Utah Life & Health Insurance Guaranty Association

Covered Contracts

§31A-28-103(6) (a) Except as limited by this part, this part provides coverage to a person specified in Subsections (1) through (5) for: (i) a direct nongroup life insurance, direct accident and health insurance, or direct annuity policy or contract; (ii) a supplemental contract to a policy or contract described in Subsection (6)(a)(i); (iii) a certificate under a direct group policy or contract; and (iv) an unallocated annuity contract issued by a member insurer. (b) For purposes of Subsection (6)(a), an annuity contract and a certificate under a group annuity contract includes: (i) a guaranteed investment contract; (ii) a deposit administration contract; (iii) an unallocated funding agreement; (iv) an allocated funding agreement; (v) a structured settlement annuity; (vi) an annuity issued to or in connection with a government lottery; and (vii) an immediate or deferred annuity contract.

Non-Covered Contracts

§31A-28-103(7) This part does not provide coverage for: (a) a portion of a policy or contract: (i) not guaranteed by the member insurer; or (ii) under which the risk is borne by the policy or contract owner; (b) a policy or contract of reinsurance, unless: (i) an assumption certificate is issued before the coverage date; (ii) the assumption certificate required by Subsection (7)(b)(i) is in effect pursuant to the reinsurance policy or contract; and (iii) the reinsurance contract is approved by the appropriate regulatory authorities; (c) except as provided in Subsection (11)(e), a portion of a policy or contract to the extent that the rate of interest on which the policy or contract is based, or the interest rate, crediting rate, or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value exceeds: (i) a rate of interest determined by subtracting two percentage points from Moody’s Corporate Bond Yield Average averaged: (A) over the period of four years before the coverage date with respect to the policy or contract; or (B) for the corresponding lesser period if the policy or contract was issued less than four years before the association became obligated; or (ii) a rate of interest determined by subtracting three percentage points from Moody’s Corporate Bond Yield Average as most recently available as determined on or after the earlier of: (A) the day on which the member insurer becomes an impaired insurer; or (B) the day on which the member insurer becomes an insolvent insurer; (d) a 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 annuity benefits to its employees, members, or others, to the extent that the plan or program is self-funded or uninsured, including benefits payable by an employer, association, or other person under: (i) a multiple employer welfare arrangement, as that term is defined in 29 U.S.C. Sec. 1002; (ii) a minimum premium group insurance plan; (iii) a stop-loss group insurance plan; or (iv) an administrative services only contract; (e) a portion of a policy or contract to the extent that it provides: (i) a dividend; (ii) an experience rating credit; (iii) voting rights; or (iv) payment of a fee or allowance to any person, including the policy or contract owner, in connection with the service to or administration of the policy or contract; (f) an unallocated annuity contract issued to or in connection with a benefit plan protected under the federal Pension Benefit Guaranty Corporation, regardless of whether the federal Pension Benefit Guaranty Corporation has yet become liable to make any payment with respect to the benefit plan; (g) a portion of an unallocated annuity contract that is not issued to or in connection with: (i) a specific benefit plan of: (A) employees; (B) a union; or (C) an association of natural persons; or (ii) a government lottery; (h) a portion of a policy or contract to the extent that the assessment required by Section 31A-28-109 that applies to the policy or contract is preempted by federal or state law; (i) an obligation that does not arise under the express written terms of the policy or contract issued by a member insurer to the enrollee, certificate holder, contract owner, or policy owner, including: (i) a claim based on marketing materials; (ii) a claim based on a side letter, rider, or other document that is issued by the member insurer without meeting applicable policy or contract form filing or approval requirements; (iii) a misrepresentation regarding a policy or contract benefit; (iv) an extra-contractual claim; (v) a claim for penalties; or (vi) a claim for consequential or incidental damages; (j) a contract 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 a person that is: (i) (A) the benefit plan; or (B) the benefit plan’s trustee; and (ii) not an affiliate of the member insurer; (k) a portion of a policy or contract to the extent it provides for interest or other changes in value: (i) to be determined by the use of an index or other external reference stated in the policy or contract; and (ii) as of the date the member insurer becomes an impaired or insolvent insurer, whichever occurs earlier: (A) that have not been credited to the policy or contract; or (B) as to which the policy or contract owner’s rights are subject to forfeiture; (l) a policy or contract providing hospital, medical, prescription drug, or other health care benefit pursuant to: (i) Part C or D of Title XVIII of the Social Security Act, 42 U.S.C. 1395 et seq.; or (ii) Title XIX of the Social Security Act, 42 U.S.C. Sec. 1396 et seq.; or (m) a structured settlement annuity benefit to which a payee or beneficiary has transferred the payee or beneficiary’s rights in a structured settlement factoring transaction, regardless of whether the transaction occurred before or after 26 U.S.C. Sec. 5891(c)(3)(A) became effective.

Non-Resident Coverage

§31A-28-103(1)(b)(ii) Yes, Non residents are covered, but only if: (A) the member insurer that issued the policy or contract is domiciled in this state; (B) the state in which the person resides has an association similar to the association created by this part; and (C) the person is not eligible for coverage by an association in any other state because the insurer was not licensed in the other states at the time specified in the other states’ guaranty association’s laws.

§31A-28-103(8) The benefits for which the association may become liable may not exceed the lesser of: (a) the contractual obligations for which the member insurer is liable or would have been liable if it were not an impaired or insolvent insurer; (b) with respect to one life, regardless of the number of policies or contracts: (i) for a life insurance policy: (A) if the insured died before the coverage date, $500,000 of the death benefit; (B) if the insurer received a valid request for cash surrender before the coverage date but has not paid the cash surrender value before the coverage date, $200,000 of cash surrender benefits; or (C) if neither Subsection (8)(b)(i)(A) nor (B) applies, the covered portion of each benefit provided under the policy; (ii) for an annuity contract, the covered portion of each benefit provided under the contract; and (iii) for an accident and health insurance policy or contract: (A) classified as a health benefit plan, $500,000; or (B) not classified as a health benefit plan, the covered portion of each benefit provided under the policy; (c) for an individual participating in a governmental retirement plan established under Section 401, 403(b), or 457, Internal Revenue Code, covered by an unallocated annuity contract, or a beneficiary of that individual if the individual is deceased, $250,000 in present value of annuity benefits, in the aggregate, including: (i) net cash surrender; and (ii) net cash withdrawal values; or (d) for a payee of a structured settlement annuity or a beneficiary of the payee if the payee is deceased, the limits set forth in Subsection (8)(b). (9) Notwithstanding Subsection (8), the association may not be obligated to cover more than: (a) an aggregate of $500,000 in benefits for any one life under: (i) Subsection (8)(b)(i)(A); (ii) Subsection (8)(b)(i)(B); (iii) Subsection (8)(b)(ii); and (iv) Subsection (8)(b)(iii)(B); (b) $5,000,000 in benefits for one owner of multiple nongroup policies of life insurance: (i) whether the policy or contract owner is an individual, firm, corporation, or other person; (ii) whether the persons insured are officers, managers, employees, or other persons; and (iii) regardless of the number of policies and contracts held by the owner; and (c) $5,000,000 in benefits, regardless of the number of contracts held by the contract owner or plan sponsor, for: (i) one contract owner provided coverage under Subsection (2)(b)(ii); or (ii) one plan sponsor whose plans own, directly or in trust, one or more unallocated annuity contracts not included in Subsection (8)(b)(ii). (10) (a) Notwithstanding Subsection (9)(c) and except as provided in Subsection (10)(b), the association shall provide coverage if one or more unallocated annuity contracts are: (i) covered contracts under this part; (ii) owned by a trust or other entity for the benefit of two or more plan sponsors; and (iii) the largest interest in the trust or entity owning the contract or contracts is held by a plan sponsor whose principal place of business is in the state. (b) The association may not be obligated to cover more than $5,000,000 in benefits with respect to the unallocated contracts described in Subsection (10)(a).

Discretionary Triggers

§31A-28-108(1)(a). When a member insurer is impaired. Amended effective 4/30/01.

Mandatory Triggers

§31A-28-108(2). When a member insurer is insolvent.

Foreign Triggers

No separate provision.

"Impaired Insurer"

§31A-28-105(12) “Impaired insurer” means a member insurer that is not an insolvent insurer and: (a) is considered by the commissioner to be hazardous pursuant to this title; or (b) is placed under an order of rehabilitation or conservation by a court of competent jurisdiction.

"Insolvent Insurer"

§31A-28-105(13) “Insolvent insurer” means a member insurer that is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.

"Member Insurer"

§ 31A-28-105 (14) (a) “Member insurer” means an insurer that holds a certificate of authority to transact in this state any kind of insurance for which coverage is provided under Section 31A-28-103. (b) “Member insurer” includes an insurer whose license or certificate of authority in this state may have been: (i) suspended; (ii) revoked; (iii) not renewed; or (iv) voluntarily withdrawn. (c) “Member insurer” does not include: (i) a for-profit or nonprofit: (A) hospital; (B) hospital service organization; or (C) medical service organization; (ii) a fraternal benefit society; (iii) a mandatory state pooling plan; (iv) a mutual assessment company or other person that operates on an assessment basis; (v) an insurance exchange; (vi) an organization described in Subsection 31A-22-1305(2); or (vii) an entity similar to an entity described in Subsections (14)(c)(i) through (vi).

§31A-28-106(1)(d). Two classes: The association shall allocate assessments among the following classes or subclasses: (i) the life insurance and annuity class, which includes the following subclasses: (A) the life insurance subclass; (B) the annuity subclass: (I) which includes annuity contracts owned by a governmental retirement plan, or its trustee, established under Section 401, 403(b), or 457, Internal Revenue Code; and (II) otherwise excludes unallocated annuities; and (C) the unallocated annuity subclass, which excludes contracts owned by a governmental retirement benefit plan, or its trustee, established under Sections 401, 403(b), or 457, Internal Revenue Code; and (ii) the accident and health insurance class.

Assessment Limits

§31A-28-109(5). (a) (i) Subject to Subsection (5)(b), the total of the assessments authorized by the association on a member insurer for each class or subclass may not in any one calendar year exceed 2% of the member insurer’s average annual assessable premium in that class or subclass as defined in Subsection (3).

Assessment Classes

§31A-28-109(2) There are two classes of assessments: (a) a Class A assessment: (i) shall be authorized and called for the purpose of meeting administrative and legal costs and other expenses; and (ii) may be authorized and called regardless of whether the assessment is related to a particular impaired or insolvent insurer; and (b) a Class B assessment shall be authorized and called to the extent necessary to carry out the powers and duties of the association under Section 31A-28-108 with regard to an impaired or an insolvent insurer.

§31A-28-103(7)(c) Guaranty Association excludes from coverage: except as provided in Subsection (11)(e), a portion of a policy or contract to the extent that the rate of interest on which the policy or contract is based, or the interest rate, crediting rate, or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value exceeds: (i) a rate of interest determined by subtracting two percentage points from Moody’s Corporate Bond Yield Average averaged: (A) over the period of four years before the coverage date with respect to the policy or contract; or (B) for the corresponding lesser period if the policy or contract was issued less than four years before the association became obligated; or (ii) a rate of interest determined by subtracting three percentage points from Moody’s Corporate Bond Yield Average as most recently available as determined on or after the earlier of: (A) the day on which the member insurer becomes an impaired insurer; or (B) the day on which the member insurer becomes an insolvent insurer;

§31A-28-113(1). Yes. Member insurers may offset up to 20% of assessment amount for 5 years following year of assessment.

§ 31A-28-105 (17) (a) Notwithstanding Section 31A-1-301, “premiums” means an amount or consideration received on covered policies or contracts, less: (i) returned: (A) premiums; (B) considerations; and (C) deposits; and (ii) dividends and experience credits. (b) (i) “Premiums” does not include an amount or consideration received for: (A) a policy or contract for which coverage is not provided under Subsections 31A-28-103(6) and (7); or (B) the portion of a policy or contract for which coverage is not provided under Subsections 31A-28-103(6) and (7). (ii) Notwithstanding Subsection (17)(b)(i), an assessable premium may not be reduced on account of: (A) Subsection 31A-28-103(7)(c) relating to interest limitations; or (B) Subsection 31A-28-103(8) relating to limitations for: (I) one individual; (II) any one participant; or (III) any one policy or contract owner. (c) “Premiums” does not include premiums in excess of $5,000,000: (i) on an unallocated annuity contract not issued under a governmental retirement plan established under Section 401, 403(b), or 457, Internal Revenue Code; or (ii) for multiple nongroup policies of life insurance owned by one owner: (A) whether the policy or contract owner is an individual, firm, corporation, or other person; (B) whether the persons insured are officers, managers, employees, or other persons; and (C) regardless of the number of policies or contracts held by the owner.

§ 31A-28-119. Prohibited advertisement of the association--Notice to owners of policies and contracts (1) (a) Except as provided in Subsection (1)(b), a person, including a member insurer, producer, or affiliate of a member insurer may not 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 a newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over a radio station or television station, or in any other way, any advertisement, announcement, or statement written or oral, that uses the existence of the association for the purpose of sales, solicitation, or inducement to purchase any form of insurance or coverage for which the guaranty association provides coverage under this part. (b) This section does not apply to: (i) the association; or (ii) another entity that does not sell or solicit insurance.