AB420: Bill Text

AB420,33,10 (b) "Business day" means any day other than a Saturday, a Sunday, or a day on which the New York Stock Exchange, or the Federal Reserve Bank of New York is closed.

AB420,33,11 (c) "Commodity contract" means any of the following:

AB420,33,15 1. A contract for the purchase or sale of a commodity for future delivery on, or subject to the rules of, a board of trade or contract market under the federal Commodity Exchange Act, 7 USC 1, et seq., or a board of trade outside the United States.

AB420,33,18 2. An agreement that is subject to regulation under the federal Commodity Exchange Act, 7 USC 23, and that is commonly known to the commodities trade as a margin account, margin contract, leverage account, or leverage contract.

AB420,33,21 3. An agreement or transaction that is subject to regulation under the federal Commodity Exchange Act, 7 USC 6c, and that is commonly known to the commodities trade as a commodity option.

AB420,33,22 4. Any combination of agreements or transactions specified in subds. 1. to 3.

AB420,33,24 5. Any option to enter into an agreement or transaction specified in subds. 1. to 3.

AB420,34,11 (d) "Contractual right" includes any right established in a rule or bylaw, or in a resolution, of the governing board of a derivatives clearing organization or board of trade as defined in the federal Commodity Exchange Act, 7 USC 1, et seq.; a multilateral clearing organization, as defined in the federal Deposit Insurance Corporation Improvement Act of 1991, 12 USC 4402; a national securities exchange, a national securities association, a securities clearing agency, or a control market designated under the federal Commodity Exchange Act, 7 USC 1, et seq.; or a derivatives transaction execution facility registered under the federal Commodity Exchange Act, 7 USC 1, et seq., or any right, regardless whether it is in writing, arising under statutory or common law, or under the uniform commercial code, or by reason of normal business practice.

AB420,34,13 (e) "Counterparty" means a person who enters into a qualified financial contract with an insurer.

AB420,34,16 (f) "Credit insurance" means insurance against loss arising from failure of debtors to meet financial obligations to creditors, except mortgage guaranty insurance.

AB420,34,20 (g) "Credit life insurance" means insurance on the lives of borrowers or purchasers of goods in connection with specific loans or credit transactions when all or a portion of the insurance is payable to the creditor to reduce or extinguish the debt.

AB420,34,22 (h) "Disability insurance" means insurance covering injury or death of persons caused by accident or insurance covering the health of persons.

AB420,35,3 (i) "Financial guaranty insurance" means a surety bond, insurance policy, indemnity contract, or any similar guarantee issued by an insurer under which a loss is payable upon proof of occurrence of financial loss to an insured claimant. "Financial guaranty insurance" does not include credit insurance, credit life insurance, disability insurance, mortgage guaranty insurance, or long-term care insurance.

AB420,35,6 (j) "First-method provision" means a contract provision in which the nondefaulting party is not required to pay if a net or settlement amount is owed to the defaulting party.

AB420,35,7 (k) "Forward contract" has the meaning given in 12 USC 1821 (e) (8) (D).

AB420,35,9 (L) "Mortgage guaranty insurance" means insurance against loss arising from any of the following:

AB420,35,11 1. Debtors to meet financial obligations to creditors under evidences of indebtedness that are secured by any of the following:

AB420,35,13 a. A first lien or charge on residential real estate designed for occupancy by not more than 4 families.

AB420,35,15 b. A first lien of charge on residential real estate designed for occupancy by 5 or more families.

AB420,35,17 c. A first lien or charge on real estate designed for industrial or commercial purposes.

AB420,35,18 d. A junior lien or charge on residential real estate.

AB420,35,20 2. Lessees to make payment on rentals under leases of real estate in which the lease extends for 3 years or longer.

AB420,35,21 (m) "Netting agreement" means any of the following:

AB420,36,5 1. A contract or agreement, or terms and conditions in a contract or agreement, including a master agreement together with all schedules, confirmations, definitions, and addenda, that documents one or more transactions between the parties to the agreement for, or involving, one or more qualified financial contracts and that provides for either the netting, liquidation, setoff, termination, acceleration, or close-out under, or in connection with, one or more qualified financial contracts or present or future payment or delivery obligations or entitlements, including related liquidation or close-out values, among the parties to the netting agreement.

AB420,36,7 2. Any master agreement or bridge agreement for one or more master agreements described in subd. 1.

AB420,36,10 3. Any security agreement or arrangement or other credit enhancement or guarantee or reimbursement obligation related to any contract or agreement described in subd. 1. or 2.

