(a) If a member insurer becomes impaired, the association may, with the approval of the director and subject to any conditions imposed by the association that do not impair the contractual obligations of the impaired insurer,
(1) guarantee, assume, reissue, reinsure, or provide for the guarantee, assumption, reissuance, or reinsurance of the policies or contracts of the impaired insurer; and
(2) provide money, pledges, loans, notes, guarantees, or other means that are necessary to act under (1) of this subsection and to assure payment of the contractual obligations of the impaired insurer until those obligations are guaranteed, reinsured, or assumed.
(b) If a member insurer becomes insolvent, the association shall, in its discretion and with the approval of the director,
(1) guarantee, assume, reissue, reinsure, or provide for the guarantee, assumption, reissuance, or reinsurance of the covered policies or contracts of the insolvent insurer, or otherwise assure payment of the contractual obligations of the insolvent insurer; and provide money, pledges, loans, notes, guarantees, or other means that are necessary to discharge the association's duties under this section; or
(2) provide benefits and coverage in accordance with the following provisions:
(A) with respect to policies and contracts, assure payment of benefits that would have been payable under a policy or contract of the insolvent insurer for claims incurred with respect to
(i) a group policy or contract, not later than the earlier of the next renewal date under the policy or contract or 45 days, but in no event less than 30 days, after the date on which the association becomes obligated with respect to the policy or contract;
(ii) an individual policy, contract, or annuity, not later than the earlier of the next renewal date, if any, under the policy or contract or one year, but in no event less than 30 days, after the date on which the association becomes obligated with respect to the policy or contract;
(B) with respect to an individual or group policy or contract, make a diligent effort to provide a known insured, an enrollee, an annuitant, or a group policy owner or group contract owner 30 days' notice of the termination of the benefits provided;
(C) with respect to an individual policy or contract, make available to each known insured, enrollee, or annuitant, or owner if other than an insured, enrollee, or annuitant, and with respect to an individual who was formerly an insured, enrollee, or annuitant under a group policy or contract who is not eligible for replacement group coverage, make available substitute coverage on an individual basis under (D) of this paragraph, if the insured, enrollee, or annuitant had a right under law or under the terminated policy or contract to convert coverage to individual coverage or to continue an individual policy or contract in force until a specified age, or for a specific time during which the insurer, hospital or medical service corporation, or health maintenance organization did not have the unilateral right to make changes in any provision of the policy or contract or had a right only to make changes in premium by class;
(D) in providing the substitute coverage under (C) of this paragraph, the association
(i) shall offer either to reissue the terminated coverage or to issue an alternate policy or contract at actuarially justified rates;
(ii) shall offer an alternative or reissued policy or contract without requiring evidence of insurability and may not provide for a waiting period or exclusion that would not have applied under the terminated policy or contract; and
(iii) may reinsure an alternative or reissued policy or contract;
(E) an alternative policy or contract must
(i) if adopted by the association, be subject to the approval of the director; the association may adopt alternative policies or contracts of various types for future issuance without regard to a particular impairment or insolvency;
(ii) contain at least the minimum statutory provisions required in the state and provide benefits that may not be unreasonable in relation to the premium charged; the association shall set the premium under a table of rates that it shall adopt; the premium must reflect the amount of insurance to be provided and the age and class of risk of each insured, but may not reflect changes in the health of the insured after the original policy or contract was last underwritten;
(iii) if issued by the association, provide coverage of a type similar to that of the policy or contract issued by the impaired or insolvent insurer, as determined by the association;
(F) if the association elects to reissue terminated coverage at a premium rate different from that charged under the terminated policy or contract, the premium shall be actuarially justified and set by the association according to the amount of insurance or coverage provided and the age and class of risk;
(G) the association's obligations with respect to coverage under a policy or contract of an impaired or insolvent insurer or under a reissued or alternative policy or contract stop on the date the coverage, policy, or contract is replaced by another similar policy or contract by the policy or contract owner, the insured, the enrollee, or the association;
(H) when proceeding under this subsection with respect to a policy or contract carrying guaranteed minimum interest rates, the association shall assure the payment or crediting of a rate of interest consistent with AS 21.79.020(c)(4).
(c) Nonpayment of a premium within 31 days after the date required under the terms of a guaranteed, assumed, alternative or reissued policy or contract or substitute coverage terminates the obligations of the association under the policy, contract, or coverage except with respect to the claims incurred or the net cash surrender value that may be due under the provisions of this chapter.
(d) A premium due for coverage after entry of an order of liquidation of an insolvent insurer belongs to and is payable at the direction of the association. Upon request of a liquidator of an insolvent insurer, the association shall provide a report to the liquidator regarding the premium collected by the association. The association is liable for unearned premiums due to a policy or contract owner arising after the entry of the order.
(e) The protection provided by this chapter does not apply if guaranty protection is provided to residents of this state by the laws of another state or jurisdiction that is the domicile of the impaired or insolvent insurer.
(f) In carrying out its duties under (b) of this section, the association may impose a permanent policy or contract lien under a guarantee, assumption, or reinsurance agreement if the policy or contract lien is approved by a court and the association finds that
(1) the amount that may be assessed under this chapter is less than the amount needed to assure full and prompt performance of the association's duties under this chapter; or
(2) the economic or financial condition that affects member insurers is sufficiently adverse that the imposition of a policy or contract lien is in the public interest.
(g) In carrying out its duties under (b) of this section, the association may request the superior court to impose an injunction against the payment of a cash value and policy loan, or the exercise of another right to withdraw funds held in connection with a policy or contract, in addition to a contractual provision for deferral of a cash or policy loan value. In addition, if the receivership court imposes an injunction on payment of cash values or policy loans or on any other right to withdraw funds of an impaired or insolvent insurer held in conjunction with a policy or contract, the association may defer payment of cash values, policy loans, or other rights for the period of the injunction, except for claims covered by the association to be paid as required by a hardship procedure established by the liquidator or rehabilitator and approved by the receivership court.
(h) If the association fails to take action under (b) of this section within a reasonable period of time after a member insurer becomes insolvent, the director shall assume the powers of the association under (b) of this section.
(i) If requested by the director, the association may assist and advise the director concerning rehabilitation, payment of claims, continuance of coverage, or the performance of other contractual obligations of an impaired or insolvent insurer.
(j) The association is entitled to appear or intervene in a court or agency proceeding in this state involving an impaired or insolvent insurer that the association is or may be obligated to or involving a person or property against which the association may have rights. The standing conferred by this subsection extends to all matters germane to the powers and duties of the association, including proposals to reinsure or guarantee a covered policy of the impaired or insolvent insurer and the determination of a covered policy and a contractual obligation. The association also has the right to appear or intervene before a court or agency in another state in a proceeding involving an impaired or insolvent insurer that the association is or may be obligated to or involving a person or property against which the association may have rights.
(k) A person who receives benefits under this chapter is considered to have assigned the rights under, and any cause of action against a person for losses arising under, resulting from, or otherwise relating to, the covered policy to the association to the extent of the benefits received under this chapter, whether the benefits are payment of or on account of contractual obligations, continuations of coverage, or provisions of substitute or alternative policies, contracts, or coverages. The association may require an assignment to the association of those rights by the enrollee, payee, policy or contract owner, beneficiary, insured, or annuitant before a person receives the rights or benefits conferred by this chapter. The priority of the association's subrogation right to the assets of the insolvent insurer is the same as the priority of the person entitled to benefits under this chapter. In addition to the rights described in this subsection, the association has common law rights of subrogation and any other equitable or legal remedy that would have been available to the impaired or insolvent insurer or owner, beneficiary, enrollee, or payee of a policy or contract with respect to the policy or contract. These rights include, in the case of a structured settlement annuity, the rights of the enrollee, owner, beneficiary, or payee of the annuity, to the extent of benefits received under this chapter, against a person originally or by succession responsible for the losses arising from the personal injury relating to the annuity or annuity payment, except for a person responsible solely by reason of being an assignee in respect to a qualified assignment under 26 U.S.C. 130 (Internal Revenue Code). If the provisions of this subsection are invalid with respect to a person or claim, the amount payable by the association with respect to the related coverage obligation shall be reduced by the amount realized by another person from the person or claim covered by the association. If the association has provided benefits with respect to a covered obligation and a person recovers amounts to which the association has rights as described in this subsection, the person recovering the amounts shall pay to the association the portion of the recovery attributable to the policies or contracts covered by the association.
(l) In addition to the rights and powers otherwise established in this chapter, the association may
(1) enter into contracts that are necessary or proper to carry out the provisions of this chapter;
(2) sue or be sued, and take legal action necessary or proper for recovery of an unpaid assessment under AS 21.79.070 or settlement of a claim or potential claim;
(3) borrow money to carry out the purposes of this chapter; notes or other evidence of indebtedness of the association not in default are legal investments for domestic member insurers and may be carried as admitted assets;
(4) employ or retain those persons necessary to handle the financial transactions of the association and other functions under this chapter;
(5) negotiate and contract with a liquidator, rehabilitator, conservator, or ancillary receiver to carry out the powers and duties of the association;
(6) exercise, for the purposes of this chapter and to the extent approved by the director, the powers of a domestic life insurer, health insurer, hospital or medical service corporation, or health maintenance organization; however, the association may not issue policies or contracts other than those issued to perform its obligations under this chapter;
(7) take legal action to prevent or recover the payment of improper claims;
(8) join an organization of one or more other state associations with similar purposes;
(9) determine, using reasonable business judgment, the means by which the association is to provide the benefits of this chapter in an economical and efficient manner;
(10) request information from a person seeking coverage from the association in order to determine the obligations of the association under this chapter; a person receiving a request under this paragraph shall promptly comply with the request;
(11) request information from a member insurer in order to aid in the exercise of a power under this section; a member insurer receiving a request under this paragraph shall promptly comply with the request;
(12) unless prohibited by law, in accordance with the terms of the policy or contract, file for actuarially justified rates or premium increases for a policy or contract for which it provides coverage under this chapter; and
(13) perform all other acts necessary or proper to implement this chapter.
(m) When the association has arranged or offered to provide the benefits of this chapter to a covered person under a plan or arrangement that fulfills the association's obligations under this chapter, the covered person is not entitled to benefits from the association in addition to or other than those provided under the plan or arrangement.
(n) In carrying out its duties in connection with guaranteeing, assuming, or reinsuring a policy or contract, the association may, subject to approval of the receivership court, issue substitute coverage for a policy or contract that provides an interest rate, crediting rate, or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value by issuing an alternative policy or contract under the following provisions:
(1) in place of the index or other external reference provided for in the original policy or contract, the alternative policy or contract provides for
(A) a fixed interest rate;
(B) payment of dividends with minimum guarantees; or
(C) a different method for calculating interest or changes in value;
(2) there is no requirement for evidence of insurability, waiting period, or other exclusion that would not have applied under the replaced policy or contract; and
(3) the alternative policy or contract is substantially similar to the replaced policy or contract in all other material terms.
(o) The rights and obligations of the association, reinsurers of an insolvent insurer, and the receiver of an insolvent insurer are governed by the following provisions:
(1) not later than 180 days after the date of the order of liquidation, the association may elect to succeed to the rights and obligations of the ceding member insurer that relate to policies, contracts, or annuities covered, in whole or in part, by the association, in each case under any one or more reinsurance contracts entered into by the insolvent insurer and its reinsurers and selected by the association; an assumption is effective as of the date of the order of liquidation; the election shall be effected by the association or the National Organization of Life and Health Insurance Guaranty Associations on the association's behalf by written notice, return receipt requested, to the affected reinsurers; to facilitate the earliest practicable decision about whether to assume any of the contracts of reinsurance and to protect the financial position of the estate, as soon as possible after commencement of formal delinquency proceedings, the receiver and each reinsurer of the ceding member insurer shall make available, upon request, to the association or the National Organization of Life and Health Insurance Guaranty Associations on the association's behalf
(A) copies of in-force contracts of reinsurance and all related files and records relevant to the determination of whether those contracts should be assumed; and
(B) notices of any defaults under the reinsurance contracts or any known event or condition that, with the passage of time, could become a default under the reinsurance contracts;
(2) as to reinsurance contracts assumed by the association under this subsection,
(A) the association is responsible for all unpaid premiums due under the reinsurance contracts for periods before, on, and after the date of the order of liquidation and is responsible for the performance of all other obligations to be performed on and after the date of the order of liquidation in each case that relates to policies, contracts, or annuities covered, in whole or in part, by the association; the association may charge policies, contracts, or annuities covered in part by the association, through reasonable allocation methods, the costs for reinsurance in excess of the obligations of the association and shall provide notice and an accounting of those charges to the liquidator;
(B) the association is entitled to any amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods on and after the date of the order of liquidation and that relate to policies, contracts, or annuities covered, in whole or in part, by the association, if, upon receiving those amounts, the association is obliged to pay to the beneficiary, under the policy, contract, or annuity for which the amounts were paid, a portion of the amount equal to the lesser of the amount
(i) received by the association; and
(ii) by which the amount received by the association exceeds the amount equal to the benefits paid by the association under the policy, contract, or annuity, less the amount retained by the insurer applicable to the loss or event;
(C) not later than 30 days after the association's election, the association and each reinsurer under contracts assumed by the association shall calculate the net balance due to or from the association under each reinsurance contract as of the election date with respect to policies, contracts, or annuities covered, in whole or in part, by the association; in making the calculation, the association and reinsurer shall give full credit to all items paid by either the member insurer or its receiver or the reinsurer before the election date; the reinsurer shall pay the receiver any amounts due for losses or events before the date of the order of liquidation, subject to any set-off for premiums unpaid for periods before the date, and the association or reinsurer shall pay any remaining balance due the other, in each case, not later than five days after the completion of the calculation; a dispute over the amount due to the association or reinsurer shall be resolved by arbitration under the terms of the affected reinsurance contract or, if the contract does not contain an arbitration clause, as otherwise provided by law; if the receiver has received an amount due to the association under (B) of this paragraph, the receiver shall remit the amount to the association as promptly as practicable;
(D) if the association or receiver on the association's behalf, not later than 60 days after the election date, pays the unpaid premiums due for periods both before and after the election date that relate to policies, contracts, or annuities covered, in whole or in part, by the association, the reinsurer may not terminate the reinsurance contracts for failure to pay premium insofar as the reinsurance contracts relate to policies, contracts, or annuities covered, in whole or in part, by the association, and may not set off an unpaid amount due under another contract or an unpaid amount due from a party other than the association against amounts due to the association;
(3) during the period from the date of the order of liquidation until the election date, or, if the election date does not occur, until 180 days after the date of the order of liquidation,
(A) neither the association nor the reinsurer shall have any rights or obligations under reinsurance contracts that the association has the right to assume, whether for periods before, on, or after the date of the order of liquidation; and
(B) the reinsurer, the receiver, and the association shall, to the extent practicable, provide to each other data and records reasonably requested, if, once the association has elected to assume a reinsurance contract, the parties' rights and obligations are governed by this subsection;
(4) if the association does not elect to assume a reinsurance contract by the election date, the association does not have rights or obligations, in each case for periods before, on, and after the date of the order of liquidation, with respect to the reinsurance contract;
(5) when policies, contracts, annuities, or covered obligations with respect to policies or annuities are transferred to an assuming insurer, the association may also transfer reinsurance on the policies, contracts, or annuities, in the case of contracts assumed by the association, subject to the following:
(A) unless the reinsurer and the assuming insurer agree otherwise, the reinsurance contract transferred may not cover any new policies or insurance, contracts, or annuities in addition to those transferred;
(B) the obligations described in (1) of this subsection do not apply with respect to matters arising on and after the effective date of the transfer; and
(C) notice shall be given in writing, return receipt requested, by the transferring party to the affected reinsurer not less than 30 days before the effective date of the transfer;
(6) the provisions of this subsection supersede the provisions of any state law or of any affected reinsurance contract that provides for or requires any payment of reinsurance proceeds, on account of losses or events that occur in periods on and after the date of the order of liquidation, to the receiver of the insolvent insurer or another person; the receiver shall remain entitled to any amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods before the date of the liquidation, subject to applicable set-off provisions;
(7) except as otherwise provided in this section, nothing in this subsection
(A) alters or modifies the terms and conditions of a reinsurance contract;
(B) abrogates or limits the right of a reinsurer to claim that the reinsurer is entitled to rescind a reinsurance contract;
(C) gives a policy or contract owner, enrollee, certificate holder, or beneficiary an independent cause of action against a reinsurer that is not otherwise set out in the reinsurance contract;
(D) limits or affects the association's rights as a creditor of the estate against the assets of the estate; and
(E) applies to a reinsurance agreement covering property or casualty risks.