N.D. Admin. Code Title 45 — Insurance, Commissioner of

Article 45-01 General Administration

Chapter 45-01-01 Organization of Department

N.D. Admin. Code 45-01-01-01 Organization of insurance department

1.History and functions. Section 12 of article V of the Constitution of North Dakota provides for the office of insurance commissioner. North Dakota Century Code title 26.1 contains statutes pertaining to the commissioner and the department. Besides administering and regulating all matters pertaining to insurance, the commissioner manages the state bonding fund, administers the state fire and tornado fund, and manages the state fire marshal.

2.State fire marshal. The state fire marshal is appointed by the insurance commissioner and supervises the operation of the fire marshal division. The division is responsible for enforcing state laws for prevention of fires; coordinating resources for large rural wild-land fires; storage, sale, and use of combustibles and explosives; installation and maintenance of fire alarms and fire extinguishing equipment; adequacy of exits from public buildings; investigation of arson and the cause and origin of fires and education on hazards of fire. The division also has responsibility for the state's emergency response to hazardous materials incidents and hazardous materials training.

3.Inquiries. Inquiries regarding the insurance department may be addressed to the commissioner:

Commissioner Insurance Department 600 East Boulevard Avenue Bismarck, North Dakota 58505

February 1, 1993; April 1, 1994; June 1, 2003; January 1, 2009; October 1, 2019; January 1, 2024.

History

• History: Amended effective January 1, 1982; August 1, 1983; March 1, 1986; January 1, 1992;
• General Authority: NDCC 28-32-02.1
• Law Implemented: NDCC 28-32-02.1

Article 45-02 Regulation of Insurance Producers, Consultants, and Administrators

Chapter 45-02-01 Licensing of Insurance Agents, Insurance Brokers, Surplus Lines Insurance Brokers, Limited Insurance Representatives, and Consultants

N.D. Admin. Code 45-02-01 Licensing of Insurance Agents, Insurance Brokers, Surplus Lines Insurance Brokers, Limited Insurance Representatives, and Consultants

ARTICLE 45-02

REGULATION OF INSURANCE PRODUCERS, CONSULTANTS, AND ADMINISTRATORS

Chapter 45-02-01Licensing of Insurance Agents, Insurance Brokers, Surplus Lines Insurance Brokers, Limited Insurance Representatives, and Consultants [Superseded] 45-02-02Licensing of Insurance Producers, Surplus Lines Insurance Producers, and Consultants 45-02-03Licensing of Administrators 45-02-04Insurance Continuing Education

CHAPTER 45-02-01

LICENSING OF INSURANCE AGENTS, INSURANCE BROKERS, SURPLUS LINES

INSURANCE BROKERS, LIMITED INSURANCE REPRESENTATIVES, AND

CONSULTANTS [Superseded by Chapter 45-02-02]

Chapter 45-02-02 Licensing of Insurance Producers, Surplus Lines Insurance Producers, and Consultants

N.D. Admin. Code 45-02-02-01 Definitions

Unless otherwise defined, or made inappropriate by context, all words used in this chapter have meaning as given them under North Dakota Century Code chapter 26.1-26. "Department" means North Dakota insurance department.

History

• History: Effective September 1, 1983; amended effective April 1, 2010.
• Law Implemented: NDCC 26.1-26-02

N.D. Admin. Code 45-02-02-02 Applications for licenses

1.Resident insurance producers' applications.

a.A complete application must be completed in accordance with the instruction sheet and submitted either electronically or with a paper filing on a commissioner-approved application form.

b.An applicant licensed in another state within the preceding ninety days who moves to this state must provide, with the application, proof of clearance from the state in which the insurance producer is currently or was most recently licensed as a resident insurance producer.

c.An application form is required to add an additional line of insurance.

d.Every application submitted to the department through either a paper or electronic filing must be accompanied by the appropriate fee made payable to either the commissioner or the commissioner's designee.

2.Nonresident insurance producers' applications.

a.A complete application for a nonresident insurance producer's license must comply with subdivisions a, c, and d of subsection 1 and must contain a written designation of the commissioner and the commissioner's successors in office as that insurance producer's true and lawful attorney for purposes of service of process.

b.An applicant for a nonresident insurance producer's license must have the state, which issued the agent's resident license, supply to the department a certificate showing the lines for which the agent is licensed and eligible to write in that state. This certification may be submitted by the national association of insurance commissioners' producer data base.

3.Surplus lines insurance producers' applications. A surplus lines insurance producer's application must be submitted in accordance with chapter 45-09-01.

4.Consultants' applications.

a.An application for a consultant's license must be submitted in accordance with the instruction sheet provided by the department and submitted on the appropriate form.

b.No person holding a license as an insurance producer or surplus lines insurance producer may obtain and simultaneously hold a license as a consultant. If the applicant holds such licenses at the time of application, the licenses must be canceled prior to obtaining a consultant's license.

5.Temporary license applications.

a.An application for a temporary insurance producer's license must be submitted in accordance with section 45-02-02-02.

b.The application must be accompanied by a written statement of the reasons for requesting the issuance of a temporary license.

c.A temporary license will not be granted for the sole reason that the applicant has failed to pass the insurance producers' examination and desires to be licensed until such time as a passing examination score is obtained.

History

• History: Effective September 1, 1983; amended effective October 1, 1984; January 1, 1987; April 1, 1996; January 1, 2000; December 1, 2001; January 1, 2008; January 1, 2016; October 1, 2019.
• Law Implemented: NDCC 26.1-26-12, 26.1-26-13

N.D. Admin. Code 45-02-02-03 Examination for licensure

1.An applicant must qualify for a line of authority by passing the examination as provided in this

chapter.

2.The examination is administered under a contract with a testing service.

3.An applicant must present a photo identification card at the test center prior to being admitted for testing.

4.An examination score is valid for one year after the date of the examination for a license applicant who has not completed the application process and who has not obtained licensure.

After one year from the date of the examination, an applicant must retake the required examination.

5.An examination is valid for as long as a person continuously holds a valid insurance producer's license issued by the North Dakota insurance department and for twelve months following cancellation of a license, with the exception that an examination ceases to be valid immediately upon the suspension or revocation of the license unless the order of suspension or revocation specifies otherwise.

December 1, 2001; January 1, 2008; April 1, 2010.

History

• History: Effective September 1, 1983; amended effective October 1, 1984; January 1, 2000;
• Law Implemented: NDCC 26.1-26-14, 26.1-26-27

N.D. Admin. Code 45-02-02-04 Specific examination requirements

1.An applicant applying to conduct insurance in the following lines must pass the following examinations:

a.Life and annuityLife and annuity

b.Accident and healthAccident and health

c. PropertyProperty

d.CasualtyCasualty

e.Variable life and annuityLife and annuity

2.An applicant applying for a license for title insurance is exempt from any examination requirement but must meet the following qualifications:

a.The applicant must be a licensed abstracter or attorney; or

b.The applicant must have a minimum of eighty hours of training provided by an insurer licensed in the line of title insurance. A certification by the insurer that the training has been completed must accompany the application.

3.An applicant for a license to write travel and baggage insurance coverage for trip cancellation, trip interruption, baggage, life, sickness and accident, disability, and personal effects when limited to a specific trip and sold in connection with transportation provided by a common carrier is exempt from examination requirements.

4.An applicant for a license with the line of authority of surety shall take and pass the casualty examination. Surety coverage is insurance or a bond that covers obligations to pay the debts of or answer for the default of another, including faithlessness in a position of public or private trust, but not including bail bonds.

5.An applicant for a license to write the following products need only take the reduced examination required for that specific product:

a.Bail bonds.

b.Credit including credit life, credit disability, credit property, credit unemployment, involuntary unemployment, mortgage life, mortgage guaranty, mortgage disability, guaranteed automobile protection insurance, and any other form of insurance offered in connection with an extension of credit that is limited to partially or wholly extinguishing that credit obligation that the insurance commissioner determines should be designated a form of credit insurance.

c.Crop or crop hail. Crop or crop hail insurance is insurance providing protection against damage to crops from unfavorable weather conditions, fire or lightning, flood, hail, insect infestation, disease or other yield-reducing conditions, or perils provided by the private insurance market, or that is subsidized by the federal crop insurance corporation, including multiperil crop insurance.

d.Legal expense, including prepaid legal service.

e.Personal lines. Personal lines is property and casualty insurance coverage sold to individuals and families for primarily noncommercial purposes.

6.An applicant for a consultant’s license shall take and pass the insurance producer’s examination for the lines in which the applicant seeks to consult. If an applicant for a consultant’s license holds a North Dakota insurance producer’s license, the applicant is exempt from the testing requirements for the lines held on the insurance producer’s license within the twelve months preceding the date on which the consultant application is filed with the commissioner. However, the applicant must cancel the insurance producer’s license prior to obtaining a consultant’s license.

December 1, 2001; January 1, 2008; April 1, 2010; January 1, 2016.

History

• History: Effective September 1, 1983; amended effective October 1, 1984; January 1, 2000;
• Law Implemented: NDCC 26.1-26-25

N.D. Admin. Code 45-02-02-05 Effective date of insurance producer license - New line

1.An applicant who has filed a completed application for an insurance producer's license with the insurance department may first transact business under that license effective the date the applicant's application is approved by the insurance department.

2.An insurance producer who is adding a new line of insurance may first transact business in that new line effective the date the application is approved by the insurance department.

On or before the last day of the month of the licensee’s birthday following the two-year anniversary of the issuance of a license by the commissioner and every two years thereafter, an individual insurance producer shall submit an application for license continuation. Applications must be accompanied by the biennial continuation fee of twenty-five dollars. Resident insurance producers must have on file with the commissioner proof of compliance with continuing education requirements before submitting the application. Nonresident insurance producers must have satisfied the producer’s home state’s insurance continuing education requirements and be in good standing in the producer’s home state before submitting the continuation application.

The license of an insurance producer who fails to complete the biennial continuation and pay the twenty-five dollar continuation fee will be canceled.

History

• History: Effective September 1, 1983; amended effective October 1, 1984; January 1, 1987; January 1, 2000; December 1, 2001.
• Law Implemented: NDCC 26.1-26-08, 26.1-26-12, 26.1-26-13, 26.1-26-32 45-02-02-05.1. Biennial license continuation.
• History: Effective April 1, 2010.
• Law Implemented: NDCC 26.1-26-13.4 45-02-02-05.2. Cancellation of license.
• History: Effective April 1, 2010.
• Law Implemented: NDCC 26.1-26-13.4, 26.1-26-31

N.D. Admin. Code 45-02-02-06 Appointment and termination procedures

1.The appointment or termination of an insurance producer must be filed with the department on either a form prescribed by the commissioner or electronically through the national association of insurance commissioners' subsidiary. The insurer shall pay an appointment fee for each insurance producer appointed pursuant to North Dakota Century Code section 26.1-01-07.

2.An insurer shall file with the department a notice of appointment within thirty days from the later of the date the agency contract is executed or the first insurance application is submitted to the insurer. The date of the appointment must include the month, day, and year.

3.An insurer shall file the notice of termination of its agency relationship with an insurance producer within thirty days following the effective date of the termination. Terminations for cause shall be submitted to the department in accordance with the requirements of North Dakota Century Code section 26.1-26-34. The insurer is responsible for notifying the insurance producer of the termination in accordance with North Dakota Century Code section 26.1-26-34.

4.Failure to timely file appointment or termination notifications may subject an insurer to sanctions under North Dakota Century Code title 26.1.

December 1, 2001.

History

• History: Effective September 1, 1983; amended effective October 1, 1984; January 1, 2000;
• Law Implemented: NDCC 26.1-26-08, 26.1-26-12, 26.1-26-13, 26.1-26-31, 26.1-26-32

N.D. Admin. Code 45-02-02-07 Renewal procedure for appointments

1.On or before December first of each year, a preliminary renewal list of the insurance producers appointed by that company, together with an instruction letter, will be furnished by the department to each company.

2.On or before March fifteenth of each year, an electronic renewal invoice will be made available through the national association of insurance commissioners' subsidiary to all companies with active appointments.

3.The insurer shall pay the appropriate fee for all appointments on the renewal invoice prior to May first.

January 1, 2008.

History

• History: Effective September 1, 1983; amended effective October 1, 1984; December 1, 2001;
• Law Implemented: NDCC 26.1-26-08, 26.1-26-32 45-02-02-07.1. License lapse.

N.D. Admin. Code 45-02-02-08 Agent - Sharing commission

N.D. Admin. Code 45-02-02-09 Insurance consultant - Agreement

In advance of rendering any service as a consultant, such consultant shall prepare a form of written agreement which shall substantially comply with the model form available on request from the insurance department. The form prepared by the consultant shall be submitted to the department for the commissioner's approval or disapproval. If the commissioner disapproves the form, the consultant shall not use the form so disapproved.

In advance of rendering any service as a consultant, a written agreement on the form which has been approved by the department shall be signed by both consultant and client. The consultant shall retain a copy of the agreement for not less than two years after completion of the services. A copy of the agreement shall be available to the department upon request.

History

• History: Effective September 1, 1983.
• Law Implemented: NDCC 26.1-26-03, 26.1-26-10, 26.1-26-35

N.D. Admin. Code 45-02-02-10 Insurance producer and surplus lines insurance producer acting as consultant

Although licensed insurance producers or surplus lines insurance producers are exempt from licensing as consultants and are specifically prohibited from concurrently holding a consultant's license and a license as an insurance producer or surplus lines insurance producer in any line, licensed insurance producers or surplus lines insurance producers may perform consulting services in the ordinary course of their businesses. However, if licensed insurance producers or surplus lines insurance producers charge a fee, or receive any type of remuneration, for rendering such consulting service, they shall comply with the provisions and requirements of a consultant's agreement set forth in

section 45-02-02-09.

History

• History: Effective September 1, 1983; amended effective December 1, 2001.
• Law Implemented: NDCC 26.1-26-35

N.D. Admin. Code 45-02-02-11 Insurance producers selling variable life and annuity contracts

In addition to the requirements set forth in section 45-02-02-03, an applicant for a license to do business in the variable life and annuity line must first become licensed as a securities salesman under North Dakota law.

December 1, 2001.

History

• History: Effective September 1, 1983; amended effective October 1, 1984; January 1, 2000;
• Law Implemented: NDCC 26.1-26-11

N.D. Admin. Code 45-02-02-12 Administrative cancellations

1.An insurance producer may cancel one's North Dakota insurance license voluntarily and have a letter of clearance issued by filing a written request with the department.

2.The insurance producer must return the licenses to the department.

3.The insurance producer is responsible for notifying the appointing companies of the cancellation.

4.A surplus lines insurance producer or consultant may cancel one's license voluntarily and have a letter of clearance issued by the department upon receipt of a written request from the licenseholder.

January 1, 2016.

History

• History: Effective September 1, 1983; amended effective January 1, 2000; December 1, 2001;
• Law Implemented: NDCC 26.1-26-31

N.D. Admin. Code 45-02-02-13 Change of address

The change of address required by North Dakota Century Code section 26.1-26-33 must be provided to the department electronically or on a letter or form separate from the application or appointment forms and submitted solely for that purpose.

History

• History: Effective September 1, 1983; amended effective October 1, 1984; January 1, 2008.
• Law Implemented: NDCC 26.1-26-33

N.D. Admin. Code 45-02-02-14 Excessive or unnecessary coverage

1.When presumed a violation. An insurance producer is presumed to have violated subsection 8 of North Dakota Century Code section 26.1-26-42 when the insurance producer knowingly solicits, procures, or sells a Medicare supplement policy containing both A and B coverage to any person who has such a Medicare supplement policy in force unless the insured is informed by the insurance producer and understands there is to be a replacement of the existing policy and there is an indication in writing or on the face of the application that the new policy is intended to replace the existing policy. It is not presumed to be a violation to solicit and sell a second policy which provides only B coverage. A violation may occur in other situations where there is the sale or solicitation of unnecessary or excessive coverage, even though no presumption has been established under this section.

2.Suitability. In recommending the purchase of any accident and health, health service, life, annuity, or nursing home policy to any consumer over age sixty-five, or Medicare supplement policy to any consumer, an insurance producer shall have reasonable grounds at the time of sale for believing that the recommendation is suitable for the consumer and shall make reasonable inquiries to determine suitability. The suitability of a recommended purchase of insurance will be determined by examination of the totality of the particular consumer's circumstances, including, but not limited to, the following:

a.The consumer's income and assets;

b.The consumer's need for insurance at the time of sale; and

c.The values, benefits, and costs of the consumer's existing insurance program, if any, when compared to the values, benefits, and costs of the recommended policy or policies.

3.Advisory committee. Prior to determining whether to prosecute a complaint received for an alleged violation of the sale of life insurance under subsection 2 of section 45-02-02-14, the commissioner shall convene an advisory committee comprised of insurance professionals and other qualified persons to review individual life insurance sales transactions and to make recommendations to appropriate staff of the insurance department regarding the suitability of the sale and whether disciplinary action may be warranted by the facts if proven. The advisory committee shall include the president of the North Dakota association of insurance and financial advisors or the president's designated representative, the president of the North Dakota chapter of chartered life underwriters or the president's designated representative and may include a member designated by the board of the local chapter of the North Dakota association of insurance and financial advisors which is located nearest to the residence of the insurance producer who is the subject of the complaint.

A licensed insurance producer or consultant may not solicit or accept a loan from an individual with whom the insurance producer or consultant came into contact in the course of the person's insurance business, or sold an insurance policy to, within the past ten years. This does not prohibit a licensed insurance producer or consultant from accepting loans from financial institutions; immediate family members, which shall mean only a spouse, parents, siblings, and children; or other loans upon the prior written approval of the insurance commissioner.

An insurance producer who is personally liable and indebted to an insurance company for the payment of commissions, premiums, or other debts incurred in the insurance producer's insurance business with the company and who fails to timely pay that debt is financially irresponsible within the meaning of subsection 6 of North Dakota Century Code section 26.1-26-42. A civil judgment entered against an insurance producer in favor of an insurance company for the collection of such a debt creates a presumption that subsection 6 of North Dakota Century Code section 26.1-26-42 has been violated.

History

• History: Effective October 1, 1984; amended effective July 1, 1986; January 1, 1988; February 1, 1988; December 1, 2001.
• Law Implemented: NDCC 26.1-26-42 45-02-02-14.1. Client loans to licensed producers and consultants prohibited - Exceptions.
• History: Effective November 1, 1987; amended effective December 1, 2001.
• General Authority: NDCC 26.1-25-49
• Law Implemented: NDCC 26.1-26-42(6) 45-02-02-14.2. Insurance producer indebtedness to companies.
• History: Effective November 1, 1987; amended effective December 1, 2001.
• General Authority: NDCC 26.1-25-49
• Law Implemented: NDCC 26.1-26-42(6)

N.D. Admin. Code 45-02-02-15 Proceedings, hearings, and appeals

All proceedings, hearings, and appeals under this chapter and North Dakota Century Code chapter 26.1-26 are governed by North Dakota Century Code chapter 28-32.

History

• History: Effective October 1, 1984.
• Law Implemented: NDCC 26.1-01-08

N.D. Admin. Code 45-02-02-16 Notification of criminal convictions and administrative actions - Duty of licensee

Chapter 45-02-03 Licensing of Administrators

N.D. Admin. Code 45-02-03-01 Definitions

Unless otherwise defined or made inappropriate by context, all words used in this chapter have meaning as given them under North Dakota Century Code chapter 26.1-27.

N.D. Admin. Code 45-02-03-02 Application for license - Fee

All persons defined as administrators under the provisions of North Dakota Century Code chapter 26.1-27 must complete an application form and file it with the insurance department and must remit the required fee along with the application.

History

• History: Effective September 1, 1983; amended effective January 1, 2006.

N.D. Admin. Code 45-02-03-03 Signature on application

The application must be signed by the applicant personally if an individual, a partner, if a partnership, an officer, if a corporation, association, or benefit society.

N.D. Admin. Code 45-02-03-04 Application of corporation, association, benefit society

Repealed effective July 1, 2012.

N.D. Admin. Code 45-02-03-05 Change of address

The applicant/administrator is required to provide a current address to the department and notify the department of any change in that address within thirty days of such change. If such notification is not provided, the certificate of registration may be administratively terminated.

History

• Law Implemented: NDCC 26.1-01-08

N.D. Admin. Code 45-02-03-06 Renewal procedure

The administrator is required to remit the renewal fee on or before April thirtieth of each year in order to maintain the certificate of authority. If such fee is not received in the prescribed time, the certificate of authority may be administratively terminated. The department will provide notice of the renewal of the certificate of authority or the termination of that certificate of authority. Certificates of

authority issued after January first will not be required to renew until April thirtieth of the following calendar year.

History

• History: Effective September 1, 1983; amended effective January 1, 2006; July 1, 2012.

N.D. Admin. Code 45-02-03-07 Waiver procedure

Repealed effective January 1, 2006.

N.D. Admin. Code 45-02-03-08 Proceedings - Hearings and appeals

All proceedings, hearings, and appeals under this chapter and North Dakota Century Code chapter 26.1-27 shall be governed by North Dakota Century Code chapter 28-32.

Chapter 45-02-04 Insurance Continuing Education

N.D. Admin. Code 45-02-04-01 Purpose

Insurance continuing education courses must promote educational activities that advance one's professional expertise and keep the individual abreast with the insurance industry. Routine meetings, luncheons, and gatherings not advertised and developed as insurance continuing education events will not qualify for insurance continuing education credit. This does not apply to industry, regulatory, or legislative meetings held by or on behalf of a professional insurance association in conjunction with North Dakota Century Code section 26.1-26-31.9.

History

• History: Effective July 1, 1986; amended effective January 1, 2008; October 1, 2019.

N.D. Admin. Code 45-02-04-02 Definitions

As used in this chapter, unless the context or subject matter otherwise requires:

1."Commissioner" means the insurance commissioner.

2."Coordinator" means an individual who is responsible for monitoring insurance continuing education offerings and who serves as the liaison for students, instructors, and the commissioner.

3."Instructor" means an individual who teaches, lectures, or otherwise instructs an insurance continuing education offering.

4."Insurance continuing education" means an accredited educational experience derived from participation in approved lectures, seminars, and correspondence courses in areas related to insurance. This education must be designed to improve the professional skills of the participant and upgrade the standard of all insurance licensees to better serve the public.

5."Insurance lines of authority" for insurance continuing education purposes include life and annuity insurance, accident and health insurance, property insurance, casualty insurance, personal lines insurance, and crop hail insurance.

6."Insurance producer or licensee" means a natural person licensed by this state for the type and kind of insurance being marketed and for which licensing examinations are required.

7."License" means the authorization issued to an individual by the insurance commissioner to act as an insurance producer.

8."License applicant" means a person not currently licensed or an insurance producer seeking a license for a line or lines of insurance for which the person is not currently licensed.

9."National insurance education program" means a curriculum dedicated to the continuance of insurance education, leading to a nationally accepted insurance designation, such as a chartered property casualty underwriter (CPCU), a chartered life underwriter (CLU), or a registered health underwriter (RHU).

10."Provider" means a natural person, firm, institution, partnership, corporation, or association offering or providing insurance education.

History

• History: Effective July 1, 1986; amended effective December 1, 2001; January 1, 2006; January 1, 2008.

N.D. Admin. Code 45-02-04-03 General rules

1.Course requirements. The insurance continuing education course requirements include an educational presentation involving insurance fundamentals, policies, laws, risk management, or other courses which are offered in a process of instruction approved by the commissioner as expanding skills and developing knowledge to better serve the insurance buying public.

2.Nonapproved courses. The following course content will not qualify for insurance continuing education credit:

a.Prelicensure training.

b.Prospecting.

c.Recruiting.

d.Sales skills and promotions.

e.Motivation.

f.Psychology.

g.Communication skills.

h.Supportive office and machine skills.

i.Personnel management.

The above listing does not limit the commissioner's authority to disapprove any application which fails to meet the standards for course approval.

3.Licensee responsibility. Each licensee shall be responsible for maintaining original records of the licensee's insurance continuing education certificates of attendance for a period of one year from the last reporting deadline. Such records shall be made available to the commissioner upon request.

4.Correspondence course credit. Credit received by an insurance producer for a correspondence course must be based on successful completion of the course as prescribed by the provider and approved by the commissioner.

5.Reciprocity. The commissioner may approve credit for insurance-related courses approved by the North Dakota real estate commission and the North Dakota state bar association for insurance continuing education purposes.

6.Credit hour. A credit hour means sixty minutes of time, of which at least fifty minutes must be instruction, with a maximum of ten minutes break.

a.Credit hours for insurance continuing education will not be approved in increments of less than one-half hour.

b.Neither students nor instructors may earn credit for attending or instructing at any subsequent offering of an insurance continuing education course more than once during a reporting period.

7.Course audit. The commissioner or an authorized representative reserves the right to audit insurance continuing education offerings with or without notice to the provider.

8.Class attendance. No certificate of attendance will be issued to an insurance continuing education participant who is absent for more than ten percent of the classroom hours.

9.Examinations. Course examinations will not be required for insurance continuing education courses, unless required by the provider.

10.Textbooks. Textbooks are not required for insurance continuing education courses. All course materials must contain accurate and current information relating to the subject matter being taught.

11.Approval of course offerings. The commissioner requires providers of insurance continuing education courses to provide the following:

a.To the commissioner on a commissioner-approved form prior to course offerings:

(1)An application for course approval of an insurance continuing education course fifteen business days prior to course offering;

(2)A complete course outline designating individual topics and the amount of time devoted to each area being taught;

(3)An application for coordinator approval; and (4)A fifty dollar per course filing fee;

b.A class roster to the commissioner using a method prescribed by the commissioner fifteen days subsequent to completion of all insurance continuing education courses; and

c.To course participants subsequent to course offerings provide a course attendance certificate (form SFN 10923) to all students successfully completing an approved insurance continuing education course.

Upon review by the commissioner, providers will receive a copy of the course application indicating approval or denial, credit hours assigned, and a course certification number. Course certification numbers must be used on all insurance continuing education certificates, correspondence, and advertisements.

12.Provider management responsibility. Providers of insurance continuing education courses are responsible for the actions of their respective instructors and coordinators.

13.Course approval after the fact. Credit may be granted for a course after the fact provided such courses are properly submitted and approved by the commissioner. Subsequent approval depends on course content and is not automatic or guaranteed.

14.Advertising. Courses may not be advertised in any manner unless approval has been granted, in writing, by the commissioner.

a.All advertising relating to approved course offerings shall contain the following statement:

"This course has been approved by the insurance commissioner for (insert hours) of insurance continuing education credit."

b.Advertising must be truthful, clear, and not deceptive or misleading.

15.Fees. Fees for courses must be reasonable and clearly identifiable to students. If a course is canceled for any reason, all fees must be returned within thirty days of cancellation.

16.Adequate facility. Each course of study must be conducted in a classroom or other facility which will adequately and comfortably accommodate the faculty and the number of students enrolled. The provider may limit the number of students enrolled in a course.

History

• History: Effective July 1, 1986; amended effective January 1, 2000; December 1, 2001; January 1, 2006; January 1, 2008; July 1, 2012.

N.D. Admin. Code 45-02-04-04 General powers of commissioner

The commissioner may deny, censure, suspend, or revoke the approval of a provider, coordinator, instructor, or course if it is determined not to be in compliance with the statute or rules governing the offering of insurance continuing education courses. The commissioner may also refuse to approve courses conducted by specific providers if the commissioner determines that past offerings have not been in compliance with insurance continuing education laws and rules.

History

• History: Effective July 1, 1986; amended effective January 1, 2006; January 1, 2008.

N.D. Admin. Code 45-02-04-05 Course coordinator

1.General requirement. Each course of study must have at least one coordinator, approved by the commissioner, who is responsible for supervising the program and assuring compliance with the statutes and rules governing the offering of insurance continuing education courses.

2.Qualifications. Course coordinators shall possess at least one of the following qualifications:

a.A minimum of five years' experience during the immediately preceding five-year period as an active licensed insurance agent;

b.At least three years' full-time experience during the immediately preceding five-year period in the administration of an education program; or

c.A degree in education plus at least two years' insurance experience during the immediately preceding five-year period.

3.Forms. Applications for coordinator approval must be submitted on forms prescribed by the commissioner.

4.Responsibilities. Coordinators shall be responsible for, but not limited to, the following:

a.Assuring compliance with all laws and rules pertaining to insurance continuing education;

b.Notifying the commissioner of any material change in course content;

c.Assuring that students are provided with current, accurate information, and classroom facilities conducive to a sound learning environment;

d.Evaluation of courses and instructors. The commissioner may request written evaluations of courses and instructors either by students or coordinators;

e.Investigating complaints relating to course offerings and instructors, and forwarding all written complaints to the insurance department;

f.Maintaining accurate records relating to course offerings, instructors, and student attendance for a period of five years from the date the course was completed;

g.Being available to instructors and students by providing the name of the coordinator and a telephone number at which the coordinator can be reached;

h.Providing students with course attendance certificates on a form prescribed by the commissioner, within thirty days of course completion; and

i.Notifying the commissioner, fifteen days in advance, of any changes in course offering dates and subsequent offering dates of an approved course.

History

• History: Effective July 1, 1986; amended effective January 1, 2006; January 1, 2008.

N.D. Admin. Code 45-02-04-06 Instructors

1.General requirement. Failure to have approved instructors teaching an approved insurance continuing education offering will result in loss of course approval.

2.Qualifications. Instructors shall possess the following qualifications:

a.Three years of recent experience in the subject area being taught;

b.A degree related to the subject area being taught; or

c.Two years of recent experience in the subject area being taught and sixty hours of coursework in the subject area being taught.

3.Responsibilities. Instructors shall be responsible for, but not limited to, the following:

a.Complying with all laws and rules pertaining to insurance continuing education;

b.Providing students with current and accurate information;

c.Providing a classroom atmosphere conducive to learning; and

d.Assisting students and responding to questions relating to course material.

History

• History: Effective July 1, 1986; amended effective January 1, 2008.

N.D. Admin. Code 45-02-04-07 Prohibited practices

Providers, coordinators, and instructors are prohibited from misrepresenting any material submitted to the commissioner.

History

• History: Effective July 1, 1986; amended effective January 1, 2006.

N.D. Admin. Code 45-02-04-08 Extension of time

The commissioner may grant an extension of time, not to exceed one year, for completion of the requirements for continuing education. Such requests must be in writing and received by the commissioner thirty days prior to the ending date of the period for which the extension is requested.

Extensions may be granted for health, disability, or other extenuating circumstances.

History

• History: Effective July 1, 1986.
• Law Implemented: NDCC 26.1-26-31.5

N.D. Admin. Code 45-02-04-09 Licensee report of compliance. 45-02-04-09.1. Continuing education due dates

On or before the last day of the month of the licensee’s birthday following the two-year anniversary of the issuance of a license and every two years thereafter, an individual resident insurance producer must complete continuing education requirements set out in North Dakota Century Code section 26.1-26-31.1.

Continuing education providers are required to report completion of continuing education courses to the commissioner. However, it is the responsibility of the individual resident insurance producer to ensure that the commissioner’s records reflect the completion of the required number of continuing education courses on or before the continuing education due date. The insurance producer must correct any discrepancies in the record through the continuing education provider. 45-02-04-09.3. Exemptions from continuing education for limited lines.

An insurance producer licensed exclusively for the sale of title insurance, travel or baggage insurance, surety, bail bonds, legal expense insurance, or credit insurance is exempt from continuing education requirements.

History

• Law Implemented: NDCC 26.1-26-31.1 45-02-04-09.2. Reporting continuing education to commissioner.
• History: Effective July 1, 2012.
• Law Implemented: NDCC 26.1-26-31.1(1)

N.D. Admin. Code 45-02-04-10 License revocation

N.D. Admin. Code 45-02-04-11 Nonresident continuing education

A nonresident insurance producer who has satisfied the producer's home state's insurance continuing education requirements and is in good standing in the producer's home state shall electronically submit a uniform application for individual producer license renewal or continuation through the national association of insurance commissioners and pay a biennial continuation fee of twenty-five dollars.

History

• History: Effective January 1, 1992; amended effective December 1, 2001; January 1, 2008; April 1, 2010.
• Law Implemented: NDCC 26.1-26-13.4, 26.1-26-31.7

N.D. Admin. Code 45-02-04-12 Nonresident letter of certification required

Repealed effective December 1, 2001.

N.D. Admin. Code 45-02-04-13 Penalty

N.D. Admin. Code 45-02-04-14 Cancellation

N.D. Admin. Code 45-02-04-15 Continuing education for relicensure

A resident insurance producer whose license is voluntarily canceled or whose license is canceled for failure to complete the biennial continuation, may apply within twelve months of the cancellation date for a license by submitting an application form and license fee. The applicant will not be required to retake qualifying examinations if the examination results are still valid pursuant to subsection 7 of

section 45-02-02-03. However, the applicant must have completed continuing education requirements as though the license had been continuously active throughout the period of cancellation.

Article 45-03 Regulation of Insurance Companies

Chapter 45-03-01 Solicitation of Proxies, Consents, and Authorizations of Domestic Stock Insurers [Repealed]

N.D. Admin. Code 45-03-01 Solicitation of Proxies, Consents, and Authorizations of Domestic Stock Insurers [Repealed]

ARTICLE 45-03

REGULATION OF INSURANCE COMPANIES

Chapter 45-03-01Solicitation of Proxies, Consents, and Authorizations of Domestic Stock Insurers [Repealed] 45-03-02Insider Trading of Equity Securities of Domestic Stock Insurers [Repealed] 45-03-03Takeover Bids and Circulation of Material Regarding the Financial Condition of an Insurer 45-03-04Reporting of Salvage and Subrogation by Fire and Casualty Companies on the Annual Statement [Repealed] 45-03-05Insurance Holding Company System Model Regulation With Reporting Forms and Instructions 45-03-06Premium Tax Payments - Estimates 45-03-07Reinsurance 45-03-07.1Credit for Reinsurance Model Regulation 45-03-07.2Life and Health Reinsurance Agreements 45-03-08Return of Premium 45-03-09Admission of Foreign Insurance Companies 45-03-10Unfair Sex Discrimination 45-03-11Notice, Consent, and Disclosure for Testing of Blood or Other Body Fluids 45-03-12Investment, Capital, and Surplus Requirements 45-03-13Regulation of and Standards for Companies Deemed to be in Hazardous Financial Condition 45-03-14Administrative Supervision Model 45-03-15Accounting Practices and Procedures 45-03-16Valuation of Securities and Other Investments [Superseded] 45-03-17Examinations [Repealed] 45-03-18Fire District Assignment 45-03-19Actuarial Opinion and Memorandum Regulation 45-03-19.1Property and Casualty Actuarial Opinion 45-03-20Annual Financial Reporting Model Regulation 45-03-21Demutualization 45-03-22Mutual Insurance Holding Company Act Rules 45-03-23Custodial Agreements and the Use of Clearing Corporations 45-03-24Unclaimed Life Insurance Benefits 45-03-25Corporate Governance Annual Disclosure Model Regulation 45-03-26Term and Universal Life Insurance Reserve Financing Model Regulation

CHAPTER 45-03-01

SOLICITATION OF PROXIES, CONSENTS, AND AUTHORIZATIONS OF DOMESTIC

STOCK INSURERS [Repealed effective May 1, 1997]

Chapter 45-03-02 Insider Trading of Equity Securities of Domestic Stock Insurers [Repealed]

N.D. Admin. Code 45-03-02 Insider Trading of Equity Securities of Domestic Stock Insurers [Repealed]

CHAPTER 45-03-02

INSIDER TRADING OF EQUITY SECURITIES OF DOMESTIC STOCK INSURERS

Section [Repealed effective May 1, 1997]

Chapter 45-03-03 Takeover Bids and Circulation of Material Regarding the Financial Condition of an Insurer

N.D. Admin. Code 45-03-03 Takeover Bids and Circulation of Material Regarding the Financial Condition of an Insurer

CHAPTER 45-03-03

TAKEOVER BIDS AND CIRCULATION OF MATERIAL REGARDING THE FINANCIAL

CONDITION OF AN INSURER [No Rules Promulgated]

Chapter 45-03-04 Reporting of Salvage and Subrogation by Fire and Casualty Companies on the Annual Statement [Repealed]

N.D. Admin. Code 45-03-04 Reporting of Salvage and Subrogation by Fire and Casualty Companies on the Annual Statement [Repealed]

CHAPTER 45-03-04

REPORTING OF SALVAGE AND SUBROGATION BY FIRE AND CASUALTY COMPANIES

ON THE ANNUAL STATEMENT [Repealed effective May 1, 1997]

Chapter 45-03-05 Insurance Holding Company System Model Regulation with Reporting Forms and Instructions

N.D. Admin. Code 45-03-05-01 Authority

This chapter is promulgated pursuant to the authority granted by North Dakota Century Code

chapter 26.1-10.

N.D. Admin. Code 45-03-05-02 Purpose

The purpose of this chapter is to set forth rules and procedural requirements which the commissioner deems necessary to carry out the provisions of the North Dakota Insurance Holding Company System Regulatory Act (North Dakota Century Code chapter 26.1-10). The information called for by this chapter is declared to be necessary and appropriate in the public interest and for the protection of policyholders and shareholders in this state.

N.D. Admin. Code 45-03-05-03 Severability clause

If any provision of this chapter, or the application of this chapter to any person or circumstance, is held invalid, the invalidity shall not affect other provisions or applications of this chapter which can be given effect without the invalid provision or application, and to that end the provisions of this chapter are severable.

N.D. Admin. Code 45-03-05-04 Forms - General requirements

1.Forms A, B, C, D, E, and F are intended to be guides in the preparation of the statements required by North Dakota Century Code sections 26.1-10-03, 26.1-10-03.1, 26.1-10-04, and 26.1-10-05. They are not intended to be blank forms which are to be filled in. The statements filed shall contain the numbers and captions of all items, but the text of the items may be omitted provided the answers are prepared in such a manner as to indicate clearly the scope and coverage of the items. All instructions, whether appearing under the items of the form or elsewhere in the form, are to be omitted. Unless expressly provided otherwise, if any item is inapplicable or the answer thereto is in the negative, an appropriate statement to that effect shall be made.

2.Two complete copies of each statement including exhibits and all other papers and documents filed as a part of the statement shall be filed with the commissioner by personal delivery or mail addressed to: Commissioner of Insurance, Fifth Floor, State Capitol, Bismarck, North Dakota 58505, Attention: Legal Department. At least one of the copies shall be signed in the manner prescribed on the form. Unsigned copies shall be conformed. If the signature of any person is affixed pursuant to a power of attorney or other similar authority, a copy of the power of attorney or other authority shall also be filed with the statement.

3.If an applicant requests a hearing on a consolidated basis under subdivision c of subsection 4 of section 26.1-10-03 of the North Dakota Century Code. in addition to filing the Form A with the commissioner, the applicant shall file a copy of Form A with the national association of insurance commissioners in electronic form.

4.Statements should be prepared electronically. Statements must be easily readable, and suitable for review and reproduction. Debits in credit categories and credits in debit categories shall be designated so as to be clearly distinguishable as such on photocopies. Statements shall be in the English language and monetary values shall be stated in United States currency. If any exhibit or other paper or document filed with the statement is in a foreign language, it shall be accompanied by a translation into the English language and any monetary value shown in a foreign currency normally shall be converted into United States currency.

History

• History: Effective January 1, 1982; amended effective January 1, 1992; January 1, 2016.

N.D. Admin. Code 45-03-05-05 Forms - Incorporation by reference, summaries, and omissions

1.Information required by any item of Form A, Form B, Form D, Form E, or Form F may be incorporated by reference in answer or partial answer to any other item. Information contained in any financial statement, annual report, proxy statement, statement filed with a governmental

authority, or any other document may be incorporated by reference in answer or partial answer to any item of Form A, Form B, Form D, Form E, or Form F provided the document is filed as an exhibit to the statement. Excerpts of documents may be filed as exhibits if the documents are extensive. Documents currently on file with the commissioner which were filed within three years need not be attached as exhibits. References to information contained in exhibits or in documents already on file shall clearly identify the material and shall specifically indicate that the material is to be incorporated by reference in answer to the item. Matter shall not be incorporated by reference in any case where the incorporation would render the statement incomplete, unclear, or confusing.

2.Where an item requires a summary or outline of the provisions of any document, only a brief statement shall be made as to the pertinent provisions of the document. In addition to the statement, the summary or outline may incorporate by reference particular parts of any exhibit or document currently on file with the commissioner which were filed within three years and may be qualified in its entirety by the reference. In any case where two or more documents required to be filed as exhibits are substantially identical in all material respects except as to the parties thereto, the dates of execution, or other details, a copy of only one of the documents need be filed with a schedule identifying the omitted documents and setting forth the material details in which the documents differ from the documents a copy of which is filed.

History

• History: Effective January 1, 1982; amended effective January 1, 1992; January 1, 2016.

N.D. Admin. Code 45-03-05-06 Forms - Information unknown or unavailable and extension of time to furnish

If it is impractical to furnish any required information, document, or report at the time it is required to be filed, there must be filed with the commissioner a separate document:

1.Identifying the information, document, or report in question;

2.Stating why the filing thereof at the time required is impractical; and

3.Requesting an extension of time for filing the information, document, or report to a specified date. The request for extension must be deemed granted unless the commissioner, within forty-five days after receipt thereof, enters an order denying the request.

N.D. Admin. Code 45-03-05-07 Forms - Additional information and exhibits

In addition to the information expressly required to be included in Form A, Form B, Form C, Form D, Form E, and Form F, the commissioner may request further material information, if any, as may be necessary to make the information contained therein not misleading. The person filing may also file the exhibits as it may desire in addition to those expressly required by the statement. The exhibits shall be so marked as to indicate clearly the subject matters to which they refer. Changes to Forms A, B, C, D, E, or F must include on the top of the cover page the phrase: "Change No. (insert number) to" and must indicate the date of the change and not the date of the original filing.

History

• History: Effective January 1, 1982; amended effective January 1, 1992; January 1, 2016.

N.D. Admin. Code 45-03-05-08 Forms - Amendments

Any amendment for Form A, Form B, Form C, and Form D shall include on the top of the cover page the phrase: "Amendment No. (insert number) to" and shall indicate the date of the amendment and not the date of the original filing.

History

• History: Effective January 1, 1982; amended effective January 1, 1992.

N.D. Admin. Code 45-03-05-09 Definitions

1."Executive officer" means chief executive officer, chief operating officer, chief financial officer, treasurer, secretary, controller, and any other individual performing functions corresponding to those performed by the foregoing officers under whatever title.

2."Ultimate controlling person" means that person which is not controlled by any other person.

4.Unless the context otherwise requires, other terms found in this chapter and in North Dakota Century Code section 26.1-10-01 are used as defined in that section. Other nomenclature or terminology is according to the Insurance Code, or industry usage if not defined in the code.

History

• History: Effective January 1, 1982; amended effective January 1, 1992; January 1, 2016.
• Law Implemented: NDCC 26.1-10-01

N.D. Admin. Code 45-03-05-10 Subsidiaries of domestic insurers

The authority to invest in subsidiaries under subsection 2 of North Dakota Century Code section 26.1-10-02 is in addition to any authority to invest in subsidiaries which may be contained in any other provision of the Insurance Code.

History

• Law Implemented: NDCC 26.1-10-02, 26.1-10-03

N.D. Admin. Code 45-03-05-11 Acquisition of control - Statement filing

A person required to file a statement pursuant to North Dakota Century Code section 26.1-10-03 shall furnish the required information on Form A, hereby made a part of this chapter. The person shall also furnish the required information on Form E, hereby made a part of this chapter and described in

section 45-03-05-12.2.

History

• Law Implemented: NDCC 26.1-10-03

N.D. Admin. Code 45-03-05-12 Amendments to Form A

The applicant shall promptly advise the commissioner of any changes in the information so furnished on Form A arising subsequent to the date upon which the information was furnished but prior to the commissioner's disposition of the application.

section 26.1-10-03 insurers.

1.If the person being acquired is deemed to be a "domestic insurer" solely because of the provisions of subdivision d of subsection 1 of North Dakota Century Code section 26.1-10-03, the name of the domestic insurer on the cover page must be indicated as follows:

"ABC Insurance Company, a subsidiary of XYZ Holding Company".

2.If subdivision d of subsection 1 of North Dakota Century Code section 26.1-10-03 insurer is being acquired, references to "the insurer" contained in Form A must refer to both the domestic subsidiary insurer and the person being acquired.

If a domestic insurer, including any person controlling a domestic insurer, is proposing a merger or acquisition pursuant to subdivision a of subsection 1 of North Dakota Century Code section 26.1-10-03, that person shall file a preacquisition notification Form E, which was developed pursuant to subdivision a of subsection 3 of North Dakota Century Code section 26.1-10-03.1.

Additionally, if a nondomiciliary insurer licensed to do business in this state is proposing a merger or acquisition pursuant to North Dakota Century Code section 26.1-10-03.1, that person shall file a preacquisition notification Form E. No preacquisition notification form need be filed if the acquisition is beyond the scope of North Dakota Century Code section 26.1-10-03.1 as set forth in subdivision b of subsection 2 of North Dakota Century Code section 26.1-10-03.1.

In addition to the information required by Form E, the commissioner may wish to require an expert opinion as to the competitive impact of the proposed acquisition.

History

• History: Effective January 1, 1982; amended effective January 1, 1992; January 1, 2016. 45-03-05-12.1. Acquisition of subdivision d of subsection 1 of North Dakota Century Code
• History: Effective January 1, 1992; amended effective January 1, 2016.
• Law Implemented: NDCC 26.1-02-02, 26.1-06.1-01, 26.1-10-05 45-03-05-12.2. Preacquisition notification.
• History: Effective January 1, 2016.

N.D. Admin. Code 45-03-05-13 Annual registration of insurers - Statement filing

An insurer required to file an annual registration statement pursuant to North Dakota Century Code

section 26.1-10-04 shall furnish the required information on Form B, hereby made a part of this chapter.

An insurer required to file an annual registration statement pursuant to North Dakota Century Code

section 26.1-10-04 is also required to furnish information required on Form C, hereby made a part of this chapter.

History

• History: Effective January 1, 1982; amended effective January 1, 1992; February 28, 1992; January 1, 45-03-05-13.1. Summary of changes to registration - Statement filing.
• History: Effective January 1, 1992; amended effective February 28, 1992; January 1, 2016.

N.D. Admin. Code 45-03-05-14 Amendments to Form B

1.An amendment to Form B must be filed within fifteen days after the end of the month in which there is a material change to the information provided in the annual registration statement.

2.Amendments must be filed in the Form B format with only those items which are being amended reported. Each such amendment must include at the top of the cover page:

"Amendment No. (insert number) to Form B for (insert year)" and must indicate the date of the change and not the date of the original filings.

History

• History: Effective January 1, 1982; amended effective January 1, 1992; February 28, 1992; January 1,

N.D. Admin. Code 45-03-05-15 Alternative and consolidated registrations

1.Any authorized insurer may file a registration statement on behalf of any affiliated insurer or insurers which are required to register under North Dakota Century Code section 26.1-10-04.

A registration statement may include information not required by North Dakota Century Code

chapter 26.1-10 regarding any insurer in the insurance holding company system even if the insurer is not authorized to do business in this state. In lieu of filing a registration statement on Form B, the authorized insurer may file a copy of the registration statement or similar report which it is required to file in its state of domicile, provided:

a.The statement or report contains substantially similar information required to be furnished on Form B; and

b.The filing insurer is the principal insurance company in the insurance holding company system.

2.The question of whether the filing insurer is the principal insurance company in the insurance holding company system is a question of fact and an insurer filing a registration statement or report in lieu of Form B on behalf of an affiliated insurer, shall set forth a brief statement of facts which will substantiate the filing insurer's claim that it, in fact, is the principal insurer in the insurance holding company system.

3.With the prior approval of the commissioner, an unauthorized insurer may follow any of the procedures which could be done by an authorized insurer under subsection 1.

4.Any insurer may take advantage of the provisions of subsection 6 or 7 of North Dakota Century Code section 26.1-10-04 without obtaining the prior approval of the commissioner.

The commissioner, however, reserves the right to require individual filings if the commissioner deems such filings necessary in the interest of clarity, ease of administration, or the public good.

N.D. Admin. Code 45-03-05-16 Exemptions

Repealed effective January 1, 1992.

N.D. Admin. Code 45-03-05-17 Disclaimers and termination of registration

1.A disclaimer of affiliation or a request for termination of registration claiming that a person does not, or will not upon the taking of some proposed action, control another person (hereinafter referred to as the subject) shall contain the following information:

a.The number of authorized, issued and outstanding voting securities of the subject.

b.With respect to the person whose control is denied and all affiliates of that person, the number and percentage of shares of the subject's voting securities which are held of record or known to be beneficially owned, and the number of the shares concerning which there is a right to acquire, directly or indirectly.

c.All material relationships and bases for affiliation between the subject and the person whose control is denied and all affiliates of that person.

d.A statement explaining why that person should not be considered to control the subject.

2.A request for termination of registration shall be deemed to have been granted unless the commissioner, within thirty days after the commissioner receives the request, notifies the registrant otherwise. 45-03-05-17.1. Transactions subject to prior notice - Notice filing.

1.An insurer required to give notice of a proposed transaction pursuant to North Dakota Century Code section 26.1-10-05 shall furnish the required information on Form D, hereby made a part of these rules.

2.Agreements for cost-sharing services and management services must at a minimum and as applicable:

a.Identify the person providing services and the nature of the services;

b.Set forth the methods to allocate costs;

c.Require timely settlement, not less frequently than on a quarterly basis, and compliance with the requirements in the national association of insurance commissioners accounting practices and procedures manual;

d.Prohibit advancement of funds by the insurer to the affiliate except to pay for services defined in the agreement;

e.State that the insurer will maintain oversight for functions provided to the insurer by the affiliate and that the insurer will monitor services annually for quality assurance;

f.Define books and records of the insurer to include all books and records developed or maintained under or related to the agreement;

g.Specify that all books and records of the insurer are and remain the property of the insurer and are subject to control of the insurer;

h.State that all funds and invested assets of the insurer are the exclusive property of the insurer, held for the benefit of the insurer and are subject to the control of the insurer;

i.Include standards for termination of the agreement with and without cause;

j.Include provisions for indemnification of the insurer in the event of gross negligence or willful misconduct on the part of the affiliate providing the services;

k.Specify that, if the insurer is placed in receivership or seized by the commissioner under North Dakota Century Code chapter 26.1-06.1:

(1)All of the rights of the insurer under the agreement extend to the receiver or commissioner; and (2)All books and records will immediately be made available to the receiver or the commissioner, and shall be turned over to the receiver or commissioner immediately upon the receiver's or the commissioner's request;

I.Specify that the affiliate has no automatic right to terminate the agreement if the insurer is placed in receivership pursuant to North Dakota Century Code chapter 26.1-06.1; and

m.Specify that the affiliate will continue to maintain any systems, programs, or other infrastructure notwithstanding a seizure by the commissioner under North Dakota Century Code chapter 26.1-06.1, and will make them available to the receiver, for so long as the affiliate continues to receive timely payment for services rendered.

The ultimate controlling person of an insurer required to file an enterprise risk report pursuant to subsection 12 of North Dakota Century Code section 26.1-10-04 shall furnish the required information on Form F, hereby made a part of this chapter.

History

• History: Effective January 1, 1992; amended effective January 1, 2016.
• Law Implemented: NDCC 26.1-10-05 45-03-05-17.2. Enterprise risk report.
• History: Effective January 1, 2016.

N.D. Admin. Code 45-03-05-18 Extraordinary dividends and other distributions

1.Requests for approval of extraordinary dividends or any other extraordinary distribution to shareholders shall include the following:

a.The amount of the proposed dividend;

b.The date established for payment of the dividend;

c.A statement as to whether the dividend is to be in cash or other property and, if in property, a description of the property, its cost, and its fair market value together with an explanation of the basis for valuation;

d.A copy of the calculations determining that the proposed dividend is extraordinary. The workpaper must include the following information:

(1)The amounts, dates, and form of payment of all dividends or distributions (including regular dividends but excluding distributions of the insurer's own securities) paid within the period of twelve consecutive months ending on the date fixed for payment of the proposed dividend for which approval is sought and commencing on the day after the same day of the same month in the last preceding year;

(2)Surplus as regards policyholders (total capital and surplus) as of the next preceding December thirty-first;

(3)If the insurer is a life insurer, the net gain from operations for the twelve-month period ending the next preceding December thirty-first;

(4)If the insurer is not a life insurer, the net income less realized capital gains for the twelve-month period ending the next preceding December thirty-first and the two preceding twelve-month periods; and (5)If the insurer is not a life insurer, the dividends paid to stockholders excluding distributions of the insurer's own securities in the preceding two calendar years.

e.A balance sheet and statement of income for the period intervening from the last annual statement filed with the commissioner and the end of the month preceding the month in which the request for dividend approval is submitted; and

f.A brief statement as to the effect of the proposed dividend upon the insurer's surplus and the reasonableness of surplus in relation to the insurer's outstanding liabilities and the adequacy of surplus relative to the insurer's financial needs.

2.Subject to subsection 2 of North Dakota Century Code section 26.1-10-05, each registered insurer shall report to the commissioner all dividends and other distributions to shareholders within fifteen business days following the declaration thereof, including the same information required by subdivision d of subsection 1.

History

• History: Effective January 1, 1982; amended effective January 1, 1992; February 28, 1992; January 1,

N.D. Admin. Code 45-03-05-19 Adequacy of surplus

The factors set forth in subsection 6 of North Dakota Century Code section 26.1-10-05 are not intended to be an exhaustive list. In determining the adequacy and reasonableness of an insurer's surplus, no single factor is controlling. The commissioner, instead, will consider the net effect of all of these factors plus other factors bearing on the financial condition of the insurer. In comparing the surplus maintained by other insurers, the commissioner will consider the extent to which each of these factors varies from company to company and in determining the quality and liquidity of investments in subsidiaries, the commissioner will consider the individual subsidiary and may discount or disallow its valuation to the extent that the individual investments so warrant.

Filed with the Insurance Department of_____________________________ (State of domicile of insurer being acquired)

Dated: ___________________, 20 ___ Name, title, address, and telephone number of individual to whom notices and correspondence ITEM 1. METHOD OF ACQUISITION State the name and address of the domestic insurer to which this application relates and a brief description of how control is to be acquired.

ITEM 2. IDENTITY AND BACKGROUND OF THE APPLICANT

1.State the name and address of the applicant seeking to acquire control over the insurer.

2.If the applicant is not an individual, state the nature of its business operations for the past five years or for a lesser period as the person and any predecessors thereof shall have been in existence. Briefly describe the business intended to be done by the applicant and the applicant's subsidiaries.

3.Furnish a chart or listing clearly presenting the identities of the interrelationships among the applicant and all affiliates of the applicant. Indicate in the chart or listing the percentage of voting securities of each person which is owned or controlled by the applicant or by any other person. If control of any person is maintained other than by the ownership or control of voting securities, indicate the basis of the control. As to each person specified in the chart or listing indicate the type of organization, e.g., corporation, trust, partnership, and the state or other jurisdiction of domicile. If court proceedings involving a reorganization or liquidation are pending with respect to any such person, indicate which person, and set forth the title of the court, nature of proceedings, and the date when commenced.

ITEM 3. IDENTITY AND BACKGROUND OF INDIVIDUALS ASSOCIATED WITH THE APPLICANT

On the biographical affidavit, include a third-party background check, and state the following with respect to (1) the applicant if the applicant is an individual or (2) all persons who are directors, executive officers, or owners of ten percent or more of the voting securities of the applicant if the applicant is not an individual:

1.Name and business address.

2.Present principal business activity, occupation, or employment including position and office held and the name, principal business, and address of any corporation or other organization in which the employment is carried on.

3.Material occupations, positions, offices, or employment during the last five years, giving the starting and ending dates of each and the name, principal business, and address of any business corporation or other organization in which each occupation, position, office, or employment was carried on; if any occupation, position, office, or employment required licensing by or registration, with any federal, state, or municipal governmental agency, indicate the fact, the current status of such licensing or registration, and an explanation of any surrender, revocation, suspension, or disciplinary proceedings in connection therewith.

4.Whether or not the person has ever been convicted in a criminal proceeding (excluding minor traffic violations) during the last ten years and, if so, give the date, nature of conviction, name and location of court, and penalty imposed or other disposition of the case.

ITEM 4. NATURE, SOURCE, AND AMOUNT OF CONSIDERATION

1.Describe the nature, source, and amount of funds or other considerations used or to be used in effecting the merger or other acquisition of control. If any part of the same is represented or is to be represented by funds or other consideration borrowed or otherwise obtained for the

purpose of acquiring, holding, or trading securities, furnish a description of the transaction, the names of the parties thereto, the relationship, if any, between the borrower and the lender, the amounts borrowed or to be borrowed, and copies of all agreements, promissory notes, and security arrangements relating thereto.

2.Explain the criteria used in determining the nature and amount of the consideration.

3.If the source of the consideration is a loan made in the lender's ordinary course of business and if the applicant wishes the identity of the lender to remain confidential, the applicant must specifically request that the identity be kept confidential.

ITEM 5. FUTURE PLANS OF INSURER

Describe any plans or proposals which the applicant may have to declare an extraordinary dividend, to liquidate the insurer, to sell its assets to or merge it with any person or persons, or to make any other material change in its business operations or corporate structure or management.

ITEM 6. VOTING SECURITIES TO BE ACQUIRED

State the number of shares of the insurer's voting securities which the applicant, its affiliates, and any person listed in Item 3 plan to acquire, and the terms of the offer, request, invitation, agreement, or acquisition, and a statement as to the method by which the fairness of the proposal was arrived at.

ITEM 7. OWNERSHIP OF VOTING SECURITIES

State the amount of each class of any voting security of the insurer which is beneficially owned or concerning which there is a right to acquire beneficial ownership by the applicant, its affiliates, or any person listed in Item 3.

ITEM 8. CONTRACTS, ARRANGEMENTS, OR UNDERSTANDINGS WITH RESPECT TO VOTING

SECURITIES OF THE INSURER

Give a full description of any contracts, arrangements, or understandings with respect to any voting security of the insurer in which the applicant, its affiliates, or any person listed in Item 3 is involved, including but not limited to transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss, or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. The description shall identify the persons with whom the contracts, arrangements, or understandings have been entered into.

ITEM 9. RECENT PURCHASES OF VOTING SECURITIES

Describe any purchases of any voting securities of the insurer by the applicant, its affiliates, or any person listed in Item 3 during the twelve calendar months preceding the filing of this statement. Include in the description the dates of purchase, the names of the purchasers, and the consideration paid or agreed to be paid therefor. State whether any shares so purchased are hypothecated.

ITEM 10. RECENT RECOMMENDATIONS TO PURCHASE

Describe any recommendations to purchase any voting security of the insurer made by the applicant, its affiliates, or any person listed in Item 3, or by anyone based upon interviews or at the suggestion of the applicant, its affiliates, or any person listed in Item 3 during the twelve calendar months preceding the filing of this statement.

ITEM 11. AGREEMENTS WITH BROKER-DEALERS

Describe the terms of any agreement, contract, or understanding made with any broker-dealer as to solicitation of voting securities of the insurer for tender, and the amount of any fees, commissions, or other compensation to be paid to broker-dealers with regard thereto.

ITEM 12. FINANCIAL STATEMENTS AND EXHIBITS

1.Financial statements, exhibits, and three-year financial projections of the insurers must be attached to this statement as an appendix, but list under this item the financial statements and exhibits so attached.

2.The financial statements must include the annual financial statements of the persons identified in Item 2 (c) for the preceding five fiscal years (or for a lesser period as an applicant and its affiliates and any predecessors thereof shall have been in existence), and similar information covering the period from the end of the person's last fiscal year, if the information is available.

The statements may be prepared on either an individual basis, or, unless the commissioner otherwise requires, on a consolidated basis if the consolidated statements are prepared in the usual course of business.

The annual financial statements of the applicant must be accompanied by the certificate of an independent public accountant to the effect that the statements present fairly the financial position of the applicant and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles prescribed or permitted under law. If the applicant is an insurer which is actively engaged in the business of insurance, the financial statements need not be certified, provided they are based on the Annual Statement of the person filed with the insurance department of the person's domiciliary state and are in accordance with the requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of the state.

3.File as exhibits copies of all tender offers for, requests or invitations for, tenders of, exchange offers for, and agreements to acquire or exchange any voting securities of the insurer and (if distributed) of additional soliciting material relating thereto, any proposed employment, consultation, advisory, or management contracts concerning the insurer, annual reports to the stockholders of the insurer, and the applicant for the last two fiscal years, and any additional documents or papers required by Form A or sections 45-03-05-04 and 45-03-05-06.

ITEM 13. AGREEMENT REQUIREMENTS FOR ENTERPRISE RISK MANAGEMENT

Applicant agrees to provide, to the best of its knowledge and belief, the information required by Form F within fifteen days after the end of the month in which the acquisition of control occurs.

ITEM 14. SIGNATURE AND CERTIFICATION

Pursuant to the requirements of North Dakota Century Code Section 26.1-10-03,_____________________ has caused this application to be duly signed on its behalf in the City of _______________________ and State of _________________, on the __________ day of ___________, 20.

(SEAL)___________________________________

BY: ___________________________________ _______________________________ _______________________________

The undersigned deposes and says that the applicant has duly executed the attached application dated ___________________, 20 ___, for and on behalf of ___________________________________; that the applicant is the ____________________________ of the company and that the applicant is authorized to execute and file the instrument. Deponent further says that deponent is familiar with the instrument and the contents thereof, and that the facts therein set forth are true to the best of deponent's knowledge, information, and belief.

(Signature)________________________ (Type or print name beneath)________________________________________ FORM B INSURANCE HOLDING COMPANY SYSTEM REGISTRATION STATEMENT Filed with the Insurance Department of the State of ______________ By ____________________________________________ NameAddress Date: _________________________, 20 ___ Name, title, address and telephone number of individual to whom notices and correspondence ITEM 1. IDENTITY AND CONTROL OF REGISTRANT Furnish the exact name of each insurer registering or being registered (hereinafter called "the registrant"), the home office address and principal executive offices of each; the date on which each registrant became part of the insurance holding company system; and the methods by which control of each registrant was acquired and is maintained.

ITEM 2. ORGANIZATIONAL CHART

Furnish a chart or listing clearly presenting the identities of and interrelationships among all affiliated persons within the insurance holding company system. The chart or listing should show the percentage of each class of voting securities of each affiliate which is owned, directly or indirectly, by another affiliate. If control of any person within the system is maintained other than by the ownership or control of voting securities, indicate the basis of the control. As to each person specified in the chart or listing indicate the type of organization, e.g., corporation, trust, partnership, and the state or other jurisdiction of domicile.

ITEM 3. THE ULTIMATE CONTROLLING PERSON

As to the ultimate controlling person in the insurance holding company system furnish the following information:

1.Name.

2.Home office address.

3.Principal executive office address.

4.The organizational structure of the person, i.e., corporation, partnership, individual, trust, etc.

5.The principal business of the person.

6.The name and address of any person who holds or owns ten percent or more of any class of voting security, the class of the security, the number of shares held of record or known to be beneficially owned, and the percentage of class so held or owned.

7.If court proceedings involving a reorganization or liquidation are pending, indicate the title and location of the court, the nature of proceedings, and the date when commenced.

ITEM 4. BIOGRAPHICAL INFORMATION

If the ultimate controlling person is a corporation, an organization, a limited liability company, or other legal entity, furnish the following information for the directors and executive officers of the ultimate controlling person: the individual's name and address, the individual's principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations. If the ultimate controlling person is an individual, furnish the individual's name and address, principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations.

ITEM 5. TRANSACTIONS AND AGREEMENTS

Briefly describe the following agreements in force and transactions currently outstanding or which have occurred during the last calendar year between the registrant and its affiliates:

1.Loans, other investments, or purchases, sales, or exchanges of securities of the affiliates by the registrant or of the registrant by its affiliates;

2.Purchases, sales, or exchanges of assets;

3.Transactions not in the ordinary course of business;

4.Guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the registrant's assets to liability, other than insurance contracts entered into in the ordinary course of the registrant's business;

5.All management agreements, service contracts, and all cost-sharing arrangements;

6.Reinsurance agreements;

7.Dividends and other distributions to shareholders;

8.Consolidated tax allocation agreements; and

9.Any pledge of the registrant's stock or of the stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system.

No information need be disclosed if the information is not material for purposes of North Dakota Century Code Section 26.1-10-04.

Sales, purchases, exchanges, loans, or extensions of credit, investments, or guarantees involving one-half of one percent or less of the registrant's admitted assets as of next preceding December thirty-first shall not be deemed material.

The description must be in a manner as to permit the proper evaluation thereof by the commissioner, and must include at least the following: the nature and purpose of the transaction, the nature and amounts of any payments or transfers of assets between the parties, the identity of all parties to the transaction, and relationship of the affiliated parties to the Registrant.

ITEM 6. LITIGATION OR ADMINISTRATIVE PROCEEDINGS

A brief description of any litigation or administrative proceedings of the following types, either then pending or concluded within the preceding fiscal year, to which the ultimate controlling person or any of its directors or executive officers was a party or of which the property of any such person is or was the subject; give the names of the parties and the court or agency in which the litigation or proceeding is or was pending:

1.Criminal prosecutions or administrative proceedings by any government agency or authority which may be relevant to the trustworthiness of any party thereto; and

2.Proceedings which may have a material effect upon the solvency or capital structure of the ultimate holding company including, but not necessarily limited to, bankruptcy, receivership, or other corporate reorganizations.

ITEM 7. STATEMENT REGARDING PLAN OR SERIES OF TRANSACTIONS

The insurer shall furnish a statement that transactions entered into since the filing of the prior year's annual registration statement are not part of a plan or series of like transactions, the purpose of which is to avoid statutory threshold amounts and the review that might otherwise occur.

ITEM 8. FINANCIAL STATEMENTS AND EXHIBITS

1.Financial statements and exhibits should be attached to this statement as an appendix, but list under this item the financial statements and exhibits so attached.

2.If the ultimate controlling person is a corporation, an organization, a limited liability company, or other legal entity, the financial statements must include the annual financial statements of the ultimate controlling person in the insurance holding company system as of the end of the person's latest fiscal year.

If at the time of the initial registration, the annual financial statements for the latest fiscal year are not available, annual statements for the previous fiscal year may be filed and similar financial information shall be filed for any subsequent period to the extent the information is available. The financial statements may be prepared on either an individual basis, or unless the commissioner otherwise requires, on a consolidated basis if the consolidated statements are prepared in the usual course of business.

Other than with respect to the foregoing, the financial statement must be filed in a standard form and format adopted by the National Association of Insurance Commissioners, unless an alternative form is accepted by the commissioner. Documentation and financial statements filed with the securities and exchange commission or audited generally accepted accounting principles financial statements shall be deemed to be an appropriate form and format.

Unless the commissioner otherwise permits, the annual financial statements shall be accompanied by the certificate of an independent public accountant to the effect that the statements present fairly the financial position of the ultimate controlling person and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles prescribed or permitted under law. If the ultimate controlling person is an insurer which is actively engaged in the business of insurance, the annual financial statements need not be certified, provided they are based on the annual statement of the insurer's domiciliary state and are in accordance with requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of the state.

Any ultimate controlling person who is an individual may file personal financial statements that are reviewed rather than audited by an independent public accountant. The review shall be conducted in accordance with standards for review of personal financial statements published in the personal financial statements guide by the American institute of certified public accountants. Personal financial statements shall be accompanied by the independent public accountant's standard review report stating that the accountant is not aware of any material modifications that should be made to the financial statements in order for the statements to be in conformity with generally accepted accounting principles.

3.Exhibits must include copies of the latest annual reports to shareholders of the ultimate controlling person and proxy material used by the ultimate controlling person; and any additional documents or papers required by Form B or North Dakota Administrative Code sections 45-03-05-04 and 45-03-05-06.

ITEM 9. FORM C REQUIRED

A Form C, Summary of Changes to Registration Statement, must be prepared and filed with this Form B.

ITEM 10. SIGNATURE AND CERTIFICATION

Pursuant to the requirements of North Dakota Century Code Section 26.1-10-04, the registrant has caused this annual registration statement to be duly signed on its behalf in the City of ___________________, and State of _________________ on the ____________ day of _______________, 20 ___.

(SEAL)___________________________________

(Name of registrant)

By: ________________________________________ _____________________________________ _____________________________________ The undersigned deposes and says that the undersigned has duly executed the attached annual registration statement dated ___________________, 20 ___, for and on behalf of _________________________________________; that the (Name of company) undersigned is the __________________________ of the company, and that the undersigned has authority to execute and file the instrument. The deponent further says that deponent is familiar with the instrument and the contents thereof, and that the facts therein set forth are true to the best of deponent's knowledge, information, and belief.

(Signature) ____________________________ (Type or print name beneath) ______________________________________ FORM C SUMMARY OF CHANGES TO REGISTRATION STATEMENT Filed with the Insurance Department of the State of________ NameAddress Name, title, address, and telephone number of individual to whom notices and correspondence Furnish a brief description of all items in the current annual registration statement which represent changes from the prior year's registration statement. The description shall be in a manner as to permit the proper evaluation thereof by the commissioner, and shall include specific references to item numbers in the annual registration statement and to the terms contained therein.

Changes occurring under Item 2 of Form B insofar as changes in the percentage of each class of voting securities held by each affiliate is concerned, need only be included where the changes are ones which result in ownership or holdings of ten percent or more of voting securities, loss or transfer of control, or acquisition or loss of partnership interest.

Changes occurring under Item 4 of Form B need only be included where an individual is, for the first time, made a director or executive officer of the ultimate controlling person; a director or executive officer terminates his or her responsibilities with the ultimate controlling person; or in the event an individual is named president of the ultimate controlling person.

If a transaction disclosed on the prior year's registration statement has been changed, the nature of the change shall be included. If a transaction disclosed on the prior year's annual registration statement has been effectuated, furnish the mode of completion and any flow of funds between affiliates resulting from the transaction.

The insurer shall furnish a statement that transactions entered into since the filing of the prior year's annual registration statement are not part of a plan or series of like transactions whose purpose it is to avoid statutory threshold amounts and the review that might otherwise occur.

SIGNATURE AND CERTIFICATION

Pursuant to the requirements of North Dakota Century Code Section 26.1-10-04, the registrant has caused this annual registration statement to be duly signed on its behalf in the City of __________ and State of __________ on the __________ day of __________, 20 ____.

(SEAL)____________________________

By: ___________________________ The undersigned deposes and says that the deponent has duly executed the attached annual registration statement dated ____, 20, for and on behalf of _______________________; that the deponent is the (Name of company) ___________________________ of the company; and that the deponent is authorized to execute and file the instrument. Deponent further says that deponent is familiar with the instrument and the contents thereof, and that the facts therein set forth are true to the best of deponent's knowledge, information, and belief.

(Signature) _______________________ (Type or print name beneath) _______________________________________ FORM D PRIOR NOTICE OF A TRANSACTION Filed with the Insurance Department of the State of ___________________ Name Address Name, title, address, and telephone number of individual to whom notices and correspondence ITEM 1. IDENTITY OF PARTIES TO TRANSACTION Furnish the following information for each of the parties to the transaction:

1.Name.

2.Home office address.

3.Principal executive office address.

4.The organizational structure, i.e., corporation, partnership, individual, trust, etc.

5.A description of the nature of the parties' business operations.

6.Relationship, if any, of other parties to the transaction to the insurer filing the notice, including any ownership or debtor/creditor interest by any other parties to the transaction in the insurer seeking approval, or by the insurer filing the notice in the affiliated parties.

7.Where the transaction is with a nonaffiliate, the names of the affiliates which will receive, in whole or in substantial part, the proceeds of the transaction.

ITEM 2. DESCRIPTION OF THE TRANSACTION

Furnish the following information for each transaction for which notice is being given:

1.A statement as to whether notice is being given under subdivision a, b, c, d, or e of subsection 2 of North Dakota Century Code Section 26.1-10-05;

2.A statement of the nature of the transaction;

3.A statement of how the transaction meets the fair and reasonable standards of subdivision a of subsection 1 of North Dakota Century Code Section 26.1-10-05; and

4.The proposed effective date of the transaction.

ITEM 3. SALES, PURCHASES, EXCHANGES, LOANS, EXTENSIONS OF CREDIT, GUARANTEES,

OR INVESTMENTS

Furnish a brief description of the amount and source of funds, securities, property, or other consideration for the sale, purchase, exchange, loan, extension of credit, guarantee, or investment, whether any provision exists for purchase by the insurer filing notice, by any party to the transaction, or by any affiliate of the insurer filing notice, a description of the terms of any securities being received, if any, and a description of any other agreements relating to the transaction such as contracts or agreements for services, consulting agreements, and the like. If the transaction involves other than cash, furnish a description of the consideration, its cost, and its fair market value, together with an explanation of the basis for evaluation.

If the transaction involves a loan, extension of credit, or a guarantee, furnish a description of the maximum amount which the insurer will be obligated to make available under the loan, extension of credit or guarantee, the date on which the credit or guarantee will terminate, and any provisions for the accrual of or deferral of interest.

If the transaction involves an investment, guarantee, or other arrangement, state the time period during which the investment, guarantee, or other arrangement will remain in effect, together with any provisions for extensions or renewals of the investments, guarantees, or arrangements. Furnish a brief statement as to the effect of the transaction upon the insurer's surplus.

No notice need be given if the maximum amount which can at any time be outstanding or for which the insurer can be legally obligated under the loan, extension of credit, or guarantee is less than: (a) in the case of nonlife insurers, the lesser of three percent of the insurer's admitted assets or twenty-five percent of surplus as regards policyholders, or (b) in the case of life insurers, three percent of the insurer's admitted assets, each as of the next preceding December thirty-first.

ITEM 4. LOANS OR EXTENSIONS OF CREDIT TO A NONAFFILIATE

If the transaction involves a loan or extension of credit to any person who is not an affiliate, furnish a brief description of the agreement or understanding whereby the proceeds of the proposed transaction, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase the assets of, or to make investments in, any affiliate of the insurer making the loans or extensions of credit, and specify in what manner the proceeds are to be used to loan to, extend credit to, purchase assets of or make investments in any affiliate. Describe the amount and source of funds, securities, property, or other consideration for the loan or extension of credit and, if the transaction is one involving consideration other than cash, a description of its cost, and its fair market value together with an explanation of the basis for evaluation. Furnish a brief statement as to the effect of the transaction upon the insurer's surplus.

No notice need be given if the loan or extension of credit is one which equals less than, in the case of nonlife insurers, the lesser of three percent of the insurer's admitted assets or twenty-five percent of surplus as regards policyholders or, with respect to life insurers, three percent of the insurer's admitted assets, each as of the next preceding December thirty-first.

ITEM 5. REINSURANCE

If the transaction is a reinsurance agreement or modification thereto, as described by paragraph 2 of subdivision c of subsection 2 of North Dakota Century Code Section 26.1-10-05, or a reinsurance pooling agreement or modification thereto as described by paragraph 1 of subdivision c of subsection 2 of North Dakota Century Code Section 26.1-10-05, furnish a description of the known or estimated amount of liability to be ceded or assumed in each calendar year, the period of time during which the agreement will be in effect, and a statement whether an agreement or understanding exists between the insurer and nonaffiliate to the effect that any portion of the assets constituting the consideration for the agreement will be transferred to one or more of the insurer's affiliates. Furnish a brief description of the consideration involved in the transaction, and a brief statement as to the effect of the transaction upon the insurer's surplus.

No notice need be given for reinsurance agreements or modifications thereto if the reinsurance premium or a change in the insurer's liabilities, or the projected reinsurance premium or change in the insurer's liabilities in any of the next three years, in connection with the reinsurance agreement or modification thereto is less than five percent of the insurer's surplus as regards policyholders, as of the next preceding December thirty-first. Notice shall be given for all reinsurance pooling agreements including modifications thereto.

ITEM 6. MANAGEMENT AGREEMENTS, SERVICE AGREEMENTS, AND COST-SHARING

ARRANGEMENTS

For management and service agreements, furnish:

1.A brief description of the managerial responsibilities or services to be performed.

2.A brief description of the agreement, including a statement of its duration, together with brief descriptions of the basis for compensation and the terms under which payment or compensation is to be made.

For cost-sharing arrangements, furnish:

1.A brief description of the purpose of the agreement.

2.A description of the period of time during which the agreement is to be in effect.

3.A brief description of each party's expenses or costs covered by the agreement.

4.A brief description of the accounting basis to be used in calculating each party's costs under the agreement.

5.A brief statement as to the effect of the transaction upon the insurer's policyholder surplus.

6.A statement regarding the cost allocation methods that specifies whether proposed charges are based on cost or market. If market based, rationale for using market instead of cost, including justification for the company's determination that amounts are fair and reasonable.

7.A statement regarding compliance with the National Association of Insurance Commissioners Accounting Practices and Procedure Manual regarding expense allocation.

ITEM 7. SIGNATURE AND CERTIFICATION

Pursuant to the requirements of North Dakota Century Code Section 26.1-10-05, __________ has caused this application to be duly signed on its behalf in the City of __________ and State of __________ on the __________ day of __________, 20 ____.

(SEAL)____________________________

By: ___________________________________________ The undersigned deposes and says that the deponent has duly executed the attached application dated __________, 20 ____, for and on behalf of __________________; that the deponent is the __________________ of the (Name of Applicant)(Title of officer) company and that the deponent is authorized to execute and file the instrument. Deponent further says that deponent is familiar with the instrument and the contents thereof, and that the facts therein set forth are true to the best of deponent's knowledge, information, and belief.

(Signature) ______________________ (Type or print name beneath) _______________________________________ FORM E PRE-ACQUISITION NOTIFICATION FORM REGARDING THE POTENTIAL COMPETITIVE IMPACT OF A PROPOSED MERGER OR ACQUISITION BY A NON-DOMICILIARY INSURER DOING BUSINESS IN THIS STATE OR BY A DOMESTIC INSURER Name of Other Person Involved in Merger or Acquisition Filed with the Insurance Department of Dated: ___________________, 20 ___ Name, title, address, and telephone number of person completing this statement:

ITEM 1. NAME AND ADDRESS

State the names and addresses of the persons who hereby provide notice of their involvement in a pending acquisition or change in corporate control.

ITEM 2. NAME AND ADDRESSES OF AFFILIATED COMPANIES

State the names and addresses of the persons affiliated with those listed in Item 1. Describe their affiliations.

ITEM 3. NATURE AND PURPOSE OF THE PROPOSED MERGER OR ACQUISITION

State the nature and purpose of the proposed merger or acquisition.

ITEM 4. NATURE OF BUSINESS

State the nature of the business performed by each of the persons identified in response to Item 1 and Item 2.

ITEM 5. MARKET AND MARKET SHARE

State specifically what market and market share in each relevant insurance market the persons identified in Item 1 and Item 2 currently enjoy in this state. Provide historical market and market share data for each person identified in Item 1 and Item 2 for the past five years and identify the source of the data. Provide a determination as to whether the proposed acquisition or merger, if consummated, would violate the competitive standards of the state as stated in subsection 4 of North Dakota Century Code Section 26.1-10-03.1. If the proposed acquisition or merger would violate competitive standards, provide justification of why the acquisition or merger would not substantially lessen competition or create a monopoly in the state.

For purposes of this question, market means direct written insurance premium in this state for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this state.

FORM F

ENTERPRISE RISK REPORT

Filed with the Insurance Department of the State of ___________________ Name of Registrant/Applicant Name Address Name, title, address, and telephone number of individual to whom notices and correspondence ITEM 1. ENTERPRISE RISK The Registrant/Applicant, to the best of its knowledge and belief, shall provide information regarding the following areas that could produce enterprise risk as defined in subsection 3 of North Dakota Century Code Section 26.1-10-01, provided the information is not disclosed in the Insurance Holding Company System Annual Registration Statement filed on behalf of itself or another insurer for which it is the ultimate controlling person: •Any material developments regarding strategy, internal audit findings, compliance or risk management affecting the insurance holding company system; •Acquisition or disposal of insurance entities and reallocating of existing financial or insurance entities within the insurance holding company system; •Any changes of shareholders of the insurance holding company system exceeding 10 percent or more of voting securities; •Developments in various investigations, regulatory activities, or litigation that may have a significant bearing or impact on the insurance holding company system; •Business plan of the insurance holding company system and summarized strategies for next 12 months; •Identification of material concerns of the insurance holding company system raised by supervisory college, if any, in last year; •Identification of insurance holding company system capital resources and material distribution patterns; •Identification of any negative movement, or discussions with rating agencies which may have caused, or may cause, potential negative movement in the credit ratings and individual insurer financial strength ratings assessment of the insurance holding company system (including both the rating score and outlook); •Information on corporate or parental guarantees throughout the holding company and the expected source of liquidity should the guarantees be called upon; and •Identification of any material activity or development of the insurance holding company system that, in the opinion of senior management could adversely affect the insurance holding company system.

The Registrant/Applicant may attach the appropriate form most recently filed with the United States Securities and Exchange Commission, provided the Registrant/Applicant includes specific references to those areas listed in Item 1 for which the form provides responsive information. If the Registrant/Applicant is not domiciled in the United States, it may attach its most recent public audited financial statement filed in its country of domicile, provided the Registrant/Applicant includes specific references to those areas listed in Item 1 for which the financial statement provides responsive information.

ITEM 2. OBLIGATION TO REPORT

If the Registrant/Applicant has not disclosed any information pursuant to Item 1, the Registrant/Applicant shall include a statement affirming that, to the best of its knowledge and belief, it has not identified enterprise risk subject to disclosure pursuant to Item 1.

History

• History: Effective January 1, 1982; amended effective January 1, 1992; October 1, 2002; January 1,
• Law Implemented: NDCC 26.1-10-05 FORM A STATEMENT REGARDING THE ACQUISITION OF CONTROL OF OR MERGER WITH A DOMESTIC INSURER Name of Domestic Insurer Name of Acquiring Person (Applicant)

Chapter 45-03-06 Premium Tax Payments - Estimates

N.D. Admin. Code 45-03-06-01 Application of chapter - Exceptions

This chapter applies to all companies doing business in the state as described in North Dakota Century Code section 26.1-03-17 and applies to all business conducted in this state, except business specifically exempted by statute, i.e., annuities (North Dakota Century Code section 26.1-03-17) and North Dakota uniform group insurance program (North Dakota Century Code chapter 54-52.1).

N.D. Admin. Code 45-03-06-02 Definitions

Unless otherwise defined or made inappropriate by context, all words used in this chapter have meanings as given them under North Dakota Century Code chapter 26.1-03.

N.D. Admin. Code 45-03-06-03 Quarterly payments - Reconciliation

1.Every company required to pay premium taxes in this state shall make and file a statement of estimated premium taxes for the period covered by the quarterly installment tax payment. The statement shall be on forms prescribed by the commissioner. The payments shall be made on an individual quarterly basis on or before May thirtieth, August twenty-ninth, November twenty-ninth, and March first.

2.The tax imposed under North Dakota Century Code section 26.1-03-17 shall be an estimated tax of at least twenty-five percent of the premium tax on the prior calendar year's business or eighty percent of the premium tax on the current calendar year's business for each of the first three quarters and shall be reconciled for the entire calendar year on the insurance department form and filed on or before March first of the following calendar year.

3.Any company with a certificate of authority to conduct business in this state must file a quarterly estimate form even when no tax is owed. No payment is required until the final quarter when the tax is reconciled if the estimated tax for the quarter is less than twenty-five dollars.

History

• History: Effective September 1, 1983; amended effective May 1, 1997.

N.D. Admin. Code 45-03-06-04 Credits

1.The principal office ad valorem tax credit shall be used as a credit against the premium tax liability for the calendar year in which the ad valorem tax was paid. Any unused credit may be carried over as a credit against the premium tax liability for the following calendar years but not beyond 1985. North Dakota Century Code section 26.1-03-17 requires that the credit be prorated on a quarterly basis. Credit shall be used for each quarter and shall be fully reconciled, along with the premium tax, as of the end of each calendar year, on or before March first of the subsequent year.

2.The examination credit shall be used as a credit against the premium tax liability for the quarter in which expense was paid and the succeeding three quarters. The credit is limited to expenses incurred and paid to the North Dakota department of insurance. North Dakota Century Code section 26.1-03-17 requires that the credit be prorated on a quarterly basis. The credit shall be reconciled along with the premium tax as of the end of each calendar year, on or before March first of the subsequent year.

3.The credit taken for assessments paid to the comprehensive health association of North Dakota shall be taken in the calendar year in which paid and any remaining credit used as completely as possible in each succeeding year. Credit cannot be taken for any assessments paid prior to March 21, 1983.

4.The credit for assessments paid to the North Dakota life and health insurance guaranty association shall be twenty percent of the amount of the assessment for each of the five calendar years following the year in which the assessment was paid.

5.Credit may be taken in the following year for miscalculations resulting in an overpayment in a preceding reconciliation submitted with the March first payment.

6.The credit for assessments paid to the reinsurance association of North Dakota must be taken in the calendar year in which paid. If the credit exceeds the premium tax liability the excess is not eligible to be carried over to subsequent years.

History

• History: Effective September 1, 1983; amended effective April 1, 1996; May 1, 1997; April 1, 2021.

N.D. Admin. Code 45-03-06-05 Fees payable annually

All fees will be paid annually, on or before March first of each calendar year.

N.D. Admin. Code 45-03-06-06 Interest and penalties

1.Penalties and interest shall be assessed in accordance with the provisions of North Dakota Century Code section 26.1-03-17 for a failure to file the quarterly estimated tax statement or the reconciled tax statement or both, or pay the estimated or reconciled tax.

2.If an insurance company fails to pay the quarterly estimated tax or reconciled taxes prescribed by North Dakota Century Code section 26.1-03-17 in the time required, penalties of five percent shall accrue thereon, or one hundred dollars, whichever is greater, plus six percent of the tax for each day of delay except the first day after the tax became due for that quarter or year.

3.Failure of the company to make each estimated return and payments of at least one quarter of the total reconciled tax paid during the previous calendar year, or eighty percent of the actual reconciled tax for the current calendar year, shall subject the company to the penalty and interest provided in subsection 2 on the tax payable for that calendar year.

Chapter 45-03-07 Reinsurance

N.D. Admin. Code 45-03-07-01 Definitions

As used in this chapter:

1."Domestic insurer" is an insurer licensed in this state and incorporated in this state.

2."Foreign insurer" is an insurer licensed in this state but incorporated in a jurisdiction other than this state.

N.D. Admin. Code 45-03-07-02 Foreign insurer cessions

A foreign insurer may cede reinsurance to a reinsurer to which the foreign insurer is permitted to cede reinsurance under the law, regulations, or rules of the jurisdiction of that insurer's domicile.

N.D. Admin. Code 45-03-07-03 Domestic insurer cessions

A domestic insurer may cede reinsurance to:

1.A reinsurer licensed in any other state or the District of Columbia if that reinsurer conforms to the same standard of solvency which would be required if, at the time the reinsurance is effected, the reinsurer was licensed in this state.

2.A reinsurer not licensed in any state or the District of Columbia if the reinsurer appears on the most recent "Non-Admitted Insurers Quarterly Listing" published by the national association of insurance commissioners (The NAIC List).

3.A reinsurer not licensed in any state or the District of Columbia, and not appearing on the NAIC List, if approval of the commissioner is obtained by the filing of an application and current financial statement showing that the reinsurer meets the requirements set out in

section 45-03-07-04.

History

• Law Implemented: NDCC 26.1-01-08

N.D. Admin. Code 45-03-07-04 Procedure for approval of reinsurer

The reinsurer requested to obtain the approval of the commissioner pursuant to subsection 3 of

section 45-03-07-03 and North Dakota Century Code section 26.1-02-20 shall not accept reinsurance unless at the time of cession such reinsurer has been approved by the commissioner. The commissioner shall approve a reinsurer if such reinsurer has:

1.Filed with the commissioner an application including:

a.Satisfactory evidence of good repute and financial integrity.

b.Satisfactory evidence that the reinsurer has capital and surplus or its equivalent under the laws of its domiciliary jurisdiction which equals five million dollars or in the case of any Lloyd's or other similar unincorporated group of individual insurers, that the group maintains a trust fund of not less than fifty million dollars as security to the full amount thereof for all policyholders and creditors in the United States of all members of the group.

2.Provided the commissioner with a copy of its current annual financial statement in United States dollars. The statement shall be provided no more than six months after the close of the period reported upon and shall be certified by an accounting or auditing firm licensed in the jurisdiction of the reinsurer's domicile.

3.Promptly advised the commissioner in writing of any changes in the information so furnished arising subsequent to the date upon which such information is filed but prior to the commissioner's disposition of the application.

N.D. Admin. Code 45-03-07-05 Continued proof of compliance

A reinsurer shall also provide to the commissioner annually proof of continued compliance with subsection 1 of section 45-03-07-04, along with an annual statement complying with subsection 2 of

section 45-03-07-04 following the first year the application is approved by the commissioner.

N.D. Admin. Code 45-03-07-06 Withdrawal of approval of reinsurer

The commissioner may withdraw approval if at any time the commissioner has reason to believe that any reinsurer:

1.Is in unsound financial condition;

2.Is no longer eligible under North Dakota Century Code section 26.1-02-20 or this chapter; or

3.Has willfully violated the laws of this state.

The commissioner shall promptly mail notice of such withdrawal to the reinsurer and to each licensed insurer whose most recent annual statement shows it was reinsured by such reinsurer.

N.D. Admin. Code 45-03-07-07 Separability of provisions

If any provision of this chapter, or the application of such provision to any person or circumstance, is held invalid, the remainder of the chapter and the application of such provisions to persons or circumstances other than those as to which it is held invalid is not affected thereby.

Chapter 45-03-07.1 Credit for Reinsurance Model Regulation

N.D. Admin. Code 45-03-07.1 Credit for Reinsurance Model Regulation

CHAPTER 45-03-07.1

CREDIT FOR REINSURANCE MODEL REGULATION

Section 45-03-07.1-01Credit for Reinsurance - Reinsurer Licensed in This State 45-03-07.1-02Credit for Reinsurance - Accredited Reinsurers 45-03-07.1-03Credit for Reinsurance - Reinsurer Domiciled in Another State 45-03-07.1-04Credit for Reinsurance - Reinsurers Maintaining Trust Funds 45-03-07.1-04.1Credit for Reinsurance - Certified Reinsurers 45-03-07.1-04.2Credit for Reinsurance - Reciprocal Jurisdictions 45-03-07.1-05Credit for Reinsurance Required by Law 45-03-07.1-06Asset or Reduction From Liability for Reinsurance Ceded to an Unauthorized Assuming Insurer Not Meeting the Requirements of Sections 45-03-07.1-01 Through 45-03-07.1-05 45-03-07.1-07Trust Agreements Qualified Under Section 45-03-07.1-06 45-03-07.1-08Letters of Credit Qualified Under Section 45-03-07.1-06 45-03-07.1-09Other Security 45-03-07.1-10Reinsurance Contract 45-03-07.1-11Contracts Affected 45-03-07.1-01. Credit for reinsurance - Reinsurer licensed in this state.

Pursuant to subsection 2 of North Dakota Century Code section 26.1-31.2-01, the commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer that was licensed in this state as of any date on which statutory financial statement credit for reinsurance is claimed.

History: Effective October 1, 1995; amended effective October 1, 2002; January 1, 2016; April 1, 2022. 45-03-07.1-02. Credit for reinsurance - Accredited reinsurers.

1.Pursuant to subsection 3 of North Dakota Century Code section 26.1-31.2-01, the commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer that is accredited as a reinsurer in this state as of the date on which statutory financial statement credit for reinsurance is claimed. An accredited reinsurer must:

a.File a properly executed form AR-1 as evidence of its submission to this state's jurisdiction and to this state's authority to examine its books and records;

b.File with the commissioner a certified copy of a certificate of authority or other acceptable evidence that it is licensed to transact insurance or reinsurance in at least one state, or, in the case of a United States branch of an alien assuming insurer, is entered through and licensed to transact insurance or reinsurance in at least one state;

c.File annually with the commissioner a copy of its annual statement filed with the insurance department of its state of domicile or, in the case of an alien assuming insurer, with the state through which it is entered and in which it is licensed to transact insurance or reinsurance, and a copy of its most recent audited financial statement; and

d.Maintain a surplus as regards policyholders in an amount not less than twenty million dollars, or obtain the affirmative approval of the commissioner upon a finding that it has adequate financial capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from domestic insurers.

2.If the commissioner determines that the assuming insurer has failed to meet or maintain any of these qualifications, the commissioner may upon written notice and opportunity for hearing, suspend or revoke the accreditation. Credit may not be allowed a domestic ceding insurer under this section if the assuming insurer's accreditation has been revoked by the commissioner, or if the reinsurance was ceded while the assuming insurer's accreditation was under suspension by the commissioner.

History: Effective October 1, 1995; amended effective October 1, 2002; January 1, 2016; April 1, 2022. 45-03-07.1-03. Credit for reinsurance - Reinsurer domiciled in another state.

1.Pursuant to subsection 4 of North Dakota Century Code section 26.1-31.2-01, the commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer that as of any date on which statutory financial statement credit for reinsurance is claimed:

a.Is domiciled in, or, in the case of a United States branch of an alien assuming insurer, is entered through, a state that employs standards regarding credit for reinsurance substantially similar to those applicable under North Dakota Century Code chapter 26.1-31.2 and this chapter;

b.Maintains a surplus as regards policyholders in an amount not less than twenty million dollars; and

c.Files a properly executed form AR-1 with the commissioner as evidence of its submission to this state's authority to examine its books and records.

2.The provisions of this section relating to surplus as regards policyholders do not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system. As used in this section, "substantially similar" standards means credit for reinsurance standards which the commissioner determines equal or exceed the standards of North Dakota Century Code chapter 26.1-31.2 and this chapter.

History: Effective October 1, 1995; amended effective October 1, 2002; January 1, 2016; April 1, 2022. 45-03-07.1-04. Credit for reinsurance - Reinsurers maintaining trust funds.

1.Pursuant to subsection 5 of North Dakota Century Code section 26.1-31.2-01, the commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer that, as of any date on which statutory financial statement credit for reinsurance is claimed, and thereafter for so long as credit for reinsurance is claimed, maintains a trust fund in an amount prescribed in this section in a qualified United States financial institution as defined in subsection 2 of North Dakota Century Code section 26.1-31.2-03, for the payment of the valid claims of its United States domiciled ceding insurers, their assigns and successors in interest. The assuming insurer shall report annually to the commissioner substantially the same information as that required to be reported on the national association of insurance commissioners annual statement form by licensed insurers, to enable the commissioner to determine the sufficiency of the trust fund.

2.The following requirements apply to the following categories of assuming insurer:

a.The trust fund for a single assuming insurer must consist of funds in trust in an amount not less than the assuming insurer's liabilities attributable to reinsurance ceded by United States domiciled insurers, and in addition, the assuming insurer shall maintain a trusteed surplus of not less than twenty million dollars, except as provided in subdivision b.

b.At any time after the assuming insurer has permanently discontinued underwriting new business secured by the trust for at least three full years, the commissioner with principal regulatory oversight of the trust may authorize a reduction in the required trusteed surplus, but only after a finding, based on an assessment of the risk, that the new required surplus level is adequate for the protection of United States ceding insurers, policyholders, and claimants in light of reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial review, including an independent analysis of reserves and cash flows, and shall consider all material risk factors, including when applicable the lines of business involved, the stability of the incurred loss estimates and the effect of the surplus requirements on the assuming insurer's liquidity or solvency. The minimum required trusteed surplus may not be reduced to an amount less than thirty percent of the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers covered by the trust. c.(1)The trust fund for a group, including incorporated and individual unincorporated underwriters, must consist of:

(a)For reinsurance ceded under reinsurance agreements with an inception, amendment, or renewal date on or after January 1, 1993, funds in trust in an amount not less than the respective underwriters' several liabilities attributable to business ceded by the United States domiciled ceding insurers to any underwriter of the group;

(b)For reinsurance ceded under reinsurance agreements with an inception date on or before December 31, 1992, and not amended or renewed after that date, notwithstanding the other provisions of this chapter, funds in trust in an amount not less than the respective underwriters' several insurance and reinsurance liabilities attributable to business written in the United States; and (c)In addition to these trusts, the group shall maintain a trusteed surplus of which one hundred million dollars must be held jointly for the benefit of the United States domiciled ceding insurers of any member of the group for all years of account.

(2)The incorporated members of the group may not be engaged in any business other than underwriting as a member of the group and must be subject to the same level of regulation solvency control by the group's domiciliary regulator as are the unincorporated members. The group shall, within ninety days after its financial statements are due to be filed with the group's domiciliary regulator, provide to the commissioner:

(a)An annual certification by the group's domiciliary regulator of the solvency of each underwriter member of the group; or (b)If a certification is unavailable, a financial statement prepared by independent public accountants, of each underwriter member of the group. d.(1)The trust fund for a group of incorporated insurers under common administration, whose members possess aggregate policyholders surplus of ten billion dollars, calculated and reported in substantially the same manner as prescribed by the annual statement instructions and accounting practices and procedures manual of the national association of insurance commissioners, and which has continuously transacted an insurance business outside the United States for at least three years immediately prior to making application for accreditation, must:

(a)Consist of funds in trust in an amount not less than the assuming insurers' several liabilities attributable to business ceded by United States domiciled ceding insurers to any members of the group pursuant to reinsurance contracts issued in the name of the group;

(b)Maintain a joint trusteed surplus of which one hundred million dollars shall be held jointly for the benefit of United States domiciled ceding insurers of any member of the group; and (c)File a properly executed form AR-1 as evidence of the submission to this state's authority to examine the books and records of any of its members and shall certify that any member examined will bear the expense of any examination.

(2)Within ninety days after the statements are due to be filed with the group's domiciliary regulator, the group shall file with the commissioner an annual certification of each underwriter member's solvency by the members' domiciliary regulators and financial statements, prepared by independent public accountants, of each underwriter member of the group. 3.a.Credit for reinsurance shall not be granted unless the form of the trust and any amendments to the trust have been approved by either the commissioner of the state where the trust is domiciled or the commissioner of another state who, pursuant to the terms of the trust instrument, has accepted responsibility for regulatory oversight of the trust. The form of the trust and any trust amendments also shall be filed with the commissioner of every state in which the ceding insurer beneficiaries of the trust are domiciled. The trust instrument must provide that:

(1)Contested claims shall be valid and enforceable out of funds in trust to the extent remaining unsatisfied thirty days after entry of the final order of any court of competent jurisdiction in the United States;

(2)Legal title to the assets of the trust shall be vested in the trustee for the benefit of the grantor's United States ceding insurers, their assigns and successors in interest;

(3)The trust shall be subject to examination as determined by the commissioner;

(4)The trust shall remain in effect for as long as the assuming insurer, or any member or former member of a group of insurers, shall have outstanding obligations under reinsurance agreements subject to the trust; and (5)No later than February twenty-eighth of each year, the trustees of the trust shall report to the commissioner in writing setting forth the balance in the trust and listing the trust's investments at the preceding yearend, and shall certify the date of termination of the trust, if so planned, or certify that the trust shall not expire prior to the following December thirty-first. b.(1)Notwithstanding any other provisions in the trust instrument, if the trust fund is inadequate because it contains an amount less than the amount required by this subsection or if the grantor of the trust has been declared insolvent or placed into receivership, rehabilitation, liquidation, or similar proceedings under the laws of its state or country of domicile, the trustee shall comply with an order of the commissioner with regulatory oversight over the trust or with an order of a court of competent jurisdiction directing the trustee to transfer to the commissioner with regulatory oversight over the trust or other designated receiver all of the assets of the trust fund.

(2)The assets shall be distributed by and claims shall be filed with and valued by the commissioner with regulatory oversight over the trust in accordance with the laws of the state in which the trust is domiciled applicable to the liquidation of domestic insurance companies.

(3)If the commissioner with regulatory oversight over the trust determines that the assets of the trust fund or any part thereof are not necessary to satisfy the claims of the United States beneficiaries of the trust, the commissioner with regulatory oversight over the trust shall return the assets, or any part thereof, to the trustee for distribution in accordance with the trust agreement.

(4)The grantor shall waive any right otherwise available to it under United States law that is inconsistent with this provision.

4.For purposes of this section, the term "liabilities" means the assuming insurer's gross liabilities attributable to reinsurance ceded by United States domiciled insurers excluding liabilities that are otherwise secured by acceptable means, and includes:

a.For business ceded by domestic insurers authorized to write accident and health and property and casualty insurance:

(1)Losses and allocated loss expenses paid by the ceding insurer, recoverable from the assuming insurer;

(2)Reserves for losses reported and outstanding;

(3)Reserves for losses incurred but not reported;

(4)Reserves for allocated loss expenses; and (5)Unearned premiums.

b.For business ceded by domestic insurers authorized to write life, health, and annuity insurance:

(1)Aggregate reserves for life policies and contracts net of policy loans and net due and deferred premiums;

(2)Aggregate reserves for accident and health policies;

(3)Deposit funds and other liabilities without life or disability contingencies; and (4)Liabilities for policy and contract claims.

5.Assets deposited in trusts established pursuant to North Dakota Century Code section 26.1-31.2-01 and this section shall be valued according to their current fair market value and shall consist only of cash in United States dollars, certificates of deposit issued by a United States financial institution as defined in subsection 1 of North Dakota Century Code section 26.1-31.2-03, clean, irrevocable, unconditional, and "evergreen" letters of credit issued or confirmed by a qualified United States financial institution, as defined in subsection 1 of North Dakota Century Code section 26.1-31.2-03, and investments of the type specified in this subsection, but investments in or issued by an entity controlling, controlled by, or under common control with either the grantor or beneficiary of the trust shall not exceed five percent of total investments. No more than twenty percent of the total of the investments in the trust may be foreign investments authorized under paragraph 5 of subdivision a, subdivision c, paragraph 2 of subdivision f, and subdivision g, and no more than ten percent of the total of the investments in the trust may be securities denominated in foreign currencies. For purposes of applying the preceding sentence, a depository receipt denominated in United States dollars and representing rights conferred by a foreign security shall be classified as a foreign investment denominated in a foreign currency. The assets of a trust established to satisfy the requirements of North Dakota Century Code section 26.1-31.2-01 shall be invested only as follows:

a.Government obligations that are not in default as to principal or interest, that are valid and legally authorized, and that are issued, assumed, or guaranteed by:

(1)The United States or by any agency or instrumentality of the United States;

(2)A state of the United States;

(3)A territory, possession, or other governmental unit of the United States;

(4)An agency or instrumentality of a governmental unit referred to in paragraphs 2 and 3 if the obligations shall be by law, statutory or otherwise, payable, as to both principal and interest, from taxes levied or by law required to be levied or from adequate special revenues pledged or otherwise appropriated or by law required to be provided for making these payments, but shall not be obligations eligible for investment under this paragraph if payable solely out of special assessments on properties benefited by local improvements; or (5)The government of any other country that is a member of the organization for economic cooperation and development and whose government obligations are rated A or higher, or the equivalent, by a rating agency recognized by the securities valuation office of the national association of insurance commissioners.

b.Obligations that are issued in the United States, or that are dollar-denominated and issued in a non-United States market, by a solvent United States institution other than an insurance company or that are assumed or guaranteed by a solvent United States institution other than an insurance company and that are not in default as to principal or interest if the obligations:

(1)Are rated A or higher or the equivalent by a securities rating agency recognized by the securities valuation office of the national association of insurance commissioners, or if not so rated, are similar in structure and other material respects to other obligations of the same institution that are so rated;

(2)Are insured by at least one authorized insurer, other than the investing insurer or a parent, subsidiary, or affiliate of the investing insurer, licensed to insure obligations in this state and, after considering the insurance, are rated AAA or the equivalent by a securities rating agency recognized by the securities valuation office of the national association of insurance commissioners; or (3)Have been designated as class one or class two by the securities valuation office of the national association of insurance commissioners.

c.Obligations issued, assumed, or guaranteed by a solvent non-United States institution chartered in a country that is a member of the organization for economic cooperation and development or obligations of United States corporations issued in a non-United States currency, provided that in either case the obligations are rated A or higher, or the equivalent, by a rating agency recognized by the securities valuation office of the national association of insurance commissioners.

d.An investment made pursuant to the provisions of subdivisions a, b, or c shall be subject to the following additional limitations:

(1)An investment in or loan upon the obligations of an institution other than an institution that issues mortgage-related securities shall not exceed five percent of the assets of the trust;

(2)An investment in any one mortgage-related security shall not exceed five percent of the assets of the trust;

(3)The aggregate total investment in mortgage-related securities shall not exceed twenty-five percent of the assets of the trust; and (4)Preferred or guaranteed shares issued or guaranteed by a solvent United States institution are permissible investments if all of the institution's obligations are eligible as investments under paragraphs 1 and 3 of subdivision b, but shall not exceed two percent of the assets of the trust.

e.As used in this section:

(1)"Mortgage-related security" means an obligation that is rated AA or higher or the equivalent by a securities rating agency recognized by the securities valuation office of the national association of insurance commissioners and that either:

(a)Represents ownership of one or more promissory notes or certificates of interest or participation in the notes, including any rights designed to assure servicing of, or the receipt or timeliness of receipt by the holders of the notes, certificates, or participation of amounts payable under, the notes, certificates, or participation, that: [1]Are directly secured by a first lien on a single parcel of real estate, including stock allocated to a dwelling unit in a residential cooperative housing corporation, upon which is located a dwelling or mixed residential and commercial structure, or on a residential manufactured home as defined in 42 U.S.C. section 5402(6), whether the manufactured home is considered real or personal property under the laws of the state in which it is located; and [2]Were originated by a savings and loan association, savings bank, commercial bank, credit union, insurance company, or similar institution that is supervised and examined by a federal or state housing authority, or by a mortgagee approved by the secretary of housing and urban development pursuant to 12 U.S.C. sections 1709 and 1715-b, or, when the notes involve a lien on the manufactured home, by an institution or by a financial institution approved for insurance by the secretary of housing and urban development pursuant to 12 U.S.C. section 1703; or (b)Is secured by one or more promissory notes or certificates of deposit or participations in the notes, with or without recourse to the insurer of the notes, and, by its terms, provides for payments of principal in relation to payments, or reasonable projections of payments, or notes meeting the requirements of subparagraph a.

(2)"Promissory note", when used in connection with a manufactured home, shall also include a loan, advance, or credit sale as evidenced by a retail installment sales contract or other instrument.

f.Equity interests.

(1)Investments in common shares or partnership interests of a solvent United States institution are permissible if:

(a)Its obligations and preferred shares, if any, are eligible as investments under this subsection; and (b)The equity interests of the institution, except an insurance company, are registered on a national securities exchange as provided in the Securities Exchange Act of 1934, 15 U.S.C. § 78a to 78kk or otherwise registered pursuant to that Act, and if otherwise registered, price quotations for them are furnished through a nationwide automated quotations system approved by the financial industry regulatory authority, or successor organization. A trust shall not invest in equity interests under this paragraph an amount exceeding one percent of the assets of the trust even though the equity interests are not so registered and are not issued by an insurance company.

(2)Investments in common shares of a solvent institution organized under the laws of a country that is a member of the organization for economic cooperation and development, if:

(a)All its obligations are rated A or higher, or the equivalent, by a rating agency recognized by the securities valuation office of the national association of insurance commissioners; and (b)The equity interests of the institution are registered on a securities exchange regulated by the government of a country that is a member of the organization for economic cooperation and development.

(3)An investment in or loan upon any one institution's outstanding equity interests shall not exceed one percent of the assets of the trust. The cost of an investment in equity interests made pursuant to this paragraph, when added to the aggregate cost of other investments in equity interests then held pursuant to this paragraph, shall not exceed ten percent of the assets in the trust.

g.Obligations issued, assumed, or guaranteed by a multinational development bank, provided the obligations are rated A or higher, or the equivalent, by a rating agency recognized by the securities valuation office of the national association of insurance commissioners.

h.Investment companies.

(1)Securities of an investment company registered pursuant to the Investment Company Act of 1940, 15 U.S.C. section 80a, are permissible investments if the investment company:

(a)Invests at least ninety percent of its assets in the types of securities that qualify as an investment under subdivision a, b, or c or invests in securities that are determined by the commissioner to be substantively similar to the types of securities set forth in subdivision a, b, or c; or (b)Invests at least ninety percent of its assets in the types of equity interests that qualify as an investment under paragraph 1 of subdivision f.

(2)Investments made by a trust in investment companies under this paragraph shall not exceed the following limitations:

(a)An investment in an investment company qualifying under subparagraph a of paragraph 1 shall not exceed ten percent of the assets in the trust and the aggregate amount of investment in qualifying investment companies shall not exceed twenty-five percent of the assets in the trust; and (b)Investments in an investment company qualifying under subparagraph b of paragraph 1 shall not exceed five percent of the assets in the trust and the aggregate amount of investment in qualifying investment companies shall be included when calculating the permissible aggregate value of equity interests pursuant to paragraph 1 of subdivision f.

i.Letters of credit.

(1)In order for a letter of credit to qualify as an asset of the trust, the trustee must have the right and the obligation pursuant to the deed of trust or some other binding agreement, as duly approved by the commissioner, to immediately draw down the full amount of the letter of credit and hold the proceeds in trust for the beneficiaries of the trust if the letter of credit will otherwise expire without being renewed or replaced.

(2)The trust agreement shall provide that the trustee shall be liable for its negligence, willful misconduct, or lack of good faith. The failure of the trustee to draw against the letter of credit in circumstances in which a draw would be required shall be deemed to be negligence or willful misconduct.

6.A specific security provided to a ceding insurer by an assuming insurer pursuant to section 45-03-07.1-06 shall be applied, until exhausted, to the payment of liabilities of the assuming insurer to the ceding insurer holding the specific security prior to, and as a condition precedent for, presentation of a claim by the ceding insurer for payment by a trustee of a trust established by the assuming insurer pursuant to this section.

History: Effective October 1, 1995; amended effective December 1, 2001; October 1, 2002; January 1, 2016; April 1, 2022. 45-03-07.1-04.1. Credit for reinsurance - Certified reinsurers.

1.Pursuant to subsection 6 of North Dakota Century Code Section 26.1-31.2-01, the commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer that has been certified as a reinsurer in this state at all times for which statutory financial statement credit for reinsurance is claimed under this section. The credit allowed shall be based upon the security held by or on behalf of the ceding insurer in accordance with a rating assigned to the certified reinsurer by the commissioner. The security shall be in a form consistent with the provisions of subsection 6 of North Dakota Century Code section 26.1-31.2-01 and section 26.1-31.2-02 and North Dakota Administrative Code section 45-03-07.1-07, 45-03-07.1-08, or 45-03-07.1-09. The amount of security required in order for full credit to be allowed shall correspond with the following requirements:

a.RatingsSecurity Required Secure - 10% Secure - 210% Secure - 320% Secure - 450% Secure - 575% Vulnerable - 6100%

b.Affiliated reinsurance transactions shall receive the same opportunity for reduced security requirements as all other reinsurance transactions.

c.The commissioner shall require the certified reinsurer to post one hundred percent, for the benefit of the ceding insurer or its estate, security upon the entry of an order of rehabilitation, liquidation, or conservation against the ceding insurer.

d.In order to facilitate the prompt payment of claims, a certified reinsurer shall not be required to post security for catastrophe recoverables for a period of one year from the date of the first instance of a liability reserve entry by the ceding company as a result of a loss from a catastrophic occurrence as recognized by the commissioner. The one year deferral period is contingent upon the certified reinsurer continuing to pay claims in a timely manner. Reinsurance recoverables for only the following lines of business as reported on the national association of insurance commissioners annual financial statement related specifically to the catastrophic occurrence will be included in the deferral:

(1)Line 1: Fire.

(2)Line 2: Allied lines.

(3)Line 3: Farmowners multiple peril.

(4)Line 4: Homeowners multiple peril.

(5)Line 5: Commercial multiple peril.

(6)Line 9: Inland marine.

(7)Line 12: Earthquake.

(8)Line 21: Auto physical damage.

e.Credit for reinsurance under this section shall apply only to reinsurance contracts entered into or renewed on or after the effective date of the certification of the assuming insurer.

Any reinsurance contract entered into prior to the effective date of the certification of the assuming insurer that is subsequently amended after the effective date of the certification of the assuming insurer, or a new reinsurance contract, covering any risk for which collateral was provided previously, shall only be subject to this section with respect to losses incurred and reserves reported from and after the effective date of the amendment or new contract.

f.Nothing in this section shall prohibit the parties to a reinsurance agreement from agreeing to provisions establishing security requirements that exceed the minimum security requirements established for certified reinsurers under this section.

2.Certification procedure.

a.The commissioner shall post notice on the insurance department's website promptly upon receipt of any application for certification, including instructions on how members of the public may respond to the application. The commissioner may not take final action on the application until at least thirty days after posting the notice required by this subdivision.

b.The commissioner shall issue written notice to an assuming insurer that has made application and been approved as a certified reinsurer. Included in the notice shall be the rating assigned the certified reinsurer in accordance with subsection 1. The commissioner shall publish a list of all certified reinsurers and their ratings.

c.In order to be eligible for certification, the assuming insurer shall meet the following requirements:

(1)The assuming insurer must be domiciled and licensed to transact insurance or reinsurance in a qualified jurisdiction, as determined by the commissioner pursuant to subsection 3.

(2)The assuming insurer must maintain capital and surplus, or its equivalent, of no less than two hundred fifty million dollars calculated in accordance with paragraph 8 of subdivision d. This requirement may also be satisfied by an association including incorporated and individual unincorporated underwriters having minimum capital and surplus equivalents, net of liabilities, of at least two hundred fifty million dollars and a central fund containing a balance of at least two hundred fifty million dollars.

(3)The assuming insurer must maintain financial strength ratings from two or more rating agencies deemed acceptable by the commissioner. These ratings shall be based on interactive communication between the rating agency and the assuming insurer and shall not be based solely on publicly available information. These financial strength ratings will be one factor used by the commissioner in determining the rating that is assigned to the assuming insurer. Acceptable rating agencies include the following:

(a)Standard & Poor's;

(b)Moody's Investors Service;

(c)Fitch Ratings;

(d)A.M. Best Company; or (e)Any other nationally recognized statistical rating organization.

(4)The certified reinsurer must comply with any other requirements reasonably imposed by the commissioner.

d.Each certified reinsurer shall be rated on a legal entity basis, with due consideration being given to the group rating where appropriate, except that an association including incorporated and individual unincorporated underwriters that has been approved to do business as a single certified reinsurer may be evaluated on the basis of its group rating.

Factors that may be considered as part of the evaluation process include the following:

(1)The certified reinsurer's financial strength rating from an acceptable rating agency.

The maximum rating that a certified reinsurer may be assigned will correspond to its financial strength rating as outlined in the table below. The commissioner shall use the lowest financial strength rating received from an approved rating agency in establishing the maximum rating of a certified reinsurer. A failure to obtain or maintain at least two financial strength ratings from acceptable rating agencies will result in loss of eligibility for certification.

RatingsBestS&PMoody'sFitch Secure - 1A++AAAAaaAAA Secure - 2A+AA+, AA, AA-Aa1, Aa2, Aa3AA+, AA, AA- Secure - 3AA+, AA1, A2A+, A Secure - 4A-A-A3A- Secure - 5B++, B+BBB+, BBB, BBB- Baa1, Baa2, Baa3 BBB+, BBB, BBB- Vulnerable - 6B, B-, C++, C+, C, C-, D, E, F BB+, BB, BB-, B+, B, B-, CCC, CC, C, D, R Ba1, Ba2, Ba3, B1, B2, B3, Caa, Ca, C BB+, BB, BB-, B+, B, B-, CCC+, CC, CCC-, DD (2)The business practices of the certified reinsurer in dealing with its ceding insurers, including its record of compliance with reinsurance contractual terms and obligations;

(3)For certified reinsurers domiciled in the United States, a review of the most recent applicable national association of insurance commissioners annual statement blank, either schedule F for property and casualty reinsurers, or schedule S for life and health reinsurers;

(4)For certified reinsurers not domiciled in the United States, a review annually of form CR-F for property and casualty reinsurers, or form CR-S for life and health reinsurers, attached as exhibits to this chapter;

(5)The reputation of the certified reinsurer for prompt payment of claims under reinsurance agreements, based on an analysis of ceding insurers' schedule F reporting of overdue reinsurance recoverables, including the proportion of obligations that are more than ninety days past due or are in dispute. with specific attention given to obligations payable to companies that are in administrative supervision or receivership;

(6)Regulatory actions against the certified reinsurer;

(7)The report of the independent auditor on the financial statements of the insurance enterprise, on the basis described in paragraph 8;

(8)For certified reinsurers not domiciled in the United States, audited financial statements, regulatory filings, and actuarial opinion as filed with the non-United States jurisdiction supervisor, with a translation into English.

Upon the initial application for certification, the commissioner will consider audited financial statements for the last two years filed with its non-United States jurisdiction supervisor;

(9)The liquidation priority of obligations to a ceding insurer in the certified reinsurer's domiciliary jurisdiction in the context of an insolvency proceeding;

(10)A certified reinsurer's participation in any solvent scheme of arrangement, or similar procedure, which involves United States ceding insurers. The commissioner shall receive prior notice from a certified reinsurer that proposes participation by the certified reinsurer in a solvent scheme of arrangement; and (11)Any other information deemed relevant by the commissioner.

e.Based on the analysis conducted under paragraph 5 of subdivision d of a certified reinsurer's reputation for prompt payment of claims, the commissioner may make appropriate adjustments in the security the certified reinsurer is required to post to protect its liabilities to United States ceding insurers, provided that the commissioner shall, at a minimum, increase the security the certified reinsurer is required to post by one rating level under paragraph 1 of subdivision d if the commissioner finds that:

(1)More than fifteen percent of the certified reinsurer's ceding insurance clients have overdue reinsurance recoverables on paid losses of ninety days or more which are not in dispute and which exceed one hundred thousand dollars for each cedent; or (2)The aggregate amount of reinsurance recoverables on paid losses which are not in dispute that are overdue by ninety days or more exceeds fifty million dollars.

f.The assuming insurer must submit a properly executed form CR-1, attached as an exhibit to this chapter, as evidence of its submission to the jurisdiction of this state, appointment of the commissioner as an agent for service of process in this state, and agreement to provide security for one hundred percent of the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers if it resists enforcement of a final United States judgment. The commissioner shall not certify any assuming insurer that is domiciled in a jurisdiction that the commissioner has determined does not adequately and promptly enforce final United States judgments or arbitration awards.

g.The certified reinsurer must agree to meet applicable information filing requirements as determined by the commissioner, both with respect to an initial application for certification and on an ongoing basis. All information submitted by certified reinsurers which are not otherwise public information subject to disclosure shall be exempted from disclosure under North Dakota Century Code section 44-04-18 and shall be withheld from public disclosure. The applicable information filing requirements are, as follows:

(1)Notification within ten days of any regulatory actions taken against the certified reinsurer, any change in the provisions of its domiciliary license or any change in rating by an approved rating agency, including a statement describing the changes and the reasons therefor;

(2)Annually, form CR-F or CR-S, as applicable;

(3)Annually, the report of the independent auditor on the financial statements of the insurance enterprise, on the basis described in paragraph 4;

(4)Annually, the most recent audited financial statements, regulatory filings, and actuarial opinion as filed with the certified reinsurer's supervisor,with a translation into English.

Upon the initial certification, audited financial statements for the last two years filed with the certified reinsurer's supervisor;

(5)At least annually, an updated list of all disputed and overdue reinsurance claims regarding reinsurance assumed from United States domestic ceding insurers;

(6)A certification from the certified reinsurer's domestic regulator that the certified reinsurer is in good standing and maintains capital in excess of the jurisdiction's highest regulatory action level; and (7)Any other information that the commissioner may reasonably require.

h.Change in rating or revocation of certification.

(1)In the case of a downgrade by a rating agency or other disqualifying circumstance, the commissioner shall upon written notice assign a new rating to the certified reinsurer in accordance with the requirements of paragraph 1 of subdivision d.

(2)The commissioner shall have the authority to suspend, revoke, or otherwise modify a certified reinsurer's certification at any time if the certified reinsurer fails to meet its obligations or security requirements under this section, or if other financial or operating results of the certified reinsurer, or documented significant delays in payment by the certified reinsurer, lead the commissioner to reconsider the certified reinsurer's ability or willingness to meet its contractual obligations.

(3)If the rating of a certified reinsurer is upgraded by the commissioner, the certified reinsurer may meet the security requirements applicable to its new rating on a prospective basis, but the commissioner shall require the certified reinsurer to post security under the previously applicable security requirements as to all contracts in force on or before the effective date of the upgraded rating. If the rating of a certified reinsurer is downgraded by the commissioner, the commissioner shall require the certified reinsurer to meet the security requirements applicable to its new rating for all business it has assumed as a certified reinsurer.

(4)Upon revocation of the certification of a certified reinsurer by the commissioner, the assuming insurer shall be required to post security in accordance with section 45-03-07.1-06 in order for the ceding insurer to continue to take credit for reinsurance ceded to the assuming insurer. If funds continue to be held in trust in accordance with section 45-03-07.1-04, the commissioner may allow additional credit equal to the ceding insurer's pro rata share of the funds, discounted to reflect the risk of uncollectibility and anticipated expenses of trust administration.

Notwithstanding the change of a certified reinsurer's rating or revocation of its certification, a domestic insurer that has ceded reinsurance to that certified reinsurer may not be denied credit for reinsurance for a period of three months for all reinsurance ceded to that certified reinsurer, unless the reinsurance is found by the commissioner to be at high risk of uncollectibility.

3.Qualified jurisdictions.

a.If, upon conducting an evaluation under this section with respect to the reinsurance supervisory system of any non-United States assuming insurer, the commissioner determines that the jurisdiction qualifies to be recognized as a qualified jurisdiction, the commissioner shall publish notice and evidence of the recognition in an appropriate manner. The commissioner may establish a procedure to withdraw recognition of those jurisdictions that are no longer qualified.

b.In order to determine whether the domiciliary jurisdiction of a non-United States assuming insurer is eligible to be recognized as a qualified jurisdiction, the commissioner shall evaluate the reinsurance supervisory system of the non-United States jurisdiction, both initially and on an ongoing basis, and consider the rights, benefits, and the extent of reciprocal recognition afforded by the non-United States jurisdiction to reinsurers licensed and domiciled in the United States. The commissioner shall determine the appropriate approach for evaluating the qualifications of jurisdictions, and create and publish a list of jurisdictions whose reinsurers may be approved by the commissioner as eligible for certification. A qualified jurisdiction must agree to share information and cooperate with the commissioner with respect to all certified reinsurers domiciled within that jurisdiction.

Additional factors to be considered in determining whether to recognize a qualified jurisdiction, in the discretion of the commissioner, include the following:

(1)The framework under which the assuming insurer is regulated.

(2)The structure and authority of the domiciliary regulator with regard to solvency

regulation requirements and financial surveillance.

(3)The substance of financial and operating standards for assuming insurers in the domiciliary jurisdiction.

(4)The form and substance of financial reports required to be filed or made publicly available by reinsurers in the domiciliary jurisdiction and the accounting principles used.

(5)The domiciliary regulator's willingness to cooperate with United States regulators in general and the commissioner in particular.

(6)The history of performance by assuming insurers in the domiciliary jurisdiction.

(7)Any documented evidence of substantial problems with the enforcement of final United States judgments in the domiciliary jurisdiction. A jurisdiction will not be considered to be a qualified jurisdiction if the commissioner has determined that it does not adequately and promptly enforce final United States judgments or arbitration awards.

(8)Any relevant international standards or guidance with respect to mutual recognition of reinsurance supervision adopted by the international association of insurance supervisors or successor organization.

(9)Any other matters deemed relevant by the commissioner.

c.A list of qualified jurisdictions shall be published through the national association of insurance commissioners committee process. The commissioner shall consider this list in determining qualified jurisdictions. If the commissioner approves a jurisdiction as qualified that does not appear on the list of qualified jurisdictions, the commissioner shall provide thoroughly documented justification with respect to the criteria provided under paragraphs 1 through 9 of subdivision b.

d.United States jurisdictions that meet the requirements for accreditation under the national association of insurance commissioners financial standards and accreditation program shall be recognized as qualified jurisdictions.

4.Recognition of certification issued by a national association of insurance commissioners accredited jurisdiction.

a.If an applicant for certification has been certified as a reinsurer in a national association of insurance commissioners accredited jurisdiction, the commissioner has the discretion to defer to that jurisdiction's certification, and to defer to the rating assigned by that jurisdiction, if the assuming insurer submits a properly executed form CR-1 and the additional information as the commissioner requires. The assuming insurer shall be considered to be a certified reinsurer in this state.

b.Any change in the certified reinsurer's status or rating in the other jurisdiction shall apply automatically in this state as of the date it takes effect in the other jurisdiction. The certified reinsurer shall notify the commissioner of any change in its status or rating within ten days after receiving notice of the change.

c.The commissioner may withdraw recognition of the other jurisdiction's rating at any time and assign a new rating in accordance with paragraph 1 of subdivision g of subsection 2.

d.The commissioner may withdraw recognition of the other jurisdiction's certification at any time, with written notice to the certified reinsurer. Unless the commissioner suspends or revokes the certified reinsurer's certification in accordance with paragraph 2 of subdivision g of subsection 2, the certified reinsurer's certification shall remain in good standing in this state for a period of three months, which shall be extended if additional time is necessary to consider the assuming insurer's application for certification in this state.

5.Mandatory funding clause. In addition to the clauses required under section 45-03-07.1-10, reinsurance contracts entered into or renewed under this section shall include a proper funding clause, which requires the certified reinsurer to provide and maintain security in an amount sufficient to avoid the imposition of any financial statement penalty on the ceding insurer under this section for reinsurance ceded to the certified reinsurer.

6.The commissioner shall comply with all reporting and notification requirements that may be established by the national association of insurance commissioners with respect to certified reinsurers and qualified jurisdictions.

History: Effective January 1, 2016; amended effective April 1, 2017; April 1, 2022. 45-03-07.1-04.2. Credit for reinsurance - Reciprocal jurisdictions.

1.Pursuant to subsection 7 of North Dakota Century Code section 26.1-31.2-01, the commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer that is licensed to write reinsurance by, and has its head office or is domiciled in, a reciprocal jurisdiction, and which meets the other requirements of this rule.

2.A "reciprocal jurisdiction" is a jurisdiction, as designated by the commissioner pursuant to subdivision d, that meets one of the following: aA non-United States jurisdiction that is subject to an in-force covered agreement with the United States, each within its legal authority, or, in the case of a covered agreement between the United States and the European Union, is a member state of the European Union.

b.For purposes of this subsection, a "covered agreement" is an agreement entered into pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, 31 U.S.C. sections 313 and 314, that is currently in effect or in a period of provisional application and addresses the elimination, under specified conditions, of collateral requirements as a condition for entering into any reinsurance agreement with a ceding insurer domiciled in this state or for allowing the ceding insurer to recognize credit for reinsurance;

c.A United States jurisdiction that meets the requirements for accreditation under the national association of insurance commissioners financial standards and accreditation program; or

d.A qualified jurisdiction, as determined by the commissioner pursuant to subdivision c of subsection 6 of North Dakota Century Code section 26.1-31.2-01 and subsection 3 of

section 45-03-07.1-04.1, which is not otherwise described in subdivision a or b and which the commissioner determines meets all of the following additional requirements:

(1)Provides that an insurer which has its head office or is domiciled in such qualified jurisdiction shall receive credit for reinsurance ceded to a United States-domiciled assuming insurer in the same manner as credit for reinsurance is received for reinsurance assumed by insurers domiciled in such qualified jurisdiction;

(2)Does not require a United States-domiciled assuming insurer to establish or maintain a local presence as a condition for entering into a reinsurance agreement with any ceding insurer subject to regulation by the non-United States jurisdiction or as a condition to allow the ceding insurer to recognize credit for such reinsurance;

(3)Recognizes the United States state regulatory approach to group supervision and group capital, by providing written confirmation by a competent regulatory authority, in such qualified jurisdiction, that insurers and insurance groups that are domiciled or maintain their headquarters in this state or another jurisdiction accredited by the national association of insurance commissioners shall be subject only to worldwide prudential insurance group supervision, including worldwide group governance, solvency and capital, and reporting, as applicable, by the commissioner or the commissioner of the domiciliary state and will not be subject to group supervision at the level of the worldwide parent undertaking of the insurance or reinsurance group by the qualified jurisdiction; and (4)Provides written confirmation by a competent regulatory authority in such qualified jurisdiction that information regarding insurers and their parent, subsidiary, or affiliated entities, if applicable, shall be provided to the commissioner in accordance with a memorandum of understanding or similar document between the commissioner and such qualified jurisdiction, including the International Association of Insurance Supervisors Multilateral Memorandum of Understanding or other multilateral memoranda of understanding coordinated by the national association of insurance commissioners.

3.Credit must be allowed when the reinsurance is ceded from an insurer domiciled in this state to an assuming insurer meeting each of the conditions set forth below.

a.The assuming insurer must be licensed to transact reinsurance by, and have its head office or be domiciled in, a reciprocal jurisdiction.

b.The assuming insurer must have and maintain on an ongoing basis minimum capital and surplus, or its equivalent, calculated on at least an annual basis as of the preceding December thirty-first or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, and confirmed as set forth in subdivision g according to the methodology of its domiciliary jurisdiction, in the following amounts:

(1)No less than two hundred fifty million dollars; or (2)If the assuming insurer is an association, including incorporated and individual unincorporated underwriters:

(a)Minimum capital and surplus equivalents (net of liabilities) or own funds of the equivalent of at least two hundred fifty million dollars; and (b)A central fund containing a balance of the equivalent of at least two hundred and fifty million dollars.

c.The assuming insurer must have and maintain on an ongoing basis a minimum solvency or capital ratio, as applicable, as follows:

(1)If the assuming insurer has its head office or is domiciled in a reciprocal jurisdiction as defined in subdivision a of subsection 2, the ratio specified in the applicable covered agreement;

(2)If the assuming insurer is domiciled in a reciprocal jurisdiction as defined in subdivision b of subsection 2, a risk-based capital ratio of three hundred percent of the authorized control level, calculated in accordance with the formula developed by the national association of insurance commissioners; or (3)If the assuming insurer is domiciled in a reciprocal jurisdiction as defined in subdivision c of subsection 2, after consultation with the reciprocal jurisdiction and considering any recommendations published through the national association of insurance commissioners committee process, such solvency or capital ratio as the commissioner determines to be an effective measure of solvency.

d.The assuming insurer must agree to and provide adequate assurance, in the form of a properly executed Form RJ-1, attached as an exhibit to this chapter, of its agreement to the following:

(1)The assuming insurer must agree to provide prompt written notice and explanation to the commissioner if it falls below the minimum requirements set forth in subdivision b or c, or if any regulatory action is taken against it for serious noncompliance with applicable law.

(2)The assuming insurer must consent in writing to the jurisdiction of the courts of this state and to the appointment of the commissioner as agent for service of process.

(a)The commissioner may also require that such consent be provided and included in each reinsurance agreement under the commissioner's jurisdiction.

(b)Nothing in this provision shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent such agreements are unenforceable under applicable insolvency or delinquency laws.

(3)The assuming insurer must consent in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer, that have been declared enforceable in the territory where the judgment was obtained.

(4)Each reinsurance agreement must include a provision requiring the assuming insurer to provide security in an amount equal to one hundred percent of the assuming insurer's liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its legal successor on behalf of its estate, if applicable.

(5)The assuming insurer must confirm that it is not presently participating in any solvent scheme of arrangement, which involves this state's ceding insurers, and agrees to notify the ceding insurer and the commissioner and to provide one hundred percent security to the ceding insurer consistent with the terms of the scheme, should the assuming insurer enter into such a solvent scheme of arrangement. Such security must be in a form consistent with the provisions of subsection 6 of North Dakota Century Code section 26.1-31.2-01 and North Dakota Century Code section 26.1-31.2-02 and sections 45-03-07.1-07, 45-03-07.1-08 and 45-03-07.1-09. For purposes of this regulation, the term "solvent scheme of arrangement" means a foreign or alien statutory or regulatory compromise procedure subject to requisite majority creditor approval and judicial sanction in the assuming insurer's home jurisdiction either to finally commute liabilities of duly noticed classed members or creditors of a solvent debtor, or to reorganize or restructure the debts and obligations of a solvent debtor on a final basis, and which may be subject to judicial recognition and enforcement of the arrangement by a governing authority outside the ceding insurer's home jurisdiction.

(6)The assuming insurer must agree in writing to meet the applicable information filing requirements as set forth in subdivision e.

e.The assuming insurer or its legal successor must provide, if requested by the commissioner, on behalf of itself and any legal predecessors, the following documentation to the commissioner:

(1)For the two years preceding entry into the reinsurance agreement and on an annual

basis thereafter, the assuming insurer's annual audited financial statements, in accordance with the applicable law of the jurisdiction of its head office or domiciliary jurisdiction, as applicable, including the external audit report;

(2)For the two years preceding entry into the reinsurance agreement, the solvency and financial condition report or actuarial opinion, if filed with the assuming insurer's supervisor;

(3)Before entry into the reinsurance agreement and not more than semiannually thereafter, an updated list of all disputed and overdue reinsurance claims outstanding for ninety days or more, regarding reinsurance assumed from ceding insurers domiciled in the United States; and (4)Before entry into the reinsurance agreement and not more than semiannually thereafter, information regarding the assuming insurer's assumed reinsurance by ceding insurer, ceded reinsurance by the assuming insurer, and reinsurance recoverable on paid and unpaid losses by the assuming insurer to allow for the evaluation of the criteria set forth in subdivision f.

f.The assuming insurer must maintain a practice of prompt payment of claims under reinsurance agreements. The lack of prompt payment will be evidenced if any of the following criteria is met:

(1)More than fifteen percent of the reinsurance recoverables from the assuming insurer are overdue and in dispute as reported to the commissioner;

(2)More than fifteen percent of the assuming insurer's ceding insurers or reinsurers have overdue reinsurance recoverable on paid losses of ninety days or more which are not in dispute and which exceed for each ceding insurer one hundred thousand dollars, or as otherwise specified in a covered agreement; or (3)The aggregate amount of reinsurance recoverable on paid losses which are not in dispute, but are overdue by ninety days or more, exceeds fifty million dollars, or as otherwise specified in a covered agreement.

g.The assuming insurer's supervisory authority must confirm to the commissioner on an annual basis that the assuming insurer complies with the requirements set forth in subdivisions a and b.

h.Nothing in this provision precludes an assuming insurer from providing the commissioner with information on a voluntary basis.

4.The commissioner shall timely create and publish a list of reciprocal jurisdictions.

a.A list of reciprocal jurisdictions is published through the national association of insurance commissioners committee process. The commissioner's list must include any reciprocal jurisdiction as defined under subdivisions a and b of subsection 2, and must consider any other reciprocal jurisdiction included on the national association of insurance commissioners list. The commissioner may approve a jurisdiction that does not appear on the national association of insurance commissioners list of reciprocal jurisdictions as provided by applicable law, regulation, or in accordance with criteria published through the national association of insurance commissioners committee process.

b.The commissioner may remove a jurisdiction from the list of reciprocal jurisdictions upon a determination that the jurisdiction no longer meets one or more of the requirements of a reciprocal jurisdiction, as provided by applicable law, regulation, or in accordance with a process published through the national association of insurance commissioners committee process, except that the commissioner may not remove from the list a reciprocal jurisdiction as defined under subdivisions a and b of subsection 2. Upon removal of a reciprocal jurisdiction from this list, credit for reinsurance ceded to an assuming insurer domiciled in that jurisdiction must be allowed, if otherwise allowed pursuant to North Dakota Century Code chapter 26.1-31.2 or chapter 45-03-07.1.

5.The commissioner shall timely create and publish a list of assuming insurers that have satisfied the conditions set forth in this section and to which cessions must be granted credit in accordance with this section.

a.If a national association of insurance commissioners accredited jurisdiction has determined that the conditions set forth in subsection 3 have been met, the commissioner has the discretion to defer to that jurisdiction's determination, and add such assuming insurer to the list of assuming insurers to which cessions must be granted credit in accordance with this subsection. The commissioner may accept financial documentation filed with another national association of insurance commissioners accredited jurisdiction or with the national association of insurance commissioners in satisfaction of the requirements of subsection 3.

b.When requesting that the commissioner defer to another national association of insurance commissioners accredited jurisdiction's determination, an assuming insurer shall submit a properly executed Form RJ-1 and additional information as the commissioner may require. A state that has received such a request will notify other states through the national association of insurance commissioners committee process and provide relevant information with respect to the determination of eligibility.

6.If the commissioner determines that an assuming insurer no longer meets one or more of the requirements under this subsection, the commissioner may revoke or suspend the eligibility of the assuming insurer for recognition under this subsection.

a.While an assuming insurer's eligibility is suspended, no reinsurance agreement issued, amended, or renewed after the effective date of the suspension qualifies for credit except to the extent that the assuming insurer's obligations under the contract are secured in accordance with section 45-03-07.1-06.

b.If an assuming insurer's eligibility is revoked, no credit for reinsurance may be granted after the effective date of the revocation with respect to any reinsurance agreements entered into by the assuming insurer, including reinsurance agreements entered into before the date of revocation, except to the extent that the assuming insurer's obligations under the contract are secured in a form acceptable to the commissioner and consistent with the provisions of section 45-03-07.1-06.

7.Before denying statement credit or imposing a requirement to post security under subsection 6 or adopting any similar requirement that will have substantially the same regulatory impact as security, the commissioner shall:

a.Communicate with the ceding insurer, the assuming insurer, and the assuming insurer's supervisory authority that the assuming insurer no longer satisfies one of the conditions listed in subsection 3;

b.Provide the assuming insurer with thirty days from the initial communication to submit a plan to remedy the defect, and ninety days from the initial communication to remedy the defect, except in exceptional circumstances in which a shorter period is necessary for policyholder and other consumer protection;

c.After the expiration of ninety days or less, as set out in subdivision b if the commissioner determines that no or insufficient action was taken by the assuming insurer, the commissioner may impose any of the requirements as set out in this subsection; and dProvide a written explanation to the assuming insurer of any of the requirements set out in this subsection.

8.If subject to a legal process of rehabilitation, liquidation or conservation, as applicable, the ceding insurer, or its representative, may seek and, if determined appropriate by the court in which the proceedings are pending, may obtain an order requiring that the assuming insurer post security for all outstanding liabilities.

History: Effective April 1, 2022. 45-03-07.1-05. Credit for reinsurance required by law.

Pursuant to subsection 7 of North Dakota Century Code section 26.1-31.2-01, the commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of subsections 2, 3, 4, 5, and 6 of North Dakota Century Code section 26.1-31.2-01, but only as to the insurance of risks located in jurisdictions where the reinsurance is required by the applicable law or regulation of that jurisdiction. As used in this section, "jurisdiction" means state, district, or territory of the United States and any lawful national government.

History: Effective October 1, 1995; amended effective October 1, 2002; January 1, 2016; April 1, 2022. 45-03-07.1-06. Asset or reduction from liability for reinsurance ceded to an unauthorized assuming insurer not meeting the requirements of sections 45-03-07.1-01 through 45-03-07.1-05.

1.Pursuant to North Dakota Century Code section 26.1-31.2-02, the commissioner shall allow a reduction from liability for reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of North Dakota Century Code section 26.1-31.2-01 in an amount not exceeding the liabilities carried by the ceding insurer. The reduction must be in the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the exclusive benefit of the ceding insurer, under a reinsurance contract with the assuming insurer as security for the payment of obligations under the reinsurance contract. The security must be held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer or, in the case of a trust, held in a qualified United States financial institution as defined in subsection 2 of North Dakota Century Code section 26.1-31.2-03. This security may be in the form of any of the following:

a.Cash;

b.Securities listed by the securities valuation office of the national association of insurance commissioners, including those deemed exempt from filing as defined by the purposes and procedures manual of the securities valuation office, and qualifying as admitted assets;

c.Clean, irrevocable, unconditional, and "evergreen" letters of credit issued or confirmed by a qualified United States institution, as defined in subsection 1 of North Dakota Century Code section 26.1-31.2-03, effective no later than December thirty-first of the year for which filing is being made, and in the possession of, or in trust for, the ceding insurer on or before the filing date of its annual statement. Letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance or confirmation, shall, notwithstanding the issuing or confirming institution's subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification, or amendment, whichever occurs first; or

d.Any other form of security acceptable to the commissioner.

2.An admitted asset or a reduction from liability for reinsurance ceded to an unauthorized assuming insurer pursuant to this section shall be allowed only when the requirements of

section 45-03-07.1-10 and the applicable portions of sections 45-03-07.1-07, 45-03-07.1-08, or 45-03-07.1-09 have been satisfied.

History: Effective October 1, 1995; amended effective December 1, 2001; October 1, 2002; January 1, 2016. 45-03-07.1-07. Trust agreements qualified under section 45-03-07.1-06.

1.As used in this section:

a."Beneficiary" means the entity for whose sole benefit the trust has been established and any successor of the beneficiary by operation of law. If a court of law appoints a successor in interest to the named beneficiary, then the named beneficiary includes and is limited to the court-appointed domiciliary receiver, conservator, rehabilitator, or liquidator.

b."Grantor" means the entity that has established a trust for the sole benefit of the beneficiary. When established in conjunction with a reinsurance agreement, the grantor is the unlicensed, unaccredited assuming insurer.

c."Obligations", as used in subdivision k of subsection 2 means:

(1)Reinsured losses and allocated loss expenses paid by the ceding company, but not recovered from the assuming insurer;

(2)Reserves for reinsured losses reported and outstanding;

(3)Reserves for reinsured losses incurred but not reported; and (4)Reserves for allocated reinsured loss expenses and unearned premiums.

2.Required conditions:

a.The trust agreement must be entered into between the beneficiary, the grantor, and a trustee which shall be a qualified United States financial institution as defined in subsection 2 of North Dakota Century Code section 26.1-31.2-03.

b.The trust agreement must create a trust account into which assets must be deposited.

c.All assets in the trust account must be held by the trustee at the trustee's office in the United States.

d.The trust agreement must provide that:

(1)The beneficiary shall have the right to withdraw assets from the trust account at any time, without notice to the grantor, subject only to written notice from the beneficiary to the trustee;

(2)No other statement or document is required to be presented in order to withdraw assets, except that the beneficiary may be required to acknowledge receipt of withdrawn assets;

(3)It is not subject to any conditions or qualifications outside of the trust agreement; and (4)It shall not contain references to any other agreements or documents except as provided for in subdivisions k and l.

e.The trust agreement must be established for the sole benefit of the beneficiary.

f.The trust agreement must require the trustee to:

(1)Receive assets and hold all assets in a safe place;

(2)Determine that all assets are in a form that the beneficiary, or the trustee upon direction by the beneficiary, may whenever necessary negotiate any assets, without consent or signature from the grantor or any other person or entity;

(3)Furnish to the grantor and the beneficiary a statement of all assets in the trust account upon its inception and at intervals no less frequent than the end of each calendar quarter;

(4)Notify the grantor and the beneficiary within ten days of any deposits to or withdrawals from the trust account;

(5)Upon written demand of the beneficiary, immediately take any and all steps necessary to transfer absolutely and unequivocably all right, title, and interest in the assets held in the trust account to the beneficiary and deliver physical custody of the assets to the beneficiary; and (6)Allow no substitutions or withdrawals of assets from the trust account, except on written instructions from the beneficiary, except that the trustee may, without the consent of but with notice to the beneficiary, upon call or maturity of any trust asset, withdraw the asset upon condition that the proceeds are paid into the trust account.

g.The trust agreement must provide that at least thirty days, but not more than forty-five days, prior to termination of the trust account, written notification of termination must be delivered by the trustee to the beneficiary.

h.The trust agreement must be made subject to and governed by the laws of the state in which the trust is domiciled.

i.The trust agreement must prohibit invasion of the trust corpus for the purpose of paying compensation to, or reimbursing the expenses of, the trustee. In order for a letter of credit to qualify as an asset of the trust, the trustee shall have the right and the obligation pursuant to the deed of trust or some other binding agreement, as duly approved by the commissioner, to immediately draw down the full amount of the letter of credit and hold the proceeds in trust for the beneficiaries of the trust if the letter of credit will otherwise expire without being renewed or replaced.

j.The trust agreement must provide that the trustee is liable for its own negligence, willful misconduct, or lack of good faith. The failure of the trustee to draw against the letter of credit in circumstances in which the draw would be required shall be deemed to be negligence or willful misconduct.

k.Notwithstanding other provisions of this chapter, when a trust agreement is established in conjunction with a reinsurance agreement covering risks other than life, annuities, and accident and health, when it is customary practice to provide a trust agreement for a specific purpose, the trust agreement may provide that the ceding insurer shall undertake to use and apply amounts drawn upon the trust account, without diminution because of the insolvency of the ceding insurer or the assuming insurer, only for the following purposes:

(1)To pay or reimburse the ceding insurer for the assuming insurer's share under the specific reinsurance agreement regarding any losses and allocated loss expenses paid by the ceding insurer, but not recovered from the assuming insurer, or for unearned premiums due to the ceding insurer if not otherwise paid by the assuming insurer;

(2)To make payment to the assuming insurer of any amounts held in the trust account that exceed one hundred two percent of the actual amount required to fund the assuming insurer's obligations under the specific reinsurance agreement; or (3)If the ceding insurer has received notification of termination of the trust account and if the assuming insurer's entire obligations under the specific reinsurance agreement remain unliquidated and undischarged ten days prior to the termination date, to withdraw amounts equal to the obligations and deposit those amounts in a separate account, in the name of the ceding insurer in any qualified United States financial institution as defined in subsection 2 of North Dakota Century Code section 26.1-31.2-03 apart from its general assets, in trust for the uses and purposes specified in paragraphs 1 and 2 as may remain executory after the withdrawal and for any period after the termination date.

l.Notwithstanding other provisions of this chapter, when a trust agreement is established to meet the requirements of section 45-03-07.1-06 in conjunction with a reinsurance agreement covering life, annuities, or accident and health risks, if it is customary practice to provide a trust agreement for a specific purpose, the trust agreement may provide that the ceding insurer shall undertake to use and apply amounts drawn upon the trust account, without diminution because of the insolvency of the ceding insurer or the assuming insurer, only for the following purposes:

(1)To pay or reimburse the ceding insurer for:

(a)The assuming insurer's share under the specific reinsurance agreement of premiums returned, but not yet recovered from the assuming insurer, to the owners of policies reinsured under the reinsurance agreement on account of cancellations of the policies; and (b)The assuming insurer's share under the specific reinsurance agreement of surrenders and benefits or losses paid by the ceding insurer, but not yet recovered from the assuming insurer, under the terms and provisions of the policies reinsured under the reinsurance agreement;

(2)To pay to the assuming insurer amounts held in the trust account in excess of the amount necessary to secure the credit or reduction from liability for reinsurance taken by the ceding insurer; or (3)If the ceding insurer has received notification of termination of the trust and the assuming insurer's entire obligations under the specific reinsurance agreement remain unliquidated and undischarged ten days prior to the termination date, to withdraw amounts equal to the assuming insurer's share of liabilities, to the extent that the liabilities have not yet been funded by the assuming insurer, and deposit those amounts in a separate account, in the name of the ceding insurer in any qualified United States financial institution apart from its general assets, in trust for the uses and purposes specified in paragraphs 1 and 2 as may remain executory after withdrawal and for any period after the termination date.

m.Either the reinsurance agreement or the trust agreement must stipulate that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash in United States dollars, certificates of deposit issued by a United States bank and payable in United States dollars, and investments permitted by the insurance code or any combination of the above, provided investments in or issued by an entity controlling, controlled by or under common control with either the grantor or the beneficiary of the trust shall not exceed five percent of total investments. The agreement may further specify the types of investments to be deposited. If the reinsurance agreement covers life, annuities, or accident and health risks, then the provisions required by this subdivision must be included in the reinsurance agreement.

3.Permitted conditions:

a.The trust agreement may provide that the trustee may resign upon delivery of a written notice of resignation, effective not less than ninety days after the beneficiary and grantor receive the notice and that the trustee may be removed by the grantor by delivery to the trustee and the beneficiary of a written notice of removal, effective not less than ninety days after the trustee and the beneficiary receive the notice, provided that no such resignation or removal shall be effective until a successor trustee has been duly appointed and approved by the beneficiary and the grantor and all assets in the trust have been duly transferred to the new trustee.

b.The grantor may have the full and unqualified right to vote any shares of stock in the trust account and to receive from time to time payments of any dividends or interest upon any shares of stock or obligations included in the trust account. Any interest or dividends must be either forwarded promptly upon receipt to the grantor or deposited in a separate account established in the grantor's name.

c.The trustee may be given authority to invest, and accept substitutions of, any funds in the account, provided that no investment or substitution may be made without prior approval of the beneficiary, unless the trust agreement specifies categories of investments acceptable to the beneficiary and authorizes the trustee to invest funds and to accept substitutions which the trustee determines are at least equal in current fair market value to the assets withdrawn and that are consistent with the restrictions in paragraph 2 of subdivision a of subsection 4.

d.The trust agreement may provide that the beneficiary may at any time designate a party to which all or part of the trust assets are to be transferred. The transfer may be conditioned upon the trustee receiving, prior to or simultaneously, other specified assets.

e.The trust agreement may provide that, upon termination of the trust account, all assets not previously withdrawn by the beneficiary, with written approval by the beneficiary, must be delivered over to the grantor.

4.Additional conditions applicable to reinsurance agreements:

a.A reinsurance agreement may contain provisions that:

(1)Require the assuming insurer to enter into a trust agreement and to establish a trust account for the benefit of the ceding insurer, and specifying what the agreement is to cover;

(2)Require the assuming insurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the ceding insurer, or the trustee upon the direction of the ceding insurer, may whenever necessary negotiate these assets without consent or a signature from the assuming insurer or any other entity;

(3)Require that all settlements of account between the ceding insurer and the assuming insurer be made in cash or its equivalent; and (4)Stipulate that the assuming insurer and the ceding insurer agree that the assets in the trust account, established pursuant to the provisions of the reinsurance agreement, may be withdrawn by the ceding insurer at any time, notwithstanding any other provisions in the reinsurance agreement, and shall be utilized and applied by the ceding insurer or its successors in interest by operation of law, including without limitation any liquidator, rehabilitator, receiver, or conservator of the company, without diminution because of insolvency on the part of the ceding insurer or the assuming insurer, only for the following purposes:

(a)To pay or reimburse the ceding insurer for: [1]The assuming insurer's share under the specific reinsurance agreement of premiums returned, but not yet recovered from the assuming insurer, to the owners of policies reinsured under the reinsurance agreement because of cancellations of the policies; [2]The assuming insurer's share of surrenders and benefits or losses paid by the ceding insurer pursuant to the provisions of the policies reinsured under the reinsurance agreement; and [3]Any other amounts necessary to secure the credit or reduction from (b)To make payment to the assuming insurer of amounts held in the trust account in excess of the amount necessary to secure the credit or reduction from

b.The reinsurance agreement may also contain provisions that:

(1)Give the assuming insurer the right to seek approval from the ceding insurer, which shall not be unreasonably or arbitrarily withheld, to withdraw from the trust account all or any part of the trust assets and transfer those assets to the assuming insurer, provided:

(a)At the time of withdrawal, the assuming insurer shall replace the withdrawn assets with other qualified assets having a current fair market value equal to the market value of the assets withdrawn so as to maintain at all times the deposit in the required amount; or (b)After withdrawal and transfer, the current fair market value of the trust account is no less than one hundred two percent of the required amount.

(2)Provide for the return of any amount withdrawn in excess of the actual amounts required for paragraph 5 of subdivision a and interest payments, at a rate not in excess of the prime rate of interest, on those amounts.

(3)Permit the award by any arbitration panel or court of competent jurisdiction of:

(a)Interest at a rate different from that provided in paragraph 2;

(b)Court or arbitration costs;

(c)Attorney's fees; and (d)Any other reasonable expenses.

c.Financial reporting. A trust agreement may be used to reduce any liability for reinsurance ceded to an unauthorized assuming insurer in financial statements required to be filed with the department in compliance with this chapter when established on or before the date of filing of the financial statement of the ceding insurer. Further, the reduction for the existence of an acceptable trust account may be up to the current fair market value of acceptable assets available to be withdrawn from the trust account at that time, but the reduction must be no greater than the specific obligations under the reinsurance agreement that the trust account was established to secure.

d.Existing agreements. Any trust agreement or underlying reinsurance agreement in existence prior to October 1, 1995, will continue to be acceptable until January 1, 1996, at which time the agreements will have to fully comply with this chapter for the trust agreement to be acceptable.

e.The failure of any trust agreement to specifically identify the beneficiary as defined in subsection 1 may not be construed to affect any actions or rights which the commissioner may take or possess pursuant to the provisions of the laws of this state.

History: Effective October 1, 1995; amended effective December 1, 2001; October 1, 2002; January 1, 2016. 45-03-07.1-08. Letters of credit qualified under section 45-03-07.1-06.

1.The letter of credit must be clean, irrevocable, unconditional, and issued or confirmed by a qualified United States financial institution as defined in subsection 1 of North Dakota Century Code section 26.1-31.2-03. The letter of credit must contain an issue date and expiration date and stipulate that the beneficiary need only draw a sight draft under the letter of credit and present it to obtain funds and that no other document need be presented. The letter of credit must also indicate that it is not subject to any condition or qualifications outside of the letter of credit. In addition, the letter of credit itself may not contain reference to any other agreements, documents, or entities, except as provided in subdivision a of subsection 9. As used in this

section, "beneficiary" means the domestic insurer for whose benefit the letter of credit has been established and any successor of the beneficiary by operation of law. If a court of law appoints a successor in interest to the named beneficiary, then the named beneficiary includes and is limited to the court-appointed domiciliary receiver, including conservator, rehabilitator, or liquidator.

2.The heading of the letter of credit may include a boxed section containing the name of the applicant and other appropriate notations to provide a reference for the letter of credit. The boxed section must be clearly marked to indicate that the information is for internal identification purposes only.

3.The letter of credit must contain a statement to the effect that the obligation of the qualified United States financial institution under the letter of credit is in no way contingent upon reimbursement with respect thereto.

4.The term of the letter of credit must be for at least one year and must contain an "evergreen clause" that prevents the expiration of the letter of credit without due notice from the issuer.

The "evergreen clause" must provide for a period of no less than thirty days' notice prior to the expiration date or nonrenewal.

5.The letter of credit must state whether it is subject to and governed by the laws of this state or the uniform customs and practice for documentary credits of the international chamber of commerce, publication 600 (UCP 600) or international standby practices of the international chamber of commerce publication 590 (ISP98), and all drafts drawn thereunder must be presentable at an office in the United States of a qualified United States financial institution.

6.If the letter of credit is made subject to the uniform customs and practice for documentary credits of the international chamber of commerce, publication 600 (UCP 600) or international standby practices of the international chamber of commerce publication 590 (ISP98), or any successor publication, then the letter of credit shall specifically address and provide for an extension of time to draw against the letter of credit in the event that one or more of the occurrences specified in article 36 of publication 600 or any other successor publication occur.

7.If the letter of credit is issued by a financial institution authorized to issue letters of credit, other than a qualified United States financial institution as described in subsection 1, then the following additional requirements must be met:

a.The issuing financial institution shall formally designate the confirming qualified United States financial institution as its agent for the receipt and payment of the drafts; and

b.The "evergreen clause" must provide for thirty days' notice prior to the expiration date for nonrenewal.

8.Reinsurance agreement provisions.

a.The reinsurance agreement in conjunction with which the letter of credit is obtained may contain provisions that:

(1)Require the assuming insurer to provide letters of credit to the ceding insurer and specify what they are to cover.

(2)Stipulate that the assuming insurer and ceding insurer agree that the letter of credit provided by the assuming insurer pursuant to the provisions of the reinsurance agreement may be drawn upon at any time, notwithstanding any other provisions in the agreement, and shall be utilized by the ceding insurer or its successors in interest only for one or more of the following reasons:

(a)To pay or reimburse the ceding insurer for: [1]The assuming insurer's share under the specific reinsurance agreement of premiums returned, but not yet recovered from the assuming insurers, to the owners of policies reinsured under the reinsurance agreement on account of cancellations of the policies; [2]The assuming insurer's share, under the specific reinsurance agreement, of surrenders and benefits or losses paid by the ceding insurer, but not yet recovered from the assuming insurers, under the terms and provisions of the policies reinsured under the reinsurance agreement; and [3]Any other amounts necessary to secure the credit or reduction from (b)If the letter of credit will expire without renewal or be reduced or replaced by a letter of credit for a reduced amount and if the assuming insurer's entire obligations under the specific reinsurance agreement remain unliquidated and undischarged ten days prior to the termination date, to withdraw amounts equal to the assuming insurer's share of the liabilities, to the extent that the liabilities have not yet been funded by the assuming insurer and exceed the amount of any reduced or replacement letter of credit, and deposit those amounts in a separate account in the name of the ceding insurer in a qualified United States financial institution apart from its general assets, in trust for the uses and purposes specified in paragraph 2 of subdivision a as may remain after withdrawal and for any period after the termination date.

(3)All of the provisions of this subdivision must be applied without diminution because of insolvency on the part of the ceding insurer or assuming insurer.

b.Nothing contained in subdivision a precludes the ceding insurer and assuming insurer from providing for:

(1)An interest payment, at a rate not in excess of the prime rate of interest, on the amounts held pursuant to paragraph 2 of subdivision a; or (2)The return of any amounts drawn down on the letters of credit in excess of the actual amounts required for the above or any amounts that are subsequently determined not to be due.

History: Effective October 1, 1995; amended effective December 1, 2001; October 1, 2002; January 1, 2016; April 1, 2017. 45-03-07.1-09. Other security.

A ceding insurer may take credit for unencumbered funds withheld by the ceding insurer in the United States subject to withdrawal solely by the ceding insurer and under its exclusive control.

History: Effective October 1, 1995. 45-03-07.1-10. Reinsurance contract.

Credit will not be granted, nor an asset or reduction from liability allowed, to a ceding insurer for reinsurance effected with assuming insurers meeting the requirements of section 45-03-07.1-01, 45-03-07.1-02, 45-03-07.1-03, 45-03-07.1-04, 45-03-07.1-04.1, 45-03-07.1-05, or 45-03-07.1-06 or otherwise in compliance with North Dakota Century Code section 26.1-31.2-01 after October 1, 1995, unless the reinsurance agreement:

1.Includes a proper insolvency clause, which stipulates that reinsurance is payable directly to the liquidator or successor without diminution regardless of the status of the ceding company, pursuant to North Dakota Century Code section 26.1-06.1-31; and

2.Includes a provision pursuant to North Dakota Century Code section 26.1-31.2-01 whereby the assuming insurer, if an unauthorized assuming insurer, has submitted to the jurisdiction of an alternative dispute resolution panel or court of competent jurisdiction within the United States, has agreed to comply with all requirements necessary to give the court or panel jurisdiction, has designated an agent upon whom service of process may be effected, and has agreed to abide by the final decision of the court or panel; and

3.Includes a proper reinsurance intermediary clause, if applicable, which stipulates that the credit risk for the intermediary is carried by the assuming insurer.

History: Effective October 1, 1995; amended effective October 1, 2002; January 1, 2016; April 1, 2022. 45-03-07.1-11. Contracts affected.

All new and renewal reinsurance transactions entered into after October 1, 1995, must conform to the requirements of the Act and this chapter if credit is to be given to the ceding insurer for such reinsurance.

History: Effective October 1, 1995.

