[As Amended by Senate Committee of the Whole]

As Amended by Senate Committee

          Session of 1998
By Committee on Insurance
          12             AN ACT concerning insurance; accident and health insurance; rein-
13             surance; amending K.S.A. 1997 Supp. 40-221a and 40-19c09 and re-
14             pealing the existing section sections; also repealing K.S.A. 1997
15             Supp. 40-1909.
17       Be it enacted by the Legislature of the State of Kansas:
18           Section 1. K.S.A. 1997 Supp. 40-221a is hereby amended to read as
19       follows: 40-221a. (a) Any insurance company organized under the laws of
20       this state may (1) with the consent of the commissioner of insurance, cede
21       all of its risks to any other solvent insurance company authorized to trans-
22       act business in this state or accept all of the risks of any other company,
23       (2) accept all or any part of an individual risk or all or any part of a
24       particular class of risks which it is authorized to insure, and (3) cede all
25       or any part of an individual risk or all or any part of a particular class of
26       risks to another solvent insurer or insurers having the power to accept
27       such reinsurance.
28           (b) Any insurance company organized under the laws of this state
29       may take credit as an asset or as a deduction from loss and unearned
30       premium reserves on such ceded risks to the extent reinsured by an in-
31       surer or insurers authorized to transact business in this state, but such
32       credit on ceded risks reinsured by any insurer which is not authorized to
33       transact business in this state may be taken in an amount not exceeding:
34           (1) The amount of deposits by, and funds withheld from, the assum-
35       ing insurer pursuant to express provision therefor in the reinsurance con-
36       tract, as security for the payment of the obligations thereunder, if such
37       deposits or funds are held subject to withdrawal by, and under the control
38       of, the ceding insurer or are placed in trust for such purposes in a bank
39       which is insured by the federal deposit insurance corporation or its suc-
40       cessor, if withdrawals from such trust cannot be made without the consent
41       of the ceding company;
42           (2) the amount of a clean and irrevocable letter of credit issued by a
43       bank which is insured by the federal deposit insurance corporation or its

HB 2636--Am. by SCW


  1       successor if such letter of credit is initially issued for a term of at least
  2       one year and by its terms is automatically renewed at each expiration date
  3       for at least an additional one-year term unless at least 30 days prior written
  4       notice of intention not to renew is given to the ceding company by the
  5       issuing bank or the assuming company and provided that such letter of
  6       credit is issued under arrangements satisfactory to the commissioner of
  7       insurance as constituting security to the ceding insurer substantially equal
  8       to that of a deposit under paragraph (1) of this subsection; or
  9           (3) the amount of loss and unearned premium reserves on such ceded
10       risks to an assuming insurer which maintains a trust fund in a qualified
11       United States financial institution, as defined in (b)(3)(D), for the pay-
12       ment of the valid claims of its United States policyholders and ceding
13       insurers, their assigns and successors in interest. The assuming insurer
14       shall report annually to the commissioner information substantially the
15       same as that required to be reported on the national association of insur-
16       ance commissioners annual statement form by licensed insurers to enable
17       the commissioner to determine the sufficiency of the trust fund. In the
18       case of a single assuming insurer, the trust shall consist of a trusteed
19       account representing the assuming insurer's liability attributable to busi-
20       ness written in the United States and, in addition, the assuming insurer
21       shall maintain a trusteed surplus of not less than $20,000,000. In the case
22       of a group including incorporated and individual unincorporated under-
23       writers, the trust shall consist of a trusteed account representing the
24       group's liabilities attributable to business written in the United States and,
25       in addition, the group shall maintain a trusteed surplus of which
26       $100,000,000 shall be held jointly for the benefit of United States ceding
27       insurers of any member of the group; the incorporated members of the
28       group shall not be engaged in any business other than underwriting as a
29       member of the group and shall be subject to the same level of solvency
30       regulation and control by the group's domiciliary regulator as are the
31       unincorporated members; and the group shall make available to the com-
32       missioner an annual certification of the solvency of each underwriter by
33       the group's domiciliary regulator and its independent public accountants.
34           (A) Such trust must be in a form approved by the commissioner of
35       insurance. The trust instrument shall provide that contested claims shall
36       be valid and enforceable upon the final order of any court of competent
37       jurisdiction in the United States. The trust shall vest legal title to its assets
38       in the trustees of the trust for its United States policyholders and ceding
39       insurers, their assigns and successors in interest. The trust and the assum-
40       ing group or insurer shall be subject to examination as determined by the
41       commissioner. The trust, described herein, must remain in effect for as
42       long as the assuming group or insurer shall have outstanding obligations
43       due under the reinsurance agreements subject to the trust.

