transfer can 23.20 be arranged without prejudice to applicable priorities under 23.21 section 60B.44. 23.22 (9) Acquire, hypothecate, encumber, lease, improve, sell, 23.23 transfer, abandon, or otherwise dispose of or deal with any 23.24 property of the insurer at its market value or upon such terms 23.25 and conditions as are fair and reasonable, except that no 23.26 transaction involving property the market value of which exceeds 23.27 $10,000 shall be concluded without express permission of the 23.28 court. The liquidator may also execute, acknowledge, and 23.29 deliver any deeds, assignments, releases, and other instruments 23.30 necessary or proper to effectuate any sale of property or other 23.31 transaction in connection with the liquidation. In cases where 23.32 real property sold by the liquidator is located other than in 23.33 the county where the liquidation is pending, the liquidator 23.34 shall cause to be filed with the county recorder for the county 23.35 in which the property is located a certified copy of the order 23.36 of appointment. 24.1 (10) Borrow money on the security of the insurer's assets 24.2 or without security and execute and deliver all documents 24.3 necessary to that transaction for the purpose of facilitating 24.4 the liquidation. 24.5 (11) Enter into such contracts as are necessary to carry 24.6 out the order to liquidate, and affirm or disavow any contracts 24.7 to which the insurer is a party. 24.8 (12) Continue to prosecute and institute in the name of the 24.9 insurer or in the liquidator's own name any suits and other 24.10 legal proceedings, in this state or elsewhere, and abandon the 24.11 prosecution of claims the liquidator deems unprofitable to 24.12 pursue further. If the insurer is dissolved under section 24.13 60B.23, the liquidator may apply to any court in this state or 24.14 elsewhere for leave to be substituted for the insurer as 24.15 plaintiff. 24.16 (13) Prosecute any action which may exist in behalf of the 24.17 creditors, members, policyholders, or shareholders of the 24.18 insurer against any officer of the insurer, or any other person. 24.19 (14) Remove any records and property of the insurer to the 24.20 offices of the commissioner or to such other place as is 24.21 convenient for the purposes of efficient and orderly execution 24.22 of the liquidation. 24.23 (15) Deposit in one or more banks in this state such sums 24.24 as are required for meeting current administration expenses and 24.25 dividend distributions. 24.26 (16) Deposit with the state board of investment for 24.27 investment pursuant to section 11A.24, all sums not currently 24.28 needed, unless the court orders otherwise. 24.29 (17) File any necessary documents for record in the office 24.30 of any county recorder or record office in this state or 24.31 elsewhere where property of the insurer is located. 24.32 (18) Assert all defenses available to the insurer as 24.33 against third persons, including statutes of limitations, 24.34 statutes of frauds, and the defense of usury. A waiver of any 24.35 defense by the insurer after a petition for liquidation has been 24.36 filed shall not bind the liquidator. 25.1 (19) Exercise and enforce all the rights, remedies, and 25.2 powers of any creditor, shareholder, policyholder, or member, 25.3 including any power to avoid any transfer or lien that may be 25.4 given by law and that is not included within sections 60B.30 and 25.5 60B.32. 25.6 (20) Intervene in any proceeding wherever instituted that 25.7 might lead to the appointment of a receiver or trustee, and act 25.8 as the receiver or trustee whenever the appointment is offered. 25.9 (21) Enter into agreements with any receiver or 25.10 commissioner of any other state relating to the rehabilitation, 25.11 liquidation, conservation, or dissolution of an insurer doing 25.12 business in both states. 25.13 (22) Collect from an insured any unpaid earned premium or 25.14 retrospectively rated premium due the insurer based on the 25.15 termination of coverage under section 60B.22. Premium on surety 25.16 business is considered earned at inception if no policy term can 25.17 be determined. All other premium will be considered earned and 25.18 will be prorated over the determined policy term, regardless of 25.19 any provision in the bond, guaranty, contract, or other 25.20 agreement. 25.21(22)(23) Exercise all powers now held or hereafter 25.22 conferred upon receivers by the laws of this state not 25.23 inconsistent with sections 60B.01 to 60B.61. 25.24(23)(24) The enumeration in this section of the powers and 25.25 authority of the liquidator is not a limitation, nor does it 25.26 exclude the right to do such other acts not herein specifically 25.27 enumerated or otherwise provided for as are necessary or 25.28 expedient for the accomplishment of or in aid of the purpose of 25.29 liquidation. 25.30(24)(25) The power of the liquidator of a health 25.31 maintenance organization includes the power to transfer coverage 25.32 obligations to a solvent and voluntary health maintenance 25.33 organization, insurer, or nonprofit health service plan, and to 25.34 assign provider contracts of the insolvent health maintenance 25.35 organization to an assuming health maintenance organization, 25.36 insurer, or nonprofit health service plan permitted to enter 26.1 into such agreements. The liquidator is not required to meet 26.2 the notice requirements of section 62D.121. Transferees of 26.3 coverage obligations or provider contracts shall have no 26.4 liability to creditors or obligees of the health maintenance 26.5 organization except those liabilities expressly assumed. 26.6 Sec. 24. [60B.365] [REINSURER'S LIABILITY.] 26.7 Subdivision 1. [GENERALLY.] The amount recoverable by the 26.8 liquidator from reinsurers must not be reduced as a result of 26.9 the delinquency proceedings, regardless of any provision in the 26.10 reinsurance contract or other agreement. 26.11 Subd. 2. [REQUIRED CONTRACT PROVISIONS.] All reinsurance 26.12 contracts to which an insurer domiciled in this state is a party 26.13 that do not contain the provisions required with respect to the 26.14 obligation of reinsurers in the event of insolvency of the 26.15 reinsured in order to obtain credit for reinsurance or other 26.16 applicable statutes, must be construed to contain the following 26.17 provisions: 26.18 (1) in the event of insolvency and the appointment of a 26.19 receiver, the reinsurance obligation is payable to the receiver 26.20 upon demand, with reasonable provision for verification, without 26.21 diminution because of the insolvency or because the receiver has 26.22 failed to pay all or a portion of any claims. Payments by the 26.23 reinsurer must be made directly to the ceding insurer or to its 26.24 receiver; and 26.25 (2) the receiver of a reinsured company shall give written 26.26 notice of the pendency of a claim against the reinsured company 26.27 indicating the policy or bond reinsured, within a reasonable 26.28 time after the claim is filed. The receiver of a reinsured 26.29 company may arrange for the giving of notice of the pendency of 26.30 claims on reinsured policies by guaranty funds or by other 26.31 persons responsible for the adjustment and settlement of the 26.32 reinsured company's claims. Failure to give notice does not 26.33 excuse the obligation of the reinsurer unless it is 26.34 substantially prejudiced by the failure of the receiver to give 26.35 notice. The reinsurer may interpose, at its own expense, in the 26.36 proceeding where the claim is to be adjudicated, any defense or 27.1 defenses that it may consider available to the reinsured company 27.2 or its receiver. 27.3 Subd. 3. [PAYMENTS.] Payments by the reinsurer must be 27.4 made directly to the ceding insurer or its receiver, except 27.5 where the contract of insurance or reinsurance specifically 27.6 provides for another payee for the reinsurance in the event of 27.7 insolvency of the ceding insurer according to the applicable 27.8 requirements of statutes, rules, or orders of the domiciliary 27.9 state of the ceding insurer. The receiver is entitled to 27.10 recover from a person who unsuccessfully makes a claim directly 27.11 against the reinsurer the receiver's attorneys' fees and 27.12 expenses incurred in preventing any collection by the person. 27.13 Sec. 25. Minnesota Statutes 1996, section 60B.44, 27.14 subdivision 3, is amended to read: 27.15 Subd. 3. [WAGES.] (a) Debts due to employees for services 27.16 performed, not to exceed $1,000 to each employee which have been 27.17 earned within one year before the filing of the petition for 27.18 liquidation, subject to payment therefrom of applicable federal, 27.19 state or any local government taxes required by law to be 27.20 withheld from said debts. Officers shall not be entitled to the 27.21 benefit of this priority. In cases where there are no claims 27.22 and no potential claims of the federal government in the estate, 27.23 these claims will have priority over claims in subdivision 4. 27.24 (b) Such priority shall be in lieu of any other similar 27.25 priority authorized by law as to wages or compensation of 27.26 employees. 27.27 Sec. 26. Minnesota Statutes 1996, section 60B.44, 27.28 subdivision 4, is amended to read: 27.29 Subd. 4. [LOSS CLAIMS; INCLUDING CLAIMS NOT COVERED BY A 27.30 GUARANTY ASSOCIATION.] All claims under policies or contracts of 27.31 coverage for losses incurred including third party claims, and 27.32 all claims against the insurer for liability for bodily injury 27.33 or for injury to or destruction of tangible property which are 27.34 not under policies or contracts. All claims under life 27.35 insurance and annuity policies, whether for death proceeds, 27.36 annuity proceeds, or investment values, shall be treated as loss 28.1 claims. That portion of any loss for which indemnification is 28.2 provided by other benefits or advantages recovered or 28.3 recoverable by the claimant shall not be included in this class, 28.4 other than benefits or advantages recovered or recoverable in 28.5 discharge of familial obligations of support or by way of 28.6 succession at death or as proceeds of life insurance, or as 28.7 gratuities. No payment made by an employer to an employee shall 28.8 be treated as a gratuity. Claims not covered by a guaranty 28.9 association are loss claims.If any portion of a claim is28.10covered by a reinsurance treaty or similar contractual28.11obligation, that claim shall be entitled to a pro rata share,28.12based upon the relationship the claim amount bears to all claims28.13payable under the treaty or contract, of the proceeds received28.14under that treaty or contractual obligation.28.15Claims receiving pro rata payments shall not, as to any28.16remaining unpaid portion of their claim, be treated in a28.17different manner than if no such payment had been received.28.18 Sec. 27. Minnesota Statutes 1996, section 60B.44, 28.19 subdivision 6, is amended to read: 28.20 Subd. 6. [RESIDUAL CLASSIFICATION.] All other claims 28.21 including claims ofthe federal orany state or local 28.22 government, not falling within other classes under this 28.23 section. Claims, including those of any governmental body for a 28.24 penalty or forfeiture, shall be allowed in this class only to 28.25 the extent of the pecuniary loss sustained from the act, 28.26 transaction, or proceeding out of which the penalty or 28.27 forfeiture arose, with reasonable and actual costs occasioned 28.28 thereby. The remainder of such claims shall be postponed to the 28.29 class of claims under subdivision 9. 28.30 Sec. 28. Minnesota Statutes 1996, section 60D.20, 28.31 subdivision 2, is amended to read: 28.32 Subd. 2. [DIVIDENDS AND OTHER DISTRIBUTIONS.] (a) Subject 28.33 to the limitations and requirements of this subdivision, the 28.34 board of directors of any domestic insurer within an insurance 28.35 holding company system may authorize and cause the insurer to 28.36 declare and pay any dividend or distribution to its shareholders 29.1 as the directors deem prudent from the earned surplus of the 29.2 insurer. An insurer's earned surplus, also known as unassigned 29.3 funds, shall be determined in accordance with the accounting 29.4 procedures and practices governing preparation of its annual 29.5 statement, minus 25 percent of earned surplus attributable to29.6net unrealized capital gains. Dividends which are paid from 29.7 sources other than an insurer's earned surplus as of the end of 29.8 the immediately preceding quarter for which the insurer has 29.9 filed a quarterly or annual statement as appropriate, or are 29.10 extraordinary dividends or distributions may be paid only as 29.11 provided in paragraphs (d), (e), and (f). 29.12 (b) The insurer shall notify the commissioner within five 29.13 business days following declaration of a dividend declared 29.14 pursuant to paragraph (a) and at least ten days prior to its 29.15 payment. The commissioner shall promptly consider the 29.16 notification filed pursuant to this paragraph, taking into 29.17 consideration the factors described in subdivision 4. 29.18 (c) The commissioner shall review at least annually the 29.19 dividends paid by an insurer pursuant to paragraph (a) for the 29.20 purpose of determining if the dividends are reasonable based 29.21 upon (1) the adequacy of the level of surplus as regards 29.22 policyholders remaining after the dividend payments, and (2) the 29.23 quality of the insurer's earnings and extent to which the 29.24 reported earnings include extraordinary items, such as surplus 29.25 relief reinsurance transactions and reserve destrengthening. 29.26 (d) No domestic insurer shall pay any extraordinary 29.27 dividend or make any other extraordinary distribution to its 29.28 shareholders until: (1) 30 days after the commissioner has 29.29 received notice of the declaration of it and has not within the 29.30 period disapproved the payment; or (2) the commissioner has 29.31 approved the payment within the 30-day period. 29.32 (e) For purposes of this section, an extraordinary dividend 29.33 or distribution includes any dividend or distribution of cash or 29.34 other property, whose fair market value together with that of 29.35 other dividends or distributions made within the preceding 12 29.36 months exceeds the greater of (1) ten percent of the insurer's 30.1 surplus as regards policyholdersas of the 31st day of December30.2next precedingon December 31 of the preceding year; or (2) the 30.3 net gain from operations of the insurer, if the insurer is a 30.4 life insurer, or the net income, if the insurer is not a life 30.5 insurer, not including realized capital gains, for the 12-month 30.6 period endingthe 31st day of December next precedingon 30.7 December 31 of the preceding year, but does not include pro rata 30.8 distributions of any class of the insurer's own securities. 30.9 (f) Notwithstanding any other provision of law, an insurer 30.10 may declare an extraordinary dividend or distribution that is 30.11 conditional upon the commissioner's approval, and the 30.12 declaration shall confer no rights upon shareholders until: (1) 30.13 the commissioner has approved the payment of such a dividend or 30.14 distribution; or (2) the commissioner has not disapproved the 30.15 payment within the 30-day period referred to above. 30.16 Sec. 29. Minnesota Statutes 1996, section 60K.02, 30.17 subdivision 1, is amended to read: 30.18 Subdivision 1. [REQUIREMENT.] No person shall act or 30.19 assume to act as an insurance agent in the solicitation or 30.20 procurement of applications for insurance, nor in the sale of 30.21 insurance or policies of insurance, nor in any manner aid as an 30.22 insurance agent in the negotiation of insurance by or with an 30.23 insurer, including resident agents or reciprocal or 30.24 interinsurance exchanges and fraternal benefit societies, until 30.25 that person obtains from the commissioner a license for that 30.26 purpose. The license must specifically set forth the name of 30.27 the person authorized to act as an agent and the class or 30.28 classes of insurance for which that person is authorized to 30.29 solicit or countersign policies. An insurance agent may qualify 30.30 for a license in the following classes: (1) life and health; 30.31and(2) property and casualty; (3) travel baggage; (4) bail 30.32 bonds; (5) title insurance; (6) farm property and liability; and 30.33 (7) variable annuities. 30.34 No insurer shall appoint or reappoint a natural person, 30.35 partnership, or corporation to act as an insurance agent on its 30.36 behalf until that natural person, partnership, or corporation 31.1 obtains a license as an insurance agent. 31.2 Sec. 30. Minnesota Statutes 1996, section 60K.03, 31.3 subdivision 2, is amended to read: 31.4 Subd. 2. [RESIDENT AGENT.] The commissioner shall issue a 31.5 resident insurance agent's license to a qualified resident of 31.6 this state as follows: 31.7 (a) A person may qualify as a resident of this state if 31.8 that person resides in this state or the principal place of 31.9 business of that person is maintained in this state. 