It is enacted by the General Assembly as follows:

SECTION 1. Section 27-34-8 of the General Laws in Chapter 27-34 entitled "Rhode Island Insurers' Insolvency Fund" is hereby amended to read as follows:

27-34-8. Powers and duties of the fund. -- (a) The fund shall:

(1) 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 the 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 the determination. The 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);

(2) 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;

(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 fund under subsection (a)(1) 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, 1995 {ADD 1998 ADD} . 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 principle {ADD principal ADD} 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 they 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 the payment will not reduce capital or surplus below required minimums. The 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 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 the settlements, releases, and judgments may be properly contested;

(5) Notify such persons as the commissioner directs under section 27-34-10(b)(1);

(6) 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;

(7) 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; and

(8)(i) 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 subsection (a)(3) to ensure the immediate availability of funds for purposes of future claims and expenses attributable to an insurer insolvency;

(ii) 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 subsection (a)(3);

(iii) 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;

(iv) 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;

(v) 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 subsection which shall be paid into a preinsolvency assessment fund in each account.

(b) The fund may:

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

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

(3) Sue or be sued;

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

(5) Perform such other acts as are 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 fund in any account exceed the liabilities of that account as estimated by the board of directors for the coming year.

SECTION 2. This act shall take effect upon passage.