ENTITLED, An Act to increase the benefits that the Insurance Guarantee Association may become
obligated to cover for annuities, to provide for retroactive application, and to declare an
emergency.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
Section 1. That § 58-29C-46 be amended to read as follows:
58-29C-46. A. This chapter shall provide coverage for the policies and contracts specified in
subpart B:
(1) To persons who, regardless of where they reside (except for nonresident certificate
holders under group policies or contracts), are the beneficiaries, assignees, or payees of
the persons covered under subdivision (2);
(2) To persons who are owners of or certificate holders under the policies or contracts (other
than structured settlement annuities) and in each case who:
(a) Are residents; or
(b) Are not residents, but only under all of the following conditions:
(i) The insurer that issued the policies or contracts is domiciled in this state;
(ii) The states in which the persons reside have associations similar to the
association created by this chapter;
(iii) The persons are not eligible for coverage by an association in any other state
due to the fact that the insurer was not licensed in the state at the time
specified in the state's guaranty association law;
(3) For structured settlement annuities specified in subpart B, subdivisions (1) and (2) of this
subpart do not apply, and this chapter shall (except as provided in subdivisions (4) and
(5) of this subpart) provide coverage to a person who is a payee under a structured
settlement annuity (or beneficiary of a payee if the payee is deceased), if the payee:
(a) Is a resident, regardless of where the contract owner resides; or
(b) Is not a resident, but only under both of the following conditions:
(i)(I) The contract owner of the structure settlement annuity is a resident, or
(II) The contract owner of the structured settlement annuity is not a resident, but
the insurer that issued the structured settlement annuity is domiciled in this
state and the state in which the contract owner resides has an association
similar to the association created by this chapter; and
(ii) Neither the payee (or beneficiary) nor the contract owner is eligible for
coverage by the association of the state in which the payee or contract owner
resides;
(4) This chapter does not provide coverage to a person who is a payee (or beneficiary) of a
contract owner resident of this state, if the payee (or beneficiary) is afforded any coverage
by the association of another state;
(5) This chapter is intended to provide coverage to a person who is a resident of this state and,
in special circumstances, to a nonresident. In order to avoid duplicate coverage, if a
person who would otherwise receive coverage under this chapter is provided coverage
under the laws of any other state, the person may not be provided coverage under this
chapter. In determining the application of the provisions of this paragraph in situations
where a person could be covered by the association of more than one state, whether as an
owner, payee, beneficiary, or assignee, this chapter shall be construed in conjunction with
other state laws to result in coverage by only one association.
B. (1) This chapter shall provide coverage to the persons specified in subpart A for direct,
nongroup life, health, or annuity policies or contracts and supplemental contracts to any of these and
for certificates under direct group policies and contracts, except as limited by this chapter. Annuity
contracts and certificates under group annuity contracts include allocated funding agreements,
structured settlement annuities, and any immediate or deferred annuity contracts.
(2) This chapter may not provide coverage for:
(a) A portion of a policy or contract not guaranteed by the insurer, or under which the
risk is borne by the policy or contract owner;
(b) A policy or contract of reinsurance, unless assumption certificates have been issued
pursuant to the reinsurance policy or contract;
(c) A portion of a policy or contract to the extent that the rate of interest on which it
is based:
(i) Averaged over the period of four years prior to the date on which the
association becomes obligated with respect to the policy or contract, exceeds
a rate of interest determined by subtracting two percentage points from
Moody's Corporate Bond Yield Average averaged for that same four-year
period or for such lesser period if the policy or contract was issued less than
four years before the association became obligated; and
(ii) On and after the date on which the association becomes obligated with
respect to the policy or contract, exceeds the rate of interest determined by
subtracting three percentage points from Moody's Corporate Bond Yield
Average as most recently available;
(d) A portion of a policy or contract issued to a plan or program of an employer,
association, or other person to provide life, health, or annuity benefits to its
employees, members, or others, to the extent that the plan or program is self-funded or uninsured, including benefits payable by an employer, association, or
other person under:
(i) A multiple employer welfare arrangement as defined in 29 U.S.C. § 1144;
(ii) A minimum premium group insurance plan;
(iii) A stop-loss group insurance plan; or
(iv) An administrative services only contract;
(e) A portion of a policy or contract to the extent that it provides for:
(i) Dividends or experience rating credits;
(ii) Voting rights; or
(iii) Payment of any fees or allowances to any person, including the policy or
contract owner, in connection with the service to or administration of the
policy or contract;
(f) A policy or contract issued in this state by a member insurer at a time when it was
not licensed or did not have a certificate of authority to issue the policy or contract
in this state;
(g) A portion of a policy or contract to the extent that the assessments required by 58-29C-52 with respect to the policy or contract are preempted by federal or state law;
(h) An obligation that does not arise under the express written terms of the policy or
contract issued by the insurer to the contract owner or policy owner, including
without limitation:
(i) Claims based on marketing materials;
(ii) Claims based on side letters, riders, or other documents that were issued by
the insurer without meeting applicable policy form filing or approval
requirements;
(iii) Misrepresentations of or regarding policy benefits;
(iv) Extra-contractual claims; or
(v) A claim for penalties or consequential or incidental damages;
(i) A contractual agreement that establishes the member insurer's obligations to
provide a book value accounting guaranty for defined contribution benefit plan
participants by reference to a portfolio of assets that is owned by the benefit plan
or its trustee, which in each case is not an affiliate of the member insurer;
(j) An unallocated annuity contract; and
(k) A portion of a policy or contract to the extent it provides for interest or other
changes in value to be determined by the use of an index or other external reference
stated in the policy or contract, but which have not been credited to the policy or
contract, or as to which the policy or contract owner's rights are subject to
forfeiture, as of the date the member insurer becomes an impaired or insolvent
insurer under this chapter, whichever is earlier. If a policy's or contract's interest
or changes in value are credited less frequently than annually, then for purposes of
determining the values that have been credited and are not subject to forfeiture
under this subsection, the interest or change in value determined by using the
procedures defined in the policy or contract will be credited as if the contractual
date of crediting interest or changing values was the date of impairment or
insolvency, whichever is earlier, and will not be subject to forfeiture.
