2003 Wisconsin Act 261

261,115 Section 115. 646.33 (1) of the statutes is renumbered 646.33 (1) (a) and amended to read:

646.33 (1) (a) Upon payment to any loss claimant the fund is subrogated to the claimant's full right of recovery against the insurer, and, to the same extent the insurer would have been subrogated, against any liquidator and any 3rd person. A person receiving benefits under this chapter thereby assigns to the fund the person's rights under, and any causes of action against any person for losses arising under, resulting from, or otherwise relating to, the covered policy or contract to the extent of the benefits received, regardless of whether the benefits are payments of or on account of contractual obligations, continuation of coverage, or the provision of substitute or alternative coverages.

(2m) Recovery. (a) On recovery under this section, the fund may retain both the amount it has paid to the claimant and the amount it has expended to obtain the recovery and shall pay any balance to the claimant.

261,116 Section 116. 646.33 (1) (b), (c) and (d) of the statutes are created to read:

646.33 (1) (b) The subrogation rights of the fund under this subsection have the same priority against the assets of the insolvent insurer as the claimant's rights with respect to the insurer.

(c) In addition to the rights specified in pars. (a) and (b), the fund has all of the common law rights of subrogation and any other equitable or legal remedy that would have been available to the insolvent insurer or the claimant with respect to the covered policy or contract including, in the case of a structured settlement annuity, any rights of the owner, beneficiary, or payee of the annuity, to the extent of the benefits received under this chapter, against a person originally or by succession responsible for the losses that arise from the personal injury and that relate to the annuity or its payment.

(d) If any provision of this subsection is invalid or ineffective for any reason with respect to any person or claim, the amount payable by the fund with respect to the related covered obligations shall be reduced by any amount realized by any other person with respect to the person or claim that is attributable to the covered policy or contract.

261,117 Section 117. 646.33 (2) of the statutes is amended to read:

646.33 (2) Cooperation. The claimant shall cooperate with the board fund in pursuing the fund's rights under sub. (1), including executing any necessary documents. If cooperation is withheld unreasonably, the fund may recover from the claimant any amount it has paid the claimant. The fund may require a claimant to execute a written assignment to it of the claimant's rights and causes of action relating to the covered policy or contract as a condition precedent to the receipt of any right or benefits under this chapter.

261,118 Section 118. 646.33 (2m) (b) of the statutes is created to read:

646.33 (2m) (b) If a claimant to whom the fund has provided benefits under this chapter recovers amounts with respect to which the fund has rights under this section, the claimant shall pay to the fund the portion of the recovery that is attributable to the covered policy or contract.

261,119 Section 119. 646.33 (3) of the statutes is amended to read:

646.33 (3) Claims against liquidator. The board fund shall report periodically and whenever a reasonable request is made to any liquidator against whom subrogation rights exist under sub. (1) the claims paid and rejected together with estimates of unsettled claims made or anticipated against the fund.

261,120 Section 120. 646.35 (2) of the statutes is repealed.

261,121 Section 121. 646.35 (3) (title) of the statutes is amended to read:

646.35 (3) (title) Nondomestic insurer Insurer in liquidation.

261,122 Section 122. 646.35 (3) (intro.) (except 646.35 (3) (title)) of the statutes is renumbered 646.35 (3) (am) (intro.) and amended to read:

646.35 (3) (am) (intro.) If a nondomestic an insurer that is subject to this chapter is in liquidation, the board fund shall, subject to the approval of the commissioner and on a determination by the commissioner that the insurer's domiciliary jurisdiction or state of entry does not provide by statute for protection to residents of this state substantially similar to that provided by this section s. 646.31 (2), do either of the following:

261,123 Section 123. 646.35 (3) (a) of the statutes is renumbered 646.35 (3) (am) 1. and amended to read:

646.35 (3) (am) 1. Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, the policies of residents the insolvent insurer within the scope of this section;.

261,124 Section 124. 646.35 (3) (b) of the statutes is renumbered 646.35 (3) (am) 2. and amended to read:

646.35 (3) (am) 2. Assure performance of the contractual obligations of the insurer on such policies; and.

261,125 Section 125. 646.35 (3) (c) of the statutes is renumbered 646.35 (3) (bm) and amended to read:

646.35 (3) (bm) Provide the necessary money Whether the fund's duties under par. (am) are discharged by the fund under par. (am) 1. or 2. is at the fund's discretion. The fund shall provide moneys, pledges, loans, notes, guarantees, or other means reasonably necessary to discharge the duties under pars. (a) and (b) par. (am) 1. or 2.

261,126 Section 126. 646.35 (4) of the statutes is renumbered 646.35 (4) (a) and amended to read:

646.35 (4) (a) The fund has a claim against the liquidator for reasonable payments made to discharge its duties under this section. If the board fund and the liquidator disagree regarding the reasonableness of such payments, either may apply to the court to determine the question. Such payments shall have the same priority as the class of claims under s. 645.68 (3).

261,127 Section 127. 646.35 (4) (b) of the statutes is created to read:

646.35 (4) (b) As a creditor of the insolvent insurer, the fund shall be entitled to receive disbursements of assets out of marshaled assets, consistent with s. 645.72 and any substantially similar laws of other states, as a credit against obligations under this chapter. If, within 120 days after a final determination of an insurer's insolvency by the receivership court, the liquidator has not applied to the court for approval of a proposal for disbursement of assets out of marshaled assets to insurance guaranty associations having obligations because of the insolvency, the fund may apply to the receivership court, in accordance with the law of the insolvent insurer's domicile, for approval of its own proposal for disbursement of the assets.

261,128 Section 128. 646.35 (5) of the statutes is amended to read:

646.35 (5) Rate increases. The board fund may increase any rates or premiums on policies during continuation of coverage under sub. (2) (b) or (3) (b) (am) 2. to the extent the policies permit the insurer to increase the rates or premiums. If the board fund determines that the rates or premiums on policies which that do not permit an increase or the rates or premiums as increased to the extent permitted by the policies are inadequate under s. 625.11 (3), the board fund may offer the policyholders the option of terminating the coverage or continuing the coverage at adequate rates or premiums as determined by the board fund.

261,129 Section 129. 646.35 (6) (a) of the statutes is amended to read:

646.35 (6) (a) In the case of an annuity contract, the board fund may limit its performance to payment of the then current value of the loss claim under s. 645.68 (3) as of the date of the order of liquidation, with interest to the date of payment, in lieu of the requirements of sub. (2) or (3).

261,130 Section 130. 646.35 (6) (b) of the statutes is amended to read:

646.35 (6) (b) In the case of a disability insurance policy which that is neither guaranteed renewable nor noncancelable, the board fund is not obligated to continue the policy in force beyond the time required under s. 645.43 or the date established in the liquidation order of another state, but may continue the coverage under any disability insurance policy for up to 180 days after the date of the liquidation order. The commissioner may adopt rules defining "guaranteed renewable" and "noncancelable" for the purposes of this paragraph.

261,131 Section 131. 646.35 (6) (bm) of the statutes is amended to read:

646.35 (6) (bm) For coverages continued pursuant to par. (b), the board fund may substitute a comprehensive health insurance policy approved by the commissioner for a health maintenance organization policy that is subject to sub. (2) or (3), and increase rates or premiums for the substituted coverage as provided in sub. (5).

261,132 Section 132. 646.35 (6) (c) (intro.) of the statutes is amended to read:

646.35 (6) (c) (intro.) In the case of a life insurance or annuity contract, the board fund is not obligated to perform the responsibilities set forth in sub. (2) or (3) with respect to either of the following:

261,133 Section 133. 646.35 (6) (c) 1. (intro.) of the statutes is amended to read:

646.35 (6) (c) 1. (intro.) Any benefit payment liability, arising on or after the date of entry of the order of liquidation, to the extent that the payment is based upon a rate of interest that rate of interest on which it is based or the interest rate, crediting rate, or similar factor determined by use of an index or other external reference stated in the policy or contract and employed in calculating returns or changes in value exceeds the larger smaller of the following:

261,134 Section 134. 646.35 (6) (c) 1. b. of the statutes is amended to read:

646.35 (6) (c) 1. b. The rate of interest, which may not be less than zero, determined by subtracting 3 percentage points from the monthly corporate bond yield average, as most recently published by Moody's investors service or its successor and as adjusted on a monthly basis.

261,135 Section 135. 646.35 (6) (c) 2. (intro.) of the statutes is amended to read:

646.35 (6) (c) 2. (intro.) Any benefit payment liability, arising before the date of entry of the order of liquidation, to the extent that the payment is based upon a rate of interest that exceeds the larger smaller of the following:

261,136 Section 136. 646.35 (6) (c) 2. b. of the statutes is amended to read:

646.35 (6) (c) 2. b. The rate of interest, which may not be less than zero, determined by subtracting 2 percentage points from the monthly corporate bond yield average, as published by Moody's investors service or its successor, when averaged for over the 4-year period ending on the date the fund becomes obligated with respect to the contract of entry of the order of liquidation or averaged for over such lesser period if the contract was issued less than 4 years before that date.

261,137 Section 137. 646.35 (7) of the statutes is created to read:

646.35 (7) Exclusion for coverage under another fund. (a) Notwithstanding s. 646.31 (9), the fund shall not provide coverage under this section to any person who, directly or indirectly, has coverage under any other state's security fund statutes.

(b) In determining whether par. (a) applies in a situation in which a person could potentially be covered by security funds of more than one state, par. (a) shall be construed in conjunction with other states' laws in such a manner as to result in coverage for the person by only one security fund.

261,138 Section 138. 646.35 (8) of the statutes is created to read:

646.35 (8) Reinsurance. (a) In this subsection, "coverage date" means the date on which the fund becomes responsible for the obligations of an insolvent insurer.

(b) At any time within one year after the coverage date, the fund may elect to succeed to the insolvent insurer's rights and obligations that accrue on or after the coverage date and that relate to contracts covered, in whole or in part, by the fund under one or more indemnity reinsurance agreements entered into by the insolvent insurer as a ceding insurer and selected by the fund. The election shall be effected by a notice to the liquidator and to any affected reinsurer. The fund may not exercise an election under this paragraph with respect to a reinsurance agreement that the liquidator has expressly disaffirmed.

(c) With respect to each indemnity reinsurance agreement for which the fund makes an election under par. (b):

1. The fund shall be responsible for all unpaid premiums under the agreement, for periods both before and after the coverage date, and for the performance of all other obligations to be performed under the agreement after the coverage date, that relate in each case to contracts covered, in whole or in part, by the fund. The fund may charge contracts covered in part by the fund, through reasonable allocation methods, for the costs of reinsurance in excess of the obligations of the fund.

2. The fund is entitled to any amounts payable by the reinsurer under the agreement with respect to losses or events that occur in periods after the coverage date and that relate to contracts or contractual obligations covered, in whole or in part, by the fund. Upon receipt of any such amounts, the fund must pay to the beneficiary under the policy or contract on account of which the amounts were paid, the amount by which the benefits paid by the fund on account of the policy or contract less the retention of the insolvent insurer applicable to the loss or event is exceeded by the amount received by the fund.

3. Within 30 days after the election, the fund and the indemnity reinsurer must calculate the net balance due to or from the fund under the agreement as of the date of the election, giving full credit to all items paid by the insolvent insurer, the insurer's liquidator, and the indemnity reinsurer between the coverage date and the date of the election. The fund or the indemnity reinsurer shall pay the net balance due to the other within 5 days after the calculation is completed. The liquidator shall remit to the fund as promptly as practicable any amounts received by the liquidator that are due the fund under subd. 2.

4. If, within 60 days of the election, the fund pays all premiums due for periods both before and after the coverage date that relate to contracts covered, in whole or in part, by the fund, the reinsurer may not terminate the agreement insofar as it relates to contracts covered, in whole or in part, by the fund and may not set off against amounts due the fund any unpaid premium due for periods before the coverage date.

(d) If the fund transfers its obligations to another insurer and the fund and other insurer agree, unless the the fund has previously expressly determined in writing that it will not exercise an election under par. (b), the other insurer succeeds to the rights and obligations of the fund under pars. (b) and (c), regardless of whether the fund has exercised an election under par. (b). If the other insurer succeeds to the fund's rights and obligations under pars. (b) and (c):

1. The indemnity reinsurance agreements automatically terminate for new reinsurance, unless the indemnity reinsurer and the other insurer agree to the contrary.

2. On and after the date on which an indemnity reinsurance agreement is transferred to the other insurer, the fund is no longer obligated to pay beneficiaries the amounts specified in par. (c) 2. with respect to that agreement.

(e) This subsection supersedes s. 645.58 (1), any applicable rules of the commissioner, and the provisions of any affected reinsurance agreement that provide for or require payment of reinsurance proceeds to the liquidator of the insolvent insurer on account of losses or events that occur after the coverage date. The liquidator remains entitled to any amounts payable by the reinsurer under the reinsurance agreement with respect to losses or events that occur before the coverage date, subject to any applicable setoff provisions.

(f) Nothing in this subsection, except as expressly provided in this subsection:

1. Alters or modifies the terms or conditions of the indemnity reinsurance agreements of the insolvent insurer.

2. Abrogates or limits any rights of any reinsurer to rescind a reinsurance agreement.

3. Gives a policy owner or beneficiary an independent cause of action against an indemnity reinsurer that is not otherwise set forth in the indemnity reinsurance agreement.

261,139 Section 139. 646.35 (9) of the statutes is created to read:

646.35 (9) Coverage obligations. Notwithstanding sub. (3), in performing its obligations to provide coverage under this section, the fund is not required to guarantee, assume, reinsure, or perform, or cause to be guaranteed, assumed, reinsured, or performed, the contractual obligations of an insolvent insurer under a covered policy or contract that do not materially affect the economic values or economic benefits of the covered policy or contract.

261,140 Section 140. 646.35 (10) of the statutes is created to read:

646.35 (10) Board determinations. The board shall have discretion to determine the means by which the fund may economically and efficiently provide benefits under this section. If the board has arranged or offered to provide benefits to a person under a plan or arrangement that fulfills the fund's obligations under this section, the person is not entitled to any benefits from the fund in addition to or other than those provided under the plan or arrangement.

261,141 Section 141. 646.51 (1) of the statutes is renumbered 646.51 (1m) and amended to read:

646.51 (1m) Duty to assess. As soon as practicable after a liquidation order has been issued, the board shall estimate separately for each of the accounts of s. 646.11 (2), the amounts necessary to make the payments provided by this chapter and shall order authorize assessments separately for each account.

261,142 Section 142. 646.51 (1c) of the statutes is created to read:

646.51 (1c) Definitions. In this section:

(a) "Authorize" means, with respect to assessments, to approve, by the adoption of a resolution by the board, that an assessment from insurers in a specified amount be called immediately or in the future. An assessment is authorized when the resolution is adopted by the board.

(b) "Call" means, with respect to assessments, to require payment, by the mailing of a notice to insurers by the fund, of an authorized assessment within the time set forth in the notice. An assessment is called when notice is mailed to insurers by the fund.

261,143 Section 143. 646.51 (2) of the statutes is repealed.

261,144 Section 144. 646.51 (3) (a) (title) of the statutes is renumbered 646.51 (3) (am) (title).

261,145 Section 145. 646.51 (3) (a) 1. of the statutes is renumbered 646.51 (1c) (c) and amended to read:

646.51 (1c) (c) In this section, "premiums" "Premiums" means gross premiums and other considerations received for direct insurance and annuities, including considerations for a plan established under ss. 185.981 to 185.985, less return premiums and other considerations, dividends, and experience credits paid or credited to policyholders on the direct such business. The term "premiums" does not include any amounts received for any contracts or for the portions of any contracts for which coverage is excluded under s. 646.01 (1) (b) premiums or other considerations received for policies or contracts, or for portions of policies or contracts, for which coverage is not provided under this chapter, except that the amount of assessable premiums or other considerations shall not be reduced on account of limitations with respect to a single risk, loss, or life under s. 646.31 (4) or on account of interest limitations under s. 646.35 (6) (c).

261,146 Section 146. 646.51 (3) (a) 2. of the statutes is renumbered 646.51 (3) (am) (intro.) and amended to read:

646.51 (3) (am) (intro.) Except as provided in pars. (b) and par. (c), assessments shall be calculated as follows:

1. For assessments authorized by the board before the effective date of this subdivision .... [revisor inserts date], as a percentage of premiums premium written in this state by each insurer in the classes protected by the account, accounts for the year preceding the year of entry of the order of liquidation.

261,147 Section 147. 646.51 (3) (am) 2. of the statutes is created to read:

646.51 (3) (am) 2. For assessments authorized by the board on or after the effective date of this subdivision .... [revisor inserts date], as a percentage of premium written in this state by each insurer in the classes protected by the accounts for the year preceding the year in which the assessment is authorized by the board.

261,148 Section 148. 646.51 (3) (b) of the statutes is repealed.

261,149 Section 149. 646.51 (3) (c) of the statutes is amended to read:

646.51 (3) (c) Administrative assessments. The board may make authorize assessments on a prorated or nonprorated basis to meet administrative costs and other expenses whether or not related to the liquidation or rehabilitation of a particular insurer. Nonprorated assessments may not exceed $200 per insurer in any year.

261,150 Section 150. 646.51 (4) of the statutes is renumbered 646.51 (4) (c) and amended to read:

646.51 (4) (c) The maximum assessment under this section in any calendar year is 2% of the assessable premiums under sub. (3). If the maximum assessment does not enable the fund to meet its obligations, an additional assessment shall be made in each succeeding year until the amounts available enable the fund to meet its obligations. No Assessments to meet the obligations of the fund with respect to an insurer in liquidation may not be authorized or called unless the board makes a finding that it is necessary for implementing the purposes of this chapter. Recognizing that exact determinations may not always be possible, the board shall endeavor to classify and calculate assessments with a reasonable degree of accuracy. No authorized assessment may be levied called if the assets held in the appropriate account of the fund are sufficient to cover all estimated payments for liquidations in progress.