(d) An insurer shall make reasonable inquiry to ensure that any 3rd party with which the insurer contracts under par. (c) is performing the functions required under par. (a) and shall take such action as is reasonable under the circumstances to enforce the contractual obligation to perform the functions. An insurer may comply with its obligation to make reasonable inquiry in all of the following ways:
1. The insurer annually obtains from a senior manager of the 3rd party who has responsibility for the delegated functions a representation that the 3rd party is performing the required functions and that the senior manager has a reasonable basis for making the representation.
2. The insurer, based on reasonable selection criteria, periodically selects 3rd parties contracting under par. (c) for reviews to determine whether the 3rd parties are performing the required functions. The insurer shall perform those procedures to conduct the reviews that are reasonable under the circumstances.
(e) An insurer that contracts with a 3rd party under par. (c) and that complies with the supervisory requirement under par. (d) satisfies its responsibilities under par. (a) as to insurance intermediaries under contract with or employed by the 3rd party.
(f) An insurer is not required under par. (a), and a general agent or independent agency is not required under par. (b), to do any of the following:
1. Review, or provide for the review of, all insurance intermediary solicited transactions.
2. Include in its system of supervision an insurance intermediary's recommendations made to senior consumers of products other than annuities offered by the insurer, general agent, or independent agency.
(g) A general agent or independent agency contracting with an insurer under par. (c) shall promptly, upon request by the insurer under par. (d), provide a representation as described in par. (d) 1. or give a clear statement that it is unable to meet the representation criteria.
(h) No person may provide a representation under par. (d) 1. unless the person satisfies all of the following:
1. The person is a senior manager with responsibility for the delegated functions.
2. The person has a reasonable basis for making the representation.
(4) National Association of Securities Dealers Conduct Rules. Compliance with the National Association of Securities Dealers Conduct Rules pertaining to suitability satisfies the requirements under sub. (2) for the recommendation of variable annuities. Nothing in this subsection, however, limits the commissioner's ability to enforce this section.
(5) Remedial measures. The commissioner may do any of the following:
(a) Order an insurer to take reasonably appropriate corrective action for any senior consumer harmed by a violation of this section by the insurer or the insurer's insurance intermediary.
(b) Order an insurance intermediary to take reasonably appropriate corrective action for any senior consumer harmed by a violation of this section by the insurance intermediary.
(c) Order a general agent or independent agency that employs or contracts with an insurance intermediary to sell, or solicit the sale of, annuities to senior consumers to take reasonably appropriate corrective action for any senior consumer harmed by a violation of this section by the insurance intermediary.
(6) Penalties; mitigation. (a) Any person who violates this section is subject to the penalties provided under s. 601.64, suspension or revocation of a license or certificate of authority, and an order under s. 601.41 (4).
(b) A penalty under par. (a) for a violation of sub. (2) (a), (b), or (d), including a forfeiture, may be reduced or eliminated to the extent provided by rule of the commissioner if corrective action is taken for the senior consumer promptly after the violation is discovered.
(c) The commissioner may promulgate rules related to the reduction or elimination of penalties for violations of this section on the basis of prompt action taken to correct any harm caused to senior consumers by the violations.
(7) Record keeping. An insurer and an insurance intermediary, including a general agent and an independent agency, shall maintain, or be able to make available to the commissioner, records of the information collected from a senior consumer and other information used in making a recommendation that was the basis for an insurance transaction for 6 years after the insurance transaction is completed by the insurer, except as otherwise permitted by the commissioner by rule. An insurer may, but is not required to, maintain records on behalf of an insurance intermediary, including a general agent and an independent agency.
(8) Exemptions. This section does not apply to any of the following:
(a) Direct response solicitations in which no recommendation is made based on information collected from the senior consumer.
(b) Recommendations related to contracts used to fund any of the following:
1. An employee pension or welfare benefit plan that is covered by the federal Employee Retirement and Income Security Act.
2. A plan described in section
401 (a) or (k),
403 (b), or
408 (k) or (p) of the Internal Revenue Code, if the plan is established or maintained by an employer.
3. A government or church plan as defined in section
414 of the Internal Revenue Code, a government or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax exempt organization under section
457 of the Internal Revenue Code.
4. A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor.
5. A settlement or assumption of liability associated with personal injury litigation or any dispute or claim resolution process.
