Puerto Rico Life and Disability Insurance Guaranty Association

Covered Contracts

T.26 § 3903.2.a. Direct or supplemental life and disability policies or contracts, which are not group policies or contracts, and for certificates under direct group policies and contracts issued by member insurers, except for the limitations imposed in this chapter.

Non-Covered Contracts

T.26 § 3903.2.b. Any portion of a policy or contract which is not guaranteed by the insurer or under which the risk is assumed by the policy or contract holder; any reinsurance policy or contract; any portion of a policy or contract to the extent that the interest rate on which it is based exceeds a specified interest adjustment rate; any plan or program of an employer, association or similar entity to provide life, disability or annuity benefits to its employees or members, to the extent that said plan or program operates with its own funds or is not insured, including, but not limited to, benefits payable by an employer, association or similar entity under: i. A "Multiple Employer Welfare Arrangement" plan 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; iv. a contract exclusively for administrative services; v. any portion of a policy or contract to the extent that it provides dividends or experience rating or provides for the payment of any fees or allowances to a person, including the holder of a policy or contract, with respect to the service or administration of said policy or contract, and vi. any policy or contract issued in Puerto Rico by a member insurer when he/she did not have a license or certificate of authority to issue said policy or contract in Puerto Rico; vii. any unallocated annuity contract.

Non-Resident Coverage

T.26 § 3903.1.b.II. Yes. Covers nonresidents only if they meet all the following conditions: i. the insurers who issued said policies or contracts are domiciled in Puerto Rico; ii. said insurers never obtained a license or certificate of authority in the states where these persons reside; iii. those states have associations similar to the Association created by this chapter; and iv. said persons are not eligible for coverage by said associations.

T.26 §3903.3. The benefits of which the Association may become liable shall not, in any case, exceed the lesser of the contractual obligations for which the insurer is liable or would have been liable if he/she were not an impaired, or insolvent insurer, or, with respect to any life, regardless of the number of policies or contracts: I. three hundred thousand (300,000) dollars in life insurance death benefits, but not more than one hundred thousand (100,000) dollars in net cash surrender values and net cash withdrawal funds values; II. one hundred thousand (100,000) dollars in disability insurance benefits including any net cash surrender values and net cash withdrawal values; III. one hundred thousand (100,000) dollars in the present value of annuity benefits including any net cash surrender values and net cash withdrawal values. However, in no case shall the Association be bound to disburse more than three hundred thousand (300,000) dollars in aggregate form with respect to any one life.

Discretionary Triggers

T.26 § 3908.(a). If a member insurer is an impaired domestic insurer.

Mandatory Triggers

T.26 § 3908.(b). When a member insurer is impaired, not paying claims timely, and (1) if domestic, has been placed under an order of rehabilitation by a court of competent jurisdiction; or (2) if foreign, has been prohibited from soliciting or accepting new business in this state, the insurer's certificate of authority has been suspended or revoked in this state and a petition for rehabilitation has been filed in a court of competent jurisdiction in the insurer's domestic state. T.26 § 3908.(c). If a member insurer is insolvent.

Foreign Triggers

See Mandatory Triggers.

"Impaired Insurer"

T.26 § 3905.(5). A member insurer which, after the effective date of this article, is not an insolvent insurer and: (1) is deemed by the Insurance Commissioner to be potentially unable to fulfill its contractual obligations; or (2) is placed under an order of rehabilitation or conservation by a court of competent jurisdiction.

"Insolvent Insurer"

T.26 § 3905.(6). A member insurer, which after the effective date of this article, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.

"Member Insurer"

26 L.P.R.A. § 3905(7) "Member insurer" means any insurer having a license or certificate of authority to transact in Puerto Rico any of the kinds of insurance for which coverage is provided under § 3903 of this title, and includes any insurer whose license or certificate of authority in Puerto Rico may have been suspended, revoked, not renewed or voluntarily withdrawn, but does not include: (a) A nonprofit medical-hospital services organization, and any assistance or mutual aid association which operates any medical-surgical service plan in Puerto Rico; (b) a health services organization, as defined in § 1901 et seq. of this title; (c) a charitable fraternal society; (d) a mandatory state pooling association; (e) a mutual assessment company or any entity that operates on the basis of assessments; (f) an insurance exchange; or (g) any entity similar to any of those mentioned above.

T.26 §39.060.1. Three accounts: a. life insurance account; b. disability insurance account; c. annuity account, excluding unallocated annuity contracts.

Assessment Limits

T.26 §39.090.5. a. Two percent (2%) of the average premiums in state for policies covered by the account during the three calendar years preceeding the impairment or insolvency.

Assessment Classes

T.26 §39.090.2.a, b. Two types of assessments: Class A to defray administrative and legal costs, as well as other expenses and the examinations; these assessments can be made whether or not related to a particular impaired or insolvent insurer, Class B, to the extent needed to execute the powers and duties of the association with regard to an impaired or insolvent insurer.

Title 26 §3903(b)(2)(C) Guaranty Association excludes from coverage: Any portion of a policy or contract to the extent that the interest rate on which it is based: (i) Averaged out for a period of four (4) years prior to the date in which the Association becomes obligated with respect to such policy or contract, exceeds an interest rate determined by subtracting two percentage points (2% ) from "Moody's Corporate Bond Yield Average", averaged out by the same four (4)-year period or for a lesser period, if the policy or contract was issued less than four (4) years prior to the date in which the Association becomes obligated, and (ii) on and after the date in which the Association becomes obligated with respect to such a policy or contract, exceeds the interest rate determined by subtracting three percentage points (3% ) from the next recently available "Moody's Corporate Bond Yield Average".

No provision.

§ 3905 (9) Premiums.-- Means the amounts received for covered policies or contracts, less premiums, considerations and deposits returned thereon, and less dividends and credits for experience thereon. 'Premiums' does not include sums received for any policies or contracts or portions thereof for which no coverage is provided under § 3903(b) of this title, except that assessable premiums shall not be reduced by the provisions of §§ 3903(b)(2)(C) of this title regarding limitations in their interest, and 3903(c)(2) of this title concerning limitations with respect to any one life or any one contract holder.

§9.180 “Prohibited Advertisements Of The Association's Act For The Sale Of Insurance” No person, including an insurer, agent or affiliate of an insurer shall make, publish, disseminate, circulate or present to the public or shall cause directly or indirectly, to be made, published, disseminated, circulated or presented to the public,in any newspaper, magazine or other publication or in the form of a notice, circular, pamphlet, letter or poster, or on a television or radio station, or in any other manner, any advertisement, announcement or statement, written or oral, which uses the existence of the Puerto Rico Life and Disability Insurance Guaranty Association for the purpose of selling, soliciting or inducing for the purchase of any kind of insurance covered by said Association. This section, however, shall not be applicable to the Puerto Rico Life Miscellaneous Insurance Guaranty Association.