2025 -- S 0600 SUBSTITUTE A

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LC001777/SUB A

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2025

____________

A N   A C T

RELATING TO INSURANCE -- VOLUNTARY RESTRUCTURING OF SOLVENT

INSURERS

     Introduced By: Senators Sosnowski, Murray, and Britto

     Date Introduced: March 06, 2025

     Referred To: Senate Commerce

     (Dept. of Business Regulation)

It is enacted by the General Assembly as follows:

     SECTION 1. Section 27-14.5-1 of the General Laws in Chapter 27-14.5 entitled

"Voluntary Restructuring of Solvent Insurers" is hereby amended to read as follows:

     27-14.5-1. Definitions.

     As used in this chapter:

     (1) “Applicant” means a commercial run-off insurer applying under § 27-14.5-4.

     (2) “Assessment deficit” means the amount that the assessment for the previous year under

§ 27-14.5-5 is less than, and “assessment surplus” is the amount that the assessment for the previous

year exceeds:

     (i) The run-off insurer’s proportionate share of regulatory expenditure for the previous

year, if the run-off insurer was domiciled in Rhode Island on March 15 of the previous year; or

     (ii) The redomestication expenditure for the previous year attributable to the run-off

insurer, if the run-off insurer was not domiciled in Rhode Island on March 15 of the previous year.

     (3) “Assumption policyholder” means a policyholder whose policy is reinsured under an

assumption reinsurance agreement between the applicant and a reinsurer.

     (4) “Assumption reinsurance agreement” has the meaning given in § 27-53.1-3(b), subject

to the following:

     (i) The agreement may be conditioned upon the court’s entry of an implementation order.

     (ii) If any policy subject to the agreement is protected through a guarantee association, then

the assuming insurer must have been and be licensed, and must have been and be a member of the

guarantee association, in all states known to the applicant in which either: (A) Any property covered

under the policy has a permanent situs; or (B) The policyholder resided while the policy was in

force.

     (5) “Class of creditors” means:

     (i) All voting policyholders, including those without known claims;

     (ii) Voting creditors, other than policyholders; or

     (iii) Any separate class of creditors as the court may in its discretion determine should

approve the commutation plan.

     (6) “Commercial run-off insurer” means:

     (i) A run-off insurer domiciled in Rhode Island, or the protected cell of the insurer, whose

business, excluding all business subject to an assumption reinsurance agreement, includes only the

reinsuring of any line(s) of business other than life and/or the insuring of any line(s) of business

other than life, workers’ compensation, and personal lines insurance; or

     (ii) A Rhode Island domestic insurance company, or the protected cell of that insurer,

meeting the requirements of subsection (i) whose liabilities consist of commercial liabilities

transferred to said company with the approval of the commissioner and pursuant to the regulations

issued by the department under this chapter. The amount of the commercial liabilities transferred

must be less than or equal to the amount of assets transferred to the newly formed or re-activated

company.

     (7) “Commissioner” means the director of the department or designee.

     (8) “Commutation plan” means a plan for extinguishing the outstanding liabilities of a

commercial run-off insurer.

     (9) “Creditor” means:

     (i) Any person who has a claim against the applicant; or

     (ii) A policyholder other than an assumption policyholder.

     (10) “Department” means the department of business regulation.

     (11) “Guarantee association” means a guarantee association or foreign guarantee

association, as those terms are defined in § 27-14.3-3(10), that is potentially obligated with respect

to the applicant’s policies.

     (12) “Implementation order” means an order under § 27-14.5-4(c).

     (13) “Insurer” has the meaning given in § 27-14.3-3(12).

     (14) “Person” means an individual, corporation, partnership, association, joint stock

company, trust, unincorporated organization, or any similar entity or any combination of the

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foregoing acting in concert.

     (15) “Personal lines insurance” means insurance issued for personal, family, or household

purposes.

     (16) “Policy” means a contract of insurance or a contract of reinsurance.

     (17) “Policyholder” means an insured or a reinsured of the insurer.

     (18) “Proportionate share” means, for a particular run-off insurer as of December 31 of the

previous year, the ratio of:

     (i) The gross assets of that run-off insurer; to

     (ii) The gross assets of all run-off insurers, other than those that were not domiciled in

Rhode Island on March 15 of that calendar year.

     (19) “Redomestication expenditure” means, for any calendar year:

     (i) The amount that the department’s expenditures attributable to the regulation of run-off

insurers increases as a result of any run-off insurer redomiciling to Rhode Island on or after March

15 of that year; less

     (ii) Filing fees, examination costs, and any other fees in relation to insurance regulation in

this state paid to this state by run-off insurers that redomiciled to Rhode Island on or after March

15 of that year, but excluding any premium taxes.

     (20) “Regulatory expenditure” means, for any calendar year:

     (i) The amount of the department’s expenditures attributable to the regulation of run-off

insurers domiciled in Rhode Island on March 15 of that year; less

     (ii) Filing fees, examination costs, and any other fees in relation to insurance regulation in

this state paid to this state by run-off insurers domiciled in Rhode Island on March 15 of that year,

but excluding any premium taxes.

     (21) “Run-off insurer” means an insurer that:

     (i) Is domiciled in Rhode Island;

     (ii) Has liabilities under policies for property and casualty lines of business;

     (iii) Has ceased underwriting new business; and

     (iv) Is only renewing ongoing business to the extent required by law or by contract.

     (22) “Voluntary restructuring” means the act of reorganizing the legal ownership,

operational, governance, or other structures of a solvent insurer, for the purpose of enhancing

organization and maximizing efficiencies, and shall include the transfer of assets and liabilities to

or from an insurer, or the protected cell of an insurer pursuant to an insurance business transfer

plan. A voluntary restructuring under this chapter may be approved by the commissioner only if,

in the commissioner’s opinion, it would have no material adverse impact on the insurer’s

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policyholders, reinsureds, or claimants of policies subject to the restructuring.

     SECTION 2. Sections 27-34-3, 27-34-5, 27-34-8 and 27-34-11.5 of the General Laws in

Chapter 27-34 entitled "Rhode Island Property and Casualty Insurance Guaranty Association" are

hereby amended to read as follows:

     27-34-3. Scope.

     This chapter shall apply to all kinds of direct insurance, but shall not be applicable to the

following:

     (1) Life, annuity, health, or disability insurance;

     (2) Mortgage guaranty, financial guaranty, or other forms of insurance offering protection

against investment risks. For purposes of this section, “financial guaranty insurance” includes any

insurance under which loss is payable upon proof of occurrence of any of the following events to

the damage of an insured claimant or obligee:

     (i) Failure of any obligor or obligors on any debt instrument or other monetary obligation,

including common or preferred stock, to pay when due the principal, interest, dividend, or purchase

price of such instrument or obligation, whether failure is the result of a financial default or

insolvency and whether or not the obligation is incurred directly or as a guarantor by, or on behalf

of, another obligor which has also defaulted;

     (ii) Changes in the level of interest rates whether short-term or long-term, or in the

difference between interest rates existing in various markets;

     (iii) Changes in the rate of exchange of currency, or from the inconvertibility of one

currency into another for any reason;

     (iv) Changes in the value of specific assets or commodities, or price levels in general;

     (3) Fidelity or surety bonds, or any other bonding obligations;

     (4) Credit insurance, vendors’ single interest insurance, or collateral protection insurance

or any similar insurance protecting the interests of a creditor arising out of a creditor-debtor

transaction. For purposes of this section, “credit insurance” means insurance on accounts

receivable;

     (5) Insurance Other than coverages that may be set forth in a cybersecurity insurance

policy, insurance of warranties or service contracts including insurance that provides for the repair,

replacement, or service of goods or property, indemnification for repair, replacement, or service

for the operational or structural failure of the goods or property due to a defect in materials,

workmanship, or normal wear and tear, or provides reimbursement for the liability incurred by the

issuer of agreements or service contracts that provide such benefits;

     (6) Title insurance;

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     (7) Ocean marine insurance, except that portion of the marine protection and indemnity

insurance covering liability of the insured for personal injury, illness, or death to employees and

insurance covering pleasure craft;

     (8) Any transaction or combination of transactions between a person, including affiliates

of the person, and an insurer, including affiliates of such insurer, which involves the transfer of

investment or credit risk unaccompanied by transfer of insurance risk;

     (9) Any insurance provided by or guaranteed by government; or

     (10) Any transaction or combination of transactions between a protected cell and the

general account or another protected cell of a protected cell company organized under the Protected

Cell Companies Act, chapter 64 of this title, as those terms are defined in this chapter.

     27-34-5. Definitions.

     As used in this chapter:

     (1) “Account” means any one of the three (3) accounts created by § 27-34-6.

     (2) “Affiliate” means a person, who directly or indirectly, through one or more

intermediaries, controls, is controlled by, or is under common control with another on December

31 of the year immediately preceding the date the insurer becomes an insolvent insurer.

     (3) “Association” means the Rhode Island insurance guaranty association created under § 

27-34-6.

     (4) “Association similar to the association” means any guaranty association, security fund,

or other insolvency mechanism that affords protection similar to that of the association. The term

shall also include any property and casualty insolvency mechanism that obtains assessments or

other contributions from insurers on a pre-insolvency basis.

     (5) “Assumed claims transaction” means the following:

     (i) Policy obligations that have been assumed by the insolvent insurer, prior to the entry of

a final order of liquidation, through a merger between the insolvent insurer and another entity

obligated under the policies, and for which assumption consideration has been paid to the applicable

guaranty associations, if the merged entity is a non-member insurer;

     (ii) Policy obligations that have been assumed by the insolvent insurer, prior to the entry

of a final order of liquidation, pursuant to a plan, approved by the domestic commissioner of the

assuming insurer, which:

     (A) Transfers the direct policy obligations and future policy renewals from one insurer to

another insurer; and

     (B) For which assumption consideration has been paid to the applicable guaranty

associations, if the assumption is from a non-member insurer.

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     (C) For purposes of this section, the term non-member insurer also includes a self-insurer,

non-admitted insurer, and risk retention group; or

     (iii) An assumption reinsurance transaction in which all of the following has occurred:

     (A) The insolvent insurer assumed, prior to the entry of a final order of liquidation, the

claim or policy obligations of another insurer or entity obligated under the claims or policies;

     (B) The assumption of the claim or policy obligations has been approved, if such approval

is required, by the appropriate regulatory authorities; and

     (C) As a result of the assumption, the claim or policy obligations became the direct

obligations of the insolvent insurer through a novation of the claims or policies.

     (6) “Assumption consideration” shall mean the consideration received by a guaranty

association to extend coverage to the policies assumed by a member insurer from a non-member

insurer in any assumed claims transaction including liabilities that may have arisen prior to the date

of the transaction. The assumption consideration shall be in an amount equal to the amount that

would have been paid by the assuming insurer during the three (3) calendar years prior to the

effective date of the transaction to the applicable guaranty associations if the business had been

written directly by the assuming insurer.

     (i) In the event that the amount of the premiums for the three-year (3) period cannot be

determined, the assumption consideration will be determined by multiplying one hundred thirty

percent (130%) against the sum of the unpaid losses, loss adjustment expenses, and incurred but

not reported losses, as of the effective date of the assumed claims transaction, and then multiplying

such sum times the applicable guaranty association assessment percentage for the calendar year of

the transaction.

     (ii) The funds paid to a guaranty association shall be allocated in the same manner as any

assessments made during the three-year (3) period. The guaranty association receiving the

assumption consideration shall not be required to recalculate or adjust any assessments levied

during the prior three (3) calendar years as a result of receiving the assumption consideration.

Assumption consideration paid by an insurer may be recouped in the same manner as other

assessments made by a guaranty association.

     (7) “Claimant” means any person instituting a covered claim; provided that no person who

is an affiliate of the insolvent insurer may be a claimant.

     (8) “Commissioner” means the director of the department of business regulation or his or

her the commissioner’s designee.

     (9) “Control” means the possession, direct or indirect, of the power to direct or cause the

direction of the management and policies of a person, whether through the ownership of voting

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securities, by contract other than a commercial contract for goods or nonmanagement services, or

otherwise, unless the power is the result of an official position with, or corporate office held by, the

person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds

with the power to vote, or holds proxies representing, ten percent (10%) or more of the voting

securities of any other person. This presumption may be rebutted by a showing that control does

not exist in fact.

     (10) “Covered claim” means:

     (i) An unpaid claim, including one for unearned premiums, submitted by a claimant, which

arises out of and is within the coverage and subject to the applicable limits of an insurance policy

to which this chapter applies, if the policy was issued by an insurer that becomes an insolvent

insurer after the effective date of this chapter and the policy was either issued by the insurer or

assumed by the insurer in an assumed claims transaction, and:

     (A) The claimant or insured is a resident of this state at the time of the insured event;

provided, that for entities other than an individual, the residence of a claimant, insured, or

policyholder is the state in which its principal place of business is located at the time of the insured

event; or

     (B) The claim is a first-party claim for damage to property with a permanent location in

this state.

     (ii) Covered claim includes claim obligations that arose through the issuance of an

insurance policy by a member insurer, which are later allocated, transferred, merged into, novated,

assumed by, or otherwise made the sole responsibility of a member or non-member insurer if:

     (A) The original member insurer has no remaining obligations on the policy after the

transfer;

     (B) A final order of liquidation with a finding of insolvency has been entered against the

insurer that assumed the member’s coverage obligations by a court of competent jurisdiction in the

insurer’s state of domicile;

     (C) The claim would have been a covered claim, as defined in this section, if the claim had

remained the responsibility of the original member insurer and the order of liquidation had been

entered against the original member insurer, with the same claim submission date and liquidation

date; and

     (D) In cases where the member’s coverage obligations were assumed by a non-member

insurer, the transaction received prior regulatory or judicial approval.

     (iii) Covered claim includes claim obligations that were originally covered by a non-

member insurer including, but not limited to, a self-insurer, non-admitted insurer or risk retention

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group, but subsequently became the sole direct obligation of a member insurer before the entry of

a final order of liquidation with a finding of insolvency against the member insurer by a court of

competent jurisdiction in its state of domicile, if the claim obligations were assumed by the member

insurer in a transaction of one of the following types:

     (A) A merger in which the surviving company was a member insurer immediately after the

merger;

     (B) An assumption reinsurance transaction that received any required approvals from the

appropriate regulatory authorities; or

     (C) A transaction entered into pursuant to a plan approved by the member insurer’s

domiciliary regulator.

     (iv) Except as provided elsewhere in this section, “covered claim” shall not include:

     (A) Any amount awarded as punitive or exemplary damages;

     (B) Any amount sought as a return of premium under any retrospective rating plan;

     (C) Any amount due any reinsurer, insurer, insurance pool, or underwriting association,

health maintenance organization, hospital plan corporation, professional health service corporation,

or self-insurer as subrogation recoveries, reinsurance recoveries, contribution, indemnification or

otherwise. No claim for any amount due any reinsurer, insurer, insurance pool, underwriting

association, health maintenance organization, hospital plan corporation, professional health service

corporation, or self-insurer may be asserted against a person insured under a policy issued by an

insolvent insurer other than to the extent the claim exceeds the association obligation limitations

set forth in § 27-34-8;

     (D) Any claims excluded pursuant to § 27-34-11.5 due to the high net worth of an insured;

     (E) Any first party claims by an insured that is an affiliate of the insolvent insurer;

     (F) Any fee or other amount relating to goods or services sought by or on behalf of any

attorney or other provider of goods or services retained by the insolvent insurer or an insured prior

to the date it was determined to be insolvent;

     (G) Any fee or other amount sought by or on behalf of any attorney or other provider of

goods or services retained by any insured or claimant in connection with the assertion or

prosecution of any claim, covered or otherwise, against the association;

     (H) Any claims for interest; or

     (I) Any claim filed with the association or a liquidator for protection afforded under the

insured’s policy for incurred-but-not-reported losses.

     (11) “Cybersecurity insurance” means for purposes of this section includes first and third-

party coverage, in a policy or endorsement, written on a direct, admitted basis for losses and loss

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mitigation arising out of or relating to data privacy breaches, unauthorized information network

security intrusions, computer viruses, ransomware, cyber extortion, identity theft, and similar

exposures.

     (11)(12) “Insolvent insurer” means an insurer licensed to transact insurance in this state

either at the time the policy was issued; when the obligation with respect to the covered claim was

assumed under an assumed claims transaction; or when the insured event occurred, and against

whom a final order of liquidation has been entered after the effective date of this chapter with a

finding of insolvency by a court of competent jurisdiction in the insurer’s state of domicile.

     (12)(13) “Insured” means any named insured, any additional insured, any vendor, lessor,

or any other party identified as an insured under the policy.

     (13)(14) “Line of credit” means an irrevocable stand-by commitment whereby the

association or member insurer and a qualified financial institution or group of qualified financial

institutions enter into a formal and binding contract in which the qualified financial institution or

group of qualified financial institutions agree to lend a certain amount of money within a stated

period of time.

     (14)(15)(i) “Member insurer” means any person who:

     (A) Writes any kind of insurance to which this chapter applies, under § 27-34-3, including

the exchange of reciprocal or interinsurance contracts;

     (B) Is licensed to transact insurance in this state; and

     (C) Is not otherwise excepted from membership by statute or regulation.

     (ii) An insurer shall cease to be a member insurer effective on the day following the

termination or expiration of its license to transact the kinds of insurance to which this chapter

applies, however, the insurer shall remain liable as a member insurer for any and all obligations,

including obligations for assessments levied prior to the termination or expiration of the insurer’s

license and assessments levied after the termination or expiration, which relate to any insurer that

became an insolvent insurer prior to the termination or expiration of the insurer’s license.

     (15)(16) “Net direct written premiums” means direct gross premiums written in this state

on insurance policies to which this chapter applies, including policy and membership fees, less the

following amounts: (i) Return premiums; (ii) Premiums on policies not taken; and (iii) Dividends

paid or credited to policyholders on that direct business. “Net direct written premiums” does not

include premiums on contracts between insurers or reinsurers.

     (16)(17) “Novation” means that the assumed claim or policy obligations became the direct

obligations of the insolvent insurer through consent of the policyholder and that thereafter the

ceding insurer or entity initially obligated under the claims or policies is released by the

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policyholder from performing its claim or policy obligations. Consent may be express or implied

based upon the circumstances, notice provided, and conduct of the parties.

     (17)(18) “Ocean marine insurance” means any form of insurance, regardless of the name,

label, or marketing designation of the insurance policy, that insures against maritime perils or risks

and other related perils or risks, which are usually insured against by traditional marine insurance,

such as hull and machinery, marine builders risk, and marine protection and indemnity. Perils and

risk insured against include without limitation: loss, damage, expense, or legal liability of the

insured for loss, damage, or expense arising out of or incident to ownership, operation, chartering,

maintenance, use, repair, or construction of any vessel, craft, or instrumentality in use in ocean or

inland waterways for commercial purposes, including liability of the insured for personal injury,

injury, illness, or death or for loss or damage to the property of the insured or another person.

     (18)(19) “Person” means any individual, aggregation of individuals, corporation,

partnership, or other entity.

     (19)(20) “Qualified financial institution” shall have the same meaning as the term in § 27-

1.1-3.

     (20)(21) “Receiver” means liquidator, rehabilitator, conservator, or ancillary receiver, as

the context requires.

     (21)(22) “Self-insurer” means a person that covers its liability through a qualified

individual or group self-insurance program or any other formal program created for the specific

purpose of covering liabilities typically covered by insurance.

     (22)(23) “Self-insured retention” means:

     (i) Any fund or other arrangement to pay claims other than by an insurance company; or

     (ii) Any arrangement under which an insurance company has no obligation to pay claims

on behalf of an insured if it is not reimbursed by the insured.

     27-34-8. Powers and duties of the association.

     (a) The association shall:

     (1)(i) Be obligated to pay covered claims existing prior to the order of liquidation; arising

within sixty (60) days after the order of liquidation or before the policy expiration date if less than

sixty (60) days after the order of liquidation or before the insured replaces the policy or causes its

cancellation if the insured does so within sixty (60) days of the order of liquidation. The obligations

shall be satisfied by paying to the claimant an amount as follows:

     (A) The full amount of a covered claim for benefits under a workers’ compensation

insurance coverage;

     (B) An amount not exceeding ten thousand dollars ($10,000), per policy for a covered

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claim for the return of unearned premium;

     (C) An amount not exceeding one million dollars ($1,000,000) for all first-party property

loss claims arising from a single occurrence under a policy covering commercial or residential

property for all other covered claims for insolvencies occurring after January 1, 2026. An amount

not exceeding five hundred thousand dollars ($500,000), per claimant for all other covered claims

for insolvencies occurring on or after January 1, 2008, and an amount not exceeding three hundred

thousand dollars ($300,000) per claimant for all other covered claims for insolvencies occurring

prior to January 1, 2008.