AB420,36,14 (n) "Qualified financial contract" means a commodity contract, forward contract, repurchase agreement, securities contract, swap agreement, or any similar agreement that the commissioner determines by rule or order to be a qualified financial contract.

AB420,36,15 (o) "Repurchase agreement" has the meaning given in 12 USC 1821 (e) (8) (D).

AB420,36,18 (p) "Second-method provision" means a contract provision requiring a nondefaulting party to pay if a net or settlement amount is owed to the defaulting party.

AB420,36,19 (q) "Securities contract" has the meaning given in 12 USC 1821 (e) (8) (D).

AB420,36,20 (r) "Swap agreement" has the meaning given in 12 USC 1821 (e) (8) (D).

AB420,36,22 (s) "Two-way payment provision" means a contract provision under which both parties to the contract may have payment obligations to each other.

AB420,37,4 (t) "Walkaway clause" means a provision in a netting agreement or a qualified financial contract that, after calculation of a value of a party's position or an amount due to or from one of the parties in accordance with its terms upon termination, liquidation, or acceleration of the netting agreement or qualified financial contract, either does not create a payment obligation of a party or extinguishes a payment obligation of a party, in whole or in part, solely because of the party's status as a nondefaulting party.

AB420,37,10 (2) (a) On or after 5 p.m. central time on the business day following the date of appointment of a receiver, with regard to qualified financial contracts with an insurer that are subject to a proceeding under this chapter, no person may be stayed or prohibited from exercising any of the following rights, unless that person has received written notice that the contract has been sold or transferred under s. 645.33 (2) or 645.46 (9):

AB420,37,13 1. A contractual right to cause the termination, liquidation, acceleration, or close-out of obligations under, or in connection with, any netting agreement or qualified financial contract with an insurer on account of any of the following:

AB420,37,15 a. The insolvency, financial condition, or default of the insurer at any time, if the right is enforceable under applicable law other than this chapter.

AB420,37,16 b. The commencement of a formal delinquency proceeding under this chapter.

AB420,37,20 2. Any right under a pledge, security, collateral, reimbursement, or guarantee agreement or arrangement, or any other similar security agreement or arrangement or other credit enhancement, relating to one or more netting agreements or qualified financial contracts.

AB420,38,2 3. Subject to s. 645.56 (2), any right to set-off or net-out any termination value, payment amount, or other transfer obligation arising under, or in connection with, one or more qualified financial contracts in which the counterparty or its guarantor is organized under the laws of the United States or a state or foreign jurisdiction approved by the National Association of Insurance Commissioners office responsible for securities validation as eligible for netting.

AB420,38,8 (b) If a counterparty to a master netting agreement or a qualified financial contract with an insurer subject to a proceeding under this chapter terminates, liquidates, closes-out, or accelerates the agreement or contract, damages will be measured as of the date of the termination, liquidation, close-out, or acceleration. The amount of a claim for damages is the actual direct compensatory damages calculated in accordance with sub. (6).

AB420,38,20 (3) Upon termination of a netting agreement or qualified financial contract, notwithstanding any walkaway clause in the netting agreement or qualified financial contract, the net or settlement amount, if any, owed by a nondefaulting party to an insurer against which an application or petition has been filed under this chapter shall be transferred to the receiver of the insurer or as directed by the receiver of the insurer, even if the insurer is the defaulting party. Any limited 2-way payment provision or first-method provision in a netting agreement or qualified financial contract with an insurer that has defaulted shall be considered to be a full 2-way payment provision or 2nd-method provision as against the defaulting insurer. Any such property or amount is a general asset of the insurer, except to the extent that it is subject to one or more secondary liens or encumbrances or rights of netting or setoff.

AB420,38,23 (4) (a) With respect to transferring a netting agreement or qualified financial contract of an insurer that is the subject of a proceeding under this chapter, the receiver of the insurer shall do one of the following:

AB420,39,2 1. Transfer to one party, other than an insurer subject to a proceeding under this chapter, all netting agreements and qualified financial contracts between the counterparty and the insurer that is subject to a proceeding under this chapter, including all of the following:

AB420,39,4 a. All rights and obligations of each party under each netting agreement and qualified financial contract.

AB420,39,7 b. All property, including any guarantee or other credit enhancement, securing any claims of each party under each netting agreement and qualified financial contract.

AB420,39,10 2. Transfer none of the netting agreements, qualified financial contracts, rights, obligations, or property referred to in subd. 1. with respect to the counterparty.