31.10 Application for a license claiming residency in this state for 31.11 licensing purposes constitutes an election of residency in this 31.12 state. A license issued upon an application claiming residency 31.13 in this state is void if the licensee, while holding a resident 31.14 license in this state, also holds, or makes application for, a 31.15 resident license in, or thereafter claims to be a resident of, 31.16 any other state or jurisdiction or if the licensee ceases to be 31.17 a resident of this state; provided, however, if the applicant is 31.18 a resident of a community or trade area, the border of which is 31.19 contiguous with the state line of this state, the applicant may 31.20 qualify for a resident license in this state and at the same 31.21 time hold a resident license from the contiguous state. 31.22 (b) The commissioner shall subject each applicant who is a 31.23 natural person to a written examination as to the applicant's 31.24 competence to act as an insurance agent. The examination must 31.25 be held at a reasonable time and place designated by the 31.26 commissioner. 31.27 (c) The examination shall be approved for use by the 31.28 commissioner and shall test the applicant's knowledge of the 31.29 lines of insurance, policies, and transactions to be handled 31.30 under the class of license applied for, of the duties and 31.31 responsibilities of the licensee, and pertinent insurance laws 31.32 of this state. 31.33 (d) The examination shall be given only after the applicant 31.34 has completed a program of classroom studies in a school, which 31.35 shall not include a school sponsored by, offered by, or 31.36 affiliated with an insurance company or its agents; except that 32.1 this limitation does not preclude a bona fide professional 32.2 association of agents, not acting on behalf of an insurer, from 32.3 offering courses. The course of study shall consist of 30 hours 32.4 of classroom study devoted to the basic fundamentals of 32.5 insurance for those seeking a Minnesota license for the first 32.6 time,; three hours devoted to state laws, regulations, and rules 32.7 applicable to the line or lines of insurance for which licensure 32.8 is being applied; 15 hours devoted to specific life and health 32.9 topics for those seeking a life and health license,; and 15 32.10 hours devoted to specific property and casualty topics for those 32.11 seeking a property and casualty license. The program of studies 32.12 or study course shall have been approved by the commissioner in 32.13 order to qualify under this paragraph. If the applicant has 32.14 been previously licensed for the particular line of insurance in 32.15 the state of Minnesota, the requirement of a program of studies 32.16 or a study course shall be waived. A certification of 32.17 compliance by the organization offering the course shall 32.18 accompany the applicant's license application. This program of 32.19 studies in a school or a study course shall not apply to farm 32.20 property perils and farm liability applicants, or to agents 32.21 writing such other lines of insurance as the commissioner may 32.22 exempt from examination by order. 32.23 (e) The applicant must pass the examination with a grade 32.24 determined by the commissioner to indicate satisfactory 32.25 knowledge and understanding of the class or classes of insurance 32.26 for which the applicant seeks qualification. The commissioner 32.27 shall inform the applicant as to whether or not the applicant 32.28 has passed. Examination results are valid for a period of three 32.29 years from the date of the examination. The applicant must pass 32.30 the examination with a grade determined by the commissioner. 32.31 (f) An applicant who has failed to pass an examination may 32.32 take subsequent examinations. Examination fees for subsequent 32.33 examinations shall not be waived. 32.34 (g) Any applicant for a license covering the same class or 32.35 classes of insurance for which the applicant was licensed under 32.36 a similar license in this state, other than a temporary license, 33.1 within the three years preceding the date of the application 33.2 shall be exempt from the requirement of a written examination, 33.3 unless the previous license was revoked or suspended by the 33.4 commissioner. An applicant whose license is not renewed under 33.5 section 60K.12 is exempt from the requirement of a written 33.6 examination. 33.7 Sec. 31. Minnesota Statutes 1996, section 60K.03, 33.8 subdivision 3, is amended to read: 33.9 Subd. 3. [NONRESIDENT AGENT.] The commissioner shall issue 33.10 a nonresident insurance agent's license to a qualified person 33.11 who is a resident of another state or country as follows: 33.12 (a) A person may qualify for a license under this section 33.13 as a nonresident only if that person holds a license in another 33.14 state, province of Canada, or other foreign country which, in 33.15 the opinion of the commissioner, qualifies that person for the 33.16 same activity as that for which a license is sought. 33.17 (b) The commissioner shall not issue a license to a 33.18 nonresident applicant until that person files with the 33.19 commissioner a designation of the commissioner and the 33.20 commissioner's successors in office as the applicant's true and 33.21 lawful attorney upon whom may be served all lawful process in an 33.22 action, suit, or proceeding instituted by or on behalf of an 33.23 interested person arising out of the applicant's insurance 33.24 business in this state. This designation constitutes an 33.25 agreement that this service of process is of the same legal 33.26 force and validity as personal service of process in this state 33.27 upon that applicant. 33.28 Service of process upon a licensee in an action or 33.29 proceeding begun in a court of competent jurisdiction of this 33.30 state may be made in compliance with section 45.028, subdivision 33.31 2. 33.32 (c) A nonresident agent shall be held to the same knowledge 33.33 of insurance law, regulations, and rules as that required of a 33.34 resident agent according to subdivision 2, paragraph (d). 33.35(c)(d) A nonresident license terminates automatically when 33.36 the resident license for that class of license in the state, 34.1 province, or foreign country in which the licensee is a resident 34.2 is terminated for any reason. 34.3 Sec. 32. Minnesota Statutes 1996, section 60K.14, 34.4 subdivision 4, is amended to read: 34.5 Subd. 4. [SUITABILITY OF INSURANCE.] In recommending the 34.6 purchase of any life, endowment, individual accident and 34.7 sickness, long-term care, annuity, life-endowment, or Medicare 34.8 supplement insurance to a customer, an agent must have 34.9 reasonable grounds for believing that the recommendation is 34.10 suitable for the customer and must make reasonable inquiries to 34.11 determine suitability. The suitability of a recommended 34.12 purchase of insurance will be determinedby reference to the34.13totality of the particular customer's circumstancesupon the 34.14 basis of the facts disclosed by the customer as to the 34.15 customer's other insurance and financial situation and needs, 34.16 including, but not limited to, the customer'sincomefinancial 34.17 status, the customer's need for insurance, and the values, 34.18 benefits, and costs of the customer's existing insurance 34.19 program, if any, when compared to the values, benefits, and 34.20 costs of the recommended policy or policies. 34.21 Sec. 33. Minnesota Statutes 1996, section 60K.19, 34.22 subdivision 7, is amended to read: 34.23 Subd. 7. [CRITERIA FOR COURSE ACCREDITATION.] (a) The 34.24 commissioner may accredit a course only to the extent it is 34.25 designed to impart substantive and procedural knowledge of the 34.26 insurance field. The burden of demonstrating that the course 34.27 satisfies this requirement is on the individual or organization 34.28 seeking accreditation. The commissioner shall approve any 34.29 educational program approved by Minnesota Continuing Legal 34.30 Education relating to the insurance field. The commissioner is 34.31 authorized to establish a procedure for renewal of course 34.32 accreditation. 34.33 (b) The commissioner shall approve or disapprove 34.34 professional designation examinations that are recommended for 34.35 approval by the advisory task force. In order for an agent to 34.36 receive full continuing education credit for a professional 35.1 designation examination, the agent must pass the examination. 35.2 An agent may not receive credit for classroom instruction 35.3 preparing for the professional designation examination and also 35.4 receive continuing education credit for passing the professional 35.5 designation examination. 35.6 (c) The commissioner may not accredit a course: 35.7 (1) that is designed to prepare students for a license 35.8 examination; 35.9 (2) in mechanical office or business skills, including 35.10 typing, speedreading, use of calculators, or other machines or 35.11 equipment; 35.12 (3) in sales promotion, including meetings held in 35.13 conjunction with the general business of the licensed agent; or 35.14 (4) in motivation, the art of selling, psychology, or time 35.15 management; or. 35.16(5) which can be completed by the student at home or35.17outside the classroom without the supervision of an instructor35.18approved by the department of commerce, except that home-study35.19courses may be accredited by the commissioner if the student is35.20a nonresident agent residing in a state which is not contiguous35.21to Minnesota.35.22 Sec. 34. Minnesota Statutes 1996, section 60K.19, 35.23 subdivision 8, is amended to read: 35.24 Subd. 8. [MINIMUM EDUCATION REQUIREMENT.] Each person 35.25 subject to this section shall complete a minimum of 30 credit 35.26 hours of courses accredited by the commissioner during each 35.27 24-month licensing periodafter the expiration of the person's35.28initial licensing period, two hours of which must be devoted to 35.29 state law, regulations, and rules applicable to the line or 35.30 lines of insurance for which the agent is licensed. At least 15 35.31 of the 30 credit hours must be completed during the first 12 35.32 months of the 24-month licensing period. Any person whose 35.33 initial licensing period extends more than six months shall 35.34 complete 15 hours of courses accredited by the commissioner 35.35 during the initial license period. Any person teaching or 35.36 lecturing at an accredited course qualifies for 1-1/2 times the 36.1 number of credit hours that would be granted to a person 36.2 completing the accredited course. No more than 15 credit hours 36.3 per licensing period may be credited to a person for courses 36.4 sponsored by, offered by, or affiliated with an insurance 36.5 company or its agents. Courses sponsored by, offered by, or 36.6 affiliated with an insurance company or agent may restrict its 36.7 students to agents of the company or agency. 36.8 Sec. 35. Minnesota Statutes 1996, section 61A.28, 36.9 subdivision 6, is amended to read: 36.10 Subd. 6. [STOCKS, OBLIGATIONS, AND OTHER INVESTMENTS.] (a) 36.11 Common stocks, common stock equivalents, or securities 36.12 convertible into common stock or common stock equivalents of a 36.13 business entity organized under the laws of the United States or 36.14 any state thereof, or the Dominion of Canada or any province 36.15 thereof, if the net earnings of the business entity after the 36.16 elimination of extraordinary nonrecurring items of income and 36.17 expense and before income taxes and fixed charges over the five 36.18 immediately preceding completed fiscal years, or its period of 36.19 existence if less than five years, has averaged not less than 36.20 1-1/4 times its average annual fixed charges applicable to the 36.21 period. 36.22 (b) Preferred stock of, or common or preferred stock 36.23 guaranteed as to dividends by a business entity organized under 36.24 the laws of the United States or any state thereof, or the 36.25 Dominion of Canada or any province thereof, under the following 36.26 conditions: (1) No investment may be made under this paragraph 36.27 in a stock upon which any dividend, current or cumulative, is in 36.28 arrears; (2) the company may not invest in stocks under this 36.29 paragraph and in common stocks under paragraph (a) if the 36.30 investment causes the company's aggregate investments in the 36.31 common or preferred stocks to exceed 25 percent of the company's 36.32 total admitted assets, provided that no more than 20 percent of 36.33 the company's admitted assets may be invested in common stocks 36.34 under paragraph (a); and (3) the company may not invest in any 36.35 preferred stock or common stock guaranteed as to dividends, 36.36 which is rated in the four lowest categories established by the 37.1 securities valuation office of the National Association of 37.2 Insurance Commissioners, if the investment causes the company's 37.3 aggregate investment in the lower rated preferred or common 37.4 stock guaranteed as to dividends to exceed five percent of its 37.5 total admitted assets. 37.6 (c) Warrants, options, and rights to purchase stock if the 37.7 stock, at the time of the acquisition of the warrant, option, or 37.8 right to purchase, would qualify as an investment under 37.9 paragraph (a) or (b), whichever is applicable. A company shall 37.10 not invest in a warrant, option, or right to purchase stock if, 37.11 upon purchase and immediate exercise thereof, the acquisition of 37.12 the stock violates any of the concentration limitations 37.13 contained in paragraphs (a) and (b). 37.14 (d) In addition to amounts that may be invested under 37.15 subdivision 8 and without regard to the percentage limitation 37.16 applicable to stocks, warrants, options, and rights to purchase, 37.17 the securities of any face amount certificate company, unit 37.18 investment trust, or management type investment company, 37.19 registered or in the process of registration under the 37.20 Investment Company Act of 1940 as from time to time amended. In 37.21 addition, the company may transfer assets into one or more of 37.22 its separate accounts for the purpose of establishing, or 37.23 supporting its contractual obligations under, the accounts in 37.24 accordance with the provisions of sections 61A.13 to 61A.21. A 37.25 company may not invest in a security authorized under this 37.26 paragraph if the investment causes the company's aggregate 37.27 investments in the securities to exceed five percent of its 37.28 total admitted assets, except that for a health service plan 37.29 corporation operating under chapter 62C, and for a health 37.30 maintenance organization operating under chapter 62D, the 37.31 company's aggregate investments may not exceed 20 percent of its 37.32 total admitted assets. No more than five percent of the allowed 37.33 investment by health service plan corporations or health 37.34 maintenance organizations may be invested in funds that invest 37.35 in assets not backed by the federal government. When investing 37.36 in money market mutual funds, nonprofit health service plans 38.1 regulated under chapter 62C, and health maintenance 38.2 organizations regulated under chapter 62D, shall establish a 38.3 trustee custodial account for the transfer of cash into the 38.4 money market mutual fund. 38.5 (e) Investment grade obligations that are: 38.6 (1) bonds, obligations, notes, debentures, repurchase 38.7 agreements, or other evidences of indebtedness of a business 38.8 entity, organized under the laws of the United States or any 38.9 state thereof, or the Dominion of Canada or any province 38.10 thereof; and 38.11 (2) rated in one of the four highest rating categories by 38.12 at least one nationally recognized statistical rating 38.13 organization, or are rated in one of the two highest categories 38.14 established by the securities valuation office of the National 38.15 Association of Insurance Commissioners. 38.16 (f) Noninvestment grade obligations: A company may acquire 38.17 noninvestment grade obligations as defined in subclause (i) 38.18 (hereinafter noninvestment grade obligations) which meet the 38.19 earnings test set forth in subclause (ii). A company may not 38.20 acquire a noninvestment grade obligation if the acquisition will 38.21 cause the company to exceed the limitations set forth in 38.22 subclause (iii). 38.23 (i) A noninvestment grade obligation is an obligation of a 38.24 business entity, organized under the laws of the United States 38.25 or any state thereof, or the Dominion of Canada or any province 38.26 thereof, that is not rated in one of the four highest rating 38.27 categories by at least one nationally recognized statistical 38.28 rating organization, or is not rated in one of the two highest 38.29 categories established by the securities valuation office of the 38.30 National Association of Insurance Commissioners. 38.31 (ii) Noninvestment grade obligations authorized by this 38.32 subdivision may be acquired by a company if the business entity 38.33 issuing or assuming the obligation, or the business entity 38.34 securing or guaranteeing the obligation, has had net earnings 38.35 after the elimination of extraordinary nonrecurring items of 38.36 income and expense and before income taxes and fixed charges 39.1 over the five immediately preceding completed fiscal years, or 39.2 its period of existence of less than five years, has averaged 39.3 not less than 1-1/4 times its average annual fixed charges 39.4 applicable to the period; provided, however, that if a business 39.5 entity issuing or assuming the obligation, or the business 39.6 entity securing or guaranteeing the obligation, has undergone an 39.7 acquisition, recapitalization, or reorganization within the 39.8 immediately preceding 12 months, or will use the proceeds of the 39.9 obligation for an acquisition, recapitalization, or 39.10 reorganization, then such business entity shall also have, on a 39.11 pro forma basis, for the next succeeding 12 months, net earnings 39.12 averaging 1-1/4 times its average annual fixed charges 39.13 applicable to such period after elimination of extraordinary 39.14 nonrecurring items of income and expense and before taxes and 39.15 fixed charges; no investment may be made under this section upon 39.16 which any interest obligation is in default. 39.17 (iii) Limitation on aggregate interest in noninvestment 39.18 grade obligations. A company may not invest in a noninvestment 39.19 grade obligation if the investment will cause the company's 39.20 aggregate investments in noninvestment grade obligations to 39.21 exceed the applicable percentage of admitted assets set forth in 39.22 the following table: 39.23 Percentage of 39.24 Effective Date Admitted Assets 39.25 January 1, 1992 20 39.26 January 1, 1993 17.5 39.27 January 1, 1994 15 39.28 Nothing in this paragraph limits the ability of a company 39.29 to invest in noninvestment grade obligations as provided under 39.30 subdivision 12. 39.31 (g) Obligations for the payment of money under the 39.32 following conditions: (1) The obligation must be secured, 39.33 either solely or in conjunction with other security, by an 39.34 assignment of a lease or leases on property, real or personal; 39.35 (2) the lease or leases must be nonterminable by the lessee or 39.36 lessees upon foreclosure of any lien upon the leased property; 40.1 (3) the rents payable under the lease or leases must be 40.2 sufficient to amortize at least 90 percent of the obligation 40.3 during the primary term of the lease; and (4) the lessee or 40.4 lessees under the lease or leases, or a governmental entity or 40.5 business entity, organized under the laws of the United States 40.6 or any state thereof, or the Dominion of Canada, or any province 40.7 thereof, that has assumed or guaranteed any lessee's performance 40.8 thereunder, must be a governmental entity or business entity 40.9 whose obligations would qualify as an investment under 40.10 subdivision 2 or paragraph (e) or (f). A company may acquire 40.11 leases assumed or guaranteed by a noninvestment grade lessee 40.12 unless the value of the lease, when added to the other 40.13 noninvestment grade obligations owned by the company, exceeds 15 40.14 percent of the company's admitted assets. 40.15 (h) A company may sellexchange-tradedcall options against 40.16 stocks or other securities owned by the company and may purchase 40.17exchange-tradedcall options in a closing transaction against a 40.18 call option previously written by the company. In addition to 40.19 the authority granted by paragraph (c), to the extent and on the 40.20 terms and conditions the commissioner determines to be 40.21 consistent with the purposes of this chapter, a company may 40.22 purchase or sell other exchange-traded call options, and may 40.23 sell or purchase exchange-traded put options. 40.24 (i) A company may not invest in a security or other 40.25 obligation authorized under this subdivision if the investment, 40.26 valued at cost at the date of purchase, causes the company's 40.27 aggregate investment in any one business entity to exceed two 40.28 percent of the company's admitted assets. 40.29 (j) For nonprofit health service plan corporations 40.30 regulated under chapter 62C, and for health maintenance 40.31 organizations regulated under chapter 62D, a company may invest 40.32 in commercial paper rated in one of the two highest rating 40.33 categories by at least one nationally recognized statistical 40.34 rating organization, or rated in one of the two highest 40.35 categories established by the securities valuation office of the 40.36 National Association of Insurance Commissioners, if the 41.1 investment, valued at cost at the date of purchase, does not 41.2 cause the company's aggregate investment in any one business 41.3 entity to exceed six percent of the company's admitted assets. 41.4 Sec. 36. Minnesota Statutes 1996, section 61A.28, 41.5 subdivision 9a, is amended to read: 41.6 Subd. 9a. [HEDGING.] A domestic life insurance company may 41.7 enter into financial transactions solely for the purpose of 41.8managingreducing theinterest raterisk associated withthe41.9company'sassets and liabilities that the company has acquired 41.10 or incurred or has legally contracted to acquire or incur, and 41.11 not for speculative or other purposes. For purposes of this 41.12 subdivision, "financial transactions" include, but are not 41.13 limited to, futures, options to buy or sell fixed income 41.14 securities, repurchase and reverse repurchase agreements, and 41.15 interest rate swaps, caps, and floors. This authority is in 41.16 addition to any other authority of the insurer. 41.17 Sec. 37. Minnesota Statutes 1996, section 61A.28, 41.18 subdivision 12, is amended to read: 41.19 Subd. 12. [ADDITIONAL INVESTMENTS.] Investments of any 41.20 kind, without regard to the categories, conditions, standards, 41.21 or other limitations set forth in the foregoing subdivisions and 41.22 section 61A.31, subdivision 3, except that the prohibitions in 41.23 clause (d) of subdivision 3 remains applicable, may be made by a 41.24 domestic life insurance company in an amount not to exceed the 41.25 lesser of the following: 41.26 (1) Five percent of the company's total admitted assets as 41.27 of the end of the preceding calendar year, or 41.28 (2) Fifty percent of the amount by which its capital and 41.29 surplus as of the end of the preceding calendar year exceeds 41.30 $675,000. Except as provided in section 61A.281, a company's 41.31 total investment under this section in the common stock of any 41.32 corporation, other than the stock of the types of corporations 41.33 specified in section 61A.284, may not exceed ten percent of the 41.34 common stock of the corporation. No investment may be made 41.35 under the authority of this clause or clause (1) by a company 41.36 that has not completed five years of actual operation since the 42.1 date of its first certificate of authority. 42.2 If, subsequent to being made under the provisions of this 42.3 subdivision, an investment is determined to have become 42.4 qualified or eligible under any of the other provisions of this 42.5 chapter, the company may consider the investment as being held 42.6 under the other provision and the investment need no longer be 42.7 considered as having been made under the provisions of this 42.8 subdivision. 42.9 In addition to the investments authorized by this 42.10 subdivision, with the written order of the commissioner, a 42.11 domestic life insurance company may make qualified investments 42.12 in anyadditional securities or property of the type authorized42.13by subdivision 6, paragraph (e), (f), or (g), with the written42.14order of the commissionerother type of investment or exceeding 42.15 any limitations of quality, quantity, or percentage of admitted 42.16 assets contained in this section, section 61A.29 or 61A.31, or 42.17 other provision governing the investments of a domestic life 42.18 insurance company. This approval is at the discretion of the 42.19 commissioner, provided that the additional investments allowed 42.20 by the commissioner's written order may not exceed five percent 42.21 of the company's admitted assets.This authorization does not42.22negate or reduce the investment authority granted in subdivision42.236, paragraph (e), (f), or (g), or this subdivision.42.24 Sec. 38. Minnesota Statutes 1996, section 61A.60, 42.25 subdivision 1, is amended to read: 42.26 Subdivision 1. [NOTICE FORM; AGENT SALES.] The notice 42.27 required where sections 61A.53 to 61A.60 refer to this 42.28 subdivision is as follows: 42.29 IMPORTANT NOTICE 42.30 42.31 DEFINITION REPLACEMENT is any transaction where, in connection 42.32 with the purchase of New Insurance or a New 42.33 Annuity, you LAPSE, SURRENDER, CONVERT to 42.34 Paid-up Insurance, Place on Extended Term, 42.35 or BORROW all or part of the policy loan 42.36 values on an existing insurance policy or an 43.1 annuity. (See reverse side for DEFINITIONS.) 43.2 43.3 43.4 IF YOU In connection with the purchase of this insurance 43.5 INTEND TO or annuity, if you have REPLACED or intend to 43.6 REPLACE REPLACE your present life insurance coverage 43.7 COVERAGE or annuity(ies), you should be certain that you 43.8 understand all the relevant factors involved. 43.9 43.10 You should BE AWARE that you may be required to 43.11 provideEVIDENCE OF INSURABILITY and 43.13 (1) If your HEALTH condition has CHANGED since 43.14 the application was taken on your present 43.15 policies, you may be required to pay ADDITIONAL 43.16 PREMIUMS under the NEW POLICY, or be DENIED 43.17 coverage. 43.19 (2) Your present occupation or activitiesmay not 43.20be covered or could require additional premiums. 43.22 (3) The INCONTESTABLE and SUICIDE CLAUSE will 43.23 begin anew in a new policy. This could RESULT 43.24 in aCLAIM under the new policy BEING DENIED 43.25 that would otherwise have been paid. 43.27 (4) Current lawDOESMAY NOT REQUIRE your present 43.28 insurer(s) to REFUND any premiums. 43.30 (5) It is to your advantage to OBTAIN INFORMATION 43.31 regarding your existing policies or annuity 43.32 contracts [FROM THE INSURER OR AGENT FROM WHOM 43.33 YOU PURCHASED THE POLICY OR ANNUITY CONTRACT.] 43.34 43.35 (If you are purchasing an annuity, clauses (1), 43.36 (2), and (3) above would not apply to the new 44.1 annuity contract.) 44.3 THE INSURANCE OR ANNUITY I INTEND TO PURCHASE FROM 44.4 _______________________________________INSURANCE CO. 44.5 MAY REPLACE OR ALTER EXISTING LIFE INSURANCE 44.6 POLICY(IES) OR ANNUITY CONTRACT(S). 44.8 The following policy(ies) or annuity contract(s) 44.9 may be replaced as a result of this transaction: 44.11Insurer Insured 44.12as it appears on the policy as it appears on the policy 44.13or contract or contract 44.14 ______________________________ ______________________________ 44.15 ______________________________ ______________________________ 44.16 ______________________________ ______________________________ 44.17 ______________________________ ______________________________ 44.18Policy or contract number Insured birthdate 44.19 ______________________________ ______________________________ 44.20 ______________________________ ______________________________ 44.21 ______________________________ ______________________________ 44.22 ______________________________ ______________________________ 44.23 The proposed policy or contract is: 44.24 ______________________________________ $_______________ 44.25 type of policy- or contract-generic name face amount 44.27 ________________________________________________________ 44.28 signature of applicant date 44.30 ________________________________________________________ 44.31 address of applicant city state 44.33 I certify that this form was given to and completed by 44.35 ________________________________________________________ 44.36 (applicant-please print or type) 44.38 prior to taking an application and that I am leaving a 44.39 signed copy for the applicant. 44.41 ___________________________________________________ 44.42 agent's signature date 44.44 ___________________________________________________ 44.45 address 44.47 ___________________________________________________ 44.48 city state 45.1Note important statement on reverse side 45.2 Sec. 39. Minnesota Statutes 1996, section 61B.19, 45.3 subdivision 3, is amended to read: 45.4 Subd. 3. [LIMITATION OF COVERAGE.] Sections 61B.18 to 45.5 61B.32 do not provide coverage for: 45.6 (1) a portion of a policy or contract under which the 45.7 investment risk is borne by the policy or contract holder; 45.8 (2) a policy or contract of reinsurance, unless assumption 45.9 certificates have been issued and the insured has consented to 45.10 the assumption as provided under section 60A.09, subdivision 4a; 45.11 (3) a policy or contract issued by an assessment benefit 45.12 association operating under section 61A.39, or a fraternal 45.13 benefit society operating under chapter 64B; 45.14 (4) any obligation to nonresident participants of a covered 45.15 retirement plan or to the plan sponsor, employer, trustee, or 45.16 other party who owns the contract; in these cases, the 45.17 association is obligated under this chapter only to participants 45.18 in a covered plan who are residents of the state of Minnesota on 45.19 the date of impairment or insolvency; 45.20 (5) an annuity contract issued in connection with and for 45.21 the purpose of funding a structured settlement of a liability 45.22 claim, where the liability insurer remains liable; 45.23 (6) a portion of an unallocated annuity contract which is 45.24 not issued to or in connection with a specific employee, union, 45.25 or association of natural persons benefit plan or a governmental 45.26 lottery, including but not limited to, a contract issued to, or 45.27 purchased at the direction of, any governmental bonding 45.28 authority, such as a municipal guaranteed investment contract; 45.29 (7) a plan or program of an employer, association, or 45.30 similar entity to provide life, health, or annuity benefits to 45.31 its employees or members to the extent that the plan or program 45.32 is self-funded or uninsured, including benefits payable by an 45.33 employer, association, or similar entity under: 45.34 (i) a multiple employer welfare arrangement as defined in 45.35 the Employee Retirement Income Security Act of 1974, United 46.1 States Code, title 29, section 1002(40)(A), as amended; 46.2 (ii) a minimum premium group insurance plan; 46.3 (iii) a stop-loss group insurance plan; or 46.4 (iv) an administrative services only contract; 46.5 (8) any policy or contract issued by an insurer at a time 46.6 when it was not licensed or did not have a certificate of 46.7 authority to issue the policy or contract in this state; 46.8 (9) an unallocated annuity contract issued to an employee 46.9 benefit plan protected under the federal Pension Benefit 46.10 Guaranty Corporation;and46.11 (10) a portion of a policy or contract to the extent that 46.12 it provides dividends or experience rating credits except to the 46.13 extent the dividends or experience rating credits have actually 46.14 become due and payable or have been credited to the policy or 46.15 contract before the date of impairment or insolvency, or 46.16 provides that a fee or allowance be paid to a person, including 46.17 the policy or contract holder, in connection with the service 46.18 to, or administration of, the policy or contract.; and 46.19 (11) a contractual agreement that establishes the member 46.20 insurer's obligations to provide a book value accounting 46.21 guaranty for defined contribution benefit plan participants by 46.22 reference to a portfolio of assets that is owned by the benefit 46.23 plan or its trustee, which in each case is not an affiliate of 46.24 the member insurer. 46.25 Sec. 40. Minnesota Statutes 1996, section 62A.04, 46.26 subdivision 3, is amended to read: 46.27 Subd. 3. [OPTIONAL PROVISIONS.] Except as provided in 46.28 subdivision 4, no such policy delivered or issued for delivery 46.29 to any person in this state shall contain provisions respecting 46.30 the matters set forth below unless such provisions are in the 46.31 words in which the same appear in this section. The insurer 46.32 may, at its option, use in lieu of any such provision a 46.33 corresponding provision of different wording approved by the 46.34 commissioner which is not less favorable in any respect to the 46.35 insured or the beneficiary. Any such provision contained in the 46.36 policy shall be preceded individually by the appropriate caption 47.1 appearing in this subdivision or, at the option of the insurer, 47.2 by such appropriate individual or group captions or subcaptions 47.3 as the commissioner may approve. 47.4 (1) A provision as follows: 47.5 CHANGE OF OCCUPATION: If the insured be injured or 47.6 contract sickness after having changed occupations to one 47.7 classified by the insurer as more hazardous than that stated in 47.8 this policy or while doing for compensation anything pertaining 47.9 to an occupation so classified, the insurer will pay only such 47.10 portion of the indemnities provided in this policy as the 47.11 premiums paid would have purchased at the rates and within the 47.12 limits fixed by the insurer for such more hazardous occupation. 