(a) The association
(1) is obligated to pay covered claims existing before the order of liquidation and arising within 30 days after the order of liquidation, or before the policy expiration date if less than 30 days after the order of liquidation, or before the insured replaces the policy or causes its cancellation if the insured does so within 30 days after the order of liquidation, but this obligation includes only that amount of each covered claim that is less than $500,000, except that a covered claim for return of unearned premium may not exceed $10,000 for each policy, and except that the association shall pay the full amount of any covered claim arising out of a workers' compensation policy; the association is not obligated
(A) to a policyholder or claimant in an amount in excess of the obligation of the insolvent insurer under the policy from which the claim arises; or
(B) to pay a claim filed with the association after the final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer;
(2) is considered the insurer to the extent of its obligation on the covered claims and to that extent has all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent;
(3) shall allocate claims paid and expenses incurred among the three accounts separately, and assess member insurers separately for each account amounts necessary to pay the obligation of the association under (1) of this subsection subsequent to an insolvency, the expenses of handling covered claims subsequent to an insolvency, and other expenses authorized by this chapter; under this paragraph,
(A) the assessments of each member insurer must initially be based on a uniform percentage, as determined by the association, of the net direct written premiums of each member insurer for the last year for which annual statements have been filed on the kinds of insurance in the account; this initial assessment shall be adjusted by applying the same uniform percentage as initially used to each member insurer's net direct written premiums for the calendar year following the year in which the initial assessment was issued; any difference between the initial assessment amount and the adjusted assessment amount allocated to a member insurer shall be levied against or credited back to the member insurer, as appropriate, by the association; the association shall calculate and issue all appropriate levies and credits as soon as practical after all member insurers have filed their annual statements for the calendar year following the year in which the initial assessment was issued;
(B) on an annual basis, the association shall determine if funding is required for any of the three accounts; based on this determination, the association shall, during November of each year, issue initial assessments as may be necessary to cover the projected reasonable costs of claims and expenses to administer the association for the following year; under this subparagraph,
(i) the association shall use the services of an independent actuary to assist the association to evaluate and make the projection; and
(ii) an initial assessment may be made at any other time if the association determines funding is necessary, except that a member insurer may not be assessed initial assessments on any account in an amount greater than two percent of the member insurer's net direct written premiums for the applicable calendar year;
(C) the association may pay claims in any order that it determines reasonable, including the payment of claims as they are received from claimants or in groups or categories of claims; however, if the maximum of all assessments made under this section, together with the other assets of the association in any account, does not provide, in any one year, in any account, an amount sufficient to make all necessary payments from that account, the funds available shall be prorated, and the unpaid portion shall be paid as soon thereafter as funds become available;
(D) the association may defer, in whole or in part, an assessment of any member insurer if the assessment would endanger the ability of the member insurer to fulfill the insurer's contractual obligations or cause the member insurer's financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance; however, during the period of deferment, the member insurer may not pay dividends to shareholders or policyholders; a deferred assessment may only be paid when the payment does not reduce capital or surplus below minimums required by law; a member insurer who pays a larger assessment as a result of a deferment given to another member insurer shall receive a refund when the deferment ends or, at the election of the member insurer, receive a credit against future assessments;
(E) each member insurer may set off against an assessment authorized payments made on covered claims and expenses incurred in the payment of these claims by the member insurer if they are chargeable to the account for which the assessment is made;
(4) shall investigate claims brought against the association, adjust, compromise, settle, and pay covered claims to the extent of the association's obligation, and deny all other claims, and may review settlements, releases, and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which settlements, releases, and judgments may be properly contested;
(5) may, subject to AS 21.96.100, appoint, substitute, or direct legal counsel retained under an insurance policy for the defense of a covered claim;
(6) shall handle claims through its employees or through one or more insurers or other persons designated as servicing facilities; a servicing facility shall operate and maintain its principal office in this state unless the use of a servicing facility located outside of the state would result in operating cost savings of at least 10 percent and would not result in material delay in claim payments; designation of a servicing facility is subject to the approval of the director, but designation may be declined by a member insurer;
(7) shall reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association and shall pay the other expenses of the association authorized by this chapter.
(b) The association may
(1) employ or retain those persons necessary to handle claims and perform other duties of the association;
(2) borrow funds necessary to effect the purposes of this chapter in accord with the plan of operation and secure guarantees from the Alaska Industrial Development and Export Authority for association loans that are necessary to make the association financially able to meet cash flow needs;
(3) sue or be sued;
(4) negotiate and become a party to those contracts that are necessary to carry out the purposes of this chapter;
(5) perform all other acts necessary or proper to carry out the purposes of this chapter;
(6) retain amounts excess of claims, expenses, credits, and other liabilities in any account to be applied to reduce future assessments in that account, except that, if, in any year, the association determines that significant funds in excess of projected claims, expenses, credits, and other liabilities exist in an account, the association shall return amounts to policyholders, through procedures established by the association, whereby the association reimburses member insurers for providing uniform credits against rates and premiums charged for all policies applicable to the account issued during the next calendar year.