AB551: Bill Text

Among the powers that the board of directors has under current law are the power to review settlements and judgments to which an insurer or its insureds were parties to determine whether they should be contested and the power to appear in any liquidation proceeding in this state involving an insurer in liquidation. The bill adds the power to pursue salvage or subrogation with respect to paid covered claim obligations and to retain any amounts recovered and the power to appoint and direct legal counsel for the defense of covered claims under insurance policies.

The bill provides that the duty of the board to defend an insured ceases upon the board's payment of an amount equal to its covered claim obligation limit or the applicable policy limit. In addition to the requirements in current law related to whether a claim is eligible for payment, the bill adds that, except for claims under life insurance policies, annuities and noncancelable or guaranteed renewable disability insurance policies, a claim must have arisen within 30 days after the liquidation order was entered or before the policy expires or is replaced or canceled by the insured, if the policy expires or is replaced or canceled less than 30 days after the liquidation order was entered. The bill also provides that an insurer's obligation to pay assessments to the insurance security fund terminates if the insurer's license or certificate of authority to do business in this state terminates or expires. Such an insurer remains liable, however, to pay assessments that were made or called before the insurer's license or certificate terminated or expired and assessments that were made or called after the insurer's license or certificate of authority terminated or expired but that relate to a liquidation order entered before the license or certificate of authority terminated or expired.

Mutual insurance holding company provisions

Current law specifies procedures for a mutual insurance company to restructure by forming a mutual insurance holding company and becoming a stock insurance company that is owned by the mutual insurance holding company. The statutes also set out various requirements related to the structure and operation of the mutual insurance holding company that is formed in the restructuring. Because many of these requirements are identical with the requirements in the statutes for nonstock corporations, there are many cross-references to the chapter governing nonstock corporations in the chapter governing the formation of mutual insurance holding companies.

The act that created the chapter in the statutes that governs the formation of mutual insurance holding companies was passed in the 1997-98 session of the legislature. During that same session, the chapter governing nonstock corporations was completely revised. As a consequence, the cross-references in the chapter governing the formation of mutual insurance holding companies are no longer valid. This bill changes those cross-references to conform to the changes that were made in the chapter governing nonstock corporations, sometimes incorporating substantive changes that were made in the law governing nonstock corporations. For example, a provision in current law that governs the bylaws of a mutual insurance holding company specifies that the statutory provision governing the bylaws of a nonstock corporation applies to the bylaws of a mutual insurance holding company. When the chapter governing nonstock corporations was revised, provisions governing bylaws were created to include not only the former provision, which addressed adoption of bylaws, but also provisions on contents of bylaws, adopting emergency bylaws and amendment of bylaws by a corporation's board of directors and members. In changing the cross-references to conform to the current law on nonstock corporations, the bill applies the additional provisions on contents of bylaws, adopting emergency bylaws and amendment of bylaws by the board of directors and members to mutual insurance holding companies.

In addition, the bill makes a technical correction to a provision in the statutes related to a mutual insurance company. The statutes make a distinction between the way in which a sale, lease or exchange of less than all of the property and assets of a mutual may be authorized and the way in which a sale, lease or exchange of all or substantially all of the property and assets may be authorized, but incorrectly attribute both ways to the sale, lease or exchange of less than all of the property and assets. The bill specifies that the methods for authorizing the sale, lease or exchange of all or substantially all of the property and assets of a mutual apply to the sale, lease or exchange of all or substantially all of the property and assets.

Miscellaneous changes to insurance statutes

The bill makes a number of miscellaneous changes to the insurance statutes. Under current law, a group life insurance policy may be issued only to a group that is formed for purposes other than to obtain insurance. The bill eliminates this provision. Current law places no such limitation on any other type of group insurance.

Under current law, an insurer may change its registered agent for service of process no more than once per year, and any change takes effect on January 1 of the year following the delivery to the commissioner of insurance (commissioner) of the statement changing the registered agent. The bill still limits a change of registered agent to once per year, but any change takes effect immediately with the delivery of the statement.

The bill authorizes the commissioner to employ experts to assist the commissioner with examinations and reviews of insurers and insurance transactions, and provides that the subject of an examination or a person involved in a transaction under review will be responsible for the costs of the expert and related expenses.

Under current law, a life insurer is prohibited from providing any bonus, prize, award or similar additional compensation on insurance business in this state as a result of a competition among insurance intermediaries. Awards may be given as recognition of merit, however, as long as the cost of any such award does not exceed $150 and the aggregate cost of such awards in a calendar year does not exceed 1.5% of the insurer's total first year life insurance premium income derived from sales in this state. The bill eliminates this provision related to bonuses and awards.

Certified capital investment credit

Under current law, rather than pay an income tax or a franchise tax, certain insurers pay a license fee that is based on a percentage of an insurer's gross premiums. Such an insurer, however, may claim as a credit against the license fee an amount that is based on the amount the insurer paid as an investment in a capital company that is certified as a capital company by the department of commerce.

Under current law, if an in-state insurer is licensed to conduct business in another state, this state may not require a similar insurer from the other state who is licensed to conduct business in this state to pay more in license fees to this state than the in-state insurer pays to the other state. Under this bill, this state may not require a similar insurer from the other state who is licensed to conduct business in this state to pay to this state a greater amount for license fees than the amount which an in-state insurer pays to the other state, less the amount of the credits it receives from this state for investments in capital companies.

For further information see the state and local 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:

AB551, s. 1 Section 1. 76.635 (2) of the statutes, as created by 1997 Wisconsin Act 215, is amended to read:

AB551,6,2 76.635 (2) Credit. An insurer that makes a certified capital investment may credit against the fees due under s. 76.60, 76.63, 76.65 or , 76.66 or 76.67, for 10 years beginning with the year of the investment, either 10% of that investment or the amount by which the sum of the insurer's certified capital investments and the insurer's qualified investments exceeds the insurer's qualified investments in the taxable year before the insurer first claimed the credit under this section, whichever is less.

AB551, s. 2 Section 2. 76.635 (3) of the statutes, as created by 1997 Wisconsin Act 215, is amended to read:

AB551,6,10 76.635 (3) Carry-forward. If the credit under sub. (2) is not entirely offset against the fees under s. 76.60, 76.63, 76.65 or, 76.66 or 76.67 otherwise due, the unused balance may be carried forward and credited against those fees in the following years to the extent that it is not offset by those fees otherwise due in all the years between the year in which the investment was made and the year in which the carry-forward credit is claimed.

AB551, s. 3 Section 3. 76.67 (2) of the statutes is amended to read:

AB551,6,20 76.67 (2) If any domestic insurer is licensed to transact insurance business in another state, this state may not require similar insurers domiciled in that other state to pay taxes greater in the aggregate than the aggregate amount of taxes that a domestic insurer is required to pay to that other state for the same year less the credit under s. 76.635, except that the amount imposed shall not be less than the total of the amounts due under ss. 76.65 (2) and 601.93 and, if the insurer is subject to s. 76.60, 0.375% of its gross premiums, as calculated under s. 76.62, less offsets allowed under s. 646.51 (7) or under s. 76.635 against that total, and except that the amount imposed shall not be less than the amount due under s. 601.93.

AB551, s. 4 Section 4. 600.03 (28p) of the statutes is renumbered 600.03 (28p) (intro.) and amended to read:

AB551,6,24 600.03 (28p) (intro.) "Medicare replacement policy" means a, to the extent permitted under federal law, any of the following:

AB551,7,5 (a) A disability insurance policy or certificate issued to a resident of this state pursuant to a contract between the federal health care financing administration and a federally qualified health maintenance organization or a federally certified competitive medical plan to provide health care benefits to persons eligible for medicare under 42 USC 1395f, 1395x and 1395mm.

