Hawaii Life & Disability Insurance Guaranty Association

Covered Contracts

§431:16-203(b)(1) This part shall provide coverage to the persons specified in subsection (a) for direct, nongroup life, accident and health or sickness, or annuity policies or contracts, for certificates under direct group life, accident and health or sickness, or annuity policies or contracts, and for supplemental contracts to any of these, in each case issued by member insurers except as limited by this part. Annuity contracts and certificates under group annuity contracts include allocated funding agreements, structured settlement annuities, and any immediate or deferred annuity contracts. (Amended effective 7/1/12)

Non-Covered Contracts

§431:16-203(b)(2) This part shall not provide coverage for: (A) Any portion of a policy or contract not guaranteed by the insurer, or under which the risk is borne by the policy or contract owner; (B) Any policy or contract of reinsurance, unless assumption certificates have been issued pursuant to the reinsurance policy or contract; (C) Any portion of a policy or contract to the extent that the rate of interest on which it is based: (i) Averaged over the period of four years prior to the date on which the association becomes obligated with respect to such policy or contract, exceeds a rate of interest determined by subtracting two percentage points from Moody's Corporate Bond Yield Average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years before the association became obligated; and (ii) On or after the date on which the association becomes obligated with respect to such policy or contract, exceeds the rate of interest determined by subtracting three percentage points from Moody's Corporate Bond Yield Average as most recently available; (D) Any portion of a policy or contract issued to a plan or program of an employer, association, or other person to provide life, accident and health or sickness, or annuity benefits to its employees, members , or other persons to the extent that the plan or program is self-funded or uninsured, including but not limited to benefits payable by an employer, association, or other person under: (i) A Multiple Employer Welfare Arrangement as defined in section 514 of the Employee Retirement Income Security Act of 1974, as amended; (ii) A minimum premium group insurance plan; (iii) A stop-loss group insurance plan; or (iv) An administrative services only contract; (E) Any portion of a policy or contract to the extent that it provides dividends, experience rating credits, or voting rights, or provides that any fees or allowances be paid to any person, including the policy or contract holder, in connection with the service to or administration of such policy or contract; (F) Any policy or contract issued in this State by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue such policy or contract in this State; (G) Any portion of a policy or contract to the extent that the assessments required by this part with respect to the policy or contract are preempted or otherwise not permitted by federal or state law; (H) Any obligation that does not arise under the express written terms of the policy or contract issued by the insurer to the contract owner or policy owner, including without limitation: (i) Claims based on marketing materials; (ii) Claims based on side letters, riders, or other documents that were issued by the insurer without meeting applicable policy form filing or approval requirements; (iii) Misrepresentations of or regarding policy benefits; (iv) Extra-contractual claims; or (v) A claim for penalties or consequential or incidental damages; (I) Any contractual agreement that establishes the member insurer's obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, which in each case is not an affiliate of the member insurer; (J) Any unallocated annuity contract; (K) Any portion of a policy or contract to the extent it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but that have not been credited to the policy or contract, or as to which the policy or contract owner's rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this part. If a policy's or contract's interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and are not subject to forfeiture under section 431:16 403(b)(2)(L), the interest or change in value determined by using the procedures defined in the policy or contract shall be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency and shall not be subject to forfeiture; or (L) Any policy or contract providing any hospital, medical, prescription drug, or other health care benefits pursuant to Part C or Part D of subchapter XVIII, chapter 7, Title 42 of the United States Code, commonly known as medicare part C and D, or any regulations adopted pursuant thereto. (Amended effective 7/1/12)

Non-Resident Coverage

§431:16-203(a)(2)(B). Yes. Covers persons who are not residents, (i) The insurer that issued the policies or contracts is domiciled in this State; (ii) The state in which the persons reside has associations similar to the association created by this part; and (iii) The persons are not eligible for coverage by an association in any other state because the insurer was not licensed in the state at the time specified in the state's guaranty association law. (Amended effective 7/1/12)

§431:16-203 (c) The benefits for which the association may become liable shall in no event exceed the lesser of: (1) The contractual obligations for which the insurer is liable or would have been liable if it were not an impaired or insolvent insurer, or (2) With respect to any one life, regardless of the number of policies or contracts: (A) $300,000 in life insurance death benefits, but not more than $100,000 in net cash surrender and net cash withdrawal values for life insurance; (B) In accident and health or sickness insurance benefits: (i) $100,000 for coverages not defined as disability insurance or basic hospital, medical, and surgical insurance, or major medical insurance or long-term care insurance, including any net cash surrender and net cash withdrawal values; (ii) $300,000 for disability insurance and $300,000 for long-term care insurance; or (iii) $500,000 for basic hospital, medical, and surgical insurance or major medical insurance; (C) $250,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values; or (D) With respect to each payee of a structured settlement annuity, or beneficiary or beneficiaries of the payee if deceased, $250,000 in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any. (d) In no event shall the association be obligated to cover more than: (1) An aggregate of $300,000 in benefits with respect to any one life under subsection (c) except with respect to benefits for basic hospital, medical, and surgical insurance and major medical insurance under subsection (c)(2)(B), in which case the aggregate liability of the association shall not exceed $500,000 with respect to any one individual; or (2) $5,000,000 in benefits with respect to one owner or multiple non-group policies of life insurance, regardless of: (A) The number of policies and contracts held by the owner; (B) Whether the policy owner is an individual, firm, corporation, or other person; and (C) Whether the persons insured are officers, managers, employees, or other persons. (e) The limitations set forth in this section are limitations on the benefits for which the association is obligated before taking into account its subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer attributable to covered policies. The costs of the association's obligations under this part may be met by the use of assets attributable to covered policies or reimbursed to the association pursuant to its subrogation and assignment rights. (Amended effective 7/1/12)

Discretionary Triggers

§431:16-208(a) If a member insurer is an impaired insurer. (Amended effective 7/1/12)

Mandatory Triggers

§431:16-208(b). If a member insurer is an insolvent insurer. (Amended effective 7/1/12)

Foreign Triggers

No separate provision. (Amended effective 7/1/12)

"Impaired Insurer"

§431:16-205. “Impaired insurer” means a member insurer that after July 1, 1988, is not an insolvent insurer, and is placed under an order of rehabilitation or conservation by a court of competent jurisdiction. (Amended effective 7/1/12)

"Insolvent Insurer"

§431:16-205. A member insurer that is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.

"Member Insurer"

§431:16-205. “Member insurer” means any insurer licensed or who holds a certificate of authority to transact in this State any kind of insurance for which coverage is provided under section 431:16–203, and includes any insurer whose license or certificate of authority in this State may have been suspended, revoked, not renewed, or voluntarily withdrawn, but does not include: (1) A nonprofit hospital or medical service organization; (2) A health maintenance organization; (3) A fraternal benefit society; (4) A mandatory state pooling plan; (5) A mutual assessment company or any entity that operates on an assessment basis; (6) An insurance exchange; (7) An organization that has a certificate or license limited to the issuance of charitable gift annuities; or (8) Any entity similar to any of the above. (Amended effective 7/1/12)

§431:16-206. Three accounts: life, disability and annuity (excludes unallocated annuities).

Assessment Limits

§431:16-209(e)(1) Subject to the provisions of paragraph (2), the total of all assessments authorized by the association with respect to a member insurer for each account shall not in any one calendar year exceed two per cent of the insurer's average premiums received in this State on the policies and contracts covered by the account during the three calendar years preceding the year in which the insurer became an impaired or insolvent insurer. (2) If two or more assessments are authorized in one calendar year with respect to insurers that become impaired or insolvent in different calendar years, the average annual premiums for purposes of the aggregate assessment percentage limitation referenced in this section shall be equal and limited to the higher of the three-year average annual premiums for the applicable account as calculated pursuant to this section. (Amended effective 7/1/12)

Assessment Classes

§431:16-209(b) There shall be two assessments, as follows: (1) Class A assessments shall be authorized and called for the purpose of meeting administrative and legal costs, and other expenses and examinations conducted under the authority of section 431:16–212(e). Class A assessments may be authorized and called whether or not related to a particular impaired or insolvent insurer. (2) Class B assessments shall be authorized and called to the extent necessary to carry out the powers and duties of the association under section 431:16–208 with regard to an impaired or an insolvent insurer. (Amended effective 7/1/12)

§431:16-203(b)(2)(C) Guaranty Association excludes from coverage: Any portion of a policy or contract to the extent that the rate of interest on which it is based: (i) Averaged over the period of four years prior to the date on which the association becomes obligated with respect to such policy or contract, exceeds a rate of interest determined by subtracting two percentage points from Moody's Corporate Bond Yield Average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years before the association became obligated; and (ii) On or after the date on which the association becomes obligated with respect to such policy or contract, exceeds the rate of interest determined by subtracting three percentage points from Moody's Corporate Bond Yield Average as most recently available;

§431:16-213. Yes. Up to 20% of assessment amount may be offset for the 5 years following payment; covers all assessments except administrative expenses.

§431:16-205. “Premiums” means amounts and considerations received on covered policies or contracts less premiums, considerations and deposits returned thereon, and less dividends and experience credits thereon. Premiums does not include any amounts or consideration received for any policies or contracts or for the portions of any policies or contracts for which coverage is not provided under section 431:16-203(b) except that assessable premium shall not be reduced on accounts under section 431:16-203(b)(2)(C) relating to interest limitations and section 431:16-203(c)(2) relating to limitations with respect to any one life and any one contract holder. Premiums shall also not include: (1) Premiums on an unallocated annuity contract; or (2) Premiums in excess of $5,000,000, regardless of: (A) The number of policies or contracts held by the owner, with respect to multiple non-group policies of life insurance owned by one owner; (B) Whether the policy owner is an individual, firm, corporation, or other person; and (C) Whether the persons insured are officers, managers, employees, or other persons.

§ 431:16-218 Prohibited advertisement of association act in insurance sales; notice to policyholders.(a) No person, including an insurer, and an agent or affiliate of an insurer, shall make, publish, disseminate, circulate, or place before the public, or cause directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in any newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio station or television station, or in any other way, any advertisement, announcement or statement, written or oral, which uses the existence of the Hawaii Life and Disability Insurance Guaranty Association of this State for the purpose of sales, solicitation or inducement to purchase any form of insurance covered by the Hawaii Life and Disability Insurance Guaranty Association Act. This section shall not apply to the Hawaii Life and Disability Insurance Guaranty Association or any other entity which does not sell or solicit insurance.