6. A formal prepaid funeral or burial contract.
261,27
Section
27. 632.435 (1) (intro.) of the statutes is amended to read:
632.435 (1) (intro.) In the case of contracts issued on or after the operative date of this section as defined in sub. (12), no No contract of annuity shall be delivered or issued for delivery in this state unless it contains in substance the following provisions or corresponding provisions which in the opinion of the commissioner are at least as favorable to the contract holder:
261,28
Section
28. 632.435 (1) (a) of the statutes is amended to read:
632.435 (1) (a) Upon cessation of payment of considerations under a contract, or upon the written request of the contract owner, the company will shall grant a paid-up annuity on a plan stipulated in the contract of such value as is specified in subs. (5) to (8) and (10).
261,29
Section
29. 632.435 (1) (b) of the statutes is amended to read:
632.435 (1) (b) If a contract provides for a lump sum settlement at maturity or at any other time, upon surrender of the contract at or prior to the commencement of any annuity payments, the company will shall pay in lieu of any paid-up annuity benefit a cash surrender benefit of such amount as is specified in subs. (5), (6), (8), and (10). The company shall may reserve the right to defer the payment of such cash surrender benefit, for a period
of not exceeding 6 months after demand therefor with surrender of the contract, if the company receives written approval from the commissioner upon the company's written request, which shall address the deferral's necessity and equitability to all policyholders.
261,30
Section
30. 632.435 (4) of the statutes is repealed and recreated to read:
632.435 (4) (a) In this subsection, "net considerations" means, for a given contract year, an amount equal to 87.5 percent of the gross considerations credited to the contract during that contract year.
(b) The minimum nonforfeiture amount at or prior to the commencement of any annuity payments shall be equal to an accumulation up to such time, at one or more rates of interest as indicated in pars. (c) to (e), of the net considerations paid prior to such time, decreased by the sum of all of the following:
1. Any prior withdrawals from or partial surrenders of the contract accumulated at one or more rates of interest as indicated in pars. (c) to (e).
2. An annual contract charge of $50, accumulated at one or more rates of interest as indicated in pars. (c) to (e).
3. Any premium tax paid by the company for the contract, accumulated at one or more rates of interest as indicated in pars. (c) to (e).
4. The amount of any indebtedness to the company on the contract, including interest due and accrued.
(c) The interest rate used to determine minimum nonforfeiture amounts shall be an annual rate of interest that is the lower of 3 percent and the higher of either of the following:
1. The 5-year constant maturity treasury rate reported by the federal reserve board as of a date, or average over a period, specified in the contract no longer than 15 months prior to the contract issue date or redetermination date under par. (d), less 125 basis points or, if the contract provides substantive participation in an equity indexed benefit during the period or term, the contract may increase the reduction by up to an additional 100 basis points to reflect the value of the equity index benefit, and rounded to the nearest one-twentieth of 1 percent.
2. One percent.
(d) The interest rate determined under par. (c) shall apply for an initial period and may be redetermined for additional periods. The redetermination date, basis, and period, if any, shall be stated in the contract. The basis is the date or average over a specified period that produces the value of the 5-year constant maturity treasury rate to be used at each redetermination date. The method for determining the interest rate under par. (c) shall be specified in the contract if the interest rate will be reset.
(e) The present value at the contract issue date, and at each redetermination date, of the additional reduction under par. (c) 1. for substantive participation in an equity index benefit may not exceed the market value of the benefit. The commissioner may require a demonstration that the present value of the additional reduction does not exceed the market value of the benefit. The commissioner may disallow or limit the additional reduction if the commissioner determines that the demonstration is unacceptable.
(f) The commissioner may promulgate rules for the implementation of par. (e) and to provide for further adjustments to the calculation of minimum nonforfeiture amounts for contracts that provide substantive participation in an equity index benefit and for other contracts for which the commissioner determines adjustments are justified.
261,31
Section
31. 632.435 (5) of the statutes is amended to read:
632.435 (5) Any paid-up annuity benefit available under a contract shall be such that its present value on the date annuity payments are to commence is at least equal to the minimum nonforfeiture amount on that date. Such present value shall be computed using the mortality table, if any, and the interest rate or rates specified in the contract for determining the minimum paid-up annuity benefits guaranteed in the contract.
261,32
Section
32. 632.435 (12) of the statutes is repealed.
645.58 (1) Liability. (intro.) Except as provided in this subsection and in s. 646.35 (8) (e), the amount recoverable by the liquidator from a reinsurer shall not be reduced as a result of delinquency proceedings, regardless of any provision in the reinsurance contract or other agreement. Payment made directly to an insured or other creditor shall not diminish the reinsurer's obligation to the insurer's estate except when any of the following applies:
261,35
Section
35. 646.01 (1) (a) 2. k. of the statutes is created to read:
646.01 (1) (a) 2. k. Risk-sharing plans under chs. 149 and 619.
