Wisconsin Insurance Security Fund

Covered Contracts

§646.01(1)(a). This chapter applies to: 1. All kinds and lines of direct insurance, except as provided in par. (b). 2. All insurers authorized to do business in this state except: a. Fraternals that are not health maintenance organization insurers. b. Assessable mutuals, including town mutuals. c. Mutual municipal insurers under s. 611.11 (4). e. Limited service health organization insurers. f. Miscellaneous insurers and motor clubs under ch. 616. g. State insurance funds under chs. 604 to 607. h. Risk retention groups. i. Service insurance corporations that offer only dental or vision care. j. Nondomestic insurers that have not obtained a certificate of authority to do business in this state and that are doing business under s. 618.41 or 618.42. k. Risk-sharing plans under ch. 619. L. The patients compensation fund under s. 655.27.

Non-Covered Contracts

§646.01(1)(b). This chapter does not apply to any of the following: 1. Any portion of a life insurance policy or annuity contract that is not guaranteed by the insurer or under which the risk is borne by the policy or policyholder. 2. Title insurance. 3. Surety bonds, fidelity bonds and any other bonding obligations. 4. Bail bonds. 5. Mortgage guaranty, financial guaranty and other forms of insurance offering protection against investment risks. 6. Ocean marine insurance. 7. Credit insurance. 8. Product liability or completed operations liability insurance, and comprehensive general liability including either of these coverages, provided to a risk purchasing group or a member of a risk purchasing group. 9. Any self-funded, self-insured, or partially or wholly uninsured plan of an employer or other person to provide life insurance, annuity, or disability benefits to its employees or members to the extent that the plan is self-funded, self-insured, or uninsured. 10. Any liability for dividends or experience rating credits payable after the date of entry of the order of liquidation under an insurance or annuity contract, and any fees or allowances due any person, including the policyholder, in connection with service to or administration of the contract. 11. Any warranty or service contract. 11m. Any contractual liability policy that is issued to a warrantor, warranty plan, warranty plan administrator, or service contract provider and that provides coverage of any liability or performance arising out of or in connection with a warranty or service contract. 12. Municipal bond insurance. 13. Any transaction or combination of transactions between a person, including affiliates of such person, and an insurer, including affiliates of such insurer, which involves the transfer of investment or credit risk unaccompanied by transfer of insurance risk. 14. A policy issued by an insurer to, or a contract entered into by an insurer with, a care management organization, as defined in s. 46.2805 (1), or the department of health services or any other governmental entity under any state law to provide prepaid health care to medical assistance recipients. 15. An unallocated annuity contract. 16. A contractual agreement that obligates an insurer to provide a book value accounting guarantee for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, neither of which is an affiliate of the insurer. 17. Any liability under a policy or contract to the extent that it provides for interest or other changes in value that are to be determined by the use of an index or other external reference stated in the policy or contract and to the extent that the interest or other changes in value have not been credited to the policy or contract as of the date of the entry of the order of liquidation and are subject to forfeiture. If a policy’s or contract’s interest or other changes in value are credited less frequently than annually, for purposes of determining the values that have been credited and that are not subject to forfeiture, the interest or change in value determined by using the procedures specified in the policy or contract will be credited as if the contractual date of crediting interest or other changes in value was the date of entry of the order of liquidation and will not be subject to forfeiture. 18. The deductible, self-funded, or self-insured portion of a claim under a liability or worker’s compensation insurance policy, regardless of the timing or method provided in the policy, endorsement, or any other agreement for payment of the deductible, self-funded, or self-insured amount by the insured. This subdivision does not apply to a worker’s compensation insurance policy if the insured under the policy is a debtor under 11 USC 701, et seq., as of the deadline set by the liquidator for filing claims against the insolvent insurer. 19. A policy issued by an insurer to an enrollee under Title XVIII of the federal social security act, 42 USC 1395 to 1395ccc, or Title XIX of the federal social security act, 42 USC 1396 to 1396v, or a contract entered into by an insurer with the federal government or an agency of the federal government under Title XVIII or Title XIX of the federal social security act, to provide health care or prescription drug benefits to persons enrolled in Title XVIII or Title XIX programs. 20. A surplus lines insurance policy written by a domestic surplus lines insurer under s. 618.41 (1). 21. A policy issued by an insurer to the federal government or an agency of the federal government for the purpose of providing health insurance coverage to enrollees under the federal employee health benefit plan program under 5 USC 8901 et seq. 22. Funding agreements authorized under s. 632.66.

Non-Resident Coverage

§646.31(2)(b). Yes, where the claim is made under a life or disability insurance policy or annuity contract subject to this section and issued by a domestic insurer and the claimant is a resident of another state that provides coverage similar to the coverage provided under this chapter but does not provide coverage for the claimant because the insurer was not licensed in that state at the time specified as a requirement for coverage under that state’s guaranty association law.

§646.31(4) Maximum claim. (ag) For purposes of this subsection, “disability insurance” means comprehensive health insurance policies and major medical health insurance policies. “Disability insurance” does not include hospital indemnity; loss of time; accidental benefits; limited or specified benefit or other ancillary coverages; disability income insurance coverage; long-term care insurance coverage; insurance coverage that is supplemental to another insurance policy or program, including Medicare supplement insurance; or similar types of policies. (ap) Except in regard to worker’s compensation insurance and except as provided in par. (b), the obligation of the fund on a single risk, loss, or life, regardless of the number of policies or contracts, may not exceed $300,000, except that the aggregate liability of the fund for a single risk, loss, or life with respect to benefits for property insurance, liability insurance, and disability insurance, regardless of the number of those policies, may not exceed $500,000. (b) The fund is not obligated to pay a claimant an amount in excess of the loss obligation of the insurer in liquidation under the policy or coverage from which the claim arises.

Discretionary Triggers

No provision.

Mandatory Triggers

§646.35(3)(am) If an insurer that is subject to this chapter is in liquidation, the fund shall, subject to s. 646.31 (2), do either of the following: 1. Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, the policies of the insolvent insurer within the scope of this section. 2. Assure performance of the contractual obligations of the insurer on such policies. (bm) Whether the fund’s duties under par. (am) are discharged by the fund under par. (am) 1. or 2. is at the fund’s discretion. The fund shall provide moneys, pledges, loans, notes, guarantees, or other means reasonably necessary to discharge the duties under par. (am) 1. or 2.

Foreign Triggers

No separate provision.

"Impaired Insurer"

No provision. Removed effective 5.28.2010.

"Insolvent Insurer"

646.03(2p) “Insolvent insurer” means an insurer subject to this chapter that is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.

"Member Insurer"

No provision

§646.11(2). The fund shall be composed of 5 segregated accounts, one for life insurance and annuities, one for disability insurance other than policies issued or coverage provided by a health maintenance organization insurer, one for health maintenance organization insurers, one for all other kinds of insurance subject to this chapter, and an administrative account.

Assessment Limits

§646.51(4)(a) The total of all assessments for an amount authorized by the board under this section with respect to an insurer may not, in one calendar year, exceed 2% of the insurer's assessable premiums under sub. (3) (am) or (b) on the types of policies and contracts that are covered by the account.

Assessment Classes

§646.51(3) Two classes of assessments: (am)General, and (c) administrative.

§646.35(6)(c) 1. Security Fund excludes from coverage: Any benefit payment liability, arising on or after the date of entry of the order of liquidation, 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 and employed in calculating returns or changes in value exceeds the rate of interest, which may not be less than zero, determined by subtracting 3 percentage points from the monthly corporate bond yield average, as most recently published by Moody’s investors service or its successor. 2. Any benefit payment liability, arising before the date of entry of the order of liquidation, to the extent that the payment exceeds the rate of interest, which may not be less than zero, determined by subtracting 2 percentage points from the monthly corporate bond yield average, as published by Moody’s investors service or its successor, when averaged over the 4-year period ending on the date of entry of the order of liquidation or averaged over such lesser period if the contract was issued less than 4 years before that date.

§646.51(7). Yes. Member insurers may offset up to 20% of the assessment amount paid, for the next 5 calendar years following year of assessment, if premium rates on the class of business are fixed so that it is not possible to recoup assessments by increasing rates.

§ 646.51 (1c)(c)“Premiums” means gross premiums and other considerations received for direct insurance and annuities, including considerations for a plan established under ss. 185.981 to 185.985, less return premiums and other considerations, dividends, and experience credits paid or credited to policyholders on such business. The term “premiums” does not include premiums or other considerations received for policies or contracts, or for portions of policies or contracts, for which coverage is not provided under this chapter, except that the amount of assessable premiums or other considerations shall not be reduced on account of limitations with respect to a single risk, loss, or life under s. 646.31 (4) or on account of interest limitations under s. 646.35 (6) (c).

§ 628.34. “Unfair marketing practices” … (10) Insurance security fund. No insurer or insurance intermediary may make use in any manner of the protection given policyholders by ch. 646 (guaranty association statute) as a reason for buying insurance from the insurer or intermediary.