     (D) In no event shall the association be obligated to pay an amount in excess of five

hundred thousand dollars ($500,000) for all first and third-party claims under a policy or

endorsement providing, or that is found to provide, cybersecurity insurance coverage and arising

out of or related to a single insured event, regardless of the number of claims made or the number

of claimants.

     (ii) In no event shall the association be obligated to pay a claimant an amount in excess of

the obligation of the insolvent insurer under the policy or coverage from which the claim arises.

Notwithstanding any other provision of this chapter, a covered claim shall not include a claim filed

with the guaranty association after the final date set by the court for the filing of claims against the

liquidator or receiver of an insolvent insurer. For the purpose of filing a claim under this subsection,

notice of claims to the liquidator of the insolvent insurer shall be deemed notice to the association

or its agent and a list of claims shall be periodically submitted to the association or association

similar to the association in another state by the liquidator.

     (iii) Any obligation of the association to defend an insured shall cease upon the

association’s payment or tender of an amount equal to the lesser of the association’s covered claim

obligation limit or the applicable policy limit;

     (2) Be deemed the insurer to the extent of its obligation on the covered claims and to that

extent, subject to the limitation provided in this chapter, shall have all rights, duties, and obligations

of the insolvent insurer as if the insurer had not become insolvent, including, but not limited to, the

right to pursue and retain salvage and subrogation recoverable on covered claim obligations to the

extent paid by the association. The association shall not be deemed the insolvent insurer for the

purpose of conferring jurisdiction;

     (3) Allocate claims paid and expenses incurred among the three (3) accounts separately,

and assess member insurers separately for each account amounts necessary to pay the obligations

of the association under subdivision (a)(1) subsequent to an insolvency, the expenses of handling

covered claims subsequent to an insolvency, and other expenses authorized by this chapter. The

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assessments of each member insurer shall be in the proportion that the net direct written premiums

of the member insurer for the calendar year preceding the assessment on the kinds of insurance in

the account bears to the net direct written premiums of all member insurers for the calendar year

preceding the assessment on the kinds of insurance in the account. Each member insurer shall be

notified of the assessment not later than thirty (30) days before it is due.

     A member insurer may not be assessed in any one year on any account an amount greater

than two percent (2%) of that member insurer’s net direct written premiums for the calendar year

preceding the assessment on the kinds of insurance in the account. If the maximum assessment,

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, each member

insurer shall be assessed the additional amount that must be obtained to make all necessary

payments of the underfunded account from the other two accounts, subject to the same limitation

of two percent (2%) of that member insurer’s net direct written premiums for the calendar year

preceding the assessment on the kinds of insurance in the account. The additional assessments shall

be considered loans by and between the separate accounts. Amounts borrowed under this

subsection shall be paid back to the separate accounts from which they were borrowed, out of

assets, including, but not limited to, existing and future assessments in the account receiving the

loan. An interest charge shall be levied on all amounts borrowed under this subsection based on the

average prime rate of interest for each year the money remains unpaid. If the amounts borrowed

remain unpaid on the seventh yearly anniversary as a result of the inability of the borrowing account

to make repayment, then the amount borrowed and interest which is not repaid, starting with the

principal and interest of the first year, shall be considered uncollectible. The funds available shall

be prorated and the unpaid portion shall be paid as soon after this as funds become available. The

association may exempt or defer, in whole or in part, the assessment of any member insurer if the

assessment would 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, no dividends shall be paid to shareholders or policyholders. Deferred assessments shall

be paid when the payment will not reduce capital or surplus below required minimums. Payments

shall be refunded to those companies receiving larger assessments by virtue of the deferment, or,

at the election of any company, credited against future assessments;

     (4) Investigate claims brought against the association and adjust, compromise, settle, and

pay covered claims to the extent of the association’s obligation and deny all other claims. The

association shall pay claims in any order that it may deem reasonable, including the payment of

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claims as they are received from the claimants or in groups or categories of claims. The association

shall have the right to appoint and to direct legal counsel retained under liability insurance policies

for the defense of covered claims and to appoint and direct other service providers for covered

services;

     (5) Notify claimants in this state as deemed necessary by the commissioner and upon the

commissioner’s request, to the extent records are available to the association;

     (6)(i) Have the right to review and contest as set forth in this subsection settlements,

releases, compromises, waivers, and judgments to which the insolvent insurer or its insureds were

parties prior to the entry of the order of liquidation. In an action to enforce settlements, releases,

and judgments to which the insolvent insurer or its insureds were parties prior to the entry of the

order of liquidation, the association shall have the right to assert the following defenses, in addition

to the defenses available to the insurer:

     (A) The association is not bound by a settlement, release, compromise, or waiver executed

by an insured or the insurer, or any judgment entered against an insured or the insurer by consent

or through a failure to exhaust all appeals, if the settlement, release, compromise, waiver, or

judgment was:

     (I) Executed or entered into within one hundred twenty (120) days prior to the entry of an

order of liquidation, and the insured or the insurer did not use reasonable care in entering into the

settlement, release, compromise, waiver, or judgment, or did not pursue all reasonable appeals of

an adverse judgment; or

     (II) Executed by or taken against an insured or the insurer based on default, fraud, collusion,

or the insurer’s failure to defend.

     (B) If a court of competent jurisdiction finds that the association is not bound by a

settlement, release, compromise, waiver, or judgment for the reasons described in subparagraph

(i)(A), the settlement, release, compromise, waiver, or judgment shall be set aside, and the

association shall be permitted to defend any covered claim on the merits. The settlement, release,

compromise, waiver, or judgment may not be considered as evidence of liability or damages in

connection with any claim brought against the association or any other party under this chapter.

     (C) The association shall have the right to assert any statutory defenses or rights of offset

against any settlement, release, compromise, or waiver executed by an insured or the insurer, or

any judgment taken against the insured or the insurer.

     (ii) As to any covered claims arising from a judgment under any decision, verdict, or

finding based on the default of the insolvent insurer or its failure to defend, the association, either

on its own behalf or on behalf of an insured, may apply to have the judgment, order, decision,

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verdict, or finding set aside by the same court or administrator that entered the judgment, order,

decision, verdict, or finding and shall be permitted to defend the claim on the merits;

     (7) Handle claims through its employees or through one or more insurers or other persons

designated as servicing facilities. Designation of a servicing facility is subject to the approval of

the commissioner, but the designation may be declined by a member insurer;

     (8) 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;

     (9)(i) The association shall obtain a line of credit for the benefit of each account, in an

amount not to exceed the applicable maximum to ensure the immediate availability of funds for

purposes of future claims and expenses attributable to an insurer insolvency in that account. The

line of credit shall be obtained from qualified financial institutions. The line of credit shall provide

for a thirty-day (30) notice of termination or nonrenewal to the commissioner and the association

and shall provide funding to the association within three (3) business days of receipt of written

notice from the commissioner of an insolvent insurer in that account. Each member insurer upon

receipt of notice from the association shall make immediate payment for its proportionate share of

the amount borrowed based on the premium for the preceding calendar year. The maximum line of

credit or preinsolvency assessment for each account shall be subject to prior review and approval

by the commissioner at the time of origination.

     (ii) If the association cannot obtain a line of credit, the association may obtain an

irrevocable line of credit agreement from each member insurer in an amount not to exceed the

member insurer’s maximum assessment pursuant to subdivision (a)(3) to ensure the immediate

availability of funds for the purposes of future claims and expenses attributable to an insurer

insolvency.

     Any amount drawn under any line of credit shall be considered a payment toward the

member insurer’s assessment provided for in subdivision (a)(3).

     The member insurer shall provide funding to the association under the line of credit within

three (3) business days of receipt of a written request from the association for a draw-down under

the line of credit.

     The line of credit agreement shall be subject to prior review and approval by the

commissioner at the time of origination and any subsequent renewal. It shall include any

commercially reasonable provisions the association or the commissioner may deem advisable,

including a provision that the line of credit is irrevocable or for a stated period of time and provides

for thirty-day (30) notice to the association and the commissioner that the line is being terminated

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or not renewed.