261,36
Section
36. 646.01 (1) (a) 2. L. of the statutes is created to read:
646.01 (1) (a) 2. L. The patients compensation fund under s. 655.27.
261,37
Section
37. 646.01 (1) (b) 1. of the statutes is repealed and recreated to read:
646.01 (1) (b) 1. Any portion of a life insurance policy or annuity contract that is not guaranteed by the insurer or under which the risk is borne by the policy or policyholder.
261,38
Section
38. 646.01 (1) (b) 9. (intro.) of the statutes is renumbered 646.01 (1) (b) 9. and amended to read:
646.01 (1) (b) 9. Any self-funded, self-insured, or partially or wholly uninsured plan of an employer or other person to provide life insurance, annuity, or disability benefits to its employees or members to the extent that the plan is self-funded, self-insured, or uninsured
, including benefits payable by an employer or other person under any of the following:.
261,39
Section
39. 646.01 (1) (b) 9. a. of the statutes is repealed.
261,40
Section
40. 646.01 (1) (b) 9. b. of the statutes is repealed.
261,41
Section
41. 646.01 (1) (b) 9. c. of the statutes is repealed.
261,42
Section
42. 646.01 (1) (b) 9. d. of the statutes is repealed.
261,43
Section
43. 646.01 (1) (b) 11. of the statutes is repealed and recreated to read:
646.01 (1) (b) 11. Any warranty or service contract.
261,44
Section
44. 646.01 (1) (b) 11m. of the statutes is created to read:
646.01 (1) (b) 11m. Any contractual liability policy that is issued to a warrantor, warranty plan, warranty plan administrator, or service contract provider and that provides coverage of any liability or performance arising out of or in connection with a warranty or service contract.
261,45
Section
45. 646.01 (1) (b) 15. of the statutes is created to read:
646.01 (1) (b) 15. An unallocated annuity contract.
261,46
Section
46. 646.01 (1) (b) 16. of the statutes is created to read:
646.01 (1) (b) 16. A contractual agreement that obligates an insurer to provide a book value accounting guarantee for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, neither of which is an affiliate of the insurer.
261,47
Section
47. 646.01 (1) (b) 17. of the statutes is created to read:
646.01 (1) (b) 17. Any liability under a policy or contract to the extent that it provides for interest or other changes in value that are to be determined by the use of an index or other external reference stated in the policy or contract and to the extent that the interest or other changes in value have not been credited to the policy or contract as of the date of the entry of the order of liquidation and are subject to forfeiture. If a policy's or contract's interest or other changes in value are credited less frequently than annually, for purposes of determining the values that have been credited and that are not subject to forfeiture, the interest or change in value determined by using the procedures specified in the policy or contract will be credited as if the contractual date of crediting interest or other changes in value was the date of entry of the order of liquidation and will not be subject to forfeiture.
261,48
Section
48. 646.01 (1) (b) 18. of the statutes is created to read:
646.01
(1) (b) 18. The deductible, self-funded, or self-insured portion of a claim under a liability or worker's compensation insurance policy, regardless of the timing or method provided in the policy, endorsement, or any other agreement for payment of the deductible, self-funded, or self-insured amount by the insured. This subdivision does not apply to a worker's compensation insurance policy if the insured under the policy is a debtor under
11 USC 701, et seq., as of the deadline set by the liquidator for filing claims against the insolvent insurer.
261,49
Section
49. 646.03 (1m) of the statutes is created to read:
646.03 (1m) "Direct insurance" does not include a policy or contract of reinsurance, except for the following:
(a) Reinsurance for which the reinsurer has issued assumption certificates under the reinsurance policy or contract.
(b) Reinsurance ceded by an assessable town mutual company.
261,50
Section
50. 646.03 (2n) of the statutes is created to read:
646.03 (2n) "Impaired insurer" means an insurer subject to this chapter that is placed under an order of rehabilitation or conservation by a court of competent jurisdiction.
261,51
Section
51. 646.03 (2p) of the statutes is created to read:
646.03 (2p) "Insolvent insurer" means an insurer subject to this chapter that is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.
261,52
Section
52. 646.03 (4) of the statutes is created to read:
646.03 (4) With respect to a life or disability insurance policy or an annuity contract, "owner" or "policyholder" means the person who is identified as the legal owner under the terms of the policy or contract or who is otherwise vested with legal title to the policy or contract through a valid assignment completed in accordance with the terms of the policy or contract and properly recorded as the owner on the books of the insurer. "Owner" or "policyholder" does not include a person with only a beneficial interest in a policy or contract.
261,53
Section
53. 646.03 (5) of the statutes is created to read:
