North Carolina Life & Health Insurance Guaranty Association

Contact Information

North Carolina Life & Health Insurance Guaranty Association
PO Box 10218
Raleigh, NC 27605-0218
(p) 919.833.6838 (f) 919.833.9576
Association Web site: http://www.nclifega.org
State Insurance Department: http://www.ncdoi.com/

Law Summaries Report

[ Current as of January 01, 2020 ] ]

Coverages

Covered Contracts

§58-62-21(b). This Article provides coverage to the persons specified in subsection (a) of this section for policies or contracts of direct, nongroup life insurance, health insurance, or annuities, and supplemental contracts to any of these, for certificates under direct group policies and contracts, and for unallocated annuity contracts issued by member insurers, except as limited by this Article. Annuity contracts and certificates under group annuity contracts include, but are not limited to, guaranteed investment contracts, deposit administration contracts, unallocated funding agreements, allocated funding agreements, structured settlement annuities, annuities issued in connection with government lotteries, and any immediate or deferred annuity contracts.

Non-Covered Contracts

§58-62-21(c)Except as provided for in subsection (c1) of this section, this Article does not provide coverage for any of the following: (1) Any part of a policy or contract not guaranteed by the member insurer, or under which the risk is borne by the policy or contract owner. (2) Any policy or contract of reinsurance, unless assumption certificates have been issued pursuant to the reinsurance policy or contract. (3) Any part of a policy or contract to the extent that the rate of interest on which it is based, or the interest rate, crediting rate, or similar factor determined by the use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value: a. Averaged over the period of four years before the date on which the member insurer becomes an impaired or insolvent insurer under this Article, whichever is earlier, exceeds the rate of interest determined by subtracting two percentage points from Moody's Corporate Bond Yield Average averaged for that same four-year period or for a lesser period if the policy or contract was issued less than four years before the member insurer becomes an impaired or insolvent insurer under this Article, whichever is earlier; and b. On and after the date on which the member insurer becomes an impaired or insolvent insurer under this Article, whichever is earlier, exceeds the rate of interest determined by subtracting three percentage points from Moody's Corporate Bond Yield Average as most recently available. (4) Any portion of a policy or contract issued to a plan or program of an employer, association, or other person to provide life, health, or annuity benefits to its employees, members, or others to the extent that the plan or program is self-funded or uninsured, including, but not limited to, benefits payable by an employer, association, or other entity under any of the following: a. A multiple employer welfare arrangement as defined in 29 U.S.C. § 1002(40). b. A minimum premium group insurance plan. c. A stop-loss group insurance plan. d. An administrative services only contract. (5) Any part of a policy or contract to the extent that it provides dividends or experience-rating credits, voting rights, or provides that any fees or allowances be paid to any person, including the policy or contract owner, in connection with the service to or administration of the policy or contract. (6) Any policy or contract issued in this State by a member insurer at a time when it was not licensed to issue the policy or contract in this State. (7) Any unallocated annuity contract issued to, or in connection with, a benefit plan protected under the federal Pension Benefit Guaranty Corporation, regardless of whether the federal Pension Benefit Guaranty Corporation has yet become liable to make any payments with respect to the benefit plan. (8) Any part of any unallocated annuity contract that is not issued to or in connection with a specific employee, union, or association of natural persons benefit plan or a government lottery. (8a) Any part of a policy or contract to the extent that the assessments required by G.S. 58-62-41 with respect to the policy or contract are preempted by federal or state law. (8b) An obligation that does not arise under the express written terms of the policy or contract issued by the member insurer to the enrollee, certificate holder, contract owner, or policy owner, including, without limitation: a. Claims based on marketing materials. b. Claims based on side letters, riders, or other documents that were issued by the member insurer without meeting applicable policy or contract form filing or approval requirements. c. Misrepresentations of or regarding policy or contract benefits. d. Extra-contractual claims. e. A claim for penalties or consequential or incidental damages. (8c) A contractual agreement that establishes the member insurer's obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, which in each case is not an affiliate of the member insurer. (9) A policy or contract providing any hospital, medical, prescription drug, or other health care benefits pursuant to Part C or Part D of Subchapter XVIII, Chapter 7 of Title 42 of the United States Code, commonly known as Medicare Parts C & D, Subchapter XIX, Chapter 7 of Title 42 of the United States Code, commonly referred to as Medicaid, or any regulations issued pursuant thereto. (10) A portion of a policy or contract to the extent it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but which have not been credited to the policy or contract or as to which the policy or contract owner's rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this Article, whichever is earlier. If a policy's or contract's interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and are not subject to forfeiture under this subdivision, the interest or change in value determined by using the procedures defined in the policy or contract will be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency, whichever is earlier, and will not be subject to forfeiture. (11) A policy or contract providing any hospital, medical, prescription drug, or other health care benefits under the State's Medicaid program or NC Health Choice program. (12) Structured settlement annuity benefits to which a payee or beneficiary has transferred his or her rights in a structured settlement factoring transaction as defined in 26 U.S.C. § 5891(c)(3)(A), regardless of whether the transaction occurred before or after such section became effective.

Non-Resident Coverage

§58-62-21(a)(2). Yes. Covers persons who are not residents of North Carolina, but only under all of the following conditions: (i) the member insurer that issued the policies or contracts is domiciled in this State; (ii) the states in which the persons reside have associations similar to the association created by this Article; and (iii) the persons are not eligible for coverage by an association in any other state due to the fact that the insurer or the health maintenance organization was not licensed in the state at the time specified in the state's guaranty association law.

Benefit Limits

§58-62-21(d). The benefits for which the Association is liable do not, in any event, exceed the lesser of: (1) The contractual obligations for which the member insurer is liable or would have been liable if it were not a delinquent insurer. (2) With respect to any one life, regardless of the number of policies or contracts, three hundred thousand dollars ($ 300,000) for all benefits, including cash values. (2a) With respect to health insurance benefits for any one life, regardless of the number of policies: a. Three hundred thousand dollars ($ 300,000) for coverages not defined as health benefit plans. b. Five hundred thousand dollars ($ 500,000) for health benefit plans. (3) With respect to each individual participating in a governmental retirement plan established under section 401, 403(b), or 457 of the Internal Revenue Code covered by an unallocated annuity contract, or the beneficiaries of each individual if deceased, in the aggregate, three hundred thousand dollars ($ 300,000) in present value annuity benefits, including net cash surrender and net cash withdrawal values; or (4) With respect to any one contract holder covered by any unallocated annuity contract not included in subdivision (3) of this subsection, five million dollars ($ 5,000,000) in benefits, regardless of the number of such contracts held by that contract holder; or (5) With respect to any one payee (or beneficiaries of one payee if the payee is deceased) of a structured settlement annuity, one million dollars ($ 1,000,000) for all benefits, including cash values. (6) However, in no event shall the Association be obligated to cover more than (i) an aggregate of three hundred thousand dollars ($ 300,000) in benefits with respect to any one life under subdivisions (2) and (3) and sub-subdivision (2a)a. except with respect to benefits for health benefit plans under sub-subdivision (2a)b. of this subsection, in which case the aggregate liability of the Association shall not exceed five hundred thousand dollars ($ 500,000) with respect to any one life.

Triggers

Discretionary Triggers

§58-62-36(a). If a member insurer is an impaired insurer

Mandatory Triggers

§58-62-36(d). If a member insurer is an insolvent insurer

Foreign Triggers

No Separate provision

"Impaired Insurer"

§58-62-16(8). A member insurer which is not an insolvent insurer, and (i) is deemed by the commissioner to be potentially unable to fulfill its contractual obligations or (ii) is placed under an order of rehabilitation or conservation by a court of competent jurisdiction.

"Insolvent Insurer"

§58-62-16(9). A member insurer which is placed under an order of liquidation with a finding of insolvency by a court of competent jurisdication.

"Member Insurer"

§58-62-16(11). "Member insurer" means any insurer, health maintenance organization that is governed by Article 67 of this Chapter, and any hospital or medical service corporation that is governed by Article 65 of this Chapter and that is licensed or that holds a license to transact in this State any kind of insurance or health maintenance organization business for which coverage is provided under G.S. 58-62-21; and includes any insurer or health maintenance organization whose license in this State may have been suspended, revoked, not renewed or voluntarily withdrawn, but does not include a fraternal order or fraternal benefit society; mandatory State pooling plan; mutual assessment company or any entity that operates on an assessment basis; insurance exchange; or any entity similar to any of the foregoing.

Account Structure

§58-62-26(a). For purposes of administration and assessment, the Association shall maintain two accounts: (1) The life insurance and annuity account, which includes the following subaccounts: a. Life insurance account. b. Annuity account, which shall include annuity contracts owned by a governmental retirement plan or its trustee established under Section 401, 403(b), or 457 of the United States Internal Revenue Code 1954, but shall otherwise exclude unallocated annuities. c. Unallocated annuity account, which shall exclude contracts owned by a governmental retirement benefit plan or its trustee established under Section 401, 403(b), or 457 of the United States Internal Revenue Code 1954. (2) The health account.

Assessments

Assessment Limits

§58-62-41(g). The total of all assessments authorized by the Association upon a member insurer for each subaccount of the life insurance and annuity account and for the health account shall not in any one calendar year exceed two percent (2%) of the member insurer's average annual premiums received in this State on the policies and contracts covered by the subaccount or account during the three calendar years preceding the year in which the member insurer became a delinquent insurer. If two or more assessments are authorized in one calendar year with respect to member insurers that become impaired or insolvent in different calendar years, the average annual premiums for purposes of the aggregate assessment percentage limitation shall be equal and limited to the higher of the three-year average annual premiums for the applicable subaccount or account as calculated pursuant to this subsection. If the maximum assessment, together with the other assets of the Association in any account, does not provide in any one year in either account an amount sufficient to carry out the Association's responsibilities, the necessary additional funds shall be assessed as soon thereafter as permitted by this Article.

Assessment Classes

§58-62-41(b). There shall be two classes of assessments, as follows: (1) Class A assessments shall be authorized and called for the purpose of meeting administrative and legal costs and other expenses. Class A assessments may be authorized and called whether or not related to a particular delinquent insurer. (2) Class B assessments shall be authorized and called to the extent necessary to carry out the powers and duties of the Association under G.S. 58-62-36 with regard to a delinquent insurer.

Interest Rate Adjustments

§58-62-21(c)(3). Guaranty Association excludes from coverage: Any part of a policy to the extent that the rate of interest on which it is based, or the interest rate, crediting rate, or similar factor determined by the use of an index or other external reference stated in the policy or contract and employed in calculating returns or changes in value: a. Averaged over the period of four years before the date on which the Association becomes obligated with respect to the policy, exceeds a rate of interest determined by subtracting two percentage points from Moody's Corporate Bond Yield Average averaged for that same four-year period or for a lesser period if the policy was issued less than four years before the Association became obligated; and b. On and after the date on which the Association becomes obligated with respect to the policy, exceeds the rate of interest determined by subtracting three percentage points from Moody's Corporate Bond Yield Average as most recently available. (Amended effective 7/1/2013)

Tax Offsets

§105-228.5A. Yes. Up to 20% of assessment amount may be offset for next 5 years; covers all but administrative expenses.

Definition of Premium

§ 58-62-16 (16) "Premiums" means amounts or considerations received on covered policies or contracts less returned premiums, considerations, and deposits, and less dividends and experience credits. "Premiums" does not include any amounts or considerations received for any policies, contracts, or portions of policies or contracts for which coverage is not provided under G.S. 58-62-21(b); except that assessable premium shall not be reduced on account of G.S. 58-62-21(c)(3) relating to interest limitations and G.S. 58-62-21(d)(2) relating to limitations with respect to any one individual, any one participant, and any one policy or contract owner. Premiums shall not include premiums in excess of five million dollars ($ 5,000,000) on an unallocated annuity contract not issued under a governmental retirement benefit plan or its trustee established under Section 401, 403(b), or 457 of the United States Internal Revenue Code of 1954, or with respect to multiple nongroup policies of life insurance owned by one owner, whether the policy or contract owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, premiums in excess of five million dollars ($ 5,000,000) with respect to these policies or contracts, regardless of the number of policies or contracts held by the owner.

Advertising Prohibition

§58-62-86 “Prohibited advertisement of Article in insurance sales; notice to policyholders” (a) No person, including a member insurer, agent, or affiliate of a member insurer, shall make, publish, disseminate, circulate, or place before the public, or cause directly or indirectly to be made, published, disseminated, circulated, or placed before the public, in any newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio station or television station, or in any other way, any oral or written advertisement, announcement, or statement that uses the existence of the Association or this Article for the purpose of sale or solicitation of or inducement to purchase any kind of insurance or other coverage covered by this Article. However, this subsection does not apply to the Association or any other person who does not sell or solicit insurance or coverage by a health maintenance organization.

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National Organization of Life & Health Insurance Guaranty Associations
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Phone Number: 703.481.5206