HB 2636--Am. by SCW


  1           (B) No later than February 28 of each year the trustees of the trust
  2       shall report to the commissioner in writing setting forth the balance of
  3       the trust and listing the trust's investments at the preceding year end and
  4       shall certify the date of termination of the trust, if so planned, or certify
  5       that the trust shall not expire prior to the next following December 31.
  6           (C) The credit authorized under subsection (b)(3) shall not be al-
  7       lowed unless the assuming group or insurer agrees in the reinsurance
  8       agreements:
  9           (i) That in the event of the failure of the assuming group or insurer
10       to perform its obligations under the terms of the reinsurance agreement,
11       the assuming group or insurer, at the request of the ceding insurer, shall
12       submit to the jurisdiction of any court of competent jurisdiction in any
13       state of the United States, will comply with all requirements necessary to
14       give such court jurisdiction, and will abide by the final decision of such
15       court or of any appellate court in the event of an appeal; and
16           (ii) to designate the commissioner or a designated attorney as its true
17       and lawful attorney upon whom may be served any lawful process in any
18       action, suit or proceeding instituted by or on behalf of the ceding com-
19       pany.
20           (iii) This provision is not intended to conflict with or override the
21       obligation of the parties to a reinsurance agreement to arbitrate their
22       disputes, if such an obligation to do so is created in the agreement.
23           (D) A ``qualified United States financial institution'' means, for pur-
24       poses of those provisions of this law specifying those institutions that are
25       eligible to act as a fiduciary of a trust, an institution that:
26           (i) Is organized, or (in the case of a U.S. branch or agency office of
27       a foreign banking organization) licensed, under the laws of the United
28       States or any state thereof and has been granted authority to operate with
29       fiduciary powers; and
30           (ii) is regulated, supervised and examined by federal or state author-
31       ities having regulatory authority over banks and trust companies.
32           The foregoing provisions of paragraphs (1), (2) and (3) of subsection
33       (b) shall not apply to a domestic title insurance company subject to the
34       provisions of K.S.A. 40-1107a and amendments thereto.
35           (c) Any reinsurance ceded by a company organized under the laws of
36       this state or ceded by any company not organized under the laws of this
37       state and transacting business in this state must, pursuant to express pro-
38       visions contained in the reinsurance agreement, be payable by the assum-
39       ing insurer on the basis of the liability of the ceding company under the
40       contract or contracts reinsured without diminution because of the insol-
41       vency of the ceding company and any such reinsurance agreement which
42       may be canceled on less than 90 days' notice must provide in the rein-
43       surance agreement for a run-off of the reinsurance in force at the date

HB 2636--Am. by SCW


  1       of cancellation.
  2           New Sec. 2. Any individual or group health insurance policy,
  3       medical service plan, contract, hospital service corporation con-
  4       tract, hospital and medical service corporation contract, fraternal
  5       benefit society or health maintenance organization which provides
  6       coverage for accident and health services and which is delivered,
  7       issued for delivery, amended or renewed on or after July 1, 1998,
  8       also, shall provide coverage for prostate cancer screening for men
  9       40 years of age or over who are symptomatic or in a high-risk cat-
10       egory and for all men 50 years of age or older. The screening shall
11       consist, at a minimum, of a prostate-specific antigen blood test and
12       a digital rectal examination. A policy, provision, contract, plan or
13       agreement may apply to prostate cancer screening the same deduc-
14       tibles, coinsurance and other limitations as apply to other covered
15       services.
16           Sec. 3. K.S.A. 1997 Supp. 40-19c09 is hereby amended to read
17       as follows: 40-19c09. (a) Corporations organized under the non-
18       profit medical and hospital service corporation act shall be subject
19       to the provisions of the Kansas general corporation code, articles
20       60 to 74, inclusive, of chapter 17 of the Kansas Statutes Annotated,
21       applicable to nonprofit corporations, to the provisions of K.S.A. 40-
22       214, 40-215, 40-216, 40-218, 40-219, 40-222, 40-223, 40-224, 40-
23       225, 40-226, 40-229, 40-230, 40-231, 40-235, 40-236, 40-237, 40-
24       247, 40-248, 40-249, 40-250, 40-251, 40-252, 40-254, 40-2,100,
25       40-2,101, 40-2,102, 40-2,103, 40-2,104, 40-2,105, 40-2,116, 40-
26       2,117, 40-2a01 et seq., 40-2111 to 40-2116, inclusive, 40-2215 to 40-
27       2220, inclusive, 40-2221a, 40-2221b, 40-2229, 40-2230, 40-2250,
28       40-2251, 40-2253, 40-2254, 40-2401 to 40-2421, inclusive, and
29       40-3301 to 40-3313, inclusive, K.S.A. 1997 Supp. 40-2,153, 40-
30       2,154, 40-2,160 and 40-2,161, and amendments thereto, and section
31       2, except as the context otherwise requires, and shall not be subject
32       to any other provisions of the insurance code except as expressly
33       provided in this act.
34           (b) No policy, agreement, contract or certificate issued by a cor-
35       poration to which this section applies shall contain a provision
36       which excludes, limits or otherwise restricts coverage because med-
37       icaid benefits as permitted by title XIX of the social security act of
38       1965 are or may be available for the same accident or illness.
39           (c) Violation of subsection (b) shall be subject to the penalties
40       prescribed by K.S.A. 40-2407 and 40-2411, and amendments
41       thereto.
42           (d) The provisions of this act shall not apply to any medicare supple-
43       ment policy of insurance, as defined by the commissioner of insurance by

HB 2636--Am. by SCW


  1       rule and regulation, any policy of long-term care insurance, as defined by
  2       K.S.A. 40-2227 and amendments thereto, any specified [disease or spec-
  3       ified] accident coverage or any accident only coverage as defined by the
  4       commissioner of insurance by rule and regulation whether written on a
  5       group, blanket or individual basis.
  6           Sec. 2. 4. K.S.A. 1997 Supp. 40-221a is, 40-1909 and 40-19c09 are
  7       hereby repealed.
  8           Sec. 3. 5. This act shall take effect and be in force from and after its
  9       publication in the statute book.