This is our starting text

HB-5608, As Passed House, November 30, 2006

SUBSTITUTE FOR

HOUSE BILL NO. 5608

A bill entering into the interstate insurance product

regulation compact; and for related purposes.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

INTERSTATE INSURANCE PRODUCT REGULATION COMPACT

ARTICLE I. PURPOSES

The purposes of this compact are, through means of joint and

cooperative action among the compacting states:

1. To promote and protect the interest of consumers of

individual and group annuity, life insurance, disability income,

and long-term care insurance products.

2. To develop uniform standards for insurance products covered

under the compact.

3. To establish a central clearinghouse to receive and provide

prompt review of insurance products covered under the compact and,

in certain cases, advertisements related to those products,

submitted by insurers authorized to do business in 1 or more

compacting states.

4. To give appropriate regulatory approval to those product

filings and advertisements satisfying the applicable uniform

standard.

5. To improve coordination of regulatory resources and

expertise between state insurance departments regarding the setting

of uniform standards and review of insurance products covered under

the compact.

6. To create the interstate insurance product regulation

commission.

7. To perform these and such other related functions as may be

consistent with the state regulation of the business of insurance.

ARTICLE II. DEFINITIONS

For purposes of this compact:

1. "Advertisement" means any material designed to create

public interest in a product, or induce the public to purchase,

increase, modify, reinstate, borrow on, surrender, replace, or

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

operating procedures of the commission.

2. "Bylaws" means those bylaws established by the commission

for its governance or for directing or controlling the commission's

actions or conduct.

3. "Compacting state" means any state which has enacted this

compact legislation and which has not withdrawn pursuant to article

XIV, section 1 of this compact, or been terminated pursuant to

article XIV, section 2 of this compact.

4. "Commission" means the "interstate insurance product

regulation commission" established by this compact.

5. "Commissioner" means the chief insurance regulatory

official of a state, including, but not limited to, commissioner,

superintendent, director, or administrator.

6. "Domiciliary state" means the state in which an insurer is

incorporated or organized or, in the case of an alien insurer, its

state of entry.

7. "Insurer" means any entity licensed by a state to issue

contracts of insurance for any of the lines of insurance covered by

this compact.

8. "Member" means the commissioner, or his or her designee.

9. "Non-compacting state" means any state that is not at the

time a compacting state.

10. "Operating procedures" means procedures promulgated by the

commission implementing a rule, uniform standard, or a provision of

this compact.

11. "Product" means the form of a policy or contract,

including any application, endorsement, or related form that is

attached to and made a part of the policy or contract, and any

evidence of coverage or certificate, for an individual or group

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

insurance product that an insurer is authorized to issue.

12. "Rule" means a statement of general or particular

applicability and future effect promulgated by the commission,

including a uniform standard developed pursuant to article VII of

this compact, designed to implement, interpret, or prescribe law or

policy or describing the organization, procedure, or practice

requirements of the commission, which shall have the force and

effect of law in the compacting states.

13. "State" means any state, district, or territory of the

United States of America.

14. "Third-party filer" means an entity that submits a product

filing to the commission on behalf of an insurer.

15. "Uniform standard" means a standard adopted by the

commission for a product line, pursuant to article VII of this

compact, and shall include all of the product requirements in

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

whether express or implied, to prohibit the use of any

inconsistent, misleading, or ambiguous provisions in a product and

the form of the product made available to the public shall not be

unfair, inequitable, or against public policy as determined by the

commission.

ARTICLE III. ESTABLISHMENT OF THE COMMISSION AND VENUE

1. The compacting states hereby create and establish a joint

public agency known as the "interstate insurance product regulation

commission". Pursuant to article IV of this compact, the commission

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

receive and provide prompt review of filed products, and give

approval to those product filings satisfying applicable uniform

standards; provided, it is not intended for the commission to be

the exclusive entity for receipt and review of insurance product

filings. This compact does not prohibit any insurer from filing its

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

business of insurance, and any such filing shall be subject to the

laws of the state where filed.

2. The commission is a body corporate and politic and an

instrumentality of the compacting states.

3. The commission is solely responsible for its liabilities

except as otherwise specifically provided in this compact.

4. Venue is proper and judicial proceedings by or against the

commission shall be brought solely and exclusively in a court of

competent jurisdiction where the principal office of the commission

is located.

ARTICLE IV. POWERS OF THE COMMISSION

The commission shall have the following powers:

1. To promulgate rules, pursuant to article VII of this

compact, which shall have the force and effect of law and shall be

binding in the compacting states to the extent and in the manner

provided in this compact.

2. To exercise its rule-making authority and establish

reasonable uniform standards for products covered under the

compact, and advertisement related to those products, which shall

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

compacting states, but only for those products filed with the

commission, provided, that a compacting state shall have the right

to opt out of such uniform standard pursuant to article VII of this

compact, to the extent and in the manner provided in this compact,

and, provided further, that any uniform standard established by the

commission for long-term care insurance products may provide the

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

less than, those protections set forth in the national association

of insurance commissioners' long-term care insurance model act and

long-term care insurance model regulation, respectively, adopted as

of 2001. The commission shall consider whether any subsequent

amendments to the national association of insurance commissioners'

long-term care insurance model act or long-term care insurance

model regulation adopted by the national association of insurance

commissioners require amending of the uniform standards established

by the commission for long-term care insurance products.

3. To receive and review in an expeditious manner products

filed with the commission, and rate filings for disability income

and long-term care insurance products, and give approval of those

products and rate filings that satisfy the applicable uniform

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

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

the manner provided in the compact.

4. To receive and review in an expeditious manner

advertisement relating to long-term care insurance products for

which uniform standards have been adopted by the commission, and

give approval to all advertisement that satisfies the applicable

uniform standard. For any product covered under this compact, other

than long-term care insurance products, the commission shall have

the authority to require an insurer to submit all or any part of

its advertisement with respect to that product for review or

approval prior to use, if the commission determines that the nature

of the product is such that an advertisement of the product could

have the capacity or tendency to mislead the public. The actions of

the commission as provided in this section shall have the force and

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

extent and in the manner provided in the compact.

5. To exercise its rule-making authority and designate

products and advertisement that may be subject to a self-

certification process without the need for prior approval by the

commission.

6. To promulgate operating procedures, pursuant to article VII

of this compact, which shall be binding in the compacting states to

the extent and in the manner provided in this compact.

7. To bring and prosecute legal proceedings or actions in its

name as the commission; provided, that the standing of any state

insurance department to sue or be sued under applicable law shall

not be affected.

8. To issue subpoenas requiring the attendance and testimony

of witnesses and the production of evidence.

9. To establish and maintain offices.

10. To purchase and maintain insurance and bonds.

11. To borrow, accept, or contract for services of personnel,

including, but not limited to, employees of a compacting state.

12. To hire employees, professionals, or specialists, and

elect or appoint officers, and to fix their compensation, define

their duties, and give them appropriate authority to carry out the

purposes of the compact, and determine their qualifications, and to

establish the commission's personnel policies and programs relating

to, among other things, conflicts of interest, rates of

compensation, and qualifications of personnel.

13. To accept any and all appropriate donations and grants of

money, equipment, supplies, materials, and services, and to

receive, utilize, and dispose of the same; provided that at all

times the commission shall strive to avoid any appearance of

impropriety.

14. To lease, purchase, accept appropriate gifts or donations

of, or otherwise to own, hold, improve, or use, any property, real,

personal, or mixed; provided that at all times the commission shall

strive to avoid any appearance of impropriety.

15. To sell, convey, mortgage, pledge, lease, exchange,

abandon, or otherwise dispose of any property, real, personal, or

mixed.

16. To remit filing fees to compacting states as may be set

forth in the bylaws, rules, or operating procedures.

17. To enforce compliance by compacting states with rules,

uniform standards, operating procedures, and bylaws.

18. To provide for dispute resolution among compacting states.

19. To advise compacting states on issues relating to insurers

domiciled or doing business in non-compacting jurisdictions,

consistent with the purposes of this compact.

20. To provide advice and training to those personnel in state

insurance departments responsible for product review and to be a

resource for state insurance departments.

21. To establish a budget and make expenditures.

22. To borrow money.

23. To appoint committees, including advisory committees

comprising members, state insurance regulators, state legislators

or their representatives, insurance industry and consumer

representatives, and such other interested persons as may be

designated in the bylaws.

24. To provide and receive information from, and to cooperate

with, law enforcement agencies.

25. To adopt and use a corporate seal.

26. To perform such other functions as may be necessary or

appropriate to achieve the purposes of this compact consistent with

the state regulation of the business of insurance.

ARTICLE V. ORGANIZATION OF THE COMMISSION

1. Membership, Voting, and Bylaws

a. Each compacting state shall have and be limited to 1

member. Each member shall be qualified to serve in that capacity

pursuant to applicable law of the compacting state. Any member may

be removed or suspended from office as provided by the law of the

state from which he or she shall be appointed. Any vacancy

occurring in the commission shall be filled in accordance with the

laws of the compacting state where the vacancy exists. Nothing in

this compact shall be construed to affect the manner in which a

compacting state determines the election or appointment and

qualification of its own commissioner.

b. Each member shall be entitled to 1 vote and shall have an

opportunity to participate in the governance of the commission in

accordance with the bylaws. Notwithstanding any provision in this

compact to the contrary, no action of the commission with respect

to the promulgation of a uniform standard shall be effective unless

2/3 of the members vote in favor of it.

c. The commission shall, by a majority of the members,

prescribe bylaws to govern its conduct as may be necessary or

appropriate to carry out the purposes, and exercise the powers, of

the compact, including, but not limited to, all of the following:

i. Establishing the fiscal year of the commission.

ii. Providing reasonable procedures for appointing and

electing members, as well as holding meetings, of the management

committee.

iii. Providing reasonable standards and procedures: for the

establishment and meetings of other committees, and governing any

general or specific delegation of any authority or function of the

commission.

iv. Providing reasonable procedures for calling and conducting

meetings of the commission that consist of a majority of commission

members, ensuring reasonable advance notice of each such meeting,

and providing for the right of citizens to attend each such meeting

with enumerated exceptions designed to protect the public's

interest, the privacy of individuals, and insurers' proprietary

information, including trade secrets. The commission may meet in

camera only after a majority of the entire membership votes to

close a meeting en toto or in part. As soon as practicable, the

commission must make public a copy of the vote to close the meeting

revealing the vote of each member with no proxy votes allowed and

votes taken during such meeting.

v. Establishing the titles, duties, and authority and

reasonable procedures for the election of the officers of the

commission.

vi. Providing reasonable standards and procedures for the

establishment of the personnel policies and programs of the

commission. Notwithstanding any civil service or other similar laws

of any compacting state, the bylaws shall exclusively govern the

personnel policies and programs of the commission.

vii. Promulgating a code of ethics to address permissible and

prohibited activities of commission members and employees.

viii. Providing a mechanism for winding up the operations of

the commission and the equitable disposition of any surplus funds

that may exist after the termination of the compact after the

payment and/or reserving of all of its debts and obligations.

d. The commission shall publish its bylaws in a convenient

form and file a copy of the bylaws and a copy of any amendment to

the bylaws with the appropriate agency or officer in each of the

compacting states.

2. Management Committee, Officers, and Personnel

a. A management committee comprising no more than 14 members

shall be established as follows:

i. One member from each of the 6 compacting states with the

largest premium volume for individual and group annuities, life,

disability income, and long-term care insurance products,

determined from the records of the national association of

insurance commissioners for the prior year.

ii. Four members from those compacting states with at least 2%

of the market based on the premium volume described above, other

than the 6 compacting states with the largest premium volume,

selected on a rotating basis as provided in the bylaws.

iii. Four members from those compacting states with less than

2% of the market, based on the premium volume described above, with

1 selected from each of the 4 zone regions of the national

association of insurance commissioners as provided in the bylaws.

b. The management committee shall have such authority and

duties as may be set forth in the bylaws, including, but not

limited to:

i. Managing the affairs of the commission in a manner

consistent with the bylaws and purposes of the commission.

ii. Establishing and overseeing an organizational structure

within, and appropriate procedures for, the commission to provide

for the creation of uniform standards and other rules, receipt and

review of product filings, administrative and technical support

functions, review of decisions regarding the disapproval of a

product filing, and the review of elections made by a compacting

state to opt out of a uniform standard; provided that a uniform

standard shall not be submitted to the compacting states for

adoption unless approved by 2/3 of the members of the management

committee.

iii. Overseeing the offices of the commission.