AB420,39,14 (b) If a receiver of an insurer transfers a netting agreement or qualified financial contract, the receiver shall use its best efforts to notify any person who is a party to the netting agreement or qualified financial contract of the transfer by noon, central time, on the business day following the transfer.

AB420,39,20 (5) Notwithstanding s. 645.52 or 645.54, a receiver may not avoid a transfer of money or other property arising under or in connection with a netting agreement or qualified financial contract, or any pledge, security, collateral, or guarantee agreement or any other similar security arrangement or credit support document relating to a netting agreement or qualified financial contract, that is made before the commencement of a formal delinquency proceeding under this chapter.

AB420,39,24 (6) (a) In exercising the rights of disaffirmance or repudiation with respect to a netting agreement or qualified financial contract between a counterparty and an insurer that is the subject of a proceeding under this chapter, the receiver of the insurer shall do one of the following:

AB420,40,2 1. Disaffirm or repudiate all netting agreements and qualified financial contracts between the counterparty and the insurer.

AB420,40,4 2. Disaffirm or repudiate none of the netting agreements or qualified financial contracts between the counterparty and the insurer.

AB420,40,15 (b) Notwithstanding any provision of this section to the contrary, any claim of a counterparty against the estate arising from the receiver's disaffirmance or repudiation of a netting agreement or qualified financial contract that has not been previously affirmed in the liquidation or immediately preceding conservation or rehabilitation case shall be determined and shall be allowed or disallowed as if the claim had arisen before the date on which the petition for liquidation was filed or, if a conservation or rehabilitation proceeding is converted to a liquidation proceeding, as if the claim had arisen before the date on which the petition for conservation or rehabilitation was filed. The amount of the claim is the actual direct compensatory damages determined as of the date of the disaffirmance or repudiation of the netting agreement or qualified financial contract.

AB420,40,23 (7) All rights of counterparties under this chapter that apply to netting agreements and qualified financial contracts entered into on behalf of a general account are available only to counterparties of netting agreements and qualified financial contracts entered into on behalf of that general account. All rights of counterparties under this chapter that apply to netting agreements and qualified financial contracts entered into on behalf of a separate account are available only to counterparties of netting agreements and qualified financial contracts entered into on behalf of that separate account.

AB420,40,25 (8) (a) This section does not apply to persons who are affiliates of an insurer subject to a proceeding under this chapter.

AB420,41,2 (b) This section does not apply to qualified financial contracts entered into with an insurer authorized to write financial guaranty insurance.

AB420,68 Section 68. 646.51 (3) (am) (intro.) and 2. of the statutes are consolidated, renumbered 646.51 (3) (am) and amended to read:

AB420,41,9 646.51 (3) (am) General. Except as provided in pars. (ar), (b) and (c), assessments shall be calculated as follows: 2. For assessments authorized by the board on or after April 30, 2004, 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.

AB420,69 Section 69. 646.51 (3) (am) 1. of the statutes is repealed.

AB420,70 Section 70. 646.51 (3) (ar) of the statutes is created to read:

AB420,41,14 646.51 (3) (ar) Disability. Except as provided in par. (c), with respect to disability insurance policies, including policies issued by health maintenance organization insurers, assessments shall be calculated as follows:

AB420,41,18 1. For assessments authorized by the board before the effective date of this subdivision .... [LRB inserts date], as a percentage of average annual premium received in this state by each insurer in the classes protected by the accounts for the 3 most recent years preceding the year of entry of the order of liquidation.

AB420,41,22 2. For assessments authorized by the board on or after the effective date of this subdivision .... [LRB 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.

AB420,71 Section 71. 646.51 (3) (b) of the statutes is amended to read:

AB420,42,4 646.51 (3) (b) Life and health annuities. Except as provided in par. (c), with respect to annuity contracts or life or disability insurance policies, including policies issued by health maintenance organizations, assessments shall be calculated as a percentage of average annual premium received in this state by each insurer in the classes protected by the accounts for the 3 most recent years preceding the year of the entry of the order of liquidation.

AB420,72 Section 72. 646.51 (4) (a) of the statutes is amended to read:

AB420,42,10 646.51 (4) (a) Subject to pars. (b) and (d), the total of all assessments for an amount authorized by the board under this section with respect to an insurer may not, in one calendar year, exceed 2 percent of the insurer's assessable premiums under sub. (3) (am), (ar), or (b) on the types of policies and contracts that are covered by the account.