C. The benefits that the association may become obligated to cover may in no event exceed the
lesser of:
(1) The contractual obligations for which the insurer is liable or would have been liable if it
were not an impaired or insolvent insurer; or
(2)(a) With respect to one life, regardless of the number of policies or contracts:
(i) Three hundred thousand dollars in life insurance death benefits, but not
more than one hundred thousand dollars in net cash surrender and net cash
withdrawal values for life insurance;
(ii) In health insurance benefits:
(I) One hundred thousand dollars for coverages not described in clauses (II) and
(III) below, including any net cash surrender and net cash withdrawal
values;
(II) Three hundred thousand dollars for disability income insurance as defined
in § 58-17-108, and three hundred thousand dollars for long-term care
insurance as defined in subdivision 58-17B-2(6);
(III) Five hundred thousand dollars for basic hospital, medical and surgical
insurance, or major medical insurance as defined in the National Association
of Insurance Commissioners Health Insurance Shoppers' Guide, as of
January 1, 2003; or
(iii) Two hundred fifty thousand dollars in the present value of annuity benefits,
including net cash surrender and net cash withdrawal values;
(b) With respect to each payee of a structured settlement annuity (or beneficiary or
beneficiaries of the payee if deceased), two hundred fifty thousand dollars in
present value annuity benefits, in the aggregate, including net cash surrender and
net cash withdrawal values;
(c) However, in no event may the association be obligated to cover more than (i) an
aggregate of three hundred thousand dollars in benefits with respect to any one life
under subsections 2(a), 2(b), and 2(c) of subpart C of this section except with
respect to benefits for basic hospital, medical and surgical insurance, and major
medical insurance under subsection 2(a)(ii) of this section, in which case the
aggregate liability of the association may not exceed five hundred thousand dollars
with respect to any one individual, or (ii) with respect to one owner of multiple
nongroup policies of life insurance, whether the policy owner is an individual,
firm, corporation, or other person, and whether the persons insured are officers,
managers, employees, or other persons, more than five million dollars in benefits,
regardless of the number of policies and contracts held by the owner;
(d) The limitations set forth in this section are limitations on the benefits for which the
association is obligated before taking into account either its subrogation and
assignment rights or the extent to which those benefits could be provided out of the
assets of the impaired or insolvent insurer attributable to covered policies. The
costs of the association's obligations under this chapter may be met by the use of
assets attributable to covered policies or reimbursed to the association pursuant to
its subrogation and assignment rights.
D. In performing its obligations to provide coverage under § 58-29C-51, the association may not
be required to guarantee, assume, reinsure, or perform, or cause to be guaranteed, assumed,
reinsured, or performed, the contractual obligations of the insolvent or impaired insurer under a
covered policy or contract that do not materially affect the economic values or economic benefits of
the covered policy or contract.
Section 2. The provisions of this Act apply to coverage the guaranty association provides in
connection with a member insurer that is placed under an order of liquidation with a finding of
insolvency on or after January 1, 2012.
Section 3. Whereas, this Act is necessary for the immediate preservation of the public peace,
health, or safety, an emergency is hereby declared to exist, and this Act shall be in full force and
effect from and after its passage and approval retroactive to January 1, 2012.
An Act to increase the benefits that the Insurance Guarantee Association may become obligated to
cover for annuities, to provide for retroactive application, and to declare an emergency.
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I certify that the attached Act
originated in the
HOUSE as Bill No. 1071
____________________________
Chief Clerk
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____________________________
Speaker of the House
____________________________
Chief Clerk
____________________________
President of the Senate
____________________________
Secretary of the Senate
House Bill No. 1071
File No. ____
Chapter No. ______
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Received at this Executive Office
this _____ day of _____________ ,
20____ at ____________ M.
By _________________________
for the Governor
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The attached Act is hereby
approved this ________ day of
______________ , A.D., 20___
____________________________
Governor
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STATE OF SOUTH DAKOTA,
ss.
Office of the Secretary of State
Filed ____________ , 20___
at _________ o'clock __ M.
____________________________
Secretary of State
By _________________________
Asst. Secretary of State
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