     (iii) If a line of credit is not given as provided for in this section, the member insurer shall

be responsible for the payment of an assessment of up to the member’s proportionate share of the

applicable maximum as set forth in this subsection which shall be paid into a pre-insolvency

assessment fund in each account;

     (10) Submit, not later than ninety (90) days after the end of the association’s fiscal year, a

financial report for the preceding fiscal year in a form approved by the commissioner.

     (b) The association may:

     (1) Employ or retain persons as are necessary to handle claims and perform other duties of

the association;

     (2) Borrow funds necessary to effect the purposes of this chapter in accordance with the

plan of operation;

     (3) Sue or be sued;

     (4) Negotiate and become a party to any contracts necessary to carry out the purpose of

this chapter;

     (5) Perform any other acts necessary or proper to effectuate the purpose of this chapter;

and

     (6) Refund to the member insurers in proportion to the contribution of each member insurer

to that account that amount by which the assets of the account exceed the liabilities, if, at the end

of any calendar year, the board of directors finds that the assets of the association in any account

exceed the liabilities of that account as estimated by the board of directors for the coming year.

     (c) Suits involving the association:

     (1) Except for actions by the receiver, all actions relating to or arising out of this chapter

against the association shall be brought in the courts in this state. The courts shall have exclusive

jurisdiction over all actions relating to or arising out of this chapter against the association.

     (2) The exclusive venue in any action by or against the association is in the Providence

county superior court. The association may, at its option, waive this venue as to specific actions.

     27-34-11.5. Net worth exclusion.

     (a) For purposes of this section, “high net worth insured” shall mean any insured, excluding

state and local governments, whose net worth exceeds fifty million dollars ($50,000,000) on

December 31 of the year prior to the year in which the insurer becomes an insolvent insurer;

provided that an insured’s net worth on that date shall be deemed to include the aggregate net worth

of the insured and all of its subsidiaries and affiliates as calculated on a consolidated basis.

     (b)(1) The association shall not be obligated to pay any first-party claims by a high net

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worth insured.

     (2) The association shall have the right to recover from the high net worth insured all

amounts paid by the association to or on behalf of such insured, whether for indemnity, defense, or

otherwise.

     (3) The association may also, at its sole discretion and without assumption of any ongoing

duty to do so, pay any cybersecurity insurance obligations covered by a policy or endorsement of

an insolvent company on behalf of a high net worth insured as defined in subsection (a) of this

section. In that case, the association shall recover from the high net worth insured under this section

all amounts paid on its behalf, all allocated claim adjusted expenses related to such claims, the

association’s attorneys’ fees, and all court costs in any action necessary to collect the full amount

to the association’s reimbursement under this section.

     (c) The association shall not be obligated to pay any claim that would otherwise be a

covered claim that is an obligation to or on behalf of a person who has a net worth greater than that

allowed by the insurance guaranty association law of the state of residence of the claimant at the

time specified by that state’s applicable law, and which association has denied coverage to that

claimant on that basis.

     (d) The association shall establish reasonable procedures subject to the approval of the

commissioner for requesting financial information from insureds on a confidential basis for

purposes of applying this section, provided that the financial information may be shared with any

other association similar to the association and the liquidator for the insolvent insurer on the same

confidential basis. Any request to an insured seeking financial information must advise the insured

of the consequences of failing to provide the financial information. If an insured refuses to provide

the requested financial information where it is requested and available, the association may, until

such time as the information is provided, provisionally deem the insured to be a high net worth

insured for the purpose of denying a claim under subsection (b).

     (e) In any lawsuit contesting the applicability of this section where the insured has refused

to provide financial information under the procedure established pursuant to subsection (d), the

insured shall bear the burden of proof concerning its net worth at the relevant time. If the insured

fails to prove that its net worth at the relevant time was less than the applicable amount, the court

shall award the association its full costs, expenses, and reasonable attorney’s fees in contesting the

claim.

     SECTION 3. This act shall take effect on January 1, 2026.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO INSURANCE -- VOLUNTARY RESTRUCTURING OF SOLVENT

INSURERS

***

     This act would make numerous technical corrections related to insurance, provides a

definition for "cybersecurity insurance".

     This act would take effect on January 1, 2026.

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