iv. Planning, implementing, and coordinating communications

and activities with other state, federal, and local government

organizations in order to advance the goals of the commission.

c. The commission shall elect annually officers from the

management committee, with each having such authority and duties,

as may be specified in the bylaws.

d. The management committee may, subject to the approval of

the commission, appoint or retain an executive director for such

period, upon such terms and conditions, and for such compensation

as the commission may deem appropriate. The executive director

shall serve as secretary to the commission, but shall not be a

member of the commission. The executive director shall hire and

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

3. Legislative and Advisory Committees

a. A legislative committee comprising state legislators or

their designees shall be established to monitor the operations of,

and make recommendations to, the commission, including the

management committee; provided that the manner of selection and

term of any legislative committee member shall be as set forth in

the bylaws. Prior to the adoption by the commission of any uniform

standard, revision to the bylaws, annual budget, or other

significant matter as may be provided in the bylaws, the management

committee shall consult with and report to the legislative

committee.

b. The commission shall establish 2 advisory committees, 1 of

which shall comprise consumer representatives independent of the

insurance industry and the other comprising insurance industry

representatives.

c. The commission may establish additional advisory committees

as its bylaws may provide for the carrying out of its functions.

4. Corporate Records of the Commission

The commission shall maintain its corporate books and records

in accordance with the bylaws.

5. Qualified Immunity, Defense, and Indemnification

a. The members, officers, executive director, employees, and

representatives of the commission shall be immune from suit and

liability, either personally or in their official capacity, for any

claim for damage to or loss of property or personal injury or other

civil liability caused by or arising out of any actual or alleged

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

whom the claim is made had a reasonable basis for believing

occurred within the scope of commission employment, duties, or

responsibilities; provided, that nothing in this paragraph shall be

construed to protect any such person from suit and/or liability for

any damage, loss, injury, or liability caused by the intentional or

willful and wanton misconduct of that person.

b. The commission shall defend any member, officer, executive

director, employee, or representative of the commission in any

civil action seeking to impose liability arising out of any actual

or alleged act, error, or omission that occurred within the scope

of commission employment, duties, or responsibilities, or that the

person against whom the claim is made had a reasonable basis for

believing occurred within the scope of commission employment,

duties, or responsibilities; provided, that nothing in this compact

shall be construed to prohibit that person from retaining his or

her own counsel; and provided further, that the actual or alleged

act, error, or omission did not result from that person's

intentional or willful and wanton misconduct.

c. The commission shall indemnify and hold harmless any

member, officer, executive director, employee, or representative of

the commission for the amount of any settlement or judgment

obtained against that person arising out of any actual or alleged

act, error, or omission that occurred within the scope of

commission employment, duties, or responsibilities, or that such

person had a reasonable basis for believing occurred within the

scope of commission employment, duties, or responsibilities,

provided, that the actual or alleged act, error, or omission did

not result from the intentional or willful and wanton misconduct of

that person.

ARTICLE VI. MEETINGS AND ACTS OF THE COMMISSION

1. The commission shall meet and take such actions as are

consistent with the provisions of this compact and the bylaws.

2. Each member of the commission shall have the right and

power to cast a vote to which that compacting state is entitled and

to participate in the business and affairs of the commission. A

member shall vote in person or by such other means as provided in

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

meetings by telephone or other means of communication.

3. The commission shall meet at least once during each

calendar year. Additional meetings shall be held as set forth in

the bylaws.

ARTICLE VII. RULES & OPERATING PROCEDURES: RULEMAKING FUNCTIONS OF

THE COMMISSION AND OPTING OUT OF UNIFORM STANDARDS

1. Rulemaking authority. The commission shall promulgate

reasonable rules, including uniform standards, and operating

procedures in order to effectively and efficiently achieve the

purposes of this compact. Notwithstanding the foregoing, in the

event the commission exercises its rulemaking authority in a manner

that is beyond the scope of the purposes of this compact, or the

powers granted under this compact, then such an action by the

commission shall be invalid and have no force and effect.

2. Rulemaking procedure. Rules and operating procedures shall

be made pursuant to a rulemaking process that conforms to the model

state administrative procedure act of 1981 as amended, as may be

appropriate to the operations of the commission. Before the

commission adopts a uniform standard, the commission shall give

written notice to the relevant state legislative committees in each

compacting state responsible for insurance issues of its intention

to adopt the uniform standard. The commission in adopting a uniform

standard shall consider fully all submitted materials and issue a

concise explanation of its decision.

3. Effective date and opt out of a uniform standard. A uniform

standard shall become effective 90 days after its promulgation by

the commission or such later date as the commission may determine;

provided, however, that a compacting state may opt out of a uniform

standard as provided in this article. "Opt out" shall be defined as

any action by a compacting state to decline to adopt or participate

in a promulgated uniform standard. All other rules and operating

procedures, and amendments to those rules and operating procedures,

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

operating procedure, or amendment.

4. Opt out procedure. A compacting state may opt out of a

uniform standard, either by legislation or regulation duly

promulgated by the insurance department under the compacting

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

to opt out of a uniform standard by regulation, it must give

written notice to the commission no later than 10 business days

after the uniform standard is promulgated, or at the time the state

becomes a compacting state, and find that the uniform standard does

not provide reasonable protections to the citizens of the state,

given the conditions in the state. The commissioner shall make

specific findings of fact and conclusions of law, based on a

preponderance of the evidence, detailing the conditions in the

state that warrant a departure from the uniform standard and

determining that the uniform standard would not reasonably protect

the citizens of the state. The commissioner must consider and

balance the following factors and find that the conditions in the

state and needs of the citizens of the state outweigh the intent of

the legislature to participate in, and the benefits of, an

interstate agreement to establish national uniform consumer

protections for the products subject to this compact and the

presumption that a uniform standard adopted by the commission

provides reasonable protections to consumers of the relevant

product.

Notwithstanding the foregoing, a compacting state may, at the

time of its enactment of this compact, prospectively opt out of all

uniform standards involving long-term care insurance products by

expressly providing for such opt out in the enacted compact, and

such an opt out shall not be treated as a material variance in the

offer or acceptance of any state to participate in this compact.

Such an opt out shall be effective at the time of enactment of this

compact by the compacting state and shall apply to all existing

uniform standards involving long-term care insurance products and

those subsequently promulgated.

5. Effect of opt out. If a compacting state elects to opt out

of a uniform standard, the uniform standard shall remain applicable

in the compacting state electing to opt out until such time the opt

out legislation is enacted into law or the regulation opting out

becomes effective.

Once the opt out of a uniform standard by a compacting state

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

uniform standard shall have no further force and effect in that

state unless and until the legislation or regulation implementing

the opt out is repealed or otherwise becomes ineffective under the

laws of the state. If a compacting state opts out of a uniform

standard after the uniform standard has been made effective in that

state, the opt out shall have the same prospective effect as

provided under article XIV of this compact for withdrawals.

6. Stay of uniform standard. If a compacting state has

formally initiated the process of opting out of a uniform standard

by regulation, and while the regulatory opt out is pending, the

compacting state may petition the commission, at least 15 days

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

effectiveness of the uniform standard in that state. The commission

may grant a stay if it determines the regulatory opt out is being

pursued in a reasonable manner and there is a likelihood of

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

stay or extension may postpone the effective date by up to 90 days,

unless affirmatively extended by the commission; provided, a stay

may not be permitted to remain in effect for more than 1 year

unless the compacting state can show extraordinary circumstances

that warrant a continuance of the stay, including, but not limited

to, the existence of a legal challenge that prevents the compacting

state from opting out. A stay may be terminated by the commission

upon notice that the rulemaking process has been terminated.

7. Not later than 30 days after a rule or operating procedure

is promulgated, any person may file a petition for judicial review

of the rule or operating procedure; provided, that the filing of

such a petition shall not stay or otherwise prevent the rule or

operating procedure from becoming effective unless the court finds

that the petitioner has a substantial likelihood of success. The

court shall give deference to the actions of the commission

consistent with applicable law and shall not find the rule or

operating procedure to be unlawful if the rule or operating

procedure represents a reasonable exercise of the commission's

authority.

ARTICLE VIII. COMMISSION RECORDS AND ENFORCEMENT

1. The commission shall promulgate rules establishing

conditions and procedures for public inspection and copying of its

information and official records, except such information and

records involving the privacy of individuals and insurers' trade

secrets. The commission may promulgate additional rules under which

it may make available to federal and state agencies, including law

enforcement agencies, records and information otherwise exempt from

disclosure, and may enter into agreements with such agencies to

receive or exchange information or records subject to nondisclosure

and confidentiality provisions.

