KRS 304.42-090: Assessments -- Classification -- Certificate of contribution -- Payment

under protest.

(1) For the purpose of providing the funds necessary to carry out the powers and duties

of the association, the board of directors shall assess the member insurers,

separately for each account, at such time and for such amounts as the board finds

necessary. Assessments shall be due not less than thirty (30) days after prior written

notice to the member insurers and shall accrue interest at eight percent (8% ) per

annum on and after the due date.

(2) There shall be two (2) classes of assessments:

(a) Class A assessments shall be made 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 impaired or insolvent insurer;

(b) Class B assessments shall be authorized and called to the extent necessary to

carry out the powers and duties of the association under KRS 304.42-080 with

regard to an impaired or insolvent insurer.

(3) (a) The amount of any Class A assessment shall be determined by the board and

may be authorized and called on a pro rata or non -pro rata basis. If pro rata,

the board may provide that it be credited against future Class B assessments.

The amount of any Class B assessment, except for assessments related to

long-term care insurance, shall be allocated for assessment purposes among

the accounts pursuant to an allocation formula which may be based on the

premiums or reserves of the impaired or insolvent insurer or any other

standard deemed by the board in its sole discretion as being fair and

reasonable under the circumstances.

(b) The amount of the Class B assessment for long -term care insurance written by

the impaired or insolvent insurer s hall be allocated according to a

methodology included in the plan of operation and approved by the

commissioner. The methodology shall provide for fifty percent (50%) of the

assessment to be allocated to accident and health member insurers and fifty

percent (50%) to be allocated to life and annuity member insurers.

(c) Class B assessments against member insurers for each account shall be in the

proportion that the premiums received on business in this state by each

assessed member insurer on policies or con tracts covered by each account for

the three (3) most recent calendar years for which information is available

preceding the year in which the member insurer became insolvent, or in the

case of assessment with respect to an impaired insurer, the three (3) most

recent calendar years for which information is available preceding the year in

which the member insurer became impaired, bears to such premiums received

on business in this state for such calendar years by all assessed member

insurers.

(d) Assessments for funds to meet the requirements of the association with

respect to an impaired or insolvent insurer shall not be made until necessary to

implement the purposes of this subtitle. Classification of assessments under

subsection (2) of this section and com putation of assessments under this

subsection shall be made with a reasonable degree of accuracy, recognizing

that exact determinations may not always be possible. The association shall

notify each member insurer of its anticipated pro rata share of an aut horized

assessment not yet called within one hundred eighty (180) days after the

assessment is authorized.

(4) The association may abate or defer, in whole or in part, the assessment of a member

insurer if, in the opinion of the board, payment of the asses sment would endanger

the ability of the member insurer to fulfill its contractual obligations. In the event an

assessment against a member insurer is abated, or deferred in whole or in part, the

amount by which such assessment is abated or deferred may be assessed against the

other member insurers in a manner consistent with the basis for assessments set

forth in this section. Once the conditions that caused a deferral have been removed

or rectified, the member shall pay all assessments that were deferred u nder a

repayment plan approved by the association.

(5) (a) Subject to the provisions of paragraph (b) of this subsection, the total of all

assessments authorized by the association with respect to a member insurer

for each account shall not in any one (1) 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 account during the three (3)

calendar years preceding the year in which the member insurer became an

impaired or insolvent insurer. If the maximum assessment, together with the

other assets of the association in any other account, does not provide in any

one (1) year in any other account an amount sufficient to carry out the

responsibilities of the associa tion, the necessary additional funds shall be

assessed as soon thereafter as permitted by this subtitle.

(b) If two (2) or more assessments are authorized in one (1) calendar year with

respect to member insurers that become impaired or insolvent in differe nt

calendar years, the average annual premiums for purposes of the aggregate

assessment percentage limitation referenced in paragraph (a) of this subsection

shall be equal and limited to the higher of the three (3) year average annual

premiums for the applicable account as calculated under this section.

(c) The board may provide in the plan of operation a method of allocating funds

among claims, whether relating to one (1) or more impaired or insolvent

insurers, when the maximum assessment will be insuffici ent to cover

anticipated claims.

(d) If the maximum assessment for the life insurance account or the annuity

account in one (1) year does not provide an amount sufficient to carry out the

responsibilities of the associa tion, then, pursuant to paragraph (c) of this

subsection, the board shall access the other account for the necessary

additional amount, subject to the maximum stated in paragraph (a) of this

subsection.

(6) The board may, by an equitable method as establis hed in the plan of operation,

refund to member insurers, in proportion to the contribution of each member insurer

to that account, the amount by which the assets of the account exceed the amount

the board finds is necessary to carry out during the coming y ear the obligations of

the association with regard to that account, including assets accruing from

assignment, subrogation, net realized gains and income from investments. A

reasonable amount may be retained in any account to provide funds for the

continuing expenses of the association and for future losses claims.

(7) It shall be proper for any member insurer, in determining its premium rates and

policy owner dividends as to any kind of insurance or health maintenance

organization business within the scope of this subtitle, to consider the amount

reasonably necessary to meet its assessment obligations under this subtitle.

(8) The association shall issue to each member insurer paying an assessment under this

subtitle, other than a Class A assessment, a certi ficate of contribution, in a form

prescribed by the commissioner, for the amount of the assessment so paid. All

outstanding certificates shall be of equal dignity and priority without reference to

amounts or dates of issue. A certificate of contribution ma y be shown by the

member insurer in its financial statement as an asset in such form and for such

amount, if any, and period of time as the commissioner may approve.

(9) (a) A member insurer that wishes to protest all or part of an assessment shall pay

when due the full amount of the assessment as set forth in the notice provided

by the association. The payment shall be available to meet association

obligations during the pendency of the protest or any subsequent appeal.

Payment shall be accompanied by a st atement in writing that the payment is

made under protest and setting forth a brief statement of the grounds for the

protest.

(b) Within sixty (60) days following the payment of an assessment under protest

by a member insurer, the association shall notify the member insurer in

writing of its determination with respect to the protest unless the association

notifies the member insurer that additional time is required to resolve the

issues raised by the protest.

(c) Within thirty (30) days after a final decisi on has been made, the association

shall notify the protesting member insurer in writing of that final decision.

Within sixty (60) days of receipt of notice of the final decision, the protesting

member insurer may appeal the final action to the commissioner , in

accordance with KRS 304.42-110(3).

(d) In the alternative to rendering a final decision with respect to a protest based

on a question regarding the assessment base, the association may refer protests

to the commissioner for a final decision, with or w ithout a recommendation

from the association.

(e) If the protest or appeal on the assessment is upheld, the amount paid in error

or excess shall be returned to the member insurer. Interest on a refund due a

protesting member insurer shall be paid at the ra te actually earned by the

association.

(10) The association may request information of member insurers in order to aid in the

exercise of its power under this section and member insurers shall promptly comply

with a request.