AB551, s. 5 Section 5. 600.03 (28p) (b) of the statutes is created to read:

AB551,7,9 600.03 (28p) (b) A medicare+choice plan, as defined in 42 USC 1395w-28 (b) (1), or a contract with a medicare+choice organization, as defined in 42 USC 1395w-28 (a) (1).

AB551, s. 6 Section 6. 600.03 (28p) (c) of the statutes is created to read:

AB551,7,13 600.03 (28p) (c) A plan, contract or policy that the commissioner by rule determines is similar to, or supplements or replaces, a program described in par. (a) or (b).

AB551, s. 7 Section 7. 601.13 (2) of the statutes is amended to read:

AB551,7,21 601.13 (2) Terms of deposit. Unless otherwise provided by the law requiring or permitting the deposit, each deposit shall be held in trust: first, for the claimants under s. 645.68 (3); 2nd, for the claimants under s. 645.68 (3c); 3rd, for the claimants under s. 645.68 (3m); 4th, for the claimants under s. 645.68 (4); and thereafter, for all other creditors in the order of priority established by s. 645.68. No claim may be made against the deposit of an alien insurer unless the claim arises out of a transaction in the United States.

AB551, s. 8 Section 8. 601.42 (7) of the statutes is created to read:

AB551,8,3 601.42 (7) Experts. The commissioner may employ experts to assist the commissioner in an examination or in the review of any transaction subject to approval under chs. 600 to 646. The person that is the subject of the examination, or that is a party to a transaction under review, including the person acquiring, controlling or attempting to acquire the insurer, shall pay the reasonable costs incurred by the commissioner for the expert and related expenses.

AB551, s. 9 Section 9. 601.43 (3) of the statutes is amended to read:

AB551,8,12 601.43 (3) Audits or actuarial or other evaluations. In lieu of all or part of an examination under subs. (1) and (2), or in addition to it, the commissioner may order an independent audit by certified public accountants or an actuarial or other evaluation by actuaries or other experts approved by the commissioner of any person subject to the examination requirement. Any accountant or , actuary or other expert selected is subject to rules respecting conflicts of interest promulgated by the commissioner. Any audit or evaluation under this section is subject to s. 601.44, so far as appropriate.

AB551, s. 10 Section 10. 601.43 (4) of the statutes is amended to read:

AB551,8,20 601.43 (4) Alternatives to examination. In lieu of all or part of an examination under this section, the commissioner may accept the report of an audit already made by certified public accountants or of an actuarial or other evaluation already made by actuaries or other experts approved by the commissioner, or the report of an examination made by the insurance department of another state or of the examination by another government agency in this state, the federal government or another state.

AB551, s. 11 Section 11. 601.465 (3) (e) of the statutes is created to read:

AB551,8,23 601.465 (3) (e) An international, federal, state or local regulatory or law enforcement agency.

AB551, s. 12 Section 12. 601.465 (3) (f) of the statutes is created to read:

AB551,8,25 601.465 (3) (f) An agent or employe of an agency described in par. (e).

AB551, s. 13 Section 13. 601.715 (2) (b) of the statutes is amended to read:

AB551,9,4 601.715 (2) (b) An authorized insurer may change its registered agent no more than one time per year. Any change of registered agent is effective on January 1 of the year following the delivery of the statement under par. (a).

AB551, s. 14 Section 14. 611.26 (1) of the statutes is amended to read:

AB551,9,12 611.26 (1) Insurance subsidiaries. An insurance corporation may form or acquire subsidiaries to do any lawful insurance business. There is no limit on the amount of investment in such subsidiaries except that the commissioner may by order or rule establish a limit and, for purposes of ss. 623.11 and 623.12, the total value of the outstanding shares of such a subsidiary shall be deemed to equal the amount of surplus possessed by the subsidiary in excess of its security surplus, as determined by the commissioner under s. 623.12.