47.13 If the insured changes occupations to one classified by the 47.14 insurer as less hazardous than that stated in this policy, the 47.15 insurer, upon receipt of proof of such change of occupation will 47.16 reduce the premium rate accordingly, and will return the excess 47.17 pro rata unearned premium from the date of change of occupation 47.18 or from the policy anniversary date immediately preceding 47.19 receipt of such proof, whichever is the more recent. In 47.20 applying this provision, the classification of occupational risk 47.21 and the premium rates shall be such as have been last filed by 47.22 the insurer prior to the occurrence of the loss for which the 47.23 insurer is liable or prior to date of proof of change in 47.24 occupation with the state official having supervision of 47.25 insurance in the state where the insured resided at the time 47.26 this policy was issued; but if such filing was not required, 47.27 then the classification of occupational risk and the premium 47.28 rates shall be those last made effective by the insurer in such 47.29 state prior to the occurrence of the loss or prior to the date 47.30 of proof of change of occupation. 47.31 (2) A provision as follows: 47.32 MISSTATEMENT OF AGE: If the age of the insured has been 47.33 misstated, all amounts payable under this policy shall be such 47.34 as the premium paid would have purchased at the correct age. 47.35 (3) A provision as follows: 47.36 OTHER INSURANCE IN THIS INSURER: If an accident or 48.1 sickness or accident and sickness policy or policies previously 48.2 issued by the insurer to the insured be in force concurrently 48.3 herewith, making the aggregate indemnity for ..... (insert type 48.4 of coverage or coverages) in excess of $..... (insert maximum 48.5 limit of indemnity or indemnities) the excess insurance shall be 48.6 void and all premiums paid for such excess shall be returned to 48.7 the insured or to the insured's estate, or, in lieu thereof: 48.8 Insurance effective at any one time on the insured under a 48.9 like policy or policies in this insurer is limited to the one 48.10 such policy elected by the insured, or the insured's beneficiary 48.11 or estate, as the case may be, and the insurer will return all 48.12 premiums paid for all other such policies. 48.13 (4) A provision as follows: 48.14 INSURANCE WITH OTHER INSURERS: If there be other valid 48.15 coverage, not with this insurer, providing benefits for the same 48.16 loss on a provision of service basis or on an expense incurred 48.17 basis and of which this insurer has not been given written 48.18 notice prior to the occurrence or commencement of loss, the only 48.19 liability under any expense incurred coverage of this policy 48.20 shall be for such proportion of the loss as the amount which 48.21 would otherwise have been payable hereunder plus the total of 48.22 the like amounts under all such other valid coverages for the 48.23 same loss of which this insurer had notice bears to the total 48.24 like amounts under all valid coverages for such loss, and for 48.25 the return of such portion of the premiums paid as shall exceed 48.26 the pro rata portion for the amount so determined. For the 48.27 purpose of applying this provision when other coverage is on a 48.28 provision of service basis, the "like amount" of such other 48.29 coverage shall be taken as the amount which the services 48.30 rendered would have cost in the absence of such coverage. 48.31 If the foregoing policy provision is included in a policy 48.32 which also contains the next following policy provision there 48.33 shall be added to the caption of the foregoing provision the 48.34 phrase "EXPENSE INCURRED BENEFITS." The insurer may, at its 48.35 option, include in this provision a definition of "other valid 48.36 coverage," approved as to form by the commissioner, which 49.1 definition shall be limited in subject matter to coverage 49.2 provided by organizations subject to regulation by insurance law 49.3 or by insurance authorities of this or any other state of the 49.4 United States or any province of Canada, and by hospital or 49.5 medical service organizations, and to any other coverage the 49.6 inclusion of which may be approved by the commissioner. In the 49.7 absence of such definition such term shall not include group 49.8 insurance, automobile medical payments insurance, or coverage 49.9 provided by hospital or medical service organizations or by 49.10 union welfare plans or employer or employee benefit 49.11 organizations. For the purpose of applying the foregoing policy 49.12 provision with respect to any insured, any amount of benefit 49.13 provided for such insured pursuant to any compulsory benefit 49.14 statute (including any workers' compensation or employer's 49.15 liability statute) whether provided by a governmental agency or 49.16 otherwise shall in all cases be deemed to be "other valid 49.17 coverage" of which the insurer has had notice. In applying the 49.18 foregoing policy provision no third party liability coverage 49.19 shall be included as "other valid coverage." 49.20 (5) A provision as follows: 49.21 INSURANCE WITH OTHER INSURERS: If there be other valid 49.22 coverage, not with this insurer, providing benefits for the same 49.23 loss on other than an expense incurred basis and of which this 49.24 insurer has not been given written notice prior to the 49.25 occurrence or commencement of loss, the only liability for such 49.26 benefits under this policy shall be for such proportion of the 49.27 indemnities otherwise provided hereunder for such loss as the 49.28 like indemnities of which the insurer had notice (including the 49.29 indemnities under this policy) bear to the total amount of all 49.30 like indemnities for such loss, and for the return of such 49.31 portion of the premium paid as shall exceed the pro rata portion 49.32 for the indemnities thus determined. 49.33 If the foregoing policy provision is included in a policy 49.34 which also contains the next preceding policy provision there 49.35 shall be added to the caption of the foregoing provision the 49.36 phrase -- "OTHER BENEFITS." The insurer may, at its option, 50.1 include in this provision a definition of "other valid 50.2 coverage," approved as to form by the commissioner, which 50.3 definition shall be limited in subject matter to coverage 50.4 provided by organizations subject to regulation by insurance law 50.5 or by insurance authorities of this or any other state of the 50.6 United States or any province of Canada, and to any other 50.7 coverage the inclusion of which may be approved by the 50.8 commissioner. In the absence of such definition such term shall 50.9 not include group insurance, or benefits provided by union 50.10 welfare plans or by employer or employee benefit organizations. 50.11 For the purpose of applying the foregoing policy provision with 50.12 respect to any insured, any amount of benefit provided for such 50.13 insured pursuant to any compulsory benefit statute (including 50.14 any workers' compensation or employer's liability statute) 50.15 whether provided by a governmental agency or otherwise shall in 50.16 all cases be deemed to be "other valid coverage" of which the 50.17 insurer has had notice. In applying the foregoing policy 50.18 provision no third party liability coverage shall be included as 50.19 "other valid coverage." 50.20 (6) A provision as follows: 50.21 RELATION OF EARNINGS TO INSURANCE: If the total monthly 50.22 amount of loss of time benefits promised for the same loss under 50.23 all valid loss of time coverage upon the insured, whether 50.24 payable on a weekly or monthly basis, shall exceed the monthly 50.25 earnings of the insured at the time disability commenced or the 50.26 insured's average monthly earnings for the period of two years 50.27 immediately preceding a disability for which claim is made, 50.28 whichever is the greater, the insurer will be liable only for 50.29 such proportionate amount of such benefits under this policy as 50.30 the amount of such monthly earnings or such average monthly 50.31 earnings of the insured bears to the total amount of monthly 50.32 benefits for the same loss under all such coverage upon the 50.33 insured at the time such disability commences and for the return 50.34 of such part of the premiums paid during such two years as shall 50.35 exceed the pro rata amount of the premiums for the benefits 50.36 actually paid hereunder; but this shall not operate to reduce 51.1 the total monthly amount of benefits payable under all such 51.2 coverage upon the insured below the sum of $200 or the sum of 51.3 the monthly benefits specified in such coverages, whichever is 51.4 the lesser, nor shall it operate to reduce benefits other than 51.5 those payable for loss of time. 51.6 The foregoing policy provision may be inserted only in a 51.7 policy which the insured has the right to continue in force 51.8 subject to its terms by the timely payment of premiums (1) until 51.9 at least age 50, or, (2) in the case of a policy issued after 51.10 age 44, for at least five years from its date of issue. The 51.11 insurer may, at its option, include in this provision a 51.12 definition of "valid loss of time coverage," approved as to form 51.13 by the commissioner, which definition shall be limited in 51.14 subject matter to coverage provided by governmental agencies or 51.15 by organizations subject to regulation by insurance law or by 51.16 insurance authorities of this or any other state of the United 51.17 States or any province of Canada, or to any other coverage the 51.18 inclusion of which may be approved by the commissioner or any 51.19 combination of such coverages. In the absence of such 51.20 definition such term shall not include any coverage provided for 51.21 such insured pursuant to any compulsory benefit statute 51.22 (including any workers' compensation or employer's liability 51.23 statute), or benefits provided by union welfare plans or by 51.24 employer or employee benefit organizations. 51.25 (7) A provision as follows: 51.26 UNPAID PREMIUM: Upon the payment of a claim under this 51.27 policy, any premium then due and unpaid or covered by any note 51.28 or written order may be deducted therefrom. 51.29 (8) A provision as follows: 51.30 CANCELLATION: The insurer may cancel this policy at any 51.31 time by written notice delivered to the insured or mailed to the 51.32 insured's last address as shown by the records of the insurer, 51.33 stating when, not less than five days thereafter, such 51.34 cancellation shall be effective; and after the policy has been 51.35 continued beyond its original term the insured may cancel this 51.36 policy at any time by written notice delivered or mailed to the 52.1 insurer, effective upon receipt or on such later date as may be 52.2 specified in such notice. In the event of cancellation, the 52.3 insurer will return promptly the unearned portion of any premium 52.4 paid.IfRegardless of whether it is the insurer or the insured 52.5 who cancels,the earned premium shall be computed by the use of52.6the short-rate table last filed with the state official having52.7supervision of insurance in the state where the insured resided52.8when the policy was issued. If the insurer cancels,the earned 52.9 premium shall be computed pro rata, unless the mode of payment 52.10 is monthly or less, or if the unearned amount is for more than 52.11 one month. Cancellation shall be without prejudice to any claim 52.12 originating prior to the effective date of cancellation. 52.13 (9) A provision as follows: 52.14 CONFORMITY WITH STATE STATUTES: Any provision of this 52.15 policy which, on its effective date, is in conflict with the 52.16 statutes of the state in which the insured resides on such date 52.17 is hereby amended to conform to the minimum requirements of such 52.18 statutes. 52.19 (10) A provision as follows: 52.20 ILLEGAL OCCUPATION: The insurer shall not be liable for 52.21 any loss to which a contributing cause was the insured's 52.22 commission of or attempt to commit a felony or to which a 52.23 contributing cause was the insured's being engaged in an illegal 52.24 occupation. 52.25 (11) A provision as follows: 52.26 NARCOTICS: The insurer shall not be liable for any loss 52.27 sustained or contracted in consequence of the insured's being 52.28 under the influence of any narcotic unless administered on the 52.29 advice of a physician. 52.30 Sec. 41. Minnesota Statutes 1996, section 62A.135, 52.31 subdivision 5, is amended to read: 52.32 Subd. 5. [SUPPLEMENT TO ANNUAL STATEMENTSSUPPLEMENTAL 52.33 FILINGS.] Each insurer that has fixed indemnity policies in 52.34 force in this state shall,as a supplement to the annual52.35statement required by section 60A.13upon request by the 52.36 commissioner, submit, in a form prescribed by the 53.1 commissioner,theexperience datafor the calendar yearshowing 53.2 its incurred claims, earned premiums, incurred to earned loss 53.3 ratio, and the ratio of the actual loss ratio to the expected 53.4 loss ratio for each fixed indemnity policy form in force in 53.5 Minnesota. The experience data must be provided on both a 53.6 Minnesota only and a national basis. If in the opinion of the 53.7 company's actuary, the deviation of the actual loss ratio from 53.8 the expected loss ratio for a policy form is due to unusual 53.9 reserve fluctuations, economic conditions, or other nonrecurring 53.10 conditions, the insurer should also file that opinion with 53.11 appropriate justification. 53.12 If the data submitted does not confirm that the insurer has 53.13 satisfied the loss ratio requirements of this section, the 53.14 commissioner shall notify the insurer in writing of the 53.15 deficiency. The insurer shall have 30 days from the date of 53.16 receipt of the commissioner's notice to file amended rates that 53.17 comply with this section or a request for an exemption with 53.18 appropriate justification. If the insurer fails to file amended 53.19 rates within the prescribed time and the commissioner does not 53.20 exempt the policy form from the need for a rate revision, the 53.21 commissioner shall order that the insurer's filed rates for the 53.22 nonconforming policy be reduced to an amount that would have 53.23 resulted in a loss ratio that complied with this section had it 53.24 been in effect for the reporting period of the supplement. The 53.25 insurer's failure to file amended rates within the specified 53.26 time of the issuance of the commissioner's order amending the 53.27 rates does not preclude the insurer from filing an amendment of 53.28 its rates at a later time. 53.29 Sec. 42. Minnesota Statutes 1996, section 62A.50, 53.30 subdivision 3, is amended to read: 53.31 Subd. 3. [DISCLOSURES.] No long-term care policy shall be 53.32 offered or delivered in this state, whether or not the policy is 53.33 issued in this state, and no certificate of coverage under a 53.34 group long-term care policy shall be offered or delivered in 53.35 this state, unless a statement containing at least the following 53.36 information is delivered to the applicant at the time the 54.1 application is made: 54.2 (1) a description of the benefits and coverage provided by 54.3 the policy and the differences between this policy, a 54.4 supplemental Medicare policy and the benefits to which an 54.5 individual is entitled under parts A and B of Medicare; 54.6 (2) a statement of the exceptions and limitations in the 54.7 policy including the following language, as applicable, in bold 54.8 print: "THIS POLICY DOES NOT COVER ALL NURSING CARE FACILITIES 54.9 OR NURSING HOME, HOME CARE, OR ADULT DAY CARE EXPENSES AND DOES 54.10 NOT COVER RESIDENTIAL CARE. READ YOUR POLICY CAREFULLY TO 54.11 DETERMINE WHICH FACILITIES AND EXPENSES ARE COVERED BY YOUR 54.12 POLICY."; 54.13 (3) a statement of the renewal provisions including any 54.14 reservation by the insurer of the right to change premiums; 54.15 (4) a statement that the outline of coverage is a summary 54.16 of the policy issued or applied for and that the policy should 54.17 be consulted to determine governing contractual provisions; 54.18 (5) an explanation of the policy's loss ratio including at 54.19 least the following language: "This means that, on the average, 54.20 policyholders may expect that $........ of every $100 in premium 54.21 will be returned as benefits to policyholders over the life of 54.22 the contract."; 54.23 (6) a statement of the out-of-pocket expenses, including 54.24 deductibles and copayments for which the insured is responsible, 54.25 and an explanation of the specific out-of-pocket expenses that 54.26 may be accumulated toward any out-of-pocket maximum as specified 54.27 in the policy; 54.28 (7) the following language, in bold print: "YOUR PREMIUMS 54.29 CAN BE INCREASED IN THE FUTURE. THE RATE SCHEDULE THAT LISTS 54.30 YOUR PREMIUM NOW CAN CHANGE."; 54.31(8) the following language, if applicable, in bold print:54.32"IF YOU ARE NOT HOSPITALIZED PRIOR TO ENTERING A NURSING HOME OR54.33NEEDING HOME CARE, YOU WILL NOT BE ABLE TO COLLECT ANY BENEFITS54.34UNDER THIS PARTICULAR POLICY.";54.35(9)(8) the following language in bold print, with any 54.36 provisions that are inapplicable to the particular policy 55.1 omitted or crossed out: "THIS POLICY HAS A WAITING PERIOD OF 55.2 ..... (CALENDAR OR BENEFIT) DAYS FOR NURSING CARE SERVICES AND A 55.3 WAITING PERIOD OF ..... (CALENDAR OR BENEFIT) DAYS FOR HOME CARE 55.4 SERVICES. THIS MEANS THAT THIS POLICY WILL NOT COVER YOUR CARE 55.5 FOR THE FIRST ..... (CALENDAR OR BENEFIT) DAYS AFTER YOU ENTER A 55.6 NURSING HOME, OR THE FIRST ..... (CALENDAR OR BENEFIT) DAYS 55.7 AFTER YOU BEGIN TO USE HOME CARE SERVICES. YOU WOULD NEED TO 55.8 PAY FOR YOUR CARE FROM OTHER SOURCES FOR THOSE WAITING 55.9 PERIODS."; and 55.10(10)(9) a signed and completed copy of the application for 55.11 insurance is left with the applicant at the time the application 55.12 is made. 55.13 Sec. 43. Minnesota Statutes 1996, section 62B.04, 55.14 subdivision 2, is amended to read: 55.15 Subd. 2. [CREDIT ACCIDENT AND HEALTH INSURANCE.] (a) The 55.16 total amount of periodic indemnity payable by credit accident 55.17 and health insurance in the event of disability, as defined in 55.18 the policy, shall not exceed the aggregate of the periodic 55.19 scheduled unpaid installments of the indebtedness; and the 55.20 amount of each periodic indemnity payment shall not exceed the 55.21 original indebtedness divided by the number of periodic 55.22 installments. If the credit transaction provides for a variable 55.23 rate of finance charge or interest, the initial rate or the 55.24 scheduled rates based on the initial index must be used in 55.25 determining the aggregate of the periodic scheduled unpaid 55.26 installments of the indebtedness. 55.27 (b) All individual policies or group certificates of credit 55.28 accident and health insurance must provide that benefits 55.29 available for a single total disability must not be less than 55.30 the total amount of insurance. 55.31 Sec. 44. Minnesota Statutes 1996, section 65A.01, 55.32 subdivision 3, is amended to read: 55.33 Subd. 3. [POLICY PROVISIONS.] On said policy following 55.34 such matter as provided in subdivisions 1 and 2, printed in the 55.35 English language in type of such size or sizes and arranged in 55.36 such manner, as is approved by the commissioner of commerce, the 56.1 following provisions and subject matter shall be stated in the 56.2 following words and in the following sequence, but with the 56.3 convenient placing, if desired, of such matter as will act as a 56.4 cover or back for such policy when folded, with the blanks below 56.5 indicated being left to be filled in at the time of the issuing 56.6 of the policy, to wit: 56.7 (Space for listing the amounts of insurance, rates and 56.8 premiums for the basic coverages provided under the standard 56.9 form of policy and for additional coverages or perils provided 56.10 under endorsements attached. The description and location of 56.11 the property covered and the insurable value(s) of any 56.12 building(s) or structure(s) covered by the policy or its 56.13 attached endorsements; also in the above space may be stated 56.14 whether other insurance is limited and if limited the total 56.15 amount permitted.) 56.16 In consideration of the provisions and stipulations herein 56.17 or added hereto and of the premium above specified this company, 56.18 for a term of ..... from ..... (At 12:01 a.m. Standard Time) to 56.19 ..... (At 12:01 a.m. Standard Time) at location of property 56.20 involved, to an amount not exceeding the amount(s) above 56.21 specified does insure ..... and legal representatives 56.22 ........................................... 56.23 (In above space may be stated whether other insurance is 56.24 limited.) (And if limited the total amount permitted.) 56.25 Subject to form No.(s) ..... attached hereto. 56.26 This policy is made and accepted subject to the foregoing 56.27 provisions and stipulations and those hereinafter stated, which 56.28 are hereby made a part of this policy, together with such 56.29 provisions, stipulations and agreements as may be added hereto 56.30 as provided in this policy. 56.31 The insurance effected above is granted against all loss or 56.32 damage by fire originating from any cause, except as hereinafter 56.33 provided, also any damage by lightning and by removal from 56.34 premises endangered by the perils insured against in this 56.35 policy, to the property described hereinafter while located or 56.36 contained as described in this policy, or pro rata for five days 57.1 at each proper place to which any of the property shall 57.2 necessarily be removed for preservation from the perils insured 57.3 against in this policy, but not elsewhere. The amount of said 57.4 loss or damage, except in case of total loss on buildings, to be 57.5 estimated according to the actual value of the insured property 57.6 at the time when such loss or damage happens. 57.7 If the insured property shall be exposed to loss or damage 57.8 from the perils insured against, the insured shall make all 57.9 reasonable exertions to save and protect same. 57.10 This entire policy shall be void if, whether before a loss, 57.11 the insured has willfully, or after a loss, the insured has 57.12 willfully and with intent to defraud, concealed or 57.13 misrepresented any material fact or circumstance concerning this 57.14 insurance or the subject thereof, or the interests of the 57.15 insured therein. 57.16 This policy shall not cover accounts, bills, currency, 57.17 deeds, evidences of debt, money or securities; nor, unless 57.18 specifically named hereon in writing, bullion, or manuscripts. 57.19 This company shall not be liable for loss by fire or other 57.20 perils insured against in this policy caused, directly or 57.21 indirectly by: (a) enemy attack by armed forces, including 57.22 action taken by military, naval or air forces in resisting an 57.23 actual or immediately impending enemy attack; (b) invasion; (c) 57.24 insurrection; (d) rebellion; (e) revolution; (f) civil war; (g) 57.25 usurped power; (h) order of any civil authority except acts of 57.26 destruction at the time of and for the purpose of preventing the 57.27 spread of fire, providing that such fire did not originate from 57.28 any of the perils excluded by this policy. 57.29 Other insurance may be prohibited or the amount of 57.30 insurance may be limited by so providing in the policy or an 57.31 endorsement, rider or form attached thereto. 57.32 Unless otherwise provided in writing added hereto this 57.33 company shall not be liable for loss occurring: 57.34 (a) while the hazard is increased by any means within the 57.35 control or knowledge of the insured; or 57.36 (b) while the described premises, whether intended for 58.1 occupancy by owner or tenant, are vacant or unoccupied beyond a 58.2 period of 60 consecutive days; or 58.3 (c) as a result of explosion or riot, unless fire ensue, 58.4 and in that event for loss by fire only. 58.5 Any other peril to be insured against or subject of 58.6 insurance to be covered in this policy shall be by endorsement 58.7 in writing hereon or added hereto. 58.8 The extent of the application of insurance under this 58.9 policy and the contributions to be made by this company in case 58.10 of loss, and any other provision or agreement not inconsistent 58.11 with the provisions of this policy, may be provided for in 58.12 writing added hereto, but no provision may be waived except such 58.13 as by the terms of this policy is subject to change. 58.14 No permission affecting this insurance shall exist, or 58.15 waiver of any provision be valid, unless granted herein or 58.16 expressed in writing added hereto. No provision, stipulation or 58.17 forfeiture shall be held to be waived by any requirements or 58.18 proceeding on the part of this company relating to appraisal or 58.19 to any examination provided for herein. 58.20 This policy shall be canceled at any time at the request of 58.21 the insured, in which case this company shall, upon demand and 58.22 surrender of this policy, refund the excess of paid premium 58.23 above the customary short rates for the expired time. This 58.24 policy may be canceled at any time by this company by giving to 58.25 the insured30 days'a written notice of cancellation with or 58.26 without tender of the excess of paid premium above the pro rata 58.27 premium for the expired time, which excess, if not tendered, 58.28 shall be refunded on demand. Notice of cancellation shall state 58.29 that said excess premium (if not tendered) will be refunded on 58.30 demand. 58.31 If loss hereunder is made payable, in whole or in part, to 58.32 a designated mortgagee or contract for deed vendor not named 58.33 herein as insured, such interest in this policy may be canceled 58.34 by giving to such mortgagee or vendor a ten days' written notice 58.35 of cancellation. 58.36 Notwithstanding any other provisions of this policy, if 59.1 this policy shall be made payable to a mortgagee or contract for 59.2 deed vendor of the covered real estate, no act or default of any 59.3 person other than such mortgagee or vendor or the mortgagee's or 59.4 vendor's agent or those claiming under the mortgagee or vendor, 59.5 whether the same occurs before or during the term of this 59.6 policy, shall render this policy void as to such mortgagee or 59.7 vendor nor affect such mortgagee's or vendor's right to recover 59.8 in case of loss on such real estate; provided, that the 59.9 mortgagee or vendor shall on demand pay according to the 59.10 established scale of rates for any increase of risks not paid 59.11 for by the insured; and whenever this company shall be liable to 59.12 a mortgagee or vendor for any sum for loss under this policy for 59.13 which no liability exists as to the mortgagor, vendee, or owner, 59.14 and this company shall elect by itself, or with others, to pay 59.15 the mortgagee or vendor the full amount secured by such mortgage 59.16 or contract for deed, then the mortgagee or vendor shall assign 59.17 and transfer to the company the mortgagee's or vendor's 59.18 interest, upon such payment, in the said mortgage or contract 59.19 for deed together with the note and debts thereby secured. 59.20 This company shall not be liable for a greater proportion 59.21 of any loss than the amount hereby insured shall bear to the 59.22 whole insurance covering the property against the peril involved. 59.23 In case of any loss under this policy the insured shall 59.24 give immediate written notice to this company of any loss, 59.25 protect the property from further damage, and a statement in 59.26 writing, signed and sworn to by the insured, shall within 60 59.27 days be rendered to the company, setting forth the value of the 59.28 property insured, except in case of total loss on buildings the 59.29 value of said buildings need not be stated, the interest of the 59.30 insured therein, all other insurance thereon, in detail, the 59.31 purposes for which and the persons by whom the building insured, 59.32 or containing the property insured, was used, and the time at 59.33 which and manner in which the fire originated, so far as known 59.34 to the insured. 59.35 The insured, as often as may be reasonably required, shall 59.36 exhibit to any person designated by this company all that 60.1 remains of any property herein described, and, after being 60.2 informed of the right to counsel and that any answers may be 60.3 used against the insured in later civil or criminal proceedings, 60.4 the insured shall, within a reasonable period after demand by 60.5 this company, submit to examinations under oath by any person 60.6 named by this company, and subscribe the oath. The insured, as 60.7 often as may be reasonably required, shall produce for 60.8 examination all records and documents reasonably related to the 60.9 loss, or certified copies thereof if originals are lost, at a 60.10 reasonable time and place designated by this company or its 60.11 representatives, and shall permit extracts and copies thereof to 60.12 be made. 60.13 In case the insured and this company, except in case of 60.14 total loss on buildings, shall fail to agree as to the actual 60.15 cash value or the amount of loss, then, on the written demand of 60.16 either, each shall select a competent and disinterested 60.17 appraiser and notify the other of the appraiser selected within 60.18 20 days of such demand. In case either fails to select an 60.19 appraiser within the time provided, then a presiding judge of 60.20 the district court of the county wherein the loss occurs may 60.21 appoint such appraiser for such party upon application of the 60.22 other party in writing by giving five days' notice thereof in 60.23 writing to the party failing to appoint. The appraisers shall 60.24 first select a competent and disinterested umpire; and failing 60.25 for 15 days to agree upon such umpire, then a presiding judge of 60.26 the above mentioned court may appoint such an umpire upon 60.27 application of party in writing by giving five days' notice 60.28 thereof in writing to the other party. The appraisers shall 60.29 then appraise the loss, stating separately actual value and loss 60.30 to each item; and, failing to agree, shall submit their 60.31 differences, only, to the umpire. An award in writing, so 60.32 itemized, of any two when filed with this company shall 60.33 determine the amount of actual value and loss. Each appraiser 60.34 shall be paid by the selecting party, or the party for whom 60.35 selected, and the expense of the appraisal and umpire shall be 60.36 paid by the parties equally. 61.1 It shall be optional with this company to take all of the 61.2 property at the agreed or appraised value, and also to repair, 61.3 rebuild or replace the property destroyed or damaged with other 61.4 of like kind and quality within a reasonable time, on giving 61.5 notice of its intention so to do within 30 days after the 61.6 receipt of the proof of loss herein required. 61.7 There can be no abandonment to this company of any property. 61.8 The amount of loss for which this company may be liable 61.9 shall be payable 60 days after proof of loss, as herein 61.10 provided, is received by this company and ascertainment of the 61.11 loss is made either by agreement between the insured and this 61.12 company expressed in writing or by the filing with this company 61.13 of an award as herein provided. It is moreover understood that 61.14 there can be no abandonment of the property insured to the 61.15 company, and that the company will not in any case be liable for 61.16 more than the sum insured, with interest thereon from the time 61.17 when the loss shall become payable, as above provided. 61.18 No suit or action on this policy for the recovery of any 61.19 claim shall be sustainable in any court of law or equity unless 61.20 all the requirements of this policy have been complied with, and 61.21 unless commenced within two years after inception of the loss. 61.22 This company is subrogated to, and may require from the 61.23 insured an assignment of all right of recovery against any party 61.24 for loss to the extent that payment therefor is made by this 61.25 company; and the insurer may prosecute therefor in the name of 61.26 the insured retaining such amount as the insurer has paid. 61.27 Assignment of this policy shall not be valid except with 61.28 the written consent of this company. 61.29 IN WITNESS WHEREOF, this company has executed and attested 61.30 these presents. 61.31 61.32 ........................ ........................ 61.33 (Signature) (Signature) 61.34 ........................ ........................ 61.35 (Name of office) (Name of office) 61.36 Sec. 45. Minnesota Statutes 1996, section 65A.01, is 62.1 amended by adding a subdivision to read: 62.2 Subd. 3c. [REQUIREMENTS OF TERMINATION 62.3 NOTICES.] Regardless of the age of a property insurance policy, 62.4 no notice of termination of a standard fire insurance policy 62.5 issued to cover buildings used for residential purposes other 62.6 than a hotel or motel is valid unless, on the face of the 62.7 notice, the notice: 62.8 (1) lists the specific reasons that the policy is being 62.9 terminated, according to sections 65A.29, subdivision 4, and 62.10 72A.20, subdivision 13; 62.11 (2) informs the insured of the possible eligibility for 62.12 coverage through the Minnesota property insurance placement 62.13 facility as provided in sections 65A.31 to 65A.43; 62.14 (3) informs the insured of the right to complain to the 62.15 commissioner of commerce, according to section 65A.29, 62.16 subdivision 9; and 62.17 (4) informs the insured that refunds, if any, must be 62.18 tendered by the effective cancellation date, according to 62.19 section 65A.29, subdivision 10. If the refund is not received 62.20 by the cancellation, the notice is invalid. 62.21 Sec. 46. Minnesota Statutes 1996, section 65A.01, is 62.22 amended by adding a subdivision to read: 62.23 Subd. 3d. [NOTICE.] Cancellation under subdivision 3a, 62.24 clause (1)(b) to (e), is not effective before 30 days after 62.25 notice to the policyholder. The notice of cancellation must 62.26 contain a specific reason for cancellation as provided in 62.27 subdivision 1. 62.28 A policy must not be canceled for nonpayment of premium 62.29 according to subdivision 3a, clause (1)(a), unless the insurer, 62.30 at least ten days before the effective cancellation date, has 62.31 given notice to the policyholder. 62.32 Sec. 47. Minnesota Statutes 1996, section 65A.01, is 62.33 amended by adding a subdivision to read: 62.34 Subd. 3e. [NEW POLICIES.] Subdivision 3d does not apply to 62.35 an insurance policy that has not been previously renewed if the 62.36 policy has been in effect fewer than 60 days at the time the 63.1 notice of cancellation is mailed or delivered. No cancellation 63.2 under this subdivision is effective until at least ten days 63.3 after the written notice to the policyholder. 63.4 Sec. 48. Minnesota Statutes 1996, section 65A.01, is 63.5 amended by adding a subdivision to read: 63.6 Subd. 3f. [TIME REQUIREMENTS.] (a) In the event of a 63.7 policy less than 60 days old, or if it is being canceled for 63.8 nonpayment of premium, the notice must be mailed to the insured 63.9 so that it is received at least ten days before the effective 63.10 cancellation date. If a newer policy is being canceled for 63.11 underwriting considerations, the insured must be informed of the 63.12 source from which the information was received. 63.13 (b) In the event of a mid-term cancellation, for reasons 63.14 listed in subdivision 3a, or according to policy provisions, the 63.15 insured must receive a 30-day notice. 63.16 (c) In the event of a nonrenewal, a 60-day notice must be 63.17 sent to the insured, according to section 65A.29, subdivision 7. 63.18 Sec. 49. Minnesota Statutes 1996, section 65A.27, 63.19 subdivision 4, is amended to read: 63.20 Subd. 4. "Homeowner's insurance" means insurance coverage, 63.21 as provided in section 60A.06, subdivision 1, clause (1)(c), 63.22 normally written by the insurer as a standard homeowner's 63.23 package policy or as a standard residential renter's package 63.24 policy. This definition includes, but is not limited to, 63.25 policies that are generally described as homeowners' policies, 63.26 mobile/manufactured homeowners' policies, dwelling owner 63.27 policies, condominium owner policies, and tenant policies. 63.28 Sec. 50. Minnesota Statutes 1996, section 65B.48, 63.29 subdivision 5, is amended to read: 63.30 Subd. 5. (a) Every owner of a motorcycle registered or 63.31 required to be registered in this state or operated in this 63.32 state by the owner or with the owner's permission shall provide 63.33 and maintain security for the payment of tort liabilities 63.34 arising out of the maintenance or use of the motorcycle in this 63.35 state. Security may be provided by a contract of liability 63.36 insurance complying with section 65B.49, subdivision 3, or by 64.1 qualifying as a self insurer in the manner provided in 64.2 subdivision 3. 64.3 (b) At the time an application for motorcycle insurance is 64.4 completed, there must be attached to the application a separate 64.5 form containing a written notice in at least 10-point bold type, 64.6 if printed, or in capital letters, if typewritten that states: 64.7 "Under Minnesota law, a policy of motorcycle coverage 64.8 issued in the State of Minnesota provides liability 64.9 coverage only, and there is no requirement that the policy 64.10 provide personal injury protection (PIP) coverage in the 64.11 case of injury sustained by the insured. No PIP coverage 64.12 provided by an automobile insurance policy I may have in 64.13 force will extend to provide coverage in the event of a 64.14 motorcycle accident." 64.15 Sec. 51. [65B.492] [TOTAL DISABILITY; WAIVER OF WAGE LOSS 64.16 REIMBURSEMENT.] 64.17 A plan of reparation security issued to or renewed with a 64.18 person who is totally disabled may contain a waiver of wage loss 64.19 reimbursement coverage, provided that the rate for any plan for 64.20 which this coverage has been excluded or reduced must be reduced 64.21 accordingly. For purposes of this section, the term "total 64.22 disability" means the inability of an insured who is ill or 64.23 injured to engage in any paid employment or work. The 64.24 reparation obligor may request the insured to provide written 64.25 certification of the disability by a licensed practicing 64.26 physician so long as the written certification is required no 64.27 more frequently than on an annual basis. This section applies 64.28 to self-insurance. 64.29 Sec. 52. Minnesota Statutes 1996, section 67A.231, is 64.30 amended to read: 64.31 67A.231 [DEPOSIT OF FUNDS; INVESTMENT; LIMITATIONS.] 64.32 The directors of any township mutual insurance company may 64.33 authorize the treasurer to invest any of its funds and 64.34 accumulations in: 64.35 (a) Bonds, notes, mortgages, or other obligations 64.36 guaranteed by the full faith and credit of the United States of 65.1 America and those for which the credit of the United States is 65.2 pledged to pay principal, interest or dividends, including 65.3 United States agency and instrumentality bonds, debentures, or 65.4 obligations; 65.5 (b) Bonds, notes, evidence of indebtedness, or other public 65.6 authority obligations guaranteed by this state; 65.7 (c) Bonds, notes, evidence of the indebtedness or other 65.8 obligations guaranteed by the full faith and credit of any 65.9 county, municipality, school district, or other duly authorized 65.10 political subdivision of this state; 65.11 (d) Bonds or other interest bearing obligations, payable 65.12 from revenues, provided that the bonds or other interest bearing 65.13 obligations are at the time of purchase rated among the highest 65.14 four quality categories used by a nationally recognized rating 65.15 agency for rating the quality of similar bonds or other interest 65.16 bearing obligations, and are not rated lower by any other such 65.17 agency; or obligations of a United States agency or 65.18 instrumentality that have been rated in one of the two highest 65.19 categories established by the Securities Valuation Office of the 65.20 National Association of Insurance Commissioners. A company may 65.21 not invest more than 20 percent of its admitted assets in the 65.22 obligations of any one corporation. This is not applicable to 65.23 bonds or other interest bearing obligations in default as to 65.24 principal; 65.25 (e) Investments in the obligations stated in paragraphs 65.26 (a), (b), (c), and (d), may be made either directly or in the 65.27 form of securities of, or other interests in, an investment 65.28 company registered under the Federal Investment Company Act of 65.29 1940. Investment company shares authorized pursuant to this 65.30 subdivision shall not exceed 20 percent of the company's 65.31 surplus. These obligations must be carried at the lower of cost 65.32 or market on the annual statement filed with the commissioner 65.33 and adjusted to market on an annual basis; 65.34 (f) Loans upon improved and unencumbered real property in 65.35 this state worth at least twice the amount loaned thereon, not 65.36 including buildings, unless insured by property insurance 66.1 policies payable to and held by the security holder; 66.2 (g) Real estate, including land, buildings and fixtures, 66.3 located in this state and used primarily as home office space 66.4 for the insurance company; 66.5 (h) Demand or time deposits or savings accounts in 66.6 federally insured depositories located in this state to the 66.7 extent that the deposit or investment is insured by the Federal 66.8 Deposit Insurance Corporation, Federal Savings and Loan 66.9 Corporation, or the National Credit Union Administration. Up to 66.10 an additional $100,000 may be located in these depositories if 66.11 covered by private deposit insurance written by an insurer 66.12 licensed by the department of commerce. In no case may the 66.13 aggregate privately insured deposits exceed a township mutual 66.14 insurance company's surplus; 66.15 (i) Guarantee fund certificates of a mutual insurer which 66.16 reinsures the business of the township mutual insurance 66.17 company. The commissioner may by rule limit the amount of 66.18 guarantee fund certificates which the township mutual insurance 66.19 company may purchase and this limit may be a function of the 66.20 size of the township mutual insurance company; and 66.21 (j) Up to $1,500 in stock of an insurer which issues 66.22 directors and officers liability insurance to township mutual 66.23 insurance company directors and officers. 66.24 Sec. 53. Minnesota Statutes 1996, section 72A.20, 66.25 subdivision 34, is amended to read: 66.26 Subd. 34. [SUITABILITY OF INSURANCE FOR CUSTOMER.] In 66.27 recommending or issuing life, endowment, individual accident and 66.28 sickness, long-term care, annuity, life-endowment, or Medicare 66.29 supplement insurance to a customer, an insurer, either directly 66.30 or through its agent, must have reasonable grounds for believing 66.31 that the recommendation is suitable for the customer, upon the 66.32 basis of facts disclosed by the customer as to the customer's 66.33 other insurance and financial situation and needs, including, 66.34 but not limited to, the customer's financial status, the 66.35 customer's need for insurance, and the values, benefits, and 66.36 costs of the customer's existing insurance program, if any, when 67.1 compared to the values, benefits, and costs of the recommended 67.2 policy or policies. 67.3 In the case of group insurance marketed on a direct 67.4 response basis without the use of direct agent contact, this 67.5 subdivision is satisfied if the insurer has reasonable grounds 67.6 to believe that the insurance offered is generally suitable for 67.7 the group to whom the offer is made. 67.8 Sec. 54. Minnesota Statutes 1996, section 72B.04, 67.9 subdivision 10, is amended to read: 67.10 Subd. 10. [FEES.] A fee of $40 is imposed for each initial 67.11 license or temporary permit and $25 for each renewal thereof or 67.12 amendment thereto.A fee of $20 is imposed for each examination67.13taken.A fee of $20 is imposed for the registration of each 67.14 nonlicensed adjuster who is required to register under section 67.15 72B.06. All fees shall be transmitted to the commissioner and 67.16 shall be payable to thestate treasurerdepartment of commerce. 67.17 If a fee is paid for an examination and if within one year from 67.18 the date of that payment no written request for a refund is 67.19 received by the commissioner or the examination for which the 67.20 fee was paid is not taken, the fee is forfeited to the state of 67.21 Minnesota. 67.22 Sec. 55. Minnesota Statutes 1996, section 79A.01, 67.23 subdivision 10, is amended to read: 67.24 Subd. 10. [COMMON CLAIMS FUND.] "Common claims fund," with 67.25 respect to group self-insurers, means the cash, cash 67.26 equivalents, or investment accounts maintained by themutual67.27 self-insurance group to pay its workers' compensation 67.28 liabilities. 67.29 Sec. 56. Minnesota Statutes 1996, section 79A.02, 67.30 subdivision 1, is amended to read: 67.31 Subdivision 1. [MEMBERSHIP.] For the purposes of assisting 67.32 the commissioner, there is established a workers' compensation 67.33 self-insurers' advisory committee of five members that are 67.34 employers authorized to self-insure in Minnesota. Three of the 67.35 members and three alternates shall be elected by the 67.36 self-insurers' security fund board of trustees and two members 68.1 and two alternates shall be appointed by the commissioner. 68.2 Sec. 57. Minnesota Statutes 1996, section 79A.02, 68.3 subdivision 4, is amended to read: 68.4 Subd. 4. [RECOMMENDATIONS TO COMMISSIONER REGARDING 68.5 REVOCATION.] After each fifth anniversary from the date each 68.6 individual and group self-insurer becomes certified to 68.7 self-insure, the committee shall review all relevant financial 68.8 data filed with the department of commerce that is otherwise 68.9 available to the public and make a recommendation to the 68.10 commissioner about whether each self-insurer's certificate 68.11 should be revoked. For group self-insurers who have been in 68.12 existence for five years or more and have been granted renewal 68.13 authority, a level of funding in the common claims fund must be 68.14 maintained at not less than the greater of either: (1) one 68.15 year's claim losses paid in the most recent year; or (2) 68.16 one-third of the security deposit posted with the department of 68.17 commerce according to section 79A.04, subdivision 2. This 68.18 provision supersedes any requirements under section 79A.03, 68.19 subdivision 10, and Minnesota Rules, part 2780.5000. 68.20 Sec. 58. Minnesota Statutes 1996, section 79A.03, 68.21 subdivision 6, is amended to read: 68.22 Subd. 6. [APPLICATIONS FOR GROUP SELF-INSURANCE.] (a) Two 68.23 or more employers may apply to the commissioner for the 68.24 authority to self-insure as a group, using forms available from 68.25 the commissioner. This initial application shall be accompanied 68.26 by a copy of the bylaws or plan of operation adopted by the 68.27 group. Such bylaws or plan of operation shall conform to the 68.28 conditions prescribed by law or rule. The commissioner shall 68.29 approve or disapprove the bylaws within 60 days unless a 68.30 question as to the legality of a specific bylaw or plan 68.31 provision has been referred to the attorney general's office. 68.32 The commissioner shall make a determination as to the 68.33 application within 15 days after receipt of the requested 68.34 response from the attorney general's office. 68.35 (b) After the initial application and the bylaws or plan of 68.36 operation have been approved by the commissioner or at the time 69.1 of the initial application, the group shall submit the names of 69.2 employers that will be members of the group; an indemnity 69.3 agreement providing for joint and several liability for all 69.4 group members for any and all workers' compensation claims 69.5 incurred by any member of the group, as set forth in Minnesota 69.6 Rules, part 2780.9920, signed by an officer of each member; and 69.7 an accounting review performed by a certified public 69.8 accountant. A certified financial audit may be filed in lieu of 69.9 an accounting review. 69.10 (c) When a group has obtained its authority to self-insure, 69.11 additional applicants who wish to join the group must apply for 69.12 approval by submitting: (1) an application; (2) an indemnity 69.13 agreement providing for joint and several liability as set forth 69.14 in Minnesota Rules, part 2780.9920, signed by an officer of the 69.15 applicant; and (3) a certified financial audit performed by a 69.16 certified public accountant at least 45 days before joining the 69.17 group. An accounting review performed by a certified public 69.18 accountant may be filed in lieu of a certified audit. 69.19 New diminutive applicants to the group, as defined in 69.20 section 79A.01, subdivision 11, applying for membership in 69.21 groups in existence longer than one year, who have a combined 69.22 equity of all group members in excess of 15 times the last 69.23 retention limit selected by the group with the workers' 69.24 compensation reinsurance association, and have posted 125 69.25 percent of the group's total estimated future liability, must 69.26 submit the items in this paragraph at least ten days before 69.27 joining the group. 69.28 If the cumulative total of premium added to the group by 69.29 diminutive new members is greater than 50 percent in a fiscal 69.30 year of the group, all subsequent new members' applications must 69.31 be submitted at least 45 days before joining the group. 69.32 In all cases of new membership, evidence that cash premiums 69.33 equal to not less than 20 percent of the current year's modified 69.34 premium of each applicant have been paid into a common claims 69.35 fund, maintained by the group in a designated depository must be 69.36 filed with the department at least ten days before joining the 70.1 group. 70.2 Sec. 59. Minnesota Statutes 1996, section 79A.03, 70.3 subdivision 7, is amended to read: 70.4 Subd. 7. [FINANCIAL STANDARDS.] A self-insurer group 70.5proposing to self-insureshall have and maintain: 70.6 (a) A combined net worth of all of the members of an amount 70.7 at least equal to the greater of ten times the retention 70.8 selected with the workers' compensation reinsurance association 70.9 or one-third of the current annual modified premium of the 70.10 members. 70.11 (b) Sufficient assets, net worth, and liquidity to promptly 70.12 and completely meet all obligations of its members under chapter 70.13 176 or this chapter. In determining whether a group is in sound 70.14 financial condition, consideration shall be given to the 70.15 combined net worth of the member companies; the consolidated 70.16 long-term and short-term debt to equity ratios of the member 70.17 companies; any excess insurance other than reinsurance with the 70.18 workers' compensation reinsurance association, purchased by the 70.19 group from an insurer licensed in Minnesota or from an 70.20 authorized surplus line carrier; other financial data requested 70.21 by the commissioner or submitted by the group; and the combined 70.22 workers' compensation experience of the group for the last four 70.23 years. 70.24 Sec. 60. Minnesota Statutes 1996, section 79A.03, 70.25 subdivision 9, is amended to read: 70.26 Subd. 9. [FILING REPORTS.] (a) Incurred losses, paid and 70.27 unpaid, specifying indemnity and medical losses by 70.28 classification, payroll by classification, and current estimated 70.29 outstanding liability for workers' compensation shall be 70.30 reported to the commissioner by each self-insurer on a calendar 70.31 year basis, in a manner and on forms available from the 70.32 commissioner. Payroll information must be filed by April 1 of 70.33 the following year, and loss information and total workers'70.34compensation liability must be filed by August 1 of the70.35following year. 70.36 (b) Each self-insurer shall, under oath, attest to the 71.1 accuracy of each report submitted pursuant to paragraph (a). 