FORM AR-1

CERTIFICATE OF ASSUMING INSURER

I, ___________________________, __________________________________

(name of officer)(title of officer) of __________________________________________, the assuming insurer under a reinsurance agreement(s) with one or more insurers domiciled in ______________________________________________________, hereby certify that _________________________________ ("Assuming Insurer"):

1.Submits to the jurisdiction of any court of competent jurisdiction in __________________________________________________________ for the adjudication of any issues arising out of the reinsurance agreement(s), agrees to comply with all requirements necessary to give such court jurisdiction, and will abide by the final decision of such court or any appellate court in the event of an appeal. Nothing in this paragraph constitutes or should be understood to constitute a waiver of Assuming Insurer's rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. This paragraph is not intended to conflict with or override the obligation of the parties to the reinsurance agreement(s) to arbitrate their disputes if such an obligation is created in the agreement(s).

2.Designates the Insurance Commissioner of ________________________ as its lawful attorney upon whom may be served any lawful process in any action, suit or proceeding arising out of the reinsurance agreement(s) instituted by or on behalf of the ceding insurer.

3.Submits to the authority of the Insurance Commissioner of _____________________________ to examine its books and records and agrees to bear the expense of any such examination.

4.Submits with this form a current list of insurers domiciled in __________________________ reinsured by Assuming Insurer and undertakes to submit additions to or deletions from the list to the Insurance Commissioner at least once per calendar quarter.

Dated: __________________________________________________________ BY: _____________________________ _____________________________ FORM CR-1 CERTIFICATE OF CERTIFIED REINSURER I, ___________________________, __________________________________ (name of officer)(title of officer) of __________________________________________, the assuming insurer under a reinsurance agreement with one or more insurers domiciled in ______________________________________________________, in order to be considered for Approval in this state, hereby certify that _________________________________ ("Assuming Insurer"):

1.Submits to the jurisdiction of any court of competent jurisdiction in __________________________________________________________ for the adjudication of any issues arising out of the reinsurance agreement, agrees to comply with all requirements necessary to give such court jurisdiction, and will abide by the final decision of such court or any appellate court in the event of an appeal. Nothing in this paragraph constitutes or should be understood to constitute a waiver of assuming insurer's rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. This paragraph is not intended to conflict with or override the obligation of the parties to the reinsurance agreement to arbitrate their disputes if such an obligation is created in the agreement.

2.Designates the Insurance Commissioner of ________________________ as its lawful attorney upon whom may be served any lawful process in any action, suit, or proceeding arising out of the reinsurance agreement instituted by or on behalf of the ceding insurer.

3.Agrees to provide security in an amount equal to 100% of liabilities attributable to U.S. ceding insurers if it resists enforcement of a final United States judgment or properly enforceable arbitration award.

4.Agrees to provide notification within 10 days of any regulatory actions taken against it, any change in the provisions of its domiciliary license or any change in its rating by an approved rating agency, including a statement describing such changes and the reasons therefor.

5.Agrees to annually file information comparable to relevant provisions of the National Association of Insurance Commissioners financial statement for use by insurance markets in accordance with paragraph 2 of subdivision g of subsection 2 of North Dakota Administrative Code Section 45-03-07.1-04.1.

6.Agrees to annually file the report of the independent auditor on the financial statements of the insurance enterprise.

7.Agrees to annually file audited financial statements, regulatory filings, and actuarial opinion in accordance with paragraph 4 of subdivision g of subsection 2 of North Dakota Administrative Code Section 45-03-07.1-04.1.

8.Agrees to annually file an updated list of all disputed and overdue reinsurance claims regarding reinsurance assumed from United States domestic ceding insurers.

9.Is in good standing as an insurer or reinsurer with the supervisor of its domiciliary jurisdiction.

Dated: __________________________________________________________ BY: _____________________________ _____________________________ Form CR-F-PART 1 Assumed Reinsurance as of December 31, Current Year (000 Omitted) 12345Reinsurance On9101112131415 Code or ID Number Premium Contingent Commissions Payable Receivable Premium Funds Held By or Deposited With Companies Letters of Credit Posted Amount of Assets Pledged or Compensating Balances to Secure Letters of Credit Amount of Assets Pledged or Collateral Held in Trust Paid Losses and Loss Adjustment Expenses Known Case Losses and LAECols. 6 + 7 ................................................................................................................................................................................................................................. 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................................................................................................................................................................................................................................. ................................................................................................................................................................................................................................. ................................................................................................................................................................................................................................. 9999999 Totals Form CR-F-PART 2 Ceded Reinsurance as of December 31, Current Year (000 Omitted) 123456Reinsurance Recoverable OnReinsurance Payable1819 Code or ID Number Contracts Ceding 75% or More of Direct Written Premiumds 7891011121314151617 Net Amount Recoverable From Reinsurers Cols. 15 - [16 + 17]

Funds Held by Company Treaties Paid Paid LAE Known Case Loss Known Case LAE IBNR Loss IBNR LAE Contingent Commissions Cols. 7 through 14 Totals Balances Payable Other Amounts Due to Reinsurers .................................................................................. .................................................................................................................................... .................................................................................. .................................................................................................................................... .................................................................................. .................................................................................................................................... .................................................................................. 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.................................................................................. .................................................................................................................................... .................................................................................. .................................................................................................................................... 9999999 Totals Form CR-S-PART 1-SECTION 1 Reinsurance Assumed Life Insurance, Annuities, Deposit Funds, and Other Liabilities Without Life or Disability Contingencies, and Related Benefits Listed by Reinsurance Company as of December 31, Current Year 123456789101112 or ID NumberEffective Date ReinsuredLocation Amount of In Force at End of YearReservePremiums Payable on Paid and Unpaid 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Form CR-S-PART 1-SECTION 2 Reinsurance Assumed Accident and Health Insurance Listed By Reinsured Company as of December 31, Current Year 123456789101112 or ID NumberEffective Date AssumedPremiums Reserve Liability Other Than For Payable on Paid and Unpaid ................................................................................................................................................................................................................................................ ................................................................................................................................................................................................................................................ ................................................................................................................................................................................................................................................ 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Form CR-S-PART 2 Reinsurance Recoverable on Paid and Unpaid Losses Listed by Reinsuring Company as of December 31, Current Year 1234567 Company Code or ID NumberEffective DateName of CompanyLocationPaid LossesUnpaid Losses ............................................................................................................................................................................................................................................................ ............................................................................................................................................................................................................................................................ ............................................................................................................................................................................................................................................................ 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Totals--Life, Annuity, and Accident and Health Form CR-S-PART 3-SECTION 1 Reinsurance Ceded Life Insurance, Annuities, Deposit Funds and Other Liabilities Without Life or Disability Contingencies, and Related Benefits Listed by Reinsuring Company as of December 31, Current Year 1234567Reserve Credit Taken10Outstanding Surplus Relief1314 Code or ID NumberEffective Date CompanyLocation Amount in Force at End of Year Funds Withheld CoinsuranceCurrent YearPrior YearCurrent YearPrior Year .............................................................................................................................................................................................................................................. .............................................................................................................................................................................................................................................. 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Form CR-S-PART 3-SECTION 2 Reinsurance Ceded Accident and Health Insurance by Reinsuring Company as of December 31, Current Year 123456789Outstanding Surplus Relief1213 or ID Number Effective Date CompanyLocationTypePremiums (Estimated)

Reserve Credit Taken Other Than for CoinsuranceCurrent YearPrior Year .......................................................................................................................................................................................................................................... .......................................................................................................................................................................................................................................... .......................................................................................................................................................................................................................................... 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FORM RJ-1

CERTIFICATE OF REINSURER DOMICILED IN RECIPROCAL JURISDICTION

I,______________________________________,__________________________________ of (name of officer) (title of officer) ______________________________________________, the assuming insurer under a reinsurance agreement with one or more insurers domiciled in ___________________________, be considered for approval in this state, hereby certify that ________________________________("Assuming Insurer"):

1.Submits to the jurisdiction of any court of competent jurisdiction in North Dakota for the adjudication of any issues arising out of the reinsurance agreement, agrees to comply with all requirements necessary to give such court jurisdiction, and will abide by the final decision of such court or any appellate court in the event of an appeal. The assuming insurer agrees that it will include such consent in each reinsurance agreement, if requested by the commissioner.

Nothing in this paragraph constitutes or should be understood to constitute a waiver of assuming insurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. This paragraph is not intended to conflict with or override the obligation of the parties to the reinsurance agreement to arbitrate their disputes if such an obligation is created in the agreement, except to the extent such agreements are unenforceable under applicable insolvency or delinquency laws.

2.Designates the Insurance Commissioner of North Dakota as its lawful attorney in and for upon whom may be served any lawful process in any action, suit or proceeding in this state arising out of the reinsurance agreement instituted by or on behalf of the ceding insurer.

3.Agrees to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer, that have been declared enforceable in the territory where the judgment was obtained.

4.Agrees to provide prompt written notice and explanation if it falls below the minimum capital and surplus or capital or surplus ratio, or if any regulatory action is taken against it for serious noncompliance with applicable law.

5.Confirms that it is not presently participating in any solvent scheme of arrangement, which involves insurers domiciled in [Name of State]. If the assuming insurer enters into such an arrangement, the assuming insurer agrees to notify the ceding insurer and the commissioner, and to provide 100% security to the ceding insurer consistent with the terms of the scheme.

6.Agrees that in each reinsurance agreement it will provide security in an amount equal to 100% of the assuming insurer's liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final U.S. judgment, that is enforceable under the law of the territory in which it was obtained, or a properly enforceable arbitration award whether obtained by the ceding insurer or by its resolution estate, if applicable.

7.Agrees to provide the documentation in accordance with subdivision e of subsection 3 of North Dakota Administrative Code section 45-03-07.1-04.2 if requested by the commissioner.

Dated:___________________________ ______________________________ BY: _______________________________ _______________________________

Chapter 45-03-07.2 Life and Health Reinsurance Agreements

N.D. Admin. Code 45-03-07.2 Life and Health Reinsurance Agreements

CHAPTER 45-03-07.2

LIFE AND HEALTH REINSURANCE AGREEMENTS

Section 45-03-07.2-01Scope 45-03-07.2-02Accounting Requirements 45-03-07.2-03Written Agreements 45-03-07.2-04Existing Agreements 45-03-07.2-01. Scope.

This chapter applies to all domestic life and accident and health insurers and to all other licensed life and accident and health insurers that are not subject to a substantially similar rule in their domiciliary state. This chapter applies to licensed property and casualty insurers with respect to their accident and health business. This chapter does not apply to assumption reinsurance, yearly renewable term reinsurance, or certain nonproportional reinsurance such as stop loss or catastrophe reinsurance. 45-03-07.2-02. Accounting requirements.

1.An insurer subject to this chapter, for reinsurance ceded, does not reduce any liability or establish any asset in any financial statement filed with the insurance department if, by the terms of the reinsurance agreement, in substance or effect, any of the following conditions exist:

a.Renewal expense allowances provided or to be provided to the ceding insurer by the reinsurer, in any accounting period, are not sufficient to cover anticipated allocable renewal expenses of the ceding insurer on the portion of the business reinsured, unless a liability is established for the present value of the shortfall, using assumptions equal to the applicable statutory reserve basis on the business reinsured. Those expenses include commissions, premium taxes, and direct expenses including billing, valuation, claims, and maintenance expected by the company at the time the business is reinsured.

b.The ceding insurer can be deprived of surplus or assets at the reinsurer's option or automatically upon the occurrence of some event, such as the insolvency of the ceding insurer, except that termination of the reinsurance agreement by the reinsurer for nonpayment of reinsurance premiums or other amounts due, such as modified coinsurance reserve adjustments, interest and adjustments on funds withheld, and tax reimbursements, may not be considered to be such a deprivation of surplus or assets.

c.The ceding insurer shall reimburse the reinsurer for negative experience under the reinsurance agreement, except that neither offsetting experience refunds against current and prior years' losses under the agreement nor payment by the ceding insurer of an amount equal to the current and prior years' losses under the agreement upon voluntary termination of in-force reinsurance by the ceding insurer must be considered a reimbursement to the reinsurer for negative experience. Voluntary termination does not include situations when termination occurs because of unreasonable provisions which allow the reinsurer to reduce its risk under the agreement. An example of such a provision is the right of the reinsurer to increase reinsurance premiums or risk and expense charges to excessive levels forcing the ceding company to prematurely terminate the reinsurance treaty.

d.At specific points in time scheduled in the agreement, the ceding insurer must terminate or automatically recapture all or part of the reinsurance ceded.

e.The reinsurance agreement involves the possible payment by the ceding insurer to the reinsurer of amounts other than from income realized from the reinsured policies. For example, it is improper for a ceding company to pay reinsurance premiums, or other fees or charges to a reinsurer which are greater than the direct premiums collected by the ceding company.

f.The treaty does not transfer all of the significant risk inherent in the business being reinsured. The following table identifies for a representative sampling of products or type of business the risks that are considered to be significant. For products not specifically included, the risks determined to be significant must be consistent with this table.

Risk categories:

(a)Morbidity.

(b)Mortality.

(c)Lapse. This is the risk that a policy will voluntarily terminate prior to the recoupment of a statutory surplus strain experienced at issue of the policy.

(d)Credit quality. This is the risk that invested assets supporting the reinsured business will decrease in value. The main hazards are that assets will default or that there will be a decrease in earning power. It excludes market value declines due to changes in interest rate.

(e)Reinvestment. This is the risk that interest rates will fall and funds reinvested, coupon payments or moneys received upon asset maturity or call, will, therefore, earn less than expected. If asset durations are less than liability durations, the mismatch will increase.

(f)Disintermediation. This is the risk that interest rates rise and policy loans and surrenders increase or maturing contracts do not renew at anticipated rates of renewal. If asset durations are greater than the liability durations, the mismatch will increase. Policyholders will move their funds into new products offering higher rates. The company may have to sell assets at a loss to provide for these withdrawals. + - Significant 0 - Insignificant RISK CATEGORY a b c d e f Health insurance - other than + 0 + 0 0 0 long-term care or long-term disability Health insurance - long-term + 0 + + + 0 care insurance and long-term disability insurance Immediate annuities 0 + 0 + + 0 Single premium deferred 0 0 + + + + annuities Flexible premium deferred 0 0 + + + + annuities Guaranteed interest 0 0 0 + + + contracts Other annuity deposit 0 0 + + + + business Single premium whole life 0 + + + + + Traditional non-par 0 + + + + + Traditional non - par term 0 + + 0 0 0 Traditional par permanent 0 + + + + + Traditional par term 0 + + 0 0 0 Adjustable premium 0 + + + + + Indeterminate premium 0 + + + + + Universal life flexible 0 + + + + + premium Universal life fixed 0 + + + + + premium Universal life fixed 0 + + + + + premium, dump-in premiums allowed g.(1)The credit quality, reinvestment, or disintermediation risk is significant for the business reinsured and the ceding company does not, other than for the classes of business excepted in paragraph 2, either transfer the underlying assets to the reinsurer or legally segregate the assets in a trust or escrow account or otherwise establish a mechanism satisfactory to the commissioner which legally segregates, by contract or contract provision, the underlying assets.

(2)Notwithstanding the requirements of paragraph 1, the assets supporting the reserves for the following classes of business and any classes of business which do not have a significant credit quality, reinvestment, or disintermediation risk may be held by the ceding company without segregation of the assets:

(a)Health insurance - Long-term care insurance and long-term disability insurance.

(b)Traditional non-par permanent.

(c)Traditional par permanent.

(d)Adjustable premium permanent.

(e)Indeterminate premium permanent.

(f)Universal life fixed premium, no dump-in premiums allowed.

The associated formula for determining the reserve interest rate adjustment must use a formula that reflects the ceding company's investment earnings and incorporates all realized and unrealized gains and losses reflected in the statutory statement. The following is an acceptable formula:

Rate = 2 (I + CG)

X + Y - I - CG

Where: I is the net investment income.

CG is capital gains less capital losses.

X is the current year cash and invested assets plus investment income due and accrued less borrowed money.

Y is the same as X but for the prior year.

h.Settlements are made less frequently than quarterly or payments due from the reinsurer are not made in cash within ninety days of the settlement date.

i.The ceding insurer is required to make representations or warranties not reasonably related to the business being reinsured.

j.The ceding insurer is required to make representations or warranties about future performance of the business being reinsured.

k.The reinsurance agreement is entered into for the principal purpose of producing significant surplus aid for the ceding insurer, typically on a temporary basis, while not transferring all of the significant risks inherent in the business reinsured and, in substance or effect, the expected potential liability to the ceding insurer remains basically unchanged.

2.Notwithstanding subsection 1, an insurer subject to this rule, with the prior approval of the commissioner, may take the reserve credit or establish the asset as the commissioner may deem consistent with North Dakota Century Code title 26.1 or the North Dakota Administrative Code, including actuarial interpretations or standards adopted by the insurance department. 3.a.Agreements entered into after October 1, 1995, which involve the reinsurance of business issued prior to October 1, 1995, along with any subsequent amendments thereto, shall be filed by the ceding company with the commissioner within thirty days from its date of execution. Each filing shall include data detailing the financial impact of the transaction. The ceding insurer's actuary who signs the financial statement actuarial opinion with respect to valuation of reserves shall consider this chapter and any applicable actuarial standards of practice when determining the proper credit in financial statements filed with this department. The actuary should maintain adequate documentation and be prepared upon request to describe the actuarial work performed for inclusion in the financial statements and to demonstrate that the work conforms to this

chapter.

b.Any increase in surplus net of federal income tax resulting from arrangements described in subdivision a must be identified separately on the insurer's statutory financial statement as a surplus item, aggregate write-ins for gains and losses in surplus in the capital and surplus account, page 4 of the annual statement, and recognition of the surplus increase as income shall be reflected on a net of tax basis in the "reinsurance ceded" line, page 4 of the annual statement as earnings emerge from the business reinsured. [For example, on the last day of calendar year N, company XYZ pays a $20 million initial commission and expense allowance to company ABC for reinsuring an existing block of business. Assuming a 34 percent tax rate, the net increase in surplus at inception is $13.2 million ($20 million - $6.8 million) which is reported on the "Aggregate write-ins for gains and losses in surplus" line in the Capital and Surplus account. $6.8 million (34 percent of $20 million) is reported as income on the "Commissions and expense allowances on reinsurance ceded" line of the Summary of Operations.

At the end of year N+1 the business has earned $4 million. ABC has paid $.5 million in profit and risk charges in arrears for the year and has received a $1 million experience refund. Company ABC's annual statement would report $1.65 million (66 percent of ($4 million - $1 million - $.5 million) up to a maximum of $13.2 million) on the "Commissions and expense allowance on reinsurance ceded" line of the Summary of Operations, and -$1.65 million on the "Aggregate write-ins for gains and losses in surplus" line of the Capital and Surplus account. The experience refund would be reported separately as a miscellaneous income item in the Summary of Operations.]

History: Effective October 1, 1995; amended effective December 1, 2001. 45-03-07.2-03. Written agreements.

1.A reinsurance agreement or amendment to any agreement may not be used to reduce any liability or to establish any asset in any financial statement filed with the department, unless the agreement, amendment, or a binding letter of intent has been duly executed by both parties no later than the as of date of the financial statement.

2.In the case of a letter of intent, a reinsurance agreement or an amendment to a reinsurance agreement must be executed within a reasonable period of time, not exceeding ninety days from the execution date of the letter of intent, in order for credit to be granted for the reinsurance ceded.

3.The reinsurance agreement must contain provisions that provide that:

a.The agreement constitutes the entire agreement between the parties with respect to the business being reinsured thereunder and that there are no understandings between the parties other than as expressed in the agreement; and

b.Any change or modification to the agreement is null and void unless made by amendment to the agreement and signed by both parties. 45-03-07.2-04. Existing agreements.

Insurers subject to this chapter shall reduce to zero by December 31, 1995, any reserve credits or assets established with respect to reinsurance agreements entered into prior to October 1, 1995, which, under this chapter would not be entitled to recognition of the reserve credits or assets; provided, however, that the reinsurance agreements must have been in compliance with laws or rules in existence immediately preceding October 1, 1995.

Chapter 45-03-08 Return of Premium

N.D. Admin. Code 45-03-08-01 Policies on which refund not required

An insurer may provide a refund of premium for life insurance policies, guaranteed renewable accident and health policies and crop/hail policies; however, such refund is not required and policy forms permitting no refund may be approved by the insurance department.

N.D. Admin. Code 45-03-08-02 Policy forms

The term "policy form" as used in subsection 3 of North Dakota Century Code section 26.1-24-03 includes manual rates, rating plans, and rating rules filed and approved under North Dakota Century Code section 26.1-25-04. Such rates, plans, and rules may constitute the basis for an exception to the refund provision set out in subsection 3 of North Dakota Century Code section 26.1-24-03.

N.D. Admin. Code 45-03-08-03 Premiums on all other policies

Premiums on all other policies are refundable in accordance with subsection 3 of North Dakota Century Code section 26.1-24-03 and the policy form filed with the insurance department.

Chapter 45-03-09 Admission of Foreign Insurance Companies

N.D. Admin. Code 45-03-09-01 Admission of foreign insurance companies - Conditions

In determining whether a foreign insurance company should be permitted to transact business in this state, and specifically in applying North Dakota Century Code section 26.1-02-02 and subsection 2 of section 26.1-11-01, the commissioner of insurance may require any foreign insurance company applying for a certificate of authority to provide the commissioner of insurance with a business plan for this state and an operational history of the company; last examination report; insurance regulatory information system reports; future business plans; operational history; loss experience; the kinds and nature of risks insured and to be insured; the financial condition and credit history of the company and its ownership; biographicals of its officers and board of directors; its proposed method of operation and its affiliations; its investments; any contracts leading to contingent liability or agreements in respect to guarantee and surety other than insurance; and the ratio of total annual premium and net investment income to the following: commission expenses, general insurance expenses, policy benefits paid and required, and policy reserve increases. If after reviewing information supplied by the insurance company and the commissioner is satisfied that the company is in a condition such that the expanded operation of the company in this state or its operations outside this state will not create a condition which might be hazardous to its policyholders, creditors, or the general public and all other legal requirements are met, the commissioner shall issue the company a certificate of authority to transact business in this state of the kind or kinds of business to be specified. As part of this review process, the commissioner may require that a foreign company seeking admission to do business in this state demonstrate that it has actively operated satisfactorily and according to the law of the state where it is domiciled for a period of at least one year.

History

• History: Effective March 1, 1988.
• General Authority: NDCC 28-32-02
• Law Implemented: NDCC 26.1-02-02, 26.1-11-01

Chapter 45-03-10 Unfair Sex Discrimination

N.D. Admin. Code 45-03-10-01 Purpose

The purpose of this rule is to eliminate the act of denying benefits or coverage on the basis of sex or marital status in the terms and conditions of insurance contracts and in the underwriting criteria of insurance carriers.

N.D. Admin. Code 45-03-10-02 Definitions

1."Contracts" means any insurance policy, certificate, plan, or binder, including any rider or endorsement thereto offered by an insurer.

2."Insurer" means any insurance company, association, reciprocal or interinsurance exchange, nonprofit hospital plan, nonprofit professional health service plan, health maintenance organization, fraternal benefit society, or beneficial association.

N.D. Admin. Code 45-03-10-03 Applicability and scope

This rule applies to all contracts delivered or issued for delivery in this state or renewed by the payment of premium or otherwise by an insurer on or after July 1, 1988, and to all existing group contracts which are substantially amended on or after July 1, 1988.

N.D. Admin. Code 45-03-10-04 Availability requirements

Availability of any insurance contract may not be denied to an insured or prospective insured on the

basis of sex or marital status of the insured or prospective insured. The amount of benefits payable, or any term, conditions, or type of coverage may not be restricted, modified, excluded, or reduced on the

basis of the sex or marital status of the insured or prospective insured except to the extent the amount of benefits, term, conditions, or type of coverage vary as a result of the application of rate differentials permitted under the North Dakota insurance code. However, nothing in this section prohibits an insurer from taking marital status into account for purposes of defining persons eligible for dependent benefits, except with regard to legally recognized minor children. Specific examples of practices prohibited by this section include, but are not limited to, the following:

1.Denying coverage to females gainfully employed at home, employed part time, or employed by relatives when coverage is offered to males similarly employed.

2.Denying policy riders to females when the riders are available to males.

3.Denying maternity benefits to insureds or prospective insureds purchasing an individual contract when comparable family coverage contracts offer maternity benefits.

4.Denying, under group contracts, dependent coverage to husbands of female employees, when dependent coverage is available to wives of male employees.

5.Denying disability income contracts to employed women when coverage is offered to men similarly employed.

6.Treating complications of pregnancy differently from any other illness or sickness under the contract.

7.Restricting, reducing modifying, or excluding benefits relating to coverage involving the genital organs of only one sex.

8.Offering lower maximum monthly benefits to women than to men who are in the same classification under a disability income contract.

9.Offering more restrictive benefit periods and more restrictive definitions of disability to women than to men in the same classifications under a disability income contract.

10.Establishing different conditions by sex under which the policyholder may exercise benefit options contained in the contract.

11.Limiting the amount of coverage an insured or prospective insured may purchase based upon the insured's or prospective insured's marital status unless such limitation is for the purpose of defining persons eligible for dependents' benefits.

History

• History: Effective July 1, 1988; amended effective January 1, 2008.

Chapter 45-03-11 Notice, Consent, and Disclosure for Testing of Blood or Other Body Fluids

N.D. Admin. Code 45-03-11-01 Definitions

1."Informed consent form" means a printed document on which an individual may signify that individual's informed consent for testing for the presence of an antibody to the human immunodeficiency virus or authorize the disclosure of any test results obtained.

2."Informed consent for testing or disclosure" means written consent on an informed consent form by an individual to the administration of a test to that individual for the presence of an antibody to the immunodeficiency virus or to the disclosure to a specified person of the results of a test administered to the consenting individual.

N.D. Admin. Code 45-03-11-02 Requirement for informed consent and disclosure

Any insurance company, health maintenance organization, fraternal benefit society, benevolent society, or nonprofit health service corporation conducting business in this state which requests its applicants for insurance coverage to provide a body fluid sample for the purpose of testing and analysis which may include testing to determine the presence of antibodies or antigens to the human immunodeficiency virus (HIV), also known as the AIDS virus, as part of its underwriting process, shall, prior to any such testing, obtain from the applicant the applicant's informed consent for testing or disclosure of the test results as provided under section 45-03-11-04.

N.D. Admin. Code 45-03-11-03 Prescribed form of informed consent

Any insurance company, health maintenance organization, fraternal benefit society, benevolent society, or nonprofit health service corporation which subjects an applicant for insurance coverage to a test for the presence of an antibody or antigen to the human immunodeficiency virus under section 45-03-11-02 shall provide the applicant with an informed consent form and shall obtain the applicant's signature on the form. The form must contain at least the following language printed in type no smaller than ten point, and must take substantially the following form:

EXAMINER ______________ INSURER ______________

ADDRESS ______________ ADDRESS ______________

NOTICE AND CONSENT FOR BLOOD (OR OTHER BODY FLUID)

TESTING AND DISCLOSURE WHICH MAY INCLUDE AIDS VIRUS (HIV)

ANTIBODY/ANTIGEN TESTING

To determine your insurability, the Insurer named above (the Insurer) has requested that you provide a sample of a body fluid for testing and analysis. All tests will be performed by a licensed laboratory.

Tests may be performed to determine the presence of antibodies or antigens to the Human Immunodeficiency Virus (HIV), also known as the AIDS virus. Other tests which may be performed include determinations of blood cholesterol and related lipids (fats) and screening for liver or kidney disorders, diabetes, and immune disorders.

CONFIDENTIALITY

All test results will be treated confidentially. The results of tests will be reported by the laboratory to the Insurer identified on this form. When necessary for business reasons in connection with insurance you have or have applied for with the Insurer, the Insurer may disclose test results to others such as its affiliates, reinsurers, employees, or contractors to whom disclosure is reasonably necessary in the ordinary course of business to carry out the purpose for which that disclosure is authorized. If the Insurer is a member of the Medical Information Bureau (MIB, Inc.), and if the test results for HIV antibodies/antigens are other than normal, the Insurer will report to the MIB, Inc., a generic code which signifies only a nonspecific test abnormality. If your HIV test is normal, no report will be made about it to the MIB, Inc. Other test results may be reported to the MIB, Inc., in a more specific manner. The organizations described in this paragraph may maintain the test results in a file or data bank. There may be other disclosure of test results as permitted by law or authorized by you.

NOTIFICATION OF RESULTS

If your HIV test results are normal, no routine notification will be sent to you. If you are a resident of North Dakota and your HIV test is other than normal, the Insurer will disclose test results to the North Dakota Department of Health as required by law. If the HIV test results are other than normal, the North Dakota Department of Health will contact you.

SIGNIFICANCE OF POSITIVE TEST RESULTS AND AFFECT ON

APPLICATION FOR INSURANCE

Positive HIV antibody/antigen test results do not mean that you have AIDS, but that you are at significantly increased risk of developing AIDS or AIDS-related conditions. Federal authorities say that persons who are HIV antibody/antigen positive should be considered infected with the AIDS virus and capable of infecting others.

Positive HIV antibody or antigen test results or other significant blood abnormalities will adversely affect your application for insurance. This means that your application may be declined, that an increased premium may be charged, or that other policy changes may be necessary.

I have read and I understand this Notice of Consent for Blood (or Other Body Fluid) Testing and Disclosure which may include HIV antibody/antigen testing. I voluntarily consent to the testing of my blood or other body fluids and the disclosure of the test results as described above.

I understand that I have the right to request and receive a copy of this authorization. A photocopy of this form will be as valid as the original. _________________________________________ ____________________ Proposed Insured (print) Date of Birth _____________________________ _________ ____________________ Signature of Proposed Insured Date State of Residence or Parent/Guardian

N.D. Admin. Code 45-03-11-04 Informed consent - Legal requirements

The form prescribed in section 45-03-11-03 is not in lieu of any legal requirements applicable to persons drawing or testing blood for human immunodeficiency virus to obtain informed consent for testing or disclosure.

N.D. Admin. Code 45-03-11-05 Notification of test results

If the results of testing subject to this chapter are other than normal, the insurer shall notify the North Dakota state department of health. The written notification must indicate the specific nature of the abnormal test results and must also indicate all persons to whom the test results have been disclosed.

The notice must also inform the department of the specific tests and procedures used to determine the proposed insured as an other than normal test result.

Chapter 45-03-12 Investment, Capital, and Surplus Requirements

N.D. Admin. Code 45-03-12-01 Capital and surplus requirements

In the reasonable exercising of the commissioner's discretion, additional capital and surplus may be required based upon the type, volume, and nature of insurance business transacted.

History

• History: Effective January 1, 1992.
• Law Implemented: NDCC 26.1-02-02, 26.1-06.1-01, 26.1-10-05

N.D. Admin. Code 45-03-12-02 Investments

All companies doing business in the state shall have an investment portfolio which is diversified as to type and issue and which maintains liquidity.

History

• History: Effective January 1, 1992.
• Law Implemented: NDCC 26.1-02-02, 26.1-05-19, 26.1-06.1-01, 26.1-10-06

N.D. Admin. Code 45-03-12-03 Admitted assets

Repealed effective December 1, 2001.

N.D. Admin. Code 45-03-12-04 Securities lending, repurchase, reverse repurchase, and dollar roll transactions

An insurer may enter into a securities lending, repurchase, reverse repurchase, and dollar roll transaction with business entities, subject to the following requirements:

1.The insurer's board of directors shall adopt a written plan for engaging in investment practices consistent with the requirements of the written plan in section 45-03-12-05 and which specifies guidelines and objectives to be followed, such as:

a.A description of how cash received will be invested or used for general corporation purposes of the insurer;

b.Operational procedures to manage interest rate risk, counterparty default risk, the conditions under which proceeds from reverse repurchase transactions may be used in the ordinary course of business, and the use of acceptable collateral in a manner that reflects the liquidity needs of the transaction; and

c.The extent to which the insurer may engage in these transactions.

The board shall review and assess the insurer's technical investment and administrative capabilities and expertise before adopting a written plan concerning an investment practice.

2.For purposes of this section, acceptable collateral means:

a.As to securities lending transactions and for the purpose of calculating counterparty exposure amount, cash, cash equivalents, letters of credit, direct obligations of, or securities that are fully guaranteed as to principal and interest by, the government of the United States or any agency of the United States, or by the federal national mortgage association or the federal home loan mortgage corporation;

b.As to repurchase transactions, cash, cash equivalents, and direct obligations of, or securities that are fully guaranteed as to principal and interest by, the government of the United States or an agency of the United States, or by the federal national mortgage association or the federal home loan mortgage corporation; and

c.As to reverse repurchase transactions, cash and cash equivalents.

3.The insurer shall enter into a written agreement for all transactions authorized in this section other than dollar roll transactions. The written agreement shall require that each transaction terminate no more than one year from its inception or upon the earlier demand of the insurer.

The agreement shall be with the business entity counterparty, but for securities lending transactions, the agreement may be with an agent acting on behalf of the insurer, if the agent is a primary dealer in United States government securities recognized by the federal reserve bank of New York and if the agreement:

a.Requires the agent to enter into separate agreements with each counterparty that are consistent with the requirements of this section; and

b.Prohibits securities lending transactions under the agreement with the agent or its affiliates.

4.Cash received in a transaction under this section shall be invested in accordance with North Dakota Century Code section 26.1-05-19 and in a manner that recognizes the liquidity needs of the transaction or used by the insurer for its general corporate purposes. For so long as the transaction remains outstanding, the insurer, its agent, or custodian shall maintain, as to acceptable collateral received in a transaction under this section, either physically or through the book entry systems of the federal reserve, depository trust company, or other securities depositories approved by the commissioner:

a.Possession of the acceptable collateral;

b.A perfected security interest in the acceptable collateral; or

c.In the case of a jurisdiction outside of the United States, title to, or rights of a secured creditor to, the acceptable collateral.

5.For purposes of calculations made to determine compliance with this subsection, no effect will be given to the insurer's future obligation to resell securities, in the case of a repurchase transaction, or to repurchase securities, in the case of a reverse repurchase transaction. An insurer shall not enter into a transaction under this section if, as a result of and after giving effect to the transaction:

a.The aggregate amount of securities then loaned, sold to, or purchased from any one business entity counterparty under this section would exceed five percent of its admitted assets. In calculating the amount sold to or purchased from a business entity counterparty under repurchase or reverse repurchase transactions, effect may be given to netting provisions under a master written agreement; or

b.The aggregate amount of all securities then loaned, sold to, or purchased from all business entities under this section would exceed forty percent of its admitted assets.

6.In a dollar roll transaction, the insurer shall receive cash in an amount at least equal to the market value of the securities transferred by the insurer in the transaction as of the transaction date.

7.The amount of collateral required for securities lending, repurchase, and reverse repurchase transactions is the amount required pursuant to the provision of the national association of insurance commissioners accounting practices and procedures manual described in section 45-03-15-01.

8.Securities acquired by an insurer in a repurchase transaction shall not be sold in a reverse repurchase transaction, loaned in a securities lending transaction, or otherwise pledged.

History

• History: Effective December 1, 2001; amended effective October 1, 2002.
• Law Implemented: NDCC 26.1-05-19

N.D. Admin. Code 45-03-12-05 Authorization of investments by the board of directors

An investment is deemed to be authorized by an insurer's board of directors prior to its acquisition if the investment is acquired and held subject to the following requirements:

1.The board of directors shall adopt a written plan for acquiring and holding investments and for engaging in investment practices that specifies guidelines as to the quality, maturity, and diversification of investments and other specifications including investment strategies intended to assure that the investments and investment practices are appropriate for the business conducted by the insurer, its liquidity needs, and its capital and surplus. The board shall review and assess the insurer's technical investment and administrative capabilities and expertise before adopting a written plan concerning an investment strategy or investment practice.

2.For purposes of this section, investment strategy means the techniques and methods used by an insurer to meet its investment objectives, such as active bond portfolio management, passive bond portfolio management, interest rate anticipation, growth investing, and value investing.

3.Investments shall be acquired and held under the supervision and direction of the board of directors and the board shall evidence by formal resolution, at least annually, that it has determined whether all investments have been made in accordance with delegations, standards, limitations, and investment objectives prescribed by the board or a committee of the board charged with the responsibility to direct its investments.

4.On no less than a quarterly basis, the board of directors or committee of the board of directors shall:

a.Receive and review a summary report on the insurer's investment portfolio, its investment activities, and investment practices engaged in under delegated authority, in order to determine whether the investment activity of the insurer is consistent with its written plan; and

b.Review and revise, as appropriate, the written plan.

5.In discharging its duties under this section, the board of directors shall require that records of any authorizations or approvals, other documentation as the board may require, and reports of any action taken under authority delegated under the written plan be made available on a regular basis to the board of directors.

History

• History: Effective December 1, 2001.
• Law Implemented: NDCC 26.1-05-18

Chapter 45-03-13 Regulation of and Standards for Companies Deemed to be in Hazardous Financial Condition

N.D. Admin. Code 45-03-13-01 Standards

The following standards, either singly or a combination of two or more, may be considered by the commissioner to determine whether the continued operation of any insurer transacting an insurance business in this state might be deemed to be hazardous to the policyholders, creditors, or the general public. The commissioner may consider:

1.Adverse findings reported in financial condition and market conduct examination reports, audit reports, actuarial opinions, reports, or summaries.

2.The national association of insurance commissioners insurance regulatory information system and its other financial analysis solvency tools and reports.

3.Whether the insurer has made adequate provision according to presently accepted actuarial standards of practice for the anticipated cashflows required by the contractual obligations and related expenses of the insurer when considered in light of the assets held by the insurer with respect to the reserves and related actuarial items, including the investment earnings on the assets, and considerations anticipated to be received and retained under the policies and contracts.

4.The ability of an assuming reinsurer to perform and whether the insurer's reinsurance program provides sufficient protection for the insurer's remaining surplus after taking into account the insurer's cashflow and the classes of business written as well as the financial condition of the assuming reinsurer.

5.The insurer's operating loss in the last twelve-month period or any shorter period of time, including, net capital gain or loss, change in nonadmitted assets, and cash dividends paid to shareholders, is greater than fifty percent of such insurer's remaining surplus as regards policyholders in excess of the minimum required.

6.Whether the insurer’s operating loss in the last twelve-month period or any shorter period of time, excluding net capital gains, is greater than twenty percent of the insurer’s remaining surplus as regards policyholders in excess of the minimum required.

7.Whether a reinsurer, obligor, or any entity within the insurer's insurance holding company system is insolvent, threatened with insolvency, or delinquent in payment of its monetary or other obligation and which may affect the solvency of the insurer.

8.Contingent liabilities, pledges, or guaranties which either individually or collectively involve a total amount which in the opinion of the commissioner may affect the solvency of the insurer.

9.Whether any "controlling person" of an insurer is delinquent in the transmitting to, or payment of, net premiums to such insurer.

10.The age and collectibility of receivables.

11.Whether the management of an insurer, including officers, directors, or any other person who directly or indirectly controls the operation of such insurer, fails to possess and demonstrate the competence, fitness, and reputation deemed necessary to serve the insurer in such position.

12.Whether management of an insurer has failed to respond to inquiries relative to the condition of the insurer or has furnished false and misleading information concerning an inquiry.

13.Whether the insurer has failed to meet financial and holding company filing requirements in the absence of a reason satisfactory to the commissioner.

14.Whether management of an insurer either has filed any false or misleading sworn financial statement, or has released a false or misleading financial statement to lending institutions or to the general public, or has made a false or misleading entry, or has omitted an entry of material amount in the books of the insurer.

15.Whether the insurer has grown so rapidly and to such an extent that it lacks adequate financial and administrative capacity to meet its obligations in a timely manner.

16.Whether the insurer has experienced or will experience in the foreseeable future cashflow or liquidity problems, or both.

17.Whether management has established reserves that do not comply with minimum standards established by state insurance laws, rules, statutory accounting standards, sound actuarial principles, and standards of practice.

18.Whether management persistently engages in material under reserving that results in adverse development.

19.Whether transactions among affiliates, subsidiaries, or controlling persons for which the insurer receives assets or capital gains or both do not provide sufficient value, liquidity, or diversity to assure the insurer’s ability to meet its outstanding obligations as they mature.

20.Any other finding determined by the commissioner to be hazardous to the insurer’s policyholders, creditors, or the general public.

History

• History: Effective January 1, 1992; amended effective April 1, 2010.
• General Authority: NDCC 28-32
• Law Implemented: NDCC 26.1-01-03.1, 26.1-05-04, 26.1-05-32, 26.1-06.1-01(3)(a), 26.1-06.1-11

N.D. Admin. Code 45-03-13-02 Commissioner's authority

1.For the purposes of making a determination of an insurer's financial condition under this

chapter, the commissioner may:

a.Disregard any credit or amount receivable resulting from transactions with a reinsurer which is insolvent, impaired, or otherwise subject to a delinquency proceeding.

b.Make appropriate adjustments, including disallowance, to asset values attributable to investments in or transactions with parents, subsidiaries, or affiliates consistent with the national association of insurance commissioners accounting policies and procedures manual, state laws, and rules.

c.Refuse to recognize the stated value of accounts receivable if the ability to collect receivables is highly speculative in view of the age of the account or the financial condition of the debtor.

d.Increase the insurer's liability in an amount equal to any contingent liability, pledge, or guarantee not otherwise included if there is a substantial risk that the insurer will be called upon to meet the obligation undertaken within the next twelve-month period.

2.If the commissioner determines that the continued operation of the insurer licensed to transact business in this state may be hazardous to its policyholders, creditors, or the general public, then the commissioner may issue an order requiring the insurer to:

a.Reduce the total amount of present and potential liability for policy benefits by reinsurance.

b.Reduce, suspend, or limit the volume of business being accepted or renewed.

c.Reduce general insurance and commission expenses by specified methods.

d.Increase the insurer's capital and surplus.

e.Suspend or limit the declaration and payment of dividend by an insurer to its stockholders or to its policyholders.

f.File reports in a form acceptable to the commissioner concerning the market value of an insurer's assets.

g.Limit or withdraw from certain investments or discontinue certain investment practices to the extent the commissioner deems necessary.

h.Document the adequacy of premium rates in relation to the risks insured.

i.File, in addition to regular annual statements, interim financial reports on the form adopted by the national association of insurance commissioners or on such format as promulgated by the commissioner.

j.Correct corporate governance practice deficiencies and adopt and use governance practices acceptable to the commissioner.

k.Provide a business plan to the commissioner in order to continue to transact business in the state.

l.Notwithstanding any other provision of law limiting the frequency or amount of premium rate adjustment, adjust rates for any non-life insurance product written by the insurer that the commissioner considers necessary to improve the financial condition of the insurer.

If the insurer is a foreign insurer, the commissioner's order may be limited to the extent provided by statute.

3.Any insurer subject to an order under subsection 2 may request a hearing to review that order.

The notice of hearing must be served upon the insurer pursuant to North Dakota Century Code chapter 28-32. The notice of hearing must state the time and place of hearing, and the conduct, condition, or ground upon which the commissioner based the order. Unless mutually agreed between the commissioner and the insurer, the hearing must occur not less than ten days nor more than forty-five days after notice is served and must be in the place to be designated by the commissioner. The commissioner shall hold all hearings under this subsection privately, unless the insurer requests a public hearing, in which case the hearing must be public.

History

• History: Effective January 1, 1992; amended effective April 1, 2010.
• General Authority: NDCC 28-32-02
• Law Implemented: NDCC 26.1-01-03.1, 26.1-05-04, 26.1-05-32, 26.1-06.1-01(3)(a), 26.1-06.1-11(1)

Chapter 45-03-14 Administrative Supervision Model

N.D. Admin. Code 45-03-14-01 Definitions

As used in this chapter:

1."Consent" means agreement to administrative supervision by the insurer.

2."Exceeded its powers" means the following conditions:

a.The insurer has refused to permit examination of its books, papers, accounts, records, or affairs by the commissioner, commissioner's deputies, employees, or duly commissioned examiners.

b.A domestic insurer has unlawfully removed from this state books, papers, accounts, or records necessary for an examination of the insurer.

c.The insurer has failed to promptly comply with the applicable financial reporting statutes or rules and departmental requests relating thereto.

d.The insurer has neglected or refused to observe an order of the commissioner to make good, within the time prescribed by law, any prohibited deficiency in its capital, capital stock, or surplus.

e.The insurer is continuing to transact insurance or write business after its license has been revoked or suspended by the commissioner.

f.The insurer, by contract or otherwise, has unlawfully or has in violation of an order of the commissioner or has without first having obtained written approval of the commissioner if approval is required by law.

(1)Totally reinsured its entire outstanding business; or (2)Merged or consolidated substantially its entire property or business with another insurer.

g.The insurer engaged in any transaction in which it is not authorized to engage under the laws of this state.

h.The insurer refused to comply with a lawful order of the commissioner.

3."Insurer" means and includes every person engaged as indemnitor, surety or contractor in the business of entering into contracts of insurance or of annuities as limited to any insurer doing business, or has transacted insurance in this state, and against whom claims arising from that transaction may exist now or in the future.

History

• Law Implemented: NDCC 26.1-01-03.1, 26.1-05-04, 26.1-05-32, 26.1-06.1-01(3)(a), 26.1-06.1-11

N.D. Admin. Code 45-03-14-02 Applicability

The provisions of this chapter apply to:

1.All domestic insurers.

2.Any other insurer doing business in this state whose state of domicile has asked the commissioner to apply the provisions of this chapter as regards such insurer.

History

• Law Implemented: NDCC 26.1-01-03.1, 26.1-05-04, 26.1-05-32, 26.1-06.1-01(3)(a), 26.1-06.1-11

N.D. Admin. Code 45-03-14-03 Notice to comply with written requirements of commissioner - Noncompliance - Administrative supervision

1.An insurer may be subject to administrative supervision by the commissioner if upon examination or at any other time it appears in the commissioner's discretion that:

a.The insurer's condition renders the continuance of its business hazardous to the public or to its insureds;

b.The insurer has exceeded its powers granted under its certificate of authority and applicable law;

c.The insurer has failed to comply with the applicable provisions of the insurance code;

d.The business of the insurer is being conducted fraudulently; or

e.The insurer gives its consent.

2.If the commissioner determines that the conditions set forth in subsection 1 exist, the commissioner shall:

a.Notify the insurer of the commissioner's determination;

b.Furnish to the insurer a written list of the requirements to abate this determination; and

c.Notify the insurer that it is under the supervision of the commissioner and that the commissioner is applying and effectuating the provisions of the chapter. Such action by the commissioner is subject to review pursuant to applicable state administrative procedures under North Dakota Century Code chapter 28-32.

3.If placed under administrative supervision, the insurer shall have sixty days, or another period of time as designated by the commissioner, to comply with the requirements of the commissioner subject to the provisions of this chapter.

4.If it is determined after notice and hearing that the conditions giving rise to the supervision still exist at the end of the supervision period specified above, the commissioner may extend such period.

5.If it is determined that none of the conditions giving rise to the supervision exist, the commissioner shall release the insurer from supervision.

History

• Law Implemented: NDCC 26.1-01-03.1, 26.1-05-04, 26.1-05-32, 26.1-06.1-01(3)(a), 26.1-06.1-11

N.D. Admin. Code 45-03-14-04 Confidentiality of certain proceedings and records

1.Notwithstanding any other provision of law and except as set forth herein; proceedings, hearings, notices, correspondence, reports, records, and other information in the possession of the commissioner or the department relating to the supervision of any insurer are confidential except as provided herein.

2.The personnel of the department shall have access to these proceedings, hearings, notices, correspondence, reports, records, or information as permitted by the commissioner.

3.The commissioner may open the proceedings or hearings or disclose the notices, correspondence, reports, records, or information to a department, agency, or instrumentality of this or another state of the United States if the commissioner determines that the disclosure is necessary or proper for the enforcement of the laws of this or another state of the United States.

4.The commissioner may open the proceedings or hearings or make public the notices, correspondence, reports, records, or other information if the commissioner deems that it is in the best interest of the public or in the best interest of the insurer, its insureds, creditors, or the general public.

5.This section does not apply to hearings, notices, correspondence, reports, records, or other information obtained upon the appointment of a receiver for the insurer by a court of competent jurisdiction.

History

• Law Implemented: NDCC 26.1-01-03.1, 26.1-05-04, 26.1-05-32, 26.1-06.1-01(3)(a), 26.1-06.1-11

N.D. Admin. Code 45-03-14-05 Prohibited acts during period of supervision

During the period of supervision, the commissioner or the commissioner's designated appointee shall serve as the administrative supervisor. The commissioner may provide that the insurer may not do any of the following things during the period of supervision, without the prior approval of commissioner or the commissioner's appointed supervisor:

1.Dispose of, convey, or encumber any of its assets or its business in force;

2.Withdraw any of its bank accounts;

3.Lend any of its funds;

4.Invest any of its funds;

5.Transfer any of its property;

6.Incur any debt, obligation, or liability;

7.Merge or consolidate with another company;

8.Approve new premiums or renew any policies;

9.Enter into any new reinsurance contract or treaty;

10.Terminate, surrender, forfeit, convert, or lapse any insurance policy, certificate, or contract, except for nonpayment of premiums due;

11.Release, pay, or refund premium deposits, accrued cash or loan values, unearned premiums, or other reserves on any insurance policy, certificate, or contract;

12.Make any material change in management; or

13.Increase salaries and benefits of officers or directors or the preferential payment of bonuses, dividends, or other payments deemed preferential.

History

• Law Implemented: NDCC 26.1-01-03.1, 26.1-05-04, 26.1-05-32, 26.1-06.1-01(3)(a), 26.1-06.1-11

N.D. Admin. Code 45-03-14-06 Review and stay of action

During the period of supervision the insurer may contest an action taken or proposed to be taken by the supervisor specifying the manner wherein the action being complained of would not result in improving the condition of the insurer. Denial of the insurer's request upon reconsideration entitles the insurer to request a proceeding under North Dakota Century Code chapter 28-32.

History

• Law Implemented: NDCC 26.1-01-03.1, 26.1-05-04, 26.1-05-32, 26.1-06.1-01(3)(a), 26.1-06.1-11

N.D. Admin. Code 45-03-14-07 Administrative election of proceedings

Nothing contained in this chapter precludes the commissioner from initiating judicial proceedings to place an insurer in conservation, rehabilitation, or liquidation proceedings or other delinquency proceedings, however designated under the laws of this state, regardless of whether the commissioner has previously initiated administrative supervision proceedings under this chapter against the insurer.

History

• Law Implemented: NDCC 26.1-01-03.1, 26.1-05-04, 26.1-05-32, 26.1-06.1-01(3)(a), 26.1-06.1-11

N.D. Admin. Code 45-03-14-08 Other laws - Conflicts - Meetings between the commissioner and the supervisor

Notwithstanding any other provision of law, the commissioner may meet with a supervisor appointed under this chapter and with the attorney or other representative of the supervisor, without the presence of any other person, at the time of any proceeding or during the pendency of any proceeding held under authority of this chapter to carry out the commissioner's duties under this chapter or for the supervisor to carry out the supervisor's duties under this chapter.

History

• Law Implemented: NDCC 26.1-01-03.1, 26.1-05-04, 26.1-05-32, 26.1-06.1-01(3)(a), 26.1-06.1-11

N.D. Admin. Code 45-03-14-09 Immunity

There is no liability on the part of, and no cause of action of any nature may arise against, the insurance commissioner or the department or its employees or agents for any action taken by them in the performance of their powers and duties under this chapter.

History

• Law Implemented: NDCC 26.1-01-03.1, 26.1-05-04, 26.1-05-32, 26.1-06.1-01(3)(a), 26.1-06.1-11

Chapter 45-03-15 Accounting Practices and Procedures

N.D. Admin. Code 45-03-15-01 Accounting practices and procedures

Every insurance company doing business in this state shall file with the commissioner, pursuant to North Dakota Century Code section 26.1-03-07, the appropriate national association of insurance commissioners annual statement blank, prepared in accordance with the national association of insurance commissioners instructions handbook and following the accounting procedures and practices prescribed by the March 2023 version of the national association of insurance commissioners accounting practices and procedures manual for property and casualty and life and health insurance.

October 1, 2019; January 1, 2024.

History

• History: Effective January 1, 1992; amended effective January 1, 2000; December 1, 2001; March 1, 2004; January 1, 2006; January 1, 2008; April 1, 2010; July 1, 2012; April 1, 2014; January 1, 2016;
• Law Implemented: NDCC 26.1-02-26, 26.1-03-07, 26.1-03-11.1

N.D. Admin. Code 45-03-15-02 Reporting of financial information

Every insurance company licensed to do business in this state shall transmit to the commissioner and to the national association of insurance commissioners its most recent financial statements compiled on a quarterly basis, within forty-five days following the calendar quarters ending March thirty-first, June thirtieth, and September thirtieth. The financial statements must be prepared and filed in the form prescribed by the commissioner and in accordance with the national association of insurance commissioners instructions handbook and following the accounting procedures and practices prescribed by the March 2023 version of the national association of insurance commissioners accounting practices and procedures manual for property and casualty and life and health insurance.

The commissioner may exempt any company or category or class of companies from the filing requirement.

October 1, 2019; January 1, 2024.

History

• History: Effective January 1, 1992; amended effective January 1, 2000; December 1, 2001; March 1, 2004; January 1, 2006; January 1, 2008; April 1, 2010; July 1, 2012; April 1, 2014; January 1, 2016;
• Law Implemented: NDCC 26.1-02-03, 26.1-02-26, 26.1-03-07, 26.1-03-11.1

N.D. Admin. Code 45-03-15-03 Annual statement filing

Every insurance company operating in more than one state shall file all annual and quarterly statements with the national association of insurance commissioners, through media acceptable to the commissioner, unless the commissioner makes a specific finding that an insurer, or type of insurer, is exempt from this filing requirement.

History

• History: Effective October 1, 1995; amended effective April 1, 1996; December 1, 1998.
• Law Implemented: NDCC 26.1-03-07, 26.1-03-11.1

N.D. Admin. Code 45-03-15-04 Acceptable media for annual statement filing

The filing of annual and quarterly statements with the national association of insurance commissioners and every insurance company subject to the requirements of section 45-03-15-03 shall use the national association of insurance commissioners internet filing website in making the filings required by that section.

History

• History: Effective December 1, 1998; amended effective October 1, 2019.
• Law Implemented: NDCC 26.1-03-07, 26.1-03-11.1

Chapter 45-03-16 Valuation of Securities and Other Investments

N.D. Admin. Code 45-03-16 Valuation of Securities and Other Investments

CHAPTER 45-03-16

VALUATION OF SECURITIES AND OTHER INVESTMENTS [Superseded by North Dakota Century Code Section 26.1-03-02.1 effective July 1, 1993]

Chapter 45-03-17 Examinations [Repealed]

N.D. Admin. Code 45-03-17 Examinations [Repealed]

CHAPTER 45-03-17

EXAMINATIONS [Repealed effective April 1, 1996]

Chapter 45-03-18 Fire District Assignment

N.D. Admin. Code 45-03-18-01 Application or renewal form to contain fire districtnumber

1.Applications for fire, allied, homeowner's multiple peril, farmowner's multiple peril, commercial multiple peril, or crop hail insurance coverage for property in this state must identify by fire district number the fire district in which the property is located.

2.A company using an in-house system (electronic or manual) in its application process to identify and record the fire district number based upon the property location and value, complies with this section if the data is accurate, accessible, and readily verifiable.

3.Companies that use agents for reporting this information may use form NDFD300 (8/93)

(appendix A).

4.For renewal business or changes not requiring a new application:

a.Companies using agents to report the information may use form NDFD300 (8/93)

(appendix A).

b.Companies using an in-house system may do so subject to the requirements of subsection 2.

5.In lieu of form NDFD300 (8/93) (appendix A), the company may amend its application or use a substantially similar supplemental form of the company's own design.

History

• History: Effective August 9, 1993; amended effective April 1, 1996.

N.D. Admin. Code 45-03-18-02 Applications involving multiple fire districts

In accordance with section 45-03-18-01, a company shall apportion the property premium attributable to each fire district on the basis of the location of the property and the insured value of the property in each district.

N.D. Admin. Code 45-03-18-03 Atlas of fire district maps

The insurance department, in conjunction with the state fire marshal and the firemen's association, shall prepare an atlas of county maps showing the fire districts in each county. The atlas must certify the fire districts as of July first of each year. A copy of the atlas must be sent and billed to each company subject to section 45-03-18-01 which is licensed in this state. The charge for the atlas is twenty dollars per copy. Companies must be notified each year of the changes to the atlas and companies are responsible for distribution of the atlas, if necessary.

N.D. Admin. Code 45-03-18-04 Company reporting of premium information

The insurance department is responsible for the collection, verification, and accuracy of data reported to the insurance department along with its annual statement. The company may file the appropriate information by computer diskette subject to the specifications set forth by the insurance department. If the company is unable to comply with these specifications, the company may use the fire district reporting form and file manually. A copy of page fourteen of the annual statement must be submitted with the diskette and fire district reporting form for purposes of cross-checking data.

N.D. Admin. Code 45-03-18-05 Reporting of property premiums only

In the lines of homeowner's multiple peril, farmowner's multiple peril, and commercial multiple peril insurance companies shall subtract any liability premium from the total premium to arrive at the property premium. For package policies containing numerous subcoverages with minor premiums attributable to each, those premiums must be included in the total amount reported.

Chapter 45-03-19 Actuarial Opinion and Memorandum Regulation

N.D. Admin. Code 45-03-19-01 Scope

This chapter applies to all life insurance companies and fraternal benefit societies doing business in this state and to all life insurance companies and fraternal benefit societies that are authorized to reinsure life insurance, annuities, or accident and health insurance business in this state. This chapter shall be applied in a manner that allows the appointed actuary to utilize the actuary's professional judgment in performing the asset analysis and developing the actuarial opinion and supporting memoranda, consistent with relevant actuarial standards of practice. However, the commissioner shall have the authority to specify specific methods of actuarial analysis and actuarial assumptions when, in the commissioner's judgment, these specifications are necessary for an acceptable opinion to be rendered relative to the adequacy of reserves and related items. This chapter is applicable to all annual statements filed with the office of the commissioner on or after October 1, 1995. A statement of opinion on the adequacy of the reserves and related actuarial items based on an asset adequacy analysis in accordance with section 45-03-19-06, and a supporting memorandum in accordance with section 45-03-19-07, are required each year.

N.D. Admin. Code 45-03-19-02 Definitions

1."Actuarial standards board" means the board established by the American academy of actuaries to develop and promulgate standards of actuarial practice.

2."Annual statement" means the statement required by North Dakota Century Code section 26.1-03-07 to be filed annually by the company with the office of the commissioner.

3."Appointed actuary" means an individual who is appointed or retained in accordance with subsection 3 of section 45-03-19-03 to provide the actuarial opinion and supporting memorandum as required by North Dakota Century Code section 26.1-35-01.1.

4."Asset adequacy analysis" means an analysis that meets the standards and other requirements referred to in subsection 4 of section 45-03-19-03.

5."Company" means a life insurance company, fraternal benefit society, or reinsurer subject to the provisions of this chapter.

6."Qualified actuary" means an individual who meets the requirements in subsection 2 of section 45-03-19-03.

N.D. Admin. Code 45-03-19-03 General requirements

1.Submission of statement of actuarial opinion.

a.There must be included on or attached to page one of the annual statement for each year beginning 1995 the statement of an appointed actuary, entitled "statement of actuarial opinion", setting forth an opinion relating to reserves and related actuarial items held in support of policies and contracts, in accordance with section 45-03-19-06.

b.Upon written request by the company, the commissioner may grant an extension of the date for submission of the statement of actuarial opinion.

2.A "qualified actuary" is an individual who:

a.Is a member in good standing of the American academy of actuaries;

b.Is qualified to sign statements of actuarial opinion for life and health insurance company annual statements in accordance with the American academy of actuaries qualification standards for actuaries signing the statements;

c.Is familiar with the valuation requirements applicable to life and health insurance companies;

d.Has not been found by the commissioner, or if so found, has subsequently been reinstated as a qualified actuary, following appropriate notice and hearing to have:

(1)Violated any provision of, or any obligation imposed by, the insurance law or other law in the course of the actuary's dealings as a qualified actuary;

(2)Been found guilty of fraudulent or dishonest practices;

(3)Demonstrated incompetency, lack of cooperation, or untrustworthiness to act as a qualified actuary;

(4)Submitted to the commissioner during the past five years, pursuant to this chapter, an actuarial opinion or memorandum that the commissioner rejected because it did not meet the provisions of this chapter, including standards set by the actuarial standards board; or (5)Resigned or been removed as an actuary within the past five years as a result of acts or omissions indicated in any adverse report on examination or as a result of failure to adhere to generally acceptable actuarial standards; and

e.Has not failed to notify the commissioner of any action taken by any commissioner of any other state similar to that under subdivision d.

3.An "appointed actuary" is a qualified actuary who is appointed or retained to prepare the statement of actuarial opinion required by this chapter, either directly by or by the authority of the board of directors through an executive officer of the company other than the qualified actuary. The company shall give the commissioner timely written notice of the name and title and, in the case of a consulting actuary, the name of the firm and manner of appointment or retention of each person appointed or retained by the company as an appointed actuary and shall state in the notice that the person meets the requirements set forth in subsection 2. Once notice is furnished, no further notice is required with respect to that person, provided that the company gives the commissioner timely written notice in the event the actuary ceases to be appointed or retained as an appointed actuary or to meet the requirements set forth in subsection 2. If any person appointed or retained as an appointed actuary replaces a previously appointed actuary, the notice shall so state and give the reasons for replacement.

4.The asset adequacy analysis required by this chapter:

a.Must conform to the standards of practice as promulgated from time to time by the actuarial standards board and on any additional standards under this chapter, which standards are to form the basis of the statement of actuarial opinion in accordance with this chapter; and

b.Must be based on methods of analysis as are deemed appropriate for the purposes by the actuarial standards board.

5.Liabilities to be covered.

a.Under authority of North Dakota Century Code section 26.1-35-01.1, the statement of actuarial opinion shall apply to all in-force business on the statement date, whether directly issued or assumed, regardless of when or where issued, for example, reserves of exhibits 8, 9, and 10, and claim liabilities in exhibit 11, part 1 and equivalent items in the separate account statement or statements.

b.If the appointed actuary determines as the result of asset adequacy analysis that a reserve should be held in addition to the aggregate reserve held by the company and calculated in accordance with methods set forth in North Dakota Century Code sections 26.1-35-02, 26.1-35-05, 26.1-35-06, 26.1-35-09, and 26.1-35-10, the company shall establish the additional reserve.

c.Additional reserves established under subdivision b and deemed not necessary in subsequent years may be released. Any amounts released must be disclosed in the actuarial opinion for the applicable year. The release of the reserves would not be deemed an adoption of a lower standard of valuation.

N.D. Admin. Code 45-03-19-04 Required opinions

N.D. Admin. Code 45-03-19-05 Statement of actuarial opinion not including an asset adequacy analysis

N.D. Admin. Code 45-03-19-06 Statement of actuarial opinion based on an asset adequacy analysis

1.The statement of actuarial opinion submitted in accordance with this section must consist of:

a.A paragraph identifying the appointed actuary and the appointed actuary's qualifications (see subdivision a of subsection 2).

b.A scope paragraph identifying the subjects on which an opinion is to be expressed and describing the scope of the appointed actuary's work, including a tabulation delineating the reserves and related actuarial items that have been analyzed for asset adequacy and the method of analysis (see subdivision b of subsection 2), and identifying the reserves and related actuarial items covered by the opinion that have not been so analyzed.

c.A reliance paragraph describing those areas, if any, where the appointed actuary has deferred to other experts in developing data, procedures or assumptions, for example, anticipated cash flows from currently owned assets, including variation in cash flows according to economic scenarios (see subdivision c of subsection 2), supported by a statement of each expert in the form prescribed by subsection 5.

d.An opinion paragraph expressing the appointed actuary's opinion with respect to the adequacy of the supporting assets to mature the liabilities (see subdivision f of subsection 2).

e.One or more additional paragraphs will be needed in individual company cases as follows:

(1)If the appointed actuary considers it necessary to state a qualification of the appointed actuary's opinion.

(2)If the appointed actuary must disclose an inconsistency in the method of analysis or

basis of asset allocation used at the prior opinion date with that used for this opinion.

(3)If the appointed actuary must disclose whether additional reserves of the prior opinion date are released as of this opinion date, and the extent of the release.

(4)If the appointed actuary chooses to add a paragraph briefly describing the assumptions that form the basis for the actuarial opinion.

2.The following paragraphs are to be included in the statement of actuarial opinion in accordance with this section. Language is that which in typical circumstances should be included in a statement of actuarial opinion. The language may be modified as needed to meet the circumstances of a particular case, but the appointed actuary should use language that clearly expresses the appointed actuary's professional judgment. However, in any event the opinion must retain all pertinent aspects of the language provided in this section.

a.The opening paragraph should generally indicate the appointed actuary's relationship to the company and the qualifications to sign the opinion. For a company actuary, the opening paragraph of the actuarial opinion should include a statement such as:

"I, [name], am [title] of [insurance company name] and a member of the American Academy of Actuaries. I was appointed by, or by the authority of, the Board of Directors of said insurer to render this opinion as stated in the letter to the commissioner dated [insert date]. I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies."

For a consulting actuary, the opening paragraph should include a statement such as:

"I, [name], a member of the American Academy of actuaries, am associated with the firm of [name of consulting firm]. I have been appointed by, or by the authority of, the Board of Directors of [name of company] to render this opinion as stated in the letter to the commissioner dated [insert date]. I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies."

b.The scope paragraph should include a statement such as:

"I have examined the actuarial assumptions and actuarial methods used in determining reserves and related actuarial items listed below, as shown in the annual statement of the company, as prepared for filing with state regulatory officials, as of December 31, 20[ ]. Tabulated below are those reserves and related actuarial items which have been subjected to asset adequacy analysis.

Asset Adequacy Tested Amounts - Reserves and Liabilities Statement Item Formula Reserves (1)

Additional Actuarial Reserves (a)

(2)

Analysis Method (b)

Other Amount (3)

Total Amount (1)+(2)+(3) (4)

Exhibit 8 ALife Insurance BAnnuities CSupplementary Contracts Involving Life Contingencies DAccidental Death Benefit EDisability - Active FDisability - Disabled GMiscellaneous Total (Exhibit 8, Item 1, Page 3)

Exhibit 9 AActive Life Reserve BClaim Reserve Total (Exhibit 9, Item 2, Page 3)

Exhibit 10 Premium and Other Deposit Funds (Column 5, Guaranteed Interest Contracts (Column 2, Other (Column 6, Line 14)

Supplemental Contracts and Annuities Certain (Column 3, Line 14)

Dividend Accumulations or Refunds (Column 4, Total Exhibit 10 (Column 1, Exhibit 11, Part 1 1Life (Page 3, Line 4.1) 2Health (Page 3, Line 4.2)

Total Exhibit 11, Part 1 Separate Accounts (Page 3 of the Annual Statement of the Separate Accounts, Lines 1, 2, 3.1, 3.2, 3.3)

TOTAL RESERVES

IMR (General Account, Page _______, Line _______)

(Separate Accounts, Page _______, Line _______)

AVR (Page _______, Line _______)(c)

Net Deferred and Uncollected Premium Notes:

(a)The additional actuarial reserves are the reserves established under subdivision b of subsection 5 of section 45-03-19-03.

(b)The appointed actuary should indicate the method of analysis, determined in accordance with the standards for asset adequacy analysis referred to in subsection 4 of section 45-03-19-03, by means of symbols that should be defined in footnotes to the table.

(c)Allocated amount of asset valuation reserve (AVR).

c.If the appointed actuary has relied on other experts to develop certain portions of the analysis, the reliance paragraph should include a statement such as the following:

"I have relied on [name], [title] for [e.g., "anticipated cash flows from currently owned assets, including variations in cash flows according to economic scenarios" or "certain critical aspects of the analysis performed in conjunction with forming my opinion"], as certified in the attached statement. I have reviewed the information relied upon for reasonableness."

Such a statement of reliance on other experts should be accompanied by a statement by each of the experts of the form prescribed by subsection 5.

d.If the appointed actuary has examined the underlying asset and liability records, the reliance paragraph should include a statement such as:

"My examination included such review of the actuarial assumptions and actuarial methods and of the underlying basic asset and liability records and such tests of the actuarial calculations as I considered necessary. I also reconciled the underlying basic asset and liability records to [exhibits and schedules listed as applicable] of the company's current annual statement."

e.If the appointed actuary has not examined the underlying records, but has relied upon data [e.g., listings and summaries of policies in force or asset records] prepared by the company, the reliance paragraph should include a statement such as:

"In forming my opinion on [specify types of reserves] I relied upon data prepared by [name and title of company officer certifying in-force records or other data] as certified in the attached statements. I evaluated that data for reasonableness and consistency. I also reconciled that data to [exhibits and schedules to be listed as applicable] of the company's current annual statement. In other respects, my examination included review of the actuarial assumptions and actuarial methods used and tests of the calculations I considered necessary."

The section must be accompanied by a statement by each person relied upon of the form prescribed by subsection 5.

f.The opinion paragraph should include a statement such as:

"In my opinion the reserves and related actuarial values concerning the statement items identified above:

1.Are computed in accordance with presently accepted actuarial standards consistently applied and are fairly stated, in accordance with sound actuarial principles;

2.Are based on actuarial assumptions that produce reserves at least as great as those called for in any contract provision as to reserve basis and method, and are in accordance with all other contract provisions;

3.Meet the requirements of the Insurance Law and chapter of the State of [state of domicile] and are at least as great as the minimum aggregate amounts required by the state in which this statement is filed;

4.Are computed on the basis of assumptions consistent with those used in computing the corresponding items in the annual statement of the preceding yearend (with any exceptions noted below); and

5.Include provision for all actuarial reserves and related statement items which ought to be established.

The reserves and related items, when considered in light of the assets held by the company with respect to the reserves and related actuarial items including, but not limited to, the investment earnings on the assets, and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision, according to presently accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the company. (At the discretion of the commissioner, this language may be omitted for an opinion filed on behalf of a company doing business only in this state and in no other state.)

The actuarial methods, considerations, and analyses used in forming my opinion conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis of this statement of opinion.

This opinion is updated annually as required by statute. To the best of my knowledge, there have been no material changes from the applicable date of the annual statement to the date of the rendering of this opinion which should be considered in reviewing this opinion. or The following material changes which occurred between the date of the statement for which this opinion is applicable and the date of this opinion should be considered in reviewing this opinion: (Describe the change or changes.)

The impact of unanticipated events subsequent to the date of this opinion is beyond the scope of this opinion. The analysis of asset adequacy portion of this opinion should be viewed recognizing that the company's future experience may not follow all the assumptions used in the analysis.

Signature of Appointed Actuary Address of Appointed Actuary Telephone Number of Appointed Actuary Date"

3.The adoption for new issues or new claims or other new liabilities of an actuarial assumption that differs from a corresponding assumption used for prior new issues or new claims or other new liabilities is not a change in actuarial assumptions within the meaning of this section.

4.If the appointed actuary is unable to form an opinion, then the appointed actuary shall refuse to issue a statement of actuarial opinion. If the appointed actuary's opinion is adverse or qualified, then the appointed actuary shall issue an adverse or qualified actuarial opinion explicitly stating the reasons for the opinion. This statement should follow the scope paragraph and precede the opinion paragraph.

5.If the appointed actuary relies on the certification of others on matters concerning the accuracy or completeness of any data underlying the actuarial opinion, or the appropriateness of any other information used by the appointed actuary in forming the actuarial opinion, the actuarial opinion should so indicate the persons the actuary is relying upon and a precise identification of the items subject to reliance. In addition, the persons on whom the appointed actuary relies shall provide a certification that precisely identifies the items on which the person is providing information and a statement as to the accuracy, completeness, or reasonableness, as applicable, of the items. This certification shall include the signature, title, company, address, and telephone number of the person rendering the certification, as well as the date on which it is signed.

6.Alternate option.

a.North Dakota Century Code section 26.1-35-01.1 gives the commissioner broad authority to accept the valuation of a foreign insurer when that valuation meets the requirements applicable to a company domiciled in this state in the aggregate. As an alternative to the requirements of paragraph 3 of subdivision f of subsection 2, the commissioner may make one or more of the following additional approaches available to the opining actuary:

(1)A statement that the reserves "meet the requirements of the insurance laws and regulations of the State of [state of domicile] and the formal written standards and conditions of this state for filing an opinion based on the law of the state of domicile." If the commissioner chooses to allow this alternative, a formal written list of standards and conditions shall be made available. If a company chooses to use this alternative, the standards and conditions in effect on July first of a calendar year shall apply to statements for that calendar year, and they shall remain in effect until they are revised or revoked. If no list is available, this alternative is not available.

(2)A statement that the reserves "meet the requirements of the insurance laws and regulations of the State of [state of domicile] and I have verified that the company's request to file an opinion based on the law of the state of domicile has been approved and that any conditions required by the commissioner for approval of that request have been met." If the commissioner chooses to allow this alternative, a formal written statement of such allowance shall be issued no later than March thirty-first of the year it is first effective. It shall remain valid until rescinded or modified by the commissioner. The rescission or modifications shall be issued no later than March thirty-first of the year they are first effective. Subsequent to that statement being issued, if a company chooses to use this alternative, the company shall file a request to do so, along with justification for its use, no later than April thirtieth of the year of the opinion to be filed. The request shall be deemed approved on October first of that year if the commissioner has not denied the request by that date.

(3)A statement that the reserves "meet the requirements of the insurance laws and regulations of the State of [state of domicile] and I have submitted the required comparison as specified by this state."

(a)If the commissioner chooses to allow this alternative, a formal written list of products (to be added to the table in paragraph b) for which the required comparison shall be provided will be published. If a company chooses to use this alternative, the list in effect on July first of a calendar year shall apply to statements for that calendar year, and it shall remain in effect until it is revised or revoked. If no list is available, this alternative is not available.

(b)If a company desires to use this alternative, the appointed actuary shall provide a comparison of the gross nationwide reserves held to the gross nationwide reserves that would be held under national association of insurance commissioners codification standards. Gross nationwide reserves are the total reserves calculated for the total company in-force business directly sold and assumed, indifferent to the state in which the risk resides, without reduction for reinsurance ceded. The information provided shall be at least:

(1)

Product Type (2)

Death Benefit or Account Value (3)

Reserves Held (4)

Codification Reserves (5)

Codification Standard (c)The information listed shall include all products identified by either the state of filing or any other states subscribing to this alternative.

(d)If there is no codification standard for the type of product or risk in force or if the codification standard does not directly address the type of product or risk in force, the appointed actuary shall provide detailed disclosure of the specific method and assumptions used in determining the reserves held.

(e)The comparison provided by the company is to be kept confidential to the same extent and under the same conditions as the actuarial memorandum.

b.Notwithstanding the above, the commissioner may reject an opinion based on the laws and regulations of the state of domicile and require an opinion based on the laws of this state. If a company is unable to provide the opinion within sixty days of the request or such other period of time determined by the commissioner after consultation with the company, the commissioner may contract an independent actuary at the company's expense to prepare and file the opinion.

N.D. Admin. Code 45-03-19-07 Description of actuarial memorandum including an asset adequacy analysis and regulatory asset adequacy issues summary

1.General.

a.In accordance with North Dakota Century Code section 26.1-35-01.1, the appointed actuary shall prepare a memorandum to the company describing the analysis done in support of the opinion regarding the reserves. The memorandum must be made available for examination by the commissioner upon the commissioner's request but must be returned to the company after the examination and may not be considered a record of the insurance department or subject to automatic filing with the commissioner.

b.In preparing the memorandum, the appointed actuary may rely on, and include as a part of the appointed actuary's own memorandum, memoranda prepared and signed by other actuaries who are qualified within the meaning of subsection 2 of section 45-03-19-03, with respect to the areas covered in the memoranda, and so state in their memoranda.

c.If the commissioner requests a memorandum and no memorandum exists or if the commissioner finds that the analysis described in the memorandum fails to meet the standards of the actuarial standards board or the standards and requirements of this

chapter, the commissioner may designate a qualified actuary to review the opinion and prepare the supporting memorandum as is required for review. The reasonable and necessary expense of the independent review must be paid by the company but must be directed and controlled by the commissioner.

d.The reviewing actuary shall have the same status as an examiner for purposes of obtaining data from the company and the workpapers and documentation of the reviewing actuary shall be retained by the commissioner, provided, however, that any information provided by the company to the reviewing actuary and included in the workpapers must be considered as material provided by the company to the commissioner and must be kept confidential to the same extent as is prescribed by law with respect to other material provided by the company to the commissioner pursuant to the statute governing this chapter. The reviewing actuary may not be an employee of a consulting firm, or have been personally involved, with the preparation of any prior memorandum or opinion for the insurer pursuant to this chapter for any one of the current year or the preceding three years.

e.In accordance with North Dakota Century Code section 26.1-35-01.1, the appointed actuary shall prepare a regulatory asset adequacy issues summary, the contents of which are specified in subsection 3. The regulatory asset adequacy issues summary will be submitted no later than March fifteenth of the year following the year for which a statement of actuarial opinion based on asset adequacy is required. The regulatory asset adequacy issues summary is to be kept confidential to the same extent and under the same conditions as the actuarial memorandum.

2.When an actuarial opinion is provided, the memorandum must demonstrate that the analysis has been done in accordance with the standards for asset adequacy referred to in subsection 4 of section 45-03-19-03 and any additional standards under this chapter. It must specify:

a.For reserves:

(1)Product descriptions, including market description, underwriting, and other aspects of a risk profile and the specific risks the appointed actuary deems significant;

(2)Source of liability in force;

(3)Reserve method and basis;

(4)Investment reserves;

(5)Reinsurance arrangements;

(6)Identification of any explicit or implied guarantees made by the general account in support of benefits provided through a separate account or under a separate account policy or contract and the methods used by the appointed actuary to provide for the guarantees in the asset adequacy analysis; and (7)Documentation of assumptions to test reserves for the following:

(a)Lapse rates (both base and excess);

(b)Interest crediting rate strategy;

(c)Mortality;

(d)Policyholder dividend strategy;

(e)Competitor or market interest rate;

(f)Annuitization rates;

(g)Commissions and expenses; and (h)Morbidity.

The documentation of the assumptions shall be such that an actuary reviewing the actuarial memorandum could form a conclusion as to the reasonableness of the assumptions.

b.For assets:

(1)Portfolio descriptions, including a risk profile disclosing the quality, distribution, and types of assets;

(2)Investment and disinvestment assumptions;

(3)Source of asset data;

(4)Asset valuation bases; and (5)Documentation of assumptions made for:

(a)Default costs;

(b)Bond call function;

(c)Mortgage prepayment function;

(d)Determining market value for assets sold due to disinvestment strategy; and (e)Determining yield on assets acquired through the investment strategy.

The documentation of the assumptions shall be such that an actuary reviewing the actuarial memorandum could form a conclusion as to the reasonableness of the assumptions.

c.For the analysis basis:

(1)Methodology;

(2)Rationale for inclusion or exclusion of different blocks of business and how pertinent risks were analyzed;

(3)Rationale for degree of rigor in analyzing different blocks of business (include in the rationale the level of "materiality" that was used in determining how rigorously to analyze different blocks of business);

(4)Criteria for determining asset adequacy (include in the criteria the precise basis for determining if assets are adequate to cover reserves under "moderately adverse conditions" or other conditions as specified in relevant actuarial standards of practice); and (5)Whether the impact of federal income taxes was considered and the method of treating reinsurance in the asset adequacy analysis;

d.Summary of material changes in methods, procedures, or assumptions from prior year's asset adequacy analysis;

e.Summary of results; and

f.Conclusions.

3.Details of the regulatory asset adequacy issues summary.

a.The regulatory asset adequacy issues summary shall include:

(1)Descriptions of the scenarios tested, including whether those scenarios are stochastic or deterministic, and the sensitivity testing done relative to those scenarios. If negative ending surplus results under certain tests in the aggregate, the actuary should describe those tests and the amount of additional reserve as of the valuation date which, if held, would eliminate the negative aggregate surplus values. Ending surplus values shall be determined by either extending the projection period until the in-force and associated assets and liabilities at the end of the projection period are immaterial or by adjusting the surplus amount at the end of the projection period by an amount that appropriately estimates the value that can reasonably be expected to arise from the assets and liabilities remaining in force;

(2)The extent to which the appointed actuary uses assumptions in the asset adequacy analysis that are materially different than the assumptions used in the previous asset adequacy analysis;

(3)The amount of reserves and the identity of the product lines that had been subjected to asset adequacy analysis in the prior opinion but were not subject to analysis for the current opinion;

(4)Comments on any interim results that may be of significant concern to the appointed actuary;

(5)The methods used by the actuary to recognize the impact of reinsurance on the company's cash flows, including both assets and liabilities, under each of the scenarios tested; and (6)Whether the actuary has been satisfied that all options, whether explicit or embedded, in any asset or liability (including those affecting cash flows embedded in fixed income securities) and equity-like features in any investments have been appropriately considered in the asset adequacy analysis.

b.The regulatory asset adequacy issues summary shall contain the name of the company for which the regulatory asset adequacy issues summary is being supplied and shall be signed and dated by the appointed actuary rendering the actuarial opinion.

4.The memorandum must include a statement:

"Actuarial methods, considerations, and analyses used in the preparation of this memorandum conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis for this memorandum."

5.An appropriate allocation of assets in the amount of the interest maintenance reserve, whether positive or negative, must be used in any asset adequacy analysis. Analysis of risks regarding asset default may include an appropriate allocation of assets supporting the asset valuation reserve; these asset valuation reserve assets may not be applied for any other risks with respect to reserve adequacy. Analysis of these and other risks may include assets supporting other mandatory or voluntary reserves available to the extent not used for risk analysis and reserve support. The amount of the assets used for the asset valuation reserve must be disclosed in the table of reserves and liabilities of the opinion and in the memorandum. The method used for selecting particular assets or allocated portions of assets must be disclosed in the memorandum.

6.The appointed actuary shall retain on file, for at least seven years, sufficient documentation so that it will be possible to determine the procedures followed, the analyses performed, the bases for assumptions, and the results obtained.

N.D. Admin. Code 45-03-19-08 Additional considerations for analysis

Chapter 45-03-19.1 Property and Casualty Actuarial Opinion

N.D. Admin. Code 45-03-19.1 Property and Casualty Actuarial Opinion

CHAPTER 45-03-19.1

PROPERTY AND CASUALTY ACTUARIAL OPINION

Section 45-03-19.1-01Statement of Actuarial Opinion and Supporting Documentation 45-03-19.1-01. Statement of actuarial opinion and supporting documentation.

1.Statement of actuarial opinion. Every property and casualty insurance company doing business in this state, unless otherwise exempted by the domiciliary commissioner, shall annually submit to the North Dakota insurance commissioner the opinion of an appointed actuary entitled "statement of actuarial opinion". This opinion shall be filed in accordance with the appropriate national association of insurance commissioners property and casualty annual statement instructions.

2.Actuarial opinion summary.

a.Every property and casualty insurance company domiciled in this state that is required to submit a statement of actuarial opinion shall annually submit to the North Dakota insurance commissioner an actuarial opinion summary, written by the company’s appointed actuary. This actuarial opinion summary shall be filed in accordance with the appropriate national association of insurance commissioners property and casualty annual statement instructions and shall be considered as a document supporting the actuarial opinion required in subsection 1.

b.A company licensed but not domiciled in this state shall provide the actuarial opinion summary upon request.

3.Actuarial report and workpapers.

a.An actuarial report and underlying workpapers as required by the appropriate national association of insurance commissioners property and casualty annual statement instructions shall be prepared to support each actuarial opinion.

b.The insurance company must provide a supporting actuarial report or workpapers at the request of the commissioner.

History: Effective April 1, 2010.

General Authority: NDCC 26.1-03-11.1

Law Implemented: NDCC 26.1-03-11.1

Chapter 45-03-20 Annual Financial Reporting Model Regulation

N.D. Admin. Code 45-03-20-01 Purpose and scope

1.The purpose of this chapter is to improve the North Dakota insurance department's surveillance of the financial condition of insurers by requiring:

a.An annual audit of financial statements reporting the financial position and the results of operations of insurers by independent certified public accountants;

b.Communication of internal control-related matters noted in an audit; and

c.Management's report of internal control over financial reporting.

2.Every insurer, as defined in section 45-03-20-02, is subject to this chapter, except a company, so defined, which is licensed only in North Dakota. The commissioner may exempt an insurer, or type of insurer, from the requirements of this chapter. Insurers having direct premiums written in this state of less than one million dollars in any calendar year and less than one thousand policyholders or certificate holders of direct written policies nationwide at the end of the calendar year are exempt from this chapter for that year, unless the commissioner makes a specific finding that compliance is necessary for the commissioner to carry out statutory responsibilities, except that insurers having assumed premiums pursuant to contracts or treaties of reinsurance of one million dollars or more will not be so exempt.

3.Foreign or alien insurers filing the audited financial report in another state, pursuant to the other state's requirement for filing of audited financial reports which has been found by the commissioner to be substantially similar to the requirements herein, are exempt from sections 45-03-20-03 through 45-03-20-12 if:

a.A copy of the audited financial report, communication of internal control-related matters noted in an audit, and the accountant's letter of qualifications which are filed with another state are filed with the commissioner in accordance with the filing dates specified in sections 45-03-20-03, 45-03-20-10, and 45-03-20-11, respectively. Canadian insurers may submit accountants' reports as filed with the office of the superintendent of financial institutions, Canada.

b.A copy of any notification of adverse financial condition report filed with another state is filed with the commissioner within the time specified in section 45-03-20-09.

4.Foreign or alien insurers required to file management’s report of internal control over financial reporting in another state are exempt from filing the report in this state provided the other state has substantially similar reporting requirements and the report is filed with the commissioner of the other state within the time specified.

5.This chapter may not prohibit, preclude, or in any way limit the insurance commissioner from ordering or conducting or performing examinations of insurers under the rules and regulations of the North Dakota insurance department and the practices and procedures of the North Dakota insurance department.

History

• History: Effective October 1, 1995; amended effective April 1, 1996; April 1, 2010.

N.D. Admin. Code 45-03-20-02 Definitions

The terms and definitions in this section are intended to provide definitional guidance as the terms are used within this chapter.

1."Accountant" or "independent certified public accountant" means an independent certified public accountant or accounting firm in good standing with the American institute of certified public accountants and in all states in which they are licensed to practice. For Canadian and British companies, it means a Canadian-chartered or British-chartered accountant.

2.An "affiliate" of, or person "affiliated" with, a specific person, is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

3."Audit committee" means a committee or equivalent body established by the board of directors of an entity for the purpose of overseeing the accounting and financial reporting processes of an insurer or group of insurers, the internal audit function of an insurer or group of insurers, if applicable, and external audits of financial statements of the insurer or group of insurers. The audit committee of any entity that controls a group of insurers may be deemed to be the audit committee for one or more of these controlled insurers solely for the purposes of this chapter at the election of the controlling person. Refer to subsection 6 of section 45-03-20-12.1 for exercising this election. If an audit committee is not designated by the insurer, the insurer's entire board of directors shall constitute the audit committee.

4."Audited financial report" means and includes those items specified in section 45-03-20-04.

5."Group of insurers" means those licensed insurers included in the reporting requirements of North Dakota Century Code chapter 26.1-10, or a set of insurers as identified by management, for the purpose of assessing the effectiveness of internal control over financing reporting.

6."Indemnification" means an agreement of indemnity or a release from liability if the intent or effect is to shift or limit in any manner the potential liability of a person or firm for failure to adhere to applicable auditing or professional standards, whether or not resulting in part from knowing of other misrepresentations made by the insurer or its representatives.

7."Independent board member" has the same meaning as described in subsection 4 of section 45-03-20-12.1.

8."Insurer" means a licensed insurer as defined in North Dakota Century Code chapter 26.1-02.

9."Internal audit function" means a person or persons that provide independent, objective, and reasonable assurance designed to add value and improve an organization's operations and accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

10."Internal control over financial reporting" means a process effected by an entity's board of directors, management, and other personnel designed to provide reasonable assurance regarding the reliability of the financial statements, that is those items specified in subsections 2 through 7 of section 45-03-20-04 and includes those policies and procedures that:

a.Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets;

b.Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements, i.e., those items specified in subsections 2 through 7 of section 45-03-20-04 and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and

c.Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on the financial statements, i.e., those items specified in subsections 2 through 7 of section 45-03-20-04.

11."Section 404" means section 404 of the Sarbanes-Oxley Act of 2002 [Pub. L. 107-204; 116 Stat. 745] and the United States securities and exchange commission’s rules and regulations promulgated thereunder.

12."Section 404 report" means management’s report on internal control over financial reporting as defined by the United States securities and exchange commission and the related attestation report of the independent certified public accountant as described in subsection 1.

13."SOX-compliant entity" means an entity that either is required to be compliant with, or voluntarily is compliant with, all of the following provisions of the Sarbanes-Oxley Act of 2002 [Pub. L. 107-204; 116 Stat. 745]:

a.The preapproval requirements of section 201 (section 10A(i) of the Securities Exchange Act of 1934 [Pub. L. 73-291; 48 Stat. 881]);

b.The audit committee independence requirements of section 301 (section 10A(m)(3) of the Securities Exchange Act of 1934 [Pub. L. 73-291; 48 Stat. 881]; and

c.The internal control over financial reporting requirements of section 404 (item 308 of the United States securities and exchange commission regulation S-K).

History

• History: Effective October 1, 1995; amended effective January 1, 2008; April 1, 2010; April 1, 2017.

N.D. Admin. Code 45-03-20-03 General requirements related to filing and extensions for filing of annual audited financial reports and audit committee appointment

1.All insurers shall have an annual audit by an independent certified public accountant and shall file an audited financial report with the commissioner on or before June first for the year ended December thirty-first immediately preceding. The commissioner may require an insurer to file an audited financial report earlier than June first with ninety days' advance notice to the insurer.

2.Extensions of the June first filing date may be granted by the commissioner for thirty-day periods upon showing by the insurer and its independent certified public accountant the reasons for requesting an extension and determination by the commissioner of good cause for an extension. The request for extension must be submitted in writing not less than ten days prior to the due date in sufficient detail to permit the commissioner to make an informed decision with respect to the requested extension.

3.If an extension is granted in accordance with the provisions in subsection 2 of section 45-03-20-03, a similar extension of thirty days is granted to the filing of management's report of internal control over financial reporting.

4.Every insurer required to file an annual audited financial report pursuant to this chapter shall designate a group of individuals as constituting its audit committee, as defined in section

N.D. Admin. Code 45-03-20-02 The audit committee of an entity that controls an insurer may be deemed to be the insurer's audit committee for purposes of this chapter at the election of the controlling person

N.D. Admin. Code 45-03-20-04 Contents of annual audited financial report

The annual audited financial report must report the financial position of the insurer as of the end of the most recent calendar year and the results of its operations, cashflows, and changes in capital and surplus for the year then ended in conformity with statutory accounting practices prescribed, or otherwise permitted, by the department of insurance of the state of domicile.

The annual audited financial report must include the following:

1.Report of independent certified public accountant.

2.Balance sheet reporting admitted assets, liabilities, capital, and surplus.

3.Statement of operations.

4.Statement of cashflows.

5.Statement of changes in capital and surplus.

6.Notes to financial statements. These notes must be those required by the appropriate national association of insurance commissioners annual statement instructions and the national association of insurance commissioners accounting practices and procedures manual. These notes must include a reconciliation of differences, if any, between the audited statutory financial statements and the annual statement filed pursuant to North Dakota Century Code

section 26.1-03-07 with a written description of the nature of these differences.

7.The financial statements included in the audited financial report must be prepared in a form and using language and groupings substantially the same as the relevant sections of the annual statement of the insurer filed with the commissioner, and the financial statement must be comparative, presenting the amounts as of December thirty-first of the current year and the amounts as of the immediately preceding December thirty-first. However, in the first year in which an insurer is required to file an audited financial report, the comparative data may be omitted.

History

• History: Effective October 1, 1995; amended effective August 1, 2000; April 1, 2010.

N.D. Admin. Code 45-03-20-05 Designation of independent certified public accountant

1.Each insurer required by this chapter to file an annual audited financial report within sixty days after becoming subject to the requirement, shall register with the commissioner in writing the name and address of the independent certified public accountant or accounting firm retained to conduct the annual audit under this chapter. Insurers not retaining an independent certified public accountant on October 1, 1995, shall register the name and address of their retained independent certified public accountants not less than six months before the date when the first audited financial report is to be filed.

2.The insurer shall obtain a letter from the accountant and file a copy with the commissioner stating that the accountant is aware of the provisions of the insurance code and the rules and regulations of the insurance department of the state of domicile that relate to accounting and financial matters and affirming that the accountant will express an opinion on the financial statements in terms of their conformity to the statutory accounting practices prescribed or otherwise permitted by that department, specifying the exceptions as the accountant may believe appropriate.

3.If an accountant who was the accountant for the immediately preceding filed audited financial report is dismissed or resigns, the insurer shall within five business days notify the commissioner of this event. The insurer shall also furnish the commissioner with a separate letter within ten business days of the above notification stating whether in the twenty-four months preceding the event there were any disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure; which disagreements, if not resolved to the satisfaction of the former accountant, would have caused the accountant to make reference to the subject matter of the disagreement in connection with the accountant's opinion. The disagreements required to be reported in response to this section include both those resolved to the former accountant's satisfaction and those not resolved to the former accountant's satisfaction. Disagreements contemplated by this section are those that occur at the decisionmaking level, that is between personnel of the insurer responsible for presentation of its financial statements and personnel of the accounting firm responsible for rendering its report. The insurer shall also in writing request the former accountant to furnish a letter addressed to the insurer stating whether the accountant agrees with the statements contained in the insurer's letter and, if not, stating the reasons for which the accountant does not agree; and the insurer shall furnish the responsive letter from the former accountant to the commissioner together with its own.

N.D. Admin. Code 45-03-20-06 Qualifications of independent certified public accountant

1.The commissioner shall not recognize any person or firm as a qualified independent certified public accountant if the person or firm:

a.Is not in good standing with the American institute of certified public accountants and in all states in which the accountant is licensed to practice, or, for a Canadian or British company, that is not a chartered accountant; or

b.Has either directly or indirectly entered into an agreement of indemnity or release from liability, collectively referred to as indemnification, with respect to the audit of the insurer.

2.Except as otherwise provided in this chapter, the commissioner shall recognize an independent certified public accountant as qualified as long as the independent certified public accountant conforms to the standards of the independent certified public accountant's profession, as contained in the code of professional ethics of the American institute of certified public accountants and rules and regulations and code of ethics and rules of professional conduct of the North Dakota board of accountancy, or similar code.

3.A qualified independent certified public accountant may enter into an agreement with an insurer to have disputes relating to an audit resolved by mediation or arbitration. However, in the event of a delinquency proceeding commenced against the insurer under North Dakota Century Code chapter 26.1-06.1, the mediation or arbitration provisions shall operate at the option of the statutory successor. 4.a.The lead or coordinating audit partner having primary responsibility for the audit may not act in that capacity for more than five consecutive years. The person must be disqualified from acting in that or a similar capacity for the same company or its insurance subsidiaries or affiliates for a period of five consecutive years. An insurer may make application to the commissioner for relief from the above rotation requirement on the

basis of unusual circumstances. This application should be made at least thirty days before the end of the calendar year. The commissioner may consider the following factors in determining if the relief should be granted:

(1)Number of partners, expertise of the partners, or the number of insurance clients in the currently registered firm;

(2)Premium volume of the insurer; or (3)Number of jurisdictions in which the insurer transacts business.

b.The insurer shall file, with its annual statement filing, the approval for relief from subdivision a with the states that it is licensed in or doing business in and with the national association of insurance commissioners. If the nondomestic state accepts electronic filing with the national association of insurance commissioners, the insurer shall file the approval in an electronic format acceptable to the national association of insurance commissioners.

5.The commissioner shall neither recognize as a qualified independent certified public accountant, nor accept any annual audited financial report, prepared in whole or in part by, any natural person who:

a.Has been convicted of fraud, bribery, a violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Sections 1961-1968, or any dishonest conduct or practices under federal or state law;

b.Has been found to have violated the insurance laws of this state with respect to any previous reports submitted under this chapter; or

c.Has demonstrated a pattern or practice of failing to detect or disclose material information in previous reports filed under the provisions of this chapter.

6.The commissioner may hold a hearing to determine whether an independent certified public accountant is qualified and, considering the evidence presented, may rule that the accountant is not qualified for purposes of expressing an opinion on the financial statements in the annual audited financial report made pursuant to this chapter and require the insurer to replace the accountant with another whose relationship with the insurer is qualified within the meaning of this chapter. 7.a.The commissioner shall not recognize as a qualified independent certified public accountant, nor accept an annual audited financial report, prepared in whole or in part by an accountant who provides to an insurer, contemporaneously with the audit, the following nonaudit services:

(1)Bookkeeping or other services relating to the accounting records or financial statements of the insurer;

(2)Financial information systems design and implementation;

(3)Appraisal or valuation services, fairness opinions, or contribution-in-kind reports;

(4)Actuarially oriented advisory services involving the determination of amounts recorded in the financial statements. The accountant may assist an insurer in understanding the methods, assumptions, and inputs used in the determination of amounts recorded in the financial statement only if it is reasonable to conclude that the services provided will not be subject to audit procedures during an audit of the insurer’s financial statements. An accountant’s actuary may also issue an actuarial opinion or certification on an insurer’s reserves if the following conditions have been met:

(a)Neither the accountant nor the accountant’s actuary has performed any management functions or made any management decisions;

(b)The insurer has competent personnel or engages a third-party actuary to estimate the reserves for which management takes responsibility; and (c)The accountant’s actuary tests the reasonableness of the reserves after the insurer’s management has determined the amount of the reserves;

(5)Internal audit outsourcing services;

(6)Management functions or human resources;

(7)Broker or dealer, investment adviser, or investment banking services;

(8)Legal services or expert services unrelated to the audit; or (9)Any other services that the commissioner determines, by regulation, are impermissible.

b.In general, the principles of independence with respect to services provided by the qualified independent certified public accountant are largely predicated on three basic principles, violations of which would impair the accountant’s independence. The principles are that the accountant cannot function in the role of management, cannot audit the accountant’s own work, and cannot serve in an advocacy role for the insurer.

8.Insurers having direct written and assumed premiums of less than one hundred million dollars in any calendar year may request an exemption from subdivision a of subsection 7. The insurer shall file with the commissioner a written statement discussing the reasons why the insurer should be exempt from these provisions. If the commissioner finds, upon review of this statement, that compliance with this chapter would constitute a financial or organizational hardship upon the insurer, an exemption may be granted.

9.A qualified independent certified public accountant who performs the audit may engage in other nonaudit services, including tax services, that are not described in subdivision a of subsection 7 or that do not conflict with subdivision b of subsection 7, only if the activity is approved in advance by the audit committee, in accordance with subsection 10.

10.All auditing services and nonaudit services provided to an insurer by the qualified independent certified public accountant of the insurer shall be preapproved by the audit committee. The preapproval requirement is waived with respect to nonaudit services if the insurer is a SOX-compliant entity or a direct or indirect wholly owned subsidiary of a SOX-compliant entity or:

a.The aggregate amount of all such nonaudit services provided to the insurer constitutes not more than five percent of the total amount of fees paid by the insurer to its qualified independent certified public accountant during the fiscal year in which the nonaudit services are provided;

b.The services were not recognized by the insurer at the time of the engagement to be nonaudit services; and

c.The services are promptly brought to the attention of the audit committee and approved prior to the completion of the audit by the audit committee or by one or more members of the audit committee who are the members of the board of directors to whom authority to grant such approvals has been delegated by the audit committee.

11.The audit committee may delegate to one or more designated members of the audit committee the authority to grant the preapprovals required by subsection 10. The decisions of any member to whom this authority is delegated shall be presented to the full audit committee at each of its scheduled meetings. 12.a.The commissioner shall not recognize an independent certified public accountant as qualified for a particular insurer if a member of the board, president, chief executive officer, controller, chief financial officer, or chief accounting officer, or any person serving in an equivalent position for that insurer, was employed by the independent certified public accountant and participated in the audit of that insurer during the one-year period preceding the date that the most current statutory opinion is due. This section shall only apply to partners and senior managers involved in the audit. An insurer may make application to the commissioner for relief from the above requirement on the basis of unusual circumstances.

b.The insurer shall file, with its annual statement filing, the approval for relief from subdivision a with the states that it is licensed in or doing business in and the national association of insurance commissioners. If the nondomestic state accepts electronic filing with the national association of insurance commissioners, the insurer shall file the approval in an electronic format acceptable to the national association of insurance commissioners.

History

• History: Effective October 1, 1995; amended effective January 1, 2008; April 1, 2010.

N.D. Admin. Code 45-03-20-07 Consolidated or combined audits

An insurer may make written application to the commissioner for approval to file audited consolidated or combined financial statements in lieu of separate annual audited financial statements if the insurer is part of a group of insurance companies which utilizes a pooling or one hundred percent reinsurance agreement that affects the solvency and integrity of the insurer's reserves and the insurer cedes all of its direct and assumed business to the pool. In such cases, a columnar consolidating or combining worksheet must be filed with the report, as follows:

1.Amounts shown on the consolidated or combined audited financial report must be shown on the worksheet.

2.Amounts for each insurer subject to this section must be stated separately.

3.Noninsurance operations may be shown on the worksheet on a combined or individual basis.

4.Explanations of consolidating and eliminating entries must be included.

5.A reconciliation must be included of any differences between the amounts shown in the individual insurer columns of the worksheet and comparable amounts shown on the annual statements of the insurers.

History

• History: Effective October 1, 1995.

N.D. Admin. Code 45-03-20-08 Scope of audit and report of independent certified public accountant

Financial statements furnished under section 45-03-20-04 must be examined by the independent certified public accountant. The audit of the insurer's financial statements shall be conducted in accordance with generally accepted auditing standards. In accordance with AU 319 of the professional standards of the American institute of certified public accountants, consideration of internal control in a financial statement audit, the independent certified public accountant should obtain an understanding of internal control sufficient to plan the audit. To the extent required by AU 319, for those insurers required to file a management’s report of internal control over financial reporting pursuant to section 45-03-20-12.3, the independent certified public accountant should consider, as that term is defined in statements on auditing standards no. 102, defining professional requirements in statements on auditing standards or its replacement, the most recently available report in planning and performing the audit of the statutory financial statements. Consideration shall be given to the procedures illustrated in the financial condition examiner's handbook promulgated by the national association of insurance commissioners as the independent certified public accountant deems necessary.

History

• History: Effective October 1, 1995; amended effective January 1, 2008; April 1, 2010.

N.D. Admin. Code 45-03-20-09 Notification of adverse financial condition

1.The insurer required to furnish the annual audited financial report shall require the independent certified public accountant to report, in writing, within five business days to the board of directors or its audit committee any determination by the independent certified public accountant that the insurer has materially misstated its financial condition as reported to the commissioner as of the balance sheet date currently under audit or that the insurer does not meet the minimum capital and surplus requirement of the North Dakota insurance statute as of that date. An insurer who has received a report under this section shall forward a copy of the report to the commissioner within five business days of receipt of the report and shall provide the independent certified public accountant making the report with evidence of the report being furnished to the commissioner. If the independent certified public accountant fails to receive the evidence within the required five-business-day period, the independent certified public accountant shall furnish to the commissioner a copy of its report within the next five business days.

2.An independent certified public accountant is not liable in any manner to any person for any statement made in connection with this section if the statement is made in good faith in compliance with subsection 1.

3.If the accountant, subsequent to the date of the audited financial report filed under this

chapter, becomes aware of facts that might have affected the accountant's report, the commissioner notes the obligation of the accountant to take action as prescribed in volume 1,

section AU 561 of the professional standards of the American institute of certified public accountants.

N.D. Admin. Code 45-03-20-10 Communication of internal control-related matters noted in an audit

1.In addition to the annual audited financial report, each insurer shall furnish the commissioner with a written communication as to any unremediated material weaknesses in its internal controls over financial reporting noted during the audit. Such communication shall be prepared by the accountant within sixty days after the filing of the annual audited financial report, and shall contain a description of any unremediated material weakness, as the term material weakness is defined by statements on auditing standards no. 60, communication of internal control-related matters noted in an audit or its replacement, as of December thirty-first immediately preceding, in the insurer’s internal control over financial reporting noted by the accountant during the course of the accountant's audit of the financial statements. If no unremediated material weaknesses were noted, the communication should so state.

2.The insurer is required to provide a description of remedial actions taken or proposed to correct unremediated material weaknesses, if the actions are not described in the accountant’s communication.

N.D. Admin. Code 45-03-20-11 Accountant's letter of qualifications

The accountant shall furnish the insurer in connection with, and for inclusion in, the filing of the annual audited financial report, a letter stating:

1.That the accountant is independent with respect to the insurer and conforms to the standards of the accountant's profession as contained in the code of professional ethics and pronouncements of the American institute of certified public accountants and the rules of professional conduct of the North Dakota board of accountancy, or similar code.

2.The background and experience in general, and the experience in audits of insurers of the staff assigned to the engagement and whether each is an independent certified public accountant. Nothing within this chapter may be construed as prohibiting the accountant from utilizing the staff as deemed appropriate where use is consistent with the standards prescribed by generally accepted auditing standards.

3.That the accountant understands the annual audited financial report and the accountant's opinion thereon will be filed in compliance with this chapter and that the commissioner will be relying on this information in the monitoring and regulation of the financial position of insurers.

4.That the accountant consents to the requirements of section 45-03-20-12 and that the accountant consents and agrees to make available for review by the commissioner, the commissioner's designee, or the commissioner's appointed agent, the workpapers, as defined in section 45-03-20-12.

5.A representation that the accountant is properly licensed by an appropriate state licensing

authority and is a member in good standing in the American institute of certified public accountants.

6.A representation that the accountant is in compliance with the requirements of section 45-03-20-06.

History

• History: Effective October 1, 1995.

N.D. Admin. Code 45-03-20-12 Definition, availability, and maintenance of independent certified public accountant workpapers

1.Workpapers are the records kept by the independent certified public accountant of the procedures followed, the tests performed, the information obtained, and the conclusions reached pertinent to the independent certified public accountant's audit of the financial statements of an insurer. Workpapers, accordingly, may include audit planning documentation, work programs, analyses, memoranda, letters of confirmation and representation, abstracts of company documents, and schedules or commentaries prepared or obtained by the independent certified public accountant in the course of the accountant's audit of the financial statements of an insurer and which support the accountant's opinion thereof.

2.Every insurer required to file an audited financial report under this chapter, shall require the accountant to make available for review by insurance department examiners, all workpapers prepared in the conduct of the accountant's audit and any communications related to the audit between the accountant and the insurer, at the offices of the insurer, at the insurance department, or at any other reasonable place designated by the commissioner. The insurer shall require that the accountant retain the audit workpapers and communications until the insurance department has filed a report on examination covering the period of the audit but no longer than seven years from the date of the audit report.

3.In the conduct of the aforementioned periodic review by the insurance department examiners, it must be agreed that photocopies of pertinent audit workpapers may be made and retained by the department. Such reviews by the department examiners must be considered investigations and all working papers and communications obtained during the course of the investigations must be afforded the same confidentiality as other examination workpapers generated by the department. 45-03-20-12.1. Requirements for audit committees.

This section shall not apply to foreign or alien insurers licensed in this state or an insurer that is a SOX-compliant entity or a direct or indirect wholly owned subsidiary of a SOX-compliant entity.

1.The audit committee shall be directly responsible for the appointment, compensation, and oversight of the work of any accountant, including resolution of disagreements between management and the accountant regarding financial reporting, for the purpose of preparing or issuing the audited financial report or related work pursuant to this chapter. Each accountant shall report directly to the audit committee.

2.The audit committee of an insurer or group of insurers shall be responsible for overseeing the insurer's internal audit function and granting the person or persons performing the function suitable authority and resources to fulfill their responsibilities if required by section 45-03-20-15.

3.Each member of the audit committee shall be a member of the board of directors of the insurer or a member of the board of directors of an entity elected pursuant to subsection 6 of this section and subsection 3 of section 45-03-20-02.

4.In order to be considered independent for purposes of this section, a member of the audit committee may not, other than in the member’s capacity as a member of the audit committee, the board of directors, or any other board committee, accept any consulting, advisory, or other compensatory fee from the entity or be an affiliated person of the entity or any subsidiary thereof. However, if law requires board participation by otherwise nonindependent members, that law shall prevail and such members may participate in the audit committee and be designated as independent for audit committee purposes, unless they are an officer or employee of the insurer or one of its affiliates.

5.If a member of the audit committee ceases to be independent for reasons outside the member's reasonable control, that person, with notice by the responsible entity to the state, may remain an audit committee member of the responsible entity until the earlier of the next annual meeting of the responsible entity or one year from the occurrence of the event that caused the member to be no longer independent.

6.To exercise the election of the controlling person to designate the audit committee for purposes of this chapter, the ultimate controlling person shall provide written notice to the commissioners of the affected insurers. Notification shall be made timely prior to the issuance of the statutory audit report and include a description of the basis for the election. The election can be changed through notice to the commissioner by the insurer, which shall include a description of the basis for the change. The election shall remain in effect for perpetuity, until rescinded. 7.a.The audit committee shall require the accountant that performs for an insurer any audit required by this chapter to timely report to the audit committee in accordance with the requirements of statements on auditing standards no. 61, communication with audit committees, or its replacement, including:

(1)All significant accounting policies and material permitted practices;

(2)All material alternative treatments of financial information within statutory accounting principles that have been discussed with management officials of the insurer, ramifications of the use of the alternative disclosures and treatments, and the treatment preferred by the accountant; and (3)Other material written communications between the accountant and the management of the insurer, such as any management letter or schedule of unadjusted differences.

b.If an insurer is a member of an insurance holding company system, the reports required by subdivision a may be provided to the audit committee on an aggregate basis for insurers in the holding company system, provided that any substantial differences among insurers in the system are identified to the audit committee.

8.The proportion of independent audit committee members shall meet or exceed the following criteria:

Prior Calendar Year Direct Written and Assumed Premiums $0-$300,000,000Over $300,000,000- $500,000,000 Over $500,000,000 No minimum requirements.

See also notes A and B.

Majority (50% or more) of members shall be independent.

See also notes A and B.

Supermajority of members (75% or more) shall be independent. See also note A.

Note A: The commissioner has authority afforded by state law to require the entity’s board to enact improvements to the independence of the audit committee membership if the insurer is in a risk-based capital action level event, meets one or more of the standards of an insurer deemed to be in hazardous financial condition, or otherwise exhibits qualities of a troubled insurer.

Note B: All insurers with less than $500,000,000 in prior year direct written and assumed premiums are encouraged to structure their audit committees with at least a supermajority of independent audit committee members.

Note C: Prior calendar year direct written and assumed premiums shall be the combined total of direct premiums and assumed premiums from nonaffiliates for the reporting entities.

9.An insurer with direct written and assumed premium, excluding premiums reinsured with the federal crop insurance corporation and federal flood program, less than five hundred million dollars may make application to the commissioner for a waiver from this section requirements based upon hardship. The insurer shall file, with its annual statement filing, the approval for relief from this section with the states that it is licensed in or doing business in and the national association of insurance commissioners. If the nondomestic state accepts electronic filing with the national association of insurance commissioners, the insurer shall file the approval in an electronic format acceptable to the national association of insurance commissioners.

1.No director or officer of an insurer shall, directly or indirectly:

a.Make or cause to be made a materially false or misleading statement to an accountant in connection with any audit, review, or communication required under this chapter; or

b.Omit to state, or cause another person to omit to state, any material fact necessary in order to make statements made, in light of the circumstances under which the statements were made, not misleading to an accountant in connection with any audit, review, or communication required under this chapter.

2.No officer or director of an insurer, or any other person acting under the direction thereof, shall directly or indirectly take any action to coerce, manipulate, mislead, or fraudulently influence any accountant engaged in the performance of an audit pursuant to this chapter if that person knew or should have known that the action, if successful, could result in rendering the insurer’s financial statements materially misleading.

3.For purposes of subsection 2, actions that if successful, could result in rendering the insurer’s financial statements materially misleading include actions taken at any time with respect to the professional engagement period to coerce, manipulate, mislead, or fraudulently influence an accountant:

a.To issue or reissue a report on an insurer’s financial statements that is not warranted in the circumstances, due to material violations of statutory accounting principles prescribed by the commissioner, generally accepted auditing standards, or other professional or regulatory standards;

b.Not to perform audit, review, or other procedures required by generally accepted auditing standards or other professional standards;

c.Not to withdraw an issued report; or

d.Not to communicate matters to an insurer’s audit committee. 45-03-20-12.3. Management’s report of internal control over financial reporting.

1.Every insurer required to file an audited financial report pursuant to this chapter that has annual direct written and assumed premiums, excluding premiums reinsured with the federal crop insurance corporation and federal flood program, of five hundred million dollars or more shall prepare a report of the insurer’s or group of insurers’ internal control over financial reporting, as these terms are defined in section 45-03-20-02. The report shall be filed with the commissioner along with the communication of internal control-related matters noted in an audit described under section 45-03-20-10. Management’s report of internal control over financial reporting shall be as of December thirty-first immediately preceding.

2.Notwithstanding the premium threshold in subsection 1, the commissioner may require an insurer to file management’s report of internal control over financial reporting if the insurer is in any risk-based capital level event, or meets any one or more of the standards of an insurer deemed to be in hazardous financial condition as defined in chapter 45-03-13.

3.An insurer or a group of insurers that is:

a.Directly subject to section 404;

b.Part of a holding company system whose parent is directly subject to section 404;

c.Not directly subject to section 404 but is a SOX-compliant entity; or

d.A member of a holding company system whose parent is not directly subject to section 404 but is a SOX-compliant entity; may file its or its parent’s section 404 report and an addendum in satisfaction of this section's requirement provided that those internal controls of the insurer or group of insurers having a material impact on the preparation of the insurer’s or group of insurers’ audited statutory financial statements were included in the scope of the section 404 report. The addendum shall be a positive statement by management that there are no material processes with respect to the preparation of the insurer’s or group of insurers’ audited statutory financial statements (those items included in subsections 2 through 7 of section 45-03-20-04) excluded from the

section 404 report. If there are internal controls of the insurer or group of insurers that have a material impact on the preparation of the insurer’s or group of insurers’ audited statutory financial statements and those internal controls were not included in the scope of the

section 404 report, the insurer or group of insurers may either file a report under this section, or the section 404 report and a report under this section for those internal controls that have a material impact on the preparation of the insurer’s or group of insurers’ audited statutory financial statements not covered by the section 404 report.

4.Management’s report of internal control over financial reporting shall include:

a.A statement that management is responsible for establishing and maintaining adequate internal control over financial reporting;

b.A statement that management has established internal control over financial reporting and an assertion, to the best of management’s knowledge and belief, after diligent inquiry, as to whether its internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of financial statements in accordance with statutory accounting principles;

c.A statement that briefly describes the approach or processes by which management evaluated the effectiveness of its internal control over financial reporting;

d.A statement that briefly describes the scope of work that is included and whether any internal controls were excluded;

e.Disclosure of any unremediated material weaknesses in the internal control over financial reporting identified by management as of December thirty-first immediately preceding.

Management is not permitted to conclude that the internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of financial statements in accordance with statutory accounting principles if there is one or more unremediated material weaknesses in its internal control over financial reporting;

f.A statement regarding the inherent limitations of internal control systems; and

g.Signatures of the chief executive officer and the chief financial officer or equivalent position or title.

5.Management shall document and make available upon financial condition examination the

basis upon which its assertions required in subsection 4 are made. Management may base its assertions, in part, upon its review, monitoring, and testing of internal controls undertaken in the normal course of its activities.

a.Management shall have discretion as to the nature of the internal control framework used, and the nature and extent of documentation, in order to make its assertion in a cost-effective manner and, as such, may include assembly of or reference to existing documentation.

b.Management’s report on internal control over financial reporting, required by subsection 1, and any documentation provided in support thereof during the course of a financial condition examination, shall be kept confidential by the insurance department.

History

• History: Effective April 1, 2010; amended effective April 1, 2017. 45-03-20-12.2. Conduct of insurer in connection with the preparation of required reports and documents.

N.D. Admin. Code 45-03-20-13 Exemptions and effective dates

1.Upon written application of any insurer, the commissioner may grant an exemption from compliance with any and all provisions of this chapter if the commissioner finds, upon review of the application, that compliance with this chapter would constitute a financial or organizational hardship upon the insurer. An exemption may be granted at any time and from time to time for a specified period or periods. Within ten days from a denial of an insurer's written request for an exemption from this chapter, the insurer may request in writing a hearing on its application for an exemption. The hearing must be held in accordance with the rules and regulations of the North Dakota insurance department pertaining to administrative hearing procedures.

2.Domestic insurers retaining a certified public accountant on October 1, 1995, who qualify as independent shall comply with this chapter for the year ending December 31, 1996, and each year thereafter unless the commissioner permits otherwise.

3.Domestic insurers not retaining a certified public accountant on October 1, 1995, who qualify as independent may meet the following schedule for compliance unless the commissioner permits otherwise:

a.As of December 31, 1996, file with the commissioner an audited financial report.

b.For the year ending December 31, 1996, and each year thereafter, the insurers shall file with the commissioner all reports and communications required by this chapter.

4.Foreign insurers shall comply with this chapter for the year ending December 31, 1996, and each year thereafter, unless the commissioner permits otherwise.

5.The requirements of subsection 4 of section 45-03-20-06 shall be in effect for audits of the year beginning January 1, 2010, and thereafter.

6.An insurer or group of insurers that is not required to have independent audit committee members or only a majority of independent audit committee members, as opposed to a supermajority, because the total written and assumed premium is below the threshold and subsequently becomes subject to one of the independence requirements due to changes in premium shall have one year following the year the threshold is exceeded, but not earlier than January 1, 2010, to comply with the independence requirements. Likewise, an insurer that becomes subject to one of the independence requirements as a result of a business combination shall have one calendar year following the date of acquisition or combination to comply with the independence requirements.

7.The requirements of section 45-03-20-01, subsection 3 of section 45-03-20-03, subsections 7 through 12 of section 45-03-20-06, and sections 45-03-20-08 and 45-03-20-12.3, except for

section 45-03-20-12.1 covered above, are effective beginning with the reporting period ending December 31, 2010, and each year thereafter. An insurer or group of insurers that is not required to file a report because the total written premium is below the threshold and subsequently becomes subject to the reporting requirements shall have two years following the year the threshold is exceeded, but not earlier than December 31, 2010, to file a report.

Likewise, an insurer acquired in a business combination shall have two calendar years following the date of acquisition or combination to comply with the reporting requirements.

8.If an insurer that is exempt from the section 45-03-20-15 requirements no longer qualifies for that exemption, the insurer has one year after the year the threshold is exceeded to comply with the requirements of this article.

History

• History: Effective October 1, 1995; amended effective April 1, 2010; April 1, 2017.

N.D. Admin. Code 45-03-20-14 Canadian and British companies

1.In the case of Canadian and British insurers, the annual audited financial report shall be defined as the annual statement of total business on the form filed by such companies with their supervision authority duly audited by an independent chartered accountant.

2.For such insurers, the letter required in subsection 2 of section 45-03-20-05 shall state that the accountant is aware of the requirements relating to the annual audited financial report filed with the commissioner pursuant to section 45-03-20-03 and shall affirm that the opinion expressed is in conformity with those requirements.

N.D. Admin. Code 45-03-20-15 Internal audit function requirements

1.Exemption. An insurer is exempt from the requirements of this section if:

a.The insurer has annual direct written and unaffiliated premium, including international direct and assumed premium, but excluding premiums reinsured with the federal crop insurance corporation and federal flood program, less than five hundred million dollars; and

b.If the insurer is a member of a group of insurers, the group has annual direct written and unaffiliated assumed premium, including international direct and assumed premium, but excluding premiums reinsured with the federal crop insurance corporation and federal flood program, less than one billion dollars.

An insurer or group of insurers exempt from the requirements of this section is encouraged, but not required, to conduct a review of the insurer business type, sources of capital, and other risk factors to determine whether an internal audit function is warranted. The potential benefits of an internal audit function should be assessed and compared against the estimated costs.

2.Function. The insurer or group of insurers shall establish an internal audit function providing independent, objective, and reasonable assurance to the audit committee and insurer management regarding the insurer's governance, risk management, and internal controls.

This assurance shall be provided by performing general and specific audits, reviews, and tests and by employing other techniques deemed necessary to protect assets, evaluate control effectiveness and efficiency, and evaluate compliance with policies and regulations.

3.Independence. To ensure internal auditors remain objective, the internal audit function must be organizationally independent. Specifically, the internal audit function may not defer ultimate judgment on audit matters to others, and must appoint an individual to head the internal audit function who has direct and unrestricted access to the board of directors. Organizational independence does not preclude dual-reporting relationships.

4.Reporting. The head of the internal audit function shall report to the audit committee regularly, but no less than annually, on the periodic audit plan, factors that may adversely impact the internal audit function's independence or effectiveness, material findings from completed audits, and the appropriateness of corrective actions implemented by management as a result of audit findings.

5.Additional requirements. If an insurer is a member of an insurance holding company system or included in a group of insurers, the insurer may satisfy the internal audit function requirements set forth in this section at the ultimate controlling parent level, an intermediate holding company level, or the individual legal entity level.

History

• History: Effective April 1, 2017.

Chapter 45-03-21 Demutualization

N.D. Admin. Code 45-03-21-01 Definitions

For the purposes of this chapter, the following definitions shall apply:

1."Commissioner" means the insurance commissioner.

2."Converted insurer" means a domestic mutual insurer that has completed a demutualization subject to this chapter.

3."Converting insurer" means a domestic mutual insurer that has filed, or announced its intent to file, an application for demutualization under this chapter.

4."Demutualization" means any transaction as part of which:

a.A domestic mutual insurer is converted into a stock corporation;

b.A substantial portion of the ownership of a domestic mutual insurer is acquired by, or merged with, another entity that is not a mutual insurer; or

c.The ownership interest of the members in a domestic mutual insurer is reduced substantially or eliminated.

5."Eligible member" means a person who, at any time during the one year preceding the record date, has been the owner of a policy of insurance issued by the converting insurer. Unless otherwise provided in the conversion plan and approved by the commissioner, a person insured under a certificate issued under a group policy is an eligible member.

6."Equitable share" means the portion allocated to an eligible member of the securities or other consideration of the converting insurer referred to in subsection 3 of section 45-03-21-05, such allocation to be made in accordance with the provisions of subsection 4 of section 45-03-21-05.

7."Member" means a person who is the holder of a policy or contract of insurance issued by the converting insurer, including the holder of a certificate issued under a group insurance policy.

The term "member" does not include a dependent of a certificate holder or policyholder who is insured by the converting insurer solely by virtue of being such a dependent nor does it include the holder of a contract issued by the converting insurer under which there is not a substantial assumption of risk, such as a contract for administrative services only.

8."Membership interest" means all rights to which members of the converting insurer are entitled under applicable law and under the converting insurer's bylaws, articles of incorporation, insurance policies, or other contracts, including the right to vote and to participate in any distribution of earnings or surplus, whether or not incident to the company's dissolution or liquidation.

9."Mutual insurance holding company" means a company formed under North Dakota Century Code section 26.1-12.1-02.

10."Plan of conversion" or "conversion plan" means a plan to engage or participate in a demutualization which is subject to this chapter.

11."Record date" means the date on which the converting insurer's board of directors adopts a plan of conversion or some other date specified as the record date in the plan of conversion and approved by the commissioner.

N.D. Admin. Code 45-03-21-02 Authority to convert

A domestic mutual insurer authorized to do business in this state may not take part in a demutualization unless the demutualization has first been approved by the commissioner in accordance with this chapter. Any domestic mutual insurer may submit to the commissioner a petition to engage in a demutualization without reincorporation, pursuant to the requirements of this chapter.

This chapter does not apply to a reorganization of a mutual insurer into a mutual holding company structure, pursuant to North Dakota Century Code chapter 26.1-12.1.

N.D. Admin. Code 45-03-21-03 Board of directors approval

A plan of conversion under this chapter must be adopted by no less than a majority of the board of directors of the converting insurer unless otherwise provided in the articles of incorporation or bylaws.

N.D. Admin. Code 45-03-21-04 Petition to convert

A petition to engage in a demutualization pursuant to this chapter must be filed with the commissioner and must contain the following:

1.The proposed plan of conversion;

2.The proposed articles of incorporation and bylaws of the converted insurer;

3.A list of the proposed officers and directors of the converted insurer, stating each of those individual's principal occupation, all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past ten years and specifying any other relationship that will exist between such individual and the converting insurer;

4.A narrative explanation of the reasons for, and purposes of, the proposed demutualization, including an analysis of alternative transactions considered;

5.A description and analysis of the anticipated risks and benefits for the converting insurer associated with the proposed demutualization;

6.A description and analysis of the anticipated risks and benefits for the insureds, eligible members, and other members of the converting insurer associated with the proposed demutualization;

7.An explanation of the anticipated effect of the demutualization on the profitability, solvency, and market position of the converting insurer;

8.An explanation of the anticipated tax implications of the proposed demutualization for the converting insurer and whether the demutualization would constitute a taxable event for its eligible members, insureds, and other members;

9.An explanation of the anticipated effect of the demutualization on insurance coverages provided by the converting insurer, including the anticipated effect on the scope and costs of such coverages;

10.The resolution of the board of directors of the converting insurer authorizing the demutualization, certified by the secretary of the company;

11.Pro forma financial statements for the converted insurer, projecting its financial condition for the three years immediately following the demutualization;

12.The proposed plan of operation for the converted insurer;

13.A summary of the plan of conversion and any other materials that the converting insurer proposes to send to members and eligible members to seek their approval of the conversion plan;

14.The proposed form of notice required pursuant to section 45-03-21-07 to members must include a reasonable description of all material terms of the conversion plan in order that the members may make an informed decision as to whether or not to vote in favor of approval of such conversion plan. Such notice must also be sent to eligible members in order that they may make an informed decision as to whether or not to participate in the hearing. The information provided to members and eligible members in accordance with this section must also include a fair and adequate description of all risks and potential adverse consequences that may arise from the demutualization; and

15.Such additional information as the commissioner reasonably deems necessary to assure that the plan complies with the standards set forth in section 45-03-21-07.

N.D. Admin. Code 45-03-21-05 Elements of the conversion plan

Any plan of conversion filed pursuant to this chapter must include at least all of the following:

1.Identification of the membership interests held or owned by the members of the converting insurer;

2.Identification of the class or classes of persons who have an ownership interest in the converting insurer as of the record date. If an ownership interest is held by any person who is not as of the record date an eligible member, the conversion plan must determine what percentage of the ownership interest in the converting insurer is held by eligible members in the aggregate, and what percentage of the ownership interest is held by each of any other classes of persons and by any other entity who holds such interest, such determinations to be made as of the record date;

3.A fair and reasonable formula, approved by the commissioner, for exchanging the equitable share of each eligible member for securities or other consideration, or both, of the converted insurer and the disposition of any unclaimed shares. Each eligible member must be entitled to receive in exchange for the eligible member's equitable share, without additional payment, consideration payable in voting common shares of the converted insurer or other consideration, or both. If the equitable share of the eligible member entitles the eligible member to receive a fractional share of stock, the eligible member must have the option to receive the value of the fractional share in cash or to purchase a full share by paying the balance in cash;

4.The allocation of the consideration mentioned in subsection 3 must take into account:

a.The value of the voting rights of each eligible member, if any;

b.The estimated proportionate contribution of each class of participating policies and contracts of insurance to the aggregate consideration being given to eligible members; and

c.Such other factors that the commissioner finds must be included in order for the allocation to be fair and equitable to eligible members and other owners;

5.If the conversion plan of the converting insurer includes or contemplates a public or private offering of stock or other securities of the converted insurer:

a.The number and characteristics of each class or type of share or other security to be authorized;

b.The maximum percentage of issued or outstanding stock or other securities to be sold;

c.A detailed description of the company's proposed capital structure;

d.The proposed method and timing of any such sale;

e.The anticipated effect of such sale on the value of the consideration distributed to eligible members in accordance with the conversion plan and this chapter; and

f.A description of how the board of directors anticipates eligible members would be treated in any such sale, including a description of any plans for initial sale of stock or other securities to third parties, the process to be used in offering the stock or other securities, and setting the initial sale price for the stock or other securities;

6.The manner in which the conversion plan, when completed, would provide for the converted insurer paid-in capital and surplus in an amount not less than the minimum paid-in capital and surplus required of a domestic stock insurer upon initial authorization to transact like kinds of insurance; and

7.A description of any plans by the converting insurer to provide any stock options or other financial incentives to any member of management or any director as part of, or following, the demutualization.

N.D. Admin. Code 45-03-21-06 Appointment of experts

The commissioner may retain, at the converting insurer's expense, such qualified experts or advisors as the commissioner deems reasonably necessary to assist in the review of the conversion plan and the determination of the value of the converting insurer on the record date.

N.D. Admin. Code 45-03-21-07 Hearing

The commissioner shall conduct a public hearing regarding a proposed demutualization within ninety days after submission of a complete petition to the commissioner. Notice of the hearing must be published in five newspapers, one of which must be a daily newspaper published at Bismarck, at least two weeks before the hearing on the petition. Notice shall be mailed by the converting insurer to each member and eligible member, accompanied by a copy of the plan of conversion, at least forty-five days prior to the hearing. At the hearing, the converting insurer, its members, eligible members, and any other person whose interests may be affected by the proposed conversion may present evidence, examine or cross-examine witnesses, and offer oral and written arguments and comments to the extent permitted by, and according to the procedure for adjudicative proceedings under, North Dakota Century Code chapter 28-32. The commissioner may approve the conversion of the plan if the commissioner finds the following:

1.The conversion plan is fair and equitable to the converting insurer, its members, and its eligible members;

2.The conversion plan does not violate the law;

3.The converted insurer, after the demutualization, will be able to satisfy the requirements for the issuance of a certificate of authority to write the line or lines of insurance for which it was licensed before the demutualization;

4.Upon demutualization, the paid-in capital and surplus of the converted insurer must be in an amount not less than the minimum paid-in capital and surplus required to organize a domestic stock insurance company;

5.The rights of every member in any policy of insurance of the converting insurer, excluding voting and dividend rights, if any, may not be adversely affected by the demutualization and must continue in full force in accordance with the terms of the policy of each such member;

6.The financial condition of the converted insurer would not be such as might jeopardize its financial stability or prejudice the interest of its policyholders and members;

7.The demutualization will not affect adversely access to health care by persons covered by any health insurance policies or contracts issued by the converting insurer;

8.The demutualization is not likely to be hazardous or prejudicial to the interests of the members, the insureds, or the public; and

9.A conversion plan affecting a nonprofit insurer or holding company makes adequate provision for the interest of the public in such insurer or holding company.

N.D. Admin. Code 45-03-21-08 Action by commissioner

Within ninety days after the conclusion of the public hearing, the commissioner shall enter an order either approving, conditionally approving, or disapproving the plan. An approval or conditional approval of a conversion plan expires if the demutualization is not completed within one hundred eighty days after the approval or conditional approval unless the time for completion is extended at the commissioner's discretion. An order approving, or approving conditionally, a conversion plan under this

chapter does not apply to a demutualization that becomes effective more than thirty days after the date of such order unless no later than five days prior to the date on which the demutualization shall become effective, but in no event any earlier than ten days before such date, the converting insurer shall file with the commissioner the following certifications:

1.A certification that all opinions, private letter rulings, revenue rulings, and other such matters relating to the material tax consequences of the demutualization remain in full force, true and correct as of the anticipated effective date except as expressly and fully noted in the certification.

2.A certification that there have been no material changes in the converting insurer's financial condition which would have a significant effect on any of the matters contained in the conversion plan or in the notices provided to members and eligible members pursuant to

section 45-03-21-07.

3.If the commissioner's order recites any factual bases for approval, or for conditional approval, a certification that no such factual bases have changed materially since the date of the order.

N.D. Admin. Code 45-03-21-09 Member approval

Following the commissioner's order, the plan of conversion and the proposed amendments to the articles of incorporation must be submitted to vote of the converting insurer's members and must be approved by an affirmative vote of a majority of votes cast by no fewer than twenty-five percent of the converting insurer's members, who may vote in person or by proxy at a meeting held for that purpose.

The meeting may be a regular or special meeting but must be held no earlier than ninety days before the effective date. Following the commissioner's approval, notice of a meeting for the purpose of voting on the plan and amendments must be provided by mail to each member entitled to vote in accordance with the articles of incorporation or bylaws of the converting insurer no earlier than ninety days and no later than thirty days before the date of the meeting. Each member entitled to vote may cast one vote unless provided otherwise in the articles of incorporation or bylaws of the converting insurer.

N.D. Admin. Code 45-03-21-10 Consideration for promoting conversion prohibited

A director, officer, or employee of the converting insurer may not receive any fee, commission, or other valuable consideration whatsoever, other than regular salary and compensation, for in any manner aiding, promoting, or assisting in the demutualization except as set forth in the conversion plan approved by the commissioner. This provision may not be deemed to prohibit the payment of reasonable fees and compensation to attorneys at law, accountants, actuaries, and other consultants for services performed in the independent practice of their professions, even though they may also be directors of the converting insurer.

N.D. Admin. Code 45-03-21-11 Directors and officers

The directors and officers of the converting insurer shall serve the converted insurer until new directors and officers are elected and qualify pursuant to the articles of incorporation and bylaws of the converted insurer.

N.D. Admin. Code 45-03-21-12 Stock acquisition - Limitations

The converted insurer may not, for at least three years following the demutualization, repurchase any of its common shares except pursuant to a pro rata tender offer to all shareholders.

N.D. Admin. Code 45-03-21-13 Action after demutualization

An administrative action or proceeding, pending at the time of the demutualization to which the converting insurer may be a party, may not be abated or discontinued by reason of such demutualization.

N.D. Admin. Code 45-03-21-14 Amendment

A petition to engage in a demutualization filed pursuant to section 45-03-21-02 or a conversion plan governed by this chapter may be amended after it is first filed with the commissioner and is subject to the following provisions:

1.If the amendment is made after approval from the commissioner pursuant to section 45-03-21-08 but prior to member approval pursuant to section 45-03-21-09 and if the commissioner determines that the amendment will not affect adversely and materially the interest of the converting insurer or its members, the amendment must be approved in the same manner as the conversion plan in accordance with section 45-03-21-09.

2.If the amendment is made prior to approval by the commissioner pursuant to section 45-03-21-08 and after notice to members has been mailed, an amended notice is not required to be mailed to members if the commissioner determines that the amendment will not adversely and materially affect the interest of the converting insurer or its members.

N.D. Admin. Code 45-03-21-15 Competitive purpose

A person or entity licensed or holding a certificate of authority to transact the business of insurance in the state of North Dakota may not use the possibility that a domestic mutual insurer may demutualize as an inducement to the sale of insurance or for any other competitive purposes.

Chapter 45-03-22 Mutual Insurance Holding Company Act Rules

N.D. Admin. Code 45-03-22-01 Definitions

As used in this chapter:

1."Affiliate" means a person who directly, or indirectly through one or more intermediaries, controls, or is under the control of, or is under common control with, the person specified.

2."Commissioner" means the North Dakota insurance commissioner.

3."Department" means the North Dakota insurance department.

4."Domestic mutual insurance company" means an insurance company organized on a mutual plan and incorporated under the laws of North Dakota.

5."Interested person" means:

a.An officer, director, partner, copartner, or employee of the mutual insurance holding company or its subsidiary or affiliates;

b.A member of the immediate family of any natural person who is an officer, director, partner, or employee of the mutual insurance holding company or its subsidiary or affiliates or who owns, controls, or holds with power to vote, directly or indirectly, five percent or more of the mutual insurance holding company's or its subsidiary's or affiliate's outstanding voting securities;

c.A person or partner or employee of any person who has acted as legal counsel for the person within the previous two years; or

d.A natural person whom the commissioner by order shall have determined to be an interested person by reason of having had, at any time within the last two years, a material business or professional relationship with another person or with a principal executive officer of another person.

6."Intermediate holding company" means a subsidiary holding company of a mutual insurance holding company or part of a holding company system that is controlled by a mutual insurance holding company pursuant to North Dakota Century Code chapter 26.1-12.1.

7."Member of the immediate family" means a spouse, parent, spouse of a parent, child, spouse of a child, brother or sister, including step and adoptive relationships.

8."Mutual insurance holding company" means a holding company organized on a mutual plan and incorporated under the laws of North Dakota, resulting from the reorganization of a domestic mutual insurance company pursuant to North Dakota Century Code chapter 26.1-12.1.

9."Plan of reorganization" means a plan to engage or participate in a reorganization subject to North Dakota Century Code chapter 26.1-12.1.

10."Stock" means any security evidencing an equity interest in the issuing entity.

11."Stock offering" means any proposed sale, exchange, transfer, or other change of ownership of stock or of securities convertible into or exchangeable or exercisable for stock. For the purposes of these rules, "stock offering" does not mean:

a.An offering of preferred stock that is not convertible or exchangeable into common stock and which has no ordinary voting rights; or

b.A transfer of stock between any of the following:

(1)A mutual insurance holding company;

(2)An insurance company subsidiary of a mutual insurance holding company;

(3)An intermediate holding company subsidiary of a mutual insurance holding company; and (4)An insurance company subsidiary of an intermediate holding company subsidiary to a mutual insurance holding company.

N.D. Admin. Code 45-03-22-02 Purpose and scope

A mutual insurance holding company and its subsidiary shall comply with North Dakota Century Code chapters 26.1-05 and 26.1-10 and the terms of all other applicable statutes or rules, including statutes or rules regulating investments, material transactions, and changes in control.

N.D. Admin. Code 45-03-22-03 General rules

1.A merger or acquisition not subject to North Dakota Century Code chapter 26.1-12.1 involving a mutual insurance holding company must be approved by the commissioner pursuant to North Dakota Century Code chapter 26.1-07.

2.Each domestic mutual insurance holding company shall provide to the commissioner an audited annual statement based upon generally accepted accounting principles and statutory accounting principles by June first of each year.

3.Unless otherwise specified by the commissioner, the mutual insurance holding company's annual statement must include:

a.An income statement.

b.A balance sheet.

c.A cash flow statement.

d.An investment plan covering all assets.

e.A statement disclosing any intention or agreement to pledge, borrow against, alienate, hypothecate, or otherwise encumber the assets of the mutual insurance holding company.

f.Complete information on the composition and status of any closed block formed as a part of a plan of reorganization.

4.At least fifty percent of the net worth of a mutual insurance holding company as determined under generally accepted accounting principles must be invested in insurance company subsidiaries.

N.D. Admin. Code 45-03-22-04 Stock offerings - Content of application

1.A stock offering by an insurance company subsidiary of a mutual insurance holding company, an intermediate holding company subsidiary of a mutual insurance holding company, or an insurance company subsidiary of an intermediate holding company subsidiary to a mutual insurance holding company may not occur without the prior written approval of the commissioner secured through the application and hearing process under this chapter. An application for approval of a stock offering must contain the following:

a.A description of the stock intended to be offered by the applicant, including a description of all shareholder rights.

b.The total number of shares authorized to be issued, the estimated number the applicant requests permission to offer, the intended date or range of dates for the offer, and the manner in which the offer is to be conducted.

c.A justification for a uniform planned offering price or a justification of the method by which the offering price will be determined.

d.The name of any underwriter, syndicate member, or placement agent involved and, if known, the name of each entity, person, or group of persons to whom the offering is to be made who will, as a result of the offering, directly or indirectly control five percent or more of the total outstanding class of shares. If any involved underwriter, syndicate member, or placement agent is a corporation, or other entity, the name of each member of its board of directors or equivalent management team, with the names of the offeror's board of directors, must be provided. A copy of any offering documents, including any filing with the securities and exchange commission or a state securities regulator, must be included in the application.

e.A description of any subscription rights to be afforded a member of the mutual insurance holding company.

f.A detailed description of all expenses projected to be incurred in connection with the offering.

g.A statement as to the intended use of the funds raised by the offering.

h.A description of any fee, commission, or other valuable consideration earned by a director, officer, agent, or employee of the mutual insurance holding company or its affiliates specifically for aiding, promoting, or assisting in the structuring or placement of the offering. The commissioner may disallow any fee, commission, or other valuable consideration deemed to be unreasonable. This subdivision does not apply to the payment of reasonable fees and compensation to attorneys at law, accountants, actuaries, and investment bankers for services performed in the independent practice of their professions, even though the underwriters of such services are also directors of the mutual insurance holding company, its subsidiaries, or affiliates.

i.A statement that the mutual insurance holding company, either directly or indirectly through an intermediate holding company of a mutual insurance holding company, shall retain ownership of at least a majority of the voting shares of the capital stock of the subsidiary stock insurance company as required by North Dakota Century Code section 26.1-12.1-02.

j.Such other information as the commissioner shall require.

2.An application for a stock offering must include the following provisions:

a.A restriction prohibiting an officer, director, employee, or other interested person of the mutual insurance holding company or its subsidiaries or its affiliates from the purchase or ownership of a share of the offering or receipt of an option to or for the benefit of an officer, director, employee, or other interested person, for a period of at least six months following the conclusion of the offering. This subdivision does not limit the rights of an officer, director, or other interested person from exercising a subscription right generally accorded a member of the mutual insurance holding company, except that, pursuant to such subscription right, an officer, director, or other interested person of the mutual insurance holding company or its subsidiaries or affiliates may not purchase or own, in the aggregate, directly or indirectly, more than five percent of the securities offered in the offering for a period of at least six months following the conclusion of the offering.

b.A provision that an entity created under a plan of reorganization may issue more than one class of securities provided, however, that at all times a voting majority of each class must be held, directly or indirectly, by the mutual insurance holding company and, provided further, that no class of common stock may receive a dividend or other right greater than the class held, directly or indirectly, in the mutual insurance holding company.

N.D. Admin. Code 45-03-22-05 Stock hearing

The commissioner may hold a public hearing to consider an application for approval of a stock offering. Upon receipt of an application for approval of an offering that includes an initial stock offering, the commissioner may hold a public hearing at which all interested parties may appear and present evidence and argument regarding the applicant's planned offering. If a hearing is held, the commissioner must publish notice of the hearing in at least one newspaper of general circulation in the state. The applicant must provide its policyholders with notice of the hearing at least twenty, but not more than sixty, days prior to the hearing by regular mail. The notice must be approved by the commissioner. Following the hearing, the commissioner may approve, conditionally approve, or deny the application.

1.The commissioner must approve the offering if the applicant demonstrates clearly that:

a.The offering complies with this chapter and other provisions of law;

b.The method for establishing the price of the offering is consistent with generally accepted market or industry practices; and

c.The plan and offering will not be unfair or contrary to the financial interests of the members of the mutual insurance holding company.

2.In determining whether the application and offering will not be unfair to or contrary to the financial interests of the members of the mutual insurance holding company, the commissioner may consider the following:

a.Whether the offering will dilute a current member's interest;

b.Whether the application provides a method whereby accumulated earnings, cash, or other nonoperating assets are distributed to or otherwise inure to the fair and equitable benefit of the eligible members, members, and new members;

c.Whether the offering will create a class of security holders with interests adverse to those of the members;

d.Whether the application and offering require a member to pay additional funds to keep a membership interest;

e.Whether the application and offering create an opportunity for the officers or directors of the mutual insurance holding company, its subsidiaries, or affiliates to enrich themselves at the expense of members;

f.Whether the offering will diminish a policyholder's contractual rights; and

g.Such other factors that the commissioner may deem necessary.

This section does not prohibit the filing of a registration statement with the securities and exchange commission.

N.D. Admin. Code 45-03-22-06 Subsequent offerings

Notwithstanding the provisions of section 45-03-22-05, stock offerings that are not initial stock offerings must be approved by the commissioner and must be made in accordance with the following:

1.If an insurance company subsidiary of a mutual insurance holding company, an intermediate holding company subsidiary of a mutual insurance holding company, or an insurance company subsidiary of an intermediate holding company subsidiary to a mutual insurance holding company intends to make a stock offering that would be governed by the provisions of this

section, then that entity must deliver to the commissioner, not less than thirty days prior to the offering, a notice of the planned offering which includes:

a.The total number of shares to be offered;

b.The intended date of sale;

c.A record of the trading price and volume of the security during the prior fifty-two weeks;

d.Evidence that, after the completion of the offering, the mutual insurance holding company will retain ownership of a majority of the voting shares of the capital stock of the reorganized insurer as required by North Dakota Century Code section 26.1-12.1-02; and

e.Such other information the commissioner may deem necessary.

2.Unless otherwise provided, the commissioner's approval of an offering expires one hundred eighty days after the date of the commissioner's order unless otherwise extended in writing by the commissioner.

N.D. Admin. Code 45-03-22-07 Prohibited practices

The following practices are prohibited:

1.Borrowing funds by the mutual insurance holding company or its subsidiaries or affiliates from the mutual insurance holding company's subsidiary or affiliates to finance the purchase of a stock offering by the reorganized insurer.

2.Payment of a commission, special fee, or any other special payment or extraordinary compensation to an officer, director, interested person, or affiliate for arranging, promoting, aiding, or assisting in the reorganization of the mutual insurance holding company or for arranging, promoting, aiding, assisting, or participating in the structuring or placement of an offering of securities except as permitted by the commissioner.

3.Avoiding this chapter by entering into an understanding or agreement transferring a legal or beneficial ownership of voting securities to another person.

4.The publication of a prospectus, information, sales material, or sales presentation by the applicant, or by any representative, agent, or affiliate of the applicant, may not contain a representation that the commissioner's approval of an offering constitutes an endorsement of the price, price range, fairness, suitability, or any other information or matter relating to the offered securities or arising from the offering. The front of the prospectus must contain in boldface type a statement that the commissioner's approval of an offering does not constitute an endorsement of the price, price range, fairness, suitability, or any other information or matter.

N.D. Admin. Code 45-03-22-08 Reporting of stock ownership and transactions

A director or officer of a mutual insurance holding company, its subsidiary, or affiliate who acquires directly or indirectly the beneficial ownership of any security issued by any member of the mutual insurance holding company system, within fifteen days following the transaction, shall file with the commissioner a statement of the transaction on a form prescribed by the commissioner.

Chapter 45-03-23 Custodial Agreements and the Use of Clearing Corporations

N.D. Admin. Code 45-03-23-01 Definitions

As used in this chapter, unless the context requires otherwise, the term:

1."Agent" means a national bank, state bank, trust company, or broker-dealer which maintains an account in its name in a clearing corporation or which is a member of the federal reserve system and through which a custodian participates in a clearing corporation, including the treasury/reserve automated debt entry securities system (TRADES) or treasury direct systems except that with respect to securities issued by institutions organized or existing under the laws of any foreign country or securities used to meet the deposit requirements pursuant to the laws of a foreign country as a condition of doing business therein, "agent" may include a corporation which is organized or existing under the laws of any foreign country and which is legally qualified under those laws to accept custody of securities.

2."Clearing corporation" means a corporation as defined in subsection 1 of North Dakota Century Code section 41-08-02 which is organized for the purpose of effecting transactions in securities by computerized book-entry; except that with respect to securities issued by institutions organized or existing under the laws of any foreign country or securities used to meet the deposit requirements pursuant to the laws of a foreign country as a condition of doing business therein, "clearing corporation" may include a corporation that is organized or existing under the laws of any foreign country and which is legally qualified under those laws to effect transactions in securities by computerized book-entry. Clearing corporation also includes “treasury/reserve automated debt entry securities system” and “treasury direct” book-entry securities systems established under 31 U.S.C. 3100 et seq., 12 U.S.C. pt. 391, and 5 U.S.C. pt. 301.

3."Custodian" means:

a.A national bank, state bank, or trust company that must at all times during which it acts as a custodian under this chapter be no less than adequately capitalized as determined by the standards adopted by United States banking regulators and which is regulated by either state banking laws or is a member of the federal reserve system and which is legally qualified to accept custody of securities in accordance with the standards set forth below; except that with respect to securities issued by institutions organized or existing under the laws of any foreign country, or securities used to meet the deposit requirements pursuant to the laws of a foreign country as a condition of doing business therein, "custodian" may include a bank or trust company incorporated or organized under the laws of a country other than the United States that is regulated as such by that country’s government or an agency of that country that must be at all times during which it acts as a custodian pursuant to this chapter be no less than adequately capitalized as determined by the standards adopted by international banking authorities and which is legally qualified to accept custody of securities; or

b.A broker-dealer that shall be registered with and subject to jurisdiction of the securities and exchange commission, maintains membership in the securities investor protection corporation, and has a tangible net worth equal to or greater than two hundred fifty million dollars.

4."Custodied securities" means securities held by the custodian or its agent or in a clearing corporation, including the treasury/reserve automated debt equity securities system or treasury direct systems.

5."Securities" means certificated securities and uncertificated securities as defined in subdivisions d and r of subsection 1 of North Dakota Century Code section 41-08-02.

6."Securities certificate" means a certificate as defined in subdivision p of subsection 1 of North Dakota Century Code section 41-08-02.

7."Tangible net worth" means shareholders' equity, less intangible assets, as reported in the broker-dealer’s most recent annual or transition report under section 13 or 15(d) of the Securities Exchange Act of 1934 (SEC form 10-K) filed with the securities and exchange commission.

8."Treasury/reserve automated debt entry securities system" ("TRADES") and “treasury direct” mean the book-entry securities systems established under 31 U.S.C. 3100 et seq., 12 U.S.C. pt. 391 and 5 U.S.C. pt. 301. The operation of TRADES and treasury direct systems are subject to 31 C.F.R. pt. 357, et seq.

History

• History: Effective March 1, 2004; amended effective April 1, 2010.

N.D. Admin. Code 45-03-23-02 Custody of agreement - Requirements

1.An insurance company may provide, by written agreement with a custodian, for the custody of its securities with a custodian. The securities that are the subject of the agreement may be held by the custodian or its agent or in a clearing corporation.

2.The agreement must be in writing and must be authorized by the resolution of the board of directors of the insurance company or of an authorized committee of the board. The terms of the agreement must comply with the following:

a.Securities certificates held by the custodian must be held separate from the securities of the custodian and of all of its other customers.

b.Securities held indirectly by the custodian and securities in a clearing corporation must be separately identified on the custodian's official records as being owned by the insurance company. The records must identify which securities are held by the custodian or by its agent and which securities are in a clearing corporation. If the securities are in a clearing corporation, the records must also identify where the securities are and, if in a clearing corporation, the name of the clearing corporation and, if through an agent, the name of the agent.

c.All custodied securities that are registered must be registered in the name of the company or in the name of a nominee of the company or in the name of the custodian or its nominee or, if in a clearing corporation, in the name of the clearing corporation or its nominee.

d.Custodied securities shall be held subject to the instructions of the insurance company and shall be withdrawable upon the demand of the insurance company, except that custodied securities used to meet the deposit requirements set forth in North Dakota Century Code section 26.1-05-23 must, to the extent required by that section, be under the control of the insurance commissioner and must not be withdrawn by the insurance company without the commissioner's approval.

e.The custodian shall be required to send or cause to be sent to the insurance company a confirmation of all transfers of custodied securities to or from the account of the insurance company. In addition, the custodian shall be required to furnish no less than monthly the insurance company with reports of holdings of custodied securities at such times and containing information as may be reasonably requested by the insurance company. The custodian’s trust committee’s annual reports of its review of the insurer’s trust accounts shall also be provided to the insurer. Reports and verifications may be transmitted in electronic or paper form.

f.During the course of the custodian's regular business hours, any officer or employee of the insurance company, any independent accountant selected by the insurance company, and any representative of an appropriate regulatory body shall be entitled to examine, on the premises of the custodian, the custodian's records relating to custodied securities, but only upon furnishing the custodian with written instructions to that effect from an appropriate officer of the insurance company.

g.The custodian and its agents shall be required to send to the insurance company:

(1)All reports which they receive from a clearing corporation on their respective systems of internal accounting control; and (2)Any reports prepared by outside auditors on the custodians or its agent's internal accounting control of custodied securities that the insurance company may reasonably request.

h.The custodian shall maintain records sufficient to determine and verify information relating to custodied securities that may be reported in the insurance company's annual statement and supporting schedules and information required in any audit of the financial statements of the insurance company.

i.The custodian shall provide, upon written request from an appropriate officer of the insurance company, the appropriate affidavits, substantially in the form described in the appendices to this chapter, with respect to custodied securities.

j.A national bank, state bank, or trust company shall secure and maintain insurance protection in an adequate amount covering the bank’s or trust company’s duties and activities as custodian for the insurer’s assets and shall state in the custody agreement that protection is in compliance with the requirements of the custodian’s banking regulator. A broker-dealer shall secure and maintain insurance protection for each insurance company’s custodied securities in excess of that provided by the securities investor protection corporation in an amount equal to or greater than the market value of each respective insurance company’s custodied securities. The commissioner may determine whether the type of insurance is appropriate and the amount of coverage is adequate.

k.The custodian shall be obligated to indemnify the insurance company for any loss of custodied securities, except that the custodian shall not be so obligated to the extent that the loss was caused by other than the negligence or dishonesty of the custodian.

l.The custodian shall be obligated to indemnify the insurance company for any loss of custodied securities occasioned by the negligence or dishonesty of the custodian's officers or employees, or burglary, robbery, holdup, theft, or mysterious disappearance, including loss by damage or destruction.

m.In the event that there is a loss of custodied securities for which the custodian shall be obligated to indemnify the insurance company, the custodian shall promptly replace the securities or their value thereof and the value of any loss of rights or privileges resulting from the loss of securities.

n.The agreement may provide that the custodian will not be liable for any failure to take any action required to be taken under the agreement in the event and to the extent that the taking of such action is prevented or delayed by war (whether declared or not and including existing wars), revolution, insurrection, riot, civil commotion, act of God, accident, fire, explosion, stoppage of labor, strikes or other differences with employees, laws, rules, orders, or other acts of any governmental authority, or any other cause whatever beyond its reasonable control.

o.In the event that the custodian gains entry in a clearing corporation through an agent, there shall be an agreement between the custodian and the agent under which the agent shall be subject to the same liability for loss of custodied securities as the custodian; provided, however, that if the agent shall be subject to regulation under the laws of a jurisdiction which is different from the jurisdiction the laws of which regulate the custodian, the insurance commissioner of the state of domicile of the insurance company may accept a standard of liability applicable to the agent which is different from the standard of liability applicable to the custodian.

p.The custodian shall provide written notification to the insurer's domiciliary commissioner if the custodial agreement with the insurer has been terminated or if one hundred percent of the account assets in any one custody account have been withdrawn. This notification shall be remitted to the insurance commissioner within three business days of the receipt by the custodian of the insurer's written notice of termination or within three business days of the withdrawal of one hundred percent of the account assets.

3.An insurer having direct written and assumed premiums of less than three million dollars in any calendar year may request an exemption from the requirements of this section. The insurer must file with the commissioner a written statement explaining the reasons why the insurer should be exempt. The commissioner may grant an exemption if the commissioner finds that compliance with this section would constitute a financial or organizational hardship upon the insurer.

History

• History: Effective March 1, 2004; amended effective April 1, 2010; July 1, 2012.

N.D. Admin. Code 45-03-23-03 Deposit with affiliates - Requirements

1.Nothing prevents an insurance company from depositing securities with another insurance company with which the depositing insurance company is affiliated, provided that the securities are deposited pursuant to a written agreement authorized by the board of directors of the depositing insurance company or an authorized committee of the board and that the receiving insurance company is organized under the laws of one of the states of the United States or of the District of Columbia. If the respective states of domicile of the depositing and receiving insurance companies are not the same, the depositing insurance company shall have given notice of such deposit to the insurance commissioner in the state of its domicile and the commissioner shall not have objected to it within thirty days of the receipt of the notice.

2.The terms of the agreement must comply with the following:

a.The insurance company receiving the deposit shall maintain records adequate to identify and verify the securities belonging to the depositing insurance company.

b.The receiving insurance company shall allow representatives of any appropriate regulatory body to examine records relating to securities held subject to the agreement.

c.The depositing insurance company may authorize the receiving insurance company:

(1)To hold the securities of the depositing insurance company in bulk, in certificates issued in the name of the receiving insurance company or its nominee, and to commingle them with securities owned by other affiliates of the receiving insurance company; and (2)To provide for such securities to be held by a custodian, including the custodian of securities of the receiving insurance company or in a clearing corporation.

APPENDIX I

FORM A

(For use by a custodian where securities entrusted to its care have not been redeposited elsewhere) ____________________, being duly sworn deposes and says that he or she is ___________ of ______________, a corporation organized under and pursuant to the laws of the __________ with the That his or her duties involve supervision of activities of the corporation as custodian and records relating to the corporation;

That the corporation is custodian for certain securities of ______________________ having a place of business at __________________________ ("insurance company") pursuant to an agreement That the schedule attached is a true and complete statement of securities (other than those caused to be deposited with The Depository Trust Company or like entity or a Federal Reserve Bank under the TRADES or Treasury Direct systems) which were in the custody of the corporation for the account of the insurance company as of the close of business on _____________________; that, unless otherwise indicated on the schedule the next maturing and all subsequent coupons were then either attached to coupon bonds or in the process of collection; and that, unless otherwise shown on the schedule, all such securities were in bearer form or in registered form in the name of the insurance company or its nominee, or of the corporation or its nominee, or were in the process of being registered in such form;

That the corporation as custodian has the responsibility for the safekeeping of the securities as that responsibility is specifically set forth in the agreement between the corporation as custodian and the insurance company; and That, to the best of his or her knowledge and belief, unless otherwise shown on the schedule, the securities were the property of the insurance company and were free of all liens, claims, or

APPENDIX II

FORM B

(For use in instances where a custodian corporation maintains securities on deposit with The Depository Trust Company or like entity) ____________________, being duly sworn deposes and says that he or she is ___________ of ______________, a corporation organized under and pursuant to the laws of the __________ with the That his or her duties involve supervision of activities of the corporation as custodian and records relating thereto;

That the corporation is custodian for certain securities of ______________________ having a place of business at __________________________ ("insurance company") pursuant to an agreement That the corporation has caused certain of the securities to be deposited with _______________ and that the schedule attached hereto is a true and complete statement of the securities of the insurance company of which the custodian was custodian as of the close of business on ______________________, and which were so deposited on such date;

That the corporation as custodian has the responsibility for the safekeeping of the securities both in the possession of the corporation or deposited with ___________________________ as is specifically set forth in the agreement between the corporation as custodian and the insurance company; and That, to the best of his or her knowledge and belief, unless otherwise shown on the schedule, the securities were the property of the insurance company and were free of all liens, claims, or

APPENDIX III

FORM C

(For use where ownership is evidenced by book-entry at a Federal Reserve Bank) ____________________, being duly sworn deposes and says that he or she is ___________ of ______________, a corporation organized under and pursuant to the laws of the __________ with the That his or her duties involve supervision of activities of the corporation as custodian and records relating to the corporation;

That the corporation is custodian for certain securities of ______________________ ("insurance company") with a place of business at __________________________ pursuant to an agreement That it has caused certain securities to be credited to its book-entry account with the Federal Reserve Bank of ________________________ under the TRADES or Treasury Direct systems; and that the schedule attached is a true and complete statement of the securities of the insurance company of which the corporation was custodian as of the close of business on ____________________ which were in a "General" book-entry account maintained in the name of the corporation on the books and records of the Federal Reserve Bank of _______________ at such date;

That the corporation has the responsibility for the safekeeping of the securities both in the possession of the corporation or in the general book-entry account as is specifically set forth in the agreement between the corporation as custodian and the insurance company; and That, to the best of his or her knowledge and belief, unless otherwise shown on the schedule, the securities were the property of the insurance company and were free of all liens, claims, or

History

• History: Effective March 1, 2004; amended effective April 1, 2010.

Chapter 45-03-24 Unclaimed Life Insurance Benefits

N.D. Admin. Code 45-03-24-01 Commissioner's authority

Pursuant to North Dakota Century Code chapter 26.1-55, the commissioner may approve a transition plan and timeline temporarily waiving some or all of the requirements of chapter 26.1-55 to allow insurance companies to phase into compliance with chapter 26.1-55.