AB551, s. 15 Section 15. 611.72 (3) (intro.) of the statutes is amended to read:

AB551,9,18 611.72 (3) Grounds for disapproval. (intro.) The commissioner shall approve the plan if the commissioner finds, after a hearing, unless a hearing is not required under sub. (3m), that it would not violate the law or be contrary to the interests of the insureds of any participating domestic corporation or of the Wisconsin insureds of any participating nondomestic corporation and that:

AB551, s. 16 Section 16. 611.72 (3m) of the statutes is created to read:

AB551,9,24 611.72 (3m) Hearing not required. A hearing is not required under sub. (3) before approval of a proposed plan of merger or other plan for acquisition of control if the proposed merger is with, or the proposed acquirer is, an affiliate of the insurer and the proposed merger or other acquisition of control does not change the controlling person of the insurer.

AB551, s. 17 Section 17. 611.78 (1m) (b) (intro.) of the statutes is amended to read:

AB551,10,3 611.78 (1m) (b) (intro.) A sale, lease, exchange or other disposition of all or substantially all of the property and assets under par. (a) of a mutual may be made upon such terms and conditions as may be authorized only in the following manner:

AB551, s. 18 Section 18. 628.10 (2) (a) of the statutes is amended to read:

AB551,10,14 628.10 (2) (a) For failure to comply with continuing education requirements. The commissioner may by order suspend the license of any intermediary who fails to produce evidence of compliance with continuing education standards set by the commissioner is suspended, effective on the day on which the evidence of compliance is due. If an intermediary whose license has been suspended under this paragraph produces evidence of compliance within 60 days after the date on which the license is suspended, the commissioner shall reinstate the license effective on the date of suspension. If such an intermediary does not produce evidence of compliance within 60 days, the license is revoked and the intermediary may be relicensed only after satisfying all requirements under s. 628.04.

AB551, s. 19 Section 19. 628.77 of the statutes is repealed.

AB551, s. 20 Section 20. 632.47 (3) of the statutes is renumbered 632.47 (3) (intro.) and amended to read:

AB551,10,19 632.47 (3) Group annuities Prohibition on assignment. (intro.) Assignment may be expressly prohibited by a any of the following:

AB551,10,20 (a) A group contract providing annuities as retirement benefits.

AB551, s. 21 Section 21. 632.47 (3) (b) of the statutes is created to read:

AB551,10,23 632.47 (3) (b) An annuity contract that is subject to transferability restrictions under any federal or state tax, employe benefit or securities law.

AB551, s. 22 Section 22. 632.55 of the statutes is repealed.

AB551, s. 23 Section 23. 644.04 (3) (intro.) of the statutes is amended to read:

AB551,11,4 644.04 (3) (intro.) Subject to s. 611.33, the The converted insurance company , subject to s. 611.33, and any intermediate stock holding company may thereafter issue to 3rd parties debt securities, stock other than voting stock and, subject to s. 644.15, voting stock, so long as all of the following are true:

AB551, s. 24 Section 24. 644.05 (1) of the statutes is amended to read:

AB551,11,7 644.05 (1) Powers. Section 181.04 Subject to s. 644.19 (2) and (3), s. 181.0302 (intro.), (1) to (15), (18) and (19) applies to mutual holding companies.

AB551, s. 25 Section 25. 644.05 (2) of the statutes is amended to read:

AB551,11,11 644.05 (2) Effect of unauthorized corporate acts. Section 181.057 (1) and (2) 181.0304 applies to mutual holding companies , except that, for purposes of this subsection, "attorney general" used in s. 181.0304 (3) means "commissioner".

AB551, s. 26 Section 26. 644.05 (3) of the statutes is repealed.

AB551, s. 27 Section 27. 644.05 (4) of the statutes is amended to read:

AB551,11,17 644.05 (4) Waiver of notice and informal action by members or directors. Sections 181.70 and 181.72 181.0704, 181.0706, 181.0821 and 181.0823 apply to mutual holding companies. For purposes of this subsection, "board" used in s. 181.0821 includes "committee of the board of a mutual holding company".