71.2 Upon sufficient cause, the commissioner shall require the 71.3 self-insurer to submit a certified audit of payroll and claim 71.4 records conducted by an independent auditor approved by the 71.5 commissioner, based on generally accepted accounting principles 71.6 and generally accepted auditing standards, and supported by an 71.7 actuarial review and opinion of the future contingent 71.8 liabilities. The basis for sufficient cause shall include the 71.9 following factors: where the losses reported appear 71.10 significantly different from similar types of businesses; where 71.11 major changes in the reports exist from year to year, which are 71.12 not solely attributable to economic factors; or where the 71.13 commissioner has reason to believe that the losses and payroll 71.14 in the report do not accurately reflect the losses and payroll 71.15 of that employer. If any discrepancy is found, the commissioner 71.16 shall require changes in the self-insurer's or workers' 71.17 compensation service company record keeping practices. 71.18 (c)With theAn annuallossstatus report due August 1, 71.19 by each self-insurer shallreport to the commissioner any71.20workers' compensation claim from the previous year where the71.21full, undiscounted value is estimated to exceed $50,000,be 71.22 filed in a manner and on forms prescribed by the commissioner. 71.23 (d) Each individual self-insurer shall, within four months 71.24 after the end of its fiscal year, annually file with the 71.25 commissioner its latest 10K report required by the Securities 71.26 and Exchange Commission. If an individual self-insurer does not 71.27 prepare a 10K report, it shall file an annual certified 71.28 financial statement, together with such other financial 71.29 information as the commissioner may require to substantiate data 71.30 in the financial statement. 71.31 (e) Each member of the group shall, within four months 71.32 after the end of each fiscal year for that group, file the most 71.33 recent annual financial statement, reviewed by a certified 71.34 public accountant in accordance with the Statements on Standards 71.35 for Accounting and Review Services, Volume 2, the American 71.36 Institute of Certified Public Accountants Professional 72.1 Standards, or audited in accordance with generally accepted 72.2 auditing standards, together with such other financial 72.3 information the commissioner may require. In addition, the 72.4 group shall file, within four months after the end of each 72.5 fiscal year for that group, combining financial statements of 72.6 the group members, compiled by a certified public accountant in 72.7 accordance with the Statements on Standards for Accounting and 72.8 Review Services, Volume 2, the American Institute of Certified 72.9 Public Accountants Professional Standards. The combining 72.10 financial statements shall include, but not be limited to, a 72.11 balance sheet, income statement, statement of changes in net 72.12 worth, and statement of cash flow. Each combining financial 72.13 statement shall include a column for each individual group 72.14 member along with a total column. 72.15 Where a group has 50 or more members, the group shall file, 72.16 in lieu of the combining financial statements, a combined 72.17 financial statement showing only the total column for the entire 72.18 group's balance sheet, income statement, statement of changes in 72.19 net worth, and statement of cash flow. Additionally, the group 72.20 shall disclose, for each member, the total assets, net worth, 72.21 revenue, and income for the most recent fiscal year. The 72.22 combining and combined financial statements may omit all 72.23 footnote disclosures. 72.24 (f) In addition to the financial statements required by 72.25 paragraphs (d) and (e), interim financial statements or 10Q 72.26 reports required by the Securities and Exchange Commission may 72.27 be required by the commissioner upon an indication that there 72.28 has been deterioration in the self-insurer's financial 72.29 condition, including a worsening of current ratio, lessening of 72.30 net worth, net loss of income, the downgrading of the company's 72.31 bond rating, or any other significant change that may adversely 72.32 affect the self-insurer's ability to pay expected losses. Any 72.33 self-insurer that files an 8K report with the Securities and 72.34 Exchange Commission shall also file a copy of the report with 72.35 the commissioner within 30 days of the filing with the 72.36 Securities and Exchange Commission. 73.1 Sec. 61. Minnesota Statutes 1996, section 79A.03, is 73.2 amended by adding a subdivision to read: 73.3 Subd. 13. [ANNUAL REQUIREMENTS.] The financial 73.4 requirements set forth in subdivisions 3, 4, 5, and 7 must be 73.5 met on an annual basis. 73.6 Sec. 62. Minnesota Statutes 1996, section 79A.06, 73.7 subdivision 5, is amended to read: 73.8 Subd. 5. [PRIVATE EMPLOYERS WHO HAVE CEASED TO BE 73.9 SELF-INSURED.] Private employers who have ceased to be private 73.10 self-insurers shall discharge their continuing obligations to 73.11 secure the payment of compensation which is accrued during the 73.12 period of self-insurance, for purposes of Laws 1988, chapter 73.13 674, sections 1 to 21, by compliance with all of the following 73.14 obligations of current certificate holders: 73.15 (1) Filing reports with the commissioner to carry out the 73.16 requirements of this chapter; 73.17 (2) Depositing and maintaining a security deposit for 73.18 accrued liability for the payment of any compensation which may 73.19 become due, pursuant to chapter 176. However, if a private 73.20 employer who has ceased to be a private self-insurer purchases 73.21 an insurance policy from an insurer authorized to transact 73.22 workers' compensation insurance in this state which provides 73.23 coverage of all claims for compensation arising out of injuries 73.24 occurring during the period the employer was self-insured, 73.25 whether or not reported during that period, the policy will 73.26 discharge the obligation of the employer to maintain a security 73.27 deposit for the payment of the claims covered under the policy. 73.28 The policy may not be issued by an insurer unless it has 73.29 previously been approved as to form and substance by the 73.30 commissioner; and 73.31(3) Paying within 30 days all assessments of which notice73.32is sent by the security fund, for a period of seven years from73.33the last day its certificate of self-insurance was in effect.73.34Thereafter, the private employer who has ceased to be a private73.35self-insurer may either: (a) continue to pay within 30 days all73.36assessments of which notice is sent by the security fund until74.1it has no incurred liabilities for the payment of compensation74.2arising out of injuries during the period of self-insurance; or74.3(b) pay the security fund a cash payment equal to four percent74.4of the net present value of all remaining incurred liabilities74.5for the payment of compensation under sections 176.101 and74.6176.111 as certified by a member of the casualty actuarial74.7society. Assessments shall be based on the benefits paid by the74.8employer during the calendar year immediately preceding the74.9calendar year in which the employer's right to self-insure is74.10terminated or withdrawn.74.11 (3) At the time of the cessation of a member of the 74.12 self-insurer's authority to self-insure, that member shall 74.13 obtain and file with the commissioner an actuarial opinion of 74.14 its outstanding liabilities as determined by an associate or 74.15 fellow associate of the casualty actuarial society. The opinion 74.16 must separate liability for indemnity benefits from liability 74.17 from medical benefits, and must discount each up to four percent 74.18 per annum to net present value. Within 30 days after 74.19 notification of approval of the actuarial opinion by the 74.20 commissioner, the member shall pay to the security fund an 74.21 amount equal to 120 percent of that discounted outstanding 74.22 indemnity liability, multiplied by the greater of the average 74.23 annualized assessment rate since inception of the security fund 74.24 or the annual rate at the time of the most recent assessment 74.25 prior to termination. 74.26 A former member who has paid the security fund in 74.27 accordance with this clause and later receives authority from 74.28 the commissioner to self-insure again shall be assessed under 74.29 section 79A.12, subdivision 2, only on indemnity benefits paid 74.30 on injuries that occurred after the former member received 74.31 authority to self-insure again if the member furnishes verified 74.32 data regarding those benefits to the security fund. 74.33 In addition to proceedings to establish liabilities and 74.34 penalties otherwise provided, a failure to comply may be the 74.35 subject of a proceeding before the commissioner. An appeal from 74.36 the commissioner's determination may be taken pursuant to the 75.1 contested case procedures of chapter 14 within 30 days of the 75.2 commissioner's written determination. 75.3 Any current or past member of the self-insurers' security 75.4 fund is subject to service of process on any claim arising out 75.5 of chapter 176 or this chapter in the manner provided by section 75.6 5.25, or as otherwise provided by law. The issuance of a 75.7 certificate to self-insure to the private self-insured employer 75.8 shall be deemed to be the agreement that any process which is 75.9 served in accordance with this section shall be of the same 75.10 legal force and effect as if served personally within this state. 75.11 Sec. 63. Minnesota Statutes 1996, section 79A.20, 75.12 subdivision 1, is amended to read: 75.13 Subdivision 1. [GROUP ELIGIBILITY.] A commercial 75.14 self-insurance group consists of two or more employersin75.15similar industries. The commercial self-insurance group shall 75.16 not incorporate or form a business trust pursuant to chapter 318. 75.17 Sec. 64. Minnesota Statutes 1996, section 79A.21, 75.18 subdivision 2, is amended to read: 75.19 Subd. 2. [REQUIRED DOCUMENTS.] All first year applications 75.20 must be accompanied by the following: 75.21 (a) A detailed business plan including the risk profile of 75.22 the proposed membership, underwriting guidelines, marketing 75.23 plan, minimum financial criteria for each member, and financial 75.24 projections for the first year of operation. 75.25 (b) A plan describing the method in which premiums are to 75.26 be charged to the employer members. The plan shall be 75.27 accompanied by copies of the member's workers' compensation 75.28 insurance policies in force at the time of application. In 75.29 developing the premium for the group, the commercial 75.30 self-insurance group shall base its premium on the Minnesota 75.31 workers' compensation insurers association's manual of rules, 75.32 loss costs, and classifications approved for use in Minnesota by 75.33 the commissioner. Each member applicant shall, on a form 75.34 approved by the commissioner, complete estimated payrolls for 75.35 the first 12-month period that the applicant will be 75.36 self-insured. Premium volume discounts per the plan will be 76.1 permitted if they can be shown to be consistent with actuarial 76.2 standards. 76.3 (c) A schedule indicating actual or anticipated operational 76.4 expenses of the commercial self-insurance group. No authority 76.5 to self-insure will be granted unless, over the term of the 76.6 policy year, at least 65 percent of total revenues from all 76.7 sources for the year are available for the payment of its claim 76.8 and assessment obligations. For purposes of this calculation, 76.9 claim and assessment obligations include the cost of allocated 76.10 loss expenses as well as special compensation fund and 76.11 commercial self-insurance group security fund assessments but 76.12 exclude the cost of unallocated loss expenses. 76.13 (d) An indemnity agreement from each member who will 76.14 participate in the commercial self-insurance group, signed by an 76.15 officer of each member, providing for joint and several 76.16 liability for all claims and expenses of all of the members of 76.17 the commercial self-insurance group arising in any fund year in 76.18 which the member was a participant on a form approved by the 76.19 commissioner. The indemnity agreement shall provide for 76.20 assessments according to the group's bylaws on an individual and 76.21 proportionate basis. 76.22 (e) A copy of the commercial self-insurance group bylaws. 76.23 (f) Evidence of the security deposit required under section 76.24 79A.24, accompanied by the actuarial certification study for the 76.25 minimum security deposit as required under section 79A.24. 76.26 (g) Each initial member of the commercial self-insurance 76.27 group shall submit to the commercial self-insurance group 76.28 accountant its most recent annual financial statement. 76.29 Financial statements for a period ending more than six months 76.30 prior to the date of the application must be accompanied by an 76.31 affidavit, signed by a company officer under oath, stating that 76.32 there has been no material lessening of the net worth nor other 76.33 adverse changes in its financial condition since the end of the 76.34 period. Individual group members constituting at least 75 76.35 percent of the group's annual premium shall submit reviewed or 76.36 audited financial statements. The remaining members may submit 77.1 compilation level statements. Statements for a period ending 77.2 more than 12 months prior to the date of application cannot be 77.3 accepted. 77.4 (h) A compiled combined financial statement of all group 77.5 members prepared by the commercial self-insurance group's 77.6 accountant and a list of members included in such statements. 77.7 (i) A copy of each member's accountant's report letter from 77.8 the reports used in compiling the combined financial statements. 77.9 (j) A list of all members and the percentage of premium 77.10 each represents to the total group's annual premium for the 77.11 policy year. 77.12 Sec. 65. Minnesota Statutes 1996, section 79A.22, 77.13 subdivision 7, is amended to read: 77.14 Subd. 7. [INVESTMENTS.] (a) Any securities purchased by 77.15 the common claims fund shall be in such denominations and with 77.16 dates of maturity to ensure securities may be redeemable at 77.17 sufficient time and in sufficient amounts to meet the fund's 77.18 current and long-term liabilities. 77.19(b) Cash assets of the common claims fund may be invested77.20in the following securities:77.21(1) direct obligations of the United States government,77.22except mortgage-backed securities of the Government National77.23Mortgage Association;77.24(2) bonds, notes, debentures, and other instruments which77.25are obligations of agencies and instrumentalities of the United77.26States including, but not limited to, the federal National77.27Mortgage Association, the federal Home Loan Mortgage77.28Corporation, the federal Home Loan Bank, the Student Loan77.29Marketing Association, and the Farm Credit System, and their77.30successors, but not including collateralized mortgage77.31obligations or mortgage pass-through instruments;77.32(3) bonds or securities that are issued by the state of77.33Minnesota and that are secured by the full faith and credit of77.34the state;77.35(4) certificates of deposit which are insured by the77.36federal Deposit Insurance Corporation and are issued by a78.1Minnesota depository institution;78.2(5) obligations of, or instruments unconditionally78.3guaranteed by, Minnesota depository institutions whose long-term78.4debt rating is at least AA-, or Aa3, or their equivalent by at78.5least two nationally recognized rating agencies.78.6 (b) Cash assets of the self-insurer's fund may be invested 78.7 as provided in section 60A.11 for a casualty insurance company, 78.8 provided that investment in real estate of or indebtedness from 78.9 any member company or affiliates prohibited. In addition, 78.10 investment in the following is allowed: 78.11 (1) savings accounts or certificates of deposit in a duly 78.12 chartered commercial bank located within the state of Minnesota 78.13 and insured through the Federal Deposit Insurance Corporation; 78.14 (2) share accounts or savings certificates in a duly 78.15 chartered savings and loan association located within the state 78.16 of Minnesota and insured through the Federal Savings and Loan 78.17 Insurance Corporation; 78.18 (3) direct obligations of the United States Treasury, such 78.19 as notes, bonds, or bills; 78.20 (4) a bond or security issued by the state of Minnesota and 78.21 backed by the full faith and credit of the state; 78.22 (5) a credit union where the employees of the self-insurer 78.23 are members if the credit union is located in Minnesota, 78.24 licensed by the state of Minnesota, and insured through the 78.25 Federal Deposit Insurance Corporation; or 78.26 (6) real estate, common stock, preferred stock, or 78.27 corporate bonds listed on the New York, American Stock Exchange 78.28 or NASDAQ Stock Market, so long as these investments are not 78.29 issued by any member company or affiliate and the total in all 78.30 other allowable categories make up at least 75 percent of the 78.31 total required in the common claims fund. 78.32 Sec. 66. Minnesota Statutes 1996, section 79A.22, is 78.33 amended by adding a subdivision to read: 78.34 Subd. 13. [COMMON CLAIMS FUND; FIVE-YEAR EXCEPTION.] For 78.35 commercial group self-insurers who have been in existence for 78.36 five years or more, a level of funding in the common claims fund 79.1 must be maintained at not less than the greater of either: 79.2 (1) one year's claim losses paid in the most recent year; 79.3 or 79.4 (2) one-third of the security deposit posted with the 79.5 department of commerce according to section 79A.24, subdivision 79.6 2. 