Vermont Life & Health Insurance Guaranty Association

Covered Contracts

Vt. Stat. Ann. tit. 8, § 4173(b)(1) - This chapter shall provide coverage to a person specified in subsection (a) of this section for a policy or contract of direct, nongroup life insurance, health insurance, which for purposes of this chapter includes health maintenance organization subscriber contracts and certificates, an annuity, or a certificate under a direct group policy or contract, and supplemental policies or contracts to any of these, and for an unallocated annuity contract, in each case, issued by a member insurer, except as limited by this chapter. An annuity contract or certificate under a group annuity contract includes a guaranteed investment contract, guaranteed interest contract, guaranteed accumulation contract, deposit administration contract, unallocated funding agreement, allocated funding agreement, structured settlement annuity, annuity issued to or in connection with a government lottery, and any immediate or deferred annuity contract.

Non-Covered Contracts

Vt. Stat. Ann. tit. 8, § 4173 Except as otherwise provided in subdivision (3) of this subsection, this chapter shall not provide coverage for: (A) a portion of a policy or contract not guaranteed by the member insurer or under which the risk is borne by the policy or contract holder; (B) a policy or contract of reinsurance, unless assumption certificates have been issued pursuant to the reinsurance policy or contract; (C) a portion of a policy or contract to the extent that the rate of interest on which it 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: (i) averaged over the period of four years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, 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 member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier; and (ii) on and after the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds the rate of interest determined by subtracting three percentage points from Moody’s Corporate Bond Yield Average as most recently available;

Non-Resident Coverage

Vt. Stat. Ann. tit. 8, § 4173(a)(2)(B). Is not a Vermont resident, provided all of the following conditions are met: (i) the member insurer that issued the policy or contract is domiciled in Vermont; (ii) the state in which the person resides has an association similar to the Association created by this chapter; and (iii) the person is not eligible for coverage by an association in any other state due to the fact that the insurer or the health maintenance organization was not licensed in that state at the time specified in that state’s guaranty association law.

Vt. Stat. Ann. tit. 8, § 4173(c) The benefits that the Association may become obligated to cover shall in no event exceed the lesser of: (1) The contractual obligations for which the member insurer is liable or would have been liable if it were not an impaired or insolvent insurer; or (2) (A) with respect to one life, regardless of the number of policies or contracts: (i) $300,000.00 in life insurance death benefits, but not more than $100,000.00 in net cash surrender and net cash withdrawal values for life insurance; (ii) for health insurance benefits: (I) $100,000.00 for coverages not defined as disability income insurance or health benefit plans or long-term care insurance, including any net cash surrender and net cash withdrawal values; (II) $300,000.00 for disability income insurance, and $300,000.00 for long-term care insurance; (III) $500,000.00 for health benefit plans; (iii) $250,000.00 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values; or (B) with respect to each individual participating in a governmental retirement benefit plan established under section 401, 403(b), or 457 of the U.S. Internal Revenue Code covered by an unallocated annuity contract or the beneficiaries of each such individual if deceased, in the aggregate, $250,000.00 in present value annuity benefits, including net cash surrender and net cash withdrawal values; (C) with respect to each payee of a structured settlement annuity, or beneficiary or beneficiaries of the payee if deceased, $250,000.00 in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any; (D) however, in no event shall the Association be obligated to cover more than: (i) an aggregate of $300,000.00 in benefits with respect to any one life under subdivisions (2)(A)–(C) of this subsection (c) except with respect to benefits for health benefit plans under subdivision (2)(A)(ii) of this subsection (c), in which case the aggregate liability of the Association shall not exceed $500,000.00 with respect to any one individual; or (ii) with respect to one owner of multiple nongroup policies of life insurance, whether the policy or contract owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, more than $5,000,000.00 in benefits, regardless of the number of policies and contracts held by the owner; (E) with respect to either one contract owner provided coverage under subdivision (a)(3)(B) of this section, or one plan sponsor whose plans own directly or in trust one or more unallocated annuity contracts not included in subdivision (2)(B) of this subsection (c), $5,000,000.00 in benefits, irrespective of the number of contracts with respect to the contract owner or plan sponsor. However, in the case where one or more unallocated annuity contracts are covered contracts under this chapter and are owned by a trust or other entity for the benefit of two or more plan sponsors, coverage shall be afforded by the Association if 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 Vermont and in no event shall the Association be obligated to cover more than $5,000,000.00 in benefits with respect to all these unallocated contracts. (F) The limitations set forth in this subsection (c) are limitations on the benefits for which the Association is obligated before taking into account either 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 chapter may be met by the use of assets attributable to covered policies or reimbursed to the Association pursuant to its subrogation and assignment rights. (G) For purposes of this chapter, benefits provided by a long-term care rider to a life insurance policy or annuity contract shall be considered the same type of benefits as the base life insurance policy or annuity contract to which it relates.

Discretionary Triggers

§4178(a). If a member insurer is an impaired insurer.

Mandatory Triggers

§4178(b). If a member insurer is an insolvent insurer.

Foreign Triggers

No separate provision.

"Impaired Insurer"

Vt. Stat. Ann. tit. 8, § 4175(12) “Impaired insurer” means a member insurer that, after the effective date of this chapter, is not an insolvent insurer and who is placed under an order of rehabilitation or conservation by a court of competent jurisdiction.

"Insolvent Insurer"

Vt. Stat. Ann. tit. 8, § 4175 (13) “Insolvent insurer” means a member insurer that, after the effective date of this chapter, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.

"Member Insurer"

Vt. Stat. Ann. tit. 8, § 4175(14) “Member insurer” means any insurer or health maintenance organization licensed or that holds a certificate of authority to transact in this State any kind of insurance or health maintenance organization business for which coverage is provided under section 4173 of this chapter and includes an insurer or health maintenance organization whose license or certificate of authority in this State may have been suspended, revoked, not renewed, or voluntarily withdrawn, but does not include: (A) a hospital or medical service organization, whether for-profit or nonprofit; (B) a fraternal benefit society; (C) a mandatory State pooling plan; (D) a mutual assessment company or other person that operates on an assessment basis; (E) an insurance exchange; (F) an organization that has a certificate or license limited to the issuance of charitable gift annuities under section 3718a of this title; or (G) an entity similar to any of the above.

§4176(a). Two accounts, which include: (1) health and (2) life and annuity.

Assessment Limits

Vt. Stat. Ann. tit. 8, § 4179(e)(1)(A) Subject to the provisions of subdivision (1)(B) of this subsection (e), the total of all assessments authorized by the Association with respect to a member insurer for each subaccount of the life insurance and annuity account and for the health account shall not in one calendar year exceed two percent of that member insurer’s average annual premiums received in Vermont on the policies and contracts covered by the subaccount or account during the three calendar years preceding the year in which the member insurer became an impaired or insolvent insurer.

Assessment Classes

§4179(b). Two classes of assessments: Class A for administrative costs and other general expenses; Class B to carry out the powers and duties of the association.

Vt. Stat. Ann. tit. 8, § 4173 this chapter shall not provide coverage for: a portion of a policy or contract to the extent that the rate of interest on which it 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: (i) averaged over the period of four years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, 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 member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier; and (ii) on and after the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds the rate of interest determined by subtracting three percentage points from Moody’s Corporate Bond Yield Average as most recently available;

Vt. Stat. Ann. tit. 8, § 4183(a) A member insurer may offset against its premium tax liability to Vermont an assessment described in subsection 4179(h) of this chapter to the extent of 20 percent of the amount of the assessment for each of the five calendar years following the year in which the assessment was paid. In the event a member insurer should cease doing business, all uncredited assessments may be credited against its premium tax liability for the year it ceases doing business.

Vt. Stat. Ann. tit. 8, § 4175(19) “Premiums” mean amounts or considerations, by whatever name called, received on covered policies or contracts, less returned premiums, considerations, and deposits, and less dividends and experience credits. “Premiums” does not include amounts or considerations received for policies or contracts or for the portions of any policies or contracts for which coverage is not provided under subsection 4173(b) of this chapter except that assessable premium shall not be reduced on account of subdivision 4173(b)(2)(C) of this chapter, relating to interest limitations, and of subdivision 4173(c)(2) of this chapter, relating to limitations with respect to one individual, one participant, and one policy or contract owner. “Premiums” shall not include: (A) premiums in excess of $5,000,000.00 on an unallocated annuity contract not issued under a governmental retirement benefit plan, or its trustee, established under 26 U.S.C. § 401, 403(b), or 457 of the U.S. Internal Revenue Code; or (B) with respect to multiple nongroup policies of life insurance owned by one owner, whether the policy or contract owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, premiums in excess of $5,000,000.00 with respect to these policies or contracts, regardless of the number of policies or contracts held by the owner.

Vt. Stat. Ann. tit. 8, § 4189(a) No person, including a member insurer, or agent or affiliate of a member 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, that uses the existence of the Insurance Guaranty Association of Vermont for the purpose of sales, solicitation, or inducement to purchase any form of insurance or other coverage covered by this chapter. However, this section shall not apply to the Vermont Life and Health Insurance Guaranty Association or any other entity that does not sell or solicit insurance or coverage by a health maintenance organization.