Public Law 404

CHAPTER 404 94-S 3168A

Approved Jul. 13, 1994.

AN ACT RELATING TO INSURANCE

It is enacted by the General Assembly as follows:

SECTION 1. Sections 27-19-8 and 27-19-9 of the General Laws in Chapter 27-19 entitled "Nonprofit Hospital Service Corporations" are hereby amended to read as follows:

{DEL 27-19-8. Annual statement. -- DEL} {ADD 27-19-8. Annual and quarterly statements. -- ADD} {ADD (a) ADD} Every such nonprofit hospital service corporation shall annually, on or before the first day of March in each year, file in the office of the commissioner of insurance a statement, verified by at least two (2) of the principal officers of the corporation, of its condition on the thirty-first day of December then next preceding, which statement shall {ADD be in general form and context as approved by the National Association of Insurance Commissioners and ADD} contain such matters as the commissioner shall prescribe and shall be available for inspection by the public.

{ADD (b) Every such corporation shall also file quarterly statements with the insurance commissioner, due on or before forty-five (45) days after the quarter ending in accordance with the National Association of Insurance Commissioners' guidelines and procedures, and shall be available for inspection by the public.

{ADD 27-19-9. Examination of affairs of corporations. -- ADD} It shall be the duty of the insurance commissioner {DEL at such time or times as he may see fit but at least once in each three (3) years DEL} to make an examination of the financial condition and methods of doing business of every such nonprofit hospital service corporation. {DEL The total cost of such examination shall be borne by the corporations so examined and shall be one hundred thirty-five percent (135%) of the total salaries paid to the examining personnel of the insurance division engaged in such examinations less any salary reimbursements and shall be paid to the insurance commissioner to and for the use of the state. Such assessment shall be in addition to any taxes and fees otherwise payable to the state. DEL} {ADD Said examination shall be performed, and the associated costs shall be borne by the company, in accordance with all provisions of section 27-13.1. ADD}

SECTION 2. Sections 27-20-8 and 27-20-9 of the General Laws in Chapter 27-20 entitled "Nonprofit Medical Service Corporations" are hereby amended to read as follows:

{DEL 27-20-8. Annual statement. -- DEL} {ADD 27-20-8. Annual and quarterly statements. -- ADD} {ADD (a) ADD} Every such nonprofit medical service corporation shall annually, on or before the first day of March in each year, file in the office of the director of business regulation a statement, verified by at least two (2) of the principal officers of the corporation, of its condition on the thirty-first day of December then next preceding, which statement shall {ADD be in general form and context as approved by the National Association of Insurance Commissioners and ADD} contain such matters as the director of business regulation shall prescribe and shall be available for inspection by the public.

{ADD 27-20-9. Examination of affairs of corporation. -- ADD} It shall be the duty of the director of business regulation {DEL at such time or times as the director may see fit, but at least once in each three (3) years DEL} to make an examination of the financial condition and methods of doing business of every such nonprofit medical service corporation. {DEL The total cost of the examinations shall be borne by the corporations so examined and shall be one hundred thirty-five percent (135%) of the total salaries paid to the examining personnel of the insurance division engaged in the examinations less any salary reimbursements, and shall be paid to the director of business regulation to and for the use of the state. The assessment shall be in addition to any taxes and fees otherwise payable to the state. DEL} {ADD Said examination shall be performed, and the associated costs shall be borne by the company, in accordance with all provisions of section 27-13.1. ADD}

SECTION 3. Sections 27-20.1-4 and 27-20.1-5 of the General Laws in Chapter 27-20.1 entitled "Nonprofit Dental Service Corporations" are hereby amended to read as follows:

{DEL 27-20.1-4. Annual statement. -- DEL} {ADD 27-20.1-4. Annual and quarterly statements. -- ADD} {ADD (a) ADD} Every nonprofit dental service corporation shall annually, on or before the first day of March in each year, file in the office of the director of business regulation a statement, verified by at least two (2) of the principal officers of the corporation, of its condition on the 31st day of December then next preceding, which statement shall {ADD be in general form and context as approved by the National Association of Insurance Commissioners and ADD} contain such matters as the director of business regulation shall prescribe and shall be available for inspection by the public.

{ADD 27-20.1-5. Examination of affairs of corporation. -- ADD} It shall be the duty of the director of business regulation {DEL at such time or times as the director may see fit, but at least once a year DEL} {ADD every three (3) years ADD} to make an examination of the financial condition and methods of doing business of every such nonprofit dental service corporation. {DEL The total cost of the examinations shall be borne by the corporations so examined and shall be one hundred thirty-five percent (135%) of the total salaries paid to the examining personnel of the insurance division engaged in the examinations less any salary reimbursements, and shall be paid to the director of business regulation to and for the use of the state. The assessment shall be in addition to any taxes and fees otherwise payable to the state. DEL} {ADD Said examination shall be performed, and the associated costs shall be borne by the company, in accordance with all provisions of section 27-13.1. ADD}

SECTION 4. Sections 27-20.2-4 and 27-20.2-5 of the General Laws in Chapter 27-20.2 entitled "Nonprofit Optometric Service Corporations" are hereby amended to read as follows:

{DEL 27-20.2-4. Annual statement. -- DEL} {ADD 27-20.2-4. Annual and quarterly statements. -- ADD} {ADD (a) ADD} Every nonprofit optometric service corporation shall annually, on or before the first day of March in each year, file in the office of the director of business regulation a statement, verified by at least two (2) of the principal officers of the corporation, of its condition on the 31st day of December then next preceding, which statement shall contain such matters as the director of business regulation shall prescribe and shall be available for inspection by the public.

{ADD 27-20.2-5. Examination of affairs of corporation. -- ADD} It shall be the duty of the director of business regulation {DEL at such time or times as the director may see fit, but at least once a year, DEL} to make an examination of the financial condition and methods of doing business of every nonprofit optometric service corporation. {DEL Each corporation so examined shall pay for the examination at the rate of ten dollars ($10.00) a day for each examiner reasonably employed in making the examination, provided that no corporation shall be required to pay for the examinations during any one year a total sum in excess of two hundred dollars ($200). DEL} {ADD Said examination shall be performed, and the associated costs shall be borne by the company, in accordance with all provisions of section 27-13.1. ADD}

SECTION 5. Sections 27-20.3-4 and 27-20.3-5 of the General Laws in Chapter 27-20.3 entitled "Nonprofit Legal Service Corporations" are hereby amended to read as follows:

{DEL 27-20.3-4. Annual statement. -- DEL} {ADD 27-20.3-4. Annual and quarterly statements. -- ADD} {ADD (a) ADD} Every nonprofit prepaid legal service corporation shall annually, on or before the first day of March in each year, file in the office of the director of business regulation a statement verified by at least two (2) of the principal officers of the corporation, of its condition on the thirty-first day of December then next preceding, which statement shall contain such matters relating to its financial operation, financial condition, and reserves as the director of business regulation shall prescribe, and shall be available for inspection by the public.

{ADD 27-20.3-5. Examination of affairs of corporation. -- ADD} It shall be the duty of the director of business regulation {DEL at such time or times as the director may see fit, but at least once in each three (3) years, DEL} to make an examination of the financial condition and methods of doing business of every nonprofit prepaid legal service corporation. {DEL The total cost of the examination shall be borne by the corporation so examined and shall be one hundred thirty-five percent (135%) of the total salaries paid to the examining personnel of the department of business regulation during the examinations and shall be paid to the director of business regulation to and for the use of the state. The assessment shall be in addition to any taxes and fees otherwise payable to the state. DEL} {ADD Said examination shall be performed, and the associated costs shall be borne by the company, in accordance with all provisions of section 27-13.1. ADD}

SECTION 6. Section 27-12-1 of the General Laws in Chapter 27-12 entitled "Annual Reports of Insurance Companies" is hereby amended to read as follows:

{ADD 27-12-1. Time of filing -- Contents of report. -- ADD} {ADD (a) ADD} Every insurance company of whatever name or kind, doing business in this state, shall annually on the first day of January, or within two (2) months thereafter, file with the insurance commissioner an annual National Association of Insurance Commissioners statement Convention blank prepared in accordance with the national association of insurance commissioners annual statement instructions and accounting practices and procedures manuals as may be amended from time to time and shall pay a filing fee of one hundred dollars ($100), signed and sworn to by its president and secretary, of its exact condition specifying that the company is a fire, marine, fire and marine, life, health, accident, or other insurance company, as the case may be; stating the amount of its capital and the manner of its investment; designating the amount invested respectively in mortgages, in what companies, particularizing each item of investment; the amount of marine risks not terminated, and the premium paid thereon; the amount of fire risks not terminated, and the premium paid thereon; the amount of liabilities, specifying therein the amount of outstanding claims, adjusted or unadjusted, due or not due; and in case the company is incorporated on the mutual principle, the statement shall set forth, in addition to the foregoing, the amount of risks insured by the company, the amount of premium thereon, what portion of it has been paid in cash, what security has been taken for the remainder, and what is the largest sum insured in any one risk; and, except in the case of a company writing less than one million dollars ($1,000,000) of total direct plus assumed written premiums during a calendar year or which has less than one thousand (1,000) policyholders or certificate holders at the end of a calendar year, a statement of actuarial opinion relating to loss and loss adjustment expense reserves; and, except in the case of a company having direct premiums written of less than one million dollars ($1,000,000) in any calendar year and less than one thousand (1,000) policyholders or certificate holders at the end of a calendar year, an audited financial report prepared by an independent certified public accountant; and the statement herein required to be made, so far as applicable, shall be made of each class in companies authorized to take risks in classes, and in all cases the returns may be varied by the commissioner to obtain more definite information of the company.

{ADD (b) Companies may be required to file quarterly statements upon request by the insurance commissioner, in accordance with the National Association of Insurance Commissioners' guidelines and procedures, due on or before forty-five (45) days after the quarter ending. Annual and quarterly statements shall be available for inspection by the public. ADD}

SECTION 7. Sections 27-4-6.1 and 27-4-24 of the General Laws in Chapter 27-4 entitled "Life Insurance Policies and Reserves" are hereby amended to read as follows:

{ADD 27-4-6.1. Right to examine and return policy. -- ADD} Every individual life insurance policy delivered or issued for delivery in this state after July 1, 1978 {ADD and every individual annuity contract delivered in this state after January 1, 1995 ADD} shall contain a provision therein, or in a separate rider attached thereto when delivered, stating in substance that the person to whom the policy {ADD or contract ADD} is issued shall be permitted to return the policy {ADD or contract ADD} within a minimum of ten (10) days of its delivery to that person and to have a refund of the premium paid, if after examination of the policy {ADD or contract ADD} the purchaser is not satisfied with it for any reason. The provision shall be set forth in the policy {ADD or contract ADD} under an appropriate caption and, if not so printed on the face page of the policy {ADD or contract ADD} , adequate notice of the provision shall be printed or stamped conspicuously on the face page. The policy {ADD or contract ADD} may be so returned to the insurer at its home or branch office or to the agent through whom it was applied for, and thereupon shall be void as from the beginning and as if the policy {ADD or contract ADD} had not been issued.

{ADD 27-4-24. Filing of life insurance policy forms. -- ADD} Any insurance company authorized to do a life insurance {ADD and/or annuities ADD} business within this state in accordance with the provisions of this title shall file all life insurance policy forms {ADD and annuity contract forms ADD} used by it in the state with the insurance commissioner. The commissioner may also require any company to file the forms of any rider, {DEL indorsement DEL} {ADD endorsement ADD} , application blank, and other matter generally used or incorporated by reference in its policies or contracts of insurance {ADD or annuities ADD} . Any organization, bureau, or association of which the company is a member may, on behalf of the company, make the filings required by this section. If the commissioner finds from an examination of any form so filed that it is contrary to the public interest, he or she shall forbid the use thereof, and shall notify the company in writing as provided in section 27-4-24.2.

SECTION 8. Section 27-3-39 of the General Laws in Chapter 27-3 entitled "Surplus Line Broker's Bond" is hereby amended to read as follows:

{ADD 27-3-39. Surplus line broker's bond. -- ADD} (a) No license to act as a surplus line broker in this state shall be issued until a certificate of the general treasurer is deposited with the insurance commissioner on a blank furnished by that insurance commissioner, stating that the licensee has filed with the general treasurer a bond in the penal sum of {DEL seventy-five thousand dollars ($75,000) DEL} {ADD twenty-five thousand dollars ($25,000) ADD} executed by the licensee as principal and by a surety company authorized to transact business in this state as surety, and conditioned upon the licensee faithfully complying with all of the requirements of section 27-3-38.

(b) Any bond required by this section shall be continuous while the principal is licensed to act as a surplus line broker in this state; provided, that before the bond may be cancelled, the insurance commissioner must have been notified in writing by the surety of the proposed cancellation at least thirty (30) days prior to the date cancellation is to become effective; and, provided, further, that in the event of cancellation, any license covered thereby shall be suspended by the insurance commissioner pending the substitution of a like bond for the bond so cancelled. The surety shall be released from further liability under any bond covering a license revoked, terminated or expired as to any acts committed after the date that license is revoked, terminated, or expired. The aggregate liability of the surety for any and all claims or recoveries which arise under any bond shall in no event exceed the amount of the penal sum of the bond. The commissioner may promulgate standards and procedures for collecting under bonds issued pursuant to this section.

SECTION 9. Section 27-11.1-4 of the General Laws in Chapter 27-11.1 entitled "Investments of Domestic Insurance Companies" is hereby amended to read as follows:

{ADD 27-11.1-4. Maximum investments in affiliated or subsidiary companies. -- ADD} A domestic insurance company may invest in securities of affiliated insurance companies or subsidiary insurance companies provided however that any investment in securities of affiliated insurance companies or subsidiary insurance companies shall not exceed in the aggregate fifty per cent (50%) of the domestic insurance company's surplus. A domestic insurance company may invest in securities of affiliated non-insurance companies or subsidiary non-insurance companies in amounts which do not exceed the lesser of ten percent (10%) of such insurer's assets or fifty percent (50%) of such insurer's surplus as regards policyholders, provided that after such investments, the insurer's surplus as regards policyholders will be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. {ADD In no event may the aggregate investment in securities of insurance or non-insurance affiliates or subsidiary companies exceed fifty percent (50%) of the domestic insurance company's surplus. ADD}

SECTION 10. Section 27-2.3-21 of the General Laws in Chapter 27-2.3 entitled "Single License Procedure Act" is hereby amended to read as follows:

{ADD 27-2.3-21. Bond required of insurance producers -- [Effective January 1, 1994. --] ADD} (a) {DEL Each DEL} {ADD After January 1, 1995, each ADD} insurance producer who brokers insurance shall maintain in force while licensed a bond filed with the general treasurer in favor of the people of the state of Rhode Island executed by an authorized surety company and payable to any party injured under the terms of the bond. The bond shall be continuous in form and in the amount of {DEL two thousand five hundred dollars ($2,500) or five percent (5%) DEL} {ADD five thousand dollars ($5,000) or one percent (1%) ADD} of the premiums brokered in the previous calendar year, whichever is greater, but not to exceed twenty-five thousand dollars ($25,000) total aggregate liability. The bond shall be conditioned upon full accounting and due payment to the person or company entitled thereto, of funds coming into the insurance producer's possession as an incident to insurance transactions under his license.

(b) Authorized insurance producers of a licensed firm may meet the requirements of this section with a bond in the name of the licensed firm, continuous in form and in the amounts set forth in subsection (a) of this section.

(c) Such bond shall remain in force and effect until the surety is released from liability and by the director or until the bond is cancelled by the surety. The surety may cancel the bond and be released from further liability thereunder upon thirty (30) days' written notice in advance to the director. Such cancellation shall not affect any liability incurred or accrued thereunder before the termination of the thirty (30) day period. Upon receipt of any notice of cancellation, the director shall immediately notify the licensee.

(d) Such license shall automatically terminate upon there being no bond in force, or if the producer acts without a bond which is required pursuant to this section, and the license shall be returned by its lawful custodian to the director for cancellation.

(e) For the purposes of this section, brokering of insurance shall mean placing business through another insurance producer or insurance producer firm {ADD , insurance company or underwriting association ADD} rather than directly with an insurance company {DEL . DEL} {ADD for which the insurance producer is contracted. ADD}

SECTION 11. Sections 27-4.5-4.1, 27-4.5-5 and 27-4.5-8 of the General Laws in Chapter 27-4.5 entitled "The Standard Valuation Law" are hereby amended to read as follows:

{ADD 27-4.5-4.1. Computation of minimum standard by calendar year of issue -- [Effective January 1, 1994. -- ] ADD} (a) Applicability of this section. The interest rates used in determining the minimum standards for the valuation of:

(1) All life insurance policies issued on or after January 1, 1994;

(2) All individual annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1994;

(3) All annuities and pure endowments purchased in a particular calendar year on or after January 1, 1994 under group annuity and pure endowment contracts; and

(4) The net increase, if, any, in a particular calendar year after January 1, 1994, in amounts held under guaranteed interest contracts, shall be the calendar year statutory valuation interest rates as defined in this section 27-4.5-4.1.

(b) Calendar Year Statutory Valuation Interest Rates. (1) The calendar year statutory valuation interest rates, "I", shall be determined as follows and the results rounded to the nearer one-quarter of one percent (1/4 of 1%):

(A) For life insurance: I = .03 + W(R1 --.03) + W/2 (R2 --.09);

(B) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options:

I = .03 + W(RI--.03); where R1 is the lesser of R and .09, R2 is the greater of R and .09, R is the reference interest rate defined in this section, and W is the weighting factor defined in this section;

(C) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issued year basis, except as stated in (B) above, the formula for life insurance stated in (A) above shall apply to annuities and guaranteed interest contracts with guarantee durations in excess of ten (10) years and the formula for single premium immediate annuities stated in (B) above shall apply to annuities and guaranteed interest contracts with guarantee duration of ten (10) years or less;

(D) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities stated in (B) above shall apply.

(E) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, the formula for single premium immediate annuities stated in (B) above shall apply.

(2) If however, the calendar year statutory valuation interest rate for any life insurance policies issued in any calendar year determined without reference to this sentence differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than one-half of one percent (1/2 of 1%) the calendar year statutory valuation interest rate for such life insurance policies shall be equal to the corresponding actual rate for the immediately preceding calendar year. For purposes of applying the immediately preceding sentence, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1994, using the reference interest rate defined in 1993 by application of the standards specified in section 27-4-17(2) and shall be determined for each subsequent calendar year regardless of when section 27-4.3-5 becomes effective.

(c) (1) The weighting factors referred to in the formulas stated in subsections 27-4.5-4(a) (b) (1) (A) and (B) are given in the following tables:

(A) WEIGHTING FACTORS FOR LIFE INSURANCE: Guarantee Duration (Years) Weighting Factors 10 or less .50 More than 10, but {DEL less DEL} {ADD not more ADD} than 20 .45 More than 20 .35

For life insurance, the guarantee duration is the maximum number of years the life insurance can remain in force on a basis guaranteed in the policy or under options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy;

(B) Weighting factor for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options is .80;

(C) Weighting factors for other annuities and for guaranteed interest contracts, except as stated in (B) above, shall be as specified in Tables (i), (ii) and (iii) below, according to the rules and definitions in (iv), (v) and (vi) below:

(i) For annuities and guaranteed interest contracts valued on an issue year basis: Guarantee Duration (Years) Weighting Factor for Plan Type A B {ADD C ADD} 5 or less: .80 .60 {ADD .50 ADD} More than 5, but not more than 10: .75 .60 {ADD .50 ADD} More than 10, but not more than 20: .65 .50 {ADD .45 ADD} More than 20: .45 .35 {ADD .35 ADD}

(ii) For annuities and guaranteed interest contracts valued on a change in fund basis, the factors show in (i) above increased by: Plan Type A B C .15 .25 .05

(iii) For annuities and guaranteed interest contracts valued on an issued year basis, other than those with no cash settlement options, which do not guarantee interest on considerations received more than one year after issue or purchase and for annuities and guaranteed interest contracts valued on a change in fund basis which do not guarantee interest rates on consideration received more than twelve (12) months beyond the valuation date, the factors shown in (i) above or derived in (ii) above increased by: Plan Type A B C .05 .05 .05

(iv) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee durations in excess of twenty (20) years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guaranteed duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.

(v) Plan type as used in the above tables is defined as follows:

(A) Plan Type A: At any time policyholder may withdraw funds only (1) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (2) without such adjustment but installments over five years or more, or (3) as an immediate life annuity, or (4) no withdrawal permitted.

(B) Plan Type B: Before expiration of the interest rate guarantee, policyholder may withdraw funds only (1) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (2) without such adjustment but in installments over five years or more, or (3) no withdrawal permitted. At the end of interest rate guarantee, funds may be withdrawn without such adjustment in a single sum or installments over less than five years.

(C) Plan Type C: Policyholder may withdraw funds before expiration of interest rate guarantee in a single sum or installments over less than five years either (1) without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (2) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.

(vi) A company may elect to value guaranteed interest contracts with cash settlement options and annuities with cash settlement options on either an issue year basis or on a change in fund basis. Guaranteed interest contracts with no cash settlement options and other annuities with no cash settlement options must be valued on an issue year basis. As used in this section, an issue year basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard for the entire duration of the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of issue or year of purchase of the annuity or guaranteed interest contract, and the change in fund basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard applicable to each change in the fund held under the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of the change in the fund.

(d) Reference Interest Rate. (1) Reference Interest Rate referred to in subsection (B) of this section shall be defined as follows:

(A) For all life insurance, the lesser of the average over a period of thirty-six (36) months and the average over a period of twelve (12) months, ending on June 30 of the calendar year next preceding the year of issue, of the Monthly Average of the composite Yield on Seasoned Corporate Bonds, as published by Moody's Investors Service, Inc.

(B) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the average over a period of twelve (12) months, ending on June 30 of the calendar year of issue or year of purchase, of the Monthly Average of the Composite Yield on Seasoned Corporate Bonds, as published by Moody's Investors Service, Inc.

(C) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in (B) above, with guarantee duration in excess of ten (10) years, the lesser of the average over a period of thirty-six (36) months and the average over a period of twelve (12) months, ending on June 30 of the calendar year of issue or purchase, of the Monthly Average of the Composite Yield on Seasoned Corporate Bonds, as published by Moody's Investors Service, Inc.

(D) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in (B) above, with guarantee duration of ten (10) years or less, the average over a period of twelve (12) months, ending on June 30 of the calendar year of issue or purchase, of the Monthly Average of the Composite Yield on Seasoned Corporate Bonds, as published by Moody's Investors Service, Inc.

(E) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the average over a period of twelve (12) months, ending on June 30 of the calendar year of issue or purchase, of the Monthly Average of the Composite Yield on Seasoned Corporate Bonds, as published by Moody's Investors Service, Inc.

(F) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except as stated in (b) above, the average over a period of twelve (12) months, ending on June 30 of the calendar year of the change in the fund, of the Monthly Average of the Composite Yield on Seasoned Corporate Bonds, as published by Moody's Investors Service, Inc.

(e) Alternative Method for Determining Reference Interest Rates. In the event that the Monthly Average of the Composite Yield on Seasoned Corporate Bonds is no longer published by Moody's Investors Service, Inc. or in the event that the National Association of Insurance Commissioners determines that the Monthly Average of the Composite Yield on Seasoned Corporate Bonds as published by Moody's Investors Service, Inc. is no longer appropriate for the determination of the reference interest rate, then an alternative method for determination of the reference interest rate, which is adopted by the National Association of Insurance Commissioners and approved by regulation promulgated by the commissioner of insurance, may be substituted.

{ADD 27-4.5-5. Reserve valuation method -- Life insurance and endowment benefits -- [Effective January 1, 1994. --] ADD} Except as otherwise provided in sections 5a, 8, and 10 of this chapter, reserves according to the commissioners' {ADD reserve ADD} valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums shall be the excess, if any, of the present value, at the date of valuation, of such future guaranteed benefits provided for by such policies, over the then present value of any future modified net premiums therefor. The modified net premiums for any such policy shall be such uniform percentage of the respective contract premiums for such benefits that the present value, at the date of issue of the policy, of all such modified net premiums shall be equal to the sum of the then present value of such benefits provided for by the policy and the excess of (a) over (b), as follows:

(a) A net level annual premium equal to the present value, at the date of issue, of such benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one per annum payable on the first and each subsequent anniversary of such policy on which a premium falls due; provided, however, that such net level annual premium shall not exceed the net level annual premium shall not exceed the net level annual premium on the nineteen (19) year premium whole life plan for insurance of the same amount at an age one year higher than the age at issue of such policy.

(b) A net one year term premium for such benefits provided for in the first policy year.

Provided that for any life insurance policy issued or or after January 1, 1994 for which the contract premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the reserve according to the commissioner's reserve valuation method as of any policy anniversary occurring on or before the assumed ending date defined herein as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than such excess premium shall, except as otherwise provided in section 8 of this chapter, be the greater of the reserve as of such policy anniversary calculated as described in the preceding paragraph and the reserve as of such policy anniversary calculated as described in that paragraph, but with (i) the value defined in subsection (a) of that paragraph being reduced by fifteen percent (15%) of the amount of such excess first year premium, (ii) all present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date, (iii) the policy being assumed to mature on such date as an endowment, and (iv) the cash surrender value provided on such date being considered as an endowment benefit. In making the above comparison the mortality and interest basis stated in sections 4 and 4a of this chapter shall be used.

Reserves according to the commissioner's reserve valuation method for: (i) life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums;

(ii) group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under section 408 of the Internal Revenue Code, as now or hereafter amended; (iii) disability and accidental death benefits in all policies and contracts; and (iv) all other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts, shall be calculated by a method consistent with the principles of the preceding paragraphs of this section.

{ADD 27-4.5-8. Reserve calculation -- Valuation net premium exceeding the gross premium charged -- [Effective January 1, 1994. --] ADD} If in any contract year the gross premium charged by any life insurance company on any policy or contract is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve thereon but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for such policy or contract shall be the greater of either the reserve calculated according to the mortality table, rate of interest, and method actually used for such policy or contract, or the reserve calculated by the method actually used for such policy or contract but using the minimum valuation standards of mortality and rate of interest and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. The minimum valuation standards of mortality and rate of interest referred to in this section are those standards stated in section {ADD s ADD} 4 {ADD and 4.1 ADD} of this chapter.

Provided that for any life insurance policy issued on or after January 1, 1994 for which the gross premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the foregoing provisions of this section of this chapter shall be applied as if the method actually used in calculating the reserve for such policy were the method described in section 5 of this chapter, ignoring the second paragraph of that section. The minimum reserve at each policy anniversary of such a policy shall be the greater of the minimum reserve calculated in accordance with section 5 of this chapter, including the second paragraph of that section, and the minimum reserve calculated in accordance with this section.

SECTION 12. Section 27-25-26 of the General Laws in Chapter 27-25 entitled "Rhode Island Fraternal Code" is hereby amended to read as follows:

{ADD 27-25-26. Reports. -- ADD} Reports shall be filed in accordance with the provisions of this section.

(a) Every society transacting business in this state shall annually, on or before the first day of March, unless for cause shown such time has been extended by the commissioner of insurance, file with the commissioner of insurance a true statement of its financial condition, transactions, and affairs for the preceding calendar year, and pay a fee of one hundred dollars ($100) for filing same. The statement shall be in general form and context as approved by the national association of insurance commissioners for fraternal benefit societies and as supplemented by additional information required by the commissioner of insurance.

(b) As part of the annual statement herein required, each society shall, on or before the first day of March, file with the commissioner of insurance a valuation of its certificates in force on December thirty-first last preceding, provided the commissioner of insurance may, in his or her discretion for cause shown, extend the time for filing the valuation for not more than two (2) calendar months. The valuation shall be done in accordance with the standards specified in section 27-25-25. The valuation and underlying data shall be certified by a qualified actuary or, at the expense of the society, verified by the actuary of the department of insurance of the state of domicile of the society.

(c) A society neglecting to file the annual statement in the form and within the time provided by this section shall forfeit $100.00 for each day during which the neglect continues, and, upon notice by the commissioner of insurance to that effect, its authority to do business in this state shall cease while the default continues.

{ADD (d) A society may be required to file quarterly statements upon request by the insurance commissioner, in accordance with the National Association of Insurance Commissioners guidelines and procedures, due on or before forty-five (45) days after the quarter ending. Annual and quarterly statements shall be available for inspection by the public.

(e) The insurance commissioner shall also require compliance with chapter 12.1 of title 27. ADD}

SECTION 13. Sections 27-41-9, 27-41-16 and 27-41-23 of the General Laws in Chapter 27-41 entitled "Health Maintenance Organizations" are hereby amended to read as follows:

{ADD 27-41-9. Required reports. -- ADD} (1) Every health maintenance organization shall annually, on or before the first day of March, file a report verified by at least two (2) principal officers with the director, with a copy to the director of health, covering the preceding calendar year.

