.................... moves to amend H.F. No. 1754, the delete everything amendment
(A09-0328), as follows:
Page 18, after line 1, insert:
1.5DEPARTMENT OF COMMERCE; OTHER REGULATORY PROVISIONS
Section 1. Minnesota Statutes 2008, section 47.58, subdivision 1, is amended to read:
Subdivision 1. Definitions.
For the purposes of this section, the terms defined in this
subdivision have the meanings given them.
(a) "Reverse mortgage loan" means a loan:
(1) Made to a borrower wherein the committed principal amount is paid to the
borrower in equal or unequal installments over a period of months or years, interest is
assessed, and authorized closing costs are incurred as specified in the loan agreement;
(2) Which is secured by a mortgage on residential property owned solely by the
(3) Which is due when the committed principal amount has been fully paid to the
borrower, or upon sale of the property securing the loan, or upon the death of the last
surviving borrower, or upon the borrower terminating use of the property as principal
residence so as to disqualify the property from the homestead credit given in chapter 290A.
(b) "Lender" means any bank subject to chapter 48, credit union subject to chapter
52, savings bank organized and operated pursuant to chapter 50, savings association
subject to chapter 51A, any residential mortgage originator subject to chapter 58,
insurance company as defined in section
60A.02, subdivision 4
. "Lender" also includes
any federally chartered bank supervised by the comptroller of the currency or federally
chartered savings association supervised by the Federal Home Loan Bank Board or
federally chartered credit union supervised by the National Credit Union Administration,
to the extent permitted by federal law.
(c) "Borrower" includes any natural person holding an interest in severalty or as joint
tenant or tenant-in-common in the property securing a reverse mortgage loan.
(d) "Outstanding loan balance" means the current net amount of money owed by the
borrower to the lender whether or not that sum is suspended pursuant to the terms of the
reverse mortgage loan agreement or is immediately due and payable. The outstanding
loan balance is calculated by adding the current totals of the items described in clauses (1)
to (5) and subtracting the current totals of the item described in clause (6):
(1) The sum of all payments made by the lender which are necessary to clear the
property securing the loan of any outstanding mortgage encumbrance or mechanics or
material supplier's lien.
(2) The total disbursements made by the lender to date pursuant to the loan
agreement as formulated in accordance with subdivision 3.
(3) All taxes, assessments, insurance premiums and other similar charges paid to
date by the lender pursuant to subdivision 6, which charges were not reimbursed by the
borrower within 60 days.
(4) All actual closing costs which the borrower has deferred, if a deferral provision
is contained in the loan agreement as authorized by subdivision 7.
(5) The total accrued interest to date, as authorized by subdivision 5.
(6) All payments made by the borrower pursuant to subdivision 4.
(e) "Actual closing costs" mean reasonable charges or sums ordinarily paid at the
time of closing for the following, whether or not retained by the lender:
(1) Any insurance premiums on policies covering the mortgaged property including
but not limited to premiums for title insurance, fire and extended coverage insurance, flood
insurance, and private mortgage insurance.
(2) Abstracting, title examination and search, and examination of public records
related to the mortgaged property.
(3) The preparation and recording of any or all documents required by law or custom
for closing a reverse mortgage loan agreement.
(4) Appraisal and survey of real property securing a reverse mortgage loan.
(5) A single service charge, which service charge shall include any consideration,
not otherwise specified in this section as an "actual closing cost," paid by the borrower to
the lender for or in relation to the acquisition, making, refinancing or modification of a
reverse mortgage loan, and shall also include any consideration received by the lender
for making a commitment for a reverse mortgage loan, whether or not an actual loan
follows the commitment. The service charge shall not exceed one percent of the bona fide
committed principal amount of the reverse mortgage loan.
(6) Charges and fees necessary for or related to the transfer of real property securing
a reverse mortgage loan or the closing of a reverse mortgage loan agreement paid by the
borrower and received by any party other than the lender.
Sec. 2. Minnesota Statutes 2008, section 47.60, subdivision 1, is amended to read:
Subdivision 1. Definitions.
For purposes of this section, the terms defined have
the meanings given them:
(a) "Consumer small loan" is a loan transaction in which cash is advanced to a
borrower for the borrower's own personal, family, or household purpose. A consumer
small loan is a short-term, unsecured loan to be repaid in a single installment. The cash
advance of a consumer small loan is equal to or less than $350. A consumer small loan
includes an indebtedness evidenced by but not limited to a promissory note or agreement
to defer the presentation of a personal check for a fee.
(b) "Consumer small loan lender" is a financial institution as defined in section
person business entity
registered with the commissioner and engaged in the
business of making consumer small loans.
Sec. 3. Minnesota Statutes 2008, section 47.60, subdivision 3, is amended to read:
Subd. 3. Filing.
person business entity
other than a financial institution
as defined by section
engages in the business of making consumer small loans to
person business entity
shall file with the commissioner as a
consumer small loan lender. The filing must be on a form prescribed by the commissioner
together with a fee of $250 for each place of business and contain the following
information in addition to the information required by the commissioner:
(1) evidence that the filer has available for the operation of the business at the
location specified, liquid assets of at least $50,000; and
(2) a biographical statement on the principal person responsible for the operation
and management of the business to be certified.
Revocation of the filing
and the right to engage in the business of a consumer small
3.28 loan lender
is the same as in the case of a regulated lender license in section
3.29For purposes of this subdivision, "business entity" includes one that does not have a
3.30physical location in Minnesota that makes a consumer small loan electronically via the
Sec. 4. Minnesota Statutes 2008, section 47.60, subdivision 6, is amended to read:
Subd. 6. Penalties for violation.
person business entity
members, officers, directors, agents, and employees who violate or participate in the
violation of any of the provisions of this section may be liable in the same manner as in
Sec. 5. Minnesota Statutes 2008, section 48.21, is amended to read:
4.448.21 REAL ESTATE; RESTRICTIONS ON HOLDING.
Subdivision 1. Specific restrictions. (a)
A bank may purchase, carry as an asset,
and convey real estate only:
(1) as provided for in section
(2) if acquired through foreclosure of a mortgage given to it in good faith as security
for loans made by or money due to it;
(3) if conveyed to it in satisfaction of debts previously contracted in good faith in
the course of its dealings;
(4) if acquired by sale on execution or judgment of a court in its favor; or
(5) if reasonably necessary to mitigate or avoid loss on a loan or investment
Real estate acquired under clauses (2) to (5) shall be carried as an asset only in
accordance with rules the commissioner prescribes. The maximum period for holding
4.17other real estate as an asset shall be five years, provided that upon application to the
4.18commissioner, the commissioner may approve the possession of such real estate by a bank
4.19for a period longer than five years, but not to exceed an additional five years, if:
4.20(1) the bank has made a good faith attempt to dispose of the real estate within the
4.21initial five-year period; or
4.22(2) disposal within the initial five-year period would be detrimental to the bank.
Subd. 2. Real estate holdings not bank liabilities.
Real estate owned by a bank
as a result of actions authorized in clauses (2) to (5) of subdivision 1 and subsequently
sold to any buyer on a contract for deed may not be considered creating a liability to a
bank for purposes of section
Subd. 3. Real estate holdings not sold; authority to write off.
any rules of the commissioner to the contrary, if real estate owned by a bank pursuant to
clauses (2) to (5) of subdivision 1 is not sold or otherwise disposed of within the maximum
established by rule by the commissioner
, the bank may write off any remaining
balance at a rate not less than one-fifth of that balance each subsequent calendar year.
Sec. 6. Minnesota Statutes 2008, section 58.05, subdivision 3, is amended to read:
Subd. 3. Certificate of exemption.
A person must obtain a certificate of exemption
from the commissioner to qualify as an exempt person under section
58.04, subdivision 1
paragraph (c), a financial institution under clause (2), or by order of the commissioner
under clause (6); or under section
58.04, subdivision 2
, paragraph (b), as a financial
institution under clause
, or by order of the commissioner under clause
Sec. 7. Minnesota Statutes 2008, section 58.06, subdivision 2, is amended to read:
Subd. 2. Application contents.
(a) The application must contain the name and
complete business address or addresses of the license applicant. The license applicant
must be a partnership, limited liability partnership, association, limited liability company,
corporation, or other form of business organization, and the application must contain the
names and complete business addresses of each partner, member, director, and principal
officer. The application must also include a description of the activities of the license
applicant, in the detail and for the periods the commissioner may require.
An A residential mortgage originator
applicant must submit one of the following:
(1) evidence which shows, to the commissioner's satisfaction, that either the federal
Department of Housing and Urban Development or the Federal National Mortgage
Association has approved the residential mortgage originator
applicant as a mortgagee;
(2) a surety bond or irrevocable letter of credit in the amount of not less than
$50,000 in a form approved by the commissioner, issued by an insurance company or bank
authorized to do so in this state. The bond or irrevocable letter of credit must be available
for the recovery of expenses, fines, and fees levied by the commissioner under this chapter
and for losses incurred by borrowers. The bond or letter of credit must be submitted with
the license application, and evidence of continued coverage must be submitted with each
renewal. Any change in the bond or letter of credit must be submitted for approval by the
commissioner within ten days of its execution; or
(3) a copy of the residential mortgage originator
applicant's most recent audited
financial statement, including balance sheet, statement of income or loss, statements of
changes in shareholder equity, and statement of changes in financial position. Financial
statements must be as of a date within 12 months of the date of application.
(c) The application must also include all of the following:
(1) an affirmation under oath that the applicant:
(i) is in compliance with the requirements of section
(ii) will maintain a perpetual roster of individuals employed as residential mortgage
originators, including employees and independent contractors, which includes the
that mandatory testing,
was, and continuing education were
completed. In addition, the roster must be made available to the commissioner on demand,
within three business days of the commissioner's request;
(iii) will advise the commissioner of any material changes to the information
submitted in the most recent application within ten days of the change;
(iv) will advise the commissioner in writing immediately of any bankruptcy petitions
filed against or by the applicant or licensee;
(v) will maintain at all times either a net worth, net of intangibles, of at least
$250,000 or a surety bond or irrevocable letter of credit in the amount of at least $50,000;
(vi) complies with federal and state tax laws; and
(vii) complies with sections
, the Minnesota unclaimed property
(2) information as to the mortgage lending, servicing, or brokering experience of the
applicant and persons in control of the applicant;
(3) information as to criminal convictions, excluding traffic violations, of persons in
control of the license applicant;
(4) whether a court of competent jurisdiction has found that the applicant or persons
in control of the applicant have engaged in conduct evidencing gross negligence, fraud,
misrepresentation, or deceit in performing an act for which a license is required under
(5) whether the applicant or persons in control of the applicant have been the subject
of: an order of suspension or revocation, cease and desist order, or injunctive order, or
order barring involvement in an industry or profession issued by this or another state or
federal regulatory agency or by the Secretary of Housing and Urban Development within
the ten-year period immediately preceding submission of the application; and
(6) other information required by the commissioner.
Sec. 8. Minnesota Statutes 2008, section 58.126, is amended to read:
6.2558.126 EDUCATION AND TESTING REQUIREMENT.
No individual shall engage in residential mortgage origination or make residential
mortgage loans, whether as an employee or independent contractor, before the completion
hours of educational training which has been approved by the commissioner, and
covering state and federal laws concerning residential mortgage lending.
6.30(b) In addition to the initial education requirements in paragraph (a), each individual
6.31must also complete eight hours of continuing education annually. The education must
6.33(1) three hours of federal law and regulations;
6.34(2) two hours of ethics, which must include fraud, consumer protection, and fair
7.1(3) two hours of standards governing nontraditional mortgage lending.
7.2(c) The commissioner may by rule establish testing requirements for individuals
7.3subject to the requirements of paragraphs (a) and (b). An individual must satisfy the
7.4testing requirements established by the commissioner before engaging in residential
7.5mortgage loan origination or making residential mortgage loans.
7.6EFFECTIVE DATE.This section is effective September 1, 2009, and applies to
7.7license applications and renewals made on or after that date.
Sec. 9. Minnesota Statutes 2008, section 58.13, subdivision 1, is amended to read:
Subdivision 1. Generally.
(a) No person acting as a residential mortgage originator
or servicer, including a person required to be licensed under this chapter, and no person
exempt from the licensing requirements of this chapter under section
, except as
otherwise provided in paragraph (b), shall:
(1) fail to maintain a trust account to hold trust funds received in connection with a
residential mortgage loan;
(2) fail to deposit all trust funds into a trust account within three business days of
receipt; commingle trust funds with funds belonging to the licensee or exempt person; or
use trust account funds for any purpose other than that for which they are received;
(3) unreasonably delay the processing of a residential mortgage loan application,
or the closing of a residential mortgage loan. For purposes of this clause, evidence of
unreasonable delay includes but is not limited to those factors identified in section
, clause (d);
(4) fail to disburse funds according to its contractual or statutory obligations;
(5) fail to perform in conformance with its written agreements with borrowers,
investors, other licensees, or exempt persons;
(6) charge a fee for a product or service where the product or service is not actually
provided, or misrepresent the amount charged by or paid to a third party for a product
(7) fail to comply with sections
, the Minnesota unclaimed property
(8) violate any provision of any other applicable state or federal law regulating
residential mortgage loans including, without limitation, sections
(9) make or cause to be made, directly or indirectly, any false, deceptive, or
misleading statement or representation in connection with a residential loan transaction
including, without limitation, a false, deceptive, or misleading statement or representation
regarding the borrower's ability to qualify for any mortgage product;
(10) conduct residential mortgage loan business under any name other than that
under which the license or certificate of exemption was issued;
(11) compensate, whether directly or indirectly, coerce or intimidate an appraiser for
the purpose of influencing the independent judgment of the appraiser with respect to the
value of real estate that is to be covered by a residential mortgage or is being offered as
security according to an application for a residential mortgage loan;
(12) issue any document indicating conditional qualification or conditional approval
for a residential mortgage loan, unless the document also clearly indicates that final
qualification or approval is not guaranteed, and may be subject to additional review;
(13) make or assist in making any residential mortgage loan with the intent that the
loan will not be repaid and that the residential mortgage originator will obtain title to
the property through foreclosure;
(14) provide or offer to provide for a borrower, any brokering or lending services
under an arrangement with a person other than a licensee or exempt person, provided that
a person may rely upon a written representation by the residential mortgage originator that
it is in compliance with the licensing requirements of this chapter;
(15) claim to represent a licensee or exempt person, unless the person is an employee
of the licensee or exempt person or unless the person has entered into a written agency
agreement with the licensee or exempt person;
(16) fail to comply with the record keeping and notification requirements identified
or fail to abide by the affirmations made on the application for licensure;
(17) represent that the licensee or exempt person is acting as the borrower's agent
after providing the nonagency disclosure required by section
, unless the disclosure
is retracted and the licensee or exempt person complies with all of the requirements of
(18) make, provide, or arrange for a residential mortgage loan that is of a lower
investment grade if the borrower's credit score or, if the originator does not utilize credit
scoring or if a credit score is unavailable, then comparable underwriting data, indicates
that the borrower may qualify for a residential mortgage loan, available from or through
the originator, that is of a higher investment grade, unless the borrower is informed that
the borrower may qualify for a higher investment grade loan with a lower interest rate
and/or lower discount points, and consents in writing to receipt of the lower investment
For purposes of this section, "investment grade" refers to a system of categorizing
residential mortgage loans in which the loans are: (i) commonly referred to as "prime" or
"subprime"; (ii) commonly designated by an alphabetical character with "A" being the
highest investment grade; and (iii) are distinguished by interest rate or discount points
or both charged to the borrower, which vary according to the degree of perceived risk
of default based on factors such as the borrower's credit, including credit score and
credit patterns, income and employment history, debt ratio, loan-to-value ratio, and prior
bankruptcy or foreclosure;
(19) make, publish, disseminate, circulate, place before the public, or cause to be
made, directly or indirectly, any advertisement or marketing materials of any type, or any
statement or representation relating to the business of residential mortgage loans that is
false, deceptive, or misleading;
(20) advertise loan types or terms that are not available from or through the licensee
or exempt person on the date advertised, or on the date specified in the advertisement.
For purposes of this clause, advertisement includes, but is not limited to, a list of sample
mortgage terms, including interest rates, discount points, and closing costs provided by
licensees or exempt persons to a print or electronic medium that presents the information
to the public;
(21) use or employ phrases, pictures, return addresses, geographic designations, or
other means that create the impression, directly or indirectly, that a licensee or other
person is a governmental agency, or is associated with, sponsored by, or in any manner
connected to, related to, or endorsed by a governmental agency, if that is not the case;
(22) violate section
, relating to table funding;
(23) make, provide, or arrange for a residential mortgage loan all or a portion
of the proceeds of which are used to fully or partially pay off a "special mortgage"
unless the borrower has obtained a written certification from an authorized independent
loan counselor that the borrower has received counseling on the advisability of the
loan transaction. For purposes of this section, "special mortgage" means a residential
mortgage loan originated, subsidized, or guaranteed by or through a state, tribal, or
local government, or nonprofit organization, that bears one or more of the following
nonstandard payment terms which substantially benefit the borrower: (i) payments vary
with income; (ii) payments of principal or interest are not required or can be deferred under
specified conditions; (iii) principal or interest is forgivable under specified conditions;
or (iv) where no interest or an annual interest rate of two percent or less is charged in
connection with the loan. For purposes of this section, "authorized independent loan
counselor" means a nonprofit, third-party individual or organization providing homebuyer
education programs, foreclosure prevention services, mortgage loan counseling, or credit
counseling certified by the United States Department of Housing and Urban Development,
the Minnesota Home Ownership Center, the Minnesota Mortgage Foreclosure Prevention
Association, AARP, or NeighborWorks America;
(24) make, provide, or arrange for a residential mortgage loan without verifying
the borrower's reasonable ability to pay the scheduled payments of the following, as
applicable: principal; interest; real estate taxes; homeowner's insurance, assessments,
and mortgage insurance premiums. For loans in which the interest rate may vary, the
reasonable ability to pay shall be determined based on a fully indexed rate and a repayment
schedule which achieves full amortization over the life of the loan. For all residential
mortgage loans, the borrower's income and financial resources must be verified by tax
returns, payroll receipts, bank records, or other similarly reliable documents.
Nothing in this section shall be construed to limit a mortgage originator's or exempt
person's ability to rely on criteria other than the borrower's income and financial resources
to establish the borrower's reasonable ability to repay the residential mortgage loan,
including criteria established by the United States Department of Veterans Affairs or the
United States Department of Housing and Urban Development for interest rate reduction
refinancing loans or streamline loans, or criteria authorized or promulgated by the
Federal National Mortgage Association or Federal Home Loan Mortgage Corporation;
however, such other criteria must be verified through reasonably reliable methods and
documentation. The mortgage originator's analysis of the borrower's reasonable ability
to repay may include, but is not limited to, consideration of the following items, if
verified: (1) the borrower's current and expected income; (2) current and expected cash
flow; (3) net worth and other financial resources other than the consumer's equity in the
dwelling that secures the loan; (4) current financial obligations; (5) property taxes and
insurance; (6) assessments on the property; (7) employment status; (8) credit history; (9)
debt-to-income ratio; (10) credit scores; (11) tax returns; (12) pension statements; and
(13) employment payment records, provided that no mortgage originator shall disregard
facts and circumstances that indicate that the financial or other information submitted by
the consumer is inaccurate or incomplete. A statement by the borrower to the residential
mortgage originator or exempt person of the borrower's income and resources or sole
reliance on any single item listed above is not sufficient to establish the existence of the
income or resources when verifying the reasonable ability to pay.
(25) engage in "churning." As used in this section, "churning" means knowingly or
intentionally making, providing, or arranging for a residential mortgage loan when the
new residential mortgage loan does not provide a reasonable, tangible net benefit to the
borrower considering all of the circumstances including the terms of both the new and
refinanced loans, the cost of the new loan, and the borrower's circumstances;
(26) the first time a residential mortgage originator orally informs a borrower of the
anticipated or actual periodic payment amount for a first-lien residential mortgage loan
which does not include an amount for payment of property taxes and hazard insurance,
the residential mortgage originator must inform the borrower that an additional amount
will be due for taxes and insurance and, if known, disclose to the borrower the amount of
the anticipated or actual periodic payments for property taxes and hazard insurance. This
same oral disclosure must be made each time the residential mortgage originator orally
informs the borrower of a different anticipated or actual periodic payment amount change
from the amount previously disclosed. A residential mortgage originator need not make
this disclosure concerning a refinancing loan if the residential mortgage originator knows
that the borrower's existing loan that is anticipated to be refinanced does not have an
escrow account; or
(27) make, provide, or arrange for a residential mortgage loan, other than a reverse
mortgage pursuant to United States Code, title 15, chapter 41, if the borrower's compliance
with any repayment option offered pursuant to the terms of the loan will result in negative
amortization during any six-month period.
(b) Paragraph (a), clauses (24) through (27), do not apply to a state or federally
chartered bank, savings bank, or credit union, an institution chartered by Congress under
the Farm Credit Act, or to a person making, providing, or arranging a residential mortgage
loan originated or purchased by a state agency or a tribal or local unit of government. This
paragraph supersedes any inconsistent provision of this chapter.
Sec. 10. Minnesota Statutes 2008, section 60A.124, is amended to read:
11.2560A.124 INDEPENDENT AUDIT.
The audit report of the independent certified public accountant that performs the
audit of an insurer's annual statement as required under section
should contain a statement as to whether anything, in
connection with their audit, came to their attention that caused them to believe that the
insurer failed to adopt and consistently apply the valuation procedure as required by
Sec. 11. [60A.1291] ANNUAL AUDIT.
11.33 Subdivision 1. Definitions. The definitions in this subdivision apply to this section.
11.34(a) "Accountant" and "independent public accountant" mean an independent certified
11.35public accountant or accounting firm in good standing with the American Institute of
12.1Certified Public Accountants and in all states in which the accountant or firm is licensed
12.2or is required to be licensed to practice. For Canadian and British companies, the term
12.3means a Canadian-chartered or British-chartered accountant.
12.4(b) "Audit committee" means a committee or equivalent body established by the
12.5board of directors of an entity for the purpose of overseeing the accounting and financial
12.6reporting processes of an insurer or group of insurers, and audits of financial statements of
12.7the insurer or group of insurers. The audit committee of any entity that controls a group of
12.8insurers may be deemed to be the audit committee for one or more of these controlled
12.9insurers solely for the purposes of this section at the election of the controlling person
12.10under subdivision 15, paragraph (e). If an audit committee is not designated by the insurer,
12.11the insurer's entire board of directors constitutes the audit committee.
12.12(c) "Indemnification" means an agreement of indemnity or a release from liability
12.13where the intent or effect is to shift or limit in any manner the potential liability of the
12.14person or firm for failure to adhere to applicable auditing or professional standards,
12.15whether or not resulting in part from knowing of other misrepresentations made by the
12.16insurer or its representatives.
12.17(d) "Independent board member" has the same meaning as described in subdivision
12.1815, paragraph (c).
12.19(e) "Internal control over financial reporting" means a process effected by an entity's
12.20board of directors, management and other personnel designed to provide reasonable
12.21assurance regarding the reliability of the financial statements, for example, those items
12.22specified in subdivision 4, paragraphs (a), clauses (2) to (6), (b), and (c), and includes
12.23those policies and procedures that:
12.24(1) pertain to the maintenance of records that, in reasonable detail, accurately and
12.25fairly reflect the transactions and dispositions of assets;
12.26(2) provide reasonable assurance that transactions are recorded as necessary to permit
12.27preparation of the financial statements, for example, those items specified in subdivision 4,
12.28paragraphs (a), clauses (2) to (6), (b), and (c), and that receipts and expenditures are being
12.29made only in accordance with authorizations of management and directors; and
12.30(3) provide reasonable assurance regarding prevention or timely detection of
12.31unauthorized acquisition, use or disposition of assets that could have a material effect on
12.32the financial statements, for example, those items specified in subdivision 4, paragraphs
12.33(a), clauses (2) to (6), (b), and (c).
12.34(f) "SEC" means the United States Securities and Exchange Commission.
12.35(g) "Section 404" means Section 404 of the Sarbanes-Oxley Act of 2002 and the
12.36SEC's rules and regulations promulgated under it.
13.1(h) "Section 404 report" means management's report on "internal control over
13.2financial reporting" as defined by the SEC and the related attestation report of the
13.3independent certified public accountant as described in paragraph (a).
13.4(i) "SOX compliant entity" means an entity that either is required to be
13.5compliant with, or voluntarily is compliant with, all of the following provisions of the
13.6Sarbanes-Oxley Act of 2002: (i) the preapproval requirements of Section 201 (section
13.710A(i) of the Securities Exchange Act of 1934); (ii) the audit committee independence
13.8requirements of Section 301 (section 10A(m)(3) of the Securities Exchange Act of 1934);
13.9and (iii) the internal control over financial reporting requirements of Section 404 (Item
13.10308 of SEC Regulation S-K).
13.11 Subd. 2. Filing requirements. Every insurance company doing business in this
13.12state, including fraternal benefit societies, reciprocal exchanges, service plan corporations
13.13licensed pursuant to chapter 62C, and legal service plans licensed pursuant to chapter
13.1462G, unless exempted by the commissioner pursuant to subdivision 9, paragraph (a), or by
13.15subdivision 18, shall have an annual audit of the financial activities of the most recently
13.16completed calendar year performed by an independent certified public accountant, and
13.17shall file the report of this audit with the commissioner on or before June 1 for the
13.18immediately preceding year ending December 31. The commissioner may require an
13.19insurer to file an audited financial report earlier than June 1 with 90 days' advance notice
13.20to the insurer.
13.21Extensions of the June 1 filing date may be granted by the commissioner for 30-day
13.22periods upon a showing by the insurer and its independent certified public accountant of
13.23the reasons for requesting the extension and a determination by the commissioner of good
13.24cause for the extension.
13.25The request for extension must be submitted in writing not less than ten days before
13.26the due date in sufficient detail to permit the commissioner to make an informed decision
13.27with respect to the requested extension.
13.28If an extension is granted in accordance with this subdivision, a similar extension of
13.2930 days is granted to the filing of management's report of internal control over financial
13.31Every insurer required to file an annual audited financial report pursuant to this
13.32subdivision shall designate a group of individuals as constituting its audit committee. The
13.33audit committee of an entity that controls an insurer may be deemed to be the insurer's
13.34audit committee for purposes of this subdivision at the election of the controlling person.
13.35 Subd. 3. Exemptions. Foreign and alien insurers filing audited financial reports in
13.36another state under the other state's requirements of audited financial reports which have
14.1been found by the commissioner to be substantially similar to these requirements are
14.2exempt from this subdivision if a copy of the audited financial report, communication of
14.3internal control related matters noted in an audit, accountant's letter of qualifications, and
14.4report on significant deficiencies in internal controls, which are filed with the other state,
14.5are filed with the commissioner in accordance with the filing dates specified in subdivision
14.62 (Canadian insurers may submit accountants' reports as filed with the Canadian Dominion
14.7Department of Insurance); and a copy of any notification of adverse financial condition
14.8report filed with the other state is filed with the commissioner within the time specified
14.9in subdivision 11. Foreign or alien insurers required to file management's report of
14.10internal control over financial reporting in another state are exempt from filing the report
14.11in this state provided the other state has substantially similar reporting requirements and
14.12the report is filed with the commissioner of the other state within the time specified.
14.13This subdivision does not prohibit or in any way limit the commissioner from ordering,
14.14conducting, and performing examinations of insurers under the authority of this chapter.
14.15 Subd. 4. Contents of annual audit; financial report. (a) The annual audited
14.16financial report must report, in conformity with statutory accounting practices required
14.17or permitted by the commissioner of insurance of the state of domicile, the financial
14.18position of the insurer as of the end of the most recent calendar year and the results of
14.19its operations, cash flows, and changes in capital and surplus for the year ended. The
14.20annual audited financial report must include:
14.21(1) a report of an independent certified public accountant;
14.22(2) a balance sheet reporting admitted assets, liabilities, capital, and surplus;
14.23(3) a statement of operations;
14.24(4) a statement of cash flows;
14.25(5) a statement of changes in capital and surplus; and
14.26(6) notes to the financial statements.
14.27(b) The notes required under paragraph (a) are those required by the appropriate
14.28National Association of Insurance Commissioners (NAIC) annual statement instructions
14.29and National Association of Insurance Commissioners Accounting Practices and
14.30Procedures Manual and include reconciliation of differences, if any, between the audited
14.31statutory financial statements and the annual statement filed under section 60A.13,
14.32subdivision 1, with a written description of the nature of these differences.
14.33(c) The financial statements included in the audited financial report must be prepared
14.34in a form and using language and groupings substantially the same as the relevant sections
14.35of the annual statement of the insurer filed with the commissioner. The financial statement
14.36must be comparative, presenting the amounts as of December 31 of the current year and
15.1the amounts as of the immediately preceding December 31. In the first year in which
15.2an insurer is required to file an audited financial report, the comparative data may be
15.3omitted. The amounts may be rounded to the nearest $1,000, and all immaterial amounts
15.4may be combined.
15.5 Subd. 5. Designation of independent certified public accountant. Each insurer
15.6required by this section to file an annual audited financial report must notify the
15.7commissioner in writing of the name and address of the independent certified public
15.8accountant or accounting firm retained to conduct the annual audit within 60 days after
15.9becoming subject to the annual audit requirement. The insurer shall obtain from the
15.10accountant a letter which states that the accountant is aware of the provisions that relate
15.11to accounting and financial matters in the insurance laws and the rules of the insurance
15.12regulatory authority of the state of domicile. The letter shall affirm that the accountant will
15.13express an opinion on the financial statements in terms of their conformity to the statutory
15.14accounting practices prescribed or otherwise permitted by that insurance regulatory
15.15authority, specifying the exceptions believed to be appropriate. A copy of the accountant's
15.16letter shall be filed with the commissioner.
15.17 Subd. 6. Report of disagreements. If an accountant who was the accountant for
15.18the immediately preceding filed audited financial report is dismissed or resigns, the
15.19insurer shall notify the commissioner of this event within five business days. Within
15.20ten business days of this notification, the insurer shall also furnish the commissioner
15.21with a separate letter stating whether in the 24 months preceding this event there were
15.22any disagreements with the former accountant on any matter of accounting principles or
15.23practices, financial statement disclosure, or auditing scope or procedure, which, if not
15.24resolved to the satisfaction of the former accountant, would have caused that person to
15.25make reference to the subject matter of the disagreement in connection with the opinion
15.26on the financial statements. The disagreements required to be reported in response to this
15.27subdivision include both those resolved to the former accountant's satisfaction and those
15.28not resolved to the former accountant's satisfaction. Disagreements contemplated by this
15.29subdivision are those disagreements between personnel of the insurer responsible for
15.30presentation of its financial statements and personnel of the accounting firm responsible
15.31for rendering its report. The insurer shall also in writing request the former accountant
15.32to furnish a letter addressed to the insurer stating whether the accountant agrees with
15.33the statements contained in the insurer's letter and, if not, stating the reasons for any
15.34disagreement. The insurer shall furnish this responsive letter from the former accountant
15.35to the commissioner together with its own.
16.1 Subd. 7. Qualifications of independent certified public accountant. (a) The
16.2commissioner shall not recognize any person or firm as a qualified independent certified
16.3public accountant that is not in good standing with the American Institute of Certified
16.4Public Accountants and in all states in which the accountant is licensed or is required
16.5to be licensed to practice, or for a Canadian or British company, that is not a chartered
16.6accountant. Except as otherwise provided, an independent certified public accountant must
16.7be recognized as qualified as long as the person conforms to the standards of the person's
16.8profession, as contained in the Code of Professional Conduct of the American Institute
16.9of Certified Public Accountants and the Code of Professional Conduct of the Minnesota
16.10Board of Public Accountancy or similar code and the person is properly licensed in good
16.11standing with all required state boards of accountancy.
16.12(b) The lead or coordinating audit partner, having primary responsibility for the
16.13audit, may not act in that capacity for more than five consecutive years. The person shall
16.14be disqualified from acting in that or a similar capacity for the same company or its
16.15insurance subsidiaries or affiliates for a period of five consecutive years. An insurer may
16.16make application to the commissioner for relief from this rotation requirement on the
16.17basis of unusual circumstances. This application must be made at least 30 days before
16.18the end of the calendar year. The commissioner may consider the following factors in
16.19determining if the relief should be granted:
16.20(1) number of partners, expertise of the partners, or the number of insurance clients
16.21in the currently registered firm;
16.22(2) premium volume of the insurer; or
16.23(3) number of jurisdictions in which the insurer transacts business.
16.24The insurer shall file, with its annual statement filing, the approval for relief from this
16.25paragraph with the states that it is licensed in or doing business in and with the NAIC. If
16.26the nondomestic state accepts electronic filing with the NAIC, the insurer shall file the
16.27approval in an electronic format acceptable to the NAIC.
16.28(c) The commissioner shall not recognize as a qualified independent certified public
16.29accountant, nor accept an annual audited financial report, prepared in whole or in part by
16.30an accountant who provides to an insurer, contemporaneously with the audit, the following
16.32(1) bookkeeping or other services related to the accounting records or financial
16.33statements of the insurer;
16.34(2) financial information systems design and implementation;
16.35(3) appraisal or valuation services, fairness opinions, or contribution in-kind reports;
17.1(4) actuarially oriented advisory services involving the determination of amounts
17.2recorded in the financial statements. The accountant may assist an insurer in understanding
17.3the methods, assumptions, and inputs used in the determination of amounts recorded in the
17.4financial statement only if it is reasonable to conclude that the services provided will not
17.5be subject to audit procedures during an audit of the insurer's financial statements. An
17.6accountant's actuary may also issue an actuarial opinion or certification on an insurer's
17.7reserves if the following conditions have been met:
17.8(i) neither the accountant nor the accountant's actuary has performed any
17.9management functions or made any management decisions;
17.10(ii) the insurer has competent personnel, or engages a third-party actuary, to estimate
17.11the loss reserves for which management takes responsibility; and
17.12(iii) the accountant's actuary tests the reasonableness of the reserves after the
17.13insurer's management has determined the amount of the loss reserves;
17.14(5) internal audit outsourcing services;
17.15(6) management functions or human resources;
17.16(7) broker or dealer, investment adviser, or investment banking services;
17.17(8) legal services or expert services unrelated to the audit; and
17.18(9) any other services that the commissioner determines, by rule, are impermissible.
17.19(d) The commissioner shall not recognize as a qualified independent certified public
17.20accountant, nor accept any audited financial report, prepared in whole or in part by any
17.21natural person who has been convicted of fraud, bribery, a violation of the Racketeer
17.22Influenced and Corrupt Organizations Act, United States Code, title 18, sections 1961 to
17.231968, or any dishonest conduct or practices under federal or state law, has been found to
17.24have violated the insurance laws of this state with respect to any previous reports submitted
17.25under this section, or has demonstrated a pattern or practice of failing to detect or disclose
17.26material information in previous reports filed under the provisions of this section.
17.27(e) The commissioner, after notice and hearing under chapter 14, may find that
17.28the accountant is not qualified for purposes of expressing an opinion on the financial
17.29statements in the annual audited financial report. The commissioner may require the
17.30insurer to replace the accountant with another whose relationship with the insurer is
17.31qualified within the meaning of this section.
17.32 Subd. 8. Exemptions to qualifications of certified public accountant. (a) Insurers
17.33having direct written and assumed premiums of less than $100,000,000 in any calendar
17.34year may request an exemption from subdivision 7, paragraph (c). The insurer shall
17.35file with the commissioner a written statement discussing the reasons why the insurer
17.36should be exempt from these provisions. If the commissioner finds, upon review of this
18.1statement, that compliance with this section would constitute a financial or organizational
18.2hardship upon the insurer, an exemption may be granted.
18.3(b) A qualified independent certified public accountant who performs the audit
18.4may engage in other nonaudit services, including tax services, that are not described in
18.5subdivision 7, paragraph (c), only if the activity is approved in advance by the audit
18.6committee, in accordance with paragraph (c).
18.7(c) All auditing services and nonaudit services provided to an insurer by the qualified
18.8independent certified public accountant of the insurer must be preapproved by the audit
18.9committee. The preapproval requirement is waived with respect to nonaudit services if
18.10the insurer is a SOX compliant entity or a direct or indirect wholly owned subsidiary of a
18.11SOX compliant entity or:
18.12(1) the aggregate amount of all such nonaudit services provided to the insurer
18.13constitutes not more than five percent of the total amount of fees paid by the insurer to
18.14its qualified independent certified public accountant during the fiscal year in which the
18.15nonaudit services are provided;
18.16(2) the services were not recognized by the insurer at the time of the engagement to
18.17be nonaudit services; and
18.18(3) the services are promptly brought to the attention of the audit committee and
18.19approved before the completion of the audit by the audit committee or by one or more
18.20members of the audit committee who are the members of the board of directors to whom
18.21authority to grant such approvals has been delegated by the audit committee.
18.22(d) The audit committee may delegate to one or more designated members of the
18.23audit committee the authority to grant the preapprovals required by paragraph (c). The
18.24decisions of any member to whom this authority is delegated must be presented to the full
18.25audit committee at each of its scheduled meetings.
18.26(e) The commissioner shall not recognize an independent certified public accountant
18.27as qualified for a particular insurer if a member of the board, president, chief executive
18.28officer, controller, chief financial officer, chief accounting officer, or any person serving in
18.29an equivalent position for that insurer, was employed by the independent certified public
18.30accountant and participated in the audit of that insurer during the one-year period preceding
18.31the date that the most current statutory opinion is due. This paragraph applies only to
18.32partners and senior managers involved in the audit. An insurer may make application to
18.33the commissioner for relief from this paragraph on the basis of unusual circumstances.
18.34(f) The insurer shall file, with its annual statement filing, the approval for relief with
18.35the states that it is licensed in or doing business in and the NAIC. If the nondomestic state
19.1accepts electronic filing with the NAIC, the insurer shall file the approval in an electronic
19.2format acceptable to the NAIC.
19.3 Subd. 9. Consolidated or combined audits. (a) The commissioner may allow
19.4an insurer to file consolidated or combined audited financial statements required by
19.5subdivision 2, in lieu of separate annual audited financial statements, where it can be
19.6demonstrated that an insurer is part of a group of insurance companies that has a pooling
19.7or 100 percent reinsurance agreement which substantially affects the solvency and
19.8integrity of the reserves of the insurer and the insurer cedes all of its direct and assumed
19.9business to the pool. An affiliated insurance company not meeting these requirements may
19.10be included in the consolidated or combined audited financial statements, if the company's
19.11total admitted assets are less than five percent of the consolidated group's total admitted
19.12assets. If these circumstances exist, then the company may file a written application to
19.13file consolidated or combined audited financial statements. This application must be for
19.14a specified period.
19.15(b) Upon written application by a domestic insurer, the commissioner may
19.16authorize the domestic insurer to include additional affiliated insurance companies in the
19.17consolidated or combined audited financial statements. A foreign insurer must obtain the
19.18prior written authorization of the commissioner of its state of domicile in order to submit
19.19an application for authority to file consolidated or combined audited financial statements.
19.20This application must be for a specified period.
19.21(c) A consolidated annual audit filing must include a columnar consolidated or
19.22combining worksheet. Amounts shown on the audited consolidated or combined financial
19.23statement must be shown on the worksheet. Amounts for each insurer must be stated
19.24separately. Noninsurance operations may be shown on the worksheet on a combined or
19.25individual basis. Explanations of consolidating or eliminating entries must be shown on
19.26the worksheet. A reconciliation of any differences between the amounts shown in the
19.27individual insurer columns of the worksheet and comparable amounts shown on the annual
19.28statement of the insurers must be included on the worksheet.
19.29 Subd. 10. Scope of audit and report of independent certified public accountant.
19.30Financial statements furnished pursuant to subdivision 4 must be examined by an
19.31independent certified public accountant. The audit of the insurer's financial statements
19.32must be conducted in accordance with generally accepted auditing standards. In
19.33accordance with AICPA Statement on Auditing Standards (SAS) No. 109, Understanding
19.34the Entity and its Environment and Assessing the Risks of Material Misstatement, or its
19.35replacement, the independent certified public accountant should obtain an understanding
19.36of internal control sufficient to plan the audit. To the extent required by SAS No. 109,
20.1for those insurers required to file a management's report of internal control over financial
20.2reporting pursuant to subdivision 17, the independent certified public accountant should
20.3consider (as that term is defined in SAS No. 102, Defining Professional Requirements in
20.4Statements on Auditing Standards or its replacement) the most recently available report in
20.5planning and performing the audit of the statutory financial statements. Consideration
20.6should be given to other procedures illustrated in the Financial Condition Examiners
20.7Handbook promulgated by the National Association of Insurance Commissioners as the
20.8independent certified public accountant deems necessary.
20.9 Subd. 11. Notification of adverse financial condition. The insurer required to
20.10furnish the annual audited financial report shall require the independent certified public
20.11accountant to provide written notice within five business days to the board of directors of
20.12the insurer or its audit committee of any determination by that independent certified public
20.13accountant that the insurer has materially misstated its financial condition as reported to
20.14the commissioner as of the balance sheet date currently under audit or that the insurer does
20.15not meet the minimum capital and surplus requirement of sections
20.1666A.33 as of that date. An insurer required to file an annual audited financial report who
20.17received a notification of adverse financial condition from the accountant shall file a
20.18copy of the notification with the commissioner within five business days of the receipt
20.19of the notification. The insurer shall provide the independent certified public accountant
20.20making the notification with evidence of the report being furnished to the commissioner.
20.21If the independent certified public accountant fails to receive the evidence within the
20.22required five-day period, the independent certified public accountant shall furnish to the
20.23commissioner a copy of the notification to the board of directors or its audit committee
20.24within the next five business days. No independent certified public accountant is liable in
20.25any manner to any person for any statement made in connection with this subdivision if
20.26the statement is made in good faith in compliance with this subdivision. If the accountant
20.27becomes aware of facts which might have affected the audited financial report after
20.28the date it was filed, the accountant shall take the action prescribed by AU section
20.29561, Subsequent Discovery of Facts Existing at the Date of the Auditor's Report of the
20.30Professional Standards issued by the American Institute of Certified Public Accountants,
20.31or its replacement.
20.32 Subd. 12. Communication of internal control related matters noted in an
20.33audit. In addition to the annual audited financial report, each insurer shall furnish the
20.34commissioner with a written communication as to any unremediated material weaknesses
20.35in its internal control over financial reporting noted during the audit. The communication
20.36must be prepared by the accountant within 60 days after the filing of the annual audited
21.1financial report, and must contain a description of any unremediated material weakness, as
21.2the term material weakness is defined by SAS No. 115, Communicating Internal Control
21.3Related Matters Identified in an Audit, as of December 31 immediately preceding so as
21.4to coincide with the audited financial report discussed in subdivision 2 in the insurer's
21.5internal control over financial reporting noted by the accountant during the course of their
21.6audit of the financial statements. If no unremediated material weaknesses were noted, the
21.7communication should so state.
21.8The insurer is required to provide a description of remedial actions taken or
21.9proposed to correct unremediated material weaknesses, if the actions are not described in
21.10the accountant's communication.
21.11 Subd. 13. Accountant's letter of qualification. The accountant shall furnish the
21.12insurer in connection with, and for inclusion in, the filing of the annual audited financial
21.13report, a letter stating that the accountant is independent with respect to the insurer and
21.14conforms to the standards of the accountant's profession as contained in the Code of
21.15Professional Conduct of the American Institute of Certified Public Accountants and the
21.16Code of Professional Conduct of the Minnesota Board of Accountancy or similar code;
21.17the background and experience in general, and the experience in audits of insurers of the
21.18staff assigned to the engagement and whether each is an independent certified public
21.19accountant; that the accountant understands that the annual audited financial report and the
21.20opinion on it will be filed in compliance with this statute and that the commissioner will
21.21be relying on this information in the monitoring and regulation of the financial position of
21.22insurers; that the accountant consents to the requirements of subdivision 14 and that the
21.23accountant consents and agrees to make available for review by the commissioner, or the
21.24commissioner's designee or appointed agent, the work papers, as defined in subdivision
21.2514; a representation that the accountant is properly licensed in good standing by the
21.26appropriate state licensing authorities and is a member in good standing in the American
21.27Institute of Certified Public Accountants; and a representation that the accountant complies
21.28with subdivision 7. Nothing in this section prohibits the accountant from utilizing staff
21.29the accountant deems appropriate where use is consistent with the standards prescribed
21.30by generally accepted auditing standards.
21.31 Subd. 14. Availability and maintenance of independent certified public
21.32accountants' work papers. Work papers are the records kept by the independent certified
21.33public accountant of the procedures followed, tests performed, information obtained, and
21.34conclusions reached pertinent to the independent certified public accountant's audit of the
21.35financial statements of an insurer. Work papers may include audit planning documents,
21.36work programs, analyses, memoranda, letters of confirmation and representation,
22.1management letters, abstracts of company documents, and schedules or commentaries
22.2prepared or obtained by the independent certified public accountant in the course of the
22.3audit of the financial statements of an insurer and that support the accountant's opinion.
22.4Every insurer required to file an audited financial report shall require the accountant,
22.5through the insurer, to make available for review by the examiners the work papers
22.6prepared in the conduct of the audit and any communications related to the audit between
22.7the accountant and the insurer. The work papers must be made available at the offices of
22.8the insurer, at the offices of the commissioner, or at any other reasonable place designated
22.9by the commissioner. The insurer shall require that the accountant retain the audit work
22.10papers and communications until the commissioner has filed a report on examination
22.11covering the period of the audit but no longer than seven years after the period reported
22.12upon, provided retention of the working papers beyond the seven years is not required by
22.13other professional or regulatory requirements. In the conduct of the periodic review by
22.14the examiners, it must be agreed that photocopies of pertinent audit work papers may be
22.15made and retained by the commissioner. These copies shall be part of the commissioner's
22.16work papers and must be given the same confidentiality as other examination work papers
22.17generated by the commissioner.
22.18 Subd. 15. Requirements for audit committee. (a) The audit committee must
22.19be directly responsible for the appointment, compensation, and oversight of the work
22.20of any accountant including resolution of disagreements between management and the
22.21accountant regarding financial reporting for the purpose of preparing or issuing the audited
22.22financial report or related work pursuant to this regulation. Each accountant shall report
22.23directly to the audit committee.
22.24(b) Each member of the audit committee must be a member of the board of directors
22.25of the insurer or a member of the board of directors of an entity elected pursuant to
22.26paragraph (e) and subdivision 1, paragraph (b).
22.27(c) In order to be considered independent for purposes of this section, a member of
22.28the audit committee may not, other than in his or her capacity as a member of the audit
22.29committee, the board of directors, or any other board committee, accept any consulting,
22.30advisory, or other compensatory fee from the entity or be an affiliated person of the entity
22.31or any subsidiary of the entity. However, if law requires board participation by otherwise
22.32nonindependent members, that law shall prevail and such members may participate in the
22.33audit committee and be designated as independent for audit committee purposes, unless
22.34they are an officer or employee of the insurer or one of its affiliates.
22.35(d) If a member of the audit committee ceases to be independent for reasons outside
22.36the member's reasonable control, that person, with notice by the responsible entity to the
23.1state, may remain an audit committee member of the responsible entity until the earlier of
23.2the next annual meeting of the responsible entity or one year from the occurrence of the
23.3event that caused the member to be no longer independent.
23.4(e) To exercise the election of the controlling person to designate the audit committee
23.5for purposes of this section, the ultimate controlling person shall provide written notice to
23.6the commissioners of the affected insurers. Notification must be made timely before the
23.7issuance of the statutory audit report and include a description of the basis for the election.
23.8The election can be changed through notice to the commissioner by the insurer, which
23.9shall include a description of the basis for the change. The election remains in effect for
23.10perpetuity, until rescinded.
23.11(f) The audit committee shall require the accountant that performs for an insurer any
23.12audit required by this section to timely report to the audit committee in accordance with
23.13the requirements of SAS No. 114, The Auditor's Communication with Those Charged
23.14with Governance, including:
23.15(1) all significant accounting policies and material permitted practices;
23.16(2) all material alternative treatments of financial information within statutory
23.17accounting principles that have been discussed with management officials of the insurer,
23.18ramifications of the use of the alternative disclosures and treatments, and the treatment
23.19preferred by the accountant; and
23.20(3) other material written communications between the accountant and the
23.21management of the insurer, such as any management letter or schedule of unadjusted
23.23(g) If an insurer is a member of an insurance holding company system, the reports
23.24required by paragraph (f) may be provided to the audit committee on an aggregate basis
23.25for insurers in the holding company system, provided that any substantial differences
23.26among insurers in the system are identified to the audit committee.
23.27(h) The proportion of independent audit committee members shall meet or exceed
23.28the following criteria:
23.29(1) for companies with prior calendar year direct written and assumed premiums $0
23.30to $300,000,000, no minimum requirements;
23.31(2) for companies with prior calendar year direct written and assumed premiums
23.32over $300,000,000 to $500,000,000, majority of members must be independent; and
23.33(3) for companies with prior calendar year direct written and assumed premiums
23.34over $500,000,000, 75 percent or more must be independent.
23.35(i) An insurer with direct written and assumed premium, excluding premiums
23.36reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less
24.1than $500,000,000 may make application to the commissioner for a waiver from the
24.2requirements of this subdivision based upon hardship. The insurer shall file, with its
24.3annual statement filing, the approval for relief from this subdivision with the states that
24.4it is licensed in or doing business in and the NAIC. If the nondomestic state accepts
24.5electronic filing with the NAIC, the insurer shall file the approval in an electronic format
24.6acceptable to the NAIC.
24.7This subdivision does not apply to foreign or alien insurers licensed in this state or
24.8an insurer that is a SOX compliant entity or a direct or indirect wholly-owned subsidiary
24.9of a SOX compliant entity.
24.10 Subd. 16. Conduct of insurer in connection with the preparation of required
24.11reports and documents. (a) No director or officer of an insurer shall, directly or indirectly:
24.12(1) make or cause to be made a materially false or misleading statement to an
24.13accountant in connection with any audit, review, or communication required under this
24.15(2) omit to state, or cause another person to omit to state, any material fact necessary
24.16in order to make statements made, in light of the circumstances under which the statements
24.17were made, not misleading to an accountant in connection with any audit, review, or
24.18communication required under this section.
24.19(b) No officer or director of an insurer, or any other person acting under the direction
24.20thereof, shall directly or indirectly take any action to coerce, manipulate, mislead, or
24.21fraudulently influence any accountant engaged in the performance of an audit pursuant to
24.22this section if that person knew or should have known that the action, if successful, could
24.23result in rendering the insurer's financial statements materially misleading.
24.24(c) For purposes of paragraph (b), actions that, "if successful, could result in
24.25rendering the insurer's financial statements materially misleading" include, but are not
24.26limited to, actions taken at any time with respect to the professional engagement period to
24.27coerce, manipulate, mislead, or fraudulently influence an accountant:
24.28(1) to issue or reissue a report on an insurer's financial statements that is not
24.29warranted in the circumstances due to material violations of statutory accounting
24.30principles prescribed by the commissioner, generally accepted auditing standards, or
24.31other professional or regulatory standards;
24.32(2) not to perform audit, review, or other procedures required by generally accepted
24.33auditing standards or other professional standards;
24.34(3) not to withdraw an issued report; or
24.35(4) not to communicate matters to an insurer's audit committee.
25.1 Subd. 17. Management's report of internal control over financial reporting.
25.2(a) Every insurer required to file an audited financial report pursuant to this section that
25.3has annual direct written and assumed premiums, excluding premiums reinsured with the
25.4Federal Crop Insurance Corporation and Federal Flood Program, of $500,000,000 or
25.5more, shall prepare a report of the insurer's or group of insurers' internal control over
25.6financial reporting, as these terms are defined in subdivision 1. The report must be filed
25.7with the commissioner along with the communication of internal control related matters
25.8noted in an audit described under subdivision 12. Management's report of internal control
25.9over financial reporting shall be as of December 31 immediately preceding.
25.10(b) Notwithstanding the premium threshold in paragraph (a), the commissioner may
25.11require an insurer to file management's report of internal control over financial reporting if
25.12the insurer is in any RBC level event, or meets any one or more of the standards of an
25.13insurer deemed to be in hazardous financial condition as pursuant to sections 606.20
25.15(c) An insurer or a group of insurers that is:
25.16(1) directly subject to Section 404;
25.17(2) part of a holding company system whose parent is directly subject to Section 404;
25.18(3) not directly subject to Section 404 but is a SOX compliant entity; or
25.19(4) a member of a holding company system whose parent is not directly subject to
25.20Section 404 but is a SOX compliant entity;
25.21may file its or its parent's Section 404 report and an addendum in satisfaction of this
25.22requirement provided that those internal controls of the insurer or group of insurers
25.23having a material impact on the preparation of the insurer's or group of insurers' audited
25.24statutory financial statements, consisting of those items included in subdivision 4,
25.25paragraphs (a), clauses (2) to (6), (b), and (c), were included in the scope of the Section
25.26404 report. The addendum shall be a positive statement by management that there are
25.27no material processes with respect to the preparation of the insurer's or group of insurers'
25.28audited statutory financial statements, consisting of those items included in subdivision 4,
25.29paragraphs (a), clauses (2) to (6), (b), and (c), excluded from the Section 404 report. If
25.30there are internal controls of the insurer or group of insurers that have a material impact on
25.31the preparation of the insurer's or group of insurers' audited statutory financial statements
25.32and those internal controls were not included in the scope of the Section 404 report, the
25.33insurer or group of insurers may either file (i) a report under this subdivision, or (ii) the
25.34Section 404 report and a report under this subdivision for those internal controls that have
25.35a material impact on the preparation of the insurer's or group of insurers' audited statutory
25.36financial statements not covered by the Section 404 report.
26.1(d) Management's report of internal control over financial reporting shall include:
26.2(1) a statement that management is responsible for establishing and maintaining
26.3adequate internal control over financial reporting;
26.4(2) a statement that management has established internal control over financial
26.5reporting and an assertion, to the best of management's knowledge and belief, after diligent
26.6inquiry, as to whether its internal control over financial reporting is effective to provide
26.7reasonable assurance regarding the reliability of financial statements in accordance with
26.8statutory accounting principles;
26.9(3) a statement that briefly describes the approach or processes by which
26.10management evaluated the effectiveness of its internal control over financial reporting;
26.11(4) a statement that briefly describes the scope of work that is included and whether
26.12any internal controls were excluded;
26.13(5) disclosure of any unremediated material weaknesses in the internal control over
26.14financial reporting identified by management as of December 31 immediately preceding.
26.15Management is not permitted to conclude that the internal control over financial reporting
26.16is effective to provide reasonable assurance regarding the reliability of financial statements
26.17in accordance with statutory accounting principles if there is one or more unremediated
26.18material weaknesses in its internal control over financial reporting;
26.19(6) a statement regarding the inherent limitations of internal control systems; and
26.20(7) signatures of the chief executive officer and the chief financial officer or
26.21equivalent position or title.
26.22(e) Management shall document and make available upon financial condition
26.23examination the basis upon which its assertions, required in paragraph (d), are made.
26.24Management may base its assertions, in part, upon its review, monitoring, and testing of
26.25internal controls undertaken in the normal course of its activities.
26.26(1) Management has discretion as to the nature of the internal control framework
26.27used, and the nature and extent of documentation, in order to make its assertion in a
26.28cost-effective manner and, as such, may include assembly of or reference to existing
26.30(2) Management's report on internal control over financial reporting, required by
26.31paragraph (a), and any documentation provided in support of the report during the course
26.32of a financial condition examination, must be kept confidential by the Department of
26.34 Subd. 18. Exemptions. (a) Upon written application of any insurer, the
26.35commissioner may grant an exemption from compliance with the provisions of this
26.36section. In order to receive an exemption, an insurer must demonstrate to the satisfaction
27.1of the commissioner that compliance would constitute a financial or organizational
27.2hardship upon the insurer. An exemption may be granted at any time and from time
27.3to time for specified periods. Within ten days from the denial of an insurer's written
27.4request for an exemption, the insurer may request in writing a hearing on its application
27.5for an exemption. This hearing must be held in accordance with chapter 14. Upon written
27.6application of any insurer, the commissioner may permit an insurer to file annual audited
27.7financial reports on some basis other than a calendar year basis for a specified period. An
27.8exemption may not be granted until the insurer presents an alternative method satisfying
27.9the purposes of this section. Within ten days from a denial of a written request for an
27.10exemption, the insurer may request in writing a hearing on its application. The hearing
27.11must be held in accordance with chapter 14.
27.12(b) This section applies to all insurers, unless otherwise indicated, required to file
27.13an annual audit by subdivision 2, except insurers having less than $1,000,000 of direct
27.14written premiums in this state in any calendar year and fewer than 1,000 policyholders
27.15or certificate holders of directly written policies nationwide at the end of the calendar
27.16year, are exempt from this section for that year, unless the commissioner makes a
27.17specific finding that compliance is necessary for the commissioner to carry out statutory
27.18responsibilities, except that insurers having assumed premiums from reinsurance contracts
27.19or treaties of $1,000,000 or more are not exempt.
27.20 Subd. 19. Canadian and British companies. (a) In the case of Canadian and
27.21British insurers, the annual audited financial report means the annual statement of total
27.22business on the form filed by these companies with their domiciliary supervision authority
27.23and duly audited by an independent chartered accountant.
27.24(b) For these insurers the letter required in subdivision 5 shall state that the
27.25accountant is aware of the requirements relating to the annual audited statement filed
27.26with the commissioner under subdivision 2, and shall affirm that the opinion expressed
27.27is in conformity with those requirements.
27.28 Subd. 20. Commercial mortgage loan valuation procedures. A report of the
27.29independent certified public accountant that performs the audit of an insurer's annual
27.30statement as required under subdivision 2, shall be filed and contain a statement as to
27.31whether anything in connection with the audit came to the accountant's attention that
27.32caused the accountant to believe that the insurer failed to adopt and consistently apply the
27.33valuation procedures as required by sections
27.34 Subd. 21. Examinations. (a) The commissioner or a designated representative shall
27.35determine the nature, scope, and frequency of examinations under this section conducted
27.36by examiners under section
60A.031. These examinations may cover all aspects of the
28.1insurer's assets, condition, affairs, and operations and may include and be supplemented
28.2by audit procedures performed by independent certified public accountants. Scheduling
28.3of examinations will take into account all relevant matters with respect to the insurer's
28.4condition, including results of the National Association of Insurance Commissioners,
28.5Insurance Regulatory Information Systems, changes in management, results of market
28.6conduct examinations, and audited financial reports. The type of examinations performed
28.7by examiners under this section must be compliance examinations, targeted examinations,
28.8and comprehensive examinations.
28.9(b) Compliance examinations will consist of a review of the accountant's workpapers
28.10defined under this section and a general review of the insurer's corporate affairs and
28.11insurance operations to determine compliance with the Minnesota insurance laws and
28.12the rules of the Department of Commerce. The examiners may perform alternative or
28.13additional examination procedures to supplement those performed by the accountant
28.14when the examiners determine that the procedures are necessary to verify the financial
28.15condition of the insurer.
28.16(c) Targeted examinations may cover limited areas of the insurer's operations as
28.17the commissioner may deem appropriate.
28.18(d) Comprehensive examinations will be performed when the report of the
28.19accountant as provided for in subdivision 7, paragraph (b), the notification required by
28.20subdivision 7, paragraph (c), the results of compliance or targeted examinations, or other
28.21circumstances indicate in the judgment of the commissioner or a designated representative
28.22that a complete examination of the condition and affairs of the insurer is necessary.
28.23(e) Upon completion of each targeted, compliance, or comprehensive examination,
28.24the examiner appointed by the commissioner shall make a full and true report on the
28.25results of the examination. Each report shall include a general description of the audit
28.26procedures performed by the examiners and the procedures of the accountant that
28.27the examiners may have utilized to supplement their examination procedures and the
28.28procedures that were performed by the registered independent certified public accountant
28.29if included as a supplement to the examination.
28.30 Subd. 22. Penalties. An annual statement, report, or document related to the
28.31business of insurance must not be filed with the commissioner or issued to the public if it
28.32is signed by anyone who is represented in the instrument as an "accountant," unless the
28.33person is qualified as defined by this section. A violation of this subdivision is a violation
72A.19 and punishable in accordance with section
28.35EFFECTIVE DATE.(a) Domestic insurers retaining a certified public accountant
28.36on the effective date of this section who qualify as independent shall comply with this
29.1section for the year ending December 31, 2010, and each year thereafter unless the
29.2commissioner permits otherwise.
29.3(b) Domestic insurers not retaining a certified public accountant on the effective
29.4date of this section who qualifies as independent shall meet the following schedule for
29.5compliance unless the commissioner permits otherwise.
29.6(1) As of December 31, 2010, file with the commissioner an audited financial report.
29.7(2) For the year ending December 31, 2010, and each year thereafter, such insurers
29.8shall file with the commissioner all reports and communication required by this section.
29.9(c) Foreign insurers shall comply with this section for the year ending December 31,
29.102010, and each year thereafter, unless the commissioner permits otherwise.
29.11(d) The requirements of subdivision 7, paragraph (b), are in effect for audits of the
29.12year beginning January 1, 2010, and thereafter.
29.13(e) The requirements of subdivision 15 are in effect January 1, 2010. An insurer or
29.14group of insurers that is not required to have independent audit committee members or
29.15only a majority of independent audit committee members, as opposed to a supermajority,
29.16because the total written and assumed premium is below the threshold and subsequently
29.17becomes subject to one of the independence requirements due to changes in premium has
29.18one year following the year the threshold is exceeded, but not earlier than January 1,
29.192010, to comply with the independence requirements. Likewise, an insurer that becomes
29.20subject to one of the independence requirements as a result of a business combination
29.21has one calendar year following the date of acquisition or combination to comply with
29.22the independence requirements.
29.23(f) An insurer or group of insurers that is not required to file a report because the total
29.24written premium is below the threshold and subsequently becomes subject to the reporting
29.25requirements has two years following the year the threshold is exceeded, but not earlier
29.26than December 31, 2010, to file a report. Likewise, an insurer acquired in a business
29.27combination has two calendar years following the date of acquisition or combination to
29.28comply with the reporting requirements.
29.29(g) The requirements and provisions contained in this section are effective January
29.301, 2010, and thereafter.
Sec. 12. Minnesota Statutes 2008, section 60B.03, subdivision 15, is amended to read:
Subd. 15. Insolvency.
(a) For an insurer organized under sections
, the inability to pay
any uncontested debt as it becomes due
or any other loss within 30 days after the due date
29.35 specified in the first assessment notice issued pursuant to section
(b) For any other insurer, that it is unable to pay its debts or meet its obligations
as they mature or that its assets do not exceed its liabilities plus the greater of (1) any
capital and surplus required by law to be constantly maintained, or (2) its authorized and
issued capital stock. For purposes of this subdivision, "assets" includes one-half of the
maximum total assessment liability of the policyholders of the insurer, and "liabilities"
includes reserves required by law. For policies issued on the basis of unlimited assessment
liability, the maximum total liability, for purposes of determining solvency only, shall be
deemed to be that amount that could be obtained if there were 100 percent collection of an
assessment at the rate of ten mills per dollar of insurance written by it and in force.
Sec. 13. Minnesota Statutes 2008, section 60L.02, subdivision 3, is amended to read:
Subd. 3. Additional requirements.
(a) In order to be eligible to be governed by
, the insurer must meet the requirements specified under this
(b) The insurer shall:
(1) have been in continuous operation for a minimum of five years; and
(2) maintain a minimum claims-paying, financial strength, or equivalent rating from
at least one nationally recognized statistical rating organization in one of the organization's
three highest rating categories for the time period during which sections
apply to the insurer. For purposes of this subdivision, the rating must be based on a
review of the insurer by the nationally recognized statistical rating organization with the
cooperation of the insurer; must not depend on a guarantee or other credit enhancement
from another entity; and must not be modified or otherwise qualified to show dependence
of the rating on the performance or a contractual obligation of, or the insurer's affiliation
with, another insurer.
(c) The insurer or an affiliate, as defined in section
60D.15, subdivision 2
, of the
insurer shall employ at least one individual as a professional investment manager for
the insurer's investments whom the board of directors or trustees of the insurer finds
is qualified on the basis of experience, education or training, competence, personal
integrity, and who conducts professional investment management activities in accordance
with the Code of Ethics and Standards of Professional Conduct of the Association for
Investment Management and Research. For purposes of complying with this paragraph,
an employee of an affiliate may only be used if they are responsible for managing the
(d) The board of directors of the insurer must annually adopt a resolution finding
that the insurer or an affiliate, as defined in section
60D.15, subdivision 2
, of the insurer
has employed a professional investment manager for the insurer's investments with
sufficient expertise and has sufficient other resources to implement and monitor the
insurer's investment policies and strategies.
(e) In the report required under section
60A.129 60A.1291, subdivision 3 12
the insurer's independent auditor shall not have identified any significant
deficiencies in the insurer's internal control structure related to investments during any of
the five years immediately preceding the date on which sections
apply to the insurer, and as long as sections
apply to the insurer.
Sec. 14. [61A.258] PRENEED INSURANCE PRODUCTS; MINIMUM
31.10MORTALITY STANDARDS FOR RESERVES AND NONFORFEITURE VALUES.
31.11 Subdivision 1. Definitions. For the purposes of this section, the following terms
31.12have the meanings given them:
31.13(1) "2001 CSO Mortality Table (2001 CSO)" means that mortality table, consisting
31.14of separate rates of mortality for male and female lives, developed by the American
31.15Academy of Actuaries CSO Task Force from the Valuation Basic Mortality Table
31.16developed by the Society of Actuaries Individual Life Insurance Valuation Mortality
31.17Task Force, and adopted by the National Association of Insurance Commissioners
31.18(NAIC) in December 2002. The 2001 CSO Mortality Table (2001 CSO) is included in
31.19the Proceedings of the NAIC (2nd Quarter 2002). Unless the context indicates otherwise,
31.20the "2001 CSO Mortality Table (2001 CSO)" includes both the ultimate form of that
31.21table and the select and ultimate form of that table and includes both the smoker and
31.22nonsmoker mortality tables and the composite mortality tables. It also includes both the
31.23age-nearest-birthday and age-last-birthday bases of the mortality tables;
31.24(2) "Ultimate 1980 CSO" means the Commissioners' 1980 Standard Ordinary Life
31.25Valuation Mortality Tables (1980 CSO) without ten-year selection factors, incorporated
31.26into the 1980 amendments to the NAIC Standard Valuation Law approved in December
31.28(3) "preneed insurance" is any life insurance policy or certificate that is issued
31.29in combination with, in support of, with an assignment to, or as a guarantee for a
31.30prearrangement agreement for goods and services to be provided at the time of and
31.31immediately following the death of the insured. Goods and services may include, but
31.32are not limited to embalming, cremation, body preparation, viewing or visitation, coffin
31.33or urn, memorial stone, and transportation of the deceased. The status of the policy or
31.34contract as preneed insurance is determined at the time of issue in accordance with the
31.35policy form filing.
32.1 Subd. 2. Minimum valuation mortality standards. For preneed insurance
32.2contracts, the minimum mortality standard for determining reserve liabilities and
32.3nonforfeiture values for both male and female insureds shall be the Ultimate 1980 CSO.
32.4 Subd. 3. Minimum valuation interest rate standards. (a) The interest rates used
32.5in determining the minimum standard for valuation of preneed insurance shall be the
32.6calendar year statutory valuation interest rates as defined in section 61A.25.
32.7(b) The interest rates used in determining the minimum standard for nonforfeiture
32.8values for preneed insurance shall be the calendar year statutory nonforfeiture interest
32.9rates as defined in section 61A.24.
32.10 Subd. 4. Minimum valuation method standards. (a) The method used in
32.11determining the standard for the minimum valuation of reserves of preneed insurance shall
32.12be the method defined in section 61A.25.
32.13(b) The method used in determining the standard for the minimum nonforfeiture
32.14values for preneed insurance shall be the method defined in section 61A.24.
32.15EFFECTIVE DATE; TRANSITION RULES.(a) This section is effective January
32.161, 2009, and applies to preneed insurance policies and certificates issued on or after that
32.18(b) For preneed insurance policies issued on or after the effective date of this
32.19section and before January 1, 2012, the 2001 CSO may be used as the minimum standard
32.20for reserves and minimum standard for nonforfeiture benefits for both male and female
32.22(c) If an insurer elects to use the 2001 CSO as a minimum standard for any policy
32.23issued on or after the effective date of section 1 and before January 1, 2012, the insurer
32.24shall provide, as a part of the actuarial opinion memorandum submitted in support of
32.25the company's asset adequacy testing, an annual written notification to the domiciliary
32.26commissioner. The notification shall include:
32.27(1) a complete list of all preneed policy forms that use the 2001 CSO as a minimum
32.29(2) a certification signed by the appointed actuary stating that the reserve
32.30methodology employed by the company in determining reserves for the preneed policies
32.31issued after the effective date and using the 2001 CSO as a minimum standard, develops
32.32adequate reserves (For the purposes of this certification, the preneed insurance policies
32.33using the 2001 CSO as a minimum standard cannot be aggregated with any other
33.1(3) supporting information regarding the adequacy of reserves for preneed insurance
33.2policies issued after the effective date of section 1 and using the 2001 CSO as a minimum
33.3standard for reserves.
33.4(d) Preneed insurance policies issued on or after January 1, 2012, must use the
33.5Ultimate 1980 CSO in the calculation of minimum nonforfeiture values and minimum
Sec. 15. Minnesota Statutes 2008, section 61B.19, subdivision 4, is amended to read:
Subd. 4. Limitation of benefits.
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) subject to the limitation in clause (5), with respect to any one life, regardless of
the number of policies or contracts:
in life insurance death benefits, but not more than
in net cash surrender and net cash withdrawal values for life insurance;
in health insurance benefits, including any net cash surrender
and net cash withdrawal values;
in annuity net cash surrender and net cash withdrawal values;
in present value of annuity benefits for structured settlement
annuities or for annuities in regard to which periodic annuity benefits, for a period of not
less than the annuitant's lifetime or for a period certain of not less than ten years, have
begun to be paid, on or before the date of impairment or insolvency; or
(3) subject to the limitations in clauses (5) and (6), with respect to each individual
resident participating in a retirement plan, except a defined benefit plan, established under
section 401, 403(b), or 457 of the Internal Revenue Code of 1986, as amended through
December 31, 1992, covered by an unallocated annuity contract, or the beneficiaries
of each such individual if deceased, in the aggregate,
in net cash
surrender and net cash withdrawal values;
(4) where no coverage limit has been specified for a covered policy or benefit, the
coverage limit shall be
in present value;
(5) in no event shall the association be liable to expend more than
in the aggregate with respect to any one life under clause (2), items (i), (ii), (iii),
(iv), and clause (4), and any one individual under clause (3);
(6) in no event shall the association be liable to expend more than
with respect to all unallocated annuities of a retirement plan, except a defined
benefit plan, established under section 401, 403(b), or 457 of the Internal Revenue Code
of 1986, as amended through December 31, 1992. If total claims from a plan exceed
shall be prorated among the
(7) for purposes of applying clause (2)(ii) and clause (5), with respect only to
health insurance benefits, the term "any one life" applies to each individual covered by a
health insurance policy;
(8) where covered contractual obligations are equal to or less than the limits stated in
this subdivision, the association will pay the difference between the covered contractual
obligations and the amount credited by the estate of the insolvent or impaired insurer, if
that amount has been determined or, if it has not, the covered contractual limit, subject
to the association's right of subrogation;
(9) where covered contractual obligations exceed the limits stated in this subdivision,
the amount payable by the association will be determined as though the covered
contractual obligations were equal to those limits. In making the determination, the estate
shall be deemed to have credited the covered person the same amount as the estate would
credit a covered person with contractual obligations equal to those limits; or
(10) the following illustrates how the principles stated in clauses (8) and (9) apply.
The example illustrated concerns hypothetical claims subject to the limit stated in clause
(2)(iii). The principles stated in clauses (8) and (9), and illustrated in this clause, apply
to claims subject to any limits stated in this subdivision.
CONTRACTUAL OBLIGATIONS OF:
For purposes of this subdivision, the commissioner shall determine the discount rate
to be used in determining the present value of annuity benefits.
35.18EFFECTIVE DATE.This section is effective the day following final enactment
35.19and applies to member insurers who are first determined to be impaired or insolvent on or
35.20after that date. Member insurers who are subject to an order of impairment in effect on the
35.21effective date but are not declared insolvent until after the effective date shall continue to
35.22be governed by the law in effect prior to the effective date.
Sec. 16. Minnesota Statutes 2008, section 61B.28, subdivision 4, is amended to read:
Subd. 4. Prohibited sales practice.
No person, including an insurer, 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, an advertisement, announcement, or statement, written or
oral, which uses the existence of the Minnesota Life and Health Insurance Guaranty
Association for the purpose of sales, solicitation, or inducement to purchase any form of
insurance covered by sections
. The notice required by subdivision 8
is not a violation of this subdivision nor is it a violation of this subdivision to explain
35.34verbally to an applicant or potential applicant the coverage provided by the Minnesota
35.35Life and Health Insurance Guaranty Association at any time during the application process
. This subdivision does not apply to the Minnesota Life and Health Insurance
Guaranty Association or an entity that does not sell or solicit insurance.
A person violating
35.38 this section is guilty of a misdemeanor.
Sec. 17. Minnesota Statutes 2008, section 61B.28, subdivision 8, is amended to read:
Subd. 8. Form.
The form of notice referred to in subdivision 7, paragraph (a),
is as follows:
(insert name, current address, and
telephone number of insurer)
NOTICE CONCERNING POLICYHOLDER RIGHTS IN AN
INSOLVENCY UNDER THE MINNESOTA LIFE AND HEALTH
INSURANCE GUARANTY ASSOCIATION LAW
If the insurer that issued your life, annuity, or health insurance policy becomes
impaired or insolvent, you are entitled to compensation for your policy from the assets of
that insurer. The amount you recover will depend on the financial condition of the insurer.
In addition, residents of Minnesota who purchase life insurance, annuities, or health
insurance from insurance companies authorized to do business in Minnesota are protected,
SUBJECT TO LIMITS AND EXCLUSIONS, in the event the insurer becomes financially
impaired or insolvent. This protection is provided by the Minnesota Life and Health
Insurance Guaranty Association.
Minnesota Life and Health Insurance Guaranty Association
address and telephone number)
The maximum amount the guaranty association will pay for all policies issued on
one life by the same insurer is limited to
. Subject to this
limit, the guaranty association will pay up to
insurance death benefits,
in net cash surrender and net cash withdrawal
values for life insurance,
in health insurance benefits, including any
net cash surrender and net cash withdrawal values,
in annuity net
cash surrender and net cash withdrawal values,
in present value of
annuity benefits for annuities which are part of a structured settlement or for annuities
in regard to which periodic annuity benefits, for a period of not less than the annuitant's
lifetime or for a period certain of not less than ten years, have begun to be paid on or
before the date of impairment or insolvency, or if no coverage limit has been specified
for a covered policy or benefit, the coverage limit shall be
value. Unallocated annuity contracts issued to retirement plans, other than defined benefit
plans, established under section 401, 403(b), or 457 of the Internal Revenue Code of
1986, as amended through December 31, 1992, are covered up to
net cash surrender and net cash withdrawal values, for Minnesota residents covered by
the plan provided, however, that the association shall not be responsible for more than
in claims from all Minnesota residents covered by the plan. If
total claims exceed
shall be prorated
among all claimants. These are the maximum claim amounts. Coverage by the guaranty
association is also subject to other substantial limitations and exclusions and requires
continued residency in Minnesota. If your claim exceeds the guaranty association's limits,
you may still recover a part or all of that amount from the proceeds of the liquidation of
the insolvent insurer, if any exist. Funds to pay claims may not be immediately available.
The guaranty association assesses insurers licensed to sell life and health insurance in
Minnesota after the insolvency occurs. Claims are paid from this assessment.
THE COVERAGE PROVIDED BY THE GUARANTY ASSOCIATION IS NOT
A SUBSTITUTE FOR USING CARE IN SELECTING INSURANCE COMPANIES
THAT ARE WELL MANAGED AND FINANCIALLY STABLE. IN SELECTING AN
INSURANCE COMPANY OR POLICY, YOU SHOULD NOT RELY ON COVERAGE
BY THE GUARANTY ASSOCIATION.
THIS NOTICE IS REQUIRED BY MINNESOTA STATE LAW TO ADVISE
POLICYHOLDERS OF LIFE, ANNUITY, OR HEALTH INSURANCE POLICIES
OF THEIR RIGHTS IN THE EVENT THEIR INSURANCE CARRIER BECOMES
FINANCIALLY INSOLVENT. THIS NOTICE IN NO WAY IMPLIES THAT THE
COMPANY CURRENTLY HAS ANY TYPE OF FINANCIAL PROBLEMS. ALL LIFE,
ANNUITY, AND HEALTH INSURANCE POLICIES ARE REQUIRED TO PROVIDE
Additional language may be added to the notice if approved by the commissioner
prior to its use in the form. This section does not apply to fraternal benefit societies
regulated under chapter 64B.
Sec. 18. Minnesota Statutes 2008, section 67A.01, is amended to read:
37.2767A.01 NUMBER OF MEMBERS REQUIRED, PROPERTY AND
37.29 Subdivision 1. Number of members.
It shall be lawful for any number of
persons, not less than 25, residing in adjoining
in this state, who shall
collectively own property worth at least $50,000, to form themselves into a corporation
for mutual insurance against loss or damage by the perils listed in section
(b) Except as otherwise provided in this section, the company shall operate in no
37.34 more than 150 adjoining townships in the aggregate at the same time. The company may,
37.35 if approval has been granted by the commissioner, operate in more than 150 adjoining
38.1 townships in the aggregate at the same time, subject to a maximum of 300 townships.
38.2 If the company confines its operations to one county it may transact business in that
38.3 county by so providing in its certificate of incorporation. In case of merger of two or
38.4 more companies having contiguous territories, the surviving company in the merger may
38.5 transact business in the entire territory of the merged companies, but the territory of the
38.6 surviving company in the merger must not be larger than 300 townships.
38.7 Subd. 2. Authorized territory. (a) A township mutual fire insurance company may
38.8be authorized to write business in up to nine adjoining counties in the aggregate at the
38.9same time. If policyholder surplus is at least $500,000 as reported in the company's last
38.10annual financial statement filed with the commissioner, the company may, if approval has
38.11been granted by the commissioner, be authorized to write business in ten or more counties
38.12in the aggregate at the same time, subject to a maximum of 20 adjoining counties, in
38.13accordance with the following schedule:
38.27(b) In the case of a merger of two or more companies having contiguous territories,
38.28the surviving company in the merger may transact business in the entire territory of the
38.29merged companies; however, the territory of the surviving company in the merger may not
38.30be larger than 20 counties.
38.31(c) A township mutual fire insurance company may write new and renewal insurance
38.32on property in cities within the company's authorized territory having a population less
38.33than 25,000. A township mutual may continue to write new and renewal insurance once
38.34the population increases to 25,000 or greater provided that amended and restated articles
38.35are filed with the commissioner along with a certification that such city's population has
38.36increased to 25,000 or greater.
38.37(d) A township mutual fire insurance company may write new and renewal insurance
38.38on property in cities within the company's authorized territory with a population of 25,000
39.1or greater, but less than 150,000, if approval has been granted by the commissioner.
39.2No township mutual fire insurance company shall insure any property in cities with a
39.3population of 150,000 or greater.
39.4(e) If a township mutual fire insurance company provides evidence to the
39.5commissioner that the company had insurance in force on December 31, 2007, in a city
39.6within the company's authorized territory with a population of 25,000 or greater, but less
39.7than 150,000, the company may write new and renewal insurance on property in that city
39.8provided that the company files amended and restated articles by July 31, 2010, naming
Sec. 19. Minnesota Statutes 2008, section 67A.06, is amended to read:
39.1167A.06 POWERS OF CORPORATION.
Every corporation formed under the provisions of sections
shall have power:
(1) to have succession by its corporate name for the time stated in its certificate of
(2) to sue and be sued in any court;
(3) to have and use a common seal and alter the same at pleasure;
(4) to acquire, by purchase or otherwise, and to hold, enjoy, improve, lease,
encumber, and convey all real and personal property necessary for the purpose of its
organization, subject to such limitations as may be imposed by law or by its articles of
(5) to elect or appoint in such manner as it may determine all necessary or proper
officers, agents, boards, and committees, fix their compensation, and define their powers
(6) to make and amend consistently with law bylaws providing for the management
of its property and the regulation and government of its affairs;
(7) to wind up and liquidate its business in the manner provided by chapter 60B;
(8) to indemnify certain persons against expenses and liabilities as provided in
. In applying section
for this purpose, the term "members"
shall be substituted for the terms "shareholders" and "stockholders
39.31(9) to eliminate or limit a director's personal liability to the company or its members
39.32for monetary damages for breach of fiduciary duty as a director. A company shall not
39.33eliminate or limit the liability of a director:
39.34(i) for breach of loyalty to the company or its members;
40.1(ii) for acts or omissions made in bad faith or with intentional misconduct or
40.2knowing violation of law;
40.3(iii) for transactions from which the director derived an improper personal benefit; or
40.4(iv) for acts or omissions occurring before the date that the provisions in the articles
40.5eliminating or limiting liability become effective.
Sec. 20. Minnesota Statutes 2008, section 67A.07, is amended to read:
40.767A.07 PRINCIPAL OFFICE.
The principal office of a township mutual fire insurance company shall be located in
township or in a city in a township county
in which the company is authorized to do
Sec. 21. Minnesota Statutes 2008, section 67A.14, subdivision 1, is amended to read:
Subdivision 1. Kinds of property; property outside authorized territory.
Township mutual fire insurance companies may insure qualified property. Qualified
property means dwellings, household goods, appurtenant structures, farm buildings, farm
personal property, churches, church personal property, county fair buildings, community
and township meeting halls and their usual contents.
(b) Township mutual fire insurance companies may extend coverage to include
an insured's secondary property if the township mutual fire insurance company covers
qualified property belonging to the insured. Secondary property means any real or
personal property that is not considered qualified property for a township mutual fire
insurance company to cover under this chapter. The maximum amount of coverage that a
township mutual fire insurance company may write for secondary property is 25 percent of
the total limit of liability of the policy issued to an insured covering the qualified property.
40.24(c) A township mutual fire insurance company may insure any real or personal
40.25property, including qualified or secondary property, subject to the limitations in
40.26subdivision 1, paragraph (b), located outside the limits of the territory in which the
40.27company is authorized by its certificate or articles of incorporation to transact business, if
40.28the company is already covering qualified property belonging to the insured, inside the
40.29limits of the company's territory.
40.30(d) A township mutual fire insurance company may insure property temporarily
40.31outside of the authorized territory of the township mutual fire insurance company.
Sec. 22. Minnesota Statutes 2008, section 67A.14, subdivision 7, is amended to read:
Subd. 7. Amount of insurable risk.
No township mutual fire
shall insure or reinsure a single risk or hazard in a larger sum than the greater of $3,000, or
one tenth of its net assets plus two tenths of a mill of its insurance in force; provided that
no portion of any such risk or hazard which shall have been reinsured, as authorized by
the laws of this state, shall be included in determining the limitation of risk prescribed
by this subdivision.
Sec. 23. [67A.175] SURPLUS REQUIREMENTS.
41.6 Subdivision 1. Minimum. Township mutual fire insurance companies shall maintain
41.7a minimum policyholders' surplus of $300,000 at all times.
41.8 Subd. 2. Corrective action plan; filing. A township mutual fire insurance company
41.9that falls below the $300,000 minimum surplus requirement must file a corrective action
41.10plan with the commissioner. The plan shall state how the company will correct its surplus
41.11deficiency. The plan must be submitted within 45 days of the company falling below the
41.12minimum surplus level.
41.13 Subd. 3. Corrective action plan; commissioner's notification. Within 30 days
41.14after the submission by a township mutual fire insurance company of a corrective action
41.15plan, the commissioner shall notify the insurer whether the plan may be implemented or
41.16is, in the judgment of the commissioner, unsatisfactory. If the commissioner determines
41.17the plan is unsatisfactory, the notification to the company must set forth the reasons for the
41.18determination, and may set forth proposed revisions that will render the plan satisfactory
41.19in the judgment of the commissioner. Upon notification from the commissioner, the
41.20insurer shall prepare a revised corrective action plan that may incorporate by reference
41.21any revisions proposed by the commissioner, and shall submit the revised plan to the
41.22commissioner within 45 days.
Sec. 24. Minnesota Statutes 2008, section 67A.18, subdivision 1, is amended to read:
Subdivision 1. By member.
Any member may terminate membership in the
company by giving written notice or returning the member's policy to the secretary
41.26 paying the withdrawing member's share of all existing claims
Sec. 25. APPROPRIATION.
41.28$1,000 in fiscal year 2010 and $1,000 in fiscal year 2011 is appropriated from the
41.29general fund to the commissioner of commerce for the purpose of implementing this
41.30article. This appropriation is added to the department's base.
Sec. 26. REPEALER.
41.32 Subdivision 1. Annual audits. Minnesota Statutes 2008, section 60A.129, is
42.1 Subd. 2. Township mutual insured properties, joint or partial risks, and
42.2assessments. Minnesota Statutes 2008, sections 67A.14, subdivision 5; 67A.17; and
42.367A.19, are repealed.
42.4 Subd. 3. Banking procedures; real estate tax records. Minnesota Rules, part
42.52675.2180, is repealed.
42.6 Subd. 4. Debt prorating companies. Minnesota Rules, parts 2675.7100;
42.72675.7110; 2675.7120; 2675.7130; and 2675.7140, are repealed.
42.8 Subd. 5. Guaranty association; inflation indexing. Minnesota Statutes 2008,
42.9section 61B.19, subdivision 6, is repealed.
Renumber the sections in sequence and correct the internal references
Amend the title accordingly