N.D. Admin. Code 45-03-24-02 Applicability

Companies failing to receive transition plan approval or failing to meet a timeline approved by the commissioner must comply with North Dakota Century Code chapter 26.1-55.

N.D. Admin. Code 45-03-24-03 Requirements

The commissioner may approve a transition plan temporarily waiving some or all of the requirements of North Dakota Century Code chapter 26.1-55 if:

1.The company demonstrates and the commissioner determines implementation of the requirements of chapter 26.1-55 will cause legitimate financial hardship;

2.The insurance company transition plan is submitted to the commissioner at least six months prior to the waiver date requested; and

3.The transition plan includes a timeline to convert electronic records and implement electronic searches within a reasonable time as determined by the commissioner.

Chapter 45-03-25 Corporate Governance Annual Disclosure Model Regulation

N.D. Admin. Code 45-03-25-01 Authority

This chapter is adopted pursuant to the authority granted by North Dakota Century Code chapter 26.1-10.3.

N.D. Admin. Code 45-03-25-02 Purpose

The purpose of this chapter is to set forth the procedures for filing and the required contents of the corporate governance annual disclosure, deemed necessary by the commissioner to carry out the provisions of North Dakota Century Code chapter 26.1-10.3.

N.D. Admin. Code 45-03-25-03 Definitions

1."Board" means an insurer's or insurance group's board of directors.

2."Commissioner" means the North Dakota insurance commissioner.

3."Insurance group" for the purpose of this chapter means those insurers and affiliates included within an insurance holding company system as defined in North Dakota Century Code

section 26.1-10-01.

4."Insurer" has the same meaning as set forth in North Dakota Century Code section 26.1-29-02, except that it does not include agencies, authorities or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state.

5."Senior management" means any corporate officer responsible for reporting information to the board of directors at regular intervals or providing this information to shareholders or regulators and includes the chief executive officer, chief financial officer, chief operations officer, chief procurement officer, chief legal officer, chief information officer, chief technology officer, chief revenue officer, chief visionary officer, or any other "C" level executive.

N.D. Admin. Code 45-03-25-04 Filing procedures

1.An insurer, or the insurance group of which the insurer is a member, required to file a corporate governance annual disclosure pursuant to North Dakota Century Code chapter 26.1-10.3, no later than June first of each calendar year, shall submit to the commissioner a corporate governance annual disclosure that contains the information described in section 45-03-25-05.

2.The corporate governance annual disclosure must include a signature of the insurer's or insurance group's chief executive officer or corporate secretary attesting to the best of that individual's belief and knowledge that the insurer or insurance group has implemented the corporate governance practices and that a copy of the corporate governance annual disclosure has been provided to the board or the appropriate committee thereof.

3.The insurer or insurance group has discretion regarding the appropriate format for providing the information required by these regulations and may customize the corporate governance annual disclosure to provide the most relevant information necessary to permit the commissioner to gain an understanding of the corporate governance structure, policies, and practices utilized by the insurer or insurance group.

4.For purposes of completing the corporate governance annual disclosure, the insurer or insurance group may choose to provide information on governance activities that occur at the ultimate controlling parent level, an intermediate holding company level or the individual legal entity level, or both, depending upon how the insurer or insurance group has structured its system of corporate governance. The insurer or insurance group is encouraged to make the corporate governance annual disclosures at the level at which the insurer's or insurance group's risk appetite is determined, or at which the earnings, capital, liquidity, operations, and reputation of the insurer are overseen collectively and at which the supervision of those factors are coordinated and exercised, or the level at which legal liability for failure of general corporate governance duties would be placed. If the insurer or insurance group determines the level of reporting based on these criteria, it shall indicate which of the three criteria was used to determine the level of reporting and explain any subsequent changes in the level of reporting.

5.Notwithstanding subsection 1, and as outlined in North Dakota Century Code section 26.1-10.3-02, if the corporate governance annual disclosure is completed at the insurance group level, it must be filed with the lead state of the group as determined by the procedures outlined in the most recent Financial Analysis Handbook adopted by the national association of insurance commissioners. In these instances, a copy of the corporate governance annual disclosure also must be provided to the chief regulatory official of any state in which the insurance group has a domestic insurer, upon request.

6.An insurer or insurance group may comply with this section by referencing other existing documents (e.g., own risk and solvency assessment summary report, holding company form B or F filings, securities and exchange commission proxy statements, or foreign regulatory reporting requirements) if the documents provide information comparable to the information described in subsection 5. The insurer or insurance group clearly shall reference the location of the relevant information within the corporate governance annual disclosure and attach the referenced document if it is not already filed or available to the regulator.

7.Each year following the initial filing of the corporate governance annual disclosure, the insurer or insurance group shall file an amended version of the previously filed corporate governance annual disclosure indicating where changes have been made. If no changes were made in the information or activities reported by the insurer or insurance group, the filing should so state.

N.D. Admin. Code 45-03-25-05 Contents of corporate governance annual disclosure

1.The insurer or insurance group shall be as descriptive as possible in completing the corporate governance annual disclosure, with inclusion of attachments or example documents used in the governance process, since these may provide a means to demonstrate the strengths of their governance framework and practices.

2.The corporate governance annual disclosure must describe the insurer's or insurance group's corporate governance framework and structure including consideration of the following:

a.The board and various committees thereof ultimately responsible for overseeing the insurer or insurance group and the level at which that oversight occurs (e.g., ultimate control level, intermediate holding company, or legal entity). The insurer or insurance group shall describe and discuss the rationale for the current board size and structure; and

b.The duties of the board and each of its significant committees and how they are governed (e.g., bylaws, charters, and informal mandates), as well as how the board's leadership is structured, including a discussion of the roles of chief executive officer and chairman of the board within the organization.

3.The insurer or insurance group shall describe the policies and practices of the most senior governing entity and significant committees thereof, including a discussion of the following factors:

a.How the qualifications, expertise, and experience of each board member meet the needs of the insurer or insurance group.

b.How an appropriate amount of independence is maintained on the board and its significant committees.

c.The number of meetings held by the board and its significant committees over the past year as well as information on director attendance.

d.How the insurer or insurance group identifies, nominates, and elects members to the board and its committees. The discussion should include, for example:

(1)Whether a nomination committee is in place to identify and select individuals for consideration.

(2)Whether term limits are placed on directors.

(3)How the election and re-election processes function.

(4)Whether a board diversity policy is in place and if so, how it functions.

e.The processes in place for the board to evaluate its performance and the performance of its committees, as well as any recent measures taken to improve performance, including any board or committee training programs that have been put in place.

4.The insurer or insurance group shall describe the policies and practices for directing senior management, including a description of the following factors:

a.Any processes or practices (i.e., suitability standards) to determine whether officers and key persons in control functions have the appropriate background, experience, and integrity to fulfill their prospective roles, including:

(1)Identification of the specific positions for which suitability standards have been developed and a description of the standards employed.

(2)Any changes in an officer's or key person's suitability as outlined by the insurer's or insurance group's standards and procedures to monitor and evaluate such changes.

b.The insurer's or insurance group's code of business conduct and ethics, the discussion of which considers, for example:

(1)Compliance with laws, rules, and regulations; and (2)Proactive reporting of any illegal or unethical behavior.

c.The insurer's or insurance group's processes for performance evaluation, compensation, and corrective action to ensure effective senior management throughout the organization, including a description of the general objectives of significant compensation programs and what the programs are designed to reward. The description must include sufficient detail to allow the commissioner to understand how the organization ensures that compensation programs do not encourage and reward excessive risk taking.

Elements to be discussed may include, for example:

(1)The board's role in overseeing management compensation programs and practices.

(2)The various elements of compensation awarded in the insurer's or insurance group's compensation programs and how the insurer or insurance group determines and calculates the amount of each element of compensation paid;

(3)How compensation programs are related to both company and individual performance over time;

(4)Whether compensation programs include risk adjustments and how those adjustments are incorporated into the programs for employees at different levels;

(5)Any clawback provisions built into the programs to recover awards or payments if the performance measures upon which they are based are restated or otherwise adjusted; and (6)Any other factors relevant in understanding how the insurer or insurance group monitors its compensation policies to determine whether its risk management objectives are met by incentivizing its employees.

d.The insurer's or insurance group's plans for chief executive officer and senior management succession.

5.The insurer or insurance group shall describe the processes by which the board, its committees, and senior management ensure an appropriate amount of oversight to the critical risk areas impacting the insurer's business activities, including a discussion of:

a.How oversight and management responsibilities are delegated between the board, its committees, and senior management;

b.How the board is kept informed of the insurer's strategic plans, the associated risks, and steps that senior management is taking to monitor and manage those risks; and

c.How reporting responsibilities are organized for each critical risk area. The description should allow the commissioner to understand the frequency at which information on each critical risk area is reported to and reviewed by senior management and the board. This description may include, for example, the following critical risk areas of the insurer:

(1)Risk management processes. An own risk and solvency assessment summary report filer may refer to its own risk and solvency assessment summary report pursuant to North Dakota Century Code chapter 26.1-10.2;

(2)Actuarial function;

(3)Investment decisionmaking processes;

(4)Reinsurance decisionmaking processes;

(5)Business strategy/finance decisionmaking processes;

(6)Compliance function;

(7)Financial reporting/internal auditing; and (8)Market conduct decisionmaking processes.

N.D. Admin. Code 45-03-25-06 Severability clause

If any provision of this chapter, or the application of this chapter to any person or circumstance, is held invalid, the validity does not affect other provisions or applications of this chapter which can be given effect without the invalid provision or application, and to that end the provisions of this chapter are severable.

Chapter 45-03-26 Term and Universal Life Insurance Reserve Financing Model Regulation

N.D. Admin. Code 45-03-26-01 Authority

This chapter is adopted pursuant to the authority granted by North Dakota Century Code chapter 26.1-31.2.

History

• Law Implemented: NDCC 26.1-31.2-04

N.D. Admin. Code 45-03-26-02 Purpose

The purpose and intent of this chapter is to establish standards governing reserve financing arrangements pertaining to life insurance policies containing guaranteed nonlevel gross premiums, guaranteed nonlevel benefits and universal life insurance policies with secondary guarantees; and to ensure that, with respect to each such financing arrangement, funds consisting of primary security and other security, as defined in section 45-03-26-05, are held by or on behalf of ceding insurers in the forms and amounts required herein. In general, reinsurance ceded for reserve financing purposes has one or more of the following characteristics: some or all of the assets used to secure the reinsurance treaty or to capitalize the reinsurer:

1.Are issued by the ceding insurer or its affiliates;

2.Are not unconditionally available to satisfy the general account obligations of the ceding insurer; or

3.Create a reimbursement, indemnification or other similar obligation on the part of the ceding insurer or any if its affiliates, other than a payment obligation under a derivative contract acquired in the normal course and used to support and hedge liabilities pertaining to the actual risks in the policies ceded pursuant to the reinsurance treaty.

N.D. Admin. Code 45-03-26-03 Applicability

This chapter shall apply to reinsurance treaties that cede liabilities pertaining to covered policies, as that term is defined in subsection 2 of section 45-03-26-05, issued by any life insurance company domiciled in this state. This chapter and North Dakota Century Code chapter 26.1-31.2 shall both apply to such reinsurance treaties.

N.D. Admin. Code 45-03-26-04 Exemptions from this chapter

This chapter does not apply to the situations described in subsections 1 through 6.

1.Reinsurance of:

a.Policies that satisfy the criteria for exemption set forth in subsection 6 of section 45-04-12-04 or subsection 7 of section 45-04-12-04 and which are issued before the later of:

(1)The effective date of this chapter, and (2)The date on which the ceding insurer begins to apply the provisions of VM-20 to establish the ceded policies' statutory reserves, but in no event later than January 1, 2020;

b.Portions of policies that satisfy the criteria for exemption set forth in subsection 5 of

section 45-04-12-04 and which are issued before the later of:

(1)The effective date of this chapter, and (2)The date on which the ceding insurer begins to apply the provisions of VM-20 to establish the ceded policies' statutory reserves, but in no event later than January 1, 2020;

c.Any universal life policy that meets all of the following requirements:

(1)Secondary guarantee period, if any, is five years or less;

(2)Specified premium for the secondary guarantee period is not less than the net level reserve premium for the secondary guarantee period based on the commissioners standard ordinary valuation tables and valuation interest rate applicable to the issue year of the policy; and (3)The initial surrender charge is not less than one hundred percent of the first year annualized specified premium for the secondary guarantee period;

d.Credit life insurance;

e.Any variable life insurance policy that provides for life insurance, the amount or duration of which varies according to the investment experience of any separate account or accounts; or

f.Any group life insurance certificate unless the certificate provides for a stated or implied schedule of maximum gross premiums required in order to continue coverage in force for a period in excess of one year;

2.Reinsurance ceded to an assuming insurer that meets the applicable requirements of subsection 5 of North Dakota Century Code section 26.1-31.2-01;

3.Reinsurance ceded to an assuming insurer that meets the applicable requirements of subsection 2, 3, or 4 of North Dakota Century Code section 26.1-31.2-01 and that, in addition:

a.Prepares statutory financial statements in compliance with the national association of insurance commissioners' "Accounting Practices and Procedures Manual", without any departures from national association of insurance commissioners statutory accounting practices and procedures pertaining to the admissibility or valuation of assets or liabilities that increase the assuming insurer’s reported surplus and are material enough that they need to be disclosed in the financial statement of the assuming insurer pursuant to Statement of Statutory Accounting Principles No. 1; and

b.Is not in a company action level event, regulatory action level event, authorized control level event, or mandatory control level event as those terms are defined in North Dakota Century Code chapter 26.1-03.1 when its risk-based capital is calculated in accordance with the life risk-based capital report, including overview and instructions for companies, as the same may be amended by the national association of insurance commissioners from time to time, without deviation;

4.Reinsurance ceded to an assuming insurer that meets the applicable requirements of subsection 2, 3, or 4 of North Dakota Century Code section 26.1-31.2-01 and that, in addition:

a.Is not an affiliate, as that term is defined in subsection 1 of North Dakota Century Code

section 26.1-10-01 of:

(1)The insurer ceding the business to the assuming insurer; or (2)Any insurer that directly or indirectly ceded the business to that ceding insurer;

b.Prepares statutory financial statements in compliance with the national association of insurance commissioners' "Accounting Practices and Procedures Manual";

c.Is both:

(1)Licensed or accredited in at least ten states, including its state of domicile; or (2)Not licensed in any state as a captive, special purpose vehicle, special purpose financial captive, special purpose life reinsurance company, limited purpose subsidiary, or any other similar licensing regime; and

d.Is not, or would not be, below five hundred percent of the authorized control level risk-based capital as that term is defined in North Dakota Century Code chapter 26.1-03.1 when its risk-based capital is calculated in accordance with the life risk-based capital report, including overview and instructions for companies, as the same may be amended by the national association of insurance commissioners from time to time, without deviation, and without recognition of any departures from national association of insurance commissioners' statutory accounting practices and procedures pertaining to the admission or valuation of assets or liabilities that increase the assuming insurer’s reported surplus;

5.Cessions to an assuming insurer that:

a.Meets the conditions set forth in subsection 7 of North Dakota Century Code section 26.1-31.2-01 or is operating in accordance with provisions substantially equivalent to subsection 7 of North Dakota Century Code section 26.1-31.2-01 in a minimum of five other states;

b.Is certified in this state as set forth in subsection 6 of North Dakota Century Code section 26.1-31.2-01 or certified in accordance with provisions substantially equivalent to subsection 6 of North Dakota Century Code section 26.1-31.2-01 in a minimum of five other states; or

c.Maintains at least two hundred fifty million dollars in capital and surplus when determined in accordance with national association of insurance commissioners' "Accounting Practices and Procedures Manual", including all amendments thereto adopted by the national association of insurance commissioners, excluding the impact of any permitted or prescribed practices; and is:

(1)Licensed in at least twenty-six states; or (2)Licensed in at least ten states, and licensed or accredited in a total of at least thirty-five states; or

6.Reinsurance not otherwise exempt under subsections 1 through 5 if the commissioner, after consulting with the national association of insurance commissioners' financial analysis working group or other group of regulators designated by the national association of insurance commissioners, as applicable, determines under all the facts and circumstances that all of the following apply:

a.The risks are clearly outside of the intent and purpose of this chapter as described in

section 45-03-26-02;

b.The risks are included within the scope of this chapter only as a technicality; and

c.The application of this chapter to those risks is not necessary to provide appropriate protection to policyholders. The commissioner shall publicly disclose any decision made pursuant to this subsection to exempt a reinsurance treaty from this chapter, as well as the general basis therefor, including a summary description of the treaty.

History

• Law Implemented: NDCC 26.1-31.2-01

N.D. Admin. Code 45-03-26-05 Definitions

1."Actuarial method" means the methodology used to determine the required level of primary security, as described in section 45-03-26-06.

2."Covered policies" means subject to the exemptions described in section 45-03-26-04, covered policies are those policies, other than grandfathered policies, of the following policy types:

a.Life insurance policies with guaranteed nonlevel gross premiums or guaranteed nonlevel benefits, or both, except for flexible premium universal life insurance policies; or

b.Flexible premium universal life insurance policies with provisions resulting in the ability of a policyholder to keep a policy in force over a secondary guarantee period.

3."Grandfathered policies" means policies of the types described in subsection 2 that were:

a.Issued prior to January 1, 2015; and

b.Ceded, as of December 31, 2014, as part of a reinsurance treaty that would not have met one of the exemptions set forth in section 45-03-26-04 had that section then been in effect.

4."Noncovered policies" means any policy that does not meet the definition of covered policies, including grandfathered policies.

5."Required level of primary security" means the dollar amount determined by applying the actuarial method to the risks ceded with respect to covered policies, but not more than the total reserve ceded.

6."Primary security" means the following forms of security:

a.Cash meeting the requirements of subsection 1 of North Dakota Century Code section 26.1-31.2-02.

b.Securities listed by the securities valuation office of the national association of insurance commissioners meeting the requirements of subsection 2 North Dakota Century Code

section 26.1-31.2-02 but excluding any synthetic letter of credit, contingent note, credit-linked note, or other similar security that operates in a manner similar to a letter of credit, and excluding any securities issued by the ceding insurer or any of its affiliates; and

c.For security held in connection with funds-withheld and modified coinsurance reinsurance treaties:

(1)Commercial loans in good standing of CM3 quality and higher;

(2)Policy loans; and (3)Derivatives acquired in the normal course and used to support and hedge liabilities pertaining to the actual risks in the policies ceded pursuant to the reinsurance treaty.

7."Other security" means any security acceptable to the commissioner other than security meeting the definition of primary security.

8."Valuation manual" means the valuation manual adopted by the national association of insurance commissioners as described in subdivision a of subsection 1 of North Dakota Century Code section 26.1-35-00.2, with all amendments adopted by the national association of insurance commissioners that are effective for the financial statement date on which credit for reinsurance is claimed. 9"VM-20" means requirements for principle-based reserves for life products, including all relevant definitions, from the Valuation Manual.

N.D. Admin. Code 45-03-26-06 The actuarial method

1.The actuarial method to establish the required level of primary security for each reinsurance treaty subject to this chapter shall be VM-20, applied on a treaty-by-treaty basis, including all relevant definitions, from the valuation manual as then in effect, applied as follows:

a.For covered policies described in subdivision a of subsection 2 of section 45-03-26-05, the actuarial method is the greater of the deterministic reserve or the net premium reserve regardless of whether the criteria for exemption testing can be met. However, if the covered policies do not meet the requirements of the stochastic reserve exclusion test in the valuation manual, then the actuarial method is the greatest of the deterministic reserve, the stochastic reserve, or the net premium reserve. In addition, if such covered policies are reinsured in a reinsurance treaty that also contains covered policies described in subdivision b of subsection 2 of section 45-03-26-05, the ceding insurer may elect to instead use subdivision b as the actuarial method for the entire reinsurance agreement. Whether subdivision a or subdivision b are used, the actuarial method must comply with any requirements or restrictions that the valuation manual imposes when aggregating these policy types for purposes of principle-based reserve calculations.

b.For covered policies described in subdivision b of subsection 2 of section 45-03-26-05, the actuarial method is the greatest of the deterministic reserve, the stochastic reserve, or the net premium reserve regardless of whether the criteria for exemption testing can be met.

c.Except as provided in subdivision d, the actuarial method is to be applied on a gross

basis to all risks with respect to the covered policies as originally issued or assumed by the ceding insurer.

d.If the reinsurance treaty cedes less than one hundred percent of the risk with respect to the covered policies, then the required level of primary security may be reduced as follows:

(1)If a reinsurance treaty cedes only a quota share of some or all of the risks pertaining to the covered policies, the required level of primary security, as well as any adjustment under paragraph 3, may be reduced to a pro rata portion in accordance with the percentage of the risk ceded;

(2)If the reinsurance treaty in a nonexempt arrangement cedes only the risks pertaining to a secondary guarantee, the required level of primary security may be reduced by an amount determined by applying the actuarial method on a gross

basis to all risks, other than risks related to the secondary guarantee, pertaining to the covered policies, except that for covered policies for which the ceding insurer did not elect to apply the provisions of VM-20 to establish statutory reserves, the required level of primary security may be reduced by the statutory reserve retained by the ceding insurer on those covered policies, where the retained reserve of those covered policies should be reflective of any reduction pursuant to the cession of mortality risk on a yearly renewable term basis in an exempt arrangement;

(3)If a portion of the covered policy risk is ceded to another reinsurer on a yearly renewable term basis in an exempt arrangement, the required level of primary security may be reduced by the amount resulting by applying the actuarial method including the reinsurance section of VM-20 to the portion of the covered policy risks ceded in the exempt arrangement, except that for covered policies issued prior to January 1, 2017, this adjustment is not to exceed [cx/ (2 * number of reinsurance premiums per year)] where cx is calculated using the same mortality table used in calculating the net premium reserve; and (4)For any other treaty ceding a portion of risk to a different reinsurer, including stop loss, excess of loss, and other nonproportional reinsurance treaties, there will be no reduction in the required level of primary security.

(5)It is possible for any combination of paragraphs 1, 2, 3, and 4 to apply. Such adjustments to the required level of primary security will be done in the sequence that accurately reflects the portion of the risk ceded via the treaty. The ceding insurer should document the rationale and steps taken to accomplish the adjustments to the required level of primary security due to the cession of less than one hundred percent of the risk. The adjustments for other reinsurance will be made only with respect to reinsurance treaties entered into directly by the ceding insurer.

The ceding insurer will make no adjustment as a result of a retrocession treaty entered into by the assuming insurers.

e.In no event will the required level of primary security resulting from application of the actuarial method exceed the amount of statutory reserves ceded.

f.If the ceding insurer cedes risks with respect to covered policies, including any riders, in more than one reinsurance treaty subject to this regulation, in no event will the aggregate required level of primary security for those reinsurance treaties be less than the required level of primary security calculated using the actuarial method as if all risks ceded in those treaties were ceded in a single treaty subject to this chapter.

g.If a reinsurance treaty subject to this chapter cedes risk on both covered and noncovered policies, credit for the ceded reserves shall be determined as follows:

(1)The actuarial method shall be used to determine the required level of primary security for the covered policies, and section 45-03-26-07 shall be used to determine the reinsurance credit for the covered policy reserves; and (2)Credit for the noncovered policy reserves shall be granted only to the extent that security, in addition to the security held to satisfy the requirements of paragraph 1, is held by or on behalf of the ceding insurer in accordance with North Dakota Century Code sections 26.1-31.2-01 and 26.1-31.2-02. Any primary security used to meet the requirements of this paragraph may not be used to satisfy the required level of primary security for the covered policies.

2.For the purposes of both calculating the required level of primary security pursuant to the actuarial method and determining the amount of primary security and other security, as applicable, held by or on behalf of the ceding insurer, the following shall apply:

a.For assets, including any such assets held in trust, that would be admitted under the national association of insurance commissioners' "Accounting Practices and Procedures Manual" if they were held by the ceding insurer, the valuations are to be determined according to statutory accounting procedures as if such assets were held in the ceding insurer's general account and without taking into consideration the effect of any prescribed or permitted practices; and

b.For all other assets, the valuations are to be those that were assigned to the assets for the purpose of determining the amount of reserve credit taken. In addition, the asset spread tables and asset default cost tables required by VM-20 shall be included in the actuarial method if adopted by the national association of insurance commissioners' life actuarial task force no later than the December thirty-first on or immediately preceding the valuation date for which the required level of primary security is being calculated. The tables of asset spreads and asset default costs shall be incorporated into the actuarial method in the manner specified in VM-20.

History

• Law Implemented: NDCC 26.1-31.2-01

N.D. Admin. Code 45-03-26-07 Requirements applicable to covered policies to obtain credit for reinsurance - Opportunity for remediation

1.Subject to the exemptions described in section 45-03-26-04 and the provisions of subsection 2, credit for reinsurance shall be allowed with respect to ceded liabilities pertaining to covered policies pursuant to North Dakota Century Code sections 26.1-31.2-01 and 26.1-31.2-02 if, and only if, in addition to all other requirements imposed by law or regulation, the following requirements are met on a treaty-by-treaty basis:

a.The ceding insurer's statutory policy reserves with respect to the covered policies are established in full and in accordance with the applicable requirements of North Dakota Century Code chapter 26.1-35 and related chapters and actuarial guidelines, and credit claimed for any reinsurance treaty subject to this chapter does not exceed the proportionate share of those reserves ceded under the contract;

b.The ceding insurer determines the required level of primary security with respect to each reinsurance treaty subject to this regulation and provides support for its calculation as determined to be acceptable to the commissioner;

c.Funds consisting of primary security, in an amount at least equal to the required level of primary security, are held by or on behalf of the ceding insurer, as security under the reinsurance treaty within the meaning of North Dakota Century Code section 26.1-31.2-02 on a funds withheld, trust, or modified coinsurance basis;

d.Funds consisting of other security, in an amount at least equal to any portion of the statutory reserves as to which primary security is not held pursuant to subdivision c, are held by or on behalf of the ceding insurer as security under the reinsurance treaty within the meaning of North Dakota Century Code section 26.1-31.2-02;

e.Any trust used to satisfy the requirements of this section shall comply with all of the conditions and qualifications of section 45-03-07.1-08 except that:

(1)Funds consisting of primary security or other security held in trust, shall for the purposes identified in subsection 2 of section 45-03-07.1-08, be valued according to the valuation rules set forth in subsection 2 of section 45-03-07.1-08, as applicable;

(2)There are no affiliate investment limitations with respect to any security held in such trust if such security is not needed to satisfy the requirements of subdivision c;

(3)The reinsurance treaty must prohibit withdrawals or substitutions of trust assets that would leave the fair market value of the primary security within the trust when aggregated with primary security outside the trust that is held by or on behalf of the ceding insurer in the manner required by subdivision c below one hundred two percent of the level required by subdivision c at the time of the withdrawal or substitution; and (4)The determination of reserve credit under subdivision c of subsection 4 of section 45-03-07.1-08 shall be determined according to the valuation rules set forth in subsection 2 of section 45-03-26-06, as applicable; and

f.The reinsurance treaty has been approved by the commissioner.

2.Requirements at inception date and on an ongoing basis; remediation.

a.The requirements of subsection 1 must be satisfied as of the date that risks under covered policies are ceded, if such date is on or after the effective date of this chapter, and on an ongoing basis thereafter. Under no circumstances may a ceding insurer take or consent to any action or series of actions that would result in a deficiency under subdivision c of subsection 1 or subdivision d of subsection 1 with respect to any reinsurance treaty under which covered policies have been ceded, and in the event that a ceding insurer becomes aware at any time that such a deficiency exists, it shall use its best efforts to arrange for the deficiency to be eliminated as expeditiously as possible.

b.Before the due date of each quarterly or annual statement, each life insurance company that has ceded reinsurance within the scope of section 45-03-26-03 shall perform an analysis, on a treaty-by-treaty basis, to determine, as to each reinsurance treaty under which covered policies have been ceded, whether as of the end of the immediately preceding calendar quarter, the valuation date, the requirements of subdivision c of subsection 1 and subdivision d of subsection 1 were satisfied. The ceding insurer shall establish a liability equal to the excess of the credit for reinsurance taken over the amount of primary security actually held pursuant to subdivision c of subsection 1, unless either:

(1)The requirements of subdivisions c and d of subsection 1 were fully satisfied as of the valuation date as to such reinsurance treaty; or (2)Any deficiency has been eliminated before the due date of the quarterly or annual statement to which the valuation date relates through the addition of primary security or other security, or both, as the case may be, in such amount and in such form as would have caused the requirements of subdivision c of subsection 1 and subdivision d of subsection 1 to be fully satisfied as of the valuation date.

c.Nothing in subsection 2 shall be construed to allow a ceding company to maintain any deficiency under subdivision c of subsection 1 or subdivision d of subsection 1 for any period of time longer than is reasonably necessary to eliminate it.

History

• Law Implemented: NDCC 26.1-31.2-01, 26.1-31.2-02

N.D. Admin. Code 45-03-26-08 Severability

If any provision of this chapter is held invalid, the remainder shall not be affected.

N.D. Admin. Code 45-03-26-09 Prohibition against avoidance

No insurer that has covered policies as to which this chapter applies as set forth in section 45-03-26-03 may take any action or series of actions, or enter into any transaction or arrangement or series of transactions or arrangements if the purpose of such action, transaction or arrangement, or series thereof is to avoid the requirements of this chapter, or to circumvent its purpose and intent, as set forth in section 45-03-26-02.

Article 45-04 Life Insurance

Chapter 45-04-01 Life Insurance Solicitation

N.D. Admin. Code 45-04-01-01 Purpose

1.The purpose of this chapter is to require insurers to deliver to purchasers of life insurance, information which will improve the buyer's ability to select the most appropriate plan of life insurance for the buyer's needs, improve the buyer's understanding of the basic features of the policy which has been purchased or which is under consideration, and improve the ability of the buyer to evaluate the relative costs of similar plans of life insurance.

2.This chapter does not prohibit the use of additional material which is not in violation of this

chapter or any other (state) statute or regulation.

N.D. Admin. Code 45-04-01-02 Scope

1.Except as hereafter exempted, this chapter shall apply to any solicitation, negotiation, or procurement of life insurance occurring within this state. This chapter shall apply to any issuer of life insurance contracts including fraternal benefit societies.

2.Unless otherwise specifically included, this chapter shall not apply to:

a.Annuities.

b.Credit life insurance.

c.Group life insurance.

d.Life insurance policies issued in connection with pension and welfare plans as defined by and which are subject to the federal Employee Retirement Income Security Act of 1974.

e.Variable life insurance under which the death benefits and cash values vary in accordance with unit values of investments held in a separate account.

N.D. Admin. Code 45-04-01-03 Definitions

For the purposes of this chapter, the following definitions shall apply:

1."Buyer's guide" means the current version of the national association of insurance commissioners life insurance buyer's guide or language approved by the insurance commissioner.

2."Cash dividend" means the current illustrated dividend which can be applied toward payment of the gross premium.

3."Equivalent level annual dividend" is calculated by applying the following steps:

a.Accumulate the annual cash dividends at five percent interest compounded annually to the end of the tenth and twentieth policy years.

b.Divide each accumulation in subdivision a by an interest factor that converts it into one equivalent level annual amount that, if paid at the beginning of each year, would accrue to the values in subdivision a over the respective periods stipulated in subdivision a. If the period is ten years, the factor is 13.207, and if the period is twenty years, the factor is 34.719.

c.Divide the results of subdivision b by the number of thousands of the equivalent level death benefit to arrive at the equivalent level annual dividend.

4."Equivalent level death benefit" of a policy or term life insurance rider is an amount calculated as follows:

a.Accumulate the guaranteed amount payable upon death, regardless of the cause of death, at the beginning of each policy year for ten and twenty years at five percent interest compounded annually to the end of the tenth and twentieth policy years respectively.

b.Divide each accumulation of subdivision a by an interest factor that converts it into one equivalent level annual amount that, if paid at the beginning of each year, would accrue to the value in subdivision a over the respective periods stipulated in subdivision a. If the period is ten years, the factor is 13.207, and if the period is twenty years, the factor is 34.719.

5."Generic name" means a short title which is descriptive of the premium and benefit patterns of a policy or a rider.

6."Life insurance cost indexes" are calculated as follows:

a."Life insurance net payment cost index" is calculated in the same manner as the comparable life insurance cost index except that the cash surrender value and any terminal dividend are set at zero.

b."Life insurance surrender cost index" is calculated by applying the following steps:

(1)Determine the guaranteed cash surrender value, if any, available at the end of the tenth and twentieth policy years.

(2)For participating policies, add the terminal dividend payable upon surrender, if any, to the accumulation of the annual cash dividends at five percent interest compounded annually to the end of the period selected and add this sum to the amount determined in paragraph 1.

(3)Divide the result of paragraph 2. (Paragraph 1 for guaranteed-cost policies) by an interest factor that converts it into an equivalent level annual amount that, if paid at the beginning of each year, would accrue to the value in paragraph 2. (Paragraph 1 for guaranteed-cost policies) over the respective periods stipulated in paragraph 1.

If the period is ten years, the factor is 13.207, and if the period is twenty years, the factor is 34.719.

(4)Determine the equivalent level premium by accumulating each annual premium payable for the basic policy or rider at five percent interest compounded annually to the end of the period stipulated in paragraph 1 and dividing the result by the respective factors stated in paragraph 3. (This amount is the annual premium payable for a level premium plant.)

(5)Subtract the result of paragraph 3 from paragraph 4.

(6)Divide the result of paragraph 5 by the number of thousands of the equivalent level death benefit to arrive at the life insurance surrender cost index.

7."Policy summary" means a basic illustration as defined in chapter 45-04-01.1 for policy forms for which the company chooses to illustrate under chapter 45-04-01.1, otherwise it means a written statement using elements guaranteed in the policy only describing the elements of the policy including:

a.A prominently placed title as follows: "STATEMENT OF POLICY COST AND BENEFIT INFORMATION".

b.The name and address of the insurance agent, or if no agent is involved, a statement of the procedure to be followed in order to receive responses to inquiries regarding the policy summary.

c.The full name and home office or administrative office address of the company in which the life insurance policy is to be or has been written.

d.The generic name of the basic policy and each rider.

e.The following amounts, where applicable, for the first five policy years and representative policy years thereafter sufficient to clearly illustrate the premium and benefit patterns, including, but not necessarily limited to, the years for which life insurance cost indexes are displayed and at least one age from sixty through sixty-five or maturity, whichever is earlier:

(1)The annual premium for the basic policy.

(2)The annual premium for each optional rider.

(3)The guaranteed amount payable upon death, at the beginning of the policy year regardless of the cause of death, other than suicide, or other specifically enumerated exclusions, which is provided by the basic policy and each optional rider, with benefits provided under the basic policy and each rider shown separately.

(4)The total guaranteed cash surrender values at the end of the year with values shown separately for the basic policy and each rider.

(5)The cash dividends payable at the end of the year with value shown separately for the basic policy and each rider. (Dividends need not be displayed beyond the twentieth policy year.)

(6)The guaranteed endowment amounts payable under the policy which are not included under guaranteed cash surrender values above.

f.The effective policy loan annual percentage interest rate, if the policy contains this provision, specifying whether this rate is applied in advance or in arrears. If the policy loan interest rate is variable, the policy summary includes the maximum annual percentage rate.

g.Life insurance cost indexes for ten and twenty years but in no case beyond the premium paying period. Separate indexes are displayed for the basic policy and for each optional term life insurance rider. Such indexes need not be included for optional riders which are limited to benefits such as accidental death benefits, disability waiver of premium, preliminary term life insurance coverage of less than twelve months and guaranteed insurability benefits nor for the basic policies or optional riders covering more than one life.

h.The equivalent level annual dividend, in the case of participating policies and participating optional term life insurance riders, under the same circumstances and for the same durations at which life insurance cost indexes are displayed.

i.A policy summary which includes dividends shall also include a statement that dividends are based on the company's current dividend scale and are not guaranteed in addition to a statement in close proximity to the equivalent level annual dividend as follows: "An explanation of the intended use of the Equivalent Level Annual Dividend is included in the Life Insurance Buyer's Guide."

j.A statement in close proximity to the life insurance costs indexes as follows: "An explanation of the intended use of these indexes is provided in the Life Insurance Buyer's Guide."

k.The date on which the policy summary is prepared.

The policy summary must consist of a separate document. All information required to be disclosed must be set out in such a manner as to not minimize or render any portion thereof obscure. Any amounts which remain level for two or more years of the policy may be represented by a single number if it is clearly indicated what amounts are applicable for each policy year. Amounts in subdivision e shall be listed in total, not on a per thousand nor per unit

basis. If more than one insured is covered under one policy or rider, guaranteed death benefits shall be displayed separately for each insured or for each class of insureds if death benefits do not differ within the class. Zero amounts shall be displayed as zero and shall not be displayed as a blank space.

History

• History: Effective January 1, 1980; amended effective January 1, 1997.

N.D. Admin. Code 45-04-01-04 Disclosure requirements

1.The insurer shall provide, to all prospective purchasers, a buyer's guide and a policy summary prior to accepting the applicant's initial premium or premium deposit, unless the policy for which application is made contains an unconditional refund provision of at least ten days or unless the policy summary contains such an unconditional refund offer, in which event the buyer's guide and policy summary must be delivered with the policy or prior to delivery of the policy.

2.The insurer shall provide a buyer's guide and a policy summary to any prospective purchaser upon request.

3.In the case of policies whose equivalent level death benefit does not exceed five thousand dollars, the requirement for providing a policy summary will be satisfied by delivery of a written statement containing the information described in subdivisions b, c, d, paragraphs 1, 2, and 3 of subdivision e, and subdivisions f, g, h, j, and k, all of subsection 7 of section 45-04-01-03.

N.D. Admin. Code 45-04-01-05 General rules

1.Each insurer shall maintain at its home office or principal office a complete file containing one copy of each document authorized by the insurer for use pursuant to this chapter. The file shall contain one copy of each authorized form for a period of three years following the date of its last authorized use.

2.An agent shall inform the prospective purchaser, prior to commencing a life insurance sales presentation, that the agent is acting as a life insurance agent and inform the prospective purchaser of the full name of the insurance company which the agent is representing to the buyer. In sales situations in which an agent is not involved, the insurer shall identify its full name.

3.Terms such as financial planner, investment advisor, financial consultant, or financial counseling shall not be used in such a way as to imply that the insurance agent is generally engaged in an advisory business in which compensation is unrelated to sales unless such is actually the case.

4.Any reference to policy dividends must include a statement that dividends are not guaranteed.

5.A system or presentation which does not recognize the time-value of money through the use of appropriate interest adjustments shall not be used for comparing the cost of two or more life insurance policies. Such a system may be used for the purpose of demonstrating a cash-flow pattern of a policy if such presentation is accompanied by a statement disclosing that the presentation does not recognize that, because of interest, a dollar in the future has less value than a dollar today.

6.A presentation of benefits shall not display guaranteed and nonguaranteed benefits as a single sum unless they are shown separately in close proximity thereto.

7.A statement regarding the use of life insurance cost indexes shall include an explanation to the effect that the indexes are useful only for the comparison of the relative costs of two or more similar policies.

8.A life insurance cost index which reflects dividends or an equivalent level annual dividend shall be accompanied by a statement that it is based on the company's current dividend scale and is not guaranteed.

9.For the purposes of this chapter, the annual premium for a basic policy or rider, for which the company reserves the right to change the premium, shall be the maximum annual premium.

N.D. Admin. Code 45-04-01-06 Failure to comply

Failure of an insurer to provide or deliver a buyer's guide, or a policy summary as provided in

section 45-04-01-04 shall constitute an omission which misrepresents the benefits, advantages, conditions, or terms of an insurance policy.

N.D. Admin. Code 45-04-01-07 Effective date

This chapter shall apply to all solicitations of life insurance which commence on or after January 1, 1980. Amendments to subsections 1 and 7 of section 45-04-01-03 and the appendix are effective January 1, 1997.

History

• History: Effective January 1, 1980; amended effective January 1, 1997.

Chapter 45-04-01.1 Life Insurance Illustrations Model Regulation

N.D. Admin. Code 45-04-01.1 Life Insurance Illustrations Model Regulation

CHAPTER 45-04-01.1

LIFE INSURANCE ILLUSTRATIONS MODEL REGULATION

Section 45-04-01.1-01Applicability and Scope 45-04-01.1-02Definitions 45-04-01.1-03Policies to be Illustrated 45-04-01.1-04General Rules and Prohibitions 45-04-01.1-05Standards for Basic Illustrations 45-04-01.1-06Standards for Supplemental Illustrations 45-04-01.1-07Delivery of Illustrations and Record Retention 45-04-01.1-08Annual Report - Notice to Policy Owners 45-04-01.1-09Annual Certifications 45-04-01.1-10Effective Date 45-04-01.1-01. Applicability and scope.

This chapter is intended to ensure that illustrations do not mislead purchasers of life insurance and to make illustrations more understandable. As far as possible, insurers will eliminate the use of footnotes and caveats and define terms used in the illustration in language that would be understood by a typical person within the segment of the public to which the illustration is directed. This chapter applies to all group and individual life insurance policies and certificates except:

1.Variable life insurance;

2.Individual and group annuity contracts;

3.Credit life insurance; or

4.Life insurance policies with no illustrated death benefits on any individual exceeding ten thousand dollars. 45-04-01.1-02. Definitions.

For the purposes of this chapter:

1."Actuarial standards board" means the board established by the American academy of actuaries to develop and promulgate standards of actuarial practice.

2."Contract premium" means the gross premium that is required to be paid under a fixed premium policy, including the premium for a rider for which benefits are shown in the illustration.

3."Currently payable scale" means a scale of nonguaranteed elements in effect for a policy form as of the preparation date of the illustration or declared to become effective within the next ninety-five days.

4."Disciplined current scale" means a scale of nonguaranteed elements constituting a limit on illustrations currently being illustrated by an insurer which is reasonably based on actual recent historical experience, as certified annually by an illustration actuary designated by the insurer. Further guidance in determining the disciplined current scale as contained in standards established by the actuarial standards board may be relied upon if the standards:

a.Are consistent with all provisions of this chapter;

b.Limit a disciplined current scale to reflect only actions that have already been taken or events that have already occurred;

c.Do not permit a disciplined current scale to include any projected trends of improvements in experience or any assumed improvements in experience beyond the illustration date; and

d.Do not permit assumed expenses to be less than minimum assumed expenses.

5."Generic name" means a short title descriptive of the policy being illustrated such as "whole life", "term life", or "flexible premium adjustable life".

6."Guaranteed elements" and "nonguaranteed elements" mean:

a."Guaranteed elements" means the premiums, benefits, values, credits, or charges under a policy of life insurance that are guaranteed and determined at issue.

b."Nonguaranteed elements" means the premiums, benefits, values, credits, or charges under a policy of life insurance that are not guaranteed or not determined at issue.

7."Illustrated scale" means a scale of nonguaranteed elements currently being illustrated that is not more favorable to the policy owner than the lesser of:

a.The disciplined current scale; or

b.The currently payable scale.

8."Illustration" means a presentation or depiction that includes nonguaranteed elements of a policy of life insurance over a period of years and that is one of the three types defined below:

a."Basic illustration" means a ledger or proposal used in the sale of a life insurance policy that shows both guaranteed and nonguaranteed elements.

b."In force illustration" means an illustration furnished at any time after the policy that it depicts has been in force for one year or more.

c."Supplemental illustration" means an illustration furnished in addition to a basic illustration that meets the applicable requirements of this chapter, and that may be presented in a format differing from the basic illustration, but may only depict a scale of nonguaranteed elements that is permitted in a basic illustration.

9."Illustration actuary" means an actuary meeting the requirements of section 45-04-01.1-09 who certifies to illustrations based on the standard of practice promulgated by the actuarial standards board.

10."Lapse-supported illustration" means an illustration of a policy form failing the test of self-supporting as defined in this chapter, under a modified persistency rate assumption using persistency rates underlying the disciplined current scale for the first five years and one hundred percent policy persistency thereafter. 11.a."Minimum assumed expenses" means the minimum expenses that may be used in the calculation of the disciplined current scale for a policy form. The insurer may choose to designate each year the method of determining assumed expenses for all policy forms from the following:

(1)Fully allocated expenses;

(2)Marginal expenses; and (3)A generally recognized expense table based on fully allocated expenses representing a significant portion of insurance companies and approved by the commissioner.

b.Marginal expenses may be used only if greater than a generally recognized expense table. If no generally recognized expense table is approved, fully allocated expenses must be used.

12."Nonterm group life" means a group policy or individual policies of life insurance issued to members of an employer group or other permitted group where:

a.Every plan of coverage was selected by the employer or other group representative;

b.Some portion of the premium is paid by the group or through payroll deduction; and

c.Group underwriting or simplified underwriting is used.

13."Policy owner" means the owner named in the policy or the certificate holder in the case of a group policy.

14."Premium outlay" means the amount of premium assumed to be paid by the policy owner or other premium payer out of pocket.

15."Self-supporting illustration" means an illustration of a policy form for which it can be demonstrated that, when using experience assumptions underlying the disciplined current scale, for all illustrated points in time on or after the fifteenth policy anniversary or the twentieth policy anniversary for second-or-later-to-die policies, or upon policy expiration if sooner, the accumulated value of all policy cash flows equals or exceeds the total policy owner value available. For this purpose, policy owner value will include cash surrender values and any other illustrated benefit amounts available at the policy owner's election. 45-04-01.1-03. Policies to be illustrated.

1.Each insurer marketing policies to which this chapter is applicable shall notify the commissioner whether a policy form is to be marketed with or without an illustration. For all policy forms being actively marketed on January 1, 1997, the insurer shall identify in writing those forms and whether or not an illustration will be used with them. For policy forms filed after January 1, 1997, the identification shall be made at the time of filing. Any previous identification may be changed by notice to the commissioner.

2.If the insurer identifies a policy form as one to be marketed without an illustration, any use of an illustration for any policy using that form prior to the first policy anniversary is prohibited.

3.If a policy form is identified by the insurer as one to be marketed with an illustration, a basic illustration prepared and delivered in accordance with this chapter is required, except that a basic illustration need not be provided to individual members of a group or to individuals insured under multiple lives coverage issued to a single applicant unless the coverage is marketed to these individuals. The illustration furnished an applicant for a group life insurance policy or policies issued to a single applicant on multiple lives may be either an individual or composite illustration representative of the coverage on the lives of members of the group or the multiple lives covered.

4.Potential enrollees of nonterm group life subject to this chapter must be furnished a quotation with the enrollment materials. The quotation must show potential policy values for sample ages and policy years on a guaranteed and nonguaranteed basis appropriate to the group and the coverage. This quotation may not be considered an illustration for purposes of this

chapter, but all information provided must be consistent with the illustrated scale. A basic illustration must be provided at delivery of the certificate to enrollees for nonterm group life who enroll for more than the minimum premium necessary to provide pure death benefit protection. In addition, the insurer shall make a basic illustration available to any nonterm group life enrollee who requests it. 45-04-01.1-04. General rules and prohibitions.

1.An illustration used in the sale of a life insurance policy must satisfy the applicable requirements of this chapter, be clearly labeled life insurance illustration, and contain the following basic information:

a.Name of insurer;

b.Name and business address of producer or insurer's authorized representative, if any;

c.Name, age, and sex of proposed insured, except where a composite illustration is permitted under this chapter;

d.Underwriting or rating classification upon which the illustration is based;

e.Generic name of policy, the company product name, if different, and form number;

f.Initial death benefit; and

g.Dividend option election or application of nonguaranteed elements, if applicable.

2.When using an illustration in the sale of a life insurance policy, an insurer or its producers or other authorized representatives shall not:

a.Represent the policy as anything other than a life insurance policy;

b.Use or describe nonguaranteed elements in a manner that is misleading or has the capacity or tendency to mislead;

c.State or imply that the payment or amount of nonguaranteed elements is guaranteed;

d.Use an illustration that does not comply with the requirements of this chapter;

e.Use an illustration that at any policy duration depicts policy performance more favorable to the policy owner than that produced by the illustrated scale of the insurer whose policy is being illustrated;

f.Provide an applicant with an incomplete illustration;

g.Represent in any way that premium payments will not be required for each year of the policy in order to maintain the illustrated death benefits, unless that is the fact;

h.Use the term "vanish" or "vanishing premium" or a similar term that implies the policy becomes paid up, to describe a plan for using nonguaranteed elements to pay a portion of future premiums;

i.Except for polices that can never develop nonforfeiture values, use an illustration that is lapse-supported; or

j.Use an illustration that is not self-supporting.

3.If an interest rate used to determine the illustrated nonguaranteed elements is shown, it may not be greater than the earned interest rate underlying the disciplined current scale. 45-04-01.1-05. Standards for basic illustrations.

1.Format. A basic illustration must conform with the following requirements:

a.The illustration must be labeled with the date on which it was prepared.

b.Each page, including any explanatory notes or pages, must be numbered and show its relationship to the total number of pages in the illustration (e.g., the fourth page of a seven-page illustration shall be labeled "page 4 of 7 pages").

c.The assumed dates of payment receipt and benefit payout within a policy year must be clearly identified.

d.If the age of the proposed insured is shown as a component of the tabular detail, it must be issue age plus the numbers of years the policy is assumed to have been in force.

e.The assumed payments on which the illustrated benefits and values are based must be identified as premium outlay or contract premium, as applicable. For policies that do not require a specific contract premium, the illustrated payments must be identified as premium outlay.

f.Guaranteed death benefits and values available upon surrender, if any, for the illustrated premium outlay or contract premium must be shown and clearly labeled guaranteed.

g.If the illustration shows any nonguaranteed elements, they may not be based on a scale more favorable to the policy owner than the insurer's illustrated scale at any duration.

These elements must be clearly labeled nonguaranteed.

h.The guaranteed elements, if any, must be shown before corresponding nonguaranteed elements and must be specifically referred to on any page of an illustration that shows or describes only the nonguaranteed elements (e.g., "see page one for guaranteed elements").

i.The account or accumulation value of a policy, if shown, must be identified by the name this value is given in the policy being illustrated and shown in close proximity to the corresponding value available upon surrender.

j.The value available upon surrender must be identified by the name this value is given in the policy being illustrated and must be the amount available to the policy owner in a lump sum after deduction of surrender charges, policy loans, and policy loan interest, as applicable.

k.Illustrations may show policy benefits and values in graphic or chart form in addition to the tabular form.

l.Any illustration of nonguaranteed elements must be accompanied by a statement indicating that:

(1)The benefits and values are not guaranteed;

(2)The assumptions on which they are based are subject to change by the insurer; and (3)Actual results may be more or less favorable.

m.If the illustration shows that the premium payer may have the option to allow policy charges to be paid using nonguaranteed values, the illustration must clearly disclose that a charge continues to be required and that, depending on actual results, the premium payer may need to continue or resume premium outlays. Similar disclosure must be made for premium outlay of lesser amounts or shorter durations than the contract premium. If a contract premium is due, the premium outlay display may not be left blank or show zero unless accompanied by an asterisk or similar mark to draw attention to the fact that the policy is not paid up.

n.If the applicant plans to use dividends or policy values, guaranteed or nonguaranteed, to pay all or a portion of the contract premium or policy charges, or for any other purpose, the illustration may reflect those plans and the impact on future policy benefits and values.

2.Narrative summary. A basic illustration must include the following:

a.A brief description of the policy being illustrated, including a statement that it is a life insurance policy;

b.A brief description of the premium outlay or contract premium, as applicable, for the policy. For a policy that does not require payment of a specific contract premium, the illustration must show the premium outlay that must be paid to guarantee coverage for the term of the contract, subject to maximum premiums allowable to qualify as a life insurance policy under the applicable provisions of the Internal Revenue Code;

c.A brief description of any policy features, riders, or options, guaranteed or nonguaranteed, shown in the basic illustration and the impact they may have on the benefits and values of the policy;

d.Identification and a brief definition of column headings and key terms used in the illustration; and

e.A statement containing in substance the following: "This illustration assumes that the currently illustrated nonguaranteed elements will continue unchanged for all years shown. This is not likely to occur, and actual results may be more or less favorable than those shown."

3.Numeric summary.

a.Following the narrative summary, a basic illustration must include a numeric summary of the death benefits and values and the premium outlay and contract premium, as applicable. For a policy that provides for a contract premium, the guaranteed death benefits and values must be based on the contract premium. This summary must be shown for at least policy years five, ten, and twenty and at age seventy, if applicable, on the three bases shown below. For multiple life policies the summary shall show for at least policy years five, ten, twenty, and thirty.

(1)Policy guarantees;

(2)Insurer's illustrated scale;

(3)Insurer's illustrated scale used but with the nonguaranteed elements reduced as follows:

(a)Dividends at fifty percent of the dividends contained in the illustrated scale used;

(b)Nonguaranteed credited interest at rates that are the average of the guaranteed rates and the rates contained in the illustrated scale used; and (c)All nonguaranteed charges, including term insurance charges, mortality and expense charges, at rates that are the average of the guaranteed rates and the rates contained in the illustrated scale used.

b.In addition, if coverage would cease prior to policy maturity or age one hundred, the year in which coverage ceases must be identified for each of the three bases.

4.Statements. Statements substantially similar to the following must be included on the same page as the numeric summary and signed by the applicant, or the policy owner in the case of an illustration provided at time of delivery, as required in this chapter.

a.A statement to be signed and dated by the applicant or policy owner reading as follows: "I have received a copy of this illustration and understand that any nonguaranteed elements illustrated are subject to change and could be either higher or lower. The agent has told me they are not guaranteed."

b.A statement to be signed and dated by the insurance producer or other authorized representative of the insurer reading as follows: "I certify that this illustration has been presented to the applicant and that I have explained that any nonguaranteed elements illustrated are subject to change. I have made no statements that are inconsistent with the illustration."

5.Tabular detail.

a.A basic illustration must include the following for at least each policy year from one to ten and for every fifth policy year thereafter ending at age one hundred, policy maturity, or final expiration; and except for term insurance beyond the twentieth year, for any year in which the premium outlay and contract premium, if applicable, is to change:

(1)The premium outlay and mode the applicant plans to pay and the contract premium, as applicable;

(2)The corresponding guaranteed death benefit, as provided in the policy; and (3)The corresponding guaranteed value available upon surrender, as provided in the policy.

b.For a policy that provides for a contract premium, the guaranteed death benefit and value available upon surrender must correspond to the contract premium.

c.Nonguaranteed elements may be shown if described in the contract. In the case of an illustration for a policy on which the insurer intends to credit terminal dividends, they may be shown if the insurer's current practice is to pay terminal dividends. If any nonguaranteed elements are shown they must be shown at the same durations as the corresponding guaranteed elements, if any. If no guaranteed benefit or value is available at any duration for which a nonguaranteed benefit or value is shown, a zero must be displayed in the guaranteed column. 45-04-01.1-06. Standards for supplemental illustrations.

1.A supplemental illustration may be provided as long as:

a.It is appended to, accompanied by, or preceded by a basic illustration that complies with this chapter;

b.The nonguaranteed elements shown are not more favorable to the policy owner than the corresponding elements based on the scale used in the basic illustration;

c.It contains the same statement required of a basic illustration that nonguaranteed elements are not guaranteed; and

d.For a policy that has a contract premium, the contract premium underlying the supplemental illustration is equal to the contract premium shown in the basic illustration.

For policies that do not require a contract premium, the premium outlay underlying the supplemental illustration must be equal to the premium outlay shown in the basic illustration.

2.The supplemental illustration must include a notice referring to the basic illustration for guaranteed elements and other important information. 45-04-01.1-07. Delivery of illustration and record retention. 1.a.If a basic illustration is used by an insurance producer or other authorized representative of the insurer in the sale of a life insurance policy and the policy is applied for as illustrated, a copy of that illustration, signed in accordance with this chapter, must be submitted to the insurer at the time of policy application. A copy also must be provided to the applicant.

b.If the policy is issued other than as applied for, a revised basic illustration conforming to the policy as issued must be sent with the policy. The revised illustration must conform to the requirements of this chapter, be labeled "Revised Illustration" and must be signed and dated by the applicant or policy owner and producer or other authorized representative of the insurer no later than the time the policy is delivered. A copy must be provided to the insurer and the policy owner. 2.a.If no illustration is used by an insurance producer or other authorized representative in the sale of a life insurance policy or if the policy is applied for other than as illustrated, the producer or representative shall certify to that effect in writing on a form provided by the insurer. On the same form the applicant shall acknowledge that no illustration conforming to the policy applied for was provided and shall further acknowledge an understanding that an illustration conforming to the policy as issued will be provided no later than at the time of policy delivery. This form must be submitted to the insurer at the time of policy application.

b.If the policy is issued, a basic illustration conforming to the policy as issued must be sent with the policy and signed no later than the time the policy is delivered. A copy must be provided to the insurer and the policy owner.

3.If the basic illustration or revised illustration is sent to the applicant or policy owner by mail from the insurer, it must include instructions for the applicant or policy owner to sign the duplicate copy of the numeric summary page of the illustration for the policy issued and return the signed copy to the insurer. The insurer's obligation under this subsection is satisfied if it can demonstrate that it has made a diligent effort to secure a signed copy of the numeric summary page. The requirement to make a diligent effort is deemed satisfied if the insurer includes in the mailing a self-addressed postage prepaid envelope with instructions for the return of the signed numeric summary page.

4.A copy of the basic illustration and a revised basic illustration, if any, signed as applicable, along with any certification that either no illustration was used or that the policy was applied for other than as illustrated, shall be retained by the insurer until three years after the policy is no longer in force. A copy need not be retained if no policy is issued. 45-04-01.1-08. Annual report - Notice to policy owners.

1.In the case of a policy designated as one for which illustrations will be used, the insurer shall provide each policy owner with an annual report on the status of the policy that must contain at least the following information:

a.For universal life policies, the report must include the following:

(1)The beginning and end date of the current report period;

(2)The policy value at the end of the previous report period and at the end of the current report period;

(3)The total amounts that have been credited or debited to the policy value during the current report period, identifying each by type (e.g., interest, mortality, expense, and riders);

(4)The current death benefit at the end of the current report period on each life covered by the policy;

(5)The net cash surrender value of the policy as of the end of the current report period;

(6)The amount of outstanding loans, if any, as of the end of the current report period; and (7)For fixed premium policies, if, assuming guaranteed interest, mortality, and expense loads and continued scheduled premium payments, the policy's net cash surrender value is such that it would not maintain insurance in force until the end of the next reporting period, a notice to this effect must be included in the report; or (8)For flexible premium policies, if, assuming guaranteed interest, mortality, and expense loads, the policy's net cash surrender value will not maintain insurance in force until the end of the next reporting period unless further premium payments are made, a notice to this effect must be included in the report.

b.For all other policies, where applicable:

(1)Current death benefit;

(2)Annual contract premium;

(3)Current cash surrender value;

(4)Current dividend;

(5)Application of current dividend; and (6)Amount of outstanding loan.

c.Insurers writing life insurance policies that do not build nonforfeiture values shall only be required to provide an annual report with respect to these policies for those years when a change has been made to nonguaranteed policy elements by the insurer.

2.If the annual report does not include an in force illustration, it must contain the following notice displayed prominently: "IMPORTANT POLICY OWNER NOTICE: You should consider requesting more detailed information about your policy to understand how it may perform in the future. You should not consider replacement of your policy or make changes in your coverage without requesting a current illustration. You may annually request, without charge, such an illustration by calling [insurer's phone number], writing to [insurer's name] at [insurer's address] or contacting your agent. If you do not receive a current illustration of your policy within thirty days from your request, you should contact your state insurance department." The insurer may vary the sequential order of the methods for obtaining an in force illustration.

3.Upon the request of the policy owner, the insurer shall furnish an in force illustration of current and future benefits and values based on the insurer's present illustrated scale. This illustration must comply with the requirements of subsections 1 and 2 of section 45-04-01.1-04 and subsections 1 and 5 of section 45-04-01.1-05. No signature or other acknowledgment of receipt of this illustration shall be required.

4.If an adverse change in nonguaranteed elements that could affect the policy has been made by the insurer since the last annual report, the annual report must contain a notice of that fact and the nature of the change prominently displayed. 45-04-01.1-09. Annual certifications.

1.The board of directors of each insurer shall appoint one or more illustration actuaries.

2.The illustration actuary shall certify that the disciplined current scale used in illustrations is in conformity with the actuarial standard of practice for compliance with the national association of insurance commissioners model regulation on life insurance illustrations promulgated by the actuarial standards board, and that the illustrated scales used in insurer-authorized illustrations meet the requirements of this chapter.

3.The illustration actuary shall:

a.Be a member in good standing of the American academy of actuaries;

b.Be familiar with the standard of practice regarding life insurance policy illustrations;

c.Not have been found by the commissioner, following appropriate notice and hearing to have:

(1)Violated any provision of, or any obligation imposed by, the insurance law or other law in the course of the person's dealings as an illustration actuary;

(2)Been found guilty of fraudulent or dishonest practices;

(3)Demonstrated the person's incompetence, lack of cooperation, or untrustworthiness to act as an illustration actuary; or (4)Resigned or been removed as an illustration actuary within the past five years as a result of acts or omissions indicated in any adverse report on examination or as a result of a failure to adhere to generally acceptable actuarial standards;

d.Not fail to notify the commissioner of any action taken by a commissioner of another state similar to that under subdivision c;

e.Disclose in the annual certification whether, since the last certification, a currently payable scale applicable for business issued within the previous five years and within the scope of the certification has been reduced for reasons other than changes in the experience factors underlying the disciplined current scale. If nonguaranteed elements illustrated for new policies are not consistent with those illustrated for similar in force policies, this must be disclosed in the annual certification. If nonguaranteed elements illustrated for both new and in force policies are not consistent with the nonguaranteed elements actually being paid, charged, or credited to the same or similar forms, this must be disclosed in the annual certification; and

f.Disclose in the annual certification the method used to allocate overhead expenses for all illustrations:

(1)Fully allocated expenses;

(2)Marginal expenses; or (3)A generally recognized expense table based on fully allocated expenses representing a significant portion of insurance companies and approved by the commissioner. 4.a.The illustration actuary shall file a certification with the board and with the commissioner:

(1)Annually for all policy forms for which illustrations are used; and (2)Before a new policy form is illustrated.

b.If an error in a previous certification is discovered, the illustration actuary shall notify the board of directors of the insurer and the commissioner promptly.

5.If an illustration actuary is unable to certify the scale for any policy form illustration the insurer intends to use, the actuary shall notify the board of directors of the insurer and the commissioner promptly of the actuary's inability to certify.

6.A responsible officer of the insurer, other than the illustration actuary, shall certify annually:

a.That the illustration formats meet the requirements of this chapter and that the scales used in insurer-authorized illustrations are those scales certified by the illustration actuary; and

b.That the company has provided its agents with information about the expense allocation method used by the company in its illustrations and disclosed as required in subdivision f of subsection 3.

7.The annual certifications must be provided to the commissioner each year by a date determined by the insurer.

8.If an insurer changes the illustration actuary responsible for all or a portion of the company's policy forms, the insurer shall notify the commissioner of that fact promptly and disclose the reason for the change. 45-04-01.1-10. Effective date.

This chapter applies to all life insurance policies or certificates sold on or after January 1, 1997.

Chapter 45-04-02 Variable Contracts

N.D. Admin. Code 45-04-02-01 Applicability

This chapter is applicable to insurance companies, including any fraternal benefit society which operates on a legal reserve basis, delivering or issuing for delivery in this state variable contracts or policies, as defined in subsections 16 and 18 of section 45-04-02-02.

History

• Law Implemented: NDCC 26.1-33-13, 26.1-34-11

N.D. Admin. Code 45-04-02-02 Definitions

1."Affiliate" of an insurer means any person, directly or indirectly, controlling, controlled by, or under common control with such insurer; any person who regularly furnishes investment advice to such insurer with respect to its variable life insurance separate accounts for which a specific fee or commission is charged; or any director, officer, partner, or employee of any such insurer, controlling or controlled person, or person providing investment advice or any member of the immediate family of such person.

2."Agent" means any person who under the laws of this state is licensed as an insurance agent, solicitor, general agent, or broker, with respect to the sale or solicitation for the sale of life insurance and annuities.

3."Assumed investment rate" means the rate of investment return which would be required to be credited to a variable life insurance policy, after deduction of charges for taxes, investment expenses, and mortality and expense guarantees, to maintain the variable death benefit equal at all times to the amount of death benefit, other than incidental insurance benefits, which would be payable under the plan of insurance if the death benefit did not vary according to the investment experience of the separate account.

4."Benefit base" means the amount, not less than the amount determined under the specifications of subdivision b of subsection 2 of section 45-04-02-12, in accordance with the terms of the variable life insurance policy, to which the difference between the net investment return and the assumed investment rate is applied in determining the variable benefits of the policy.

5."Commissioner" means the commissioner of insurance, unless otherwise specified.

6."Control" (including the terms "controlling", "controlled by", and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing more than ten percent of the voting securities of any other person. This presumption may be rebutted by a showing made to the satisfaction of the commissioner that control does not exist in fact. The commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.

7."General account" means all assets of the insurer other than assets in separate accounts established pursuant to North Dakota Century Code sections 26.1-33-13 and 26.1-34-11, whether or not for variable life insurance.

8."Incidental insurance benefit" means all insurance benefits in a variable life insurance policy, other than the variable death benefit and the minimum death benefit, including but not limited to accidental death and dismemberment benefits, disability income benefits, guaranteed insurability options, family income, or fixed benefit term riders.

9."May" is permissive.

10."Minimum death benefit" means the amount of the guaranteed death benefit, other than incidental insurance benefits, payable under a variable life insurance policy regardless of the investment performance of the separate account.

11."Net investment return" means the rate of investment return actually credited to a variable life insurance policy, after deduction of charges for taxes, investment expenses, and mortality and expense guarantees in accordance with the terms of the policy.

12."Person" means an individual, corporation, partnership, association, trust, or fund.

13."Regulations" means rules and regulations.

14."Separate account" means a separate account established under North Dakota Century Code sections 26.1-33-13 and 26.1-34-11.

15."Shall" is mandatory.

16."Variable annuity contract" means any policy or contract which provides for annuity benefits that vary according to the investment experience of any separate account or accounts maintained by the insurer as to such policy or contract, as provided for in North Dakota Century Code sections 26.1-33-13 and 26.1-34-11.

17."Variable death benefit" means the amount of the death benefit, other than incidental insurance benefits, payable under a variable life insurance policy dependent on the investment performance of the separate account, which the insurer would have to pay in the absence of the minimum death benefit.

18."Variable life insurance policy" means any individual policy which provides for life insurance which varies according to the investment experience of any separate account or accounts established and maintained by the insurer as to such policy, as provided for in North Dakota Century Code sections 26.1-33-13 and 26.1-34-11.

N.D. Admin. Code 45-04-02-03 Qualification of insurance companies to issue variable annuity contracts

1.No company shall deliver or issue for delivery variable annuity contracts within this state unless:

a.It is licensed or organized to do a life insurance and annuity business in this state;

b.The commissioner is satisfied that neither its condition nor its method of operation in connection with the issuance of such contracts will render its operation hazardous to its policyholders or the public in this state. In this connection, the commissioner shall consider among other things:

(1)The history and financial condition of the company.

(2)The characters, responsibility, and fitness of the officers and directors of the company.

(3)The laws and regulations under which the company is authorized in the state of domicile to issue variable contracts.

(4)The adequacy of the company's program for the thorough training in variable contracts of all agents who shall be selling or soliciting for the sale of variable annuity contracts in this state.

2.If the company is a subsidiary of an admitted life insurance company, or affiliated with such company by common management or ownership, it may be deemed by the commissioner to have satisfied the provisions of subdivision b of subsection 1 if either it or such admitted life company satisfied those provisions; provided, further, that a company licensed and having a satisfactory record of doing business in this state for a period of at least three years may be deemed to have satisfied the commissioner with respect to subdivision b of subsection 1.

3.Before any company shall deliver or issue for delivery variable annuity contracts within this state it shall submit to the commissioner:

a.A general description of the kinds of variable annuity contracts it intends to issue.

b.If requested by the commissioner, copies of the statutes and regulations of its state of domicile under which it is authorized to issue variable annuity contracts.

c.If requested by the commissioner, biographical data with respect to officers and directors of the company on the uniform biographical data forms as prescribed by the national association of insurance commissioners.

N.D. Admin. Code 45-04-02-04 Separate accounts for variable annuity contracts

A domestic company issuing variable annuity contracts shall establish one or more separate accounts pursuant to North Dakota Century Code sections 26.1-33-13 and 26.1-34-11, subject to the following provisions:

1.Except as may be provided with respect to reserves for guaranteed benefits and funds referred to in subsection 2, amounts allocated to any separate account and accumulations thereon may be invested and reinvested without regard to any requirements or limitations prescribed by the laws of this state governing the investments of life insurance companies and the investments in such separate account or accounts shall not be taken into account in applying the investment limitations otherwise applicable to the investments of the company.

2.Reserves for benefits guaranteed as to dollar amount and duration and funds guaranteed as to principal amount or stated rate of interest may be maintained in a separate account if a portion of the assets of such separate account at least equal to such reserve liability is invested in accordance with the laws and regulations of this state governing the investments of life insurance companies. Such portion of the assets shall not be taken into account in applying the investment limitations otherwise applicable to the investments of the company.

3.No company shall purchase or otherwise acquire the securities of any issuer, other than securities issued or guaranteed as to principal or interest by the United States, if immediately after such purchase or acquisition the market value of such investment, together with prior investments of such separate account in such security taken at market value, would exceed ten percent of the market value of the total assets of said separate account. However, the commissioner may waive such limitation if, in the commissioner's opinion, such waiver will not render the operation of such separate account hazardous to the policyholders or the public in this state.

4.Unless otherwise permitted by law or approved by the commissioner, no company shall purchase or otherwise acquire for its separate accounts the voting securities of any issuer if as a result of such acquisition the insurance company and its separate accounts, in the aggregate, would own more than ten percent of the total issued and outstanding voting securities of such issuer; provided, that the foregoing shall not apply with respect to securities held in separate accounts the voting rights in which are exercisable only in accordance with instructions from persons having interests in such accounts.

5.The limitations provided in subsections 3 and 4 shall not apply to the investment with respect to a separate account in the securities of an investment company registered under the Investment Company Act of 1940, as amended [15 U.S.C. 80a-1 through 80a-52], provided the investments of such investment company comply in substance with subsections 3 and 4.

In determining the percentage of voting securities of any issuer owned by the company and its separate accounts for purposes of subsection 4, the voting securities of such issuer owned indirectly through investment in an investment company shall be added to any such voting securities owned directly by the company and its separate accounts.

6.Unless otherwise approved by the commissioner, assets allocated to a separate account shall be valued at their market value on the date of valuation, or if there is no readily available market, then as provided under the terms of the contract or the rules of other written agreement applicable to such separate account; provided, that unless otherwise approved by the commissioner, the portion, if any, of the assets of such separate account equal to the company's reserve liability with regard to the benefits and funds referred to in subsection 2 shall be valued in accordance with the rules otherwise applicable to the company's assets.

7.If provided, and to the extent so provided under the applicable contracts, that portion of the assets of any such separate account equal to the reserves and other contract liabilities with respect to such account shall not be chargeable with liabilities arising out of any other business the company may conduct.

8. Notwithstanding any other provisions of law, a company may:

a.With respect to any separate account registered with the securities and exchange commission as a unit investment trust, exercise voting rights, in connection with any securities of a regulated Investment Company Act of 1940, as amended [15 U.S.C. 80a-1 through 80a-52], and held in such separate account, in accordance with instructions from persons having interests in such account ratably as determined by the company; or

b.With respect to any separate account registered with the securities and exchange commission as a management investment company, establish for such account a committee, board, or other body, the members of which may or may not be otherwise affiliated with such company and may be elected to such membership by the vote of persons having interests in such account ratably as determined by the company. Such committee, board, or other body may have the power, exercisable alone or in conjunction with others, to manage such separate account and the investment of assets.

A company, committee, board, or other body may establish such other provisions in respect to any such separate account as may be deemed appropriate to facilitate compliance with requirements of any federal or state law now or hereafter in effect; provided, that the commissioner approves such provisions as not being hazardous to the policyholders or the public in this state.

9.No sale, exchange, or other transfer of assets may be made by a company between any of its separate accounts or between any other investment account and one or more of its separate accounts unless, in case of a transfer into a separate account, such transfer is made solely to establish the account or to support the operation of the contracts with respect to the separate account to which the transfer is made, and unless such transfer, whether into or from a separate account, is made (a) by a transfer of cash, or (b) by a transfer of securities having a valuation which could be readily determined in the market place; provided, that such transfer of securities is approved by the commissioner. The commissioner may authorize other transfers among such accounts, if, in the commissioner's opinion, such transfers would not be inequitable.

10.The company shall maintain in each such separate account assets with a value at least equal to the reserves and other contract liabilities with respect to such account, except as may otherwise be approved by the commissioner.

11.The laws and regulations of this state applicable to officers and directors of insurance companies with respect to conflicts of interest shall apply to members of the committee, board, or other body of any separate account. No officer or director of such company and no member of the committee, board, or other body of a separate account shall receive directly or indirectly any commission or other compensation with respect to the purchase or sale of assets of such separate account.

History

• Law Implemented: NDCC 26.1-33-13, 26.1-34-11

N.D. Admin. Code 45-04-02-05 Filing of variable annuity contracts

The filing requirements applicable to variable annuity contracts shall, to the extent appropriate, be those filing requirements otherwise applicable under existing laws and regulations of this state with respect to the filing of annuity contract forms, both individual and group.

N.D. Admin. Code 45-04-02-06 Variable benefits under variable annuity contracts

1.Any variable annuity contract providing benefits payable in variable amounts delivered or issued for delivery in this state shall contain a statement of the essential features of the procedures to be followed by the company in determining the dollar amount of such variable benefits. Any such contract, including a group contract and any certificate in evidence of variable benefits issued thereunder, shall state that such dollar amount will vary to reflect investment experience and shall contain on its first page a clear statement to the effect that the benefits thereunder are on a variable basis.

2.Illustrations of benefits payable under any variable annuity contract shall not include projections of past investment experience into the future or attempted predictions of future investment experience; provided, that nothing contained herein is intended to prohibit use of hypothetical assumed rates of return to illustrate possible levels of benefits.

3.Any variable annuity contract delivered or issued for delivery in this state shall define the investment increment factors to be used in computing the dollar amount of variable benefits or other variable contractual payments or values thereunder, and may guarantee that expense or mortality results shall not adversely affect such dollar amounts. In the case of an individual variable annuity contract under which expense or mortality results may adversely affect the dollar amount of benefits, the expense or mortality factors to be used (as aforesaid for the investment increment factors) shall be defined in the contract.

In computing the dollar amount of the first annuity payment, payable on the annuity commencement date, under an individual variable annuity contract:

a.The net annual investment increment assumption shall not exceed five percent per year, except with the approval of the commissioner; and

b.With respect to a contract under which the level of benefits may be adversely affected by future mortality results, the mortality assumption shall be based upon the Annuity Mortality Table for 1949, Ultimate, or any modification of such table not having a lower life expectancy at any age, or, if approved by the commissioner, some other table.

"Expense" as used in this subsection may exclude some or all taxes, as specified in the contract.

4.The reserve liability for variable annuity contracts shall be established pursuant to the requirements of North Dakota Century Code chapter 26.1-35, in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees.

History

• Law Implemented: NDCC 26.1-33-15, 26.1-34-11

N.D. Admin. Code 45-04-02-07 Required report for variable annuity contracts

1.Any company issuing individual variable annuity contracts shall mail to the contract holder at least once in each contract year after the first at the contract holder's last address known to the company a statement or statements reporting the investments held in the separate account. The company shall submit annually to the commissioner a statement of the business of its separate account or accounts in such form as may be prescribed by the national association of insurance commissioners.

2.Any company issuing individual variable annuity contracts shall mail to the contract holder at least once in each contract year after the first at the contract holder's last address known to the company a statement reporting as of a date not more than four months previous to the date of mailing, in the case of an annuity contract under which payments have not yet commenced, (a) the number of accumulation units credited to such contract and the dollar value of each unit, or (b) the value of the contract holder's account.

N.D. Admin. Code 45-04-02-08 Eligibility of agents to sell or solicit variable annuity contracts

1.No person shall be eligible to sell or to solicit for the sale of variable annuity contracts unless, prior to making any such sale or solicitation, the person shall have become licensed as a life insurance agent and shall have become licensed as a securities salesman under North Dakota law.

2.Any person, having been licensed as a securities salesman and being associated with the variable contract business, shall immediately report to the commissioner of insurance and the commissioner of securities (a) any suspension or revocation of the person's variable annuity contract agent's license or life insurance agent's license in any other jurisdiction, or (b) the imposition of any disciplinary action (including suspension of or expulsion from membership, denial or suspension or revocation of registration, or other adverse order or directive) upon the person by any self-regulatory securities association, securities exchange, or any governmental agency with jurisdiction over securities or contracts of a variable nature, or (c) any judgment or injunction entered against the person on the basis of conduct deemed to have involved fraud, deceit, misrepresentation, or violation of any insurance or securities law or regulation.

N.D. Admin. Code 45-04-02-09 Qualification of insurer to issue variable life insurance

N.D. Admin. Code 45-04-02-10 Policy requirements for variable life insurance

N.D. Admin. Code 45-04-02-11 Reserve liabilities for variable life insurance

N.D. Admin. Code 45-04-02-12 Separate accounts for variable life insurance

N.D. Admin. Code 45-04-02-13 Information furnished to applicants for variable life insurance

N.D. Admin. Code 45-04-02-14 Applications for variable life insurance

N.D. Admin. Code 45-04-02-15 Reports to variable life insurance policyholders

N.D. Admin. Code 45-04-02-16 Qualification of agents for the sale of variable life insurance

N.D. Admin. Code 45-04-02-17 Separability

If any provision of this chapter or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the chapter and the application of such provision to other persons or circumstances shall not be affected thereby.

History

• Law Implemented: NDCC 26.1-33-17, 26.1-34-11

N.D. Admin. Code 45-04-02-18 Foreign and alien companies

If the laws and regulations in the place of domicile of a foreign or alien company provide a degree of protection to the policyholders and the public which is substantially equal to that provided by this

chapter, the commissioner, to the extent deemed appropriate by the commissioner in the commissioner's discretion, may consider compliance with such laws and regulations as compliance with this chapter.

History

• General Authority: NDCC 26.1-33, 26.1-34
• Law Implemented: NDCC 26.1-33-17, 26.1-34-11

Chapter 45-04-03 Interest Rates on Life Insurance Policy Loans

N.D. Admin. Code 45-04-03-01 Purpose

The purpose of this chapter is to permit and set guidelines for life insurers to include in life insurance policies issued after January 1, 1982, a provision for periodic adjustment of policy loan interest rates.

N.D. Admin. Code 45-04-03-02 Definitions

For purposes of this chapter, the "published monthly average" means:

1.Moody's corporate bond yield average - monthly average corporates as published by Moody's investors service, incorporated or any successor thereto; or

2.In the event that Moody's corporate bond yield average - monthly average corporates is no longer published, a substantially similar average, established by regulation issued by the commissioner.

N.D. Admin. Code 45-04-03-03 Maximum rate of interest on policy loans

1.Policies issued on or after January 1, 1982, shall provide for policy loan interest rates as follows:

a.A provision permitting a maximum interest rate of not more than eight percent per annum; or

b.A provision permitting an adjustable maximum interest rate established from time to time by the life insurer as permitted by law.

2.The rate of interest charged on a policy loan made under subdivision b of subsection 1 shall not exceed the higher of the following:

a.The published monthly average for the calendar month ending two months before the date on which the rate is determined; or

b.The rate used to compute the cash surrender values under the policy during the applicable period plus one percent per annum.

3.If the maximum rate of interest is determined pursuant to subdivision b of subsection 1, the policy shall contain a provision setting forth the frequency at which the rate is to be determined for that policy.

4.The maximum rate for each policy must be determined at regular intervals at least once every twelve months, but not more frequently than once in any three-month period. At the intervals specified in the policy:

a.The rate being charged may be increased whenever such increase as determined under subsection 2 would increase that rate by one-half percent or more per annum.

b.The rate being charged must be reduced whenever such reduction as determined under subsection 2 would decrease that rate by one-half percent or more per annum.

5.The life insurer shall:

a.Notify the policyholder at the time a cash loan is made of the initial rate of interest on the loan;

b.Notify the policyholder with respect to premium loans of the initial rate of interest on the loan as soon as it is reasonably practical to do so after making the initial loan. Notice need not be given to the policyholder when a further premium loan is added, except as provided in subdivision c;

c.Send to policyholders with loans reasonable advance notice of any increase in the rate; and

d.Include in the notices required above the substance of the pertinent provisions of subsections 1 and 3.

6.No policy shall terminate in a policy year as the sole result of change in the interest rate during that policy year, and the life insurer shall maintain coverage during that policy year until the time at which it would otherwise have terminated if there had been no change during that policy year.

7.The substance of the pertinent provisions of subsections 1 and 3 shall be set forth in the policies to which they apply.

8.For purposes of this section:

a.The rate of interest on policy loans permitted under this section includes the interest rate charged on reinstatement of policy loans for the period during and after any lapse of a policy.

b.The term "policy" includes certificates issued by a fraternal benefit society and annuity contracts which provide for policy loans.

c.The term "policy loan" includes any premium loan made under a policy to pay one or more premiums that were not paid to the life insurer as they fell due.

d.The term "policyholder" includes the owner of the policy or the person designated to pay premiums as shown on the records of the life insurer.

N.D. Admin. Code 45-04-03-04 Applicability to existing policies

The provisions of this chapter shall not apply to any insurance contract issued before January 1, 1982, unless the policyholder agrees in writing to the applicability of such provisions.

Chapter 45-04-04 Variable Life Insurance

N.D. Admin. Code 45-04-04-01 Definitions

1."Affiliate" means any person, directly or indirectly, controlling, controlled by, or under common control with such insurer; any person who regularly furnishes investment advice to such insurer with respect to its separate accounts for which a specific fee or commission is charged; or any director, officer, partner, or employee of any such insurer, controlling or controlled person, or person providing investment advice or any member of the immediate family of such person.

2."Assumed investment rate" means the rate of investment return which would be required to be credited to a variable life insurance policy, after deduction of charges for taxes, investment expenses, and mortality and expense guarantees to maintain the variable death benefit equal at all times to the amount of death benefit, other than incidental insurance benefits, which would be payable under the plan of insurance if the death benefit did not vary according to the investment experience of the separate account.

3."Benefit base" means the amount, to which the net investment return is applied.

4."Control" (including the terms "controlling", "controlled by", and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing more than ten percent of the voting securities of any other person. This presumption may be rebutted by a showing made to the satisfaction of the commissioner that control does not exist in fact. The commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.

5."Flexible premium policy" means any variable life insurance policy other than a scheduled premium policy such as specified in subsection 11.

6."General account" means all assets of the insurer other than assets in separate accounts established pursuant to North Dakota Century Code sections 26.1-33-13 and 26.1-34-11 or pursuant to the corresponding section of the insurance laws of the state of domicile of a foreign or alien insurer, whether or not for variable life insurance.

7."Incidental insurance benefit" means all insurance benefits in a variable life insurance policy, other than the variable death benefit and the minimum death benefit, including but not limited to accidental death and dismemberment benefits, disability benefits, guaranteed insurability options, family income, or term riders.

8."Minimum death benefit" means the amount of the guaranteed death benefit, other than incidental insurance benefits, payable under a variable life insurance policy regardless of the investment performance of the separate account.

9."Net investment return" means the rate of investment return in a separate account to be applied to the benefit base.

10."Policy processing day" means the day on which charges authorized in the policy are deducted from the policy's cash values.

11."Scheduled premium policy" means any variable life insurance policy under which both the amount and timing of premium payments are fixed by the insurer.

12."Separate account" means a separate account established pursuant to North Dakota Century Code sections 26.1-33-13 and 26.1-34-11 or pursuant to the corresponding section of the insurance laws of the state of domicile of a foreign or alien insurer.

13."Variable death benefit" means the amount of the death benefit, other than incidental insurance benefits, payable under a variable life insurance policy dependent on the investment performance of the separate account, which the insurer would have to pay in the absence of any minimum death benefit.

14."Variable life insurance policy" means any individual policy which provides for life insurance the amount or duration of which varies according to the investment experience of any separate account or accounts established and maintained by the insurer as to such policy, pursuant to North Dakota Century Code sections 26.1-33-13 and 26.1-34-11 or pursuant to the corresponding section of the insurance laws of the state of domicile of a foreign or alien insurer.

N.D. Admin. Code 45-04-04-02 Qualification of insurer to issue variable life insurance

1.Licensing and approval to do business in this state. Any insurer may not deliver or issue for delivery in this state any variable life insurance policy unless:

a.The insurer is licensed or organized to do a life insurance business in this state; and

b.The insurer has obtained the written approval of the commissioner for the issuance of variable life insurance policies in this state. The commissioner shall grant such written approval only after the commissioner has found that:

(1)The plan of operation for the issuance of variable life insurance policies is not unsound;

(2)The general character, reputation, and experience of the management and those persons or firms proposed to supply consulting, investment, administrative, or custodial services to the insurer are such as to reasonably assure competent operation of the variable life insurance business of the insurer in this state; and (3)The present and foreseeable future financial condition of the insurer and its method of operation in connection with the issuance of such policies is not likely to render its operation hazardous to the public or its policyholders in this state. The commissioner shall consider, among other things:

(a)The history of operation and financial condition of the insurer.

(b)The qualifications, fitness, character, responsibility, reputation, and experience of the officers and directors and other management of the insurer and those persons or firms proposed to supply consulting, investment, administrative, or custodial service to the insurer.

(c)The applicable law and regulations under which the insurer is authorized in its state of domicile to issue variable life insurance policies. The state of entry of an alien insurer shall be deemed its state of domicile for this purpose.

(d)If the insurer is a subsidiary of, or is affiliated by common management or ownership with another company, its relationship to such other company and the degree to which the requesting insurer, as well as the other company, meet these standards.

2.Filing for approval to do business in this state. The commissioner may, at the commissioner's discretion, require that an insurer, before it delivers or issues for delivery any variable life insurance policy in this state, file with this department the following information for the consideration of the commissioner in making the determination required by subdivision b of subsection 1:

a.Copies of a general description of the variable life insurance policies it intends to issue.

b.A general description of the methods of operation of the variable life insurance business of the insurer, including methods of distribution of policies and the names of those persons or firms proposed to supply consulting, investment, administrative, custodial, or distribution services to the insurer.

c.With respect to any separate account maintained by an insurer for any variable life insurance policy, a statement of the investment policy the issuer intends to follow for the investment of the assets held in the separate account, and a statement of procedures for changing the investment policy. The statement of investment policy must include a description of the investment objectives intended for the separate account.

d.A description of any investment advisory services contemplated as required by subsection 10 of section 45-04-04-05.

e.A copy of the statutes and regulations of the state domicile of the insurer under which it is authorized to issue variable life insurance policies.

f.Biographical data with respect to officers and directors of the insurer on the National Association of Insurance Commissioners Uniform Biographical Data Form.

g.A statement of the insurer's actuary describing the mortality and expense risks which the insurer will bear under the policy.

3.Standards of suitability. Every insurer seeking approval to enter into the variable life insurance business in this state shall establish and maintain a written statement specifying the standards of suitability to be used by the insurer. The standards of suitability must specify that no recommendations will be made to an applicant to purchase a variable life insurance policy and that no variable life insurance policy will be issued in the absence of reasonable grounds to believe that the purchase of such policy is not unsuitable for such applicant on the basis of information furnished after reasonable inquiry of the applicant concerning the applicant's insurance and investment objectives, financial situation and needs, and any other information known to the insurer or to the agent making the recommendation.

4.Use of sales materials. An insurer authorized to transact variable life insurance business in this state may not use any sales material, advertising material, or descriptive literature or other materials of any kind in connection with its variable life insurance business in this state which is false, misleading, deceptive, or inaccurate.

Variable life insurance sales material, advertising material, and descriptive literature are subject to the additional requirements of North Dakota Century Code chapter 26.1-04 and North Dakota Administrative Code chapter 45-04-01.

5.Requirements applicable to contractual services. Any material contract between an insurer and suppliers of consulting investment, administrative, sales, marketing, custodial, or other services with respect to variable life insurance operations must be in writing and provide that the supplier of such services shall furnish the commissioner with any information or reports in connection with such services with the commissioner may request in order to ascertain whether the variable life insurance operations of the insurer are being conducted in a manner consistent with these rules and any other applicable law or rules.

6.Reports to the commissioner. Any insurer authorized to transact the business of variable life insurance in this state shall submit to the commissioner, in addition to any other materials which may be required by this rule or any other applicable law or rules:

a.An annual statement of the business of its separate account or accounts in such form as may be prescribed by the national association of insurance commissioners.

b.Prior to the use in this state any information furnished to applicants as provided for in

section 45-04-04-06.

c.Prior to the use in this state the form of any of the reports to policyholders as provided for in section 45-04-04-08.

d.Such additional information concerning its variable life insurance operations or its separate accounts as the commissioner shall deem necessary.

Any material submitted to the commissioner under this subsection shall be disapproved if it is found to be false, misleading, deceptive, or inaccurate in any material respect and, if previously distributed, the commissioner shall require the distribution of amended material.

7.Authority of commissioner to disapprove. Any material required to be filed with and approved by the commissioner is subject to disapproval if at any time it is found by the commissioner not to comply with the standards established by this rule.

N.D. Admin. Code 45-04-04-03 Insurance policy requirements

The commissioner will not approve any variable life insurance form filed pursuant to this chapter unless it conforms to the requirements of this section.

1.Filing of variable life insurance policies. All variable life insurance policies, and all riders, endorsements, applications, and other documents which are to be attached to and made part of the policy and which relate to the variable nature of the policy, must be filed with the commissioner and approved by the commissioner prior to delivery or issuance for delivery in this state.

a.The procedures and requirements for filing and approval are, to the extent appropriate and not inconsistent with this chapter, the same as those otherwise applicable to other life insurance policies.

b.The commissioner may approve variable life insurance policies and related forms with provisions the commissioner deems to be not less favorable to the policyholder and the beneficiary than those required by this chapter.

2.Mandatory policy benefit and design requirements. Variable life insurance policies delivered or issued for delivery in this state must comply with the following minimum requirements:

a.Mortality and expense risks must be borne by the insurer. The mortality and expense charges must be subject to the maximums stated in the contract.

b.For scheduled premium policies, a minimum death benefit must be provided in an amount at least equal to the initial face amount of the policy so long as premiums are duly paid,subject to the provisions of subdivision b of subsection 3.

c.The policy must reflect the investment experience of one or more separate accounts established and maintained by the insurer. The insurer must demonstrate that the variable life insurance policy is actuarially sound.

d.Each variable life insurance policy must be credited with the full amount of the net investment return applied to the benefit base.

e.Any changes in variable death benefits of each variable life insurance policy must be determined at least annually.

f.The cash value of each variable life insurance policy must be determined at least monthly. The method of computation of cash values and other nonforfeiture benefits, as described either in the policy or in a statement filed with the commissioner of the state in which the policy is delivered, or issued for delivery, must be in accordance with actuarial procedures that recognize the variable nature of the policy. The method of computation must be such that, if the net investment return credited to the policy at all times from the date of issue should be equal to the assumed investment rate with premiums and benefits determined accordingly under the terms of the policy, then the resulting cash values and other nonforfeiture benefits must be at least equal to the minimum values required by North Dakota Century Code chapter 26.1-33 for a general account policy with such premiums and benefits. The assumed investment rate may not exceed the maximum interest rate permitted under North Dakota Century Code chapter 26.1-33. If the policy does not contain an assumed investment rate this demonstration must be based on the maximum interest rate permitted under North Dakota Century Code chapter 26.1-33. The method of computation may disregard incidental minimum guarantees as to the dollar amounts payable. Incidental minimum guarantees include, for example, but are not to be limited to, a guarantee that the amount payable at death or maturity is at least equal to the amount that otherwise would have been payable if the net investment return credited to the policy at all times from the date of issue had been equal to the assumed investment rate.

g.The computation of values required for each variable life insurance policy may be based upon such reasonable and necessary approximations as are acceptable to the commissioner.

3.Mandatory policy provisions. Every variable life insurance policy filed for approval in this state must contain at least the following:

a.The cover page or pages corresponding to the cover pages of each such policy shall contain:

(1)A prominent statement in either contrasting color or in boldface type that the amount or duration of death benefit may be variable or fixed under specified conditions.

(2)A prominent statement in either contrasting color or in boldface type that cash values may increase or decrease in accordance with the experience of the separate account subject to any specified minimum guarantees.

(3)A statement describing any minimum death benefit required pursuant to subdivision b of subsection 2.

(4)The method, or a reference to the policy provision which describes the method, for determining the amount of insurance payable at death.

(5)To the extent permitted by state law, a captioned provision that the policyholder may return the variable life insurance policy within ten days of receipt of the policy by the policyholder, and receive a refund equal to the sum of (a) the difference between the premiums paid including any policy fees or other charges and the amounts allocated to any separate accounts under the policy and (b) the value of the amounts allocated to any separate accounts under the policy, on the date the returned policy is received by the insurer or its agent. Until such time as state law authorizes the return of payments as calculated in the preceding sentence, the amount of the refund must be the total of all premium payments for such policy.

(6)Such other items as are currently required for fixed benefit life insurance policies and which are not inconsistent with this chapter. b.(1)For scheduled premium policies, a provision for a grace period of not less than thirty-one days from the premium due date which must provide that where the premium is paid within the grace period, policy values will be the same, except for the deduction of any overdue premium, as if the premium were paid on or before the due date.

(2)For flexible premium policies, a provision for a grace period beginning on the policy processing day when the total charges authorized by the policy that are necessary to keep the policy in force until the next policy processing day exceed the amounts available under the policy to pay such charges in accordance with the terms of the policy. Such grace period must end on a date not less than sixty-one days after the mailing date of the report to policyholders required by subsection 3 of section 45-04-04-08.

The death benefit payable during the grace period will equal the death benefit in effect immediately prior to such period less any overdue charges. If the policy processing days occur monthly, the insurer may require the payment of not more than three times the charges which were due on the policy processing day on which the amounts available under the policy were insufficient to pay all charges authorized by the policy that are necessary to keep such policy in force until the next policy processing day.

c.For scheduled premium policies, a provision that the policy will be reinstated at any time within two years from the date of default upon the written application of the insured and evidence of insurability, including good health, satisfactory to the insurer, unless the cash surrender value has been paid or the period of extended insurance has expired, upon the payment of any outstanding indebtedness arising subsequent to the end of the grace period following the date of default together with accrued interest thereon to the date of reinstatement and payment of an amount not exceeding that permitted by North Dakota law.

d.A full description of the benefit base and of the method of calculation and application of any factors used to adjust variable benefits under the policy.

e.A provision designating the separate account to be used and stating that:

(1)The assets of the separate account will be available to cover the liabilities of the general account of the insurer only to the extent that the assets of the separate account exceed the liabilities of the separate account arising under the variable life insurance policies supported by the separate account.

(2)The assets of such separate account will be valued at least as often as any policy benefits vary but at least monthly.

f.A provision specifying what documents constitute the entire insurance contract under state law.

g.A designation of the officers who are empowered to make an agreement or representation on behalf of the insurer and an indication that statements by the insured, or on the insured's behalf, are considered as representations and not warranties.

h.An identification of the owner of the insurance contract.

i.A provision setting forth conditions or requirements as to the designation, or change of designation, of a beneficiary and a provision for disbursement of benefits in the absence of a beneficiary designation.

j.A statement of any conditions or requirements concerning the assignment of the policy.

k.A description of any adjustments in the policy values to be made in the event of misstatement of age or sex of the insured.

l.A provision that the policy is incontestable by the insurer after it has been in force for two years during the lifetime of the insured; provided, however, that any increase in the amount of the policy's death benefits subsequent to the policy issue date, which increase occurred upon a new application or request of the owner and was subject to satisfactory proof of the insured's insurability, is incontestable after any such increase has been in force, during the lifetime of the insured, for two years from the date of issue of such increase.

m.A provision stating that the investment policy of the separate account will not be changed without the approval of the insurance commissioner of the state of domicile of the insurer, and that the approval process is on file with the commissioner of this state.

n.A provision that payment of variable death benefits in excess of any minimum death benefits, cash values, policy loans, or partial withdrawals, except when used to pay premiums, or partial surrenders may be deferred:

(1)For up to six months from the date of request, if such payments are based on policy values which do not depend on the investment performance of the separate account; or (2)Otherwise, for any period during which the New York stock exchange is closed for trading, except for normal holiday closing or when the securities and exchange commission has determined that a state of emergency exists which may make such payment impractical.

o.If settlement options are provided, at least one such option must be provided on a fixed

basis only.

p.A description of the basis for computing the cash value and the surrender value under the policy.

q.Premiums or charges for incidental insurance benefits must be stated separately.

r.Any other policy provision required by this chapter.

s.Such other items as are currently required for fixed benefit life insurance policies and are not inconsistent with this chapter.

t.A provision for nonforfeiture insurance benefits. The insurer may establish a reasonable minimum cash value below which any nonforfeiture insurance options will not be available.

4.Policy loan provision. Every variable life insurance policy, other than term insurance policies and pure endowment policies, delivered or issued for delivery in this state must contain provisions which are not less favorable to the policyholder than the following:

a.A provision for policy loans after the policy has been in force for three full years which provides the following:

(1)At least seventy-five percent of the policy's cash surrender value may be borrowed.

(2)The amount borrowed must bear interest at a rate not to exceed that permitted by

chapter 45-04-03.

(3)Any indebtedness must be deducted from the proceeds payable on death.

(4)Any indebtedness must be deducted from the cash surrender value upon surrender or in determining any nonforfeiture benefit.

(5)For scheduled premium policies, whenever the indebtedness exceeds the cash surrender value, the insurer shall give notice of any intent to cancel the policy if the excess indebtedness is not repaid within thirty-one days after the date of mailing of such notice. For flexible premium policies, whenever the total charges authorized by the policy that are necessary to keep the policy in force until the next following processing day exceed the amounts available under the policy to pay such charges, a report must be sent to the policyholder containing the information specified by subsection 3 of section 45-04-04-08.

(6)The policy may provide that if, at any time, so long as premiums are duly paid, the variable death benefit is less than it would have been if no loan or withdrawal had ever been made, the policyholder may increase such variable death benefit up to what it would have been if there had been no loan or withdrawal by paying an amount not exceeding one hundred percent of the corresponding increase in cash value and by furnishing such evidence of insurability as the insurer may request.

(7)The policy may specify a reasonable minimum amount which may be borrowed at any time but such minimum may not apply to any automatic premium loan provision.

(8)No policy loan provision is required if the policy is under extended insurance nonforfeiture option.

(9)The policy loan provisions may be constructed so that variable life insurance policyholders who have not exercised such provisions are not disadvantaged by the exercise thereof.

(10)Amounts paid to the policyholders upon the exercise of any policy loan provision must be withdrawn from the separate account and must be returned to the separate account upon repayment except that a stock insurer may provide the amounts for policy loans from the general account.

5.Other policy provisions. The following provision may in substance be included in a variable life insurance policy or related form delivered or issued for delivery in this state:

a.An exclusion for suicide within one year of the issue date of the policy; provided, however, that to the extent of the increased death benefits only, the policy may provide an exclusion for suicide within one year of any increase in death benefits which results from an application of the owner subsequent to the policy issue date.

b.Incidental insurance benefits may be offered on a fixed or variable basis.

c.Policies issued on a participating basis must offer to pay dividend amounts in cash. In addition, such policies may offer the following dividend options:

(1)The amount of the dividend may be credited against premium payments.

(2)The amount of the dividend may be applied to provide amounts of additional fixed or variable benefit life insurance.

(3)The amount of the dividend may be deposited in the general account at a specified minimum rate of interest.

(4)The amount of the dividend may be applied to provide paid-up amounts of fixed benefit one-year term insurance.

(5)The amount of the dividend may be deposited as a variable deposit in a separate

d.A provision allowing the policyholder to elect in writing in the application for the policy or thereafter an automatic premium loan on a basis not less favorable than that required of policy loans under subsection 4, except that a restriction that no more than two consecutive premiums can be paid under this provision may be imposed.

e.A provision allowing the policyholder to make partial withdrawals.

f.Any other policy provision approved by the commissioner.

History

• History: Effective June 1, 1984; amended effective April 1, 2010.

N.D. Admin. Code 45-04-04-04 Reserve liabilities for variable life insurance

1.Reserve liabilities for variable life insurance policies must be established under North Dakota Century Code chapter 26.1-33 in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees.

2.For scheduled premium policies, reserve liabilities for the guaranteed minimum death benefit must be the reserve needed to provide for the contingency of death occurring when the guaranteed minimum death benefit exceeds the death benefit that would be paid in the absence of the guarantee, and must be maintained in the general account of the insurer, and may not be less than the greater of the following minimum reserves:

a.The aggregate total of the term costs, if any, covering a period of one full year from the valuation date, of the guarantee on each variable life insurance contract, assuming an immediate one-third depreciation in the current value of the assets of the separate account followed by a net investment return equal to the assumed investment rate; or

b.The aggregate total of the "attained age level" reserves on each variable life insurance contract. The "attained age level" reserve on each variable life insurance contract may not be less than zero and must equal the "residue", as described in paragraph 1, of the prior year's "attained age level" reserve on the contract, with any such "residue", increased or decreased by a payment computed on an attained age basis as described in paragraph 2:

(1)The "residue" of the prior year's "attained age level" reserve on each variable life insurance contract may not be less than zero and must be determined by adding interest at the valuation interest rate to such prior year's reserve, deducting the tabular claims based on the "excess" if any, of the guaranteed minimum death benefit over the death benefit that would be payable in the absence of such guarantee, and dividing the net result by the tabular probability of survival. The "excess" referred to in the preceding sentence must be based on the actual level of death benefits that would have been in effect during the preceding year in the absence of the guarantee, taking appropriate account of the reserve assumptions regarding the distribution of death claim payments over the year.

(2)The payment referred to in subdivision b must be computed so that the present value of a level payment of that amount each year over the future premium paying period of the contract is equal to (a) minus (b) minus (c), where (a) is the present value of the future guaranteed minimum death benefits, (b) is the present value of the future death benefits that would be payable in the absence of such guarantee, and (c) is any "residue", as described in paragraph 1, of the prior year's "attained age level" reserve on such variable life insurance contract. If the contract is paid up, the payment shall equal (a) minus (b) minus (c). The amounts of future death benefits referred to in (b) shall be computed assuming a net investment return of the separate account which may differ from the assumed investment rate or the valuation interest rate but in no event may exceed the maximum interest rate permitted for the valuation of life contracts.

The valuation interest rate and mortality table used in computing the two minimum reserves described in a and b above shall conform to permissible standards for the valuation of life insurance contracts. In determining such minimum reserve, the company may employ suitable approximations and estimates, including but not limited to groupings and averages.

3.For flexible premium policies, reserve liabilities for any guaranteed minimum death benefit must be maintained in the general account of the insurer and may be not less than the aggregate total of the term costs, if any, covering the period provided for in the guarantee not otherwise provided for by the reserves held in the separate account assuming an immediate one-third depreciation in the current value of the assets of the separate account followed by a net investment return equal to the valuation interest rate.

The valuation interest rate and mortality table in computing this additional reserve, if any, must conform to permissible standards for the valuation of life insurance contracts. In determining such minimum reserve, the company may employ suitable approximations and estimates including but not limited to groupings and averages.

4.Reserve liabilities for all fixed incidental insurance benefits and any guarantees associated with variable incidental insurance benefits shall be maintained in the general account and reserve liabilities for all variable aspects of the variable incidental insurance benefits shall be maintained in a separate account, in amounts determined in accordance with the actuarial procedures appropriate to such benefit.

N.D. Admin. Code 45-04-04-05 Separate accounts

The following requirements apply to the establishment and administration of variable life insurance separate accounts by any domestic insurer.

1.Establishment and administration of separate accounts. Any domestic insurer issuing variable life insurance shall establish one or more separate accounts pursuant to North Dakota Century Code sections 26.1-33-13 and 26.1-34-11.

a.If no law or other regulation provides for the custody of separate account assets and if such insurer is not the custodian of such separate account assets, all contracts for custody of such assets must be in writing and the commissioner may review and approve of both the terms of any such contract and the proposed custodian prior to the transfer of custody.

b.The insurer may not without the prior written approval of the commissioner employ in any material connection with the handling of separate account assets any person who:

(1)Within the last ten years has been convicted of any felony or misdemeanor arising out of such person's conduct involving embezzlement, fraudulent, conversion, or misappropriation of funds or securities or involving violation of 18 U.S.C. 1341, 1342, or 1343;

(2)Within the last ten years has been found by any state regulatory authority to have violated or has acknowledged violation of any provision of any state insurance law involving fraud, deceit, or knowing misrepresentation; or (3)Within the last ten years has been found by federal or state regulatory authorities to have violated or has acknowledged violation of any provision of federal or state securities laws involving fraud, deceit, or knowing misrepresentation.

c.All persons with access to the cash, securities, or other assets of the separate account must be under bond in the amount of not less than a value indexed to the fidelity bonding recommendations stated in the financial condition examiners handbook published by the national association of insurance commissioners, 2009 edition, regarding personnel handling general account assets.

d.The assets of such separate accounts must be valued at least as often as variable benefits are determined but in any event at least monthly.

2.Amounts in the separate account. The insurer shall maintain in each separate account assets with a value at least equal to the greater of the valuation reserves for the variable portion of the variable life insurance policies or the benefit base for such policies.

3.Investments by the separate account.

a.No sale, exchange, or other transfer of assets may be made by an insurer or any of its affiliates between any of its separate accounts or between any other investment account and one or more of its separate accounts unless:

(1)In case of a transfer into a separate account, the transfer is made solely to establish the account or to support the operation of the policies with respect to the separate account to which the transfer is made; and (2)The transfer, whether into or from a separate account, is made by a transfer of cash; but other assets may be transferred if approved by the commissioner in advance.

b.The separate account must have sufficient net investment income and readily marketable assets to meet anticipated withdrawals under policies funded by the account.

4.Limitations on ownership.

a.A separate account may not purchase or otherwise acquire the securities of any issuer, other than securities issued or guaranteed as to principal and interest by the United States, if immediately after such purchase or acquisition the value of such investment, together with prior investments of such account in such security valued as required by these regulations, would exceed ten percent of the value of the assets of the separate account. The commissioner may waive this limitation in writing if the commissioner believes waiver will not render the operation of the separate account hazardous to the public or the policyholders in this state.

b.No separate account may purchase or otherwise acquire the voting securities of an issuer if as a result of such acquisition the insurer and its separate accounts, in the aggregate, will own more than ten percent of the total issued and outstanding voting securities of the issuer. The commissioner may waive this limitation in writing if the commissioner believes waiver will not render the operation of the separate account hazardous to the public or the policyholders in this state or jeopardize the independent operation of the issuer of such securities.

c.The percentage limitation specified in subdivision a may not be construed to preclude the investment of the assets of separate accounts in shares of investment companies registered pursuant to the Investment Company Act of 1940 or other pools of investment assets if the investments and investment policies of such investment companies or assets pools comply substantially with subsection 3 and the other applicable portions of this chapter.

5.Valuation of separate account assets. Investments of the separate account must be valued at their market value on the date of valuation, or at amortized cost if it approximates market value.

6.Separate account investment policy. The investment policy of a separate account operated by a domestic insurer filed under subdivision c of subsection 2 of section 45-04-04-02 may not be changed without first filing the change with the commissioner.

a.Any change filed pursuant to this subsection is effective sixty days after the date it was filed with the commissioner, unless the commissioner notifies the insurer before the end of such sixty-day period of approval of the proposed change. At any time the commissioner may, after notice and public hearing, disapprove any change that has become effective pursuant to this subsection.

b.The commissioner may disapprove the change if the commissioner determines that the change would be detrimental to the interests of the policyholders participating in such separate account.

7.Charges against separate account. The insurer must disclose in writing, prior to or contemporaneously with delivery of the policy, all charges that may be made against the separate account, including the following:

a.Taxes or reserves for taxes attributable to investment gains and income of the separate

b.Actual cost of reasonable brokerage fees and similar direct acquisition and sale costs incurred in the purchase or sale of separate account assets.

c.Actuarially determined costs of insurance (tabular costs) and the release of separate account liabilities.

d.Charges for administrative expenses and investment management expenses, including internal costs attributable to the investment management of assets of the separate

e.A charge, at a rate specified in the policy, for mortality and expense guarantees.

f.Any amounts in excess of those required to be held in the separate accounts.

g.Charges for incidental insurance benefits.

8.Standards of conduct. Every insurer seeking approval to enter into the variable life insurance business in this state shall adopt by formal action of its board of directors a written statement specifying the standards of conduct of the insurer, its officers, directors, employees, and affiliates with respect to the purchase or sale of investments of separate accounts. The standards of conduct must be binding on the insurer and those to whom it refers. A code or codes of ethics meeting the requirements of section 17j under the Investment Company Act of 1940 and applicable rules and regulations thereunder satisfies the provisions of this subsection.

9.Conflicts of interest. Rules under any provision of the insurance laws of this state or any rule applicable to the officers and directors of insurance companies with respect to conflicts of interest also apply to members of any separate account's committee or other similar body.

10.Investment advisory services to a separate account. An insurer may not enter into a contract under which any person undertakes, for a fee, to regularly furnish investment advice to the insurer with respect to its separate accounts maintained for variable life insurance policies unless the investment advisory contract is in writing and provides that it may be terminated by the insurer without penalty to the insurer or the separate account upon no more than sixty days' written notice to the investment adviser and unless:

a.The person providing such advice is registered as an investment adviser under the Investment Advisers Act of 1940;

b.The person providing such advice is an investment manager under the Employee Retirement Income Security Act of 1974 with respect to the assets of each employee benefit plan allocated to the separate account; or

c.The insurer has filed with the commissioner and continues to file annually the following information and statements concerning the proposed adviser:

(1)The name and form of organization, state of organization, and its principal place of business;

(2)The names and addresses of its partners, officers, directors, and persons performing similar functions or, if such an investment adviser be an individual, of such individual;

(3)A written standard of conduct complying in substance with the requirements of subsection 8 which has been adopted by the investment adviser and is applicable to the investment adviser, its officers, directors, and affiliates;

(4)A statement provided by the proposed adviser as to whether the adviser or any person associated therewith:

(a)Has been convicted within ten years of any felony, or misdemeanor arising out of such person's conduct as an employee, salesman, officer or director of an insurance company, a banker, an insurance agent, a securities broker, or an investment adviser involving embezzlement, fraudulent conversion, or misappropriation of funds or securities, or involving the violation of 18 U.S.C. 1341, 1342, or 1343;

(b)Has been permanently or temporarily enjoined by order, judgment, or decree of any court of competent jurisdiction from acting as an investment adviser, underwriter, broker, or dealer, or as an affiliated person or as an employee of any investment company, bank, or insurance company, or from engaging or in continuing any conduct or practice in connection with any such activity;

(c)Has been found by federal or state regulatory authorities to have willfully violated or have acknowledged willful violation of any provision of federal or state securities laws or state insurance laws or of any rule or regulation under any such laws; or (d)Has been censured, denied an investment adviser registration, had a registration as an investment adviser revoked or suspended, or been barred or suspended from being associated with an investment adviser by order of federal or state regulatory authorities.

The commissioner may, after notice and opportunity for hearing, by order require such investment advisory contract to be terminated if the commissioner deems continued operation thereunder to be hazardous to the public or the insurer's policyholders.

History

• History: Effective June 1, 1984; amended effective April 1, 2010.

N.D. Admin. Code 45-04-04-06 Information furnished to applicants

An insurer delivering or issuing for delivery in this state any variable life insurance policy shall deliver to the applicant for the policy, and obtain a written acknowledgment of receipt from such application coincident with or prior to the execution of the application, the following information. The requirements of this section are deemed to have been satisfied to the extent that a disclosure containing information required by this section is delivered in the form of a prospectus included in the requirements of the Securities Act of 1933 and which was all information and reports required by the Employee Retirement Income Security Act of 1974 if the policies are exempted from the registration requirements of the Securities Act of 1933 pursuant to section 3(a)(2) thereof.

1.A summary explanation, in nontechnical terms, of the principal features of the policy, including a description of the manner in which the variable benefits will reflect the investment experience of the separate account and the factors which affect such variation. Such explanation must include notices of the provision required by paragraph 5 of subdivision a of subsection 3 and subdivision f of subsection 3 of section 45-04-04-03.

2.A statement of the investment policy of the separate account, including:

a.A description of the investment objectives intended for the separate account and the principal types of investments intended to be made; and

b.Any restriction of limitations on the manner in which the operations of the separate account are intended to be conducted.

3.A statement of the net investment return of the separate account for each of the last ten years or such lesser period as the separate account has been in existence.

4.A statement of the charges levied against the separate account during the previous year.

5.A summary of the method to be used in valuing assets held by the separate account.

6.A summary of the federal income tax aspects of the policy applicable to the insured, the policyholder, and the beneficiary.

7.Illustrations of benefits payable under the variable life insurance contract. Such illustrations shall be prepared by the insurer and may not include projections of past investment experience into the future or attempted predictions of future investment experience; provided, that nothing contained herein prohibits use of hypothetical assumed rates of return to illustrate possible levels of benefits if it is made clear that such assumed rates are hypothetical only.

N.D. Admin. Code 45-04-04-07 Applications

The application for a variable life insurance policy must contain:

1.A prominent statement that the death benefit may be variable or fixed under specified conditions.

2.A prominent statement that cash values may increase or decrease in accordance with the experience of the separate account (subject to any specified minimum guarantees).

3.Questions designed to elicit information which enables the insurer to determine the suitability of variable life insurance for the applicant.

N.D. Admin. Code 45-04-04-08 Reports to policyholders

Any insurer delivering or issuing for delivery in this state any variable life insurance policies shall mail to each variable life insurance policyholder at the policyholder's last-known address the following reports:

1.Within thirty days after each anniversary of the policy, a statement or statements of the cash surrender value, death benefit, any partial withdrawal or policy loan, any interest charge, and any optional payments allowed pursuant to subsection 4 of section 45-04-04-03 under the policy computed as of the policy anniversary date. Provided, however, that such statement may be furnished within thirty days after a specified date in each policy year so long as the information contained therein is computed as of a date not more than sixty days prior to the mailing of the notice. This statement must state that, in accordance with the investment experience of the separate account, the cash values and the variable death benefit may increase or decrease, and must prominently identify any value described therein which may be recomputed prior to the next statement required by this section. If the policy guarantees that the variable death benefit on the next policy anniversary date will not be less than the variable death benefit specified in such statement, the statement must be modified to so indicate. For flexible premium policies, the report must contain a reconciliation of the change since the previous report in cash value and cash surrender value, if different, because of payments made (less deductions for expense charges), withdrawals, investment experience, insurance charges, and any other charges made against the cash value. In addition, the report must show the projected cash value and cash surrender value, if different, as of one year from the end of the period covered by the report assuming that: (a) planned periodic premiums, if any, are paid as scheduled; (b) guaranteed costs of insurance are deducted; and (c) the net investment return is equal to the guaranteed rate or, in the absence of a guaranteed rate, is not greater than zero. If the projected value is less than zero, a warning message must be included that states that the policy may be in danger of terminating without value in the next twelve months unless additional premium is paid.

2.Annually, a statement or statements including:

a.A summary of the financial statement of the separate account based on the annual statement last filed with the commissioner.

b.The net investment return of the separate account for the last year and, for each year after the first, a comparison of the investment rate of the separate account during the last year with the investment rate during prior years, up to a total of not less than five years when available.

c.A list of investments held by the separate account as of a date not earlier than the end of the last year for which an annual statement was filed with the commissioner.

d.Any charges levied against the separate account during the previous year.

e.A statement of any change, since the last report, in the investment objective and orientation of the separate account, in any investment restriction or material quantitative or qualitative investment requirement applicable to the separate account or in the investment adviser of the separate account.

3.For flexible premium policies, a report must be sent to the policyholder if the amounts available under the policy on any policy processing day to pay the charges authorized by the policy are less than the amount necessary to keep the policy in force until the next following policy processing day. The report must indicate the minimum payment required under the terms of the policy to keep it in force and the length of the grace period for payment of such amount.

N.D. Admin. Code 45-04-04-09 Foreign companies

If the law or regulation in the place of domicile of a foreign company provides a degree of protection to the policyholder and the public which is substantially similar to that provided by this chapter, the commissioner to the extent deemed appropriate by the commissioner in the commissioner's discretion, may consider compliance with such law or regulation as compliance with this chapter.

N.D. Admin. Code 45-04-04-10 Qualification of agents for the sale of variable life insurance

1.Qualification to sell variable life insurance.

a.No person may sell or offer for sale in this state any variable life insurance policy unless such person is an agent and has filed with the commissioner, in a form satisfactory to the commissioner, evidence that such person holds any license or authorization which may be required for the solicitation or sale of variable life insurance and evidence that such person holds a license as a securities salesman under North Dakota law.

b.Any examination administered by the department for the purpose of determining the eligibility of any person for licensing as an agent shall, after June 1, 1984, include such questions concerning the history, purpose, regulation, and sale of variable life insurance as the commissioner deems appropriate.

2.Reports of disciplinary actions. Any person qualified in this state under this section to sell or offer to sell variable life insurance shall immediately report to the commissioner:

a.Any suspension or revocation of that person's agent's license in any other state or territory of the United States.

b.The imposition of any disciplinary sanction, including suspension or expulsion from membership, suspension or revocation of or denial of registration, imposed upon that person by any national securities exchange, or national securities association, or any federal, state or territorial agency with jurisdiction over securities or variable life insurance.

c.Any judgment or injunction entered against that person on the basis of conduct deemed to have involved fraud, deceit, misrepresentation, or violation of any insurance or securities law or regulation.

3.Refusal to qualify agent to sell variable life insurance. The commissioner may reject any application or suspend or revoke or refuse to renew any agent's qualification under this

section to sell or offer to sell variable life insurance upon any ground that would bar such applicant or such agent from being licensed to sell other life insurance contracts in this state.

The rules governing any proceeding relating to the suspension or revocation of an agent's license shall also govern any proceeding for suspension or revocation of an agent's qualification to sell or offer to sell variable life insurance.

N.D. Admin. Code 45-04-04-11 Separability

If any provision of this chapter or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the chapter and the application of such provision to other persons or circumstances not affected thereby.

N.D. Admin. Code 45-04-04-12 Supersession of conflicting rules

This chapter supersedes and fully replaces any prior rule concerning variable life insurance. This

chapter is particularly intended to replace any provisions of chapter 45-04-02, sections 45-04-04-01 through 45-04-02-18 as they may pertain to variable life insurance. The provisions of chapter 45-04-02, sections 45-04-02-01 through 45-04-02-18 that regulate variable annuities remain undisturbed by this

chapter.

Chapter 45-04-05 Universal Life Insurance

N.D. Admin. Code 45-04-05-01 Definitions

As used in this chapter:

1."Cash surrender value" means the net cash surrender value plus any amounts outstanding as policy loans.

2."Fixed premium universal life insurance policy" means a universal life insurance policy other than a flexible premium universal life insurance policy.

3."Flexible premium universal life insurance policy" means a universal life insurance policy which permits the policyowner to vary, independently of each other, the amount or timing of one or more premium payments or the amount of insurance.

4."Interest-indexed universal life insurance policy" means any universal life insurance policy where the interest credits are linked to an external referent.

5."Net cash surrender value" means the maximum amount payable to the policyowner upon surrender.

6."Policy value" means the amount to which separately identified interest credits and mortality, expense, or other charges are made under a universal life insurance policy.

7."Universal life insurance policy" means any individual life insurance policy under the provisions of which separately identified interest credits (other than in connection with dividend accumulations, premium deposit funds, or other supplementary accounts) and mortality and expense charges are made to the policy. A universal life insurance policy may provide for other credits and charges, such as charges for the cost of benefits provided by rider.

N.D. Admin. Code 45-04-05-02 Scope

1.This chapter encompasses all individual universal life insurance policies except those policies defined under subsection 14 of section 45-04-04-01.

2.All companies shall be in full compliance with this rule on or before one year from January 1, 1985.

N.D. Admin. Code 45-04-05-03 Valuation

1.Requirements.

a.The minimum valuation standard for universal life insurance policies shall be the commissioners reserve valuation method, as described below for such policies, and the tables and interest rates specified below. The terminal reserve for the basic policy and any benefits or riders, or both, for which premiums are not paid separately as of any policy anniversary must be equal to the net level premium reserves less (C) and less (D), where:

Reserves by the net level premium method must be equal to ((A) - (B))r where (A), (B) and r are as defined below:

(A) is the present value of all future guaranteed benefits at the date of valuation.

(B) is the quantity ((PVFB)/a )a , where PVFB is the present value of all benefits guaranteed at issue assuming future guaranteed maturity premiums are paid by the policyowner and taking into account all guarantees contained in the policy or ax and a are present values of an annuity of one per year payable on policy anniversaries beginning at ages x and x+t, respectively, and continuing until the highest attained age at which a premium may be paid under the policy. (x) is defined as the issue age and (t) is defined as the issue age and (t) is defined as the duration of the policy.

The guaranteed maturity premium for flexible premium universal life insurance policies must be that level gross premium, paid at issue and periodically thereafter over the period during which premiums are allowed to be paid, which will mature the policy on the latest maturity date, if any, permitted under the policy (otherwise at the highest age in the valuation mortality table), for an amount which is in accordance with the policy structure.

The guaranteed maturity premium is calculated at issue based on all policy guarantees at issue (excluding guarantees linked to an external referent). The guaranteed maturity premium for fixed premium universal life insurance policies must be the premium defined in the policy which at issue provides the minimum policy guarantees. r is equal to one, unless the policy is a flexible premium policy and the policy value is less than the guaranteed maturity fund, in which case r is the ratio of the policy value to the guaranteed maturity fund.

The guaranteed maturity fund at any duration is that amount which, together with future guaranteed maturity premiums, will mature the policy based on all policy guarantees at issue.

(C) is the quantity ((a)-(b))((a )(r)/a where (a)-(b) is as described in [Section Four of the NAIC Standard Valuation Law, as amended in 1980] for the plan of insurance defined at issue by the guaranteed maturity premiums and all guarantees contained in the policy or a and a are defined in (B) above.

(D) is the sum of any additional quantities analogous to (C) which arise because of structural changes in the policy, with each such quantity being determined on a basis consistent with that of (C) using the maturity date in effect at the time of the change.

The guaranteed maturity premium, the guaranteed maturity fund and (B) above must be recalculated to reflect any structural changes in the policy. This recalculation must be done in a manner consistent with the descriptions above. Future guaranteed benefits are determined by (a) projecting the greater of the guaranteed maturity fund and the policy value, taking into account future guaranteed maturity premiums, if any, and using all guarantees of interest, mortality, expense deductions, etc., contained in the policy or declared by the insurer; and (b) taking into account any benefits guaranteed in the policy or by declaration which do not depend on the policy value.

All present values shall be determined using (a) an interest rate (or rates) specified by [the NAIC Standard Valuation Law, as amended in 1980] for policies issued in the same year; (b) the mortality rates specified by [the NAIC Standard Valuation Law, as amended in 1980] for policies issued in the same year or contained in such other table as may be approved by the commissioner for this purpose; and (c) any other tables needed to value supplementary benefits provided by a rider which is being valued together with the policy.

2.Alternative minimum reserves.

a.If, in any policy year, the guaranteed maturity premium on any universal life insurance policy is less than the valuation net premium for such policy, calculated by the valuation method actually used in calculating the reserve thereon but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for such contract shall be the greater of (1) or (2).

(1)The reserve calculated according to the method, the mortality table, and the rate of interest actually used.

(2)The reserve calculated according to the method actually used but using the minimum valuation standards of mortality and rate of interest and replacing the valuation net premium by the guaranteed maturity premium in each policy year for which the valuation net premium exceeds the guaranteed maturity premium.

For universal life insurance reserves on a net level premium basis, the valuation net premium is (PVFB)/a and for reserves on a commissioners reserve valuation method, the valuation net premium is (PVFB)/a + ((a)-(b))/a .

N.D. Admin. Code 45-04-05-04 Nonforfeiture

1.Minimum cash surrender values for flexible premium universal life insurance policies.

a.Minimum cash surrender values for flexible premium universal life insurance policies must be determined separately for the basic policy and any benefits and riders for which premiums are paid separately. The following requirements pertain to a basic policy and any benefits and riders for which premiums are not paid separately.

The minimum cash surrender value (before adjustment for indebtedness and dividend credits) available on a date as of which interest is credited to the policy shall be equal to the accumulations to that date of the premiums paid minus the accumulations to that date of (1) the benefit charges, (2) the averaged administrative expense charges for the first policy year and any insurance-increase years, (3) actual administrative expense charges for other years, (4) initial and additional acquisition expense charges not exceeding the initial or additional expense allowances, respectively, (5) any service charges actually made (excluding charges for cash surrender or election of a paid-up nonforfeiture benefit) and (6) any deductions made for partial withdrawals; all accumulations being at the actual rate or rates of interest at which interest credits have been made unconditionally to the policy (or have been made conditionally, but for which the conditions have since been met), and minus any unamortized unused initial and additional expense allowances.

Interest on the premiums and on all charges referred to in items (1) through (6) above must be accumulated from and to such dates as are consistent with the manner in which interest is credited in determining the policy value.

The benefit charges must include the charges made for mortality and any charges made for riders or supplementary benefits for which premiums are not paid separately. If benefit charges are substantially level by duration and develop low or no cash values, then the commissioner may require higher cash values unless the insurer provides adequate justification that the cash values are appropriate in relation to the policy's other characteristics.

The administrative expense charges must include charges per premium payment, charges per dollar of premium paid, periodic charges per thousand dollars of insurance, periodic per policy charges, and any other charges permitted by the policy to be imposed without regard to the policyowner's request for services.

The averaged administrative expense charges for any year must be those which would have been imposed in that year if the charge rate or rates for each transaction or period within the year had been equal to the arithmetic average of the corresponding charge rates which the policy states will be imposed in policy years two through twenty in determining the policy value.

The initial acquisition expense charges must be the excess of the expense charges, other than service charges, actually made in the first policy year over the averaged administrative expense charges for that year. Additional acquisition expense charges must be the excess of the expense charges, other than service charges, actually made in an insurance-increase year over the averaged administrative expense charges for that year. An insurance-increase year must be the year beginning on the date of increase in the amount of insurance by policyowner request (or by the terms of the policy).

Service charges include charges permitted by the policy to be imposed as the result of a policyowner's request for a service by the insurer (such as the furnishing of future benefit illustrations) or of special transactions.

The initial expense allowance must be the allowance provided by subdivisions b, c, and d of subsection 1 of North Dakota Century Code section 26.1-33-21 or by subdivisions b and c of subsection 1 of North Dakota Century Code section 26.1-33-24 as applicable for a fixed premium, fixed benefit endowment policy with a face amount equal to the initial face amount of the flexible premium universal life insurance policy, with level premiums paid annually until the highest attained age at which a premium may be paid under the flexible premium universal life insurance policy, and maturing on the latest maturity date permitted under the policy, if any, otherwise at the highest age in the valuation mortality table. The unused initial expense allowance must be the excess, if any, of the initial expense allowance over the initial acquisition expense charges as defined above.

If the amount of insurance is subsequently increased upon request of the policyowner (or by the terms of the policy), an additional expense allowance and an unused additional expense allowance must be determined on a basis consistent with the above and with subsection 5 of North Dakota Century Code section 26.1-33-24 using the face amount and the latest maturity date permitted at that time under the policy.

The unamortized unused initial expense allowance during the policy year beginning on the policy anniversary at age x+t (where x is the issue age) must be the unused initial expense allowance multiplied by (a )/a where a and a are present values of an annuity of one per year payable on policy anniversaries beginning at ages x+t and x, respectively, and continuing until the highest attained age at which a premium may be paid under the policy, both on the mortality and interest bases guaranteed in the policy.

An unamortized unused additional expense allowance must be the unused additional expense allowance multiplied by a similar ratio of annuities, with a replaced by an annuity beginning on the date as of which the additional expense allowance was determined.

2.Minimum cash surrender values for fixed premium universal life insurance policies.

a.For fixed premium universal life insurance policies, the minimum cash surrender values must be determined separately for the basic policy and any benefits and riders for which premiums are paid separately. The following requirements pertain to a basic policy and any benefits and riders for which premiums are not paid separately.

The minimum cash surrender value (before adjustment for indebtedness and dividend credits) available on a date as of which interest is credited to the policy must be equal to ((A)-(B)-(C)-(D)), where:

(A)is the present value of all future guaranteed benefits.

(B)is the present value of future adjusted premiums. The adjusted premiums are calculated as described in North Dakota Century Code sections 26.1-33-22 and 26.1-33-23 or in subsection 1 of North Dakota Century Code section 26.1-33-24 as applicable. If subsection 1 of North Dakota Century Code section 26.1-33-24 is applicable, the nonforfeiture net level premium is equal to the quantity (PVFB)/a where PVFB is the present value of all benefits guaranteed at issue assuming future premiums are paid by the policyowner and all guarantees contained in the policy or a is the present value of an annuity of one per year payable on policy anniversaries beginning at age x and continuing until the highest attained age at which a premium may be paid under the policy.

(C)is the present value of any quantities analogous to the nonforfeiture net level premium which arise because of guarantees declared by the insurer after the issue date of the policy. a shall be replaced by an annuity beginning on the date as of which the declaration became effective and payable until the end of the period covered by the declaration.

(D)is the sum of any quantities analogous to (B) which arise because of structural changes in the policy.

Future guaranteed benefits are determined by (1) projecting the policy value, taking into account future premiums, if any, and using all guarantees of interest, mortality, expense deductions, etc., contained in the policy or declared by the insurer; and (2) taking into account any benefits guaranteed in the policy or by declaration which do not depend on the policy value.

All present values shall be determined using (1) an interest rate (or rates) specified by North Dakota Century Code chapter 26.1-33 for policies issued in the same year and (2) the mortality rates specified by North Dakota Century Code chapter 26.1-33 for policies issued in the same year or contained in such other table as may be approved by the commissioner for this purpose.

3.Minimum paid-up nonforfeiture benefits. If a universal life insurance policy provides for the optional election of a paid-up nonforfeiture benefit, it must be such that its present value must be at least equal to the cash surrender value provided for by the policy on the effective date of the election. The present value must be based on mortality and interest standards at least as favorable to the policyowner as (1) in the case of a flexible premium universal life insurance policy, the mortality and interest basis guaranteed in the policy for determining the policy value, or (2) in the case of a fixed premium policy the mortality and interest standards permitted for paid-up nonforfeiture benefits by North Dakota Century Code chapter 26.1-33. In lieu of the paid-up nonforfeiture benefit, the insurer may substitute, upon proper request not later than sixty days after the due date of the premium in default, an actuarially equivalent alternative paid-up nonforfeiture benefit which provides a greater amount or longer period of death benefits, or, if applicable, a greater amount or earlier payment of endowment benefits.

N.D. Admin. Code 45-04-05-05 Mandatory policy provisions

The policy shall provide the following:

1.Periodic disclosure to policyowner. The policy must provide that the policyowner will be sent, without charge, at least annually, a report which will serve to keep such policyowner advised as to the status of the policy. The end of the current report period must be not more than three months previous to the date of the mailing of the report. Specific requirements of this report are detailed in section 45-04-05-06.

2.Illustrative reports. The policy must provide for an illustrative report which will be sent to the policyowner upon request. Minimum requirements of such report are the same as those set forth in section 45-04-05-05. The insurer may charge the policyowner a reasonable fee for providing the report.

3.Policy guarantees. The policy must provide guarantees of minimum interest credits and maximum mortality and expense charges. All values and data shown in the policy must be based on guarantees. No figures based on nonguarantees may be included in the policy.

4.Calculation of cash surrender values. The policy must contain at least a general description of the calculation of cash surrender values including the following information:

a.The guaranteed maximum expense charges and loads.

b.Any limitation on the crediting of additional interest. Interest credits may not remain conditional for a period longer than twelve months.

c.The guaranteed minimum rate or rates of interest.

d.The guaranteed maximum mortality charges.

e.Any other guaranteed charges.

f.Any surrender or partial withdrawal charges.

5.Changes in basic coverage. If the policyowner has the right to change the basic coverage, any limitation on the amount or timing of such change must be stated in the policy. If the policyowner has the right to increase the basic coverage, the policy must state whether a new period of contestability, or suicide, or both, is applicable to the additional coverage.

6.Grace period and lapse. The policy must provide for written notice to be sent to the policyowner's last known address at least thirty days prior to termination of coverage. A flexible premium policy must provide for a grace period of at least thirty days (or as required by North Dakota law) after lapse. Unless otherwise defined in the policy, lapse occurs on that date on which the net cash surrender value first equals zero.

7.Misstatement of age or sex. If there is a misstatement of age or sex in the policy, the amount of the death benefit must be that which would be purchased by the most recent mortality charge at the correct age or sex. The commissioner may approve other methods which are deemed satisfactory.

8.Maturity date. If a policy provides for a "maturity date," "end date," or similar date, then the policy shall also contain a statement, in close proximity to that date, that it is possible that coverage may not continue to the maturity date even if scheduled premiums are paid in a timely manner, if such is the case.

N.D. Admin. Code 45-04-05-06 Disclosure requirements

In connection with any advertising, solicitation, negotiation, or procurement of a universal life insurance policy:

1.Any statement of policy cost factors or benefits must contain:

a.The corresponding guaranteed policy cost factors or benefits, clearly identified.

b.A statement explaining the nonguaranteed nature of any current interest rates, charges, or other fees applied to the policy, including the insurer's rights to alter any of these factors.

c.Any limitations on the crediting of interest, including identification of those portions of the policy to which a specified interest rate shall be credited.

(Note: Policy cost factors are those amounts which affect the price per thousand of life insurance coverage or other benefits. They include: interest, mortality, expense charges and fees, including any surrender or withdrawal charges, but not persistency assumptions.)

2.Any illustration of the policy value must be accompanied by the corresponding net cash surrender value.

3.Any statement regarding the crediting of a specific current interest rate must also contain the frequency and timing by which such rate is determined.

4.If any statement refers to the policy being interest-indexed, the index must be described. In addition, a description must be given of the frequency and timing of determining the interest rate and of any adjustments made to the index in arriving at the interest rate credited under the policy.

5.Any illustrated benefits based upon nonguaranteed interest, mortality, or expense factors must be accompanied by a statement indicating that these benefits are not guaranteed.

6.If the guaranteed cost factors or initial policy cost factor assumptions would result in policy values becoming exhausted prior to the policy's maturity date, such fact must be disclosed, including notice that coverage will terminate under such circumstances.

N.D. Admin. Code 45-04-05-07 Periodic disclosure to policyowner requirements

The policy must provide that the policyowner will be sent, without charge, at least annually, a report which will serve to keep such policyowner advised of the status of the policy. The end of the current report period may be not more than three months previous to the date of the mailing of the report.

The report must include the following:

1.The beginning and end of the current report period.

2.The policy value at the end of the previous report period and at the end of the current report period.

3.The total amounts which have been credited or debited to the policy value during the current report period, identifying each by type (e.g., interest, mortality, expense and riders).

4.The current death benefit at the end of the current report period on each life covered by the policy.

5.The net cash surrender value of the policy as of the end of the current report period.

6.The amount of outstanding loans, if any, as of the end of the current report period.

7.For fixed premium policies: If, assuming guaranteed interest, mortality and expense loads and continued scheduled premium payments, the policy's net cash surrender value is such that it would not maintain insurance in force until the end of the next reporting period, a notice to this effect must be included in the report.

8.For flexible premium policies: If, assuming guaranteed interest, mortality and expense loads, the policy's net cash surrender value will not maintain insurance in force until the end of the next reporting period unless further premium payments are made, a notice to this effect must be included in the report.

N.D. Admin. Code 45-04-05-08 Interest-indexed universal life insurance policies

1.Initial filing requirements. The following information must be submitted in connection with any filing of interest-indexed universal life insurance policies ("interest-indexed policies"). All such information received must be treated confidentially to the extent permitted by law.

a.A description of how the interest credits are determined, including:

(1)A description of the index.

(2)The relationship between the value of the index and the actual interest rate to be credited.

(3)The frequency and timing of determining the interest rate.

(4)The allocation of interest credits, if more than one rate of interest applies to different portions of the policy value.

b.The insurer's investment policy, which includes a description of the following:

(1)How the insurer addressed the reinvestment risks.

(2)How the insurer plans to address the risk of capital loss on cash outflows.

(3)How the insurer plans to address the risk that appropriate investments may not be available or not available in sufficient quantities.

(4)How the insurer plans to address the risk that the indexed interest rate may fall below the minimum contractual interest rate guaranteed in the policy.

(5)The amount and type of assets currently held for interest-indexed policies.

(6)The amount and type of assets expected to be acquired in the future.

c.If policies are linked to an index for a specified period less than to the maturity date of the policy, a description of the method used (or currently contemplated) to determine interest credits upon the expiration of such period.

d.A description of any interest guarantee in addition to or in lieu of the index.

e.A description of any maximum premium limitations and the conditions under which they apply.

2.Additional filing requirements.

a.Annually, ever insurer shall submit a statement of actuarial opinion by the insurer's actuary similar to the example contained in subsection 3.

b.Annually, every insurer shall submit a description of the amount and type of assets currently held by the insurer with respect to its interest-indexed policies.

c.Prior to implementation, every domestic insurer shall submit a description of any material change in the insurer's investment strategy or method of determining the interest credits.

A change is considered to be material if it would affect the form or definition of the index (i.e., any change in the information supplied in subdivision a above) or if it would significantly change the amount or type of assets held for interest-indexed policies.

3.Statement of actuarial opinion for interest-indexed universal life insurance policies.

I, __________________, am ____________________________________ (name) (position or relationship to Insurer) for the XYZ Life Insurance Company (The Insurer) in the state of ____________________________________.

(State of Domicile of Insurer)

I am a member of the American Academy of Actuaries (or if not, state other qualifications to sign annual statement actuarial opinions).

I have examined the interest-indexed universal life insurance policies of the insurer in force as of December 31, 19____, encompassing ____ number of policies and $ ____ of insurance in force.

I have considered the provisions of the policies. I have considered any reinsurance agreements pertaining to such policies, the characteristics of the identified assets and the investment policy adopted by the insurer as they affect future insurance and investment cash flows under such policies and related assets. My examination included such tests and calculations as I considered necessary to form an opinion concerning the insurance and investment cash flows arising from the policies and related assets.

I relied on the investment policy of the insurer and on projected investment cash flows as provided by _____________________, Chief Investment Officer of the insurer.

The tests were conducted under various assumptions as to future interest rates, and particular attention was given to those provisions and characteristics that might cause future insurance and investment cash flows to vary with changes in the level of prevailing interest rates.

In my opinion, the anticipated insurance and investment cash flows referred to above make good and sufficient provision for the contractual obligations of the insurer under these insurance policies. ________________________________ Signature of Actuary

N.D. Admin. Code 45-04-05-09 Separability

If any provision of this chapter or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the chapter and the application of such provision to other persons or circumstances is not affected thereby.

Chapter 45-04-06 Smoker/Nonsmoker Mortality Tables

N.D. Admin. Code 45-04-06-01 Definitions

As used in this chapter:

1."Composite mortality tables" refers to the mortality tables defined in subsections 3 through 6 of this section as they were originally published with rates of mortality that do not distinguish between smokers and nonsmokers.

2."Smoker and nonsmoker mortality tables" refers to the mortality tables with separate rates of mortality for smokers and nonsmokers derived from the tables defined in subsections 3 through 6 of this section which were developed by the society of actuaries task force on smoker/nonsmoker mortality and the California insurance department staff and recommended on the NAIC technical staff actuarial group.

3."1958 CET Table" means that mortality table developed by the society of actuaries special committee on new mortality tables, incorporated in the NAIC Model Standard Nonforfeiture Law for Life Insurance, and referred to in that model as the Commissioners 1958 Extended Term Insurance Table.

4."1958 CSO Table" means that mortality table developed by the society of actuaries special committee on new mortality tables, incorporated in the NAIC Model Standard Nonforfeiture Law for Life Insurance, and referred to in that model as the Commissioners 1958 Standard Ordinary Mortality Table.

5."1980 CET Table" means that mortality table consisting of separate rates of mortality for male and female lives, developed by the society of actuaries committee to recommend new mortality tables for valuation of standard individual ordinary life insurance, incorporated in the 1980 NAIC amendments to the Model Standard Nonforfeiture Law for Life Insurance, and referred to in those models as the Commissioners 1980 Extended Term Insurance Table.

6."1980 CSO Table, with or without ten-year select mortality factor" means that mortality table, consisting of separate rate of mortality for male and female lives, developed by the society of actuaries committee to recommend new mortality tables for valuation of standard individual ordinary life insurance, incorporated in the 1980 NAIC amendments to the Model Standard Valuation Law and Standard Nonforfeiture Law for Life Insurance, and referred to in those models as the Commissioners 1980 Standard Ordinary Mortality Table, with or without ten-year select mortality factors. The same select factors will be used for both smokers and nonsmokers tables.

N.D. Admin. Code 45-04-06-02 Alternate tables

1.For any policy of insurance delivered or issued for delivery in this state after the operative date of subsection 11 of North Dakota Century Code section 26.1-33-24 for that policy form and before January 1, 1989, at the option of the company and subject to the conditions stated in

section 45-04-06-05:

a.The 1958 CSO Smoker and Nonsmoker Mortality Tables may be substituted for the 1980 CSO Table, with or without ten-year select mortality factors; and

b.The 1958 CET Smoker and Nonsmoker Mortality Tables may be substituted for the 1980 CET Table, for use in determining minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits.

Provided, that for any category of insurance issued on female lives with minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits determined using the 1958 CSO or 1958 CET Smoker and Nonsmoker Mortality Tables, such minimum values may be calculated according to an age not more than six years younger than the actual age of the insured.

Provided, further, that the substitution of the 1958 CSO or 1958 CET Smoker and Nonsmoker Mortality Tables is available only if made for each policy of insurance on a policy form delivered or issued for delivery on or after the operative date for that policy form and before a date not later than January 1, 1989.

2.For any policy of insurance delivered or issued for delivery in this state after the operative date of subsection 11 of North Dakota Century Code section 26.1-33-24 for that policy form, at the option of the company and subject to the conditions stated in section 45-04-06-05:

a.The 1980 CSO Smoker and Nonsmoker Mortality Tables, with or without ten-year select mortality factors, may be substituted for the 1980 CSO Table, with or without ten-year select mortality factors; and

b.The 1980 CET Smoker and Nonsmoker Mortality Tables may be substituted for the 1980 CET Table, for use in determining minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits.

N.D. Admin. Code 45-04-06-03 Conditions

For each plan of insurance with separate rates for smokers and nonsmokers an insurer may:

1.Use composite mortality tables to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits;

2.Use smoker and nonsmoker mortality tables to determine the valuation net premiums and additional minimum reserves, if any, required by North Dakota Century Code section 26.1-35-09 and use composite mortality tables to determine the basic minimum reserves, minimum cash surrender values and amounts of paid-up nonforfeiture benefits; or

3.Use smoker and nonsmoker mortality to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits.

N.D. Admin. Code 45-04-06-04 Separability

If any provision of this chapter or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the regulation and the application of such provision to other persons or circumstances is not affected thereby.

N.D. Admin. Code 45-04-06-05 Effective date

The effective date of this chapter is January 1, 1985.

Chapter 45-04-07 Mixed-Gender Mortality Tables

N.D. Admin. Code 45-04-07-01 Definitions

As used in this chapter:

1."1980 CET Table" means that mortality table consisting of separate rates of mortality for male and female lives, developed by the society of actuaries committee to recommend new mortality tables for valuation of standard individual ordinary life insurance, incorporated in the 1980 national association of insurance commissioners' amendments to the model standard valuation law and standard nonforfeiture law for life insurance, and referred to in those models as the commissioners' 1980 extended term insurance table.

2."1980 CET Table (F)" means that mortality table consisting of the rates of mortality for female lives from the 1980 CET Table.

3."1980 CET Table (M)" means that mortality table consisting of the rates of mortality for male lives from the 1980 CET Table.

4."1980 CSO Table, with or without ten-year select mortality factors" means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the society of actuaries committee to recommend new mortality tables for valuation of standard individual ordinary life insurance, incorporated in the 1980 national association of insurance commissioners' amendments to the model standard valuation law and standard nonforfeiture law for life insurance, and referred to in those models as the commissioners' 1980 standard ordinary mortality table, with or without ten-year select mortality factors.

5."1980 CSO Table (F), with or without ten-year select mortality factors" means that mortality table consisting of the rates of mortality for female lives from the 1980 CSO Table, with or without ten-year select mortality factors.

6."1980 CSO Table (M), with or without ten-year select mortality factors" means that mortality table consisting of the rates of mortality for male lives from the 1980 CSO Table, with or without ten-year select mortality factors.

7."1980 CSO and CET Smoker and Nonsmoker Mortality Tables" means the mortality tables with separate rates of mortality for smokers and nonsmokers derived from the 1980 CSO and 1980 CET Mortality Tables by the society of actuaries task force on smoker/nonsmoker mortality and adopted by the national association of insurance commissioners in December 1983. (Subsection 7 added by the national association of insurance commissioners, December 1986).

History

• History: Effective February 1, 1985; amended effective October 1, 1989.

N.D. Admin. Code 45-04-07-02 Tables

1.For any policy of insurance on the life of either a male or female insured delivered or issued for delivery in this state and after the operative date of subsection 11 of North Dakota Century Code section 26.1-33-25 for that policy form:

a.A mortality table which is a blend of the 1980 CSO Table (M) and the 1980 CSO Table (F) with or without ten-year select mortality factors may, at the option of the company, be substituted for the 1980 CSO Table, with or without ten-year select mortality factors; and

b.A mortality table which is of the same blend as used in (i) but applied to form a blend of the 1980 CET Table (M) and the 1980 CET Table (F) may, at the option of the company, be substituted for the 1980 CET Table, for use in determining minimum cash surrender values and amounts of paid-up nonforfeiture benefits.

2.The following tables will be considered as the basis for acceptable tables: a.100% Male 0% Female for tables to be designated as the "1980 CSO-A" and "1980 CET-A" Tables. b.80% Male 20% Female for tables to be designated as the "1980 CSO-B" and "1980 CET-B" Tables. c.60% Male 40% Female for tables to be designated as the "1980 CSO-C" and "1980 CET-C" Tables. d.50% Male 50% Female for tables to be designated as the "1980 CSO-D" and "1980 CET-D" Tables. e.40% Male 60% Female for tables to be designated as the "1980 CSO-E" and "1980 CET-E" Tables. f.20% Male and 80% Female for tables to be designated as the "1980 CSO-F" and"1980 CET-F" Tables. g.0% Male 100% Female for tables to be designated as the "1980 CSO-G" and "1980 CET-G" Tables.

Tables A and G are not to be used with respect to policies issued on or after January 1, 1985, except where the proportion of persons insured is anticipated to be ninety percent, or more of one sex or the other except for certain policies converted from group insurance. Such group conversions issued on or after January 1, 1986, must use mortality tables based on the blend of lives by sex expected for such policies if such group conversions are considered as extensions of the Norrisdecision. This consideration has not been clearly defined by court or legislative action in all jurisdictions. The values of 10000qx for blended tables B, C, D, E, and F are shown in Appendix I. The letter in Appendix II states the method by which selection factors may be obtained. Table A is the same as 1980 CSO Table (M) and 1980 CET Table (M) and Table G is the same as 1980 CSO Table (F) and 1980 CET Table (F).

3.Alternate rule. In determining minimum cash surrender values and amounts of paid-up nonforfeiture benefits for any policy of insurance on the life of either a male or female insured on a form of insurance with separate rates for smokers and nonsmokers delivered or issued for delivery in this state after the operative date of subsection 11 of North Dakota Century Code section 26.1-33-24 for that policy form, in addition to the mortality tables that may be used according to this section:

a.A mortality table which is a blend of the male and female rates of mortality according to the 1980 CSO Smoker Mortality Table, in the case of lives classified as smokers, or the 1980 CSO Nonsmoker Mortality Table, in the case of lives classified as nonsmokers, with or without ten-year select mortality factors, may, at the option of the company, be substituted for the 1980 CSO Table, with or without ten-year select mortality factors; and

b.A mortality table which is of the same blend as used in subdivision a of this subsection but applied to form a blend of the male and female rates of mortality according to the corresponding 1980 CET Smoker Mortality Table or 1980 CET Nonsmoker Mortality Table may, at the option of the company, be substituted for the 1980 CET Table.

The following blended mortality tables will be considered acceptable:

SA: 100% Male 0% Female smoker tables designated as "1980 CSO-SA" and "1980 CET-SA" Tables.

SB: 80% Male 20% Female smoker tables designated as "1980 CSO-SB" and "1980 CET-SB" Tables.

SC: 60% Male 40% Female smoker tables designated as "1980 CSO-SC" and "1980 CET-SC" Tables.

SD: 50% Male 50% Female smoker tables designated as "1980 CSO-SD" and "1980 CET-SD" Tables.

SE: 40% Male 60% Female smoker tables designated as "1980 CSO-SE" and "1980 CET-SE" Tables.

SF: 20% Male 80% Female smoker tables designated as "1980 CSO-SF" and "1980 CET-SF" Tables.

SG: 0% Male 100% Female smoker tables designated as "1980 CSO-SG" and "1980 CET-SG" Tables.

NA: 100% Male 0% Female nonsmoker tables designated as "1980 CSO-NA" and "1980 CET-NA" Tables.

NB: 80% Male 20% Female nonsmoker tables designated as "1980 CSO-NB" and "1980 CET-NB" Tables.

NC: 60% Male 40% Female nonsmoker tables designated as "1980 CSO-NC" and "1980 CET-NC" Tables.

ND: 50% Male 50% Female nonsmoker tables designated as "1980 CSO-ND" and "1980 CET-ND" Tables.

NE: 40% Male 60% Female nonsmoker tables designated as "1980 CSO-NE" and "1980 CET-NE" Tables.

NF: 20% Male 80% Female nonsmoker tables designated as "1980 CSO-NF" and "1980 CET-NF" Tables.

NG: 0% Male 100% Female nonsmoker tables designated as "1980 CSO-NG" and "1980 CET-NG" Tables.

Tables SA, SG, NA, and NG are not acceptable as blended tables unless the proportion of persons insured is anticipated to be ninety percent or more of one sex or the other.

History

• History: Effective February 1, 1985; amended effective October 1, 1989.

N.D. Admin. Code 45-04-07-03 Unfair discrimination

It is not a violation of North Dakota Century Code section 26.1-04-03 for an insurer to issue the same kind of policy of life insurance on both a sex-distinct and sex-neutral basis.

N.D. Admin. Code 45-04-07-04 Separability

If any provision of this chapter or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the chapter and the application of such provision to other persons or circumstances is not affected thereby.

N.D. Admin. Code 45-04-07-05 Retroactive effective date

The effective date of this chapter is August 1, 1983, to comply with the Norris decision (Norris v.

Arizona Governing Committee).

Chapter 45-04-07.1 2001 CSO Mortality Table

N.D. Admin. Code 45-04-07.1 2001 CSO Mortality Table

CHAPTER 45-04-07.1

2001 CSO MORTALITY TABLE

Section 45-04-07.1-01Definitions 45-04-07.1-022001 CSO Mortality Table 45-04-07.1-03Conditions 45-04-07.1-04Application of the 2001 CSO Mortality Table to Chapter 45-04-12 45-04-07.1-05Gender-Blended Tables 45-04-07.1-06Separability 45-04-07.1-01. Definitions.

1."2001 CSO mortality table" means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the American academy of actuaries CSO task force from the valuation basic mortality table developed by the society of actuaries individual life insurance valuation mortality task force, and adopted by the national association of insurance commissioners in December 2002. The 2001 CSO mortality table is included in the proceedings of the national association of insurance commissioners (second quarter 2002).

Unless the context indicates otherwise, the "2001 CSO mortality table" includes both the ultimate form of that table and the select and ultimate form of that table and includes both the smoker and nonsmoker mortality tables and the composite mortality tables. It also includes both the age-nearest-birthday and age-last-birthday bases of the mortality tables.

2."2001 CSO mortality table (F)" means that mortality table consisting of the rates of mortality for female lives from the 2001 CSO mortality table.

3."2001 CSO mortality table (M)" means that mortality table consisting of the rates of mortality for male lives from the 2001 CSO mortality table.

4."Composite mortality tables" means mortality tables with rates of mortality that do not distinguish between smokers and nonsmokers.

5."Smoker and nonsmoker mortality tables" means mortality tables with separate rates of mortality for smokers and nonsmokers. 45-04-07.1-02. 2001 CSO mortality table.

1.At the election of the company for any one or more specified plans of insurance and subject to the conditions stated in this regulation, the 2001 CSO mortality table may be used as the minimum standard for policies issued on or after January 1, 2005, and before the date specified in subsection 2 to which subdivision c of subsection 1 of North Dakota Century Code

section 26.1-35-02, subdivision f of subsection 8 of North Dakota Century Code section 26.1-33-24, and subsections 1 and 2 of section 45-04-12-03 are applicable. If the company elects to use the 2001 CSO mortality table, it shall do so for both valuation and nonforfeiture purposes.

2.Subject to the conditions stated in this chapter, the 2001 CSO mortality table shall be used in determining minimum standards for policies issued on and after January 1, 2009, to which subdivision c of subsection 1 of North Dakota Century Code section 26.1-35-02, subdivision f of subsection 8 of North Dakota Century Code section 26.1-33-24, and subsections 1 and 2 of

section 45-04-12-03 are applicable.

Law Implemented: NDCC 26,1-35-02 45-04-07.1-03. Conditions.

1.For each plan of insurance with separate rates for smokers and nonsmokers an insurer may use:

a.Composite mortality tables to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits;

b.Smoker and nonsmoker mortality tables to determine the valuation net premiums and additional minimum reserves, if any, required by North Dakota Century Code section 26.1-35-09 and use composite mortality tables to determine the basic minimum reserves, minimum cash surrender values and amounts of paid-up nonforfeiture benefits; or

c.Smoker and nonsmoker mortality to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits.

2.For plans of insurance without separate rates for smokers and nonsmokers, the composite mortality tables shall be used.

3.For the purpose of determining minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits, the 2001 CSO mortality table may, at the option of the company for each plan of insurance, be used in its ultimate or select and ultimate form, subject to the restrictions of section 45-04-07.1-04 and chapter 45-04-12 relative to use of the select and ultimate form.

4.When the 2001 CSO mortality table is the minimum reserve standard for any plan for a company, the actuarial opinion in the annual statement filed with the commissioner shall be based on an asset adequacy analysis as specified in section 45-03-19-03. A commissioner may exempt a company from this requirement if it only does business in this state and in no other state. 45-04-07.1-04. Application of the 2001 CSO mortality table to chapter 45-04-12.

1.The 2001 CSO mortality table may be used in applying chapter 45-04-12 in the following manner, subject to the transition dates for use of the 2001 CSO mortality table in section 45-04-07.1-02 (unless otherwise noted, the references in this section are to chapter 45-04-12):

a.Paragraph 2 of subdivision b of subsection 1 of section 45-04-12-01: The net level reserve premium is based on the ultimate mortality rates in the 2001 CSO mortality table.

b.Subsection 2 of section 45-04-12-02: All calculations are made using the 2001 CSO mortality rate, and, if elected, the optional minimum mortality standard for deficiency reserves stipulated in subdivision d. The value of "qx+k+t-1" is the valuation mortality rate for deficiency reserves in policy year k+t, but using the unmodified select mortality rates if modified select mortality rates are used in the computation of deficiency reserves.

c.Subsection 1 of section 45-04-12-03: The 2001 CSO mortality table is the minimum standard for basic reserves.

d.Subsection 2 of section 45-04-12-03: The 2001 CSO mortality table is the minimum standard for deficiency reserves. If select mortality rates are used, they may be multiplied by x percent for durations in the first segment, subject to the conditions specified in subdivision c of subsection 2 of section 45-04-12-03. In demonstrating compliance with those conditions, the demonstrations may not combine the results of tests that utilize the 1980 CSO mortality table with those tests that utilize the 2001 CSO mortality table, unless the combination is explicitly required by regulation or necessary to be in compliance with relevant actuarial standards of practice.

e.Subsection 3 of section 45-04-12-04: The valuation mortality table used in determining the tabular cost of insurance shall be the ultimate mortality rates in the 2001 CSO mortality table.

f.Subdivision d of subsection 5 of section 45-04-12-04: The calculations specified in subsection 5 of section 45-04-12-04 shall use the ultimate mortality rates in the 2001

g.Subdivision d of subsection 6 of section 45-04-12-04: The calculations specified in subsection 6 of section 45-04-12-04 shall use the ultimate mortality rates in the 2001

h.Subdivision b of subsection 7 of section 45-04-12-04: The calculations specified in subsection 7 of section 45-04-12-04 shall use the ultimate mortality rates in the 2001

i.Paragraph 2 of subdivision a of subsection 1 of section 45-04-12-05: The one-year valuation premium shall be calculated using the ultimate mortality rates in the 2001 CSO mortality table.

2.Nothing in this section shall be construed to expand the applicability of chapter 45-04-12 to include life insurance policies exempted under subsection 1 of section 45-04-12-01. 45-04-07.1-05. Gender-blended tables.

1.For any ordinary life insurance policy delivered or issued for delivery in this state on and after January 1, 2005, that utilizes the same premium rates and charges for male and female lives or is issued in circumstances where applicable law does not permit distinctions on the basis of gender, a mortality table that is a blend of the 2001 CSO mortality table (M) and the 2001 CSO mortality table (F) may, at the option of the company for each plan of insurance, be substituted for the 2001 CSO mortality table for use in determining minimum cash surrender values and amounts of paid-up nonforfeiture benefits. No change in minimum valuation standards is implied by this subsection.

2.The company may choose from among the blended tables developed by the American academy of actuaries CSO task force and adopted by the national association of insurance commissioners in December 2002.

3.It shall not, in and of itself, be a violation of North Dakota Century Code section 26.1-04-03 for an insurer to issue the same kind of policy of life insurance on both a sex-distinct and sex-neutral basis. 45-04-07.1-06. Separability.

If any provision of this chapter or its application to any person or circumstance is for any reason held to be invalid, the remainder of the chapter and the application of the provision to other persons or circumstances shall not be affected.

Chapter 45-04-07.2 Preferred Mortality Tables

N.D. Admin. Code 45-04-07.2 Preferred Mortality Tables

CHAPTER 45-04-07.2

PREFERRED MORTALITY TABLES

Section 45-04-07.2-01Definitions 45-04-07.2-022001 CSO Preferred Class Structure Table 45-04-07.2-03Conditions 45-04-07.2-01. Definitions.

1."2001 CSO mortality table" means that mortality table consisting of separate rates of mortality for male and female lives developed by the American academy of actuaries commissioners standard ordinary task force from the valuation basic mortality table developed by the society of actuaries individual life insurance valuation mortality task force and adopted by the national association of insurance commissioners in December 2002. The 2001 CSO mortality table is included in the Proceedings of the National Association of Insurance Commissioners (2nd Quarter 2002) and supplemented by the 2001 CSO preferred class structure mortality table described in subsection 2. Unless the context indicates otherwise, the 2001 CSO mortality table includes both the ultimate form of that table and the select and ultimate form of that table and includes both the smoker and nonsmoker mortality tables and the composite mortality tables. It also includes both the age-nearest-birthday and age-last-birthday bases of the mortality tables. Mortality tables in the 2001 CSO table include the following:

a."2001 CSO mortality table (F)" means that mortality table consisting of the rates of mortality for female lives from the 2001 CSO mortality table.

b."2001 CSO mortality table (M)" means that mortality table consisting of the rates of mortality for male lives from the 2001 CSO mortality table.

c."Composite mortality tables" means mortality tables with rates of mortality that do not distinguish between smokers and nonsmokers.

d."Smoker and nonsmoker mortality tables" means mortality tables with separate rates of mortality for smokers and nonsmokers.

