North Dakota Life & Health Insurance Guaranty Association

Covered Contracts

§26.1-38.1-01.2. This chapter provides coverage to the persons specified in subsection 1 for policies or contracts of direct, nongroup life insurance, health insurance, which for the purposes of this chapter includes health maintenance organization subscriber contracts and certificates, or annuities, and supplemental contracts to any of these, for certificates under direct group policies and contracts, and supplemental contracts to any of these and for unallocated annuity contracts issued by member insurers, except as limited by this chapter. Annuity contracts and certificates under group annuity contracts include guaranteed investment contracts, deposit administration contracts, unallocated funding agreements, allocated funding agreements, structured settlement annuities, annuities issued to or in connection with government lotteries, and any immediate or deferred annuity contracts.

Non-Covered Contracts

§26.1-38.1-01.3. Except for the portion of a policy or contract, including a rider, which provides long-term care or any other health insurance benefits, this chapter does not provide coverage for: a. Any portion of a policy or contract not guaranteed by the member insurer, or under which the risk is borne by the policy owner or contract owner; b. Any policy or contract of reinsurance, unless assumption certificates have been issued pursuant to the reinsurance policy or contract; c. Any portion of a policy or contract to the extent that the rate of interest on which the portion of the policy or contract is based or to the extent that the rate of interest, crediting of a rate of interest, or similar factor determined by using an index or other external reference stated in the policy or contract which is employed in calculating returns or changes in value: (1) Averaged over the period of four years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, 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 prior to the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier; and (2) On and after the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, 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 such plan or program is self-funded or uninsured, including benefits payable by an employer, association, or other person under: (1) A multiple employer welfare arrangement as defined in section 1144 of title 29 of the United States Code; (2) A minimum premium group insurance plan; (3) A stop-loss group insurance plan; or (4) An administrative services only contract; e. Any portion of a policy or contract to the extent that it provides for dividends or experience rating credits, voting rights, or payment of any fees or allowances to any person, including the policy owner or contract owner, in connection with the service to or administration of the policy or contract; f. Any 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. Any unallocated annuity contract issued to or in connection with a benefit plan protected under the federal pension benefit guaranty corporation regardless of whether the federal pension benefit guaranty corporation has yet become liable to make any payments with respect to the benefit plan; h. Any portion of any unallocated annuity contract which is not issued to, or in connection with, a specific employee, union, or association of natural persons benefit plan or a government lottery; i. A portion of a policy or contract to the extent that the assessments required by section 26.1-38.1-06 with respect to the policy or contract are preempted or otherwise not permitted by federal or state law; j. An obligation that does not arise under the express written terms of the policy or contract issued by the member insurer to the enrollee, certificate holder, contract owner or policy owner, including: (1) Claims based on marketing materials; (2) Claims based on side letters, riders, or other documents that were issued by the member insurer without meeting applicable policy or contract form filing or approval requirements; (3) Misrepresentations of or regarding policy or contract benefits; (4) Extracontractual claims; or (5) A claim for penalties or consequential or incidental damages; k. 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; l. 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 has not been credited to the policy or contract, or as to which the policy owner’s 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 subdivision, the interest or changes 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 is not subject to forfeiture; m. A policy or contract providing any hospital, medical, prescription drug, or other health care benefits pursuant to part C or part D of subchapter XVIII of chapter 7 of title 42 of the United States Code, commonly known as Medicare part C and part D, or subchapter XIX of chapter 7 of title 42 of the United States Code; commonly known as Medicaid, or any regulations issued pursuant thereto; and n. Structured settlement annuity benefits to which a payee or beneficiary has transferred the payee’s or beneficiary’s rights in a structured settlement factoring transactions, as defined in section 5891(c)(3)(A) of title 26 of the United States Code, regardless of whether the transaction occurred before or after this federal law became effective.

Non-Resident Coverage

§26.1-38.1-01.1.b(2). Yes. Covers nonresidents, but only under all of the following conditions: (a) The member insurer that issued such policies or contracts is domiciled in this state; (b) The states in which the persons reside have associations similar to the association created under this chapter; and (c) The persons are not eligible for coverage by an association in any other state because the insurer or the health maintenance organization was not licensed in the state at the time specified in the state’s guaranty association law.

§26.1-38.1-01.4. The benefits that the association may become obligated to cover may in no event exceed the lesser of: a. The contractual obligations for which the member insurer is liable or would have been liable if it were not an impaired or insolvent insurer; or b. (1) With any respect to one life, regardless of the number of policies, or contracts: (a) 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; (b) For health insurance benefits: [1] One hundred thousand dollars for coverages not defined as disability income insurance or health benefit plans or long-term care insurance, including any net cash surrender and net cash withdrawal values. [2] Three hundred thousand dollars for disability income insurance, and three hundred thousand dollars for long-term care insurance. [3] Five hundred thousand dollars for health benefit plans. (c) Two hundred fifty thousand dollars in the present value of annuity benefits, including net cash surrender and net cash withdrawal values. (2) With respect to each individual participating in a government retirement benefit plan established under section 401(k), 403(b), or 457 of the United States Internal Revenue Code covered by an unallocated annuity contract or the beneficiaries of each such individual if deceased, in the aggregate, two hundred fifty thousand dollars in present value annuity benefits, including net cash surrender and net cash withdrawal values. (3) 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, if any. (4) However, in no event shall the association be obligated to cover more than: (a) An aggregate of three hundred thousand dollars in benefits with respect to any one life under paragraphs 1, 2, and 3 of subdivision b except with respect to the benefits for health benefit plans under subparagraph b of paragraph 1 of subdivision b, in which case the aggregate liability of the association shall not exceed five hundred thousand dollars with respect to any one individual; or (b) With respect to one owner of multiple nongroup policies of life insurance, 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. (5) With respect to either one contract owner provided coverage under paragraph 2 of subdivision c of subsection 1; or one plan sponsor whose plans own directly or in trust one or more unallocated annuity contracts not included in paragraph 2 of subdivision b, five million dollars in benefits, irrespective of the number of contracts with respect to the contract owner or plan sponsor. However, in the case in which one or more unallocated annuity contracts are covered contracts under this chapter and are owned by a trust or other entity for the benefit of two or more plan sponsors, coverage must be afforded by the association if the largest interest in the trust or entity owning the contract or contracts is held by a plan sponsor whose principal place of business is in this state and in no event is the association obligated to cover more than five million dollars in benefits with respect to all these unallocated contracts.

Discretionary Triggers

§26.1-38.1-05.1. When a member insurer is impaired.

Mandatory Triggers

§26.1-38.1-05.2. When a member insurer is insolvent. Amended effective 8/1/99.

Foreign Triggers

No separate provision.

"Impaired Insurer"

§26.1-38.1-02.11. “Impaired insurer” means a member insurer that, after July 1, 1989, is not an insolvent insurer, and is placed under an order of rehabilitation or conservation by a court of competent jurisdiction.

"Insolvent Insurer"

§26.1-38.1-02.12. “Insolvent insurer” means a member insurer which, after July 1, 1989, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.

"Member Insurer"

§26.1-38.1-02.13. “Member insurer” means any insurer or health maintenance organization licensed or which holds a certificate of authority to transact in this state any kind of insurance or health maintenance organization business for which coverage is provided under section 26.1-38.1-01. The term includes any insurer or health maintenance organization whose license or certificate of authority in this state may have been suspended, revoked, not renewed, or voluntarily withdrawn, but does not include: a. A fraternal benefit society; b. A mandatory state pooling plan; c. A mutual assessment company or other person that operates on an assessment basis; d. An insurance exchange; e. An organization that has a certificate or license limited to the issuance of charitable gift annuities under sections 26.1-34.1-01 through 26.1-34.1-07; or f. Any entity similar to any of the above.

§26.1-38.1-03.1. For purposes of administration and assessment, the association shall maintain two accounts: a. The life insurance and annuity account that includes the following subaccounts: (1) Life insurance account; (2) Annuity account, which includes annuity contracts owned by a governmental retirement plan or its trustee established under section 401, 403(b), or 457 of the United States Internal Revenue Code, but otherwise excludes unallocated annuities; and (3) Unallocated annuity account that excludes contracts owned by a governmental retirement benefit plan or its trustee established under section 401, 403(b), or 457 of the United States Internal Revenue Code. b. The health account.

Assessment Limits

§26.1-38.1-06.9.a. Subject to subdivision b, the total of all assessments authorized by the association with respect to a member insurer for each subaccount of the life insurance and annuity account and for the health account may not in any one calendar year exceed two percent of that member insurer’s average annual premiums received in this state on the policies and contracts covered by the subaccount or account during the three calendar years preceding the year in which the member insurer became an impaired or insolvent insurer.

Assessment Classes

§26.1-38.1-06.2. There must be two classes of assessment, as follows: a. Class A assessments must be authorized and called for the purpose of meeting administrative and legal costs and other expenses. Class A assessments may be authorized and called whether or not related to a particular impaired or insolvent insurer. b. Class B assessments must be authorized and called to the extent necessary to carry out the powers and duties of the association under section 26.1-38.1-05 with regard to an impaired or insolvent insurer.

§26.1-38.1-01.3.c. Guaranty Association excludes from coverage: Any portion of a policy or contract to the extent that the rate of interest on which the portion of the policy or contract is based or to the extent that the rate of interest, crediting of a rate of interest, or similar factor determined by using an index or other external reference stated in the policy or contract which is employed in calculating returns or changes in value: (1) Averaged over the period of four years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, 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 prior to the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier; and (2) On and after the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds the rate of interest determined by subtracting three percentage points from Moody’s corporate bond yield average as most recently available;

§26.1-38.1-10. Yes. Up to 20% of assessment amount may be offset for next 5 years.

§ 26.1-38.1-02 18. “Premiums” means amounts or considerations, by whatever name called, received on covered policies or contracts less returned premiums, considerations, and deposits, and less dividends and experience credits. “Premiums” do not include any amounts or considerations received for any policies or contracts or for the portions of any policies or contracts for which coverage is not provided under subsections 2 and 3 of section 26.1-38.1-01 and except that assessable premium shall not be reduced on account of subdivision c of subsection 3 of section 26.1-38.1-01, relating to interest limitations, and subsection 3 of section 26.1-38.1-01, relating to limitations with respect to any one individual, any one participant, and any one policy or contract owner. “Premiums” do not include: a. Premiums in excess of five million dollars on any unallocated annuity contract not issued under a governmental retirement plan established under section 401(k), 403(b), or 457 of the United States Internal Revenue Code; or b. With respect to multiple nongroup policies of life insurance owned by one owner, whether the policy or contract owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, premiums in excess of five million dollars with respect to these policies or contracts, regardless of the number of policies or contracts held by the owner.

§26.1-38.1-16 “Prohibited advertisement of Insurance Guaranty Association Act in insurance sales -- Notice to policy owners” 1. No person, including a member insurer, insurance producer, or affiliate of a member insurer, may make, publish, disseminate, circulate, or place before the public, or cause directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in any newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio station or television station, or in any other way, any advertisement, announcement or statement, written or oral, which uses the existence of the insurance guaranty association of this state for the purpose of sales, solicitation, or inducement to purchase any form of insurance or other coverage covered by chapter 26.1-38.1. However, this section does not apply to the North Dakota life and health insurance guaranty association or any other entity that does not sell or solicit insurance or coverage by a health maintenance organization.