AB420,73 Section 73. 646.51 (9) (a) of the statutes is amended to read:

AB420,42,16 646.51 (9) (a) Except as provided in par. (b), if an insurer's license or certificate of authority to do business in this state terminates or , expires, or is surrendered, the insurer's obligation to pay assessments under this section ceases beginning on the day after the insurer's license or certificate of authority terminates or, expires, or is surrendered.

AB420,74 Section 74. 646.51 (9) (b) of the statutes is amended to read:

AB420,42,20 646.51 (9) (b) An insurer whose license or certificate of authority to do business in this state terminates or, expires , or is surrendered remains liable after the termination or, expiration, or surrender to pay all of the following:

AB420,42,22 1. Assessments authorized or called before the insurer's license or certificate of authority terminated or, expired, or was surrendered.

AB420,43,2 2. Assessments authorized or called after the insurer's license or certificate of authority terminated or, expired, or was surrendered that relate to a liquidation order entered before the insurer's license or certificate of authority terminated or, expired, or was surrendered.

AB420,75 Section 75. 646.51 (10) of the statutes is created to read:

AB420,43,7 646.51 (10) Assessment of converting insurers. When an insurer converts to a different type of entity or license and the effect of the conversion is to subject the insurer to the liabilities of a different account or accounts of the fund, the converting insurer's obligation to pay assessments is as follows:

AB420,43,12 (a) Assessments authorized prior to or during the year of conversion. For assessments authorized by the board prior to or during the year in which the insurer's conversion to a different type of entity or license is effective, the insurer is liable for assessments to cover the obligations of the account or accounts to which it was subject prior to conversion.

AB420,43,16 (b) Assessments authorized after the year of conversion. For assessments authorized by the board after the year in which the insurer's conversion to a different type of entity or license is effective, the insurer is liable for assessments to cover the obligations of the account or accounts to which it is subject after conversion.

AB420,76 Section 76. 655.27 (3) (b) 1. of the statutes is amended to read:

AB420,43,24 655.27 (3) (b) 1. The commissioner, after approval by the board of governors, shall by rule set the fees under par. (a). The rule shall provide that fees may be paid annually or in semiannual or quarterly installments. In addition to the prorated portion of the annual fee, semiannual and quarterly installments shall include an amount sufficient to cover interest not earned and administrative costs incurred because the fees were not paid on an annual basis. This paragraph does not impose liability on the board of governors for payment of any part of a fund deficit.

AB420,77 Section 77. 655.27 (3) (b) 2. of the statutes is amended to read:

AB420,44,4 655.27 (3) (b) 2. With respect to fees paid by physicians, the rule commissioner shall provide for not more than 4 payment classifications, based upon the amount of surgery performed and the risk of diagnostic and therapeutic services provided or procedures performed.

AB420,78 Section 78. 655.27 (3) (b) 2m. of the statutes is amended to read:

AB420,44,11 655.27 (3) (b) 2m. In addition to the fees and payment classifications described under subds. 1. and 2., the commissioner, after approval by the board of governors, may by rule establish a separate payment classification for physicians satisfying s. 655.002 (1) (b) and a separate fee for nurse anesthetists satisfying s. 655.002 (1) (b) which take into account the loss experience of health care providers for whom Michigan is a principal place of practice.

AB420,79 Section 79. 655.27 (3) (bg) 1. of the statutes is amended to read:

AB420,44,20 655.27 (3) (bg) 1. Every rule under par. (b) The commissioner shall provide for an automatic increase in a health care provider's fees, except as provided in subd. 2., if the loss and expense experience of the fund and other sources with respect to the health care provider or an employee of the health care provider exceeds either a number of claims paid threshold or a dollar volume of claims paid threshold, both as established in the rule by the commissioner. The rule commissioner shall specify applicable amounts of increase corresponding to the number of claims paid and the dollar volume of awards in excess of the respective thresholds.

AB420,80 Section 80. 655.27 (3) (bg) 2. of the statutes is amended to read:

AB420,45,2 655.27 (3) (bg) 2. The rule commissioner shall provide that the automatic increase does not apply if the board of governors determines that the performance of the injured patients and families compensation fund peer review council in making recommendations under s. 655.275 (5) (a) adequately addresses the consideration set forth in par. (a) 2m.

AB420,81 Section 81. 655.27 (3) (br) (intro.) of the statutes is amended to read:

AB420,45,6 655.27 (3) (br) Limit on fees. (intro.) Every rule The commissioner, in setting fees for a particular fiscal year under par. (b), shall ensure that the fees assessed do not exceed the greatest of the following:

AB420,82 Section 82. 655.27 (3) (bt) of the statutes is created to read: