Chapter 000

Chapter 463

2004 -- H 7596

Enacted 07/07/04

A N A C T

RELATING TO INSURANCE -- INTERSTATE INSURANCE PRODUCT REGULATION COMPACT

Introduced By: Representatives Schadone, T Brien, Malik, Winfield, and Anguilla

Date Introduced: February 10, 2004

Referred To: House Corporations

It is enacted by the General Assembly as follows:

SECTION 1. Title 27 of the General Laws entitled "Insurance" is hereby amended by

adding thereto the following chapter:

CHAPTER 2.5

INTERSTATE COMPACT ON INSURANCE PRODUCT REGULATIONS

27-2.5-1. Short title. This chapter may be cited as the "Interstate Compact."

27-2.5-2. Compact enacted. – The interstate compact on insurance product regulation is

hereby enacted into law and entered into with all other jurisdictions legally joining therein in

form substantially as follows:

Interstate Insurance Product Regulation Compact

ARTICLE I. PURPOSES

The purposes of this compact are, through means of joint and cooperative action among

the compacting states:

(1) To promote and protect the interest of consumers of individual and group annuity, life

insurance, disability income and long-term care insurance products;

(2) To develop uniform standards for insurance products covered under the compact;

(3) To establish a central clearinghouse to receive and provide prompt review of

insurance products covered under the compact and, in certain cases, advertisements related

thereto, submitted by insurers authorized to do business in one or more compacting states;

(4) To give appropriate regulatory approval to those product filings and advertisements

satisfying the applicable uniform standard;

(5) To improve coordination of regulatory resources and expertise between state

insurance departments regarding the setting of uniform standards and review of insurance

products covered under the compact;

(6) To create the Interstate insurance product regulation commission; and

(7) To perform these and such other related functions as may be consistent with the state

regulation of the business of insurance.

ARTICLE II. DEFINITIONS

For purposes of this compact:

(1) "Advertisement" means any material designed to create public interest in a product, or

induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace or retain

a policy, as more specifically defined in the rules and operating procedures of the commission.

(2) "Bylaws" mean those bylaws established by the commission for its governance, or for

directing or controlling the commissions' actions or conduct.

(3) "Compacting state" means any state which has enacted this compact legislation and

which has not withdrawn pursuant to Article XIV, Section 1, or been terminated pursuant to

Article XIV, Section 2.

(4) "Commission" means the "Interstate Insurance Product Regulation Commission"

established by this compact.

(5) "Commissioner" means the chief insurance regulatory official of a state including, but

not limited to, commissioner, superintendent, director or administrator.

(6) "Domiciliary state" means the state in which an insurer is incorporated or organized;

or, in the case of an alien insurer, its state of entry.

(7) "Insurer" means any entity licensed by a state to issue contracts of insurance for any

of the lines of insurance covered by this act.

(8) "Member" means the person chosen by a compacting state as its representative to the

commission, or his or her designee.

(9) "Noncompacting state" means any state which is not at the time a compacting state.

(10) "Operating procedures" mean procedures promulgated by the commission

implementing a rule, uniformed standard or a provision of this compact.

(11) "Product" means the form of a policy or contract, including any application

endorsement, or related from which is attached to and made a part of the policy or contract, and

any evidence of coverage of certificate, for an individual or group annuity, life insurance,

disability income or long-term care insurance product that an insurer is authorized to issue.

(12) "Rule" means a statement of general or particular applicability and future effect

promulgated by the commission, including a uniform standard developed pursuant to Article VII

of this compact, designed to implement, interpret, or prescribe law or policy or describing the

organization, procedure, or practice requirements of the commission, which shall have the force

and effect of law in the compacting states.

(13) "State" means any state, district or territory of the United States of America.

(14) "Third-party filer" means an entity that submits a product filing to the commission

on behalf of an insurer.

(15) "Uniform standard" means a standard adopted by the commission for a product line,

pursuant to Article VII of this compact, and shall include all of the product requirements in

aggregate; provided, that each uniform standard shall be construed, whether express or implied, to

prohibit the use of any inconsistent, misleading or ambiguous provisions in a product and the

form of the product made available to the public shall not be unfair, inequitable or against public

policy as determined by the commission.

ARTICLE III. ESTABLISHMENT OF THE COMMISSION AND VENUE

(1) The compacting states hereby create and establish a joint public agency known as the

"Interstate Insurance Product Regulation Commission." Pursuant to Article IV, the commission

will have the power to develop uniform standards for product lines, receive and provide prompt

review of products filed therewith, and give approval to those product filings satisfying applicable

uniform standards; provided, it is not intended for the commission to be the exclusive entity for

receipt and review of insurance product filings. Nothing herein shall prohibit any insurer from

filing its product in any state wherein the insurer is licensed to conduct the business of insurance;

and any such filing shall be subject to the laws of the state where filed.

(2) The commission is a body corporate and politic, and an instrumentality of the

compacting states.

(3) The commission is a not-for-profit entity, separate and distinct from the individual

compacting states.

(4) The commission is solely responsible for its liabilities except as otherwise specifically

provided in this compact.

(5) Venue is proper and judicial proceedings by or against the commission shall be

brought solely and exclusively in a court of competent jurisdiction where the principal office of

the commission is located.

ARTICLE IV. POWERS OF THE COMMISSION

The commission shall have the following powers:

(1) To promulgate rules, pursuant to Article VII of this compact, which shall have the

force and effect of law and shall be binding in the compacting states to the extent and in the

manner provided in this compact;

(2) To exercise its rule-making authority and establish reasonable uniform standards for

products covered under the compact, and advertisement related thereto, which shall have the

force and effect of law and shall be binding in the compacting states, but only for those products

filed with the commission, provided, that a compacting state shall have the right to opt out of

such uniform standard pursuant to Article VII, to the extent and in the manner provided in this

compact and, provided, further, that any uniform standard established by the commission for

long-term care insurance products may provide the same or greater protections for consumers as,

but shall not provide less than, those protections set forth in the National Association of Insurance

Commissioners' Long-Term Care Insurance Model Act and Long-Term Care Insurance Model

Regulation, respectively, adopted as of 2001. The commission shall consider whether any

subsequent amendments to the NAIC Long-Term Care Insurance Model Act or Long-Term Care

Insurance Model Regulation adopted by the NAIC require amending of the uniform standards

established by the commission for long-term care insurance products;

(3) To receive and review in an expeditious manner products filed with the commission,

and rate filings for disability income and long-term care insurance products, and give approval of

those products and rate filings that satisfy the applicable uniform standard, where such approval

shall have the force and effect of law and be binding on the compacting states to the extent and in

the manner provided in the compact;

(4) To receive and review in an expeditious manner advertisement relating to long-term

care insurance products for which uniform standards have been adopted by the commission, and

give approval to all advertisement that satisfies the applicable uniform standard. For any product

covered under this compact, other than long-term care insurance products, the commission shall

have the authority to require an insurer to submit all or any part of its advertisement with respect

to that product for review or approval prior to use, if the commission determines that the nature of

the product is such that an advertisement of the product could have the capacity or tendency to

mislead the public. The actions of commission as provided in this section shall have the force

and effect of law and shall be binding in the compacting states to the extent and in the manner

provided in the compact;

(5) To exercise its rule-making authority and designate products and advertisement that

may be subject to a self-certification process without the need for prior approval by the

commission;

(6) to promulgate operating procedures, pursuant to Article VII of the compact, which

shall be binding in the compacting states to the extent and in the manner provided in this

compact;

(7) To bring and prosecute legal proceedings or actions in its name as the commission;

provided, that the standing of any state insurance department to sue or be sued under applicable

law shall not be affected;

(8) To issue subpoenas requiring the attendance and testimony of witnesses and the

production of evidence;

(9) To establish and maintain offices;

(10) To purchase and maintain insurance and bonds;

(11) To borrow, accept or contract for services of personnel, including, but not limited

to, employees of a compacting state;

(12) To hire employees, professionals or specialists, and elect or appoint officers, and to

fix their compensation, define their duties and give them appropriate authority to carry out the

purposes of the compact, and determine their qualifications; and to establish the commission's

personnel policies and programs relating to, among other things, conflicts of interest, rates of

compensation and qualifications of personnel;

(13) To accept any and all appropriate donations and grants of money, equipment,

supplies, materials, and services, and to receive, utilize and dispose of the same; provided, that at

all times the commission shall strive to avoid any appearance of impropriety;

(14) To lease, purchase, accept appropriate gifts or donations of, or otherwise to own,

hold, improve or use, any property, real, personal or mixed; provided, that at all times the

commission shall strive to avoid any appearance of impropriety;

(15) To sell, convey, mortgage, pledge, lease, exchange, abandon or otherwise dispose of

any property, real, personal or mixed;

(16) To remit filing fees to compacting states as may be set forth in the bylaws, rules or

operating procedures;

(17) To enforce compliance by compacting states with rules, uniform standards,

operating procedures and bylaws;

(18) To provide for dispute resolution among compacting states;

(19) To advise compacting states on issues relating to insurers domiciled or doing

business in noncompacting jurisdictions, consistent with the purposes of the compact;

(20) To provide advice and training to those personnel in state insurance departments

responsible for product review, and to be a resource for state insurance departments;

(21) To establish a budget and make expenditures;

(22) To borrow money;

(23) To appoint committees including advisory committees comprising members, state

insurance regulators, state legislators or their representatives, insurance industry and consumer

representatives, and such other interested persons as may be designated in the bylaws;

(24) To provide and receive information from, and to cooperate with law enforcement

agencies;

(25) To adopt and use a corporate seal; and

(26) To perform such other functions as may be necessary or appropriate to achieve the

purposes of this compact consistent with the state regulation of the business of insurance.

ARTICLE V. ORGANIZATION OF THE COMMISSION

(1) Membership, voting and bylaws.

(a) Each compacting state shall have limited to one member. Each member shall be

qualified to serve in that capacity pursuant to applicable law of the compacting state. Any

member may be removed or suspended from office as provided by the law of the state from

which he or she shall be appointed. Any vacancy occurring in the commission shall be filled in

accordance with the laws of the compacting state wherein the vacancy exists. Nothing herein

shall be construed to affect the manner in which a compacting state determines the election or

appointment and qualification of its own commissioner.

(b) Each member shall be entitled to one vote and shall have an opportunity to participate

in the governance of the commission in accordance with the bylaws. Notwithstanding any

provision herein to the contrary, no action of the commission with respect to the promulgation of

a uniform standard shall be effective unless two-thirds (2/3) of the members vote in favor thereof.

conduct as may be necessary or appropriate to carry out the purposes, and exercise the powers, of

the compact, including, but not limited to:

(i) establishing the fiscal year of the commission;

(ii) providing reasonable procedures for appointing and electing members, as well as

holding meetings, of the management committee;

(iii) providing reasonable standards and procedures: (i) for the establishment and

meetings of other committees; and (ii) governing any general or specific delegation of any

authority or function of the commission;

(iv) providing reasonable procedures for calling and conducting meetings of the

commission that consists of a majority of commission members, ensuring reasonable advance

notice of each such meeting and providing for the rights of citizens to attend such meeting with

enumerated exceptions designed to protect the public's interest, the privacy of individuals, and

insurers' proprietary information, including trade secrets. The commission may meet in camera

only after a majority of the entire membership votes to close a meeting en toto or in part. As soon

as practicable, the commission must make public: (i) a copy of the vote to close the meeting

revealing the vote of each member with no proxy votes allowed; and (ii) votes taken during such

meeting;

(v) establishing the titles, duties and authority and reasonable procedures for the election

of the officers of the commission;

(vi) providing reasonable standards and procedures for the establishment of the personnel

policies and programs of the commission. Notwithstanding any civil service or other similar laws

of any compacting state, the bylaws shall exclusively govern the personnel policies and programs

of the commission;

(vii) promulgating a code of ethics to address permissible and prohibited activities of

commission members and employees; and

(viii) providing a mechanism for winding up the operations of the commission and the

equitable disposition of any surplus funds that may exist after the termination of the compact after

the payment and/or reserving of all of its debts and obligations.

(d) The commission shall publish its bylaws in a convenient form and file a copy thereof

and a copy of any amendment thereto, with the appropriate agency or officer in each of the

compacting states.

(2) Management committee, officers and personnel.

(a) A management committee comprising no more than fourteen (14) members shall be

established as follows:

(i) One (1) member from each of the six (6) compacting states with the largest premium

volume for individual and group annuities, life, disability income and long-term care insurance

products, determined from the records of the NAIC for the prior year;

(ii) Four (4) members from those compacting states with at least two percent (2%) of the

market based on the premium volume described above, other than the six (6) compacting states

with the largest premium volume, selected on a rotating basis as provided in the bylaws, and;

(iii) Four (4) members from those compacting states with less than two percent (2%) of

the market, based on the premium volume described above, with one (1) selected form each of the

four (4) zone regions of the NAIC as provided in the bylaws.

(b) The management committee shall have such authority and duties as may be set forth

in the bylaws, including, but not limited to:

(i) managing the affairs of the commission in a manner consistent with the bylaws and

purposes of the commission;

(ii) establishing and overseeing an organizational structure within, and appropriate

procedures for, the commission to provide for the creation of uniform standards and other rules,

receipt and review of product filings, administrative and technical support functions, review of

decisions regarding the disapproval of a product filing, and the review of elections made by a

compacting state to opt out of a uniform standard; provided, that a uniform standard shall not be

submitted to the compacting states for adoption unless approved by two-thirds (2/3) of the

members of the management committee;

(iii) overseeing the offices of the commission; and

(iv) planning, implementing, and coordinating communications and activities with other

state, federal and local government organizations in order to advance the goals of the

commission.

each having such authority and duties, as may be specified in the bylaws.

(d) The management committee may, subject to the approval of the commission, appoint

or retain an executive director for such period, upon such terms and conditions and for such

compensation as the commission may deem appropriate. The executive director shall serve as

secretary to the commission, but shall not be a member of the commission. The executive

director shall hire and supervise such other staff as may be authorized by the commission.

(3) Legislative and advisory committees.

(a) A legislative committee comprising state legislators or their designees shall be

established to monitor the operations of, and make recommendations to, the commission,

including the management committee; provided, that the manner of selection and term of any

legislative committee member shall be as set forth in the bylaws. Prior to the adoption by the

commission of any uniform standard, revision to the bylaws, annual budget or other significant

matter as may be provided in the bylaws, the management committee shall consult with and

report to the legislative committee.

(b) The commission shall establish two (2) advisory committees, one of which shall

comprise consume representatives independent of the insurance industry, and the other

comprising insurance industry representatives.

provide for the carrying out of its functions.

(4) Corporate records of the commission.

The commission shall maintain its corporate books and records in accordance with the

bylaws.

(5) Qualified immunity, defense and indemnification.

(a) The members, officers, executive director, employees and representatives of the

commission shall be immune from suit and liability, either personally or in their official capacity,

for any claim for damage to or loss of property or personal injury or other civil liability caused by

or arising out of any actual or alleged act, error or omission that occurred, or that the person

against whom the claim is made had a reasonable basis for believing occurred within the scope of

commission employment, duties or responsibilities; provided, that nothing in this paragraph shall

be construed to protect any such person from suit and/or liability for any damage, loss, injury or

liability caused by the intentional or willful and wanton misconduct of that person.

(b) The commission shall defend any member, officer, executive director, employee or

representative of the commission in any civil action seeking to impose liability arising out of any

actual or alleged act, error or omission that occurred within the scope of commission

employment, duties or responsibilities, or that the person against whom the claim is made had a

reasonable basis for believing occurred within the scope of commission employment, duties or

responsibilities; provided, that nothing herein shall be construed to prohibit that person from

retaining his or her own counsel; and provided, further, that the actual or alleged act, error or

omission did not result form that person's intentional or willful and wanton misconduct.

director, employee or representative of the commission for the amount of any settlement or

judgment obtained against that person arising out of any actual or alleged act, error or omission

that occurred within the scope of commission employment, duties or responsibilities, or that such

person had a reasonable basis for believing occurred within the scope of commission

employment, duties or responsibilities, provided, that the actual or alleged act, error or omission

did not result from the intentional or willful and wanton misconduct of that person.

ARTICLE VI. MEETINGS AND ACTS OF THE COMMISSION

(1) The commission shall meet and take such actions as are consistent with the provisions

of this compact and the bylaws.

(2) Each member of the commission shall have the right and power to cast a vote to

which that compacting state is entitle and to participate in the business and affairs of the

commission. A member shall vote in person or by such other means as provided in the bylaws.

The bylaws may provide for members' participation in meetings by telephone or other means of

communication.

(3) The commission shall meet at least once during each calendar year. Additional

meetings shall be held as set forth in the bylaws.

ARTICLED VII. RULES AND OPERATING PROCEDURES: RULEMAKING

FUNCTIONS OF THE COMMISSION AND OPTING OUT OF UNIFORM STANDARDS.

(1) Rulemaking authority. The commission shall promulgate reasonable rules, including

uniform standards, and operating procedures in order to effectively and efficiently achieve the

purposes of this compact. Notwithstanding the foregoing, in the event the commission exercises

its rulemaking authority in a manner that is beyond the scope of the purposes of this act, or the

powers granted hereunder, then such an action by the commission shall be invalid and have no

force and effect.

(2) Rulemaking procedure. Rules and operating procedures shall be made pursuant to a

rulemaking process that conforms to the Model State Administrative Procedure Act of 1981 as

amended, as may be appropriate to the operations of the commission. Before the commission

adopts a uniform standard, the commission shall give written notice to the relevant state

legislative committee(s) in each compacting state responsible for insurance issues of its intention

to adopt the uniform standard. The commission in adopting a uniform standard shall consider

fully all submitted materials and issue a concise explanation of its decision.

(3) Effective date and opt out of a uniform standard. A uniform standard shall become

effective ninety (90) days after its promulgation by the commission or such later date as the

commission may determine; provided, however, that a compacting state may opt out of a uniform

standard as provided in this Article. "Opt out" shall be defined as any action by a compacting

state to decline to adopt or participate in a promulgated uniform standard. All other rules and

operating procedures, and amendments thereto, shall become effective as of the date specified in

each rule, operating procedure or amendment.

(4) Opt out procedure. A compacting state may opt out of a uniform standard, either by

legislation or regulation duly promulgated by the insurance department under the Compacting

State's Administrative Procedure Act. If a compacting state elects to opt out of a uniform

standard by regulation, it must: (a) give written notice to the commission no later than ten (10)

business days after the uniform standard is promulgated, or at the time the state becomes a

compacting state; and (b) find that the uniform standard does not provide reasonable protections

to the citizens of the state, given the conditions in the state. The commissioner shall make

specific findings of fact and conclusions of law, based on a preponderance of the evidence,

detailing the conditions in the state which warrant a departure from the uniform standard and

determining that the uniform standard would not reasonably protect the citizens of the state. The

commissioner must consider and balance the following factors and find that the conditions in the

state and needs of the citizens of the state outweigh: (i) the intent of the legislature to participate

in, and the benefits of, an interstate agreement to establish national uniform consumer protections

for the products subject to this act; and (ii) the presumption that a uniform standard adopted by

the commission provides reasonable protections to consumers of the relevant product.

Notwithstanding the foregoing, a compacting state, may, at the time of its enactment of

this compact, prospectively opt out of all uniform standards involving long-term care insurance

products by expressly providing for such opt out in the enacted compact, and such an opt out shall

not be treated as a material variance in the offer or acceptance of any state to participate in this

compact. Such an opt out shall be effective at the time of enactment of this compact by the

compacting state and shall apply to all existing uniform standards involving long-term care

insurance products and those subsequently promulgated.

(5) Effect of opt out. If a compacting state elects to opt out of a uniform standard, the

uniform standard shall remain applicable in the compacting state electing to opt out until such

time the opt out legislation is enacted into law or the regulation opting out becomes effective.

Once the opt out of a uniform standard by a compacting state becomes effective as

provided under the laws of that state, the uniform standard shall have no further force and effect

in that state unless and until the legislation or regulation implementing the opt out is repealed or

otherwise becomes ineffective under the laws of the state. If a compacting state opts out of a

uniform standard after the uniform standard has been made effective in that state, the opt out shall

have the same prospective effect as provided under Article XIV for withdrawals.

(6) Stay of uniform standard. If a compacting state has formally initiated the process of

opting out of a uniform standard by regulation, and while the regulatory opt out is pending, the

compacting state may petition the commission, at least fifteen (15) days before the effective date

of the uniform standard, to stay the effectiveness of the uniform standard in that state. The

commission may grant a stay if it determines the regulatory opt out is being pursued in a

reasonable manner and there is a likelihood of success. If a stay is granted or extended by the

commission, the stay or extension thereof may postpone the effective date by up to ninety (90)

days, unless affirmatively extended by the commission; provided, a stay may not be permitted to

remain in effect for more than one (1) year unless the compacting state can show extraordinary

circumstances which warrant a continuance of the stay, including, but not limited to, the existence

of a legal challenge which prevents the compacting state from opting out. A stay may be

terminated by the commission upon notice that the rulemaking process has been terminated.

