NORTH CAROLINA GENERAL ASSEMBLY

EXTRA SESSION 1986

 

 

CHAPTER 7

SENATE BILL 2

 

 

AN ACT TO AUTHORIZE THE COMMISSIONER OF INSURANCE OR INSURANCE COMPANIES TO CREATE RISK SHARING PLANS FOR INADEQUATE OR UNAVAILABLE KINDS OF PROPERTY AND CASUALTY INSURANCE; TO EXPAND THE FAIR PLAN; TO AUTHORIZE THE COMMISSIONER OF INSURANCE TO DESIGNATE ADDITIONAL COVERAGES UNDER THE FAIR AND BEACH PLANS; AND TO AUTHORIZE INSURERS TO FORM MARKET ASSISTANCE PROGRAMS.

 

The General Assembly of North Carolina enacts:

 

Section 1. Chapter 58 of the General Statutes is amended by adding a new Article to read:

"ARTICLE 37.

"Mandatory or Voluntary Risk Sharing Plans.

"§ 58-450. Establishment of plans. - If the Commissioner finds, after a hearing held in accordance with G.S. 58-9.2, that in all or any part of this State, any amount or kind of insurance authorized by G.S. 58-72(4) through G.S. 58-72(22) is not readily available in the voluntary market and that the public interest requires the availability of that insurance, he may either:

(1)       promulgate plans to provide insurance coverage for any risks in this State that are, based on reasonable underwriting standards, entitled to obtain but are otherwise unable to obtain coverage; or

(2)       call upon insurers to prepare plans for his approval.

"§ 58-451. Purposes, contents and operation of risk sharing plans. - (a) Each plan promulgated or prepared pursuant to G.S. 58-450 shall:

(1)       give consideration to:

a.         the need for adequate and readily accessible coverage;

b.         optional methods of improving the market affected;

c.         the inherent limitations of the insurance mechanism;

d.         the need for reasonable underwriting standards; and

e.         the requirement of reasonable loss prevention measures;

(2)       establish procedures that will create minimum interference with the voluntary market;

(3)       distribute the obligations imposed by the plan, and any profits or losses experienced by the plan, equitably and efficiently among the participating insurers; and

(4)       establish procedures for applicants and participants to have their grievances reviewed by an impartial body. The filing and processing of a grievance pursuant to this subdivision does not stay the requirement for participation in a plan mandated by G.S. 58-452.

(b)       Each plan may, on behalf of its participants:

(1)       issue policies of insurance to eligible applicants;

(2)       underwrite, adjust, and pay losses on insurance issued by the plan;

(3)       appoint a service company or companies to perform the functions enumerated in this subsection; and

(4)       obtain reinsurance for any part or all of its risks.

"§ 58-452. Persons required to participate. - (a) Each plan shall require participation:

(1)       by all insurers licensed in this State to write the kinds of insurance covered by the specific plan;

(2)       by all agents licensed to represent those insurers for that kind of insurance; and

(3)       by every rating organization that makes rates for that kind of insurance.

(b)       The Commissioner shall exclude from each plan any person if participation would impair the solvency of that person.

"§ 58-453. Voluntary participation. - Each plan may provide for participation by:

(1)       insurers that are not required to participate by G.S. 58-452;

(2)       eligible surplus lines insurers as defined in G.S. 58-422(3); or

(3)       reinsurers approved by the Commissioner.

"§ 58-454. Classification and rates. - Each plan shall provide for:

(1)       the method of classifying risks;

(2)       the making and filing of rates which are not excessive, inadequate, or unfairly discriminatory and policy forms applicable to the various risks insured by the plan;

(3)       the adjusting and processing of claims;

(4)       the commission rates to be paid to agents or brokers for coverages written by the plan; and

(5)       any other insurance or investment functions that are necessary for the purpose of providing adequate and readily accessible coverage.

"§ 58-455. Basis for participation. - Each plan shall specify the basis for participation by insurers, agents, rating organizations, and other participants and shall specify the conditions under which risks shall be accepted and underwritten by the plan.

"§ 58-456. Duty to provide information. - Every participating insurer and agent shall provide to any person seeking the insurance available in each plan, information about the services prescribed in the plan, including full information on the requirements and procedures for obtaining insurance under the plan, whenever the insurance is not readily available in the voluntary market.

"§ 58-457. Provision of marketing facilities. - If the Commissioner finds that the lack of participating insurers or agents in a geographic area makes the functioning of a plan difficult, he may order that the plan appoint agents on such terms as he designates or that the plan take other appropriate steps to guarantee that service is available.

"§ 58-458. Voluntary risk sharing plans. - Insurers doing business within this State or reinsurers approved by the Commissioner may prepare voluntary plans that will provide any specific amount or kind of insurance or component thereof for all or any part of this State in which that insurance is not readily available in the voluntary market and in which the public interest requires the availability of the coverage. These plans shall be submitted to the Commissioner and, if approved by him, may be put into operation.

"§ 58-459. Article not subject to Administrative Procedure Act. - The provisions of Chapter 150B of the General Statutes shall not apply to this Article, except that G.S. 150B-39 and G.S. 150B-41 shall apply to hearings conducted pursuant to G.S. 58-450.

"§ 58-460. Immunity of Commissioner and plan participants. - There shall be no liability on the part of, and no cause of action shall arise against the Commissioner, his representatives, or any plan, its participants, or its employees for any good faith action taken by them in the performance of their powers and duties in creating any plan pursuant to this Article."

Sec. 2. The second sentence of G.S. 58-72 is rewritten to read: "Except to the extent an insurer participates in a risk sharing plan under Article 37 of this Chapter, nothing herein contained shall require any insurer to insure every kind of risk which it is authorized to insure."

Sec. 3. The second sentence of G.S. 58-72(22) is rewritten to read: "Except to the extent an insurer participates in a risk sharing plan under Article 37 of this Chapter, no corporation so formed may transact any other business than that specified in its charter and articles of association."

Sec. 4. G.S. 58-173.17 is rewritten to read:

"§ 58-173.17. Purpose and geographic coverage of Article. - (a) It is the purpose of this Article to provide a program whereby adequate basic property insurance may be made available to property owners having insurable property in the State. It is further the purpose of this Article to encourage the improvement of properties located in the State and to arrest the decline of properties located in the State.

(b)       This Article shall apply to all geographic areas of the State except the 'Beach Area' defined in G.S. 58-173.2(2)."

Sec. 5. The first sentence of G.S. 58-173.20 is amended by adding immediately after the words "basic property insurance" the words ", including property insurance for farm risks".

Sec. 6. The second sentence of G.S. 58-173.20 is amended by deleting the words "the geographical areas of coverage,".

Sec. 7. G.S. 58-173.21 is amended by adding a new subsection to read:

"(c)      The Commissioner may designate the kinds of property insurance policies on principal residences to be offered by the association, including insurance policies under Article 12B of this Chapter, and the commission rates to be paid to agents or brokers for these policies, if he finds, after a hearing held in accordance with G.S. 58-9.2, that the public interest requires the designation. The provisions of Chapter 150B do not apply to any procedure under this subsection, except that G.S. 150B-39 and G.S. 150B-41 shall apply to a hearing under this subsection. Within 30 days after the receipt of notification from the Commissioner of a change in designation pursuant to this subsection, the association shall submit a revised plan and articles of association for approval in accordance with subsection (b) of this section."

Sec. 8. G.S. 58-173.7 is amended by adding a new paragraph at the end to read:

"The Commissioner may designate the kinds of property insurance policies on principal residences to be offered by the association, including insurance policies under Article 12B of this Chapter, and the commission rates to be paid to agents or brokers for these policies, if he finds, after a hearing held in accordance with G.S. 58-9.2, that the public interest requires the designation. The provisions of Chapter 150B do not apply to any procedure under this subsection, except that G.S. 150B-39 and G.S. 150B-41 shall apply to a hearing under this subsection. Within 30 days after the receipt of notification from the Commissioner of a change in designation pursuant to this subsection, the association shall submit a revised plan and articles of association for approval in accordance with this section."

Sec. 9. G.S. 58-131.46 is amended by adding immediately after the words "other information and data" the words ", the creation, administration, or termination of a market assistance program".

Sec. 10. The first sentence of G.S. 58-131.48 is amended by adding immediately after the words "management or is a member of" the words "a market assistance program or of".

Sec. 11. The second sentence of G.S. 58-131.48 is amended by deleting the words "This section shall not apply to" and substituting "This section does not apply to mandatory or voluntary risk sharing plans established under Article 37 of this Chapter or".

Sec. 12. The provisions of this act are severable, and if any provision of this act is held invalid by a court of competent jurisdiction, the invalidity shall not affect other provisions of the act which can be given effect without the invalid provision.

Sec. 13. This act is effective upon ratification and shall expire on June 30, 1988. Within 30 days after the effective date of this act the boards of directors of the FAIR Plan and the Beach Plan shall each submit a revised plan of operation for approval by the Commissioner in accordance with G.S. 58-173.21(b) and G.S. 58-173.7, respectively.

In the General Assembly read three times and ratified, this the 18th day of February, 1986.