AB637: Bill Text

LRB-3593/1

PJK:skg:km

1995 - 1996 LEGISLATURE

1995 Assembly BILL 637

October 26, 1995 - Introduced by Representatives Lorge, Albers and Baldus. Referred to Committee on Insurance, Securities and Corporate Policy.

AB637,1,4 An Act to amend 15.01 (2); and to create 14.83, 601.415 (11) and 601.59 of the statutes; relating to: ratifying the interstate insurance receivership compact, creating the interstate insurance receivership commission, granting rule-making authority and making an appropriation.

Analysis by the Legislative Reference Bureau

This bill ratifies the interstate insurance receivership compact (compact). The main purposes of the compact are to promote and develop orderly, efficient, cost-effective and uniform insurer receivership laws and operations and to coordinate interaction between insurer receivership and guaranty fund operations. Any state may join in the compact by ratifying it by statute. The functions under the compact are performed by the interstate insurance receivership commission (commission), which is created by the compact. The commission is composed of members who represent the compacting states. Each compacting state has one member, and one vote, on the commission. The commissioner of insurance, or his or her designee, is the commission member representing this state.

The commission is a body corporate of each compacting state and has the usual corporate powers, such as to elect or appoint officers, employes or attorneys, to borrow money, to accept donations and grants of money, to prescribe bylaws for its operation, to establish a budget and make expenditures, to lease or purchase real or personal property, to sell or mortgage real or personal property, to bring or prosecute legal proceedings, to establish and maintain offices and to purchase insurance and bonds. In addition, the commission has the power to promulgate rules that are binding on the compacting states and to enforce those rules, to oversee, supervise and coordinate the activities of receivers in compacting states, to monitor the activities and functions of guaranty funds in the compacting states, to act as a receiver of insurers, to provide advice and training regarding receiverships in the compacting states and to provide for dispute resolution among compacting states and receivers.

The primary functions of the commission are the oversight of receiverships in the compacting states and the promulgation of rules related to the operation of receiverships. To aid the commission in the first primary function, each compacting state must keep the commission informed of receiverships in the state by providing notice to the commission of those receiverships and by submitting certain reports regarding those receiverships. Receivers in the compacting states must submit to the commission reports and other information requested by the commission. The commission will analyze the information received and may make recommendations to a compacting state for improving the performance of its receivers. The commission may act as receiver of any insurer in a compacting state upon the request of the commissioner of the compacting state or if the commissioner, while acting as receiver, fails to comply with commission rules or operating procedures. With regard to the 2nd primary function, within 3 years after ratification of the compact by at least 2 states, the commission is required to promulgate uniform provisions for the operation of receiverships among the compacting states. The uniform provisions will become law in the compacting states upon legislative enactment in a majority of the compacting states. A compacting state, however, may exempt itself from the application of a uniform provision if the state expressly rejects the provision by legislative enactment.

The expenses of the commission are to be paid through annual assessments against each compacting state and each insurer authorized to do a direct insurance business in a compacting state. The commission is exempt from taxation in the compacting states.

Any compacting state may withdraw from the compact by repealing the state's statute that ratifies the compact. A compacting state may also be terminated from the compact if it defaults in any of its obligations under the compact and fails to cure the default within the time specified by the commission. The entire compact dissolves if membership is at any time reduced to one state.

Current law provides for the grounds, and procedures to be followed, for the rehabilitation and liquidation of insurers doing business in this state, actions in which the insurers are subject to receivership.

This bill will be referred to the joint survey committee on tax exemptions for a detailed analysis, which will be printed as an appendix to this bill.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB637, s. 1 Section 1. 14.83 of the statutes is created to read:

AB637,3,6 14.83 Interstate insurance receivership commission. There is created an interstate insurance receivership commission as specified in s. 601.59 (3). The member of the commission representing this state shall be the commissioner of insurance or his or her designated representative. The commission member shall serve without compensation but shall be reimbursed from the appropriation under s. 20.145 (1) (g) for actual and necessary expenses incurred in the performance of his or her duties. The commission has the powers and duties granted and imposed under s. 601.59.

AB637, s. 2 Section 2. 15.01 (2) of the statutes is amended to read:

AB637,3,17 15.01 (2) "Commission" means a 3-member governing body in charge of a department or independent agency or of a division or other subunit within a department, except for the sentencing commission which shall consist of 17 members, the Wisconsin waterways commission which shall consist of 5 members, the parole commission which shall consist of 5 members and the Fox river management commission which shall consist of 7 members. A Wisconsin group created for participation in a continuing interstate body, or the interstate body itself, shall be known as a "commission", but is not a commission for purposes of s. 15.06. The parole commission created under s. 15.145 (1) shall be known as a "commission", but is not a commission for purposes of s. 15.06.

AB637, s. 3 Section 3. 601.415 (11) of the statutes is created to read:

AB637,3,21 601.415 (11) Interstate insurance receivership commission. The commissioner or a designated representative shall serve as a member of the interstate insurance receivership commission under ss. 14.83 and 601.59 (3).

AB637, s. 4 Section 4. 601.59 of the statutes is created to read:

AB637,4,2 601.59 Interstate insurance receivership compact. The interstate insurance receivership compact is hereby enacted into law and entered into by this state with all other jurisdictions legally joining therein, in the form substantially as follows:

AB637,4,5 (1) Article I — Purposes. Through means of joint and cooperative action among the compacting states, the purposes of this compact include all of the following:

AB637,4,7 (a) To promote, develop and facilitate orderly, efficient, cost-effective and uniform insurer receivership laws and operations.

AB637,4,9 (b) To coordinate interaction between insurer receivership and guaranty association operations.

AB637,4,10 (c) To create the interstate insurance receivership commission.

AB637,4,13 (d) To perform these and such other related functions as may be consistent with the state regulation of the business of insurance pursuant to the McCarran-Ferguson act.

AB637,4,14 (2) Article II — Definitions. In this compact:

AB637,4,16 (a) "Bylaws" means those bylaws prescribed by the commission for its governance, or for directing or controlling the commission's actions or conduct.

AB637,4,18 (b) "Compacting state" means any state which has enacted enabling legislation for this compact.

AB637,4,20 (c) "Commission" means the interstate insurance receivership commission created by this compact.

AB637,4,21 (d) "Commissioner" means the chief insurance regulatory official of a state.

AB637,4,24 (e) "Deputy receiver" means any person appointed or retained by a receiver and who is the receiver's duly authorized representative for administering one or more estates.

AB637,5,4 (f) "Domiciliary state" means the state in which an insurer is incorporated or organized; or, in the case of an alien insurer, its state of entry; or, in the case of an unauthorized insurer not incorporated, organized, or entered in any state, a state where the insurer is engaged in or doing business.

AB637,5,5 (g) "Estate" means the assets and liabilities of any insurer in receivership.

AB637,5,9 (h) "Guaranty association" means an insurance guaranty fund or association or any similar entity now or hereafter created by statute in a compacting state, other than a receivership, to pay or assume, in whole or in part, the contractual claim obligations of insolvent insurers.

AB637,5,13 (i) "Insurer" means any person or entity that has done, purports to do, is doing or is licensed to do any insurance or reinsurance business, or that is or has been subject to the authority of, or to liquidation, rehabilitation, supervision, conservation or ancillary receivership by, any commissioner.

AB637,5,16 (j) "Member" means the commissioner of a compacting state or his or her designee, who shall be a person officially connected with the commissioner and who is wholly or principally employed by the commissioner.

AB637,5,18 (k) "Noncompacting state" means any state which has not enacted enabling legislation for this compact.

AB637,5,21 (L) "Operating procedures" means those procedures promulgated by the commission implementing a rule, an existing law in a compacting state or a provision of this compact.

AB637,5,24 (m) "Publication" means the act of publishing in the official state publication in a compacting state or in such other publication as may be established by the commission.

AB637,6,2 (n) "Receiver" means receiver, liquidator, rehabilitator, conservator or ancillary receiver as the context requires.

AB637,6,4 (o) "Receivership" means any liquidation, rehabilitation, conservation or ancillary receivership proceeding as the context requires.

AB637,6,7 (p) "Rules" means acts of the commission, duly promulgated pursuant to sub. (7), substantially affecting interested parties in addition to the commission, which shall have the force and effect of law in the compacting states.

AB637,6,8 (q) "State" means any state, district or territory of the United States of America.

AB637,6,18 (3) Article III — Establishment of the Commission and Venue. The compacting states hereby create the interstate insurance receivership commission. The commission is a body corporate of each compacting state. The commission is a not-for-profit entity, separate and distinct from the compacting states. The commission is solely responsible for its liabilities except as otherwise provided in this compact. Except as otherwise specifically provided in state or federal law in the jurisdiction where the commission's principal office is located or where the commission is acting as receiver, venue is proper, and judicial proceedings by or against the commission shall be brought, in a court of competent jurisdiction where the commission's principal office is located.

AB637,6,20 (4) Article IV — Powers of the Commission. The commission shall have all of the following powers: