AB 550

This bill makes various changes to insurance laws, including correcting certain

grammatical errors.

Fraternals

Under the bill, the commissioner of insurance may issue an order that declares

a domestic fraternal that has undergone a certain financial event specified in the bill

to be in a hazardous condition. The commissioner may then order the fraternal to

remedy the event, and the order may include authorization to negotiate to transfer

all of its members, insurance certificates, and other assets and liabilities to another

fraternal or insurer. The transfer is considered to be a novation of the insurance

certificates effective on the date of transfer. The fraternal must ensure the transfer

is concluded within the time specified by the commissioner and subject to approval

by the commissioner. Though other law may require notice to or approval by the

fraternal's members or supreme governing body, a transfer agreement under the bill

is considered to be fully approved by the fraternal upon a majority vote of the

fraternal's board of directors. If the fraternal seeks to transfer to an organization

that does not have authority to transact insurance business in Wisconsin, the

commissioner may grant a limited certificate of authority for the organization to

service the existing insurance certificates and fulfill obligations to certificate holders

following the transfer.

The bill adds the following to current law grounds for rehabilitation or

liquidation of an insurer: failure by a domestic fraternal to comply with a

commissioner's order related to the financial event and failure by a domestic

fraternal to remedy the hazardous condition within the time specified by the

commissioner. The bill, however, specifies that unless the commissioner reasonably

believes that rehabilitation of the fraternal has a high probability of returning the

fraternal to long-term viability or will facilitate transfer to another fraternal or

insurer, rehabilitation of the fraternal is presumed to be futile and to serve no useful

purpose. After a petition for liquidation of a fraternal is filed, the fraternal may not

assess payment of shares of a deficiency, unless the commissioner determines the

assessment is for the purpose of satisfying obligations to creditors. Liquidation of

domestic fraternals must be conducted consistent with the purposes of the current

law purpose of enhancing efficiency and economy of liquidation, through clarification

and specification of the law, to minimize legal uncertainty and litigation in a manner

designed to conserve assets, limit liquidation expenses, and avoid any assessment

of shares of a deficiency.

A liquidator of a fraternal under the bill must attempt to transfer insurance

policies or certificates by assignment, assumption, or another means to another

qualified fraternal, or if no qualified fraternal will accept the transfer, to an insurer

authorized to sell life insurance in Wisconsin. Upon transfer to an insurer, each

member of the transferring fraternal and owner of an insurance policy or certificate