(7) Not later than thirty (30) days after a rule or operating procedure is promulgated any

person may file a petition for judicial review of the rule or operating procedure; provided, that the

filing of such a petition shall not stay or otherwise prevent the rule or operating procedure from

becoming effective unless the court finds that the petitioner has a substantial likelihood of

success. The court shall give deference to the actions of the commission consistent with

applicable law and shall not find the rule or operating procedure to be unlawful if the rule or

operating procedure represents a reasonable exercise of the commission's authority.

ARTICLE VIII. COMMISSION RECORDS AND ENFORCEMENT

(1) The commission shall promulgate rules establishing conditions and procedures for

public inspection and copying of its information and official records, except such information and

records involving the privacy of individuals and insurers' trade secrets. The commission may

promulgate additional rules under which it may make available to federal and state agencies

including law enforcement agencies, records and information otherwise exempt from disclosure

and may enter into agreements with such agencies to receive or exchange information or records

subject to nondisclosure and confidentiality provisions.

(2) Except as to privileged records, data and information, the laws of any compacting

state pertaining to confidentiality or nondisclosure shall not relieve any compacting state

commissioner of the duty to disclose any relevant records, data or information to the commission;

provided, that disclosure to the commission shall not be deemed to waive or otherwise affect any

confidentiality requirement; and further provided, that, except as otherwise expressly provided in

this act, the commission shall not be subject to the compacting state's laws pertaining to

confidentiality and nondisclosure with respect to records, data and information in its possession.

Confidential information of the commission shall remain confidential after such information is

provided to any commissioner.

(3) The commission shall monitor compacting states for compliance with duly adopted

bylaws, rules, including uniform standards, and operating procedures. The commission shall

notify any noncomplying compacting state in writing of its noncompliance with commission

bylaws, rules or operating procedures. If a noncomplying compacting state fails to remedy its

noncompliance within the time specified in the notice of noncompliance, the compacting state

shall be deemed to be in default as set forth in Article XIV.

(4) The commissioner of any state in which an insurer is authorized to do business, or is

conducting the business of insurance, shall continue to exercise his or her authority to oversee the

market regulation of the activities of the insurer in accordance with the provisions of the state's

law. The commissioner's enforcement of compliance with the compact is governed by the state

following provisions:

(a) With respect to the commissioner's market regulation of a product or advertisement

that is approved or certified to the commission, the content of the product or advertisement shall

not constitute a violation of the provisions, standards or requirements of the compact except upon

a final order of the commission, issued at the request of a commissioner after prior notice to the

insurer and an opportunity for hearing before the commission.

(b) Before a commissioner may bring an action for violation of any provision, standard

or requirement of the compact relating to the content of an advertisement not approved or

certified to the commission, the commission, or an authorized commission officer or employee,

must authorize the section. However, authorization pursuant to this paragraph does not require

notice to the insurer, opportunity for hearing or disclosure of requests for authorization or records

of the commission's action on such requests.

ARTICLE IX. DISPUTE RESOLUTION

The commission shall attempt, upon the request of a member, to resolve any disputes or

other issues that are subject to this compact and which may arise between two (2) or more

compacting states, or between compacting states and noncompacting states, and the commission

shall promulgate an operating procedure providing for resolution of such disputes.

ARTICLE X. PRODUCT FILING AND APPROVAL

(1) Insurers and third-party filers seeking to have a product approved by the commission

shall file the product with, and pay applicable filing fees to, the commission. Nothing in this act

shall be construed to restrict or otherwise prevent an insurer from filing its product with the

insurance department in any state wherein the insurer is licensed to conduct the business of

insurance, and such filing shall be subject to the laws of the states where filed.

(2) The commission shall establish appropriate filing and review processes and

procedures pursuant to commission rules and operating procedures. Notwithstanding any

provision herein to the contrary, the commission shall promulgate rules to establish conditions

and procedures under which the commission will provide public access to product filing

information. In establishing such rules, the commission shall consider the interests of the public

in having access to such information, as well as protection of personal medical and financial

information and trade secrets, that may be contained in a product filing or supporting information.

(3) Any product approved by the commission may be sold or otherwise issued in those

compacting states for which the insurer is legally authorized to do business.

ARTICLE XI. REVIEW OF COMMISSION DECISIONS REGARDING FILINGS

(1) Not later than thirty (30) days after the commission has given notice of a disapproved

product or advertisement filed with the commission, the insurer or third party filer whose filing

was disapproved may appeal the determination to a review panel appointed by the commission.