(2) The annual report shall be on forms prescribed by the director in consultation with the director of health and shall include:

(a) A financial statement of the organization, including its balance sheet and receipts and disbursements for the preceding year certified by an independent public accountant;

(b) Any material changes in the information submitted pursuant to section 27-41-3(3);

(c) The number of persons enrolled during the year, the number of enrollees as of the end of the year, and the number of enrollments terminated during the year;

(d) A summary of information compiled pursuant to section 27-41-4(1)(b) (iv) in such form as required by the director of health; and

(e) Such other information relating to the performance of the health maintenance organization as is necessary to enable the director to carry out his or her duties under this chapter.

(3) In addition to the reports required in subsection (1) above, every health maintenance organization shall on a form prescribed by the director report on or before September 30 of each year a filing that shall set forth the amount of uncovered and covered expenses that are payable and are more than 90 days past due. That report shall cover the period January 1 through July 31 of that year. Further, at the time of the filing of the annual report as required in subsection (1) above, a report shall be filed setting forth the amount of uncovered and covered expenses that are payable and are more than 90 days past due; that report shall cover the preceding period of August 1 through December 31 of that year.

{ADD (4) Every health maintenance organization shall also file quarterly statements with the insurance commissioner, due on or before forty-five (45) days after the quarter ending in accordance with the National Association of Insurance Commissioners guidelines and procedures, and shall be available for inspection by the public.

(5) The insurance commissioner shall also require compliance with chapter 12.1 of title 27. ADD}

{ADD 27-41-16. Examination. -- ADD} (1) The director of business regulation may make an examination of the affairs of any health maintenance organization and the providers with whom the organization has contracts, agreements, or other arrangements pursuant to its health care plan as often as is reasonably necessary for the protection of the interests of the people of this state {DEL but not less frequently than once every three (3) years. The director may at his or her option use the services of outside auditors. DEL} {ADD Said examination shall be performed and the associated costs shall be borne by the company in accordance with all the provisions of section 27-13.1 ADD}

(2) The director of health may make an examination concerning the quality of health care services of any health maintenance organization and the providers with whom the organization has contracts, agreements, or other arrangements as often as is reasonably necessary for the protection of the interests of the people of this state.

(3) Each health maintenance organization shall establish and maintain on an ongoing basis a quality assurance program which involves the assessment of all quality assurance activities conducted in the provision of its health care services to its subscribers, which shall include no less than:

(a) Assessment of health outcomes;

(b) Ongoing review of health services by physicians and other health professionals; and

(4) Every health maintenance organization and provider shall submit its books and records to those examinations and in every way facilitate them. For the purpose of examinations, the director of business regulation and the director of health may administer oaths to, and examine, the officers and agents of the health maintenance organization and the principals of their providers concerning their business.

(5) The expenses of examinations under this section shall be assessed against the organization being examined and remitted to the director of the department for whom the examination is being conducted. The total cost of those examinations whether made by the director of business regulation or by the director of health shall be borne by the health maintenance organizations so examined and shall be in the same amount as provided for in section 27-13-1 and shall be paid to the director of the department conducting the examination to a restricted receipt account hereby established in the department which shall be utilized solely for the expenses of that department in administering its responsibilities under this chapter. That assessment shall be in addition to any taxes and fees otherwise payable to the state. In instances where the examination is performed by outside accountants, the expenses of the examination shall be borne by the health maintenance organization so examined.

(6) In lieu of any state examination, the director of business regulation or the director of health may accept the report of an examination made by the director of business regulation or the director of health of another state.

{ADD 27-41-23. Filings and reports as public documents. -- ADD} The provisions of chapter 2 of title 38, relating to access to public records, shall apply to all applications, filings, and reports required under this chapter. Annual {ADD and quarterly ADD} financial statements shall be treated as public documents.

SECTION 14. Sections 27-12.1-1, 27-12.1-2, 27-12.1-3, and 27-12.1-5 of the General Laws in Chapter 27-12.1 entitled "National Association of Insurance Commissioners (NAIC) Insurance Regulatory Information System Act" are hereby amended to read as follows:

{ADD 27-12.1-1. Scope. -- ADD} The provisions of this Act shall apply to all domestic, foreign and alien insurers who are authorized to transact business in this state. {ADD Insurer shall mean any legal entity subject to state insurance regulation. ADD}

{ADD 27-12.1-2. Filing requirements. -- ADD} (a) Each domestic, foreign and alien insurer who is authorized to transact insurance in this state shall annually on or before March 1, of each year, file with the National Association of Insurance Commissioners a {ADD hard ADD} copy of its annual statement convention blank, {ADD including diskette, ADD} along with such additional filings as prescribed by the commissioner for the preceding year. The information filed with the National Association of Insurance Commissioners shall be in the same format and scope as that required by the commissioner and shall include the signed jurat page and the actuarial certification. {ADD Quarterly statements on hard copy and on diskette must also be filed with the National Association of Insurance Commissioners due on or before forty-five (45) days after the quarter ending. ADD} Any amendments and addendum to the annual {ADD or quarterly ADD} statement filing subsequently filed with the commissioner shall also be filed with the National Association of Insurance Commissioners.

(b) Foreign insurers that are domiciled in a state which has a law substantially similar to subsection (a) of this section shall be deemed in compliance with this section.

{ADD 27-12.1-3. Immunity. -- ADD} In the absence of actual malice, members of the National Association of Insurance Commissioners, their duty authorized committees, subcommittees, and task forces, their delegates, National Association of Insurance Commissioners employees, and all others charged with the responsibility of collecting, reviewing, analyzing and disseminating the information developed from the filing of the annual {ADD and quarterly ADD} statement convention blanks shall be acting as agents of the commissioner under the authority of this chapter and shall not be subject to civil liability for libel, slander or any other cause of action by virtue of their collection, review, and analysis or dissemination of the data and information collected from the filings required hereunder.

