SB320, s. 9 11Section 9. 609.98 (1) of the statutes is amended to read:
SB320,7,1312 609.98 (1) Definition. In this section, "premiums" has the meaning given
13under s. 646.51 (3) (a) 1 (1c) (c).
SB320, s. 10 14Section 10. 609.98 (4) (a) of the statutes is amended to read:
SB320,7,1515 609.98 (4) (a) To pay an assessment under s. 646.51 (3) (a) or (b) (am).
SB320, s. 11 16Section 11. 609.98 (4) (b) of the statutes is amended to read:
SB320,7,2017 609.98 (4) (b) To the extent that the amount on deposit exceeds 1% of premiums
18written in this state by the health maintenance organization insurer in the preceding
19calendar year and the deposit is not necessary to pay an assessment under s. 646.51
20(3) (a) or (b) (am).
SB320, s. 12 21Section 12. 611.26 (4) of the statutes is renumbered 611.26 (4) (intro.) and
22amended to read:
SB320,8,623 611.26 (4) Other subsidiaries. (intro.) An insurance corporation may form or
24acquire other subsidiaries than those under subs. (1) to (3). The investment in such
25subsidiaries may be counted toward satisfaction of the compulsory surplus

1requirement of s. 623.11 and the security surplus standard of s. 623.12 to the extent
2that the investment is a part of the leeway investments of s. 620.22 (9) for the first
3$200,000,000 of assets or to the extent that the investment is within the limitations
4under s. 620.23 (2) (a) and (b) for other assets. The commissioner may limit
5investment in subsidiaries under this subsection by rule or order. Unless approved
6by the commissioner, an insurance corporation may not do any of the following:
SB320, s. 13 7Section 13. 611.26 (4) (a) of the statutes is created to read:
SB320,8,98 611.26 (4) (a) Invest in a subsidiary more than 10 percent of its assets or 50
9percent of its capital and surplus, whichever is less.
SB320, s. 14 10Section 14. 611.26 (4) (b) of the statutes is created to read:
SB320,8,1311 611.26 (4) (b) Invest in a subsidiary to the extent that the insurer's capital and
12surplus with regard to policyholders will not be reasonable in relation to the insurer's
13outstanding liabilities or adequate to meet the insurer's financial needs.
SB320, s. 15 14Section 15. 611.56 (1) of the statutes is amended to read:
SB320,8,2315 611.56 (1) Appointment. If the articles or bylaws of a corporation so provide,
16the board by resolution adopted by a majority of the full board may designate one or
17more committees, each consisting of at least 3 or more directors serving at the
18pleasure of the board. The board may designate one or more directors as alternate
19members of any committee to substitute for any absent member at any meeting of
20the committee. Any committee under this section may include one or more nonvoting
21members who are not directors.
The designation of a committee and delegation of
22authority to it shall not relieve the board or any director of any responsibility
23imposed by law.
SB320, s. 16 24Section 16. 611.56 (2) of the statutes is amended to read:
SB320,9,7
1611.56 (2) Delegation; major committees. When the board is not in session,
2a committee satisfying all of the requirements for the composition of a board under
3s. 611.51 (2) to (4) may exercise any of the powers of the board in the management
4of the business and affairs of the corporation, including action under ss. 611.60 and
5611.61, to the extent authorized in the resolution or in the articles or bylaws; except
6that any such committee may be composed of include 7 or more directors if the
7corporation has 9 or more directors.
SB320, s. 17 8Section 17. 612.13 (1m) of the statutes is created to read:
SB320,9,109 612.13 (1m) Inside directors. (a) Beginning 2 years after the effective date
10of this paragraph .... [revisor inserts date], all of the following apply:
SB320,9,1211 1. If a town mutual has fewer than 9 directors, no more than one director may
12be an employee or representative of the town mutual.
SB320,9,1413 2. Employees and representatives of a town mutual may not constitute a
14majority of its board.
SB320,9,1715 (b) Notwithstanding par. (a), the commissioner may allow a town mutual an
16extension of up to one year to come into compliance with the requirements under par.
17(a).
