KRS 304.51-010: Interstate Insurance Product Regulation Compact.

Interstate Insurance Product Regulation Compact

Pursuant to terms and conditions of this compact, the Commonwealth of Kentucky seeks

to join with other states and establish the Interstate Insurance Product Regulation

Compact, and thus become a member of th e Interstate Insurance Product Regulation

Commission. The commissioner of insurance, or his or her designee, is hereby designated

to serve as the representative of this state to the commission.

ARTICLE I

The purposes of this compact are, through means of j oint and cooperative action among

the compacting states:

(1) To promote and protect the interest of consumers of individual and group annuity,

life insurance, disability income, and long-term care insurance products;

(2) To develop uniform standards for insurance products covered under the compact;

(3) To establish a central clearinghouse to receive and provide prompt review of

insurance products covered under the compact and, in certain cases, advertisements

related thereto, submitted by insurers authorize d to do business in one (1) or more

compacting states;

(4) To give appropriate regulatory approval to those product filings and advertisements

satisfying the applicable uniform standard;

(5) To improve coordination of regulatory resources and expertise bet ween state

insurance departments regarding the setting of uniform standards and review of

insurance products covered under the compact;

(6) To create the Interstate Insurance Product Regulation Commission; and

(7) To perform these and such other related fu nctions as may be consistent with the

state regulation of the business of insurance.

ARTICLE II

For purposes of this compact:

(1) "Advertisement" means any material designed to create public interest in a product,

or induce the public to purchase, increase, modify, reinstate, borrow on, surrender,

replace, or retain a policy, as more specifically defined in the rules and operating

procedures of the commission;

(2) "Bylaws" mean those bylaws established by the commission for its governance, or

for directing or controlling the commission's actions or conduct;

(3) "Compacting state" means any state which has enacted this compact legislat ion and

which has not withdrawn pursuant to Article XIV, Section (1), or been terminated

pursuant to Article XIV, Section (2);

(4) "Commission" means the Interstate Insurance Product Regulation Commission

established by this compact;

(5) "Commissioner" means the chief insurance regulatory official of a state including

but not limited to commissioner, superintendent, director, or administrator;

(6) "Domiciliary state" means the state in which an insurer is incorporated or organized;

or, in the case of an alien insurer, its state of entry;

(7) "Insurer" means any entity licensed by a state to issue contracts of insurance for any

of the lines of insurance covered by this compact;

(8) "Member" means the person chosen by a compacting state as its representative t o

the commission, or his or her designee;

(9) "Noncompacting state" means any state which is not at the time a compacting state;

(10) "Operating procedures" mean procedures promulgated by the commission

implementing a rule, uniform standard or a provision of this compact;

(11) "Product" means the form of a policy or contract, including any application,

endorsement, or related form which is attached to and made a part of the policy or

contract, and any evidence of coverage or certificate, for an individual o r group

annuity, life insurance, disability income, or long -term care insurance product that

an insurer is authorized to issue;

(12) "Rule" means a statement of general or particular applicability and future effect

promulgated by the commission, including a uniform standard developed pursuant

to Article VII of this compact, designed to implement, interpret, or prescribe law or

policy or describing the organization, procedure, or practice requirements of the

commission, which shall have the force and effect of law in the compacting states;

(13) "State" means any state, district, or territory of the United States of America;

(14) "Third-party filer" means an entity that submits a product filing to the commission

on behalf of an insurer; and

(15) "Uniform standard" means a standard adopted by the commission for a product line,

pursuant to Article VII of this compact, and shall include all of the product

requirements in aggregate; provided, that each uniform standard shall be construed,

whether express or implied , to prohibit the use of any inconsistent, misleading or

ambiguous provisions in a product and the form of the product made available to

the public shall not be unfair, inequitable, or against public policy as determined by

the commission.

ARTICLE III

(1) The compacting states hereby create and establish a joint public agency known as

the Interstate Insurance Product Regulation Commission. Pursuant to Article IV, the

commission will have the power to develop uniform standards for product lines,

receive and provide prompt review of products filed therewith, and give approval to

those product filings satisfying applicable uniform standards; provided, it is not

intended for the commission to be the exclusive entity for receipt and review of

insurance product fi lings. Nothing herein shall prohibit any insurer from filing its

product in any state wherein the insurer is licensed to conduct the business of

insurance; and any such filing shall be subject to the laws of the state where filed.

(2) The commission is a b ody corporate and politic, and an instrumentality of the

compacting states.

(3) The commission is solely responsible for its liabilities except as otherwise

specifically provided in this compact.

(4) Venue is proper and judicial proceedings by or against t he commission shall be

brought solely and exclusively in a court of competent jurisdiction where the

principal office of the commission is located.

ARTICLE IV

The commission shall have the following powers:

(1) To promulgate rules, pursuant to Article VII of this compact, which shall have the

force and effect of law and shall be binding in the compacting states to the extent

and in the manner provided in this compact;

(2) To exercise its rule-making authority and establish reasonable uniform standards for

products covered under the compact, and advertisement related thereto, which shall

have the force and effect of law and shall be binding in the compacting states, but

only for those products filed with the commission, provided, that a compacting state

shall have the right to opt out of such uniform standard pursuant to Article VII, to

the extent and in the manner provided in this compact, and, provided further, that

any uniform standard established by the commission for long -term care insurance

products may provide the same or greater protections for consumers as, but shall not

provide less than, those protections set forth in the National Association of

Insurance Commissioners' (NAIC) Long -Term Care Insurance Model Act and

Long-Term Care Insurance Model Regulation, respectively, adopted as of 2001. The

commission shall consider whether any subsequent amendments to the National

Association of Insurance Commissioners' Long -Term Care Insurance Model Act or

Long-Term Care Insurance Model Regulation adopted by the National Association

of Insurance Commissioners require amending of the uniform standards established

by the commission for long-term care insurance products;

(3) To receive and review in an expeditious manner products filed with the

commission, and rate filings for disability income and long -term care insurance

products, and give approval of those products and rate filings that satisfy the

applicable uniform standard, where such approval shall have the force and effect of

law and be binding on the compacting states to the extent and in the manner

provided in the compact;

(4) To receive and review in an expeditious manner advertisement relating to long-term

care insu rance products for which uniform standards have been adopted by the

commission, and give approval to all advertisement that satisfies the applicable

uniform standard. For any product covered under this compact, other than long-term

care insurance products, the commission shall have the authority to require an

insurer to submit all or any part of its advertisement with respect to that product for

review or approval prior to use, if the commission determines that the nature of the

product is such that an adve rtisement of the product could have the capacity or

tendency to mislead the public. The actions of commission as provided in this

section shall have the force and effect of law and shall be binding in the compacting

states to the extent and in the manner provided in the compact;

(5) To exercise its rule-making authority and designate products and advertisement that

may be subject to a self -certification process without the need for prior approval by

the commission;

(6) To promulgate operating procedures, pursuant to Article VII of this compact, which

shall be binding in the compacting states to the extent and in the manner provided in

this compact;

(7) To bring and prosecute legal proceedings or actions in its name as the commission;

provided, that the stand ing of any state insurance department to sue or be sued

under applicable law shall not be affected;

(8) To issue subpoenas requiring the attendance and testimony of witnesses and the

production of evidence;

(9) To establish and maintain offices;

(10) To purchase and maintain insurance and bonds;

(11) To borrow, accept or contract for services of personnel, including but not limited to

employees of a compacting state;

(12) To hire employees, professionals, or specialists, and elect or appoint officers, and to

fix their compensation, define their duties, and give them appropriate authority to

carry out the purposes of the compact, and determine their qualifications; and to

establish the commission's personnel policies and programs relating to, among other

things, conflicts of interest, rates of compensation, and qualifications of personnel;

(13) To accept any and all appropriate donations, and grants of money, equipment,

supplies, materials, and services, and to receive, utilize, and dispose of the same;

provided that at all times the commission shall strive to avoid any appearance of

impropriety;

(14) To lease, purchase, accept appropriate gifts or donations of, or otherwise to own,

hold, improve or use, any property, real, personal or mixed; provided that at a ll

times the commission shall strive to avoid any appearance of impropriety;

(15) To sell, convey, mortgage, pledge, lease, exchange, abandon, or otherwise dispose

of any property, real, personal, or mixed;

(16) To remit filing fees to compacting states as may be set forth in the bylaws, rules, or

operating procedures;

(17) To enforce compliance by compacting states with rules, uniform standards,

operating procedures, and bylaws;

(18) To provide for dispute resolution among compacting states;

(19) To advise compacting states on issues relating to insurers domiciled or doing

business in noncompacting jurisdictions, consistent with the purposes of this

compact;

(20) To provide advice and training to those personnel in state insurance departments

responsible for product review, and to be a resource for state insurance departments;

(21) To establish a budget and make expenditures;

(22) To borrow money;

(23) To appoint committees, including advisory committees comprising members, state

insurance regulators, state legislators or their representatives, insurance industry and

consumer representatives, and such other interested persons as may be designated in

the bylaws;

(24) To provide and receive information from, and to cooperate with, law enforcement

agencies;

(25) To adopt and use a corporate seal; and

(26) To perform such other functions as may be necessary or appropriate to achieve the

purposes of this compact consistent with the state regulation of the business of

insurance.

ARTICLE V

(1) Membership, Voting, and Bylaws.

(a) Each compacting state shall have and be limited to one (1) member. Each

member shall be qualified to serve in that capa city pursuant to applicable law

of the compacting state. Any member may be removed or suspended from

office as provided by the law of the state from which he or she shall be

appointed. Any vacancy occurring in the commission shall be filled in

accordance with the laws of the compacting state wherein the vacancy exists.

Nothing herein shall be construed to affect the manner in which a compacting

state determines the election or appointment and qualification of its own

commissioner.

(b) Each member shall be entitled to one (1) vote and shall have an opportunity to

participate in the governance of the commission in accordance with the

bylaws. Notwithstanding any provision herein to the contrary, no action of the

commission with respect to the promulgation of a uniform standard shall be

effective unless two-thirds (2/3) of the members vote in favor thereof.

(c) The commission shall, by a majority of the members, prescribe bylaws to

govern its conduct as may be necessary or appropriate to carry out the

purposes, and exercise the powers, of the compact, including but not limited

to:

1. Establishing the fiscal year of the commission;

2. Providing reasonable procedures for appointing and electing members,

as well as holding meetings, of the management committee;

3. Providing reasonable standards and procedures:

a. For the establishment and meetings of other committees; and

b. Governing any general or specific delegation of any authority or

function of the commission;

4. Providing reasonable procedures for calling and c onducting meetings of

the commission that consists of a majority of commission members,

ensuring reasonable advance notice of each such meeting and providing

for the right of citizens to attend each such meeting with enumerated

exceptions designed to prote ct the public's interest, the privacy of

individuals, and insurers' proprietary information, including trade

secrets. The commission may meet in camera only after a majority of the

entire membership votes to close a meeting in total or in part. As soon as

practicable, the commission must make public:

a. A copy of the vote to close the meeting revealing the vote of each

member with no proxy votes allowed; and

b. Votes taken during such meeting;

5. Establishing the titles, duties, and authority and reasonable procedures

for the election of the officers of the commission;

6. Providing reasonable standards and procedures for the establishment of

the personnel policies and programs of the commission.

Notwithstanding any civil service or other similar laws of any

compacting state, the bylaws shall exclusively govern the personnel

policies and programs of the commission;

7. Promulgating a code of ethics to address permissible and prohibited

activities of commission members and employees; and

8. Providing a mechanism for winding up the operations of the commission

and the equitable disposition of any surplus funds that may exist after

the termination of the compact after the payment and/or reserving of all

of its debts and obligations.

(d) The commission shall publish its bylaws in a convenient form and file a copy

thereof and a copy of any amendment thereto, with the appropriate agency or

officer in each of the compacting states.

(2) Management Committee, Officers, and Personnel.

(a) A management committee comprising no more than fourteen (14) members

shall be established as follows:

1. One (1) member from each of the six (6) compacting states with the

largest premium volume for individual and group annuities, life,

disability income, and long -term care insurance produ cts, determined

from the records of the National Association of Insurance

Commissioners for the prior year;

2. Four (4) members from those compacting states with at least two percent

(2%) of the market based on the premium volume described above, other

than the six (6) compacting states with the largest premium volume,

selected on a rotating basis as provided in the bylaws; and

3. Four (4) members from those compacting states with less than two

percent (2%) of the market, based on the premium volume describ ed

above, with one (1) selected from each of the four (4) zone regions of

the National Association of Insurance Commissioners as provided in the

bylaws.

(b) The management committee shall have such authority and duties as may be set

forth in the bylaws, including but not limited to:

1. Managing the affairs of the commission in a manner consistent with the

bylaws and purposes of the commission;

2. Establishing and overseeing an organizational structure within, and

appropriate procedures for, the commission to provide for the creation of

uniform standards and other rules, receipt and review of product filings,

administrative and technical support functions, review of decisions

regarding the disapproval of a product filing, and the review of elections

made by a compacting state to opt out of a uniform standard; provided

that a uniform standard shall not be submitted to the compacting states

for adoption unless approved by two -thirds (2/3) of the members of the

management committee;

3. Overseeing the offices of the commission; and

4. Planning, implementing, and coordinating communications and

activities with other state, federal, and local government organizations in

order to advance the goals of the commission.

(c) The commission shall elect annually officers from the management

committee, with each having such authority and duties, as may be specified in

the bylaws.

(d) The management committee may, subject to the approval of the commission,

appoint or retain an exe cutive director for such period, upon such terms and

conditions and for such compensation as the commission may deem

appropriate. The executive director shall serve as secretary to the commission,

but shall not be a member of the commission. The executive director shall hire

and supervise such other staff as may be authorized by the commission.

(3) Legislative and Advisory Committees.

(a) A legislative committee comprising state legislators or their designees shall be

established to monitor the operations o f, and make recommendations to, the

commission, including the management committee; provided that the manner

of selection and term of any legislative committee member shall be as set forth

in the bylaws. Prior to the adoption by the commission of any unifo rm

standard, revision to the bylaws, annual budget, or other significant matter as

may be provided in the bylaws, the management committee shall consult with

and report to the legislative committee.

(b) The commission shall establish two (2) advisory committees, one (1) of which

shall comprise consumer representatives independent of the insurance

industry, and the other comprising insurance industry representatives.

(c) The commission may establish additional advisory committees as its bylaws

may provide for the carrying out of its functions.

(4) Corporate Records of the Commission. The commission shall maintain its corporate

books and records in accordance with the bylaws.

(5) Qualified Immunity, Defense, and Indemnification.

(a) The members, officers, exec utive director, employees, and representatives of

the commission shall be immune from suit and liability, either personally or in

their official capacity, for any claim for damage to or loss of property or

personal injury or other civil liability caused by or arising out of any actual or

alleged act, error, or omission that occurred, or that the person against whom

the claim is made had a reasonable basis for believing occurred within the

scope of commission employment, duties, or responsibilities; provided , that

nothing in this paragraph shall be construed to protect any such person from

suit or liability for any damage, loss, injury, or liability caused by the

intentional or willful and wanton misconduct of that person.

(b) The commission shall defend any member, officer, executive director,

employee, or representative of the commission in any civil action seeking to

impose liability arising out of any actual or alleged act, error, or omission that

occurred within the scope of commission employment, duties, or

responsibilities, or that the person against whom the claim is made had a

reasonable basis for believing occurred within the scope of commission

employment, duties, or responsibilities; provided, that nothing herein shall be

construed to prohibit that person from retaining his or her own counsel; and

provided further, that the actual or alleged act, error, or omission did not result

from that person's intentional or willful and wanton misconduct.

(c) The commission shall indemnify and hold harmless any member, officer,

executive director, employee, or representative of the commission for the

amount of any settlement or judgment obtained against that person arising out

of any actual or alleged act, error, or omission that occurred within the scope

of commission employment, duties, or responsibilities, or that such person had

a reasonable basis for believing occurred within the scope of commission

employment, duties, or responsibilities; provided, that the actual or alleged

act, error, or omission did not result from the intentional or willful and wanton

misconduct of that person.

ARTICLE VI

(1) The commission shall meet and take such actions as are consistent with the

provisions of this compact and the bylaws.

(2) Each member of the commission shall have th e right and power to cast a vote to

which that compacting state is entitled and to participate in the business and affairs

of the commission. A member shall vote in person or by such other means as

provided in the bylaws. The bylaws may provide for members ' participation in

meetings by telephone or other means of communication.

(3) The commission shall meet at least once during each calendar year. Additional

meetings shall be held as set forth in the bylaws.

ARTICLE VII

(1) Rulemaking Authority. The commiss ion shall promulgate reasonable rules,

including uniform standards, and operating procedures in order to effectively and

efficiently achieve the purposes of this compact. Notwithstanding the foregoing, in

the event the commission exercises its rulemaking a uthority in a manner that is

beyond the scope of the purposes of this compact, or the powers granted hereunder,

then such an action by the commission shall be invalid and have no force and effect.

(2) Rulemaking Procedure, Rules, and Operating Procedures. Rulemaking procedure.

rules, and operating procedures shall be made pursuant to a rulemaking process that

conforms to the Model State Administrative Procedure Act of 1981 as amended, as

may be appropriate to the operations of the commission. Before the com mission

adopts a uniform standard, the commission shall give written notice to the relevant

state legislative committee in each compacting state responsible for insurance issues

of its intention to adopt the uniform standard. The commission in adopting a

uniform standard shall consider fully all submitted materials and issue a concise

explanation of its decision.

(3) Effective Date and Opt Out of a Uniform Standard. A uniform standard shall

become effective ninety (90) days after its promulgation by the com mission or such

later date as the commission may determine; provided, however, that a compacting

state may opt out of a uniform standard as provided in this article. "Opt out" shall be

defined as any action by a compacting state to decline to adopt or part icipate in a

promulgated uniform standard. All other rules and operating procedures, and

amendments thereto, shall become effective as of the date specified in each rule,

operating procedure, or amendment.

(4) Opt Out Procedure. A compacting state may opt out of a uniform standard, either by

legislation or regulation duly promulgated by the insurance department under the

compacting state's administrative procedure act. If a compacting state elects to opt

out of a uniform standard by regulation, it must give written notice to the

commission no later than ten (10) business days after the uniform standard is

promulgated, or at the time the state becomes a compacting state, and find that the

uniform standard does not provide reasonable protections to the citizens of the state,

given the conditions in the state. The commissioner shall make specific findings of

fact and conclusions of law, based on a preponderance of the evidence, detailing the

conditions in the state which warrant a departure from the uniform stan dard and

determining that the uniform standard would not reasonably protect the citizens of

the state. The commissioner must consider and balance the following factors and

find that the conditions in the state and needs of the citizens of the state outweigh:

(a) The intent of the legislature to participate in, and the benefits of, an interstate

agreement to establish national uniform consumer protections for the products

subject to this compact; and

(b) The presumption that a uniform standard adopted by the commission provides

reasonable protections to consumers of the relevant product.

Notwithstanding the foregoing, a compacting state may, at the time of its enactment

of this compact, prospectively opt out of all uniform standards involving long -term

care insurance products by expressly providing for such opt out in the enacted

compact, and such an opt out shall not be treated as a material variance in the offer

or acceptance of any state to participate in this compact. Such an opt out shall be

effective at the time of enactment of this compact by the compacting state and shall

apply to all existing uniform standards involving long -term care insurance products

and those subsequently promulgated.

(5) Effect of Opt Out. If a compacting state elects to opt out of a uniform standard, the

uniform standard shall remain applicable in the compacting state electing to opt out

until such time the opt out legislation is enacted into law or the regulation opting

out becomes effective. Once the opt out of a uniform standard by a compacting state

becomes effective as provided under the laws of that state, the uniform standard

shall have no further force and effect in that state unless and until the legislation or

regulation implementing the opt out is repealed or otherwise becomes ineffective

under the laws of the state. If a compacting state opts out of a uniform standard after

the uniform standard has been made effective in that state, the opt out shall have the

same prospective effect as provided under Article XIV for withdrawals.

(6) Stay of Uniform Standard. If a compacting state has formally initiated the process of

opting out of a uniform standard by regulation, and while the regulatory opt out is

pending, the compacting state may petition the commission, at least fifteen (15)

days before the effective date of the uniform standard, to stay the effectiveness of

the uniform standard in that state. The commission may grant a stay if it determines

the regulatory opt out is being pursued in a reasonable manner and there is a

likelihood of success. If a stay is granted or extended by the commission, the stay or

extension thereof may postpone the effective date by up to ninety (90) days, unless

affirmatively extended by the commission; provided, a stay may not be permitted to

remain in effect for more than one (1) year unless the compacting state can s how

extraordinary circumstances which warrant a continuance of the stay, including but

not limited to the existence of a legal challenge which prevents the compacting state

from opting out. A stay may be terminated by the commission upon notice that the

rule-making process has been terminated.

(7) Not later than thirty (30) days after a rule or operating procedure is promulgated,

any person may file a petition for judicial review of the rule or operating procedure;

provided, that the filing of such a petiti on shall not stay or otherwise prevent the

rule or operating procedure from becoming effective unless the court finds that the

petitioner has a substantial likelihood of success. The court shall give deference to

the actions of the commission consistent wi th applicable law and shall not find the

rule or operating procedure to be unlawful if the rule or operating procedure

represents a reasonable exercise of the commission's authority.

ARTICLE VIII

(1) The commission shall promulgate rules establishing condi tions and procedures for

public inspection and copying of its information and official records, except such

information and records involving the privacy of individuals and insurers' trade

secrets. The commission may promulgate additional rules under which it may make

available to federal and state agencies, including law enforcement agencies, records,

and information otherwise exempt from disclosure, and may enter into agreements

with such agencies to receive or exchange information or records subject to

nondisclosure and confidentiality provisions.

(2) Except as to privileged records, data, and information, the laws of any compacting

state pertaining to confidentiality or nondisclosure shall not relieve any compacting

state commissioner of the duty to disclose any relevant records, data, or information

to the commission; provided, that disclosure to the commission shall not be deemed

to waive or otherwise affect any confidentiality requirement; and further provided,

that, except as otherwise expressly provi ded in this compact, the commission shall

not be subject to the compacting state's laws pertaining to confidentiality and

nondisclosure with respect to records, data, and information in its possession.

Confidential information of the commission shall remai n confidential after such

information is provided to any commissioner.

(3) The commission shall monitor compacting states for compliance with duly adopted

bylaws, rules, including uniform standards, and operating procedures. The

commission shall notify any noncomplying compacting state in writing of its

noncompliance with commission bylaws, rules, or operating procedures. If a

noncomplying compacting state fails to remedy its noncompliance within the time

specified in the notice of noncompliance, the compac ting state shall be deemed to

be in default as set forth in Article XIV.

(4) The commissioner of any state in which an insurer is authorized to do business, or is

conducting the business of insurance, shall continue to exercise his or her authority

to oversee the market regulation of the activities of the insurer in accordance with

the provisions of the state's law. The commissioner's enforcement of compliance

with the compact is governed by the following provisions:

(a) With respect to the commissioner's m arket regulation of a product or

advertisement that is approved or certified to the commission, the content of

the product or advertisement shall not constitute a violation of the provisions,

standards, or requirements of the compact except upon a final or der of the

commission, issued at the request of a commissioner after prior notice to the

insurer and an opportunity for hearing before the commission;

(b) Before a commissioner may bring an action for violation of any provision,

standard, or requirement of the compact relating to the content of an

advertisement not approved or certified to the commission, the commission,

or an authorized commission officer or employee, must authorize the action.

However, authorization pursuant to this paragraph does not req uire notice to

the insurer, opportunity for hearing, or disclosure of requests for authorization

or records of the commission's action on such requests.

ARTICLE IX

The commission shall attempt, upon the request of a member, to resolve any disputes or

other issues that are subject to this compact and which may arise between two (2) or more

compacting states, or between compacting states and noncompacting states, and the

commission shall promulgate an operating procedure providing for resolution of such

disputes.

ARTICLE X

(1) Insurers and third -party filers seeking to have a product approved by the

commission shall file the product with, and pay applicable filing fees to, the

commission. Nothing in this compact shall be construed to restrict or otherwise

prevent an insurer from filing its product with the insurance department in any state

wherein the insurer is licensed to conduct the business of insurance, and such filing

shall be subject to the laws of the states where filed.

(2) The commission shall establi sh appropriate filing and review processes and

procedures pursuant to commission rules and operating procedures.

Notwithstanding any provision herein to the contrary, the commission shall

promulgate rules to establish conditions and procedures under which the

commission will provide public access to product filing information. In establishing

such rules, the commission shall consider the interests of the public in having

access to such information, as well as protection of personal medical and financial

information and trade secrets, that may be contained in a product filing or

supporting information.

(3) Any product approved by the commission may be sold or otherwise issued in those

compacting states for which the insurer is legally authorized to do business.

ARTICLE XI

(1) Not later than thirty (30) days after the commission has given notice of a

disapproved product or advertisement filed with the commission, the insurer or

third-party filer whose filing was disapproved may appeal the determination to a

review panel appointed by the commission. The commission shall promulgate rules

to establish procedures for appointing such review panels and provide for notice and

hearing. An allegation that the commission, in disapproving a product or

advertisement filed w ith the commission, acted arbitrarily, capriciously, or in a

manner that is an abuse of discretion or otherwise not in accordance with the law, is

subject to judicial review in accordance with Article III, Section (4).

(2) The commission shall have authori ty to monitor, review, and reconsider products

and advertisement subsequent to their filing or approval upon a finding that the

product does not meet the relevant uniform standard. Where appropriate, the

commission may withdraw or modify its approval after proper notice and hearing,

subject to the appeal process in Section (1) above.

ARTICLE XII

(1) The commission shall pay or provide for the payment of the reasonable expenses of

its establishment and organization. To fund the cost of its initial operations , the

commission may accept contributions and other forms of funding from the National

Association of Insurance Commissioners, compacting states, and other sources.

Contributions and other forms of funding from other sources shall be of such a

nature that the independence of the commission concerning the performance of its

duties shall not be compromised.

(2) The commission shall collect a filing fee from each insurer and third -party filer

filing a product with the commission to cover the cost of the operat ions and

activities of the commission and its staff in a total amount sufficient to cover the

commission's annual budget.

(3) The commission's budget for a fiscal year shall not be approved until it has been

subject to notice and comment as set forth in Article VII of this compact.

(4) The commission shall be exempt from all taxation in and by the compacting states.

(5) The commission shall not pledge the credit of any compacting state, except by and

with the appropriate legal authority of that compacting state.

(6) The commission shall keep complete and accurate accounts of all its internal

receipts, including grants and donations, and disbursements of all funds under its

control. The internal financial accounts of the commission shall be subject to the

accounting procedures established under its bylaws. The financial accounts and

reports including the system of internal controls and procedures of the commission

shall be audited annually by an independent certified public accountant. Upon the

determination of the commission, but no less frequently than every three (3) years,

the review of the independent auditor shall include a management and performance

audit of the commission. The commission shall make an annual report to the

Governor and legislature of the compacting states, which shall include a report of

the independent audit. The commission's internal accounts shall not be confidential

and such materials may be shared with the commissioner of any compacting state

upon request; provided, however, that any work papers related to any internal or

independent audit and any information regarding the privacy of individuals and

insurers' proprietary information, including trade secrets, shall remain confidential.

(7) No compacting state shall have any claim to or ownership of any property held by

or vested in the commission or to any commission funds held pursuant to the

provisions of this compact.

ARTICLE XIII

(1) Any state is eligible to become a compacting state.

(2) The compact shall become effective and binding upon legislative enactment of the

compact into law by two (2) compacting states; provided, the commission shall

become effective for purposes of adopting uniform standards for, reviewing, and

giving approval or disapproval of, products filed with the commission that satisfy

applicable uniform standards only after twenty-six (26) states are compacting states

or, alternatively, by states representing greater than forty percent (40%) of the

premium volume for li fe insurance, annuity, disability income, and long -term care

insurance products, based on records of the National Association of Insurance

Commissioners for the prior year. Thereafter, it shall become effective and binding

as to any other compacting state upon enactment of the compact into law by that

state.

(3) Amendments to the compact may be proposed by the commission for enactment by

the compacting states. No amendment shall become effective and binding upon the

commission and the compacting states unle ss and until all compacting states enact

the amendment into law.

ARTICLE XIV

(1) Withdrawal.

(a) Once effective, the compact shall continue in force and remain binding upon

each and every compacting state; provided, that a compacting state may

withdraw fro m the compact ("withdrawing state") by enacting a statute

specifically repealing the statute which enacted the compact into law.

(b) The effective date of withdrawal is the effective date of the repealing statute.

However, the withdrawal shall not apply to any product filings approved or

self-certified, or any advertisement of such products, on the date the repealing

statute becomes effective, except by mutual agreement of the commission and

the withdrawing state, unless the approval is rescinded by the wit hdrawing

state as provided in paragraph (e) of this section.

(c) The commissioner of the withdrawing state shall immediately notify the

management committee in writing upon the introduction of legislation

repealing this compact in the withdrawing state.

(d) The commission shall notify the other compacting states of the introduction of

such legislation within ten (10) days after its receipt of notice thereof.

(e) The withdrawing state is responsible for all obligations, duties, and liabilities

incurred through the effective date of withdrawal, including any obligations,

the performance of which extend beyond the effective date of withdrawal,

except to the extent those obligations may have been released or relinquished

by mutual agreement of the commission and the withdrawing state. The

commission's approval of products and advertisement prior to the effective

date of withdrawal shall continue to be effective and be given full force and

effect in the withdrawing state, unless formally rescinded by the withdrawi ng

state in the same manner as provided by the laws of the withdrawing state for

the prospective disapproval of products or advertisement previously approved

under state law.

(f) Reinstatement following withdrawal of any compacting state shall occur upon

the effective date of the withdrawing state reenacting the compact.

(2) Default.

(a) If the commission determines that any compacting state has at any time

defaulted ("defaulting state") in the performance of any of its obligations or

responsibilities under this compact, the bylaws, or duly promulgated rules or

operating procedures, then, after notice and hearing as set forth in the bylaws,

all rights, privileges, and benefits conferred by this compact on the defaulting

state shall be suspended from the effe ctive date of default as fixed by the

commission. The grounds for default include but are not limited to failure of a

compacting state to perform its obligations or responsibilities, and any other

grounds designated in commission rules. The commission shal l immediately

notify the defaulting state in writing of the defaulting state's suspension

pending a cure of the default. The commission shall stipulate the conditions

and the time period within which the defaulting state must cure its default. If

the defaulting state fails to cure the default within the time period specified by

the commission, the defaulting state shall be terminated from the compact and

all rights, privileges, and benefits conferred by this compact shall be

terminated from the effective date of termination.

(b) Product approvals by the commission or product self -certifications, or any

advertisement in connection with such product, that are in force on the

effective date of termination shall remain in force in the defaulting state in the

same manner as if the defaulting state had withdrawn voluntarily pursuant to

Section (1) of this article.

(c) Reinstatement following termination of any compacting state requires a

reenactment of the compact.

(3) Dissolution of Compact.

(a) The compact dissolves effective upon the date of the withdrawal or default of

the compacting state which reduces membership in the compact to one (1)

compacting state.

(b) Upon the dissolution of this compact, the compact becomes null and void and

shall be of no further for ce or effect, and the business and affairs of the

commission shall be wound up and any surplus funds shall be distributed in

accordance with the bylaws.

ARTICLE XV

(1) The provisions of this compact shall be severable; and if any phrase, clause,

sentence, or provision is deemed unenforceable, the remaining provisions of the

compact shall be enforceable.

(2) The provisions of this compact shall be liberally construed to effectuate its

purposes.

ARTICLE XVI

(1) Other Laws.

(a) Nothing herein prevents the enfo rcement of any other law of a compacting

state, except as provided in paragraph (b) of this section.

(b) For any product approved or certified to the commission, the rules, uniform

standards, and any other requirements of the commission shall constitute the

exclusive provisions applicable to the content, approval, and certification of

such products. For advertisement that is subject to the commission's authority,

any rule, uniform standard, or other requirement of the commission which

governs the content of the advertisement shall constitute the exclusive

provision that a commissioner may apply to the content of the advertisement.

Notwithstanding the foregoing, no action taken by the commission shall

abrogate or restrict:

1. The access of any person to state courts;

2. Remedies available under state law related to breach of contract, tort, or

other laws not specifically directed to the content of the product;

3. State law relating to the construction of insurance contracts; or

4. The authority of the Attorney General of the state, including but not

limited to maintaining any actions or proceedings, as authorized by law.

(c) All insurance products filed with individual states shall be subject to the laws

of those states.

(2) Binding Effect of This Compact.

(a) All lawful actions of the commission, including all rules and operating

procedures promulgated by the commission, are binding upon the compacting

states.

(b) All agreements between the commission and the compacting states are

binding in accordance with their terms.

(c) Upon the request of a party to a conflict over the meaning or interpretation of

commission actions, and upon a majority vote of the compacting states, the

commission may issue advisory opinions regarding the meaning or

interpretation in dispute.

(d) In the event any provision of this compact exceeds the constitutional limits

imposed on the legis lature of any compacting state, the obligations, duties,

powers, or jurisdiction sought to be conferred by that provision upon the

commission shall be ineffective as to that compacting state, and those

obligations, duties, powers, or jurisdiction shall rem ain in the compacting

state and shall be exercised by the agency thereof to which those obligations,

duties, powers, or jurisdiction are delegated by law in effect at the time this

compact becomes effective.