79.7 This provision supersedes any requirements under 79.8 subdivisions 11 and 12 and Minnesota Rules, part 2780.5000. 79.9 Sec. 67. Minnesota Statutes 1996, section 79A.23, 79.10 subdivision 1, is amended to read: 79.11 Subdivision 1. [REQUIRED REPORTS TO COMMISSIONER.] Each 79.12 commercial self-insurance group shall submit the following 79.13 documents to the commissioner. 79.14 (a) An annual report shall be submitted by April 1 showing 79.15 the incurred losses, paid and unpaid, specifying indemnity and 79.16 medical losses by classification, payroll by classification, and 79.17 current estimated outstanding liability for workers' 79.18 compensation on a calendar year basis, in a manner and on forms 79.19 available from the commissioner. In addition each group will 79.20 submit a quarterly interim loss report showing incurred losses 79.21 for all its membership. 79.22 (b) Each commercial self-insurance group shall submit 79.23 within 45 days of the end of each quarter: 79.24 (1) a schedule showing all the members who participate in 79.25 the group, their date of inception, and date of withdrawal, if 79.26 applicable; 79.27 (2) a separate section identifying which members were added 79.28 or withdrawn during that quarter; and 79.29 (3) an internal financial statement and copies of the 79.30 fiscal agent's statements supporting the balances in the common 79.31 claims fund. 79.32 (c) The commercial self-insurance group shall submit an 79.33 annual certified financial audit report of the commercial 79.34 self-insurance group fund by April 1 of the following year. The 79.35 report must be accompanied by an expense schedule showing the 79.36 commercial self-insurance group's operational costs for the same 80.1 year including service company charges, accounting and actuarial 80.2 fees, fund administration charges, reinsurance premiums, 80.3 commissions, and any other costs associated with the 80.4 administration of the group program. 80.5 (d) An officer of the commercial self-insurance group 80.6 shall, under oath, attest to the accuracy of each report 80.7 submitted under paragraphs (a), (b), and (c). Upon sufficient 80.8 cause, the commissioner shall require the commercial 80.9 self-insurance group to submit a certified audit of payroll and 80.10 claim records conducted by an independent auditor approved by 80.11 the commissioner, based on generally accepted accounting 80.12 principles and generally accepted auditing standards, and 80.13 supported by an actuarial review and opinion of the future 80.14 contingent liabilities. The basis for sufficient cause shall 80.15 include the following factors: 80.16 (1) where the losses reported appear significantly 80.17 different from similar types of groups; 80.18 (2) where major changes in the reports exist from year to 80.19 year, which are not solely attributable to economic factors; or 80.20 (3) where the commissioner has reason to believe that the 80.21 losses and payroll in the report do not accurately reflect the 80.22 losses and payroll of the commercial self-insurance group. 80.23 If any discrepancy is found, the commissioner shall require 80.24 changes in the commercial self-insurance group's business plan 80.25 or service company recordkeeping practices. 80.26 (e) Each commercial self-insurance group shall submit by 80.27 August 15 a copy of the group's annual federal and state income 80.28 tax returns or provide proof that it has received an exemption 80.29 from these filings. 80.30 (f) With the annual loss report each commercial 80.31 self-insurance group shall report to the commissioner any 80.32 worker's compensation claim where the full, undiscounted value 80.33 is estimated to exceed $50,000, in a manner and on forms 80.34 prescribed by the commissioner. 80.35 (g) Each commercial self-insurance group shall submit by 80.36 May 1 a list of all members and the percentage of premium each 81.1 represents to the total group's premium for the previous 81.2 calendar year. 81.3 (h) Each commercial self-insurance group shall submit by 81.4 May 1 the following documents prepared by the group's certified 81.5 public accountant: 81.6 (1) a compiled combined financial statement of group 81.7 members and a list of members included in this statement; and 81.8 (2) a report that the statements which were combined have 81.9 met the requirements of subdivision 2. 81.10 (i) If any group member comprises over 25 percent of total 81.11 group premium, that member's financial statement must be 81.12 reviewed or audited, andmust be submitted to the commissioner, 81.13 at the commissioner's option, must be filed with the department 81.14 of commerce by May 1 of the following year. 81.15 (j) Each commercial self-insurance group shall submit a 81.16 copy of each member's accountant's report letter from the 81.17 reports used in compiling the combined financial statements. 81.18 Sec. 68. Minnesota Statutes 1996, section 79A.23, 81.19 subdivision 2, is amended to read: 81.20 Subd. 2. [REQUIRED REPORTS FROM MEMBERS TO GROUP.] Each 81.21 member of the commercial self-insurance group shall, by April 1, 81.22 submit to the group its most recent annual financial statement, 81.23 together with other financial information the group may 81.24 require. These financial statements submitted must not have a 81.25 fiscal year end date older than January 15 of the group's 81.26 calendar year end. Individual group members constituting at 81.27 least7550 percent of the group's annual premium shall submit 81.28 to the group reviewed or audited financial statements. The 81.29 remaining members may submit compilation level statements. 81.30 Sec. 69. Minnesota Statutes 1996, section 79A.24, 81.31 subdivision 1, is amended to read: 81.32 Subdivision 1. [ANNUAL SECURING OF LIABILITY.] Each year 81.33 every commercial self-insurance group shall secure its estimated 81.34 futureincurred liabilitiesliability for the payment of 81.35 compensation and the performance of the obligations of its 81.36 membership imposed under chapter 176. A new deposit must be 82.1 posted within 30 days of the filing of the commercial 82.2 self-insurance group's annual actuarial report with the 82.3 commissioner. 82.4 Sec. 70. Minnesota Statutes 1996, section 79A.24, 82.5 subdivision 2, is amended to read: 82.6 Subd. 2. [MINIMUM DEPOSIT.] The minimum deposit is 150 82.7 percent of the commercial self-insurance group's estimated 82.8 futureincurred liabilitiesliability for the payment of 82.9 compensation as determined by an actuary. If all the members of 82.10 the commercial self-insurance group have submitted reviewed or 82.11 audited financial statements to the group's accountant, this 82.12 minimum deposit shall be 110 percent of the commercial 82.13 self-insurance group's estimated futureincurred82.14liabilitiesliability for the payment of workers' compensation 82.15 as determined by an actuary. The group must file a letter with 82.16 the commissioner from the group's accountant which confirms that 82.17 the compiled combined financial statements were prepared from 82.18 members reviewed or audited financial statements only before the 82.19 lower security deposit is allowed. Each actuarial study shall 82.20 include a projection of future losses during a one-year period 82.21 until the next scheduled actuarial study, less payments 82.22 anticipated to be made during that time. Deduction should be 82.23 made for the total amount which is estimated to be returned to 82.24 the commercial self-insurance group from any specific excess 82.25 insurance coverage, aggregate excess insurance coverage, and any 82.26 supplementary benefits which are estimated to be reimbursed by 82.27 the special compensation fund. Supplementary benefits will not 82.28 be reimbursed by the special compensation fund unless the 82.29 special compensation fund assessment pursuant to section 176.129 82.30 is paid and the required reports are filed with the special 82.31 compensation fund. In the case of surety bonds, bonds shall 82.32 secure administrative and legal costs in addition to the 82.33 liability for payment of compensation reflected on the face of 82.34 the bond. In no event shall the security be less than the 82.35 group's selected retention limit of the workers' compensation 82.36 reinsurance association. The posting or depositing of security 83.1 under this section shall release all previously posted or 83.2 deposited security from any obligations under the posting or 83.3 depositing and any surety bond so released shall be returned to 83.4 the surety. Any other security shall be returned to the 83.5 depositor or the person posting the bond. 83.6 Sec. 71. Minnesota Statutes 1996, section 79A.24, 83.7 subdivision 4, is amended to read: 83.8 Subd. 4. [CUSTODIAL ACCOUNTS.] (a) All surety bonds, 83.9 irrevocable letters of credit, and documents showing issuance of 83.10 any irrevocable letter of credit shall be deposited in 83.11 accordance with the provisions of section 79A.071. 83.12 (b) Upon the commissioner sending a request to renew, 83.13 request to post, or request to increase a security deposit, a 83.14 perfected security interest is created in the commercial 83.15 self-insurance group's and member's assets in favor of the 83.16 commissioner to the extent of any then unsecured portion of the 83.17 commercial self-insurance group's incurred liabilities. The 83.18 perfected security interest is transferred to any cash or 83.19 securities thereafter posted by the commercial self-insurance 83.20 group with the state treasurer and is released only upon either 83.21 of the following: 83.22 (1) the acceptance by the commissioner of a surety bond or 83.23 irrevocable letter of credit for the full amount of the incurred 83.24 liabilities for the payment of compensation; or 83.25 (2) the return of cash or securities by the commissioner. 83.26 The commercial self-insurance group loses all right, title, and 83.27 interest in and any right to control all assets or obligations 83.28 posted or left on deposit as security. In the event of a 83.29 declaration of bankruptcy or insolvency by a court of competent 83.30 jurisdiction, or in the event of the issuance of a certificate 83.31 of default by the commissioner, the commissioner shall liquidate 83.32 the deposit as provided in this chapter, and transfer it to the 83.33 commercial self-insurance group security fund for application to 83.34 the commercial self-insurance group's incurred liability. 83.35 (c) No securities in physical form on deposit with the 83.36 state treasurer or the commissioner or custodial accounts 84.1 assigned to the state shall be released or exchanged without an 84.2 order from the commissioner. No security can be exchanged more 84.3 than once every 90 days. 84.4 (d) Any securities deposited with the state treasurer or 84.5 with a custodial account assigned to the state treasurer or 84.6 letters of credit or surety bonds held by the commissioner may 84.7 be exchanged or replaced by the depositor with any other 84.8 acceptable securities or letters of credit or surety bond of 84.9 like amount so long as the market value of the securities or 84.10 amount of the surety bonds or letter of credit equals or exceeds 84.11 the amount of the deposit required. If securities are replaced 84.12 by surety bond, the commercial self-insurance group must 84.13 maintain securities on deposit in an amount sufficient to meet 84.14 all outstanding workers' compensation liability arising during 84.15 the period covered by the deposit of the replaced securities. 84.16(e) The commissioner shall return on an annual basis to the84.17commercial self-insurance group all amounts of security84.18determined by the commissioner to be in excess of the statutory84.19requirements for the group to self-insure, including that84.20necessary for administrative costs, legal fees, and the payment84.21of any future workers' compensation claims.84.22 Sec. 72. Minnesota Statutes 1996, section 79A.26, 84.23 subdivision 2, is amended to read: 84.24 Subd. 2. [BOARD OF TRUSTEES.] The commercial security fund 84.25 shall be governed by a board consisting of a minimum of three 84.26 and maximum of five trustees. The trustees shall be 84.27 representatives of commercial self-insurance groups who shall be 84.28 elected by the participants of the commercial security fund, 84.29 each group having one vote. The trustees initially elected by 84.30 the participants shall serve staggered terms of either two or 84.31 three years. Thereafter, trustees shall be elected to 84.32 three-year terms and shall serve until their successors are 84.33 elected and assume office pursuant to the bylaws of the 84.34 commercial security fund. Two additional trustees shall be 84.35 appointed by the commissioner.These trustees shall serve84.36four-year terms.Initially, one of these trustees shall serve a 85.1 two-year term. Thereafter, the trustees shall be appointed to 85.2 four-year terms, and shall serve until their successors are 85.3 appointed and assume office according to the bylaws of the 85.4 commercial security fund. In addition to the trustees elected 85.5 by the participants or appointed by the commissioner, the 85.6 commissioner of labor and industry or the commissioner's 85.7 designee shall be an ex officio, nonvoting member of the board 85.8 of trustees. A member of the board of trustees may designate 85.9 another person to act in the member's place as though the member 85.10 were acting and the designee's actions shall be deemed those of 85.11 the member. 85.12 Sec. 73. Minnesota Statutes 1996, section 79A.31, 85.13 subdivision 1, is amended to read: 85.14 Subdivision 1. [WITHDRAWAL.] Any group self-insurer that 85.15 is a memberas of August 1, 1995,of the self-insurers' security 85.16 fund established under section 79A.09, mayuntil January 1,85.171996,elect to withdraw from that fund and become a member of 85.18 the commercial self-insurance group security fund established 85.19 under section 79A.26. The transferring group shall be subject 85.20 to the provisions and requirements of sections 79A.19 to 79A.32 85.21 as of the date of transfer. Additional security may be required 85.22 pursuant to section 79A.24. Group self-insurers electing to 85.23 transfer to the commercial self-insurance group fund shall not 85.24 be subject to the provisions of section 79A.06, subdivision 5, 85.25 including, but not limited to, assessments by the self-insurers' 85.26 security fund. Notice of transfer must be filed by November 1 85.27 for all transfers that must be effective at midnight on December 85.28 31. 85.29 Sec. 74. [WARRANTY PRODUCTS AND EXTENDED SERVICE 85.30 CONTRACTS; STUDY.] 85.31 The commissioner of commerce shall conduct a study to 85.32 determine the appropriate regulatory framework for warranty 85.33 products and extended service contracts offered for sale in 85.34 Minnesota. 85.35 The commissioner shall make a written report to the 85.36 legislature on or before February 15, 1998, discussing the types 86.1 of warranty and extended service contracts available to 86.2 Minnesota consumers. The report must also include 86.3 recommendations as to how these products should be regulated in 86.4 Minnesota, including a discussion as to when these products 86.5 should be regulated as insurance. In examining these issues, 86.6 the commissioner may seek the advice of representatives from the 86.7 attorney general's office, the retail merchants industry, public 86.8 utilities, and the insurance industry. 86.9 Sec. 75. [APPLICATION.] 86.10 (a) Section 21, subdivision 2, applies to a suit based in 86.11 whole or in part on an alleged act, error, or omission that 86.12 takes place on or after the effective date of the section. 86.13 (b) No legal action lies against the receiver or any 86.14 employee based in whole or in part on any alleged act, error, or 86.15 omission that took place before the effective date of the 86.16 section, unless suit is filed and valid service of process is 86.17 obtained within 12 months after the effective date of the 86.18 section. 86.19 (c) Section 21, subdivisions 3 to 5, apply to a suit that 86.20 is pending on or filed after the effective date of the section 86.21 without regard to when the alleged act, error, or omission took 86.22 place. 86.23 (d) Section 24 applies to all contracts entered into, 86.24 renewed, extended, or amended on or after its effective date and 86.25 to obligations arising from any business written or transaction 86.26 occurring covered by reinsurance after the effective date 86.27 according to any contract including those in existence before 86.28 the effective date. 86.29 Sec. 76. [REPEALER.] 86.30 Minnesota Statutes 1996, sections 60B.36; and 79A.04, 86.31 subdivision 8, are repealed. 86.32 Sec. 77. [EFFECTIVE DATE.] 86.33 Section 72 is effective the day after final enactment.