{ADD 27-12.1-5. Revocation of certification of authority. -- ADD} The commissioner may suspend, revoke or refuse to renew the Certificate of Authority of any insurer failing to file its annual {ADD or quarterly ADD} statement when due or within any extension of time which the commissioner, for good cause, may have granted. {ADD The commissioner may exempt diskette filings from domestic insurers that operate only in Rhode Island. ADD}

SECTION 15. Section 27-1.1-1 of the General Laws in Chapter 27-1.1 entitled "Credit for Reinsurance Act" is hereby amended to read as follows:

{ADD 27-1.1-1. Credit allowed a domestic ceding insurer. -- ADD} Credit for reinsurance shall be allowed a domestic ceding insurer as either an asset or a deduction from liability on account of reinsurance ceded only when the reinsurer meets the requirements of subsections A or B or C or D or E of section 27-1.1-1 set forth below.

If meeting the requirements of C or D, the requirements of F must also be met.

(A) Credit shall be allowed when the reinsurance is ceded to an assuming insurer which is licensed to transact insurance of reinsurance in this state.

(B) Credit shall be allowed when the reinsurance is ceded to an assuming insurer which is accredited as a reinsurer in this state. An accredited reinsurer is one which:

(1) Files with the commissioner evidence of its submission to this state's jurisdiction;

(2) Submits to this state's authority to examine its books and records;

(3) Is licensed to transact insurance or reinsurance in at least one state, or in the case of a United States branch of an alien assuming insurer is entered through and licensed to transact insurance or reinsurance in at least one state;

(4) Files annually with the commissioner a copy of its annual statement filed with the insurance department of its state of domicile and a copy of its most recent audited financial statement; and either;

(a) Maintains a surplus as regards policyholders in an amount which is not less than twenty million dollars ($20,000,000) and whose accreditation has not been denied by the commissioner within ninety (90) days of its submission; or

(b) Maintains a surplus as regards policyholders in an amount less than twenty million dollars ($20,000,000) and whose accreditation has been approved by the commissioner

No credit shall be allowed a domestic ceding insurer, if the assuming insurers' accreditation has been revoked by the commissioner after notice and hearing.

(C) Credit shall be allowed when the reinsurance is ceded to an assuming insurer which is domiciled and licensed in, or in the case of a United States branch of an alien assuming insurer is entered through, a state which employs standards regarding credit for reinsurance substantially similar to those applicable under this statute and the assuming insurer or U.S. branch of an alien assuming insurer:

(1) Maintains a surplus as regards policyholders in an amount not less than twenty million dollars ($20,000,000); and

(2) Submits to the authority of this state to examine its books and records.

Provided, however, that the requirement of subsection (C)(1) does not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system.

(D)(1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer which maintains a trust fund in a qualified United States financial institution, as defined in 27-1.1-3(b), for the payment of the valid claims of its United States policyholders and ceding insurers, their assigns and successors in interest. The assuming insurer shall report annually to the commissioner information substantially the same as that required to be reported on the National Association of Insurance Commissioners Annual Statement form by licensed insurers to enable the commissioner to determine the sufficiency of the trust fund. In the case of a single assuming insurer, the trust shall consist of a trusted account representing the assuming insurer's liabilities attributable to business written in the United States and, in addition, the assuming insurer shall maintain a trusted surplus of not less than twenty million dollars ($20,000,000). In the case of a group {DEL of DEL} {ADD including incorporated and/or ADD} individual unincorporated underwriters, the trust shall consist of a trusted account representing the group's liabilities attributable to business written in the United States and, in addition, the group shall maintain a trusted surplus of which one hundred million dollars ($100,000,000) shall be held jointly for the benefit of United States ceding insurers of any member of the group; {ADD the incorporated members of the group shall not be engaged in any business other than underwriting as a member of the group and shall be subject to the same level of solvency regulation and control by the groups domiciliary regulator as are the unincorporated members ADD} and the group shall make available to the commissioner an annual certification of the solvency of each under writer by the group's domiciliary regulator and its independent public accountants.

(2) In the case of a group of incorporated insurers under common administration which complies with the filing requirements contained in the previous paragraph, and which has continuously transacted an insurance business outside the United States for at least three (3) years immediately prior to making application for accreditation; and submits to this state's authority to examine its books and records and bears the expenses of the examination, and which has aggregate policyholders' surplus of ten billion dollars ($10,000,000,000); the trust shall be in an amount equal to the group's several liabilities attributable to business ceded by United States ceding insurers to any member of the group pursuant to reinsurance contracts issued in the name of such group; plus the group shall maintain a joint trusted surplus of which one hundred million dollars ($100,000,000) shall be held jointly for the benefit of United States ceding insurers of any member of the group as additional security for any such liabilities, and each member of the group shall make available to the commissioner an annual certification of the member's solvency by the member's domiciliary regulator and its independent public accountant.

(3) Such trust shall be established in a form approved by the commissioner. The trust instrument shall provide that contested claims shall be valid and enforceable upon the final order of any court of competent jurisdiction in the United States. The trust shall vest legal title to its assets in the trustees of the trust for its United States policyholders and ceding insurers, their assigns and successors in interest. The trust and the assuming insurer shall be subject to examination as determined by the commissioner. The trust described herein must remain in effect for as long as the assuming insurer shall have outstanding obligations due under the reinsurance agreements subject to the trust.

(4) No later than February 28 of each year the trustees of the trust shall report to the commissioner in writing setting forth the balance of the trust and listing the trust's investments at the preceding year end and shall certify the date of termination of the trust, if so planned, or certify that the trust shall not expire prior to the next following December 31.

(E) Credit shall be allowed when the reinsurance is ceded to an assuming insurer not meeting the requirements of subdivisions (A), (B), (C), or (D) of this section but only with respect to the insurance of risks located in jurisdictions where such reinsurance is required by applicable law or regulation of that jurisdiction.