SB320, s. 18 18Section 18. 612.22 (title) of the statutes is amended to read:
SB320,9,20 19612.22 (title) Merger of town mutuals into and mutual insurance
20corporations.
SB320, s. 19 21Section 19. 612.22 (1) of the statutes is amended to read:
SB320,9,2422 612.22 (1) Conditions for merger. One or more town mutuals may merge with
23a single domestic mutual under ch. 611. The If the domestic mutual is nonassessable,
24the
surviving corporation shall be a mutual under ch. 611. If the domestic mutual

1is assessable, the surviving corporation may be either a mutual under ch. 611 or a
2town mutual under this chapter.
SB320, s. 20 3Section 20. 612.22 (3) of the statutes is renumbered 612.22 (3) (a) and
4amended to read:
SB320,10,135 612.22 (3) (a) Each of the participating corporations shall file with the
6commissioner for approval a copy of the resolution and any explanatory material
7proposed to be issued to the members, together with so much of the information
8under s. 611.13 (2) or 612.02 (4), whichever is appropriate, for the surviving or new
9corporation as the commissioner reasonably requires. The commissioner shall
10approve the plan unless he or she finds, after a hearing, that it would be contrary to
11the law, or that the surviving or new corporation would not satisfy the requirements
12for a certificate of authority under s. 611.20 or 612.02 (6), whichever is appropriate,
13or that the plan would be contrary to the interest of insureds or of the public.
SB320, s. 21 14Section 21. 612.22 (3) (b) of the statutes is created to read:
SB320,10,1815 612.22 (3) (b) If the surviving corporation will be a town mutual, the plan filed
16with the commissioner under par. (a) shall include a time schedule for bringing the
17surviving corporation into compliance with this chapter. The commissioner may
18approve a reasonable time schedule that does not exceed 3 years.
SB320, s. 22 19Section 22. 612.22 (4) of the statutes is amended to read:
SB320,10,2320 612.22 (4) Approval by members of the town mutuals. After being approved
21by the commissioner under sub. (3), the plan shall be submitted to the members of
22the participating town mutuals for their approval. The members of each town
23participating mutual shall vote separately.
SB320, s. 23 24Section 23. 612.22 (6) of the statutes is amended to read:
SB320,11,5
1612.22 (6) Reports to commissioner. Each participating town mutual shall file
2with the commissioner a copy of the resolution adopted under sub. (4), stating the
3number of members entitled to vote, the number of members voting, and the number
4of votes cast in favor of the plan, stating separately in each case the mail votes and
5the votes cast in person.
SB320, s. 24 6Section 24. 617.225 (1) of the statutes is amended to read:
SB320,11,117 617.225 (1) Except as provided under sub. (5), a A domestic insurer may not
8pay an extraordinary dividend to its shareholders and an affiliate of the insurer may
9not accept an extraordinary dividend unless the insurer reports the extraordinary
10dividend to the commissioner at least 30 days before payment and the commissioner
11does not disapprove the extraordinary dividend within that period.
SB320, s. 25 12Section 25. 617.225 (5) of the statutes is repealed.
SB320, s. 26 13Section 26. 628.347 of the statutes is created to read:
SB320,11,15 14628.347 Suitability of annuity sales to senior consumers. (1)
15Definitions. In this section:
SB320,11,1716 (a) "Annuity" means a fixed or variable annuity that is individually solicited,
17whether the product is classified as individual or group.
SB320,11,2018 (b) "Recommendation" means advice provided by an insurance intermediary,
19or an insurer if no intermediary is involved, to an individual senior consumer that
20results in the purchase or exchange of an annuity in accordance with that advice.
SB320,11,2521 (c) "Senior consumer" means a person who is 65 years of age or older. The term
22includes any joint owner of an annuity who is less than 65 years of age if at least one
23joint owner is 65 years of age or older, and any prospective joint purchaser of an
24annuity who is less than 65 years of age if at least one prospective joint purchaser
25is 65 years of age or older.
SB320,12,8
1(2) Duties of insurers and insurance intermediaries with regard to
2recommendations.