2."2001 CSO preferred class structure mortality table" means mortality tables with separate rates of mortality for super preferred nonsmokers, preferred nonsmokers, residual standard nonsmokers, preferred smokers, and residual standard smoker splits of the 2001 CSO nonsmoker and smoker tables as adopted by the national association of insurance commissioners at the September 2006 national meeting and published in the Proceedings of the National Association of Insurance Commissioners (3 rd Quarter 2006). Unless the context indicates otherwise, the 2001 CSO preferred class structure mortality table includes both the ultimate form of that table and the select and ultimate form of that table. It includes both the smoker and nonsmoker mortality tables. It includes both the male and female mortality tables and the gender composite mortality tables. It also includes both the age-nearest-birthday and age-last-birthday bases of the mortality table.

3."Commissioner" means the insurance commissioner.

4."Statistical agent" means an entity with proven systems for protecting the confidentiality of individual insured and insurer information, demonstrated resources for and history of ongoing electronic communications and data transfer ensuring data integrity with insurers, which are its members or subscribers, and a history of and means for aggregation of data and accurate promulgation of the experience modifications in a timely manner. 45-04-07.2-02. 2001 CSO preferred class structure table.

At the election of an insurer for each calendar year of issue, for any one or more specified plans of insurance and subject to satisfying the conditions stated in this chapter, the 2001 CSO preferred class structure mortality table may be substituted in place of the 2001 CSO smoker or nonsmoker mortality table as the minimum valuation standard for policies issued on or after January 1, 2007. The election may not be made until an insurer demonstrates at least twenty percent of the business to be valued on this table is in one or more of the preferred classes. A table from the 2001 CSO preferred class structure mortality table used in place of a 2001 CSO mortality table will be treated as part of the 2001 CSO mortality table only for purposes of reserve valuation pursuant to the requirements of the national association of insurance commissioners model regulation, regarding recognition of the 2001 CSO mortality table for use in determining minimum reserve liabilities and nonforfeiture benefits model

regulation as described in chapter 45-04-07.1. 45-04-07.2-03. Conditions.

1.For each plan of insurance with separate rates for preferred and standard nonsmoker lives, an insurer may use the super preferred nonsmoker, preferred nonsmoker, and residual standard nonsmoker tables to substitute for the nonsmoker mortality table found in the 2001 CSO mortality table to determine minimum reserves. At the time of election and annually after that, except for business valued under the residual standard nonsmoker table, the appointed actuary of the insurer shall certify to the commissioner that:

a.The present value of death benefits over the next ten years after the valuation date using the anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class is less than the present value of death benefits using the valuation basic mortality table corresponding to the valuation table being used for that class.

b.The present value of death benefits over the future life of the contracts using anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class is less than the present value of death benefits using the valuation basic mortality table corresponding to the valuation table being used for that class.

2.For each plan of insurance with separate rates for preferred and standard smoker lives, an insurer may use the preferred smoker and residual standard smoker tables to substitute for the smoker mortality table found in the 2001 CSO mortality table to determine minimum reserves. At the time of election and annually thereafter for business valued under the preferred smoker table, the appointed actuary of an insurer shall certify to the commissioner that:

a.The present value of death benefits over the next ten years after the valuation date using the anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class is less than the present value of death benefits using the preferred smoker valuation basic mortality table corresponding to the valuation table being used for that class.

b.The present value of death benefits over the future life of the contracts using anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class is less than the present value of death benefits using the preferred smoker valuation basic mortality table.

c.Unless exempted by the commissioner, every authorized insurer using the 2001 CSO preferred class structure table shall annually file with the commissioner, with the national association of insurance commissioners, or with a statistical agent designated by the national association of insurance commissioners and acceptable to the commissioner, statistical reports showing mortality and such other information as the commissioner may deem necessary or expedient for the administration of the provisions of this regulation.

The form of the reports shall be established by the commissioner or the commissioner may require the use of a form established by the national association of insurance commissioners or by a statistical agent designated by the national association of insurance commissioners and acceptable to the commissioner.

Chapter 45-04-07.3 Pre-Need Life Insurance Minimum Standards for Determining Reserve Liabilities and Nonforfeiture Values

N.D. Admin. Code 45-04-07.3 Pre-Need Life Insurance Minimum Standards for Determining Reserve Liabilities and Nonforfeiture Values

CHAPTER 45-04-07.3

PRE-NEED LIFE INSURANCE MINIMUM STANDARDS FOR DETERMINING RESERVE

LIABILITIES AND NONFORFEITURE VALUES

Section 45-04-07.3-01Definitions 45-04-07.3-02Minimum Valuation Mortality Standards 45-04-07.3-03Minimum Valuation Interest Rate Standards 45-04-07.3-04Minimum Valuation Method Standards 45-04-07.3-05Transition Rules 45-04-07.3-06Effective Date 45-04-07.3-01. Definitions.

1."2001 CSO mortality table" means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the American academy of actuaries CSO task force from the valuation basic mortality table developed by the society of actuaries individual life insurance valuation mortality task force, and adopted by the national association of insurance commissioners in December 2002. The 2001 CSO mortality table is included in the proceedings of the national association of insurance commissioners (second quarter 2002).

Unless the context indicates otherwise, the "2001 CSO mortality table" includes both the ultimate form of that table and the select and ultimate form of that table and includes both the smoker and nonsmoker mortality tables and the composite mortality tables. It also includes both the age-nearest-birthday and age-last-birthday bases of the mortality tables.

2."Ultimate 1980 CSO" means the commissioners' 1980 standard ordinary life valuation mortality tables (1980 CSO) without ten-year selection factors, incorporated into the 1980 amendments to the national association of insurance commissioners standard valuation law approved in December 1983.

3.For the purposes of this chapter, pre-need life insurance is any life insurance policy or certificate that is issued in combination with, in support of, with an assignment to, or as a guarantee for a prearrangement agreement for goods and services to be provided at the time of and immediately following the death of the insured. Goods and services may include embalming, cremation, body preparation, viewing or visitation, coffin or urn, memorial stone, and transportation of the deceased. The status of the policy or contract as pre-need life insurance is determined at the time of issue in accordance with the policy form filing. 45-04-07.3-02. Minimum valuation mortality standards.

The minimum mortality standard for pre-need life insurance contracts for determining reserve liabilities and nonforfeiture values for both male and female insureds shall be the ultimate 1980 CSO. 45-04-07.3-03. Minimum valuation interest rate standards.

1.The interest rates used in determining the minimum standard for valuation of pre-need life insurance shall be the calendar year statutory valuation interest rates as defined in North Dakota Century Code section 26.1-35-04.

2.The interest rates used in determining the minimum standard for nonforfeiture values for pre-need life insurance shall be the calendar year statutory nonforfeiture interest rates as defined in North Dakota Century Code section 26.1-33-27. 45-04-07.3-04. Minimum valuation method standards.

1.The method used in determining the standard for the minimum valuation of reserves of pre-need life insurance shall be the method defined in North Dakota Century Code section 26.1-35-02.

2.The method used in determining the standard for the minimum nonforfeiture values for pre-need life insurance shall be the method defined in North Dakota Century Code section 26.1-33-27. 45-04-07.3-05. Transition rules.

1.For pre-need life insurance policies issued on or after the effective date of this chapter and before January 1, 2012, the 2001 CSO may be used as the minimum standard for reserves and minimum standard for nonforfeiture benefits for both male and female insureds.

2.If an insurer elects to use the 2001 CSO as a minimum standard for any policy issued on or after the effective date of this chapter and before January 1, 2012, the insurer shall provide, as a part of the actuarial opinion memorandum submitted in support of the company's asset adequacy testing, an annual written notification to the domiciliary commissioner. The notification shall include:

a.A complete list of all pre-need life insurance policy forms that use the 2001 CSO as a minimum standard;

b.A certification signed by the appointed actuary stating that the reserve methodology employed by the company in determining reserves for the pre-need life insurance policies issued after the effective date and using the 2001 CSO as a minimum standard, develops adequate reserves. For the purposes of this certification, the pre-need life insurance policies using the 2001 CSO as a minimum standard cannot be aggregated with any other policies; and

c.Supporting information regarding the adequacy of reserves for pre-need life insurance policies issued after the effective date of this chapter and using the 2001 CSO as a minimum standard for reserves.

3.Pre-need life insurance policies issued on or after January 1, 2012, must use the ultimate 1980 CSO in the calculation of minimum nonforfeiture values and minimum reserves. 45-04-07.3-06. Effective date.

This chapter is applicable to pre-need life insurance policies and certificates and similar contracts and certificates issued on or after January 1, 2009.

Chapter 45-04-08 Annuity Tables

N.D. Admin. Code 45-04-08-01 Definitions

As used in this chapter:

1."1983 GAM Table" means that mortality table developed by the society of actuaries committee on annuities and adopted as a recognized mortality table for annuities in December 1983 by the national association of insurance commissioners.

2."1983 Table 'a'" means that mortality table developed by the society of actuaries committee to recommend a new mortality basis for individual annuity valuation and adopted as a recognized mortality table for annuities in June 1982 by the national association of insurance commissioners.

3."1994 GAR Table" means that mortality table developed by the society of actuaries group annuity valuation table task force and shown at XLVII transactions of the society of actuaries 866-867 (1995).

4."2012 IAR Table" means that generational mortality table developed by the society of actuaries committee on life insurance research and containing rates, q , derived from a combination of the 2012 IAM Period Table and Projection Scale G2.

5."2012 Individual Annuity Mortality Period Life (2012 IAM Period) Table" or "2012 IAM Period Table" means the period table containing loaded mortality rates for calendar year 2012. This table contains rates, q , developed by the society of actuaries committee on life insurance.

6."Annuity 2000 Mortality Table" means that mortality table developed by the society of actuaries committee on life insurance research and shown at XLVII transactions of the society of actuaries 240 (1995).

7."Projection Scale G2 (Scale G2)" is a table of annual rates, G2 x, of which mortality improvement by age for projecting future mortality rates beyond calendar year 2012. This table was developed by the society of actuaries committee on life insurance research.

History

• History: Effective January 1, 1985; amended effective September 1, 1999; October 1, 2015.

N.D. Admin. Code 45-04-08-02 Individual annuity or pure endowment contracts

1.Except as provided in subsections 2 and 3, 1983 Table "a" is recognized and approved as an individual mortality table for valuation and, at the option of the company, may be used for purposes of determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after July 1, 1983.

2.Except as provided in subsection 3, 1983 Table "a" is to be used for determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after January 1, 1986.

3.Except as provided in subsection 4, the Annuity 2000 Mortality Table must be used for determining the minimum standard of valuation of any individual annuity or pure endowment contract issued on or after September 1, 1999.

4.Except as provided in subsection 5, the 2012 IAR Table must be used for determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after January 1, 2016.

5.The 1983 Table "a" without projection is to be used for determining the minimum standards of valuation for an individual annuity or pure endowment contract issued on or after September 1, 1999, solely when the contract is based on life contingencies and is issued to fund periodic benefits arising from:

a.Settlements of various forms of claims pertaining to court settlements or out-of-court settlements from tort actions;

b.Settlements involving similar actions such as workers' compensation claims; or

c.Settlements of long-term disability claims when a temporary or life annuity has been used in lieu of continuing disability payments.

In using the 2012 IAR Mortality Table, the mortality rate for a person age x in year (2012 + n) is calculated as follows: = q (1-G2 ) n The resulting q shall be rounded to three decimal places per 1,000 (e.g., 0.741 per 1,000). Also, the rounding shall occur according to the formula above, starting at the 2012 IAM Period Table rate.

For example, for a male age 30, q = 0.741 = 0.741 * (1-0.010) ^{1 = 07.73358, which is rounded to 0.734. = 0.741 * (1-0.010)} 2 = 0.7262541, which is rounded to 0.726.

A method leading to incorrect round would be to calculate q as q * (1-0.010), or 0.734 * 0.99 = 0.727. It is incorrect to use the already rounded q to calculate q .

History

• History: Effective January 1, 1985; amended effective September 1, 1999; October 1, 2015. 45-04-08-02.1. Application of the 2012 IAR Mortality Table.
• History: Effective October 1, 2015.

N.D. Admin. Code 45-04-08-03 Group annuity or pure endowment contracts

1.Except as provided in subsections 2 and 3, the 1983 GAM Table and the 1983 Table "a" and the 1994 GAR Table are recognized and approved as group annuity mortality tables for valuation and, at the option of the company, any one of these tables may be used for purposes of valuation for any annuity or pure endowment purchased on or after July 1, 1983, under a group annuity or pure endowment contract.

2.Except as provided in subsection 3, either the 1983 GAM Table or the 1994 GAR Table must be used for determining the minimum standard of valuation for any annuity or pure endowment purchased on or after January 1, 1986, under a group annuity or pure endowment contract.

3.The 1994 GAR Table must be used for determining the minimum standard of valuation for any annuity or pure endowment purchased on or after September 1, 1999, under a group annuity or pure endowment contract.

In using the 1994 GAR Table, the mortality rate for a person age x in year (1994 + n) is calculated as follows: 1994+n = q (1 - AA ) n where the q and AA are as specified in the 1994 GAR Table.

History

• History: Effective January 1, 1985; amended effective September 1, 1999. 45-04-08-03.1. Application of the 1994 GAR Table.
• History: Effective September 1, 1999.

N.D. Admin. Code 45-04-08-04 Separability

If any provision of this chapter or the application thereof to any person or circumstances is for any reason held to be invalid, the remainder of the regulation and the application of such provision to other persons or circumstances is not affected thereby.

History

• History: Effective January 1, 1985.

Chapter 45-04-09 Regulation on the Use of Clearing Corporations and Federal Reserve Book-Entry System by Insurance Companies

N.D. Admin. Code 45-04-09 Regulation on the Use of Clearing Corporations and Federal Reserve Book-Entry System by Insurance Companies

CHAPTER 45-04-09

REGULATION ON THE USE OF CLEARING CORPORATIONS AND FEDERAL RESERVE

BOOK-ENTRY SYSTEM BY INSURANCE COMPANIES [Superseded by Chapter 45-03-23, effective March 1, 2004]

Chapter 45-04-10 Advertising Rules

N.D. Admin. Code 45-04-10-01 Definitions

For the purpose of sections 45-04-10-01 through 45-04-10-08:

1."Advertisement" is material designed to create public interest in life insurance or annuities or in an insurer or in an insurance agent or agency, or to induce the public to purchase, increase, modify, reinstate, or retain a policy including:

a.Printed and published material, audiovisual material, and descriptive literature of an insurer or agent used in direct mail, newspapers, magazines, radio, and television scripts, billboards, and similar displays.

b.Descriptive literature, identification cards, and sales aids of all kinds issued by an insurer or agent, including, but not limited to, business calling cards, lead cards, surveys, circulars, leaflets, booklets, depictions, illustrations, and form letters.

c.Material used for the recruitment, training, and education of an insurer's sales personnel, agents, solicitors, and brokers which is designed to be used or is used to induce the public to purchase, increase, modify, reinstate, or retain a policy.

d.Prepared sales talks, presentations, and material for use by sales personnel, agents, solicitors, and brokers.

2."Advertisement" for the purpose of this chapter does not include:

a.Communications or materials used within an insurer's, agent's, or broker's own organization and not intended for dissemination to the public.

b.Communications with policyholders other than material urging policyholders to purchase, increase, modify, reinstate, request information relating to, or retain a policy.

c.A general announcement from a group or blanket policyholder to eligible individuals on an employment or membership list that a policy or program has been written or arranged; provided the announcement clearly indicates that it is preliminary to the issuance of a booklet explaining the proposed coverage.

3."Insurer" includes any individual, corporation, partnership, reciprocal exchange, interinsurer, Lloyd's, fraternal benefit society, and any other legal entity which is defined as an "insurer" in the insurance code of this state or issues life insurance or annuities in this state and is engaged in the advertisement of a policy. This term also includes insurance agents, brokers, and agencies insofar as their own advertising practices for a particular policy or type of coverage are concerned.

4."Policy" includes any policy, plan, certificate, contract, agreement, statement of coverage, rider, or endorsement which provides for life insurance or annuity benefits.

N.D. Admin. Code 45-04-10-02 Applicability

1.This chapter applies to any advertisement of life insurance or an annuity product intended for dissemination in this state and which advertisement is disseminated in any manner by or on behalf of an insurance company, agency, agent, or broker.

2.All advertisements, regardless of by whom written, created, designed, or presented, shall be the responsibility of the insurer, as well as the agent or agency who created, requested, or presented the advertisement. Insurers shall establish and at all times maintain a system of control over the content, form, and methods of dissemination of all advertisements of its policies. A system of control shall include regular and routine notification, at least once a year, to agents, brokers, and others authorized by the insurer to disseminate advertisements, of the requirement and procedures for insurance company approval prior to the use of any advertisements that are not furnished by the insurer and that clearly set forth within the notice the most serious consequences of not obtaining the required prior approval.

History

• History: Effective March 1, 1988; amended effective January 1, 2016.

N.D. Admin. Code 45-04-10-03 Disclosure requirements

1.The information required to be disclosed by this chapter may not be minimized, rendered obscure, or presented in an ambiguous fashion or intermingled with the text of the advertisement so as to be confusing or misleading.

2.No advertisement may omit material information or use words, phrases, statements, references, or illustrations if such omission or such use has the capacity, tendency, or effect of misleading or deceiving purchasers or prospective purchasers as to the nature or extent of any policy benefit payable, loss covered, premium payable, or state or federal tax consequences. The fact that the policy offered is made available to a prospective insured for inspection prior to consummation of the sale, or an offer is made to refund the premium if the purchaser is not satisfied, does not remedy misleading statements. Whether an advertisement has the capacity or tendency to mislead or deceive must be determined by the insurance commissioner from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence, within the segment of the public to which it is directed.

3.In the event an advertisement uses "Non-Medical", "No Medical Examination Required", or similar terms where issue is not guaranteed, such terms must be accompanied by a further disclosure of equal prominence and in juxtaposition thereto to the effect that issuance of the policy may depend upon the answers to the health questions.

4.An advertisement may not use as the name or title of a life insurance policy any phrase which does not include the words "life insurance" unless accompanied by other language clearly indicating it is life insurance.

5.An advertisement must prominently describe the type of policy advertised.

6.An advertisement of an insurance policy marketed by direct response techniques may not state or imply that because there is no agent or commission involved there will be a cost-savings to prospective purchasers unless such is the fact. No such cost-savings may be stated or implied without justification satisfactory to the insurance commissioner prior to use.

7.An advertisement for a policy containing graded or modified benefits must prominently display any limitation of benefits. If the premium is level and coverage decreases or increases with age or duration, such fact must be prominently disclosed.

8.An advertisement for a policy with nonlevel premiums must prominently describe the premium changes.

9.Dividends.

a.An advertisement may not utilize or describe dividends in a manner which is misleading or has the capacity or tendency to mislead.

b.An advertisement may not state or imply that the payment or amount of dividends is guaranteed. If dividends are illustrated, they must be based on the insurer's current dividend scale and the illustration must contain a statement to the effect that they are not to be construed as guarantees or estimates of dividends to be paid in the future.

c.An advertisement may not state or imply that illustrated dividends under a participating policy or pure endowments, or both, will be or can be sufficient at any future time to assure, without the further payment of premiums, the receipt of benefits, such as a paid-up policy, unless the advertisement clearly and precisely explains (1) what benefits or coverage would be provided at such time and (2) under what conditions this would occur.

10.An advertisement may not state that a purchaser of a policy will share in or receive a stated percentage or portion of the earning on the general account assets of the company.

11.Testimonials or endorsements by third parties.

a.Testimonials used in advertisements must be genuine; represent the current opinion of the author; be applicable to the policy advertised, if any; and be accurately reproduced.

In using a testimonial the insurer makes as its own all of the statements contained therein, and such statements are subject to all the provisions of these rules.

b.If the individual making a testimonial or an endorsement has a financial interest in the insurer or a related entity as a stockholder, director, officer, employee, or otherwise, or receives any benefit directly or indirectly other than required union scale wages, such fact must be disclosed in the advertisement.

c.An advertisement may not state or imply that an insurer or a policy has been approved or endorsed by a group of individuals, society, association, or other organization unless such is the fact and unless any proprietary relationship between an organization and the insurer is disclosed. If the entity making the endorsement or testimonial is owned, controlled, or managed by the insurer, or receives any payment or other consideration from the insurer for making such endorsement or testimonial, such fact must be disclosed in the advertisement.

12.An advertisement may not contain statistical information relating to any insurer or policy unless it accurately reflects recent and relevant facts. The source of any such statistics used in an advertisement must be identified therein.

13.Introductory, initial, or special offers and enrollment periods.

a.An advertisement of an individual policy or combination of such policies may not state or imply that such policy or combination of such policies is an introductory, initial, or special offer, or that applicants will receive substantial advantages not available at a later date, or that the offer is available only to a specified group of individuals, unless such is the fact. An advertisement may not describe an enrollment period as "special" or "limited" or use similar words or phrases in describing it when the insurer uses successive enrollment periods as its usual method of marketing its policies.

b.An advertisement may not state or imply that only a specific number of policies will be sold, or that a time is fixed for the discontinuance of the sale of the particular policy advertised because of special advantages available in the policy.

c.An advertisement may not offer a policy which utilizes a reduced initial premium rate in a manner which overemphasizes the availability and the amount of the reduced initial premium. When an insurer charges an initial premium that differs in amount from the amount of the renewal premium payable on the same mode, all references to the reduced initial premium must be followed by an asterisk or other appropriate symbol which refers the reader to that specific portion of the advertisement which contains the full rate schedule for the policy being advertised.

d.An enrollment period during which a particular insurance policy may be purchased on an individual basis may not be offered within this state unless there has been a lapse of not less than twelve months between the close of the immediately preceding enrollment period for the same policy and the opening of the new enrollment period. The advertisement must specify the date by which the applicant must mail the application, which must be not less than ten days and not more than forty days from the date on which such enrollment period is advertised for the first time. This rule applies to all advertising media - i.e., mail, newspapers, radio, television, magazines, and periodicals by any one insurer. The phrase "any one insurer" includes all the affiliated companies of a group of insurance companies under common management or control. This rule does not apply to the use of a termination or cutoff date beyond which an individual application for a guaranteed issue policy will not be accepted by an insurer in those instances where the application has been sent to the applicant in response to the applicant's request. It is also inapplicable to solicitations of employees or members of a particular group or association which otherwise would be eligible under specific provisions of the insurance code for group, blanket, or franchise insurance. In cases where an insurance product is marketed on a direct mail basis to prospective insureds by reason of some common relationship with a sponsoring organization, this section must be applied separately to each sponsoring organization.

14.An advertisement of a particular policy may not state or imply that prospective insureds shall be or become members of a special class, group, or quasi-group and as such enjoy special rates, dividends, or underwriting privileges, unless such is the fact.

15.An advertisement may not make unfair or incomplete comparisons of policies, benefits, dividends, or rates of other insurers. An advertisement may not falsely or unfairly describe other insurers, their policies, services, or methods of marketing.

16.For individual deferred annuity products or deposit funds, the following shall apply:

a.Any illustrations or statements containing or based upon interest rates higher than the guaranteed accumulation interest rates shall likewise set forth with equal prominence comparable illustrations or statements containing or based upon the guaranteed accumulation interest rates. Such higher interest rates may not be greater than those currently being credited by the company unless such higher rates have been publicly declared by the company with an effective date for new issues not more than three months subsequent to the date of declaration.

b.If an advertisement states the net premium accumulation interest rate, whether guaranteed or not, it must also disclose in close proximity thereto and with equal prominence, the actual relationship between the gross and net premiums.

c.If any contract does not provide a cash surrender benefit prior to commencement of payment of any annuity benefits, any illustrations or statements concerning such contract must prominently state that cash surrender benefits are not provided.

History

• History: Effective March 1, 1988; amended effective January 1, 2016.

N.D. Admin. Code 45-04-10-04 Identity of insurer

1.The name of the insurer, insurance agency, agent, or broker must be clearly identified on all advertisements, and if any specific individual policy is advertised it must be identified either by form number or other appropriate description. An advertisement may not use a trade name, an insurance group designation, name of the parent company of the insurer, name of a particular division of the insurer, agent, broker, or agency, service mark, slogan, symbol, or other device or reference without disclosing the name of the insurer, agent, broker, or agency if the advertisement would have the capacity or tendency to mislead or deceive as to the true identity of the insurer, agent, broker, or agency or create the impression that an entity other than the insurer would have any responsibility for the financial obligation under a policy.

2.No advertisement may use any combination of words, symbols, or physical materials which by their content, phraseology, shape, color, or other characteristics are so similar to a combination of words, symbols, or physical materials used by a governmental program or agency or otherwise appear to be of such a nature that they tend to mislead prospective insureds into believing that the solicitation is in some manner connected with such governmental program or agency.

N.D. Admin. Code 45-04-10-05 Jurisdictional licensing and status of insurer

1.An advertisement which is intended to be seen or heard beyond the limits of the jurisdiction in which the insurer is licensed may not imply licensing beyond such limits.

2.An advertisement may state that an insurer is licensed in the state where the advertisement appears, provided it does not exaggerate such fact or suggest or imply that competing insurers may not be so licensed.

3.An advertisement may not create the impression that the insurer, its financial condition or status, the payment of its claims, or the merits, desirability, or advisability of its policy forms or kinds of plans of insurance are recommended or endorsed by any governmental entity.

However, where a governmental entity has recommended or endorsed a policy form or plan, such fact may be stated if the entity authorizes its recommendation or endorsement to be used in an advertisement.

N.D. Admin. Code 45-04-10-06 Statements about the insurer

An advertisement may not contain statements, pictures, or illustrations which are false or misleading, in fact or by implication, with respect to the assets, liabilities, insurance in force, corporate structure, financial condition, age or relative position of the insurer in the insurance business. An advertisement may not contain a recommendation by any commercial rating system unless it clearly defines the scope and extent of the recommendation.

N.D. Admin. Code 45-04-10-07 Enforcement procedures

Each insurer shall maintain at its home or principal office a complete file containing a specimen copy of every printed, published, or prepared advertisement of its individual policies and specimen copies of typical printed, published, or prepared advertisements of its blanket, franchise, and group policies, hereafter disseminated in this state, with a notation indicating the manner and extent of distribution and the form number of any policy advertised. Such file is subject to inspection by this department. All such advertisements must be maintained in said file for a period of either four years or until the filing of the next regular report on the examination of the insurer, whichever is the longer period of time.

History

• History: Effective March 1, 1988; amended effective January 1, 2006.

N.D. Admin. Code 45-04-10-08 Conflict with other rules

It is not intended that this chapter conflict with or supersede any rules currently in force or subsequently adopted in this state governing specific aspects of the sale or replacement of life insurance including, but not limited to, rules dealing with life insurance cost comparison indices, deceptive practices in the sale of life insurance, and replacement of life insurance policies.

Consequently, no disclosure required under any such rules shall be deemed to be an advertisement within the meaning of this chapter.

Chapter 45-04-11 Reinsurance Transactions by Licensed Life Insurers

N.D. Admin. Code 45-04-11-01 Financial statement prohibitions

1.No licensed life insurer shall, for reinsurance ceded, reduce any liability or establish any asset in any financial statement filed with this department if, by the terms of the reinsurance agreement, in substance or effect, any of the following conditions exist:

a.The primary effect of the reinsurance agreement is to transfer deficiency reserves or excess interest reserves to the books of the reinsurer for a "risk charge" and the agreement does not provide for significant participation by the reinsurer in one or more of the following risks: mortality, morbidity, investment, or surrender benefit;

b.The reserve credit taken by the ceding insurer is in excess of the actuarial reserve necessary, under the North Dakota insurance law or rules, including actuarial interpretations or standards adopted by the department, to support the policy obligations transferred under the reinsurance agreement;

c.The reserve credit taken by the ceding insurer is greater than the underlying reserve of the ceding company supporting the policy obligations transferred under the reinsurance agreement;

d.The ceding insurer is required to reimburse the reinsurer for negative experience under the reinsurance agreement, except that neither offsetting experience refunds against prior years' losses nor payment by the ceding insurer of an amount equal to prior years' losses upon voluntary termination of inforce reinsurance by that ceding insurer shall be considered such a reimbursement to the insurer for negative experience;

e.The ceding insurer can be deprived of surplus at the reinsurer's option or automatically upon the occurrence of some event, such as the insolvency of the ceding insurer, except that termination of the reinsurance agreement by the reinsurer for nonpayment of reinsurance premiums shall not be considered to be such a deprivation of surplus;

f.The ceding insurer must, at specific points in time scheduled in the agreement, terminate or automatically recapture all or part of the reinsurance ceded;

g.No cash payment is due from the reinsurer, throughout the lifetime of the reinsurance agreement, with all settlements prior to the termination date of the agreement made only in a "reinsurance account", and no funds in such account are available for the payment of claims; or

h.The reinsurance agreement involves the possible payment by the ceding insurer to the reinsurer of amounts other than from income reasonably expected from the reinsured policies.

2.Notwithstanding subsection 1, a licensed life insurer may, with the prior approval of the commissioner, take such reserve credit as the commissioner may deem consistent with the insurance law or rules, including actuarial interpretations or standards adopted by the department.

History

• History: Effective October 1, 1989; amended effective January 1, 1992; February 28, 1992.
• Law Implemented: NDCC 26.1-05-04, 26.1-05-19, 26.1-05-32

N.D. Admin. Code 45-04-11-02 Financial statement requirements

1.No reinsurance agreement or amendment to any reinsurance agreement may be used to reduce any liability or to establish any asset in any financial statement filed with this department, unless the agreement, amendment, or a letter of intent has been duly executed by both parties no later than the "as of date" of the financial statement.

2.In the case of a letter of intent, a reinsurance agreement or an amendment to a reinsurance agreement must be executed within a reasonable period of time, not exceeding ninety days from the execution date of the letter of intent, in order for credit to be granted for the reinsurance ceded.

History

• History: Effective October 1, 1989.
• Law Implemented: NDCC 26.1-05-04, 26.1-05-19, 26.1-05-32

N.D. Admin. Code 45-04-11-03 Financial statement exceptions

Notwithstanding section 45-04-11-01, licensed life insurers may continue to reduce liabilities or establish assets in financial statements filed with this department for reinsurance ceded under types of reinsurance agreements described in section 45-04-11-01, provided:

1.The agreements were executed and in force prior to October 1, 1989;

2.No new business is ceded under the agreements after October 1, 1989;

3.The reduction of the liability or the asset established for the reinsurance ceded is reduced to zero by December 31, 1992, or such later date approved by the commissioner as a result of an application made by the ceding insurer prior to December 31, 1989;

4.The reduction of the liability or the establishment of the asset is otherwise permissible under all other applicable provisions of the insurance law or rules, including actuarial interpretations or standards adopted by the department; and

5.The insurance department is notified, within sixty days following October 1, 1989, of the existence of such reinsurance agreements and all corresponding credits taken in the ceding insurer's 1988 annual statement.

History

• History: Effective October 1, 1989.
• Law Implemented: NDCC 26.1-05-04, 26.1-05-32, 26.1-05-19

Chapter 45-04-12 Valuation of Life Insurance Policies

N.D. Admin. Code 45-04-12-01 Applicability

This chapter shall apply to all life insurance policies, with or without nonforfeiture values, issued on or after January 1, 2000, subject to the following exceptions and conditions:

1.Exceptions.

a.This chapter shall not apply to any individual life insurance policy issued on or after January 1, 2000, if the policy is issued in accordance with and as a result of the exercise of a reentry provision contained in the original life insurance policy of the same or greater face amount issued before January 1, 2000, which guarantees the premium rates of the new policy. This chapter also shall not apply to subsequent policies issued as a result of the exercise of such a provision, or a derivation of the provision, in the new policy.

b.This chapter shall not apply to any universal life policy that meets all the following requirements:

(1)Secondary guarantee period, if any, is five years or less;

(2)Specified premium for the secondary guarantee period is not less than the net level reserve premium for the secondary guarantee period based on the CSO valuation tables as defined in subsection 6 of section 45-04-12-02 and the applicable valuation interest rate; and (3)The initial surrender charge is not less than one hundred percent of the first year annualized specified premium for the secondary guarantee period.

c.This chapter shall not apply to any variable life insurance policy that provides for life insurance, the amount or duration of which varies according to the investment experience of any separate account or accounts.

d.This chapter shall not apply to any variable universal life insurance policy that provides for life insurance, the amount or duration of which varies according to the investment experience of any separate account or accounts.

e.This chapter shall not apply to a group life insurance certificate unless the certificate provides for a stated or implied schedule of maximum gross premiums required in order to continue coverage in force for a period in excess of one year.

2.Conditions.

a.Calculation of the minimum valuation standard for policies with guaranteed nonlevel gross premiums or guaranteed nonlevel benefits, other than universal life policies, or both, shall be in accordance with the provisions of section 45-04-12-04.

b.Calculation of the minimum valuation standard for flexible premium and fixed premium universal life insurance policies, that contain provisions resulting in the ability of a policyholder to keep a policy in force over a secondary guarantee period, shall be in accordance with the provisions of section 45-04-12-05.

N.D. Admin. Code 45-04-12-02 Definitions

For purposes of this chapter:

1."Basic reserves" means reserves calculated in accordance with North Dakota Century Code

section 26.1-35-05.

2."Contract segmentation method" means the method of dividing the period from issue to mandatory expiration of a policy into successive segments, with the length of each segment being defined as the period from the end of the prior segment, from policy inception for the first segment, to the end of the latest policy year as determined below. All calculations are made using the 1980 CSO valuation tables or any other valuation mortality table adopted by the national association of insurance commissioners after January 1, 2000, and promulgated by rule by the commissioner for this purpose, and, if elected, the optional minimum mortality standard for deficiency reserves stipulated in subsection 2 of section 45-04-12-03.

The length of a particular contract segment shall be set equal to the minimum of the value t for which G is greater than R , if G never exceeds R the segment length is deemed to be the number of years from the beginning of the segment to the mandatory expiration date of the policy, where G and R are defined as follows:

G = ____________ where: x = original issue age; k = the number of years from the date of issue to the beginning of the segment; t = 1, 2, ...; t is reset to 1 at the beginning of each segment; and = Guaranteed gross premium per thousand of face amount for year t of the segment, ignoring policy fees only if level for the premium paying period of the policy.

R = _____________, however, R may be increased or decreased by one percent in any policy year, at the company's option, but R shall not be less than one; where: x, k, and t are as defined above, and x+k+t-1= Valuation mortality rate for deficiency reserves in policy year k+t but using the mortality of subdivision b of subsection 2 of section 45-04-12-03 if subdivision c of subsection 2 of section 45-04-12-03 is elected for deficiency reserves.

However, if GP is greater than 0 and GP is equal to 0, G shall be deemed to be 1000.

If GP and GP are both equal to 0, G shall be deemed to be 0.

3."Deficiency reserves" means the excess, if greater than zero, of:

a.Minimum reserves calculated in accordance with North Dakota Century Code section 26.1-35-09.

b.Basic reserves.

4."Guaranteed gross premiums" means the premiums under a policy of life insurance that are guaranteed and determined at issue.

5."Maximum valuation interest rates" means the interest rates defined in North Dakota Century Code section 26.1-35-04, computation of minimum standard by calendar year of issue, which are to be used in determining the minimum standard for the valuation of life insurance policies.

6."1980 CSO valuation tables" means the commissioners' 1980 standard ordinary mortality table (1980 CSO table) without ten-year selection factors, incorporated into the 1980 amendments to the national association of insurance commissioners standard valuation law, and variations of the 1980 CSO table approved by the national association of insurance commissioners, such as the smoker and nonsmoker versions approved in December 1983.

7."Scheduled gross premium" means the smallest illustrated gross premium at issue for other than universal life insurance policies. For universal life insurance policies, scheduled gross premium means the smallest specified premium described in subdivision c of subsection 1 of

section 45-04-12-05, if any, or else the minimum premium described in subdivision d of subsection 1 of section 45-04-12-05. 8.a."Segmented reserves" means reserves, calculated using segments produced by the contract segmentation method, equal to the present value of all future guaranteed benefits less the present value of all future net premiums to the mandatory expiration of a policy, when the net premiums within each segment are a uniform percentage of the respective guaranteed gross premiums within the segment. The uniform percentage for each segment is such that, at the beginning of the segment, the present value of the net premiums within the segment equals:

(1)The present value of the death benefits within the segment; plus (2)The present value of any unusual guaranteed cash value (see subsection 4 of

section 45-04-12-04) occurring at the end of the segment; less (3)Any unusual guaranteed cash value occurring at the start of the segment; plus (4)For the first segment only, the excess of subparagraph a over subparagraph b, as follows:

(a)A net level annual premium equal to the present value, at the date of issue, of the benefits provided for in the first segment after the first policy year, divided by the present value, at the date of issue, of an annuity of one per year payable on the first and each subsequent anniversary within the first segment on which a premium falls due. However, the net level annual premium shall not exceed the net level annual premium on the nineteen-year premium whole life plan of insurance of the same renewal year equivalent level amount at an age one year higher than the age at issue of the policy.

(b)A net one-year term premium for the benefits provided for in the first policy year.

b.The length of each segment is determined by the contract segmentation method, as defined in this section.

c.The interest rates used in the present value calculations for any policy may not exceed the maximum valuation interest rate, determined with a guarantee duration equal to the sum of the lengths of all segments of the policy.

d.For both basic reserves and deficiency reserves computed by the segmented method, present values shall include future benefits and net premiums in the current segment and in all subsequent segments.

9."Tabular cost of insurance" means the net single premium at the beginning of a policy year for one-year term insurance in the amount of the guaranteed death benefit in that policy year.

10."Ten-year select factors" means the select factors adopted with the 1980 amendments to the national association of insurance commissioners standard valuation law. 11.a."Unitary reserves" means the present value of all future guaranteed benefits less the present value of all future modified net premiums, when:

(1)Guaranteed benefits and modified net premiums are considered to the mandatory expiration of the policy; and (2)Modified net premiums are a uniform percentage of the respective guaranteed gross premiums, when the uniform percentage is such that, at issue, the present value of the net premiums equals the present value of all death benefits and pure endowments, plus the excess of subparagraph a over subparagraph b, as follows:

(a)A net level annual premium equal to the present value, at the date of issue, of the benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one per year payable on the first and each subsequent anniversary of the policy on which a premium falls due. However, the net level annual premium shall not exceed the net level annual premium on the nineteen-year premium whole life plan of insurance of the same renewal year equivalent level amount at an age one year higher than the age at issue of the policy.

(b)A net one-year term premium for the benefits provided for in the first policy year.

b.The interest rates used in the present value calculations for any policy may not exceed the maximum valuation interest rate, determined with a guarantee duration equal to the length from issue to the mandatory expiration of the policy.

12."Universal life insurance policy" means any individual life insurance policy under the provisions of which separately identified interest credits, other than in connection with dividend accumulations, premium deposit funds, or other supplementary accounts, and mortality or expense charges are made to the policy.

N.D. Admin. Code 45-04-12-03 General calculation requirements for basic reserves and premium deficiency reserves

1.At the election of the company for any one or more specified plans of life insurance, the minimum mortality standard for basic reserves may be calculated using the 1980 CSO valuation tables with select mortality factors, or any other valuation mortality table adopted by the national association of insurance commissioners after January 1, 2000, and promulgated by rule by the commissioner for this purpose. If select mortality factors are elected, they may be:

a.The ten-year select mortality factors incorporated into the 1980 amendments to the national association of insurance commissioners standard valuation law;

b.The select mortality factors in the appendix; or

c.Any other table of select mortality factors adopted by the national association of insurance commissioners after January 1, 2000, and promulgated by rule by the commissioner for the purpose of calculating basic reserves.

2.Deficiency reserves, if any, are calculated for each policy as the excess, if greater than zero, of the quantity A over the basic reserve. The quantity A is obtained by recalculating the basic reserve for the policy using guaranteed gross premiums instead of net premiums when the guaranteed gross premiums are less than the corresponding net premiums. At the election of the company for any one or more specified plans of insurance, the quantity A and the corresponding net premiums used in the determination of quantity A may be based upon the 1980 CSO valuation tables with select mortality factors, or any other valuation mortality table adopted by the national association of insurance commissioners after January 1, 2000, and promulgated by rule by the commissioner. If select mortality factors are elected, they may be:

a.The ten-year select mortality factors incorporated into the 1980 amendments to the national association of insurance commissioners standard valuation law;

b.The select mortality factors in the appendix of this chapter;

c.For durations in the first segment, X percent of the select mortality factors in the

appendix, subject to the following:

(1)X may vary by policy year, policy form, underwriting classification, issue age, or any other policy factor expected to affect mortality experience;

(2)X shall not be less than twenty percent;

(3)X shall not decrease in any successive policy years;

(4)X is such that, when using the valuation interest rate used for basic reserves, subparagraph a is greater than or equal to subparagraph b:

(a)The actuarial present value of future death benefits, calculated using the mortality rates resulting from the application of X;

(b)The actuarial present value of future death benefits calculated using anticipated mortality experience without recognition of mortality improvement beyond the valuation date;

(5)X is such that the mortality rates resulting from the application of X are at least as great as the anticipated mortality experience, without recognition of mortality improvement beyond the valuation date, in each of the first five years after the valuation date;

(6)The appointed actuary shall increase X at any valuation date when it is necessary to continue to meet all the requirements of subdivision c of subsection 2;

(7)The appointed actuary may decrease X at any valuation date as long as X does not decrease in any successive policy years and as long as it continues to meet all the requirements of subdivision c of subsection 2;

(8)The appointed actuary shall specifically take into account the adverse effect on expected mortality and lapsation of any anticipated or actual increase in gross premiums; and (9)If X is less than one hundred percent at any duration for any policy, the following requirements shall be met:

(a)The appointed actuary shall annually prepare an actuarial opinion and memorandum for the company in conformance with the requirements of

chapter 45-03-19; and (b)The appointed actuary shall annually opine for all policies subject to this rule as to whether the mortality rates resulting from the application of X meet the requirements of subdivision c of subsection 2. This opinion shall be supported by an actuarial report, subject to appropriate actuarial standards of practice promulgated by the actuarial standards board of the American academy of actuaries. The X factors shall reflect anticipated future mortality, without recognition of mortality improvement beyond the valuation date, taking into account relevant emerging experience.

d.Any other table of select mortality factors adopted by the national association of insurance commissioners after January 1, 2000, and promulgated by rule by the commissioner for the purpose of calculating deficiency reserves.

3.This subsection applies to both basic reserves and deficiency reserves. Any set of select mortality factors may be used only for the first segment. However, if the first segment is less than ten years, the appropriate ten-year select mortality factors incorporated into the 1980 amendments to the national association of insurance commissioners standard valuation law may be used thereafter through the tenth policy year from the date of issue.

4.In determining basic reserves or deficiency reserves, guaranteed gross premiums without policy fees may be used when the calculation involves the guaranteed gross premium but only if the policy fee is a level dollar amount after the first policy year. In determining deficiency reserves, policy fees may be included in guaranteed gross premiums, even if not included in the actual calculation of basic reserves.

5.Reserves for policies that have changes to guaranteed gross premiums, guaranteed benefits, guaranteed charges, or guaranteed credits that are unilaterally made by the insurer after issue and that are effective for more than one year after the date of the change shall be the greatest of the following:

a.Reserves calculated ignoring the guarantee;

b.Reserves assuming the guarantee was made at issue; and

c.Reserves assuming that the policy was issued on the date of the guarantee.

6.The commissioner may require that the company document the extent of the adequacy of reserves for specified blocks, including policies issued prior to January 1, 2000. This documentation may include a demonstration of the extent to which aggregation with other nonspecified blocks of business is relied upon in the formation of the appointed actuary opinion pursuant to and consistent with the requirements of chapter 45-03-19.

N.D. Admin. Code 45-04-12-04 Calculation of minimum valuation standard for policies with guaranteed nonlevel gross premiums or guaranteed nonlevel benefits, other than universal life policies

1.Basic reserves. Basic reserves shall be calculated as the greater of the segmented reserves and the unitary reserves. Both the segmented reserves and the unitary reserves for any policy shall use the same valuation mortality table and selection factors. At the option of the insurer, in calculating segmented reserves and net premiums, either of the adjustments described in subdivision a or b may be made:

a.Treat the unitary reserve, if greater than zero, applicable at the end of each segment as a pure endowment and subtract the unitary reserve, if greater than zero, applicable at the beginning of each segment from the present value of guaranteed life insurance and endowment benefits for each segment.

b.Treat the guaranteed cash surrender value, if greater than zero, applicable at the end of each segment as a pure endowment and subtract the guaranteed cash surrender value, if greater than zero, applicable at the beginning of each segment from the present value of guaranteed life insurance and endowment benefits for each segment.

2.Deficiency reserves.

a.The deficiency reserve at any duration shall be calculated:

(1)On a unitary basis if the corresponding basic reserve determined by subsection 1 is unitary;

(2)On a segmented basis if the corresponding basic reserve determined by subsection 1 is segmented; or (3)On the segmented basis if the corresponding basic reserve determined by subsection 1 is equal to both the segmented reserve and the unitary reserve.

b.This subsection shall apply to any policy for which the guaranteed gross premium at any duration is less than the corresponding modified net premium calculated by the method used in determining the basic reserves, but using the minimum valuation standards of mortality, specified in subsection 2 of section 45-04-12-03, and rate of interest.

c.Deficiency reserves, if any, shall be calculated for each policy as the excess if greater than zero, for the current and all remaining periods, of the quantity A over the basic reserve, where A is obtained as indicated in subsection 2 of section 45-04-12-03.

d.For deficiency reserves determined on a segmented basis, the quantity A is determined using segment lengths equal to those determined for segmented basic reserves.

3.Minimum value. Basic reserves may not be less than the tabular cost of insurance for the balance of the policy year if mean reserves are used. Basic reserves may not be less than the tabular cost of insurance for the balance of the current modal period or to the paid-to date, if later, but not beyond the next policy anniversary, if midterminal reserves are used. The tabular cost of insurance shall use the same valuation mortality table and interest rates as that used for the calculation of the segmented reserves. However, if select mortality factors are used, they shall be the ten-year select factors incorporated into the 1980 amendments of the national association of insurance commissioners standard valuation law. In no case may total reserves, including basic reserves, deficiency reserves, and any reserves held for supplemental benefits that would expire upon contract termination, be less than the amount that the policy owner would receive, including the cash surrender value of the supplemental benefits, if any, referred to above, exclusive of any deduction for policy loans, upon termination of the policy.

4.Unusual pattern of guaranteed cash surrender values.

a.For any policy with an unusual pattern of guaranteed cash surrender values, the reserves actually held prior to the first unusual guaranteed cash surrender value shall not be less than the reserves calculated by treating the first unusual guaranteed cash surrender value as a pure endowment and treating the policy as an n-year policy providing term insurance plus a pure endowment equal to the unusual cash surrender value, when n is the number of years from the date of issue to the date the unusual cash surrender value is scheduled.

b.The reserves actually held subsequent to any unusual guaranteed cash surrender value shall not be less than the reserves calculated by treating the policy as an n-year policy providing term insurance plus a pure endowment equal to the next unusual guaranteed cash surrender value, and treating any unusual guaranteed cash surrender value at the end of the prior segment as a net single premium, when:

(1)n is the number of years from the date of the last unusual guaranteed cash surrender value prior to the valuation date to the earlier of:

(a)The date of the next unusual guaranteed cash surrender value, if any, that is scheduled after the valuation date; or (b)The mandatory expiration date of the policy;

(2)The net premium for a given year during the n-year period is equal to the product of the net to gross ratio and the respective gross premium; and (3)The net to gross ratio is equal to subparagraph a divided by subparagraph b as follows:

(a)The present value, at the beginning of the n year period, of death benefits payable during the n-year period plus the present value, at the beginning of the n-year period, of the next unusual guaranteed cash surrender value, if any, minus the amount of the last unusual guaranteed cash surrender value, if any, scheduled at the beginning of the n-year period.

(b)The present value, at the beginning of the n-year period, of the scheduled gross premiums payable during the n-year period.

c.For purposes of this subsection, a policy is considered to have an unusual pattern of guaranteed cash surrender values if any future guaranteed cash surrender value exceeds the prior year's guaranteed cash surrender value by more than the sum of:

(1)One hundred ten percent of the scheduled gross premium for that year;

(2)One hundred ten percent of one year's accrued interest on the sum of the prior year's guaranteed cash surrender value and the scheduled gross premium using the nonforfeiture interest rate used for calculating policy guaranteed cash surrender values; and (3)Five percent of the first policy year surrender charge, if any.

5.Optional exemption for yearly renewable term reinsurance. At the option of the company, the following approach for reserves on yearly renewable term reinsurance may be used:

a.Calculate the valuation net premium for each future policy year as the tabular cost of insurance for that future year.

b.Basic reserves shall never be less than the tabular cost of insurance for the appropriate period, as determined under subsection 3.

c.Deficiency reserves.

(1)For each policy year, calculate the excess, if greater than zero, of the valuation net premium over the respective maximum guaranteed gross premium.

(2)Deficiency reserves shall never be less than the sum of the present values, at the date of valuation, of the excesses determined in accordance with paragraph 1.

d.For purposes of this subsection, the calculations use the maximum valuation interest rate and the 1980 CSO mortality tables with or without ten-year select mortality factors, or any other table adopted after January 1, 2000, by the national association of insurance commissioners and promulgated by rule by the commissioner for this purpose.

e.A reinsurance agreement shall be considered yearly renewable term reinsurance for purposes of this subsection if only the mortality risk is reinsured.

f.If the assuming company chooses this optional exemption, the ceding company's reinsurance reserve credit shall be limited to the amount of reserve held by the assuming company for the affected policies.

6.Optional exemption for attained-age-based yearly renewable term life insurance policies. At the option of the company, the following approach for reserves for attained-age-based yearly renewable term life insurance policies may be used:

a.Calculate the valuation net premium for each future policy year as the tabular cost of insurance for that future year.

b.Basic reserves shall never be less than the tabular cost of insurance for the appropriate period, as defined in paragraph 3 of subdivision f.

c.Deficiency reserves.

(1)For each policy year, calculate the excess, if greater than zero, of the valuation net premium over the respective maximum guaranteed gross premium.

(2)Deficiency reserves shall never be less than the sum of the present values, at the date of valuation, of the excesses determined in accordance with paragraph 1.

d.For purposes of this subsection, the calculations use the maximum valuation interest rate and the 1980 CSO valuation tables with or without ten-year select mortality factors, or any other table adopted after Janaury 1, 2000, by the national association of insurance commissioners and promulgated by rule by the commissioner for this purpose.

e.A policy shall be considered an attained-age-based yearly renewable term life insurance policy for purposes of this subsection if:

(1)The premium rates, on both the initial current premium scale and the guaranteed maximum premium scale, are based upon the attained age of the insured such that the rate for any given policy at a given attained age of the insured is independent of the year the policy was issued; and (2)The premium rates, on both the initial current premium scale and the guaranteed maximum premium scale, are the same as the premium rates for policies covering all insureds of the same sex, risk class, plan of insurance, and attained age.

f.For policies that become attained-age-based yearly renewable term policies after an initial period of coverage, the approach of this subsection may be used after the initial period if:

(1)The initial period is constant for all insureds of the same sex, risk class, and plan of insurance; or (2)The initial period runs to a common attained age for all insureds of the same sex, risk class, and plan of insurance; and (3)After the initial period of coverage, the policy meets the conditions of subdivision e.

g.If this election is made, this approach shall be applied in determining reserves for all attained-age-based yearly renewable term life insurance policies issued on or after January 1, 2000.

7.Exemption from unitary reserves for certain n-year renewable term life insurance policies.

Unitary basic reserves and unitary deficiency reserves need not be calculated for a policy if the following conditions are met:

a.The policy consists of a series of n-year periods, including the first period and all renewal periods, where n is the same for each period, except that for the final renewal period, n may be truncated or extended to reach the expiry age, provided that this final renewal period is less than ten years and less than twice the size of the earlier n-year periods, and for each period, the premium rates on both the initial current premium scale and the guaranteed maximum premium scale are level;

b.The guaranteed gross premiums in all n-year periods are not less than the corresponding net premiums based upon the 1980 CSO valuation table with or without the ten-year select mortality factors; and

c.There are no cash surrender values in any policy year.

8.Exemption from unitary reserves for certain juvenile policies. Unitary basic reserves and unitary deficiency reserves need not be calculated for a policy if the following conditions are met, based upon the initial current premium scale at issue:

a.At issue, the insured is age twenty-four or younger;

b.Until the insured reaches the end of the juvenile period, which shall occur at or before age twenty-five, the gross premiums and death benefits are level, and there are no cash surrender values; and

c.After the end of the juvenile period, gross premiums are level for the remainder of the premium paying period, and death benefits are level for the remainder of the life of the policy.

N.D. Admin. Code 45-04-12-05 Calculation of minimum valuation standard for flexible premium and fixed premium universal life insurance policies that contain provisions resulting in the ability of a policy owner to keep a policy in force over a secondary guarantee period

1.General.

a.Policies with a secondary guarantee include:

(1)A policy with a guarantee that the policy will remain in force at the original schedule of benefits, subject only to the payment of specified premiums;

(2)A policy in which the minimum premium at any duration is less than the corresponding one-year valuation premium, calculated using the maximum valuation interest rate and the 1980 CSO valuation tables with or without ten-year select mortality factors, or any other table adopted after January 1, 2000, by the national association of insurance commissioners and promulgated by rule by the commissioner for this purpose; or (3)A policy with any combination of paragraphs 1 and 2.

b.A secondary guarantee period is the period for which the policy is guaranteed to remain in force subject only to a secondary guarantee. When a policy contains more than one secondary guarantee, the minimum reserve shall be the greatest of the respective minimum reserves at that valuation date of each unexpired secondary guarantee, ignoring all other secondary guarantees. Secondary guarantees that are unilaterally changed by the insurer after issue shall be considered to have been made at issue.

Reserves described in subsections 2 and 3 shall be recalculated from issue to reflect these changes.

c.Specified premiums mean the premiums specified in the policy, the payment of which guarantees that the policy will remain in force at the original schedule of benefits, but which otherwise would be insufficient to keep the policy in force in the absence of the guarantee if maximum mortality and expense charges and minimum interest credits were made and any applicable surrender charges were assessed.

d.For purposes of this section, the minimum premium for any policy year is the premium that, when paid into a policy with a zero account value at the beginning of the policy year, produces a zero account value at the end of the policy year. The minimum premium calculation shall use the policy cost factors, including mortality charges, loads, and expense charges, and the interest crediting rate, which are all guaranteed at issue.

e.The one-year valuation premium means the net one-year premium based upon the original schedule of benefits for a given policy year. The one-year valuation premiums for all policy years are calculated at issue. The select mortality factors defined in subdivisions b, c, and d of subsection 2 of section 45-04-12-03 may not be used to calculate the one-year valuation premiums.

f.The one-year valuation premium should reflect the frequency of fund processing, as well as the distribution of deaths assumption employed in the calculation of the monthly mortality charges to the fund.

2.Basic reserves for the secondary guarantees. Basic reserves for the secondary guarantees shall be the segmented reserves for the secondary guarantee period. In calculating the segments and the segmented reserves, the gross premiums shall be set equal to the specified premiums, if any, or otherwise to the minimum premiums, that keep the policy in force and the segments will be determined according to the contract segmentation method as defined in subsection 2 of section 45-04-12-02.

3.Deficiency reserves for the secondary guarantees. Deficiency reserves, if any, for the secondary guarantees shall be calculated for the secondary guarantee period in the same manner as described in subsection 2 of section 45-04-12-04 with gross premiums set equal to the specified premiums, if any, or otherwise to the minimum premiums that keep the policy in force.

4.Minimum reserves. The minimum reserves during the secondary guarantee period are the greater of:

a.The basic reserves for the secondary guarantee plus the deficiency reserve, if any, for the secondary guarantees; or

b.The minimum reserves required by other rules or rules governing universal life plans.

Chapter 45-04-13 Viatical Settlement Advertising [Repealed]

N.D. Admin. Code 45-04-13 Viatical Settlement Advertising [Repealed]

CHAPTER 45-04-13

VIATICAL SETTLEMENT ADVERTISING [Repealed effective April 1, 2010]

Chapter 45-04-14 Military Sales Practices

N.D. Admin. Code 45-04-14-01 Definitions

1."Active duty" means full-time duty in the active military service of the United States and includes members of the reserve component such as the national guard and reserve while serving under published orders for active duty or full-time training. The term does not include members of the reserve component who are performing active duty or active duty for training under military calls or orders specifying periods of less than thirty-one calendar days.

2."Commissioner" means the North Dakota insurance commissioner.

3."DoD personnel" means all active duty service members and all civilian employees, including nonappropriated fund employees and special government employees of the department of defense.

4."Door to door" means a solicitation or sales method whereby an insurance producer proceeds randomly or selectively from household to household without prior specific appointment.

5."General advertisement" means an advertisement having as its sole purpose the promotion of the reader's or viewer's interest in the concept of insurance, or the promotion of the insurer or the insurance producer.

6."Insurance producer" means a person required to be licensed under the laws of this state to sell, solicit, or negotiate life insurance, including annuities.

7."Insurer" means an insurance company required to be licensed under the laws of this state to provide life insurance products, including annuities.

8."Known" or "knowingly" means the insurance producer or insurer had actual awareness or in the exercise of ordinary care should have known at the time of the act or practice complained of that the person solicited is a service member.

9."Life insurance" means insurance coverage on human lives, including benefits of endowment, annuities, benefits in the event of death or dismemberment by accident, and benefits for disability income.

10."Military installation" means any federally owned, leased, or operated base, reservation, post, camp, building, or other facility to which service members are assigned for duty, including barracks, transient housing, and family quarters.

11."MyPay" is a defense finance and accounting service (DFAS) web-based system that enables service members to process certain discretionary pay transactions or provide updates to personal information data elements without using paper forms.

12."Service member" means any active duty commissioned or warrant officer or enlisted member of the United States armed forces.

13."SGLI" means the United States department of veterans affairs servicemembers' group life insurance program of low cost group life insurance for servicemembers on active duty, ready reservists, members of the national guard, members of the commissioned corps of the national oceanic and atmospheric administration and the public health service, cadets and midshipmen of the four service academies, and members of the reserve officer training corps.

14."Side fund" means a fund or reserve, excluding individually issued annuities, that is part of or otherwise attached to a life insurance policy by rider, endorsement, or other mechanism which accumulates premium or deposits with interest or by other means. The term does not include:

a.Accumulated value or cash value or secondary guarantees provided by a universal life policy;

b.Cash values provided by a whole life policy which are subject to standard nonforfeiture law for life insurance; or

c.A premium deposit fund which:

(1)Contains only premiums paid in advance which accumulate at interest;

(2)Imposes no penalty for withdrawal;

(3)Does not permit funding beyond future required premiums;

(4)Is not marketed or intended as an investment; and (5)Does not carry a commission, either paid or calculated.

15."Specific appointment" means a prearranged appointment agreed upon by both parties and definite as to place and time.

16."United States armed forces" means all components of the army, navy, air force, marine corps, and coast guard.

17."VGLI" means the United States department of veterans affairs veterans' group life insurance program of post-separation insurance which allows servicemembers to convert their SGLI coverage to renewable term insurance.

N.D. Admin. Code 45-04-14-02 Scope

1.This chapter applies to the solicitation or sale of any life insurance or annuity product by an insurer or insurance producer to an active duty service member of the United States armed forces. This rule shall not apply to solicitations or sales involving;

a.Credit insurance;

b.Group life insurance or group annuities when there is no in-person, face-to-face solicitation of individuals by an insurance producer or when the contract or certificate does not include a side fund;

c.An application to the existing insurer that issued the existing policy or contract when a contractual change or a conversion privilege is being exercised or, when the existing policy or contract is being replaced by the same insurer pursuant to a program filed with and approved by the commissioner or, when a term conversion privilege is exercised among corporate affiliates;

d.Individual stand-alone health policies, including disability income policies;

e.Contracts offered by SGLI or VGLI, as authorized by 38 U.S.C. section 1965 et seq.;

f.Life insurance contracts offered through or by a nonprofit military association qualifying under section 501(c)(23) of the Internal Revenue Code and which are not underwritten by an insurer; or

g.Contracts used to fund:

(1)An employee pension or welfare benefit plan that is covered by the Employee Retirement and Income Security Act (ERISA);

(2)A plan described by sections 401(a), 401(k), 403(b), 408(k) or 408(p) of the Internal Revenue Code, as amended, if established or maintained by an employer;

(3)A government or church plan defined in section 414 of the Internal Revenue Code, a government or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax-exempt organization under section 457 of the Internal Revenue Code;

(4)A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor;

(5)Settlements of or assumptions of liabilities associated with personal injury litigation or any dispute or claim resolution process; or (6)Prearranged funeral contracts.

2.This chapter shall not abrogate the ability of nonprofit organizations or other organizations to educate members of the United States armed forces in accordance with department of defense DoD instruction 1344.07 - personal commercial solicitation on DoD installations or a successor directive.

3.General advertisements, direct mail, and internet marketing shall not constitute solicitation.

Telephone marketing shall not constitute solicitation provided the caller explicitly and conspicuously discloses that the product concerned is life insurance and makes no statements that avoid a clear and unequivocal statement that life insurance is the subject matter of the solicitation. Provided however, nothing in this chapter shall be construed to exempt an insurer or insurance producer from this rule in any in-person, face-to-face meeting established as a result of the solicitation exemptions identified in this subsection.

N.D. Admin. Code 45-04-14-03 Practices declared false, misleading, deceptive, or unfair on a military installation

1.The following acts or practices when committed on a military installation by an insurer or insurance producer with respect to the in-person, face-to-face solicitation of life insurance are declared to be false, misleading, deceptive, or unfair:

a.Knowingly soliciting the purchase of any life insurance product door to door or without first establishing a specific appointment for each meeting with the prospective purchaser;

b.Soliciting service members in a group or mass audience or in a captive audience where attendance is not voluntary;

c.Knowingly making appointments with or soliciting service members during their normally scheduled duty hours;

d.Making appointments with or soliciting service members in barracks, day rooms, unit areas, or transient personnel housing or other areas where the installation commander has prohibited solicitation;

e.Soliciting the sale of life insurance without first obtaining permission from the installation commander or the commander's designee;

f.Posting unauthorized bulletins, notices, or advertisements;

g.Failing to present DD form 2885, personal commercial solicitation evaluation, to service members solicited or encouraging service members solicited not to complete or submit a DD from 2885; or

h.Knowingly accepting an application for life insurance or issuing a policy of life insurance on the life of an enlisted member of the United States armed forces without first obtaining for the insurer's files a completed copy of any required form which confirms that the applicant has received counseling or fulfilled any other similar requirement for the sale of life insurance established by regulations, directives, or rules of the department of defense or any branch of the United States armed forces.

2.The following acts or practices when committed on a military installation by an insurer or insurance producer constitute corrupt practices, improper influences, or inducements and are declared to be false, misleading, deceptive, or unfair:

a.Using department of defense personnel, directly or indirectly, as a representative, or agent in any official or business capacity with or without compensation with respect to the solicitation or sale of life insurance to service members; or

b.Using an insurance producer to participate in any United States armed forces-sponsored education or orientation program.

N.D. Admin. Code 45-04-14-04 Practices declared false, misleading, deceptive, or unfair regardless of location

1.The following acts or practices by an insurer or insurance producer constitute corrupt practices, improper influences, or inducements and are declared to be false, misleading, deceptive, or unfair:

a.Submitting, processing or assisting in the submission or processing of any allotment form or similar device used by the United States armed forces to direct a service member's pay to a third party for the purchase of life insurance, including using or assisting in using a service member's "MyPay" account or other similar internet or electronic medium. This subdivision does not prohibit assisting a service member by providing insurer or premium information necessary to complete any allotment form;

b.Knowingly receiving funds from a service member for the payment of premium from a depository institution with which the service member has no formal banking relationship.

For purposes of this section, a formal banking relationship is established when the depository institution:

(1)Provides the service member a deposit agreement and periodic statements and makes the disclosures required by the Truth in Savings Act [12 U.S.C. 4301 et seq.] and the regulations adopted under it; and (2)Permits the service member to make deposits and withdrawals unrelated to the payment or processing of insurance premiums;

c.Employing any device or method or entering into any agreement whereby funds received from a service member by allotment for the payment of insurance premiums are identified on the service member's leave and earnings statement or equivalent or successor form as savings or checking and when the service member has no formal banking relationship as defined in subdivision b;

d.Entering into any agreement with a depository institution for the purpose of receiving funds from a service member whereby the depository institution, with or without compensation, agrees to accept direct deposits from a service member with whom it has no formal banking relationship;

e.Using department of defense personnel, directly or indirectly, as a representative or agent in any official or unofficial capacity with or without compensation with respect to the solicitation or sale of life insurance to service members who are junior in rank or grade, or to the family members of such personnel;

f.Offering or giving anything of value, directly or indirectly, to department of defense personnel to procure their assistance in encouraging, assisting or facilitating the solicitation or sale of life insurance to another service member;

g.Knowingly offering or giving anything of value to a service member with a pay grade of E-4 or below for attending any event where an application for life insurance is solicited; or

h.Advising a service member with a pay grade of E-4 or below to change his or her income tax withholding or state of legal residence for the sole purpose of increasing disposable income to purchase life insurance.

2.The following acts or practices by an insurer or insurance producer lead to confusion regarding source, sponsorship, approval, or affiliation and are declared to be false, misleading, deceptive, or unfair:

a.Making any representation or using any device, title, descriptive name, or identifier that has the tendency or capacity to confuse or mislead a service member into believing that the insurer, insurance producer, or product offered is affiliated, connected, or associated with, endorsed, sponsored, sanctioned, or recommended by the United States government, the United States armed forces, or any state or federal agency or government entity. Examples of prohibited insurance producer titles include "battalion insurance counselor", "unit insurance advisor", "servicemen's group life insurance conversion consultant", or "veteran's benefits counselor"; or

b.Soliciting the purchase of any life insurance product through the use of or in conjunction with any third party organization that promotes the welfare of or assists members of the United States armed forces in a manner that has the tendency or capacity to confuse or mislead a service member into believing that either the insurer, insurance producer, or insurance product is affiliated, connected or associated with, endorsed, sponsored, sanctioned, or recommended by the United States government or the United States armed forces.

3.This section does not prohibit a person from using a professional designation awarded after the successful completion of a course of instruction in the business of insurance by an accredited institution of higher learning. Such designations include chartered life underwriter (CLU), chartered financial consultant (ChFC), certified financial planner (CFP), master of science in financial services (MSFS), or masters of science financial planning (MS).

4.The following acts or practices by an insurer or insurance producer lead to confusion regarding premiums, costs, or investment returns and are declared to be false, misleading, deceptive, or unfair:

a.Using or describing the credited interest rate on a life insurance policy in a manner that implies that the credited interest rate is a net return on premium paid; or

b.Excluding individually issued annuities or misrepresenting the mortality costs of a life insurance product, including stating or implying that the product costs nothing or is free.

5.The following acts or practices by an insurer or insurance producer regarding SGLI, or VGLI are declared to be false, misleading, deceptive or unfair:

a.Making any representation regarding the availability, suitability, amount, cost, exclusions or limitations to coverage provided to a service member or dependents by SGLI, or VGLI, which is false, misleading, or deceptive;

b.Making any representation regarding conversion requirements, including the costs of coverage, or exclusions or limitations to coverage of SGLI or VGLI to private insurers which is false, misleading, or deceptive; or

c.Suggesting, recommending, or encouraging a service member to cancel or terminate the servicemember's SGLI policy or issuing a life insurance policy which replaces an existing SGLI policy unless the replacement shall take effect upon or after the service member's separation from the United States armed forces.

6.The following acts or practices by an insurer or insurance producer, or both, regarding disclosure are declared to be false, misleading, deceptive, or unfair:

a.Deploying, using, or contracting for any lead generating materials designed exclusively for use with service members that do not clearly and conspicuously disclose that the recipient will be contacted by an insurance producer, if that is the case, for the purpose of soliciting the purchase of life insurance;

b.Failing to disclose that a solicitation for the sale of life insurance will be made when establishing a specific appointment for an in-person, face-to-face meeting with a prospective purchaser;

c.Excluding individually issued annuities, failing to clearly and conspicuously disclose the fact that the product being sold is life insurance;

d.Failing to make, at the time of sale or offer to an individual known to be a service member, the written disclosures required by section 10 of the Military Personnel Financial Services Protection Act [Pub. L. 109-290; 120 Stat. 1317; 10 U.S.C. 992]; or

e.Excluding individually issued annuities, when the sale is conducted in-person face-to-face with an individual known to be a service member, failing to provide the applicant at the time the application is taken:

(1)An explanation of any free look period with instructions on how to cancel if a policy is issued; and (2)Either a copy of the application or a written disclosure. The copy of the application or the written disclosure shall clearly and concisely set out the type of life insurance, the death benefit applied for and its expected first-year cost. A basic illustration that meets the requirements of chapter 45-04-01.1 shall be deemed sufficient to meet this requirement for a written disclosure.

7.The following acts or practices by an insurer or insurance producer with respect to the sale of certain life insurance products are declared to be false, misleading, deceptive, or unfair:

a.Excluding individually issued annuities, recommending the purchase of any life insurance product which includes a side fund to a service member in pay grades E-4 and below unless the insurer has reasonable grounds for believing that the life insurance death benefit, standing alone, is suitable;

b.Offering for sale or selling a life insurance product which includes a side fund to a service member in pay grades E-4 and below who is currently enrolled in SGLI is presumed unsuitable unless, after the completion of a needs assessment, the insurer demonstrates that the applicant's SGLI death benefit, together with any other military survivor benefits, savings and investments, survivor income, and other life insurance are insufficient to meet the applicant's insurable needs for life insurance.

(1)"Insurable needs" are the risks associated with premature death taking into consideration the financial obligations and immediate and future cash needs of the applicant's estate, survivors, and dependents.

(2)"Other military survivor benefits" include the death gratuity, funeral reimbursement, transition assistance, survivor and dependents' educational assistance, dependency and indemnity compensation, TRICARE health care benefits, survivor housing benefits and allowances, federal income tax forgiveness, and social security survivor benefits.

c.Excluding individually issued annuities, offering for sale or selling any life insurance contract which includes a side fund:

(1)Unless interest credited accrues from the date of deposit to the date of withdrawal and permits withdrawals without limit or penalty;

(2)Unless the applicant has been provided with a schedule of effective rates of return based upon cash flows of the combined product. For this disclosure, the effective rate of return will consider all premiums and cash contributions made by the policyholder and all cash accumulations and cash surrender values available to the policyholder in addition to life insurance coverage. This schedule will be provided for at least each policy year from one to ten and for every fifth policy year thereafter ending at age one hundred, policy maturity, or final expiration; and (3)Which by default diverts or transfers funds accumulated the side fund to pay, reduce, or offset any premiums due.

d.Excluding individually issued annuities, offering for sale or selling any life insurance contract which after considering all policy benefits including endowment, return of premium, or persistency, does not comply with standard nonforfeiture law for life insurance; or

e.Selling any life insurance product to an individual known to be a service member which excludes coverage if the insured's death is related to war, declared or undeclared, or any act related to military service except for an accidental death coverage, such as a double indemnity provision, which may be excluded.

Article 45-05 Property and Casualty Insurance

Chapter 45-05-01 Self-Insurance Used as Security Required by the North Dakota Auto Accident Reparations Act

N.D. Admin. Code 45-05-01-01 Definitions

As used in this chapter:

1."Certificate of self-insurance" means the certificate issued by the commissioner authorizing a person to be a self-insurer.

2."Commissioner" means the insurance commissioner of North Dakota.

3."Person" or "persons" means any individual, partnership, corporation, or other legal entity who are owners of one or more motor vehicles operated in North Dakota by them or with their permission.

4."Security requirement" means the financial ability of a person to make payment of basic no-fault benefits of thirty thousand dollars per person per accident; motor vehicle liability insurance of twenty-five thousand dollars per person, fifty thousand dollars per accident, and twenty-five thousand dollars property damage; and uninsured motorist protection of twenty-five thousand dollars per person and fifty thousand dollars per accident.

5."Self-insurance" means any person who establishes a self-administered plan to meet the security requirements as required by North Dakota Century Code chapter 26.1-41, the North Dakota Auto Accident Reparations Act.

6."Self-insurer" means a person who has an approved plan of self-insurance and holds a certificate of self-insurance.

7."Undertaking" means a continuing agreement by any person, or persons, or their duly authorized officers and agents, to pay basic no-fault benefits and the liabilities covered by motor vehicle liability insurance and to perform all other obligations imposed by North Dakota Century Code chapter 26.1-41.

History

• History: Amended effective January 1, 1987.
• Law Implemented: NDCC 26.1-41-01

N.D. Admin. Code 45-05-01-02 Self-insurers - Restrictions

Only persons in whose name one or more motor vehicles are registered may qualify as self-insurers. Such persons must file satisfactory evidence that they are possessed and will be continued to be possessed of the ability to provide for the prompt and efficient administration of all claims, benefits, and obligations provided by North Dakota Century Code chapter 26.1-41 and that reliable financial arrangements, deposits, or commitments exist to meet their security requirement as required by North Dakota Century Code chapter 26.1-41 substantially equivalent to those afforded by a policy of insurance that would comply with that chapter.

N.D. Admin. Code 45-05-01-03 Evidence to be submitted by persons to obtain a certificate of self-insurance

The commissioner will not issue a certificate of self-insurance until the person attempting to qualify as a self-insurer shall have filed all of the following with the commissioner:

1.A completed application for a certificate of self-insurance (Appendix I).

2.An executed undertaking signed and sworn to by either the person or its president or secretary or other similar officers (Appendix II).

N.D. Admin. Code 45-05-01-04 Issuance of certificate of self-insurance

If a person files sufficient evidence to satisfy the commissioner that the person is qualified to be a self-insurer under North Dakota Century Code chapter 26.1-41, the commissioner will issue a certificate of self-insurance to that person. The certificate of self-insurance shall authorize any person to be a self-insurer under North Dakota Century Code chapter 26.1-41 until that certificate is canceled by the commissioner, or the commissioner's successors in office.

N.D. Admin. Code 45-05-01-05 Requirement of deposit

The commissioner may require persons seeking to qualify as self-insurers, or persons qualified as self-insurers in order to maintain their certificate of self-insurance, to make and maintain such deposits or bond as the commissioner may require to assure that those persons will meet their security requirements and all other obligations imposed by North Dakota Century Code chapter 26.1-41.

N.D. Admin. Code 45-05-01-06 Filing of annual statement

As a condition to the continuance of a certificate of self-insurance, every self-insurer shall transmit to the commissioner, not later than the first day of March in each year, a copy of its last annual statement showing consolidated report and profit and loss statement as certified by a certified public accountant or a reputable firm of public accountants. Any self-insurer who fails to comply with this provision will have its certificate of self-insurance canceled.

APPENDIX I

(Article 45-05) 600 East Boulevard Avenue, Dept. 401 Bismarck, ND 58505 Date Application Received APPLICATION FOR CERTIFICATE OF SELF-INSURANCE The undersigned, herein referred to as the applicant, being the owner of one or more motor vehicles, hereby makes application for a certificate of self-insurance. In connection with such application the applicant makes the following declarations, for the purpose of enabling the insurance commissioner to make a finding as to whether the applicant possesses the ability to handle and process claims and make payments of basic no-fault benefits and the liabilities covered by motor vehicle liability insurance as required by a self-insurer under North Dakota Century Code chapter 26.1-41, the North Dakota Auto Accident Reparations Act.

The applicant hereby agrees that if this application be approved, such approval shall be subject to making and maintaining with the commissioner such deposits or bonds as the commissioner may require.

It is further agreed and understood that the commissioner may cancel at any time the applicant's certificate of self-insurance.

Name of Applicant ________________ Nature of Business ________________ FEIN # _________________________________________________________ Address (Principal Office) __________________________________________ _______________________________________________________________

1.Are you now operating as a self-insurer? ____________________________ If so, how long? ________________________________________________

2.Have you a claim department for investigating and adjusting claims? _____________________________________________________________ If not, how are claims investigated and adjusted? _____________________

3.Have you set up a reserve fund for accident claims? ____________________ If so, (a) Under what caption does it appear on your financial statement? and (b) What basis is used for determining reserve requirements?

If not, how do you determine your outstanding liability?

4.Give the following information concerning accidents in which your vehicles were involved during the past three years.

Accident Years 20____20____20____ A.Number of accidents:

B.Number of claims:

PERSONAL INJURY

Settled by payment Settled without payment Open and pending PROPERTY DAMAGE Settled by payment Settled without payment Open and pending Number of accidents for which no claims were made C.Payments on claims:

D.Reserves for pending claims:

5.Are any automobile liability judgments open and unsatisfied? ______________ If so, how many? ___________ Total amount involved $__________________ Are any other judgments open and unsatisfied? ________________________ If so, how many? __________ Total amount involved $___________________

6.Is your company a self-insurer under any other phase of your business?

If so, give particulars _____________________________________________

7.Describe motor vehicles owned by applicant (in North Dakota) under the following headings:

Year of ManufactureMake VehicleTypeModelLicense Number SELF-INSURANCE USED AS SECURITY An Individual A Copartnership A Corporation FINANCIAL STATEMENT Submitted by __________________________________________________ With principal offices at ___________________________________________ Condition at close of business _________, 20 ASSETS DollarsCents (1)Cash(a)On hand$ (b)In banks$ (2)Accounts receivable(a)Current$ (b)Slow$ (c)Past due$ (3)Notes receivable(a)Due within 30 days$ (b)Due after 90 days$ (c)Past due$ (4)Inventories(a)Finished goods$ (b)Work in process$ (c)Other$ (5)Other current assets (attach list)$ (6)Fixed assetsLand$ Buildings Equipment Other Total$ (7)Other assets (attach list)$ Total Assets$ LIABILITIES (1)Accounts payable trade(a)Not past due$ (b)Past due$ (2)Notes payable trade(a)To banks$ (b)To others$ (3)Accounts payable others (attach list)$ (4)Notes payable others (attach list)$ (5)Other liabilities (attach list)$ (6)Other reserves (attach list)$ Total liabilities$ NET WORTH (7)Capital stock paid in(a)Common$ (b)Preferred$ (8)If individual (or other), amount of investment$ (9)Surplus, earned $ (Paid in or other)$ Total net worth$ Total liabilities and net worth$ A.Contingent liabilities (1)Liability on notes discounted, or sold, accounts pledged or sold, or as guarantor on contracts or other contingent liabilities.

Total contingent liabilities (attach schedule) $ In lieu of filling in the financial statement above, applicants may attach a copy of their last annual statement showing consolidated report and profit and loss statement as certified by certified public accountant or a reputable firm of public accountants. Said statement to be a part of this application.

Give following additional information:

A.Names and addresses of banks in which company has accounts.

B.Insurance on:

Inventories ________________ Plants ____________________ C.Attach statement of profit and loss to date of balance sheet.

D.When and where incorporated or established E.Are any assets pledged to secure notes, loans or mortgages payable?

F.If you have any notes or accounts receivable or payable from or to officers or stockholders, give details concerning method and terms of payment.

G.List names of officers or partners of company.

H.If foreign entity, or nonresident individual, list agent for service of process.

Witness our hands and seals this _______ day of ________, 20, at ______________________.

STATE OF

SS.

COUNTY OF

(Official Title) _____________ (Official Title) _____________ Before me, ______________________________, a notary public in and for said county and state, personally appeared ______________________________, respectively of the above-named (corporation), (partnership), or (proprietorship), and severally acknowledged the execution of the foregoing and swore to the contents thereof this ________________ day of ________________________, 20.

Notary Public My commission expires ___________________.

FOR DEPARTMENT USE ONLY

Financial ability approved Date Chief Examiner Application approvedDate

APPENDIX II

(Article 45-05)

UNDERTAKING

The undersigned, pursuant to North Dakota Century Code chapter 26.1-41, the North Dakota Auto Accident Reparations Act, being the owner of one or more motor vehicles as a condition to the issuance of a certificate of self-insurance, hereby executes this undertaking and agrees as follows:

1.The undersigned will respond in the payment of the minimum security requirements as provided under North Dakota Century Code chapter 26.1-41.

2.The undersigned will promptly and efficiently administer all claims made by injured persons, or their successors, and make payment of no-fault benefits to them resulting from accidental bodily injuries sustained in motor vehicles owned by the undersigned.

3.The undersigned agrees and understands that North Dakota Century Code chapter 26.1-41 imposes an absolute liability at law for payment of basic no-fault benefits as a result of being the owner of motor vehicles.

4.The undersigned agrees that the undersigned and any other person occupying the undersigned's motor vehicle or motor vehicles with the expressed or implied permission of the undersigned shall be insured against loss from the liability imposed by law for damages arising out of the operation of such motor vehicles within the United States of America, its territories or possessions, or Canada, with respect to each such motor vehicle as follows: twenty-five thousand dollars because of bodily injury to or death of one person in any one accident and subject to said limit for one person, fifty thousand dollars because of bodily injury to or death of two or more persons in any one accident, and ten thousand dollars because of injuries to or destruction of property of others in any one accident; and coverage for the protection of such persons who are legally entitled to recover damages from owners or operators of uninsured motor vehicles and hit and run motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom, in the amount of twenty-five thousand dollars because of bodily injury to or death of one person in any one accident and subject to said limit for one person, fifty thousand dollars because of bodily injury to or death of two or more persons in any one accident.

5.The undersigned will promptly and efficiently administer and make a good-faith disposal of all no-fault benefits, liability, and uninsured motorist claims.

6.The undersigned will perform all other obligations not specifically mentioned herein imposed on a basic no-fault insurer by North Dakota Century Code chapter 26.1-41.

7.That any breach of this undertaking, or of the conditions imposed by North Dakota Century Code chapter 26.1-41, will result in the cancellation of the undersigned's certificate of self-insurance.

8.This undertaking shall bind not only the undersigned, but the undersigned's successors, survivors, assigns, and legal representatives.

Witness our hands and seals this _____________ day of _______________, 20, at ______________________________________.

(Official Title)

(Official Title)

STATE OF

SS.

COUNTY OF

Before me, _____________________________________, a notary public in and for said county and state, personally appeared _________________________________, respectively, of the above-named (corporation), (partnership), or (proprietorship), and severally acknowledged the execution of the foregoing and swore to the contents thereof this ___________________________ day of ______________________, 20.

Notary Public My commission expires ___________________.

FOR DEPARTMENT USE ONLY

Undertaking approvedDat e Chief Examiner Undertaking approvedDat e

History

• History: Amended effective October 1, 1984.

Chapter 45-05-02 Crop Hail Insurance

N.D. Admin. Code 45-05-02-01 Policy term

N.D. Admin. Code 45-05-02-02 Cash discounts

N.D. Admin. Code 45-05-02-03 Dividends

1."Guaranteed dividends" may not be offered or provided with regard to any policy of crop/hail insurance. Dividends may be provided through a participating policy based upon the profit of the preceding year's experience for that line of insurance.

2.Payment of dividends may not be made at the time of or in connection with the solicitation of insurance for the new crop year, nor may payment of the dividend be contingent upon obtaining a policy through the same insurer or agent.

3.Any requests for assignment of dividends by lending institutions must be fully explained to the policy or certificate holder.

4.Only insurance companies or insurers may pay dividends and they shall be paid directly to the policy or certificate holder.

5.A dividend may not be used as a credit against the next year's premium.

History

• History: Effective May 1, 1984.
• General Authority: NDCC 28-32-02
• Law Implemented: NDCC 26.1-25

N.D. Admin. Code 45-05-02-04 Rate for similar crop varieties

Chapter 45-05-03 Automobile Warranty Insurance [Repealed]

N.D. Admin. Code 45-05-03 Automobile Warranty Insurance [Repealed]

CHAPTER 45-05-03

AUTOMOBILE WARRANTY INSURANCE [Repealed effective December 1, 2001]

Chapter 45-05-04 Property and Casualty Insurance Policyholder's Right to Loss and Claim Information

N.D. Admin. Code 45-05-04-01 Release of loss and claim information

Upon written and notarized authorization or request of the policyholder, every insurer licensed to sell property and casualty insurance as that is defined in North Dakota Century Code section 26.1-25-02, shall mail or deliver the policyholder's loss information to the policyholder or a designated, authorized agent or broker within twenty days of receipt of request by the insured, provided the request is:

1.Dated;

2.Signed by the individual policyholder; and

3.Noted as to whether information should be sent directly to the policyholder or a designated, authorized agent or broker.

N.D. Admin. Code 45-05-04-02 Scope of information required

The policyholder's loss and claim information shall include all data in the insurer's possession pertaining to the following:

1.All closed claims and incurred losses;

2.All open claims and paid amounts, excluding therefrom any information regarding established reserves on open claims; and

3.Notices of any occurrences including dates and descriptions.

N.D. Admin. Code 45-05-04-03 Fee

The insurer may charge a reasonable fee, not to exceed fifty cents per page of information, incurred in the production of claim and loss information to be paid by the policyholder. An insurer may apply to the insurance commissioner for approval of a higher fee for individual cases where warranted by the facts and circumstances.

N.D. Admin. Code 45-05-04-04 Record retention

For the three-year period immediately preceding the cancellation or nonrenewal of policyholder coverage, the following loss and claim information must be retained:

1.Date of loss or claim;

2.General nature of loss or claim; and

3.Amount paid.

This information must be retained by the insurer for a period of one year after cancellation or nonrenewal of policyholder coverage.

Chapter 45-05-05 Risk Retention and Purchasing Groups

N.D. Admin. Code 45-05-05-01 Definitions

As used in this chapter:

1."Authorized to transact insurance in this state" and "admitted" means an insurer authorized by a subsisting certificate of authority issued by the commissioner to transact insurance in this state.

2."Commissioner" means the insurance commissioner of North Dakota.

3."Federal Liability Risk Retention Act of 1986" means that federal legislation which authorized qualified individuals or organizations to form special association insurance captives or to join together to purchase liability insurance on a group basis enacted as 15 U.S.C. 3901, et seq.

4."Liability insurance coverage" means liability insurance policy or endorsement forms under which a liability risk retention group or liability insurer may undertake to indemnify a risk retention group or purchasing group member against liability arising from similar hazards or risk contingencies including, but not limited to, those liability insurance coverages commonly referred to in the industry as products-completed operations' liability, liquor liability, hospital professional liability, physicians', surgeons', and dentists' liability, lawyers' professional liability, elevator liability, storekeepers' liability, governmental entity general liability, public officials' errors and omissions, school board errors and omissions, directors' and officers' errors and omissions, oilfield general liability, day care general liability, outfitters' and guides' general liability, recreational area general liability, long haul truckers' liability, garage liability, pollution liability, etc.

5."Purchasing group" means any group meeting the requirements of a purchasing group contained in North Dakota Century Code chapter 26.1-46.

6."Purchasing group representative" means any individual, partnership, or corporation appointed by a purchasing group for the purpose of providing insurance to the members of the purchasing group or for the purpose of soliciting members for the purchasing group.

7."Risk retention group" means any group meeting the requirements of a risk retention group contained in North Dakota Century Code chapter 26.1-46.

8."Risk retention group representative" means any individual, partnership, or corporation appointed by a risk retention group for the purpose of providing insurance to the members of the risk retention group.

N.D. Admin. Code 45-05-05-02 Financial statements, reports, examinations

Any risk retention group doing business in this state shall submit to the commissioner all of the following:

1.By March first of each year, a copy of the group's financial statement submitted to its state of domicile, which must be certified by an independent public accountant and contain a statement of opinion on loss and loss adjustment expense reserves made by a member of the American academy of actuaries or a qualified loss reserve specialist according to criteria established by the national association of insurance commissioners.

2.A copy of each examination of the risk retention group as certified by the commissioner or public official conducting the examination.

3.A copy of any audit performed with respect to the risk retention group.

4.This section does not apply to risk retention groups doing business in this state which have fewer than twenty-six resident members or insureds.

N.D. Admin. Code 45-05-05-03 Risk retention groups not chartered in this state - Registration

1.Any risk retention group chartered in a state other than North Dakota and not holding a subsisting certificate of authority issued by the commissioner of the state of North Dakota, before offering liability insurance as a risk retention group on any risk located, resident or to be performed in this state, shall:

a.Register with the commissioner in the form and manner prescribed by the commissioner, a statement sworn to by the president or chief executive officer and the secretary of the risk retention group providing such information and documentation as the commissioner shall require pursuant to North Dakota Century Code section 26.1-46-03.

b.File with the commissioner a copy of the risk retention group's charter showing that it has been organized primarily for the purpose of assuming and spreading all, or any portion, of the liability exposure of the group members.

c.File with the commissioner a copy of the risk retention group's certificate of authority or license issued in its state of domicile authorizing it to transact business as an insurance company.

d.File with the commissioner a copy of the risk retention group's most recent annual financial statement which must be certified by an independent public accountant.

2.Any risk retention group chartered in a state other than North Dakota and not holding a subsisting certificate of authority issued by the commissioner of the state of North Dakota which has registered with the commissioner pursuant to section 3(d) of the Federal Liability Risk Retention Act of 1986 or North Dakota Century Code section 26.1-46-03 prior to October 1, 1989, shall comply with subsection 1 by registering in the form prescribed by subsection 1 on or before December 1, 1989.

3.The statement of registration appointing the commissioner as agent for the purpose of receiving legal documents and service of process, required in North Dakota Century Code sections 26.1-46-03 and 26.1-46-07 shall be irrevocable, and must be in substantially the same form as that shown in exhibit A.

N.D. Admin. Code 45-05-05-04 Liability purchasing group notice of intent

1.Any purchasing group which intends to do business in this state, before soliciting any member to insure through the group any liability risk located, resident or to be performed in this state, shall furnish notice of its intent to do business to the commissioner, in the form and manner prescribed by the commissioner, sworn to by the president, chief executive officer, secretary, partner, trustee, or such other officer or party who, under the organizational plan of the group, has authority to bind the group with that person's signature, on forms the commissioner designates and furnishes, providing such information and documentation as the commissioner shall require pursuant to North Dakota Century Code section 26.1-46-07.

2.Any purchasing group which has filed with the commissioner its notice of intent to do business pursuant to section 4(d)(1) of the Federal Liability Risk Retention Act of 1986 or North Dakota Century Code section 26.1-46-07 prior to October 1, 1989, shall comply with subsection 1 by registering in the form prescribed by subsection 1 on or before December 1, 1989.

N.D. Admin. Code 45-05-05-05 Updates and amendments

1.Any risk retention group or purchasing group authorized to do business in the state of North Dakota shall notify the commissioner in writing within thirty days of any changes in its operations, which result in the registration or notice then on file containing false, inaccurate, or misleading information, including the solicitation or writing of any liability insurance coverage in addition to that for which it is registered, so as to correct such false, inaccurate, or misleading information. The commissioner may request such additional information and documentation pertaining to such notice as the commissioner deems necessary provided, however, no such request shall delay the effective date of the notice.

2.Any risk retention group or purchasing group authorized to do business in the state of North Dakota, on or before March first of each year, by sworn affidavit, shall certify to the commissioner as to the continued accuracy of the information on file or as amended by notice filed pursuant to subsection 1, and as to its continued intent to be registered and do business in this state.

N.D. Admin. Code 45-05-05-06 Risk retention group representatives and purchasing group representatives

1.License requirement. No person, resident or nonresident in this state, may act as or hold out in this state to be a risk retention group representative for a risk retention group, or a purchasing group representative for a purchasing group which solicits members for the

purpose of selling liability insurance coverage, purchases liability insurance coverage for group members located within this state or otherwise does business in this state unless then licensed as such under these rules.

2.Any person, resident or nonresident in this state, acting as or holding out in this state to be a risk retention group representative or a purchasing group representative must hold a current North Dakota insurance producer license, in the lines of insurance represented, and must be appointed by the risk retention group or purchasing group represented in North Dakota.

3.Any person acting as a risk retention group representative or purchasing group representative shall otherwise be subject to and comply with the provisions of North Dakota Century Code

chapter 26.1-46 as they pertain to insurance producers.

4.Exceptions to license requirement. Risk retention group representative and purchasing group representative for the purpose of licensing does not include:

a.Any officer, director, owner, partner, trustee, or full-time salaried employee of a risk retention group or purchasing group; and

b.Any telemarketing or mass mailing organization or any radio or television station or network or, newspaper or magazine publisher or distributor which makes statements or carries advertisements for a risk retention group or purchasing group to the extent only general, nonrisk specific information is given concerning the Federal Liability Risk Retention Act, North Dakota Century Code chapter 26.1-46, and the risk retention group or purchasing group and no application for insurance is received, no underwriting information is taken, and no insurance rate or premium is quoted or collected.

5.Licensing of partnership or corporation.

a.A partnership or corporation may be licensed as a risk retention group representative or purchasing group representative. Each general partner and each other individual authorized to act for the partnership and each individual authorized to act for the corporation must be named in the license or registered with the commissioner and shall qualify as through an individual licensee; and

b.The licensee shall promptly notify the commissioner of any changes among its members, directors, officers, and other individuals designated in or registered as to the license.

History

• History: Effective October 1, 1989; amended effective April 1, 2010.

N.D. Admin. Code 45-05-05-07 Group location

For the purposes of this chapter, a purchasing group must be deemed located in this state if any member of said group is located or resident in this state.

N.D. Admin. Code 45-05-05-08 Insurance purchase

Any purchasing group duly authorized to do business in the state of North Dakota may purchase insurance only from the following sources:

1.A risk retention group authorized to do business in this state.

2.An admitted insurance carrier.

3.An authorized surplus lines carrier listed on the commissioner's white list, only if the purchase is effected through a licensed surplus lines producer who has been appointed by the purchasing group.

History

• History: Effective October 1, 1989; amended effective April 1, 2010.

N.D. Admin. Code 45-05-05-09 Risk retention group representative or purchasing group representative memorandum

Any risk retention group representative or purchasing group representative effecting insurance on any risk located, resident or to be performed within or properly allocated to this state with an unauthorized risk retention group or unauthorized insurer, pursuant to the Federal Liability Risk Retention Act of 1986 and this chapter, shall file with the commissioner a summary memorandum, in a form the commissioner prescribes or accepts, setting forth the facts concerning the placement of such insurance so as to identify the coverage and the tax payable to the state relative thereto pursuant to North Dakota Century Code chapter 26.1-44. The risk retention group representative or purchasing group representative shall file this memorandum with the commissioner on or before April first of each year in which the premium or consideration is due. Any risk retention group representative or purchasing group representative may contract with the unauthorized risk retention group or unauthorized insurer or with a purchasing group for which it acts to provide for the unauthorized risk retention group, the unauthorized insurer, or the purchasing group filing this memorandum on behalf of the risk retention group representative or purchasing group representative in accordance with this

section, provided the risk retention group representative or purchasing group representative notifies the commissioner of such delegation and files with the commissioner a copy of the contract authorizing such alternative method of filing prior to the effective date of such delegation.

N.D. Admin. Code 45-05-05-10 Direct production

1.Any risk retention group required to register in this state pursuant to section 3(d) of the Federal Liability Risk Retention Act of 1986 or section 45-05-05-02 which utilizes risk retention representatives in soliciting, negotiating, procuring, or providing liability insurance for its members located or resident within this state shall do so only through risk retention group representatives licensed in this state pursuant to North Dakota Century Code chapters 26.1-26, 26.1-44, and 26.1-46 and this chapter provided, however, nothing herein may be construed to prevent such a risk retention group from soliciting, negotiating, procuring, or providing liability insurance for its members located or resident within this state directly through its officers, directors, owners, partners, trustees, or full-time salaried employees not so licensed in this state.

2.Any purchasing group required to file notice of its intent to do business in this state pursuant to section 4(d)(1) of the Federal Liability Risk Retention Act of 1986, North Dakota Century Code section 26.1-46-07, or section 45-05-05-03 which utilizes purchasing group representatives in soliciting, negotiating, procuring, or providing liability insurance for its members located or resident within this state shall do so only through purchasing group representatives licensed in this state pursuant to North Dakota Century Code chapters 26.1-26, 26.1-44, and 26.1-46, and this chapter.

N.D. Admin. Code 45-05-05-11 Solicitation by nonresident

Repealed effective January 1, 2008.

N.D. Admin. Code 45-05-05-12 Severability

If any section of this chapter or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of this chapter and the application of such section to other persons and circumstances shall not be affected thereby.

INSURANCE DEPARTMENT

APPLICATION FOR REGISTRATION AS A PURCHASING GROUP

We, the undersigned President (or Chief Executive Officer) and Secretary, on behalf of ____________________________________, make (Name of Purchasing Group) application for registration in North Dakota as a Purchasing Group ("Group") and do hereby affirm that:

1.The Group is domiciled in the State of _____________________.

2.The Group's principal place of business (street and mailing address) is:

3.The Group is composed of members whose business or activities are similar or related with respect to the liability to which members are exposed by virtue of any related, similar, or common business, trade, product, services, premises or operations (Give general description of business or activities engaged in by Group members):

4.The Group has as one of its purposes the purchase of liability insurance on a group basis.

5.The Group purchases such liability insurance only for its group members and only to cover their similar or related liability exposure, as described in item (3) above.

6.The Group intends to purchase the following lines and classifications of liability insurance:

7.The Group intends to purchase the liability insurance described in item (6) above from the following insurance company or companies (Give full name of company and state of domicile):

8.The name and address of the insurance producer licensed by the insurance commissioner through whom purchases in North Dakota will be effected are as follows:

9.The Group has designated the insurance commissioner of North Dakota to be its agent solely for the purpose of receiving service of legal documents.

10.The Group's federal identification number is: _________________ We do hereby swear and affirm that the aforementioned statements and information are true and correct.

President or Chief Executive Officer Secretary Sworn to before me this _________ day of ________________, 20, _____________________________ Notary Public State of ______________________ My Commission Expires: ________ INSURANCE DEPARTMENT APPLICATION FOR REGISTRATION AS A RISK RETENTION GROUP (FOREIGN)

We, the undersigned President (or Chief Executive Officer) and Secretary, on behalf of ______________________________________________________________________ ________________________________________________________________________________ (Name must include the phrase "Risk Retention Group") located at ________________________________________________________________________ make application for registration in North Dakota as a Risk Retention Group ("Group") and do hereby affirm that:

1.The primary activity of this Group consists of assuming and spreading all, or any portion, of the liability exposure of its Group members.

2.The Group is organized for the primary purpose of conducting the activity described under (1) above.

3.The Group is chartered and licensed as a liability insurance company under the laws of the State of ______________________, and is authorized to engage in the business of insurance under the laws of its chartering state.

4.The Group does not exclude any person from its membership in the Group solely to provide for members of the Group a competitive advantage over such a person.

5.Ownership of the Group consists of one or the other of the following (check one): ____________ the owners of the Group are only persons who comprise the membership of the Group and who are provided insurance by the Group; ____________ the sole owner of the Group is (Give name and address of organization) an organization whose members only comprise the membership of the Group, and whose owners are only persons who comprise the membership of the Group and who are provided insurance by the Group.

6.The Group is composed of members who are engaged in the following described business or activities, which are similar or related with respect to the liability to which such members are exposed by virtue of related, similar, or common business, trade, produce, services, premises or operations (Give general description of business or activities engaged in by Group members):

7.The activities of the Group do not include the provision of insurance other than: a.liability insurance for assuming and spreading all or any portion of the similar or related liability exposure of its group members; and b.reinsurance with respect to the similar or related liability exposure of another risk retention group (or a member of such other risk retention group) engaged in businesses or activities which qualify such other risk retention group (or member) under item (6) above for membership in this Group.

8.The Group will comply with the unfair claim settlement practices laws of North Dakota.

9.The Group will pay, on a nondiscriminatory basis, applicable premium and other taxes which are levied on admitted insurers under the laws of North Dakota.

10.The Group will participate, on a nondiscriminatory basis, in any mechanism established or authorized under the laws of North Dakota for the equitable apportionment among insurers of liability insurance losses and expenses incurred on policies written through such mechanism.

11.The Group has designated the Insurance Commissioner of North Dakota to be its agent solely for the purpose of receiving service of legal documents or process.

12.The Group will submit to examination by the Insurance Commissioner to determine the Group's financial condition, if: a.the Insurance Commissioner of the Group's chartering state has not begun or has refused to initiate an examination of the Group; and b.any such examination by the Insurance Commissioner is coordinated so as to avoid unjustified duplication and unjustified repetition.

13.The Group will comply with a lawful order issued in a delinquency proceeding commenced by the Insurance Commissioner upon a finding of financial impairment, or in a voluntary dissolution proceeding.

14.The Group will comply with the laws of North Dakota concerning deceptive, false or fraudulent acts or practices, including any injunctions regarding such conduct obtained from a court of competent jurisdiction.

15.The Group will comply with an injunction issued by a court of competent jurisdiction upon petition by the Insurance Commissioner alleging that the Group is in hazardous financial condition or is financially impaired.

16.The Group will provide the following notice, in 10-point type, in any insurance policy issued by the Group:

"NOTICE

This policy is issued by your risk retention group. Your risk retention group may not be subject to all of the insurance laws and regulations of your state. State insurance insolvency guaranty funds are not available for your risk retention group."

17.The Group has submitted to the Insurance Commissioner, as part of this application and before it has offered any insurance in North Dakota, a copy of the plan of operation or feasibility study which it has filed with the Insurance Commissioner of its chartering state. The plan or study submitted herewith discloses the name of the state in which the Group is chartered, as well as the Group's principal place of business, and such plan or study further includes the coverages, deductibles, coverage limits, rates, and rating classification systems for each line of insurance the Group intends to offer. The Group will promptly submit to the Insurance Commissioner any revisions of such plan or study to reflect any changes therein including, but without limitation, additional lines of liability insurance which the Group intends to offer, and any change in the designation of the Group's chartering state.

18.The Group has submitted to the Insurance Commissioner, as part of this application, a copy of the Group's annual financial statement submitted to the state in which it is chartered as an insurance company. The annual financial statement has been certified by an independent public accountant and contains a statement of opinion on loss and loss adjustment expense reserves made by a member of the American Academy of Actuaries or a qualified loss reserve specialist. Hereafter, the Group will submit its annual financial statement to the Insurance Commissioner by March 1 of each year.

19.The Group will not solicit or sell insurance to any person in North Dakota who is not eligible for membership in the Group.

20.The Group will not solicit or sell insurance in North Dakota, or otherwise operate in this state, if the Group is financially impaired or is in a hazardous financial condition.

21.The name and address of the insurance producer(s) licensed by the Insurance Commissioner through whom purchases in North Dakota will be effected are as follows:

22.The Group's federal identification number is ________.

We do hereby swear and affirm that the aforementioned statements and information are true and correct.

President or Chief Executive Officer Secretary Sworn to before me this day of _____________________, 20. ______________________________ Notary Public, State of:

My Commission Expires:

EXHIBIT A

DEPARTMENT OF INSURANCE

REGISTRATION OF APPOINTMENT OF AGENT FOR SERVICE OF PROCESS

KNOW ALL MEN BY THESE PRESENTS:

The (name of group) , a [risk retention] [purchasing] group authorized to transact liability insurance under the Federal Liability Risk Retention Act of 1986 and Chapter 26.1-46 of the North Dakota Century Code, domiciled in the State of _____________ and whose principal place of business is located at (address)____________ (city) ________ (state) ______ (zip code)_______ does hereby constitute, designate and appoint the Insurance Commissioner of the State of North Dakota, and the commissioner's successors in office, as its true and lawful agent to receive legal documents and service of process issued against said [risk retention] [purchasing] group in the State of North Dakota.

This appointment shall be irrevocable, shall be binding upon the group, and its successors in interest, as to the assets and liabilities of the group and shall remain in full force and effect for so long as there is in force any contract or certificate insuring any member [of the risk retention group] [of the purchasing group] in the State of North Dakota or any obligation of the group arising out of its transactions in the State of North Dakota.

The [risk retention] [purchasing] group hereby designates the following person as the person to whom legal documents and process against it served shall be forwarded by the Insurance Commissioner:

(name),(title)

(company or group name),(street address)

(city),(state)(zip code)

IN WITNESS WHEREOF, the said [risk retention] [purchasing] group has caused this appointment to be duly executed this ____ day of ________, 20.

(name of group)

BY:

(SEAL) [President, Chief Executive Officer, Secretary, Partner, Trustee, or title of the officer or party who under the organization of the group has

authority to bind the group with that person's signature]

State of _______________) )ss County of ______________)

The foregoing instrument was acknowledged and executed before me this _____ day of _____________, 20. ______________________________ NOTARY PUBLIC (SEAL)My Commission Expires: _________

History

• History: Effective October 1, 1989; amended effective January 1, 2008.

Chapter 45-05-06 Risk Modification Plan Regulation

N.D. Admin. Code 45-05-06-01 Scope

This chapter applies to all commercial lines of insurance (including farmowners) except those excepted risks described in North Dakota Century Code section 26.1-30.1-01 and for plans such as Automobile Insurance Plan Services Office (AIPSO), Market Assistance Plan (MAP), Joint Underwriting Association (JUA), North Dakota Insurance Reserve Fund (NDIRF), and state property insurance plan (FAIR plans) are exempt from this regulation.

N.D. Admin. Code 45-05-06-02 Definitions

1."Experience rating plan" means any rating plan or system whereby a manual rate for insurance is adjusted or modified based on the past loss experience of the insured.

2."Manual rate" means a rate, designed to apply on a generic basis to similar risks within the same class, filed by an insurer or rating organization with the department of insurance and made part of the rating manual used by an insurer or rating organization.

3."Rate modification plan" means a rating plan or procedure which provides a listing of various risk characteristics or conditions and a range of modification factors which may be applied for these characteristics or conditions to the manual rate of a particular insurance risk. The effect of the modification factor is to increase (debit) or decrease (credit) the manual rate. Rate modification plans include, but are not limited to, plans commonly called schedule rating plans and individual risk premium modification plans.

N.D. Admin. Code 45-05-06-03 Rate modification plans

Rate modification plans, justified according to the standards herein, are allowed by the insurance code. However, the commissioner has determined that the use of unjustified rate modification plans is not reasonable, is not objective, and is unfairly discriminatory. Therefore, the use of unjustified rate modification plans in rating of commercial property and casualty insurance risks located in North Dakota is prohibited.

The following elements must be considered in determining whether or not a rate modification plan, or its use, is justified:

1.Rate modification plans must be used to acknowledge variance in risk characteristics and not merely to gain competitive advantage or for any other purpose.

2.Rate modification plans must be based only on rating characteristics not already reflected in the manual rates. The plans must clearly indicate the objective criteria to be used.

3.Individual underwriting files must contain the specific criteria and document the particular circumstances of the risk that support each debit or credit. This documentation must exist in the individually rated risk file to enable the commissioner to verify compliance with this

chapter. Documentation may include, but is not limited to, inspection reports, photographs, agent observations and findings, insured's formal safety plans, premises evaluations, and narrative reports covering other aspects of the risk. Intentional or willful misclassification of a risk constitutes a modification without justification.

4.Any rate modification plan designed to be applied simultaneously to property, liability, or vehicle coverage must contain reasonable factors that give appropriate recognition to the distinct exposures involved in such coverages.

5.Once a company has filed a rate modification plan, its use is mandatory. The plan must be applied uniformly in a nondiscriminatory manner for all eligible classes of risk.

6.The application of any rate modification plan may not result in debits or credits that exceed twenty-five percent. Modifications generated by experience rating plans or based upon company expense experience are not subject to this limitation.

7.Once a rate modification plan has been applied to a risk and a credit or debit established, no change in the established credit or debit can be made without appropriate justification and documentation.

8.Any rate modification plan must provide that when a risk is rated below average (debited) an insured or applicant, upon request, will be advised by the insurer of the factors which resulted in the adverse rating so that the insured or applicant will be fairly apprised of any corrective action that might be appropriate with respect to the insurance risk.

N.D. Admin. Code 45-05-06-04 Experience rating plans

Exposure, premium, and loss figures used in the calculation of experience rating plans must be verifiable and justifiable.

N.D. Admin. Code 45-05-06-05 Reporting of pertinent information

Upon the request of the commissioner, an insurer authorized to write any insurance in this state to which this chapter applies shall submit to the commissioner the number of policies by line issued with rate modification as defined in subsection 3 of section 45-05-07-02 and the proportion of policies so issued to all policies written by line by the company. A rating organization may file the data on behalf of the insurer.

N.D. Admin. Code 45-05-06-06 Rate compliance examinations

To determine compliance with this chapter the commissioner may order a rate compliance examination be made of any insurer to which this chapter applies. Any examination must be conducted pursuant to North Dakota Century Code chapter 26.1-03.

N.D. Admin. Code 45-05-06-07 Filing of rate modification plans

Within one hundred eighty days of October 1, 1989, each insurer to which this chapter applies shall refile its rate modification plans in accordance with the provisions of this chapter. At the end of the one hundred eighty-day period all prior rate modification plans filed with the department of insurance will be considered obsolete. Subsequent changes in any insurer's rate modification plan will not be considered to be filed with the commissioner unless the complete plan, as modified, is submitted.

N.D. Admin. Code 45-05-06-08 Separability

If any provision of this chapter or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the chapter and the application of such provision shall not be affected thereby.

N.D. Admin. Code 45-05-06-09 Dissemination

Each insurer or rating organization is instructed to distribute a copy of this chapter to all personnel engaged in activities requiring knowledge of this chapter, and to instruct them as to its scope and operation.

Chapter 45-05-07 Advisory Organization Exemption - Highly Protected Risk Market

N.D. Admin. Code 45-05-07-01 Definition - Highly protected risk market

"Highly protected risk market" consists of commercial property coverage written specifically for large, complex, and multistate commercial and industrial properties. Further, the "highly protected risk market" is characterized by large size, high value, diversity and loss control; and with policyholders who are sophisticated commercial insureds employing professional risk managers and insurance appraisers on staff.

N.D. Admin. Code 45-05-07-02 Exemption

The market commonly known as "highly protected risk market" is exempt from the filing restrictions limiting filings to prospective loss cost filings as found in North Dakota Century Code chapter 26.1-25 and an advisory organization may file fully developed rates on behalf of specific companies for this market.

N.D. Admin. Code 45-05-07-03 Definition - North Dakota automobile insurance plan

The North Dakota automobile insurance plan is an association of all insurance companies licensed to write automobile insurance in North Dakota and is the residual market mechanism for automobile liability insurance in North Dakota, through which applicants who are in good faith entitled to but unable to procure such insurance through ordinary means may obtain such insurance. This plan is managed and operated by the automobile insurance plan services office.

N.D. Admin. Code 45-05-07-04 Exemption

The automobile insurance plan services office is exempt from the filing restrictions limiting filings to prospective loss cost filings as found in North Dakota Century Code chapter 26.1-25 and as an advisory organization may file fully developed rates on behalf of the North Dakota automobile insurance plan.

Chapter 45-05-08 Binding Intercompany Arbitration [Repealed]

N.D. Admin. Code 45-05-08 Binding Intercompany Arbitration [Repealed]

CHAPTER 45-05-08

BINDING INTERCOMPANY ARBITRATION [Repealed effective January 1, 2006]

Chapter 45-05-09 Defense Expenses within the Limit of Liability Provisions

N.D. Admin. Code 45-05-09-01 Defense expenses within limit of liability provisions - Exceptions

1.No admitted insurer shall issue or renew a policy of liability insurance in this state that includes defense expenses within the limit of liability unless the policy's minimum limit per occurrence or the aggregate liability limit for all liability risks and coverages under the policy is at least:

a.One million dollars for primary coverages; and

b.One hundred thousand dollars for secondary coverages.

2.No admitted insurer shall issue or renew a policy of liability insurance in this state that includes defense expense allowance provision unless the policy's minimum limit per occurrence or the aggregate liability limit for all liability risks and coverages under the policy is at least:

a.Three hundred thousand dollars for damages and one hundred thousand dollars for defense for primary coverages except medical malpractice and legal malpractice;

(1)Three hundred thousand dollars for damages and fifty thousand dollars for defense for primary coverages for legal malpractice only;

(2)One million dollars for defense for primary coverages for medical malpractice; and

b.One hundred thousand dollars for either damages or defense for secondary coverages.

"Primary coverages" means the main or intended coverage of the policy.

"Secondary coverages" means coverage which is in addition to the main policy by endorsement, rider, or additional coverages.

History

• History: Effective April 1, 2015; amended effective October 1, 2019.

N.D. Admin. Code 45-05-09-02 Policies within which defense expenses within limit of liability permitted

Defense expenses within the limit of liability provisions are allowed only within the following types of policies or coverages within a policy with the limits of liability as required in section 45-05-09-01:

1.Cyber liability;

2.Fiduciary liability;

3.Directors and officers liability;

4.Errors and omissions liability;

5.Employer practices liability;

6.Medical malpractice liability;

7.Pollution liability;

8.Liquor liability;

9.Nuclear liability;

10.Fidelity bond;

11.Umbrella and excess policies; and

12.Other policies permitted within the discretion of the insurance commissioner.

History

• History: Effective April 1, 2015.

N.D. Admin. Code 45-05-09-03 Notice required

The fact that defense expenses are within the limit of liability or defense costs are limited by an allowance must be disclosed on the declaration page in at least twelve-point bold print.

History

• History: Effective April 1, 2015; amended effective October 1, 2019.

N.D. Admin. Code 45-05-09-04 Acknowledgment

The applicant or insured must sign a disclosure form as part of the application or renewal process wherein the applicant or insured acknowledges that the subject policy has limits of liability which may be reduced or completely eliminated by payments for legal defense costs or claims expenses. Only one signed disclosure is required regardless of whether the disclosure is attached to an application or a renewal.

History

• History: Effective April 1, 2015; amended effective October 1, 2019; April 1, 2022.

N.D. Admin. Code 45-05-09-05 Defense-only policies excepted

Defense-only policies are excepted from the requirements of chapter 45-05-09. A defense-only policy is a policy which is purchased solely to provide a legal defense and is not meant to provide indemnification or to be a source of payment for damages to a third party.

History

• History: Effective April 1, 2015.

Article 45-06 Accident and Health Insurance

Chapter 45-06-01 Medicare Supplement Insurance Minimum Standards

N.D. Admin. Code 45-06-01 Medicare Supplement Insurance Minimum Standards

ARTICLE 45-06

ACCIDENT AND HEALTH INSURANCE

Chapter 45-06-01Medicare Supplement Insurance Minimum Standards [Superseded] 45-06-01.1Medicare Supplement Insurance Minimum Standards 45-06-02Intercarrier Health Insurance Pool 45-06-02.1Comprehensive Health Association of North Dakota 45-06-03Standard Health Insurance Proof of Loss Forms [Superseded] 45-06-03.1Standardized Health Claim Form Model Regulation 45-06-04Advertising Rules 45-06-05Long-Term Care Insurance Model Regulation 45-06-05.1Long-Term Care Insurance Model Regulation 45-06-06North Dakota Small Employer Health Reinsurance Program [Repealed] 45-06-06.1Regulation to Implement The Small Employer Health Insurance Availability Act 45-06-07Model Regulation to Implement Rules Regarding Contracts and Services of Health Maintenance Organizations 45-06-08Loss Ratios 45-06-09Group Health Insurance Purchasing Cooperatives 45-06-10Utilization Review 45-06-11Regulation on the Crediting of Qualifying Previous Coverage Toward the Reduction of Preexisting Condition Exclusion Periods 45-06-12Regulation to Implement North Dakota Century Code Chapter 26.1-36.4, Relating to Hospital and Medical Insurance 45-06-13Provider-Sponsored Organizations 45-06-14Multiple Employer Welfare Arrangements 45-06-15Short-Term Care Insurance 45-06-16Short-Term Limited-Duration Insurance 45-06-17Self-Insurance Health Plans

CHAPTER 45-06-01

MEDICARE SUPPLEMENT INSURANCE MINIMUM STANDARDS [Superseded by Chapter 45-06-01.1]

Chapter 45-06-01.1 Medicare Supplement Insurance Minimum Standards

N.D. Admin. Code 45-06-01.1 Medicare Supplement Insurance Minimum Standards

CHAPTER 45-06-01.1

MEDICARE SUPPLEMENT INSURANCE MINIMUM STANDARDS

Section 45-06-01.1-01Applicability and Scope 45-06-01.1-02Definitions 45-06-01.1-03Policy Definitions and Terms 45-06-01.1-04Policy Provisions 45-06-01.1-05Minimum Benefit Standards for Prestandardized Medicare Supplement Benefit Plan Policies or Certificates Issued for Delivery Prior to January 1, 1992 45-06-01.1-06Benefit Standards for 1990 Standardized Medicare Supplement Benefit Plan Policies or Certificates Issued for Delivery on or After January 1, 1992, and With an Effective Date for Coverage Prior to June 1, 2010 45-06-01.1-06.1Benefit Standards for 2010 Standardized Medicare Supplement Benefit Plan Policies or Certificates Issued for Delivery With an Effective Date for Coverage on or After June 1, 2010 45-06-01.1-07Standard Medicare Supplement Benefit Plans for 1990 Standardized Medicare Supplement Benefit Plan Policies or Certificates Issued for Delivery on or After January 1, 1992, and With an Effective Date for Coverage Prior to June 1, 2010 45-06-01.1-07.1Standard Medicare Supplement Benefit Plans for 2010 Standardized Medicare Supplement Benefit Plan Policies or Certificates Issued for Delivery With an Effective Date for Coverage on or After June 1, 2010 45-06-01.1-07.2Standard Medicare Supplement Benefit Plans for 2020 Standardized Medicare Supplement Benefit Plan Policies or Certificates Issued for Delivery to Individuals Newly Eligible for Medicare on or After January 1, 2020 45-06-01.1-08Medicare Select Policies and Certificates 45-06-01.1-09Open Enrollment 45-06-01.1-09.1Guaranteed Issue for Eligible Persons 45-06-01.1-10Standards for Claims Payment 45-06-01.1-11Loss Ratio Standards and Refund or Credit of Premium 45-06-01.1-12Filing and Approval of Policies and Certificates and Premium Rates 45-06-01.1-13Permitted Compensation Arrangements 45-06-01.1-14Required Disclosure Provisions 45-06-01.1-15Requirements for Application Forms and Replacement Coverage 45-06-01.1-16Filing Requirements for Advertising 45-06-01.1-17Standards for Marketing 45-06-01.1-18Appropriateness of Recommended Purchase and Excessive Insurance 45-06-01.1-19Reporting of Multiple Policies 45-06-01.1-20Prohibition Against Preexisting Conditions, Waiting Periods, Elimination Periods, and Probationary Periods in Replacement Policies or Certificates 45-06-01.1-20.1Prohibition Against Use of Genetic Information and Requests for Genetic Testing 45-06-01.1-21Separability 45-06-01.1-22Effective Date [Repealed] 45-06-01.1-01. Applicability and scope.

1.Except as otherwise specifically provided in sections 45-06-01.1-05, 45-06-01.1-10, 45-06-01.1-11, 45-06-01.1-14, and 45-06-01.1-19, this chapter applies to:

a.All Medicare supplement policies delivered or issued for delivery in this state on or after the effective date of this rule; and

b.All certificates issued under group Medicare supplement policies which certificates have been delivered or issued for delivery in this state.

2.This chapter does not apply to a policy or contract of one or more employers or labor organizations, or of the trustees of a fund established by one or more employers or labor organizations, or combination thereof, for employees or former employees, or a combination thereof, or for members or former members, or a combination thereof, of the labor organizations.

History: Effective January 1, 1992; amended effective July 8, 1997. 45-06-01.1-02. Definitions.

For purposes of this chapter:

1."1990 standardized Medicare supplement benefit plan", "1990 standardized benefit plan", or "1990 plan" means a group or individual policy of Medicare supplement insurance issued on or after January 1, 1992, and with an effective date for coverage prior to June 1, 2010, and includes Medicare supplement insurance policies and certificates renewed on or after that date which are not replaced by the issuer at the request of the insured.

2."2010 standardized Medicare supplement benefit plan", "2010 standardized benefit plan" or "2010 plan" means a group or individual policy of Medicare supplement insurance issued with an effective date for coverage on or after June 1, 2010.

3."Applicant" means:

a.In the case of an individual Medicare supplement policy, the person who seeks to contract for insurance benefits; and

b.In the case of a group Medicare supplement policy, the proposed certificate holder.

4."Bankruptcy" means when a Medicare advantage organization that is not an issuer has filed, or has had filed against it, a petition for declaration of bankruptcy and has ceased doing business in the state.

5."Certificate" means any certificate delivered or issued for delivery in this state under a group Medicare supplement policy.

6."Certificate form" means the form on which the certificate is delivered or issued for delivery by the issuer.

7."Continuous period of creditable coverage" means the period during which an individual was covered by creditable coverage, if during the period of the coverage the individual had no breaks in coverage greater than sixty-three days. 8.a."Creditable coverage" means, with respect to an individual, coverage of the individual provided under any of the following:

(1)A group health plan;

(2)Health insurance coverage;

(3)Part A or part B of title XVIII of the Social Security Act (Medicare);

(4)Title XIX of the Social Security Act other than coverage consisting solely of benefits under section 1928;

(5)10 U.S.C. 55 (CHAMPUS);

(6)A medical care program of the Indian health service or of a tribal organization;

(7)A state health benefits risk pool;

(8)A health plan offered under 5 U.S.C. 89 (federal employees health benefits program);

(9)A public health plan as defined in federal regulations; and (10)A health benefit plan under section 5(e) of the Peace Corps Act (22 U.S.C. 2504(e)).

b."Creditable coverage" does not include one or more, or any combination of, the following:

(1)Coverage only for accident or disability income insurance, or any combination thereof;

(2)Coverage issued as a supplement to liability insurance;

(3)Liability insurance, including general liability insurance and automobile liability insurance;

(4)Workers' compensation or similar insurance;

(5)Automobile medical payment insurance;

(6)Credit-only insurance;

(7)Coverage for onsite medical clinics; and (8)Other similar insurance coverage, specified in federal regulations under which benefits for medical care are secondary or incidental to other insurance benefits.

c."Creditable coverage" does not include the following benefits if they are provided under a separate policy, certificate, or contract of insurance or are otherwise not an integral part of the plan:

(1)Limited scope dental or vision benefits;

(2)Benefits for long-term care, nursing home care, home health care, community-based care, or any combination thereof; and (3)Such other similar, limited benefits as are specified in federal regulations.

d."Creditable coverage" does not include the following benefits if offered as independent, noncoordinated benefits:

(1)Coverage only for a specified disease or illness; and (2)Hospital indemnity or other fixed indemnity insurance.

e."Creditable coverage" does not include the following if it is offered as a separate policy, certificate, or contract of insurance:

(1)Medicare supplement health insurance as defined under section 1882(g)(1) of the Social Security Act;

(2)Coverage supplemental to the coverage provided under 10 U.S.C. 55; and (3)Similar supplemental coverage provided to coverage under a group health plan.

9."Employee welfare benefit plan" means a plan, fund, or program of employee benefits as defined in 29 U.S.C. 1002 (Employee Retirement Income Security Act).

10."Insolvency" means when an issuer, licensed to transact the business of insurance in this state, is unable to pay its obligations when they are due, or when its admitted assets do not exceed its liabilities plus the greater of:

a.Any capital and surplus required by law for its organization; or

b.The total par or stated value of its authorized and issued capital stock.

11."Issuer" includes insurance companies, fraternal benefit societies, health care service plans, health maintenance organizations, and any other entity delivering or issuing for delivery in this state Medicare supplement policies or certificates.

12."Medicare" means the Health Insurance for the Aged Act, title XVIII of the Social Security Amendments of 1965, as then constituted or later amended.

13."Medicare advantage plan" means a plan of coverage for health benefits under Medicare

part C as defined in 42 U.S.C. 1395w-28(b)(1), and includes:

a.Coordinated care plans which provide health care services, including health maintenance organization plans, with or without a point-of-service option; plans offered by provider-sponsored organizations; and preferred provider organization plans;

b.Medical savings account plans coupled with a contribution into a Medicare advantage medical savings account; and

c.Medicare advantage private fee-for-service plans.

14."Medicare supplement policy" means a group or individual policy of accident and sickness insurance or a subscriber contract of hospital and medical service associations or health maintenance organizations, other than a policy issued pursuant to a contract under section 1876 of the federal Social Security Act [42 U.S.C. 1395 et seq.] or an issued policy under the demonstration project specified in 42 U.S.C. 1395ss(g)(1), which is advertised, marketed, or designed primarily as a supplement to reimbursements under Medicare for the hospital, medical, or surgical expenses of persons eligible for Medicare. "Medicare supplement policy" does not include Medicare advantage plans established under Medicare part C, outpatient prescription drug plans established under Medicare part D, or any health care prepayment plan that provides benefits pursuant to an agreement under section 1833(a)(1)(A) of the Social Security Act.

15."Policy form" means the form on which the policy is delivered or issued for delivery by the issuer.

16."Prestandardized Medicare supplement benefit plan", "prestandardized benefit plan", or "prestandardized plan" means a group or individual policy of Medicare supplement insurance issued prior to January 1, 1992.

17."Secretary" means the secretary of the United States department of health and human services.

History: Effective January 1, 1992; amended effective August 27, 1998; December 1, 2001;

September 1, 2005; July 1, 2009. 45-06-01.1-03. Policy definitions and terms.

No policy or certificate may be advertised, solicited, or issued for delivery in this state as a Medicare supplement policy or certificate unless such policy or certificate contains definitions or terms which conform to the requirements of this section.

1."Accident", "accidental injury", or "accidental means" must be defined to employ "result" language and may not include words which establish an accidental means test or use words such as "external, violent, visible wounds" or similar words of description or characterization.

a.The definition may not be more restrictive than the following: "Injury or injuries for which benefits are provided means accidental bodily injury sustained by the insured person which is the direct result of an accident, independent of disease or bodily infirmity or any other cause, and occurs while insurance coverage is in force".

b.The definition may provide that injuries do not include injuries for which benefits are provided or available under any workers' compensation, employer's liability or similar law, or motor vehicle no-fault plan, unless prohibited by law.

2."Benefit period" or "Medicare benefit period" may not be defined more restrictively than as defined in the Medicare program.

3."Convalescent nursing home", "extended care facility", or "skilled nursing facility" may not be defined more restrictively than as defined in the Medicare program.

4."Health care expenses" means, for purposes of section 45-06-01.1-11, expenses of health maintenance organizations associated with the delivery of health care services, which expenses are analogous to incurred losses of insurers.

5."Hospital" may be defined in relation to its status, facilities, and available services or to reflect its accreditation by the joint commission on accreditation of hospitals, but not more restrictively than as defined in the Medicare program.

6."Medicare" must be defined in the policy and certificate. Medicare may be substantially defined as "The Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965 as Then Constituted or Later Amended", or "Title I, Part I of Public Law 89-97, as Enacted by the Eighty-Ninth Congress of the United States of America and popularly known as the Health Insurance for the Aged Act, as then constituted and any later amendments or substitutes thereof", or words of similar import.

7."Medicare eligible expenses" means expenses of the kinds covered by Medicare parts A and B, to the extent recognized as reasonable and medically necessary by Medicare.

8."Physician" may not be defined more restrictively than as defined in the Medicare program.

9."Sickness" may not be defined to be more restrictive than the following: "Sickness means illness or disease of an insured person which first manifests itself after the effective date of insurance and while the insurance is in force." The definition may be further modified to exclude sicknesses or diseases for which benefits are provided under any workers' compensation, occupational disease, employer's liability, or similar law.

History: Effective January 1, 1992; amended effective July 8, 1997; September 1, 2005. 45-06-01.1-04. Policy provisions.

1.Except for permitted preexisting condition clauses as described in subdivision a of subsection 1 of section 45-06-01.1-05, subdivision a of subsection 1 of section 45-06-01.1-06, and subdivision a of subsection 1 of section 45-06-01.1-06.1, no policy or certificate may be advertised, solicited, or issued for delivery in this state as a Medicare supplement policy if the policy or certificate contains limitations or exclusions on coverage that are more restrictive than those of Medicare.

2.No Medicare supplement policy or certificate may use waivers to exclude, limit, or reduce coverage or benefits for specifically named or described preexisting diseases or physical conditions.

3.No Medicare supplement policy or certificate in force in the state may contain benefits which duplicate benefits provided by Medicare. 4.a.Subject to subdivisions d, e, and g of subsection 1 of section 45-06-01.1-05 and subdivisions d and e of subsection 1 of section 45-06-01.1-06, a Medicare supplement policy with benefits for outpatient prescription drugs in existence prior to January 1, 2006, shall be renewed for current policyholders who do not enroll in part D at the option of the policyholder.

b.A Medicare supplement policy with benefits for outpatient prescription drugs shall not be issued after December 31, 2005.

c.After December 31, 2005, a Medicare supplement policy with benefits for outpatient prescription drugs may not be renewed after the policyholder enrolls in Medicare part D unless:

(1)The policy is modified to eliminate outpatient prescription coverage for expenses of outpatient prescription drugs incurred after the effective date of the individual's coverage under a Medicare part D plan; and (2)Premiums are adjusted to reflect the elimination of outpatient prescription drug coverage at the time of Medicare part D enrollment, accounting for any claims paid, if applicable.

History: Effective January 1, 1992; amended effective July 8, 1997; September 1, 2005; July 1, 2009. 45-06-01.1-05. Minimum benefit standards for prestandardized Medicare supplement benefit plan policies or certificates issued for delivery prior to January 1, 1992.

No policy or certificate may be advertised, solicited, or issued for delivery in this state as a Medicare supplement policy or certificate unless it meets or exceeds the following minimum standards.

These are minimum standards and do not preclude the inclusion of other provisions or benefits which are not inconsistent with these standards:

1.General standards. The following standards apply to Medicare supplement policies and certificates and are in addition to all other requirements of this rule:

a.A Medicare supplement policy or certificate may not exclude or limit benefits for losses incurred more than six months from the effective date of coverage because it involved a preexisting condition. The policy or certificate may not define a preexisting condition more restrictively than a condition for which medical advice was given or treatment was recommended by or received from a physician within six months before the effective date

b.A Medicare supplement policy or certificate may not indemnify against losses resulting

c.A Medicare supplement policy or certificate must provide that benefits designed to cover cost-sharing amounts under Medicare will be changed automatically to coincide with any changes in the applicable Medicare deductible, copayment, or coinsurance amounts.

d.A "noncancelable", "guaranteed renewable", or "noncancelable and guaranteed renewable" Medicare supplement policy may not:

(1)Provide for termination of coverage of a spouse solely because of the occurrence of an event specified for termination of coverage of the insured, other than the nonpayment of premium; or (2)Be canceled or nonrenewed by the issuer solely on the grounds of deterioration of health. e.(1)Except as authorized by the commissioner of this state, an issuer may neither cancel nor nonrenew a Medicare supplement policy or certificate for any reason other than nonpayment of premium or material misrepresentation.

(2)If a group Medicare supplement insurance policy is terminated by the group policyholder and not replaced as provided in paragraph 4, the issuer must offer certificate holders an individual Medicare supplement policy. The issuer must offer the certificate holder at least the following choices:

(a)An individual Medicare supplement policy currently offered by the issuer having comparable benefits to those contained in the terminated group Medicare supplement policy; and (b)An individual Medicare supplement policy which provides only such benefits as are required to meet the minimum standards as defined in subsection 2 of

section 45-06-01.1-06.1.

(3)If membership in a group is terminated, the issuer must:

(a)Offer the certificate holder the conversion opportunities described in paragraph 2; or (b)At the option of the group policyholder, offer the certificate holder continuation (4)If a group Medicare supplement policy is replaced by another group Medicare replacement policy must offer coverage to all persons covered under the old group policy on its date of termination. Coverage under the new group policy may not result in any exclusion for preexisting conditions that would have been covered under the group policy being replaced.

f.Termination of a Medicare supplement policy or certificate must be without prejudice to any continuous loss which commenced while the policy was in force, but the extension of benefits beyond the period during which the policy was in force may be predicated upon the continuous total disability of the insured, limited to the duration of the policy benefit period, if any, or to payment of the maximum benefits. Receipt of Medicare part D benefits will not be considered in determining a continuous loss.

g.If a Medicare supplement policy eliminates an outpatient prescription drug benefit as a result of requirements imposed by the Medicare Prescription Drug Improvement and Modernization Act of 2003, the modified policy shall be deemed to satisfy the guaranteed renewal requirements of this subsection.

2.Minimum benefit standards.

a.Coverage of part A Medicare eligible expenses for hospitalization to the extent not covered by Medicare from the sixty-first day through the ninetieth day in any Medicare benefit period.

b.Coverage for either all or none of the Medicare part A inpatient hospital deductible amount.

c.Coverage of part A Medicare eligible expenses incurred as daily hospital charges during use of Medicare's lifetime hospital inpatient reserve days.

d.Upon exhaustion of all Medicare hospital inpatient coverage including the lifetime reserve days, coverage of ninety percent of all Medicare part A eligible expenses for hospitalization not covered by Medicare subject to a lifetime maximum benefit of an additional three hundred sixty-five days.

e.Coverage under Medicare part A for the reasonable cost of the first three pints of blood (or equivalent quantities of packed red blood cells, as defined under federal regulations) unless replaced in accordance with federal regulations or already paid for under part B.

f.Coverage for the coinsurance amount, or in the case of hospital outpatient department services paid under a prospective payment system, the copayment amount, of Medicare eligible expenses under part B regardless of hospital confinement, subject to a maximum calendar year out-of-pocket amount equal to the Medicare part B deductible (one hundred dollars).

g.Effective January 1, 1990, coverage under Medicare part B for the reasonable cost of the first three pints of blood (or equivalent quantities of packed red blood cells, as defined under federal regulations), unless replaced in accordance with federal regulations or already paid for under part A, subject to the Medicare deductible amount.

History: Effective January 1, 1992; amended effective July 1, 1994; April 1, 1996; July 8, 1997;

September 1, 2005; July 1, 2009. 45-06-01.1-06. Benefit standards for 1990 standardized Medicare supplement benefit plan policies or certificates issued for delivery on or after January 1, 1992, and with an effective date for coverage prior to June 1, 2010.

The following standards are applicable to all Medicare supplement policies or certificates delivered or issued for delivery in this state on or after January 1, 1992, and with an effective date for coverage prior to June 1, 2010. No policy or certificate may be advertised, solicited, delivered, or issued for delivery in this state as a Medicare supplement policy or certificate unless it complies with these benefit standards:

1.General standards. The following standards apply to Medicare supplement policies and certificates and are in addition to all other requirements of this rule:

a.A Medicare supplement policy or certificate may not exclude or limit benefits for losses incurred more than six months from the effective date of coverage because it involved a preexisting condition. The policy or certificate may not define a preexisting condition more restrictively than a condition for which medical advice was given or treatment was recommended by or received from a physician within six months before the effective date

b.A Medicare supplement policy or certificate may not indemnify against losses resulting

c.A Medicare supplement policy or certificate must provide that benefits designed to cover cost-sharing amounts under Medicare will be changed automatically to coincide with any changes in the applicable Medicare deductible, copayment, or coinsurance amounts.

d.No Medicare supplement policy or certificate may provide for termination of coverage of a spouse solely because of the occurrence of an event specified for termination of coverage of the insured, other than the nonpayment of premium.

e.Each Medicare supplement policy must be guaranteed renewable:

(1)The issuer may not cancel or nonrenew the policy solely on the ground of health status of the individual.

(2)The issuer may not cancel or nonrenew the policy for any reason other than nonpayment of premium or material misrepresentation.

(3)If the Medicare supplement policy is terminated by the group policyholder and is not replaced as provided under paragraph 5, the issuer must offer certificate holders an individual Medicare supplement policy which at the option of the certificate holder:

(a)Provides for continuation of the benefits contained in the group policy; or (b)Provides for benefits that otherwise meet the requirements of this subsection.

(4)If an individual is a certificate holder in a group Medicare supplement policy and the individual terminates membership in the group, the issuer must:

(a)Offer the certificate holder the conversion opportunity described in paragraph 3; or (b)At the option of the group policyholder, offer the certificate holder continuation (5)If a group Medicare supplement policy is replaced by another group Medicare replacement policy must offer coverage to all persons covered under the old group policy on its date of termination. Coverage under the new policy may not result in any exclusion for preexisting conditions that would have been covered under the group policy being replaced.

(6)If a Medicare supplement policy eliminates an outpatient prescription drug benefit as a result of requirements imposed by the Medicare Prescription Drug Improvement and Modernization Act of 2003, the modified policy shall be deemed to satisfy the guaranteed renewal requirements of this paragraph.

f.Termination of a Medicare supplement policy or certificate must be without prejudice to any continuous loss which commenced while the policy was in force, but the extension of benefits beyond the period during which the policy was in force may be conditioned upon the continuous total disability of the insured, limited to the duration of the policy benefit period, if any, or payment of the maximum benefits. Receipt of Medicare part D benefits will not be considered in determining a continuous loss. g.(1)A Medicare supplement policy or certificate must provide that benefits and premiums under the policy or certificate must be suspended at the request of the policyholder or certificate holder for the period, not to exceed twenty-four months, in which the policyholder or certificate holder has applied for and is determined to be entitled to medical assistance under title XIX of the Social Security Act [42 U.S.C. 1396, et seq.], but only if the policyholder or certificate holder notifies the issuer of the policy or certificate within ninety days after the date the individual becomes entitled to assistance. Upon receipt of timely notice, the issuer shall return to the policyholder or certificate holder that portion of the premium attributable to the period of medical assistance eligibility, subject to adjustment for paid claims.

(2)If suspension occurs and if the policyholder or certificate holder loses entitlement to medical assistance, the policy or certificate shall be automatically reinstituted, effective as of the date of termination of entitlement if the policyholder or certificate holder provides notice of loss of entitlement within ninety days after the date of loss and pays the premium attributable to the period, effective as of the date of termination of entitlement.

(3)Each Medicare supplement policy shall provide that benefits and premiums under the policy shall be suspended for any period that may be provided by federal

regulation at the request of the policyholder if the policyholder is entitled to benefits under section 226(b) of the Social Security Act and is covered under a group health plan, as defined in section 1862(b)(1)(A)(v) of the Social Security Act. If suspension occurs and if the policyholder or certificate holder loses coverage under the group health plan, the policy shall be automatically reinstituted, effective as of the date of loss of such coverage, if the policyholder provides notice of loss of coverage within ninety days after the date of such loss and pays the premium due from that date.

(4)Reinstitution of coverage as described in paragraphs 2 and 3:

(a)May not provide for any waiting period with respect to treatment of preexisting conditions;

(b)Must provide for resumption of coverage that is substantially equivalent to coverage in effect before the date of suspension. If the suspended Medicare supplement policy provided coverage for outpatient prescription drugs, reinstitution of the policy for Medicare part D enrollees shall be without coverage for outpatient prescription drugs and shall otherwise provide substantially equivalent coverage to the coverage in effect before the date of suspension; and (c)Must provide for classification of premiums on terms at least as favorable to the policyholder or certificate holder as the premium classification terms that would have applied to the policyholder or certificate holder had the coverage not been suspended.

h.If an issuer makes a written offer to the Medicare supplement policyholders or certificate holders of one or more of its plans, to exchange during a specified period from the 1990 standardized plan as described in section 45-06-01.1-07 to a 2010 standardized plan as described in section 45-06-01.1-07.1, the offer and subsequent exchange shall comply with the following requirements:

(1)An issuer need not provide justification to the commissioner if the insured replaces a 1990 standardized policy or certificate with an issue age rated 2010 standardized policy or certificate at the insured's original issue age and duration. If an insured's policy or certificate to be replaced is priced on an issue age rate schedule at the time of such offer, the rate charged to the insured for the new exchanged policy shall recognize the policy reserve buildup, due to the prefunding inherent in the use of an issue age rate basis, for the benefit of the insured. The method proposed to be used by an issuer must be filed with the commissioner.

(2)The rating class of the new policy or certificate shall be the class closest to the insured's class of the replaced coverage.

(3)An issuer may not apply new preexisting condition limitations or a new incontestability period to the new policy for those benefits contained in the exchanged 1990 standardized policy or certificate of the insured, but may apply preexisting condition limitations of no more than six months to any added benefits contained in the new 2010 standardized policy or certificate not contained in the exchanged policy.

(4)The new policy or certificate shall be offered to all policyholders or certificate holders within a given plan, except where the offer or issue would be in violation of state or federal law.

2.Standards for basic core benefits common to benefit plans A through J. Every issuer must make available a policy or certificate including only the following basic core package of benefits to each prospective insured. An issuer may make available to prospective insureds any of the other Medicare supplement insurance benefit plans in addition to the basic core package, but not in lieu of it:

a.Coverage of part A Medicare-eligible expenses for hospitalization to the extent not covered by Medicare from the sixty-first day through the ninetieth day in any Medicare benefit period.

b.Coverage of part A Medicare-eligible expenses incurred for hospitalization to the extent not covered by Medicare for each Medicare lifetime inpatient reserve day used.

c.Upon exhaustion of the Medicare hospital inpatient coverage including the lifetime reserve days, coverage of one hundred percent of the Medicare part A eligible expenses for hospitalization paid at the applicable prospective payment system rate, or other appropriate Medicare standard of payment, subject to a lifetime maximum benefit of an additional three hundred sixty-five days. The provider must accept the issuer's payment as payment in full and may not bill the insured for any balance.

d.Coverage under Medicare parts A and B for the reasonable cost of the first three pints of blood or equivalent quantities of packed red blood cells, as defined under federal regulations unless replaced in accordance with federal regulations.

e.Coverage for the coinsurance amount, or in the case of hospital outpatient department services paid under a prospective payment system, the copayment amount, of Medicare-eligible expenses under part B regardless of hospital confinement, subject to

3.Standards for additional benefits. The following additional benefits must be included in Medicare supplement benefit plans "B" through "J" only as provided by section 45-06-01.1-07:

a.Medicare part A deductible: Coverage for all of the Medicare part A inpatient hospital deductible amount per benefit period.

b.Skilled nursing facility care: Coverage for the actual billed charges up to the coinsurance amount from the twenty-first day through the one hundredth day in a Medicare benefit period for posthospital skilled nursing facility care eligible under Medicare part A.

c.Medicare part B deductible: Coverage for all of the Medicare part B deductible amount per calendar year regardless of hospital confinement.

d.Eighty percent of the Medicare part B excess charges: Coverage for eighty percent of the difference between the actual Medicare part B charge as billed, not to exceed any charge limitation established by the Medicare program or state law, and the Medicare-approved

part B charge.

e.One hundred percent of the Medicare part B excess charges: Coverage for all of the difference between the actual Medicare part B charge as billed, not to exceed any charge limitation established by the Medicare program or state law, and the Medicare-approved

part B charge.

f.Basic outpatient prescription drug benefit: Coverage for fifty percent of outpatient prescription drug charges, after a two hundred fifty dollar calendar year deductible, to a maximum of one thousand two hundred fifty dollars in benefits received by the insured per calendar year, to the extent not covered by Medicare. The outpatient prescription drug benefit may be included for sale or issuance in a Medicare supplement policy until January 1, 2006.

g.Extended outpatient prescription drug benefit: Coverage for fifty percent of outpatient prescription drug charges, after a two hundred fifty dollar calendar year deductible to a maximum of three thousand dollars in benefits received by the insured per calendar year, to the extent not covered by Medicare. The outpatient prescription drug benefit may be included for sale or issuance in a Medicare supplement policy until January 1, 2006.

h.Medically necessary emergency care in a foreign country: Coverage to the extent not covered by Medicare for eighty percent of the billed charges for Medicare-eligible expenses for medically necessary emergency hospital, physician, and medical care received in a foreign country, which care would have been covered by Medicare if provided in the United States and which care began during the first sixty consecutive days of each trip outside the United States, subject to a calendar year deductible of two hundred fifty dollars, and a lifetime maximum benefit of fifty thousand dollars. For purposes of this benefit, "emergency care" means care needed immediately because of an injury or an illness of sudden and unexpected onset. i.(1)Preventive medical care benefit: Coverage for the following preventive health services not covered by Medicare:

(a)An annual clinical preventive medical history and physical examination that may include tests and services from subparagraph b and patient education to address preventive health care measures.

(b)Preventive screening tests or preventive services, the selection and frequency of which is determined to be medically appropriate by the attending physician.

(2)Reimbursement must be for the actual charges up to one hundred percent of the Medicare-approved amount for each service, as if Medicare were to cover the service as identified in American medical association current procedural terminology codes, to a maximum of one hundred twenty dollars annually under this benefit.

This benefit may not include payment for any procedure covered by Medicare.

j.At-home recovery benefit: Coverage for services to provide short-term, at-home assistance with activities of daily living for those recovering from an illness, injury, or surgery.

(1)For purposes of this benefit, the following definitions apply:

(a)"Activities of daily living" includes, but is not limited to bathing, dressing, personal hygiene, transferring, eating, ambulating, assistance with drugs that are normally self-administered, and changing bandages or other dressings.

(b)"At-home recovery visit" means the period of a visit required to provide at-home recovery care, without limit on the duration of the visit, except each consecutive four hours in a twenty-four-hour period of services provided by a care provider is one visit.

(c)"Care provider" means a duly qualified or licensed home health aide or homemaker, personal care aide, or nurse provided through a licensed home health care agency or referred by a licensed referral agency or licensed nurses registry.

(d)"Home" means any place used by the insured as a place of residence, provided that such place would qualify as a residence for home health care services covered by Medicare. A hospital or skilled nursing facility may not be considered the insured's place of residence.

(2)Coverage requirements and limitations.

(a)At-home recovery services provided must be primarily services which assist in activities of daily living.

(b)The insured's attending physician must certify that the specific type and frequency of at-home recovery services are necessary because of a condition for which a home care plan of treatment was approved by Medicare.

(c)Coverage is limited to: [1]No more than the number and type of at-home recovery visits certified as necessary by the insured's attending physician. The total number of at-home recovery visits may not exceed the number of Medicare-approved home health care visits under a Medicare-approved home care plan of treatment. [2]The actual charges for each visit up to a maximum reimbursement of forty dollars per visit. [3]One thousand six hundred dollars per calendar year. [4]Seven visits in any one week. [5]Care furnished on a visiting basis in the insured's home. [6]Services provided by a care provider as defined in this section. [7]At-home recovery visits while the insured is covered under the policy or certificate and not otherwise excluded. [8]At-home recovery visits received during the period the insured is receiving Medicare- approved home care services or no more than eight weeks after the service date of the last Medicare-approved home health care visit.

(3)Coverage is excluded for:

(a)Home care visits paid for by Medicare or other government programs; and (b)Care provided by family members, unpaid volunteers, or providers who are not care providers.

4.Standards for plans K and L.

a.Standardized Medicare supplement benefit plan K shall consist of the following:

(1)Coverage of one hundred percent of the part A hospital coinsurance amount for each day used from the sixty-first through the ninetieth day in any Medicare benefit period;

(2)Coverage of one hundred percent of the part A hospital coinsurance amount for each Medicare lifetime inpatient reserve day used from the ninety-first through the one hundred fiftieth day in any Medicare benefit period;

(3)Upon exhaustion of the Medicare hospital inpatient coverage, including the lifetime reserve days, coverage of one hundred percent of the Medicare part A eligible expenses for hospitalization paid at the applicable prospective payment system rate, or other appropriate Medicare standard of payment, subject to a lifetime maximum benefit of an additional three hundred sixty-five days. The provider shall accept the issuer's payment as payment in full and may not bill the insured for any balance;

(4)Medicare part A deductible: Coverage for fifty percent of the Medicare part A inpatient hospital deductible amount per benefit period until the out-of-pocket limitation is met as described in paragraph 10;

(5)Skilled nursing facility care: Coverage for fifty percent of the coinsurance amount for each day used from the twenty-first day through the one hundredth day in a Medicare benefit period for posthospital skilled nursing facility care eligible under Medicare part A until the out-of-pocket limitation is met as described in (6)Hospice care: Coverage for fifty percent of cost-sharing for all part A Medicare eligible expenses and respite care until the out-of-pocket limitation is met as (7)Coverage for fifty percent, under Medicare part A or B, of the reasonable cost of the first three pints of blood (or equivalent quantities of packed red blood cells, as defined under federal regulations) unless replaced in accordance with federal regulations until the out-of-pocket limitation is met as described in paragraph 10;

(8)Except for coverage provided in paragraph 9, coverage for fifty percent of the cost-sharing otherwise applicable under Medicare part B after the policyholder pays the part B deductible until the out-of-pocket limitation is met as described in (9)Coverage of one hundred percent of the cost-sharing for Medicare part B preventive services after the policyholder pays the part B deductible; and (10)Coverage of one hundred percent of all cost-sharing under Medicare parts A and B for the balance of the calendar year after the individual has reached the out-of-pocket limitation on annual expenditures under Medicare parts A and B of four thousand dollars in 2006, indexed each year by the appropriate inflation adjustment specified by the secretary of the United States department of health and human services.

b.Standardized Medicare supplement benefit plan L shall consist of the following:

(1)The benefits described in paragraphs 1, 2, 3, and 9 of subdivision a;

(2)The benefits described in paragraphs 4, 5, 6, 7, and 8 of subdivision a, but substituting seventy-five percent for fifty percent; and (3)The benefits described in paragraph 10 of subdivision a, but substituting two thousand dollars for four thousand dollars.

History: Effective January 1, 1992; amended effective April 1, 1996; July 8, 1997; August 1, 2000;

December 1, 2001; September 1, 2005; July 1, 2009. 45-06-01.1-06.1. Benefit standards for 2010 standardized Medicare supplement benefit plan policies or certificates issued for delivery with an effective date for coverage on or after June 1, 2010.

The following standards are applicable to all Medicare supplement policies or certificates delivered or issued for delivery in this state with an effective date for coverage on or after June 1, 2010. No policy or certificate may be advertised, solicited, delivered, or issued for delivery in this state as a Medicare supplement policy or certificate unless it complies with these benefit standards. No issuer may offer any 1990 standardized Medicare supplement benefit plan for sale on or after June 1, 2010. Benefit standards applicable to Medicare supplement policies and certificates issued with an effective date for coverage prior to June 1, 2010, remain subject to the requirements of sections 45-06-01.1-06 and 45-06-01.1-07.

1.General standards. The following standards apply to Medicare supplement policies and certificates and are in addition to all other requirements of this chapter:

a.A Medicare supplement policy or certificate shall not exclude or limit benefits for losses incurred more than six months from the effective date of coverage because it involved a preexisting condition. The policy or certificate may not define a preexisting condition more restrictively than a condition for which medical advice was given or treatment was recommended by or received from a physician within six months before the effective date

b.A Medicare supplement policy or certificate shall not indemnify against losses resulting

c.A Medicare supplement policy or certificate shall provide that benefits designed to cover cost-sharing amounts under Medicare will be changed automatically to coincide with any changes in the applicable Medicare deductible, copayment, or coinsurance amounts.

d.No Medicare supplement policy or certificate shall provide for termination of coverage of a spouse solely because of the occurrence of an event specified for termination of coverage of the insured, other than the nonpayment of premium.

e.Each Medicare supplement policy shall be guaranteed renewable.

(1)The issuer shall not cancel or nonrenew the policy solely on the ground of health status of the individual.

(2)The issuer shall not cancel or nonrenew the policy for any reason other than nonpayment of premium or material misrepresentation.

(3)If the Medicare supplement policy is terminated by the group policyholder and is not replaced as provided under paragraph 5, the issuer shall offer certificate holders an individual Medicare supplement policy which at the option of the certificate holder:

(a)Provides for continuation of the benefits contained in the group policy; or (b)Provides for benefits that otherwise meet the requirements of this subsection.

(4)If an individual is a certificate holder in a group Medicare supplement policy and the individual terminates membership in the group the issuer shall:

(a)Offer the certificate holder the conversion opportunity described in paragraph 3; or (b)At the option of the group policyholder, offer the certificate holder continuation (5)If a group Medicare supplement policy is replaced by another group Medicare replacement policy shall offer coverage to all persons covered under the old group policy on its date of termination. Coverage under the new policy shall not result in any exclusion for preexisting conditions that would have been covered under the group policy being replaced.

f.Termination of a Medicare supplement policy or certificate shall be without prejudice to any continuous loss which commenced while the policy was in force, but the extension of benefits beyond the period during which the policy was in force may be conditioned upon the continuous total disability of the insured, limited to the duration of the policy benefit period, if any, or payment of the maximum benefits. Receipt of Medicare part D benefits will not be considered in determining a continuous loss. g.(1)A Medicare supplement policy or certificate shall provide that benefits and premiums under the policy or certificate shall be suspended at the request of the policyholder or certificate holder for the period not to exceed twenty-four months in which the policyholder or certificate holder has applied for and is determined to be entitled to medical assistance under title XIX of the Social Security Act, but only if the policyholder or certificate holder notifies the issuer of the policy or certificate within ninety days after the date the individual becomes entitled to assistance. Upon receipt of timely notice, the issuer shall return to the policyholder or certificate holder that portion of the premium attributable to the period of medical assistance eligibility subject to adjustment for paid claims.

(2)If suspension occurs and if the policyholder or certificate holder loses entitlement to medical assistance, the policy or certificate shall be automatically reinstituted effective as of the date of termination of entitlement if the policyholder or certificate holder provides notice of loss of entitlement within ninety days after the date of loss and pays the premium attributable to the period, effective as of the date of termination of entitlement.

(3)Each Medicare supplement policy shall provide that benefits and premiums under the policy shall be suspended for any period that may be provided by federal

regulation at the request of the policyholder if the policyholder is entitled to benefits under section 226(b) of the Social Security Act and is covered under a group health plan as defined in section 1862(b)(1)(A)(v) of the Social Security Act. If suspension occurs and if the policyholder or certificate holder loses coverage under the group health plan, the policy shall be automatically reinstituted effective as of the date of loss of coverage if the policyholder provides notice of loss of coverage within ninety days after the date of the loss and pays the premium attributable to the period, effective as of the date of termination of enrollment in the group health plan.

(4)Reinstitution of coverages as described in paragraphs 2 and 3:

(a)Shall not provide for any waiting period with respect to treatment of preexisting conditions;

(b)Shall provide for resumption of coverage that is substantially equivalent to coverage in effect before the date of suspension; and (c)Shall provide for classification of premiums on terms at least as favorable to the policyholder or certificate holder as the premium classification terms that would have applied to the policyholder or certificate holder had the coverage not been suspended.

2.Standards for basic benefits common to Medicare supplement insurance benefit plans A, B, C, D, F, F with high deductible, G, M, and N. Every issuer of Medicare supplement insurance benefit plans shall make available a policy or certificate including only the following basic core package of benefits to each prospective insured. An issuer may make available to prospective insureds any of the other Medicare supplement insurance benefit plans in addition to the basic core package but not in lieu of it.

a.Coverage of part A Medicare-eligible expenses for hospitalization to the extent not covered by Medicare from the sixty-first day through the ninetieth day in any Medicare benefit period;

b.Coverage of part A Medicare-eligible expenses incurred for hospitalization to the extent not covered by Medicare for each Medicare lifetime inpatient reserve day used;

c.Upon exhaustion of the Medicare hospital inpatient coverage, including the lifetime reserve days coverage of one hundred percent of the Medicare part A eligible expenses for hospitalization paid at the applicable prospective payment system rate or other appropriate Medicare standard of payment subject to a lifetime maximum benefit of an additional three hundred sixty-five days. The provider shall accept the issuer's payment as payment in full and may not bill the insured for any balance;

d.Coverage under Medicare parts A and B for the reasonable cost of the first three pints of blood or equivalent quantities of packed red blood cells, unless replaced in accordance with federal regulations;

e.Coverage for the coinsurance amount, or in the case of hospital outpatient department services paid under a prospective payment system, the copayment amount of Medicare-eligible expenses under part B regardless of hospital confinement, subject to the Medicare part B deductible; and

f.Hospice care. Coverage of cost-sharing for all part A Medicare eligible hospice care and respite care expenses.

3.Standards for additional benefits. The following additional benefits shall be included in Medicare supplement benefit plans B, C, D, F, F with high deductible, G, M, and N as provided by section 45-06-01.1-07.1.

a.Medicare part A deductible. Coverage for one hundred percent of the Medicare part A inpatient hospital deductible amount per benefit period.

b.Medicare part A deductible. Coverage for fifty percent of the Medicare part A inpatient hospital deductible amount per benefit period.

c.Skilled nursing facility care. Coverage for the actual billed charges up to the coinsurance amount from the twenty-first day through the one hundredth day in a Medicare benefit period for posthospital skilled nursing facility care eligible under Medicare part A.

d.Medicare part B deductible. Coverage for one hundred percent of the Medicare part B deductible amount per calendar year regardless of hospital confinement.

e.One hundred percent of the Medicare part B excess charges. Coverage for all of the difference between the actual Medicare part B charges as billed, not to exceed any charge limitation established by the Medicare program or state law, and the Medicare-approved part B charge.

f.Medically necessary emergency care in a foreign country. Coverage to the extent not covered by Medicare for eighty percent of the billed charges for Medicare-eligible expenses for medically necessary emergency hospital, physician, and medical care received in a foreign country, which care would have been covered by Medicare if provided in the United States and which care began during the first sixty consecutive days of each trip outside the United States, subject to a calendar year deductible of two hundred fifty dollars, and a lifetime maximum benefit of fifty thousand dollars. For purposes of this benefit, "emergency care" shall mean care needed immediately because of an injury or an illness of sudden and unexpected onset.

History: Effective July 1, 2009; amended effective October 1, 2019. 45-06-01.1-07. Standard Medicare supplement benefit plans for 1990 standardized Medicare supplement benefit plan policies or certificates issued for delivery on or after January 1, 1992, and with an effective date for coverage prior to June 1, 2010.

1.An issuer shall make available to each prospective policyholder and certificate holder a policy form or certificate form containing only the basic core benefits, as defined in subsection 2 of

section 45-06-01.1-06.

2.No groups, packages, or combinations of Medicare supplement benefits other than those listed in this section may be offered for sale in this state, except as may be permitted in subsection 7 of this section and in section 45-06-01.1-08.

3.Benefit plans must be uniform in structure, language, designation, and format to the standard benefit plans "A" through "L" listed in this section and conform to the definitions in section 45-06-01.1-02 and contained in North Dakota Century Code section 26.1-36.1-01. Each benefit must be structured in accordance with the format provided in subsections 2 and 3 or 4 of section 45-06-01.1-06 and list the benefits in the order shown in this section. For purposes of this section, "structure, language, and format" means style, arrangement, and overall content of a benefit.

4.An issuer may use, in addition to the benefit plan designations required in subsection 3, other designations to the extent permitted by law.

5.Makeup of benefit plans:

a.Standardized Medicare supplement benefit plan "A" is limited to the basic (core) benefits common to all benefit plans, as defined in subsection 2 of section 45-06-01.1-06.

b.Standardized Medicare supplement benefit plan "B" may include only the following: The core benefit as defined in subsection 2 of section 45-06-01.1-06, plus the Medicare

part A deductible as defined in subdivision a of subsection 3 of section 45-06-01.1-06.

c.Standardized Medicare supplement benefit plan "C" may include only the following: The core benefit as defined in subsection 2 of section 45-06-01.1-06, plus the Medicare

part A deductible, skilled nursing facility care, Medicare part B deductible and medically necessary emergency care in a foreign country as defined in subdivisions a, b, c, and h of subsection 3 of section 45-06-01.1-06, respectively.

d.Standardized Medicare supplement benefit plan "D" may include only the following: The core benefit as defined in subsection 2 of section 45-06-01.1-06, plus the Medicare

part A deductible, skilled nursing facility care, medically necessary emergency care in a foreign country and the at-home recovery benefit as defined in subdivisions a, b, h, and j of subsection 3 of section 45-06-01.1-06, respectively.

e.Standardized Medicare supplement benefit plan "E" may include only the following: The core benefit as defined in subsection 2 of section 45-06-01.1-06, plus the Medicare

part A deductible, skilled nursing facility care, medically necessary emergency care in a foreign country, and preventive medical care as defined in subdivisions a, b, h, and i of subsection 3 of section 45-06-01.1-06, respectively.

f.Standardized Medicare supplement benefit plan "F" may include only the following: The core benefit as defined in subsection 2 of section 45-06-01.1-06, plus the Medicare

part A deductible, the skilled nursing facility care, the Medicare part B deductible, one hundred percent of the Medicare part B excess charges, and medically necessary emergency care in a foreign country as defined in subdivisions a, b, c, e, and h of subsection 3 of section 45-06-01.1-06, respectively.

g.Standardized Medicare supplement benefit high deductible plan "F" includes only the following: one hundred percent of covered expenses following the payment of the annual high deductible plan "F" deductible. The covered expenses include the core benefit as defined in subsection 2 of section 45-06-01.1-06, plus the Medicare part A deductible, skilled nursing facility care, the Medicare part B deductible, one hundred percent of the Medicare part B excess charges, and medically necessary emergency care in a foreign country as defined in subdivisions a, b, c, e, and h of subsection 3 of section 45-06-01.1-06, respectively. The annual high deductible plan "F" deductible consists of out-of-pocket expenses, other than premiums, for services covered by the Medicare supplement plan "F" policy, and are in addition to any other specific benefit deductibles.

The annual high deductible plan "F" deductible is one thousand five hundred dollars for 1998 and 1999 and must be based on the calendar year. It must be adjusted annually thereafter by the secretary to reflect the change in the consumer price index for all urban consumers for the twelve-month period ending with August of the preceding year and rounded to the nearest multiple of ten dollars.

h.Standardized Medicare supplement benefit plan "G" may include only the following: The core benefit as defined in subsection 2 of section 45-06-01.1-06, plus the Medicare

part A deductible, skilled nursing facility care, eighty percent of the Medicare part B excess charges, medically necessary emergency care in a foreign country, and the at-home recovery benefit as defined in subdivisions a, b, d, h, and j of subsection 3 of

section 45-06-01.1-06, respectively.

i.Standardized Medicare supplement benefit plan "H" may consist of only the following:

The core benefit as defined in subsection 2 of section 45-06-01.1-06, plus the Medicare

part A deductible, skilled nursing facility care, basic prescription drug benefit, and medically necessary emergency care in a foreign country as defined in subdivisions a, b, f, and h of subsection 3 of section 45-06-01.1-06, respectively. The outpatient prescription drug benefit shall not be included in a Medicare supplement policy sold after December 31, 2005.

j.Standardized Medicare supplement benefit plan "I" may consist of only the following: The core benefit as defined in subsection 2 of section 45-06-01.1-06, plus the Medicare

part A deductible, skilled nursing facility care, one hundred percent of the Medicare

part B excess charges, basic prescription drug benefit, medically necessary emergency care in a foreign country, and at-home recovery benefit as defined in subdivisions a, b, e, f, h, and j of subsection 3 of section 45-06-01.1-06, respectively. The outpatient prescription drug benefit shall not be included in a Medicare supplement policy sold after December 31, 2005.

k.Standardized Medicare supplement benefit plan "J" may consist of only the following:

The core benefit as defined in subsection 2 of section 45-06-01.1-06, plus the Medicare

part A deductible, skilled nursing facility care, Medicare part B deductible, one hundred percent of the Medicare part B excess charges, extended prescription drug benefit, medically necessary emergency care in a foreign country, preventive medical care, and at-home recovery benefit as defined in subdivisions a, b, c, e, g, h, i, and j of subsection 3 of section 45-06-01.1-06, respectively. The outpatient prescription drug benefit shall not be included in a Medicare supplement policy sold after December 31, 2005.

l.Standardized Medicare supplement benefit high deductible plan "J" consists of only the following: one hundred percent of covered expenses following the payment of the annual high deductible plan "J" deductible. The covered expenses include the core benefit as defined in subsection 2 of section 45-06-01.1-06, plus the Medicare part A deductible, skilled nursing facility care, Medicare part B deductible, one hundred percent of the Medicare part B excess charges, extended outpatient prescription drug benefit, medically necessary emergency care in a foreign country, preventive medical care benefit, and at-home recovery benefit as defined in subdivisions a, b, c, e, g, h, i, and j of subsection 3 of section 45-06-01.1-06, respectively. The annual high deductible plan "J" deductible consists of out-of-pocket expenses, other than premiums, for services covered by the Medicare supplement plan "J" policy, and are in addition to any other specific benefit deductibles. The annual deductible is one thousand five hundred dollars for 1998 and 1999 and must be based on a calendar year. It must be adjusted annually thereafter by the secretary to reflect the change in the consumer price index for all urban consumers for the twelve-month period ending with August of the preceding year and rounded to the nearest multiple of ten dollars. The outpatient prescription drug benefit shall not be included in a Medicare supplement policy sold after December 31, 2005.

6.Makeup of two Medicare supplement plans mandated by the Medicare Prescription Drug Improvement and Modernization Act of 2003:

a.Standardized Medicare supplement benefit plan "K" shall consist of only those benefits described in subdivision a of subsection 4 of section 45-06-01.1-06.

b.Standardized Medicare supplement benefit plan "L" shall consist of only those benefits described in subdivision b of subsection 4 of section 45-06-01.1-06.

7.New or innovative benefits: An issuer may, with the prior approval of the commissioner, offer policies or certificates with new or innovative benefits in addition to the benefits provided in a policy or certificate that otherwise complies with the applicable standards. The new or innovative benefits may include benefits that are appropriate to Medicare supplement insurance, new or innovative, not otherwise available, cost-effective, and offered in a manner which is consistent with the goal of simplification of Medicare supplement policies. After December 31, 2005, the innovative benefit shall not include an outpatient prescription drug benefit.

History: Effective January 1, 1992; amended effective July 1, 1994; August 27, 1998; September 1, 2005; July 1, 2009. 45-06-01.1-07.1. Standard Medicare supplement benefit plans for 2010 standardized Medicare supplement benefit plan policies or certificates issued for delivery with an effective date for coverage on or after June 1, 2010.

The following standards are applicable to all Medicare supplement policies or certificates delivered or issued for delivery in this state with an effective date for coverage on or after June 1, 2010. No policy or certificate may be advertised, solicited, delivered, or issued for delivery in this state as a Medicare supplement policy or certificate unless it complies with these benefit plan standards. Benefit plan standards applicable to Medicare supplement policies and certificates with an effective date for coverage before June 1, 2010, remain subject to the requirements of sections 45-06-01.1-06 and 45-06-01.1-07. 1.a.An issuer shall make available to each prospective policyholder and certificate holder a policy form or certificate form containing only the basic benefits, as defined in subsection 2 of section 45-06-01.1-06.1.

b.If an issuer makes available any of the additional benefits described in subsection 3 of

section 45-06-01.1-06.1, or offers standardized benefit plans K or L as described in subdivisions h and i of subsection 5, then the issuer shall make available to each prospective policyholder and certificate holder, in addition to a policy form or certificate form with only the basic benefits as described in subdivision a, a policy form or certificate form containing either standardized benefit plan C as described in subdivision c of subsection 5 or standardized benefit plan F as described in subdivision e of subsection 5.

2.No groups, packages, or combinations of Medicare supplement benefits other than those listed in this section shall be offered for sale in this state, except as may be permitted in subsection 6 and section 45-06-01.1-08.

3.Benefit plans shall be uniform in structure, language, designation, and format to the standard benefit plans listed in this subsection and conform to the definitions in section 45-06-01.1-02.

Each benefit shall be structured in accordance with the format provided in subsections 2 and 3 of section 45-06-01.1-06.1; or, in the case of plans K or L, in subdivisions h and i of subsection 5 and list the benefits in the order shown. For purposes of this section, "structure, language, and format" means style, arrangement, and overall content of a benefit.

4.In addition to the benefit plan designations required in subsection 3, an issuer may use other designations to the extent permitted by law.

5.Makeup of 2010 standardized benefit plans:

a.Standardized Medicare supplement benefit plan A shall include only the following: the basic benefits as defined in subsection 2 of section 45-06-01.1-06.1.

b.Standardized Medicare supplement benefit plan B shall include only the following: the basic benefit as defined in subsection 2 of section 45-06-01.1-06.1, plus one hundred percent of the Medicare part A deductible as defined in subdivision a of subsection 3 of

section 45-06-01.1-06.1.

c.Standardized Medicare supplement benefit plan C shall include only the following: the basic benefit as defined in subsection 2 of section 45-06-01.1-06.1, plus one hundred percent of the Medicare part A deductible, skilled nursing facility care, one hundred percent of the Medicare part B deductible, and medically necessary emergency care in a foreign country as defined in subdivisions a, c, d, and f of subsection 3 of section 45-06-01.1-06.1, respectively.

d.Standardized Medicare supplement benefit plan D shall include only the following: the basic benefit as defined in subsection 2 of section 45-06-01.1-06.1, plus one hundred percent of the Medicare part A deductible, skilled nursing facility care, and medically necessary emergency care in a foreign country as defined in subdivisions a, c, and f of subsection 3 of section 45-06-01.1-06.1, respectively.

e.Standardized Medicare supplement plan F shall include only the following: the basic benefit as defined in subsection 2 of section 45-06-01.1-06.1, plus one hundred percent of the Medicare part A deductible, the skilled nursing facility care, one hundred percent of the Medicare part B deductible, one hundred percent of the Medicare part B excess charges, and medically necessary emergency care in a foreign country as defined in subdivisions a, c, d, e, and f of subsection 3 of section 45-06-01.1-06.1, respectively.

f.Standardized Medicare supplement plan F with high deductible shall include only the following: one hundred percent of covered expenses following the payment of the annual deductible set forth in paragraph 2.

(1)The basic benefit as defined in subsection 2 of section 45-06-01.1-06.1, plus one hundred percent of the Medicare part A deductible, skilled nursing facility care, one hundred percent of the Medicare part B deductible, one hundred percent of the Medicare part B excess charges, and medically necessary emergency care in a foreign country as defined in subdivisions a, c, d, e, and f of subsection 3 of section 45-06-01.1-06.1, respectively.

(2)The annual deductible in plan F with high deductible shall consist of out-of-pocket expenses, other than premiums, for services covered by plan F, and shall be in addition to any other specific benefit deductibles. The basis for the deductible shall be one thousand five hundred dollars and shall be adjusted annually from 1999 by the secretary of the United States department of health and human services to reflect the change in the consumer price index for all urban consumers for the twelve-month period ending with August of the preceding year, and rounded to the nearest multiple of ten dollars.

g.Standardized Medicare supplement benefit plan G shall include only the following: the basic benefit as defined in subsection 2 of section 45-06-01.1-06.1, plus one hundred percent of the Medicare part A deductible, skilled nursing facility care, one hundred percent of the Medicare part B excess charges, and medically necessary emergency care in a foreign country as defined in subdivisions a, c, e, and f of subsection 3 of

section 45-06-01.1-06.1, respectively. Effective January 1, 2020, the standardized benefit plans described in subdivision d of subsection 1 of section 45-06-01.1-07.2 of this

regulation (Redesignated plan G high deductible) may be offered to any individual who was eligible for Medicare prior to January 1, 2020.

h.Standardized Medicare supplement plan K is mandated by the Medicare Prescription Drug Improvement and Modernization Act of 2003, and shall include only the following:

(1)Part A hospital coinsurance, sixty-first through ninetieth days. Coverage of one hundred percent of the part A hospital coinsurance amount for each day used from the sixty-first through the ninetieth day in any Medicare benefit period;

(2)Part A hospital coinsurance, ninety-first through one hundred fiftieth days. Coverage of one hundred percent of the part A hospital coinsurance amount for each Medicare lifetime inpatient reserve day used from the ninety-first through the one hundred fiftieth day in any Medicare benefit period;

(3)Part A hospitalization after one hundred fifty days. Upon exhaustion of the Medicare hospital inpatient coverage, including the lifetime reserve days, coverage of one hundred percent of the Medicare part A eligible expenses for hospitalization paid at the applicable prospective payment system rate, or other appropriate Medicare standard of payment, subject to a lifetime maximum benefit of an additional three hundred sixty-five days. The provider shall accept the issuer's payment as payment in full and may not bill the insured for any balance;

(4)Medicare part A deductible. Coverage for fifty percent of the Medicare part A inpatient hospital deductible amount per benefit period until the out-of-pocket limitation is met as described in paragraph 10;

(5)Skilled nursing facility care. Coverage for fifty percent of the coinsurance amount for each day used from the twenty-first day through the one hundredth day in a Medicare benefit period for posthospital skilled nursing facility care eligible under Medicare part A until the out-of-pocket limitation is met as described in (6)Hospice care. Coverage for fifty percent of cost-sharing for all part A Medicare eligible expenses and respite care until the out-of-pocket limitation is met as (7)Blood. Coverage for fifty percent, under Medicare part A or B, of the reasonable cost of the first three pints of blood or equivalent quantities of packed red blood cells, as defined under federal regulations, unless replaced in accordance with federal regulations until the out-of-pocket limitation is met as described in paragraph 10;

(8)Part B cost-sharing. Except for coverage provided in paragraph 9, coverage for fifty percent of the cost-sharing otherwise applicable under Medicare part B after the policyholder pays the part B deductible until the out-of-pocket limitation is met as (9)Part B preventive services. Coverage of one hundred percent of the cost-sharing for Medicare part B preventive services after the policyholder pays the part B deductible; and (10)Cost-sharing after out-of-pocket limits. Coverage of one hundred percent of all cost-sharing under Medicare parts A and B for the balance of the calendar year after the individual has reached the out-of-pocket limitation on annual expenditures under Medicare parts A and B of four thousand dollars in 2006, indexed each year by the appropriate inflation adjustment specified by the secretary of the United States department of health and human services.

i.Standardized Medicare supplement plan L is mandated by the Medicare Prescription Drug Improvement and Modernization Act of 2003, and shall include only the following:

(1)The benefits described in paragraphs 1, 2, 3, and 9 of subdivision h of subsection 5 of section 45-06-01.1-07.1;

(2)The benefit described in paragraphs 4, 5, 6, 7, and 8 of subdivision h of subsection 5 of section 45-06-01.1-07.1, but substituting seventy-five percent for fifty percent; and (3)The benefit described in paragraph 10 of subdivision h of subsection 5 of section 45-06-01.1-07.1, but substituting two thousand dollars for four thousand dollars.

j.Standardized Medicare supplement plan M shall include only the following: the basic benefit as defined in subsection 2 of section 45-06-01.1-06.1, plus fifty percent of the Medicare part A deductible, skilled nursing facility care, and medically necessary emergency care in a foreign country as defined in subdivisions b, c, and f of subsection 3 of section 45-06-01.1-06.1, respectively.

k.Standardized Medicare supplement plan N shall include only the following: the basic benefit as defined in subsection 2 of section 45-06-01.1-06.1, plus one hundred percent of the Medicare part A deductible, skilled nursing facility care, and medically necessary emergency care in a foreign country as defined in subdivisions a, c, and f of subsection 3 of section 45-06-01.1-06.1, respectively, with copayments in the following amounts:

(1)The lesser of twenty dollars or the Medicare part B coinsurance or copayment for each covered health care provider office visit, including visits to medical specialists; and (2)The lesser of fifty dollars or the Medicare part B coinsurance or copayment for each covered emergency room visit; however, this copayment shall be waived if the insured is admitted to any hospital and the emergency visit is subsequently covered as a Medicare part A expense.

6.New or innovative benefits. An issuer may, with the prior approval of the commissioner, offer policies or certificates with new or innovative benefits, in addition to the standardized benefits provided in a policy or certificate that otherwise complies with the applicable standards. The new or innovative benefits shall include only benefits that are appropriate to Medicare supplement insurance, are new or innovative, are not otherwise available, and are cost-effective. Approval of new or innovative benefits must not adversely impact the goal of Medicare supplement simplification. New or innovative benefits shall not include an outpatient prescription drug benefit. New or innovative benefits shall not be used to change or reduce benefits, including a change of any cost-sharing provision, in any standardized plan.

History: Effective July 1, 2009; amended effective October 1, 2019. 45-06-01.1-07.2. Standard Medicare supplement benefit plans for 2020 standardized Medicare supplement benefit plan policies or certificates issued for delivery to individuals newly eligible for Medicare on or after January 1, 2020.

The Medicare Access and CHIP Reauthorization Act of 2015 requires the following standards are applicable to all Medicare supplement policies or certificates delivered or issued for delivery in this state to individuals newly eligible for Medicare on or after January 1, 2020. No policy or certificate that provides coverage of the Medicare part B deductible may be advertised, solicited, delivered or issued for delivery in this state as a Medicare supplement policy or certificate to individuals newly eligible for Medicare on or after January 1, 2020. All policies must comply with the following benefit standards.

Benefit plan standards applicable to Medicare supplement policies and certificates issued to individuals eligible for Medicare before January 1, 2020, remain subject to the requirements of sections 45-06-01.1-06, 45-06-01.1-06.1, 45-06-01.1-07, and 45-06-01.1-07.1.

1.Benefit requirements. The standards and requirements of section 45-06-01.1-07.1 apply to all Medicare supplement policies or certificates delivered or issued for delivery to individuals newly eligible for Medicare on or after January 1, 2020, with the following exceptions:

a.Standardized Medicare supplement benefit plan C is redesignated as plan D and must provide the benefits contained in subdivision c of subsection 5 of section 45-06-01.1-07.1 of this regulation but may not provide coverage for one hundred percent or any portion of

b.Standardized Medicare supplement benefit plan F is redesignated as plan G and must provide the benefits contained in subdivision e of subsection 5 of section 45-06-01.1-07.1 of this regulation but may not provide coverage for one hundred percent or any portion of

c.Standardized Medicare supplement benefit places C, F, and F with high deductible may not be offered to individuals newly eligible for Medicare on or after January 1, 2020.

d.Standardized Medicare supplement benefit plan F with high deductible is redesignated as plan G with high deductible and must provide the benefits contained in subdivision f of subsection 5 of section 45-06-01.1-07.1 of this regulation but may not provide coverage for one hundred percent or any portion of the Medicare part B deductible; provided further that, the Medicare part B deductible paid by the beneficiary shall be considered an out-of-pocket expense in meeting the annual high deductible.

e.The reference to plans C or F contained in subdivision b of subsection 1 of section 45-06-01.1-07.1 is deemed a reference to plans D or G for purposes of this section.

2.Applicability to certain individuals. This section applies to only individuals newly eligible for Medicare on or after January 1, 2020:

a.By reason of attaining age sixty-five on or after January 1, 2020; or

b.By reason of entitlement to benefits under part A pursuant to section 226(b) or 226A of the Social Security Act, or who is deemed to be eligible for benefits under section 226(a) of the Social Security Act on or after January 1, 2020.

3.Guaranteed issue for eligible persons. For purposes of subsection 5 of section 45-06-01.1-09.1 in the case of any individual newly eligible for Medicare on or after January 1, 2020, any reference to a Medicare supplement policy C or F (including F with high deductible) is deemed to be a reference to Medicare supplement policy D or G (including G with high deductible), respectively, that meet the requirements of subsection 1.

4.Applicability to waivered states. In the case of a state described in section 1882(p)(6) of the Social Security Act ("waivered" alternative simplification states) Medicare Access and CHIP Reauthorization Act of 2015 prohibits the coverage of the Medicare part B deductible for any Medicare supplement policy sold or issued to an individual that is newly eligible for Medicare on or after January 1, 2020.

5.Offer of redesignated plans to individuals other than newly eligible. On or after January 1, 2020, the standardized benefit plans described in subdivision d of subsection 1 may be offered to any individual who was eligible for Medicare prior to January 1, 2020, in addition to the standardized plans described in subsection 5 of section 45-06-01.1-07.1 of this regulation.

History: Effective January 1, 2020. 45-06-01.1-08. Medicare select policies and certificates. 1.a.This section applies to Medicare select policies and certificates, as defined in this

section.

b.No policy or certificate may be advertised as a Medicare select policy or certificate unless it meets the requirements of this section.

2.For the purposes of this section:

a."Complaint" means any dissatisfaction expressed by an individual concerning a Medicare select issuer or its network providers.

b."Grievance" means dissatisfaction expressed in writing by an individual insured under a Medicare select policy or certificate with the administration, claims practices, or provision of services concerning a Medicare select issuer or its network providers.

c."Medicare select issuer" means an issuer offering, or seeking to offer, a Medicare select policy or certificate.

d."Medicare select policy" or "Medicare select certificate" mean respectively a Medicare supplement policy or certificate that contains restricted network provisions.

e."Network provider" means a provider of health care, or a group of providers of health care, which has entered into a written agreement with the issuer to provide benefits insured under a Medicare select policy.

f."Restricted network provision" means any provision which conditions the payment of benefits, in whole or in part, on the use of network providers.

g."Service area" means the geographic area approved by the commissioner within which an issuer is authorized to offer a Medicare select policy.

3.The commissioner may authorize an issuer to offer a Medicare select policy or certificate, pursuant to this section and section 4358 of the Omnibus Budget Reconciliation Act of 1990 [Pub. L. 101-508; 104 Stat. 1388; 42 U.S.C. 1395ss(t)(1)] if the commissioner finds that the issuer has satisfied all of the requirements of this regulation.

4.A Medicare select issuer may not issue a Medicare select policy or certificate in this state until its plan of operation has been approved by the commissioner.

5.A Medicare select issuer must file a proposed plan of operation with the commissioner in a format prescribed by the commissioner. The plan of operation must contain at least the following information:

a.Evidence that all covered services that are subject to restricted network provisions are available and accessible through network providers, including a demonstration that:

(1)Services can be provided by network providers with reasonable promptness with respect to geographic location, hours of operation, and after-hour care. The hours of operation and availability of after-hour care must reflect usual practice in the local area. Geographic availability must reflect the usual travel times within the community.

(2)The number of network providers in the service area is sufficient, with respect to current and expected policyholders, either:

(a)To deliver adequately all services that are subject to a restricted network provision; or (b)To make appropriate referrals.

(3)There are written agreements with network providers describing specific responsibilities.

(4)Emergency care is available twenty-four hours per day and seven days per week.

(5)In the case of covered services that are subject to a restricted network provision and are provided on a prepaid basis, there are written agreements with network providers prohibiting the providers from billing or otherwise seeking reimbursement from or recourse against any individual insured under a Medicare select policy or certificate. This paragraph does not apply to supplemental charges or coinsurance amounts as stated in the Medicare select policy or certificate.

b.A statement or map providing a clear description of the service area.

c.A description of the grievance procedure to be utilized.

d.A description of the quality assurance program, including:

(1)The formal organizational structure;

(2)The written criteria for selection, retention, and removal of network providers; and (3)The procedures for evaluating quality of care provided by network providers and the process to initiate corrective action when warranted.

e.A list and description, by specialty, of the network providers.

f.Copies of the written information proposed to be used by the issuer to comply with subsection 9.

g.Any other information requested by the commissioner. 6.a.A Medicare select issuer must file any proposed changes to the plan of operation, except for changes to the list of network providers, with the commissioner prior to implementing such changes. Such changes must be considered approved by the commissioner after thirty days unless specifically disapproved.

b.An updated list of network providers must be filed with the commissioner at least quarterly.

7.A Medicare select policy or certificate may not restrict payment for covered services provided by non-network providers if:

a.The services are for symptoms requiring emergency care or are immediately required for an unforeseen illness, injury, or a condition; and

b.It is not reasonable to obtain such services through a network provider.

8.A Medicare select policy or certificate must provide payment for full coverage under the policy for covered services that are not available through network providers.

9.A Medicare select issuer must make full and fair disclosure in writing of the provisions, restrictions, and limitations of the Medicare select policy or certificate to each applicant. This disclosure must include at least the following:

a.An outline of coverage sufficient to permit the applicant to compare the coverage and premiums of the Medicare select policy or certificate with:

(1)Other Medicare supplement policies or certificates offered by the issuer; and (2)Other Medicare select policies or certificates.

b.A description (including address, telephone number, and hours of operation) of the network providers, including primary care physicians, specialty physicians, hospitals, and other providers.

c.A description of the restricted network provisions, including payments for coinsurance and deductibles when providers other than network providers are utilized. Except to the extent specified in the policy or certificate, expenses incurred when using out-of-network providers do not count toward the out-of-pocket annual limit contained in plans K and L.

d.A description of coverage for emergency and urgently needed care and other out-of-service area coverage.

e.A description of limitations on referrals to restricted network providers and to other providers.

f.A description of the policyholder's rights to purchase any other Medicare supplement policy or certificate otherwise offered by the issuer.

g.A description of the Medicare select issuer's quality assurance program and grievance procedure.

10.Prior to the sale of a Medicare select policy or certificate, a Medicare select issuer must obtain from the applicant a signed and dated form stating that the applicant has received the information provided pursuant to subsection 9 and that the applicant understands the restrictions of the Medicare select policy or certificate.

11.A Medicare select issuer must have and use procedures for hearing complaints and resolving written grievances from the subscribers. Such procedures must be aimed at mutual agreement for settlement and may include arbitration procedures.

a.The grievance procedure must be described in the policy and certificates and in the outline of coverage.

b.At the time the policy or certificate is issued, the issuer must provide detailed information to the policyholder describing how a grievance may be registered with the issuer.

c.Grievances must be considered in a timely manner and shall be transmitted to appropriate decisionmakers who have authority to fully investigate the issue and take corrective action.

d.If a grievance is found to be valid, corrective action must be taken promptly.

e.All concerned parties must be notified about the results of a grievance.

f.The issuer must report no later than each March thirty-first to the commissioner regarding its grievance procedure. The report must be in a format prescribed by the commissioner and must contain the number of grievances filed in the past year and a summary of the subject, nature, and resolution of such grievances.

12.At the time of initial purchase, a Medicare select issuer must make available to each applicant for a Medicare select policy or certificate the opportunity to purchase any Medicare supplement policy or certificate otherwise offered by the issuer. 13.a.At the request of an individual insured under a Medicare select policy or certificate, a Medicare select issuer must make available to the individual insured the opportunity to purchase a Medicare supplement policy or certificate offered by the issuer which has comparable or lesser benefits and which does not contain a restricted network provision.

The issuer must make the policies or certificates available without requiring evidence of insurability after the Medicare select policy or certificate has been in force for six months.

b.For the purposes of this subsection, a Medicare supplement policy or certificate will be considered to have comparable or lesser benefits unless it contains one or more significant benefits not included in the Medicare select policy or certificate being replaced. For the purposes of this paragraph, a significant benefit means coverage for the Medicare part A deductible, coverage for at-home recovery services, or coverage for Medicare part B excess charges.

14.Medicare select policies and certificates must provide for continuation of coverage in the event the secretary of health and human services determines that Medicare select policies and certificates issued pursuant to this section should be discontinued due to either the failure of the Medicare select program to be reauthorized under law or its substantial amendment.

a.Each Medicare select issuer must make available to each individual insured under a Medicare select policy or certificate the opportunity to purchase any Medicare supplement policy or certificate offered by the issuer which has comparable or lesser benefits and which does not contain a restricted network provision. The issuer must make such policies and certificates available without requiring evidence of insurability.

b.For the purposes of this subsection, a Medicare supplement policy or certificate will be considered to have comparable or lesser benefits unless it contains one or more significant benefits not included in the Medicare select policy or certificate being replaced. For the purposes of this paragraph, a significant benefit means coverage for the Medicare part A deductible, coverage for at-home recovery services, or coverage for

part B excess charges.

15.A Medicare select issuer must comply with reasonable requests for data made by state or federal agencies, including the United States department of health and human services, for the purpose of evaluating the Medicare select program.

History: Effective January 1, 1992; amended effective July 8, 1997; September 1, 2005. 45-06-01.1-09. Open enrollment.

1.Any issuer may not deny or condition the issuance or effectiveness of any Medicare supplement policy or certificate available for sale in this state, or discriminate in the pricing of such a policy or certificate because of the health status, claims experience, receipt of health care, or medical condition of an applicant in the case of an application for a policy or certificate that is submitted prior to or during the six-month period beginning with the first day of the first month in which an individual is both sixty-five years of age or older and is enrolled for benefits under Medicare part B. Each Medicare supplement policy and certificate currently available from an insurer must be made available to all applicants who qualify under this subsection without regard to age. 2.a.If an applicant qualifies under subsection 1 and submits an application during the time period referenced in subsection 1 and, as of the date of application, has had a continuous period of creditable coverage of at least six months, the issuer may not exclude benefits based on a preexisting condition.

b.If the applicant qualifies under subsection 1 and submits an application during the time period referenced in subsection 1 and, as of the date of application, has had a continuous period of creditable coverage that is less than six months, the issuer shall reduce the period of any preexisting condition exclusion by the aggregate of the period of creditable coverage applicable to the applicant as of the enrollment date. The secretary shall specify the manner of the reduction under this subsection.

3.Except as provided in subsection 2 and sections 45-06-01.1-09.1 and 45-06-01.1-20, subsection 1 may not be construed as preventing the exclusion of benefits under a policy, during the first six months, based on a preexisting condition for which the policyholder or certificate holder received treatment or was otherwise diagnosed during the six months before the coverage became effective.

History: Effective January 1, 1992; amended effective July 8, 1997; August 27, 1998; September 1, 2005. 45-06-01.1-09.1. Guaranteed issue for eligible persons.

1.Guaranteed issue.

a.Eligible persons are those individuals described in subsection 2 who seek to enroll under the policy during the period specified in subsection 3, and who submit evidence of the date of termination, disenrollment, or Medicare part D enrollment with the application for a Medicare supplement policy.

b.With respect to eligible persons, an issuer may not deny or condition the issuance or effectiveness of a Medicare supplement policy described in subsection 5 that is offered and is available for issuance to new enrollees by the issuer, may not discriminate in the pricing of such a Medicare supplement policy because of health status, claims experience, receipt of health care, or medical condition, and may not impose an exclusion of benefits based on a preexisting condition under such a Medicare supplement policy.

2.Eligible persons. An eligible person is an individual described in any of the following subdivisions:

a.The individual is enrolled under an employee welfare benefit plan that provides health benefits that supplement the benefits under Medicare, and the plan terminates, or the plan ceases to provide all such supplemental health benefits to the individual;

b.The individual is enrolled with a Medicare advantage organization under a Medicare advantage plan under part C of Medicare, and any of the following circumstances apply, or the individual is sixty-five years of age or older and is enrolled with a program of all-inclusive care for the elderly provider under section 1894 of the Social Security Act, and there are circumstances similar to those described below that would permit discontinuance of the individual's enrollment with such provider if such individual were enrolled in a Medicare advantage plan:

(1)The organization's or plan's certification has been terminated;

(2)The organization has terminated or otherwise discontinued providing the plan in the area in which the individual resides;

(3)The individual is no longer eligible to elect the plan because of a change in the individual's place of residence or other change in circumstances specified by the secretary, but not including termination of the individual's enrollment on the basis described in section 1851(g)(3)(B) of the federal Social Security Act, if the individual has not paid premiums on a timely basis or has engaged in disruptive behavior as specified in standards under section 1856, or the plan is terminated for all individuals within a residence area;

(4)The individual demonstrates, in accordance with guidelines established by the secretary, that:

(a)The organization offering the plan substantially violated a material provision of the organization's contract under this part in relation to the individual, including the failure to provide an enrollee on a timely basis medically necessary care for which benefits are available under the plan or the failure to provide such covered care in accordance with applicable quality standards; or (b)The organization, or agent or other entity acting on the organization's behalf, materially misrepresented the plan's provision in marketing the plan to the individual; or (5)The individual meets such other exceptional conditions as the secretary may provide. c.(1)The individual is enrolled with:

(a)An eligible organization operating under a contract under section 1876 of the Social Security Act (Medicare cost);

(b)A similar organization operating under demonstration project authority, effective for periods before April 1, 1999;

(c)An organization under an agreement under section 1833(a)(1)(A) of the Social Security Act (health care prepayment plan); or (d)An organization under a Medicare select policy; and (2)The enrollment ceases under the same circumstances that would permit discontinuance of an individual's election of coverage under subdivision b of subsection 2;

d.The individual is enrolled under a Medicare supplement policy and the enrollment ceases because:

(1)(a)Of the insolvency of the issuer or bankruptcy of the nonissuer organization; or (b)Of other involuntary termination of coverage or enrollment under the policy;

(2)The issuer of the policy substantially violated a material provision of the policy; or (3)The issuer, or an agent or other entity acting on the issuer's behalf, materially misrepresented the policy's provisions in marketing the policy to the individual; e.(1)The individual was enrolled under a Medicare supplement policy and terminates enrollment and subsequently enrolls, for the first time, with any Medicare advantage organization under a Medicare advantage plan under part C of Medicare, any eligible organization under a contract under section 1876 of the Social Security Act regarding Medicare cost, any similar organization operating under demonstration project authority, any program of all-inclusive care for the elderly provider under

section 1894 of the Social Security Act, or a Medicare select policy; and (2)The subsequent enrollment under paragraph 1 is terminated by the enrollee during any period within the first twelve months of such subsequent enrollment, during which the enrollee is permitted to terminate such subsequent enrollment under

section 1851(e) of the federal Social Security Act; or

f.The individual, upon first becoming eligible for benefits under part A of Medicare at age sixty-five, enrolls in a Medicare advantage plan under part C of Medicare, or in a program of all-inclusive care for the elderly provider under section 1894 of the Social Security Act, and disenrolls from the plan or program by not later than twelve months after the effective date of enrollment.

g.The individual enrolls in a Medicare part D plan during the initial enrollment period and, at the time of enrollment in part D, was enrolled under a Medicare supplement policy that covers outpatient prescription drugs and the individual terminates enrollment in the Medicare supplement policy and submits evidence of enrollment in Medicare part D along with the application for a policy described in subdivision d of subsection 5.

3.Guaranteed issue time periods.

a.In the case of an individual described in subdivision a of subsection 2, the guaranteed issue period begins on the later of: (i) the date the individual receives a notice of termination or cessation of all supplemental health benefits or, if such notice is not received, notice that a claim has been denied because of a termination or cessation; or (ii) the date that the applicable coverage terminates or ceases; and ends sixty-three days thereafter;

b.In the case of an individual described in subdivision b, c, e, or f of subsection 2 whose enrollment is terminated involuntarily, the guaranteed issue period begins on the date that the individual receives a notice of termination and ends sixty-three days after the date the applicable coverage is terminated;

c.In the case of an individual described in paragraph 1 of subdivision d of subsection 2, the guaranteed issue period begins on the earlier of (i) the date that the individual receives a notice of termination, a notice of the issuer's bankruptcy or insolvency, or other such similar notice if any, and (ii) the date that the applicable coverage is terminated, and ends on the date that is sixty-three days after the date the coverage is terminated;

d.In the case of an individual described in subdivision b, d, e, or f of subsection 2 who disenrolls voluntarily, the guaranteed issue period begins on the date that is sixty days before the effective date of the disenrollment and ends sixty-three days after the effective date;

e.In the case of an individual described in subdivision g of subsection 2, the guaranteed issue period begins on the date the individual receives notice pursuant to section 1882(v)

(2)(B) of the Social Security Act from the Medicare supplement issuer during the sixty-day period immediately preceding the initial part D enrollment period and ends on the date that is sixty-three days after the effective date of the individual's coverage under Medicare part D; and

f.In the case of an individual described in subsection 2 but not described in the preceding provisions of this subsection, the guaranteed issue period begins on the effective date of disenrollment and ends on the date that is sixty-three days after the effective date.

4.Extended medigap access for interrupted trial periods.

a.In the case of an individual described in subdivision e of subsection 2, or deemed to be so described pursuant to this paragraph, whose enrollment with an organization or provider described in paragraph 1 of subdivision e of subsection 2 is involuntarily terminated within the first twelve months of enrollment, and who, without an intervening enrollment, enrolls with another such organization or provider, the subsequent enrollment shall be deemed to be an initial enrollment described in subdivision e of subsection 2;

b.In the case of an individual described in subdivision f of subsection 2, or deemed to be so described pursuant to this paragraph, whose enrollment with a plan or in a program described in subdivision f of subsection 2 is involuntarily terminated within the first twelve months of enrollment, and who, without an intervening enrollment, enrolls in another such plan or program, the subsequent enrollment shall be deemed to be an initial enrollment described in subdivision f of subsection 2; and

c.For purposes of subdivisions e and f of subsection 2, no enrollment of an individual with an organization or provider described in paragraph 1 of subdivision e of subsection 2, or with a plan or in a program described in subdivision f of subsection 2, may be deemed to be an initial enrollment under this paragraph after the two-year period beginning on the date on which the individual first enrolled with such an organization, provider, plan, or program.

5.Products to which eligible persons are entitled. The Medicare supplement policy to which eligible persons are entitled under:

a.Subdivisions a, b, c, and d of subsection 2 are a Medicare supplement policy that has a benefit package classified as plan A, B, C, F (including F with a high deductible), K, or L offered by any issuer. b.(1)Subject to paragraph 2, subdivision e of subsection 2 is the same Medicare supplement policy in which the individual was most recently previously enrolled, if available from the same issuer, or, if not so available, a policy described in subdivision a.

(2)After December 31, 2005, if the individual was most recently enrolled in a Medicare supplement policy with an outpatient prescription drug benefit, a Medicare supplement policy described in this paragraph is:

(a)The policy available from the same issuer but modified to remove outpatient prescription drug coverage; or (b)At the election of the policyholder, an A, B, C, F (including F with a high deductible), K, or L policy that is offered by any issuer.

c.Subdivision f of subsection 2 includes any Medicare supplement policy offered by any issuer.

d.Subdivision g of subsection 2 is a Medicare supplement policy that has a benefit package classified as plan A, B, C, F (including F with a high deductible), K, or L, and that is offered and is available for issuance to new enrollees by the same issuer that issued the individual's Medicare supplement policy with outpatient prescription drug coverage.

6.Notification provisions.

a.At the time of an event described in subsection 2 because of which an individual loses coverage or benefits due to the termination of a contract or agreement, policy, or plan, the organization that terminates the contract or agreement, issuer terminating the policy, or the administrator of the plan being terminated, respectively, shall notify the individual of the individual's rights under this section, and of the obligations of the issuers of Medicare supplement policies under subsection 1. Such notice shall be communicated contemporaneously with the notification of termination.

b.At the time of an event described in subsection 2 because of which an individual ceases enrollment under a contract or agreement, policy, or plan, the organization that offers the contract or agreement, regardless of the basis for the cessation of enrollment, the issuer offering the policy, or the administrator of the plan, respectively, shall notify the individual of the individual's rights under this section, and of the obligations of issuers of Medicare supplement policies under subsection 1. Such notice shall be communicated within ten working days of the issuer receiving notification of disenrollment.

History: Effective August 27, 1998; amended effective December 1, 2001; September 1, 2005; July 1, 2009.

General Authority: NDCC 26.1-36.1-02, 26.1-36.1-03 45-06-01.1-10. Standards for claims payment.

1.An issuer must comply with section 1882(c)(3) of the Social Security Act [as enacted by

section 4081(b)(2)(C) of the Omnibus Budget Reconciliation Act of 1987 (Pub. L. 100-203; 101 Stat. 1330; 42 U.S.C. 1395ss(c)(3))] by:

a.Accepting a notice from a Medicare carrier on dually assigned claims submitted by participating physicians and suppliers as a claim for benefits in place of any other claim form otherwise required and making a payment determination on the basis of the information contained in that notice;

b.Notifying the participating physician or supplier and the beneficiary of the payment determination;

c.Paying the participating physician or supplier directly;

d.Furnishing, at the time of enrollment, each enrollee with a card listing the policy name, number, and a central mailing address to which notices from a Medicare carrier may be sent;

e.Paying user fees for claim notices that are transmitted electronically or otherwise; and

f.Providing to the secretary of health and human services, at least annually, a central mailing address to which all claims may be sent by Medicare carriers.

2.Compliance with the requirements set forth in subsection 1 must be certified on the Medicare supplement insurance experience reporting form. 45-06-01.1-11. Loss ratio standards and refund or credit of premium.

1.Loss ratio standards. a.(1)A Medicare supplement policy form or certificate form may not be delivered or issued for delivery unless the policy form or certificate form can be expected, as estimated for the entire period for which rates are computed to provide coverage, to return to policyholders and certificate holders in the form of aggregate benefits (not including anticipated refunds or credits) provided under the policy form or certificate form:

(a)At least seventy-five percent of the aggregate amount of premiums earned in the case of group policies; or (b)At least sixty-five percent of the aggregate amount of premiums earned in the case of individual policies;

(2)Calculated on the basis of incurred claims experience or incurred health care expenses where coverage is provided by a health maintenance organization on a service rather than reimbursement basis and earned premiums for such period and in accordance with accepted actuarial principles and practices. Incurred health care expenses when coverage is provided by a health maintenance organization shall not include:

(a)Home office and overhead costs;

(b)Advertising costs;

(c)Commissions and other acquisition costs;

(d)Taxes;

(e)Capital costs;

(f)Administrative costs; and (g)Claims processing costs.

b.All filings of rates and rating schedules must demonstrate that expected claims in relation to premiums comply with the requirements of this section when combined with actual experience to date. Filings of rate revisions must also demonstrate that the anticipated loss ratio over the entire future period for which the revised rates are computed to provide coverage can be expected to meet the appropriate loss ratio standards.

c.For purposes of applying subdivision a of subsection 1 of this section and subdivision c of subsection 4 of section 45-06-01.1-12 only, policies issued as a result of solicitations of individuals through the mails or by mass media advertising (including both print and broadcast advertising) are deemed to be group policies.

d.For policies issued prior to January 1, 1992, expected claims in relation to premiums must meet:

(1)The originally filed anticipated loss ratios when combined with the actual experience since inception;

(2)The appropriate loss ratio requirements from subparagraphs a and b of paragraph 1 of subdivision a when combined with actual experience beginning with July 1, 1997, to date; and (3)The appropriate loss ratio requirement from subparagraphs a and b of paragraph 1 of subdivision a over the entire future period for which the rates are computed to provide coverage.

2.Refund or credit calculation.

a.An issuer must collect and file with the commissioner by May thirty-first of each year the data contained in the applicable reporting form contained in appendix A for each type in a standard Medicare supplement benefit plan.

b.If on the basis of the experience as reported the benchmark ratio since inception (ratio 1) exceeds the adjusted experience ratio since inception (ratio 3), then a refund or credit calculation is required. The refund calculation must be done on a statewide basis for each type in a standard Medicare supplement benefit plan. For purposes of the refund or credit calculation, experience on policies issued within the reporting year must be excluded.

c.For the purposes of this section, policies or certificates issued prior to January 1, 1992, the issuer shall make the refund or credit calculation separately for all individual policies (including all group policies subject to an individual loss ratio standard when issued) combined and all other group policies combined for experience after July 1, 1997. The first report is due by May 31, 1998.

d.A refund or credit may be made only when the benchmark loss ratio exceeds the adjusted experience loss ratio and the amount to be refunded or credited exceeds a de minimis level. The refund must include interest from the end of the calendar year to the date of the refund or credit at a rate specified by the secretary of health and human services, but in no event may it be less than the average rate of interest for thirteen-week treasury notes. A refund or credit against premiums due must be made by September thirtieth following the experience year upon which the refund or credit is based.

3.Annual filing of premium rates. An issuer of Medicare supplement policies and certificates issued before or after the effective date of this chapter must file annually its rates, rating schedule, and supporting documentation including ratios of incurred losses to earned premiums by policy duration for approval by the commissioner in accordance with the filing requirements and procedures prescribed by the commissioner. The supporting documentation must also demonstrate in accordance with actuarial standards of practice using reasonable assumptions that the appropriate loss ratio standards can be expected to be met over the entire period for which rates are computed. The demonstration must exclude active life reserves. An expected third-year loss ratio which is greater than or equal to the applicable percentage must be demonstrated for policies or certificates in force less than three years.

As soon as practicable, but prior to the effective date of enhancements in Medicare benefits, every issuer of Medicare supplement policies or certificates in this state must file with the commissioner, in accordance with the applicable filing procedures of this state: a.(1)Appropriate premium adjustments necessary to produce loss ratios as anticipated for the current premium for the applicable policies or certificates. The supporting documents as necessary to justify the adjustment must accompany the filing.

(2)An issuer must make premium adjustments necessary to produce an expected loss ratio under the policy or certificate to conform to minimum loss ratio standards for Medicare supplement policies and which are expected to result in a loss ratio at least as great as that originally anticipated in the rates used to produce current premiums by the issuer for the Medicare supplement policies or certificates. No premium adjustment which would modify the loss ratio experience under the policy other than the adjustments described herein may be made with respect to a policy at any time other than upon its renewal date or anniversary date.

(3)If an issuer fails to make premium adjustments acceptable to the commissioner, the commissioner may order premium adjustments, refunds, or premium credits deemed necessary to achieve the loss ratio required by this section.

b.Any appropriate riders, endorsements, or policy forms needed to accomplish the Medicare supplement policy or certificate modifications necessary to eliminate benefit duplications with Medicare. The riders, endorsements, or policy forms must provide a clear description of the Medicare supplement benefits provided by the policy or certificate.

4.Public hearings. The commissioner may conduct a public hearing to gather information concerning a request by an issuer for an increase in a rate for a policy form or certificate form issued before or after the effective date of this chapter if the experience of the form for the previous reporting period is not in compliance with the applicable loss ratio standard. The determination of compliance is made without consideration of any refund or credit for such reporting period. Public notice of the hearing may be furnished in a manner deemed appropriate by the commissioner.

History: Effective January 1, 1992; amended effective July 8, 1997; September 1, 2005.

Law Implemented: NDCC 26.1-36.1-04 45-06-01.1-12. Filing and approval of policies and certificates and premium rates.

1.An issuer may not deliver or issue for delivery a policy or certificate to a resident of this state unless the policy form or certificate form has been filed with and approved by the commissioner in accordance with filing requirements and procedures prescribed by the commissioner.

2.An issuer shall file any riders or amendments to policy or certificate forms to delete outpatient prescription drug benefits as required by the Medicare Prescription Drug Improvement and Modernization Act of 2003 only with the commissioner in the state in which the policy or certificate was issued.

3.An issuer may not use or change premium rates for a Medicare supplement policy or certificate unless the rates, rating schedule, and supporting documentation have been filed with and approved by the commissioner in accordance with the filing requirements and procedures prescribed by the commissioner. 4.a.Except as provided in subdivision b of this subsection, an issuer may not file for approval more than one form of a policy or certificate of each type for each standard Medicare supplement benefit plan.

b.An issuer may offer, with the approval of the commissioner, up to four additional policy forms or certificate forms of the same type for the same standard Medicare supplement benefit plan, one for each of the following cases:

(1)The inclusion of new or innovative benefits.

(2)The addition of either direct response or agent marketing methods.

(3)The addition of either guaranteed issue or underwritten coverage.

(4)The offering of coverage to individuals eligible for Medicare by reason of disability.

c.For the purposes of this section, a "type" means an individual policy, a group policy, an individual Medicare select policy, or a group Medicare select policy. 5.a.Except as provided in paragraph 1, an issuer must continue to make available for purchase any policy form or certificate form issued after the effective date of this

regulation that has been approved by the commissioner. A policy form or certificate form may not be considered to be available for purchase unless the issuer has actively offered it for sale in the previous twelve months.

(1)An issuer may discontinue the availability of a policy form or certificate form if the issuer provides to the commissioner in writing its decision at least thirty days prior to discontinuing the availability of the form of the policy or certificate. After receipt of the notice by the commissioner, the issuer may no longer offer for sale the policy form or certificate form in this state.

(2)An issuer that discontinues the availability of a policy form or certificate form pursuant to paragraph 1 may not file for approval a new policy form or certificate form of the same type for the same standard Medicare supplement benefit plan as the discontinued form for a period of five years after the issuer provides notice to the commissioner of the discontinuance. The period of discontinuance may be reduced if the commissioner determines that a shorter period is appropriate.

b.The sale or other transfer of Medicare supplement business to another issuer is considered a discontinuance for the purposes of this subsection.

c.A change in the rating structure or methodology is considered a discontinuance under subdivision a unless the issuer complies with the following requirements:

(1)The issuer provides an actuarial memorandum, in a form and manner prescribed by the commissioner, describing the manner in which the revised rating methodology and resultant rates differ from the existing rating methodology and existing rates.

(2)The issuer does not subsequently put into effect a change of rates or rating factors that would cause the percentage differential between the discontinued and subsequent rates as described in the actuarial memorandum to change. The commissioner may approve a change to the differential which is in the public interest. 6.a.Except as provided in subdivision b, the experience of all policy forms or certificate forms of the same type in a standard Medicare supplement benefit plan must be combined for purposes of the refund or credit calculation prescribed in section 45-06-01.1-11.

b.Forms assumed under an assumption reinsurance agreement may not be combined with the experience of other forms for purposes of the refund or credit calculation.

History: Effective January 1, 1992; amended effective July 1, 1994; September 1, 2005. 45-06-01.1-13. Permitted compensation arrangements.

1.An issuer or other entity must provide level commissions or other compensation to an agent or other representative for the sale of a Medicare supplement policy or certificate for the year of issuance and no fewer than five renewal years.

2.No issuer or other entity may provide compensation to its agents or other producers and no agent or producer may receive compensation greater than the renewal compensation payable by the replacing issuer on renewal policies or certificates if an existing policy or certificate is replaced.

3.For purposes of this section, "compensation" includes pecuniary or nonpecuniary remuneration of any kind relating to the sale or renewal of the policy or certificate including, but not limited to, bonuses, gifts, prizes, awards, and finders fees.

4.This section does not apply to an issuer or other entity that provides a one-time commission or other compensation provided the amount paid to an agent or other representative for the sale of a Medicare supplement insurance policy or certificate does not exceed twenty-five dollars.

This payment is in lieu of level commissions.

History: Effective January 1, 1992; amended effective January 6, 1992.

General Authority: NDCC 26.1-36.1-02(1)(2)

Law Implemented: NDCC 26.1-36.1-03 45-06-01.1-14. Required disclosure provisions.

1.General rules.

a.Medicare supplement policies and certificates must include a renewal or continuation provision. The language or specifications of the provision must be consistent with the type of contract issued. Such provision must be appropriately captioned and must appear on the first page of the policy, and must include any reservation by the issuer of the right to change premiums and any automatic renewal premium increases based on the policyholder's age.

b.Except for riders or endorsements by which the issuer effectuates a request made in writing by the insured, exercises a specifically reserved right under a Medicare supplement policy, or is required to reduce or eliminate benefits to avoid duplication of Medicare benefits, all riders or endorsements added to a Medicare supplement policy after date of issue or at reinstatement or renewal which reduce or eliminate benefits or coverage in the policy must require a signed acceptance by the insured. After the date of policy or certificate issue, any rider or endorsement which increases benefits or coverage with a concomitant increase in premium during the policy term must be agreed to in writing signed by the insured, unless the benefits are required by the minimum standards for Medicare supplement policies, or if the increased benefits or coverage is required by law. When a separate additional premium is charged for benefits provided in connection with riders or endorsements, the premium charge must be set forth in the policy.

c.Medicare supplement policies or certificates may not provide for the payment of benefits based on standards described as "usual and customary", "reasonable and customary", or words of similar import.

d.If a Medicare supplement policy or certificate contains any limitations with respect to preexisting conditions, such limitations must appear as a separate paragraph of the policy and be labeled as "preexisting condition limitations".

e.Medicare supplement policies and certificates must have a notice prominently printed on the first page of the policy or certificate or attached thereto stating in substance that the policyholder or certificate holder has the right to return the policy or certificate within thirty days of its delivery and to have the premium refunded if, after examination of the policy or certificate, the insured person is not satisfied for any reason. f.(1)Issuers of accident and sickness policies or certificates which provide hospital or medical expense coverage on an expense incurred or indemnity basis to persons eligible for Medicare must provide to those applicants a guide to health insurance for people with Medicare in the form developed jointly by the national association of insurance commissioners and the centers for Medicare and Medicaid services and in a type size no smaller than twelve-point type. Delivery of the guide must be made whether or not such policies or certificates are advertised, solicited, or issued as Medicare supplement policies or certificates as defined in this regulation. Except in the case of direct response issuers, delivery of the guide must be made to the applicant at the time of application and acknowledgment of receipt of the guide must be obtained by the insurer. Direct response issuers must deliver the guide to the applicant upon request but not later than at the time the policy is delivered.

(2)For the purposes of this section, "form" means the language, format, type size, type proportional spacing, bold character, and line spacing.

2.Notice requirements.

a.As soon as practicable, but no later than thirty days prior to the annual effective date of any Medicare benefit changes, an issuer must notify its policyholders and certificate holders of modifications it has made to Medicare supplement insurance policies or certificates in a format acceptable to the commissioner. The notice must:

(1)Include a description of revisions to the Medicare program and a description of each modification made to the coverage provided under the Medicare supplement policy or certificate; and (2)Inform each policyholder or certificate holder as to when any premium adjustment is to be made due to changes in Medicare.

b.The notice of benefit modifications and any premium adjustments must be in outline form and in clear and simple terms so as to facilitate comprehension.

c.Such notices may not contain or be accompanied by any solicitation.

3.Medicare Prescription Drug Improvement and Modernization Act of 2003 notice requirements. Issuers must comply with any notice requirements of the Medicare Prescription Drug Improvement and Modernization Act of 2003.

4.Outline of coverage requirements for Medicare supplement policies.

a.Issuers must provide an outline of coverage to all applicants at the time application is presented to the prospective applicant and, except for direct response policies, must obtain an acknowledgment of receipt of the outline from the applicant; and

b.If an outline of coverage is provided at the time of application and the Medicare supplement policy or certificate is issued on a basis which would require revision of the outline, a substitute outline of coverage properly describing the policy or certificate must accompany such policy or certificate when it is delivered and contain the following statement, in no less than twelve-point type, immediately above the company name:

"NOTICE: Read this outline of coverage carefully. It is not identical to the outline of coverage provided upon application and the coverage originally applied for has not been issued."

c.The outline of coverage provided to applicants pursuant to this section consists of four parts: a cover page, premium information, disclosure pages, and charts displaying the features of each benefit plan offered by the issuer. The outline of coverage must be in the language and format prescribed below in no less than twelve-point type. All plans must be shown on the cover page, and the plans that are offered by the issuer must be prominently identified. Premium information for plans that are offered must be shown on the cover page or immediately following the cover page and must be prominently displayed. The premium and mode must be stated for all plans that are offered to the prospective applicant. All possible premiums for the prospective applicant must be illustrated.

d.The following items must be included in the outline of coverage in the order prescribed below:

Benefit Chart of Medicare Supplement Plans Sold for Effective Dates on or After June 1, 2010 This chart shows the benefits included in each of the standard Medicare supplement plans. Every company must make Plan A available. Some plans may not be available in your state.

Basic Benefits:

• Hospitalization - Part A coinsurance plus coverage for 365 additional days after Medicare benefits end.

• Medical Expenses - Part B coinsurance (generally 20 percent of Medicare- approved expenses) or copayments for hospital outpatient services. Plans K, L, and N require insureds to pay a portion of Part B coinsurance or copayments.

• Blood - First three pints of blood each year.

• Hospice - Part A coinsurance.

ABCDFF*GKLMN

Basic, including Hospitalization and preventive care paid at 100%; other basic benefits paid at 50% Hospitalization and preventive care paid at 100%; other basic benefits paid at 75% including 100% Basic, including 100% Part B coinsurance, except up to $20 copayment for office visit, and up to $50 copayment for ER Skilled Nursing 50% Skilled Nursing Facility 75% Skilled Nursing Facility Skilled Nursing 50% Part A 75% Part A 50% Part A

Part A Deductible

Part B Excess (100%)

Part B Excess (100%)

Foreign Travel Emergency *Plan F also has an option called a high deductible Plan F. This high deductible plan pays the same benefits as Plan F after one has paid a calendar year [$2,240] deductible. Benefits from high deductible Plan F will not begin until out-of-pocket expenses exceed [$2,240]. Out-of-pocket expenses for this deductible are expenses that would ordinarily be paid by the policy. These expenses include the Medicare deductibles for Part A and Part B, but do not include the plan's separate foreign travel emergency deductible.

Out-of-pocket limit [$5,240]; paid at 100% after limit reached Out-of-pocket limit [$2,620]; paid at 100% after limit reached PREMIUM INFORMATION [Boldface Type]

We [insert issuer's name] can only raise your premium if we raise the premium for all policies like yours in this State. [If the premium is based on the increasing age of the insured, include information specifying when premiums will change.]

DISCLOSURES [Boldface Type]

Use this outline to compare benefits and premiums among policies.

This outline shows benefits and premiums of policies sold for effective dates on or after June 1, 2010. Policies sold for effective dates prior to June 1, 2010, have different benefits and premiums. Plans E, H, I, and J are no longer available for sale. [This paragraph shall not appear after June 1, 2011.]

READ YOUR POLICY VERY CAREFULLY [Boldface Type]

This is only an outline describing your policy's most important features. The policy is your insurance contract. You must read the policy itself to understand all of the rights and duties of both you and your insurance company.

RIGHT TO RETURN POLICY [Boldface Type]

If you find that you are not satisfied with your policy, you may return it to [insert issuer's address]. If you send the policy back to us within 30 days after you receive it, we will treat the policy as if it had never been issued and return all of your payments.

POLICY REPLACEMENT [Boldface Type]

If you are replacing another health insurance policy, do NOT cancel it until you have actually received your new policy and are sure you want to keep it.

NOTICE [Boldface Type]

This policy may not fully cover all of your medical costs. [for agents:]

Neither [insert company's name] nor its agents are connected with Medicare. [for direct response:] [insert company's name] is not connected with Medicare.

This outline of coverage does not give all the details of Medicare coverage. Contact your local Social Security Office or consult Medicare and You for more details.

COMPLETE ANSWERS ARE VERY IMPORTANT [Boldface Type]

When you fill out the application for the new policy, be sure to answer truthfully and completely all questions about your medical and health history. The company may cancel your policy and refuse to pay any claims if you leave out or falsify important medical information. [If the policy or certificate is guaranteed issue, this paragraph need not appear.]

Review the application carefully before you sign it. Be certain that all information has been properly recorded. [Include for each plan prominently identified in the cover page, a chart showing the services, Medicare payments, plan payments and insured payments for each plan, using the same language, in the same order, using uniform layout and format as shown in the charts below. No more than four plans may be shown on one chart. For purposes of illustration, charts for each plan are included in this regulation. An issuer may use additional benefit plan designations on these charts pursuant to subsection 4 of Section 45-06-01.1-07.1.] [Include an explanation of any innovative benefits on the cover page and in the chart, in a manner approved by the commissioner.]

Benefit Chart of Medicare Supplement Plans Sold On or After January 1, 2020 This chart shows the benefits included in each of the standard Medicare supplement plans. Some plans may not be available. Only applicants first eligible for Medicare before 2020 may purchase plans C, F, and high deductible F.

Note: A  means one hundred percent of the benefits is paid.

BenefitsPlans Available to All Applicants Medicare First Eligible Before 2020 Only ABDG KLMNCF Medicare part A coinsurance and hospital coverage (up to an additional 365 days after Medicare benefits are used up)  coinsurance or copayment Copays apply Blood (first three pints)

Part A hospice care coinsurance or copayment Skilled nursing facility coinsurance Medicare part A deductible 50%75%50%  deductible excess charges Foreign travel emergency (up to plan limits)    Out-of-pocket limit in [2018] [$5,240] [$2,620]

Plans F and G also have a high deductible option which require first paying a plan deductible of [$2,240] before the plan begins to pay. Once the plan deductible is met, the plan pays one hundred percent of covered services for the rest of the calendar year. High deductible plan G does not cover the Medicare part B deductible. However, high deductible plans F and G count your payment of the Medicare part B deductible toward meeting the plan deductible.

Plans K and L pay one hundred percent of covered services for the rest of the calendar year once you meet the out-of-pocket yearly limit.

Plan N pays one hundred percent of the part B coinsurance, except for a copayment of up to $20 for some office visits and up to a $50 copayment for emergency room visits that do not result in an inpatient admission.

PLAN A * A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for 60 days in First 60 daysAll but [$1,340]$0[$1,340] (Part A deductible)

SKILLED NURSING

FACILITY CARE*

Medicare-approved facility Within 30 days after leaving the hospital 21st thru 100th dayAll but [$167.50] a day$0Up to [$167.50] a day requirements, including a doctor's certification of terminal illness. ** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional 365 days as provided in the policy's "Core Benefits." During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare would have PLAN A * Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year.

MEDICARE-APPROVED --Medically necessary skilled care services and medical PLAN B * A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for 60 days in 21st thru 100th dayAll but [$167.50] a day$0Up to [$167.50] a day ** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional 365 days as provided in the policy's "Core Benefits." During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare would have PLAN B * Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year.

MEDICARE-APPROVED --Medically necessary skilled care services and medical PLAN C * A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for 60 days in ** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional 365 days as provided in the policy's "Core Benefits." During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare would have PLAN C * Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year.

IN OR OUT OF THE HOSPITAL AND

OUTPATIENT HOSPITAL TREATMENT, such as physician's services, inpatient and outpatient medical and surgical services and supplies, physical and speech therapy, diagnostic tests, durable medical

Part B Excess Charges (Above Medicare-approved amounts)

Next [$183] of Medicare-approved amounts*$0[$183] (Part B Remainder of Medicare-approved amounts80%20%$0 SERVICES--TESTS FOR DIAGNOSTIC --Medically necessary skilled care services and medical supplies Medically necessary emergency care services beginning during the first 60 days of each trip outside the USA * A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for 60 days in ** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional 365 days as provided in the policy's "Core Benefits." During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare would have * Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year.

HOSPITAL AND

OUTPATIENT HOSPITAL diagnostic tests, durable medical equipment, (Above --Medically necessary skilled care services and medical supplies Remainder of Medicare-approved amounts80%20%$0 * A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for 60 days in [** This high deductible plan pays the same benefits as Plan F after one has paid a calendar year [$2,240] deductible. Benefits from the high deductible plan F will not begin until out-of-pocket expenses are [$2,240]. Out-of-pocket expenses for this deductible are expenses that would ordinarily be paid by the policy. This includes the Medicare deductibles for Part A and Part B, but does not include the plan's separate foreign travel emergency deductible.]

[IN ADDITION

TO [$2,240]

Semiprivate room and board, general nursing and miscellaneous services and supplies While using 60 lifetime reserve daysAll but [$670] a day[$670] a day $0 Once lifetime reserve days are used:

Additional 365 days$0100% of Beyond the additional 365 days$0$0All costs including having been in a hospital for at least 3 days and entered a Medicare-approved facility within 30 days after leaving the hospital including a doctor's certification of terminal illness. *** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional 365 days as provided in the policy's "Core Benefits." During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare * Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year. [** This high deductible plan pays the same or offers the same benefits as Plan F after one has paid a calendar year [$2,240] deductible. Benefits from the high deductible plan F will not begin until out-of-pocket expenses are [$2,240]. Out-of-pocket expenses for this deductible are expenses that would ordinarily be paid by the policy. This includes the Medicare deductibles for

Part A and Part B, but does not include the plan's separate foreign travel emergency deductible.]

MEDICAL EXPENSES -

IN OR OUT OF THE HOSPITAL

AND OUTPATIENT HOSPITAL diagnostic tests, durable medical $0[$183] (Part B deductible)$0 $0100%$0 $0[$183] (Part B deductible)$0 * A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for 60 days in [** This high deductible plan pays the same benefits as Plan G after one has paid a calendar year [$2,240] deductible. Benefits from the high deductible Plan G will not begin until out-of-pocket expenses are [$2,240]. Out-of-pocket expenses for this deductible include expenses for the Medicare Part B deductible, and expenses that would ordinarily be paid by the policy. This does not include the plan's separate foreign travel emergency deductible.]

[$2,240] DEDUCTIBLE,

**] PLAN PAYS

[$2,240] DEDUCTIBLE,

**] YOU PAY

Semiprivate room and board, general nursing and miscellaneous services and supplies including having been in a hospital for at least 3 days and entered a Medicare-approved facility within 30 days after leaving the hospital *** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional 365 days as provided in the policy's "Core Benefits." During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare PLAN G or HIGH DEDUCIBLE PLAN G * Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year. [** This high deductible plan pays the same benefits as Plan G after one has paid a calendar year [$2,240] deductible. Benefits from the high deductible Plan G will not begin until out-of-pocket expenses are [$2,240]. Out-of-pocket expenses for this deductible include expenses for the Medicare Part B deductible, and expenses that would ordinarily be paid by the policy. This does not include the plan's separate foreign travel emergency deductible.]

DEDUCTIBLE, **] YOU PAY

MEDICAL EXPENSES - $0100%$0 $0$0[$183] (unless Part B deductible has been met)

DEDUCTIBLE, **] YOU

PAY $0$0[$183] (unless Part B deductible has been met)

DEDUCTIBLE, **] YOU

PAY FOREIGN TRAVEL--NOT COVERED

BY MEDICARE

Medically necessary emergency care services beginning during the first 60 days of each trip outside the USA Remainder of charges$080% to a lifetime maximum benefit of $50,000 20% and amounts over the $50,000 lifetime maximum * You will pay half the cost-sharing of some covered services until you reach the annual out-of-pocket limit of [$5,240] each calendar year. The amounts that count toward your annual limit are noted with diamonds (♦) in the chart below. Once you reach the annual limit, the plan pays 100% of your Medicare copayment and coinsurance for the rest of the calendar year. However, this limit does NOT include charges from your provider that exceed Medicare-approved amounts (these are called "Excess Charges") and you will be responsible for paying this difference in the amount charged by your provider and the amount paid by Medicare for the item or service. ** A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for 60 days in a row.

HOSPITALIZATION** general nursing and miscellaneous services and supplies First 60 daysAll but [$1,340][$670] (50% of Part A [$670] (50% of Part A All but [$670] a day [$670] a day$0 CARE** 21st thru 100th dayAll but [$167.50] a dayUp to [$83.75] a dayUp to [$183.75] a day♦ First 3 pints$050%50%♦ for outpatient drugs and 50% of 50% of Medicare copayment/coinsurance♦ *** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional 365 days as provided in the policy's "Core Benefits." During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare **** Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year.

HOSPITAL AND

OUTPATIENT HOSPITAL diagnostic tests, durable medical equipment, Preventive benefits for Medicare-covered services Generally 75% or more of All costs above Generally 80%Generally 10%Generally 10%♦ $0$0All costs (and they do not count toward annual out-of-pocket limit of [$5,240])* First 3 pints$050%50%♦ Generally 80%Generally 10%Generally 10%♦ * This plan limits your annual out-of-pocket payments for Medicare-approved amounts to [$5,240] per year. However, this limit does NOT include charges from your provider that exceed Medicare-approved amounts (these are called "Excess Charges") and you will be responsible for paying this difference in the amount charged by your provider and the amount paid by Medicare for the item or service. amounts***** 80%10%10%♦ ***** Medicare benefits are subject to change. Please consult the latest Guide to Health Insurance for People with Medicare. * You will pay one-fourth of the cost-sharing of some covered services until you reach the annual out-of-pocket limit of [$2,620] each calendar year. The amounts that count toward your annual limit are noted with diamonds (♦) in the chart below. Once you reach the annual limit, the plan pays 100% of your Medicare copayment and coinsurance for the rest of the calendar year. However, this limit does NOT include charges from your provider that exceed Medicare-approved amounts (these are called "Excess Charges") and you will be responsible for paying this difference in the amount charged by your provider and the amount paid by Medicare for the item or service. ** A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for 60 days in a row.

HOSPITALIZATION** general nursing and miscellaneous services and supplies First 60 daysAll but [$1,340] [$1,005] (75% of Part A [$335] (25% of Part A --Once lifetime reserve days are used:

CARE** 21st thru 100th dayAll but [$167.50] a dayUp to [$125.63] a dayUp to [$41.88] a day♦ First 3 pints$075%25%♦ for outpatient drugs and 75% of 25% of copayment/coinsurance♦ *** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional 365 days as provided in the policy's "Core Benefits." During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare **** Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year.

Preventive benefits for Medicare-covered services Generally 75% or more of All costs above Generally 80%Generally 15%Generally 5%♦ $0$0All costs (and they do not count toward annual out-of-pocket limit of [$2,620])* First 3 pints$075%25%♦ $0$0[$183] (Part B deductible)♦ Generally 80%Generally 15%Generally 5%♦ * This plan limits your annual out-of-pocket payments for Medicare-approved amounts to [$2,620] per year. However, this limit does NOT include charges from your provider that exceed Medicare-approved amounts (these are called "Excess Charges") and you will be responsible for paying this difference in the amount charged by your provider and the amount paid by Medicare for the item or service. amounts***** 80%15%5%♦ ***** Medicare benefits are subject to change. Please consult the latest Guide to Health Insurance for People with Medicare. * A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for 60 days in First 60 daysAll but [$1,340] [$670] (50% of Part A [$670] (50% of Part A CARE* ** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional 365 days as provided in the policy's "Core Benefits". During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare would have * Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year.

Medically necessary skilled care --Durable medical equipment100%$0$0 * A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for 60 days in First 60 daysAll but [$1,340] [$1,340] (Part A deductible)$0 CARE* 0% ** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional 365 days as provided in the policy's "Core Benefits". During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare * Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year.

Generally 80%Balance, other than up to [$20] per office visit and up to [$50] per emergency room visit. The copayment of up to [$50] is waived if the insured is admitted to any hospital and the emergency visit is covered as a Medicare Part A expense.

Up to [$20] per office visit and up to [$50] per emergency room visit. The copayment of up to [$50] is waived if the insured is admitted to any hospital and the emergency visit is covered as a Medicare Part A expense.

Medically necessary skilled care --Durable medical equipment100%$0$0

5.Notice regarding policies or certificates that are not Medicare supplement policies.

a.Any accident and sickness insurance policy or certificate, other than a Medicare supplement policy; a policy issued pursuant to a contract under section 1876 of the Social Security Act [42 U.S.C. 1395 et seq.]; disability income policy; or other policy identified in subsection 2 of section 45-06-01.1-01, issued for delivery in this state to persons eligible for Medicare, must notify insureds under the policy that the policy is not a Medicare supplement policy or certificate. The notice must either be printed or attached to the first page of the outline of coverage delivered to insureds under the policy, or if no outline of coverage is delivered, to the first page of the policy, or certificate delivered to insureds. The notice must be in no less than twelve-point type and must contain the following language:

"THIS [POLICY OR CERTIFICATE] IS NOT A MEDICARE SUPPLEMENT [POLICY OR

CONTRACT]. If you are eligible for Medicare, review the Guide to Health Insurance for People with Medicare available from the company."

b.Applications provided to persons eligible for Medicare for the health insurance policies for certificates described in subdivision a must disclose, using the applicable statement in

appendix C, the extent to which the policy duplicates Medicare. The disclosure statement must be provided as a part of, or together with, the application for the policy or certificate.

History: Effective January 1, 1992; amended effective August 1, 1992; July 1, 1994; April 1, 1996;

July 1, 1998; August 27, 1998; December 1, 2001; September 1, 2005; July 1, 2009; January 1, 2020.

General Authority: NDCC 26.1-36.1-03, 26.1-36.1-05

Law Implemented: NDCC 26.1-36.1-05 45-06-01.1-15. Requirements for application forms and replacement coverage.

1.Application forms must include the following questions designed to elicit information as to whether, as of the date of the application, the applicant currently has Medicare supplement, Medicare advantage, Medicaid coverage, or other health insurance policy or certificate in force or whether a Medicare supplement policy or certificate is intended to replace any other accident and sickness policy or certificate presently in force. A supplementary application or other form to be signed by the applicant and agent containing such questions and statements may be used. [Statements]

1.You do not need more than one Medicare supplement policy.

2.If you purchase this policy, you may want to evaluate your existing health coverage and decide if you need multiple coverages.

3.You may be eligible for benefits under Medicaid and may not need a Medicare supplement policy.

4.If, after purchasing this policy, you become eligible for Medicaid, the benefits and premiums under your Medicare supplement policy can be suspended, if requested, during your entitlement to benefits under Medicaid for 24 months. You must request this suspension within 90 days of becoming eligible for Medicaid. If you are no longer entitled to Medicaid, your suspended Medicare supplement policy (or, if that is no longer available, a substantially equivalent policy) will be reinstituted if requested within 90 days of losing Medicaid eligibility. If the Medicare supplement policy provided coverage for outpatient prescription drugs and you enrolled in Medicare Part D while your policy was suspended, the reinstituted policy will not have outpatient prescription drug coverage, but will otherwise be substantially equivalent to your coverage before the date of the suspension.

5.If you are eligible for, and have enrolled in a Medicare supplement policy by reason of disability and you later become covered by an employer or union-based group health plan, the benefits and premiums under your Medicare supplement policy can be suspended, if requested, while you are covered under the employer or union-based group health plan. If you suspend your Medicare supplement policy under these circumstances, and later lose your employer or union-based group health plan, your suspended Medicare supplement policy (or, if that is no longer available, a substantially equivalent policy) will be reinstituted if requested within 90 days of losing your employer or union-based group health plan. If the Medicare supplement policy provided coverage for outpatient prescription drugs and you enrolled in Medicare Part D while your policy was suspended, the reinstituted policy will not have outpatient prescription drug coverage, but will otherwise be substantially equivalent to your coverage before the date of the suspension.

6.Counseling services may be available in your state to provide advice concerning your purchase of Medicare supplement insurance and concerning medical assistance through the state medical assistance program, including benefits as a qualified Medicare beneficiary (QMB) and a special low-income Medicare beneficiary (SLMB). [Questions]

If you lost or are losing other health insurance coverage and received a notice from your prior insurer saying you were eligible for guaranteed issue of a Medicare supplement insurance policy, or that you had certain rights to buy such a policy, you may be guaranteed acceptance in one or more of our Medicare supplement plans. Please include a copy of the notice from your prior insurer with your application. PLEASE ANSWER ALL QUESTIONS. [Please mark Yes or No below with an "X"]

To the best of your knowledge, 1.a.Did you turn age 65 in the last 6 months?

b.Did you enroll in Medicare Part B in the last 6 months?

c.If yes, what is the effective date? _____________

2.Are you covered for medical assistance through the state Medicaid program? [NOTE TO APPLICANT: If you are participating in a "Spend-Down Program" and have not met your "Share of Cost," please answer NO to this question.]

If yes,

a.Will Medicaid pay your premiums for this Medicare supplement policy?

b.Do you receive any benefits from Medicaid OTHER THAN payments toward your Medicare Part B premium? 3.a.If you had coverage from any Medicare plan other than original Medicare within the past 63 days (for example, a Medicare Advantage plan, or a Medicare HMO or PPO), fill in your start and end dates below. If you are still covered under this plan, leave "END" blank.

START / / END / /

b.If you are still covered under the Medicare plan, do you intend to replace your current coverage with this new Medicare supplement policy?

c.Was this your first time in this type of Medicare plan?

d.Did you drop a Medicare supplement policy to enroll in the Medicare plan? 4.a.Do you have another Medicare supplement policy in force?

b.If so, with what company, and what plan do you have [optional for Direct Mailers]?

c.If so, do you intend to replace your current Medicare supplement policy with this policy?

5.Have you had coverage under any other health insurance within the past 63 days? (For example, an employer, union, or individual plan)

a.If so, with what company and what kind of policy?

b.What are your dates of coverage under the other policy?

START / / END / /

If you are still covered under the other policy, leave "END" blank.

2.Agents shall list any other health insurance policies they have sold to the applicant.

a.List policies sold which are still in force.

b.List policies sold in the past five years which are no longer in force.

3.In the case of a direct response issuer, a copy of the application or supplemental form, signed by the applicant, and acknowledged by the insurer, must be returned to the applicant by the insurer upon delivery of the policy.

4.Upon determining that a sale will involve replacement of Medicare supplement coverage, any issuer, other than a direct response issuer, or its agent, must furnish the applicant, prior to issuance or delivery of the Medicare supplement policy or certificate, a notice regarding replacement of Medicare supplement coverage. One copy of the notice signed by the applicant and the agent, except where the coverage is sold without an agent, must be provided to the applicant and an additional signed copy must be retained by the issuer. A direct response issuer must deliver to the applicant at the time of the issuance of the policy the notice regarding replacement of Medicare supplement coverage.

5.The notice required by subsection 4 for an issuer must be provided in substantially the following form in no less than twelve-point type:

NOTICE TO APPLICANT REGARDING REPLACEMENT OF

MEDICARE SUPPLEMENT INSURANCE

OR MEDICARE ADVANTAGE [Insurance company's name and address]

SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FUTURE

According to [your application] [information you have furnished], you intend to terminate existing Medicare supplement or Medicare Advantage insurance and replace it with a policy to be issued by [Company Name] Insurance Company. Your new policy will provide thirty (30) days within which you may decide without cost whether you desire to keep the policy.

You should review this new coverage carefully. Compare it with all accident and sickness coverage you now have. If, after due consideration, you find that purchase of this Medicare supplement coverage is a wise decision, you should terminate your present Medicare supplement or Medicare Advantage coverage. You should evaluate the need for other accident and sickness coverage you have that may duplicate this policy.

STATEMENT TO APPLICANT BY ISSUER, AGENT [BROKER OR OTHER REPRESENTATIVE]:

I have reviewed your current medical or health insurance coverage. To the best of my knowledge, this Medicare supplement policy will not duplicate your existing Medicare supplement or, if applicable, Medicare Advantage coverage because you intend to terminate your existing Medicare supplement coverage or leave your Medicare Advantage plan. The replacement policy is being purchased for the following reason (check one):

Additional benefits.

No change in benefits, but lower premiums.

Fewer benefits and lower premiums.

My plan has outpatient prescription drug coverage and I am enrolling in Part D.

Disenrollment from a Medicare Advantage plan. Please explain reason for disenrollment [Optional only for Direct Mailers].

Other. (please specify)

1.Note: If the issuer of the Medicare supplement policy being applied for does not, or is otherwise prohibited from imposing preexisting condition limitations, please skip to statement 2 below. Health conditions which you may presently have (preexisting conditions) may not be immediately or fully covered under the new policy. This could result in denial or delay of a claim for benefits under the new policy, whereas a similar claim might have been payable under your present policy.

2.State law provides that your replacement policy or certificate may not contain new preexisting conditions, waiting periods, elimination periods, or probationary periods. The insurer will waive any time periods applicable to preexisting conditions, waiting periods, elimination periods, or probationary periods in the new policy (or coverage) for similar benefits to the extent such time was spent (depleted) under the original policy.

3.If you still wish to terminate your present policy and replace it with new coverage, be certain to truthfully and completely answer all questions on the application concerning your medical and health history. Failure to include all material medical information on an application may provide a basis for the company to deny any future claims and to refund your premium as though your policy had never been in force. After the application has been completed and before you sign it, review it carefully to be certain that all information has been properly recorded. [If the policy or certificate is guaranteed issue, this paragraph need not appear.]

Do not cancel your present policy until you have received your new policy and are sure that you want to keep it.

(Signature of Agent, Broker or Other Representative)* [Typed Name and Address of Issuer, Agent or Broker]

(Applicant's Signature)

(Date) *Signature not required for direct response sales.

6.Paragraphs 1 and 2 of the replacement notice (applicable to preexisting conditions) may be deleted by an issuer if the replacement does not involve application of a new preexisting condition limitation.

History: Effective January 1, 1992; amended effective July 1, 1994; April 1, 1996; July 8, 1997;

September 1, 2005.

Law Implemented: NDCC 26.1-36.1-02, 26.1-36.1-05 45-06-01.1-16. Filing requirements for advertising.

An issuer must provide a copy of any Medicare supplement advertisement intended for use in this state whether through written, radio, or television medium to the insurance commissioner of this state for review or approval by the commissioner to the extent it may be required under state law.

Law Implemented: NDCC 26.1-36.1-07 45-06-01.1-17. Standards for marketing.

1.An issuer, directly or through its producers, must:

a.Establish marketing procedures to assure that any comparison of policies by its agents or other producers will be fair and accurate.

b.Establish marketing procedures to assure excessive insurance is not sold or issued.

c.Display prominently by type, stamp, or other appropriate means on the first page of the policy the following:

"Notice to buyer: This policy may not cover all of your medical expenses."

d.Inquire and otherwise make every reasonable effort to identify whether a prospective applicant or enrollee for Medicare supplement insurance already has accident and sickness insurance and the types and amounts of any such insurance.

e.Establish auditable procedures for verifying compliance with this subsection.

2.In addition to the practices prohibited in North Dakota Century Code chapter 26.1-04, the following acts and practices are prohibited:

a.Twisting. Knowingly making any misleading representation or incomplete or fraudulent comparison of any insurance policies or insurers for the purpose of inducing, or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, or convert any insurance policy or to take out a policy of insurance with another insurer.

b.High pressure tactics. Employing any method of marketing having the effect of or tending to induce the purchase of insurance through force, fright, threat, whether explicit or implied, or undue pressure to purchase or recommend the purchase of insurance.

c.Cold lead advertising. Making use directly or indirectly of any method of marketing which fails to disclose in a conspicuous manner that a purpose of the method of marketing is solicitation of insurance and that contact will be made by an insurance agent or insurance company.

3.The terms "Medicare supplement", "medigap", "Medicare wraparound", and words of similar import may not be used unless the policy is issued in compliance with this chapter. 45-06-01.1-18. Appropriateness of recommended purchase and excessive insurance.

1.In recommending the purchase or replacement of any Medicare supplement policy or certificate an agent shall make reasonable efforts to determine the appropriateness of a recommended purchase or replacement.

2.Any sale of a Medicare supplement policy or certificate that will provide an individual more than one Medicare supplement policy or certificate is prohibited.

3.An issuer shall not issue a Medicare supplement policy or certificate to an individual enrolled in Medicare part C unless the effective date of the coverage is after the termination date of the individual's part C coverage.

History: Effective January 1, 1992; amended effective September 1, 2005. 45-06-01.1-19. Reporting of multiple policies.

1.On or before March first of each year, an issuer must report the following information for every individual resident of this state for which the issuer has in force more than one Medicare supplement policy or certificate:

a.Policy and certificate number.

b.Date of issuance.

2.The items set forth above must be grouped by individual policyholder. 45-06-01.1-20. Prohibition against preexisting conditions, waiting periods, elimination periods, and probationary periods in replacement policies or certificates.

1.If a Medicare supplement policy or certificate replaces another Medicare supplement policy or certificate, the replacing issuer must waive any time periods applicable to preexisting conditions, waiting periods, elimination periods, and probationary periods in the new Medicare supplement policy or certificate for similar benefits to the extent such time was spent under the original policy.

2.If a Medicare supplement policy or certificate replaces another Medicare supplement policy or certificate which has been in effect for at least six months, the replacing policy may not provide any time period applicable to preexisting conditions, waiting periods, elimination periods, and probationary periods for benefits similar to those contained in the original policy or certificate.

History: Effective January 1, 1992; amended effective September 1, 2005. 45-06-01.1-20.1. Prohibition against use of genetic information and requests for genetic testing.

This section applies to all policies with policy years beginning on or after May 21, 2009.

1.An issuer of a Medicare supplement policy or certificate shall not:

a.Deny or condition the issuance or effectiveness of the policy or certificate, including the imposition of any exclusion of benefits under the policy based on a preexisting condition, on the basis of the genetic information with respect to such individual; and

b.Discriminate in the pricing of the policy or certificate, including the adjustment of premium rates, of an individual on the basis of the genetic information with respect to such individual.

2.Nothing in subsection a shall be construed to limit the ability of an issuer, to the extent otherwise permitted by law, from:

a.Denying or conditioning the issuance or effectiveness of the policy or certificate or increasing the premium for a group based on the manifestation of a disease or disorder of an insured or applicant; or

b.Increasing the premium for any policy issued to an individual based on the manifestation of a disease or disorder of an individual who is covered under the policy. In such case, the manifestation of a disease or disorder in one individual cannot also be used as genetic information about other group members and to further increase the premium for the group.

3.An issuer of a Medicare supplement policy or certificate shall not request or require an individual or a family member of such individual to undergo a genetic test.

4.Subsection 3 shall not be construed to preclude an issuer of a Medicare supplement policy or certificate from obtaining and using the results of a genetic test in making a determination regarding payment (as defined for the purposes of applying the regulations promulgated under

part C of title XI and section 264 of the Health Insurance Portability and Accountability Act of 1996, as may be revised from time to time) and consistent with subsection 1.

5.For purposes of carrying out subsection 4, an issuer of a Medicare supplement policy or certificate may request only the minimum amount of information necessary to accomplish the intended purpose.

6.Notwithstanding subsection 3, an issuer of a Medicare supplement policy may request, but not require, that an individual or a family member of such individual undergo a genetic test if each of the following conditions is met:

a.The request is made pursuant to research that complies with part 46 of title 45, Code of Federal Regulations, or equivalent federal regulations, and any applicable state or local law or regulations for the protection of human subjects in research.

b.The issuer clearly indicates to each individual, or in the case of a minor child, to the legal guardian of such child, to whom the request is made that:

(1)Compliance with the request is voluntary; and (2)Noncompliance will have no effect on enrollment status or premium or contribution amounts.

c.No genetic information collected or acquired under this subsection shall be used for underwriting, determination of eligibility to enroll or maintain enrollment status, premium rates, or the issuance, renewal, or replacement of a policy or certificate.

d.The issuer notifies the secretary in writing that the issuer is conducting activities pursuant to the exception provided for under this subsection, including a description of the activities conducted.

e.The issuer complies with such other conditions as the secretary may by regulation require for activities conducted under this subsection.

7.An issuer of a Medicare supplement policy or certificate shall not request, require, or purchase genetic information for underwriting purposes.

8.An issuer of a Medicare supplement policy or certificate shall not request, require, or purchase genetic information with respect to any individual prior to such individual's enrollment under the policy in connection with such enrollment.

9.If an issuer of a Medicare supplement policy or certificate obtains genetic information incidental to the requesting, requiring, or purchasing of other information concerning any individual, such request, requirement, or purchase shall not be considered a violation of subsection 8 if such request, requirement, or purchase is not in violation of subsection 7.

10.For the purposes of this section only:

a."Family member" means, with respect to an individual, any other individual who is a first-degree, second-degree, third-degree, or fourth-degree relative of such individual.

b."Genetic information" means, with respect to any individual, information about such individual's genetic tests, the genetic tests of family members of such individual, and the manifestation of a disease or disorder in family members of such individual. Such term includes, with respect to any individual, any request for, or receipt of, genetic services, or participation in clinical research which includes genetic services, by such individual or any family member of such individual. Any reference to genetic information concerning an individual or family member of an individual who is a pregnant woman, includes genetic information of any fetus carried by such pregnant woman, or with respect to an individual or family member utilizing reproductive technology, includes genetic information of any embryo legally held by an individual or family member. The term "genetic information" does not include information about the sex or age of any individual.

c."Genetic services" means a genetic test, genetic counseling (including obtaining, interpreting, or assessing genetic information), or genetic education.

d."Genetic test" means an analysis of human DNA, RNA, chromosomes, proteins, or metabolites, that detect genotypes, mutations, or chromosomal changes. The term "genetic test" does not mean an analysis of proteins or metabolites that does not detect genotypes, mutations, or chromosomal changes; or an analysis of proteins or metabolites that is directly related to a manifested disease, disorder, or pathological condition that could reasonably be detected by a health care professional with appropriate training and expertise in the field of medicine involved.

e."Issuer of a Medicare supplement policy or certificate" includes third-party administrator, or other person acting for or on behalf of such issuer.

f."Underwriting purposes" means:

(1)Rules for, or determination of, eligibility (including enrollment and continued eligibility) for benefits under the policy;

(2)The computation of premium or contribution amounts under the policy;

(3)The application of any preexisting condition exclusion under the policy; and (4)Other activities related to the creation, renewal, or replacement of a contract of health insurance or health benefits.

History: Effective July 1, 2009.

General Authority: NDCC 26.1-36.1-02(1)(20), 26.1-36.1-03 45-06-01.1-21. Separability.

If any provision of this chapter or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the chapter and the application of such provision to other persons or circumstances may not be affected thereby. 45-06-01.1-22. Effective date.

Repealed effective October 1, 2019.

APPENDIX A

MEDICARE SUPPLEMENT REFUND CALCULATION FORM

FOR CALENDAR YEAR _________________________

Line Earned Premium Incurred Claims

1.Current Year's Experience

a.Total (all policy years)

b.Current year's issues

c.Net (for reporting purposes = 1a-1b)

2.Past Years' Experience (all policy years)

3.Total Experience (Net Current Year + Past Year)

4.Refunds Last Year (Excluding Interest)

5.Previous Since Inception (Excluding Interest)

6.Refunds Since Inception (Excluding Interest)

7.Benchmark Ratio Since Inception (see worksheet for Ratio 1)

8.Experienced Ratio Since Inception (Ratio 2)

Total Actual Incurred Claims (line 3, col. b)

Total Earned Prem. (line 3, col. a) - Refunds Since Inception (line 6)

9.Life Years Exposed Since Inception If the Experienced Ratio is less than the Benchmark Ratio, and there are more than 500 life years exposure, then proceed to calculation of refund.

10.Tolerance Permitted (obtained from credibility table)

Medicare Supplement Credibility Table Life Years Exposed Since InceptionTolerance 10,000+0.0% 5,000-9,9995.0% 2,500-4,9997.5% 1,000-2,49910.0% 500-99915.0% If less than 500, no credibility. ______________________________ "SMSBP" = Standardized Medicare Supplement Benefit Plan - Use "P" for prestandardized plans.

Includes Modal Loadings and Fees Charged.

Excludes Active Life Reserves.

This is to be used as "Issue Year Earned Premium" for Year 1 of next year's "Worksheet for Calculation of Benchmark Ratios".

MEDICARE SUPPLEMENT REFUND CALCULATION FORM

FOR CALENDAR YEAR _________________________

11.Adjustment to Incurred Claims for Credibility Ratio 3 = Ratio 2 + Tolerance If Ratio 3 is more than Benchmark Ratio (Ratio 1), a refund or credit to premium is not required. If Ratio 3 is less than the Benchmark Ratio, then proceed.

12.Adjusted Incurred Claims [Total Earned Premiums (line 3, col. a)-Refunds Since Inception (line 6)] x Ratio 3 (line 11)

13.Refund = Total Earned Premiums (line 3, col. a)-Refunds Since Inception (line 6)-[Adjusted Incurred Claims (line 12)/Benchmark Ratio (Ratio 1)]

If the amount on line 13 is less than .005 times the annualized premium in force as of December 31 of the reporting year, then no refund is made. Otherwise, the amount on line 13 is to be refunded or credited, and a description of the refund or credit against premiums to be used must be attached to this form.

I certify that the above information and calculations are true and accurate to the best of my knowledge and belief.

Signature Name - Please Type Title - Please Type Date REPORTING FORM FOR THE CALCULATION OF BENCHMARK RATIO SINCE INCEPTION FOR GROUP POLICIES FOR CALENDAR YEAR __________________ 12.7700.5070.0000.0000.46 24.1750.5670.0000.0000.63 34.1750.5671.1940.7590.75 44.1750.5672.2450.7710.77 54.1750.5673.1700.7820.80 64.1750.5673.9980.7920.82 74.1750.5674.7540.8020.84 84.1750.5675.4450.8110.87 94.1750.5676.0750.8180.88 104.1750.5676.6500.8240.88 114.1750.5677.1760.8280.88 124.1750.5677.6550.8310.88 134.1750.5678.0930.8340.89 144.1750.5678.4930.8370.89 +6 4.1750.5678.6840.8380.89 Total:(k):(l):(m):(n):

Benchmark Ratio Since Inception: (l + n)/(k + m): __________________________ "SMSBP" = Standardized Medicare Supplement Benefit Plan - Use "P" for prestandardized plans.

Year 1 is the current calendar year - 1. Year 2 is the current calendar year - 2 (etc.) (Example: If the current year is 1991, then: Year 1 is 1990; Year 2 is 1989, etc.).

For the calendar year on the appropriate line in column (a), the premium earned during that year for policies issued in that year.

These loss ratios are not explicitly used in computing the benchmark loss ratios. They are the loss ratios, on a policy year basis, which result in the cumulative loss ratios displayed on this worksheet. They are shown here for informational purposes only.

To include the earned premium for all years prior to as well as the 15th year prior to the current year.

REPORTING FORM FOR THE CALCULATION OF BENCHMARK

RATIO SINCE INCEPTION FOR INDIVIDUAL POLICIES

FOR CALENDAR YEAR __________________ 12.7700.4420.0000.0000.40 24.1750.4930.0000.0000.55 34.1750.4931.1940.6590.65 44.1750.4932.2450.6690.67 54.1750.4933.1700.6780.69 64.1750.4933.9980.6860.71 74.1750.4934.7540.6950.73 84.1750.4935.4450.7020.75 94.1750.4936.0750.7080.76 104.1750.4936.6500.7130.76 114.1750.4937.1760.7170.76 124.1750.4937.6550.7200.77 134.1750.4938.0930.7230.77 144.1750.4938.4930.7250.77 +6 4.1750.4938.6840.7250.77 Total:(k):(l):(m):(n):

Benchmark Ratio Since Inception: (l + n)/(k + m): __________________________ "SMSBP" = Standardized Medicare Supplement Benefit Plan - Use "P" for prestandardized plans.

Year 1 is the current calendar year - 1. Year 2 is the current calendar year - 2 (etc.) (Example: If the current year is 1991, then: Year 1 is 1990; Year 2 is 1989, etc.).

For the calendar year on the appropriate line in column (a), the premium earned during that year for policies issued in that year.

These loss ratios are not explicitly used in computing the benchmark loss ratios. They are the loss ratios, on a policy year basis, which result in the cumulative loss ratios displayed on this worksheet. They are shown here for informational purposes only.

To include the earned premium for all years prior to as well as the 15th year prior to the current year.

APPENDIX B

FORM FOR REPORTING

MEDICARE SUPPLEMENT POLICIES

Company Name:

Address:

Telephone Number:

Due March 1, annually The purpose of this form is to report the following information on each resident of this state who has in force more than one Medicare supplement policy or certificate. The information is to be grouped by individual policyholder.

Policy and Certificate #Date of Issuance Signature Name and Title (please type)

Date

APPENDIX C

DISCLOSURE STATEMENTS

Instructions for Use of the Disclosure Statements for Health Insurance Policies Sold to Medicare Beneficiaries That Duplicate Medicare

1.Section 1882 (d) of the federal Social Security Act [42 U.S.C. 1395ss] prohibits the sale of a health insurance policy (the term policy includes certificate) to Medicare beneficiaries that duplicates Medicare benefits unless it will pay benefits without regard to a beneficiary's other health coverage and it includes the prescribed disclosure statement on or together with the application for the policy.

2.All types of health insurance policies that duplicate Medicare shall include one of the attached disclosure statements, according to the particular policy type involved, on the application or together with the application. The disclosure statement may not vary from the attached statements in terms of language or format (type size, type proportional spacing, bold character, line spacing, and usage of boxes around text).

3.State and federal law prohibits insurers from selling a Medicare supplement policy to a person that already has a Medicare supplement policy except as a replacement policy.

4.Property/casualty and life insurance policies are not considered health insurance.

5.Disability income policies are not considered to provide benefits that duplicate Medicare.

6.Long-term care insurance policies that coordinate with Medicare and other health insurance are not considered to provide benefits that duplicate Medicare.

7.The federal law does not preempt state laws that are more stringent than the federal requirements.

8.The federal law does not preempt existing state form filing requirements.

9.Section 1882 of the federal Social Security Act was amended in Subsection (d)(3)(A) to allow for alternative disclosure statements.

The disclosure statements already in Appendix C remain. Carriers may use either disclosure statement with the requisite insurance product. However, carriers should use either the original disclosure statements or the alternative disclosure statements and not use both simultaneously. [Original disclosure statement for policies that provide benefits for expenses incurred for an accidental injury only.]

This insurance provides limited benefits, if you meet the policy conditions, for hospital or medical expenses that result from accidental injury. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.

• hospital or medical expenses up to the maximum stated in the policy Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:

• hospitalization • physician services • [outpatient prescription drugs if you are enrolled in Medicare Part D]

• other approved items and services √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] [Original disclosure statement for policies that provide benefits for specified limited services.]

This insurance provides limited benefits, if you meet the policy conditions, for expenses relating to the specific services listed in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.

• any of the services covered by the policy are also covered by Medicare Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:

• hospitalization • physician services • [outpatient prescription drugs if you are enrolled in Medicare Part D]

• other approved items and services √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] [Original disclosure statement for policies that reimburse expenses incurred for specified diseases or other specified impairments. This includes expense-incurred cancer, specified disease and other types of health insurance policies that limit reimbursement to named medical conditions.]

This insurance provides limited benefits, if you meet the policy conditions, for hospital or medical expenses only when you are treated for one of the specific diseases or health conditions listed in the policy. It does not pay your Medicare deductibles or coinsurance and is not a • hospital or medical expenses up to the maximum stated in the policy Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:

• hospitalization • physician services • hospice • [outpatient prescription drugs if you are enrolled in Medicare Part D]

• other approved items and services √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] [Original disclosure statement for policies that pay fixed dollar amounts for specified diseases or other specified impairments. This includes cancer, specified disease, and other health insurance policies that pay a scheduled benefit or specific payment based on diagnosis of the conditions named in the policy.]

This insurance pays a fixed amount, regardless of your expenses, if you meet the policy conditions, for one of the specific diseases or health conditions named in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.

This insurance duplicates Medicare benefits because Medicare generally pays for most of the expenses for the diagnosis and treatment of the specific conditions or diagnoses named in the policy.

Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:

• hospitalization • physician services • hospice • [outpatient prescription drugs if you are enrolled in Medicare Part D]

• other approved items and services √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] [Original disclosure statement for indemnity policies and other policies that pay a fixed dollar amount per day, excluding long-term care policies.]

This insurance pays a fixed dollar amount, regardless of your expenses, for each day you meet the policy conditions. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.

• any expenses or services covered by the policy are also covered by Medicare Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:

• hospitalization • physician services • hospice • [outpatient prescription drugs if you are enrolled in Medicare Part D]

• other approved items and services √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] [Original disclosure statement for policies that provide benefits upon both an expense-incurred and fixed indemnity basis.]

This insurance pays limited reimbursement for expenses if you meet the conditions listed in the policy. It also pays a fixed amount, regardless of your expenses, if you meet other policy conditions. It does not pay your Medicare deductibles or coinsurance and is not a • any expenses or services covered by the policy are also covered by Medicare; or • it pays the fixed dollar amount stated in the policy and Medicare covers the same event Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:

• hospitalization • physician services • hospice care • [outpatient prescription drugs if you are enrolled in Medicare Part D]

• other approved items and services √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] [Original disclosure statement for other health insurance policies not specifically identified in the preceding statements.]

This insurance provides limited benefits if you meet the conditions listed in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.

• the benefits stated in the policy and coverage for the same event is provided by Medicare Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:

• hospitalization • physician services • hospice • [outpatient prescription drugs if you are enrolled in Medicare Part D]

• other approved items and services √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] [Alternative disclosure statement for policies that provide benefits for expenses incurred for an accidental injury only.]

Some health care services paid for by Medicare may also trigger the payment of benefits from this policy.

This insurance provides limited benefits, if you meet the policy conditions, for hospital or medical expenses that result from accidental injury. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.

Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:

• hospitalization • physician services • [outpatient prescription drugs if you are enrolled in Medicare Part D]

• other approved items and services This policy must pay benefits without regard to other health benefit coverage to which you may be entitled under Medicare or √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] [Alternative disclosure statement for policies that provide benefits for specified limited services.]

Some health care services paid for by Medicare may also trigger the payment of benefits under this policy.

This insurance provides limited benefits, if you meet the policy conditions, for expenses relating to the specific services listed in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.

Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:

• hospitalization • physician services • [outpatient prescription drugs if you are enrolled in Medicare Part D]

• other approved items and services This policy must pay benefits without regard to other health benefit coverage to which you may be entitled under Medicare or √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] [Alternative disclosure statement for policies that reimburse expenses incurred for specified diseases or other specified impairments. This includes expense-incurred cancer, specified disease and other types of health insurance policies that limit reimbursement to named medical conditions.]

Some health care services paid for by Medicare may also trigger the payment of benefits from this policy. Medicare generally pays for most or all of these expenses.

This insurance provides limited benefits, if you meet the policy conditions, for hospital or medical expenses only when you are treated for one of the specific diseases or health conditions listed in the policy. It does not pay your Medicare deductibles or coinsurance and is not a Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:

• hospitalization • physician services • hospice • [outpatient prescription drugs if you are enrolled in Medicare Part D]

• other approved items and services This policy must pay benefits without regard to other health benefit coverage to which you may be entitled under Medicare or √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] [Alternative disclosure statement for policies that pay fixed dollar amounts for specified diseases or other specified impairments. This includes cancer, specified disease, and other health insurance policies that pay a scheduled benefit or specific payment based on diagnosis of the conditions named in the policy.]

Some health care services paid for by Medicare may also trigger the payment of benefits from this policy.

This insurance pays a fixed amount, regardless of your expenses, if you meet the policy conditions, for one of the specific diseases or health conditions named in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.

Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:

• hospitalization • physician services • hospice • [outpatient prescription drugs if you are enrolled in Medicare Part D]

• other approved items and services This policy must pay benefits without regard to other health benefit coverage to which you may be entitled under Medicare or √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] [Alternative disclosure statement for indemnity policies and other policies that pay a fixed dollar amount per day, excluding long-term care policies.]

Some health care services paid for by Medicare may also trigger the payment of benefits from this policy.

This insurance pays a fixed dollar amount, regardless of your expenses, for each day you meet the policy conditions. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.

Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:

• hospitalization • physician services • hospice • [outpatient prescription drugs if you are enrolled in Medicare Part D]

• other approved items and services This policy must pay benefits without regard to other health benefit coverage to which you may be entitled under Medicare or √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] [Alternative disclosure statement for policies that provide benefits upon both an expense-incurred and fixed indemnity basis.]

Some health care services paid for by Medicare may also trigger the payment of benefits from this policy.

This insurance pays limited reimbursement for expenses if you meet the conditions listed in the policy. It also pays a fixed amount, regardless of your expenses, if you meet other policy conditions. It does not pay your Medicare deductibles or coinsurance and is not a Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:

• hospitalization • physician services • hospice care • [outpatient prescription drugs if you are enrolled in Medicare Part D]

• other approved items and services This policy must pay benefits without regard to other health benefit coverage to which you may be entitled under Medicare or √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] [Alternative disclosure statement for other health insurance policies not specifically identified in the preceding statements.]

Some health care services paid for by Medicare may also trigger the payment of benefits from this policy.

This insurance provides limited benefits if you meet the conditions listed in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.

Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:

• hospitalization • physician services • hospice • [outpatient prescription drugs if you are enrolled in Medicare Part D]

• other approved items and services This policy must pay benefits without regard to other health benefit coverage to which you may be entitled under Medicare or √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance]

Chapter 45-06-02 Intercarrier Health Insurance Pool

N.D. Admin. Code 45-06-02-01 Definitions

Unless otherwise defined, or made inappropriate by context, all words used in this chapter shall have the meanings given them under North Dakota Century Code chapter 26.1-08.

History

• Law Implemented: NDCC 26.1-08-01, 26.1-08-02, 26.1-08-03, 26.1-08-04, 26.1-08-06, 26.1-08-07, 26.1-08-08, 26.1-08-09, 26.1-08-10, 26.1-08-11, 26.1-08-12

N.D. Admin. Code 45-06-02-02 Assessment of insurers for losses and expenses of the comprehensive health association and comprehensive health insurance plan

1.Insurers which are members of the association will be assessed annually for their proportionate share of administrative expenses of the association and the amount by which operating, administrative, and claims expenses of the association plan exceed the association plan premium in each fiscal year of the association.

2.The association shall notify each insurer member of the association of the insurer's total annual premium volume for accident and sickness insurance policies received from or on behalf of state residents for the calendar year immediately preceding the assessment, as shown on page 46, column 3, line 25 of that insurer's annual statement if an accident and health insurance company, or the figures shown on page 14, column 3, lines 13, 15.1, 15.2, 15.3, 15.4, 15.5, and 15.6 if a property and casualty company, for the appropriate year required to be filed with the commissioner. That figure will be used in determining an insurer's proportionate share of association expenses and association plan losses under subsection 4 of North Dakota Century Code section 26.1-08-09, unless within thirty days after receiving notification the insurer objects in writing to the association and the commissioner. The objection shall set forth the following information:

a.The reasons why the figure shown on page 46, column 3, line 25 of its annual statement if an accident and health insurance company, or the figures shown on page 14, column 3, lines 13, 15.1, 15.2, 15.3, 15.4, 15.5, and 15.6 of its annual statement if a property and casualty company, should not be used in determining that insurer's proportionate share of association losses; and

b.A certification by that insurer's chief actuarial officer of the correct total annual premium volume for accident and sickness policies received from or on behalf of state residents.

3.The commissioner, within thirty days of receipt of the reason for the objection, shall notify the insurer of the acceptance or rejection of the objection to the figure used to determine the insurer members' assessment.

4.If the objection is accepted by the commissioner, an insurer members' assessment will be determined on that basis. If the objection is not accepted, an insurer members' assessment will be set on the basis established by the commissioner.

History

• Law Implemented: NDCC 26.1-08-01, 26.1-08-02, 26.1-08-03, 26.1-08-04, 26.1-08-06, 26.1-08-07, 26.1-08-08, 26.1-08-09, 26.1-08-10, 26.1-08-11, 26.1-08-12

N.D. Admin. Code 45-06-02-03 Penalty

If an insurer fails to pay an assessment, in the time prescribed, subject to the hearing requirements of North Dakota Century Code chapter 28-32, its membership in the association will cease, and it shall not be permitted to write accident and sickness insurance policies as defined in North Dakota Century Code chapter 26.1-08 in this state.

History

• Law Implemented: NDCC 26.1-08-03(4)

N.D. Admin. Code 45-06-02-04 Coordination of benefits with other accident and sickness insurance policies

The contracts issued by the comprehensive health association of North Dakota for accident and sickness insurance coverage must in all cases be considered secondary to any other accident and sickness insurance policy the insured may have. Benefits to be paid by the comprehensive health association of North Dakota for a covered person on any individual claim may not exceed the difference in the amount between allowable covered expenses for that claim and any amounts covered by other accident and sickness insurance policies carried by the insured. For the purpose of this section, policy includes insurance certificates and other evidence of coverage.

History

• History: Effective March 1, 1988.
• General Authority: NDCC 26.1-04-08
• Law Implemented: NDCC 26.1-04-03

Chapter 45-06-02.1 Comprehensive Health Association of North Dakota

N.D. Admin. Code 45-06-02.1 Comprehensive Health Association of North Dakota

CHAPTER 45-06-02.1

COMPREHENSIVE HEALTH ASSOCIATION OF NORTH DAKOTA

Section 45-06-02.1-01Definitions 45-06-02.1-02Grievance Procedures 45-06-02.1-03Enrollment by Certain Children 45-06-02.1-01. Definitions.

1."Applicant" means an individual seeking enrollment under the association.

2."Board" means the board of directors of the association as set forth under North Dakota Century Code section 26.1-08-03.

3."Enrollee" means an eligible person who is covered under an association plan.

4."Grievance" means a written complaint submitted in accordance with the formal grievance procedure by or on behalf of the enrollee or applicant regarding any aspect of the association relative to the enrollee or applicant.

History: Effective September 1, 1994. 45-06-02.1-02. Grievance procedures.

1.The board of directors of the association shall establish and maintain a grievance procedure which has been approved by the commissioner to provide procedures for the resolution of grievances initiated by enrollees or applicants. The board shall maintain records regarding grievances received.

2.The commissioner may examine the grievance procedures and records.

3.Any enrollee or applicant receiving an adverse determination through the grievance procedure may request a hearing pursuant to North Dakota Century Code chapter 28-32.

History: Effective September 1, 1994. 45-06-02.1-03. Enrollment by certain children.

A child will be deemed an "eligible person" pursuant to subdivision b of subsection 4 of North Dakota Century Code section 26.1-08-01, despite the lack of eighteen months of qualifying previous coverage, if:

1.The child was covered under any qualifying previous coverage within thirty days of birth, adoption, or placement for adoption; and

2.The child has not had a break in qualifying previous coverage which exceeds sixty-three days.

History: Effective December 1, 1997.

Chapter 45-06-03 Standard Health Insurance Proof of Loss Forms

N.D. Admin. Code 45-06-03 Standard Health Insurance Proof of Loss Forms

CHAPTER 45-06-03

STANDARD HEALTH INSURANCE PROOF OF LOSS FORMS [Superseded by Chapter 45-06-03.1]

Chapter 45-06-03.1 Standardized Health Claim Form Model Regulation

N.D. Admin. Code 45-06-03.1 Standardized Health Claim Form Model Regulation

CHAPTER 45-06-03.1

STANDARDIZED HEALTH CLAIM FORM MODEL REGULATION

Section 45-06-03.1-01Definitions 45-06-03.1-02Applicability and Scope 45-06-03.1-03General Provisions 45-06-03.1-01. Definitions.

As used in this chapter:

1."CDT-1 codes" means the current dental terminology prescribed by the American dental association.

2."CPT-4 codes" means the current procedural terminology published by the American medical association.

3."HCFA" means the health care financing administration of the United States department of health and human services.

4."HCFA form 1450" means the health insurance claim form published by HCFA for use by institutional care practitioners.

5."HCFA form 1500" means the health insurance claim form published by HCFA for use by health care practitioners.

6."HCPCS" means HCFA's common procedure coding system, a coding system which describes products, supplies, procedures, and health professional services and includes the American medical association's physician current procedural terminology, fourth edition (CPT-4) codes, alphanumeric codes, and related modifiers. This includes:

a."HCPCS level 1 codes" which are the American medical association's CPT-4 codes and modifiers for professional services and procedures.

b."HCPCS level 2 codes" which are national alphanumeric codes and modifiers for health care products and supplies, as well as some codes for professional services not included in the American medical association's CPT-4.

c."HCPCS level 3 codes" which are local alphanumeric codes and modifiers for items and services not included in HCPCS level 1 or HCPCS level 2.

7."Health care practitioner" means:

a.An addiction counselor licensed under North Dakota Century Code chapter 43-45.

b.An audiologist licensed under North Dakota Century Code chapter 43-37.

c.A chiropractor licensed under North Dakota Century Code chapter 43-06.

d.A corporation or partnership of health care practitioners defined in this section.

e.A dentist licensed under North Dakota Century Code chapter 43-28.

f.A nurse licensed under North Dakota Century Code chapter 43-12.1.

g.A nutritionist licensed under North Dakota Century Code chapter 43-44.

h.An optometrist licensed under North Dakota Century Code chapter 43-13.

i.A pharmacist licensed under North Dakota Century Code chapter 43-15.

j.A physician licensed under North Dakota Century Code chapter 43-17.

k.A podiatrist licensed under North Dakota Century Code chapter 43-05.

l.A psychologist licensed under North Dakota Century Code chapter 43-32.

m.A social worker licensed under North Dakota Century Code chapter 43-41.

n.A physical, speech, occupational, or respiratory therapist licensed under North Dakota Century Code chapters 43-26, 43-37, 43-40, or 43-42.

o.A home health care provider licensed under North Dakota Century Code chapter 23-17.3.

8."ICD-9-CM codes" means the diagnosis and procedure codes in the international classification of disease, ninth revision, clinical modifications published by the United States department of health and human services.

9."Institutional care practitioner" means:

a.A hospice licensed under North Dakota Century Code chapter 23-17.4.

b.A hospital licensed under North Dakota Century Code chapter 23-16, 23-17, or 23-17.1.

c.Certified rural health clinic, nursing facility, basic care facility, intermediate care facility for the mentally retarded, and residential treatment center.

10."Issuer" means an insurance company, fraternal benefit society, health care service plan, health maintenance organization, or third-party administrator, or any other entity reimbursing the costs of health care expenses.

11."J512 form" means the uniform dental claim form approved by the American dental association for use by dentists.

12."Medicare" means the Health Insurance for the Aged Act, title XVIII of the Social Security Amendments of 1965, as then constituted or later amended.

13."Medical assistance or Medicaid" means title XIX of the federal Social Security Act [42 U.S.C. 1396, et seq.] as then constituted or later amended.

14."Prescription universal claim form" means the uniform claim form used by pharmacists.

15."Revenue codes" means the codes established for use by institutional care practitioners by the national uniform billing committee. 45-06-03.1-02. Applicability and scope.

1.Except as otherwise specifically provided, the requirements of this chapter apply to issuers, health care practitioners, and institutional care practitioners.

2.Nothing in this chapter prevents an issuer from requesting additional information that is not contained on the forms required under this chapter to determine eligibility of the claim for payment if required under the terms of the policy or certificate issued to the claimant. 45-06-03.1-03. General provisions.

1.Health care practitioners and institutional care practitioners shall file claims in a manner consistent with the requirements of this chapter. Claims filed in paper form must be printed on eight and one-half by eleven-inch [21.59 by 27.94-centimeter] paper.

2.Issuers shall accept forms submitted in compliance with this chapter for the processing of claims.

3.Health care practitioners, institutional care practitioners, and issuers shall:

a.Use and accept the most current editions of the HCFA form 1450, HCFA form 1500, prescription universal claim form, or J512 form and most current instructions for these forms in the billing of patients or their representatives filing claims with issuers.

b.Modify their billing and claim reimbursement practices to encompass the coding changes for all billing and claim filing by the effective date of the changes set forth by the developers of the forms, codes, and procedures required under this chapter.

4.Issuers may not require health care practitioners to use any coding system for the initial filing of claims for health care services other than the following:

a.HCPCS codes.

b.ICD-9-CM codes.

c.Revenue codes.

5.Issuers may not require health care practitioners to use any other descriptor with a code or to furnish additional information with the initial submission of a HCFA form 1500 except under the following circumstances:

a.When the procedure code used describes a treatment or service that is not otherwise classified; or

b.When the procedure code is followed by the CPT-4 modifier 22, 52, or 99.

Chapter 45-06-04 Advertising Rules

N.D. Admin. Code 45-06-04-01 Purpose

The purpose of this chapter is to assure truthful and adequate disclosure of all material and relevant information in the advertising of disability and accident and sickness insurance (including nursing home, long-term care, and Medicare supplement insurance). This purpose is intended to be accomplished by the establishment of, and adherence to, certain minimum standards and guidelines of conduct in the advertising of such insurance in a manner which prevents unfair competition among insurers and is conducive to the accurate presentation and description to the insurance buying public of a policy or agreement of such insurance offered through various advertising media. Subsections 1 and 2 of North Dakota Century Code section 26.1-04-03 prohibit false, deceptive or misleading advertising in the conduct of the business of insurance. Because those statutes establish only general standards, this rule establishes specific standards for advertisements relating to individual group, blanket, and franchise disability, and accident and sickness insurance.

N.D. Admin. Code 45-06-04-02 Applicability

1.This chapter applies to every "advertisement", as that term is defined in this chapter unless otherwise specified in this chapter, intended for presentation, distribution, or dissemination in this state when such presentation, distribution, or dissemination is made either directly or indirectly by or on behalf of an insurer, agent, or broker as those terms are defined in the insurance code of this state and this chapter.

2.Every insurer, agent, or broker shall establish and at all times maintain a system of control over the content, form, and method of dissemination of all advertisements of its policies. All such advertisements, regardless of by whom written, created, designed, or presented, are the joint and several responsibility of the insurer, agent, broker, or agency for whom such advertisements are prepared.

N.D. Admin. Code 45-06-04-03 Definitions

1.An "advertisement" for the purpose of this chapter includes:

a.Printed and published material, audio visual material, and descriptive literature of an insurer, agent, or broker used in direct mail, newspapers, magazines, radio scripts, television scripts, billboards, and similar displays;

b.Descriptive literature, identification cards, and sales aids of all kinds used by an insurer, agent, or broker for presentation to members of the insurance buying public, including, but not limited to, circulars, business calling cards, lead cards, surveys, leaflets, booklets, depictions, illustrations, and form letters; and

c.Prepared sales talks, presentations, and material for use by agents, brokers, and solicitors.

2."Exception" for the purpose of this chapter means any provision in a policy whereby coverage for a specified hazard is entirely eliminated; it is a statement or a risk not assumed under the policy.

3."Institutional advertisement" for the purpose of this chapter means an advertisement having as its sole purpose the promotion of the reader's or viewer's interest in the concept of accident and sickness insurance, or the promotion of the insurer.

4."Insurer" for the purposes of this chapter includes any individual, corporation, association, partnership, reciprocal exchange, interinsurer, Lloyds, fraternal benefit society, nonprofit health service corporation, health maintenance organization, and any other legal entity which is defined as an "insurer" in the insurance code of this state and is engaged in the advertisement of an insurance policy as "policy" is defined in this section.

5."Invitation to contract" for the purpose of this chapter means an advertisement which is neither an invitation to inquire nor an institutional advertisement.

6."Invitation to inquire" for the purpose of this chapter means an advertisement having as its objective the creation of a desire to inquire further about the product and which is limited to a brief description of the loss for which the benefit is payable, and which may contain:

a.The dollar amount of benefit payable, and/or

b.The period of time during which the benefit is payable; provided the advertisement does not refer to cost. An advertisement which specifies either the dollar amount of benefit payable or the period of time during which the benefit is payable must contain a provision in effect as follows:

"For costs and further details of the coverage, including exclusions, any reductions or limitations and the terms under which the policy may be continued in force, see your agent or write to the company."

7."Limitation" for the purpose of this chapter means any provision which restricts coverage under the policy other than an exception or a reduction.

8."Policy" for the purpose of this chapter includes any policy, plan, certificate, contract, agreement, statement of coverage, rider, or endorsement which provides disability benefits, or medical, surgical, or hospital expense benefits, whether on an indemnity, reimbursement, service, or prepaid basis, nursing home benefits, long-term care insurance benefits, and Medicare supplement benefits.

9."Reduction" for the purpose of this chapter means any provision which reduces the amount of the benefit; a risk of loss is assumed but payment upon the occurrence of such loss is limited to some amount or period less than would be otherwise payable had such reduction not been used.

N.D. Admin. Code 45-06-04-04 Form and content of advertisements

1.The format and content of an advertisement to which this chapter applies must be sufficiently complete and clear to avoid deception or the capacity or tendency to mislead or deceive.

Whether an advertisement has a capacity or tendency to mislead or deceive must be determined by the insurance commissioner from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence, within the segment of the public to which it is directed.

2.Advertisements must be truthful and not misleading in fact or in implication. Words or phrases, the meaning of which is clear only by implication or by familiarity with insurance terminology, may not be used.

N.D. Admin. Code 45-06-04-05 Deceptive words, phrases, or illustrations prohibited

1.No advertisement may omit information or use words, phrases, statements, references, or illustrations if the omission of such information or use of such words, phrases, statements, references, or illustrations has the capacity, tendency, or effect of misleading or deceiving purchasers or prospective purchasers as to the nature or extent of any policy benefit payable, loss covered, or premium payable. The fact that the policy offered is made available to a prospective insured for inspection prior to consummation of the sale of an offer is made to refund the premium if the purchaser is not satisfied, does not remedy misleading statements.

2.No advertisement may contain or use words or phrases such as, "all"; "full"; "complete";

"comprehensive"; "unlimited"; "up to"; "as high as"; "this policy will help pay your hospital and surgical bills"; "this policy will help fill some of the gaps that Medicare and your present insurance leave out"; "this policy will help to replace your income" (when used to express loss of time benefits); or similar words and phrases, in a manner which exaggerates any benefits beyond the terms of the policy.

3.An advertisement may not contain descriptions of a policy limitation, exception, or reduction, worded in a positive manner to imply that it is a benefit, such as, describing a waiting period as a "benefit builder", or stating "even preexisting conditions are covered after two years".

Words and phrases used in an advertisement to describe such policy limitations, exceptions, and reductions must fairly and accurately describe the negative features of such limitations, exceptions, and reductions of the policy offered.

4.No advertisement of a benefit for which payment is conditional upon confinement in a hospital or similar facility may use words or phrases such as "extra cash"; "extra income"; "extra pay"; or substantially similar words or phrases because such words and phrases have the capacity, tendency, or effect of misleading the public into believing that the policy advertised will, in some way, enable them to make a profit from being hospitalized.

5.No advertisement of a hospital or other similar facility confinement benefit may advertise that the amount of the benefit is payable on a monthly or weekly basis when, in fact, the amount of the benefit payable is based upon a daily pro rata basis relating to the number of days of confinement. When the policy contains a limit on the number of days of coverage provided, such limit must appear in the advertisement.

6.No advertisement of a policy covering only one disease or a list of specified diseases may imply coverage beyond the terms of the policy. Synonymous terms may not be used to refer to any disease so as to imply broader coverage than is the fact.

7.An advertisement for a policy providing benefits for specified illnesses only, such as cancer, or for specified accidents only, such as automobile accidents, must clearly and conspicuously in prominent type state the limited nature of the policy. The statement must be worded in language identical to, or substantially similar to the following: "THIS IS AN AUTOMOBILE ACCIDENT ONLY POLICY".

8.An advertisement of a direct response insurance product may not imply that because "no insurance agent will call and no commissions will be paid to agents" that it is "a low cost plan", or use other similar words or phrases because the cost of advertising and servicing such policies is a substantial cost in the marketing of a direct response insurance product.

9.The phrase "tax free" may not be used in or as a heading, caption, or title in any advertisement and may not be unduly or deceptively emphasized, but it may be used in connection with a reasonably complete explanation of the internal revenue service rules applicable to the particular benefits afforded by the policy or policies advertised.

N.D. Admin. Code 45-06-04-06 Exceptions, reductions, and limitations to be disclosed

1.When an advertisement which is an invitation to contract refers to either a dollar amount, or a period of time for which any benefit is payable, or the cost of the policy, or specific policy benefit, or the loss for which such benefit is payable, it must also disclose those exceptions, reductions, and limitations affecting the basic provisions of the policy without which the advertisement would have the capacity or tendency to mislead or deceive.

2.When a policy contains a waiting, elimination, probationary, or similar time period between the effective date of the policy and the effective date of coverage under the policy or a time period between the date a loss occurs and the date benefits begin to accrue for such loss, an advertisement which is subject to the requirements of subsection 1 must disclose the existence of such periods.

3.An advertisement may not use the words "only"; "just"; "merely"; "minimum"; or similar words or phrases to deceptively describe or unfairly minimize the applicability of any exceptions and reductions contained in the policy advertised.

N.D. Admin. Code 45-06-04-07 Preexisting conditions

1.An advertisement which is subject to the requirements of section 45-06-04-06 must, in negative terms, disclose the extent to which any loss is traceable to a condition existing prior to the effective date of the policy. The use of the term "preexisting condition" without an appropriate definition or description may not be used.

2.When a policy does not cover losses resulting from preexisting conditions, no advertisement of the policy may state or imply that the applicant's physical condition or medical history will not affect the issuance of the policy or payment of a claim thereunder. This rule prohibits the use of the phrase "no medical examination required" and phrases of similar import, but does not prohibit explaining "automatic issue". If an insurer requires a medical examination for a specified policy, the advertisement if it is an invitation to contract must disclose that a medical examination is required.

3.When an advertisement contains an application form to be completed by the applicant and returned by mail for a direct response insurance product, such application form must contain a question requiring a response by the applicant or a statement in prominent type, all in capital letters, which reflects the preexisting condition provisions of the policy immediately preceding the blank space for the applicant's signature. For example, such an application form must contain a question substantially as follows:

"Do you understand that this policy will not pay benefits during the first ----- year(s) after the issue date for a disease or physical condition which you now have or have had in the past?" -------- Yes Or a statement in prominent type, all capitalized, substantially as follows:

"I UNDERSTAND THAT THE POLICY APPLIED FOR WILL NOT PAY BENEFITS FOR

ANY LOSS INCURRED DURING THE FIRST ------- YEAR(S) AFTER THE ISSUE DATE

ON ACCOUNT OF DISEASE OR PHYSICAL CONDITION WHICH I NOW HAVE OR

HAVE HAD IN THE PAST."

N.D. Admin. Code 45-06-04-08 Testimonials or endorsements by third parties

1.Testimonials used in advertisements must be genuine, represent the current opinion of the author, be applicable to the policy advertised, and be accurately reproduced. The insurer, in using a testimonial, makes as its own all of the statements contained therein, and the advertisement, including such statement is subject to all the provisions of these rules.

2.If the person making a testimonial, an endorsement, or an appraisal has a financial interest in the insurer or a related entity as a stockholder, director, officer, employee, or otherwise, such fact must be disclosed in the advertisement. If a person is compensated for making a testimonial, endorsement, or appraisal, such fact must be disclosed in the advertisement by language substantially as follows: "Paid endorsement". This rule does not require disclosure of union "scale" wages required by union rules if the payment is actually for such "scale" for television or radio performance. The payment of substantial amounts, directly or indirectly, for "travel and entertainment" for filming or recording of television or radio advertisements removes the filming or recording from the category of an unsolicited testimonial and requires disclosure of such compensation. This subsection does not apply to an institutional advertisement which has as its sole purpose the promotion of the insurer.

3.An advertisement may not state or imply that any insurer or a policy has been approved or endorsed by an individual, group of individuals, society, association, or other organizations, unless such is the fact, and unless any proprietary relationship between an organization and the insurer is disclosed. If the entity making the endorsement or testimonial has been formed by the insurer or is owned or controlled by the insurer or the person or persons who own or control the insurer, such fact must be disclosed in the advertisement.

4.When a testimonial refers to benefits received under a policy, the specific claim data, including claim number, date of loss, and other pertinent information must be retained by the insurer for inspection for a period of four years or until the filing of the next regular report on examination of the insurer, whichever is the longer period of time.

N.D. Admin. Code 45-06-04-09 Jurisdictional licensing and status of insurer

1.An advertisement which reasonably is expected to be seen or heard beyond the limits of the jurisdiction in which the insurer is licensed may not imply licensing beyond those limits.

2.An advertisement may not create the impression directly or indirectly that the insurer, its financial condition or status, or the payment of its claims, or the merits, desirability, or advisability of its policy forms or kinds or plans of insurance are approved, endorsed, or accredited by any division or agency of this state or the United States government.

N.D. Admin. Code 45-06-04-10 Identity of insurer and agent or agency

1.The full legal name of the actual insurer and insurance agent or agency must be shown in each advertisement. An advertisement may not use a trade name, any insurance group designation, name of the parent company of the insurer, name of a particular division of the insurer or agency, service mark, slogan, symbol, or other device in a manner which would have the capacity and tendency to mislead or deceive as to the true identity of the insurer or insurance agent or agency.

2.No advertisement may use any combination of words, symbols, or physical materials which by their content, phraseology, shape, color, or other characteristics are so similar to combination of words, symbols, or physical materials, used by agencies of the federal government or of this state, or otherwise appear to be of such a nature that it tends to confuse or mislead prospective insureds into believing that the solicitation is in some manner connected with an agency of the municipal, state, or federal government.

3.Each advertisement must clearly disclose that it is a promotion for an insurance product, company, agent, or agency.

N.D. Admin. Code 45-06-04-11 Advertising file to be maintained

Each insurer shall maintain at its home or principal office a complete file containing every printed, published, or prepared advertisement of its individual policies and typical printed, published, or prepared advertisements of its blanket, franchise, and group policies hereafter disseminated in this or any other state whether or not licensed in such state, with a notation attached to each such advertisement which shall indicate the manner and extent of distribution and the form number of any policy advertised. Such file is subject to regular and periodical inspection by the insurance commissioner. All such advertisements must be maintained in said file for a period of either four years or until the filing of the next regular report on examination of the insurer, whichever is the longer period of time.

N.D. Admin. Code 45-06-04-12 Violation defined as unfair trade practice

A violation of this chapter by an insurance company or agent is an unfair method of competition and an unfair or deceptive act or practice in the conduct of the business of insurance, pursuant to North Dakota Century Code section 26.1-04-03.

Chapter 45-06-05 Long-Term Care Insurance Model Regulation

N.D. Admin. Code 45-06-05-01 Applicability and scope

Except as otherwise specifically provided, this section applies to all long-term care insurance policies delivered or issued for delivery in this state between July 1, 1988, and February 29, 2004, by insurers, fraternal benefit societies, nonprofit health, hospital and medical service corporations, prepaid health maintenance organizations, and all similar organizations. Policies delivered or issued for delivery in this state on or after March 1, 2004, are governed by chapter 45-06-05.1.

History

• History: Effective July 1, 1988; amended effective March 1, 2004.

N.D. Admin. Code 45-06-05-02 Definitions

For the purpose of this regulation, the terms "long-term care insurance", "group long-term care insurance", "commissioner", "applicant", "policy", and "certificate" have the meanings set forth in North Dakota Century Code section 26.1-45-01.

N.D. Admin. Code 45-06-05-03 Policy definitions

No long-term care insurance policy delivered or issued for delivery in this state may use the terms set forth in this section, unless the terms are defined in the policy and the definitions satisfy the following requirements:

1."Acute condition" means that the individual is medically unstable. Such an individual requires frequent monitoring by medical professionals, such as physicians and registered nurses, in order to maintain the individual's health status.

2."Adult day care" means a program for six or more individuals of social and health-related services provided during the day in a community group setting for the purpose of supporting frail, impaired elderly, or other disabled adults who can benefit from care in a group setting outside the home.

3."Home health care services" means medical and nonmedical services provided to ill, disabled, or infirm persons in their residences. Such services may include homemaker services, assistance with activities of daily living, and respite care services.

4."Medicare" must be defined as "The Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965, as then constituted or later amended", or "Title I, Part I of Public Law 89-97, as enacted by the Eighty-ninth Congress of the United States of America and popularly known as the Health Insurance for the Aged Act, as then constituted and any later amendments or substitutes thereof", or words of similar import.

5."Mental or nervous disorder" may not be defined to include more than neurosis, psychoneurosis, psychopathy, psychosis, or mental or emotional disease or disorder.

6."Personal care" means the provisions of hands-on services to assist an individual with activities of daily living (such as bathing, eating, dressing, transferring, continence, and toileting).

7."Skilled nursing care", "intermediate care", "personal care", "home care", and other services must be defined in relation to the level of skill required, the nature of the care, and the setting in which care must be delivered.

8.All providers of services, including "skilled nursing facility", "extended care facility", "intermediate care facility", "convalescent nursing home", "personal care facility", and "home care agency" must be defined in relation to the services and facilities required to be available and the licensure or degree status of those providing or supervising the services. The definition may require that the provider be appropriately licensed or certified.

History

• History: Effective July 1, 1988; amended effective July 1, 1994.

N.D. Admin. Code 45-06-05-04 Policy practices and provisions

1.Renewability. The terms "guaranteed renewable" and "noncancelable" may not be used in any individual long-term care insurance policy without further explanatory language in accordance with the disclosure requirements of section 45-06-04-05.

a.No such policy issued to an individual may contain renewal provisions less favorable to the insured than "guaranteed renewable" or "noncancelable".

b.The term "guaranteed renewable" may be used only when the insured has the right to continue the long-term care insurance in force by the timely payment of premiums and when the insurer has no unilateral right to make any change in any provision of the policy or rider while the insurance is in force, and cannot decline to renew, except that rates may be revised by the insurer on a class basis.

c.The term "noncancelable" may be used only when the insured has the right to continue the long-term care insurance in force by the timely payment of premiums during which period the insurer has no right to unilaterally make any change in any provision of the insurance or in the premium rate.

2.Limitations and exclusions. No policy may be delivered or issued for delivery in this state as long-term care insurance if such policy limits or excludes coverage by type of illness, treatment, medical condition, or accident, except as follows:

a.Preexisting conditions or diseases;

b.Mental or nervous disorders; however, this does not permit exclusion or limitation of benefits on the basis of alzheimer's disease;

c.Alcoholism and drug addiction;

d.Illness, treatment, or medical condition arising out of:

(1)War or act of war (whether declared or undeclared);

(2)Participation in a felony, riot, or insurrection;

(3)Service in the armed forces or units auxiliary thereto;

(4)Suicide (sane or insane), attempted suicide, or intentionally self-inflicted injury; or (5)Aviation (this exclusion applies only to nonfare paying passenger).

e.Treatment provided in a government facility (unless otherwise required by law), services for which benefits are available under Medicare or other governmental program (except Medicaid), any state or federal workers' compensation, employer's liability or occupational disease law, or any motor vehicle no-fault law, services provided by a member of the covered person's immediate family and services for which no charge is normally made in the absence of insurance.

f.This subsection is not intended to prohibit exclusions and limitations by type of provider or territorial limitations.

3.Extension of benefits. Termination of long-term care insurance shall be without prejudice to any benefits payable for institutionalization if such institutionalization began while the long-term care insurance was in force and continues without interruption after termination.

Such extension of benefits beyond the period the long-term care insurance was in force may be limited to the duration of the benefit period, if any, or to payment of the maximum benefits and may be subject to any policy waiting period, and all other applicable provisions of the policy.

4.Continuation or conversion.

a.Group long-term care insurance issued in this state on or after October 1, 1989, shall provide covered individuals with a basis for continuation or conversion of coverage.

b.For the purposes of this section, "a basis for continuation of coverage" means a policy provision which maintains coverage under the existing group policy when such coverage would otherwise terminate and which is subject only to the continued timely payment of premium when due. Group policies that restrict provision of benefits and services to, or contain incentives to use, certain providers or facilities may provide continuation benefits that are substantially equivalent to the benefits of the existing group policy. The commissioner shall make a determination as to the substantial equivalency of benefits, and in doing so, shall take into consideration the differences between managed and nonmanaged plans, including provider system arrangements, service availability, benefit levels, and administrative complexity.

c.For the purposes of this section, "a basis for conversion of coverage" means a policy provision that an individual whose coverage under the group policy would otherwise terminate or has been terminated for any reason, including discontinuance of the group policy in its entirety or with respect to an insurance class, and who has been continuously insured under the group policy (and any group policy which it replaced), for at least six months immediately prior to termination, shall be entitled to the issuance of a converted policy by the insurer under whose group policy he or she is covered, without evidence of insurability.

d.For the purposes of this section, "converted policy" means an individual policy of long-term care insurance providing benefits identical to or benefits determined by the commissioner to be substantially equivalent to or in excess of those provided under the group policy from which conversion is made. Where the group policy from which conversion is made restricts the provision of benefits and services to, or contains incentives to use, certain providers or facilities the commissioner, in making a determination as to the substantial equivalency of benefits, shall take into consideration the differences between managed and nonmanaged plans, including, but not limited to, provider system arrangements, service availability, benefit levels, and administrative complexity.

e.Written application for the converted policy must be made and the first premium due, if any, must be paid as directed by the insurer not later than thirty-one days after termination of coverage under the group policy. The converted policy must be issued effective on the day following the termination of coverage under the group policy, and must be renewable annually.

f.Unless the group policy from which conversion is made replaced previous group coverage, the premium for the converted policy must be calculated on the basis of the insured's age at inception of coverage under the group policy from which the conversion is made. Where the group policy from which conversion is made replaced previous group coverage, the premium for the converted policy must be calculated on the basis of the insured's age at inception of coverage under the group policy replaced.

g.Continuation of coverage or issuance of a converted policy shall be mandatory, except where:

(1)Termination of group coverage resulted from an individual's failure to make any required payment of premium or contribution when due; or (2)The terminating coverage is replaced not later than thirty-one days after termination by group coverage effective on the day following the termination of coverage:

(a)Providing benefits identical to or benefits determined by the commissioner to be substantially equivalent to or in excess of those provided by the terminating coverage; and (b)The premium for which is calculated in a manner consistent with the requirements of subdivision f.

h.Notwithstanding any other provision of this section, a converted policy issued to an individual who at the time of conversion is covered by another long-term care insurance policy which provides benefits on the basis of incurred expenses, may contain a provision which results in a reduction of benefits payable if the benefits provided under the additional coverage, together with the full benefits provided by the converted policy, would result in payment of more than one hundred percent of incurred expenses. Such provision shall only be included in the converted policy if the converted policy also provides for a premium decrease or refund which reflects the reduction in benefits payable.

i.The converted policy may provide that the benefits payable under the converted policy, together with the benefits payable under the group policy from which conversion is made, shall not exceed those that would have been payable had the individual's coverage under the group policy remained in force and effect.

j.Notwithstanding any other provision of this section, any insured individual whose eligibility for group long-term care coverage is based upon his or her relationship to another person shall be entitled to continuation of coverage under the group policy upon termination of the qualifying relationship by death or dissolution of marriage.

5.Discontinuance and replacement. If a group long-term care policy is replaced by another group long-term care policy issued to the same policyholder, the succeeding insurer shall offer coverage to all persons covered under the previous group policy on its date of termination.

Coverage provided or offered to individuals by the insurer and premiums charged to persons under the new group policy:

a.May not result in any exclusion for preexisting conditions that would have been covered under the group policy being replaced; and

b.May not vary or otherwise depend on the individual's health or disability status, claim experience, or use of long-term care services.

6.The premiums charged to an insured for long-term care insurance may not increase due to either:

a.The increasing age of the insured at ages beyond sixty-five; or

b.The duration the insured has been covered under the policy.

Each insurer offering long-term care insurance shall, as a protection against unintentional lapse, comply with the following: 1.a.Notice before lapse or termination. An individual long-term care policy or certificate may not be issued until the insurer has received from the applicant either a written designation of at least one person, in addition to the applicant, who is to receive notice of lapse or termination of the policy or certificate for nonpayment of premium, or a written waiver dated and signed by the applicant electing not to designate additional persons to receive notice. The applicant has the right to designate at least one person who is to receive the notice of termination, in addition to the insured. Designation does not constitute acceptance of any liability on the third party for services provided to the insured. The form used for the written designation must provide space clearly designated for listing at least one person. The designation must include each person's full name and home address. In the case of an applicant who elects not to designate an additional person, the waiver must state: "Protection against unintended lapse. I understand that I have the right to designate at least one person other than myself to receive notice of lapse or termination of this long-term care insurance policy for nonpayment of premium. I understand that notice will not be given until thirty (30) days after a premium is due and unpaid. I elect NOT to designate any person to receive such notice."

The insurer shall notify the insured of the right to change this written designation, no less often than once every two years.

b.When the policyholder or certificate holder pays premium for a long-term care insurance policy or certificate through a payroll or pension deduction plan, the requirements contained in subdivision a need not be met until sixty days after the policyholder or certificate holder is no longer on such a payment plan. The application or enrollment form for such policies or certificates must clearly indicate the payment plan selected by the applicant.

c.Lapse or termination for nonpayment of premium. An individual long-term care policy or certificate may not lapse or be terminated for nonpayment of premium unless the insurer, at least thirty days before the effective date of the lapse or termination, has given notice to the insured and to those persons designated pursuant to subdivision a of subsection 1, at the address provided by the insured for purposes of receiving notice of lapse or termination. Notice must be given by first-class mail, postage prepaid, and notice may not be given until thirty days after a premium is due and unpaid. Notice is deemed to have been given as of five days after the date of mailing.

2.Reinstatement. In addition to the requirement in subsection 1, a long-term care insurance policy or certificate must include a provision that provides for reinstatement of coverage, in the event of lapse if the insurer is provided proof of cognitive impairment or the loss of functional capacity. This option must be available to the insured if requested within five months after termination and must allow for the collection of past due premium, when appropriate. The standard of proof of cognitive impairment or loss of functional capacity may not be more stringent than the benefit eligibility criteria on cognitive impairment or the loss of functional capacity, if any, contained in the policy and certificate.

History

• History: Effective July 1, 1988; amended effective October 1, 1989; July 1, 1994. 45-06-05-04.1. Unintentional lapse.

N.D. Admin. Code 45-06-05-05 Required disclosure provisions

1.Renewability. Individual long-term care insurance policies must contain a renewability provision. Such provision must be appropriately captioned, must appear on the first page of the policy, and must clearly state the duration, where limited, of renewability and the duration of the term of coverage for which the policy is issued and for which it may be renewed.

2.Riders and endorsements. Except for riders or endorsements by which the insurer effectuates a request made in writing by the insured under an individual long-term care insurance policy, all riders or endorsements added to an individual long-term care insurance policy after date of issue or at reinstatement or renewal which reduce or eliminate benefits or coverage in the policy must require signed acceptance by the individual insured. After the date of policy issue, any rider or endorsement which increases benefits or coverage with a concomitant increase in premium during the policy term must be agreed to in writing signed by the insured, except if the increased benefits or coverage are required by law. Where a separate additional premium is charged for benefits provided in connection with riders or endorsements, such premium charge must be set forth in the policy, rider, or endorsement.

3.Payment of benefits. A long-term care insurance policy which provides for the payment of benefits based on standards described as "usual and customary", "reasonable and customary", or words of similar import must include a definition of such terms and an explanation of such terms in its accompanying outline of coverage.

4.Limitations. If a long-term care insurance policy or certificate contains any limitations with respect to preexisting conditions, such limitations must appear as a separate paragraph of the policy or certificate and be labeled as "preexisting condition limitations".

5.Other limitations or conditions on eligibility for benefits. Effective July 1, 1990, a long-term care insurance policy or certificate containing any limitations or conditions for eligibility other than those prohibited in subsection 2 of North Dakota Century Code section 26.1-45-07 must set forth a description of such limitations or conditions, including any required number of days of confinement, in a separate paragraph of the policy or certificate and must label such paragraph "limitations or conditions on eligibility for benefits".

6.Disclosure of tax consequences. With regard to life insurance policies that provide an accelerated benefit for long-term care, a disclosure statement is required at the time of application for the policy or rider and at the time the accelerated benefit payment request is submitted that receipt of these accelerated benefits may be taxable, and that assistance should be sought from a personal tax adviser. The disclosure statement must be prominently displayed on the first page of the policy or rider and any other related documents.

1.All applications for long-term care insurance policies or certificates, except those which are guaranteed issue, must contain clear and unambiguous questions designed to ascertain the health condition of the applicant. 2.a.If an application for long-term care insurance contains a question which asks whether the applicant has had medication prescribed by a physician, it must also ask the applicant to list the medication that has been prescribed.

b.If the medications listed in such application were known by the insurer, or should have been known at the time of application, to be directly related to a medical condition for which coverage would otherwise be denied, then the policy or certificate may not be rescinded for that condition.

3.Except for policies or certificates which are guaranteed issue:

a.The following language must be set out conspicuously and in close conjunction with the applicant's signature block on an application for a long-term care insurance policy or certificate:

Caution: If your answers on this application are incorrect or untrue, [company] has the right to deny benefits or rescind your policy.

b.The following language, or language substantially similar to the following, must be set out conspicuously on the long-term care insurance policy or certificate at the time of delivery:

Caution: The issuance of this long-term care insurance [policy] [certificate] is based upon your responses to the questions on your application. A copy of your [application] [enrollment form] [is enclosed] [was retained by you when you applied].

If your answers are incorrect or untrue, the company has the right to deny benefits or rescind your policy. The best time to clear up any questions is now, before a claim arises! If, for any reason, any of your answers are incorrect, contact the company at this address: [insert address]

c.Prior to issuance of a long-term care policy or certificate to an applicant age eighty or older, the insurer shall obtain one of the following:

(1)A report of a physical examination;

(2)An assessment of functional capacity;

(3)An attending physician's statement; or (4)Copies of medical records.

4.A copy of the completed application or enrollment form (whichever is applicable) must be delivered to the insured no later than at the time of delivery of the policy or certificate unless it was retained by the applicant at the time of application.

5.Every insurer or other entity selling or issuing long-term care insurance benefits shall maintain a record of all policy or certificate rescissions, both state and countrywide, except those which the insured voluntarily effectuated and shall annually furnish this information to the insurance commissioner in the format prescribed by the national association of insurance commissioners.

1.A long-term care insurance policy or certificate may not, if it provides benefits for home health care or community care services, limit or exclude benefits:

a.By requiring that the insured or claimant would need care in a skilled nursing facility if home health care services were not provided;

b.By requiring that the insured or claimant first or simultaneously receive nursing or therapeutic services, or both in a home, community, or institutional setting before home health care services are covered;

c.By limiting eligible services to services provided by registered nurses or licensed practical nurses;

d.By requiring that a nurse or therapist provide services covered by the policy that can be provided by a home health aide, or other licensed or certified home care worker acting within the scope of his or her licensure or certification;

e.By requiring that the insured or claimant have an acute condition before home health care services are covered;

f.By limiting benefits to services provided by Medicare-certified agencies or providers;

g.By excluding coverage for personal care services provided by a home health aide;

h.By requiring that the provision of home health care services be at a level of certification or licensure greater than that required by the eligible service; or

i.By excluding coverage for adult day care services.

2.Home health care coverage may be applied to the nonhome health care benefits provided in the policy or certificate when determining maximum coverage under the terms of the policy or certificate.

3.A long-term care insurance policy or certificate, if it provides for home health or community care services, must provide total home health or community care coverage that is a dollar amount equivalent to at least one-half of one year's coverage available for nursing home benefits under the policy or certificate, at the time covered home health or community care services are being received. This requirement does not apply to policies or certificates issued to residents of continuing care retirement communities.

1.No insurer may offer a long-term care insurance policy unless the insurer also offers to the policyholder in addition to any other inflation protection the option to purchase a policy that provides for benefit levels to increase with benefit maximums or reasonable durations which are meaningful to account for reasonably anticipated increases in the costs of long-term care services covered by the policy. Insurers must offer to each policyholder, at the time of purchase, the option to purchase a policy with an inflation protection feature no less favorable than one of the following:

a.Increases benefit levels annually, in a manner so that the increases are compounded annually at a rate not less than five percent;

b.Guarantees the insured individual the right to periodically increase benefit levels without providing evidence of insurability or health status so long as the option for the previous period has not been declined. The amount of the additional benefit must be no less than the difference between the existing policy benefit and that benefit compounded annually at a rate of at least five percent for the period beginning with the purchase of the existing benefit and extending until the year in which the offer is made; or

c.Covers a specified percentage of actual or reasonable charges and does not include a maximum specified indemnity amount or limit.

2.Where the policy is issued to a group, the required offer in subsection 1 must be made to the group policyholder; except, if the policy is issued to a group defined in subdivision d of subsection 3 of section 26.1-45-01 other than to a continuing care retirement community, the offering must be made to each proposed certificate holder.

3.The offer in subsection 1 is not required of life insurance policies or riders containing accelerated long-term care benefits.

4.Insurers shall include the following information in or with the outline of coverage:

a.A graphic comparison of the benefit levels of a policy that increases benefits over the policy period with a policy that does not increase benefits. The graphic comparison must show benefit levels over at least a twenty-year period.

b.Any expected premium increases or additional premiums to pay for automatic or optional benefit increases.

An insurer may use a reasonable hypothetical, or a graphic demonstration, for the purposes of this disclosure.

5.Inflation protection benefit increases under a policy which contains such benefits shall continue without regard to an insured's age, claim status or claim history, or the length of time the person has been insured under the policy.

6.An offer of inflation protection which provides for automatic benefit increases shall include an offer of a premium which the insurer expects to remain constant. Such offer shall disclose in a conspicuous manner that the premium may change in the future unless the premium is guaranteed to remain constant. 7.a.Inflation protection as provided in subdivision a of subsection 1 shall be included in a long-term care insurance policy unless an insurer obtains a rejection of inflation protection signed by the policyholder as required in this subsection.

b.The rejection shall be considered a part of the application and shall state: "I have reviewed the outline of coverage and the graphs that compare the benefits and premiums of this policy with and without inflation protection. Specifically, I have reviewed Plans _____, and I reject inflation protection."

History

• History: Effective July 1, 1988; amended effective October 1, 1989; July 1, 1994. 45-06-05-05.1. Prohibition against post-claims underwriting.
• History: Effective November 1, 1990. 45-06-05-05.2. Minimum standards for home health and community care benefits in long-term care insurance policies.
• History: Effective November 1, 1990; amended effective July 1, 1994. 45-06-05-05.3. Requirement to offer inflation protection.
• History: Effective November 1, 1990; amended effective July 1, 1994.

N.D. Admin. Code 45-06-05-06 Requirements for application forms and replacement coverage

1.Application forms must include the following questions designed to elicit information as to whether, as of the date of the application, the applicant has another long-term care insurance policy or certificate in force or whether a long-term care policy or certificate is intended to replace any other accident and sickness or long-term care policy or certificate presently in force. A supplementary application or other form to be signed by the applicant and agent, except when the coverage is sold without an agent, containing such questions may be used.

With regard to a replacement policy issued to groups defined by subsection 3 of North Dakota Century Code section 26.1-45-01, the following questions may be modified only to the extent necessary to elicit information about health or long-term care insurance policies other than the group policy being replaced; provided, however, that the certificate holder has been notified of the replacement.

a.Do you have another long-term care insurance policy or certificate in force (including health care service contract or health maintenance organization contract)?

b.Did you have another long-term care insurance policy or certificate in force during the last twelve months?

(1)If so, with which company?

(2)If that policy lapsed, when did it lapse?

c.Are you covered by Medicaid?

d.Do you intend to replace any of your medical or health insurance coverage with this policy [certificate]?

2.Agents shall list any other health insurance policies they have sold to the applicant.

a.List policies sold which are still in force.

b.List policies sold in the past five years which are no longer in force.

3.Solicitations other than direct response. Upon determining that a sale will involve replacement, an insurer, other than an insurer using direct response solicitation methods, or its agent, shall furnish the applicant, prior to issuance or delivery of the individual long-term care insurance policy, a notice regarding replacement of accident and sickness or long-term care coverage.

One copy of such notice must be retained by the applicant and an additional copy signed by the applicant must be retained by the insurer. The required notice must be provided in the following manner:

"NOTICE TO APPLICANT REGARDING REPLACEMENT OF INDIVIDUAL ACCIDENT AND

SICKNESS OR LONG-TERM CARE INSURANCE [Insurance company's name and address]

SAVE THIS NOTICE!

IT MAY BE IMPORTANT TO YOU IN THE FUTURE.

According to [your application] [information you have furnished], you intend to lapse or otherwise terminate existing accident and sickness or long-term care insurance and replace it with an individual long-term care insurance policy to be issued by [company name] Insurance Company. Your new policy provides thirty (30) days within which you may decide, without cost, whether you desire to keep the policy. For your own information and protection, you should be aware of and seriously consider certain factors which may affect the insurance protection available to you under the new policy.

You should review this new coverage carefully, comparing it with all accident and sickness or long-term care insurance coverage you now have, and terminate your present policy only if, after due consideration, you find that purchase of this long-term care coverage is a wise decision.

STATEMENT TO APPLICANT BY AGENT [BROKER OR OTHER REPRESENTATIVE]:

(Use additional sheets, as necessary.)

I have reviewed your current medical or health insurance coverage. I believe the replacement of insurance involved in this transaction materially improves your position.

My conclusion has taken into account the following considerations, which I call to your attention:

1.Health conditions which you may presently have (preexisting conditions), may not be immediately or fully covered under the new policy. This could result in denial or delay in payment of benefits under the new policy, whereas a similar claim might have been payable under your present policy.

2.State law provides that your replacement policy or certificate may not contain new preexisting conditions or probationary periods. The insurer will waive any time periods applicable to preexisting conditions or probationary periods in the new policy (or coverage) for similar benefits to the extent such time was spent (depleted) under the original policy.

3.If you are replacing existing long-term care insurance coverage, you may wish to secure the advice of your present insurer or its agent regarding the proposed replacement of your present policy. This is not only your right, but it is also in your best interest to make sure you understand all the relevant factors involved in replacing your present coverage.

4.If, after due consideration, you still wish to terminate your present policy and replace it with new coverage, be certain to truthfully and completely answer all questions on the application concerning your medical health history. Failure to include all material medical information on an application may provide a basis for the company to deny any future claims and to refund your premium as though your policy had never been in force. After the application has been completed and before you sign it, reread it carefully to be certain that all information has been properly recorded. ________________________________________________________ (Signature of Agent, Broker, or Other Representative) [Typed Name and Address of Agent or Broker]

The above "Notice to Applicant" was delivered to me on:

(Date)

(Applicant's Signature)"

4.Direct response solicitations. Insurers using direct response solicitation methods shall deliver a notice regarding replacement of accident and sickness or long-term care coverage to the applicant upon issuance of the policy. The required notice must be provided in the following manner:

"NOTICE TO APPLICANT REGARDING REPLACEMENT OF ACCIDENT AND SICKNESS OR

LONG-TERM CARE INSURANCE [Insurance company's name and address]

SAVE THIS NOTICE!

IT MAY BE IMPORTANT TO YOU IN THE FUTURE.

According to [your application] [information you have furnished], you intend to lapse or otherwise terminate existing accident and sickness or long-term care insurance and replace it with the long-term care insurance policy delivered herewith issued by [company name] Insurance Company. Your new policy provides thirty (30) days within which you may decide, without cost, whether you desire to keep the policy. For your own information and protection, you should be aware of and seriously consider certain factors which may affect the insurance protection available to you under the new policy.

You should review this new coverage carefully, comparing it with all accident and sickness or long-term care insurance coverage you now have, and terminate your present policy only if, after due consideration, you find that purchase of this long-term care coverage is a wise decision.

1.Health conditions which you may presently have (preexisting conditions), may not be immediately or fully covered under the new policy. This could result in denial or delay in payment of benefits under the new policy, whereas a similar claim might have been payable under your present policy.

2.State law provides that your replacement policy or certificate may not contain new preexisting conditions or probationary periods. Your insurer will waive any time periods applicable to preexisting conditions or probationary periods in the new policy (or coverage) for similar benefits to the extent such time was spent (depleted) under the original policy.

3.If you are replacing existing long-term care insurance coverage, you may wish to secure the advice of your present insurer or its agent regarding the proposed replacement of your present policy. This is not only your right, but it is also in your best interest to make sure you understand all the relevant factors involved in replacing your present coverage. 4.[To be included only if the application is attached to the policy.] If, after due consideration, you still wish to terminate your present policy and replace it with new coverage, read the copy of the application attached to your new policy and be sure that all questions are answered fully and correctly. Omissions or misstatements in the application could cause an otherwise valid claim to be denied. Carefully check the application and write to [company name and address] within thirty (30) days if any information is not correct and complete, or if any past medical history has been left out of the application.

(Company Name)"

5.Where replacement is intended, the replacing insurer shall notify, in writing, the existing insurer of the proposed replacement. The existing policy shall be identified by the insurer, name of the insured, and policy number or address including zip code. Such notice shall be made within five working days from the date the application is received by the insurer or the date the policy is issued, whichever is sooner.

1.Every insurer shall maintain records for each agent of that agent's amount of replacement sales as a percent of the agent's total annual sales and the amount of lapses of long-term care insurance policies sold by the agent as a percent of the agent's total annual sales.

2.Each insurer shall report annually by June thirtieth the ten percent of its agents with the greatest percentages of lapses and replacements as measured by subsection 1.

3.Reported replacement and lapse rates do not alone constitute a violation of insurance laws or necessarily imply wrongdoing. The reports are for the purpose of reviewing more closely agent activities regarding the sale of long-term care insurance.

4.Every insurer shall report annually by June thirtieth the number of lapsed policies as a percent of its total annual sales and as a percent of its total number of policies in force as of the end of the preceding calendar year.

5.Every insurer shall report annually by June thirtieth the number of replacement policies sold as a percent of its total annual sales and as a percent of its total number of policies in force as of the preceding calendar year.

6.For purposes of this section, "policy" means only long-term care insurance and "report" means on a statewide basis.

History

• History: Effective July 1, 1988; amended effective November 1, 1990; July 1, 1994. 45-06-05-06.1. Reporting requirements.

N.D. Admin. Code 45-06-05-07 Discretionary powers of commissioner

The commissioner may, upon written request and after an administrative hearing, issue an order to modify or suspend a specific provision or provision of this chapter with respect to a specific long-term care insurance policy or certificate upon a written finding that:

1.The modification or suspension would be in the best interest of the insureds; and

2.The purposes to be achieved could not be effectively or efficiently achieved without the modification or suspension; and

a.The modification or suspension is necessary to the development of an innovative and reasonable approach for insuring long-term care;

b.The policy or certificate is to be issued to residents of a life care or continuing care retirement community or some other residential community for the elderly and the modification or suspension is reasonably related to the special needs or nature of such a community; or

c.The modification or suspension is necessary to permit long-term care insurance to be sold as part of, or in conjunction with, another insurance product.

N.D. Admin. Code 45-06-05-08 Loss ratio

Benefits under long-term care insurance policies must be deemed reasonable in relation to premiums provided the expected loss ratio is at least sixty percent, calculated in a manner which provides for adequate reserving of the long-term care insurance risk. In evaluating the expected loss ratio, due consideration must be given to all relevant factors, including:

1.Statistical credibility of incurred claims experience and earned premiums;

2.The period for which rates are computed to provide coverage;

3.Experienced and projected trends;

4.Concentration of experience within early policy duration;

5.Expected claim fluctuation;

6.Experience refunds, adjustments, or dividends;

7.Renewability features;

8.All appropriate expense factors;

9.Interest;

10.Experimental nature of the coverage;

11.Policy reserves;

12.Mix of business by risk classification; and

13.Product features such as long elimination periods, high deductibles, and high maximum limits.

1.When long-term care benefits are provided through the acceleration of benefits under group or individual life policies or riders to such policies, policy reserves for such benefits must be determined in accordance with North Dakota Century Code chapter 26.1-35. Claim reserves must also be established in the case when such policy or rider is in claim status.

Reserves for policies and riders subject to this subsection should be based on the multiple decrement model utilizing all relevant decrements except for voluntary termination rates.

Single decrement approximations are acceptable if the calculation produces essentially similar reserves, if the reserve is clearly more conservative, or if the reserve is immaterial. The calculations may take into account the reduction in life insurance benefits due to the payment of long-term care benefits. However, the reserves for the long-term care benefit and the life insurance benefit may not be less than the reserves for the life insurance benefit assuming no long-term care benefit.

In the development and calculation of reserves for policies and riders subject to this subsection, due regard must be given to the applicable policy provisions, marketing methods, administrative procedures, and all other considerations that have an impact on projected claim costs, including the following:

a.Definition of insured events;

b.Covered long-term care facilities;

c.Existence of home convalescence care coverage;

d.Definition of facilities;

e.Existence or absence of barriers to eligibility;

f.Premium waiver provision;

g.Renewability;

h.Ability to raise premiums;

i.Marketing method;

j.Underwriting procedures;

k.Claims adjustment procedures;

l.Waiting period;

m.Maximum benefit;

n.Availability of eligible facilities;

o.Margins in claim costs;

p.Optional nature of benefit;

q.Delay in eligibility for benefit;

r.Inflation protection provisions; and

s.Guaranteed insurability option.

Any applicable valuation morbidity table must be certified as appropriate as a statutory valuation table by a member of the American academy of actuaries.

2.When long-term care benefits are provided other than as in subsection 1, reserves must be determined in accordance with generally accepted industry standards.

History

• History: Effective July 1, 1988; amended effective July 1, 1994. 45-06-05-08.1. Reserve standards.

N.D. Admin. Code 45-06-05-09 Filing requirement

Prior to an insurer or similar organization offering group long-term care insurance to a resident of this state pursuant to North Dakota Century Code section 26.1-45-03, it shall file with the commissioner evidence that the group policy or certificate thereunder has been approved by a state having statutory or regulatory long-term care insurance requirements substantially similar to those adopted in this state. 45-06-05-09.1. Filing requirements for advertising.

1.An insurer, health care service plan, or other entity providing long-term care insurance or benefits in this state shall provide a copy of any long-term care insurance advertisement intended for use in this state whether through written, radio, or television medium to the insurance commissioner of this state for review or approval by the commissioner to the extent it may be required under state law. In addition, all advertisements must be retained by the insurer, health care service plan, or other entity for at least three years from the date the advertisement was first used.

2.The commissioner may exempt from these requirements any advertising form or material when, in the commissioner's opinion, this requirement may not be reasonably applied. 45-06-05-09.2. Standards for marketing.

1.Every insurer, health care service plan, or other entity marketing long-term care insurance coverage in this state, directly or through its producers, shall:

a.Establish marketing procedures to assure that any comparison of policies by its agents or other producers will be fair and accurate.

b.Establish marketing procedures to assure excessive insurance is not sold or issued.

c.Display prominently by type, stamp, or other appropriate means, on the first page of the outline of coverage and policy the following: "Notice to buyer: This policy may not cover all of the costs associated with long-term care incurred by the buyer during the period of coverage. The buyer is advised to review carefully all policy limitations."

d.Inquire and otherwise make every reasonable effort to identify whether a prospective applicant or enrollee for long-term care insurance already has accident and sickness or long-term care insurance and the types and amounts of any such insurance.

e.Every insurer or entity marketing long-term care insurance shall establish auditable procedures for verifying compliance with this subsection.

f.If the state in which the policy or certificate is to be delivered or issued for delivery has a senior insurance counseling program approved by the commissioner, the insurer shall, at solicitation, provide written notice to the prospective policyholder and certificate holder that such a program is available and the name, address, and telephone number of the program.

g.For long-term care health insurance policies and certificates, use the terms "noncancelable" or "level premium" only when the policy or certificate conforms to subdivision c of subsection 1 of section 45-06-05-04.

2.In addition to the practices prohibited in North Dakota Century Code section 26.1-04-03, the following acts and practices are prohibited:

a.Twisting. Knowingly making any misleading representation or incomplete or fraudulent comparison of any insurance policies or insurers for the purpose of inducing, or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, or convert any insurance policy or to take out a policy of insurance with another insurer.

b.High pressure tactics. Employing any method of marketing having the effect of or tending to induce the purchase of insurance through force, fright, threat, whether explicit or implied, or undue pressure to purchase or recommend the purchase of insurance.

c.Cold lead advertising. Making use directly or indirectly of any method of marketing that fails to disclose in a conspicuous manner that a purpose of the method of marketing is solicitation of insurance and that contact will be made by an insurance agent or insurance company. 3.a.With respect to the obligations set forth in this subsection, the primary responsibility of an association, as defined in subdivision b of subsection 3 of North Dakota Century Code

section 26.1-45-01, when endorsing long-term care insurance is to educate its members concerning long-term care issues in general so that its members can make informed decisions. Associations shall provide objective information regarding long-term care insurance policies or certificates endorsed by such associations to ensure that members of such associations receive a balanced and complete explanation of the features in the policies or certificates that are being endorsed.

b.The insurer shall file with the insurance department the following material:

(1)The policy and certificate;

(2)A corresponding outline of coverage; and (3)All advertisements requested by the insurance department.

c.The association shall disclose in any long-term care insurance solicitation:

(1)The specific nature and amount of the compensation arrangements, including all fees, commissions, administrative fees, and other forms of financial support, that the association receives from endorsement or sale of the policy or certificate to its members; and (2)A brief description of the process under which such policies and the insurer issuing such policies were selected.

d.If the association and the insurer have interlocking directorates or trustee arrangements, the association shall disclose such fact to its members.

e.The board of directors of associations selling or endorsing long-term care insurance policies or certificates shall review and approve such insurance policies as well as the compensation arrangements made with the insurer.

f.The association shall also:

(1)At the time of the association's decision to endorse, engage the services of a person with expertise in long-term care insurance not affiliated with the insurer to conduct an examination of the policies, including its benefits, features, and rates and update such examination thereafter in the event of material change;

(2)Actively monitor the marketing efforts of the insurer and its agents; and (3)Review and approve all marketing materials or other insurance communications used to promote sales or sent to members regarding such policies or certificates.

g.A group long-term care insurance policy or certificate may not be issued to an association unless the insurer files with the insurance department the information required in this subsection.

h.The insurer may not issue a long-term care policy or certificate to an association or continue to market such a policy or certificate unless the insurer certifies annually that the association has complied with the requirements set forth in this subsection.

i.Failure to comply with the filing and certification requirements of this section constitutes an unfair trade practice under North Dakota Century Code section 26.1-04-03. 45-06-05-09.3. Appropriateness of recommended purchase.

In recommending the purchase or replacement of any long-term care insurance policy or certificate, an agent shall make reasonable efforts to determine the appropriateness of a recommended purchase or replacement.

N.D. Admin. Code 45-06-05-10 Standard format outline of coverage

This section implements, interprets, and makes specific the provisions of subsection 2 of North Dakota Century Code section 26.1-45-09 in prescribing a standard format and the content of an outline of coverage.

1.The outline of coverage must be a freestanding document, using no smaller than ten point type.

2.The outline of coverage must contain no material of an advertising nature.

3.Text which is capitalized or underscored in the standard format outline of coverage may be emphasized by other means which provide prominence equivalent to such capitalization or underscoring.

4.Use of the text and sequence of text of the standard format outline of coverage is mandatory, unless otherwise specifically indicated.

5.Format for outline of coverage:

[COMPANY NAME]

[ADDRESS - CITY AND STATE]

[TELEPHONE NUMBER]

LONG-TERM CARE INSURANCE

OUTLINE OF COVERAGE [Policy number or group master policy and certificate number] [Except for policies or certificates which are guaranteed issue, the following caution statement, or language substantially similar, must appear as follows in the outline of coverage.]

Caution: The issuance of this long-term care insurance [policy] [certificate] is based upon your responses to the questions on your application. A copy of your [application] [enrollment form] [is enclosed] [was retained by you when you applied]. If your answers are incorrect or untrue, the company has the right to deny benefits or rescind your policy.

The best time to clear up any questions is now, before a claim arises! If, for any reason, any of your answers are incorrect, contact the company at this address: [insert address]

1.This policy is [an individual policy of insurance] ([a group policy] which was issued in the [indicate jurisdiction in which group policy was issued]).

2.PURPOSE OF OUTLINE OF COVERAGE. This outline of coverage provides a very brief description of the important features of the policy. You should compare this outline of coverage to outlines of coverage for other policies available to you. This is not an insurance contract, but only a summary of coverage. Only the individual or group policy contains governing contractual provisions. This means that the policy or group policy sets forth in detail the rights and obligations of both you and the insurance company.

Therefore, if you purchase this coverage, or any other coverage, it is important that you READ YOUR POLICY (OR CERTIFICATE) CAREFULLY!

3.TERMS UNDER WHICH THE POLICY OR CERTIFICATE MAY BE RETURNED AND

PREMIUM REFUNDED. a.[Provide a brief description of the right to return - "free look" provision of the policy.] b.[Include a statement that the policy either does or does not contain provisions providing for a refund or partial refund of premium upon the death of an insured or surrender of the policy or certificate. If the policy contains such provisions, include a description of them.]

4.THIS IS NOT MEDICARE SUPPLEMENT COVERAGE. If you are eligible for Medicare, review the Medicare Supplement Buyer's Guide from the insurance company. a.[For agents] Neither [insert company name] nor its agents represent Medicare, the federal government or any state government. b.[For direct response] [insert company name] is not representing Medicare, the federal government, or any state government.

5.LONG-TERM CARE COVERAGE. Policies of this category are designed to provide coverage for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services, provided in a setting other than an acute care unit of a hospital, such as in a nursing home, in the community, or in the home.

This policy provides coverage in the form of a fixed dollar indemnity benefit for covered long-term care expenses, subject to policy [limitations] [waiting periods] and [coinsurance] requirements. [Modify this paragraph if the policy is not an indemnity policy.]

6.BENEFITS PROVIDED BY THIS POLICY. a.[Covered services, related deductibles, waiting periods, elimination periods and benefit maximums.] b.[Institutional benefits, by skill level.] c.[Noninstitutional benefits, by skill level.] [Any benefit screens must be explained in this section. If these screens differ for different benefits, explanation of the screen should accompany each benefit description. If an attending physician or other specified person must certify a certain level of functional dependency in order to be eligible for benefits, this too must be specified. If activities of daily living (ADLs) are used to measure an insured's need for long-term care, then these qualifying criteria or screens must be explained.]

7.LIMITATIONS AND EXCLUSIONS. [Describe:

a.Preexisting conditions.

b.Noneligible facilities and provider.

c.Noneligible levels of care (e.g., unlicensed providers, care or treatment provided by a family member, etc.).

d.Exclusions and exceptions.

e.Limitations.] [This section should provide a brief specific description of any policy provisions which limit, exclude, restrict, reduce, delay, or in any other manner operate to qualify payment of the benefits described in (6) above.]

THIS POLICY MAY NOT COVER ALL THE EXPENSES ASSOCIATED WITH YOUR

LONG-TERM CARE NEEDS.

8.RELATIONSHIP OF COST OF CARE AND BENEFITS. Because the costs of long-term care services will likely increase over time, you should consider whether and how the benefits of this plan may be adjusted. [As applicable, indicate the following:

a.That the benefit level will not increase over time.

b.Any automatic benefit adjustment provisions.

c.Whether the insured will be guaranteed the option to buy additional benefits and the

basis upon which benefits will be increased over time if not by a specified amount or percentage.

d.If there is such a guarantee, include whether additional underwriting or health screening will be required, the frequency and amounts of the upgrade options, and any significant restrictions or limitations.

e.And finally, describe whether there will be any additional premium charge imposed, and how that is to be calculated.]

9.TERMS UNDER WHICH THE POLICY OR CERTIFICATE MAY BE CONTINUED IN

FORCE OR DISCONTINUED. a.[For long-term care health insurance policies or certificates describe one of the following permissible policy renewability provisions:

(1)Policies and certificates that are guaranteed renewable must contain the following statement:] RENEWABILITY: THIS POLICY [CERTIFICATE] IS GUARANTEED RENEWABLE. This means you have the right, subject to the terms of your policy [certificate], to continue this policy as long as you pay your premiums on time. [Company Name] cannot change any of the terms of your policy on its own, except that, in the future, IT MAY INCREASE THE PREMIUM YOU PAY.

(2)[Policies and certificates that are noncancelable shall contain the following statement:] RENEWABILITY: THIS POLICY [CERTIFICATE] IS NONCANCELABLE. This means that you have the right, subject to the terms of your policy, to continue this policy as long as you pay your premiums on time. [Company Name] cannot change any of the terms of your policy on its own and cannot change the premium you currently pay. However, if your policy contains an inflation protection feature where you choose to increase your benefits, [Company Name] may increase your premium at that time for those additional benefits. b.[For group coverage, specifically describe continuation/conversion provisions applicable to the certificate and group policy;] c.[Describe waiver of premium provisions or state that there are not such provisions;] d.[State whether or not the company has a right to change premium, and if such right exists, describe clearly and concisely each circumstance under which premium may change.]

10.ALZHEIMER'S DISEASE AND OTHER ORGANIC BRAIN DISORDERS. [State that the policy provides coverage for insureds clinically diagnosed as having Alzheimer's disease or related degenerative and dementing illnesses. Specifically, describe each benefit screen or other policy provision which provides preconditions to the availability of policy benefits for such an insured.]

11.PREMIUM. a.[State the total annual premium for the policy.

b.If the premium varies with an applicant's choice among benefit options, indicate the portion of annual premium which corresponds to each benefit option.]

12.ADDITIONAL FEATURES. a.[Indicate if medical underwriting is used;

b.Describe other important features.]

History

• History: Effective October 1, 1989; amended effective November 1, 1990; July 1, 1994.

N.D. Admin. Code 45-06-05-11 Requirement to deliver shopper's guide

1.A long-term care insurance shopper's guide in the format developed by the national association of insurance commissioners, or a guide developed or approved by the commissioner, must be provided to all prospective applicants of a long-term care insurance policy or certificate.

a.In the case of agent solicitations, an agent must deliver the shopper's guide prior to the presentation of an application or enrollment form.

b.In the case of direct response solicitations, the shopper's guide must be presented in conjunction with any application or enrollment form.

2.Life insurance policies or riders containing accelerated long-term care benefits are not required to furnish the above-referenced guide, but shall furnish the policy summary required under subsection 4 of North Dakota Century Code section 26.1-45-09.

APPENDIX A

RECISSION REPORTING FORM FOR

LONG-TERM CARE POLICIES

FOR THE STATE OF __________________________

FOR THE REPORTING YEAR 20[ ]

Company Name:

Address:

Telephone Number:

Due: March 1, annually Instructions:

The purpose of this form is to report all rescissions of long-term care insurance policies or certificates.

Those recissions voluntarily effectuated by an insured are not required to be included in this report.

Please furnish one form per rescission.

Policy Form Number Policy and Certificate # Name of Insured Date of Policy Issuance Date/s Claim/s Submitted Date of Rescission Detailed reason for rescission:

Signature Name and Title (please type)

Date

Chapter 45-06-05.1 Long-Term Care Insurance Model Regulation

N.D. Admin. Code 45-06-05.1 Long-Term Care Insurance Model Regulation

CHAPTER 45-06-05.1

LONG-TERM CARE INSURANCE MODEL REGULATION

Section 45-06-05.1-01Applicability and Scope 45-06-05.1-02Definitions 45-06-05.1-03Policy Definitions 45-06-05.1-04Policy Practices and Provisions 45-06-05.1-05Unintentional Lapse 45-06-05.1-06Required Disclosure Provisions 45-06-05.1-07Required Disclosure of Rating Practices to Consumers 45-06-05.1-08Initial Filing Requirements 45-06-05.1-08.1Initial Filing Requirements for Policies Issued After March 1, 2020 45-06-05.1-09Prohibition Against Post-Claims Underwriting 45-06-05.1-10Minimum Standards for Home Health and Community Care Benefits in Long-Term Care Insurance Policies 45-06-05.1-11Requirement to Offer Inflation Protection 45-06-05.1-12Requirements for Application Forms and Replacement Coverage 45-06-05.1-13Reporting Requirements 45-06-05.1-14Licensing 45-06-05.1-15Discretionary Powers of Commissioner 45-06-05.1-16Reserve Standards 45-06-05.1-17Life Insurance Long-Term Care Benefits 45-06-05.1-18Premium Rate Schedule Increases 45-06-05.1-19Filing Requirement 45-06-05.1-20Filing Requirements for Advertising 45-06-05.1-21Standards for Marketing 45-06-05.1-22Suitability 45-06-05.1-23Prohibition Against Preexisting Conditions and Probationary Periods in Replacement Policies or Certificates 45-06-05.1-24Nonforfeiture Benefit Requirement 45-06-05.1-25Standards for Benefit Triggers 45-06-05.1-26Additional Standards for Benefit Triggers for Qualified Long-Term Care Insurance Contracts 45-06-05.1-27Standard Format Outline of Coverage 45-06-05.1-28Requirement to Deliver Shopper's Guide 45-06-05.1-29Penalties 45-06-05.1-01. Applicability and scope.

Except as otherwise specifically provided, this chapter applies to all long-term care insurance policies, including qualified long-term care contracts and life insurance policies that accelerate benefits for long-term care delivered or issued for delivery in this state on or after March 1, 2004, fraternal benefit societies, nonprofit health, hospital and medical service corporations, prepaid health plans, health maintenance organizations, and all similar organizations. Certain provisions of this chapter apply only to qualified long-term care insurance contracts as noted. Policies delivered or issued for delivery in this state before March 1, 2004, are governed by chapter 45-06-05.

Additionally, this chapter is intended to apply to policies having indemnity benefits triggered by activities of daily living and sold as disability income insurance, if:

1.The benefits of the disability income policy are dependent upon or vary in amount based on the receipt of long-term care services;

2.The disability income policy is advertised, marketed, or offered as insurance for long-term care services; or

3.Benefits under the policy may commence after the policyholder has reached social security's normal retirement age unless benefits are designed to replace lost income or pay for specific expenses other than long-term care services. 45-06-05.1-02. Definitions.

For the purpose of this chapter, the terms "long-term care insurance", "qualified long-term care insurance", "group long-term care insurance", "commissioner", "applicant", "policy", and "certificate" shall have the meanings set forth in North Dakota Century Code section 26.1-45-01. In addition, the following definitions apply: 1.a."Exceptional increase" means only those increases filed by an insurer as exceptional for which the commissioner determines the need for the premium rate increase is justified:

(1)Due to changes in laws or regulations applicable to long-term care coverage in this state; or (2)Due to increased and unexpected utilization that affects the majority of insurers of similar products.

b.Except as provided in section 45-06-05.1-18, exceptional increases are subject to the same requirements as other premium rate schedule increases.

c.The commissioner may request a review by an independent actuary or a professional actuarial body of the basis for a request that an increase be considered an exceptional increase.

d.The commissioner, in determining that the necessary basis for an exceptional increase exists, shall also determine any potential offsets to higher claims costs.

2."Incidental", as used in subsection 10 of section 45-06-05.1-18, means that the value of the long-term care benefits provided is less than ten percent of the total value of the benefits provided over the life of the policy. These values shall be measured as of the date of issue.

3."Qualified actuary" means a member in good standing of the American academy of actuaries.

4."Similar policy forms" means all of the long-term care insurance policies and certificates issued by an insurer in the same long-term care benefit classification as the policy form being considered. Certificates of groups that meet the definition in subdivision a of subsection 3 of North Dakota Century Code section 26.1-45-01 are not considered similar to certificates or policies otherwise issued as long-term care insurance, but are similar to other comparable certificates with the same long-term care benefit classifications. For purposes of determining similar policy forms, long-term care benefit classifications are defined as follows: institutional long-term care benefits only, noninstitutional long-term care benefits only, or comprehensive long-term care benefits. 45-06-05.1-03. Policy definitions.

No long-term care insurance policy delivered or issued for delivery in this state shall use the terms set forth below, unless the terms are defined in the policy and the definitions satisfy the following requirements:

1."Activities of daily living" means at least bathing, continence, dressing, eating, toileting, and transferring.

2."Acute condition" means that the individual is medically unstable. Such an individual requires frequent monitoring by medical professionals, such as physicians and registered nurses, in order to maintain the individual's health status.

3."Adult day care" means a program for six or more individuals of social and health-related services provided during the day in a community group setting for the purpose of supporting frail, impaired elderly or other disabled adults who can benefit from care in a group setting outside the home.

4."Bathing" means washing oneself by sponge bath, or in either a tub or shower, including the task of getting into or out of the tub or shower.

5."Cognitive impairment" means a deficiency in a person's short-term or long-term memory; orientation as to person, place, and time; deductive or abstract reasoning; or judgment as it relates to safety awareness.

6."Continence" means the ability to maintain control of bowel and bladder function, or, when unable to maintain control of bowel or bladder function, the ability to perform associated personal hygiene, including caring for catheter or colostomy bag.

7."Dressing" means putting on and taking off all items of clothing and any necessary braces, fasteners, or artificial limbs.

8."Eating" means feeding oneself by getting food into the body from a receptacle such as a plate, cup, or table or by a feeding tube or intravenously.

9."Hands-on assistance" means physical assistance (minimal, moderate, or maximal) without which the individual would not be able to perform the activity of daily living.

10."Home health care services" means medical and nonmedical services provided to ill, disabled, or infirm persons in their residences. Such services may include homemaker services, assistance with activities of daily living, and respite care services.

11."Medicare" means "The Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965 as Then Constituted or Later Amended" or "Title I, Part I of Public Law 89-97, as Enacted by the Eighty-Ninth Congress of the United States of America and popularly known as The Health Insurance for the Aged Act, as then constituted and any later amendments or substitutes thereof", or words of similar import.

12."Mental or nervous disorder" shall not be defined to include more than neurosis, psychoneurosis, psychopathy, psychosis, or mental or emotional disease or disorder.

13."Personal care" means the provision of hands-on services to assist an individual with activities of daily living.

14."Skilled nursing care", "personal care", "home care", "specialized care", "assisted living care", and other services shall be defined in relation to the level of skill required, the nature of the care, and the setting in which care must be delivered.

15."Toileting" means getting to and from the toilet, getting on and off the toilet, and performing associated personal hygiene.

16."Transferring" means moving into or out of a bed, chair, or wheelchair.

17.All providers of services, including "skilled nursing facility", "extended care facility", "convalescent nursing home", "personal care facility", "specialized care providers", "assisted living facility", and "home care agency", shall be defined in relation to the services and facilities required to be available and the licensure, certification, registration, or degree status of those providing or supervising the services. When the definition requires the provider be appropriately licensed, certified, or registered, it also must state what requirements a provider must meet in lieu of licensure, certification, or registration when the state in which the service is to be furnished does not require a provider of these services to be licensed, certified, or registered, or when the state licenses, certifies, or registers the provider of services under another name. 45-06-05.1-04. Policy practices and provisions.

1.Renewability. The terms "guaranteed renewable" and "noncancelable" shall not be used in any individual long-term care insurance policy without further explanatory language in accordance with the disclosure requirements of section 45-06-05.1-06.

a.A policy issued to an individual shall not contain renewal provisions other than "guaranteed renewable" or "noncancelable".

b.The term "guaranteed renewable" may be used only when the insured has the right to continue the long-term care insurance in force by the timely payment of premiums and when the insurer has no unilateral right to make any change in any provision of the policy or rider while the insurance is in force, and cannot decline to renew, except that rates may be revised by the insurer on a class basis.

c.The term "noncancelable" may be used only when the insured has the right to continue the long-term care insurance in force by the timely payment of premiums during which period the insurer has no right to unilaterally make any change in any provision of the insurance or in the premium rate.

d.The term "level premium" may only be used when the insurer does not have the right to change the premium.

e.In addition to the other requirements of this subsection, a qualified long-term care insurance contract shall be guaranteed renewable, within the meaning of section 7702B(b)(1)(C) of the Internal Revenue Code of 1986, as amended.

2.Limitations and exclusions. A policy may not be delivered or issued for delivery in this state as long-term care insurance if the policy limits or excludes coverage by type of illness, treatment, medical condition, or accident, except as follows:

a.Preexisting conditions or diseases.

b.Mental or nervous disorders; however, this shall not permit exclusion or limitation of benefits on the basis of alzheimer's disease.

c.Alcoholism and drug addiction.

d.Illness, treatment, or medical condition arising out of:

(1)War or act of war (whether declared or undeclared);

(2)Participation in a felony, riot, or insurrection;

(3)Service in the armed forces or units auxiliary thereto;

(4)Suicide (sane or insane), attempted suicide, or intentionally self-inflicted injury; or (5)Aviation (this exclusion applies only to non-fare-paying passengers).

e.Treatment provided in a government facility, unless otherwise required by law, services for which benefits are available under Medicare or other governmental program, except Medicaid, any state or federal workers' compensation, employer's liability or occupational disease law, or any motor vehicle no-fault law, services provided by a member of the covered person's immediate family, and services for which no charge is normally made in the absence of insurance.

f.In the case of a qualified long-term care insurance contract, expenses for services or items to the extent that the expenses are reimbursable under title XVIII of the Social Security Act or would be so reimbursable but for the application of a deductible or coinsurance amount. g.(1)This subsection is not intended to prohibit exclusions and limitations by type of provider. However, a long-term care issuer may not deny a claim because services are provided in a state other than the state of policy issued under the following conditions:

(a)When the state other than the state of policy issue does not have the provider licensing, certification, or registration required in the policy, but where the provider satisfies the policy requirements outlined for providers in lieu of licensure, certification, or registration; or (b)When the state other than the state of policy issue licenses, certifies, or registers the provider under another name.

(2)For purposes of this subdivision, "state of policy issue" means the state in which the individual policy or certificate was originally issued.

h.This subsection is not intended to prohibit territorial limitations.

3.Extension of benefits. Termination of long-term care insurance shall be without prejudice to any benefits payable for institutionalization if the institutionalization began while the long-term care insurance was in force and continues without interruption after termination. The extension of benefits beyond the period the long-term care insurance was in force may be limited to the duration of the benefit period, if any, or to payment of the maximum benefits and may be subject to any policy waiting period, and all other applicable provisions of the policy.

4.Continuation or conversion.

a.Group long-term care insurance issued in this state on or after the effective date of this

section shall provide covered individuals with a basis for continuation or conversion of coverage.

b.For the purposes of this section, "a basis for continuation of coverage" means a policy provision that maintains coverage under the existing group policy when the coverage would otherwise terminate and which is subject only to the continued timely payment of premium when due. Group policies that restrict provision of benefits and services to, or contain incentives to use certain providers or facilities, may provide continuation benefits that are substantially equivalent to the benefits of the existing group policy. The commissioner shall make a determination as to the substantial equivalency of benefits, and in doing so, shall take into consideration the differences between managed care and non-managed care plans, including, but not limited to, provider system arrangements, service availability, benefit levels, and administrative complexity.

c.For the purposes of this section, "a basis for conversion of coverage" means a policy provision that an individual whose coverage under the group policy would otherwise terminate or has been terminated for any reason, including discontinuance of the group policy in its entirety or with respect to an insured class, and who has been continuously insured under the group policy, and any group policy which it replaced, for at least six months immediately prior to termination, shall be entitled to the issuance of a converted policy by the insurer under whose group policy the individual is covered, without evidence of insurability.

d.For the purposes of this section, "converted policy" means an individual policy of long-term care insurance providing benefits identical to or benefits determined by the commissioner to be substantially equivalent to or in excess of those provided under the group policy from which conversion is made. When the group policy from which conversion is made restricts provision of benefits and services to, or contains incentives to use certain providers or facilities, the commissioner, in making a determination as to the substantial equivalency of benefits, shall take into consideration the differences between managed care and non-managed care plans, including provider system arrangements, service availability, benefit levels, and administrative complexity.

e.Written application for the converted policy shall be made and the first premium due, if any, shall be paid as directed by the insurer not later than thirty-one days after termination of coverage under the group policy. The converted policy shall be issued effective on the day following the termination of coverage under the group policy, and shall be renewable annually.

f.Unless the group policy from which conversion is made replaced previous group coverage, the premium for the converted policy shall be calculated on the basis of the insured's age at inception of coverage under the group policy from which conversion is made. When the group policy from which conversion is made replaced previous group coverage, the premium for the converted policy shall be calculated on the basis of the insured's age at inception of coverage under the group policy replaced.

g.Continuation of coverage or issuance of a converted policy shall be mandatory, except when:

(1)Termination of group coverage resulted from an individual's failure to make any required payment of premium or contribution when due; or (2)The terminating coverage is replaced not later than thirty-one days after termination, by group coverage effective on the day following the termination of coverage:

(a)Providing benefits identical to or benefits determined by the commissioner to be substantially equivalent to or in excess of those provided by the terminating coverage; and (b)The premium for which is calculated in a manner consistent with the requirements of subdivision f.

h.Notwithstanding any other provision of this section, a converted policy issued to an individual who at the time of conversion is covered by another long-term care insurance policy that provides benefits on the basis of incurred expenses may contain a provision that results in a reduction of benefits payable if the benefits provided under the additional coverage, together with the full benefits provided by the converted policy, would result in payment of more than one hundred percent of incurred expenses. The provision shall only be included in the converted policy if the converted policy also provides for a premium decrease or refund which reflects the reduction in benefits payable.

i.The converted policy may provide that the benefits payable under the converted policy, together with the benefits payable under the group policy from which conversion is made, shall not exceed those that would have been payable had the individual's coverage under the group policy remained in force and effect.

j.Notwithstanding any other provision of this section, an insured individual whose eligibility for group long-term care coverage is based upon the insured individual's relationship to another person shall be entitled to continuation of coverage under the group policy upon termination of the qualifying relationship by death or dissolution of marriage.

k.For the purposes of this section, a "managed care plan" is a health care or assisted living arrangement designed to coordinate patient care or control costs through utilization review, case management, or use of specific provider networks.

5.Discontinuance and replacement. If a group long-term care policy is replaced by another group long-term care policy issued to the same policyholder, the succeeding insurer shall offer coverage to all persons covered under the previous group policy on its date of termination.

Coverage provided or offered to individuals by the insurer and premiums charged to persons under the new group policy:

a.Shall not result in an exclusion for preexisting conditions that would have been covered under the group policy being replaced; and

b.Shall not vary or otherwise depend on the individual's health or disability status, claim experience, or use of long-term care services. 6.a.The premium charged to an insured shall not increase due to either:

(1)The increasing age of the insured at ages beyond sixty-five; or (2)The duration the insured has been covered under the policy.

b.The purchase of additional coverage shall not be considered a premium rate increase, but for purposes of the calculation required under section 45-06-05.1-24, the portion of the premium attributable to the additional coverage shall be added to and considered

part of the initial annual premium.

c.A reduction in benefits shall not be considered a premium change, but for purpose of the calculation required under section 45-06-05.1-24, the initial annual premium shall be based on the reduced benefits.

7.Electronic enrollment for group policies.

a.In the case of a group defined in subdivision a of subsection 3 of North Dakota Century Code section 26.1-45-01, any requirement that a signature of an insured be obtained by an agent or insurer shall be deemed satisfied if:

(1)The consent is obtained by telephonic or electronic enrollment by the group policyholder or insurer. A verification of enrollment information shall be provided to the enrollee;

(2)The telephonic or electronic enrollment provides necessary and reasonable safeguards to assure the accuracy, retention, and prompt retrieval of records; and (3)The telephonic or electronic enrollment provides necessary and reasonable safeguards to assure that the confidentiality of nonpublic personal financial information and nonpublic personal health information as defined by chapter 45-14-01 is maintained.

b.The insurer shall make available, upon request of the commissioner, records that will demonstrate the insurer's ability to confirm enrollment and coverage amounts. 45-06-05.1-05. Unintentional lapse.

Each insurer offering long-term care insurance shall, as a protection against unintentional lapse, comply with the following: 1.a.Notice before lapse or termination. No individual long-term care policy or certificate shall be issued until the insurer has received from the applicant either a written designation of at least one person, in addition to the applicant, who is to receive notice of lapse or termination of the policy or certificate for nonpayment of premium, or a written waiver dated and signed by the applicant electing not to designate additional persons to receive notice. The applicant has the right to designate at least one person who is to receive the notice of termination, in addition to the insured. Designation shall not constitute acceptance of any liability on the third party for services provided to the insured. The form used for the written designation must provide space clearly designated for listing at least one person. The designation shall include each person's full name and home address. In the case of an applicant who elects not to designate an additional person, the waiver shall state: "Protection against unintended lapse. I understand that I have the right to designate at least one person other than myself to receive notice of lapse or termination of this long-term care insurance policy for nonpayment of premium. I understand that notice will not be given until thirty (30) days after a premium is due and unpaid. I elect NOT to designate a person to receive this notice."

The insurer shall notify the insured of the right to change this written designation, no less often than once every two years.

b.When the policyholder or certificate holder pays premium for a long-term care insurance policy or certificate through a payroll or pension deduction plan, the requirements contained in subdivision a need not be met until sixty days after the policyholder or certificate holder is no longer on such a payment plan. The application or enrollment form for such policies or certificates shall clearly indicate the payment plan selected by the applicant.

c.Lapse or termination for nonpayment of premium. No individual long-term care policy or certificate shall lapse or be terminated for nonpayment of premium unless the insurer, at least thirty days before the effective date of the lapse or termination, has given notice to the insured and to those persons designated pursuant to subdivision a, at the address provided by the insured for purposes of receiving notice of lapse or termination. Notice shall be given by first-class United States mail, postage prepaid, and notice may not be given until thirty days after a premium is due and unpaid. Notice shall be deemed to have been given as of five days after the date of mailing.

2.Reinstatement. In addition to the requirement in subsection 1, a long-term care insurance policy or certificate shall include a provision that provides for reinstatement of coverage, in the event of lapse if the insurer is provided proof that the policyholder or certificate holder was cognitively impaired or had a loss of functional capacity before the grace period contained in the policy expired. This option shall be available to the insured if requested within five months after termination and shall allow for the collection of past-due premium, when appropriate. The standard of proof of cognitive impairment or loss of functional capacity shall not be more stringent than the benefit eligibility criteria on cognitive impairment or the loss of functional capacity contained in the policy and certificate. 45-06-05.1-06. Required disclosure provisions.

1.Renewability. Individual long-term care insurance policies shall contain a renewability provision.

a.The provision shall be appropriately captioned, shall appear on the first page of the policy, and shall clearly state that the coverage is guaranteed renewable or noncancelable. This provision shall not apply to policies that do not contain a renewability provision and under which the right to nonrenew is reserved solely to the policyholder.

b.A long-term care insurance policy or certificate, other than one in which the insurer does not have the right to change the premium, shall include a statement that premium rates may change.

2.Riders and endorsements. Except for riders or endorsements by which the insurer effectuates a request made in writing by the insured under an individual long-term care insurance policy, all riders or endorsements added to an individual long-term care insurance policy after date of issue or at reinstatement or renewal that reduce or eliminate benefits or coverage in the policy shall require signed acceptance by the individual insured. After the date of policy issue, any rider or endorsement which increases benefits or coverage with a concomitant increase in premium during the policy term must be agreed to in writing signed by the insured, except if the increased benefits or coverage are required by law. If a separate additional premium is charged for benefits provided in connection with riders or endorsements, the premium charge shall be set forth in the policy, rider, or endorsement.

3.Payment of benefits. A long-term care insurance policy that provides for the payment of benefits based on standards described as "usual and customary", "reasonable and customary", or words of similar import shall include a definition of these terms and an explanation of the terms in its accompanying outline of coverage.

4.Limitations. If a long-term care insurance policy or certificate contains any limitations with respect to preexisting conditions, the limitations shall appear as a separate paragraph of the policy or certificate and shall be labeled as "Preexisting Condition Limitations".

5.Other limitations or conditions on eligibility for benefits. A long-term care insurance policy or certificate containing any limitations or conditions for eligibility other than those prohibited in subsection 2 of North Dakota Century Code section 26.1-45-07 shall set forth a description of the limitations or conditions, including any required number of days of confinement, in a separate paragraph of the policy or certificate and shall label such paragraph "Limitations or Conditions on Eligibility for Benefits".

6.Disclosure of tax consequences. With regard to life insurance policies that provide an accelerated benefit for long-term care, a disclosure statement is required at the time of application for the policy or rider and at the time the accelerated benefit payment request is submitted that receipt of these accelerated benefits may be taxable, and that assistance should be sought from a personal tax advisor. The disclosure statement shall be prominently displayed on the first page of the policy or rider and any other related documents. This subsection shall not apply to qualified long-term care insurance contracts.

7.Benefit triggers. Activities of daily living and cognitive impairment shall be used to measure an insured's need for long-term care and shall be described in the policy or certificate in a separate paragraph and shall be labeled "Eligibility for the Payment of Benefits". Any additional benefit triggers shall also be explained in this section. If these triggers differ for different benefits, explanation of the trigger shall accompany each benefit description. If an attending physician or other specified person must certify a certain level of functional dependency in order to be eligible for benefits, this too shall be specified.

8.A qualified long-term care insurance contract shall include a disclosure statement in the policy and in the outline of coverage as contained in subsection 5 of section 45-06-05.1-27, federal tax consequences, that the policy is intended to be a qualified long-term care insurance contract under section 7702B(b) of the Internal Revenue Code of 1986, as amended.

9.A nonqualified long-term care insurance contract shall include a disclosure statement in the policy and in the outline of coverage as contained in subsection 5 of section 45-06-05.1-27, federal tax consequences, that the policy is not intended to be a qualified long-term care insurance contract. 45-06-05.1-07. Required disclosure of rating practices to consumers.

1.This section shall apply as follows:

a.Except as provided in subdivision b, this section applies to any long-term care policy or certificate issued in this state on or after September 1, 2004.

b.For certificates issued on or after the effective date of this amended regulation under a group long-term care insurance policy as defined in subdivision a of subsection 3 of North Dakota Century Code section 26.1-45-01, which policy was in force at the time this amended regulation became effective, the provisions of this section shall apply on the policy anniversary following March 1, 2005.

2.Other than policies for which no applicable premium rate or rate schedule increases can be made, insurers shall provide all of the information listed in this subsection to the applicant at the time of application or enrollment, unless the method of application does not allow for delivery at that time. In such a case, an insurer shall provide all of the information listed in this

section to the applicant no later than at the time of delivery of the policy or certificate.

a.A statement that the policy may be subject to rate increases in the future;

b.An explanation of potential future premium rate revisions, and the policyholder's or certificate holder's option in the event of a premium rate revision;

c.The premium rate or rate schedules applicable to the applicant that will be in effect until a request is made for an increase;

d.A general explanation for applying premium rate or rate schedule adjustments that shall include:

(1)A description of when premium rate or rate schedule adjustments will be effective, e.g., next anniversary date, next billing date, etc.; and (2)The right to a revised premium rate or rate schedule as provided in subdivision c if the premium rate or rate schedule is changed; and e.(1)Information regarding each premium rate increase on this policy form or similar policy forms over the past ten years for this state or any other state that, at a minimum, identifies:

(a)The policy forms for which premium rates have been increased;

(b)The calendar years when the form was available for purchase; and (c)The amount or percent of each increase. The percentage may be expressed as a percentage of the premium rate prior to the increase, and may also be expressed as minimum and maximum percentages if the rate increase is variable by rating characteristics.

(2)The insurer may, in a fair manner, provide additional explanatory information related to the rate increases.

(3)An insurer shall have the right to exclude from the disclosure premium rate increases that only apply to blocks of business acquired from other nonaffiliated insurers or the long-term care policies acquired from other nonaffiliated insurers when those increases occurred prior to the acquisition.

(4)If an acquiring insurer files for a rate increase on a long-term care policy form acquired from nonaffiliated insurers or a block of policy forms acquired from nonaffiliated insurers on or before the later of the effective date of this section or the end of a twenty-four-month period following the acquisition of the block or policies, the acquiring insurer may exclude that rate increase from the disclosure. However, the nonaffiliated selling company shall include the disclosure of that rate increase in accordance with paragraph 1.

(5)If the acquiring insurer in paragraph 4 files for a subsequent rate increase, even within the twenty-four-month period, on the same policy form acquired from nonaffiliated insurers or block of policy forms acquired from nonaffiliated insurers referenced in paragraph 4, the acquiring insurer shall make all disclosures required by this subdivision, including disclosure of the earlier rate increase referenced in paragraph 4.

3.An applicant shall sign an acknowledgment at the time of application, unless the method of application does not allow for signature at that time, that the insurer made the disclosure required under subdivisions a and e of subsection 2. If due to the method of application the applicant cannot sign an acknowledgment at the time of application, the applicant shall sign no later than at the time of delivery of the policy or certificate.

4.An insurer shall use the forms in appendices B and F to comply with the requirements of subsections 2 and 3.

5.An insurer shall provide notice of an upcoming premium rate schedule increase to all policyholders or certificate holders, if applicable, at least forty-five days prior to the implementation of the premium rate schedule increase by the insurer. The notice shall include the information required by subsection 2 when the rate increase is implemented. 45-06-05.1-08. Initial filing requirements.

1.This section applies to any long-term care policy issued in this state on or after September 1, 2004.

2.An insurer shall provide the information listed in this subsection to the commissioner sixty days prior to making a long-term care insurance form available for sale.

a.A copy of the disclosure documents required in section 45-06-05.1-07; and

b.An actuarial certification consisting of at least the following:

(1)A statement that the initial premium rate schedule is sufficient to cover anticipated costs under moderately adverse experience and that the premium rate schedule is reasonably expected to be sustainable over the life of the form with no future premium increases anticipated;

(2)A statement that the policy design and coverage provided have been reviewed and taken into consideration;

(3)A statement that the underwriting and claims adjudication processes have been reviewed and taken into consideration;

(4)A complete description of the basis for contract reserves that are anticipated to be held under the form, to include:

(a)Sufficient detail or sample calculations provided so as to have a complete depiction of the reserve amounts to be held;

(b)A statement that the assumptions used for reserves contain reasonable margins for adverse experience;

(c)A statement that the net valuation premium for renewal years does not increase, except for attained-age rating where permitted; and (d)A statement that the difference between the gross premium and the net valuation premium for renewal years is sufficient to cover expected renewal expenses; or if such a statement cannot be made, a complete description of the situations in which this does not occur: [1]An aggregate distribution of anticipated issues may be used as long as the underlying gross premiums maintain a reasonably consistent relationship; and [2]If the gross premiums for certain age groups appear to be inconsistent with this requirement, the commissioner may request a demonstration under subsection 3 based on a standard age distribution; and (5)(a)A statement that the premium rate schedule is not less than the premium rate schedule for existing similar policy forms also available from the insurer except for reasonable differences attributable to benefits; or (b)A comparison of the premium schedules for similar policy forms that are currently available from the insurer with an explanation of the differences. 3.a.The commissioner may request an actuarial demonstration that benefits are reasonable in relation to premiums. The actuarial demonstration shall include either premium and claim experience on similar policy forms, adjusted for any premium or benefit differences, relevant and credible data from other studies, or both.

b.In the event the commissioner asks for additional information under this provision, the period in subsection 2 does not include the period during which the insurer is preparing the requested information. 45-06-05.1-08.1. Initial filing requirements for policies issued after March 1, 2020.

1.This section applies to any long-term care policy issued in this state on or after March 1, 2020.

2.An insurer shall provide the information listed in this subsection to the commissioner sixty days prior to making a long-term care insurance form available for sale.

a.A copy of the disclosure documents required in section 45-06-05.1-07.

b.An actuarial certification consisting of at least the following:

(1)A statement that the initial premium rate schedule is sufficient to cover anticipated costs under moderately adverse experience and that the premium rate schedule is reasonably expected to be sustainable over the life of the form with no future premium increases anticipated.

(2)A statement that the policy design and coverage provided have been reviewed and taken into consideration.

(3)A statement that the underwriting and claims adjudication processes have been reviewed and taken into consideration.

(4)A statement that the premiums contain at least the minimum margin for moderately adverse experience defined in subparagraphs a and b:

(a)A composite margin may not be less than ten percent of lifetime claims.

(b)A greater margin may be appropriate in circumstances where the company has less credible experience to support its assumptions used to determine the premium rates.

(5)(a)A statement that the premium rate schedule is not less than the premium rate schedule for existing similar policy forms also available from the insurer except for reasonable differences attributable to benefits; or (b)A comparison of the premium schedules for similar policy forms currently available from the insurer with an explanation of the differences.

(6)A statement that reserve requirements have been reviewed and considered.

Support for this statement must include:

(a)Sufficient detail or sample calculations provided so as to have a complete depiction of the reserve amounts to be held; and (b)A statement that the difference between the gross premium and the net valuation premium for renewal years is sufficient to cover expected renewal expenses; or if such a statement cannot be made, a complete description of the situations where this does not occur. An aggregate distribution of anticipated issues may be used as long as the underlying gross premiums maintain a reasonably consistent relationship.

c.An actuarial memorandum prepared, dated, and signed by the member of the academy of actuaries must be included and must address and support each specific item required as part of the actuarial certification and provide at least the following information:

(1)An explanation of the review performed by the actuary prior to making the statements in paragraphs 2 and 3 of subdivision b.

(2)A complete description of pricing assumptions.

(3)Sources and levels of margins incorporated into the gross premiums that are the

basis for the statement in paragraph 1 of subdivision b of the actuarial certification and an explanation of the analysis and testing performed in determining the sufficiency of the margins. Deviations in margins between ages, sexes, plans, or states must be clearly described. Deviations in margins required to be described are other than those produced utilizing generally accepted actuarial methods for smoothing and interpolating gross premium scales.

(4)A demonstration that the gross premiums include the minimum composite margin specified in paragraph 4 of subdivision b.

History: Effective October 1, 2019; amended effective April 1, 2021. 45-06-05.1-09. Prohibition against post-claims underwriting.

1.All applications for long-term care insurance policies or certificates except those that are guaranteed issue shall contain clear and unambiguous questions designed to ascertain the health condition of the applicant. 2.a.If an application for long-term care insurance contains a question that asks whether the applicant has had medication prescribed by a physician, it must also ask the applicant to list the medication that has been prescribed.

b.If the medications listed in the application were known by the insurer, or should have been known at the time of application, to be directly related to a medical condition for which coverage would otherwise be denied, then the policy or certificate shall not be rescinded for that condition.

3.Except for policies or certificates which are guaranteed issue:

a.The following language shall be set out conspicuously and in close conjunction with the applicant's signature block on an application for a long-term care insurance policy or certificate:

Caution: If your answers on this application are incorrect or untrue, [company] has the right to deny benefits or rescind your policy.

b.The following language, or language substantially similar to the following, shall be set out conspicuously on the long-term care insurance policy or certificate at the time of delivery:

Caution: The issuance of this long-term care insurance [policy] [certificate] is based upon your responses to the questions on your application. A copy of your [application] [enrollment form] [is enclosed] [was retained by you when you applied].

If your answers are incorrect or untrue, the company has the right to deny benefits or rescind your policy. The best time to clear up any questions is now, before a claim arises! If, for any reason, any of your answers are incorrect, contact the company at this address: [insert address]

c.Prior to issuance of a long-term care policy or certificate to an applicant age eighty or older, the insurer shall obtain one of the following:

(1)A report of a physical examination;

(2)An assessment of functional capacity;

(3)An attending physician's statement; or (4)Copies of medical records.

4.A copy of the completed application or enrollment form, whichever is applicable, shall be delivered to the insured no later than at the time of delivery of the policy or certificate unless it was retained by the applicant at the time of application.

5.Every insurer or other entity selling or issuing long-term care insurance benefits shall maintain a record of all policy or certificate rescissions, both state and countrywide, except those that the insured voluntarily effectuated and shall annually furnish this information to the insurance commissioner in the format prescribed by the national association of insurance commissioners in appendix A. 45-06-05.1-10. Minimum standards for home health and community care benefits in long-term care insurance policies.

1.A long-term care insurance policy or certificate shall not, if it provides benefits for home health care or community care services, limit or exclude benefits:

a.By requiring that the insured or claimant would need care in a skilled nursing facility if home health care services were not provided;

b.By requiring that the insured or claimant first or simultaneously receive nursing or therapeutic services, or both, in a home, community, or institutional setting before home health care services are covered;

c.By limiting eligible services to services provided by registered nurses or licensed practical nurses;

d.By requiring that a nurse or therapist provide services covered by the policy that can be provided by a home health aide, or other licensed or certified home care worker acting within the scope of the worker's licensure or certification;

e.By excluding coverage for personal care services provided by a home health aide;

f.By requiring that the provision of home health care services be at a level of certification or licensure greater than that required by the eligible service;

g.By requiring that the insured or claimant have an acute condition before home health care services are covered;

h.By limiting benefits to services provided by Medicare-certified agencies or providers; or

i.By excluding coverage for adult day care services.

2.A long-term care insurance policy or certificate, if it provides for home health or community care services, shall provide total home health or community care coverage that is a dollar amount equivalent to at least one-half of one year's coverage available for nursing home benefits under the policy or certificate, at the time covered home health or community care services are being received. This requirement shall not apply to policies or certificates issued to residents of continuing care retirement communities.

3.Home health care coverage may be applied to the nonhome health care benefits provided in the policy or certificate when determining maximum coverage under the terms of the policy or certificate. 45-06-05.1-11. Requirement to offer inflation protection.

1.No insurer may offer a long-term care insurance policy unless the insurer also offers to the policyholder in addition to any other inflation protection the option to purchase a policy that provides for benefit levels to increase with benefit maximums or reasonable durations which are meaningful to account for reasonably anticipated increases in the costs of long-term care services covered by the policy. Insurers must offer to each policyholder, at the time of purchase, the option to purchase a policy with an inflation protection feature no less favorable than one of the following:

a.Increases benefit levels annually in a manner so that the increases are compounded annually at a rate not less than five percent;

b.Guarantees the insured individual the right to periodically increase benefit levels without providing evidence of insurability or health status so long as the option for the previous period has not been declined. The amount of the additional benefit shall be no less than the difference between the existing policy benefit and that benefit compounded annually at a rate of at least five percent for the period beginning with the purchase of the existing benefit and extending until the year in which the offer is made; or

c.Covers a specified percentage of actual or reasonable charges and does not include a maximum specified indemnity amount or limit.

2.Where the policy is issued to a group, the required offer in subsection 1 shall be made to the group policyholder; except, if the policy is issued to a group defined in subdivision d of subsection 3 of North Dakota Century Code section 26.1-45-01 other than to a continuing care retirement community, the offering shall be made to each proposed certificate holder.

3.The offer in subsection 1 shall not be required of life insurance policies or riders containing accelerated long-term care benefits. 4.a.Insurers shall include the following information in or with the outline of coverage:

(1)A graphic comparison of the benefit levels of a policy that increases benefits over the policy period with a policy that does not increase benefits. The graphic comparison shall show benefit levels over at least a twenty-year period.

(2)Any expected premium increases or additional premiums to pay for automatic or optional benefit increases.

b.An insurer may use a reasonable hypothetical, or a graphic demonstration, for the purposes of this disclosure.

5.Inflation protection benefit increases under a policy which contains these benefits shall continue without regard to an insured's age, claim status or claim history, or the length of time the person has been insured under the policy.

6.An offer of inflation protection that provides for automatic benefit increases shall include an offer of a premium which the insurer expects to remain constant. The offer shall disclose in a conspicuous manner that the premium may change in the future unless the premium is guaranteed to remain constant. 7.a.Inflation protection as provided in subdivision a of subsection 1 shall be included in a long-term care insurance policy unless an insurer obtains a rejection of inflation protection signed by the policyholder as required in this subsection. The rejection may be either in the application or on a separate form.

b.The rejection shall be considered a part of the application and shall state:

I have reviewed the outline of coverage and the graphs that compare the benefits and premiums of this policy with and without inflation protection. Specifically, I have reviewed Plans ______, and I reject inflation protection. 45-06-05.1-12. Requirements for application forms and replacement coverage.

1.Application forms shall include the following questions designed to elicit information as to whether, as of the date of the application, the applicant has another long-term care insurance policy or certificate in force or whether a long-term care policy or certificate is intended to replace any other accident and sickness or long-term care policy or certificate presently in force. A supplementary application or other form to be signed by the applicant and agent, except when the coverage is sold without an agent, containing the questions may be used.

With regard to a replacement policy issued to a group defined by subdivision a of subsection 3 of North Dakota Century Code section 26.1-45-01, the following questions may be modified only to the extent necessary to elicit information about health or long-term care insurance policies other than the group policy being replaced, provided that the certificate holder has been notified of the replacement.

a.Do you have another long-term care insurance policy or certificate in force (including health care service contract, health maintenance organization contract)?

b.Did you have another long-term care insurance policy or certificate in force during the last twelve months?

(1)If so, with which company?

(2)If that policy lapsed, when did it lapse?

c.Are you covered by Medicaid?

d.Do you intend to replace any of your medical or health insurance coverage with this policy [certificate]?

2.Agents shall list any other health insurance policies they have sold to the applicant.

a.List policies sold that are still in force.

b.List policies sold in the past five years that are no longer in force.

3.Solicitations other than direct response. Upon determining that a sale will involve replacement, an insurer, other than an insurer using direct response solicitation methods, or its agent shall furnish the applicant, prior to issuance or delivery of the individual long-term care insurance policy, a notice regarding replacement of accident and sickness or long-term care coverage.

One copy of the notice shall be retained by the applicant and an additional copy signed by the applicant shall be retained by the insurer. The required notice shall be provided in the following manner:

NOTICE TO APPLICANT REGARDING REPLACEMENT OF INDIVIDUAL

ACCIDENT AND SICKNESS OR LONG-TERM CARE INSURANCE [Insurance company's name and address]

SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FUTURE.

According to [your application] [information you have furnished], you intend to lapse or otherwise terminate existing accident and sickness or long-term care insurance and replace it with an individual long-term care insurance policy to be issued by [company name] Insurance Company. Your new policy provides thirty (30) days within which you may decide, without cost, whether you desire to keep the policy. For your own information and protection, you should be aware of and seriously consider certain factors which may affect the insurance protection available to you under the new policy.

You should review this new coverage carefully, comparing it with all accident and sickness or long-term care insurance coverage you now have, and terminate your present policy only if, after due consideration, you find that purchase of this long-term care coverage is a wise decision.

STATEMENT TO APPLICANT BY AGENT [BROKER OR OTHER REPRESENTATIVE]:

(Use additional sheets, as necessary.)

I have reviewed your current medical or health insurance coverage. I believe the replacement of insurance involved in this transaction materially improves your position. My conclusion has taken into account the following considerations, which I call to your attention:

1.Health conditions that you may presently have (preexisting conditions) may not be immediately or fully covered under the new policy. This could result in denial or delay in payment of benefits under the new policy, whereas a similar claim might have been payable under your present policy.

2.State law provides that your replacement policy or certificate may not contain new preexisting conditions or probationary periods. The insurer will waive any time periods applicable to preexisting conditions or probationary periods in the new policy (or coverage) for similar benefits to the extent such time was spent (depleted) under the original policy.

3.If you are replacing existing long-term care insurance coverage, you may wish to secure the advice of your present insurer or its agent regarding the proposed replacement of your present policy. This is not only your right, but it is also in your best interest to make sure you understand all the relevant factors involved in replacing your present coverage.

4.If, after due consideration, you still wish to terminate your present policy and replace it with new coverage, be certain to truthfully and completely answer all questions on the application concerning your medical health history. Failure to include all material medical information on an application may provide a basis for the company to deny any future claims and to refund your premium as though your policy had never been in force. After the application has been completed and before you sign it, reread it carefully to be certain that all information has been properly recorded.

(Signature of Agent, Broker, or Other Representative) [Typed Name and Address of Agent or Broker]

The above "Notice to Applicant" was delivered to me on:

(Applicant's Signature)(Date)

4.Direct response solicitations. Insurers using direct response solicitation methods shall deliver a notice regarding replacement of accident and sickness or long-term care coverage to the applicant upon issuance of the policy. The required notice shall be provided in the following manner:

NOTICE TO APPLICANT REGARDING REPLACEMENT

OF ACCIDENT AND SICKNESS OR LONG-TERM CARE INSURANCE [Insurance company's name and address]

SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FUTURE.

According to [your application] [information you have furnished], you intend to lapse or otherwise terminate existing accident and sickness or long-term care insurance and replace it with the long-term care insurance policy delivered herewith issued by [company name] Insurance Company. Your new policy provides thirty (30) days within which you may decide, without cost, whether you desire to keep the policy. For your own information and protection, you should be aware of and seriously consider certain factors which may affect the insurance protection available to you under the new policy.

You should review this new coverage carefully, comparing it with all accident and sickness or long-term care insurance coverage you now have, and terminate your present policy only if, after due consideration, you find that purchase of this long-term care coverage is a wise decision.

1.Health conditions which you may presently have (preexisting conditions), may not be immediately or fully covered under the new policy. This could result in denial or delay in payment of benefits under the new policy, whereas a similar claim might have been payable under your present policy.

2.State law provides that your replacement policy or certificate may not contain new preexisting conditions or probationary periods. Your insurer will waive any time periods applicable to preexisting conditions or probationary periods in the new policy (or coverage) for similar benefits to the extent such time was spent (depleted) under the original policy.

3.If you are replacing existing long-term care insurance coverage, you may wish to secure the advice of your present insurer or its agent regarding the proposed replacement of your present policy. This is not only your right, but it is also in your best interest to make sure you understand all the relevant factors involved in replacing your present coverage. 4.[To be included only if the application is attached to the policy.] If, after due consideration, you still wish to terminate your present policy and replace it with new coverage, read the copy of the application attached to your new policy and be sure that all questions are answered fully and correctly. Omissions or misstatements in the application could cause an otherwise valid claim to be denied. Carefully check the application and write to [company name and address] within thirty (30) days if any information is not correct and complete, or if any past medical

history has been left out of the application. [Company Name]

5.If replacement is intended, the replacing insurer shall notify, in writing, the existing insurer of the proposed replacement. The existing policy shall be identified by the insurer, name of the insured and policy number or address, including zip code. Notice shall be made within five working days from the date the application is received by the insurer or the date the policy is issued, whichever is sooner.

6.Life insurance policies that accelerate benefits for long-term care shall comply with this section if the policy being replaced is a long-term care insurance policy. If the policy being replaced is a life insurance policy, the insurer shall comply with the requirements of article 45-04. If a life insurance policy that accelerates benefits for long-term care is replaced by another such policy, the replacing insurer shall comply with both the long-term care and the life insurance replacement requirements. 45-06-05.1-13. Reporting requirements.

1.Every insurer shall maintain records for each agent of that agent's amount of replacement sales as a percentage of the agent's total annual sales and the amount of lapses of long-term care insurance policies sold by the agent as a percentage of the agent's total annual sales.

2.Every insurer shall report annually by June thirtieth the ten percent of its agents with the greatest percentages of lapses and replacements as measured by subsection 1. (Appendix G)

3.Reported replacement and lapse rates do not alone constitute a violation of insurance laws or necessarily imply wrongdoing. The reports are for the purpose of reviewing more closely agent activities regarding the sale of long-term care insurance.

4.Every insurer shall report annually by June thirtieth the number of lapsed policies as a percentage of its total annual sales and as a percentage of its total number of policies in force as of the end of the preceding calendar year. (Appendix G)

5.Every insurer shall report annually by June thirtieth the number of replacement policies sold as a percentage of its total annual sales and as a percentage of its total number of policies in force as of the preceding calendar year. (Appendix G)

6.Every insurer shall report annually by June thirtieth, for qualified long-term care insurance contracts, the number of claims denied for each class of business, expressed as a percentage of claims denied. (Appendix E)

7.For purposes of this section:

a.Subject to subdivision c, "claim" means a request for payment of benefits under an in-force policy regardless of whether the benefit claimed is covered under the policy or any terms or conditions of the policy have been met;

b."Denied" means the insurer refuses to pay a claim for any reason other than for claims not paid for failure to meet the waiting period or because of an applicable preexisting condition;

c."Policy" means only long-term care insurance; and

d."Report" means on a statewide basis.

8.Reports required under this section shall be filed with the commissioner. 45-06-05.1-14. Licensing.

A producer is not authorized to sell, solicit, or negotiate with respect to long-term care insurance except as authorized by chapter 45-02-02 and North Dakota Century Code chapter 26.1-26. 45-06-05.1-15. Discretionary powers of commissioner.

The commissioner may, upon written request and after an administrative hearing, issue an order to modify or suspend a specific provision or provisions of this chapter with respect to a specific long-term care insurance policy or certificate upon a written finding that:

1.The modification or suspension would be in the best interest of the insureds;

2.The purposes to be achieved could not be effectively or efficiently achieved without the modification or suspension; and 3.a.The modification or suspension is necessary to the development of an innovative and reasonable approach for insuring long-term care;

b.The policy or certificate is to be issued to residents of a life care or continuing care retirement community or some other residential community for the elderly and the modification or suspension is reasonably related to the special needs or nature of such a community; or

c.The modification or suspension is necessary to permit long-term care insurance to be sold as part of, or in conjunction with, another insurance product. 45-06-05.1-16. Reserve standards.

1.When long-term care benefits are provided through the acceleration of benefits under group or individual life policies or riders to such policies, policy reserves for the benefits shall be determined in accordance with North Dakota Century Code section 26.1-35-02. Claim reserves shall also be established in the case when the policy or rider is in claim status.

Reserves for policies and riders subject to this subsection should be based on the multiple decrement model utilizing all relevant decrements except for voluntary termination rates.

Single decrement approximations are acceptable if the calculation produces essentially similar reserves, if the reserve is clearly more conservative, or if the reserve is immaterial. The calculations may take into account the reduction in life insurance benefits due to the payment of long-term care benefits. However, in no event shall the reserves for the long-term care benefit and the life insurance benefit be less than the reserves for the life insurance benefit assuming no long-term care benefit.

In the development and calculation of reserves for policies and riders subject to this subsection, due regard shall be given to the applicable policy provisions, marketing methods, administrative procedures, and all other considerations which have an impact on projected claim costs, including, but not limited to, the following:

a.Definition of insured events;

b.Covered long-term care facilities;

c.Existence of home convalescence care coverage;

d.Definition of facilities;

e.Existence or absence of barriers to eligibility;

f.Premium waiver provision;

g.Renewability;

h.Ability to raise premiums;

i.Marketing method;

j.Underwriting procedures;

k.Claims adjustment procedures;

l.Waiting period;

m.Maximum benefit;

n.Availability of eligible facilities;

o.Margins in claim costs;

p.Optional nature of benefit;

q.Delay in eligibility for benefit;

r.Inflation protection provisions; and

s.Guaranteed insurability option.

Any applicable valuation morbidity table shall be certified as appropriate as a statutory valuation table by a member of the American academy of actuaries.

2.When long-term care benefits are provided other than as in subsection 1, reserves shall be determined in accordance with generally accepted accounting and reserve practices. 45-06-05.1-17. Life insurance long-term care benefits.

1.A life insurance policy that funds long-term care benefits entirely by accelerating the death benefit is considered to provide reasonable benefits in relation to premiums paid, if the policy complies with all of the following provisions:

a.The interest credited internally to determine cash value accumulations, including long-term care, if any, are guaranteed not to be less than the minimum guaranteed interest rate for cash value accumulations without long-term care set forth in the policy;

b.The portion of the policy that provides life insurance benefits meets the nonforfeiture requirements of North Dakota Century Code sections 26.1-33-18 through 26.1-33-28;

c.The policy meets the disclosure requirements of subsections 4, 5, and 6 of North Dakota Century Code section 26.1-45-09;

d.Any policy illustration that meets the applicable requirements of the national association of insurance commissioners life insurance illustrations model regulation; and

e.An actuarial memorandum is filed with the insurance department that includes:

(1)A description of the basis on which the long-term care rates were determined;

(2)A description of the basis for the reserves;

(3)A summary of the type of policy, benefits, renewability, general marketing method, and limits on ages of issuance;

(4)A description and a table of each actuarial assumption used. For expenses, an insurer must include a percentage of premium dollars per policy and dollars per unit of benefits, if any;

(5)A description and a table of the anticipated policy reserves and additional reserves to be held in each future year for active lives;

(6)The estimated average annual premium per policy and the average issue age;

(7)A statement as to whether underwriting is performed at the time of application. The statement shall indicate whether underwriting is used and, if used, the statement shall include a description of the type or types of underwriting used, such as medical underwriting or functional assessment underwriting. Concerning a group policy, the statement shall indicate whether the enrollee or any dependent will be underwritten and when underwriting occurs; and (8)A description of the effect of the long-term care policy provision on the required premiums, nonforfeiture values, and reserves on the underlying life insurance policy, both for active lives and those in long-term care claim status. 45-06-05.1-18. Premium rate schedule increases.

1.This section shall apply as follows:

a.Except as provided in subdivision b, this section applies to any long-term care policy or certificate issued in this state on or after September 1, 2004.

b.For certificates issued on or after the effective date of this amended regulation under a group long-term care insurance policy as defined in subdivision a of subsection 3 of North Dakota Century Code section 26.1-45-01, which policy was in force at the time this amended regulation became effective, the provisions of this section shall apply on the policy anniversary following March 1, 2005.

2.An insurer shall request approval of a pending premium rate schedule increase, including an exceptional increase, to the commissioner at least thirty days prior to the notice to the policyholders and shall include:

a.Information required by section 45-06-05.1-07;

b.Certification by a qualified actuary that:

(1)If the requested premium rate schedule increase is implemented and the underlying assumptions, which reflect moderately adverse conditions, are realized, no further premium rate schedule increases are anticipated; and (2)The premium rate filing is in compliance with the provisions of this section;

c.An actuarial memorandum justifying the rate schedule change request that includes:

(1)Lifetime projections of earned premiums and incurred claims based on the filed premium rate schedule increase; and the method and assumptions used in determining the projected values, including reflection of any assumptions that deviate from those used for pricing other forms currently available for sale;

(a)Annual values for the five years preceding and the three years following the valuation date shall be provided separately;

(b)The projections shall include the development of the lifetime loss ratio, unless the rate increase is an exceptional increase;

(c)The projections shall demonstrate compliance with subsection 3; and (d)For exceptional increases: [1]The projected experience should be limited to the increases in claims expenses attributable to the approved reasons for the exceptional increase; and [2]In the event the commissioner determines as provided in subdivision d of subsection 1 of section 45-06-05.1-02 that offsets may exist, the insurer shall use appropriate net projected experience;

(2)Disclosure of how reserves have been incorporated in this rate increase whenever the rate increase will trigger contingent benefit upon lapse;

(3)Disclosure of the analysis performed to determine why a rate adjustment is necessary, which pricing assumptions were not realized and why, and what other actions taken by the company have been relied on by the actuary;

(4)A statement that policy design, underwriting, and claims adjudication practices have been taken into consideration;

(5)In the event that it is necessary to maintain consistent premium rates for new certificates and certificates receiving a rate increase, the insurer will need to file composite rates reflecting projections of new certificates; and (6)A demonstration that actual and projected costs exceed costs anticipated at the time of initial pricing under moderately adverse experience and that the composite margin specified in paragraph 4 of subdivision b of subsection 2 of section 45-06-05.1-08.1 is projected to be exhausted.

d.A statement that renewal premium rate schedules are not greater than new business premium rate schedules except for differences attributable to benefits, unless sufficient justification is provided to the commissioner; and

e.Sufficient information for review and approval of the premium rate schedule increase by the commissioner.

3.All premium rate schedule increases shall be determined in accordance with the following requirements:

a.Exceptional increases shall provide that seventy percent of the present value of projected additional premiums from the exceptional increase will be returned to policyholders in benefits;

b.Premium rate schedule increases shall be calculated such that the sum of the accumulated value of incurred claims, without the inclusion of active life reserves, and the present value of future projected incurred claims, without the inclusion of active life reserves, will not be less than the sum of the following:

(1)The accumulated value of the initial earned premium times fifty-eight percent;

(2)Eighty-five percent of the accumulated value of prior premium rate schedule increases on an earned basis;

(3)The present value of future projected initial earned premiums times fifty-eight percent; and (4)Eighty-five percent of the present value of future projected premiums not in paragraph 3 on an earned basis;

c.In the event that a policy form has both exceptional and other increases, the values in paragraphs 2 and 4 of subdivision b will also include seventy percent for exceptional rate increase amounts; and

d.All present and accumulated values used to determine rate increases shall use the maximum valuation interest rate permitted by law in the valuation of whole life insurance issued on the same date as the health insurance contract. The actuary shall disclose as

part of the actuarial memorandum the use of any appropriate averages.

4.For each rate increase that is implemented, the insurer shall file for approval by the commissioner updated projections, as defined in paragraph 1 of subdivision c of subsection 2, annually for the next three years and include a comparison of actual results to projected values. The commissioner may extend the period to greater than three years if actual results are not consistent with projected values from prior projections. For group insurance policies that meet the conditions in subsection 11, the projections required by this subsection shall be provided to the policyholder in lieu of filing with the commissioner.

5.If any premium rate in the revised premium rate schedule is greater than two hundred percent of the comparable rate in the initial premium schedule, lifetime projections, as defined in paragraph 1 of subdivision c of subsection 2, shall be filed for approval by the commissioner every five years following the end of the required period in subsection 4. For group insurance policies that meet the conditions in subsection 11, the projections required by this subsection shall be provided to the policyholder in lieu of filing with the commissioner. 6.a.If the commissioner has determined that the actual experience following a rate increase does not adequately match the projected experience and that the current projections under moderately adverse conditions demonstrate that incurred claims will not exceed proportions of premiums specified in subsection 3, the commissioner may require the insurer to implement any of the following:

(1)Premium rate schedule adjustments; or (2)Other measures to reduce the difference between the projected and actual experience.

b.In determining whether the actual experience adequately matches the projected experience, consideration should be given to paragraph 5 of subdivision c of subsection 2, if applicable.

7.If the majority of the policies or certificates to which the increase is applicable are eligible for the contingent benefit upon lapse, the insurer shall file:

a.A plan, subject to commissioner approval, for improved administration or claims processing designed to eliminate the potential for further deterioration of the policy form requiring further premium rate schedule increases, or both, or to demonstrate that appropriate administration and claims processing have been implemented or are in effect; otherwise the commissioner may impose the condition in subsection 8; and

b.The original anticipated lifetime loss ratio and the premium rate schedule increase that would have been calculated according to subsection 3 had the greater of the original anticipated lifetime loss ratio or fifty-eight percent been used in the calculations described in paragraphs 1 and 3 of subdivision b of subsection 3. 8.a.For a rate increase filing that meets the following criteria, the commissioner shall review, for all policies included in the filing, the projected lapse rates and past lapse rates during the twelve months following each increase to determine if significant adverse lapsation has occurred or is anticipated:

(1)The rate increase is not the first rate increase requested for the specific policy form or forms;

(2)The rate increase is not an exceptional increase; and (3)The majority of the policies or certificates to which the increase is applicable are eligible for the contingent benefit upon lapse.

b.In the event significant adverse lapsation has occurred and is anticipated in the filing or is evidenced in the actual results as presented in the updated projections provided by the insurer following the requested rate increase, the commissioner may determine that a rate spiral exists. Following the determination that a rate spiral exists, the commissioner may require the insurer to offer, without underwriting, to all in-force insureds subject to the rate increase the option to replace existing coverage with one or more reasonably comparable products being offered by the insurer or its affiliates.

(1)The offer shall:

(a)Be subject to the approval of the commissioner;

(b)Be based on actuarially sound principles, but not be based on attained age;

(c)Provide that maximum benefits under any new policy accepted by an insured shall be reduced by comparable benefits already paid under the existing policy.

(2)The insurer shall maintain the experience of all the replacement insureds separate from the experience of insureds originally issued the policy forms. In the event of a request for a rate increase on the policy form, the rate increase shall be limited to the lesser of:

(a)The maximum rate increase determined based on the combined experience;

(b)The maximum rate increase determined based only on the experience of the insureds originally issued the form plus ten percent.

9.If the commissioner determines that the insurer has exhibited a persistent practice of filing inadequate initial premium rates for long-term care insurance, the commissioner may, in addition to the provisions of subsection 8, prohibit the insurer from either of the following:

a.Filing and marketing comparable coverage for a period of up to five years; or

b.Offering all other similar coverages and limiting marketing of new applications to the products subject to recent premium rate schedule increases.

10.Subsections 1 through 9 shall not apply to policies for which the long-term care benefits provided by the policy are incidental, as defined in subsection 2 of section 45-06-05.1-02, if the policy complies with all of the following provisions:

a.The interest credited internally to determine cash value accumulations, including long-term care, if any, are guaranteed not to be less than the minimum guaranteed interest rate for cash value accumulations without long-term care set forth in the policy;

b.The portion of the policy that provides insurance benefits other than long-term care coverage meets the nonforfeiture requirements as applicable in any of the following:

(1)North Dakota Century Code sections 26.1-33-18 through 26.1-33-28; and (2)North Dakota Century Code section 26.1-34-02.

c.The policy meets the disclosure requirements of subsections 4, 5, and 6 of North Dakota Century Code section 26.1-45-09;

d.The portion of the policy that provides insurance benefits other than long-term care coverage meets the requirements as applicable in the following:

(1)Policy illustrations as required by chapter 45-04-01.1; and (2)Disclosure requirements in chapter 45-04-02.

e.An actuarial memorandum is filed with the insurance department that includes:

(1)A description of the basis on which the long-term care rates were determined;

(2)A description of the basis for the reserves;

(3)A summary of the type of policy, benefits, renewability, general marketing method, and limits on ages of issuance;

(4)A description and a table of each actuarial assumption used. For expenses, an insurer must include a percentage of premium dollars per policy and dollars per unit of benefits, if any;

(5)A description and a table of the anticipated policy reserves and additional reserves to be held in each future year for active lives;

(6)The estimated average annual premium per policy and the average issue age;

(7)A statement as to whether underwriting is performed at the time of application. The statement shall indicate whether underwriting is used and, if used, the statement shall include a description of the type or types of underwriting used, such as medical underwriting or functional assessment underwriting. Concerning a group policy, the statement shall indicate whether the enrollee or any dependent will be underwritten and when underwriting occurs; and (8)A description of the effect of the long-term care policy provision on the required premiums, nonforfeiture values, and reserves on the underlying insurance policy, both for active lives and those in long-term care claim status.

11.Subsections 6 and 8 shall not apply to group insurance policies as defined in subdivision a of subsection 3 of North Dakota Century Code section 26.1-45-01 when:

a.The policies insure two hundred fifty or more persons and the policyholder has five thousand or more eligible employees of a single employer; or

b.The policyholder, and not the certificate holders, pays a material portion of the premium, which shall not be less than twenty percent of the total premium for the group in the calendar year prior to the year a rate increase is filed. 45-06-05.1-19. Filing requirement.

Prior to an insurer or similar organization offering group long-term care insurance to a resident of this state pursuant to North Dakota Century Code section 26.1-45-03, it shall file with the commissioner evidence that the group policy or certificate thereunder has been approved by a state having statutory or regulatory long-term care insurance requirements substantially similar to those adopted in this state. 45-06-05.1-20. Filing requirements for advertising.

1.Every insurer, health care service plan, or other entity providing long-term care insurance or benefits in this state shall provide a copy of any long-term care insurance advertisement intended for use in this state whether through written, radio, or television medium to the insurance commissioner of this state for review or approval by the commissioner to the extent it may be required under state law. In addition, all advertisements shall be retained by the insurer, health care service plan, or other entity for at least three years from the date the advertisement was first used.

2.The commissioner may exempt from these requirements any advertising form or material when, in the commissioner's opinion, this requirement may not be reasonably applied. 45-06-05.1-21. Standards for marketing.

1.Every insurer, health care service plan, or other entity marketing long-term care insurance coverage in this state, directly or through its producers, shall:

a.Establish marketing procedures and agent training requirements to assure that:

(1)Any marketing activities, including any comparison of policies, by its agents or other producers will be fair and accurate; and (2)Excessive insurance is not sold or issued.

b.Display prominently by type, stamp, or other appropriate means, on the first page of the outline of coverage and policy the following:

"Notice to buyer: This policy may not cover all of the costs associated with long-term care incurred by the buyer during the period of coverage. The buyer is advised to review carefully all policy limitations."

c.Provide copies of the disclosure forms required in subsection 3 of section 45-06-05.1-07 (appendices B and F) to the applicant.

d.Inquire and otherwise make every reasonable effort to identify whether a prospective applicant or enrollee for long-term care insurance already has accident and sickness or long-term care insurance and the types and amounts of any such insurance, except that in the case of qualified long-term care insurance contracts, an inquiry into whether a prospective applicant or enrollee for long-term care insurance has accident and sickness insurance is not required.

e.Every insurer or entity marketing long-term care insurance shall establish auditable procedures for verifying compliance with subsection 1.

f.If the state in which the policy or certificate is to be delivered or issued for delivery has a senior insurance counseling program approved by the commissioner, the insurer shall, at solicitation, provide written notice to the prospective policyholder and certificate holder that the program is available and the name, address, and telephone number of the program.

g.For long-term care health insurance policies and certificates, use the terms "noncancelable" or "level premium" only when the policy or certificate conforms to subdivision c of subsection 1 of section 45-06-05.1-04.

h.Provide an explanation of contingent benefit upon lapse provided for in subdivision c of subsection 4 of section 45-06-05.1-24 and, if applicable, the additional contingent benefit upon lapse provided to policies with fixed or limited premium payment periods in subdivision d of subsection 4 of section 45-06-05.1-24.

2.In addition to the practices prohibited in North Dakota Century Code section 26.1-04-03, the following acts and practices are prohibited:

a.Twisting. Knowingly making any misleading representation or incomplete or fraudulent comparison of any insurance policies or insurers for the purpose of inducing, or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, or convert any insurance policy or to take out a policy of insurance with another insurer.

b.High pressure tactics. Employing any method of marketing having the effect of or tending to induce the purchase of insurance through force, fright, threat, whether explicit or implied, or undue pressure to purchase or recommend the purchase of insurance.

c.Cold lead advertising. Making use directly or indirectly of any method of marketing which fails to disclose in a conspicuous manner that a purpose of the method of marketing is solicitation of insurance and that contact will be made by an insurance agent or insurance company.

d.Misrepresentation. Misrepresenting a material fact in selling or offering to sell a long-term care insurance policy. 3.a.With respect to the obligations set forth in this subsection, the primary responsibility of an association, as defined in subdivision b of subsection 3 of North Dakota Century Code

section 26.1-45-01, when endorsing or selling long-term care insurance shall be to educate its members concerning long-term care issues in general so that its members can make informed decisions. Associations shall provide objective information regarding long-term care insurance policies or certificates endorsed or sold by such associations to ensure that members of such associations receive a balanced and complete explanation of the features in the policies or certificates that are being endorsed or sold.

b.The insurer shall file with the insurance department the following material:

(1)The policy and certificate;

(2)A corresponding outline of coverage; and (3)All advertisements requested by the insurance department.

c.The association shall disclose in any long-term care insurance solicitation:

(1)The specific nature and amount of the compensation arrangements, including all fees, commissions, administrative fees, and other forms of financial support, that the association receives from endorsement or sale of the policy or certificate to its members; and (2)A brief description of the process under which the policies and the insurer issuing the policies were selected.

d.If the association and the insurer have interlocking directorates or trustee arrangements, the association shall disclose that fact to its members.

e.The board of directors of associations selling or endorsing long-term care insurance policies or certificates shall review and approve the insurance policies as well as the compensation arrangements made with the insurer.

f.The association shall also:

(1)At the time of the association's decision to endorse, engage the services of a person with expertise in long-term care insurance not affiliated with the insurer to conduct an examination of the policies, including its benefits, features, and rates and update the examination thereafter in the event of material change;

(2)Actively monitor the marketing efforts of the insurer and its agents; and (3)Review and approve all marketing materials or other insurance communications used to promote sales or sent to members regarding the policies or certificates.

(4)Paragraphs 1 through 3 shall not apply to qualified long-term care insurance contracts.

g.No group long-term care insurance policy or certificate may be issued to an association unless the insurer files with the state insurance department the information required in this subsection.

h.The insurer shall not issue a long-term care policy or certificate to an association or continue to market such a policy or certificate unless the insurer certifies annually that the association has complied with the requirements set forth in this subsection.

i.Failure to comply with the filing and certification requirements of this section constitutes an unfair trade practice in violation of North Dakota Century Code section 26.1-04-03. 45-06-05.1-22. Suitability.

1.This section shall not apply to life insurance policies that accelerate benefits for long-term care.

2.Every insurer, health care service plan, or other entity marketing long-term care insurance (the "issuer") shall:

a.Develop and use suitability standards to determine whether the purchase or replacement of long-term care insurance is appropriate for the needs of the applicant;

b.Train its agents in the use of its suitability standards; and

c.Maintain copies of its suitability standards and make them available for inspection upon request by the commissioner. 3.a.To determine whether the applicant meets the standards developed by the issuer, the agent and issuer shall develop procedures that take the following into consideration:

(1)The ability to pay for the proposed coverage and other pertinent financial information related to the purchase of the coverage;

(2)The applicant's goals or needs with respect to long-term care and the advantages and disadvantages of insurance to meet these goals or needs; and (3)The values, benefits, and costs of the applicant's existing insurance, if any, when compared to the values, benefits, and costs of the recommended purchase or replacement.

b.The issuer and, when an agent is involved, the agent shall make reasonable efforts to obtain the information set out in subdivision a. The efforts shall include presentation to the applicant, at or prior to application, the "long-term care insurance personal worksheet". The personal worksheet used by the issuer shall contain, at a minimum, the information in the format contained in appendix B, in not less than twelve-point type. The issuer may request the applicant to provide additional information to comply with its suitability standards. A copy of the issuer's personal worksheet shall be filed with the commissioner.

c.A completed personal worksheet shall be returned to the issuer prior to the issuer's consideration of the applicant for coverage, except the personal worksheet need not be returned for sales of employer group long-term care insurance to employees and their spouses.

d.The sale or dissemination outside the company or agency by the issuer or agent of information obtained through the personal worksheet in appendix B is prohibited.

4.The issuer shall use the suitability standards it has developed pursuant to this section in determining whether issuing long-term care insurance coverage to an applicant is appropriate.

5.Agents shall use the suitability standards developed by the issuer in marketing long-term care insurance.

6.At the same time as the personal worksheet is provided to the applicant, the disclosure form entitled "Things You Should Know Before You Buy Long-Term Care Insurance" shall be provided. The form shall be in the format contained in appendix C, in not less than twelve-point type.

7.If the issuer determines that the applicant does not meet its financial suitability standards, or if the applicant has declined to provide the information, the issuer may reject the application. In the alternative, the issuer shall send the applicant a letter similar to appendix D. However, if the applicant has declined to provide financial information, the issuer may use some other method to verify the applicant's intent. Either the applicant's returned letter or a record of the alternative method of verification shall be made part of the applicant's file.

8.The issuer shall report annually to the commissioner the total number of applications received from residents of this state, the number of those who declined to provide information on the personal worksheet, the number of applicants who did not meet the suitability standards, and the number of those who chose to confirm after receiving a suitability letter. 45-06-05.1-23. Prohibition against preexisting conditions and probationary periods in replacement policies or certificates.

If a long-term care insurance policy or certificate replaces another long-term care policy or certificate, the replacing insurer shall waive any time periods applicable to preexisting conditions and probationary periods in the new long-term care policy for similar benefits to the extent that similar exclusions have been satisfied under the original policy. 45-06-05.1-24. Nonforfeiture benefit requirement.

1.This section does not apply to life insurance policies or riders containing accelerated long-term care benefits.

2.To comply with the requirement to offer a nonforfeiture benefit pursuant to the provisions of North Dakota Century Code section 26.1-45-14:

a.A policy or certificate offered with nonforfeiture benefits shall have coverage elements, eligibility, benefit triggers, and benefit length that are the same as coverage to be issued without nonforfeiture benefits. The nonforfeiture benefit included in the offer shall be the benefit described in subsection 5; and

b.The offer shall be in writing if the nonforfeiture benefit is not otherwise described in the outline of coverage or other materials given to the prospective policyholder.

3.If the offer required to be made under North Dakota Century Code section 26.1-45-14 is rejected, the insurer shall provide the contingent benefit upon lapse described in this section.

Even if this offer is accepted for a policy with a fixed or limited premium paying period, the contingent benefit on lapse in subdivision d of subsection 4 still applies. 4.a.After rejection of the offer required under North Dakota Century Code section 26.1-45-14, for individual and group policies without nonforfeiture benefits issued after the effective date of this section, the insurer shall provide a contingent benefit upon lapse.

b.In the event a group policyholder elects to make the nonforfeiture benefit an option to the certificate holder, a certificate shall provide either the nonforfeiture benefit or the contingent benefit upon lapse.

c.The contingent benefit on lapse shall be triggered every time an insurer increases the premium rates to a level which results in a cumulative increase of the annual premium equal to or exceeding the percentage of the insured's initial annual premium set forth below based on the insured's issue age and the policy or certificate lapses within one hundred twenty days of the due date of the premium so increased. Unless otherwise required, policyholders shall be notified at least thirty days prior to the due date of the premium reflecting the rate increase.

Issue Age Percentage Increase Over Initial Premium 29 and under200% 30-34190% 35-39170% 40-44150% 45-49130% 50-54110% 55-5990% 6070% 6166% 6262% 6358% 6454% 6550% 6648% 6746% 6844% 6942% 7040% 7138% 7236% 7334% 7432% 7530% 7628% 7726% 7824% 7922% 8020% 8119% 8218% 8317% 8416% 8515% 8614% 8713% 8812% 8911% 90 and over10%

d.A contingent benefit on lapse also must be triggered for policies with a fixed or limited premium paying period every time an insurer increases the premium rates to a level that results in a cumulative increase of the annual premium equal to or exceeding the percentage of the insured's initial annual premium set forth below based on the insured's issue age, the policy or certificate lapses within one hundred twenty days of the due date of the premium so increased, and the ratio in paragraph 2 of subdivision f is forty percent or more. Unless otherwise required, policyholders must be notified at least thirty days prior to the due date of the premium reflecting the rate increase.

Percent Increase Over Issue AgeInitial Premium Under 6550% 65-8030% Over 8010% This provision is in addition to the contingent benefit provided by subdivision c and where both are triggered, the benefit provided must be at the option of the insured.

e.On or before the effective date of a substantial premium increase as defined in subdivision c, the insurer shall:

(1)Offer to reduce policy benefits provided by the current coverage without the requirement of additional underwriting so that required premium payments are not increased;

(2)Offer to convert the coverage to a paid-up status with a shortened benefit period in accordance with the terms of subsection 5. This option may be elected at any time during the one hundred twenty-day period referenced in subdivision c; and (3)Notify the policyholder or certificate holder that a default or lapse at any time during the one hundred twenty-day period referenced in subdivision c shall be deemed to be the election of the offer to convert in paragraph 2 unless the automatic option in paragraph 3 of subdivision f applies.

f.On or before the effective date of a substantial premium increase as defined in subdivision d, the insurer shall:

(1)Offer to reduce policy benefits provided by the current coverage so that required premium payments are not increased;

(2)Offer to convert the coverage to a paid-up status where the amount payable for each benefit is ninety percent of the amount payable in effect immediately prior to lapse times the ratio of the number of completed months of paid premiums divided by the number of months in the premium paying period. This option may be elected at any time during the one hundred twenty-day period referenced in subdivision d;

(3)Notify the policyholder or certificate holder that a default or lapse at any time during the one hundred twenty-day period referenced in subdivision d is deemed to be the election of the offer to convert in paragraph 2 if the ratio is forty percent or more.

g.For any long-term care policy issued in this state on or after March 1, 2020:

(1)If the policy or certificate was issued at least twenty years before the effective date of the increase, a value of zero percent must be used in place of all values in the above table; and (2)Values above one hundred percent in the table in subdivision c must be reduced to one hundred percent.

5.Benefits continued as nonforfeiture benefits, including contingent benefits upon lapse in accordance with subdivision c of subsection 4 but not subdivision d of subsection 4, are described in this subsection:

a.For purposes of this subsection, attained age rating is defined as a schedule of premiums starting from the issue date which increases age at least one percent per year prior to age fifty, and at least three percent per year beyond age fifty.

b.For purposes of this subsection, the nonforfeiture benefit shall be of a shortened benefit period providing paid-up long-term care insurance coverage after lapse. The same benefits (amounts and frequency in effect at the time of lapse but not increased thereafter) will be payable for a qualifying claim, but the lifetime maximum dollars or days of benefits shall be determined as specified in subdivision c.

c.The standard nonforfeiture credit will be equal to one hundred percent of the sum of all premiums paid, including the premiums paid prior to any changes in benefits. The insurer may offer additional shortened benefit period options, as long as the benefits for each duration equal or exceed the standard nonforfeiture credit for that duration. However, the minimum nonforfeiture credit shall not be less than thirty times the daily nursing home benefit at the time of lapse. In either event, the calculation of the nonforfeiture credit is subject to the limitation of subsection 6. d.(1)The nonforfeiture benefit shall begin not later than the end of the third year following the policy or certificate issue date. The contingent benefit upon lapse shall be effective during the first three years as well as thereafter.

(2)Notwithstanding paragraph 1, for a policy or certificate with attained age rating, the nonforfeiture benefit shall begin on the earlier of:

(a)The end of the tenth year following the policy or certificate issue date; or (b)The end of the second year following the date the policy or certificate is no longer subject to attained age rating.

e.Nonforfeiture credits may be used for all care and services qualifying for benefits under the terms of the policy or certificate, up to the limits specified in the policy or certificate.

6.All benefits paid by the insurer while the policy or certificate is in premium paying status and in the paid-up status will not exceed the maximum benefits which would be payable if the policy or certificate had remained in premium paying status.

7.There shall be no difference in the minimum nonforfeiture benefits as required under this

section for group and individual policies.

8.The requirements set forth in this section shall become effective twelve months after adoption of this provision and shall apply as follows:

a.Except as provided in subdivisions b and c, the provisions of this section apply to any long-term care policy issued in this state on or after the effective date of this amended

regulation.

b.For certificates issued on or after the effective date of this section, under a group long-term care insurance policy as defined in subdivision a of subsection 3 of North Dakota Century Code section 26.1-45-01, which policy was in force at the time this amended regulation became effective, the provisions of this section shall not apply.

c.The last sentence in subsection 3 and subdivisions d and f of subsection 4 apply to any long-term care insurance policy or certificate issued in this state after six months after their adoption, except new certificates on a group policy as defined in subdivision a of subsection 3 of North Dakota Century Code section 26.1-45-01 one year after adoption.

9.Premiums charged for a policy or certificate containing nonforfeiture benefits or a contingent benefit on lapse shall be subject to the requirements of section 45-06-05.1-17 or 45-06-05.1-18, treating the policy as a whole.

10.To determine whether contingent nonforfeiture upon lapse provisions are triggered under subdivision c or d of subsection 4, a replacing insurer that purchased or otherwise assumed a block or blocks of long-term care insurance policies from another insurer shall calculate the percentage increase based on the initial annual premium paid by the insured when the policy was first purchased from the original insurer.

11.A nonforfeiture benefit for qualified long-term care insurance contracts that are level premium contracts shall be offered that meets the following requirements:

a.The nonforfeiture provision shall be appropriately captioned;

b.The nonforfeiture provision shall provide a benefit available in the event of a default in the payment of any premiums and shall state that the amount of the benefit may be adjusted subsequent to being initially granted only as necessary to reflect changes in claims, persistency, and interest as reflected in changes in rates for premium paying contracts approved by the commissioner for the same contract form; and

c.The nonforfeiture provision shall provide at least one of the following:

(1)Reduced paid-up insurance;

(2)Extended term insurance;

(3)Shortened benefit period; or (4)Other similar offerings approved by the commissioner. 45-06-05.1-25. Standards for benefit triggers.

1.A long-term care insurance policy shall condition the payment of benefits on a determination of the insured's ability to perform activities of daily living and on cognitive impairment.

Eligibility for the payment of benefits shall not be more restrictive than requiring either a deficiency in the ability to perform not more than three of the activities of daily living or the presence of cognitive impairment. 2.a.Activities of daily living shall include at least the following as defined in section 45-06-05.1-03 and in the policy:

(1)Bathing;

(2)Continence;

(3)Dressing;

(4)Eating;

(5)Toileting; and (6)Transferring; and

b.Insurers may use activities of daily living to trigger covered benefits in addition to those contained in subdivision a as long as they are defined in the policy.

3.An insurer may use additional provisions for the determination of when benefits are payable under a policy or certificate; however the provisions shall not restrict, and are not in lieu of, the requirements contained in subsections 1 and 2.

4.For purposes of this section, the determination of a deficiency shall not be more restrictive than:

a.Requiring the hands-on assistance of another person to perform the prescribed activities of daily living; or

b.If the deficiency is due to the presence of a cognitive impairment, supervision or verbal cueing by another person is needed in order to protect the insured or others.

5.Assessments of activities of daily living and cognitive impairment shall be performed by licensed or certified professionals, such as physicians, nurses, or social workers.

6.Long-term care insurance policies shall include a clear description of the process for appealing and resolving benefit determinations.

7.The requirements set forth in this section shall be effective March 1, 2005, and shall apply as follows:

a.Except as provided in subdivision b, the provisions of this section apply to a long-term care policy issued in this state on or after the effective date of the amended regulation.

b.For certificates issued on or after the effective date of this section, under a group long-term care insurance policy as defined in subdivision a of subsection 3 of North Dakota Century Code section 26.1-45-01 that was in force at the time this amended

regulation became effective, the provisions of this section shall not apply. 45-06-05.1-26. Additional standards for benefit triggers for qualified long-term care insurance contracts.

1.For purposes of this section, the following definitions apply: a.(1)"Chronically ill individual" has the meaning prescribed for this term by section 7702B(c)(2) of the Internal Revenue Code of 1986, as amended. Under this provision, a chronically ill individual means any individual who has been certified by a licensed health care practitioner as:

(a)Being unable to perform, without substantial assistance from another individual, at least two activities of daily living for a period of at least ninety days due to a loss of functional capacity; or (b)Requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment.

(2)The term "chronically ill individual" shall not include an individual otherwise meeting these requirements unless within the preceding twelve-month period a licensed health care practitioner has certified that the individual meets these requirements.

b."Licensed health care practitioner" means a physician, as defined in section 1861(r)(1) of the Social Security Act, a registered professional nurse, licensed social worker, or other individual who meets requirements prescribed by the secretary of the treasury.

c."Maintenance or personal care services" means any care the primary purpose of which is the provision of needed assistance with any of the disabilities as a result of which the individual is a chronically ill individual, including the protection from threats to health and safety due to severe cognitive impairment.

d."Qualified long-term care services" means services that meet the requirements of section 7702(c)(1) of the Internal Revenue Code of 1986, as amended, as follows: necessary diagnostic, preventive, therapeutic, curative, treatment, mitigation and rehabilitative services, and maintenance or personal care services which are required by a chronically ill individual, and are provided pursuant to a plan of care prescribed by a licensed health care practitioner.

2.A qualified long-term care insurance contract shall pay only for qualified long-term care services received by a chronically ill individual provided pursuant to a plan of care prescribed by a licensed health care practitioner.

3.A qualified long-term care insurance contract shall condition the payment of benefits on a determination of the insured's inability to perform activities of daily living for an expected period of at least ninety days due to a loss of functional capacity or to severe cognitive impairment.

4.Certifications regarding activities of daily living and cognitive impairment required pursuant to subsection 3 shall be performed by the following licensed or certified professionals: physicians, registered professional nurses, licensed social workers, or other individuals who meet requirements prescribed by the secretary of the treasury.

5.Certifications required pursuant to subsection 3 may be performed by a licensed health care professional at the direction of the carrier as is reasonably necessary with respect to a specific claim, except that when a licensed health care practitioner has certified that an insured is unable to perform activities of daily living for an expected period of at least ninety days due to a loss of functional capacity and the insured is in claim status, the certification may not be rescinded and additional certifications may not be performed until after the expiration of the ninety-day period.

6.Qualified long-term care insurance contracts shall include a clear description of the process for appealing and resolving disputes with respect to benefit determinations. 45-06-05.1-27. Standard format outline of coverage.

This section implements, interprets, and makes specific the provisions of subsection 2 of North Dakota Century Code section 26.1-45-09 in prescribing a standard format and the content of an outline of coverage.

1.The outline of coverage shall be a freestanding document, using no smaller than ten-point type.

2.The outline of coverage shall contain no material of an advertising nature.

3.Text that is capitalized or underscored in the standard format outline of coverage may be emphasized by other means that provide prominence equivalent to the capitalization or underscoring.

4.Use of the text and sequence of text of the standard format outline of coverage is mandatory, unless otherwise specifically indicated.

5.Format for outline of coverage:

[COMPANY NAME]

[ADDRESS - CITY AND STATE]

[TELEPHONE NUMBER]

LONG-TERM CARE INSURANCE

OUTLINE OF COVERAGE [Policy Number or Group Master Policy and Certificate Number] [Except for policies or certificates which are guaranteed issue, the following caution statement, or language substantially similar, must appear as follows in the outline of coverage.]

Caution: The issuance of this long-term care insurance [policy] [certificate] is based upon your responses to the questions on your application. A copy of your [application] [enrollment form] [is enclosed] [was retained by you when you applied]. If your answers are incorrect or untrue, the company has the right to deny benefits or rescind your policy. The best time to clear up any questions is now, before a claim arises! If, for any reason, any of your answers are incorrect, contact the company at this address: [insert address]

1.This policy is [an individual policy of insurance] ([a group policy] which was issued in the [indicate jurisdiction in which group policy was issued]).

2.PURPOSE OF OUTLINE OF COVERAGE. This outline of coverage provides a very brief description of the important features of the policy. You should compare this outline of coverage to outlines of coverage for other policies available to you. This is not an insurance contract, but only a summary of coverage. Only the individual or group policy contains governing contractual provisions. This means that the policy or group policy sets forth in detail the rights and obligations of both you and the insurance company.

Therefore, if you purchase this coverage, or any other coverage, it is important that you READ YOUR POLICY (OR CERTIFICATE) CAREFULLY!

3.FEDERAL TAX CONSEQUENCES.

This [POLICY] [CERTIFICATE] is intended to be a federally tax-qualified, long-term care insurance contract under Section 7702B(b) of the Internal Revenue Code of 1986, as amended.

OR Federal Tax Implications of this [POLICY] [CERTIFICATE]. This [POLICY] [CERTIFICATE] is not intended to be a federally tax-qualified, long-term care insurance contract under Section 7702B(b) of the Internal Revenue Code of 1986, as amended.

Benefits received under the [POLICY] [CERTIFICATE] may be taxable as income.

4.Terms Under Which the Policy OR Certificate May Be Continued in Force or Discontinued. a.[For long-term care health insurance policies or certificates describe one of the following permissible policy renewability provisions:

(1)Policies and certificates that are guaranteed renewable shall contain the following statement:] RENEWABILITY: THIS POLICY [CERTIFICATE] IS GUARANTEED RENEWABLE. This means you have the right, subject to the terms of your policy [certificate], to continue this policy as long as you pay your premiums on time. [Company Name] cannot change any of the terms of your policy on its own, except that, in the future, IT MAY INCREASE THE PREMIUM YOU PAY.

(2)[Policies and certificates that are noncancelable shall contain the following statement:] RENEWABILITY: THIS POLICY [CERTIFICATE] IS NONCANCELABLE. This means that you have the right, subject to the terms of your policy, to continue this policy as long as you pay your premiums on time. [Company Name] cannot change any of the terms of your policy on its own and cannot change the premium you currently pay. However, if your policy contains an inflation protection feature where you choose to increase your benefits, [Company Name] may increase your premium at that time for those additional benefits. b.[For group coverage, specifically describe continuation/conversion provisions applicable to the certificate and group policy.] c.[Describe waiver of premium provisions or state that there are not such provisions.]

5.TERMS UNDER WHICH THE COMPANY MAY CHANGE PREMIUMS. [In bold type larger than the maximum type required to be used for the other provisions of the outline of coverage, state whether or not the company has a right to change the premium, and if a right exists, describe clearly and concisely each circumstance under which the premium may change.]

6.TERMS UNDER WHICH THE POLICY OR CERTIFICATE MAY BE RETURNED AND

PREMIUM REFUNDED. a.[Provide a brief description of the right to return - "free look" provision of the policy.] b.[Include a statement that the policy either does or does not contain provisions providing for a refund or partial refund of premium upon the death of an insured or surrender of the policy or certificate. If the policy contains such provisions, include a description of them.]

7.THIS IS NOT MEDICARE SUPPLEMENT COVERAGE. If you are eligible for Medicare, review the Medicare Supplement Buyer's Guide available from the insurance company. a.[For agents] Neither [insert company name] nor its agents represent Medicare, the federal government, or any state government. b.[For direct response] [insert company name] is not representing Medicare, the federal government, or any state government.

8.LONG-TERM CARE COVERAGE. Policies of this category are designed to provide coverage for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services, provided in a setting other than an acute care unit of a hospital, such as in a nursing home, in the community, or in the home.

This policy provides coverage in the form of a fixed dollar indemnity benefit for covered long-term care expenses, subject to policy [limitations] [waiting periods] and [coinsurance] requirements. [Modify this paragraph if the policy is not an indemnity policy.]

9.BENEFITS PROVIDED BY THIS POLICY. a.[Covered services, related deductibles, waiting periods, elimination periods, and benefit maximums.] b.[Institutional benefits, by skill level.] c.[Noninstitutional benefits, by skill level.]

d.Eligibility for Payment of Benefits. [Activities of daily living and cognitive impairment shall be used to measure an insured's need for long-term care and must be defined and described as part of the outline of coverage.] [Any additional benefit triggers must also be explained. If these triggers differ for different benefits, explanation of the triggers should accompany each benefit description. If an attending physician or other specified person must certify a certain level of functional dependency in order to be eligible for benefits, this too must be specified.]

10.LIMITATIONS AND EXCLUSIONS. [Describe:

a.Preexisting conditions;

b.Noneligible facilities and provider;

c.Noneligible levels of care (e.g., unlicensed providers, care, or treatment provided by a family member, etc.);

d.Exclusions and exceptions; and

e.Limitations.]. [This section should provide a brief specific description of any policy provisions which limit, exclude, restrict, reduce, delay, or in any other manner operate to qualify payment of the benefits described in Number 9 above.]

THIS POLICY MAY NOT COVER ALL THE EXPENSES ASSOCIATED WITH YOUR

LONG-TERM CARE NEEDS.

11.RELATIONSHIP OF COST OF CARE AND BENEFITS. Because the costs of long-term care services will likely increase over time, you should consider whether and how the benefits of this plan may be adjusted. [As applicable, indicate the following:

a.That the benefit level will not increase over time;

b.Any automatic benefit adjustment provisions;

c.Whether the insured will be guaranteed the option to buy additional benefits and the

basis upon which benefits will be increased over time if not by a specified amount or percentage;

d.If there is such a guarantee, include whether additional underwriting or health screening will be required, the frequency and amounts of the upgrade options, and any significant restrictions or limitations; and

e.And finally, describe whether there will be any additional premium charge imposed, and how that is to be calculated.].

12.ALZHEIMER'S DISEASE AND OTHER ORGANIC BRAIN DISORDERS. [State that the policy provides coverage for insureds clinically diagnosed as having Alzheimer's disease or related degenerative and dementing illnesses. Specifically describe each benefit screen or other policy provision which provides preconditions to the availability of policy benefits for such an insured.]

13.PREMIUM. [a.State the total annual premium for the policy; and

b.If the premium varies with an applicant's choice among benefit options, indicate the portion of annual premium which corresponds to each benefit option.]

14.ADDITIONAL FEATURES. [a.Indicate if medical underwriting is used; and

b.Describe other important features.]

15.CONTACT THE STATE SENIOR HEALTH INSURANCE ASSISTANCE PROGRAM IF

YOU HAVE GENERAL QUESTIONS REGARDING LONG-TERM CARE INSURANCE.

CONTACT THE INSURANCE COMPANY IF YOU HAVE SPECIFIC QUESTIONS

REGARDING YOUR LONG-TERM CARE INSURANCE POLICY OR CERTIFICATE. 45-06-05.1-28. Requirement to deliver shopper's guide.

1.A long-term care insurance shopper's guide in the format developed by the national association of insurance commissioners, or a guide developed or approved by the commissioner, shall be provided to all prospective applicants of a long-term care insurance policy or certificate.

a.In the case of agent solicitations, an agent must deliver the shopper's guide prior to the presentation of an application or enrollment form.

b.In the case of direct response solicitations, the shopper's guide must be presented in conjunction with any application or enrollment form.

2.Life insurance policies or riders containing accelerated long-term care benefits are not required to furnish the above-referenced guide, but shall furnish the policy summary required under North Dakota Century Code section 26.1-45-09. 45-06-05.1-29. Penalties.

In addition to any other penalties provided by the laws of this state, any insurer and any agent found to have violated any requirement of this state relating to the regulation of long-term care insurance or the marketing of such insurance shall be subject to a fine of up to three times the amount of any commissions paid for each policy involved in the violation or up to ten thousand dollars, whichever is greater.

Appendix A Rescission Reporting Form RESCISSION REPORTING FORM FOR LONG-TERM CARE POLICIES FOR THE STATE OF __________________ FOR THE REPORTING YEAR 20[ ]

Company Name: ________________________________________ Address: _______________________________________________ _______________________________________________ Telephone Number: ______________________________________ Due: March 1 annually Instructions:

The purpose of this form is to report all rescissions of long-term care insurance policies or certificates. Those rescissions voluntarily effectuated by an insured are not required to be included in this report. Please furnish one form per rescission.

Policy Form # Policy and Certificate # Name of Insured Date of Policy Issuance Date/s Claim/s Submitted Date of Rescission Detailed reason for rescission: ______________________________________________ Signature Name and title (please type)

Date

Appendix B Personal Worksheet Personal Worksheet This worksheet will help you understand some important information about this type of insurance. State law requires companies issuing this [policy] [certificate] [rider] to give you some important facts about premiums and premium increases and to ask you some important questions to help you and the company decide if you should buy this [policy] [certificate] [rider]. Long-term care insurance can be expensive and it may not be right for everyone.

Premium Information The premium for the coverage you are considering will be [$ ______ per [insert payment interval] or a total of [$ _____ per year] [a one-time single premium of $ ______.]

The premium quoted in this worksheet is not guaranteed and may change during the underwriting process and in the future while this [policy] [certificate] [rider] is in force.

Type of Policy and The Company's Right to Increase Premiums on the Coverage You Choose: [Noncancellable - The company cannot increase your premiums on this [policy] [certificate] [rider].] [Guaranteed renewable - The company can increase your premiums on this [policy] [certificate] [rider] in the future if it increases the premiums for all [policies] [certificates] [riders] like yours in this state.] [Paid-up - This [policy] [certificate] [rider] will be paid-up after you have paid all of the premiums specified in your [policy] [certificate] [rider].]

Premium Increase History [Name of company] has sold long-term care insurance since [year] and has sold this [policy] [certificate] [rider] since [year]. [The company has never increased its premiums for any long-term care [policy] [certificate] [rider] it has sold in this state or any other state.] [The company has not increased its premiums for this [policy] [certificate] [rider] or similar [policies] [certificates] [riders] in this state or any other state in the last 10 years.] [The company has increased its premiums on this [policy] [certificate] [rider] or similar [policies] [certificates] [riders] in the last 10 years. A summary of those premium increases follows.]

Questions About Your Income You do not have to answer the questions that follow. They are intended to make sure you have thought about how you'll pay premiums and the cost of care your insurance does not cover. If you do not want to answer these questions, you should understand that the company might refuse to insure you.

What resources will you use to pay your premium?

Current income from employment Current income from investments Other current income Savings Sell investments Sell other assets Money from my familyOther _______ If you will be paying premiums with money received only from your own income, a rule of thumb is that you may not be able to afford this [policy] [certificate] [rider] if the premiums will be more than 7% of your income.

Could you afford to keep this [policy] [certificate] [rider] if your spouse or partner dies first?

Yes NoHad not thought about itDo not knowDoes not apply What would you do if the premiums went up, for example, by 50%?

Pay the higher premium Call the company/agent Reduce benefits Drop the [policy] [certificate] [rider] Do not know What is your household annual income from all sources? (check one) [Less than $10,000] [$10,000-$19,999] [$20,000-$29,999] [$30,000-$50,000] [More than $50,000]

Do you expect your income to change over the next 10 years? (check one)

NoYes, expect increase Yes, expect decrease If you plan to pay premiums from your income, have you thought about how a change in your income would affect your ability to continue to pay the premium?

Yes No Do not know Will you buy inflation protection? (check one)

Yes No Inflation may increase the cost of long-term care in the future.

If you do not buy inflation protection, how will you pay for the difference between future costs and your daily benefit amount?

From my incomeFrom savingsFrom investmentsSell other assets Money from my family Other The national average annual cost of long-term care in [insert year] was [insert $ amount], but this figure varies across the country. In 10 years the national average annual cost would be about [insert $ amount] if costs increase 5% annually.

What [elimination period] [waiting period] [cash deductible] are you considering? [Number of days _______ in [elimination period] [waiting period]

Approximate cost of care for that period: $ ________ ($xxx per day times number of days in [elimination period] [waiting period], where "xxx" represents the most recent estimate of the national daily average cost of long-term care)] [Cash Deductible $ _______]

How are you planning to pay for your care during the [elimination period] [waiting period] [deductible period]? (check all that apply)

From my incomeFrom my savings/investmentsMy family will pay Questions About Your Savings and Investments Not counting your home, about how much are all of your assets (your savings and investments) worth? (check one) [Less than $20,000][$20,000-$29,999][$30,000-$50,000][More than $50,000]

Do you expect your assets to change over the next 10 years? (check one)

NoYes, expect to increaseYes, expect to decrease If you are buying this [policy] [certificate] [rider] to protect your assets and your assets are less than $50,000, experts suggest you think about other ways to pay for your long-term care.

Disclosure Statement The answers to the questions above describe my financial situation.

Or I choose not to complete this information.

(Check one.)

I agree that the company and/or its agent (below) has reviewed this worksheet with me, including the premium, premium increase history, and potential for premium increases in the future. I understand the information contained in this worksheet. (This box must be checked.)

(Applicant) [I explained to the applicant the importance of completing this information.

(Agent)

Agent's Printed Name:] [In order for us to process your application, please return this signed worksheet to [name of company], along with your application.] [My agent has advised me that this long-term care insurance [policy] [certificate] [rider] does not seem to be suitable for me. However, I still want the company to consider my application.]

(Applicant)

Someone from the company may contact you to discuss your answers and the suitability of this [policy] [certificate] [rider] for you.

Appendix C Disclosure Form Things You Should Know Before You Buy Long-Term Care Insurance •A long-term care insurance policy may pay most of the costs for your care in a nursing home. Many policies also pay for care at home or other community settings. Since policies can vary in coverage, you should read this policy and make sure you understand what it covers before you buy it. •[You should not buy this insurance policy unless you can afford to pay the premiums every year.] [Remember that the company can increase premiums in the future.] •The personal worksheet includes questions designed to help you and the company determine whether this policy is suitable for your needs.

Medicare•Medicare does not pay for most long-term care.

Medicaid•Medicaid will generally pay for long-term care if you have very little income and few assets. You probably should not buy this policy if you are now eligible for Medicaid. •Many people become eligible for Medicaid after they have used up their own financial resources by paying for long-term care services. •When Medicaid pays your spouse's nursing home bills, you are allowed to keep your house and furniture, a living allowance, and some of your joint assets. •Your choice of long-term care services may be limited if you are receiving Medicaid. To learn more about Medicaid, contact your local or state Medicaid agency.

Shopper's Guide•Make sure the insurance company or agent gives you a copy of a book called the National Association of Insurance Commissioners' "Shopper's Guide to Long-Term Care Insurance". Read it carefully. If you have decided to apply for long-term care insurance, you have the right to return the policy within 30 days and get back any premium you have paid if you are dissatisfied for any reason or choose not to purchase the policy.

Counseling•Free counseling and additional information about long-term care insurance are available through your state's insurance counseling program. Contact your state insurance department or department on aging for more information about the senior health insurance counseling program in your state.

Facilities•Some long-term care insurance contracts provide for benefit payments in certain facilities only if they are licensed or certified, such as in assisted living centers. However, not all states regulate these facilities in the same way. Also, many people move into a different state from where they purchased their long-term care insurance policy. Read the policy carefully to determine what types of facilities qualify for benefit payments, and to determine that payment for a covered service will be made if you move to a state that has a different licensing scheme for facilities than the one in which you purchased the policy.

Appendix D Response Letter Long-Term Care Insurance Suitability Letter Dear [Applicant]:

Your recent application for long-term care insurance included a "personal worksheet", which asked questions about your finances and your reasons for buying long-term care insurance. For your protection, state law requires us to consider this information when we review your application, to avoid selling a policy to those who may not need coverage. [Your answers indicate that long-term care insurance may not meet your financial needs. We suggest that you review the information provided along with your application, including the booklet "Shopper's Guide to Long-Term Care Insurance" and the page titled "Things You Should Know Before Buying Long-Term Care Insurance". Your state insurance department also has information about long-term care insurance and may be able to refer you to a counselor free of charge who can help you decide whether to buy this policy.] [You chose not to provide any financial information for us to review.]

We have suspended our final review of your application. If, after careful consideration, you still believe this policy is what you want, check the appropriate box below and return this letter to us within the next 60 days. We will then continue reviewing your application and issue a policy if you meet our medical standards.

If we do not hear from you within the next 60 days, we will close your file and not issue you a policy.

You should understand that you will not have any coverage until we hear back from you, approve your application, and issue you a policy.

Please check one box and return in the enclosed envelope. [ ]Yes, [although my worksheet indicates that long-term care insurance may not be a suitable purchase,] I wish to purchase this coverage. Please resume review of my application. [ ]No. I have decided not to buy a policy at this time. ______________________________ APPLICANT'S SIGNATURE _____________________ DATE Please return to [issuer] at [address] by [date].

Appendix E Sample Claims Denial Format Claims Denial Reporting Form For the State of _______________________________ For the Reporting Year of ______________________ Company Name: ______________________________Due: June 30 annually Company Address: ______________________________________________ ______________________________________________________________ Company NAIC Number: __________________________________________ Contact Person: ___________________ Telephone Number: ________________ Line of Business:IndividualGroup Instructions The purpose of this form is to report all long-term care claim denials under in-force long-term care insurance policies. Indicate the manner of reporting by checking one of the boxes below: □ Per Claimant - Counts each individual who makes one or a series of claim requests. □ Per Transaction - Counts each claim payment request.

"Denied" means a claim that is not paid for any reason other than for claims not paid for failure to meet the waiting period or because of an applicable pre-existing condition. It does not include a request for payment that is in excess of the applicable contractual limits.

In-force Data State DataNationwide Data 1Total Number of In-force Policies [Certificates] as of December 31st Claims and Denial Data State DataNationwide Data 1Total Number of Long-Term Care Claims Reported 2Total Number of Long-Term Care Claims Denied/Not Paid 3Number of Claims Not Paid Due to Preexisting Condition Exclusion 4Number of Claims Not Paid Due to Waiting (Elimination) Period Not Met 5Net Number of Long-Term Care Claims Denied for Reporting Purposes (line 2 minus line 3 minus line 4) 6Percentage of Long-Term Care Claims Denied of Those Reported (line 5 divided by line 1) 7Number of Long-Term Care Claims Denied Due to: 8Long-Term Care Services Not Covered Under the policy 9Provider/Facility Not Qualified Under the Policy 10Benefit Eligibility Criteria Not Met 11Other

1.The nationwide data may be viewed as a more representative and credible indicator where the data for claims reported and denied for your state are small in number.

2.Example - Home health care claim filed under a nursing home only policy.

3.Example - A facility that does not meet the minimum level of care requirements or the licensing requirements as outlined in the policy.

4.Examples - A benefit trigger not met, certification by a licensed health care practitioner not provided, no plan of care.

Appendix F Potential Rate Increase Disclosure Form Instructions:

This form provides information to the applicant regarding premium rate schedules, rate schedule adjustments, potential rate revisions, and policyholder options in the event of a rate increase.

Insurers shall provide all of the following information to the applicant:

Potential Rate Increase Disclosure Form 1.[Premium Rate] [Premium Rate Schedules]: [Premium rate] [Premium rate schedules] that [is][are] applicable to you and that will be in effect until a request is made and approved for an increase [is][are] [on the application] [$_____].

2.The [premium] [premium rate schedule] for this policy [will be shown on the schedule page of] [will be attached to] your policy.

3.Rate Schedule Adjustments:

The company will provide a description of when premium rate or rate schedule adjustments will be effective (e.g., next anniversary date, next billing date, etc.) (fill in the blank): __________.

4.Potential Rate Revisions:

This policy is Guaranteed Renewable. This means that the rates for this product may be increased in the future. Your rates CANNOT be increased due to your increasing age or declining health, but your rates may go up based on the experience of all policyholders with a policy similar to yours.

If you receive a premium rate or premium rate schedule increase in the future, you will be notified of the new premium amount and you will be able to exercise at least one of the following options:

• Pay the increased premium and continue your policy in force as is.

• Reduce your policy benefits to a level such that your premiums will not increase. (Subject to state law minimum standards.)

• Exercise your nonforfeiture option if purchased. (This option is available for purchase for an additional premium.)

• Exercise your contingent nonforfeiture rights.* (This option may be available if you do not purchase a separate nonforfeiture option.)

If the premium rate for your policy goes up in the future and you did not buy a nonforfeiture option, you may be eligible for contingent nonforfeiture. Here is how to tell if you are eligible:

You will keep some long-term care insurance coverage, if:

• Your premium after the increase exceeds your original premium by the percentage shown (or more) in the following table; and • You lapse (not pay more premiums) within 120 days of the increase.

The amount of coverage (i.e., new lifetime maximum benefit amount) you will keep will equal the total amount of premiums you have paid since your policy was first issued. If you have already received benefits under the policy, so that the remaining maximum benefit amount is less than the total amount of premiums you've paid, the amount of coverage will be that remaining amount.

Except for this reduced lifetime maximum benefit amount, all other policy benefits will remain at the levels attained at the time of the lapse and will not increase thereafter.

Should you choose this Contingent Nonforfeiture option, your policy, with this reduced maximum benefit amount, will be considered "paid-up" with no further premiums due.

Example:

• You bought the policy at age 65 and paid the $1,000 annual premium for 10 years, so you have paid a total of $10,000 in premium.

• In the eleventh year, you receive a rate increase of 50%, or $500 for a new annual premium of $1,500, and you decide to lapse the policy (not pay any more premiums).

• Your "paid-up" policy benefits are $10,000 (provided you have at least $10,000 of benefits remaining under your policy.)

Cumulative Premium Increase Over Initial Premium That Qualifies for (Percentage increase is cumulative from date of original issue. It does NOT represent a one-time increase.)

Issue Age Percentage Increase Over Initial Premium 29 and under200% 30-34190% 35-39170% 40-44150% 45-49130% 50-54110% 55-5990% 6070% 6166% 6262% 6358% 6454% 6550% 6648% 6746% 6844% 6942% 7040% 7138% 7236% 7334% 7432% 7530% 7628% 7726% 7824% 7922% 8020% 8119% 8218% 8317% 8416% 8515% 8614% 8713% 8812% 8911% 90 and over10% [The following contingent nonforfeiture disclosure need only be included for those limited pay policies to which subdivisions d and f of subsection 4 of section 45-06-05.1-24 are applicable.]

In addition to the contingent nonforfeiture benefits described above, the following reduced "paid-up" contingent nonforfeiture benefit is an option in all policies that have a fixed or limited premium payment period, even if you selected a nonforfeiture benefit when you bought your policy. If both the reduced "paid-up" benefit AND the contingent benefit described above are triggered by the same rate increase, you can choose either of the two benefits.

You are eligible for the reduced "paid-up" contingent nonforfeiture benefit when all three conditions shown below are met:

1.The premium you are required to pay after the increase exceeds your original premium by the same percentage or more shown in the chart below:

Percent Increase Over Issue AgeInitial Premium Under 6550% 65-8030% Over 8010%

2.You stop paying your premiums within 120 days of when the premium increase took effect;

AND

3.The ratio of the number of months you already paid premiums is 40% or more than the number of months you originally agreed to pay.

If you exercise this option your coverage will be converted to reduced "paid-up" status. That means there will be no additional premiums required. Your benefits will change in the following ways:

a.The total lifetime amount of benefits your reduced paid-up policy will provide can be determined by multiplying 90% of the lifetime benefit amount at the time the policy becomes paid up by the ratio of the number of months you already paid premiums to the number of months you agreed to pay them.

b.The daily benefit amounts you purchased will also be adjusted by the same ratio.

If you purchased lifetime benefits, only the daily benefit amounts you purchased will be adjusted by the applicable ratio.

Example:

• You bought the policy at age 65 with an annual premium payable for 10 years.

• In the sixth year, you receive a rate increase of 35% and you decide to stop paying premiums.

• Because you have already paid 50% of your total premium payments and that is more than the 40% ratio, your "paid-up" policy benefits are .45 (.90 times .50) times the total benefit amount that was in effect when you stopped paying your premiums. If you purchased inflation protection, it will not continue to apply to the benefits in the reduced "paid-up" policy.

Appendix G Replacement and Lapse Reporting Form Replacement and Lapse Reporting Form For the State of _____________For the Reporting Year of _______ Company Name: __________________Due: June 30 annually Company Address: _________Company NAIC Number: ______ Contact Person: _________________Telephone Number: () Instructions The purpose of this form is to report on a statewide basis information regarding long-term care insurance policy replacements and lapses. Specifically, every insurer shall maintain records for each agent on that agent's amount of long-term care insurance replacement sales as a percentage of the agent's total annual sales and the amount of lapses of long-term care insurance policies sold by the agent as a percentage of the agent's total annual sales. The tables below should be used to report the ten percent (10%) of the insurer's agents with the greatest percentages of replacements and lapses.

Listing of the 10% of Agents With the Greatest Percentage of Replacements Agent's Name Replaced by This Agent Number of Replacements as Percentage of Number Listing of the 10% of Agents With the Greatest Percentage of Lapses Agent's Name Replaced by This Agent Number of Replacements as Percentage of Number Company Totals Percentage of Replacement Policies Sold to Total Annual Sales _____% Percentage of Replacement Policies Sold to Policies in Force (as of the end of the preceding calendar year) _____% Percentage of Lapsed Policies to Total Annual Sales _____% Percentage of Lapsed Policies to Policies in Force (as of the end of the preceding calendar year) _____%

Chapter 45-06-06 North Dakota Small Employer Health Reinsurance Program [Repealed]

N.D. Admin. Code 45-06-06 North Dakota Small Employer Health Reinsurance Program [Repealed]

CHAPTER 45-06-06

NORTH DAKOTA SMALL EMPLOYER HEALTH REINSURANCE PROGRAM [Repealed effective May 1, 1997]

Chapter 45-06-06.1 Regulation to Implement the Small Employer Health Insurance Availability Act

N.D. Admin. Code 45-06-06.1 Regulation to Implement the Small Employer Health Insurance Availability Act

CHAPTER 45-06-06.1

REGULATION TO IMPLEMENT THE SMALL EMPLOYER HEALTH INSURANCE

AVAILABILITY ACT

Section 45-06-06.1-01Definitions 45-06-06.1-02Applicability and Scope 45-06-06.1-03Establishment of Classes of Business 45-06-06.1-04Transition for Assumptions of Business from Another Carrier 45-06-06.1-05Restrictions Relating to Premium Rates 45-06-06.1-06Requirement to Insure Entire Groups 45-06-06.1-07Consideration of Industry 45-06-06.1-08Application to Reenter State 45-06-06.1-09Qualifying Previous and Qualifying Existing Coverage [Repealed] 45-06-06.1-10Restrictive Riders 45-06-06.1-11Rules Related to Fair Marketing 45-06-06.1-12Status of Carriers as Small Employer Carriers 45-06-06.1-13Restoration of Coverage 45-06-06.1-14Special Enrollment Periods 45-06-06.1-01. Definitions.

As used in this chapter:

1."Associate member of an employee organization" means any individual who participates in an employee benefit plan (as defined in 29 U.S.C. 1002(1)) that is a multiemployer plan (as defined in 29 U.S.C. 1002(37A)), other than the following:

a.An individual, or the beneficiary of such individual, who is employed by a participating employer within a bargaining unit covered by at least one of the collective bargaining agreements under or pursuant to which the employee benefit plan is established or maintained; or

b.An individual who is a present or former employee, or a beneficiary of such employee, of the sponsoring employee organization, of an employer who is or was a party to at least one of the collective bargaining agreements under or pursuant to which the employee benefit plan is established or maintained, or of the employee benefit plan or of a related

2."New entrant" means an eligible employee, or the dependent of an eligible employee, who becomes part of an employer group after the initial period for enrollment in a health benefit

3."Preexisting condition exclusion" means a limitation or exclusion of benefits relating to a condition based on the fact that the condition was present before the effective date of coverage, whether or not any medical advice, diagnosis, care, or treatment was recommended or received before such date.

4."Risk characteristic" means the health status, claims experience, duration ofcoverage, health status-related factor, or any similar characteristic related to the health status or experience of a small employer group or of any member of a small employer group.

5."Risk load" means the percentage above the applicable base premium rate that is charged by a small employer carrier to a small employer to reflect the risk characteristics of the small employer group.

6."Waiting period" means, with respect to a group health benefit plan and an individual who is a potential participant or beneficiary in the plan, the period that must pass with respect to the individual before the individual is eligible to be covered for benefits under the terms of the

History: Effective August 1, 1994; amended effective December 1, 1997. 45-06-06.1-02. Applicability and scope.

1.Except as provided in section 45-06-06.1-13, this chapter applies to any health benefit plan, whether provided on a group or individual basis, which:

a.Meets one or more of the conditions set forth in subdivisions a, b, and c of subsection 1 of North Dakota Century Code section 26.1-36.3-02; and

b.Provides coverage to one or more employees of a small employer located in this state, without regard to whether the policy or certificate was issued in this state. 2.a.A carrier that provides individual health insurance policies to one or more of the employees of a small employer shall be considered a small employer carrier and is subject to the provisions of the Act and this chapter with respect to such policies if the small employer contributes directly or indirectly to the premiums for the policies and the carrier is aware or should have been aware of such contribution.

b.In the case of a carrier that provides individual health insurance policies to one or more employees of a small employer, the small employer carrier is subject to subdivision b of subsection 1 of North Dakota Century Code section 26.1-36.3-06, relating to guaranteed issue of coverage, if:

(1)The small employer has at least two employees;

(2)The small employer contributes directly or indirectly to the premiums charged by the carrier; and (3)The carrier is aware or should have been aware of the contribution by the employer.

3.The provisions of the Act and this chapter apply to a health benefit plan provided to a small employer or to the employees of a small employer without regard to whether the health benefit plan is offered under or provided through a group policy or trust arrangement of any size sponsored by an association or discretionary group.

4.An individual health insurance policy is not subject to the provisions of the Act and this chapter solely because the policyholder elects a deduction under section 162(1) of the Internal Revenue Code. 5.a.If a small employer is issued a health benefit plan under the terms of the Act, the provisions of the Act and this chapter continue to apply to the health benefit plan in the case that the small employer subsequently employs less than two or more than fifty eligible employees. Within sixty days of becoming aware that the employer has less than two or more than fifty eligible employees but no later than the anniversary date of the employer's health benefit plan, a carrier providing coverage to such an employer shall notify the employer that the protections provided under the Act and this chapter shall cease to apply to the employer if such employer fails to renew its current health benefit plan or elects to enroll in a different health benefit plan. b.(1)If a health benefit plan is issued to an employer that is not a small employer as defined in the Act, but subsequently the employer becomes a small employer, due to the loss or change of work status of one or more employees, the terms of the Act shall not apply to the health benefit plan. The carrier providing a health benefit plan to such an employer shall not become a small employer carrier under the terms of the Act solely because the carrier continues to provide coverage under the health benefit plan to the employer.

(2)Within sixty days of becoming aware that the employer is a "small employer" as that term is defined in subsection 35 of North Dakota Century Code section 26.1-36.1-01, a carrier providing coverage to an employer described in paragraph 1 shall notify the employer of the options and protections available to the employer under the Act, including the employer's option to purchase a small employer health benefit plan from any small employer carrier. 6.a.(1)If a small employer has employees in more than one state, the provisions of the Act and this chapter shall apply to a health benefit plan issued to the small employer if:

(a)The majority of eligible employees of such small employer are employed in this state; or (b)If no state contains a majority of the eligible employees of the small employer, the primary business location of the small employer is in this state.

(2)In determining whether the laws of this state or another state apply to a health benefit plan issued to a small employer described in paragraph 1, the provisions of the subdivision shall be applied as of the date the health benefit plan was issued to the small employer for the period that the health benefit plan remains in effect.

b.If a health benefit plan is subject to the Act and this chapter, the provisions of the Act and this chapter shall apply to all individuals covered under the health benefit plan, whether they reside in this state or in another state.

7.A carrier that is not operating as a small employer carrier in this state shall not become subject to the provisions of the Act and this chapter solely because a small employer that was issued a health benefit plan in another state by that carrier moves to this state.

History: Effective August 1, 1994; amended effective September 12, 1994; December 1, 1997. 45-06-06.1-03. Establishment of classes of business.

1.A small employer carrier that establishes more than one class of business pursuant to the provisions of North Dakota Century Code section 26.1-36.3-03 shall maintain on file for inspection by the commissioner the following information with respect to each class of business so established:

a.A description of each criterion employed by the carrier or any of its agents for determining membership in the class of business;

b.A statement describing the justification for establishing the class as a separate class of business and documentation that the establishment of the class of business is intended to reflect substantial differences in expected claims experience or administrative costs related to the reasons set forth in North Dakota Century Code section 26.1-36.3-03; and

c.A statement disclosing which, if any, health benefit plans are currently available for purchase in the class and any significant limitations related to the purchase of such plans.

2.A carrier may not directly or indirectly use group size as a criterion for establishing eligibility for a health benefit plan or for a class of business.

General Authority: NDCC 26.1-01-08, 26.1-36.3-03

Law Implemented: NDCC 26.1-36.3-03 45-06-06.1-04. Transition for assumptions of business from another carrier. 1.a.A small employer carrier shall not transfer or assume the entire insurance obligation or risk of a health benefit plan covering a small employer in this state unless:

(1)The transaction has been approved, to the extent required by law, by the insurance supervisory official of the state of domicile of the assuming carrier;

(2)The transaction has been approved to the extent required by law by the insurance supervisory official of the state of domicile of the ceding carrier; and (3)The transaction otherwise meets the requirements of this section.

b.A carrier domiciled in this state that proposes to assume or cede the entire insurance obligation or risk of one or more small employer health benefit plans from another carrier shall make a filing for approval with the commissioner at least sixty days prior to the date of the proposed assumption. The commissioner may approve the transaction if the commissioner finds that the transaction is in the best interests of the individuals insured under the health benefit plans to be transferred and is consistent with the purposes of the Act and this chapter. The commissioner shall not approve the transaction until at least thirty days after the date of the filing; except that, if the ceding carrier is in hazardous financial condition, the commissioner may approve the transaction as soon as the commissioner deems reasonable after the filing. c.(1)The filing required under subdivision b shall:

(a)Describe the class of business, including any eligibility requirements, of the ceding carrier from which the health benefit plans will be ceded;

(b)Describe whether the assuming carrier will maintain the assumed health benefit plans as a separate class of business pursuant to subsection 3 or will incorporate them into an existing class of business pursuant to subsection 4. If the assumed health benefit plans will be incorporated into an existing class of business, the filing shall describe the class of business of the assuming carrier into which the health benefit plans will be incorporated;

(c)Describe whether the health benefit plans being assumed are currently available for purchase by small employers;

(d)Describe the potential effect of the assumption, if any, on the benefits provided by the health benefit plans to be assumed;

(e)Describe the potential effect of the assumption, if any, on the premiums for the health benefit plans to be assumed;

(f)Describe any other potential material effects of the assumption on the coverage provided to the small employers covered by the health benefit plans to be assumed; and (g)Include any other information required by the commissioner.

(2)A domestic small employer carrier required to make a filing under subdivision b shall also make an informational filing with the commissioner of each state in which there are small employer health benefit plans that would be included in the transaction.

The informational filing to each state shall be made concurrently with the filing made under subdivision b and shall include at least the information specified in paragraph 1 for the small employer health benefit plans in that state.

d.A small employer carrier shall not transfer or assume the entire insurance obligation or risk of a health benefit plan covering a small employer in this state unless it complies with the following provisions:

(1)The carrier has provided notice to the commissioner at least sixty days prior to the date of the proposed assumption. The notice shall contain the information specified in subdivision c for the health benefit plans covering small employers in this state.

(2)If the assumption of a class of business would result in the assuming small employer carrier being out of compliance with the limitations related to premium rates contained in subdivision a of subsection 1 of North Dakota Century Code

section 26.1-36.3-04, the assuming carrier shall make a filing with the commissioner pursuant to subsection 3 of North Dakota Century Code section 26.1-36.3-04 seeking suspension of the application of subdivision a of subsection 1 of section 26.1-36.3-04.

(3)An assuming carrier seeking suspension of the application of subdivision a of subsection 1 of North Dakota Century Code section 26.1-36.3-04 shall not complete the assumption of health benefit plans covering small employers in this state unless the commissioner grants the suspension requested pursuant to paragraph 2.

(4)Unless a different period is approved by the commissioner, a suspension of the application of subdivision a of subsection 1 of North Dakota Century Code section 26.1-36.3-04, with respect to an assumed class of business, shall be for no more than fifteen months and, with respect to each individual small employer, shall last only until the anniversary date of such employer's coverage, except that the period with respect to an individual small employer may be extended beyond its first anniversary date for a period of up to twelve months if the anniversary date occurs within three months of the date of assumption of the class of business. 2.a.Except as provided in subdivision b, a small employer carrier shall not cede or assume the entire insurance obligation or risk for a small employer health benefit plan unless the transaction includes the ceding to the assuming carrier of the entire class of business which includes such health benefit plan.

b.A small employer carrier may cede less than an entire class of business to an assuming carrier if:

(1)One or more small employers in the class have exercised their right under contract or state law to reject, either directly or by implication, the ceding of their health benefit plans to another carrier. In that instance, the transaction shall include each health benefit plan in the class of business except those health benefit plans for which a small employer has rejected the proposed cession; or (2)After a written request from the transferring carrier, the commissioner determines that the transfer of less than the entire class of business is in the best interest of the small employers insured in that class of business.

3.Except as provided in subsection 4, a small employer carrier that assumes one or more health benefit plans from another carrier shall maintain such health benefit plans as a separate class of business.

4.A small employer carrier that assumes one or more health benefit plans from another carrier may exceed the limitation contained in subsection 2 of North Dakota Century Code section 26.1-36.3-03, relating to the maximum number of classes of business a carrier may establish, due solely to such assumption for a period of up to fifteen months after the date of the assumption, provided that the carrier complies with the following provisions:

a.Upon assumption of the health benefit plans, such health benefit plans shall be maintained as a separate class of business. During the fifteen-month period following the assumption, each of the assumed small employer health benefit plans shall be transferred by the assuming small employer carrier into a single class of business operated by the assuming small employer carrier. The assuming small employer carrier shall select the class of business into which the assumed health benefit plans will be transferred in a manner such that the transfer results in the least possible change to the benefits and rating method of the assumed health benefit plans.

b.The transfers authorized in subdivision a shall occur with respect to each small employer on the anniversary date of the small employer's coverage, except that the period with respect to an individual small employer may be extended beyond its first anniversary date for a period of up to twelve months if the anniversary date occurs within three months of the date of assumption of the class of business.

c.A small employer carrier making a transfer pursuant to subdivision a may alter the benefits of the assumed health benefit plans to conform to the benefits currently offered by the carrier in the class of business into which the health benefit plans have been transferred.

d.The premium rate for an assumed small employer health benefit plan shall not be modified by the assuming small employer carrier until the health benefit plan is transferred pursuant to subdivision a. Upon transfer, the assuming small employer carrier shall calculate a new premium rate for the health benefit plan from the rate manual established for the class of business into which the health benefit plan is transferred. In making such calculation, the risk load applied to the health benefit plan shall be no higher than the risk load applicable to such health benefit plan prior to the assumption.

e.During the fifteen-month period provided in this subsection, the transfer of small employer health benefit plans from the assumed class of business in accordance with this subsection shall not be considered a violation of the first sentence of subsection 2 of North Dakota Century Code section 26.1-36.3-04.

5.An assuming carrier may not apply eligibility requirements, including minimum participation and contribution requirements, with respect to an assumed health benefit plan or with respect to any health benefit plan subsequently offered to a small employer covered by such an assumed health benefit plan that are more stringent than the requirements applicable to such health benefit plan prior to the assumption.

6.The commissioner may approve a longer period of transition upon application of a small employer carrier. The application shall be made within sixty days after the date of assumption of the class of business and shall clearly state the justification for a longer transition period.

7.Nothing in this section or in the Act is intended to:

a.Reduce or diminish any legal or contractual obligation or requirement, including any obligation provided by law, of the ceding or assuming carrier related to the transaction;

b.Authorize a carrier that is not admitted to transact the business of insurance in this state to offer or insure health benefit plans in this state; or

c.Reduce or diminish the protections related to an assumption reinsurance transaction provided by law.

General Authority: NDCC 26.1-01-08, 26.1-36.3-03

Law Implemented: NDCC 26.1-36.3-03 45-06-06.1-05. Restrictions relating to premium rates.

1.This section applies only to a health benefit plan offered by a small employer who employed an average of at least two but not more than twenty-five eligible employees on business days during the preceding calendar year and who employs at least two employees on the first day of the plan year. 2.a.A small employer carrier shall develop a separate rate manual for each class of business.

Base premium rates and new business premium rates charged to small employers by the small employer carrier shall be computed solely from the applicable rate manual developed pursuant to this subsection. To the extent that a portion of the premium rates charged by a small employer carrier is based on the carrier's discretion, the manual shall specify the criteria and factors considered by the carrier in exercising such discretion. b.(1)A small employer carrier shall not modify the rating method used in the rate manual for a class of business until the change has been approved as provided in this paragraph. The commissioner may approve a change to a rating method if the commissioner finds that the change is reasonable, actuarially appropriate, and consistent with the purposes of the Act and this chapter.

(2)A carrier may modify the rating method for a class of business only with prior approval of the commissioner. A carrier requesting to change the rating method for a class of business shall make a filing with the commissioner at least thirty days prior to the proposed date of the change. The filing shall contain at least the following information:

(a)The reasons the change in rating method is being requested;

(b)A complete description of each of the proposed modifications to the rating method;

(c)A description of how the change in rating method would affect the premium rates currently charged to small employers in the class of business, including an estimate from a qualified actuary of the number of groups or individuals and a description of the types of groups or individuals whose premium rates may change by more than ten percent due to the proposed change in rating method, not generally including increases in premium rates applicable to all small employers in a health benefit plan;

(d)A certification from a qualified actuary that the new rating method would be based on objective and credible data and would be actuarially sound and appropriate; and (e)A certification from a qualified actuary that the proposed change in rating method would not produce premium rates for small employers that would be in violation of North Dakota Century Code section 26.1-36.3-04.

(3)For the purpose of this section a change in rating method means:

(a)A change in the number of case characteristics used by a small employer carrier to determine premium rates for health benefit plans in a class of business;

(b)A change in the manner or procedures by which insureds are assigned into categories for the purpose of applying a case characteristic to determine premium rates for health benefit plans in a class of business;

(c)A change in the method of allocating expenses among health benefit plans in a class of business; or (d)[1]A change in a rating factor with respect to any case characteristic if the change would produce a change in premium for any small employer that exceeds ten percent. [2]For the purpose of item 1, a change in a rating factor shall mean the cumulative change with respect to such factor considered over a twelve-month period. If a small employer carrier changes rating factors with respect to more than one case characteristic in a twelve-month period, the carrier shall consider the cumulative effect of all such changes in applying the ten percent test under item 1. 3.a.The rate manual developed pursuant to subsection 2 shall specify the case characteristics and rate factors to be applied by the small employer carrier in establishing premium rates for the class of business.

b.A small employer carrier may not use case characteristics other than those specified in subdivision j of subsection 1 of North Dakota Century Code section 26.1-36.3-04 without the prior approval of the commissioner. A small employer carrier seeking such an approval shall make a filing with the commissioner for a change in rating method under subdivision b of subsection 2.

c.A small employer carrier shall use the same case characteristics in establishing premium rates for each health benefit plan in a class of business and shall apply them in the same manner in establishing premium rates for each such health benefit plan. Case characteristics shall be applied without regard to the risk characteristics of a small employer.

d.The rate manual developed pursuant to subsection 2 shall clearly illustrate the relationship among the base premium rates charged for each health benefit plan in the class of business. If the new business premium rate is different than the base premium rate for a health benefit plan, the rate manual shall illustrate the difference.

e.Differences among base premium rates for health benefit plans shall be based solely on the reasonable and objective differences in the design and benefits of the health benefit plans and shall not be based in any way on the actual or expected health status or claims experience of the small employer groups that choose or are expected to choose a particular health benefit plan. A small employer carrier shall apply case characteristics and rate factors within a class of business in a manner that assures that premium differences among health benefit plans for identical small employer groups vary only due to reasonable and objective differences in the design and benefits of the health benefit plans and are not due to the actual or expected health status or claims experience of the small employer groups that choose or are expected to choose a particular health benefit

f.The rate manual developed pursuant to subsection 2 shall provide for premium rates to be developed in a two step process. In the first step, a base premium rate shall be developed for the small employer group without regard to any risk characteristics of the group. In the second step, the resulting base premium rate may be adjusted by a risk load, subject to the provisions of North Dakota Century Code section 26.1-36.3-04, to reflect the risk characteristics of the group.

g.A premium charged to a small employer for a health benefit plan shall not include a separate application fee, underwriting fee, or any other separate fee or charge.

h.A small employer carrier shall allocate administrative expenses to the basic and standard health benefit plans on no less favorable of a basis than expenses are allocated to other health benefit plans in the class of business. The rate manual developed pursuant to subsection 2 shall describe the method of allocating administrative expenses to the health benefit plans in the class of business for which the manual was developed.

i.Each rate manual developed pursuant to subsection 2 shall be maintained by the carrier for a period of six years. Updates and changes to the manual shall be maintained with the manual.

j.The rate manual and rating practices of a small employer carrier shall comply with any guidelines issued by the commissioner.

4.If group size is used as a case characteristic by a small employer carrier, the highest rate factor associated with a group size classification shall not exceed the lowest rate factor associated with such a classification by more than twenty percent.

5.The restrictions related to changes in premium rates in subdivisions c and g of subsection 1 of North Dakota Century Code section 26.1-36.3-04 shall be applied as follows:

a.A small employer carrier shall revise its rate manual each rating period to reflect changes in base premium rates and changes in new business premium rates. b.(1)If, for any health benefit plan with respect to any rating period, the percentage change in the new business premium rate is less than or the same as the percentage change in the base premium rate, the change in the new business premium rate shall be deemed to be the change in the base premium rate for the purposes of paragraph 3 of subdivision c of subsection 1 and paragraph 1 of subdivision g of subsection 1 of North Dakota Century Code section 26.1-36.3-04.

(2)If, for any health benefit plan with respect to any rating period, the percentage change in the new business premium rate exceeds the percentage change in the base premium rate, the health benefit plan shall be considered a health benefit plan into which the small employer carrier is no longer enrolling new small employers for the purposes of subdivisions c and g of subsection 1 of North Dakota Century Code

section 26.1-36.3-04.

c.If, for any rating period, the change in the new business premium rate for a health benefit plan differs from the change in the new business premium rate for any other health benefit plan in the same class of business by more than twenty percent, the carrier shall make a filing with the commissioner containing a complete explanation of how the respective changes in new business premium rates were established and the reason for the difference. The filing shall be made within thirty days of the beginning of the rating period.

d.A small employer carrier shall keep on file for a period of at least six years the calculations used to determine the change in base premium rates and new business premium rates for each health benefit plan for each rating period. 6.a.Except as provided in subdivisions b through d, a change in premium rate for a small employer shall produce a revised premium rate that is no more than the following:

(1)The base premium rate for the small employer, as shown in the rate manual as revised for the rating period, multiplied by;

(2)One plus the sum of:

(a)The risk load applicable to the small employer during the previous rating period; and (b)Fifteen percent, prorated for periods of less than one year.

b.In the case of a health benefit plan into which a small employer carrier is no longer enrolling new small employers, a change in premium rate for a small employer shall produce a revised premium rate that is no more than the following:

(1)The base premium rate for the small employer, given its present composition and as shown in the rate manual in effect for the small employer at the beginning of the previous rating period, multiplied by;

(2)One plus the lesser of:

(a)The change in the base rate; or (b)The percentage change in the new business premium for the most similar health benefit plan into which the small employer carrier is enrolling new small employers, multiplied by;

(3)One plus the sum of:

(a)The risk load applicable to the small employer during the previous rating period; and (b)Fifteen percent, prorated for periods of less than one year.

c.In the case of a health benefit plan described in subdivision g of subsection 1 of North Dakota Century Code section 26.1-36.3-04, if the current premium rate for the health benefit plan exceeds the ranges set forth in subsection 1 of North Dakota Century Code

section 26.1-36.3-04, the formulae set forth in subdivisions a and b will be applied as if the fifteen percent adjustment provided in subparagraph b of paragraph 2 of subdivision a and subparagraph b of paragraph 3 of subdivision b were a zero percent adjustment.

d.Notwithstanding the provisions of subdivisions a and b, a change in premium rate for a small employer shall not produce a revised premium rate that would exceed the limitations on rates provided in subdivision b of subsection 1 of North Dakota Century Code section 26.1-36.3-04. 7.a.A representative of a Taft-Hartley trust, including a carrier upon the written request of such a trust, may file in writing with the commissioner a request for the waiver of application of the provisions of subsection 1 of North Dakota Century Code section 26.1-36.3-04 with respect to such trust.

b.A request made under subdivision a shall identify the provisions for which the trust is seeking the waiver and shall describe, with respect to each provision, the extent to which application of such provision would:

(1)Adversely affect the participants and beneficiaries of the trust; and (2)Require modifications to one or more of the collective bargaining agreements under or pursuant to which the trust was or is established or maintained.

c.A waiver granted under subsection 3 of North Dakota Century Code section 26.1-36.3-04 shall not apply to an individual who participates in the trust because the individual is an associate member of an employee organization or the beneficiary of such an individual.

History: Effective August 1, 1994; amended effective December 1, 1997.

General Authority: NDCC 26.1-01-08, 26.1-36.3-04

Law Implemented: NDCC 26.1-36.3-04 45-06-06.1-06. Requirement to insure entire groups. 1.a.A small employer carrier that offers coverage to a small employer shall offer to provide coverage to each eligible employee and to each dependent of an eligible employee.

Except as provided in subdivision b, the small employer carrier shall provide the same health benefit plan to each such employee and dependent.

b.A small employer carrier may offer the employees of a small employer the option of choosing among one or more health benefit plans, provided that each employee may choose any of the offered plans. Except as provided in subsection 3 of North Dakota Century Code section 26.1-36.3-06, with respect to exclusions for preexisting conditions, the choice among benefit plans may not be limited, restricted, or conditioned based upon the risk characteristics of the employees or their dependents. 2.a.A small employer carrier shall require each small employer that applies for coverage, as

part of the application process, to provide a complete list of eligible employees and dependents of eligible employees as defined in subsections 12 and 13 of North Dakota Century Code section 26.1-36.3-01. The small employer carrier shall require the small employer to provide appropriate supporting documentation, such as the W-2 summary wage and tax form, or certification, to verify the information required under this subdivision.

b.A small employer carrier shall secure a waiver with respect to each eligible employee and each dependent of such an eligible employee who declines an offer of coverage under a health benefit plan provided to a small employer. The waiver shall be signed by the eligible employee, on behalf of such employee or the dependent of such employee, and shall certify that the individual who declined coverage was informed of the availability of coverage under the health benefit plan. The waiver form shall require that the reason for declining coverage be stated on the form and shall include a written warning of the penalties imposed on late enrollees. Waivers shall be maintained by the small employer carrier for a period of six years. c.(1)A small employer carrier may not issue coverage to a small employer that refuses to provide the list required under subdivision a or a waiver required under subdivision b.

(2)(a)A small employer carrier shall not issue coverage to a small employer if the carrier, or a producer for such carrier, has reason to believe that the small employer has induced or pressured an eligible employee, or dependent of an eligible employee, to decline coverage due to the individual's risk characteristics.

(b)A producer shall notify a small employer carrier, prior to submitting an application for coverage with the carrier on behalf of a small employer, of any circumstances that would indicate that the small employer has induced or pressured an eligible employee, or dependent of an eligible employee, to decline coverage due to the individual's risk characteristics. 3.a.New entrants to a small employer group shall be offered an opportunity to enroll in the health benefit plan currently held by such group. A new entrant that does not exercise the opportunity to enroll in the health benefit plan within the period provided by the small employer carrier may be treated as a late enrollee by the carrier, provided that the period provided to enroll in the health benefit plan extends at least thirty days after the date the new entrant is notified of the entrant's opportunity to enroll. If a small employer carrier has offered more than one health benefit plan to a small employer group pursuant to subdivision b of subsection 1, the new entrant shall be offered the same choice of health benefit plans as the other members of the group.

b.A small employer carrier may not apply a waiting period, elimination period, or other similar limitation of coverage, other than an exclusion for preexisting medical conditions consistent with subdivision b of subsection 3 of North Dakota Century Code section 26.1-36.3-06, with respect to a new entrant that is longer than ninety days.

c.New entrants to a group shall be accepted for coverage by the small employer carrier without any restrictions or limitations on coverage related to the risk characteristics of the employees or their dependents, except that a carrier may exclude coverage for preexisting medical conditions, consistent with the provisions provided in subsection 3 of North Dakota Century Code section 26.1-36.3-06.

d.A small employer carrier may assess a risk load to the premium rate associated with a new entrant, consistent with the requirements of North Dakota Century Code section 26.1-36.3-04. The risk load shall be the same risk load charged to the small employer group immediately prior to acceptance of the new entrant into the group. 4.a.(1)In the case of an eligible employee or dependent of an eligible employee who, prior to the effective date of subsection 1 of North Dakota Century Code section 26.1-36.3-06,0was excluded from coverage or denied coverage by a small employer carrier in the process of providing a health benefit plan to an eligible small employer, as defined in subdivision c of subsection 1 of North Dakota Century Code section 26.1-36.3-06, the small employer carrier shall provide an opportunity for the eligible employee or dependent of such eligible employee to enroll in the health benefit plan currently held by the small employer.

(2)A small employer carrier may require an individual who requests enrollment under this subsection to sign a statement indicating that such individual sought coverage under the group contract other than as a late enrollee and that the coverage was not offered to the individual.

b.The opportunity to enroll must meet the following requirements:

(1)The opportunity to enroll shall begin September 1, 1994, and shall last for a period of at least three months.

(2)Eligible employees and dependents of eligible employees who are provided an opportunity to enroll pursuant to this subsection shall be treated as new entrants.

Premium rates related to such individuals shall be set in accordance with subsection 3.

(3)The terms of coverage offered to an individual described in paragraph 1 ofsubdivision a may exclude coverage for preexisting medical conditions if the health benefit plan currently held by the small employer contains such an exclusion, provided that the exclusion period shall be reduced by the number of days between the date the individual was excluded or denied coverage and the date coverage is provided to the individual pursuant to this subsection.

(4)A small employer carrier shall provide written notice at least forty-five days prior to the opportunity to enroll provided in paragraph 1 of subdivision a to each small employer insured under a health benefit plan offered by such carrier. The notice shall clearly describe the rights granted under this subsection to employees and dependents who were previously excluded from or denied coverage and the process for enrollment of such individuals in the employer's health benefit plan.

History: Effective August 1, 1994; amended effective December 1, 1997; August 1, 2000. 45-06-06.1-07. Consideration of industry.

1.Except as provided in subsections 2 and 3, a small employer carrier may not consider the trade or occupation of the employees of a small employer or the industry or type of business in which the small employer is engaged in determining whether to issue or continue to provide coverage to the small employer.

2.A small employer carrier may use industry as a case characteristic in establishing premium rates, subject to subdivision f of subsection 1 of North Dakota Century Code section 26.1-36.3-04.

3.A small employer carrier may consider trade, occupation, or industry as part of the eligibility criteria for a class of business, subject to paragraph 2 of subdivision b of subsection 1 of North Dakota Century Code section 26.1-36.3-06. 45-06-06.1-08. Application to reenter state.

1.A carrier that has been prohibited from writing coverage for small employers in this state pursuant to subsection 2 of North Dakota Century Code section 26.1-36.3-05 may not resume offering health benefit plans to small employers in this state until the carrier has made a petition to the commissioner to be reinstated as a small employer carrier and the petition has been approved by the commissioner. In reviewing a petition, the commissioner may ask for such information and assurances as the commissioner finds reasonable and appropriate.

2.In the case of a small employer carrier doing business in only one established geographic service area of the state, if the small employer carrier elects to nonrenew a health benefit plan under subdivision f of subsection 1 of North Dakota Century Code section 26.1-36.3-05, the small employer carrier shall be prohibited from offering health benefit plans to small employers in any part of the service area for a period of five years. In addition, the small employer carrier shall not offer health benefit plans to small employers in any other geographic area of the state without the prior approval of the commissioner. In considering whether to grant approval, the commissioner may ask for such information and assurances as the commissioner finds reasonable and appropriate.

Law Implemented: NDCC 26.1-36.3-05 45-06-06.1-09. Qualifying previous and qualifying existing coverage.

Repealed effective December 1, 1997. 45-06-06.1-10. Restrictive riders.

1.A restrictive rider, endorsement, or other provision that would violate the provisions of paragraph 2 of subdivision e of subsection 3 of North Dakota Century Code section 26.1-36.3-06 and that was in force on the effective date of this chapter may not remain in force beyond the first anniversary date of the health benefit plan subject to the restrictive provision that follows the effective date of this chapter. A small employer carrier shall provide written notice to those small employers whose coverage will be changed pursuant to this subsection at least thirty days prior to the required change to the health benefit plan.

2.Except as permitted in subdivision b of subsection 3 of North Dakota Century Code section 26.1-36.3-06, a small employer carrier shall not modify or restrict a basic or standard health benefit plan in any manner for the purposes of restricting or excluding coverage or benefits for specific diseases, medical conditions, or services otherwise covered by the plan.

3.Except as permitted in subdivision b of subsection 3 of North Dakota Century Code section 26.1-36.3-06, a small employer carrier shall not modify or restrict any health benefit plan with respect to any eligible employee or dependent of an eligible employee, through riders, endorsements, or otherwise, for the purpose of restricting or excluding the coverage or benefits provided to such employee or dependent for specific diseases, medical conditions, or services otherwise covered by the plan.

Law Implemented: NDCC 26.1-36.3-06 45-06-06.1-11. Rules related to fair marketing. 1.a.A small employer carrier shall actively market each of its health benefit plans to small employers in this state. A small employer carrier may not suspend the marketing or issuance of a health benefit plan unless the carrier has good cause and has received the prior approval of the commissioner.

b.In marketing the basic and standard health benefit plans to small employers, a small employer carrier shall use at least the same sources and methods of distribution that it uses to market other health benefit plans to small employers. Any producer authorized by a small employer carrier to market health benefit plans to small employers in the state shall also be authorized to market the basic and standard health benefit plans. 2.a.A small employer carrier shall offer to any small employer that applies for or makes an inquiry regarding health insurance coverage from the small employer carrier all health benefit plans it actively markets to small employers. The offer shall be in writing and shall include at least the following information:

(1)A general description of the benefits contained in the health benefit plans being offered to small employers in this state; and (2)Information describing how the small employer may enroll in the plans. The offer may be provided directly to the small employer or delivered through a producer.

b.In connection with the offering of any health insurance coverage to a small employer, a health insurance issuer is required to make reasonable disclosure to the employer, as a

part of its solicitation and sales materials, of the availability of information described in this subsection; and upon request provide that information to the employer.

Subject to the above, the information that must be provided is the provisions of coverage relating to the following:

(1)The issuer's right to change premium rates and the factors that may affect changes in premium rates.

(2)Renewability of coverage.

(3)Any preexisting condition exclusion, including use of the alternative method of counting creditable coverage.

(4)The geographic areas served by HMOs. c.(1)A small employer carrier shall provide a price quote to a small employer, directly or through an authorized producer, within ten working days of receiving a request for a quote and such information as is necessary to provide the quote. A small employer carrier shall notify a small employer, directly or through an authorized producer, within five working days of receiving a request for a price quote of any additional information needed by the small employer carrier to provide the quote.

(2)A small employer carrier may not apply more stringent or detailed requirements related to the application process for the basic and standard health benefit plans than are applied for other health benefit plans offered by the carrier.

3.The small group carrier shall not require a small employer to join or contribute to any association or group as a condition of being accepted for coverage by the small employer carrier, except that, if membership in an association or other group is a requirement for accepting a small employer into a particular health benefit plan, a small employer carrier may apply such requirement, subject to the requirements of paragraph 2 of subdivision b of subsection 1 of North Dakota Century Code section 26.1-36.3-06.

4.A small employer carrier may not require, as a condition to the offer or sale of a health benefit plan to a small employer, that the small employer purchase or qualify for any other insurance product or service. 5.a.Carriers offering individual and group health benefit plans in this state shall be responsible for determining whether the plans are subject to the requirements of the Act and this chapter. Carriers shall elicit the following information from applicants for such plans at the time of application:

(1)Whether or not any portion of the premium will be paid by or on behalf of a small employer, either directly or through wage adjustments or other means of reimbursement; and (2)Whether or not the prospective policyholder, certificate holder, or any prospective insured individual intends to treat the health benefit plan as part of plan or program under section 162 (other than section 162(1)), section 125, or section 106 of the United States Internal Revenue Code.

b.If a small employer carrier fails to comply with subdivision a, the small employer carrier shall be deemed to be on notice of any information that could reasonably have been attained if the small employer carrier had complied with subdivision a.

History: Effective August 1, 1994; amended effective December 1, 1997; January 1, 2024.

Law Implemented: NDCC 26.1-36.3-11 45-06-06.1-12. Status of carriers as small employer carriers.

1.A carrier shall not offer health benefit plans to small employers after January 1, 1994, or continue to provide coverage after September 1, 1994, under health benefit plans previously issued to small employers in this state, unless the filing provided pursuant to section 45-06-06-01 indicates the carrier intends to operate as a small employer carrier in this state.

2.If the filing made pursuant to section 45-06-06-01 indicates that a carrier does not intend to operate as a small employer carrier in this state, the carrier shall be precluded from operating as a small employer carrier in this state for a period of five years from the date of the filing.

Upon a written request from such a carrier, the commissioner may reduce the period provided for in the previous sentence if the commissioner finds that permitting the carrier to operate as a small employer carrier would be in the best interests of the small employers in the state.

General Authority: NDCC 26.1-01-08, 26.1-36.3-07

Law Implemented: NDCC 26.1-36.3-07 45-06-06.1-13. Restoration of coverage. 1.a.Except as provided in subdivision b, a small employer carrier shall, as a condition of continuing to transact business in this state with small employers, offer to provide a health benefit plan as described in subsection 3 to any small employer whose coverage was terminated or not renewed by such small employer carrier after January 1, 1994.

b.The offer required under subdivision a shall not be required with respect to a health benefit plan that was not renewed if:

(1)The health benefit plan was not renewed for reasons permitted in subsection 1 of North Dakota Century Code section 26.1-36.3-05; or (2)The nonrenewal was a result of the small employer voluntarily electing coverage under a different health benefit plan.

2.The offer made under subsection 1 shall be made in accordance with paragraph 4 of subdivision b of subsection 4 of section 45-06-06.1-06. A small employer shall be given at least ninety days to accept an offer made pursuant to subsection 1.

3.A health benefit plan provided to a terminated small employer pursuant to subsection 1 shall meet the following conditions:

a.The health benefit plan shall contain benefits that are identical to the benefits in the health benefit plan that was terminated or nonrenewed.

b.The health benefit plan shall not be subject to any waiting periods, including exclusion periods for preexisting conditions, or other limitations on coverage that exceed those contained in the health benefit plan that was terminated or nonrenewed. In applying such exclusions or limitations, the health benefit plan shall be treated as if it were continuously in force from the date it was originally issued to the date that it is restored pursuant to this

section and North Dakota Century Code section 26.1-36.3-12.

c.The health benefit plan shall not be subject to any provision that restricts or excludes coverage or benefits for specific diseases, medical conditions, or services otherwise covered by the plan.

d.The health benefit plan shall provide coverage to all employees who are eligible employees as of the date the plan is restored. The carrier shall offer coverage to each dependent of such eligible employees.

e.The premium rate for the health benefit plan shall be no more than the premium rate charged to the small employer on the date the health benefit plan was terminated or nonrenewed; provided that, if the number or case characteristics of the eligible employees or their dependents of the small employer has changed between the date the health benefit plan was terminated or nonrenewed and the date that it is restored, the carrier may adjust the premium rates to reflect any changes in case characteristics of the small employer. If the carrier has increased premium rates for other similar groups with similar coverage to reflect general increases in health care costs and utilization, the premium rate may further be adjusted to reflect the lowest such increase given to a similar group. The premium rate for the health benefit plan may not be increased to reflect any changes in risk characteristics of the small employer group until one year after the date the health benefit plan is restored. Any such increase shall be subject to the provisions of North Dakota Century Code section 26.1-36.3-04.

f.A carrier may reinsure new entrants to the health benefit plan who enroll after the restoration of coverage.

General Authority: NDCC 26.1-01-08, 26.1-36.3-12

Law Implemented: NDCC 26.1-36.3-12 45-06-06.1-14. Special enrollment periods.

1.Employees losing other coverage. A group health plan shall permit an employee who is eligible, but not enrolled, for coverage (or a dependent of the employee if the dependent is eligible, but not enrolled) to enroll for coverage under the terms of the plan if each of the following conditions is met:

a.The employee or dependent was covered under a group health plan at the time coverage was previously offered to the employee or dependent.

b.The employee stated in writing at the time coverage was previously offered that coverage under a group health plan was the reason for declining enrollment, but only if the plan required such a statement at the time and provided the employee with notice of the requirement and its consequences.

c.The employee's or dependent's coverage:

(1)Was under a Consolidated Omnibus Budget Reconciliation Act continuation provision and the coverage was exhausted; or (2)If not under a Consolidated Omnibus Budget Reconciliation Act continuation provision, the coverage was terminated as a result of loss of eligibility for the coverage or because employer contributions toward the coverage were terminated.

d.Under the terms of the plan, the employee requests enrollment not later than thirty days after the date of termination of the coverage or employer contribution.

2.For dependent beneficiaries. A group health plan shall provide for a "dependent special enrollment period" if:

a.The group health plan makes coverage available with respect to dependents of an employee;

b.The employee is a participant under the plan or has met any waiting period applicable to becoming a participant under the plan and is eligible to be enrolled under the plan but for a failure to enroll during a previous enrollment period; and

c.A person becomes a dependent of the individual through marriage, birth, or adoption or placement for adoption.

3.For purposes of this section, a "dependent special enrollment period" is a period of not less than thirty days beginning on the later of:

a.The date dependent coverage is made available; or

b.The date of the marriage, birth, adoption, or placement for adoption.

During the dependent special enrollment period, the dependent or, if not otherwise enrolled, the employee may be enrolled under the plan as a dependent of the employee. In the case of the birth or adoption of a child, the spouse of the employee may be enrolled as a dependent if the spouse is otherwise eligible for coverage.

4.If an employee seeks to enroll a dependent during the first thirty days of the dependent special enrollment period, the coverage of the dependent shall become effective:

a.In the case of marriage, not later than the first day of the first month beginning after the date the completed request for enrollment is received;

b.In the case of a dependent's birth, as of the date of birth; or

c.In the case of a dependent's adoption or placement for adoption, the date of adoption or placement for adoption.

History: Effective December 1, 2001.

General Authority: NDCC 28-32-02(1)

Chapter 45-06-07 Model Regulation to Implement Rules Regarding Contracts and Services of Health Maintenance Organizations

N.D. Admin. Code 45-06-07-01 Applicability and scope

This chapter applies to all health maintenance organizations that are required to obtain a certificate of authority in this state. In the event of conflict between the provisions of this chapter and the provisions of any other chapter issued by the commissioner, the provisions of this chapter shall be controlling as to health maintenance organizations.

N.D. Admin. Code 45-06-07-02 Effective date

1.All group and individual contracts written or issued on or after December 31, 1993, must conform with the provisions of these rules.

2.Group or individual contract or evidence of coverage may not be reissued, renewed, amended, or extended in this state on or after December 31, 1993, unless it complies with this

chapter. A group or individual contract or evidence of coverage approved before December 31, 1993, must be deemed to be reissued, renewed, amended, or extended on the date the health maintenance organization changes the terms of the group or individual contract or evidence of coverage or adjusts the premiums charged. Such group or individual contracts or evidence of coverage must comply with this chapter when amended but in no event later than June 30, 1995.

N.D. Admin. Code 45-06-07-03 Definitions

Group or individual contract or evidence of coverage delivered or issued for delivery to any person in this state by a health maintenance organization required to obtain a certificate of authority in this state may not contain definitions respecting the matters set forth below unless such definitions comply with the requirements of this section. Definitions other than those in this section may be used as appropriate, providing that they do not contradict these requirements. All definitions used in the group or individual contract and evidence of coverage must be in alphabetical order. As used in this chapter and as used in the group or individual contract and evidence of coverage:

1."Basic health care services" means the following medically necessary services: preventive care, emergency care, inpatient and outpatient hospital and physician care, diagnostic laboratory, and diagnostic and therapeutic radiological services. It does not include mental health services or services for alcohol or drug abuse, dental or vision services, or long-term rehabilitation treatment.

2."Copayment" means the amount an enrollee must pay in order to receive a specific service that is not fully prepaid.

3."Deductible" means the amount an enrollee is responsible to pay out of pocket before the health maintenance organization begins to pay the costs or provide the services associated with treatment.

4."Eligible dependent" means any member of a subscriber's family who meets the eligibility requirements set forth in subsection 2 of section 45-06-07-04.

5."Emergency care services" means:

a.Within the service area: covered health care services rendered by affiliated or nonaffiliated providers under unforeseen conditions that require immediate medical attention. Emergency care services within the service area include covered health care services from nonaffiliated providers only when delay in receiving care from the health maintenance organization could reasonably be expected to cause severe jeopardy to the enrollee's condition.

b.Outside the service area: medically necessary health care services that are immediately required because of unforeseen illness or injury while the enrollee is outside the geographical limits of the health maintenance organization's service area.

6."Enrollee" means an individual who is covered by a health maintenance organization.

7."Evidence of coverage" means a statement of the essential features and services of the health maintenance organization coverage which is given to the subscriber by the health maintenance organization or by the group contractholder.

8."Extension of benefits" means the continuation of coverage of a particular benefit provided under a group or individual contract following termination with respect to an enrollee who is totally disabled on the date of termination.

9."Grievance" means a written complaint submitted in accordance with the health maintenance organization's formal grievance procedure by or on behalf of the enrollee regarding any aspect of the health maintenance organization relative to the enrollee.

10."Group contract" means a contract for health care services which by its terms limits eligibility to enrollees of a specified group. The group contract may include coverage for dependents.

11."Group contractholder" means the person to whom a group contract has been issued.

12."Health maintenance organization" means any person who undertakes to provide or arrange for the delivery of basic health care services to enrollees on a prepaid basis, except for enrollee responsibility for copayments or deductibles.

13."Hospital" means a duly licensed institution that provides general and specialized inpatient medical care. The term "hospital" does not include a convalescent facility, nursing home, or any institution or part of an institution which is used principally as a convalescent facility, rest facility, nursing facility, or facility for the aged.

14."Individual contract" means a contract for health care services issued to and covering an individual. The individual contract may include coverage for dependents of the subscriber.

15."Medical necessity" or "medically necessary" means appropriate and necessary services as determined by any provider affiliated with the health maintenance organization which are rendered to an enrollee for any condition requiring, according to generally accepted principles of good medical practice, the diagnosis or direct care and treatment of an illness or injury and are not provided only as a convenience. This does not preclude the health maintenance organization from establishing standards by which providers make their decisions as to what is medically necessary or from penalizing providers for failure to meet these standards. In the case of emergency medical services, the health maintenance organization has the right to make the final determination of whether services should be covered.

16."Nonbasic health care services" means any health care services, other than basic health care services, that may be provided in the absence of basic health care services.

17."Out-of-area services" means the health care services that a health maintenance organization covers when its enrollees are outside of the service area.

18."Participating provider" means a provider as defined in this section who, under an express or implied contract with the health maintenance organization or with its contractor or subcontractor, has agreed to provide health care services to enrollees with an expectation of receiving payment, other than copayment or deductible, directly or indirectly from the health maintenance organization.

19."Physician" means a duly licensed doctor of medicine or osteopathy practicing within the scope of such a license.

20."Primary care physician" means a physician who supervises, coordinates, and provides initial and basic care to enrollees, and who initiates their referral for specialist care and maintains continuity of patient care.

21."Provider" means any physician, hospital, or other person licensed or otherwise authorized to furnish health care services.

22."Replacement coverage" means the benefits provided by a succeeding carrier.

23."Service area" means the geographical area as approved by the commissioner within which the health maintenance organization provides or arranges for health care services that are available and accessible to enrollees.

24."Skilled nursing facility" means a facility that is operated pursuant to law and is primarily engaged in providing room and board accommodations and skilled nursing care under the supervision of a duly licensed physician.

25."Subscriber" means an individual whose employment or other status, except family dependency, is the basis for eligibility for enrollment in the health maintenance organization, or in the case of an individual contract, the person in whose name the contract is issued.

26."Supplemental health care services" means any health care services that are provided in addition to basic health care services.

N.D. Admin. Code 45-06-07-04 Requirements for contracts and evidence of coverage

Each subscriber is entitled to receive an individual contract or evidence of coverage in a form that has been approved by the commissioner. Each group contractholder is entitled to receive a group contract as approved by the commissioner. Group contracts, individual contracts, and evidences of coverage must be delivered or issued for delivery to subscribers or group contractholders within a reasonable time after enrollment, but not more than fifteen days from the later of the effective date of coverage or the date on which the health maintenance organization is notified of enrollment.

1.Health maintenance organization information. The group or individual contract and evidence of coverage must contain the name, address, and telephone number of the health maintenance organization, and where and in what manner information is available as to how services may be obtained. A telephone number within the service area for calls, without charge to members, to the health maintenance organization's administrative office must be made available and disseminated to enrollees to adequately provide telephone access for enrollee services, problems, or questions. A health maintenance organization shall provide a method by which the enrollee may contact the health maintenance organization at no cost to the enrollee. This may be done through the use of toll-free or collect telephone calls. The enrollee must be informed of the method by notice in the handbook, newsletter, or flyer. The group or individual contract or evidence of coverage may indicate the manner in which the number will be disseminated rather than list the number itself.

2.Eligibility requirements.

a.The group or individual contract and evidence of coverage must contain eligibility requirements indicating the conditions that must be met to enroll as a subscriber or eligible dependent, the limiting age for subscribers and eligible dependents including the effects of Medicare eligibility, and a clear statement regarding coverage of newbornand adopted children.

b.A group or individual contract or evidence of coverage may not contain any provision excluding or limiting coverage for a newborn child or adopted child. Medically diagnosed congenital defects and birth abnormalities must be treated the same as any other illness or injury for which coverage is provided. The group or individual contract and evidence of coverage may require that notification of birth of a newborn childor the placement for adoption of a child and payment of any required premium must be furnished to the health maintenance organization within thirty-one days after the date of birthor placement for adoption in order to have coverage continue beyond such thirty-one-day period. The health maintenance organization is entitled to premium for the first thirty-one days of coverage, unless the coverage is rejected by the subscriber prior to the birthor placement for adoption of the child.

c.The definition of an eligible dependent must include:

(1)The spouse of the subscriber.

(2)An unmarried dependent child of the subscriber, including a dependent of an unmarried child who:

(a)Has not reached age twenty-two;

(b)Has reached age sixteen through age twenty-six who is attending a recognized college or university, trade school, or secondary school on a full-time basis; or (c)Has reached agetwenty-two but who is incapable of self-support because of mental retardation, mental illness, or physical incapacity which began before the child reached age twenty-two, and who is chiefly dependent upon the subscriber for support and maintenance.

d.The definition of a dependent child of a subscriber must include a child who:

(1)Is related to the subscriber as a natural child, a child placed for adoption, or a stepchild;

(2)Resides in the subscriber's household and who qualifies as a dependent of the subscriber or the subscriber's spouse under the United States Internal Revenue Code and the federal tax regulations; or (3)Is eligible by virtue of a court order making the subscriber responsible for health care services for the dependent child.

3.Benefits and services within the service area. The group or individual contract and evidence of coverage must contain a specific description of benefits and services available within the service area.

4.Emergency care benefits and services. The group or individual contract and evidence of coverage must contain a specific description of benefits and services available for emergencies twenty-four hours a day, seven days a week, including disclosure of any restrictions on emergency care services. A group or individual contract or evidence of coverage may not limit the coverage of emergency services within the service area to affiliated providers only.

5.Out-of-area benefits and services. The group or individual contract and evidence of coverage must contain a specific description of benefits and services available out of the service area.

6.Copayments and deductibles. The group or individual contract and evidence of coverage must contain a description of any copayments or deductibles that must be paid by enrollees.

7.Limitations and exclusions. The group or individual contract and evidence of coverage must contain a description of any limitations or exclusions on the services, kind of services, benefits, or kind of benefits including any limitations or exclusions due to preexisting conditions, waiting periods, or an enrollee's refusal of treatment.

8.Enrollee termination.

a.A health maintenance organization may not cancel or terminate coverage of services provided an enrollee under a health maintenance organization group or individual contract except for one or more of the following reasons:

(1)Failure to pay the amounts due under the group or individual contract.

(2)Fraud or material misrepresentation in enrollment or in the use of services or facilities.

(3)Material violation of the terms of the group or individual contract.

(4)Failure to meet the eligibility requirements under a group contract.

(5)Termination of the group contract under which the enrollee was covered.

(6)Failure of the enrollee and the primary care physician to establish a satisfactory patient-physician relationship if:

(a)It is shown that the health maintenance organization has, in good faith, provided the enrollee with the opportunity to select an alternative primary care physician;

(b)The enrollee has repeatedly refused to follow the plan of treatment ordered by the physician; and (c)The enrollee is notified in writing at least thirty days in advance that the health maintenance organization considers the patient-physician relationship to be unsatisfactory and specific changes are necessary in order to avoid termination.

(7)Such other good cause agreed upon in the group or individual contract and approved by the commissioner.

However, coverage may not be canceled or terminated on the basis of the status of the enrollee's health or because the enrollee has exercised the enrollee's rights under the health maintenance organization's grievance procedure by registering a grievance against the health maintenance organization.

b.A health maintenance organization may not cancel or terminate an enrollee's coverage for services provided under a health maintenance organization group or individual contract without giving the enrollee at least fifteen days' written notice of such termination. Notice will be considered given on the date of mailing or, if not mailed, on the date of delivery. This notice must include the reason for termination. If termination is due to nonpayment of premium, the grace period required in subsection 23 of section 45-06-07-04 applies. Advance notice of termination is not required to be given for termination due to nonpayment of premium.

c.A health maintenance organization may not terminate coverage of a dependent child upon attainment of the limiting age if the child is and continues to be both:

(1)Incapable of self-support because of mental retardation, mental illness, or physical incapacity; and (2)Chiefly dependent upon the subscriber for support and maintenance.

Proof of such incapacity and dependency must be furnished to the health maintenance organization by the subscriber within thirty-one days of the child's attainment of the limiting age and subsequently as reasonably required by the health maintenance organization.

9.Enrollee reinstatement. If a health maintenance organization permits reinstatement of an enrollee's coverage, the group or individual contract and evidence of coverage must include any terms and conditions concerning reinstatement. The contract and evidence of coverage may state that all reinstatements are at the option of the health maintenance organization and that the health maintenance organization is not obligated to reinstate any terminated coverage.

10.Claims procedures. The group or individual contract and evidence of coverage must contain procedures for filing claims that include:

a.Any required notice to the health maintenance organization.

b.If any claim forms are required, how, when, and where to obtain and submit them.

c.Any requirements for filing proper proofs of loss.

d.Any time limit of payment of claims.

e.Notice of any provisions for resolving disputed claims, including arbitration.

f.A statement of restrictions, if any, on assignment of sums payable to the enrollee by the health maintenance organization.

11.Enrollee grievance procedures and arbitration. In compliance with subsection 4 of section 45-06-07-09, the group or individual contract and evidence of coverage must contain a description of the health maintenance organization's method for resolving enrollee grievances, including procedures to be followed by the enrollee in the event any dispute arises under the contract, including any provisions for arbitration.

12.Continuation of coverage. A group contract and evidence of coverage must contain a provision that any enrollee who is an inpatient in a hospital or a skilled nursing facility on the date of discontinuance of the group contract must be covered in accordance with the terms of the group contract until discharged from such hospital or skilled nursing facility. The enrollee may be charged the appropriate premium for coverage that was in effect prior to discontinuance of the group contract.

13.Conversion of coverage.

a.The group or individual contract and evidence of coverage must contain a conversion provision that provides that each enrollee has the right to convert coverage to an individual health maintenance organization contract in the following circumstances:

(1)Upon termination of eligibility for coverage under a group or individual contract; or (2)Upon termination of the group contract.

To obtain the conversion contract, an enrollee shall submit a written application and the applicable premium payment to the health maintenance organization within thirty-one days after the date the enrollee's eligibility for coverage terminates.

b.A conversion contract is not required to be made available if:

(1)The enrollee's termination of coverage occurred for any of the reasons listed in paragraphs 1, 2, 3, 6, and 7 of subdivision a of subsection 8 of section 45-06-07-04;

(2)The enrollee is covered by or is eligible for benefits under Title XVIII of the United States Social Security Act (Medicare);

(3)The enrollee is covered by or is eligible for similar hospital, medical, or surgical benefits under state or federal law;

(4)The enrollee is covered by or is eligible for similar hospital, medical, or surgical benefits under any arrangement of coverage for individuals in a group;

(5)The enrollee is covered for similar benefits by an individual policy or contract; or (6)The enrollee has not been continuously covered during the three-month period immediately preceding that person's termination of coverage.

c.The conversion contract must provide basic health care services to its enrollees as a minimum.

d.The conversion contract must begin coverage of the enrollee formerly covered under the group or individual contract on the date of termination from such group or individual contract.

e.Coverage must be provided without requiring evidence of insurability and may not impose any preexisting condition limitations or exclusions as described in subsection 1 of

section 45-06-07-05 other than those remaining unexpired under the contract from which conversion is exercised. Any probationary or waiting period set forth in the conversion contract must be deemed to commence on the effective date of the enrollee's coverage under the prior group or individual contract.

f.If a health maintenance organization does not issue individual or conversion contracts, the health maintenance organization may use a noncancelable group contract to provide coverage for enrollees who are eligible for conversion coverage.

14.Extension of benefits for total disability.

a.Each group contract issued by a health maintenance organization must contain a reasonable extension of benefits upon discontinuance of the group contract with respect to enrollees who become totally disabled while enrolled under the contract and who continue to be totally disabled at the date of discontinuance of the contract.

b.Upon payment of premium at the current group rate, coverage must remain in full force and effect until the first of the following to occur:

(1)The end of a period of twelve months starting with the date of termination of the group contract;

(2)The date the enrollee is no longer totally disabled; or (3)The date a succeeding carrier provides replacement coverage to that enrollee without limitation as to the disabling condition.

c.Upon termination of the extension of benefits, the enrollee must have the right to convert coverage as provided in subsection 13.

15.Coordination of benefits. The group or individual contract and evidence of coverage may contain a provision for coordination of benefits that is consistent with that applicable to other carriers in the jurisdiction. Any provisions or rules for coordination of benefits established by a health maintenance organization may not relieve a health maintenance organization of its duty to provide or arrange for a covered health care service to any enrollee because the enrollee is entitled to coverage under any other contract, policy, or plan, including coverage provided under government programs. The health maintenance organization is required to provide covered health care services first and then, at its option, seek coordination of benefits.

16.Subrogation for injuries caused by third parties. The group or individual contract and evidence of coverage may not contain any provisions concerning subrogation for injuries caused by third parties unless the wording has been approved by the commissioner.

17.Description of the service area. The group or individual contract and evidence of coverage must contain a description of the approved service area.

18.Entire contract provision. The group or individual contract must contain a statement that the contract, all applications, and any amendments constitute the entire agreement between the parties. A portion of the charter, bylaws, or other document of the health maintenance organization may not be part of such a contract unless set forth in full in the contract or attached to the contract. However, the evidence of coverage may be attached to and made a

part of the group contract.

19.Term of coverage. The group or individual contract and evidence of coverage must contain the time and date or occurrence upon which coverage takes effect, including any applicable waiting periods, or describe how the time and date or occurrence upon which coverage takes effect is determined. The contract and evidence of coverage must also contain the time and date or occurrence upon which coverage will terminate.

20.Cancellation or termination. The group or individual contract must contain the conditions upon which cancellation or termination may be effected by the health maintenance organization, the group contractholder, or the subscriber.

21.Renewal. The group or individual contract and evidence of coverage must contain the conditions for, and any restrictions upon, the subscriber's right to renewal.

22.Reinstatement of group or individual contractholder. If a health maintenance organization permits reinstatement of a group or individual, the contract and evidence of coverage must include any terms and conditions concerning reinstatement. The contract and evidence of coverage may state that all reinstatements are at the option of the health maintenance organization and that the health maintenance organization is not obligated to reinstate any terminated contract.

23.Grace period.

a.The group or individual contract must provide for a grace period of not less than thirty-one days for the payment of any premium except the first, during which time the coverage must remain in effect if payment is made during the grace period. The evidence of coverage must include notice that a grace period exists under the group contract and that coverage continues in force during the grace period.

b.During the grace period:

(1)The health maintenance organization remains liable for providing the services and benefits contracted for;

(2)The contractholder remains liable for the payment of premium for coverage during the grace period; and (3)The subscriber remains liable for any copayments and deductibles.

c.If the premium is not paid during the grace period, coverage is automatically terminated at the end of the grace period. Following the effective date of such termination, the health maintenance organization shall deliver written notice of termination to the contractholder.

24.Conformity with state law. Any group or individual contract and evidence of coverage delivered or issued for delivery in this state must include a provision that states that any provision not in conformity with North Dakota Century Code chapter 26.1-18.1, this chapter, or any other applicable law or rule in this state may not be rendered invalid but be must construed and applied as if it were in full compliance with the applicable laws and rules of this state.

25.Right to examine contract. An individual contract must contain a provision stating that a person who has entered into an individual contract with a health maintenance organization must be permitted to return the contract within ten days of receiving it and to receive a refund of the premium paid if the person is not satisfied with the contract for any reason. If the contract is returned to the health maintenance organization or to the agent through whom it was purchased, it is considered void from the beginning. However, if services are rendered or claims are paid for such person by the health maintenance organization during the ten-day examination period and the person returns the contract to receive a refund of the premium paid, the person must be required to pay for such services.

History

• History: Effective July 1, 1994; amended effective April 1, 1996.

N.D. Admin. Code 45-06-07-05 Prohibited practices

1.Preexisting conditions.

a.A health maintenance organization may impose a preexisting condition exclusion only if:

(1)The exclusion relates to a condition, regardless of the cause of the condition, for which medical advice, diagnosis, care, or treatment was recommended or received within the six-month period immediately preceding the effective date of coverage;

(2)The exclusion extends for a period of not more than twelve months, or eighteen months in the case of a late enrollee for coverage offered to a small employer pursuant to North Dakota Century Code chapter 26.1-36.3, after the effective date of coverage;

(3)In the case of group contracts, the exclusion does not relate to pregnancy as a preexisting condition; and (4)In the case of group contracts, the exclusion does not relate to genetic information as a preexisting condition in the absence of a diagnosis of a condition related to such information.

b.A health maintenance organization may not exclude or limit services for a preexisting condition when the enrollee transfers coverage from one individual contract to another or when the enrollee converts coverage under the enrollee's conversion option, except to the extent of a preexisting condition limitation or exclusion remaining unexpired under the prior contract. Any required probationary or waiting period must be deemed to have commenced on the effective date of coverage under the prior contract. The health maintenance organization contract must disclose any preexisting condition limitations or exclusions that are applicable when an enrollee transfers from a prior health maintenance organization contract.

c.A health maintenance organization shall reduce any time period applicable to a preexisting condition, for a contract by the aggregate of periods the individual was covered by qualifying previous coverage, if the qualifying previous coverage as defined in North Dakota Century Code section 26.1-36.3-01 is continuous until at least sixty-three days before the effective date of the new coverage. Any waiting period applicable to an individual for coverage under a health maintenance organization contract may not be taken into account in determining the period of continuous coverage. A health maintenance organization shall credit coverage in the same manner as provided by North Dakota Century Code section 26.1-36.3-06 and the rules adopted by the commissioner pursuant thereto.

2.Unfair discrimination. A health maintenance organization may not unfairly discriminate against any enrollee or applicant for enrollment on the basis of the age, sex, race, color, creed, national origin, ancestry, religion, marital status, or lawful occupation of an enrollee, or because of the frequency of utilization of services by an enrollee. However, a health maintenance organization is not prohibited from setting rates or establishing a schedule of charges in accordance with relevant actuarial data.

3.Prohibiting discrimination against enrollees and beneficiaries based on health status-related factors.

a.A health maintenance organization may not establish rules for eligibility including continued eligibility of any individual to enroll under the terms it group contracts based on a health status-related factor, as defined in subsection 20 of North Dakota Century Code

section 26.1-36.3-01.

b.This section shall not be construed to:

(1)Require a health maintenance organization offering group contracts to provide particular benefits other than those provided under the terms of the contract; or (2)To prevent a health maintenance organization from establishing limitations or restrictions on the amount, level, extent, or nature of the benefits or coverage for similarly situated individuals enrolled under the contract.

c.A health maintenance organization offering group contracts may not require an individual as a condition of enrollment or continued enrollment under the plan to pay a premium or contribution that is greater than the premium or contribution for a similarly situated individual enrolled under the contract based on any health status-related factor, as defined in subsection 20 of North Dakota Century Code section 26.1-36.3-01.

d.This subsection shall not be construed to:

(1)Restrict the amount that an employer may be charged for the contract; or (2)Prevent a health maintenance organization offering group contracts from establishing premium discounts or modifying otherwise applicable copayments or deductibles in return for adherence to programs of health promotion and disease prevention.

History

• History: Effective July 1, 1994; amended effective April 1, 1996; December 1, 1997.

N.D. Admin. Code 45-06-07-06 Services

1.Access to care.

a.A health maintenance organization shall establish and maintain adequate arrangements to provide health services for its enrollees, including:

(1)Reasonable proximity to the business or personal residences of the enrollees so as not to result in unreasonable barriers to accessibility;

(2)Reasonable hours of operation and after-hours services;

(3)Emergency care services available and accessible within the service area twenty-four hours a day, seven days a week; and (4)Sufficient providers, personnel, administrators, and support staff to assure that all services contracted for will be accessible to enrollees on an appropriate basis without delays detrimental to the health of enrollees.

b.A health maintenance organization shall make available to each enrollee a primary care physician and provide accessibility to medically necessary specialists through staffing, contracting, or referral. A health maintenance organization shall provide for continuity of care for enrollees referred to specialists.

c.A health maintenance organization shall have written procedures governing the availability of services utilized by enrollees, including at least the following:

(1)Well-patient examinations and immunizations;

(2)Emergency telephone consultation on a twenty-four hours per day, seven days per week basis;

(3)Treatment of emergencies;

(4)Treatment of minor illness; and (5)Treatment of chronic illnesses.

2.Basic health care services. A health maintenance organization shall provide, or arrange for the provision of, as a minimum, basic health care services that must include the following:

a.Emergency care services, as defined in subsection 5 of section 45-06-06-03.

b.Inpatient hospital services, meaning medically necessary hospital services including room and board; general nursing care; special diets when medically necessary; use of operating room and related facilities; use of intensive care units and services; x-ray, laboratory, and other diagnostic tests; drugs, medications, biologicals, anesthesia, and oxygen services; special nursing when medically necessary; physical therapy, radiation therapy, and inhalation therapy; administration of whole blood and blood plasma; and short-term rehabilitation services.

c.Inpatient physician care services, meaning medically necessary health care services performed, prescribed, or supervised by physicians or other providers including diagnostic, therapeutic, medical, surgical, preventive, referral, and consultative health care services.

d.Outpatient medical services, meaning preventive and medically necessary health care services provided in a physician's office, a nonhospital-based health care facility, or at a hospital. Outpatient medical services must include diagnostic services; treatment services; laboratory services; x-ray services; referral services; and physical therapy, radiation therapy, and inhalation therapy. Outpatient services must also include preventive health services that must include at least a broad range of voluntary family planning services, well-child care from birth, periodic health evaluations for adults, screening to determine the need for vision and hearing correction, and pediatric and adult immunizations in accordance with accepted medical practice.

3.Out-of-area services and benefits.

a.Out-of-area services are subject to the same copayment requirements set forth in subsection 6 of section 45-06-07-04.

b.When an enrollee is traveling or temporarily residing out of a health maintenance organization's service area, a health maintenance organization shall provide benefits for reimbursement for emergency care services and transportation which is medically necessary and appropriate under the circumstances to return the enrollee to a health maintenance organization provider, subject to the following conditions:

(1)The condition could not reasonably have been foreseen;

(2)The enrollee could not reasonably arrange to return to the service area to receive treatment from the health maintenance organization's provider;

(3)The travel or temporary residence must be for some purpose other than the receipt of medical treatments; and (4)The health maintenance organization is notified by telephone within twenty-four hours of the commencement of such care unless it is shown that it was not reasonably possible to communicate with the health maintenance organization in such time limits.

c.Services received by an enrollee outside of the health maintenance organization's service area will be covered only so long as it is unreasonable to return the enrollee to the service area.

4.Supplemental health care services. In addition to the basic health care services required to be provided in subsection 2, a health maintenance organization may offer to its enrollees any supplemental health care services it chooses to provide. Limitations as to time and cost may vary from those applicable to basic health care services.

5.Nonbasic health care services. A health maintenance organization may offer nonbasic health care services to any group or individual on a prepaid basis, subject to the same conditions as for supplemental health care services, as described in subsection 4, except that the health maintenance organization need not provide basic health care services as a condition to providing nonbasic health care services.

N.D. Admin. Code 45-06-07-07 Other requirements

1.Description of providers.

a.A health maintenance organization shall provide its subscribers with a list of the names and locations of all of its providers no later than the time of enrollment or the time the group or individual contract and evidence of coverage are issued and upon reenrollment.

If a provider is no longer affiliated with a health maintenance organization, the health maintenance organization shall provide notice of such change to its affected subscribers within thirty days. Subject to the approval of the commissioner, a health maintenance organization may provide its subscribers with a list of providers or provider groups for a segment of the service area. However, a list of all providers must be made available to subscribers upon request.

b.Any list of providers must contain a notice regarding the availability of the listed primary care physicians. Such notice must be in not less than twelve-point type and be placed in a prominent place on the list of providers. The notice must contain the following or similar language:

Enrolling in [name of health maintenance organization] does not guarantee services by a particular provider on this list. If you wish to receive care from specific providers listed, you should contact those providers to be sure that they are accepting additional patients for [name of health maintenance organization].

2.Description of the services area. A health maintenance organization shall provide its subscribers with a description of its service area no later than the time of enrollment or the time the group or individual contract and evidence of coverage is issued and upon request thereafter. If the description of the service area is changed, the health maintenance organization shall provide at such time a new description of the service area to its subscribers.

3.Copayments and deductibles. A health maintenance organization may require copayments or deductibles of enrollees as a condition for the receipt of specific health care services.

Copayments for basic health care services must be shown in the group or individual contract and evidence of coverage as a specified dollar amount. Copayments and deductibles must be the only allowable charge, other than premiums, assessed to subscribers for basic, supplemental, and nonbasic health care services.

4.Grievance procedure.

a.A grievance procedure must be established and maintained by a health maintenance organization to provide reasonable procedures for the prompt and effective resolution of written grievances.

b.A health maintenance organization shall provide grievance forms to be given to enrollees who wish to register written grievances. Such forms must include the address and telephone number to which grievances must be directed and must also specify any required time limits imposed by the health maintenance organization.

c.The grievance procedure must provide for written acknowledgment of grievances and grievances to be resolved or to have a final determination of the grievance by the health maintenance organization within a reasonable period of time, but not more than ninety days from the date the grievance is received. This period may be extended in the event of a delay in obtaining the documents or records necessary for the resolution of the grievance, or by the mutual written agreement of the health maintenance organization and the enrollee.

d.Prior to the resolution of a grievance filed by a subscriber or enrollee, coverage may not be terminated for any reason which is the subject of the written grievance, except if the health maintenance organization has, in good faith, made a reasonable effort to resolve the written grievance through its grievance procedure and coverage is being terminated as provided for in subsection 8 of section 45-06-07-04.

e.If enrollee's grievances may be resolved through a specified arbitration agreement, the enrollee must be advised in writing of the enrollee's rights and duties under the agreement at the time the grievance is registered. Any such agreement must be accompanied by a statement setting forth in writing the terms and conditions of binding arbitration. Any health maintenance organization that makes such binding arbitration a condition of enrollment must fully disclose this requirement to its enrollees in the group or individual contract and evidence of coverage.

N.D. Admin. Code 45-06-07-08 Penalties

Any violation of this chapter is subject to the penalties as provided for in North Dakota Century Code title 26.1 and any other applicable law of this state.

N.D. Admin. Code 45-06-07-09 Severability

If any provision of this chapter or the application thereof to any person or circumstances is for any reason held to be invalid, the remainder of the chapter and the application for such provision to other persons or circumstances is not affected thereby.

N.D. Admin. Code 45-06-07-10 Producer compliance

Any health maintenance organization producer under this chapter is subject to the requirements and provisions of North Dakota Century Code chapter 26.1-26.

History

• History: Effective July 1, 1998.
• General Authority: NDCC 26.1-18.1-16
• Law Implemented: NDCC 26.1-18.1-16

Chapter 45-06-08 Loss Ratios

N.D. Admin. Code 45-06-08-01 Scope

These rules apply to all policies providing hospital, surgical, medical, or major medical benefits, including major medical, hospital/surgical, medical expense, and surgical expense policies. This rule does not apply to any contract or plan of insurance that provides exclusively for accident, disability income insurance, specified disease, hospital confinement indemnity, or other limited benefit health insurance.

History

• History: Effective July 1, 1994; amended effective March 1, 2004.

N.D. Admin. Code 45-06-08-02 Mandated loss ratios - Factors to be considered

Mandated loss ratio benefits under the policies specified in section 45-06-08-01 must return benefits to group policyholders in the aggregate of not less than seventy percent of premium received and to individual policyholders in the aggregate of not less than fifty-five percent of premium received.

Association group business which is marketed to individuals and individually underwritten and issued is considered individual coverage for loss ratio purposes. These minimum standards must be on the basis of incurred claims experienced and earned premiums for the entire period for which rates are computed to provide coverage in accordance with accepted actuarial principles and practices. In evaluating the experienced loss ratio, due consideration must be given to all relevant factors, including:

1.Statistical credibility of incurred claims experience and earned premiums;

2.The period for which rates are computed to provide coverage;

3.Experienced and projected trends;

4.Concentration of experience within early policy duration;

5.Expected claim fluctuation;

6.Experience refunds, adjustments, or dividends;

7.Renewability features;

8.Interest; and

9.Policy reserves.

History

• History: Effective July 1, 1994; amended effective March 1, 2004; January 1, 2008.

N.D. Admin. Code 45-06-08-03 Compliance

The requirements of this chapter apply to policies issued after January 1, 1994.

History

• History: Effective July 1, 1994.

Chapter 45-06-09 Group Health Insurance Purchasing Cooperatives

N.D. Admin. Code 45-06-09-01 Purpose and intent

The purpose of this chapter is to further improve the fairness, efficiency, and competition in the pricing and delivering of health care and health care coverage. It does so by allowing for the establishment of joint purchasing entities (purchasing cooperatives) through which eligible small employers can purchase health coverage for their employees.

N.D. Admin. Code 45-06-09-02 Applicability and scope

This chapter applies to all health insurance purchasing cooperatives operating in this state or providing coverage to North Dakota residents. Health purchasing cooperatives are subject to the small employer employee health insurance coverage requirements contained in North Dakota Century Code

chapter 26.1-36.3. This chapter does not apply to any other health insurance or health care buying or marketing mechanism otherwise permitted by law.

N.D. Admin. Code 45-06-09-03 Definitions

1."Business plan" means the plan of operation of the health insurance purchasing cooperative.

2."Commissioner" means the insurance commissioner.

3."Group" means a collection of small employers subject to the requirements of North Dakota Century Code chapter 26.1-36.3 who elect to join together to form a group health insurance purchasing cooperative. It does not include an industrywide trade association meeting the exemption requirements outlined in subsection 15 of North Dakota Century Code section 26.1-36.3-07 or any other insurance purchasing group arrangements in existence prior to August 1, 1994.

4."Health insurance purchasing cooperative" means a group of small employers who join together to purchase health insurance.

History

• History: Effective August 1, 1994; amended effective April 1, 2010.

N.D. Admin. Code 45-06-09-04 Commissioner duties - Filing requirements - Audits and examinations

1.The commissioner has the authority to regulate the establishment and conduct of health insurance purchasing cooperatives as set forth in this chapter.

2.The commissioner has the authority to conduct financial and performance audits on health insurance purchasing cooperatives operating in the state. The costs of such audits shall be the responsibility of the purchasing cooperative.

3.Each health insurance purchasing cooperative doing business in the state shall file with the commissioner the following information or documents:

a.A business plan for approval by the commissioner.

b.Annual reports identifying the number of individuals insured through the cooperative, the names of insurance companies providing coverage to cooperative members and rates charged for insurance policies provided through the cooperative, and any proposed changes in the business plan of the cooperative. 4.a.A health insurance purchasing cooperative may not enter the marketplace until the commissioner has approved the business plan.

b.Any material changes to the business plan must be submitted to the commissioner for approval prior to implementation.

N.D. Admin. Code 45-06-09-05 Business plan

A health insurance purchasing cooperative shall submit a business plan for review and approval by the commissioner. The business plan must include the following information:

1.The specific steps by the health insurance purchasing cooperative to advance cost control, quality improvement, and improved access to health insurance and health care services.

2.The scope of health insurance purchasing cooperative services to be offered in the service territory and the resources and expertise to be used to implement and administer the plan.

3.The corporate chart, bylaws, and other business operation documents of the health insurance purchasing cooperative.

4.A list of officers and directors of the health insurance purchasing cooperative and the contract administrator if one is employed.

5.Evidence of adequate security and prudence in the accounting, deposit, collection, handling, and transfer of moneys.

6.Any other information required by the commissioner to verify the purchasing group is qualified to administer the benefit plan.

N.D. Admin. Code 45-06-09-06 Conflict of interest

1.Health care providers or insurers offering competing products within the same service territory may not participate in a health insurance purchasing cooperative as a sponsor or administrator.

2.A health insurance purchasing cooperative sponsor or administrator may not be an employee or a subsidiary of a health care provider or insurer offering competing products within the same service territory.

3.The employees of a health care provider or insurer may receive services through a health insurance purchasing cooperative. The employer may vote in corporate governance elections for officers and directors. A health care provider, insurer, or an employee of a health care provider or insurer may not serve as an officer or director of a health insurance purchasing cooperative.

N.D. Admin. Code 45-06-09-07 Insurance risk

Repealed effective April 1, 2010.

N.D. Admin. Code 45-06-09-08 Bonding protection

Health insurance cooperatives collecting premiums shall provide bonding coverage for cooperative employees handling funds. Evidence of bond coverage sufficient to cover the volume of premium collected by the purchasing cooperative must be filed with the annual report required under subdivision b of subsection 3 of section 45-06-09-04.

Chapter 45-06-10 Utilization Review

N.D. Admin. Code 45-06-10-01 Definition

For purposes of this chapter "licensed practitioner" includes dentist, chiropractor, psychologist, and optometrist.

History

• History: Effective September 1, 1994.
• General Authority: NDCC 26.1-01-08, 28-32-02
• Law Implemented: NDCC 26.1-26.4-04

N.D. Admin. Code 45-06-10-02 Subsequent determination after initial appeal

1.After an initial appeal to reverse a determination regarding hospital, medical, or other health care services is unsuccessful, a subsequent determination which may result in denial of third-party reimbursement or denial of precertification for service must include the evaluation, findings, and concurrence of a physician or licensed practitioner trained in the relevant specialty to make a final determination that care provided or to be provided was, is, or may be medically inappropriate.

2.A physician or licensed practitioner must hold a valid, current professional license issued by an appropriate professional board.

3.Compensation of a physician or licensed practitioner giving an opinion in regard to any determination under subsection 1 may not be dependent in any way upon the result of the final determination.

History

• History: Effective September 1, 1994.
• General Authority: NDCC 26.1-01-08, 28-32-02
• Law Implemented: NDCC 26.1-26.4-04

Chapter 45-06-11 Regulation on the Crediting of Qualifying Previous Coverage toward the Reduction of Preexisting Condition Exclusion Periods

N.D. Admin. Code 45-06-11-01 Definitions

As used in this chapter:

1."Enrollment date" means the first day of coverage or, if there is a waiting period, the first day of the waiting period.

2."First day of coverage" means, in the case of an individual covered for benefits under a group health plan in the group market, the first day of coverage under the plan and, in the case of an individual covered by health insurance coverage in the individual market, the first day of coverage under the policy.

3."Health carrier" means any entity that provides health insurance in this state. For purposes of this chapter, "health carrier" includes an insurance company, a prepaid limited health services corporation, a fraternal benefits society, a health maintenance organization, a nonprofit health services corporation, and any other entity providing a plan of health insurance or health benefits subject to state insurance regulation.

4."Late enrollee" means an individual whose enrollment in a plan is a late enrollment.

5."Late enrollment" means enrollment under a group health plan other than on the earliest date on which coverage can become effective under the terms of the plan, or a special enrollment date for the individual. If an individual ceases to be eligible for coverage under the plan by terminating employment, and then subsequently becomes eligible for coverage under the plan by resuming employment, only eligibility during the individual's most recent period of employment is taken into account in determining whether the individual is a late enrollee under the plan with respect to the most recent period of coverage. Similar rules apply if an individual again becomes eligible for coverage following a suspension of coverage that applied generally under the plan.

6."Preexisting condition exclusion" means a limitation or exclusion of benefits relating to a condition based on the fact that the condition was present before the effective date of coverage, whether or not any medical advice, diagnosis, care, or treatment was recommended or received before such date.

7."Waiting period" means the period that must pass before an employee or dependent is eligible to enroll under the terms of a group health plan. If an employee or dependent enrolls as a late enrollee or on a special enrollment date, any period before such late or special enrollment is not a waiting period. If an individual seeks and obtains coverage in the individual market, any period after the date the individual files a substantially complete application for coverage and before the first day of coverage is a waiting period.

N.D. Admin. Code 45-06-11-02 Methods of crediting coverage

1.Any health carrier offering health insurance in this state must reduce any time period applicable to a preexisting condition exclusion or limitation period by the aggregate of periods the individual was covered by qualifying previous coverage, if any, if the qualifying previous coverage was continuous until at least sixty-three days prior to the effective date of the new coverage. The health carrier must credit coverage by either a standard or alternative method.

2.A health carrier electing to credit coverage by the standard method shall determine the amount of qualifying previous coverage without regard to the specific benefits covered during the period of qualifying previous coverage.

3.For purposes of reducing the preexisting condition exclusion period under the standard method, a health carrier determines the amount of qualifying previous coverage by counting all the days that the individual has under one or more types of qualifying previous coverage. If an individual is covered by more than one source of qualifying previous coverage on any given day, all the qualifying previous coverage on that day is counted as one day. Days spent in a waiting period for a plan or policy are not days of qualifying previous coverage.

4.Days of qualifying previous coverage occurring before a significant break in coverage are not required to be counted by the plan or issuer in reducing the preexisting condition exclusion. A significant break in coverage means a period of sixty-three consecutive days during all of which the individual was not covered by any qualifying previous coverage. Waiting periods are not taken into account in determining a significant break in coverage.

5.A health carrier offering health insurance in this state may elect to use an alternative method of crediting coverage. In applying the alternative method, coverage may be credited based on coverage of benefits within the following five categories of benefits:

a.Mental health;

b.Substance abuse treatment;

c.Prescription drugs;

d.Dental care; or

e.Vision care.

Any health carrier offering health insurance in this state may use the alternative method for any or all of the five categories and may apply a different preexisting condition exclusion with respect to each category. The qualifying previous coverage determined for a category of benefits applies only for purposes of reducing the preexisting condition exclusion period with respect to that category. For coverage that is not within the above categories, qualifying previous coverage is determined by using the standard method. A health carrier using the alternative method is required to apply it in a uniform manner.

6.Under the alternative method, the health carrier counts qualifying previous coverage within a category if any level of benefits is provided within a category. The health carrier first determines the amount of the individual's qualifying previous coverage that may be counted under the standard method, up to a total of three hundred sixty-five days of the most recent qualifying previous coverage. The period over which this qualifying previous coverage is determined is referred to as the determination period. Then, for the category specified under the alternative method, the health carrier counts within the category all days of coverage that occurred during the determination period, whether or not a significant break in coverage for that category occurs, and reduces the individual's preexisting condition exclusion period for that category by that number of days.

7.A health carrier electing to credit coverage using the alternative method is required to:

a.State prominently that the health carrier is using the alternative method of counting qualifying previous coverage in disclosure statements concerning the health insurance coverage, and state this to each enrollee at the time of enrollment under the coverage; and

b.Include in these statements a description of the effect of using the alternative method, including an identification of the categories used.

8.A health carrier may determine the amount of qualifying previous coverage in any other reasonable manner that is at least as favorable to the individual as long as the issuer applies the method uniformly.

History

• History: Effective December 1, 1997.

N.D. Admin. Code 45-06-11-03 Certification of coverage in the individual market

1.This section applies to all health carriers offering health insurance coverage in the individual market.

2.A certificate of coverage must be provided, without charge, for individuals and dependents, who are or were covered under an individual health insurance policy, for the following:

a.An automatic certificate must be provided within a reasonable period of time after the individual ceases to be covered under the policy; and

b.A certificate of coverage must be provided upon request if the request is made, by or on behalf of an individual, within twenty-four months after coverage ends.

c.A certificate of coverage issued under this section must be provided in writing. However, a written certificate is not required if:

(1)The individual is entitled to receive a certificate of coverage;

(2)The individual requests that the certificate be sent to another plan or health carrier instead of to the individual;

(3)The plan or health carrier agrees to accept the information through means other than a written certificate; and (4)The plan or health carrier receives the certification within a reasonable time.

d.A certificate of coverage issued under this section must include the following information in a form similar to that shown in appendix A:

(1)The date on which the certificate is issued;

(2)The name of the individual or dependent to whom the certificate applies and any other information necessary to identify the individual;

(3)The name, address, and telephone number of the issuer of the certificate;

(4)A telephone number to call for further information;

(5)The date the qualifying previous coverage ended, unless the certificate indicates that the qualifying previous coverage is continuing as of the date of the certificate; and (6)Either one of the following statements:

(a)A statement that the individual has at least eighteen months of qualifying previous coverage; or (b)Both the date the individual first sought coverage, as evidenced by a substantially complete application, and the date qualifying previous coverage began.

e.If an automatic certificate is provided under this section, the period that must be included on the certificate is the last period of continuous qualifying previous coverage ending on the date coverage ceased.

f.If an individual requests a certificate under this section, a certificate must be provided for each period of continuous qualifying previous coverage ending within the twenty-four-month period ending on the date of the request. A separate certificate may be provided for each such period of continuous qualifying previous coverage.

g.A health carrier may provide a single certificate for both an individual and the individual's dependents if it provides all the required information for each individual and dependent, and separately states the information that is not identical.

h.The certificate is required to be provided, without charge, to each individual described in this section or an entity requesting the certificate on behalf of the individual. The certificate may be provided by first-class mail. If the certificate or certificates are provided to the individual and the individual's spouse at the individual's last-known address, the requirements of this section are satisfied with resect to all individuals residing and dependents at that address. If the dependent's last-known address is different than the individual's last-known address, a separate certificate is required to be provided to the dependent at the dependent's last-known address.

i.A health carrier must establish a procedure for individuals to request and receive certificates under this section.

j.If an automatic certificate is required to be provided under this section, and the individual entitled to receive the certificate designates another individual or entity to receive the certificate, the health carrier responsible for providing the certificate is permitted to provide the certificate to the designated party.

k.If a certificate is required to be provided upon request under this section and the individual entitled to receive the certificate designates another individual or entity to receive the certificate, the health carrier responsible for providing the certificate is required to provide the certificate to the designated party.

l.A health carrier is required to use reasonable efforts to determine any information needed for a certificate relating to the dependent coverage. In any case in which an automatic certificate is required to be furnished with respect to a dependent under this

section, no individual certificate is required to be furnished until the health carrier knows, or making reasonable efforts should know, of the dependent's cessation of coverage under the plan.

m.If a certificate furnished by a health carrier does not provide the name of any dependent of an individual covered by the certificate, the individual may, if necessary, use the procedures described in this section for demonstrating dependent status. In addition, an individual may, if necessary, use these procedures to demonstrate that a child was enrolled within thirty days of birth, adoption, or placement for adoption.

n.A health carrier that cannot provide the names of dependents, or related coverage information, for purposes of providing a certificate of coverage for a dependent may satisfy the requirements of this section by providing the name of the participant covered by the health carrier and specifying that the type of coverage described in the certificate is for dependent coverage. This subdivision is in effect through June 30, 1998.

o.For purposes of certificates provided at the request of, or on behalf of, an individual in this section, a health carrier must make reasonable efforts to obtain and provide the names of any dependent covered by the certificate if such information is requested to be provided. If the certificate does not include the name of any dependent of an individual covered by the certificate, the individual may, if necessary, use the procedures described in this section for submitting documentation to establish that the qualifying previous coverage in the certificate applies to the dependent.

p.A health carrier providing an automatic certificate that does not contain the name of a dependent must furnish a certificate within twenty-one days after the individual ceases to be covered under the policy.

q.If an individual enrolls in a group health benefit plan with respect to which the plan or health carrier uses the alternative method of counting qualifying previous coverage described in this section, the individual provides a certificate of coverage under this

section, and the plan or health carrier in which the individual enrolls so requests, the entity that issued the certificate, the "prior entity", is required to disclose promptly to a requesting plan or health carrier, the "requesting entity", the information set forth in this

section. The prior entity furnishing the information under this subsection may charge the requesting entity for the reasonable cost of disclosing such information.

r.Every health carrier must allow individuals to establish qualifying previous coverage by means other than a certificate. The health carrier is required to take into account all information that it obtains or that is presented on behalf of an individual in making its determination, based on the relevant facts and circumstances, whether the individual has qualifying previous coverage and is entitled to offset all or a portion of any preexisting condition exclusion period. The health carrier shall treat the individual as having provided a certificate if the individual attests to the period of qualifying previous coverage, presents relevant corroborating evidence, and cooperates with the plan or health carrier's efforts to verify the coverage. While a health carrier may refuse to credit coverage if the individual fails to cooperate with efforts to verify coverage, the health carrier may not consider an individual's inability to obtain a certificate as evidence of the absence of qualifying previous coverage.

N.D. Admin. Code 45-06-11-04 Certification of coverage in the group market

1.A health carrier offering group health insurance coverage under a group health benefit plan is required to provide certificates of qualifying previous coverage in accordance with this section.

2.Any entity required to provide a certificate under this section for an individual is deemed to have satisfied the requirements of this section for that individual if another party provides the certificate, but only to the extent the information related to the individual's qualifying previous coverage and waiting period is provided by the other party.

3.A health carrier is not required to provide information regarding coverage provided to an individual by another party.

4.If an individual's coverage under a health carrier's policy ceases before an individual's coverage under the plan ceases, the health carrier is required to provide sufficient information to the plan to enable a certificate to be provided by the plan, after cessation of the individual's coverage under the plan, that reflects the period of coverage under the policy.

5.A certificate of coverage must be provided, without charge, for individuals and dependents, who are or were covered under a group health insurance policy, for the following:

a.An automatic certificate must be provided in the following circumstances:

(1)In the case of an individual who is a qualified beneficiary entitled to elect Consolidated Omnibus Budget Reconciliation Act [Pub. L. 99-272; 100 Stat. 82] continuation coverage, an automatic certificate is required to be provided at the time the individual would lose coverage under the plan in the absence of Consolidated Omnibus Budget Reconciliation Act continuation coverage or alternative coverage elected instead of Consolidated Omnibus Budget Reconciliation Act continuation coverage.

(2)In the case of an individual who is not a qualified beneficiary entitled to elect Consolidated Omnibus Budget Reconciliation Act continuation coverage, an automatic certificate is required to be provided at the time the individual ceases to be covered under the plan. A health carrier satisfies this requirement if it provides the certificate within a reasonable time period after the individual ceases to be covered under the plan. In the case of an individual who is entitled to elect continuation coverage under North Dakota Century Code section 26.1-36-23 or 26.1-36-23.1, an automatic certificate is required to be furnished no later than thirty-one days after the individual ceases to be covered under the plan.

(3)In the case of an individual who has elected Consolidated Omnibus Budget Reconciliation Act continuation coverage, an automatic certificate must be provided at the time the individual's coverage under the plan ceases. The health carrier satisfies this requirement if it provides the automatic certificate within a reasonable time after coverage ceases. An automatic certificate is required to be provided to an individual regardless of whether the individual has previously received an automatic certificate.

b.A certificate of coverage must be provided upon request if the request is made, by or on behalf of an individual, within twenty-four months after coverage ends.

6.A certificate of coverage issued pursuant to this section must be provided in writing. However, a written certificate is not required if:

a.The individual is entitled to receive a certificate of coverage;

b.The individual requests that the certificate be sent to another plan or health carrier instead of to the individual;

c.The plan or health carrier agrees to accept the information through means other than a written certificate; and

d.The plan or health carrier receives the certification within a reasonable time.

7.A certificate of coverage issued under this section must include the following information in a form similar to that shown in appendix B:

a.The date on which the certificate is issued;

b.The name of the individual or dependent to whom the certificate applies and any other information necessary to identify the individual;

c.The name, address, and telephone number of the issuer of the certificate;

d.A telephone number to call for further information;

e.The date qualifying previous coverage ended, unless the certificate indicates the qualifying previous coverage is continuing as of the date of the certificate; and

f.Either:

(1)A statement that the individual has at least eighteen months of qualifying previous coverage; or (2)The date any waiting period began and the date qualifying previous coverage began.

8.If an automatic certificate is provided under this section, the period that must be included on the certificate is the last period of continuous qualifying previous coverage ending on the date coverage ended.

9.If an individual requests a certificate under this section, a certificate must be provided for each period of continuous qualifying previous coverage ending within the twenty-four-month period ending on the date of the request. A separate certificate may be provided for each such period of continuous qualifying previous coverage.

10.A certificate may provide information with respect to both a participant and the participant's dependents if the information is identical for each individual or, if the information is not identical, certificates may be provided on one form if the form provides all the required information for each individual and separately states the information that is not identical.

11.The certificate is required to be provided to each individual described in this section or an entity requesting the certificate on behalf of the individual. The certificate may be provided by first-class mail. If the certificate or certificates are provided to the participant and the participant's spouse at the participant's last-known address, the requirements of this section are satisfied with respect to all individuals residing at that address. If the dependent's last-known address is different than the participant's last-known address, a separate certificate is required to be provided to the dependent at the dependent's last-known address.

12.A health carrier must establish a procedure for individuals to request and receive certificates under this section.

13.If an automatic certificate is required to be provided under this section, and the individual entitled to receive the certificate designates another individual or entity to receive the certificate, the health carrier responsible for providing the certificate is permitted to provide the certificate to the designated party.

14.If a certificate is required to be provided upon request under this section and the individual entitled to receive the certificate designates another individual or entity to receive the certificate, the health carrier responsible for providing the certificate is required to provide the certificate to the designated party.

15.A health carrier is required to use reasonable efforts to determine any information needed for a certificate relating to the dependent coverage. In any case in which an automatic certificate is required to be furnished with respect to a dependent under this section, no individual certificate is required to be furnished until the health carrier knows, or making reasonable efforts should know, of the dependent's cessation of coverage under the plan.

16.If a certificate furnished by a health carrier does not provide the name of any dependent of an individual covered by the certificate, the individual may, if necessary, use the procedures described in this section for demonstrating dependent status. In addition, an individual may, if necessary, use these procedures to demonstrate that a child was enrolled within thirty days of birth, adoption, or placement for adoption.

17.A health carrier that cannot provide the names of dependents, or related coverage information, for purposes of providing a certificate of coverage for a dependent may satisfy the requirements of this section by providing the name of the participant covered by the health carrier and specifying that the type of coverage described in the certificate is for dependent coverage. This subsection is in effect through June 30, 1998.

18.For purposes of certificates provided on the request of, or on behalf of, an individual in this

section, a health carrier must make reasonable efforts to obtain and provide the names of any dependent covered by the certificate when such information is requested to be provided. If the certificate does not include the name of any dependent of an individual covered by the certificate, the individual may, if necessary, use the procedures described in this section for submitting documentation to establish that the qualifying previous coverage in the certificate applies to the dependent.

19.Issuers of group and individual health insurance are required to provide certificates of any qualifying previous coverage they provide in the group or individual health insurance market even if the coverage is provided in connection with an entity or program that is not itself required to provide a certificate because it is not subject to the group market provisions.

20.If an individual enrolls in a group health benefit plan with respect to which the plan or health carrier uses the alternative method of counting qualifying previous coverage described in this

section, the individual provides a certificate of coverage under this section, and the plan or health carrier in which the individual enrolls so requests, the entity that issued the certificate, the "prior entity", is required to disclose promptly to a requesting plan or health carrier, the "requesting entity", the information set forth in this section. The prior entity furnishing the information under this subsection may charge the requesting entity for the reasonable cost of disclosing such information.

21.Every health carrier must allow individuals to establish qualifying previous coverage by means other than a certificate. The health carrier is required to take into account all information that it obtains or that is presented on behalf of an individual in making its determination, based on the relevant facts and circumstances, whether the individual has qualifying previous coverage and is entitled to offset all or a portion of any preexisting condition exclusion period. The health carrier shall treat the individual as having provided a certificate if the individual attests to the period of qualifying previous coverage, presents relevant corroborating evidence, and cooperates with the plan or health carrier's efforts to verify the coverage. While a health carrier may refuse to credit coverage where the individual fails to cooperate with efforts to verify coverage, the health carrier may not consider an individual's inability to obtain a certificate as evidence of the absence of qualifying previous coverage.

22.Every health carrier offering health insurance on a group basis using the alternative method of crediting coverage is required to allow an individual to demonstrate categories of qualifying previous coverage in a fashion similar to that outlined in subsection 21. Likewise, a health carrier offering health insurance on a group basis must allow an individual to demonstrate dependent status in a fashion similar to that outlined in subsection 21.

N.D. Admin. Code 45-06-11-05 Notification of qualifying previous coverage and preexisting condition exclusion period

1.A health carrier is required, within a reasonable time, to make a determination regarding the individual's qualifying previous coverage and notify the individual of the determination in accordance with this section.

2.A health carrier seeking to impose a preexisting condition exclusion is required to disclose to the individual in writing its determination of any preexisting condition exclusion period that applies to the individual and the basis for such determination, including the source and substance of any information on which the health carrier relied. In addition, the health carrier is required to provide the individual with a written explanation of any appeal procedures established by the issuer and with a reasonable opportunity to submit additional evidence of coverage. Nothing in this section prevents a health carrier from modifying an initial determination qualifying previous coverage if it determines that the individual did not have the claimed qualifying previous coverage, provided that:

a.A notice of reconsideration is provided to the individual; and

b.Until the final determination is made, the health carrier, for purposes of approving access to medical services, acts in a manner consistent with the initial determination.

APPENDIX A

CERTIFICATE OF INDIVIDUAL HEALTH INSURANCE COVERAGE *IMPORTANT--This certificate provides evidence of your prior health coverage. You may need to furnish this certificate if you become eligible under a group health plan that excludes coverage for certain medical conditions that you have before you enroll, if medical advice, diagnosis, care, or treatment was recommended or received for the condition during the six months before your enrollment in the new plan. If you become covered under another group health plan, check with the plan administrator to see if you need to provide this certificate. You may also need this certificate to establish your right to buy coverage for yourself or your family, with no exclusion for previous medical conditions, if you are not covered under a group health plan.

1.Date of this certificate: ______________________________________

2. Name of policyholder: _______________________________________

3. Identification number of policyholder: ___________________________

4.Name of any dependents to which this certificate applies: ________________________________________________________

5.Name, address, and telephone number of issuer responsible for providing this certificate:

6.For further information, call: __________________________________

7.If all individuals identified in lines 2 and 4 have at least 18 months of creditable coverage (disregarding periods of coverage before a 63-day break), check here ____________________and skip lines 8 and 9.

8.Date coverage began: _______________________________________

9.Date that a substantially completed application was received from this policyholder: _______________________________________________

10.Date coverage ended: ____________________________ (or check here if coverage is continuing as of the date of this certificate: _________).

NOTE: Separate certificates will be furnished if information is not identical for the participant and each beneficiary.

APPENDIX B

CERTIFICATE OF GROUP HEALTH PLAN COVERAGE *IMPORTANT--This certificate provides evidence of your prior health coverage. You may need to furnish this certificate if you become eligible under a group health plan that excludes coverage for certain medical conditions that you have before you enroll. This certificate may need to be provided if medical advice, diagnosis, care, or treatment was recommended or received for the condition within the six-month period prior to your enrollment in the new plan. If you become covered under another group health plan, check with the plan administrator to see if you need to provide this certificate. You may also need this certificate to buy, for yourself or your family, an insurance policy that does not exclude coverage for medical conditions that are present before you enroll.

1.Date of this certificate: ________________________________________

2. Name of group health plan: ____________________________________

3.Name of participant: _________________________________________

4.Identification number of participant: ______________________________

5.Name of any dependents to which this certificate applies:

6.Name, address, and telephone number of plan administrator or issuer responsible for providing this certificate: _____________________________________________

7.For further information, call: ____________________________

8.If the individuals identified in line 3 and line 5 have at least 18 months of creditable coverage (disregarding periods of coverage before a 63-day break), check here ____________________and skip lines 9 and 10.

9.Date waiting period or affiliation period (if any) began: _______________

10.Date coverage began: ________________________________________

11.Date coverage ended: ____________________________ (or check here if coverage is continuing as of the date of this certificate: ________).

NOTE: Separate certificates will be furnished if information is not identical for the the participant and each beneficiary.

History

• History: Effective December 1, 1997.

Chapter 45-06-12 Regulation to Implement North Dakota Century Code Chapter 26.1-36.4, Relating to Hospital and Medical Insurance

N.D. Admin. Code 45-06-12-01 Definitions

As used in this chapter and North Dakota Century Code chapter 26.1-36.4:

1."Preexisting condition exclusion" means a limitation or exclusion of benefits relating to a condition based on the fact that the condition was present before the effective date of coverage, whether or not any medical advice, diagnosis, care, or treatment was recommended or received before such date.

2."Waiting period" means, with respect to a health benefit plan, whether offered on a group or individual basis, and an individual who is a potential participant or beneficiary in the plan, the period that must pass with respect to the individual before the individual is eligible to be covered for benefits under the terms of the plan.

N.D. Admin. Code 45-06-12-02 Prohibiting discrimination against participants and beneficiaries based on health status-related factors

1.An insurer offering group health insurance coverage in connection with a group health benefit plan may not establish rules for eligibility, including continued eligibility, of any individual to enroll under the terms of the plan based on a health status-related factor, as defined in subsection 20 of North Dakota Century Code section 26.1-36.3-01.

2.Subsection 1 shall not be construed to:

a.Require an insurer to provide particular benefits other than those provided under the terms of the plan or coverage; or

b.Prevent the insurer from establishing limitations or restrictions on the amount, level, extent, or nature of the benefits or coverage for similarly situated individuals enrolled in the plan or coverage.

3.An insurer offering group health insurance coverage in connection with a group health benefit plan may not require an individual as a condition of enrollment or continued enrollment under the plan to pay a premium or contribution that is greater than the premium or contribution for a similarly situated individual enrolled in the plan based on any health status-related factor, as defined in subsection 20 of North Dakota Century Code section 26.1-36.3-01.

4.Subsection 3 shall not be construed to:

a.Restrict the amount that an employer may be charged by an insurer for coverage under a group health benefit plan; or

b.Prevent the insurer from establishing premium discounts or rebates or modifying otherwise applicable copayments or deductibles in return for adherence for a bona fide wellness program. For purposes of this subsection, a bona fide wellness program is a program of health promotion and disease prevention.

N.D. Admin. Code 45-06-12-03 Special enrollments for certain individuals who lose coverage

1.An insurer offering group health insurance coverage in connection with a group health benefit plan is required to permit employees and dependents described in this section to enroll for coverage under the terms of the plan if the conditions in subsection 4 are satisfied and the enrollment is requested within the period described in subsection 5.

2.An employee is described in this section if:

a.The employee is eligible, but not enrolled, for coverage under the terms of the plan; and

b.When enrollment was previously offered to the employee under the plan and was declined by the employee, the employee was covered under another group health benefit plan or had other health insurance coverage.

3.A dependent is described in this section if:

a.The dependent is a dependent of an employee participating in the plan;

b.The dependent is eligible, but not enrolled, for coverage under the terms of the plan; and

c.When enrollment was previously offered under the plan and was declined, the dependent was covered under another group health benefit plan or had other health insurance coverage.

4.An employee or dependent described above is eligible to enroll during a special enrollment period if each of the following applicable conditions is met:

a.When the employee declined enrollment for the employee or the dependent, the employee stated in writing that coverage under another group health benefit plan or other health insurance coverage was the reason for declining enrollment. This paragraph only applies if:

(1)The plan required such a statement when the employee declined enrollment; and (2)The employee is provided with notice of the requirement to provide the statement in this section, and the consequences of the employee's failure to provide the statement, at the time the employee declined enrollment. b.(1)When the employee declined enrollment for the employee or dependent under the plan, the employee or dependent had Consolidated Omnibus Budget Reconciliation Act [Pub. L. 99-272; 100 Stat. 82] continuation coverage under another plan and Consolidated Omnibus Budget Reconciliation Act continuation coverage under the other plan has since been exhausted; or (2)If the other coverage that applied to the employee or dependent when enrollment was declined was not under a Consolidated Omnibus Budget Reconciliation Act continuation provision, either the other coverage has been terminated as a result of loss of eligibility for the coverage or employer contributions towards the other coverage has been terminated. For this purpose, loss of eligibility for coverage includes a loss of coverage as a result of legal separation, divorce, death, termination of employment, reduction of the number of hours of employment and any loss of eligibility after a period that is measured by reference to any of the foregoing.

5.The employee is required to request enrollment for the employee or the employee's dependent not later than thirty days after the exhaustion of the other coverage described in this section or termination of other coverage has resulted in the loss of eligibility for the other coverage for items described in this section or following the termination of employer contributions toward the other coverage. The plan may impose the same requirements that apply to employees who are otherwise eligible under the plan to immediately request enrollment for coverage.

6.Enrollment is effective not later than the first day of the first calendar month beginning after the date the completed request is received.

N.D. Admin. Code 45-06-12-04 Special enrollment periods for certain dependent beneficiaries

1.A group health benefit plan that makes coverage available with respect to dependents of a participant is required to provide a special enrollment period to permit individuals described in this section to be enrolled for coverage under the terms of the plan if the enrollment is requested within the time period described in subsection 7. The enrollment is effective at the time described in subsection 8. The special enrollment rights under this section apply without regard to the dates on which an individual would otherwise be able to enroll under the plan.

2.An individual is described in this section if:

a.The individual is an employee who is eligible, but not enrolled, in the plan;

b.The individual would be a participant but for a prior election by the individual not to enroll in the plan during a previous enrollment period; and

c.A person becomes a dependent of the individual through marriage, birth, adoption, or placement for adoption.

3.An individual is described in this section if either:

a.The individual becomes the spouse of a participant; or

b.The individual is a spouse of a participant and a child becomes a dependent of a participant through birth, adoption, or placement for adoption.

4.An employee who is eligible, but not enrolled, in the plan, and an individual who is a dependent of such employee, is described in this section if the employee would be a participant but for a prior election by the employee not to enroll in the plan during a previous enrollment period, and either:

a.The employee and the individual become married; or

b.The employee and the individual are married and a child becomes a dependent of the employee through birth, adoption, or placement for adoption.

5.An individual is described in this section if:

a.The individual is a dependent of a participant; and

b.The individual becomes a dependent of such participant through marriage, birth, adoption, or placement for adoption.

6.An employee who is eligible, but not enrolled, in the plan, and an individual who is a dependent of such employee, is described in this section if:

a.The employee would be a participant but for a prior election by the employee not to enroll in the plan during a previous enrollment period; and

b.The dependent becomes a dependent of the employee through marriage, birth, adoption, or placement for adoption.

7.The special enrollment period under this section is a period of not less than thirty days and begins on the date of marriage, birth, adoption, or placement for adoption. The period does not begin earlier than the date the plan makes dependent coverage generally available.

8.Enrollment is effective:

a.In the case of marriage, not later than the first day of the first calendar month beginning after the date the completed request for enrollment is received by the plan;

b.In the case of a dependent's birth, the date of such birth; and

c.In the case of a dependent's adoption or placement for adoption, the date of such adoption or placement for adoption.

N.D. Admin. Code 45-06-12-05 Notice of enrollment rights

On or before the time an employee is offered the opportunity to enroll in a group health benefit plan, the plan is required to provided the employee with a description of the plan's special enrollment rules under this chapter. A group health benefit plan using the following model description of the special enrollment rules is deemed to be in compliance with this section:

If you decline enrollment for yourself or your dependents, including your spouse, because of other health insurance coverage, you may in the future be able to enroll yourself or your dependents in this plan, provided that you request enrollment within thirty days after your other coverage ends. In addition, if you have a new dependent as a result of marriage, birth, adoption, or placement for adoption, you may be able to enroll yourself or your dependents, provided that you request enrollment within thirty days after the marriage, birth, adoption, or placement for adoption.

N.D. Admin. Code 45-06-12-06 Conformance with the Health Insurance Portability and Accountability Act of 1996

This chapter, as well as North Dakota Century Code chapter 26.1-36.4, will be interpreted by the commissioner to conform with the requirements of the Health Insurance Portability and Accountability Act of 1996 [Pub. L. 104-191; 110 Stat. 1936; 29 U.S.C. 1181 et seq.].

Chapter 45-06-13 Provider-Sponsored Organizations

N.D. Admin. Code 45-06-13-01 Definitions

1."Commissioner" means the insurance commissioner of North Dakota.

2."Department" means the North Dakota insurance department.

3."Health care services" means the following medically necessary services: preventive care, emergency care, inpatient and outpatient hospital and physician care, diagnostic laboratory, and diagnostic and therapeutic radiological services.

4."Medicare+choice program" means the criteria developed by the Balanced Budget Act of 1997 [Pub. L. 105-33; 111 Stat. 312; 42 U.S.C. 1345 et seq.], whereby risk-bearing organizations are permitted to offer health insurance or health benefits coverage to Medicare-eligible enrollees through a Medicare+choice plan.

5."Provider" means any physician, hospital, or other person licensed or otherwise authorized to furnish health care services.

6."Provider-sponsored organization" means a public or private entity that:

a.Is established or organized, and operated, by a health care provider, or group of affiliated health care providers;

b.Provides a substantial proportion of the health care items and services under the Medicare+choice program directly through the provider or affiliated group of providers; and

c.With respect to which the affiliated providers share, directly or indirectly, substantial financial risk with respect to the provision of such items and services and have at least a majority financial interest in the entity.

N.D. Admin. Code 45-06-13-02 General

The commissioner shall issue a certificate of authority for the purpose of providing health care to Medicare enrollees only to a provider-sponsored organization that meets each requirement for the issuance of a certificate of authority as a health maintenance organization as in North Dakota Century Code chapter 26.1-18.1 and other applicable insurance laws and regulations of this state except when preempted by federal law.

N.D. Admin. Code 45-06-13-03 Action

The department shall take action on an application required in section 45-06-13-02 within ninety days of the date of receipt of a substantially complete application.

N.D. Admin. Code 45-06-13-04 Minimum net worth requirements

Prior to the issuance of a certificate of authority, a provider-sponsored organization must have a minimum net worth amount of:

1.At least one million five hundred thousand dollars except as provided in subsection 2.

2.No less than one million dollars based on evidence from the organization's financial plan demonstrating to the department's satisfaction that the organization has available to it an administrative infrastructure that the department considers appropriate to reduce, control, or eliminate startup administrative costs.

a.After the effective date of a provider-sponsored organization's certificate of authority, a provider-sponsored organization shall maintain a minimum net worth amount equal to the greater of:

(1)One million dollars;

(2)Two percent of annual premium revenues as reported on the most recent annual financial statement filed with the department for up to and including the first one hundred fifty million dollars of annual premiums and one percent of annual premium revenues on premiums in excess of one hundred fifty million dollars;

(3)An amount equal to the sum of three months of uncovered health care expenditures as reported on the most recent financial statement filed with the department; or (4)Using the most recent annual financial statement filed with the department, an amount equal to the sum of:

(a)Eight percent of annual health care expenditures paid on a noncapitated basis to nonaffiliated providers;

(b)Four percent of annual health care expenditures paid on a capitated basis to nonaffiliated providers plus annual health care expenditures paid on a noncapitated basis to affiliated providers; and (c)Annual health care expenditures that are paid on a capitated basis to affiliated providers are not included in the calculation of the net worth requirement under subsection 1 and this paragraph.

b.The minimum net worth amount shall be calculated as follows:

(1)Cash requirement:

(a)At the time of the application for a certificate of authority, the provider-sponsored organization shall maintain at least seven hundred fifty thousand dollars of the minimum net worth amount in cash or cash equivalents.

(b)After the effective date of a provider-sponsored organization's certificate of

authority, a provider-sponsored organization shall maintain the greater of seven hundred fifty thousand dollars or forty percent of the minimum net worth amount in cash or cash equivalents.

(2)Intangible assets. An organization may include intangible assets, the value of which is based on generally accepted accounting principles, in the minimum net worth amount calculation subject to the following limitations:

(a)At the time of application: [1]Up to twenty percent of the minimum net worth amount, provided at least one million dollars of the minimum net worth amount is met through cash or cash equivalents; or [2]Up to ten percent of the minimum net worth amount, if less than one million dollars of the minimum net worth is met through cash or cash equivalents, or if the department has used its discretion under this subsection.

(b)From the effective date of the provider-sponsored organization's certificate of

authority: [1]Up to twenty percent of the minimum net worth amount if the greater of one million dollars or sixty-seven percent of the minimum net worth is met by cash or cash equivalents; or [2]Up to ten percent of the minimum net worth amount if the greater of one million dollars or sixty-seven percent of the minimum net worth amount is not met by cash or cash equivalents.

(3)Health care delivery assets. Subject to the other provisions of this section, a provider-sponsored organization may apply one hundred percent of the generally accepted accounting principles depreciated value of health care delivery assets to satisfy the minimum net worth amount.

(4)Other assets. A provider-sponsored organization may apply other assets not used in the delivery care provided that those assets are valued according to statutory accounting practices as defined by the department.

(5)Subordinated debts and subordinated liabilities. Fully subordinated debt and subordinated liabilities are excluded from the minimum net worth amount calculation.

(6)Deferred acquisition costs. Deferred acquisition costs are excluded from the calculation of the minimum net worth amount.

N.D. Admin. Code 45-06-13-05 Financial plan requirements

1.General rule. At the time of application under section 45-06-13-03, an applicant must submit a financial plan acceptable to the department.

2.A financial plan must include:

a.A detailed marketing plan;

b.Statements of revenue and expense on an accrual basis;

c.Statements of sources and uses of funds;

d.Balance sheets;

e.Detailed justifications and assumptions in support of the financial plan including, when appropriate, certification of reserves and actuarial liabilities by a qualified health maintenance organization actuary; and

f.If applicable, statements of the availability of financial resources to meet projected losses.

3.Period covered by the plan. A financial plan shall:

a.Cover the first twelve months after the estimated effective date of a provider-sponsored organization's Medicare+choice contract; or

b.If the provider-sponsored organization is projecting losses, cover twelve months beyond the end of the period for which losses are projected.

4.Funding for projected losses. Except for the use of guarantees, letters of credit, and other means as provided in section 45-06-13-08, an organization shall have the resources for meeting projected losses on its balance sheet in cash or a form that is convertible to cash in a timely manner, in accordance with the provider-sponsored organization's financial plan.

5.Guarantees and projected losses. Guarantees will be an acceptable resource to fund projected losses, provided that a provider-sponsored organization:

a.Meets the department's requirements for guarantors and guarantee documents as specified in section 45-06-13-08; and

b.Obtains from the guarantor cash or cash equivalents to fund the projected losses timely, as follows:

(1)Prior to the effective date of a provider-sponsored organization's Medicare+choice contract, the amount of the projected losses for the first two quarters;

(2)During the first quarter and prior to the beginning of the second quarter of a provider-sponsored organization's Medicare+choice contract, the amount of projected losses through the end of the third quarter; and (3)During the second quarter and prior to the beginning of the third quarter of a provider-sponsored organization's Medicare+choice contract, the amount of projected losses through the end of the fourth quarter.

c.If the guarantor complies with the requirements in subdivision b, the provider-sponsored organization, in the third quarter, may notify the department of its intent to reduce the period of advance funding of projected losses. The department shall notify the provider-sponsored organization within sixty days of receiving the provider-sponsored organization's request if the requested reduction in the period of advance funding will not be accepted.

d.If the guarantee requirements in subdivision b are not met, the department may take appropriate action, such as requiring funding of projected losses through means other than a guarantee. The department retains discretion to require other methods or timing of funding, considering factors such as the financial condition of the guarantor and the accuracy of the financial plan.

6.Letters of credit. Letters of credit are an acceptable resource to fund projected losses, provided they are irrevocable, unconditional, and satisfactory to the department. They shall be capable of being promptly paid upon presentation of a sight draft under the letters of credit without further reference to any other agreement, document, or entity.

7.Other means. If satisfactory to the department, and for periods beginning one year after the effective date of a provider-sponsored organization's Medicare+choice contract, a provider-sponsored organization may use the following to fund projected losses:

a.Lines of credit from regulated financial institutions;

b.Legally binding agreements for capital contributions; or

c.Legally binding agreements of a similar quality and reliability as permitted in subdivisions a and b.

8.Application of guarantees, letters of credit, or other means of funding projected losses.

Notwithstanding any other provision of this section, a provider-sponsored organization may use guarantees, letters of credit, and, beginning one year after the effective date of a provider-sponsored organization's Medicare+choice contract, other means of funding projected losses, but only in a combination or sequence that the department considers appropriate.

N.D. Admin. Code 45-06-13-06 Liquidity

1.A provider-sponsored organization shall have sufficient cash flow to meet its financial obligations as they become due and payable.

2.To determine whether the provider-sponsored organization meets the requirement in subsection 1, the department will examine the following:

a.The provider-sponsored organization's timelilness in meeting current obligations;

b.The extent to which the provider-sponsored organization's current ratio of assets to liabilities is maintained at a one to one ratio including whether there is a declining trend in the current ratio over time; and

c.The availability of outside financial resources to the provider-sponsored organization.

3.If the department determines that a provider-sponsored organization fails to meet the requirement in subdivision a of subsection 2, the department will require the provider-sponsored organization to initiate corrective action and pay all overdue obligations.

4.If the department determines that a provider-sponsored organization fails to meet the requirement of subdivision b of subsection 2, the department will require the provider-sponsored organization to initiate corrective action to:

a.Change the distribution of its assets;

b.Reduce its liabilities; or

c.Make alternative arrangements to secure additional funding to restore the provider-sponsored organization's current ratio to one to one.

5.If the department determines that a provider-sponsored organization fails to meet the requirement of subdivision c of subsection 2, the department will require the provider-sponsored organization to obtain funding from alternative financial resources.

N.D. Admin. Code 45-06-13-07 Deposits

1.Insolvency deposit.

a.At the time of application, an organization shall deposit one hundred thousand dollars in cash or securities, or any combination thereof, into an account in a manner that is acceptable to the department.

b.The deposit must be restricted to use in the event of insolvency to help assure continuation of services or pay costs associated with receivership or liquidation.

c.At the time of the provider-sponsored organization's application for a certification of

authority, and, thereafter, upon the department's request, a provider-sponsored organization shall provide the department with proof of the insolvency deposit, such proof to be in a form that the department considers appropriate.

2.Uncovered expenditures deposit.

a.If at any time uncovered expenditures exceed ten percent of a provider-sponsored organization's total health care expenditures, then the provider-sponsored organization must place an uncovered expenditures deposit into an account with any organization or trustee that is acceptable to the department.

b.The deposit must at all times have fair market value of an amount that is one hundred twenty percent of the provider-sponsored organization's outstanding liability for uncovered expenditures for enrollees, including incurred, but not reported, claims.

c.The deposit must be calculated as of the first day of each month required and maintained for the remainder of each month required.

d.If a provider-sponsored organization is not otherwise required to file a quarterly report, it must file a report within forty-five days of the end of the calendar quarter with information sufficient to demonstrate compliance with this section.

e.The deposit required under this section is restricted and in trust for the department's use to protect the interests of the provider-sponsored organization's Medicare enrollees and to pay the costs associated with administering the insolvency. It may be used only as provided under this section.

3.Deposit as asset. A provider-sponsored organization may use the deposits required under subsections 1 and 2 to satisfy the provider-sponsored organization's minimum net worth amount required under section 45-06-13-04.

4.Income. All income from the deposits or trust accounts required under subsections 1 and 2 is considered assets of the provider-sponsored organization. Upon the department's approval, the income from the deposits may be withdrawn.

5.Withdrawal. On prior written approval from the department, a provider-sponsored organization that has made a deposit under subsection 1 or 2may withdraw that deposit or any part thereof if:

a.A substitute deposit of cash or securities of equal amount and value is made;

b.The fair market value exceeds the amount of the required deposit; or

c.The required deposit under subsection 1 or 2 is reduced or eliminated.

N.D. Admin. Code 45-06-13-08 Guarantees

1.General policy. A provider-sponsored organization, or the legal entity of which the provider-sponsored organization is a component, may apply to the department to use the financial resources of a guarantor for the purpose of meeting the requirements in section

N.D. Admin. Code 45-06-13-05 The department has the discretion to approve or deny approval of the use of a guarantor

2.Request to use a guarantor. To apply to use the financial resources of a guarantor, a provider-sponsored organization must submit to the department the following material:

a.Documentation that the guarantor meets the requirements for a guarantor under subsection 3; and

b.The guarantor's independently audited financial statements for the current year-to-date and for the two most recent fiscal years. The financial statements must include the guarantor's balance sheets, the profit and loss statements, and cash flow statements.

3.Requirements for guarantor. To serve as a guarantor, an organization must meet the following requirements:

a.Be a legal entity authorized to conduct business within a state of the United States.

b.Not be under federal or state bankruptcy or rehabilitation proceedings.

c.Have a net worth, not including other guarantees, intangibles, and restricted reserves, equal to three times the amount of the provider-sponsored organization guarantee.

d.If the guarantor is regulated by a state insurance commissioner, or other state official with

authority for risk-bearing entities, it must meet the net worth requirement in subdivision c with all guarantees and all investments in and loans to organizations covered by guarantees excluded from its assets.

e.If the guarantor is not regulated by a state insurance commissioner or other similar state official, it must meet the net worth requirement in subdivision c with all guarantees and all investments in and loans to organizations covered by a guarantee and to related parties, subsidiaries, and affiliates excluded from its assets.

4.Guarantee document. If the guarantee request is approved, a provider-sponsored organization must submit to the department a written guarantee document signed by an appropriate authority of the guarantor. The guarantee document must contain the following provisions:

a.State the financial obligation covered by the guarantee;

b.Agree to unconditionally fulfill the financial obligation covered by the guarantee;

c.Agree not to subordinate the guarantee to any other claim on the resources of the guarantor;

d.Declare that the guarantor must act on a timely basis, in any case not more than five business days, to satisfy the financial obligation covered by the guarantee; and

e.Meet other conditions as the department may establish from time to time.

5.Reporting requirement. A provider-sponsored organization shall submit to the department the current internal financial statements and annual financial statements of the guarantor according to the schedule, manner, and form that the department requests.

6.Modification, substitution, and termination of a guarantee. A provider-sponsored organization may not modify, substitute, or terminate a guarantee unless the provider-sponsored organization:

a.Requests the department's approval at least ninety days before the proposed effective date of the modification, substitution, or termination;

b.Demonstrates to the department's satisfaction that the modification, substitution, or termination will not result in insolvency of the provider-sponsored organization; and

c.Demonstrates how the provider-sponsored organization will meet the requirements of this section.

7.Nullification. If at any time the guarantor or the guarantee ceases to meet the requirements of this section, the department shall notify the provider-sponsored organization that it ceases to recognize the guarantee document. In the event of this nullification, a provider-sponsored organization shall:

a.Meet the applicable requirements of this section within fifteen business days; and

b.If required by the department, meet a portion of the applicable requirements in less than the time period granted in subdivision a.

Chapter 45-06-14 Multiple Employer Welfare Arrangements

N.D. Admin. Code 45-06-14-01 Definitions

1."Board" means a multiple employer welfare arrangement's board of trustees.

2."Bylaws" means the statements and organizational documents adopted by a multiple employer welfare arrangement that prescribe its purpose, government, and administration.

3."Commissioner" means the insurance commissioner.

4."Coverage" means the right of a covered person or entity to benefits or indemnification provided directly or indirectly by a multiple employer welfare arrangement, by virtue of the coverage document.

5."Coverage document" means the document specifying the characteristics and duration of coverage provided through a multiple employer welfare arrangement. Characteristics of coverage include the kind of loss or benefit that the multiple employer welfare arrangement will reimburse, subject to specific exclusions, limitations, or deductibles.

6."Days" means calendar days.

7."Employee welfare benefit plan" means an employee welfare benefit plan as defined by 29 U.S.C. section 1002.

8."Financial administrator" means an entity employing persons trained and experienced in money management and investments, and possessing no less than five years' experience as an organization in money management and investments with demonstrated competence.

9."Fully insured" means that for the health care benefits or coverage provided or offered by or through a multiple employer welfare arrangement:

a.An admitted insurer is directly obligated by contract to each participant to provide all of the coverage under the plan or arrangement; and

b.The liability and responsibility of the admitted insurer to provide covered services or to pay benefits is not contingent, and is provided directly to the individual employee, member, or dependent.

10."Fund year" means a multiple employer welfare arrangement's twelve-month fiscal year.

11."Multiple employer welfare arrangement" means a multiple employer welfare arrangement as defined by 29 U.S.C. section 1002.

12."Premium" means the amount charged by the multiple employer welfare arrangement for health coverage. "Premium" does not include assessments or penalties.

13."Professional employer organization" means an arrangement, under contract or otherwise, whereby one business or entity represents that it co-employs or leases workers to another business or entity for an ongoing and extended, rather than a temporary or project-specific, relationship.

14."Runoff multiple employer welfare arrangement" means a multiple employer welfare arrangement that no longer has authority to self-fund but that continues to exist for the

purpose of paying claims, preparing reports, and administering transactions associated with the period when the multiple employer welfare arrangement provided coverage.

15."Self-funded multiple employer welfare arrangement" means a multiple employer welfare arrangement that does not provide for payment of benefits under the arrangement solely through a policy or policies of insurance issued by one or more insurance companies with a certificate of authority under North Dakota Century Code title 26.1.

16."Service company" means an entity licensed under North Dakota Century Code chapter 26.1-27 as an administrator or an entity licensed under North Dakota Century Code title 26.1 as an insurance company, health maintenance organization, or nonprofit health service corporation.

17."Sponsoring association" means a group that sponsors or organizes a multiple employer welfare arrangement. A multiple employer welfare arrangement may have more than one sponsoring association.

18."Surplus" means a multiple employer welfare arrangement's total assets minus total liabilities.

"Surplus" includes paid-in capital and retained earnings. The amount of a multiple employer welfare arrangement's surplus is determined according to the instructions provided for a multiple employer welfare arrangement's financial statements.

N.D. Admin. Code 45-06-14-02 Purpose

This chapter governs the formation, operation, and dissolution of a multiple employer welfare arrangement. The provisions are intended to ensure the financial integrity and the competent and equitable administration of the multiple employer welfare arrangement.

N.D. Admin. Code 45-06-14-03 Scope

This chapter shall apply to all multiple employer welfare arrangements which offer or maintain an employee welfare benefit plan that is not fully insured, to or on behalf of an employer domiciled in this state or to an employer which has its principal headquarters or principal administrative offices in this state and to all service companies that provide services to the employee welfare benefit plan or multiple employer welfare arrangement.

N.D. Admin. Code 45-06-14-04 Bylaws

1.Content. Bylaws may contain any provision that does not conflict with this chapter. Bylaws must, at a minimum, contain the following provisions:

a.The multiple employer welfare arrangement's name, purpose, fiscal year, and initial date of existence;

b.Definitions of key terms;

c.A statement of the powers, duties, and responsibilities assigned to the board, the service company, the financial administrator, and reserved by the membership;

d.The number, term of office, and method of selection and replacement of the members of the board;

e.The procedure for calling board meetings;

f.The method of periodic selection and review of the service company and financial administrator;

g.The procedure for amending the bylaws;

h.The procedure for resolving disputes among members, which must not include submitting disputes to the commissioner;

i.The criteria for membership in the multiple employer welfare arrangement, including standards of financial integrity and loss experience;

j.The procedure for admitting new members to the multiple employer welfare arrangement;

k.The criteria for expelling members from the multiple employer welfare arrangement for reasons, including nonpayment of premiums;

l.The procedure for withdrawal and expulsion of members from the multiple employer welfare arrangement, including the minimum required period of membership;

m.A statement of the coverages to be provided by the multiple employer welfare arrangement;

n.The procedure for including and excluding a member's participation in a particular coverage;

o.The proposed initial premium payments by members and, if applicable, by the members' employees;

p.The procedure for changing premium rates;

q.The procedure for levying and collecting an assessment;

r.A statement identifying those with access to multiple employer welfare arrangement funds and the purposes for which multiple employer welfare arrangement funds may be spent;

s.The procedure for distributing dividends, and the eligibility of past members and past covered employees for dividends; and

t.The procedure for distributing any assets remaining upon the multiple employer welfare arrangement's dissolution.

2.Adoption and changes. The bylaws must be adopted in writing by all initial members.

Authority to change the bylaws must reside with the membership or the board, according to the terms of the bylaws. The multiple employer welfare arrangement must file bylaws changes with the commissioner within thirty days after adoption.

N.D. Admin. Code 45-06-14-05 Board

1.Structure. A multiple employer welfare arrangement must have a board of trustees consisting of at least three persons, who must be officials or employees of the members of the multiple employer welfare arrangement or of the sponsoring association of the multiple employer welfare arrangement. No member may have more than one representative on the board, unless the multiple employer welfare arrangement has only two members, in which case each member must have at least one representative on the board. No trustee may be an employee of, or receive compensation from, the multiple employer welfare arrangement's service company, financial administrator, or insurer. A trustee may be an employee, agent, or representative of the sponsoring association. Trustees shall be elected by the membership or appointed by the sponsoring association. A majority of the trustees must be employees of members and be covered by the benefits provided by the multiple employer welfare arrangement. One trustee shall be designated the chairperson. The board shall meet no less than four times annually.

2.Duties. The board is responsible for operation of the multiple employer welfare arrangement.

The board may delegate some or all of its responsibilities to the chairperson or other trustees between board meetings. All responsibilities of the multiple employer welfare arrangement not expressly delegated by the board or this chapter are the responsibility of the board. The board shall, at a minimum, have the following responsibilities:

a.Exercise fiduciary responsibility for the multiple employer welfare arrangement's operation and financial condition;

b.Select, supervise, and evaluate the service company, financial administrator, accountant, insurer, and any other contractors;

c.On the basis of the multiple employer welfare arrangement's overall financial condition, authorize changes in premium, reserve, or investment practices and declare assessments or dividends as appropriate;

d.Approve all reports concerning the multiple employer welfare arrangement's operations and status and oversee filing of reports with the commissioner;

e.Monitor delinquent premiums, loss experience, and the financial condition of individual members and authorize disciplinary action or expulsion as appropriate;

f.Accept or reject applications for membership;

g.As permitted by the bylaws, make or recommend changes to the bylaws for the improvement of the multiple employer welfare arrangement's operation and financial integrity; and

h.Monitor the multiple employer welfare arrangement's compliance with all statutes and rules governing its operation.

N.D. Admin. Code 45-06-14-06 Application

1.Initial application. A multiple employer welfare arrangement seeking to offer an employee welfare benefit plan that is not fully insured shall apply for a certificate of authority.

Applications must be submitted on forms prescribed by the commissioner. The appropriate filing fee pursuant to North Dakota Century Code section 26.1-01-07 must accompany the application. An application must be submitted no later than sixty days prior to the requested date for authority to self-fund. An incomplete application must be returned to the applicant. An application not returned to the applicant within fourteen days of receipt must be acted upon within sixty days of receipt.

2.Documents which must accompany application. A multiple employer welfare arrangement shall file all of the following with its initial application:

a.A copy of the organizational documents of the multiple employer welfare arrangement, including the articles of incorporation and bylaws, partnership agreement, or instrument;

b.A copy of each insurance or reinsurance contract that purports to insure or guarantee any portion of benefits or coverage offered by the multiple employer welfare arrangement;

c.A copy of the benefit plan description and any other materials intended to be distributed to potential members; and

d.The names and addresses of all persons performing or expected to perform the functions of a financial administrator or service company.

3.Renewal. Authority to operate as an existing multiple employer welfare arrangement will automatically renew annually with the filing of the multiple employer welfare arrangement's annual report to the commissioner and the payment of the appropriate fee pursuant to North Dakota Century Code section 26.1-01-07, subject to the multiple employer welfare arrangement maintaining its financial ability to pay claims and expenses.

4.Merger. Two or more existing multiple employer welfare arrangements may apply to merge, provided the merged multiple employer welfare arrangement assumes all financial and regulatory obligations of the former multiple employer welfare arrangements. Merger applications must be filed with the commissioner and are subject to the same requirements as prospective new multiple employer welfare arrangements.

5.Approval or disapproval. Upon approval of an application, the commissioner shall issue a certificate authorizing the proposed self-funded multiple employer welfare arrangement. The initial certificate for a new multiple employer welfare arrangement is effective until revoked by the commissioner. Approval of an application for authority to self-fund must be granted if the proposed multiple employer welfare arrangement conforms with all requirements of this

chapter.

N.D. Admin. Code 45-06-14-07 Ending self-funding, runoff period, and plan dissolution

1.Termination. A multiple employer welfare arrangement may terminate its self-funded authority and cease to provide coverage effective at the end of a fund year. The multiple employer welfare arrangement must notify the commissioner within ninety days of its decision to terminate. A multiple employer welfare arrangement may not terminate its self-funding

authority less than ninety days prior to the end of the fund year in question. The voluntary termination of self-funding authority does not constitute multiple employer welfare arrangement dissolution under subsection 4.

2.Revocation. The commissioner shall, by order, revoke the authority of a multiple employer welfare arrangement to self-fund upon no less than ten days' written notice if any of the following events occur or conditions develop, and if the commissioner determines that the conditions are material:

a.Failure of the multiple employer welfare arrangement to comply with this chapter or with other applicable North Dakota laws or rules or the applicable laws and rules of any other state;

b.Failure of the multiple employer welfare arrangement to comply with any lawful order of the commissioner or the lawful order of the commissioner of another state;

c.Commission by the multiple employer welfare arrangement of a prohibited practice as defined by North Dakota Century Code chapter 26.1-04 or in related rules; or

d.A deterioration of the multiple employer welfare arrangement's financial integrity to the extent that its present or future ability to meet its obligations is or will be significantly impaired.

3.Runoff multiple employer welfare arrangement. A multiple employer welfare arrangement must continue to exist as a runoff multiple employer welfare arrangement after its authority to self-fund has ended, for the purpose of paying claims, preparing reports, and administering transactions associated with the period during which the multiple employer welfare arrangement provided coverage. A runoff multiple employer welfare arrangement must continue to comply with this chapter and with other applicable North Dakota laws and rules.

4.Dissolution. A multiple employer welfare arrangement, including a runoff multiple employer welfare arrangement, must apply to the commissioner for authorization to dissolve. An application must be approved or disapproved within sixty days of receipt. Dissolution without authorization is prohibited and void and does not absolve a multiple employer welfare arrangement or runoff multiple employer welfare arrangement from fulfilling its continuing obligations and does not absolve its members from assessments under subsection 3 of

section 45-06-14-14. The multiple employer welfare arrangement's assets at dissolution must be distributed to the members and covered persons as provided in the bylaws. Authorization to dissolve must be granted if either of the following conditions is met:

a.The multiple employer welfare arrangement demonstrates that it has no outstanding liabilities, including incurred but not reported liabilities; or

b.The multiple employer welfare arrangement has obtained an irrevocable commitment from a licensed insurer to pay all outstanding liabilities and to provide all related services, including the payment of claims, preparation of reports, and the administration of transactions associated with the period during which the multiple employer welfare arrangement provided coverage.

N.D. Admin. Code 45-06-14-08 Administration

1.Service company. A multiple employer welfare arrangement must contract with a service company for services necessary to conduct the multiple employer welfare arrangement day-to-day operations, except services and responsibilities reserved to the members, the board, individual trustees, the financial administrator, the accountant, or other contractors unless the multiple employer welfare arrangement has the staff and expertise to perform the day-to-day operations. The service company must have expertise in and be licensed for the coverages provided by the multiple employer welfare arrangement. Subject to the oversight of the board, the service company shall, directly or through subcontractors, provide all services directly related to the administration of coverage. These services include:

a.Accounting and recordkeeping;

b.Billing and collection of premiums and assessments;

c.Claims investigation, settlement, and reserving;

d.Claims payment, including claims wholly or partially subject to stop-loss insurance or member deductibles;

e.General administration;

f.Loss control, safety programs, or both; and

g.Underwriting.

2.Financial administrator. A multiple employer welfare arrangement must contract with a financial administrator for investment of the multiple employer welfare arrangement's assets and other financial or accounting services. A staff member of the financial administrator may not be an owner, officer, employee, or agent of the service company, or of a subcontractor of the service company.

3.Recordkeeping and examination authority. A multiple employer welfare arrangement must maintain all records necessary to verify the accuracy and completeness of all reports submitted to the commissioner under section 45-06-14-16. The commissioner may examine the multiple employer welfare arrangement's records in order to verify the multiple employer welfare arrangement's compliance with this chapter and with other statutes and rules. The provisions of North Dakota Century Code chapter 26.1-03 apply to the commissioner's examination. All records concerning claims, reserves, financial transactions, and other matters necessary for the multiple employer welfare arrangement's operations are the multiple employer welfare arrangement's property and shall be retained for the current year plus the previous five years.

N.D. Admin. Code 45-06-14-09 Membership

1.Availability. A multiple employer welfare arrangement must establish nondiscriminatory criteria for membership. A multiple employer welfare arrangement may reject applicants or dispel members that do not meet the multiple employer welfare arrangement's underwriting standards.

2.Joining. A new member must be admitted according to the standards and procedures specified in the bylaws. Membership is not effective until the applicant has signed a membership agreement affirming its commitment to comply with the bylaws and this chapter, including joint and several liability for the multiple employer welfare arrangement's obligations.

The membership agreement must disclose that under the rules governing the multiple employer welfare arrangement, the board of trustees, or the commissioner, may order that an assessment be levied against the members if necessary to maintain the multiple employer welfare arrangement's sound financial condition.

3.Withdrawal. The membership agreement must include the procedures for withdrawing from the multiple employer welfare arrangement. A member must notify the multiple employer welfare arrangement of its desire to withdraw not less than thirty days before the date upon which it desires to withdraw. If the board determines that the withdrawal would cause the multiple employer welfare arrangement to be in violation of the minimum annual premium requirement or would compromise the multiple employer welfare arrangement's financial integrity, the multiple employer welfare arrangement must notify the commissioner as required under subsection 2 of section 45-06-14-11. Withdrawal is prohibited and void unless:

a.The member has belonged to the multiple employer welfare arrangement continuously for the period required by the bylaws, which shall provide for a minimum of one complete fund year.

b.All outstanding premiums and assessments owed by the member have been paid.

4.Expulsion. At least annually a multiple employer welfare arrangement must review the status and experience of each member relative to the criteria for expulsion in the bylaws. Expulsion is subject to the procedures and requirements for voluntary withdrawal of a member, except that:

a.A member may be expelled with outstanding premiums or assessments owing; and

b.A member may be expelled notwithstanding that the minimum term of membership has not been satisfied.

5.Runoff multiple employer welfare arrangement membership. After revocation of a multiple employer welfare arrangement's self-funding authority or after a multiple employer welfare arrangement notifies the commissioner in writing of its intent to terminate the multiple employer welfare arrangement, no member may join, leave, or be expelled from the multiple employer welfare arrangement.

N.D. Admin. Code 45-06-14-10 Coverage

1.Coverage. A multiple employer welfare arrangement must provide coverage as authorized by the board.

2.Uniform underwriting. A multiple employer welfare arrangement must offer its coverages subject to the same underwriting standards to all members and, if applicable, to all members' employees.

3.Continuing responsibility. Notwithstanding cancellation or termination of coverage to a particular member, ceasing to offer a particular coverage, or termination or revocation of

authority to self-fund, a multiple employer welfare arrangement retains indefinitely all responsibilities to members and other covered persons associated with the period while coverage was in force. This responsibility ceases only after a multiple employer welfare arrangement dissolves under subsection 4 of section 45-06-14-07.

N.D. Admin. Code 45-06-14-11 Premiums, cashflow, and dividends

1.Minimum annual premium. A multiple employer welfare arrangement must have and maintain an annual premium volume of no less than three hundred thousand dollars. A multiple employer welfare arrangement or prospective multiple employer welfare arrangement may apply to the commissioner for a reduction of the minimum annual premium requirement, stating the amount of reduction and the reasons supporting the request. The commissioner must act on the application within sixty days after receipt. The multiple employer welfare arrangement must demonstrate that the lesser premium volume would not compromise its financial integrity and stability.

2.Monitoring premium volume. A multiple employer welfare arrangement must monitor its premium volume. If annual premium is more than three hundred thousand dollars but less than four hundred thousand dollars, or less than one hundred thirty-three percent of the amount approved pursuant to subsection 1, the multiple employer welfare arrangement must notify the commissioner at monthly intervals of the then-current annualized premium volume, until the annualized volume exceeds four hundred thousand dollars. "Annualized premium volume" means the gross premiums written for the previous twelve months. If premium decreases to an annualized volume of less than three hundred thousand dollars, or a lesser amount if approved pursuant to subsection 1, the multiple employer welfare arrangement must notify the commissioner:

a.Of its intent to end its self-funding authority; or

b.Of its proposal for restoring compliance with subsection 1. If the proposal is unlikely, in the commissioner's judgment, to restore compliance with subsection 1 within ninety days, or if after ninety days the multiple employer welfare arrangement continues to be out of compliance, the commissioner may revoke the multiple employer welfare arrangement's self-funding authority.

3.Surplus or stop-loss advancement. To maintain its financial integrity, a multiple employer welfare arrangement must either:

a.Establish and maintain a surplus consisting of funds contributed by members and the multiple employer welfare arrangement's retained earnings sufficient to pay claims as they occur; or

b.Negotiate a stop-loss insurance policy requiring the insurer to advance funds to the multiple employer welfare arrangement if the multiple employer welfare arrangement's policy limits have been or are likely to be exceeded. The funds may be considered an advance against the insurer's potential liability for the policy period.

4.New multiple employer welfare arrangement deposit premium. As a condition for authorization to self-fund, a prospective multiple employer welfare arrangement must submit evidence that an initial premium payment has been made.

a.The initial premium payment must be no less than ten percent of the combined initial members' first-year premium. If the initial payment is less than one hundred percent of the initial members' first-year premium, the remainder of the initial members' first-year premium must be paid in six or more equal installments at equal intervals throughout the year.

b.A prospective multiple employer welfare arrangement may apply to the commissioner for reduction of the initial premium deposit requirement, stating the payment schedule requested and the reasons supporting the request. The commissioner may approve the applications within sixty days after receipt if the multiple employer welfare arrangement has demonstrated that the proposed payment schedule would not compromise its ability to pay large claims promptly during its first year of operation. The commissioner may consider arrangements the multiple employer welfare arrangement has made under subsection 3 in evaluating the application.

5.Premium payments. A multiple employer welfare arrangement must promptly take appropriate action to collect premiums, assessments, or penalties that are past due.

Collection costs are the obligation of the delinquent member.

6.Dividend procedures. A multiple employer welfare arrangement may declare and pay a dividend or distribution from its surplus only if:

a.The dividend will not impair the multiple employer welfare arrangement's surplus; and

b.The multiple employer welfare arrangement does not have an outstanding loan or an outstanding advancement from a stop-loss carrier.

N.D. Admin. Code 45-06-14-12 Reserves

A multiple employer welfare arrangement must establish reserves for all incurred losses, both reported and unreported, and for unearned premiums. To the extent that the amount of a loss is uncertain, the reserve must be set conservatively and adjusted as new information becomes available.

Accounting for reserves must be as required by the financial statement forms and instructions under subsection 2 of section 45-06-14-16.

N.D. Admin. Code 45-06-14-13 Stop-loss insurance

1.Purchase. A multiple employer welfare arrangement may purchase stop-loss insurance to cover a portion of its losses. If a stop-loss insurance policy is terminated or modified causing a violation of subsection 2, or otherwise compromising the multiple employer welfare arrangement's financial integrity, the multiple employer welfare arrangement must notify the commissioner prior to the termination or modification. The multiple employer welfare arrangement must inform the commissioner of corrective action that will be taken to maintain the multiple employer welfare arrangement's financial integrity.

2.Required stop-loss coverage. A multiple employer welfare arrangement may not retain liability on any one incident of more than ten percent of its annual premium volume during the most recent fund year, plus twenty percent of its surplus. A multiple employer welfare arrangement with less than one year's experience must use the multiple employer welfare arrangement's estimated premium volume during the first full fund year. The multiple employer welfare arrangement must purchase stop-loss insurance for liability exposure. The stop-loss carrier must be licensed to do business in North Dakota.

3.Return of liability. Liability transferred to an insurer under subsection 2 may not be directly or indirectly returned to a multiple employer welfare arrangement or a member.

N.D. Admin. Code 45-06-14-14 Deficit and assessments

1.Each current member of a multiple employer welfare arrangement is jointly and severally liable for all liabilities and expenses of the multiple employer welfare arrangement. Each past member is jointly and severally liable for all liabilities and expenses of the multiple employer welfare arrangement for three complete fund years after leaving the multiple employer welfare arrangement. After the period of continuing liability, a past member is no longer jointly and severally liable for the multiple employer welfare arrangement's liabilities and expenses, except as provided in subsection 2.

2.Runoff liability. If a multiple employer welfare arrangement's self-funding authority is ended under subsection 1 or 2 of section 45-06-14-07, members and past members continue to be jointly and severally liable for the multiple employer welfare arrangement's liabilities and expenses until final multiple employer welfare arrangements dissolution, as follows:

a.All members at the termination of self-funding authority are jointly and severally liable for all multiple employer welfare arrangement liabilities and expenses until the multiple employer welfare arrangement is dissolved; and

b.All past members that were jointly and severally liable under subsection 1 at the time self-funding authority is ended continue to be jointly and severally liable until the multiple employer welfare arrangement is dissolved.

3.Deficits. If at any time a multiple employer welfare arrangement's total liabilities exceed its total assets, the board must restore a positive surplus and must do so within ninety days. A deficit may be corrected using one or more of the types of assessments set forth below. A multiple employer welfare arrangement may elect to assess some but not all jointly and severally liable members and past members. The method of assessment may not arbitrarily exclude members or past members, or impose arbitrary amounts in relation to the amounts imposed on other members and past members. The bylaws may identify methods of assessment. If the board fails to do so when required, the commissioner must order an assessment to correct a deficit using the procedure described in subdivision a.

a.All jointly and severally liable members and past members may be assessed proportionately to their share of the total premiums paid and owed during the assessment base period. The assessment base period at the time of a multiple employer welfare arrangement's self-funding authority ending under subsection 1 or 2 of section 45-06-14-07 is the basis of assessments until final multiple employer welfare arrangement dissolution. The assessment base period includes all completed quarters of the current fund year and the most recent three complete fund years.

b.Jointly and severally liable members and past members may be assessed, whereby members and past members are assessed in proportion to the member's loss experience over the assessment base period if provided for in the bylaws.

c.Jointly and severally liable members and past members may be assessed, whereby current members pay more than past members if provided for in the bylaws.

d.Jointly and severally liable members and past members may be assessed whereby members belonging to the multiple employer welfare arrangement in poor loss years are assessed more than members belonging to the multiple employer welfare arrangement in better loss years if provided for in the bylaws.

e.Jointly and severally liable members and past members may be assessed according to any formula stated in the bylaws, including combinations of subdivisions a to d, if the formula is consistent with the provisions of this section.

4.Assessment to increase surplus. The board may assess current members in order to increase the surplus. The assessment may be made at any time in the discretion of the board to improve the multiple employer welfare arrangement's financial strength. The assessment may be calculated using any reasonable procedure consistent with the multiple employer welfare arrangement's bylaws.

N.D. Admin. Code 45-06-14-15 Financial integrity

1.Fidelity bond. All contractors and individuals who handle multiple employer welfare arrangement funds or who will have access to multiple employer welfare arrangement funds, including board members, must be covered by a fidelity bond providing standard fidelity coverage, including coverage against dishonesty, theft, forgery, alteration, misplacement, or mysterious and unexplainable disappearance. The amount of coverage for each occurrence must be at least three hundred thousand dollars. The multiple employer welfare arrangement must purchase a fidelity bond covering the required contractors and individuals, or submit separate proof of coverage for all required contractors and individuals not covered under the plan's bond.

2.Integrity of assets. A multiple employer welfare arrangement's assets may not be:

a.Commingled with the assets of any member;

b.Loaned to anyone for any purpose or used as security for a loan, except as permitted under subsection 5 for investments;

c.Employed for any purpose other than for the purposes stated in the bylaws and in compliance with this chapter and related statutes; or

d.Considered the property or right of any member or covered person, except:

(1)For benefits under the coverage documents;

(2)For dividends declared in accordance with subsection 5 of section 45-06-14-11; and (3)For a portion of the assets remaining after the plan's dissolution, in accordance with subsection 4 of section 45-06-14-07.

3.Sources and uses of funds. A multiple employer welfare arrangement may expend funds for payment of losses and expenses and for other costs similar to those incurred by insurers under conventional insurance policies in North Dakota. Except as provided in subdivision b of subsection 3 of section 45-06-14-11, a multiple employer welfare arrangement may not borrow money or issue debt instruments. A multiple employer welfare arrangement may bring legal suits to collect delinquent debts. A multiple employer welfare arrangement may not obtain funds through subrogation of the rights of covered persons. A multiple employer welfare arrangement may receive funds only from:

a.Its members as premiums, assessments, or penalties;

b.Its insurers or indemnitors pursuant to insurance or indemnification agreements;

c.Dividends, interest, or the proceeds of sale of investments;

d.Refunds of excess payments;

e.Coordination of benefits with other insurance or group self-insurance coverages; or

f.Collection of money owed to the multiple employer welfare arrangement.

4.Separate accounts. A multiple employer welfare arrangement may establish separate accounts for the payment of claims or certain types of expenses. These accounts must be used only by the service company, its authorized subcontractors, or the financial administrator, as appropriate to the account's purpose. The amount in a special account may not exceed an amount reasonably sufficient to pay the claims or expenses for which it is established.

5.Investments. A multiple employer welfare arrangement's investments are subject to North Dakota Century Code chapter 26.1-05, as regards both permitted and prohibited investments, maturities, and depositories. In addition, a multiple employer welfare arrangement may not invest in securities or debt of a member, or a member's parent, subsidiary, or affiliate, or any person or entity under contract with the multiple employer welfare arrangement.

6.Monitoring financial condition. The board must monitor the multiple employer welfare arrangement's revenues, expenses, and losses and evaluate its current and expected financial condition. The board must maintain the multiple employer welfare arrangement's sound financial condition at all times. The board may adjust premium rates, underwriting standards, dividend rates, expulsion standards, and invoke other powers granted in this

chapter and the bylaws. If the commissioner determines that the board's actions are inadequate to maintain the multiple employer welfare arrangement's sound financial condition, the commissioner may order an increase in the premium rates, revoke the multiple employer welfare arrangement's self-funding authority, order that an assessment be levied against the members, or take other appropriate action.

N.D. Admin. Code 45-06-14-16 Reporting

1.Financial statements. A multiple employer welfare arrangement must prepare annual financial statements containing a balance sheet; a statement of revenues, expenses, and surplus; a statement of changes in financial position; and a schedule of investments. The statements must be prepared on forms and according to instructions prescribed by the commissioner. The financial statements must be filed with the commissioner no later than one hundred eighty days after the end of the multiple employer welfare arrangement's fund year.

For multiple employer welfare arrangements with annual premiums greater than two million dollars, the financial statements must be audited by an independent certified public accountant, and the auditor's report must be submitted no later than one hundred eighty days after the end of the multiple employer welfare arrangement's fund year.

2.Quarterly reports. If the commissioner determines that a multiple employer welfare arrangement's financial integrity is such that the multiple employer welfare arrangement's ability to meet obligations promptly and in full will be significantly impaired, the commissioner may require that the multiple employer welfare arrangement file quarterly reports with the commissioner no later than thirty days after the end of the first, second, and third quarters of each fund year. The commissioner may remove the requirement to file quarterly reports when the multiple employer welfare arrangement's financial integrity is restored. A quarterly report must contain statements of the multiple employer welfare arrangement's:

a.Current total cash on hand and on deposit, and total investment;

b.Current total reserve for unearned and advance premiums, and total reserve for outstanding losses reported and unreported;

c.Dividends declared and dividends paid during the quarter;

d.Gross premiums written during the quarter;

e.Losses paid during the quarter;

f.Current total members; and

g.Any other information that the commissioner requests.

3.Extraordinary audits. As necessary, the commissioner may require a multiple employer welfare arrangement to investigate the accuracy of one or more entries on its financial statements or quarterly reports and to report its findings. The commissioner may require that a multiple employer welfare arrangement hire a qualified actuary, claims specialist, auditor, or other specialist as appropriate to the type of entry being investigated. If warranted by the investigation's findings, the commissioner may require changes in the multiple employer welfare arrangement's reserving, accounting, or recordkeeping practices. The audits are in addition to the commissioner's rights to examine self-funded multiple employer welfare arrangements directly, as applicable to insurance companies under North Dakota Century Code chapter 26.1-03.

4.Penalty. The financial statements required under subsection 1 is considered to be a multiple employer welfare arrangement's annual statement. This filing and other filings required by this

chapter and related statutes are subject to North Dakota Century Code chapter 26.1-03, as applicable to licensed insurance companies for comparable filings.

N.D. Admin. Code 45-06-14-17 Trade practices

Multiple employer welfare arrangements are subject to the provisions of the unfair trade practices act found at North Dakota Century Code section 26.1-04-03.

History

• Law Implemented: NDCC 26.1-01-07.4, 26.1-04-03, 26.1-07.1

N.D. Admin. Code 45-06-14-18 Disclosure

Each policy issued by a self-funded multiple employer welfare arrangement must contain, in at least ten-point type on the front page and the declaration page, the following notice:

NOTICE

This policy is issued by a self-funded multiple employer welfare arrangement. A self-funded multiple employer welfare arrangement may not be subject to all of the insurance laws and regulations of your state. State insurance insolvency guaranty funds are not available for a self-funded multiple employer welfare arrangement.

N.D. Admin. Code 45-06-14-19 Sanctions

The commissioner may sanction a multiple employer welfare arrangement or suspend or revoke any certificate of authority issued to a multiple employer welfare arrangement upon any of the following grounds:

1.Failure to comply with any provision of these rules or any applicable provision of the North Dakota Century Code;

2.Failure to comply with any lawful order of the commissioner of North Dakota or of any other state;

3.Committing an unfair or deceptive act or practice;

4.Deterioration of financial condition adversely affecting the multiple employer welfare arrangement's ability to pay claims;

5.A finding that the application or any necessary forms that have been filed with the commissioner contain fraudulent information or omissions; or

6.A finding that the multiple employer welfare arrangement or its service company or financial administrator has misappropriated, converted, illegally withheld, or refused to pay over upon proper demand any moneys that belong to a member, a participant, or a person otherwise entitled thereto and that have been entrusted to the multiple employer welfare arrangement or its service company or financial administrator in its fiduciary capacity.

Chapter 45-06-15 Short-Term Care Insurance

N.D. Admin. Code 45-06-15-01 Definition

"Short-term care insurance" means any insurance policy, group certificate, or rider primarily advertised, marketed, offered, or designed to provide coverage for less than twelve consecutive months for each covered person on an expense incurred, indemnity, prepaid, or other basis, for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services provided in a setting other than an acute care unit of a hospital. Service settings may include a hospital unit licensed or certified to provide skilled nursing services in a skilled nursing facility, extended care facility, intermediate care facility, convalescent nursing home, basic care facility, personal care facility, adult day care facility, and assisted living facility. The term also includes home health care and personal care services provided by a home health care agency. Notwithstanding any other provision contained herein, any product advertised, marketed, or offered as short-term care insurance is subject to the provisions of this chapter.

N.D. Admin. Code 45-06-15-02 Policy definitions

No short-term care insurance policy or group certificate delivered or issued for delivery in this state shall use the terms set forth below, unless the terms are defined in the policy and the definitions satisfy the following requirements:

1."Activities of daily living" means at least bathing, continence, dressing, eating, toileting, and transferring.

2."Acute condition" means that the individual is medically unstable. Such an individual requires frequent monitoring by medical professionals, such as physicians and registered nurses, in order to maintain the individual's health status.

3."Adult day care" means a program for six or more individuals of social and health-related services provided during the day in a community group setting for the purpose of supporting frail, impaired elderly, or other disabled adults who can benefit from care in a group setting outside the home.

4."Bathing" means washing oneself by sponge bath, or in either a tub or shower, including the task of getting into or out of the tub or shower.

5."Certificate" or "group certificate" means the insurance document or certificate of insurance coverage issued to individuals covered under the group policy.

6."Cognitive impairment" means a deficiency in a person's short-term or long-term memory; orientation as to person, place, and time; deductive or abstract reasoning; or judgment as it relates to safety awareness.

7."Continence" means the ability to maintain control of bowel and bladder function, or, when unable to maintain control of bowel or bladder function, the ability to perform associated personal hygiene, including caring for catheter or colostomy bag.

8."Dressing" means putting on and taking off all items of clothing and any necessary braces, fasteners, or artificial limbs.

9."Eating" means feeding oneself by getting food into the body from a receptacle such as a plate, cup, or table or by a feeding tube or intravenously.

10."Hands-on assistance" means physical assistance (minimal, moderate, or maximal) without which the individual would not be able to perform the activity of daily living.

11."Home health care services" means medical and nonmedical services provided to ill, disabled, or infirm persons in their residences. Such services may include homemaker services, assistance with activities of daily living, and respite care services.

12."Medicare" means "The Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965 as Then Constituted or Later Amended" or "Title I, Part I of Public Law 89-97, as Enacted by the Eighty-Ninth Congress of the United States of America and popularly known as The Health Insurance for the Aged Act, as then constituted and any later amendments or substitutes thereof", or words of similar import.

13."Mental or nervous disorder" shall not be defined to include more than neurosis, psychoneurosis, psychopathy, psychosis, or mental or emotional disease or disorder.

14."Personal care" means the provision of hands-on services to assist an individual with activities of daily living.

15."Skilled nursing care", "intermediate care", "personal care", "home care", and other services shall be defined in relation to the level of skill required, the nature of the care, and the setting in which care must be delivered.

16."Toileting" means getting to and from the toilet, getting on and off the toilet, and performing associated personal hygiene.

17."Transferring" means moving into or out of a bed, chair, or wheelchair.

18.All providers of services, including "skilled nursing facility", "extended care facility", "intermediate care facility", "convalescent nursing home", "personal care facility", and "home care agency", shall be defined in relation to the services and facilities required to be available and the licensure or degree status of those providing or supervising the services. The definition may require that the provider be appropriately licensed or certified.

N.D. Admin. Code 45-06-15-03 Policy practices and provisions

1.Guaranteed renewable for life - Limitation on preexisting conditions. Any short-term care insurance policy or group certificate must be guaranteed renewable for life. For purposes of this section. "guaranteed renewable for life" means the insured has the right to continue the policy or group certificate for life subject to the policy's terms by the timely payment of premiums during which the insurer has no right to make unilaterally any change in any provision of the policy while the policy is in force. The insurer may, however, in accordance with the provisions of the policy, make changes in premium rates as to all insureds who are placed in the same class for purposes of rate determination in the process of issuance of the policy or group certificate.

A policy or certificate of insurance, providing benefits for short-term care, which is sold to a consumer to replace a policy may not contain any provision limiting payment of benefits due to preexisting conditions of the insured except if there is any time period remaining relating to the exclusion of coverage for preexisting conditions as specified in the underlying policy that the remaining waiting period for coverage of preexisting conditions shall apply to the new policy unless the policy otherwise provides.

2.Preexisting conditions.

a.No short-term care insurance policy or group certificate may define "preexisting condition" as more restrictive than meaning a condition for which medical advice or treatment was recommended by, or received from a provider of health care services, within six months preceding the effective date of coverage of an insured person.

b.No short-term care insurance policy or certificate issued on a group short-term care insurance policy may exclude coverage for a loss or confinement that is the result of a preexisting condition unless the loss or confinement begins within six months following the effective date of coverage of an insured person.

c.The limitation on defining a preexisting condition does not prohibit an insurer from using an application form designed to elicit the complete health history of an applicant, and, on the basis of the answers on that application, from underwriting in accordance with that insurer's established underwriting standards. Unless otherwise provided in the policy or certificate, a preexisting condition, regardless of whether it is disclosed on the application, need not be covered until the waiting period described in subdivision b expires. No short-term care insurance policy or certificate may exclude or use waivers or riders of any kind to exclude, limit, or reduce coverage or benefits for specifically named or described preexisting diseases or physical conditions beyond the waiting period described in subdivision b.

3.Required information and disclosure provisions.

a.Limitations. If a short-term nursing home insurance policy or group certificate contains any limitations with respect to preexisting conditions, the limitations shall appear as a separate paragraph of the policy or certificate and shall be labeled as "preexisting condition limitations".

b.Other limitations or conditions on eligibility for benefits. A short-term nursing home insurance policy or group certificate containing any limitations or conditions for eligibility, including any elimination period shall be clearly defined in the policy or certificate and shall be labeled as "limitations or conditions on eligibility for benefits".

c.Insurers shall disclose whether or not inflation protection is offered with any short-term nursing home policy or group certificate.

d.An elimination period shall be calculated based upon consecutive calendar days, beginning the first day eligible services are received by the individual and ending the first day benefits are payable.

4.Incontestability and rescission of short-term care insurance policy or certificate.

a.If a policy or certificate has been in force for less than six months, an insurer may not rescind a short-term care insurance policy or certificate or deny an otherwise valid short-term care insurance claim except upon a showing of misrepresentation that is material to the acceptance for coverage.

b.If a policy or certificate has been in force for at least six months but less than two years, an insurer may not rescind a short-term care insurance policy or certificate or deny an otherwise valid short-term care insurance claim except upon a showing of misrepresentation that is both material to the acceptance for coverage and that pertains to the condition for which benefits are sought.

c.If a policy or certificate has been in force for two years, the policy or certificate may be contested only upon a showing that the insured knowingly and intentionally misrepresented relevant facts relating to the insured's health. The policy or certificate may not be contested based upon misrepresentation alone.

d.A short-term care insurance policy or certificate may not be field-issued based on medical or health status. For purposes of this section, "field-issued" means a policy or certificate issued by an agent or a third-party administrator pursuant to the underwriting

authority granted to the agent or third-party administrator by an insurer.

e.If an insurer has paid benefits under the short-term care insurance policy or certificate, the benefit payments may not be recovered by the insurer in the event that the policy or certificate is rescinded.

5.Prior institutionalization requirement prohibited.

a.No short-term care insurance policy or certificate may be delivered or issued for delivery in this state if the policy:

(1)Conditions eligibility for any benefits on a prior hospitalization requirement.

(2)Conditions eligibility for benefits provided in an institutional care setting on the receipt of a higher level of such institutional care.

b.A short-term care insurance policy containing postconfinement, postacute care, or recuperative benefits must clearly label in a separate paragraph of the policy or certificate entitled "limitations or conditions on eligibility for benefits" the limitations or conditions, including any required number of days of confinement.

6.Right to return policy. Short-term care insurance applicants have the right to return the policy or certificate within thirty days of the date of its delivery or within thirty days of its effective date, whichever occurs later, and to have the premium refunded if, after examination of the policy or certificate, the applicant is not satisfied for any reason. Short-term care insurance policies and certificates must have a notice prominently printed on the first page or attached thereto stating in substance that the applicant has the right to return the policy or certificate within thirty days of the date of its delivery or within thirty days of its effective date, whichever occurs later, and to have the premium refunded if, after examination of the policy or certificate the applicant is not satisfied for any reason.

7.Limitations and exclusions. A policy may not be delivered or issued for delivery in this state as short-term care insurance if the policy limits or excludes coverage by type of illness, treatment, medical condition, or accident, except as follows:

a.Preexisting conditions or diseases;

b.Mental or nervous disorders; however, this shall not permit exclusion or limitation of benefits on the basis of Alzheimer's disease;

c.Alcoholism and drug addiction;

d.Illness, treatment, or medical condition arising out of:

(1)War or act of war, whether declared or undeclared;

(2)Participation in a felony, riot, or insurrection;

(3)Service in the armed forces or units auxiliary thereto;

(4)Suicide (sane or insane), attempted suicide, or intentionally self-inflicted injury; or (5)Aviation (this exclusion applies only to non-fare-paying passengers).

e.Treatment provided in a government facility, unless otherwise required by law, services for which benefits are available under Medicare or other governmental program, except Medicaid, any state or federal workers compensation, employer's liability or occupational disease law, or any motor vehicle no-fault law, services provided by a member of the covered person's immediate family, and services for which no charge is normally made in the absence of insurance.

This subsection is not intended to prohibit exclusions limitations by type of provider or territorial limitations.

8.Extension of benefits. Termination of short-term care insurance shall be without prejudice to any benefits payable for institutionalization if the institutionalization began while the short-term care insurance was in force and continues without interruption after termination. The extension of benefits beyond the period the short-term care insurance was in force may be limited to the duration of the benefit period, if any, or to payment of the maximum benefits and may be subject to any policy waiting period, and all other applicable provisions of the policy.

9.Continuation or conversion.

a.Group short-term nursing home insurance issued in this state on or after the effective date of this administrative regulation shall provide:

(1)A covered individual with a basis for continuation or conversion of coverage without underwriting upon termination of coverage; and (2)A converted policy or continued coverage, including benefits identical to or benefits determined by the executive director to be substantially similar to or in excess of those provided under the group policy from which conversion or continued coverage is made.

b.Written application for the converted policy or continued coverage shall be made and the first premium due, if any, shall be paid as directed by the insurer not later than thirty-one days following notice of continuation or conversion rights under the group policy.

c.The premium charged to an insured for short-term nursing home insurance shall not increase due to either:

(1)The increasing age of the insured at ages beyond sixty-five; or (2)The duration the insured has been covered under the policy.

10.Discontinuance and replacement. If a group short-term care policy is replaced by another group short-term care policy issued to the same policyholder, the succeeding insurer shall offer coverage to all persons covered under the previous group policy on its date of termination. Coverage provided or offered to individuals by the insurer and premiums charged to persons under the new group policy:

a.Shall not result in an exclusion for preexisting conditions that would have been covered under the group policy being replaced;

b.Shall not vary or otherwise depend on the individual's health or disability status, claim experience, or use of short-term care services; and

c.The premium charged to an insured shall not increase due to either:

(1)The increasing age of the insured at ages beyond sixty-five; or (2)The duration the insured has been covered under the policy.

N.D. Admin. Code 45-06-15-04 Unintentional lapse

Each insurer offering short-term care insurance shall, as a protection against unintentional lapse, comply with the following: 1.a.Notice before lapse or termination. No individual short-term care policy or certificate shall be issued until the insurer has received from the applicant either a written designation of at least one person, in addition to the applicant, who is to receive notice of lapse or termination of the policy or certificate for nonpayment of premium, or a written waiver dated and signed by the applicant electing not to designate additional persons to receive notice. The applicant has the right to designate at least one person who is to receive the notice of termination, in addition to the insured. Designation shall not constitute acceptance of any liability on the third party for services provided to the insured. The form used for the written designation must provide space clearly designated for listing at least one person. The designation shall include each person's full name and home address. In the case of an applicant who elects not to designate an additional person, the waiver shall state: "Protection against unintended lapse. I understand that I have the right to designate at least one person other than myself to receive notice of lapse or termination of this short-term care insurance policy for nonpayment of premium. I understand that notice will not be given until thirty (30) days after a premium is due and unpaid. I elect NOT to designate a person to receive this notice."

The insurer shall notify the insured of the right to change this written designation, no less often than once every two years.

b.When the policyholder or certificate holder pays premium for a short-term care insurance policy or certificate through a payroll or pension deduction plan, the requirements contained in subdivision a need not be met until sixty days after the policyholder or certificate holder is no longer on such a payment plan. The application or enrollment form for such policies or certificates shall clearly indicate the payment plan selected by the applicant.

c.Lapse or termination for nonpayment of premium. No individual short-term care policy or certificate shall lapse or be terminated for nonpayment of premium unless the insurer, at least thirty days before the effective date of the lapse or termination, has given notice to the insured and to those persons designated pursuant to subdivision a, at the address provided by the insured for purposes of receiving notice of lapse or termination. Notice shall be given by first-class United States mail, postage prepaid, and notice may not be given until thirty days after a premium is due and unpaid. Notice shall be deemed to have been given as of five days after the date of mailing.

2.Reinstatement. In addition to the requirement in subsection 1, a short-term care insurance policy or certificate shall include a provision that provides for reinstatement of coverage, in the event of lapse if the insurer is provided proof that the policyholder or certificate holder was cognitively impaired or had a loss of functional capacity before the grace period contained in the policy expired. This option shall be available to the insured if requested within five months after termination and shall allow for the collection of past-due premium, when appropriate. The standard of proof of cognitive impairment or loss of functional capacity shall not be more stringent than the benefit eligibility criteria on cognitive impairment or the loss of functional capacity contained in the policy and certificate.

N.D. Admin. Code 45-06-15-05 Payment of benefits

A short-term care insurance policy that provides for the payment of benefits based on standards described as "usual and customary", "reasonable and customary", or words of similar import shall include a definition of these terms and an explanation of the terms in its accompanying outline of

N.D. Admin. Code 45-06-15-06 Required disclosure of rating practices to consumers

1.A statement that the policy may be subject to rate increases in the future.

2.If a short-term care policy uses gender rating to determine the policy's premium rate, the short-term care policy must contain the following language in conspicuous font on the application, on the outline of coverage provided to the consumer at the time of solicitation, and on the front page of the insurance policy or certificate:

The cost for this product is based in part upon the gender of the person being insured.

Buying this product means you agree to allow [insert Company or Agency Name Here] to determine the cost of this product based in part upon the gender of the person being insured.

The individual or individuals purchasing a short-term care insurance policy using gender rating to determine a policy's premium rate must specifically sign, initial or otherwise acknowledge the gender rating provision detailed above on the application. A copy of the acknowledged application must be retained by the insurance company selling the policy.

3.An insurer shall provide notice of an upcoming premium rate schedule increase to all policyholders or certificate holders, if applicable, at least forty-five days prior to the implementation of the premium rate schedule increase by the insurer. The notice shall include the information required by this section when the rate increase is implemented.

N.D. Admin. Code 45-06-15-07 Prohibition against post-claims underwriting. 1.a.If an application for short-term care insurance contains a question which asks whether the applicant has had medication prescribed by a physician, it shall also ask the applicant to list all medication that has been prescribed

b.If the medications listed in the application were known by the insurer, or should have been known at the time of application, to be directly related to a medical condition for which coverage would otherwise be denied, then the policy or certificate shall not be rescinded for that condition.

2.The following language, or language substantially similar to the following, shall be set out conspicuously on the short-term care insurance policy or certificate no later than when it is delivered:

"Caution: The issuance of this short-term care insurance (policy or certificate) is based upon your responses to the questions on your application. A copy of your (application or enrollment form) (is enclosed or was retained by you when you applied). If your answers, to the best of your knowledge and belief, are incorrect or untrue, the insurer may have the right to deny benefits or rescind your policy. The best time to clear up any questions is now, before a claim arises! If, for any reason, any of your answers are incorrect, contact the insurer at this address: (insert address)."

3.A copy of the completed application or enrollment form, whichever is applicable, shall be delivered to the insured no later than when the policy or certificate is delivered unless it was retained by the applicant at the time of application.

N.D. Admin. Code 45-06-15-08 Requirements for application forms and replacement coverage

1.The following language shall be set out conspicuously and in close conjunction with the applicant's signature block on an application for a short-term care insurance policy or certificate:

"Caution: If your answers on this application are incorrect or untrue, [company] has the right to deny benefits or rescind your policy."

2.Application forms shall include the following questions designed to elicit information as to whether, as of the date of the application, the applicant has another short-term care or long-term care insurance policy or certificate in force or whether a short-term care policy or certificate is intended to replace any other accident and sickness or short-term care policy or certificate presently in force. A supplementary application or other form to be signed by the applicant and agent, except when the coverage is sold without an agent, containing the questions may be used. With regard to a replacement policy issued to a group, the following questions may be modified only to the extent necessary to elicit information about health or short-term care insurance policies other than the group policy being replaced, provided that the certificate holder has been notified of the replacement.

a.Do you have another short-term care or long-term care insurance policy or certificate in force, including health care service contract, health maintenance organization contract?

b.Did you have another short-term care or long-term care insurance policy or certificate in force during the last twelve months?

(1)If so, with which company?

(2)If that policy lapsed, when did it lapse?

c.Are you covered by Medicaid?

d.Do you intend to replace any of your medical or health insurance coverage with this policy [certificate]?

3.Agents shall list any other health insurance policies they have sold to the applicant.

a.List policies sold that are still in force.

b.List policies sold in the past five years that are no longer in force.

4.Replacements - Solicitations other than direct response. Upon determining that a sale will involve replacement, an insurer, other than an insurer using direct response solicitation methods, or its agent shall furnish the applicant, prior to issuance or delivery of the individual short-term care insurance policy, a notice regarding replacement of accident and sickness or short-term care coverage. One copy of the notice shall be retained by the applicant and an additional copy signed by the applicant shall be retained by the insurer. The required notice shall be provided as referenced in appendix A.

5.Direct response solicitations. Insurers using direct response solicitation methods shall deliver a notice regarding replacement of accident and sickness, short-term care or long-term care coverage to the applicant upon issuance of the policy. The required notice shall be provided as referenced in appendix B.

N.D. Admin. Code 45-06-15-09 Loss ratio

Benefits under short-term care insurance policies must be deemed reasonable in relation to premiums provided the expected loss ratio is at least seventy percent, calculated in a manner which provides for adequate reserving of the insurance risk. In evaluating the expected loss ratio, due consideration must be given to all relevant factors, including:

1.Statistical credibility of incurred claims experience and earned premiums;

2.The period for which rates are computed to provide coverage;

3.Experienced and projected trends;

4.Concentration of experience within early policy duration;

5.Expected claim fluctuation;

6.Experience refunds, adjustments, or dividends;

7.Renewability features;

8.All appropriate expense factors;

9.Interest;

10.Policy reserves;

11.Mix of business by risk classification; and

12.Product features such as elimination periods, deductibles, and maximum limits.

N.D. Admin. Code 45-06-15-10 Filing requirements for advertising

1.Every insurer, health care service plan, or other entity providing short-term care insurance or benefits in this state shall provide a copy of any short-term care insurance advertisement intended for use in this state whether through written, radio, or television medium to the insurance commissioner of this state for review or approval by the commissioner to the extent it may be required under state law. In addition, all advertisements shall be retained by the insurer, health care service plan, or other entity for at least three years from the date the advertisement was first used.

2.The commissioner may exempt from these requirements any advertising form or material when, in the commissioner's opinion, this requirement may not be reasonably applied.

N.D. Admin. Code 45-06-15-11 Standards for marketing

1.Display prominently on the first page of the outline of coverage and policy the following:

"Notice to buyer: This policy may not cover all of the costs associated with short-term care incurred by the buyer during the period of coverage. The buyer is advised to review carefully all policy limitations."

2.A short-term care policy shall state in on the front page of the policy and outline of coverage the following statement:

"This is a short-term care policy that offers benefits for less than twelve (12) months. This is not a long-term care policy."

N.D. Admin. Code 45-06-15-12 Prohibition against preexisting conditions and probationary periods in replacement policies or certificates

If a short-term care insurance policy or certificate replaces another short-term care or long-term care policy or certificate, the replacing insurer shall waive any time periods applicable to preexisting conditions and probationary periods in the new short-term care policy for similar benefits to the extent that similar exclusions have been satisfied under the original policy.

N.D. Admin. Code 45-06-15-13 Standards for benefit triggers

1.A short-term care insurance policy shall condition the payment of benefits on a determination of the insured's ability to perform activities of daily living and on cognitive impairment.

Eligibility for the payment of benefits shall not be more restrictive than requiring either a deficiency in the ability to perform not more than three of the activities of daily living or the presence of cognitive impairment. 2.a.Activities of daily living shall include at least the following:

(1)Bathing;

(2)Continence;

(3)Dressing;

(4)Eating;

(5)Toileting; and (6)Transferring.

b.Insurers may use activities of daily living to trigger covered benefits in addition to those contained in subdivision a as long as they are defined in the policy.

3.An insurer may use additional provisions for the determination of when benefits are payable under a policy or certificate; however, the provisions shall not restrict, and are not in lieu of, the requirements contained in subsections 1 and 2.

4.For purposes of this section, the determination of a deficiency shall not be more restrictive than:

a.Requiring the hands-on assistance of another person to perform the prescribed activities of daily living; or

b.If the deficiency is due to the presence of a cognitive impairment, supervision or verbal cueing by another person is needed in order to protect the insured or others.

5.Assessments of activities of daily living and cognitive impairment shall be performed by licensed or certified professionals, such as physicians, nurses, or social workers.

6.Short-term care insurance policies shall include a clear description of the process for appealing and resolving benefit determinations. 45-06-15-14.

Standard format outline of coverage.

1.The outline of coverage shall be a freestanding document, using no smaller than ten-point type.

2.The outline of coverage shall contain no material of an advertising nature.

3.Text that is capitalized or underscored in the standard format outline of coverage may be emphasized by other means that provide prominence equivalent to the capitalization or underscoring.

4.Use of the text and sequence of text of the standard format outline of coverage is mandatory, unless otherwise specifically indicated.

5.Format for outline of coverage:

[COMPANY NAME]

[ADDRESS - CITY AND STATE]

[TELEPHONE NUMBER]

SHORT-TERM CARE INSURANCE

OUTLINE OF COVERAGE [Policy Number or Group Master Policy and Certificate Number] [Except for policies or certificates which are guaranteed issue, the following caution statement, or language substantially similar, must appear as follows in the outline of coverage.]

Caution: The issuance of this short-term care insurance [policy] [certificate] is based upon your responses to the questions on your application. A copy of your [application] [enrollment form] [is enclosed] [was retained by you when you applied]. If your answers are incorrect or untrue, the company has the right to deny benefits or rescind your policy. The best time to clear up any questions is now, before a claim arises! If, for any reason, any of your answers are incorrect, contact the company at this address: [insert address]

1.This policy is [an individual policy of insurance] ([a group policy] which was issued in the [indicate jurisdiction in which group policy was issued]).

2.PURPOSE OF OUTLINE OF COVERAGE. This outline of coverage provides a very brief description of the important features of the policy. You should compare this outline of coverage to outlines of coverage for other policies available to you. This is not an insurance contract, but only a summary of coverage. Only the individual or group policy contains governing contractual provisions. This means that the policy or group policy sets forth in detail the rights and obligations of both you and the insurance company. Therefore, if you purchase this coverage, or any other coverage, it is important that you READ YOUR POLICY (OR CERTIFICATE) CAREFULLY!

3.Terms Under Which the Policy OR Certificate May Be Continued in Force or Discontinued. a.[For short-term care health insurance policies or certificates describe the following permissible policy renewability provisions: Policies and certificates that are guaranteed renewable shall contain the following statement: RENEWABILITY: THIS POLICY [CERTIFICATE] IS GUARANTEED RENEWABLE. This means you have the right, subject to the terms of your policy [certificate], to continue this policy as long as you pay your premiums on time. [Company Name] cannot change any of the terms of your policy on its own, except that, in the future, IT MAY INCREASE THE PREMIUM YOU PAY.] b.[For group coverage, specifically continuation or conversion provisions applicable certificate and group policy.] c.[Describe waiver of premium provisions or state that there are not such provisions.]

4.TERMS UNDER WHICH THE COMPANY MAY CHANGE PREMIUMS. [In bold type larger than the maximum type required to be used for the other provisions of the outline of coverage, state whether or not the company has a right to change the premium, and if a right exists, describe clearly and concisely each circumstance under which the premium may change.]

5.TERMS UNDER WHICH THE POLICY OR CERTIFICATE MAY BE RETURNED AND

PREMIUM REFUNDED. a.[Provide a brief description of the right to return - "free look" provision of the policy.] b.[Include a statement that the policy either does or does not contain provisions providing for a refund or partial refund of premium upon the death of an insured or surrender of the policy or certificate. If the policy contains such provisions, include a description of them.]

6.THIS IS NOT MEDICARE SUPPLEMENT COVERAGE. If you are eligible for Medicare, review the Medicare Supplement Buyer's Guide available from the insurance company. a.[For agents] Neither [insert company name] nor its agents represent Medicare, the federal government, or any state government. b.[For direct response] [insert company name] is not representing Medicare, the federal government, or any state government.

7.SHORT-TERM CARE COVERAGE. Policies of this category are designed to provide coverage for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services, provided in a setting other than an acute care unit of a hospital, such as in a nursing home, in the community, or in the home.

This policy provides coverage in the form of a fixed dollar indemnity benefit for covered short-term care expenses, subject to policy [limitations] [waiting periods] and [coinsurance] requirements. [Modify this paragraph if the policy is not an indemnity policy.]

8.BENEFITS PROVIDED BY THIS POLICY. a.[Covered services, related deductibles, waiting periods, elimination periods, and benefit maximums.] b.[Institutional benefits, by skill level.] c.[Noninstitutional benefits, by skill level.]

d.Eligibility for payment of benefits. [Activities of daily living and cognitive impairment shall be used to measure an insured's need for short-term care and must be defined and described as part of the outline of coverage.] e.[Any additional benefit triggers must also be explained. If these triggers differ for different benefits, explanation of the triggers should accompany each benefit description. If an attending physician or other specified person must certify a certain level of functional dependency in order to be eligible for benefits, this too must be specified.]

9.LIMITATIONS AND EXCLUSIONS. [Describe:

a.Preexisting conditions;

b.Noneligible facilities and provider;

c.Noneligible levels of care (e.g., unlicensed providers, care, or treatment provided by a family member, etc.);

d.Exclusions and exceptions; and

e.Limitations.]. [This section should provide a brief specific description of any policy provisions which limit, exclude, restrict, reduce, delay, or in any other manner operate to qualify payment of the benefits described in Number 9 above.]

THIS POLICY MAY NOT COVER ALL THE EXPENSES ASSOCIATED WITH YOUR

SHORT-TERM CARE NEEDS.

10.ALZHEIMER'S DISEASE AND OTHER ORGANIC BRAIN DISORDERS. [State that the policy provides coverage for insureds clinically diagnosed as having Alzheimer's disease or related degenerative and dementing illnesses. Specifically describe each benefit screen or other policy provision which provides preconditions to the availability of policy benefits for such an insured.]

11.PREMIUM. [a.State the total annual premium for the policy; and

b.If the premium varies with an applicant's choice among benefit options, indicate the portion of annual premium which corresponds to each benefit option.]

12.ADDITIONAL FEATURES. [a.Indicate if medical underwriting is used; and

b.Describe other important features.]

13.CONTACT THE STATE SENIOR HEALTH INSURANCE ASSISTANCE PROGRAM IF YOU

HAVE GENERAL QUESTIONS REGARDING SHORT-TERM CARE INSURANCE. CONTACT

THE INSURANCE COMPANY IF YOU HAVE SPECIFIC QUESTIONS REGARDING YOUR

SHORT-TERM CARE INSURANCE POLICY OR CERTIFICATE.

Appendix A NOTICE TO APPLICANT REGARDING REPLACEMENT OF INDIVIDUAL ACCIDENT AND SICKNESS, SHORT-TERM CARE OR LONG-TERM CARE INSURANCE [Insurance company's name and address]

SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FUTURE.

According to [your application] [information you have furnished], you intend to lapse or otherwise terminate existing accident and sickness, short-term care or long-term care insurance and replace it with an individual long-term care insurance policy to be issued by [company name] Insurance Company. Your new policy provides thirty (30) days within which you may decide, without cost, whether you desire to keep the policy. For your own information and protection, you should be aware of and seriously consider certain factors which may affect the insurance protection available to you under the new policy.

You should review this new coverage carefully, comparing it with all accident and sickness, short-term care or long-term care insurance coverage you now have, and terminate your present policy only if, after due consideration, you find that purchase of this long-term care coverage is a wise decision.

STATEMENT TO APPLICANT BY AGENT [BROKER OR OTHER REPRESENTATIVE]:

(Use additional sheets, as necessary.)

I have reviewed your current medical or health insurance coverage. I believe the replacement of insurance involved in this transaction materially improves your position. My conclusion has taken into account the following considerations, which I call to your attention:

1.Health conditions that you may presently have (preexisting conditions) may not be immediately or fully covered under the new policy. This could result in denial or delay in payment of benefits under the new policy, whereas a similar claim might have been payable under your present policy.

2.State law provides that your replacement policy or certificate may not contain new preexisting conditions or probationary periods. The insurer will waive any time periods applicable to preexisting conditions or probationary periods in the new policy (or coverage) for similar benefits to the extent such time was spent (depleted) under the original policy.

3.If you are replacing existing short-term care or long-term care insurance coverage, you may wish to secure the advice of your present insurer or its agent regarding the proposed replacement of your present policy. This is not only your right, but it is also in your best interest to make sure you understand all the relevant factors involved in replacing your present

4.If, after due consideration, you still wish to terminate your present policy and replace it with new coverage, be certain to truthfully and completely answer all questions on the application concerning your medical health history. Failure to include all material medical information on an application may provide a basis for the company to deny any future claims and to refund your premium as though your policy had never been in force. After the application has been completed and before you sign it, reread it carefully to be certain that all information has been properly recorded.

(Signature of Agent, Broker, or Other Representative) [Typed Name and Address of Agent or Broker]

The above "Notice to Applicant" was delivered to me on:

(Applicant's Signature)(Date)

Appendix B NOTICE TO APPLICANT REGARDING REPLACEMENT OF ACCIDENT AND SICKNESS, SHORT-TERM CARE OR LONG-TERM CARE INSURANCE [Insurance company's name and address]

SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FUTURE.

According to [your application] [information you have furnished], you intend to lapse or otherwise terminate existing accident and sickness, short-term care or long-term care insurance and replace it with the long-term care insurance policy delivered herewith issued by [company name] Insurance Company. Your new policy provides thirty (30) days within which you may decide, without cost, whether you desire to keep the policy. For your own information and protection, you should be aware of and seriously consider certain factors which may affect the insurance protection available to you under the new policy.

You should review this new coverage carefully, comparing it with all accident and sickness, short-term care or long-term care insurance coverage you now have, and terminate your present policy only if, after due consideration, you find that purchase of this long-term care coverage is a wise decision.

1.Health conditions which you may presently have (preexisting conditions), may not be immediately or fully covered under the new policy. This could result in denial or delay in payment of benefits under the new policy, whereas a similar claim might have been payable under your present policy.

2.State law provides that your replacement policy or certificate may not contain new preexisting conditions or probationary periods. Your insurer will waive any time periods applicable to preexisting conditions or probationary periods in the new policy (or coverage) for similar benefits to the extent such time was spent (depleted) under the original policy.

3.If you are replacing existing short-term care or long-term care insurance coverage, you may wish to secure the advice of your present insurer or its agent regarding the proposed replacement of your present policy. This is not only your right, but it is also in your best interest to make sure you understand all the relevant factors involved in replacing your present 4.[To be included only if the application is attached to the policy.] lf, after due consideration, you still wish to terminate your present policy and replace it with new coverage, read the copy of the application attached to your new policy and be sure that all questions are answered fully and correctly. Omissions or misstatements in the application could cause an otherwise valid claim to be denied. Carefully check the application and write to [company name and address] within thirty (30) days if any information is not correct and complete, or if any past medical

history has been left out of the application. [Company Name]

Chapter 45-06-16 Short-Term Limited-Duration Insurance

N.D. Admin. Code 45-06-16-01 Definitions

1."Application" includes an application for individual coverage or a group enrollment form.

2."Short-term limited-duration health insurance plan" means health insurance coverage provided pursuant to an insurance policy or group certificate of insurance that has an expiration date specified in the policy that is no longer than six months after the original effective date of the policy and, taking into account any renewals or extensions, has a duration of not more than twelve months in total.

N.D. Admin. Code 45-06-16-02 Application requirements

All applications for short-term limited-duration insurance policies must contain clear and unambiguous questions designed to ascertain the reason for the health condition of the applicant as follows:

1.Do you have comprehensive major medical coverage in force as of the date of this application?

2.Are you aware that this insurance coverage is not comprehensive major medical coverage?

3.Why are you purchasing a short-term limited-duration plan? (Please check all that apply)

a.I am not eligible for Affordable Care Act marketplace tax subsidies.

b.I cannot afford an Affordable Care Act marketplace plan.

c.I do not use a lot of health care; therefore, I do not feel I need a comprehensive major medical plan.

d.Other.

4.Do you understand this policy may not have network doctors and therefore may result in a bill for additional charges not covered by a doctor that is out-of-network with this plan?

N.D. Admin. Code 45-06-16-03 Disclosure requirements

1.Disclosure statement. All short-term limited-duration policies as defined under North Dakota Century Code section 26.1-36-49 must contain the following disclosure on the front cover page of the policy, the certificate of coverage, and the application in large print:

THIS IS NOT A COMPREHENSIVE MAJOR MEDICAL INSURANCE POLICY.

THIS COVERAGE IS NOT REQUIRED TO COMPLY WITH CERTAIN FEDERAL MARKET

REQUIREMENTS FOR HEALTH INSURANCE, PRINCIPALLY THOSE CONTAINED IN THE

PATIENT PROTECTION AND AFFORDABLE CARE ACT. PLEASE CAREFULLY REVIEW

THE TERMS OF YOUR POLICY TO MAKE SURE YOU ARE AWARE OF ANY EXCLUSIONS

OR LIMITATIONS REGARDING COVERAGE OF PRE-EXISTING CONDITIONS OR HEALTH

BENEFITS (SUCH AS HOPITALIZATION, EMERGENCY SERVICES, MATERNITY CARE,

PREVENTATIVE CARE, PRESCRIPTION DRUGS, HABILITATIVE AND REHABILITATIVE

CARE, AND MENTAL HEALTH AND SUBSTANCE USE DISORDER SERVICES). YOUR

POLICY MIGHT ALSO HAVE LIFETIME AND/OR ANNUAL DOLLAR LIMITS ON HEALTH

BENEFITS. IF THIS COVERAGE EXPIRES OR YOU LOSE ELIGIBILITY FOR THIS

COVERAGE, YOU MAY HAVE TO WAIT UNTIL AN OPEN ENROLLMENT PERIOD TO

OBTAIN OTHER HEAL TH INSURANCE COVERAGE.

2.Outline of coverage. The outline of coverage must provide the following information:

a.Types of benefits provided.

b.Cost-sharing provisions and maximum limits.

c.Describe how benefit payments are determined.

d.Exclusions and limitations.

e.Renewability provisions.

N.D. Admin. Code 45-06-16-04 Standards of marketing

An issuer through its producers, shall:

1.Provide an outline of coverage to applicants at the time application is presented to the prospective applicant and shall obtain an acknowledgment of receipt of the outline from the applicant.

2.Establish marketing procedures to assure any comparison of policies by its agents or other producers will be fair and accurate.

3.Establish marketing procedures to assure full disclosure is given to the insured.

4.Establish auditable procedures for verifying compliance with this section.

Chapter 45-06-17 Self-Insurance Health Plans

N.D. Admin. Code 45-06-17-01 Definitions

1."Board" means the public employees retirement system board created by North Dakota Century Code section 54-52-03.

2."Commissioner" means the insurance commissioner.

3."Fiscal year" means a self-insurance health plan's twelve-month fiscal year.

4."Runoff self-insurance health plan" means a self-insurance health plan that no longer has

authority to self-fund but which continues to exist for the purpose of paying claims, preparing reports, and administering transactions associated with the period when the self-insurance health plan provided coverage.

5."Self-insurance health plan" has the same meaning as provided under North Dakota Century Code section 54-52.1-01.

6."Service company" means an entity licensed under North Dakota Century Code chapter 26.1-27 as an administrator of an entity licensed under North Dakota Century Code title 26.1 as an insurance company, health maintenance organization, or nonprofit health service corporation.

N.D. Admin. Code 45-06-17-02 Purpose

The provisions in this chapter are intended to ensure the financial integrity and the competent and equitable administration of the self-insurance health plan.

N.D. Admin. Code 45-06-17-03 Scope

This chapter applies to all self-insurance health plans established by the board as set forth in North Dakota Century Code chapter 54-52.1.

N.D. Admin. Code 45-06-17-04 Ending self-insurance health plan

1.Termination. The board may terminate its self-insurance health plan as set forth in North Dakota Century Code chapter 54-52.1. The board shall notify the commissioner of its decision to terminate within ninety days of its decision to terminate.

2.Runoff self-insurance health plan. A self-insurance health plan must continue to exist as a runoff self-insurance health plan after its authority to self-fund has ended, for the purpose of paying claims, preparing reports, and administering transactions associated with the period during which the self-insurance health plan provided coverage. A runoff self-insurance health plan must continue to comply with this chapter and with other applicable North Dakota laws and rules.

N.D. Admin. Code 45-06-17-05 Administration

1.Service company. The board may contract with one or more service companies for services necessary to conduct the day-to-day operations of the self-insurance health plan. The service company or companies must have expertise in and be licensed for the services provided to the self-insurance health plan. Subject to the oversight of the board, the service company or companies may provide, directly or through subcontractors, services directly related to the administration of coverage.

2.Recordkeeping and examination authority. A self-insurance health plan must maintain all records necessary to verify the accuracy and completeness of all reports submitted to the commissioner under section 45-06-17-07. The commissioner may examine the self-insurance health plan's records in order to verify the self-insurance health plan's compliance with this

chapter and with other statutes and rules. The provisions of North Dakota Century Code

chapter 26.1-03 apply to the commissioner's examination. All records concerning claims, reserves, financial transactions, and other matters necessary for the self-insurance health plan's operations are the self-insurance health plan's property and must be retained for the current year plus the previous five years.

N.D. Admin. Code 45-06-17-06 Reserves

A reserve must be established for all charges, claims, costs, and expenses of the self-insurance health plan. This reserve must be set at a level to cover between two and four months of expected charges, claims, costs, and expenses. The reserve must be adjusted as new information becomes available.

N.D. Admin. Code 45-06-17-07 Reporting

1.Financial statements. A self-insurance health plan must prepare annual financial statements containing a balance sheet; a statement of revenues, expenses, and surplus; a statement of changes in financial position; and a schedule of investments. The statements must be prepared on forms and according to instructions prescribed by the commissioner. The financial statements must be filed with the commissioner no later than one hundred eighty days after the end of the self-insurance health plan's fiscal year. In lieu of self-prepared financial statements, a self-insurance health plan may submit audited financial statements prepared by an independent certified public accountant. The auditor's report must be submitted no later than thirty days after completion of the audit.

2.Quarterly reports. If the commissioner determines a self-insurance health plan's financial integrity is such that the self-insurance health plan's ability to meet obligations promptly and in full will be significantly impaired, the commissioner may require the self-insurance health plan to file quarterly reports with the commissioner no later than thirty days after the end of the first, second, and third quarters of each fiscal year. The commissioner may remove the requirement to file quarterly reports when the self-insurance health plan's financial integrity is restored. A quarterly report must contain statements of the self-insurance health plan's:

a.Current total cash on hand and on deposit, and total investment;

b.Current total reserve for outstanding losses reported and unreported;

c.Gross premiums written during the quarter;

d.Losses paid during the quarter;

e.Current total members; and

f.Any other information that the commissioner requests.

N.D. Admin. Code 45-06-17-08 Trade practices

Self-insurance health plans are subject to the provisions of the unfair trade practices act found at North Dakota Century Code section 26.1-04-03.

N.D. Admin. Code 45-06-17-09 Disclosure

Each policy issued by a self-insurance health plan must contain, in at least ten-point type on the front page and declaration page, the following notice:

NOTICE

This policy is issued by a self-insurance health plan. A self-insurance health plan may not be subject to all of the insurance laws and regulations of your state. State insurance insolvency guaranty funds are not available for a self-insurance health plan.

Article 45-07 Credit Insurance

Chapter 45-07-01 Credit Life and Credit Accident [Repealed]

N.D. Admin. Code 45-07-01 Credit Life and Credit Accident [Repealed]

ARTICLE 45-07

CREDIT INSURANCE

Chapter 45-07-01Credit Life and Credit Accident [Repealed] 45-07-01.1Consumer Credit Insurance

CHAPTER 45-07-01

CREDIT LIFE AND CREDIT ACCIDENT [Repealed effective January 1, 2003]

Chapter 45-07-01.1 Consumer Credit Insurance

N.D. Admin. Code 45-07-01.1 Consumer Credit Insurance

CHAPTER 45-07-01.1

CONSUMER CREDIT INSURANCE

Section 45-07-01.1-01Definitions 45-07-01.1-02Rights and Treatment of Debtors 45-07-01.1-03Determination of Reasonableness of Benefits in Relation to Premium Charge 45-07-01.1-04Credit Life Insurance Rates 45-07-01.1-05Credit Accident and Health Insurance Rates 45-07-01.1-06Credit Unemployment Insurance Rates 45-07-01.1-07Credit Property Insurance Rates 45-07-01.1-08Refund Formulas 45-07-01.1-09Experience Reports and Adjustment of Prima Facie Rates 45-07-01.1-10Use of Rates 45-07-01.1-11Supervision of Consumer Credit Insurance Operations 45-07-01.1-12Prohibited Transactions 45-07-01.1-13Severability 45-07-01.1-01. Definitions.

As used in this chapter:

1."Affiliate" has the same meaning as defined in North Dakota Century Code section 26.1-10-01.

2."Control" has the same meaning as defined in North Dakota Century Code section 26.1-10-01.

3."Evidence of individual insurability" means a statement furnished by the debtor, as a condition of insurance becoming effective, that relates specifically to the health status or to the health or medical history of the debtor.

4."Loss ratio" means incurred claims divided by earned premiums.

5."Preexisting condition" means any condition for which the insured debtor received medical advice, consultation, or treatment within six months before the effective date of coverage. 45-07-01.1-02. Rights and treatment of debtors.

1.Termination of group consumer credit insurance policy.

a.If a debtor is covered by a group consumer credit insurance policy providing for the payment of single premiums to the insurer, or any other premium payment method which prepays coverage beyond one month, then provision shall be made by the insurer that in the event of termination of the policy for any reason, insurance coverage with respect to any debtor insured under the policy shall be continued for the entire period for which the premium has been paid.

b.If a debtor is covered by a group consumer credit insurance policy providing for the payment of premiums to the insurer on a monthly basis, then the policy shall provide that, in the event of termination of the policy, termination notice shall be given to the insured debtor at least thirty days prior to the effective date of termination except when replacement of the coverage by the same or another insurer in the same or greater amount takes place without lapse of coverage. The insurer shall provide or cause to be provided this required information to the debtor.

2.Remittance of premiums. If the creditor adds identifiable insurance charges or premiums for consumer credit insurance to the debt, and any direct or indirect finance, carrying, credit, or service charge is made to the debtor on the insurance charges or premiums, the creditor must remit and the insurer shall collect the premium within sixty days after it is added to the debt.

3.Refinancing of the debt. If the debt is discharged due to refinancing prior to the scheduled maturity date, the insurance in force shall be terminated before any new insurance may be issued in connection with the refinanced debt. In all cases of termination prior to scheduled maturity, a refund of all unearned premium or unearned insurance charges paid by the debtor shall be paid or credited to the debtor as provided in section 45-07-01.1-08. In any refinancing of the debt, the effective date of the coverage as respects any policy provision shall be deemed to be the first date on which the debtor became insured under the policy with respect to the debt which was refinanced, at least to extent of the amount and term of the debt outstanding at the time of refinancing of the debt.

4.Maximum aggregate provisions. A provision in an individual policy or group certificate which sets a maximum limit on total claim payments must apply only to that individual policy or group certificate.

5.Prepayment of debt. If a debtor prepays the debt in full, then any consumer credit insurance covering the debt shall be terminated and an appropriate refund of the consumer credit insurance premium shall be paid or credited to the debtor in accordance with section 45-07-01.1-08. However, if the prepayment is a result of death or any other lump sum consumer credit insurance payment, no refund shall be required for the coverage under which the lump sum was paid. If a claim under credit accident and health coverage or credit unemployment coverage is in progress at the time of prepayment, the amount of refund may be determined as if the prepayment did not occur until the payment of benefits terminates. No refund need be paid during any period of disability for which credit accident and health benefits are payable or during any period of unemployment for which credit unemployment benefits are payable. A refund shall be computed as if prepayment occurred at the end of the disability period or at the end of the unemployment period. 45-07-01.1-03. Determination of reasonableness of benefits in relation to premium charge.

1.Benefits provided by consumer credit insurance policies must be reasonable in relation to the premium charged. Premium rates charged for credit life or disability satisfy this requirement if the premium rate charged develops or may reasonably be expected to develop a loss ratio of not less than forty-five percent. With the exception of deviations approved under section 45-07-01.1-10, the rates shown in sections 45-07-01.1-04 and 45-07-01.1-05, as adjusted pursuant to section 45-07-01.1-09, shall be presumed to satisfy this standard. Anticipated losses that develop or are expected to develop a loss ratio of not less than forty-five percent shall be presumed reasonable. Any insurer filing a deviation in accordance with section 45-07-01.1-10 must satisfy the sixty percent loss ratio standard on its total consumer credit insurance business, including that of affiliated insurers, for each type of insurance defined in North Dakota Century Code section 26.1-37-02 for which the deviation is being filed.

2.Premium rates charged for credit unemployment or credit property satisfy this requirement if anticipated losses are expected to develop a loss ratio of no less than forty-five percent.

3.Nonstandard coverage. If any insurer files for approval of any form providing coverage different than that described in sections 45-07-01.1-04 through 45-07-01.1-06, the insurer shall demonstrate to the satisfaction of the commissioner that the premium rates to be charged for such coverage are:

a.Reasonably expected to develop a loss ratio of not less than sixty percent; or

b.Actuarially consistent with the rates used for standard coverages. 45-07-01.1-04. Credit life insurance rates.

1.Premium rate. Subject to the conditions and requirements in subsection 2 and section 45-07-01.1-10, the prima facie rates shown below are considered to meet the requirements of

section 45-07-01.1-03 and may be used without filing additional actuarial support.

a.Monthly outstanding balance basis: Sixty-two cents per month per one thousand dollars of outstanding insured debt on single life insurance and one dollar five cents per month per one thousand dollars of outstanding insured debt on joint life insurance if premiums are payable on a monthly outstanding balance basis.

b.Single premium basis: If the premium is charged on a single premium basis, the rate shall be computed according to the following formula or according to a formula approved by the commissioner which produces rates substantially the same as those produced by the following formula:

S p = Single premium per one hundred dollars of initial consumer credit life insurance coverage.

O p = Sixty-two cents, the prima facie consumer credit life insurance premium rate for monthly outstanding balance coverage from subdivision a.

I t = The scheduled amount of insurance for month t.

I i = Initial amount of insurance. For a net insurance policy, I i equals the initial principal balance of the loan. dis = .0028, representing an annual discount rate of three percent for interest plus four-tenths percent for mortality. n = The number of months in the term of the insurance.

c.If the benefits provided are other than those described in the introduction to this subsection, premium rates for such benefits shall be actuarially consistent with the rates provided in subdivisions a and b.

d.If life coverage is sold on a joint basis involving two people, the factor for calculating the rate is 1.7.

2.Conditions and requirements.

a.Coverage may exclude death resulting from:

(1)War or any act of war;

(2)Suicide within one year after the effective date of the coverage;

(3)A preexisting condition that causes or substantially contributes to death within twelve months of the effective date of coverage; or (4)Terminal illness with a life expectancy of twelve months or less which was diagnosed prior to the effective date of coverage.

b.The effective date of coverage for that part of the insurance attributable to a different advance or a charge to the plan account is the date on which the advance or charge occurs.

c.An age restriction may be included provided coverage continues until at least age seventy.

d.Guaranteed issue amount. An insurer must issue an amount up to five thousand dollars without regard to a debtor's or creditor's health status. An amount in excess of five thousand dollars may be denied based upon the company's underwriting determination.

An insurer may apply the exclusions set forth in subdivision a to the entire amount.

History: Effective January 1, 2003; amended effective April 1, 2021. 45-07-01.1-05. Credit accident and health insurance rates.

1.Premium rate. Subject to the conditions and requirements in subsection 5 and section 45-07-01.1-10, the prima facie rates shown below are considered to meet the requirements of

section 45-07-01.1-03 and may be used without filing additional actuarial support.

a.If premiums are payable on a single premium basis for the duration of the coverage, the prima facie rate per one hundred dollars of initial insured debt for single accident and health insurance is as set forth in the table below (rates for monthly periods other than those listed shall be interpolated or extrapolated):

Number of Equal Monthly Installments Fourteenth Disability, Retroactive to Fire Day Fourteenth Disability After Thirtieth Disability, Retroactive to First Day Thirtieth Day 6$1.31$.83$1.05$.55 121.881.301.51.94 242.541.852.031.39 363.012.232.381.70 483.402.562.651.94 603.742.832.892.16 724.003.063.062.32 844.173.243.182.43 964.303.383.272.51 1084.403.503.342.58 1204.473.603.402.62

b.If premiums are paid on the basis of a premium rate per month per thousand of outstanding insured gross debt, these premiums shall be computed according to the following formula or according to a formula approved by the commissioner which produces rates actuarially consistent with the single premium rates in subdivision a of subsection 1:

Where SP = Single premium rate per one hundred dollars of initial insured debt repayable in n equal monthly installments as shown in subdivision a.

OP = Monthly outstanding balance premium rate per one thousand dollars. n = The number of months in the term of the insurance. dis = .0025, representing an annual discount rate of three percent for interest.

c.If the coverage provided is a constant maximum indemnity for a given period of time, the actuarial equivalent of subdivisions a and b shall be used.

d.If the coverage provided is a combination of a constant maximum indemnity for a given period of time after which the maximum indemnity begins to decrease in even amounts per month, an appropriate combination of the premium rate for a constant maximum indemnity for a given period of time and the premium rate for a maximum indemnity which decreases in even amounts per month shall be used.

e.The outstanding balance rate for credit accident and health insurance may be either a term-specified rate or may be a single composite term outstanding balance rate.

2.Subject to the conditions and requirements in subsection 5 and section 45-07-01.1-10, the prima facie rates for credit accident and health insurance shown below are considered to meet the requirements of section 45-07-01.1-03 in the situation where the insurance is written on an open-end loan. These prima facie rates and the formulae used to calculate them may be used without filing additional actuarial support. Other formulae to convert from a closed-end credit rate to an open-end credit rate may be used if approved by the commissioner.

a.If the maximum benefit of the insurance equals the net debt on the date of disability, the term of the loan is calculated according to the formula: 1/(minimum payment percent).

The prima facie rate is determined by applying the calculated term to the rates shown in subsection 1. A composite minimum payment percentage may be used in place of the minimum payment percentage for a specific credit transaction.

b.If the maximum benefit of the insurance equals the outstanding balance of the loan on the date of disability plus any interest accruing on that amount during disability, the term of the insurance (n) is estimated by using the following formula: where: i = interest rate on the account or a composite interest rate used for the type of policy; x = monthly payment per one thousand dollars of coverage consistent with the term calculated above; and v = 1/(1 + i).

The calculated value of the term is used to look up an initial rate in subsection 1. The final prima facie rate is calculated by multiplying the initial rate by: the adjustment n/an where: n is the term calculated above; and a = ( 1 - v )/i.

3.If the accident and health coverage is sold on a joint basis involving two people, the factor for calculating the rate is 1.8.

4.If the benefits provided are other than those described in subsection 1 or 2, rates for those benefits shall be actuarially consistent with rates provided in subsections 1 and 2.

5.The premium rates in subsection 1 shall apply to contracts providing credit accident and health insurance and that contain the provisions below:

a.Coverage may be excluded for disabilities resulting from:

(1)Normal pregnancy;

(2)War or any act of war;

(3)Elective surgery;

(4)Intentionally self-inflicted injury;

(5)Sickness or injury caused by or resulting from the use of alcoholic beverages or narcotics, including hallucinogens, unless they are administered on the advice of and taken as directed, by a licensed physician other than the insured;

(6)Flight in any aircraft other than a commercial scheduled aircraft; or (7)A preexisting condition from which the insured debtor becomes disabled within six months after the effective date of coverage.

b.For the preexisting condition exclusion above, the effective date of coverage for that part of the insurance attributable to a different advance or a charge to the plan account may be the date on which the advance or charge occurs.

c.A definition of disability providing that for the first twelve months of disability, total disability shall be defined as the inability to perform the essential functions of the insured's own occupation. Thereafter, it shall mean the inability of the insured to perform the essential functions of any occupation for which the insured is reasonably suited by virtue of education, training, or experience.

d.No employment requirement more restrictive than one requiring that the debtor be employed full time on the effective date of coverage and for at least twelve consecutive months prior to the effective date of coverage. "Full time" means a regular workweek of not less than thirty hours.

e.An age restriction providing that no insurance will become effective on debtors on or after the attainment of age sixty-six and that all insurance will terminate upon attainment by the debtor of age sixty-six.

f.A daily benefit of not less than one-thirtieth of the monthly benefit payable under the policy.

g.Guaranteed issue. An insurer must issue a benefit amount up to five thousand dollars without regard to a debtor's or creditor's health status. A credit accident and health insurance benefit amount in excess of five thousand dollars may be denied based upon the company's underwriting determination. The benefit amount for credit accident and health insurance is defined as the monthly disability payment times the maximum number of payments payable.

History: Effective January 1, 2003; amended effective April 1, 2021. 45-07-01.1-06. Credit unemployment insurance rates.

1.Each insurer filing rates for credit unemployment insurance shall include in its rate filing with the commissioner the appropriate rate formula upon which its rates are based, including a provision for anticipated losses. Anticipated losses that develop or are expected to develop a loss ratio of not less than forty-five percent shall be presumed reasonable. Anticipated losses may include an amount for fluctuation in loss due to catastrophe based on the experience of at least the latest nine policy years or as long as the company has been writing this line of business. If coverage is sold on a joint basis involving two people, the factor for calculating the rate is 1.8.

2.Credit unemployment insurance policies must contain benefits at least as favorable to insureds as the provisions below:

a.Coverage for unemployment for any reason, except that coverage may be excluded for:

(1)Voluntary forfeiture of salary, wage, or other employment income;

(2)Resignation;

(3)Retirement;

(4)General strike;

(5)Illegal walkout;

(6)War;

(7)Separation from the military;

(8)Willful misconduct or criminal misconduct or unlawful behavior; and (9)Disability caused by injury, sickness, or pregnancy.

b.For credit unemployment insurance which provides for a monthly benefit in the event of unemployment, benefits must start after a waiting period of not longer than thirty days but need not be retroactive to the first day of unemployment and must have a maximum benefit period that is no shorter than six months.

3.Credit unemployment insurance policies may not contain eligibility requirements more restrictive than the restrictions below:

a.Exclusion from qualification for coverage:

(1)Self-employed individuals;

(2)Workers in seasonal or temporary jobs, defined as jobs designed to last six consecutive months or less; and (3)Debtors who have been notified either orally or in writing of any layoff or of employment termination either now or within the next sixty days.

This exclusion must be disclosed to all prospective insureds.

b.No employment requirement more restrictive than one requiring that the debtor be employed full time on the effective date of coverage for at least twelve consecutive months prior to the effective date of coverage. "Full time" means a regular workweek of not less than thirty hours.

c.An age restriction providing that no insurance will become effective on debtors on or after the attainment of age sixty-six and that all insurance will terminate upon attainment by the debtor of age sixty-six. 45-07-01.1-07. Credit property insurance rates.

1.Each insurer filing rates for credit property insurance shall include in its rate filing with the commissioner the appropriate rate formula upon which its rates are based, including a provision for anticipated losses. Anticipated losses that develop or are expected to develop a loss ratio of no less than forty-five percent shall be presumed to be reasonable. Anticipated losses may include an amount for fluctuation in loss due to catastrophe.

2.Credit property rates must provide for at a minimum the following coverages found in the standard fire policy and extended coverage endorsement: fire, lightning, riot, riot attending a strike, civil commotion, smoke, aircraft and vehicle damage, windstorm, hail, and explosion. 45-07-01.1-08. Refund formulas.

1.In the event of termination, no charge for consumer credit insurance may be made for the first fifteen days of a month and a full month may be charged for sixteen days or more of a month.

2.The requirements of the consumer credit insurance law that refund formulas be filed with the commissioner shall be considered fulfilled if the refund formulas are set forth in the individual policy or group certificate filed with the commissioner.

3.No refund of five dollars or less need be made. 45-07-01.1-09. Experience reports and adjustment of prima facie rates.

1.The commissioner will, on a triennial basis, beginning January 1, 2006, review the loss ratio standards set forth in section 45-07-01.1-03 and the prima facie rates set forth in sections 45-07-01.1-04 and 45-07-01.1-05 and determine therefrom the rate of expected claims on a statewide basis, compare such rate of expected claims with the rate of actual claims for the preceding three years determined from the incurred claims and earned premiums at prima facie rates reported in the annual statement supplement or other available source, and publish the adjusted actual statewide prima facie rates to be used by insurers during the next triennium. The rates will reflect the difference between:

a.Actual claims based on experience; and

b.Expected claims based on the loss ratio standards set forth in section 45-07-01.1-03 applied to the prima facie rates set forth in sections 45-07-01.1-04 and 45-07-01.1-05.

2.The commissioner will, on a triennial basis, review the discount rates for interest included in the formulae in subsection 1 of section 45-07-01.1-04 and subsection 1 of section 45-07-01.1-05 and has the discretion to adjust those discount rates. 45-07-01.1-10. Use of rates.

1.Use of prima facie rates. An insurer that files rates or has rates on file that are equivalent to the prima facie rates shown in sections 45-07-01.1-04 and 45-07-01.1-05, to the extent adjusted pursuant to section 45-07-01.1-09, may use those rates without further proof of their reasonableness.

2.Use of rates higher than prima facie rates. An insurer may file for approval of and use rates that are higher than the prima facie rates shown in sections 45-07-01.1-04 and 45-07-01.1-05, to the extent adjusted pursuant to section 45-07-01.1-09, as long as the filed rates are consistent with the provisions of section 45-07-01.1-03.

If rates higher than the prima facie rates shown in sections 45-07-01.1-04 and 45-07-01.1-05, to the extent adjusted pursuant to section 45-07-01.1-09, are filed for approval, the filing shall specify the account or accounts to which the rates apply. The rates may be:

a.Applied uniformly to all accounts of the insurer;

b.Applied on an equitable basis approved by the commissioner to only one or more accounts of the insurer for which the experience has been less favorable than expected; or

c.Applied according to a case-rating procedure on file with the commissioner.

3.Approval period of deviated rates.

a.A rate that deviates from a prima facie rate will be in effect for a period of time not longer than the experience period used to establish the rate, i.e., one year, two years, or three years. An insurer may file for a new rate before the end of a rate period but not more often than once during any twelve-month period.

b.Notwithstanding the provision of subsection 1, if an account changes insurers, the rate approved to be used for the account by the prior insurer is the maximum rate that may be used by the succeeding insurer for the remainder of the rate approval period approved for the prior insurer or until a new rate is approved for use on the account, if sooner.

4.Use of rates lower than filed rates. An insurer may at any time use a rate for an account that is lower than its filed rate without notice to the commissioner.

5.Glossary of terms and definitions.

a."Experience" means "earned premiums" and "incurred losses" during the experience period.

b."Experience period" means the most recent period of time for which earned premiums and incurred losses are reported but not for a period longer than three full years.

c."Incurred losses" means total claims paid during the experience period, adjusted for the change in claim reserve. 45-07-01.1-11. Supervision of consumer credit insurance operations.

1.Each insurer transacting credit insurance in this state shall be responsible for conducting a thorough periodic triennial review of creditors with respect to their credit insurance business with such creditors to assure compliance with the insurance laws of this state and the

regulation promulgated by the commissioner.

2.Written records of such reviews shall be maintained by the insurer for review by the commissioner. 45-07-01.1-12. Prohibited transactions.

The following practices, when engaged in by insurers in connection with the sale or placement of credit insurance, or as an inducement thereto, shall constitute unfair methods of competition and shall be subject to the Unfair Trade Practices Act of this state.

1.The offer or grant by an insurer to a creditor of any special advantage or any service not set out in either the group insurance contract or in the agency contract, other than the payment of agent's commissions;

2.Agreement by an insurer to deposit with a bank or financial institution money or securities of the insurer with the design or intent that the same shall affect or take the place of a deposit of money or securities which otherwise would be required of the creditor by the bank or financial institution as a compensating balance or offsetting deposit for a loan or other advancement; and

3.Deposit by an insurer of money or securities without interest or at a lesser rate of interest than is currently being paid by the creditor, bank, or financial institution to other depositors of like amounts for similar durations. This subsection shall not be construed to prohibit the maintenance by an insurer of such demand deposits or premium deposit accounts as are reasonably necessary for use in the ordinary course of the insurer's business. 45-07-01.1-13. Severability.

If any provision or clause of this chapter or the application thereof to any person or situation is held invalid, such invalidity shall not affect any other provision or application of the chapter which can be given effect without the invalid provision or application, and to this end the provisions of this chapter are declared severable.

Article 45-08 Group Insurance

Chapter 45-08-01 Coordination of Benefits under Group Coverages

N.D. Admin. Code 45-08-01 Coordination of Benefits under Group Coverages

ARTICLE 45-08

GROUP INSURANCE

Chapter 45-08-01Coordination of Benefits Under Group Coverages [Superseded] 45-08-01.1Coordination of Benefits Regulation [Superseded] 45-08-01.2Coordination of Benefits Regulation 45-08-02Group Coverage Discontinuance and Replacement Model Regulation 45-08-03Group Substance Abuse and Mental Care Insurance [Repealed]

CHAPTER 45-08-01

COORDINATION OF BENEFITS UNDER GROUP COVERAGES [Superseded by Chapter 45-08-01.1]

Chapter 45-08-01.1 Coordination of Benefits Regulation

N.D. Admin. Code 45-08-01.1 Coordination of Benefits Regulation

CHAPTER 45-08-01.1

COORDINATION OF BENEFITS REGULATION [Superseded by Chapter 45-08-01.2]

Chapter 45-08-01.2 Coordination of Benefits Regulation

N.D. Admin. Code 45-08-01.2 Coordination of Benefits Regulation

CHAPTER 45-08-01.2

COORDINATION OF BENEFITS REGULATION

Section 45-08-01.2-01Definitions 45-08-01.2-02Applicability and Scope 45-08-01.2-03Use of Model Coordination of Benefits Contract Provisions 45-08-01.2-04Rules for Coordination of Benefits 45-08-01.2-05Procedure to Be Followed by Secondary Plan to Calculate Benefits and Pay a Claim 45-08-01.2-06Miscellaneous Provisions 45-08-01.2-07Effective Date for Existing Contracts 45-08-01.2-01. Definitions.

As used in this chapter, these words and terms have the following meanings, unless the context clearly indicates otherwise: 1.a."Allowable expense", except as set forth below or when a statute requires a different definition, means any health care expense, including coinsurance or copayments and without reduction for any applicable deductible, that is covered in full or in part by any of the plans covering the person.

b.If a plan is advised by a covered person that all plans covering the person are high-deductible health plans and the person intends to contribute to a health savings account established in accordance with section 223 of the Internal Revenue Code of 1986, the primary high-deductible health plan's deductible is not an allowable expense, except for any health care expense incurred that may not be subject to the deductible as described in section 223(c)(2)(C) of the Internal Revenue Code of 1986.

c.An expense or a portion of an expense that is not covered by any of the plans is not an

d.Any expense that a provider by law or in accordance with a contractual agreement is prohibited from charging a covered person is not an allowable expense.

e.The following are examples of expenses that are not allowable expenses:

(1)If a person is confined in a private hospital room, the difference between the cost of a semiprivate room in the hospital and the private room is not an allowable expense, unless one of the plans provides coverage for private hospital room expenses.

(2)If a person is covered by two or more plans that compute their benefit payments on the basis of usual and customary fees or relative value schedule reimbursement or other similar reimbursement methodology, any amount charged by the provider in excess of the highest reimbursement amount for a specified benefit is not an (3)If a person is covered by two or more plans that provide benefits or services on the

basis of negotiated fees, any amount in excess of the highest of the negotiated fees is not an allowable expense.

(4)If a person is covered by one plan that calculates its benefits or services on the

basis of usual and customary fees or relative value schedule reimbursement or other similar reimbursement methodology and another plan that provides its benefits or services on the basis of negotiated fees, the primary plan's payment arrangement shall be the allowable expense for all plans. However, If the provider has contracted with the secondary plan to provide the benefit or service for a specific negotiated fee or payment amount that is different than the primary plan's payment arrangement and if the provider's contract permits, that negotiated fee or payment shall be the allowable expense used by the secondary plan to determine its benefits.

f.The definition of "allowable expense" may exclude certain types of coverage or benefits such as dental care, vision care, prescription drugs, or hearing aids. A plan that limits the application of coordination of benefits to certain coverages or benefits may limit the definition of allowable expense in its contract to expenses that are similar to the expenses that it provides. When coordination of benefits is restricted to specific coverages or benefits in a contract, the definition of allowable expense shall include similar expenses to which coordination of benefits applies.

g.When a plan provides benefits in the form of services, the reasonable cash value of each service will be considered an allowable expense and a benefit paid.

h.The amount of the reduction may be excluded from allowable expense when a covered person's benefits are reduced under a primary plan:

(1)Because the covered person does not comply with the plan provisions concerning second surgical opinions or precertification of admissions or services; or (2)Because the covered person has a lower benefit because the covered person did not use a preferred provider.

2."Birthday" refers only to month and day in a calendar year and does not include the year in which the individual is born.

3."Claim" means a request that benefits of a plan be provided or paid. The benefits claimed may be in the form of:

a.Services, including supplies;

b.Payment for all or a portion of the expenses incurred;

c.A combination of subdivisions a and b; or

d.An indemnification.

4."Closed panel plan" means a plan that provides health benefits to covered persons primarily in the form of services through a panel of providers that have contracted with or are employed by the plan, and that excludes benefits for services provided by other providers, except in cases of emergency or referral by a panel member.

5."Consolidated Omnibus Budget Reconciliation Act of 1985" or "COBRA" means coverage provided under a right of continuation pursuant to federal law.

6."Coordination of benefits" or "COB" means a provision establishing an order in which plans pay their claims, and permitting secondary plans to reduce their benefits so that the combined benefits of all plans do not exceed total allowable expenses.

7."Custodial parent" means:

a.The parent awarded custody of a child by a court decree; or

b.In the absence of a court decree, the parent with whom the child resides more than one-half of the calendar year without regard to any temporary visitation. 8.a."Group-type contract" means a contract that is not available to the general public and is obtained and maintained only because of membership in or a connection with a particular organization or group, including blanket coverage.

b."Group-type contract" does not include an individually underwritten and issued guaranteed renewable policy even if the policy is purchased through payroll deduction at a premium savings to the insured since the insured would have the right to maintain or renew the policy independently of continued employment with the employer.

9."High-deductible health plan" has the meaning given the term under section 223 of the Internal Revenue Code of 1986, as amended by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. 10.a."Hospital indemnity benefits" means benefits not related to expenses incurred.

b."Hospital indemnity benefits" does not include reimbursement-type benefits even if they are designed or administered to give the insured the right to elect indemnity-type benefits at the time of claim. 11.a."Plan" means a form of coverage with which coordination is allowed. Separate parts of a plan for members of a group that are provided through alternative contracts that are intended to be part of a coordinated package of benefits are considered one plan and there is no coordination of benefits among the separate parts of the plan.

b.If a plan coordinates benefits, its contract shall state the types of coverage that will be considered in applying the coordination of benefits provision of that contract. Whether the contract uses the term "plan" or some other term such as "program", the contractual definition may be no broader than the definition of "plan" in this subsection. The definition of "plan" in the model coordination of benefits provision in appendix A is an example.

c."Plan" includes:

(1)Group and nongroup insurance contracts and subscriber contracts;

(2)Uninsured arrangements of group or group-type coverage;

(3)Group and nongroup coverage through closed panel plans;

(4)Group-type contracts;

(5)The medical care components of long-term care contracts, such as skilled nursing care;

(6)The medical benefits coverage in automobile "no-fault" and traditional automobile "fault" type contracts subject to the provisions of the North Dakota no-fault coordination of benefits provisions as set forth in subsection 3 of section 26.1-41-13; and (7)Medicare or other governmental benefits, as permitted by law, except as provided in paragraph 8 of subdivision d. That part of the definition of plan may be limited to the hospital, medical, and surgical benefits of the governmental program.

d."Plan" does not include:

(1)Hospital indemnity coverage benefits or other fixed indemnity coverage;

(2)Accident only coverage;

(3)Specified disease or specified accident coverage;

(4)Limited benefit health coverage;

(5)School accident-type coverages that cover students for accidents only, including athletic injuries, either on a twenty-four-hour basis or on a "to and from school"

basis;

(6)Benefits provided in long-term care insurance policies for nonmedical services, for example, personal care, adult day care, homemaker services, assistance with activities of daily living, respite care, and custodial care or for contracts that pay a fixed daily benefit without regard to expenses incurred or the receipt of services;

(7)Medicare supplement policies;

(8)A state plan under Medicaid; or (9)A governmental plan, which by law, provides benefits that are in excess of those of any private insurance plan or other nongovernmental plan.

12."Policyholder" means the primary insured named in a nongroup insurance policy.

13."Primary plan" means a plan whose benefits for a person's health care coverage must be determined without taking the existence of any other plan into consideration. A plan is a primary plan if:

a.The plan either has no order of benefit determination rules, or its rules differ from those permitted by this regulation; or

b.All plans that cover the person use the order of benefit determination rules required by this regulation, and under those rules the plan determines its benefits first.

14."Secondary plan" means a plan that is not a primary plan. 45-08-01.2-02. Applicability and scope.

This chapter applies to all plans that are issued on or after the effective date of this chapter. 45-08-01.2-03. Use of model coordination of benefits contract provisions.

1.Appendix A contains a model coordination of benefits provision for use in contracts. The use of this model coordination of benefits provision is subject to the provisions of subsections 2, 3, and 4 and to the provisions of section 45-08-01.2-04.

2.Appendix B is a plain language description of the coordination of benefits process that explains to the covered person how health plans will implement coordination of benefits. It is not intended to replace or change the provisions that are set forth in the contract. Its purpose is to explain the process by which the two or more plans will pay for or provide benefits.

3.The coordination of benefits provision contained in appendix A and the plain language explanation in appendix B do not have to use the specific words and format shown in

appendix A or appendix B. Changes may be made to fit the language and style of the rest of the contract or to reflect differences among plans that provide services, that pay benefits for expenses incurred, and that indemnify. No substantive changes are permitted.

4.A coordination of benefits provision may not be used that permits a plan to reduce its benefits on the basis that:

a.Another plan exists and the covered person did not enroll in that plan;

b.A person is or could have been covered under another plan, except with respect to part B of Medicare; or

c.A person has elected an option under another plan providing a lower level of benefits than another option that could have been elected.

5.No plan may contain a provision that its benefits are "always excess" or "always secondary" except in accordance with the rules permitted by this regulation.

6.Under the terms of a closed panel plan, benefits are not payable if the covered person does not use the services of a closed panel provider. In most instances, coordination of benefits does not occur if a covered person is enrolled in two or more closed panel plans and obtains services from a provider in one of the closed panel plans because the other closed panel plan (the one whose providers were not used) has no liability. However, coordination of benefits may occur during the plan year when the covered person receives emergency services that would have been covered by both plans. Then the secondary plan shall use the provisions of

section 45-08-01.2-05 to determine the amount it should pay for the benefit.

7.No plan may use a coordination of benefits provision, or any other provision that allows it to reduce its benefits with respect to any other coverage its insured may have that does not meet the definition of plan under subsection 11 of section 45-08-01.2-01. 45-08-01.2-04. Rules for coordination of benefits.

When a person is covered by two or more plans, the rules for determining the order of benefit payments are as follows: 1.a.The primary plan shall pay or provide its benefits as if the secondary plan or plans did not exist.

b.If the primary plan is a closed panel plan and the secondary plan is not a closed panel plan, the secondary plan shall pay or provide benefits as if it were the primary plan when a covered person uses a nonpanel provider, except for emergency services or authorized referrals that are paid or provided by the primary plan.

c.When multiple contracts providing coordinated coverage are treated as a single plan under this chapter, this section applies only to the plan as a whole, and coordination among the component contracts is governed by the terms of the contracts. If more than one carrier pays or provides benefits under the plan, the carrier designated as primary within the plan shall be responsible for the plan's compliance with this regulation.

d.If a person is covered by more than one secondary plan, the order of benefit determination rules of this chapter decide the order in which secondary plans benefits are determined in relation to each other. Each secondary plan shall take into consideration the benefits of the primary plan or plans and the benefits of any other plan, which under the rules of this chapter, has its benefits determined before those of that secondary plan. 2.a.Except as provided in subdivision b, a plan that does not contain order of benefit determination provisions that are consistent with this chapter is always the primary plan unless the provisions of both plans, regardless of the provisions of this subdivision, state that the complying plan is primary.

b.Coverage that is obtained by virtue of membership in a group and designed to supplement a part of a basic package of benefits may provide that the supplementary coverage shall be excess to any other parts of the plan provided by the contractholder.

Examples of these types of situations are major medical coverages that are superimposed over base plan hospital and surgical benefits, and insurance-type coverages that are written in connection with a closed panel plan to provide out-of-network benefits.

3.A plan may take into consideration the benefits paid or provided by another plan only when, under the rules of this chapter, it is secondary to that other plan.

4.Order of benefits determination. Each plan determines its order of benefits using the first of the following rules that applies:

a.Nondependent or dependent.

(1)Subject to paragraph 2, the plan that covers the person other than as a dependent, for example as an employee, member, subscriber, policyholder, or retiree, is the primary plan and the plan that covers the person as a dependent is the secondary (2)(a)If the person is a Medicare beneficiary, and, as a result of the provisions of title XVIII of the Social Security Act and implementing regulations, Medicare is: [1]Secondary to the plan covering the person as a dependent; and [2]Primary to the plan covering the person as other than a dependent (e.g., a retired employee).

(b)Then the order of benefits is reversed so that the plan covering the person as an employee, member, subscriber, policyholder, or retiree is the secondary plan and the other plan covering the person as a dependent is the primary

b.Dependent child covered under more than one plan. Unless there is a court decree stating otherwise, plans covering a dependent child shall determine the order of benefits as follows:

(1)For a dependent child whose parents are married or are living together, whether or not they have ever been married:

(a)The plan of the parent whose birthday falls earlier in the calendar year is the primary plan; or (b)If both parents have the same birthday, the plan that has covered the parent longest is the primary plan.

(2)For a dependent child whose parents are divorced or separated or are not living together, whether or not they have ever been married:

(a)If a court decree states that one of the parents is responsible for the dependent child's health care expenses or health care coverage and the plan of that parent has actual knowledge of those terms, that plan is primary. If the parent with responsibility has no health care coverage for the dependent child's health care expenses, but that parent's spouse does, that parent's spouse's plan is the primary plan. This item shall not apply with respect to any plan year during which benefits are paid or provided before the entity has actual knowledge of the court decree provisions;

(b)If a court decree states that both parents are responsible for the dependent child's health care expenses or health care coverage, the provisions of paragraph 1 shall determine the order of benefits;

(c)If a court decree states that the parents have joint custody without specifying that one parent has responsibility for the health care expenses or health care coverage of the dependent child, the provisions of paragraph 1 shall determine the order of benefits; or (d)If there is no court decree allocating responsibility for the child's health care expenses or health care coverage, the order of benefits for the child are as follows: [1]The plan covering the custodial parent; [2]The plan covering the custodial parent's spouse; [3]The plan covering the noncustodial parent; and then [4]The plan covering the noncustodial parent's spouse.

(3)For a dependent child covered under more than one plan of individuals who are not the parents of the child, the order of benefits shall be determined, as applicable, under paragraph 1 or 2 as if those individuals were parents of the child.

c.Active employee or retired or laid-off employee.

(1)The plan that covers a person as an active employee that is an employee who is neither laid off nor retired or as a dependent of an active employee is the primary plan. The plan covering that same person as a retired or laid-off employee or as a dependent of a retired or laid-off employee is the secondary plan.

(2)If the other plan does not have this rule, and as a result, the plans do not agree on the order of benefits, this rule is ignored.

(3)This rule does not apply if the rule in subdivision a can determine the order of benefits.

d.COBRA or state continuation coverage.

(1)If a person whose coverage is provided pursuant to COBRA or under a right of continuation pursuant to state or other federal law is covered under another plan, the plan covering the person as an employee, member, subscriber, or retiree or covering the person as a dependent of an employee, member, subscriber, or retiree is the primary plan and the plan covering that same person pursuant to COBRA or under a right of continuation pursuant to state or other federal law is the secondary (2)If the other plan does not have this rule, and if as a result, the plans do not agree on the order of benefits, this rule is ignored.

(3)This rule does not apply if the rule in subdivision a can determine the order of benefits.

e.Longer or shorter length of coverage.

(1)If the preceding rules do not determine the order of benefits, the plan that covered the person for the longer period of time is the primary plan and the plan that covered the person for the shorter period of time is the secondary plan.

(2)To determine the length of time a person has been covered under a plan, two successive plans shall be treated as one if the covered person was eligible under the second plan within twenty-four hours after coverage under the first plan ended.

(3)The start of a new plan does not include:

(a)A change in the amount or scope of a plan's benefits;

(b)A change in the entity that pays, provides, or administers the plan's benefits; or (c)A change from one type of plan to another, such as, from a single employer plan to a multiple employer plan.

(4)The person's length of time covered under a plan is measured from the person's first date of coverage under that plan. If that date is not readily available for a group plan, the date the person first became a member of the group shall be used as the date from which to determine the length of time the person's coverage under the present plan has been in force.

f.If none of the preceding rules determines the order of benefits, the allowable expenses shall be shared equally between the plans. 45-08-01.2-05. Procedure to be followed by secondary plan to calculate benefits and pay a claim.

In determining the amount to be paid by the secondary plan on a claim, should the plan wish to coordinate benefits, the secondary plan shall calculate the benefits it would have paid on the claim in the absence of other health care coverage and apply that calculated amount to any allowable expense under its plan that is unpaid by the primary plan. The secondary plan may reduce its payment by the amount so that, when combined with the amount paid by the primary plan, the total benefits paid or provided by all plans for the claim do not exceed one hundred percent of the total allowable expense for that claim. In addition, the secondary plan shall credit to its plan deductible any amounts it would have credited to its deductible in the absence of other health care coverage. 45-08-01.2-06. Miscellaneous provisions.

1.A secondary plan that provides benefits in the form of services may recover the reasonable cash value of the services from the primary plan, to the extent that benefits for the services are covered by the primary plan and have not already been paid or provided by the primary plan. Nothing in this provision shall be interpreted to require a plan to reimburse a covered person in cash for the value of services provided by a plan that provides benefits in the form of services. 2.a.A plan with order of benefits determination rules that comply with this chapter (complying plan) may coordinate its benefits with a plan that is "excess" or "always secondary" or that uses order of benefits determination rules that are inconsistent with those contained in this chapter (noncomplying plan) on the following basis:

(1)If the complying plan is the primary plan, it shall pay or provide its benefits first;

(2)If the complying plan is the secondary plan, it shall pay or provide its benefits first, but the amount of the benefits payable shall be determined as if the complying plan were the secondary plan. In such a situation, the payment shall be the limit of the complying plan's liability; and (3)If the noncomplying plan does not provide the information needed by the complying plan to determine its benefits within a reasonable time after it is requested to do so, the complying plan shall assume that the benefits of the noncomplying plan are identical to its own, and shall pay its benefits accordingly. If within two years of payment the complying plan receives information as to the actual benefits of the noncomplying plan, it shall adjust payments accordingly.

b.If the noncomplying plan reduces its benefits so that the covered person receives less in benefits than the covered person would have received had the complying plan paid or provided its benefits as the secondary plan and the noncomplying plan paid or provided its benefits as the primary plan, and governing state law allows the right of subrogation set forth below, then the complying plan shall advance to the covered person or on behalf of the covered person an amount equal to the difference.

c.In no event shall the complying plan advance more than the complying plan would have paid had it been the primary plan less any amount it previously paid for the same expense or service. In consideration of the advance, the complying plan shall be subrogated to all rights of the covered person against the noncomplying plan. The advance by the complying plan shall also be without prejudice to any claim it may have against a noncomplying plan in the absence of subrogation.

3.Coordination of benefits differs from subrogation. Provisions for one may be included in health care benefits contracts without compelling the inclusion or exclusion of the other.

4.If the plans cannot agree on the order of benefits within thirty calendar days after the plans have received all of the information needed to pay the claim, the plans shall immediately pay the claim in equal shares and determine their relative liabilities following payment, except that no plan shall be required to pay more than it would have paid had it been the primary plan. 45-08-01.2-07. Effective date for existing contracts.

1.A contract that provides health care benefits and that was issued before the effective date of this chapter shall be brought into compliance with this regulation by the later of:

a.The next anniversary date or renewal date of the contract;

b.Twelve months following the effective date of these rules; or

c.The expiration of any applicable collectively bargained contract pursuant to which it was written.

2.For the transition period between the adoption of this chapter and the time frame for which plans are to be in compliance pursuant to subsection 1, a plan that is subject to the prior coordination of benefits requirements shall not be considered a noncomplying plan by a plan subject to the new coordination of benefits requirements and if there is a conflict between the prior coordination of benefits requirements under the prior regulation and the new coordination of benefits requirements under the amended regulation, the prior coordination of benefits requirements shall apply.

APPENDIX A

MODEL COB CONTRACT PROVISIONS

COORDINATION OF THIS CONTRACT'S BENEFITS WITH OTHER BENEFITS

The coordination of benefits (COB) provision applies when a person has health care coverage under more than one plan. Plan is defined below.

The order of benefits determination rules govern the order in which each plan will pay a claim for benefits. The plan that pays first is called the primary plan. The primary plan must pay benefits in accordance with its policy terms without regard to the possibility that another plan may cover some expenses. The plan that pays after the primary plan is the secondary plan. The secondary plan may reduce the benefits it pays so that payments from all plans does not exceed 100% of the total allowable expense.

DEFINITIONS

A.A plan is any of the following that provides benefits or services for medical or dental care or treatment. If separate contracts are used to provide coordinated coverage for members of a group, the separate contracts are considered parts of the same plan and there is no COB among those separate contracts.

(1)Plan includes: group and nongroup insurance contracts, health maintenance organization (HMO) contracts, closed panel plans or other forms of group or group type coverage (whether insured or uninsured); medical care components of long-term care contracts, such as skilled nursing care; medical benefits under group or individual automobile contracts; and Medicare or any other federal governmental plan, as permitted by law.

(2)Plan does not include: hospital indemnity coverage or other fixed indemnity coverage; accident-only coverage; specified disease or specified accident coverage; limited benefit health coverage, as defined by state law; school accident-type coverage; benefits for nonmedical components of long-term care policies; Medicare supplement policies;

Medicare policies; or coverage under other federal governmental plans, unless permitted by law.

Each contract for coverage under (1) or (2) is a separate plan. If a plan has two parts and COB rules apply only to one of the two, each of the parts is treated as a separate plan.

B.This plan means, in a COB provision, the part of the contract providing the health care benefits to which the COB provision applies and which may be reduced because of the benefits of other plans. Any other part of the contract providing health care benefits is separate from this plan. A contract may apply one COB provision to certain benefits, such as dental benefits, coordinating only with similar benefits, and may apply another COB provision to coordinate other benefits.

C.The order of benefit determination rules determine whether this plan is a primary plan or secondary plan when the person has health care coverage under more than one plan.

When this plan is primary, it determines payment for its benefits first before those of any other plan without considering any other plan's benefits. When this plan is secondary, it determines its benefits after those of another plan and may reduce the benefits it pays so that all plan benefits do not exceed 100% of the total allowable expense.

D.Allowable expense is a health care expense, including deductibles, coinsurance and copayments, that is covered at least in part by any plan covering the person. When a plan provides benefits in the form of services, the reasonable cash value of each service will be considered an allowable expense and a benefit paid. An expense that is not covered by any plan covering the person is not an allowable expense. In addition, any expense that a provider by law or in accordance with a contractual agreement is prohibited from charging a covered person is not an allowable expense.

The following are examples of expenses that are not allowable expenses:

(1)The difference between the cost of a semiprivate hospital room and a private hospital room is not an allowable expense, unless one of the plans provides coverage for private hospital room expenses.

(2)If a person is covered by two or more plans that compute their benefit payments on the

basis of usual and customary fees or relative value schedule reimbursement methodology or other similar reimbursement methodology, any amount in excess of the highest reimbursement amount for a specific benefit is not an allowable expense.

(3)If a person is covered by two or more plans that provide benefits or services on the basis of negotiated fees, an amount in excess of the highest of the negotiated fees is not an (4)If a person is covered by one plan that calculates its benefits or services on the basis of usual and customary fees or relative value schedule reimbursement methodology or other similar reimbursement methodology and another plan that provides its benefits or services on the basis of negotiated fees, the primary plan's payment arrangement shall be the allowable expense for all plans. However, if the provider has contracted with the secondary plan to provide the benefit or service for a specific negotiated fee or payment amount that is different than the primary plan's payment arrangement and if the provider's contract permits, the negotiated fee or payment shall be the allowable expense used by the secondary plan to determine its benefits.

(5)The amount of any benefit reduction by the primary plan because a covered person has failed to comply with the plan provisions is not an allowable expense. Examples of these types of plan provisions include second surgical opinions, precertification of admissions, and preferred provider arrangements.

E.Closed panel plan is a plan that provides health care benefits to covered persons primarily in the form of services through a panel of providers that have contracted with or are employed by the plan, and that excludes coverage for services provided by other providers, except in cases of emergency or referral by a panel member.

F.Custodial parent is the parent awarded custody by a court decree or, in the absence of a court decree, is the parent with whom the child resides more than one-half of the calendar year excluding any temporary visitation.

ORDER OF BENEFITS DETERMINATION RULES

When a person is covered by two or more plans, the rules for determining the order of benefits payments are as follows:

A.The primary plan pays or provides its benefits according to its terms of coverage and without regard to the benefits of under any other plan.

B.(1)Except as provided in paragraph 2, a plan that does not contain a coordination of benefits provision that is consistent with this regulation is always primary unless the provisions of both plans state that the complying plan is primary.

(2)Coverage that is obtained by virtue of membership in a group that is designed to supplement a part of a basic package of benefits and provides that this supplementary coverage shall be excess to any other parts of the plan provided by the contractholder.

Examples of these types of situations are major medical coverages that are superimposed over base plan hospital and surgical benefits, and insurance type coverages that are written in connection with a closed panel plan to provide out-of-network benefits.

C.A plan may consider the benefits paid or provided by another plan in calculating payment of its benefits only when it is secondary to that other plan.

D.Each plan determines its order of benefits using the first of the following rules that apply:

(1)Nondependent or dependent. The plan that covers the person other than as a dependent, for example as an employee, member, policyholder, subscriber, or retiree, is the primary plan and the plan that covers the person as a dependent is the secondary plan. However, if the person is a Medicare beneficiary and, as a result of federal law, Medicare is secondary to the plan covering the person as a dependent; and primary to the plan covering the person as other than a dependent (e.g., a retired employee); then the order of benefits between the two plans is reversed so that the plan covering the person as an employee, member, policyholder, subscriber, or retiree is the secondary plan and the other plan is the primary plan.

(2)Dependent child covered under more than one plan. Unless there is a court decree stating otherwise, when a dependent child is covered by more than one plan the order of benefits is determined as follows:

(a)For a dependent child whose parents are married or are living together, whether or not they have ever been married: •The plan of the parent whose birthday falls earlier in the calendar year is the primary plan; or •If both parents have the same birthday, the plan that has covered the parent the longest is the primary plan.

(b)For a dependent child whose parents are divorced or separated or not living together, whether or not they have ever been married:

(i)If a court decree states that one of the parents is responsible for the dependent child's health care expenses or health care coverage and the plan of that parent has actual knowledge of those terms, that plan is primary. This rule applies to plan years commencing after the plan is given notice of the court decree;

(ii)If a court decree states that both parents are responsible for the dependent child's health care expenses or health care coverage, the provisions of subparagraph a above shall determine the order of benefits;

(iii)If a court decree states that the parents have joint custody without specifying that one parent has responsibility for the health care expenses or health care coverage of the dependent child, the provisions of subparagraph a above shall determine the order of benefits; or (iv)If there is no court decree allocating responsibility for the dependent child's health care expenses or health care coverage, the order of benefits for the child are as follows: •The plan covering the custodial parent; •The plan covering the spouse of the custodial parent; •The plan covering the noncustodial parent; and then •The plan covering the spouse of the noncustodial parent.

(c)For a dependent child covered under more than one plan of individuals who are the parents of the child, the provisions of subparagraph a or b above shall determine the order of benefits as if those individuals were the parents of the child.

(3)Active employee or retired or laid-off employee. The plan that covers a person is an active employee, that is, an employee who is neither laid off nor retired, is the primary plan. The plan covering that same person as a retired or laid-off employee is the secondary plan. The same would hold true if a person is a dependent of an active employee and that same person is a dependent of a retired or laid-off employee. If the other plan does not have this rule, and as a result, the plans do not agree on the order of benefits, this rule is ignored. This rule does not apply if the rule labeled D(1) can determine the order of benefits.

(4)COBRA or state continuation coverage. If a person whose coverage is provided pursuant to COBRA or under a right of continuation provided by state or other federal law is covered under another plan, the plan covering the person as an employee, member, subscriber, or retiree or covering the person as a dependent of an employee, member, subscriber, or retiree is the primary plan and the COBRA or state or other federal continuation coverage is the secondary plan. If the other plan does not have this rule, and as a result, the plans do not agree on the order of benefits, this rule is ignored. This

rule does not apply if the rule labeled D(1) can determine the order of benefits.

(5)Longer or shorter length of coverage. The plan that covered the person as an employee, member, policyholder, subscriber, or retiree longer is the primary plan and the plan that covered the person the shorter period of time is the secondary plan.

(6)If the preceding rules do not determine the order of benefits, the allowable expenses shall be shared equally between the plans meeting the definition of plan. In addition, this plan will not pay more than it would have paid had it been the primary plan.

EFFECT ON THE BENEFITS OF THIS PLAN

A.When this plan is secondary, it may reduce its benefits so that the total benefits paid or provided by all plans during a plan year are not more than the total allowable expenses. In determining the amount to be paid for any claim, the secondary plan will calculate the benefits it would have paid in the absence of other health care coverage and apply that calculated amount to any allowable expense under its plan that is unpaid by the primary plan. The secondary plan may then reduce its payment by the amount so that, when combined with the amount paid by the primary plan, the total benefits paid or provided by all plans for the claim do not exceed the total allowable expense for that claim. In addition, the secondary plan shall credit to its plan deductible any amounts it would have credited to its deductible in the absence of other health care coverage.

B.If a covered person is enrolled in two or more closed panel plans and if, for any reason, including the provision of service by a nonpanel provider, benefits are not payable by one closed panel plan, COB shall not apply between that plan and other closed panel plans.

RIGHT TO RECEIVE AND RELEASE NEEDED INFORMATION

Certain facts about health care coverage and services are needed to apply these COB rules and to determine benefits payable under this plan and other plans. [Organization responsibility for COB administration] may get the facts it needs from or give them to other organizations or persons for the

purpose of applying these rules and determining benefits payable under this plan and other plans covering the person claiming benefits. [Organization responsibility for COB administration] need not tell, or get the consent of, any person to do this. Each person claiming benefits under this plan must give [organization responsibility for COB administration] any facts it needs to apply those rules and determine benefits payable.

FACILITY OF PAYMENT

A payment made under another plan may include an amount that should have been paid under this plan. If it does, [organization responsibility for COB administration] may pay that amount to the organization that made that payment. That amount will then be treated as though it were a benefit paid under this plan. [Organization responsibility for COB administration] will not have to pay that amount again. The term "payment made" includes providing benefits in the form of services, in which case "payment made" means the reasonable cash value of the benefits provided in the form of services.

RIGHT OF RECOVERY

If the amount of the payments made by [organization responsibility for COB administration] is more than it should have paid under this COB provision, it may recover the excess from one or more of the persons it has paid or for whom it has paid; or any other person or organization that may be responsible for the benefits or services provided for the covered person. The "amount of the payments made" includes the reasonable cash value of any benefits provided in the form of services.

APPENDIX B

CONSUMER EXPLANATORY BOOKLET

COORDINATION OF BENEFITS

IMPORTANT NOTICE

This is a summary of only a few of the provisions of your health plan to help you understand coordination of benefits, which can be very complicated. This is not a complete description of all of the coordination rules and procedures, and does not change or replace the language contained in your insurance contract, which determines your benefits.

Double Coverage It is common for family members to be covered by more than one health care plan. This happens, for example, when a husband and wife both work and choose to have family coverage through both employers.

When you are covered by more than one health plan, state law permits your insurers to follow a procedure called "coordination of benefits" to determine how much each should pay when you have a claim. The goal is to make sure that the combined payments of all plans do not add up to more than your covered health care expenses.

Coordination of benefits (COB) is complicated, and covers a wide variety of circumstances. This is only an outline of some of the most common ones. If your situation is not described, read your evidence of coverage or contact your state insurance department.

Primary or Secondary?

You will be asked to identify all the plans that cover members of your family. We need this information to determine whether we are the "primary" or "secondary" benefit payer. The primary plan always pays first when you have a claim.

Any plan that does not contain your state's COB rules will always be primary.

When This Plan is Primary If you or a family member are covered under another plan in addition to this one, we will be primary when:

Your Own Expenses • The claim is for your own health care expenses, unless you are covered by Medicare and both you and your spouse are retired.

Your Spouse's Expenses •The claim is for your spouse, who is covered by Medicare, and you are not both retired.

Your Child's Expenses •The claim is for the health care expenses of your child who is covered by this plan and •You are married and your birthday is earlier in the year than your spouse's or you are living with another individual, regardless of whether or not you have ever been married to that individual, and your birthday is earlier than that other individual's birthday. This is known as the "birthday rule"; or • You are separated or divorced and you have informed us of a court decree that makes you responsible for the child's health care expenses; or • There is no court decree, but you have custody of the child.

Other Situations We will be primary when any other provisions of state or federal law require us to be.

How We Pay Claims When We Are Primary When we are the primary plan, we will pay the benefits in accordance with the terms of your contract, just as if you had no other health care coverage under any other plan.

How We Pay Claims When We Are Secondary We will be secondary whenever the rules do not require us to be primary.

How We Pay Claims When We Are Secondary When we are the secondary plan, we do not pay until after the primary plan has paid its benefits.

We will then pay part or all of the allowable expenses left unpaid, as explained below. An "allowable expense" is a health care expense covered by one of the plans, including copayments, coinsurance, and deductibles.

• If there is a difference between the amount the plans allow, we will base our payment on the higher amount. However, if the primary plan has a contract with the provider, our combined payments will not be more than the amount called for in our contract or the amount called for in the contract of the primary plan, whichever is higher. Health maintenance organizations (HMOs) and preferred provider organizations (PPOs) usually have contracts with their providers.

• We will determine our payment by subtracting the amount the primary plan paid from the amount we would have paid if we had been primary. We may reduce our payment by any amount so that, when combined with the amount paid by the primary plan, the total benefits paid do not exceed the total allowable expense for your claim. We will credit any amount we would have paid in the absence of your other health care coverage toward our own plan deductible.

• If the primary plan covers similar kinds of health care expenses, but allows expenses that we do not cover, we may pay for those expenses.

• We will not pay an amount the primary plan did not cover because you did not follow its rules and procedures. For example, if your plan has reduced its benefit because you did not obtain precertification, as required by that plan, we will not pay the amount of the reduction, because it is not an allowable expense.

Questions About Coordination of Benefits?

Contact Your State Insurance Department

Chapter 45-08-02 Group Coverage Discontinuance and Replacement Model Regulation

N.D. Admin. Code 45-08-02-01 Scope

This chapter is applicable to all insurance policies and certificates and subscriber contracts issued or provided by an insurance company, health maintenance organization, or a nonprofit service corporation on a group or group-type basis covering persons as employees of employers or as members of unions or associations.

History

• Law Implemented: NDCC 26.1-04-03(7), 26.1-30-19, 26.1-33-11, 26.1-33-12, 26.1-36-22, 26.1-36-23,

N.D. Admin. Code 45-08-02-02 Definitions

For purposes of this chapter:

1."Carrier" means a person or an entity that offers or provides a policy, contract, or certificate of insurance coverage in this state. "Carrier" includes an insurer, a health maintenance organization, a nonprofit service corporation, or any other person or entity providing a policy, contract, or certificate of insurance coverage subject to state insurance regulation.

2."Group-type basis" means a benefit plan, other than "salary budget" plans utilizing individual insurance policies, certificates, or subscriber contracts, which meets the following conditions:

a.Coverage is provided through insurance policies, certificates, or subscriber contracts to classes of employees or members defined in terms of conditions pertaining to employment or membership.

b.The coverage is not available to the general public and can be obtained and maintained only because of the covered person's membership in or connection with the particular organization or group, including bank depositor groups.

c.There are arrangements for bulk payment of premiums or subscription charges to the insurer or nonprofit service corporation.

d.There is sponsorship of the plan by the employer, union, bank, or association. 3.a."Health insurance coverage" means a hospital and medical expense incurred policy, a nonprofit health care service plan contract, a health maintenance organization subscriber contract, or any other health care plan or arrangement that pays for or furnishes medical or health care services whether by insurance or otherwise.

b."Health insurance coverage" shall not include one or more, or any combination of, the following:

(1)Coverage only for accident, or disability income insurance, or any combination thereof;

(2)Coverage issued as a supplement to liability insurance;

(3)Liability insurance, including general liability insurance and automobile liability insurance;

(4)Workers' compensation or similar insurance;

(5)Automobile medical payment insurance;

(6)Credit-only insurance;

(7)Coverage for onsite medical clinics; and (8)Other similar insurance coverage, specified in federal regulations issued pursuant to the Health Insurance Portability and Accountability Act of 1996 (HIPAA) [Pub. L. No. 104-191], under which benefits for medical care are secondary or incidental to other insurance benefits.

c."Health insurance coverage" shall not include the following benefits if they are provided under a separate policy, certificate or contract of insurance or are otherwise not an integral part of the coverage:

(1)Limited scope dental or vision benefits;

(2)Benefits for long-term care, nursing home care, home health care, community-based care, or any combination thereof; or (3)Other similar, limited benefits specified in federal regulations issued pursuant to HIPAA.

d."Health insurance coverage" shall not include the following benefits if the benefits are provided under a separate policy, certificate or contract of insurance, there is no coordination between the provision of the benefits and any exclusion of benefits under any group health plan maintained by the same plan sponsor, and the benefits are paid with respect to an event without regard to whether benefits are provided with respect to such an event under any group health plan maintained by the same plan sponsor:

(1)Coverage only for a specified disease or illness; or (2)Hospital indemnity or other fixed indemnity insurance.

e."Health insurance coverage" shall not include the following if offered as a separate policy, certificate, or contract of insurance:

(1)Medicare supplemental health insurance as defined under section 1882(g)(1) of the Social Security Act;

(2)Coverage supplemental to the coverage provided under chapter 55 of title 10, United States Code; or (3)Similar supplemental coverage provided to coverage under a group health plan.

History

• Law Implemented: NDCC 26.1-04-03(7), 26.1-30-19, 26.1-33-11, 26.1-33-12, 26.1-36-22, 26.1-36-23,

N.D. Admin. Code 45-08-02-03 Unfair discrimination in group health insurance coverage transfers

Group coverage of accident and health insurance benefits transferred from one carrier to another must guaranty transfer of coverage for all eligible persons covered under the existing group insurance program and the transfer of such coverage must be negotiated on the basis of all eligible persons being covered under the group insurance program of the new carrier, irrespective of the current state of health of such persons, provided all such persons are currently covered under the present carrier's group insurance program. Violation of this section by an insurance company or agent constitutes unfair discrimination and is a prohibited practice as defined in subsection 7 of North Dakota Century Code

section 26.1-04-03.

History

• Law Implemented: NDCC 26.1-04-03(7), 26.1-30-19, 26.1-33-11, 26.1-33-12, 26.1-36-22, 26.1-36-23,

N.D. Admin. Code 45-08-02-04 Effective date of discontinuance for nonpayment of premium or subscription charges

1.If a policy or contract or certificate subject to these rules provides for automatic discontinuance of the coverage after a premium or subscription charge has remained unpaid through the grace period allowed for such payment, the carrier is liable for valid claims for covered losses incurred prior to the end of the grace period.

2.If the actions of the carrier after the end of the grace period indicate that it considers the coverage as continuing in force beyond the end of the grace period (such as, by continuing to recognize claims subsequently incurred), the carrier is liable for valid claims for losses beginning prior to the effective date of written notice of discontinuance to the policyholder or other entity responsible for making payments or submitting subscription charges to the carrier.

The effective date of discontinuance shall not be prior to midnight at the end of the third scheduled workday after the date upon which the notice is delivered.

History

• Law Implemented: NDCC 26.1-04-03(7), 26.1-30-19, 26.1-33-11, 26.1-33-12, 26.1-36-22, 26.1-36-23,

N.D. Admin. Code 45-08-02-05 Requirements for notice of discontinuance

1.Any notice of discontinuance so given by the carrier must include a request to the group policyholder or other entity involved to notify employees covered under the policy or subscriber contract of the date as of which the group policy or contract will discontinue and to advise that, unless otherwise provided in the policy, certificate, or contract, the carrier shall not be liable for claims for losses incurred after such date. Such notice of discontinuance must also advise, in any instance in which the plan involves employee contributions, that if the policyholder or in any instance in which the plan involves employee contributions, that if the policyholder or other entity continues to collect contributions for the coverage beyond the date of discontinuance, the policyholder or other entity may be held solely liable for the benefits with respect to which the contributions have been collected.

2.The carrier will prepare and furnish to the policyholder or other entity at the same time a supply of a notice form to be distributed to the employees or members concerned indicating such discontinuance and the effective date thereof, and urging the employees or members to refer to their certificates or contracts in order to determine what rights, if any, are available to them upon such discontinuance.

History

• Law Implemented: NDCC 26.1-04-03(7), 26.1-30-19, 26.1-33-11, 26.1-33-12, 26.1-36-22, 26.1-36-23,

N.D. Admin. Code 45-08-02-06 Extension of benefits

1.Every group policy or certificate or other contract subject to these rules hereafter issued, or under which the level of benefits is hereafter altered, modified, or amended, must provide a reasonable provision for extension of benefits in the event of total disability at the date of discontinuance of the group coverage, as required by the following subsections.

2.In the case of a group life plan which contains a disability benefit extension of any type (e.g., premium waiver extension, extended death benefit in event of total disability, or payment of income for a specified period during total disability), the discontinuance of the group policy does not operate to terminate such extension.

3.In the case of a group plan providing benefits for loss of time from work or specific indemnity during hospital confinement, discontinuance of the policy during a disability has no effect on benefits payable for that disability or confinement.

4.In the case of hospital or medical expense coverages other than dental and maternity expense, a reasonable extension of benefits or accrued liability provision is required. Such a provision will be considered "reasonable" if it provides an extension of at least twelve months under "major medical" and "comprehensive medical" type coverages, and under other types of hospital or medical expense coverages provides either an extension of at least ninety days or an accrued liability for expenses incurred during a period of disability or during a period of at least ninety days starting with a specific event which occurred while coverage was in force (e.g., an accident).

5.Any applicable extension of benefits or accrued liability must be described in any policy or contract involved as well as in group insurance certificates. The benefits payable during any period of extension or accrued liability may be subject to the policy's or contract's regular benefit limits (e.g., benefits ceasing at exhaustion of a benefit period or of maximum benefits).

For hospital or medical expense coverages, the benefit payments may be limited to payments applicable to the disabling condition only.

History

• Law Implemented: NDCC 26.1-04-03(7), 26.1-30-19, 26.1-33-11, 26.1-33-12, 26.1-36-22, 26.1-36-23,

N.D. Admin. Code 45-08-02-07 Continuance of coverage in situations involving replacement of one carrier by another

1.This section shall indicate the carrier responsible for liability in those instances in which one carrier's (succeeding carrier) contract replaces a plan of similar benefits of another (prior contract).

2.Liability of prior carrier. The prior carrier remains liable only to the extent of its accrued liabilities and extensions of benefits. The position of the prior carrier is the same whether the group policyholder or other entity secures replacement coverage from a new carrier, self-insures, or foregoes the provision of coverage.

3.Liability of succeeding carrier. a.(1)If the individual was validly covered under the prior plan on the date of discontinuance, each individual who is eligible for coverage in accordance with the succeeding carrier's plan of benefits with respect to the class or classes of individuals eligible for coverage under the succeeding carrier's plan and any actively-at-work and nonconfinement rules and requests enrollment shall be enrolled and covered by the succeeding carrier's plan of benefits.

(2)In the case of health insurance coverage:

(a)A succeeding carrier shall not have any nonconfinement rules in its plan of benefits; and (b)Any actively-at-work rules provided in the succeeding carrier's plan of benefits shall provide that absence from work due to any health status-related factor be treated as being actively at work.

(3)For purposes of this paragraph, "health status-related factor" means any of the following factors:

(a)Health status;

(b)Medical condition, including both physical and mental illnesses;

(c)Claims experience;

(d)Receipt of health care;

(e)Medical history;

(f)Genetic information;

(g)Evidence of insurability, including conditions arising out of acts of domestic violence; or (h)Disability.

b.Each person not covered under the succeeding carrier's plan of benefits in accordance with subdivision a must nevertheless be covered by the succeeding carrier in accordance with the following rules if such individual was validly covered (including benefit extension) under the prior plan on the date of discontinuance. Any reference in the following rules to an individual who was or was not totally disabled is a reference to the individual's status immediately prior to the date the succeeding carrier's coverage becomes effective.

(1)The minimum level of benefits to be provided by the succeeding carrier shall be the applicable level of benefits of the prior carrier's plan reduced by any benefits payable by the prior plan.

(2)Coverage must be provided by the succeeding carrier until at least the earliest of the following dates:

(a)The date the individual becomes eligible under the succeeding carrier's plan as described in subdivision a.

(b)For each type of coverage, the date the individual's coverage would terminate in accordance with the succeeding carrier's plan provisions applicable to individual termination of coverage (e.g., at termination of employment or ceasing to be eligible dependent, as the case may be).

(c)In the case of an individual who was totally disabled, and in the case of a type of coverage for which section 45-08-02-06 requires an extension of accrued liability, the end of any period of extension or accrued liability which is required of the prior carrier by section 45-08-02-06 or, if the prior carrier's policy or contract is not subject to that section, would have been required of that carrier had its policy or contract been subject to section 45-08-02-06 at the time the prior plan was discontinued and replaced by the succeeding carrier's plan.

c.For health insurance coverage, in the case of an individual who was totally disabled at the time the prior carrier's plan was discontinued and replaced by the succeeding carrier's plan, and in the case in which section 45-08-02-06 requires an extension of benefits or accrued liability, the minimum level of benefits to be provided by the succeeding carrier shall be the applicable level of benefits of the prior carrier's plan reduced by any benefits paid by the prior plan.

d.In the case of a preexisting conditions limitation included in the succeeding carrier's plan, the level of benefits applicable to preexisting conditions of persons becoming covered by the succeeding carrier's plan in accordance with this subsection during the period of time this limitation applies under the new plan shall be the lessor of:

(1)The benefits of the new plan determined without application of the preexisting conditions limitation; and (2)The benefits of the prior plan.

e.The succeeding carrier, in applying any deductibles or coinsurance amounts applicable to the out-of-pocket maximums or waiting periods in its plan, shall give credit for the satisfaction or partial satisfaction of the same or similar provisions under a prior plan providing similar benefits. In the case of deductible provisions or coinsurance amounts applicable to the out-of-pocket maximums, the credit shall apply for the same or overlapping benefits periods and must be given for expenses actually incurred and applied against the deductible or coinsurance provisions of the prior carrier's plan during the ninety days preceding the effective date of the succeeding carrier's plan but only to the extent these expenses are recognized under the terms of the succeeding carrier's plan and are subject to similar deductible or coinsurance provision.

f.In any situation where a determination of the prior carrier's benefit is required by the succeeding carrier, at the succeeding carrier's request the prior carrier shall furnish a statement of the benefits available or pertinent information, sufficient to permit verification of the benefit determination or the determination itself by the succeeding carrier. For the purposes of this section, benefits of the prior plan will be determined in accordance with all of the definitions, conditions, and covered expense provisions of the prior plan rather than those of the succeeding plan. The benefit determination will be made as if coverage had not been replaced by the succeeding carrier.

History

• Law Implemented: NDCC 26.1-04-03(7), 26.1-30-19, 26.1-33-11, 26.1-33-12, 26.1-36-22, 26.1-36-23,

Chapter 45-08-03 Group Substance Abuse and Mental Care Insurance [Repealed]

N.D. Admin. Code 45-08-03 Group Substance Abuse and Mental Care Insurance [Repealed]

CHAPTER 45-08-03

GROUP SUBSTANCE ABUSE AND MENTAL CARE INSURANCE [Repealed effective May 1, 1997]

Article 45-09 Regulation of Unauthorized Insurers and Insurance

Chapter 45-09-01 Surplus Lines Insurance

N.D. Admin. Code 45-09-01-01 Definitions

Unless otherwise defined, or made inappropriate by context, all words used in this chapter have meanings given to them under North Dakota Century Code chapters 26.1-02, 26.1-26, and 26.1-44.

History

• History: Effective January 1, 1982.
• Law Implemented: NDCC 26.1-44

N.D. Admin. Code 45-09-01-02 Surplus lines insurance producer application

The insurance commissioner will not issue a resident surplus lines insurance producer's license until the applicant has met the requirements of North Dakota Century Code section 26.1-26-17, has completed and filed with the commissioner a completed application for a surplus lines insurance producer license, and paid the license fee. An applicant for a nonresident surplus lines insurance producer license must hold an active resident surplus lines insurance producer license in the applicant's home state and must complete and file with the commissioner an application for a nonresident surplus lines insurance producer license and pay the license fee.

History

• History: Effective January 1, 1982; amended effective December 1, 2001; January 1, 2008; July 1,
• General Authority: NDCC 26.1-26-49, 26.1-44-09
• Law Implemented: NDCC 26.1-26-17, 26.1-26-20

N.D. Admin. Code 45-09-01-03 Surplus lines insurance producer must conduct search

The licensed surplus lines insurance producer seeking the placement of nonadmitted insurance must conduct a diligent search to ascertain whether the insurance, indemnity contract, or surety bond can be procured from a company authorized to do business in this state. The surplus lines insurance producer may rely on a diligent search done by a licensed insurance producer or the insured if the surplus lines insurance producer deems it sufficient.

January 1, 2024.

History

• History: Effective January 1, 1982; amended effective December 1, 2001; July 1, 2012; April 1, 2021;

N.D. Admin. Code 45-09-01-04 Presumption - Diligent search

A presumption that a diligent search has been made and that the insurance producer was unable to procure the insurance, indemnity contract, or surety bond desired from a company authorized to do business in this state is created when the insurance, contract, or bond is written in one of the categories set out in Appendix I.

History

• History: Effective January 1, 1982; amended effective December 1, 2001; January 1, 2008; July 1,

N.D. Admin. Code 45-09-01-05 Other acceptable lines of coverage

The categories designated in Appendix I are not to be considered as the only lines of coverage in which unauthorized insurers may be used. Other categories of coverage not listed may be acceptable because of special underwriting considerations, i.e., losses, high exposure, etc. Any exceptions must be fully explained on the surplus lines report of placement.

The securing of advantage as to lower premium rates or as to the terms of the insurance contract do not constitute justification nor are they special underwriting considerations sufficient to allow the surplus lines broker to use an unauthorized company nor lines of coverage other than those designated in Appendix I.

History

• History: Effective January 1, 1982; amended effective December 1, 2001; January 1, 2008; July 1,

N.D. Admin. Code 45-09-01-06 Surplus lines affidavit - Time for filing

N.D. Admin. Code 45-09-01-07 Surplus lines affidavit - Limits on availability

N.D. Admin. Code 45-09-01-08 Additional policy endorsement requirement

N.D. Admin. Code 45-09-01-09 Statement of taxable premiums

APPENDIX I

Categories of Acceptable Surplus Lines Coverage The following categories of surplus lines coverage are not the only lines which may be written in North Dakota. Other lines of coverage not on this list may be acceptable because of special underwriting considerations. Any exceptions must be fully explained on the surplus lines report of placement.

If the coverage written is in an approved category, there is a presumption that after diligent search the insurance, indemnity contract, or surety bond desired cannot be procured from a company authorized to do business in this state.

These categories may be changed from time to time at the discretion of the insurance commissioner subject to provisions of North Dakota Century Code chapter 28-32, the Administrative Agencies Practice Act.

1.Fiduciary liability.

2.Commercial cyber insurance (inclusive of first-party and/or third-party commercial cyber insurance coverage).

3.Professional liability (E & O) except for hospitals.

4.Directors and officers.

5.Ocean marine cargo, liability and hull.

6.Hazardous cargo and short-term trip transit.

7.Bridges (large).

8.Heavy woodworking property (unprotected, high-value sawmills).

9.Product liability (hazardous).

10.Ski lifts and tows' liability.

11.Fireworks, ammunition, fuse, cartridges, power, nitroglycerine, explosive gases.

12.Environmental impairment - pollution.

13.Kidnap ransom.

14.Oil and gas liability and marine.

15.Livestock mortality (high values and unusual).

16.Short tail (hole-in-one, 300 bowling score, etc.).

17.Large utilities (generation, transmission).

18.Building demolition and moving.

19.Mono line liquor legal liability.

20.Surcharged fire and allied lines excluding uncontrolled marine.

21.High-value substandard private passenger automobile.

22.Commercial automobile physical damage coverage in excess of rating organizations' filed rates.

23.Any excess liability coverages.

24.Day care liability insurance coverages.

July 1, 2012; January 1, 2024.

History

• History: Amended effective February 1, 1983; November 1, 1987; December 1, 2001; January 1, 2008;

Article 45-11 Life and Health Insurance Guaranty Association

Chapter 45-11-01 Notice to Policy Owners

N.D. Admin. Code 45-11-01-01 Required notice to policy owners

A document that describes the general purposes and current limitations of the North Dakota life and health insurance guaranty association as required by subsections 2 and 3 of section 26.1-38.1-16 of the North Dakota Century Code must be in the form and contain the language printed in the notice shown in exhibit A.

EXHIBIT A

NOTICE OF PROTECTION PROVIDED BY THE

NORTH DAKOTA LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION

This notice provides a brief summary of the North Dakota Life and Health Insurance Guaranty Association ("the Association") and the protection it provides for policyholders. This safety net was created under North Dakota law, which determines who and what is covered and the amounts of coverage.

The Association was established to provide protection in the unlikely event that your life, annuity or health insurance company becomes financially unable to meet its obligations and is taken over by its Insurance Department. If this should happen, the Association will typically arrange to continue coverage and pay claims, in accordance with North Dakota law, with funding from assessments paid by other insurance companies. (For purposes of this notice, the terms "insurance company" and "insurer" include health maintenance organizations (HMOs).)

The protections provided by the Association are based on contract obligations up to the following amounts:

1.Life Insurance a.$300,000 in death benefits b.$100,000 in cash surrender or withdrawal values

2.Health Insurance a.$500,000 for health benefit plans (see definition below) b.$300,000 in disability income insurance benefits c.$300,000 in long-term care insurance benefits d.$100,000 in other types of health insurance benefits

3.Annuities a.$250,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values The maximum amount of protection for each individual, regardless of type of coverage is $300,000; however, may be up to $500,000 with regard to health benefit plans.

"Health benefit plan" is defined in North Dakota Century Code Section 26.1-38.1-02(10) and generally includes hospital or medical expense policies, contracts or certificates, or HMO subscriber contracts that provide comprehensive forms of coverage for hospitalization or medical services, but excludes policies that provide coverages for limited benefits (such as dental-only or vision-only insurance), Medicare Supplement insurance, disability income insurance, and long-term care insurance (LTCI).

Benefits provided by a long-term care (LTC) rider to a life insurance policy or annuity contract shall be considered the same type of benefits as the base life insurance policy or annuity contract to which it relates.

Note: Certain policies and contracts may not be covered or fully covered. For example, coverage does not extend to any portion(s) of a policy or contract that the insurer does not guarantee, such as certain investment additions to the account value of a variable life insurance policy or a variable annuity contract. If coverage is available, it will be subject to substantial limitations. There are also various residency requirements and other limitations under North Dakota law. To learn more about the above protections, as well as protections relating to group contracts or retirement plans, please visit the Association's website at www.ndlifega.org or contact:

North Dakota Life and Health Insurance Guaranty Association North Dakota Insurance Department P.O. Box 2422600 East Boulevard Avenue, Dept. 401 Fargo, ND 58108Bismarck, ND 58505 COMPLAINTS AND COMPANY FINANCIAL INFORMATION A written complaint to allege a violation of any provision of the Life and Health Insurance Guaranty Association Act must be filed with the North Dakota Insurance Department, 600 East Boulevard Avenue, Dept. 401, Bismarck, North Dakota 58505; telephone (701) 328-2440. Financial information for an insurance company, if the information is not proprietary, is available at the same address and telephone number and on the Insurance Department website at www.nd.gov/ndins.

Insurance companies and agents are not allowed by North Dakota law to use the existence of the Association or its coverage to sell, solicit, or induce you to purchase any form of insurance or HMO coverage. When selecting an insurance company, you should not rely on Association coverage. If there is any inconsistency between this notice and North Dakota law, then North Dakota law will control.

History

• History: Effective September 1, 1990; amended effective January 1, 2000; July 1, 2012.
• General Authority: NDCC 26.1-38.1-16
• Law Implemented: NDCC 26.1-38.1-16 (Exhibit A cannot be accurately reproduced for publication. Users should contact the Insurance Commissioner to obtain a correct copy)

Article 45-13 Lines of Insurance

Chapter 45-13-01 Lines of Insurance

N.D. Admin. Code 45-13-01-01 Lines of insurance

An insurance company or an insurance agent may apply to engage in insurance activities in one or more of the following lines of insurance:

1.Life and annuity.

2.Accident and health.

3.Property.

4.Casualty.

5.Variable life and annuity.

History

• Law Implemented: NDCC 26.1-05-02, 26.1-12-11, 26.1-26-11

N.D. Admin. Code 45-13-01-02 Product types - Definition

Each line of insurance is defined to include the following products:

1.Life and annuity includes:

Annuity/institutional investmentEquity/interest indexed annuity Credit lifeEquity/interest indexed universal life Deferred annuityStructured settlement annuity EndowmentTerm life Guaranteed investmentUniversal life contract/pension planWhole life Immediate annuity and similar products relating to life and annuity matters.

2.Accident and health includes:

AccidentHospital indemnity Accidental deathHospital and surgical Accidental death and dismembermentIntensive care CancerInvoluntary unemployment Civilian health and medical programLong-term care of the uniformed servicesMajor medical supplementManaged care/excess loss Credit disabilityMedical expense Critical illnessMedicare supplement DentalNursing home Disability incomeOrgan and tissue transplant Excess lossPrescription drug Family leaveSpecified disease Human immunodeficiency virusSickness indemnityStop-loss medical Home health careSurgical expense Vision and similar products relating to accident and health matters.

3.Property includes:

Aircraft cargoEarthquake Aircraft hullExtended coverages Allied linesFire Auto commercial physical damageFire and allied lines Auto private passenger physical damageFlood BaggageForce placed Boiler and machineryGlass Burglary and robberyLenders collateral Business incomeLivestock CargoMoney and securities Commercial inland marineMarine cargo Commercial multi-perilMarine hull Commercial propertyMortgage guarantee CreditMulti-peril crop Credit cardOcean marine Credit propertyPersonal floater CrimePersonal inland marine CropPet Crop hailRain Crop supplementsTheft Difference in conditionsVandalism DwellingVendors single interest and similar products relating to property matters.

4.Casualty includes:

Aircraft liabilityMedical malpractice Asbestos abatementMechanical breakdown Auto commercial liabilityPersonal excess liability Auto private passenger liabilityPersonal umbrella liability Auto warranty contractPersonal liability Bail bondsPollution liability BondsPremises and operations Commercial excess liabilityPrepaid legal service Commercial general liabilityProduct liability Commercial umbrella liabilityProduct recall Contractual liabilityProducts and completed operations Directors and officersProfessional liability Design professionalOwners and contractors Employers liabilityRailroad protective Environmental impairmentRansom and extortion Errors and omissionsStop gap Fidelity bondsStop-loss liability Fidelity insuranceSurety Home warrantyTitle Legal expenseVehicle service contracts Legal malpracticeWorkers' compensation Liquor and dram shop liability and similar products relating to casualty matters.

5.Variable life and annuity includes:

Variable deferred annuity Variable immediate annuity Variable group annuity/pension plan Variable life and similar products relating to variable life and annuity matters.

History

• History: Effective January 1, 2000; amended effective October 1, 2019.
• Law Implemented: NDCC 26.1-05-02.1

N.D. Admin. Code 45-13-01-03 Products relating to more than one line of insurance - Combination products

Certain insurance products may involve two or more lines of insurance. A company marketing a combination product must carry authorization for each of the respective lines of insurance. Products involving a combination of property and casualty lines of insurance include aircraft, auto commercial, auto private passenger, boat owners, business owners, condominium owners, farm owners, garage keepers, homeowners, mobile homeowners, special multi-peril, commercial multi-peril package, and tenants. Products involving a combination of life and annuity, and accident and health lines of insurance include multi-line credit, multi-line life and health, and multi-line association and employer. Products involving a combination of property and casualty, and accident and health lines of insurance include multi-line association and employer, travel, and multi-line credit.

History

• Law Implemented: NDCC 26.1-05-02.1, 26.1-12-11.1, 26.1-26-11.1

N.D. Admin. Code 45-13-01-04 Prepaid legal service

An insurance company that markets prepaid legal services must be licensed as a prepaid legal service organization and comply with chapter 26.1-19 of the North Dakota Century Code before transacting business in this state.

History

• Law Implemented: NDCC 26.1-19

Article 45-14 Consumer Privacy

Chapter 45-14-01 Privacy of Consumer Financial and Health Information

N.D. Admin. Code 45-14-01-01 Authority

This rule is adopted under North Dakota Century Code section 26.1-02-27.

N.D. Admin. Code 45-14-01-02 Purpose and scope

1.Purpose. This chapter governs the treatment of nonpublic personal health information and nonpublic personal financial information about individuals by all licensees of the state insurance department. This chapter:

a.Requires a licensee to provide notice to individuals about its privacy policies and practices;

b.Describes the conditions under which a licensee may disclose nonpublic personal health information and nonpublic personal financial information about individuals to affiliates and nonaffiliated third parties; and

c.Provides methods for individuals to prevent a licensee from disclosing that information.

2.Scope. This chapter applies to:

a.Nonpublic personal financial information about individuals who obtain or are claimants or beneficiaries of products or services primarily for personal, family, or household purposes from licensees. This chapter does not apply to information about companies or about individuals who obtain products or services for business, commercial, or agricultural purposes; and

b.All nonpublic personal health information.

3.Compliance. A licensee domiciled in this state that is in compliance with this regulation in a state that has not enacted laws or rules that meet the requirements of title V of the Gramm-Leach-Bliley Act [Pub. L. 102-106] may nonetheless be deemed to be in compliance with title V of the Gramm-Leach-Bliley Act in the other state.

N.D. Admin. Code 45-14-01-03 Rule of construction

The examples in this chapter and the sample clauses in appendix A are not exclusive. Compliance with an example or use of sample clause, to the extent applicable, constitutes compliance with this

chapter.

N.D. Admin. Code 45-14-01-04 Definitions

As used in this chapter, unless the context requires otherwise:

1."Affiliate" means a company that controls, is controlled by, or is under common control with another company. 2.a."Clear and conspicuous" means that a notice is reasonably understandable and designed to call attention to the nature and significance of the information in the notice.

(1)Reasonably understandable. A licensee makes its notice reasonably understandable if it:

(a)Presents the information in the notice in clear, concise sentences, paragraphs, and sections;

(b)Uses short explanatory sentences or bullet lists whenever possible;

(c)Uses definite, concrete, everyday words and active voice whenever possible;

(d)Avoids multiple negatives;

(e)Avoids legal and highly technical business terminology whenever possible; and (f)Avoids explanations that are imprecise and readily subject to different interpretations.

(2)Designed to call attention. A licensee designs its notice to call attention to the nature and significance of the information in it if the licensee:

(a)Uses a plain-language heading to call attention to the notice;

(b)Uses a typeface and type size that are easy to read;

(c)Provides wide margins and ample line spacing;

(d)Uses boldface or italics for key words; and (e)In a form that combines the licensee's notice with other information, uses distinctive type size, style, and graphic devices, such as shading or sidebars.

(3)Notices on web sites. If a licensee provides a notice on a web page, the licensee designs its notice to call attention to the nature and significance of the information in it if the licensee uses text or visual cues to encourage scrolling down the page if necessary to view the entire notice and ensure that other elements on the web site such as text, graphics, hyperlinks, or sound do not distract attention from the notice, and the licensee either:

(a)Places the notice on a screen that consumers frequently access, such as a page on which transactions are conducted; or (b)Places a link on a screen that consumers frequently access, such as a page on which transactions are conducted, that connects directly to the notice and is labeled appropriately to convey the importance, nature, and relevance of the notice.

3."Collect" means to obtain information that the licensee organizes or can retrieve by the name of an individual or by identifying number, symbol, or other identifying particular assigned to the individual, irrespective of the source of the underlying information.

4."Commissioner" means the insurance commissioner of the state.

5."Company" means a corporation, limited liability company, business trust, general or limited partnership, association, sole proprietorship, or similar organization. 6.a."Consumer" means an individual who seeks to obtain, obtains, or has obtained an insurance product or service from a licensee that is to be used primarily for personal, family, or household purposes, and about whom the licensee has nonpublic personal information, or that individual's legal representative.

(1)An individual who provides nonpublic personal information to a licensee in connection with obtaining or seeking to obtain financial, investment, or economic advisory services relating to an insurance product or service is a consumer regardless of whether the licensee establishes an ongoing advisory relationship.

(2)An applicant for insurance prior to the inception of insurance coverage is a licensee's consumer.

(3)An individual who is a consumer of another financial institution is not a licensee's consumer solely because the licensee is acting as agent for, or provides processing or other services to, that financial institution.

(4)An individual is a licensee's consumer if:

(a)[1]The individual is a beneficiary of a life insurance policy underwritten by the licensee; [2]The individual is a claimant under an insurance policy issued by the licensee; [3]The individual is an insured or an annuitant under an insurance policy or an annuity, respectively, issued by the licensee; or [4]The individual is a mortgagor of a mortgage covered under a mortgage insurance policy; and (b)The licensee discloses nonpublic personal financial information about the individual to a nonaffiliated third party other than as permitted under sections 45-14-01-14, 45-14-01-15, and 45-14-01-16.

(5)Provided that the licensee provides the initial, annual, and revised notices under sections 45-14-01-05, 45-14-01-06, and 45-14-01-09 to the plan sponsor, group or blanket insurance policyholder, or group annuity contractholder, and further provided that the licensee does not disclose to a nonaffiliated third party nonpublic personal financial information about such an individual other than as permitted under sections 45-14-01-14, 45-14-01-15, and 45-14-01-16, an individual is not the consumer of the licensee solely because the individual is:

(a)A participant or a beneficiary of an employee benefit plan that the licensee administers or sponsors or for which the licensee acts as a trustee, insurer, or fiduciary; or (b)Covered under a group or blanket insurance policy or group annuity contract issued by the licensee.

(6)(a)The individuals described in subparagraphs a and b of paragraph 5 are consumers of a licensee if the licensee does not meet all the conditions of paragraph 5.

(b)In no event shall the individuals, solely by virtue of the status described in subparagraphs a and b of paragraph 5, be deemed to be customers for purposes of this rule.

(7)An individual is not a licensee's consumer solely because the individual is a beneficiary of a trust for which the licensee is a trustee.

(8)An individual is not a licensee's consumer solely because the individual has designated the licensee as trustee for a trust.

7."Consumer reporting agency" has the same meaning as in section 603(f) of the federal Fair Credit Reporting Act [15 U.S.C. 1681a(f)].

8."Control" means:

a.Ownership, control, or power to vote twenty-five percent or more of the outstanding shares of any class of voting security of the company, directly or indirectly, or acting through one or more other persons;

b.Control in any manner over the election of a majority of the directors, trustees, or general partners, or individuals exercising similar functions, of the company; or

c.The power to exercise, directly or indirectly, a controlling influence over the management or policies of the company, as the commissioner determines.

9."Customer" means a consumer who has a customer relationship with a licensee. 10.a."Customer relationship" means a continuing relationship between a consumer and a licensee under which the licensee provides one or more insurance products or services to the consumer that are to be used primarily for personal, family, or household purposes.

(1)A consumer has a continuing relationship with a licensee if:

(a)The consumer is a current policyholder of an insurance product issued by or through the licensee; or (b)The consumer obtains financial, investment, or economic advisory services relating to an insurance product or service from the licensee for a fee.

(2)A consumer does not have a continuing relationship with a licensee if:

(a)The consumer applies for insurance but does not purchase the insurance;

(b)The licensee sells the consumer travel insurance in an isolated transaction;

(c)The individual is no longer a current policyholder of an insurance product or no longer obtains insurance services with or through the licensee;

(d)The consumer is a beneficiary or claimant under a policy and has submitted a claim under a policy choosing a settlement option involving an ongoing relationship with the licensee;

(e)The consumer is a beneficiary or a claimant under a policy and has submitted a claim under that policy choosing a lump sum settlement option;

(f)The customer's policy is lapsed, expired, or otherwise inactive or dormant under the licensee's business practices, and the licensee has not communicated with the customer about the relationship for a period of twelve consecutive months, other than annual privacy notices, material required by law or regulation, communication at the direction of a state or federal authority, or promotional materials;

(g)The individual is an insured or an annuitant under an insurance policy or annuity, respectively, but is not the policyholder or owner of the insurance policy or annuity; or (h)For the purposes of this chapter, the individual's last-known address according to the licensee's records is deemed invalid. An address of record is deemed invalid if mail sent to that address by the licensee has been returned by the postal authorities as undeliverable and if subsequent attempts by the licensee to obtain a current valid address for the individual have been unsuccessful. 11.a."Financial institution" means any institution the business of which is engaging in activities that are financial in nature or incidental to such financial activities as described in

section 4(k) of the Bank Holding Company Act of 1956 [12 U.S.C. 1843(k)].

b.Financial institution does not include:

(1)Any person or entity with respect to any financial activity that is subject to the jurisdiction of the commodity futures trading commission under the Commodity Exchange Act [U.S.C. 1 et seq.];

(2)The federal agricultural mortgage corporation or any entity charged and operating under the Farm Credit Act of 1971 [12 U.S.C. 2001 et seq.]; or (3)Institutions chartered by Congress specifically to engage in securitizations, secondary market sales, including sales of servicing rights, or similar transactions related to a transaction of a consumer, as long as the institutions do not sell or transfer nonpublic personal information to a nonaffiliated third party. 12.a."Financial product or service" means a product or service that a financial holding company could offer by engaging in an activity that is financial in nature or incidental to such a financial activity under section 4(k) of the Bank Holding Company Act of 1956 [12 U.S.C. 1843(k)].

b.Financial service includes a financial institution's evaluation or brokerage of information that the financial institution collects in connection with a request or an application from a consumer for a financial product or service.

13."Health care" means:

a.Preventive, diagnostic, therapeutic, rehabilitative, maintenance or palliative care, services, procedures, tests, or counseling that:

(1)Relates to the physical, mental, or behavioral condition of an individual; or (2)Affects the structure or function of the human body or any part of the human body, including the banking of blood, sperm, organs, or any other tissue; or

b.Prescribing, dispensing, or furnishing to an individual drugs or biologicals, or medical devices or health care equipment and supplies.

14."Health care provider" means a physician or other health care practitioner licensed, accredited, or certified to perform specified health services consistent with state law, or a health care facility.

15."Health information" means any information or data except age or gender, whether oral or recorded in any form or medium, created by or derived from a health care provider or the consumer that relates to:

a.The past, present, or future physical, mental, or behavioral health or condition of an individual;

b.The provision of health care to an individual; or

c.Payment for the provision of health care to an individual. 16.a."Insurance product or service" means any product or service that is offered by a licensee pursuant to the insurance laws of this state.

b.Insurance service includes a licensee's evaluation, brokerage, or distribution of information that the licensee collects in connection with a request or an application from a consumer for an insurance product or service. 17.a."Licensee" means all licensed insurers, producers, and other persons licensed or required to be licensed, or authorized or required to be authorized, or registered or required to be registered pursuant to the insurance law of this state and health maintenance organizations holding a certificate of authority pursuant to North Dakota Century Code chapter 26.1-18.1. As used herein, the term "licensee" does not include either of the following:

(1)North Dakota life and health insurance guaranty association created pursuant to North Dakota Century Code chapter 26.1-38; or (2)North Dakota insurance guaranty association created pursuant to North Dakota Century Code chapter 26.1-42.1.

b.A licensee is not subject to the notice and authorization requirements for nonpublic personal financial information set forth in this chapter if the licensee is an employee, agent, or other representative of another licensee ("the principal") and:

(1)The principal otherwise complies with, and provides the notices required by, the provisions of this chapter; and (2)The licensee does not disclose any nonpublic personal information to any person other than the principal or its affiliates unless in a manner permitted by this chapter. c.(1)Subject to paragraph 2, "licensee" also includes an unauthorized insurer that accepts business placed through a licensed excess lines broker in this state, but only in regard to the excess lines placements placed pursuant to North Dakota Century Code chapter 26.1-44.

(2)An excess lines broker or excess lines insurer shall be deemed to be in compliance with the notice and authorization requirements for nonpublic personal financial information set forth in this rule provided:

(a)The broker or insurer does not disclose nonpublic personal information of a consumer or a customer to nonaffiliated third parties for any purpose, including joint servicing or marketing under section 45-14-01-14, except as permitted by

section 45-14-01-15 or 45-14-01-16; and (b)The broker or insurer delivers a notice to the consumer at the time a customer relationship is established on which the following is printed in sixteen-point type:

PRIVACY NOTICE

"Neither the U.S. brokers that handled this insurance nor the insurers that have underwritten this insurance will disclose nonpublic personal information concerning the buyer to nonaffiliates of the brokers or insurers except as permitted by law." 18.a."Nonaffiliated third party" means any person except:

(1)A licensee's affiliate; or (2)A person employed jointly by a licensee and any company that is not the licensee's affiliate, but nonaffiliated third party includes the other company that jointly employs the person.

b.Nonaffiliated third party includes any company that is an affiliate solely by virtue of the direct or indirect ownership or control of the company by the licensee or its affiliate in conducting merchant banking or investment banking activities of the type described in

section 4(k)(4)(H) or insurance company investment activities of the type described in

section 4(k)(4)(I) of the federal Bank Holding Company Act [12 U.S.C. 1843(k)(4)

(H) and (I)].

19."Nonpublic personal information" means nonpublic personal financial information and nonpublic personal health information. 20.a."Nonpublic personal financial information" means:

(1)Personally identifiable financial information; and (2)Any list, description, or other grouping of consumers, and publicly available information pertaining to them, that is derived using any personally identifiable financial information that is not publicly available.

b.Nonpublic personal financial information does not include:

(1)Health information;

(2)Publicly available information, except as included on a list described in paragraph 2 of subsection a; or (3)Any list, description, or other grouping of consumers, and publicly available information pertaining to them, that is derived without using any personally identifiable financial information that is not publicly available.

c.Examples of lists:

(1)Nonpublic personal financial information includes any list of individuals' names and street addresses that is derived in whole or in part using personally identifiable financial information that is not publicly available, such as account numbers.

(2)Nonpublic personal financial information does not include any list of individuals' names and addresses that contains only publicly available information, is not derived in whole or in part using personally identifiable financial information that is not publicly available, and is not disclosed in a manner that indicates that any of the individuals on the list is a consumer of a financial institution.

21."Nonpublic personal health information" means health information:

a.That identifies an individual who is the subject of the information; or

b.With respect to which there is a reasonable basis to believe that the information could be used to identify an individual. 22.a."Personally identifiable financial information" means any information:

(1)A consumer provides to a licensee to obtain an insurance product or service from the licensee;

(2)About a consumer resulting from a transaction involving an insurance product or service between a licensee and a consumer; or (3)The licensee otherwise obtains about a consumer in connection with providing an insurance product or service to that consumer.

(1)Information included. Personally identifiable financial information includes:

(a)Information a consumer provides to a licensee on an application to obtain an insurance product or service;

(b)Account balance information and payment history;

(c)The fact that an individual is or has been one of the licensee's customers or has obtained an insurance product or service from the licensee;

(d)Any information about the licensee's consumer if it is disclosed in a manner that indicates that the individual is or has been the licensee's consumer;

(e)Any information that a consumer provides to a licensee or that the licensee or its agent otherwise obtains in connection with collecting on a loan or servicing a loan;

(f)Any information the licensee collects through an internet cookie, an information-collecting device from a web server; and (g)Information from a consumer report.

(2)Information not included. Personally identifiable financial information does not include:

(a)Health information;

(b)A list of names and addresses of customers of an entity that is not a financial institution; and (c)Information that does not identify a consumer, such as aggregate information or blind data that does not contain personal identifiers such as account numbers, names, or addresses. 23.a."Publicly available information" means any information that a licensee has a reasonable

basis to believe is lawfully made available to the general public from:

(1)Federal, state, or local government records;

(2)Widely distributed media; or (3)Disclosures to the general public which are required to be made by federal, state, or local law.

b.Reasonable basis. A licensee has a reasonable basis to believe that information is lawfully made available to the general public if the licensee has taken steps to determine:

(1)That the information is of the type that is available to the general public; and (2)Whether an individual can direct that the information not be made available to the general public and, if so, that the licensee's consumer has not done so.

c.Examples:

(1)Government records. Publicly available information in government records includes information in government real estate records and security interest filings.

(2)Widely distributed media. Publicly available information from widely distributed media includes information from a telephone book, a television or radio program, a newspaper, or a web site that is available to the general public on an unrestricted

basis. A web site is not restricted merely because an internet service provider or a site operator requires a fee or a password, so long as access is available to the general public.

(3)Reasonable basis.

(a)A licensee has a reasonable basis to believe that mortgage information is lawfully made available to the general public if the licensee has determined that the information is of the type included on the public record in the jurisdiction where the mortgage would be recorded.

(b)A licensee has a reasonable basis to believe that an individual's telephone number is lawfully made available to the general public if the licensee has located the telephone number in the telephone book or the consumer has informed the licensee that the telephone number is not unlisted.

N.D. Admin. Code 45-14-01-05 Initial privacy notice to consumers required

1.Initial notice requirement. A licensee shall provide a clear and conspicuous notice that accurately reflects its privacy policies and practices to:

a.Customer. An individual who becomes the licensee's customer, not later than when the licensee establishes a customer relationship, except as provided in subsection 5; and

b.Consumer. A consumer, when the licensee requests authorization to disclose any nonpublic personal financial information about the consumer to any nonaffiliated third party, if the licensee makes a disclosure other than as authorized by sections 45-14-01-15 and 45-14-01-16.

2.When initial notice to a consumer is not required. A licensee is not required to provide an initial notice to a consumer under subdivision b of subsection 1 if:

a.The licensee does not request authorization to disclose any nonpublic personal financial information about the consumer to any nonaffiliated third party, other than as authorized by sections 45-14-01-15 and 45-14-01-16, and the licensee does not have a customer relationship with the consumer; or

b.A notice has been provided by an affiliated licensee, as long as the notice clearly identifies all licensees to whom the notice applies and is accurate with respect to the licensee and the other institutions.

3.When the licensee establishes a customer relationship.

a.General rule. A licensee establishes a customer relationship at the time the licensee and the consumer enter into a continuing relationship.

b.Examples of establishing customer relationship. A licensee establishes a customer relationship when the consumer:

(1)Becomes a policyholder of a licensee that is an insurer when the insurer delivers an insurance policy or contract to the consumer, or in the case of a licensee that is an insurance producer or insurance broker, obtains insurance through that licensee; or (2)Agrees to obtain financial, economic, or investment advisory services relating to insurance products or services for a fee from the licensee.

4.Existing customers. When an existing customer obtains a new insurance product or service from a licensee that is to be used primarily for personal, family, or household purposes, the licensee satisfies the initial notice requirements of subsection 1 as follows:

a.The licensee may provide a revised policy notice, under section 45-14-01-09, that covers the customer's new insurance product or service; or

b.If the initial, revised, or annual notice that the licensee most recently provided to that customer was accurate with respect to the new insurance product or service, the licensee does not need to provide a new privacy notice under subsection 1.

5.Exceptions to allow subsequent delivery of notice.

a.A licensee may provide the initial notice required by subdivision a of subsection 1 within a reasonable time after the licensee establishes a customer relationship if:

(1)Establishing the customer relationship is not at the customer's election; or (2)Providing notice not later than when the licensee establishes a customer relationship would substantially delay the customer's transaction and the customer agrees to receive the notice at a later time.

b.Examples of exceptions:

(1)Not at customer's election. Establishing a customer relationship is not at the customer's election if a licensee acquires or is assigned a customer's policy from another financial institution or residual market mechanism and the customer does not have a choice about the licensee's acquisition or assignment.

(2)Substantial delay of customer's transaction. Providing notice not later than when a licensee establishes a customer relationship would substantially delay the customer's transaction when the licensee and the individual agree over the telephone to enter into a customer relationship involving prompt delivery of the insurance product or service.

(3)No substantial delay of customer's transaction. Providing notice not later than when a licensee establishes a customer relationship would not substantially delay the customer's transaction when the relationship is initiated in person at the licensee's office or through other means by which the customer may view the notice, such as on a web site.

6.Delivery. When a licensee is required to deliver an initial privacy notice by this section, the licensee shall deliver it according to section 45-14-01-10. If the licensee uses a short-form initial notice for noncustomers according to subsection 4 of section 45-14-01-07, the licensee may deliver its privacy notice according to subdivision c of subsection 4 of section 45-14-01-07.

N.D. Admin. Code 45-14-01-06 Annual privacy notice to customers required. 1.a.General rule. A licensee shall provide a clear and conspicuous notice to customers that accurately reflects its privacy policies and practices not less than annually during the continuation of the customer relationship. Annually means at least once in any period of twelve consecutive months during which that relationship exists. A licensee may define the twelve-consecutive-month period, but the licensee shall apply it to the customer on a consistent basis

b.Example. A licensee provides a notice annually if it defines the twelve-consecutive-month period as a calendar year and provides the annual notice to the customer once in each calendar year following the calendar year in which the licensee provided the initial notice.

For example, if a customer opens an account on any day of year one, the licensee shall provide an annual notice to that customer by December 31 of year two.

2.Exception to general rule. A licensee that provides nonpublic personal information to nonaffiliated third parties only in accordance with sections 45-14-01-14, 45-14-01-15, or 45-14-01-16 and has not changed its policies and practices with regard to disclosing nonpublic personal information from the policies and practices that were disclosed in the most recent notice sent to consumers in accordance with this section or section 45-14-01-05 may not be required to provide an annual notice under this section until such time as the licensee fails to comply with any criteria described in this section. 3.a.Termination of customer relationship. A licensee is not required to provide an annual notice to a former customer. A former customer is an individual with whom a licensee no longer has a continuing relationship.

(1)A licensee no longer has a continuing relationship with an individual if the individual no longer is a current policyholder of an insurance product or no longer obtains insurance services with or through the licensee.

(2)A licensee no longer has a continuing relationship with an individual if the individual's policy is lapsed, expired, or otherwise inactive or dormant under the licensee's business practices, and the licensee has not communicated with the customer about the relationship for a period of twelve consecutive months, other than to provide annual privacy notices, material required by law or regulation, or promotional materials.

(3)For the purposes of this rule, a licensee no longer has a continuing relationship with an individual if the individual's last-known address according to the licensee's records is deemed invalid. An address of record is deemed invalid if mail sent to that address by the licensee has been returned by the postal authorities as undeliverable and if subsequent attempts by the licensee to obtain a current valid address for the individual have been unsuccessful.

(4)A licensee no longer has a continuing relationship with a customer in the case of providing real estate settlement services, at the time the customer completes execution of all documents related to the real estate closing, payment for those services has been received, or the licensee has completed all of its responsibilities with respect to the settlement, including filing documents on the public record, whichever is later.

4.Delivery. When a licensee is required by this section to deliver an annual privacy notice, the licensee shall deliver it according to section 45-14-01-10.

History

• History: Effective December 1, 2001; amended effective April 1, 2021.

N.D. Admin. Code 45-14-01-07 Information to be included in privacy notices

1.General rule. The initial, annual, and revised privacy notices that a licensee provides under sections 45-14-01-05, 45-14-01-06, and 45-14-01-09 shall include each of the following items of information, in addition to any other information the licensee wishes to provide, that applies to the licensee and to the consumers to whom the licensee sends its privacy notice:

a.The categories of nonpublic personal financial information that the licensee collects;

b.The categories of nonpublic personal financial information that the licensee discloses;

c.The categories of affiliates and nonaffiliated third parties to whom the licensee discloses nonpublic personal financial information, other than those parties to whom the licensee discloses information under sections 45-14-01-15 and 45-14-01-16;

d.The categories of nonpublic personal financial information about the licensee's former customers that the licensee discloses and the categories of affiliates and nonaffiliated third parties to whom the licensee discloses nonpublic personal financial information about the licensee's former customers, other than those parties to whom the licensee discloses information under sections 45-14-01-15 and 45-14-01-16;

e.If a licensee discloses nonpublic personal financial information to a nonaffiliated third party under section 45-14-01-14, and no other exception in sections 45-14-01-15 and 45-14-01-16 applies to that disclosure, a separate description of the categories of information the licensee discloses and the categories of third parties with whom the licensee has contracted;

f.An explanation of the consumer's right under subsection 1 of section 45-14-01-11 to authorize or not to authorize the disclosure of nonpublic personal financial information to nonaffiliated third parties, including the methods by which the consumer may exercise that right at that time;

g.Any disclosures that the licensee makes under section 603(d)(2)(A)(iii) of the federal Fair Credit Reporting Act [15 U.S.C. 1681a(d)(2)(A)(iii)] (that is, notices regarding the ability to opt out of disclosures of information among affiliates);

h.The licensee's policies and practices with respect to protecting the confidentiality and security of nonpublic personal information; and

i.Any disclosure that the licensee makes under subsection 2.

2.Description of parties subject to exceptions. If a licensee discloses nonpublic personal financial information as authorized under sections 45-14-01-15 and 45-14-01-16, the licensee is not required to list those exceptions in the initial or annual privacy notices required by sections 45-14-01-05 and 45-14-01-06. When describing the categories of parties to whom disclosure is made, the licensee is required to state only that it makes disclosures to other affiliated or nonaffiliated third parties, as applicable, as permitted by law.

3.Examples:

a.Categories of nonpublic personal financial information that the licensee collects. A licensee satisfies the requirement to categorize the nonpublic personal financial information it collects if the licensee categorizes it according to the source of the information, as applicable:

(1)Information from the consumer;

(2)Information about the consumer's transactions with the licensee or its affiliates;

(3)Information about the consumer's transactions with nonaffiliated third parties; and (4)Information from a consumer reporting agency.

b.Categories of nonpublic personal financial information a licensee discloses.

(1)A licensee satisfies the requirement to categorize nonpublic personal financial information it discloses if the licensee categorizes the information according to source, as described in subdivision a, as applicable, and provides a few examples to illustrate the types of information in each category. These might include:

(a)Information from the consumer, including application information, such as assets and income and identifying information, such as name, address, and social security number;

(b)Transaction information, such as information about balances, payment history, and parties to the transaction; and (c)Information from consumer reports, such as a consumer's creditworthiness and credit history.

(2)A licensee does not adequately categorize the information that it discloses if the licensee uses only general terms, such as transaction information about the consumer.

(3)If a licensee reserves the right to disclose all of the nonpublic personal financial information about consumers that it collects, the licensee may simply state that fact without describing the categories or examples of nonpublic personal information that the licensee discloses.

c.Categories of affiliates and nonaffiliated third parties to whom the licensee discloses.

(1)A licensee satisfies the requirement to categorize the affiliates and nonaffiliated third parties to which the licensee discloses nonpublic personal financial information about consumers if the licensee identifies the types of businesses in which they engage.

(2)Types of businesses may be described by general terms only if the licensee uses a few illustrative examples of significant lines of business. For example, a licensee may use the term financial products or services if it includes appropriate examples of significant lines of businesses, such as life insurer, automobile insurer, consumer banking, or securities brokerage.

(3)A licensee also may categorize the affiliates and nonaffiliated third parties to which it discloses nonpublic personal financial information about consumers using more detailed categories.

d.Disclosures under exception for service providers and joint marketers. If a licensee discloses nonpublic personal financial information under the exception in section 45-14-01-14 to a nonaffiliated third party to market products or services that it offers alone or jointly with another financial institution, the licensee satisfies the disclosure requirement of subdivision e of subsection 1 if it:

(1)Lists the categories of nonpublic personal financial information it discloses, using the same categories and examples the licensee used to meet the requirements of subdivision b of subsection 1, as applicable; and (2)States whether the third party is:

(a)A service provider that performs marketing services on the licensee's behalf or on behalf of the licensee and another financial institution; or (b)A financial institution with whom the licensee has a joint marketing agreement.

e.Simplified notices. If a licensee does not disclose, and does not wish to reserve the right to disclose, nonpublic personal financial information about customers or former customers to affiliates or nonaffiliated third parties except as authorized under sections 45-14-01-15 and 45-14-01-16, the licensee may simply state that fact, in addition to the information it shall provide under subdivisions a, h, and i of subsection 1 and subsection 2.

f.Confidentiality and security. A licensee describes its policies and practices with respect to protecting the confidentiality and security of nonpublic personal financial information if it does both of the following:

(1)Describes in general terms who is authorized to have access to the information; and (2)States whether the licensee has security practices and procedures in place to ensure the confidentiality of the information in accordance with the licensee's policy.

The licensee is not required to describe technical information about the safeguards it uses.

4.Short-form initial notice regarding request for authorization for noncustomers.

a.A licensee may satisfy the initial notice requirements in subdivision b of subsection 1 of

section 45-14-01-05 and subsection 3 of section 45-14-01-08 for a consumer who is not a customer by providing a short-form initial notice at the same time as the licensee delivers a notice regarding request for authorization as required in section 45-14-01-08.

b.A short-form initial notice shall:

(1)Be clear and conspicuous;

(2)State that the licensee's privacy notice is available upon request; and (3)Explain a reasonable means by which the consumer may obtain that notice.

c.The licensee shall deliver its short-form initial notice according to section 45-14-01-10.

The licensee is not required to deliver its privacy notice with its short-form initial notice.

The licensee instead may simply provide the consumer a reasonable means to obtain its privacy notice. If a consumer who receives the licensee's short-form notice requests the licensee's privacy notice, the licensee shall deliver its privacy notice according to section 45-14-01-10.

d.Examples of obtaining privacy notice. The licensee provides a reasonable means by which a consumer may obtain a copy of its privacy notice if the licensee:

(1)Provides a toll-free telephone number that the consumer may call to request the notice; or (2)For a consumer who conducts business in person at the licensee's office, maintains copies of the notice on hand that the licensee provides to the consumer immediately upon request.

5.Future disclosures. The licensee's notice may include:

a.Categories of nonpublic personal financial information that the licensee reserves the right to disclose in the future, but does not currently disclose; and

b.Categories of affiliates or nonaffiliated third parties to whom the licensee reserves the right in the future to disclose, but to whom the licensee does not currently disclose, nonpublic personal financial information.

6.Sample clauses. Sample clauses illustrating some of the notice content required by this

section are included in appendix A.

N.D. Admin. Code 45-14-01-08 Notice to consumers regarding request for authorization. 1.a.Form of notice. If a licensee is required to provide notice under subsection 1 of section 45-14-01-11, it shall provide a clear and conspicuous notice to each of its consumers that accurately explains the right to authorize disclosures under that section. The notice shall state:

(1)That the licensee may only disclose nonpublic personal financial information about its consumer to a nonaffiliated third party if the licensee first obtains authorization from the consumer; and (2)That the consumer has the right to authorize or not to authorize that disclosure.

b.Examples: Adequate notice. A licensee provides adequate notice that the consumer has the right to authorize or not to authorize the disclosure of nonpublic personal financial information to a nonaffiliated third party if the licensee:

(1)Identifies all of the categories of nonpublic personal financial information that it will disclose if authorization is obtained, and all of the categories of nonaffiliated third parties to which the licensee discloses the information, as described in subdivisions b and c of subsection 1 of section 45-14-01-07, and states that the consumer has the right to authorize or not to authorize the disclosure of that information; and (2)Identifies the insurance products or services that the consumer obtains from the licensee, either singly or jointly, to which the authorization would apply.

2.Same form as initial notice permitted. A licensee may provide the request for authorization together with or on the same written or electronic form as the initial notice the licensee provides in accordance with section 45-14-01-05.

3.Initial notice required when request for authorization delivered subsequent to initial notice. If a licensee provides the notice to consumers regarding request for authorization later than required for the initial notice in accordance with section 45-14-01-05, the licensee shall also include a copy of the initial notice with the notice regarding request for authorization in writing or, if the consumer agrees, electronically.

4.Joint relationships:

a.If two or more consumers jointly obtain an insurance product or service from a licensee, the licensee may provide a single notice to the joint consumers. The licensee's notice shall explain how the licensee will treat an authorization by a joint consumer, as explained in subdivision b.

b.Example. If John and Mary are both named policyholders on a homeowner's insurance policy issued by a licensee and the licensee sends policy statements to John's address, the licensee may:

(1)Send a single authorization notice to John's address.

(2)Permit John and Mary to make different authorizations, provided if John provides authorization and Mary does not, the licensee may only disclose nonpublic personal financial information about John, but not about Mary and not about John and Mary jointly.

5.Duration of consumer's authorization. An authorization must specify the length of time for which the authorization is valid.

6.Delivery. When a licensee is required to deliver a notice by this section, the licensee shall deliver it according to section 45-14-01-10.

N.D. Admin. Code 45-14-01-09 Revised privacy notices

1.General rule. Except as otherwise authorized in this rule, a licensee shall not, directly or through an affiliate, disclose any nonpublic personal financial information about a consumer to a nonaffiliated third party other than as described in the initial notice that the licensee provided to that consumer under section 45-14-01-05, unless:

a.The licensee has provided to the consumer a clear and conspicuous revised notice that accurately describes its policies and practices;

b.The licensee has provided a new notice to the consumer regarding requests for authorization and a new authorization; and

c.The licensee has obtained authorization from the consumer whose nonpublic personal financial information is sought to be disclosed.

2.Examples.

a.Except as otherwise permitted by sections 45-14-01-14, 45-14-01-15, and 45-14-01-16, a licensee shall provide a revised notice if it requests authorization to disclose:

(1)A new category of nonpublic personal financial information to any nonaffiliated third party;

(2)Nonpublic personal financial information to a new category of nonaffiliated third party; or (3)Nonpublic personal financial information about a former customer to a nonaffiliated third party, if that former customer has not authorized the disclosure.

b.A revised notice is not required if the licensee discloses nonpublic personal financial information to a new nonaffiliated third party that the licensee adequately described in its prior notice.

3.Delivery. When a licensee is required to deliver a revised privacy notice by this section, the licensee shall deliver it according to section 45-14-01-10.

N.D. Admin. Code 45-14-01-10 Delivery

1.How to provide notices. A licensee shall provide any notices that this rule requires so that each consumer can reasonably be expected to receive actual notice in writing or, if the consumer agrees, electronically. 2.a.Examples of reasonable expectation of actual notice. A licensee may reasonably expect that a consumer will receive actual notice if the licensee:

(1)Hand delivers a printed copy of the notice to the consumer;

(2)Mails a printed copy of the notice to the last-known address of the consumer separately, or in a policy, billing, or other written communication;

(3)For a consumer who conducts transactions electronically, posts the notice on the electronic site and requires the consumer to acknowledge receipt of the notice as a necessary step to obtaining a particular insurance product or service; or (4)For an isolated transaction with a consumer, such as the licensee providing an insurance quote or selling the consumer travel insurance, posts the notice and requires the consumer to acknowledge receipt of the notice as a necessary step to obtaining the particular insurance product or service.

b.Examples of unreasonable expectation of actual notice. A licensee may not, however, reasonably expect that a consumer will receive actual notice of its privacy policies and practices if it:

(1)Only posts a sign in its office or generally publishes advertisements of its privacy policies and practices; or (2)Sends the notice via electronic mail to a consumer who does not obtain an insurance product or service from the licensee electronically.

3.Annual notices only. A licensee may reasonably expect that a customer will receive actual notice of the licensee's annual privacy notice if:

a.The customer uses the licensee's web site to access insurance products and services electronically and agrees to receive notices at the web site and the licensee posts its current privacy notice continuously in a clear and conspicuous manner on the web site; or

b.The customer has requested that the licensee refrain from sending any information regarding the customer relationship, and the licensee's current privacy notice remains available to the customer upon request.

4.Oral description of notice insufficient. A licensee may not provide any notice required by this

rule solely by orally explaining the notice, either in person or over the telephone.

5.Retention or accessibility of notices for customers.

a.For customers only, a licensee shall provide the initial notice required by subdivision a of subsection 1 of section 45-14-01-05, the annual notice required by subsection 1 of

section 45-14-01-06, and the revised notice required by section 45-14-01-09 so that the customer can retain them or obtain them later in writing or, if the customer agrees, electronically.

b.Examples of retention or accessibility. A licensee provides a privacy notice to the customer so that the customer can retain it or obtain it later if the licensee:

(1)Hand delivers a printed copy of the notice to the customer;

(2)Mails a printed copy of the notice to the last-known address of the customer; or (3)Makes its current privacy notice available on a web site or a link to another web site for the customer who obtains an insurance product or service electronically and agrees to receive the notice at the web site.

6.Joint notice with other financial institutions. A licensee may provide a joint notice from the licensee and one or more of its affiliates or other financial institutions, as identified in the notice, as long as the notice is accurate with respect to the licensee and the other institutions.

A licensee may also provide a notice on behalf of another financial institution.

7.Joint relationships. If two or more consumers jointly obtain an insurance product or service from a licensee, the licensee may satisfy the initial, annual, and revised notice requirements of subsection 1 of section 45-14-01-05, subsection 1 of section 45-14-01-06, and subsection 1 of

section 45-14-01-09, respectively, by providing one notice to those consumers jointly.

N.D. Admin. Code 45-14-01-11 Limits on disclosure of nonpublic personal financial information to nonaffiliated third parties. 1.a.Conditions for disclosure. Except as otherwise authorized in this rule, a licensee may not, directly or through any affiliate, disclose any nonpublic personal financial information about a consumer to a nonaffiliated third party unless:

(1)The licensee has provided to the consumer an initial notice as required under

section 45-14-01-05;

(2)The licensee has provided to the consumer a notice as required in section 45-14-01-08; and (3)An authorization is obtained from the consumer whose nonpublic personal information is sought to be disclosed.

b.A valid authorization to disclose nonpublic personal information pursuant to section 45-14-01-11 shall be in written or electronic form separate from that used for any other

purpose and shall contain all of the following:

(1)The identity of the consumer or customer who is the subject of the nonpublic personal information;

(2)A specific description of the types of nonpublic personal information to be disclosed;

(3)Specific descriptions of the parties to whom the licensee discloses nonpublic personal information, the purpose of the disclosure, and how the information will be used;

(4)The signature of the consumer or customer who is the subject of the nonpublic personal information or the individual who is legally empowered to grant authority and the date signed; and (5)Notice of the length of time for which the authorization is valid and that the consumer or customer may revoke the authorization at any time and the procedure for making a revocation.

2.Application to all consumers and all nonpublic personal financial information.

a.A licensee shall comply with this section, regardless of whether the licensee and the consumer have established a customer relationship.

b.Unless a licensee complies with this section, the licensee may not, directly or through any affiliate, disclose any nonpublic personal financial information about a consumer that the licensee has collected, regardless of whether the licensee collected it before or after receiving the authorization from the consumer.

3.Partial authorization. A licensee may allow a consumer to select certain nonpublic personal financial information or certain nonaffiliated third parties with respect to which the consumer wishes to authorize disclosure.

N.D. Admin. Code 45-14-01-12 Limits on redisclosure and reuse of nonpublic personal financial information. 1.a.Information the licensee receives under an exception. If a licensee receives nonpublic personal financial information from a nonaffiliated financial institution under an exception in section 45-14-01-15 or 45-14-01-16, the licensee's disclosure and use of that information is limited as follows:

(1)The licensee may disclose the information to the affiliates of the financial institution from which the licensee received the information;

(2)The licensee may disclose the information to its affiliates, but the licensee's affiliates may, in turn, disclose and use the information only to the extent that the licensee may disclose and use the information; and (3)The licensee may disclose and use the information pursuant to an exception in

section 45-14-01-15 or 45-14-01-16, in the ordinary course of business to carry out the activity covered by the exception under which the licensee received the information.

b.Example. If a licensee receives information from a nonaffiliated financial institution for claims settlement purposes, the licensee may disclose the information for fraud prevention, or in response to a properly authorized subpoena. The licensee may not disclose that information to a third party for marketing purposes or use that information for its own marketing purposes. 2.a.Information a licensee receives outside of an exception. If a licensee receives nonpublic personal financial information from a nonaffiliated financial institution other than under an exception in section 45-14-01-15 or 45-14-01-16, the licensee may disclose the information only:

(1)To the affiliates of the financial institution from which the licensee received the information;

(2)To its affiliates, but its affiliates may, in turn, disclose the information only to the extent that the licensee may disclose the information; and (3)To any other person, if the disclosure would be lawful if made directly to that person by the financial institution from which the licensee received the information.

b.Example. If a licensee obtains a customer list from a nonaffiliated financial institution outside of the exceptions in section 45-14-01-15 or 45-14-01-16:

(1)The licensee may use that list for its own purposes; and (2)The licensee may disclose that list to another nonaffiliated third party only if the financial institution from which the licensee purchased the list could have lawfully disclosed the list to that third party. That is, the licensee may disclose the list in accordance with the privacy policy of the financial institution from which the licensee received the list, and the licensee may disclose the list in accordance with an exception in section 45-14-01-15 or 45-14-01-16, such as to the licensee's attorneys or accountants.

3.Information a licensee discloses under an exception. If a licensee discloses nonpublic personal financial information to a nonaffiliated third party under an exception in section 45-14-01-15 or 45-14-01-16, the third party may disclose and use that information only as follows:

a.The third party may disclose the information to the licensee's affiliates;

b.The third party may disclose the information to its affiliates, but its affiliates may, in turn, disclose and use the information only to the extent that the third party may disclose and use the information; and

c.The third party may disclose and use the information pursuant to an exception in section 45-14-01-15 or 45-14-01-16 in the ordinary course of business to carry out the activity covered by the exception under which it received the information.

4.Information a licensee discloses outside of an exception. If a licensee discloses nonpublic personal financial information to a nonaffiliated third party other than under an exception in

section 45-14-01-15 or 45-14-01-16, the third party may disclose the information only:

a.To the licensee's affiliates;

b.To the third party's affiliates, but the third party's affiliates, in turn, may disclose the information only to the extent the third party can disclose the information; and

c.To any other person, if the disclosure would be lawful if the licensee made it directly to that person.

N.D. Admin. Code 45-14-01-13 Limits on sharing account number information for marketing purposes

1.General prohibition on disclosure of account numbers. A licensee shall not, directly or through an affiliate, disclose, other than to a consumer reporting agency, a policy number or similar form of access number or access code for a consumer's policy or transaction account to any nonaffiliated third party for use in telemarketing, direct mail marketing, or other marketing through electronic mail to the consumer.

2.Exceptions. Subsection 1 does not apply if a licensee discloses a policy number or similar form of access number or access code:

a.To the licensee's service provider solely in order to perform marketing for the licensee's own products or services, as long as the service provider is not authorized to directly initiate charges to the account;

b.To a licensee who is a producer solely in order to perform marketing for the licensee's own products or services; or

c.To a participant in an affinity or similar program when the participants in the program are identified to the customer when the customer enters into the program.

3.Examples.

a.Policy number. A policy number, or similar form of access number or access code, does not include a number or code in an encrypted form, as long as the licensee does not provide the recipient with a means to decode the number or code.

b.Policy or transaction account. For the purposes of this section, a policy or transaction account is an account other than a deposit account or a credit card account. A policy or transaction account does not include an account to which third parties cannot initiate charges.

N.D. Admin. Code 45-14-01-14 Exception to authorization requirements for disclosure of nonpublic personal financial information for service providers and joint marketing

1.General rule.

a.The notice and authorization requirements in sections 45-14-01-08 and 45-14-01-11 do not apply when a licensee provides nonpublic personal financial information to a nonaffiliated third party to perform services for the licensee or functions on the licensee's behalf, if the licensee provides the initial notice in accordance with section 45-14-01-05 and enters into a contractual agreement with the third party that prohibits the third party from disclosing or using the information other than to carry out the purposes for which the licensee disclosed the information, including use under an exception in section 45-14-01-15 or 45-14-01-16 in the ordinary course of business to carry out those purposes.

b.Example. If a licensee discloses nonpublic personal financial information under this

section to a financial institution with which the licensee performs joint marketing, the licensee's contractual agreement with that institution meets the requirements of subdivision a if it prohibits the institution from disclosing or using the nonpublic personal financial information except as necessary to carry out the joint marketing or under an exception in section 45-14-01-15 or 45-14-01-16 in the ordinary course of business to carry out that joint marketing.

2.Service may include joint marketing. The services a nonaffiliated third party performs for a licensee under subsection 1 may include marketing of the licensee's own products or services or marketing of financial products or services offered pursuant to joint agreements between the licensee and one or more financial institutions.

3.Definition of joint agreement. For purposes of this section, "joint agreement" means a written contract pursuant to which a licensee and one or more financial institutions jointly offer, endorse, or sponsor a financial product or service.

N.D. Admin. Code 45-14-01-15 Exceptions to notice and authorization requirements for disclosure of nonpublic personal financial information for processing and servicing transactions

1.Exceptions for processing transactions at consumer's request. The requirements for initial notice in subdivision b of subsection 1 of section 45-14-01-05, for notice and authorization in sections 45-14-01-08 and 45-14-01-11 and for service providers and joint marketing in section 45-14-01-14 do not apply if the licensee discloses nonpublic personal financial information as necessary to effect, administer, or enforce a transaction that a consumer requests or authorizes, or in connection with:

a.Servicing or processing an insurance product or service that a consumer requests or authorizes;

b.Maintaining or servicing the consumer's account with a licensee, or with another entity as

part of a private label credit card program or other extension of credit on behalf of such entity;

c.A proposed or actual securitization, secondary market sale, including sales of servicing rights, or similar transaction related to a transaction of the consumer;

d.Reinsurance or stop-loss or excess loss insurance;

e.Informing a policyholder or the policyholder's producer or broker with respect to a claim asserted by, or paid to, a consumer under the policy and servicing and processing such claim; or

f.Maintaining or servicing a customer's account as authorized by the customer, orally or otherwise, or as necessary to replace an insurance product or service that is nonrenewed as a result of the withdrawal of an insurer from a market.

2."Necessary to effect, administer, or enforce a transaction" means that the disclosure is:

a.Required, or is one of the lawful or appropriate methods, to enforce the licensee's rights or the rights of other persons engaged in carrying out the financial transaction or providing the product or service; or

b.Required, or is a usual, appropriate, or acceptable method:

(1)To carry out the transaction or the product or service business of which the transaction is a part, and record, service, or maintain the consumer's account in the ordinary course of providing the insurance product or service;

(2)To administer or service benefits or claims relating to the transaction or the product or service business of which it is a part;

(3)To provide a confirmation, explanation, statement, or other record of the transaction, or information on the status or value of the insurance product or service to the consumer or the consumer's producer or a policyholder or the policyholder's agent, producer, or broker with respect to a claim asserted by, or paid to, a consumer under a policy;

(4)To accrue or recognize incentives or bonuses associated with the transaction that are provided by a licensee or any other party;

(5)To underwrite insurance at the consumer's request or for any of the following purposes as they relate to a consumer's insurance or the policyholder's insurance: account administration, reporting, investigating or preventing fraud or material misrepresentation; processing premium payments; processing, adjusting, paying, and, settling insurance claims; administering insurance benefits including utilization review activities; participating in research projects; or as otherwise required or specifically permitted by federal or state law; or (6)In connection with:

(a)The authorization, settlement, billing, processing, clearing, transferring, reconciling, or collection of amounts charged, debited, or otherwise paid using a debit, credit, or other payment card, check or account number, or by other payment means;

(b)The transfer of receivables, accounts, or interests therein; or (c)The audit of debit, credit, or other payment information.

N.D. Admin. Code 45-14-01-16 Other exceptions to notice and authorization requirements for disclosure of nonpublic personal financial information

1.Exceptions to authorization requirements. The requirements for initial notice to consumers in subdivision b of subsection 1 of section 45-14-01-05, for notice and authorization in sections 45-14-01-08 and 45-14-01-11 and for initial notice in paragraph 1 of subdivision a of subsection 1 of section 45-14-01-14 do not apply when a licensee discloses nonpublic personal financial information:

a.With the consent or at the direction of the consumer, provided that the consumer has not revoked the consent or direction; b.(1)To protect the confidentiality or security of a licensee's records pertaining to the consumer, service, product, or transaction;

(2)To protect against or prevent actual or potential fraud or unauthorized transactions;

(3)For required institutional risk control or for resolving consumer disputes or inquiries;

(4)To persons holding a legal or beneficial interest relating to the consumer; or (5)To persons acting in a fiduciary or representative capacity on behalf of the consumer;

c.To provide information to insurance rate advisory organizations, guaranty funds or agencies, agencies that are rating a licensee, persons that are assessing the licensee's compliance with industry standards, and the licensee's attorneys, accountants, and auditors;

d.To the extent specifically permitted or required under other provisions of law and in accordance with the federal Right to Financial Privacy Act of 1978 [12 U.S.C. 3401 et seq.], to law enforcement agencies, including the federal reserve board, office of the comptroller of the currency, federal deposit insurance corporation, office of thrift supervision, national credit union administration, the securities and exchange commission, the secretary of the treasury, with respect to 31 U.S.C. chapter 53, subchapter II (records and reports on monetary instruments and transactions) and 12 U.S.C. chapter 21 (financial recordkeeping), a state insurance authority, and the federal trade commission, self-regulatory organizations, or for an investigation on a matter related to public safety; e.(1)To a consumer reporting agency in accordance with the federal Fair Credit Reporting Act [15 U.S.C. 1681 et seq.]; or (2)From a consumer report reported by a consumer reporting agency;

f.In connection with a proposed or actual sale, merger, transfer, or exchange of all or a portion of a business or operating unit if the disclosure of nonpublic personal financial information concerns solely consumers of the business or unit; g.(1)To comply with federal, state, or local laws, rules, and other applicable legal requirements;

(2)To comply with a properly authorized civil, criminal, or regulatory investigation, or subpoena or summons by federal, state, or local authorities; or (3)To respond to judicial process or government regulatory authorities having jurisdiction over a licensee for examination, compliance, or other purposes as authorized by law; or

h.For purposes related to the replacement of a group benefit plan, a group health plan, a group welfare plan, or a workers' compensation plan.

2. Revocation of authorization. A consumer may revoke authorization by subsequently exercising the right at any time by informing the licensee in writing of the revocation.

N.D. Admin. Code 45-14-01-17 When authorization required for disclosure of nonpublic personal health information

1.A licensee shall not disclose nonpublic personal health information about a consumer or customer unless an authorization is obtained from the consumer or customer whose nonpublic personal health information is sought to be disclosed.

2.Nothing in this section shall prohibit, restrict, or require an authorization for the disclosure of nonpublic personal health information by a licensee for the performance of the following insurance functions by or on behalf of the licensee or its affiliate: claims administration; claims adjustment and management; detection, investigation, or reporting of actual or potential fraud, misrepresentation, or criminal activity; underwriting; policy placement or issuance; loss control; ratemaking and guaranty fund functions; reinsurance and excess loss insurance; risk management; case management; disease management; quality assurance; quality improvement; performance evaluation; provider credentialing verification; utilization review; peer review activities; actuarial, scientific, medical, or public policy research; grievance procedures; internal administration of compliance, managerial, and information systems; policyholder service functions; auditing; reporting; data base security; administration of consumer disputes and inquiries; external accreditation standards; the replacement of a group benefit plan or workers' compensation policy or program; activities in connection with a sale, merger, transfer, or exchange of all or part of a business or operating unit; any activity that permits disclosure without authorization pursuant to the federal Health Insurance Portability and Accountability Act privacy rules promulgated by the United States department of health and human services; disclosure that is required, or is one of the lawful or appropriate methods, to enforce the licensee's rights or the rights of other persons engaged in carrying out a transaction or providing a product or service that a consumer requests or authorizes; and any activity otherwise permitted by law, required pursuant to governmental reporting authority, or to comply with legal process. Additional insurance functions may be added with the approval of the commissioner to the extent they are necessary for appropriate performance of insurance functions and are fair and reasonable to the interest of consumers.

N.D. Admin. Code 45-14-01-18 Authorizations

1.A valid authorization to disclose nonpublic personal health information pursuant to sections 45-14-01-17 through 45-14-01-21 shall be in written or electronic form and shall contain all of the following:

a.The identity of the consumer or customer who is the subject of the nonpublic personal health information;

b.A general description of the types of nonpublic personal health information to be disclosed;

c.General descriptions of the parties to whom the licensee discloses nonpublic personal health information, the purpose of the disclosure, and how the information will be used;

d.The signature of the consumer or customer who is the subject of the nonpublic personal health information or the individual who is legally empowered to grant authority and the date signed; and

e.Notice of the length of time for which the authorization is valid and that the consumer or customer may revoke the authorization at any time and the procedure for making a revocation.

2.An authorization pursuant to sections 45-14-01-17 through 45-14-01-21 shall specify a length of time for which the authorization shall remain valid, which in no event shall be for more than twenty-four months.

3.A consumer or customer who is the subject of nonpublic personal health information may revoke an authorization provided pursuant to sections 45-14-01-17 through 45-14-01-21 at any time, subject to the rights of an individual who acted in reliance on the authorization prior to notice of the revocation.

4.A licensee shall retain the authorization or a copy thereof in the record of the individual who is the subject of nonpublic personal health information.

N.D. Admin. Code 45-14-01-19 Authorization request delivery

A request for authorization and an authorization form may be delivered to a consumer or a customer pursuant to section 45-14-01-10, provided that the request and the authorization form are clear and conspicuous. An authorization form is not required to be delivered to the consumer or customer or included in any other notices unless the licensee intends to disclose protected health information pursuant to subsection 1 of section 45-14-01-17.

N.D. Admin. Code 45-14-01-20 Relationship to federal rules

Irrespective of whether a licensee is subject to the federal Health Insurance Portability and Accountability Act privacy rule as promulgated by the United States department of health and human services [45 CFR subtitle A, subchapter C, part 160] (the "federal rule"), if a licensee complies with all requirements of the federal rule except for its effective date provision, the licensee shall not be subject to the provisions of sections 45-14-01-17 through 45-14-01-21.

N.D. Admin. Code 45-14-01-21 Relationship to state laws

Nothing in this rule shall preempt or supersede existing state law related to medical records, health, or insurance information privacy.

N.D. Admin. Code 45-14-01-22 Protection of Fair Credit Reporting Act

Nothing in this rule shall be construed to modify, limit, or supersede the operation of the federal Fair Credit Reporting Act [15 U.S.C. 1681 et seq.], and no inference shall be drawn on the basis of the provisions of this rule regarding whether information is transaction or experience information under

section 603 of that Act.

N.D. Admin. Code 45-14-01-23 Nondiscrimination

1.A licensee shall not unfairly discriminate against any consumer or customer because that consumer or customer has opted out from the disclosure of the person's nonpublic personal financial information pursuant to the provisions of this regulation.

2.A licensee shall not unfairly discriminate against a consumer or customer because that consumer or customer has not granted authorization for the disclosure of the person's nonpublic personal health information pursuant to the provisions of this rule.

3.Usual, appropriate, or acceptable insurance underwriting methods are not discriminatory practices for the purposes of this section.

N.D. Admin. Code 45-14-01-24 Severability

If any section or portion of a section of this chapter or its applicability to any person or circumstance is held invalid by a court, the remainder of the rule or the applicability of the provision to other persons or circumstances shall not be affected.

N.D. Admin. Code 45-14-01-25 Effective date

This chapter shall become effective November 1, 2004. As of that date, nonpublic personal information, regardless as to when the information was collected by a licensee, may not be shared with a nonaffiliated third party except as authorized by the consumer or customer, or except as permitted under subsection 2 of section 45-14-01-13 or section 45-14-01-14, 45-14-01-15, or 45-14-01-16. An initial privacy notice or an annual privacy notice issued after November 1, 2004, must comply with the revised privacy notice requirements of this chapter.

APPENDIX A

SAMPLE CLAUSES

The examples in this rule and the sample clauses in this appendix are not exclusive. Compliance with an example or use of a sample clause, to the extent applicable, constitutes compliance with this rule.

Licensees, including a group of financial holding company affiliates that use a common privacy notice, may use the following sample clauses, if the clause is accurate for each institution that uses the notice.

Note that disclosure of certain information, such as assets, income, and information from a consumer reporting agency, may give rise to obligations under the federal Fair Credit Reporting Act, such as a requirement to permit a consumer to authorize disclosures to affiliates or designation as a consumer reporting agency if disclosures are made to nonaffilated third parties.

A-1-Categories of information a licensee collects (all institutions)

A licensee may use this clause, as applicable, to meet the requirement of subdivision a of subsection 1 of section 45-14-01-07 to describe the categories of nonpublic personal information the licensee collects.

Sample Clause A-1:

We collect nonpublic personal information about you from the following sources: °Information we receive from you on applications or other forms; °Information about your transactions with us, our affiliates, or others; and °Information we receive from a consumer reporting agency.

A-2-Categories of information a licensee discloses (institutions that disclose outside of the exceptions)

A licensee may use one of these clauses, as applicable, to meet the requirement of subdivision b of subsection 1 of section 45-14-01-07 to describe the categories of nonpublic personal information the licensee discloses. The licensee may use these clauses if it discloses nonpublic personal information other than as permitted by the exceptions in sections 45-14-01-14, 45-14-01-15, and 45-14-01-16.

Sample Clause A-2, Alternative 1:

We may disclose the following kinds of nonpublic personal information about you: °Information we receive from you on applications or other forms, such as [provide illustrative examples, such as "your name, address, social security number, assets, income, and beneficiaries"]; °Information about your transactions with us, our affiliates, or others, such as [provide illustrative examples, such as "your policy coverage, premiums, and payment history"]; and °Information we receive from a consumer reporting agency, such as [provide illustrative examples, such as "your creditworthiness and credit history"].

Sample Clause A-2, Alternative 2:

We may disclose all of the information that we collect, as described [describe location in the notice, such as "above" or "below"].

A-3-Categories of information a licensee discloses and parties to whom the licensee discloses (institutions that do not disclose outside of the exceptions)

A licensee may use this clause, as applicable, to meet the requirements of subdivisions b, c, and d of subsection 1 of section 45-14-01-07 to describe the categories of nonpublic personal information about customers and former customers that the licensee discloses and the categories of affiliates and nonaffiliated third parties to whom the licensee discloses. A licensee may use this clause if the licensee does not disclose nonpublic personal information to any party, other than as permitted by the exceptions in sections 45-14-01-15 and 45-14-01-16.

Sample Clause A-3:

We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.

A-4-Categories of parties to whom a licensee discloses (institutions that disclose outside of the exceptions)

A licensee may use this clause, as applicable, to meet the requirement of subdivision c of subsection 1 of section 45-14-01-07 to describe the categories of affiliates and nonaffiliated third parties to whom the licensee discloses nonpublic personal information. This clause may be used if the licensee discloses nonpublic personal information other than as permitted by the exceptions in sections 45-14-01-14, 45-14-01-15, and 45-14-01-16, as well as when permitted by the exceptions in sections 45-14-01-15 and 45-14-01-16.

Sample Clause A-4:

We may disclose nonpublic personal information about you to the following types of third parties: °Financial service providers, such as [provide illustrative examples, such as "life insurers, automobile insurers, mortgage bankers, securities broker-dealers, and insurance agents"]; °Nonfinancial companies, such as [provide illustrative examples, such as "retailers, direct marketers, airlines, and publishers"]; and °Others, such as [provide illustrative examples, such as "nonprofit organizations"].

We may also disclose nonpublic personal information about you to nonaffiliated third parties as permitted by law.

A-5-Service provider/joint marketing exception A licensee may use one of these clauses, as applicable, to meet the requirements of subdivision e of subsection 1 of section 45-14-01-07 related to the exception for service providers and joint marketers in

section 45-14-01-14. If a licensee discloses nonpublic personal information under this exception, the licensee shall describe the categories of nonpublic personal information the licensee discloses and the categories of third parties with which the licensee has contracted.

Sample Clause A-5, Alternative 1:

We may disclose the following information to companies that perform marketing services on our behalf or to other financial institutions with which we have joint marketing agreements: °Information we receive from you on applications or other forms, such as [provide illustrative examples, such as "your name, address, social security number, assets, income, and beneficiaries"]; °Information about your transactions with us, our affiliates, or others, such as [provide illustrative examples, such as "your policy coverage, premium, and payment history"]; and °Information we receive from a consumer reporting agency, such as [provide illustrative examples, such as "your creditworthiness and credit history"].

Sample Clause A-5, Alternative 2:

We may disclose all of the information we collect, as described [describe location in the notice, such as "above" or "below"] to companies that perform marketing services on our behalf or to other financial institutions with whom we have joint marketing agreements.

A-6-Explanation of authorization right (institutions that disclose outside of the exceptions)

A licensee may use this clause, as applicable, to meet the requirement of subdivision f of subsection 1 of section 45-14-01-07 to provide an explanation of the consumer's right to authorize the disclosure of nonpublic personal information to nonaffiliated third parties, including the methods by which the consumer may exercise that right. The licensee may use this clause if the licensee discloses nonpublic personal information other than as permitted by the exceptions in sections 45-14-01-14, 45-14-01-15, and 45-14-01-16.

Sample Clause A-6:

We will not disclose nonpublic personal information about you to nonaffiliated third parties (other than as permitted by law), unless you authorize us to make those disclosures. Your authorization must be in writing or, if you agree, in electronic form. If you wish to authorize disclosures to nonaffiliated third parties, you may [describe a reasonable means of authorization, such as "call the following toll-free number: (insert number)"].

A-7-Confidentiality and security (all institutions)

A licensee may use this clause, as applicable, to meet the requirement of subdivision h of subsection 1 of section 45-14-01-07 to describe its policies and practices with respect to protecting the confidentiality and security of nonpublic personal information.

Sample Clause A-7:

We restrict access to nonpublic personal information about you to [provide an appropriate description, such as "those employees who need to know that information to provide products or services to you"]. We maintain physical, electronic, and procedural safeguards that comply with federal regulations to guard your nonpublic personal information.

Chapter 45-14-02 Information Security Program

N.D. Admin. Code 45-14-02-01 Definitions

As used in this chapter:

1."Customer" means "customer" as defined in section 45-14-01-04.

2."Customer information" means "nonpublic personal financial information", as defined in

section 45-14-01-04, about a customer, whether in paper, electronic, or other form that is maintained by or on behalf of the licensee.

3."Customer information system" means the methods used to access, collect, store, use, transmit, protect, or dispose of customer information.

4."Licensee" means "licensee" as defined in section 45-14-01-04.

5."Service provider" means a person that provides services to the licensee and maintains, possesses, or otherwise is permitted access to customer information.

N.D. Admin. Code 45-14-02-02 Information security program

Each licensee shall implement a comprehensive written information security program that includes administrative, technical, and physical safeguards for the protection of customer information that is appropriate to the size and complexity of the licensee and the nature and scope of its activities. Each information security program shall be designed to ensure the security and confidentiality of customer information, protect against any anticipated threats or hazards to the security or integrity of customer information, and protect against unauthorized access to, or use of, customer information that could result in substantial harm or inconvenience to any customer.

N.D. Admin. Code 45-14-02-03 Developing and implementing an information security program

The actions and procedures described in this section are examples of methods of implementation of this chapter. These examples are nonexclusive illustrations of practices and procedures that a licensee may follow to implement this chapter.

1.Each licensee identifies reasonably foreseeable internal or external threats that could result in unauthorized disclosure, misuse, alteration, or destruction of customer information or customer information systems. Each licensee assesses the likelihood and potential damage of the risks presented by the threats it has identified, taking into consideration the sensitivity of customer information. Each licensee assesses the sufficiency of the policies and procedures it has in place to control the risks it has identified.

2.Each information security program is designed to control the identified risks, commensurate with the sensitivity of the information and the complexity and scope of the licensee's activities.

Each licensee trains staff, as appropriate, to implement the licensee's information security program and regularly tests or otherwise monitors the key controls, systems, and procedures of its information security program.

3.Each licensee exercises due diligence in selecting service providers and obtains satisfactory assurances from the service provider that it will appropriately safeguard the information to meet the objectives of section 45-14-02-02.

4.Each licensee monitors, evaluates, and adjusts, as appropriate, its information security program to reflect any relevant changes in technology, the sensitivity of its customer information, internal or external threats to information, and the licensee's own changing business arrangements, such as mergers and acquisitions, alliances and joint ventures, outsourcing arrangements, and changes to its customer information systems.

Article 45-15 Insurance Fraud

Chapter 45-15-01 Insurance Fraud

N.D. Admin. Code 45-15-01-01 Insurance fraud

A person engaged in the business of insurance having knowledge or a reasonable belief that a fraudulent insurance act has been, is being, or will be committed shall provide information concerning the known or suspected fraudulent insurance act to the commissioner in writing within sixty days of having that knowledge or reasonable belief. The information may be reported on the national association of insurance commissioners uniform suspected insurance fraud reporting form, a copy of which is attached as appendix A. Thereafter, the person engaged in the business of insurance shall promptly provide to the commissioner any additional information that the commissioner may request concerning the known or suspected fraudulent insurance act. For the purposes of this rule, a reasonable belief means that the person engaged in the business of insurance has a given fact or combination of facts which in their totality result in a determination that more likely than not, a fraudulent insurance act has been, is being, or will be committed.

Appendix A

History

• History: Effective March 1, 2004; amended effective April 1, 2017.
• General Authority: NDCC 28-32-02
• Law Implemented: NDCC 26.1-02.1, 26.1-02.1-11

Article 45-16 Life Settlements

Chapter 45-16-01 Life Settlement Licenses

N.D. Admin. Code 45-16-01-01 Definitions

Unless otherwise defined, or made inappropriate by context, all words used in this chapter have meaning as given them under North Dakota Century Code chapter 26.1-33.4.

History

• Law Implemented: NDCC 26.1-33.4-01

N.D. Admin. Code 45-16-01-02 Provider license fees - Due Date

The fee to submit a provider application is two hundred fifty dollars. The fee to renew a provider license is one hundred dollars. The renewal fee is due on the anniversary date of issuance of the provider license. If the renewal fee is not paid on or before the anniversary date, the provider license is automatically revoked.

N.D. Admin. Code 45-16-01-03 Broker license fees - Due date

The fee to submit a broker application is one hundred dollars. A life insurance producer deemed to meet the licensing requirements of North Dakota Century Code section 26.1-33.4-02 must pay an initial broker license fee of one hundred dollars. The fee to renew a broker license is twelve dollars. The renewal fee is due on the anniversary date of issuance of the broker license. If the renewal fee is not paid on or before the anniversary date, the broker license is automatically revoked.

N.D. Admin. Code 45-16-01-04 Training requirement - Penalty

An individual licensed as a broker must submit proof of completion of no less than fifteen hours of training related to life settlement and life settlement transactions. The proof must be submitted to the commissioner on or before the anniversary date of issuance of the broker license beginning on the second anniversary of issuance of the license and every two years thereafter. If the proof is not submitted on or before the due date, the individual broker license will not be renewed. A life insurance producer who is licensed and operating as a broker is not subject to these training requirements.

N.D. Admin. Code 45-16-01-05 Consumer guide

A provider shall prepare a buyer’s guide or similar consumer advisory package for delivery to owners during the solicitation process. The buyer’s guide or similar consumer advisory package must substantially comply with the commissioner’s model guide.

History

• Law Implemented: NDCC 26.1-33.4-08

Chapter 45-16-02 Life Settlement Advertising

N.D. Admin. Code 45-16-02-01 Definitions

Unless otherwise defined, or made inappropriate by context, all words used in this chapter have meaning as given them under North Dakota Century Code chapter 26.1-33.4.

History

• General Authority: NDCC 26.1-33.4-11
• Law Implemented: NDCC 26.1-33.4-01

N.D. Admin. Code 45-16-02-02 Applicability

1.This chapter applies to any advertisement of the business of life settlements intended for dissemination in this state and which advertisement is disseminated in any manner by or on behalf of a provider or broker required to be licensed under North Dakota Century Code

section 26.1-33.4-02.

2.Every provider and broker required to be licensed under North Dakota Century Code section 26.1-33.4-02 shall submit a statement of compliance regarding advertising as part of the initial application and at other times as requested by the commissioner.

3.Life settlement promotional, advertising, or marketing materials need not be filed with the commissioner except upon request or order of the commissioner.

History

• General Authority: NDCC 26.1-33.4-11
• Law Implemented: NDCC 26.1-33.4-01

N.D. Admin. Code 45-16-02-03 Disclosure requirements

1.Advertisements must be accurate and truthful and not misleading in fact or by implication. The form and content of an advertisement of a life settlement contract shall be sufficiently complete and clear so as to avoid deception. It shall not have the capacity or tendency to mislead or deceive. Whether an advertisement has the capacity or tendency to mislead or deceive shall be determined by the commissioner from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence within the segment of the public to which it is directed.

2.A person or trust may not directly or indirectly market, advertise, solicit, or otherwise promote the purchase of a policy for the sole purpose of or with an emphasis on settling the policy.

3.The information required to be disclosed under this section shall not be minimized, rendered obscure, or presented in an ambiguous fashion or intermingled with the text of the advertisement so as to be confusing or misleading.

a.An advertisement shall not omit material information or use words, phrases, statements, references, or illustrations if the omission or use has the capacity, tendency, or effect of misleading or deceiving owners as to the nature or extent of any benefit, loss covered, premium payable, or state or federal tax consequence. The fact that the life settlement contract offered is made available for inspection prior to consummation of the sale, or an offer is made to refund the payment if the owner is not satisfied or that the life settlement contract includes a free-look period that satisfies or exceeds legal requirements, does not remedy misleading statements.

b.An advertisement shall not use the name or title of a life insurance company or a life insurance policy unless the advertisement has been approved by the insurer.

c.An advertisement shall not state or imply that interest charged on an accelerated death benefit or a policy loan is unfair, inequitable, or in any manner an incorrect or improper practice.

d.The words "free", "no cost", or words of similar import may not be used in the marketing, advertising, soliciting, or otherwise promoting of a life settlement contract. An advertisement may specify the charge for a benefit or a service or may state that a charge is included in the payment or use other appropriate language.

e.Testimonials, appraisals, or analysis used in advertisements must be genuine; represent the current opinion of the author; be applicable to the life settlement contract advertised, if any; and be accurately reproduced with sufficient completeness to avoid misleading or deceiving prospective owners as to the nature or scope of the testimonials, appraisal, analysis, or endorsement. In using testimonials, appraisal, or analysis, a licensee under this chapter makes as its own all the statements contained therein and the statements are subject to all the provisions of this section.

(1)If the individual making a testimonial, appraisal, analysis, or an endorsement has a financial interest in the party making use of the testimonial, appraisal, analysis, or endorsement, either directly or through a related entity as a stockholder, director, officer, employee, or otherwise, or receives any benefit directly or indirectly other than required union scale wages, that fact shall be prominently disclosed in the advertisement.

(2)An advertisement shall not state or imply that a life settlement contract has been approved or endorsed by a group of individuals, society, association, or other organization unless that is the fact and unless any relationship between an organization and the life settlement licensee is disclosed. If the entity making the endorsement or testimonial is owned, controlled, or managed by the life settlement licensee, or receives any payment or other consideration from the life settlement licensee for making an endorsement or testimonial, that fact shall be disclosed in the advertisement.

(3)When an endorsement refers to benefits received under a life settlement contract, all pertinent information shall be retained for a period of five years after its use.

4.An advertisement shall not contain statistical information unless it accurately reflects recent and relevant facts. The source of all statistics used in an advertisement shall be identified.

5.An advertisement shall not disparage insurers, life settlement providers, life settlement brokers, life settlement investment agents, insurance producers, policies, services, or methods of marketing.

6.The name of the life settlement licensee shall be clearly identified in all advertisements about the licensee or its life settlement contract and if any specific life settlement contract is advertised, the life settlement contract shall be identified either by form number or some other appropriate description. If an application is part of the advertisement, the name of the life settlement provider shall be shown on the application.

7.An advertisement shall not use a trade name, group designation, name of the parent company of a life settlement licensee, name of a particular division of the life settlement licensee, service mark, slogan, symbol, or other device or reference without disclosing the name of the life settlement licensee if the advertisement would have the capacity or tendency to mislead or deceive as to the true identity of the life settlement licensee or to create the impression that a company other than the life settlement licensee would have any responsibility for the financial obligation under a life settlement contract.

8.An advertisement shall not use any combination of words, symbols, or physical materials that by their content, phraseology, shape, color, or other characteristics are so similar to a combination of words, symbols, or physical materials used by a government program or agency or otherwise appear to be of such a nature that they tend to mislead prospective owners into believing that the solicitation is in some manner connected with a government program or agency.

9.An advertisement may state that a life settlement licensee is licensed in the state where the advertisement appears provided it does not exaggerate that fact or suggest or imply that a competing life settlement licensee may not be so licensed. The advertisement may ask the audience to consult the licensee’s website or contact the insurance department to find out if the state requires licensing and, if so, whether the life settlement provider or life settlement broker is licensed.

10.An advertisement shall not create the impression that the life settlement provider, its financial condition or status, the payment of its claims, or the merits, desirability, or advisability of its life settlement contracts are recommended or endorsed by any government entity.

11.The name of the actual licensee shall be stated in all of its advertisements. An advertisement shall not use a trade name, any group designation, name of any affiliate or controlling entity of the licensee, service mark, slogan, symbol, or other device in a manner that would have the capacity or tendency to mislead or deceive as to the true identity of the actual licensee or create the false impression that an affiliate or controlling entity would have any responsibility for the financial obligation of the licensee.

12.An advertisement shall not directly or indirectly create the impression that any division or agency of the state or of the United States government endorses, approves, or favors:

a.Any life settlement licensee or its business practices or methods of operation;

b.The merits, desirability, or advisability of any life settlement contract;

c.Any life settlement contract; or

d.Any life insurance policy or life insurance company.

13.If the advertiser emphasizes the speed with which the life settlement transaction will occur, the advertising must disclose the average time frame from completed application to the date of offer and from acceptance of the offer to receipt of the funds by the owner.

14.If the advertising emphasizes the dollar amounts available to owners, the advertising shall disclose the average purchase price as a percentage of face value obtained by owners contracting with the licensee during the past six months.

History

• General Authority: NDCC 26.1-33.4-07, 26.1-33.4-11
• Law Implemented: NDCC 26.1-33.4-07

Article 45-17 Bail Bondsmen

Chapter 45-17-01 Duty of Bail Bondsmen

N.D. Admin. Code 45-17-01-01 Definitions

Unless otherwise defined, or made inappropriate by context, all words used in this chapter have meaning as given them under North Dakota Century Code chapter 26.1-26.6.

History

• History: Effective January 1, 2016.
• General Authority: NDCC 26.1-26.6-10
• Law Implemented: NDCC 26.1-26.6-01

N.D. Admin. Code 45-17-01-02 Duty to monitor status of bail bonds written

In order to comply with subsection 2 of North Dakota Century Code section 26.1-26.6-05 a bail bond agent shall check the status of all issued bail bonds at least once every seven days.

History

• History: Effective January 1, 2016.
• General Authority: NDCC 26.1-26.6-10
• Law Implemented: NDCC 26.1-26.6-05

Article 45-18 Fire Marshal

Chapter 45-18-01 Fire Prevention

N.D. Admin. Code 45-18-01-01 Fire prevention rules - Intent

It is the intent of this chapter to prescribe regulations consistent with nationally recognized good practice for the safeguarding of life and property from the hazards of fire and explosions.

History

• General Authority: NDCC 18-01-04
• Law Implemented: NDCC 18-01-02

N.D. Admin. Code 45-18-01-02 Fire prevention rules - Scope

1.This chapter supplements all laws defined within the North Dakota Century Code relating to fire safety and applies to all persons without restrictions, unless specifically exempted.

2.This chapter applies to existing conditions, as well as to conditions arising after the adoption of this chapter, except that conditions legally in existence at the time of adoption of this

chapter and, not in strict compliance with this chapter, shall be permitted to continue only if, in the opinion of the state fire marshal, they do not constitute a distinct hazard to life or property.

3.Where there is a conflict between this chapter and those provisions of the North Dakota Century Code, the provisions of the North Dakota Century Code shall prevail.

History

• General Authority: NDCC 18-01-04, 18-01-33
• Law Implemented: NDCC 18-01-02

N.D. Admin. Code 45-18-01-03 Definitions

The following definitions shall be used when referred to in the content of this chapter:

1."Authority having jurisdiction", "bureau of fire prevention", "chief", "chief of the fire department", "chief of the fire prevention bureau", "fire chief", "fire code official", "fire department", "fire marshal", "fire marshal's office", "fire prevention bureau", "fire prevention engineer", "fire prevention inspector", "fire protection engineer", "inspector", or "office of the fire marshal" refers to the state fire marshal or any representative of the state fire marshal's office.

2."City" or "jurisdiction" refers to the state of North Dakota.

3."Fire prevention code", "fire prevention rules", or "state fire code" refers to the rules provided for within this chapter.

4."Local jurisdiction" refers to any agency of local or state government which has a defined responsibility for any population, group of persons, land area, occupancy type, class of persons, or municipality located within this state which is less than the entire land area, population or geographical makeup of this state.

History

• General Authority: NDCC 18-01-04, 18-01-33
• Law Implemented: NDCC 18-01-04, 18-01-33

N.D. Admin. Code 45-18-01-04 Fire prevention rules

The fire prevention rules for this state include the following:

Fire code. The State Fire Code includes:

1.The provisions of the State Building Code, effective January 1, 2023, providing for fire-safe construction and operation, as provided for in North Dakota Century Code section 54-21.3-03.

2.The provisions of the International Fire Code (IFC), 2021 edition International Code Council (ICC), with the following exceptions and modifications:

a.Chapter 1. Scope and administration. 101.1 Title. The words "[NAME OF JURISDICTION]" are replaced with "North Dakota". 102.4 Application of building code. Insert "as amended by the State of North Dakota" after the words "International Building Code" in both instances. 103.1 Creation of agency. The words "[INSERT NAME OF DEPARTMENT]" is replaced with "North Dakota fire marshals division". 105.1.1 Permits required. The words "obtain the required permit" are replaced with "may be required to obtain a permit". 106.4 Retention of construction documents. Remove the words "One set of approved construction documents shall be returned to the applicant, and said set shall be kept on the site of the building or work at all times during which the work authorized thereby is in progress." 112.4 Violation penalties. Does not apply.

b.Chapter 2. Definitions.

Commercial motor vehicle. Commercial motor vehicle is amended to read as follows:

"Refer to North Dakota Century Code section 39-06.2-02 for commercial motor vehicle definition."

Fireworks. Fireworks is amended to read as follows: "Refer to North Dakota Century Code chapter 23-15 for the fireworks definition."

Residential child care building. For the purposes of child care fire safety inspections, a residential child care building is defined as a maximum of 30 children in a building designed for residential purposes (i.e. single family dwelling, single apartment, etc.).

Commercial child care or preschool building. For the purposes of child care fire safety inspections, a commercial child care or preschool building is defined as any building licensed for over 30 children, or any building designed for commercial purpose regardless of the number of occupants.

c.Chapter 3. General requirements. 308.1.4 Open-flame cooking devices. Insert "or decks" after the word "balconies".

Exception 3. The words "2 ½ pounds [nominal 1 pound (0.454 kg)" is replaced with "47.8 pounds [nominal 20 pounds (9 kg)". 308.1.6.3 Sky lanterns. Does not apply. 308.3 Group A occupancies. Exception 1. The following is added: "1.4 Open-flame devices for food warming." 314.4 Vehicles. Insert "Batteries may remain connected if keys are not in ignition system." immediately after subsection 1's "safety features." as a subsection a. Delete "Fuel in fuel tanks does not exceed one-quarter tank or 5 gallons (19 L) (whichever is least)" and renumber accordingly.

d.Chapter 5. Fire service features. 510.1 Emergency responder radio coverage in new buildings. In the first sentence, replace "New" with "Where required by the fire code official, new".

e.Chapter 8. Interior finishes. 806.1.1 Restricted occupancies. Insert the following exception:

"3. For purposes of this provision, churches shall not be deemed public buildings and may utilize natural or resin-bearing cut trees in the alter area of the church. No electric lighting is allowed on the tree."

f.Chapter 9. Fire protection and life safety systems. 903.2.8 Group R. The following exception is added: after "fire area." add "Exception:

Sprinklers are not required in single family dwellings or residential buildings that contain no more than two dwelling units and no higher risk occupancy within the same building." 903.3.1.1.1 Exempt locations is amended by adding the following exception:

"7. Elevator machine room and machinery spaces. Where sprinklers are not installed in elevator machine rooms, shunt trip required in accordance with IBC 3005.5 shall not be installed." 903.3.5 Water supplies. After the words "fire code official." add "Underground water supply piping shall be constructed of a material allowed by the North Dakota State Plumbing Code and shall be allowed to extend into the building through the slab or wall not more than 24 inches." 905.1.1 Standpipe hose. Add the following "The installation of the fire hose on standpipes may be omitted when approved by the fire code official. Approved standpipe hose valves and connections shall be provided where required." 907.8.3 Fire alarm system interface. Delete this paragraph in its entirety.

g.Chapter 10. Means of egress. 1009.8.1 System requirements. After the words "monitoring location" delete the words "or 9-1-1". 1103.5.1 Group A-2. After the word "Where" remove the words "alcoholic beverages are consumed" and immediately add the words "a state liquor license is applied for or, renewed or in-place".

h.Chapter 23. Wood. 2301.1 Scope. After the words "in accordance with this chapter and" insert the words "/or". After the words "International Mechanical Code" insert the words "NFPA 30 and NFPA 30A."

i.Chapter 61. Liquefied petroleum gases. 6101.3 Construction documents. After the word "Where" delete "a single LP gas container is more than 2,000 gallons (750 L) in water capacity or". 6108.1 General. After the words "(15,140 L)" insert "at the request of the AHJ".

History

• General Authority: NDCC 18-01-04, 18-01-33, 18-09-02, 23-15-03
• Law Implemented: NDCC 18-01-02, 18-01-04, 18-01-33, 18-09-02, 23-15-03

N.D. Admin. Code 45-18-01-05 Availability of standards

The standards listed in section 45-18-01-04 are available from:

1.National Fire Protection Association Batterymarch Park Quincy, Massachusetts 02269 (617) 328-9290

2.International Code Council, Inc. 4051 West Flossmoor Road Country Club Hills, IL 60478-5795 (800) 214-4321

History

• General Authority: NDCC 18-01-04, 18-01-33, 18-09-02, 23-15-03
• Law Implemented: NDCC 18-01-02, 18-01-04, 18-01-33, 18-09-02, 23-15-03

Chapter 45-10

N.D. Admin. Code 45-10

ARTICLE 45-10

PETROLEUM TANK RELEASE COMPENSATION FUND [Repealed effective January 1, 2024]

Chapter 45-12

N.D. Admin. Code 45-12

ARTICLE 45-12

NORTH DAKOTA BOILER RULES [Repealed effective January 1, 2024]