The commission shall promulgate rules to establish procedures for appointing such review panels

and provide for notice and hearing. An allegation that the commission, in disapproving a product

or advertisement filed with the commission, acted arbitrarily, capriciously, or in a manner that is

an abuse of discretion or otherwise not in accordance with the law, is subject to judicial review in

accordance with Article III, Section 5.

(2) The commission shall have authority to monitor review and reconsider products and

advertisement subsequent to their filing or approval upon a finding that the product does not meet

the relevant uniform standard. Where appropriate, the commission may withdraw or modify its

approval after proper notice and hearing, subject to the appeal process in section 1 above.

ARTICLE XII. FINANCE

(1) The commission shall pay or provide for the payment of the reasonable expenses of

its establishment and organization. To fund the cost of its initial operations, the commission may

accept contributions and other forms of funding from the National Association of Insurance

Commissioners, compacting states and other sources. Contributions and other forms of funding

from other sources shall be of such a nature that the independence of the commission concerning

the performance of its duties shall not be compromised.

(2) The commission shall collect a filing fee from each insurer and third party filer filing

a product with the commission to cover the cost of the operations and activities of the

commission and its staff in a total amount sufficient to cover the commission's annual budget.

(3) The commission's budget for a fiscal year shall not be approved until it has been

subject to notice and comment as set forth in Article VII of this compact.

(4) The commission shall be exempt from all taxation in and by the compacting states.

(5) The commission shall not pledge the credit of any compacting state, except by and

with the appropriate legal authority of that compacting state.

(6) The commission shall keep complete and accurate accounts of all its internal receipts,

including grants and donations, and disbursements of all funds under its control. The internal

financial accounts of the commission shall be subject to the accounting procedures established

under its bylaws. The financial accounts and reports including the system of internal controls and

procedures of the commission shall be audited annually by an independent certified public

accountant. Upon the determination of the commission, but no less frequently than every three

(3) years, the review of the independent auditor shall include a management and performance

audit of the commission. The commission shall make an annual report to the governor and

legislature of the compacting states, which shall include a report of the independent audit. The

commission's internal accounts shall not be confidential and such materials may be shared with

the commissioner of any compacting state upon request; provided, however, that any work papers

related to any internal or independent audit and any information regarding the privacy of

individuals and insurers' proprietary information, including trade secrets, shall remain

confidential.

(7) No compacting state shall have any claim to or ownership of any property held by or

vested in the commission or to any commission funds held pursuant to the provisions of this

compact.

ARTICLE XIII. COMPACTING STATES, EFFECTIVE DATE AND AMENDMENT

(1) Any state is eligible to become a compacting state.

(2) The compact shall become effective and binding upon legislative enactment of the

compact into law by two compacting states; provided, the commission shall become effective for

purposes of adopting uniform standards for, reviewing, and giving approval or disapproval of,

products filed with the commission that satisfy applicable uniform standards only after twenty-six

(26) states are compacting states, or, alternatively, by states representing greater than forty

percent (40%) of the premium volume for life insurance, annuity, disability income and long-term

care insurance products, based on records of the NAIC for the prior year. Thereafter, it shall

become effective and binding as to any other compacting state upon enactment of the compact

into law by that state.

(3) Amendments to the compact may be proposed by the commission for enactment by

the compacting states. No amendment shall become effective and binding upon the commission

and the compacting states unless and until all compacting states enact the amendment into law.

ARTICLE XIV. WITHDRAWAL, DEFAULT AND TERMINATION

(1) Withdrawal;

(a) Once effective, the compact shall continue in force and remain binding upon each and

every compacting state; provided, that a compacting state may withdraw from the compact

("Withdrawing State") by enacting a statute specifically repealing the statute which enacted the

compact into law.

(b) The effective date of withdrawal is the effective date of the repealing statute.

However, the withdrawal shall not apply to any product filings approved or self-certified, or any

advertisement of such products, on the date the repealing statute becomes effective, except by

mutual agreement of the commission and the withdrawing state unless the approval is rescinded

by the withdrawing state as provided in subsection (e) of the this section.

committee in writing upon the introduction of legislation repealing this compact in the

withdrawing state.

(d) The commission shall notify the other compacting states of the introduction of such

legislation within ten (10) days after its receipt of notice thereof.