(a) Except as provided in par. (c), an insurance intermediary, or
3insurer if no intermediary is involved, may not recommend to a senior consumer the
4purchase or exchange of an annuity if the recommendation results in an insurance
5transaction or series of insurance transactions unless the intermediary or insurer
6has reasonable grounds to believe that the recommendation is suitable for the senior
7consumer on the basis of facts disclosed by the senior consumer as to his or her
8investments, other insurance products, and financial situation and needs.
SB320,12,119 (b) Before making a recommendation described in par. (a), an insurance
10intermediary, or insurer if no intermediary is involved, shall make reasonable efforts
11to obtain information concerning all of the following:
SB320,12,1212 1. The senior consumer's financial status.
SB320,12,1313 2. The senior consumer's tax status.
SB320,12,1414 3. The senior consumer's investment objectives.
SB320,12,1615 4. Any other information that is reasonably appropriate for determining the
16suitability of a recommendation to the senior consumer.
SB320,12,1917 (c) An insurance intermediary, or insurer if no intermediary is involved, has no
18obligation under par. (a) to a senior consumer related to a recommendation if the
19senior consumer does any of the following:
SB320,12,2120 1. Refuses to provide relevant information requested by the insurer or
21insurance intermediary.
SB320,12,2222 2. Fails to provide complete or accurate information.
SB320,12,2423 3. Decides to enter into an insurance transaction that is not based on a
24recommendation of the insurer or insurance intermediary.
SB320,13,4
1(d) Any recommendation of an insurer or insurance intermediary that, under
2par. (c), is not subject to the obligation under par. (a) shall be reasonable under all
3circumstances actually known to the insurer or insurance intermediary at the time
4the recommendation is made.
SB320,13,9 5(3) Insurer's supervisory responsibility. (a) An insurer either shall ensure
6that a system to supervise recommendations that is reasonably designed to achieve
7compliance with this section is established and maintained by complying with pars.
8(c) to (e), or shall establish and maintain such a system, which shall include at least
9all of the following:
SB320,13,1010 1. Maintaining written procedures.
SB320,13,1211 2. Conducting periodic reviews of its records that are reasonably designed to
12assist in detecting and preventing violations of this section.
SB320,13,1713 (b) A general agent or independent agency either shall adopt a system
14established by an insurer to supervise recommendations of its insurance
15intermediaries that is reasonably designed to achieve compliance with this section,
16or shall establish and maintain such a system, which shall include at least all of the
17following:
SB320,13,1818 1. Maintaining written procedures.
SB320,13,2019 2. Conducting periodic reviews of records that are reasonably designed to assist
20in detecting and preventing violations of this section.
SB320,13,2421 (c) An insurer may contract with a 3rd party, which may be a general agent or
22independent agency, to establish and maintain a system of supervision as required
23under par. (a) with respect to insurance intermediaries under contract with or
24employed by the 3rd party.
SB320,14,5
1(d) An insurer shall make reasonable inquiry to ensure that any 3rd party with
2which the insurer contracts under par. (c) is performing the functions required under
3par. (a) and shall take such action as is reasonable under the circumstances to enforce
4the contractual obligation to perform the functions. An insurer may comply with its
5obligation to make reasonable inquiry in all of the following ways:
SB320,14,96 1. The insurer annually obtains from a senior manager of the 3rd party who
7has responsibility for the delegated functions a representation that the 3rd party is
8performing the required functions and that the senior manager has a reasonable
9basis for making the representation.
SB320,14,1310 2. The insurer, based on reasonable selection criteria, periodically selects 3rd
11parties contracting under par. (c) for reviews to determine whether the 3rd parties
12are performing the required functions. The insurer shall perform those procedures
13to conduct the reviews that are reasonable under the circumstances.
SB320,14,1714 (e) An insurer that contracts with a 3rd party under par. (c) and that complies
15with the supervisory requirement under par. (d) satisfies its responsibilities under
16par. (a) as to insurance intermediaries under contract with or employed by the 3rd
17party.
SB320,14,1918 (f) An insurer is not required under par. (a), and a general agent or independent
19agency is not required under par. (b), to do any of the following:
SB320,14,2120 1. Review, or provide for the review of, all insurance intermediary solicited
21transactions.
SB320,14,2422 2. Include in its system of supervision an insurance intermediary's
23recommendations made to senior consumers of products other than annuities offered
24by the insurer, general agent, or independent agency.
SB320,15,4
1(g) A general agent or independent agency contracting with an insurer under
2par. (c) shall promptly, upon request by the insurer under par. (d), provide a
3representation as described in par. (d) 1. or give a clear statement that it is unable
4to meet the representation criteria.
SB320,15,65 (h) No person may provide a representation under par. (d) 1. unless the person
6satisfies all of the following:
SB320,15,87 1. The person is a senior manager with responsibility for the delegated
8functions.
SB320,15,99 2. The person has a reasonable basis for making the representation.
SB320,15,14 10(4) National Association of Securities Dealers Conduct Rules. Compliance
11with the National Association of Securities Dealers Conduct Rules pertaining to
12suitability satisfies the requirements under sub. (2) for the recommendation of
13variable annuities. Nothing in this subsection, however, limits the commissioner's
14ability to enforce this section.
SB320,15,15 15(5) Remedial measures. The commissioner may do any of the following:
SB320,15,1816 (a) Order an insurer to take reasonably appropriate corrective action for any
17senior consumer harmed by a violation of this section by the insurer or the insurer's
18insurance intermediary.
SB320,15,2119 (b) Order an insurance intermediary to take reasonably appropriate corrective
20action for any senior consumer harmed by a violation of this section by the insurance
21intermediary.
SB320,15,2522 (c) Order a general agent or independent agency that employs or contracts with
23an insurance intermediary to sell, or solicit the sale of, annuities to senior consumers
24to take reasonably appropriate corrective action for any senior consumer harmed by
25a violation of this section by the insurance intermediary.
SB320,16,3
1(6) Penalties; mitigation. (a) Any person who violates this section is subject
2to the penalties provided under s. 601.64, suspension or revocation of a license or
3certificate of authority, and an order under s. 601.41 (4).
SB320,16,74 (b) A penalty under par. (a) for a violation of sub. (2) (a), (b), or (d), including
5a forfeiture, may be reduced or eliminated to the extent provided by rule of the
6commissioner if corrective action is taken for the senior consumer promptly after the
7violation is discovered.
SB320,16,108 (c) The commissioner may promulgate rules related to the reduction or
9elimination of penalties for violations of this section on the basis of prompt action
10taken to correct any harm caused to senior consumers by the violations.
SB320,16,18 11(7) Record keeping. An insurer and an insurance intermediary, including a
12general agent and an independent agency, shall maintain, or be able to make
13available to the commissioner, records of the information collected from a senior
14consumer and other information used in making a recommendation that was the
15basis for an insurance transaction for 6 years after the insurance transaction is
16completed by the insurer, except as otherwise permitted by the commissioner by rule.
17An insurer may, but is not required to, maintain records on behalf of an insurance
18intermediary, including a general agent and an independent agency.
SB320,16,19 19(8) Exemptions. This section does not apply to any of the following:
SB320,16,2120 (a) Direct response solicitations in which no recommendation is made based on
21information collected from the senior consumer.
SB320,16,2222 (b) Recommendations related to contracts used to fund any of the following:
SB320,16,2423 1. An employee pension or welfare benefit plan that is covered by the federal
24Employee Retirement and Income Security Act.
SB320,17,2
12. A plan described in section 401 (a) or (k), 403 (b), or 408 (k) or (p) of the
2Internal Revenue Code, if the plan is established or maintained by an employer.
SB320,17,633. A government or church plan as defined in section 414 of the Internal
4Revenue Code, a government or church welfare benefit plan, or a deferred
5compensation plan of a state or local government or tax exempt organization under
6section 457 of the Internal Revenue Code.
SB320,17,87 4. A nonqualified deferred compensation arrangement established or
8maintained by an employer or plan sponsor.
SB320,17,109 5. A settlement or assumption of liability associated with personal injury
10litigation or any dispute or claim resolution process.
SB320,17,1111 6. A formal prepaid funeral or burial contract.
SB320, s. 27 12Section 27. 632.435 (1) (intro.) of the statutes is amended to read:
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