AB551, s. 28 Section 28. 644.08 of the statutes is amended to read:

AB551,11,20 644.08 Reservation of corporate name. Section 181.07 applies Sections 181.0402 and 181.0403 (2), (3) and (3m) apply to mutual holding companies.

AB551, s. 29 Section 29. 644.09 (1) (intro.) of the statutes is amended to read:

AB551,11,23 644.09 (1) Articles. (intro.) Section 181.31 181.0202 applies to the articles of a mutual holding company, except that all of the following apply:

AB551, s. 30 Section 30. 644.09 (1) (a) of the statutes is amended to read:

AB551,12,2 644.09 (1) (a) The name of the mutual holding company shall include the word "mutual" and shall comply with s. 181.06 (3) 181.0401 (2) to (4).

AB551, s. 31 Section 31. 644.09 (2) of the statutes is amended to read:

AB551,12,20 644.09 (2) Amendment of articles. A mutual holding company may amend its articles in the manner provided in ss. 181.35 to 181.37 and 181.39 181.1001, 181.1002 (1), 181.1003, 181.1005 and 181.1006, except that papers required by those sections to be filed with the department of financial institutions shall instead be filed with the commissioner. The articles may be amended in any desired respect, including substantial changes of its original purposes, except that no amendment may be made that is contrary to sub. (1). In addition to the requirements of s. 181.37 181.1005, the articles of amendment of a mutual holding company shall, if mail voting is used, state the number of members voting by mail and the number of such members voting for and against the amendment. No amendment may become effective until the articles of amendment have been filed with the commissioner. No amendment shall affect any existing cause of action in favor of or against such mutual holding company, any pending suit civil, criminal, administrative or investigatory proceeding to which the mutual holding company is a party or the existing rights of persons other than members. In the event that the corporate name is changed by amendment, no suit brought by or against such mutual holding company under its former name shall abate for that reason.

AB551, s. 32 Section 32. 644.09 (3) of the statutes is amended to read:

AB551,13,2 644.09 (3) Bylaws. The bylaws of a mutual holding company shall comply with this chapter. A copy of the bylaws and any amendments to the bylaws shall be filed with the commissioner within 60 days after adoption. Subject to this subsection, s. 181.13 applies ss. 181.0206, 181.0207 and 181.1021 apply to mutual holding companies.

AB551, s. 33 Section 33. 644.09 (4) of the statutes is amended to read:

AB551,13,5 644.09 (4) Principal officers. Section 181.25 (1) and (2) applies Sections 181.0840 and 181.0841 apply to mutual holding companies.

AB551, s. 34 Section 34. 644.14 (1) of the statutes is amended to read:

AB551,13,9 644.14 (1) Communication to members; member voting. Subject to this section, ss. 611.41, 611.42 (1), (1e), (1m), (2), (3), (4) (a) and (5), 611.43 and 611.53 (2) apply to mutual holding companies.

AB551, s. 35 Section 35. 644.16 (1) of the statutes is amended to read:

AB551,13,17 644.16 (1) Board of directors. Subject to this section, ss. 181.18, 181.21 181.0801 (1) and (2), 181.0802, 181.0811, 611.51 (2), (3), (5) and (8) and 611.53 (1) and (3) apply to mutual holding companies. Section 181.22 181.0824 applies to the board of a mutual holding company except as modified by s. 181.225 611.10. The board shall manage the business and affairs of the corporation and may not delegate its power or responsibility to do so, except to the extent authorized by ss. 181.23 and 181.25 (2) 181.0825 and 181.0841.

AB551, s. 36 Section 36. 644.16 (2) of the statutes is amended to read:

AB551,13,20 644.16 (2) Committees of directors. Section 181.23 181.0825 applies to mutual holding companies.

AB551, s. 37 Section 37. 644.16 (3) (a) of the statutes is amended to read: