LRB-4555/1

TJD&EKL:ahe

2019 - 2020 LEGISLATURE

2019 Senate BILL 482

October 9, 2019 - Introduced by Senator Craig, cosponsored by Representatives Petersen, Duchow, Doyle and Tusler. Referred to Committee on Insurance, Financial Services, Government Oversight and Courts.

SB482,1,4 An Act to repeal 618.416 (1) (c); to amend 600.03 (23), 610.80 (8), 614.19 (3) (b), 616.54 (8), 655.27 (3) (b) 2. and 655.275 (2); and to create 601.465 (1m) (c) 10., 614.78 and 614.79 of the statutes; relating to: various changes to insurance laws.

Analysis by the Legislative Reference Bureau

This bill makes various changes to insurance laws, including correcting certain grammatical errors.

Fraternals

Under the bill, the commissioner of insurance may issue an order that declares a domestic fraternal that has undergone a certain financial event specified in the bill to be in a hazardous condition. The commissioner may then order the fraternal to remedy the event, and the order may include authorization to negotiate to transfer all of its members, insurance certificates, and other assets and liabilities to another fraternal or insurer. The transfer is considered to be a novation of the insurance certificates effective on the date of transfer. The fraternal must ensure the transfer is concluded within the time specified by the commissioner and subject to approval by the commissioner. Though other law may require notice to or approval by the fraternal's members or supreme governing body, a transfer agreement under the bill is considered to be fully approved by the fraternal upon a majority vote of the fraternal's board of directors. If the fraternal seeks to transfer to an organization that does not have authority to transact insurance business in Wisconsin, the commissioner may grant a limited certificate of authority for the organization to service the existing insurance certificates and fulfill obligations to certificate holders following the transfer.

The bill adds the following to current law grounds for rehabilitation or liquidation of an insurer: failure by a domestic fraternal to comply with a commissioner's order related to the financial event and failure by a domestic fraternal to remedy the hazardous condition within the time specified by the commissioner. The bill, however, specifies that unless the commissioner reasonably believes that rehabilitation of the fraternal has a high probability of returning the fraternal to long-term viability or will facilitate transfer to another fraternal or insurer, rehabilitation of the fraternal is presumed to be futile and to serve no useful purpose. After a petition for liquidation of a fraternal is filed, the fraternal may not assess payment of shares of a deficiency, unless the commissioner determines the assessment is for the purpose of satisfying obligations to creditors. Liquidation of domestic fraternals must be conducted consistent with the purposes of the current law purpose of enhancing efficiency and economy of liquidation, through clarification and specification of the law, to minimize legal uncertainty and litigation in a manner designed to conserve assets, limit liquidation expenses, and avoid any assessment of shares of a deficiency.

A liquidator of a fraternal under the bill must attempt to transfer insurance policies or certificates by assignment, assumption, or another means to another qualified fraternal, or if no qualified fraternal will accept the transfer, to an insurer authorized to sell life insurance in Wisconsin. Upon transfer to an insurer, each member of the transferring fraternal and owner of an insurance policy or certificate being transferred is considered to agree that any terms of the policy or certificate that provide for the fraternal's solvency or that subject the policy or certificate to the fraternal's policies are null and void and to agree to any other changes in terms that are determined by the liquidator to be necessary to effectuate the transfer.