(F) If the assuming insurer is not licensed or accredited to transact insurance or reinsurance in this state, the credit permitted by subdivisions (C) and (D) of this section shall not allowed unless the assuming insurer agrees in the reinsurance agreements:

(1) That in the event of the failure of the assuming insurer to perform its obligations under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding insurer, shall submit to the jurisdiction of any court of competent jurisdiction in any state of the United States, will comply with all requirements necessary to give such court jurisdiction, and will abide by the final decision of such court or of any appellate court in the event of an appeal; and

(2) To designate the commissioner or a designated attorney as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the ceding company.

This provision is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if such an obligation is created in the agreement.

SECTION 16. Section 27-34-8 of the General Laws in Chapter 27-34 entitled "Insurers' Insolvency Fund" is hereby amended to read as follows:

{ADD 27-34-8. Powers and duties of the fund. -- ADD} (1) The fund shall:

(a) Be obligated to pay covered claims existing prior to the determination of the insolvency of a member insurer or arising within sixty (60) days after the determination of such insolvency or before the policy expiration date if less than sixty (60) days after the determination of insolvency or before the insured replaces the policy or causes its cancellation if he or she does so within sixty (60) days of such determination. Such obligations shall be satisfied by paying to the claimant an amount as follows:

(i) The full amount of a covered claim for benefits under a workers' compensation insurance coverage;

(ii) An amount not exceeding ten thousand dollars ($10,000) per policy for a covered claim for the return of unearned premium;

(iii) An amount not exceeding three hundred thousand dollars ($300,000) per claimant for all other covered claims. In no event shall the fund 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 provisions of this chapter, a covered claim shall not include any claim filed with the fund after the final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer. The fund shall pay only that amount of each unearned premium which is in excess of one hundred dollars ($100);

(b) Be deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all rights, duties and obligations of the insolvent insurer as if the insurer had not become insolvent;

(c) 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 fund under subsection (1)(a) subsequent to an insolvency, the expenses of handling covered claims subsequent to an insolvency and other expenses authorized by this chapter. The 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. No member insurer may 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 fund 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, subject to the limitation that the ability to assess from different accounts to make all necessary payments from any underfunded account shall lapse on December 31, {DEL 1993 DEL} {ADD 1995 ADD} . Such 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 such amounts borrowed remain unpaid on the seventh yearly anniversary as a result of the inability of the borrowing account to make repayment, then such amount borrowed and interest which is not repaid, starting with the principle 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 thereafter as funds become available. The fund shall pay claims in any order which it deems reasonable, including the payment of claims as such are received from the claimants or in groups or categories of claims. The fund 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; provided, however, that during the period of deferment, no dividends shall be paid to shareholders or policyholders. Deferred assessments shall be paid when such payment will not reduce capital or surplus below required minimums. Such payments shall be refunded to those companies receiving larger assessments by virtue of such deferment, or, at the election of any such company, credited against future assessments;

(d) Investigate claims brought against the fund and adjust, compromise, settle, and pay covered claims to the extent of the fund's obligation and deny all other claims, and may review settlements, releases, and judgments to which the insolvent insurer or its insureds were parties, to determine the extent to which such settlements, releases, and judgments may be properly contested;

(e) Notify such persons as the commissioner directs under section 27-34-10(2)(a);

(f) 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 such designation may be declined by a member insurer; and

(g) Reimburse each servicing facility for obligations of the fund paid by the facility and for expenses incurred by the facility while handling claims on behalf of the fund and shall pay the other expenses of the fund authorized by this chapter.

(h) Within thirty (30) days after June 18, 1991, 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 section 27-34-8(c) to ensure the immediate availability of funds for purposes of future claims and expenses attributable to an insurer insolvency.

Any amount drawn from the fund under any line of credit shall be considered a payment toward the member insurer's assessment provided for in section 27-34-8(c).

The member insurer shall provide funding to the fund under the line of credit within three (3) business days of receipt of a written request from the fund for a drawdown 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 such commercially reasonable provisions as the fund 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 (30) day notice to the fund and the commissioner that the line is being terminated or not renewed.

If a line of credit is not given as provided for in this section the member insurer shall be responsible for payment of an assessment of up to the member's proportionate share of the applicable maximum as set forth in this paragraph which shall be paid into a preinsolvency assessment fund in each account.

(2) The fund may:

(a) Employ or retain such persons as are necessary to handle claims and perform other duties of the fund;

(b) Borrow funds necessary to effect the purposes of this chapter in accord with the plan of operation;

(d) Negotiate and become a party to such contracts as are necessary to carry out the purpose of this chapter;

(e) Perform such other acts as are necessary or proper to effectuate the purpose of this chapter; and

(f) 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 fund in any account exceed the liabilities of that account as estimated by the board of directors for the coming year.

SECTION 17. Chapter 27-2.3 of the General Laws entitled "Single License Procedure Act" is hereby amended by adding thereto the following section:

{ADD 27-2.3-22. Errors and omissions insurance required of insurance producers. -- ADD} {ADD (A) All holders of insurance producers licenses by the insurance division of the state of Rhode Island department of business regulation shall, as a condition of retaining such license, carry and maintain errors and omissions insurance covering all business activities contemplated. Authorized insurance producers of a licensed firm may meet the requirements of this section with a policy in the name of the licensed firm insuring each licensee employed by or associated with the firm. Said policy must comply with the terms and conditions to be determined by the department of business regulation under section 27-2.3-22(B).

(B) The insurance division of the department of business regulation shall determine the terms and conditions of coverage mandated under this section, including but not limited to the minimum limits of coverage, the permissible deductible, and permissible exemptions. The department of business regulation shall seek the assistance of insurance agents associations located in Rhode Island as to the terms and conditions of coverage.

(C) The errors and omissions insurance requirement mandated by this section shall become effective January 1, 1995. ADD}

SECTION 18. This act shall take effect upon passage.

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