(e) The withdrawing state is responsible for all obligations, duties and liabilities incurred through

the effective date of withdrawal, including any obligations, the performance of which extend

beyond the effective date of withdrawal, except to the extent those obligations may have been

released or relinquished by mutual agreement of the commission and the withdrawing state. The

commission's approval of products and advertisement prior to the effect date of withdrawal shall

continue to be effective and be given full force and effect in the withdrawing state, unless

formally rescinded by the withdrawing state in the same manner as provided by the laws of the

withdrawing state for the prospective disapproval of products or advertisement previously

approved under state law.

(f) Reinstatement following withdrawal of any compacting state shall occur upon the

effective date of the withdrawing state reenacting the compact.

(2) Default. – (a) If the commission determines that any compacting state has at any time

defaulted ("defaulting state") in the performance of any of its obligations or responsibilities under

this compact, the bylaws or duly promulgated rules or operating procedures, then, after notice and

hearing as set forth in the bylaws, all rights, privileges and benefits conferred by this compact on

the defaulting state shall be suspended from the effective date of default as fixed by the

commission. The grounds for default include, but are not limited to, failure of compacting state

to perform its obligations or responsibilities, and any other grounds designated in commission

rules. The commission shall immediately notify the defaulting state in writing of the defaulting

state's suspension pending a cure of the default. The commission shall stipulate the conditions

and the time period within which the defaulting state must cure its default. If the defaulting state

fails to cure the default within the time period specified by the commission, the defaulting state

shall be terminated from the compact and all rights, privileges and benefits conferred by this

compact shall be terminated from the effective date of termination.

(b) Product approvals by the commission or product self-certifications, or any

advertisement in connection with such product, that are in force on the effective date of

termination shall remain in force in the defaulting state in the same manner as if the defaulting

state had withdrawn voluntarily pursuant to paragraph (1) of the article.

of the compact.

(3) Dissolution of compact. – (a) The compact dissolves effective upon the date of the

withdrawal or default of the compacting state which reduces membership in the compact to one

compacting state.

(b) Upon the dissolution of this compact, the compact becomes null and void and shall be

of no further force or effect, and the business and affairs of the commission shall be wound up

and any surplus funds shall be distributed in accordance with the bylaws.

ARTICLE XV. SEVERABILITY AND CONSTRUCTION

(1) The provisions of this compact shall be severable; and if any phrase, clause, sentence

or provision is deemed unenforceable, the remaining provisions of the compact shall be

enforceable.

(2) The provisions of this compact shall be liberally construed to effectuate it purposes.

ARTICLE XVI. BINDING EFFECT OF COMPACT AND OTHER LAWS

(1) Other laws. – (a) Nothing herein prevents the enforcement of any other law of a

compacting state, except as provided in paragraph (b) of the article.

(b) For any product approved or certified to the commission, the rules, uniform standards

and any other requirements of the commission shall constitute the exclusive provisions applicable

to the content, approval and certification of such products. For advertisement that is subject to

the commission's authority, any rule, uniform standard or other requirement of the commission

which governs the content of the advertisement shall constitute the exclusive provision that a

commissioner may apply to the content of the advertisement. Notwithstanding the foregoing, no

action taken by the commission shall abrogate or restrict: (i) the access of any person to state

courts; (ii) remedies available under state law related to breach of contract, tort, or other laws not

specifically directed to the content of the product; (iii) state law relating to the construction of

insurance contracts; or (iv) the authority of the attorney general of the state, including, but not

limited to, maintaining any actions or proceedings, as authorized by law.

states.

(2) Binding effect on this compact. – (a) All lawful actions of the commission, including

all rules and operating procedures promulgated by the commission, are binding upon the

compacting states.

(b) All agreements between the commission and the compacting states are binding in

accordance with their terms.

commission actions, and upon a majority vote of the compacting states, the commission may

issue advisory opinions regarding the meaning or interpretation in dispute.

(d) In the event any provision of this compact exceeds the constitutional limits imposed

on the legislature of any compacting state, the obligations, duties, powers or jurisdiction sought to

be conferred by that provision upon the commission shall be ineffective as to that compacting

state, and those obligations, duties, powers or jurisdiction shall remain in the compacting state

and shall be exercised by the agency thereof to which those obligations, duties, powers or

jurisdiction are delegated by law in effect at the time this compact becomes effective.

SECTION 2. This act shall take effect upon passage.

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LC00874

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