2. Except as to privileged records, data, and information, the

laws of any compacting state pertaining to confidentiality or

nondisclosure shall not relieve any compacting state commissioner

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

to the commission; provided, that disclosure to the commission

shall not be deemed to waive or otherwise affect any

confidentiality requirement; and further provided, that, except as

otherwise expressly provided in this compact, the commission shall

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

confidentiality and nondisclosure with respect to records, data,

and information in its possession. Confidential information of the

commission shall remain confidential after such information is

provided to any commissioner.

3. The commission shall monitor compacting states for

compliance with duly adopted bylaws, rules, including uniform

standards, and operating procedures. The commission shall notify

any non-complying compacting state in writing of its noncompliance

with commission bylaws, rules, or operating procedures. If a non-

complying compacting state fails to remedy its noncompliance within

the time specified in the notice of noncompliance, the compacting

state shall be deemed to be in default as set forth in article XIV

of this compact.

4. The commissioner of any state in which an insurer is

authorized to do business, or is conducting the business of

insurance, shall continue to exercise his or her authority to

oversee the market regulation of the activities of the insurer in

accordance with the provisions of the state's law. The

commissioner's enforcement of compliance with the compact is

governed by the following provisions:

a. With respect to the commissioner's market regulation of a

product or advertisement that is approved or certified to the

commission, the content of the product or advertisement shall not

constitute a violation of the provisions, standards, or

requirements of the compact except upon a final order of the

commission, issued at the request of a commissioner after prior

notice to the insurer and an opportunity for hearing before the

commission.

b. Before a commissioner may bring an action for violation of

any provision, standard, or requirement of the compact relating to

the content of an advertisement not approved or certified to the

commission, the commission, or an authorized commission officer or

employee, must authorize the action. However, authorization

pursuant to this paragraph does not require notice to the insurer,

opportunity for hearing, or disclosure of requests for

authorization or records of the commission's action on such

requests.

ARTICLE IX. DISPUTE RESOLUTION

The commission shall attempt, upon the request of a member, to

resolve any disputes or other issues that are subject to this

compact and that may arise between 2 or more compacting states, or

between compacting states and non-compacting states, and the

commission shall promulgate an operating procedure providing for

resolution of such disputes.

ARTICLE X. PRODUCT FILING AND APPROVAL

1. Insurers and third-party filers seeking to have a product

approved by the commission shall file the product with, and pay

applicable filing fees to, the commission. Nothing in this compact

shall be construed to restrict or otherwise prevent an insurer from

filing its product with the insurance department in any state where

the insurer is licensed to conduct the business of insurance, and

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

2. The commission shall establish appropriate filing and

review processes and procedures pursuant to commission rules and

operating procedures. Notwithstanding any provision in this compact

to the contrary, the commission shall promulgate rules to establish

conditions and procedures under which the commission will provide

public access to product filing information. In establishing such

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

having access to such information, as well as protection of

personal medical and financial information and trade secrets, that

may be contained in a product filing or supporting information.

3. Any product approved by the commission may be sold or

otherwise issued in those compacting states for which the insurer

is legally authorized to do business.

ARTICLE XI. REVIEW OF COMMISSION DECISIONS REGARDING FILINGS

1. Not later than 30 days after the commission has given

notice of a disapproved product or advertisement filed with the

commission, the insurer or third party filer whose filing was

disapproved may appeal the determination to a review panel

appointed by the commission. The commission shall promulgate rules

to establish procedures for appointing such review panels and

provide for notice and hearing. An allegation that the commission,

in disapproving a product or advertisement filed with the

commission, acted arbitrarily, capriciously, or in a manner that is

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

is subject to judicial review in accordance with article III,

section 4.

2. The commission shall have authority to monitor, review, and

reconsider products and advertisement subsequent to their filing or

approval upon a finding that the product does not meet the relevant

uniform standard. Where appropriate, the commission may withdraw or

modify its approval after proper notice and hearing, subject to the

appeal process in section 1 above.

ARTICLE XII. FINANCE

1. The commission shall pay or provide for the payment of the

reasonable expenses of its establishment and organization. To fund

the cost of its initial operations, the commission may accept

contributions and other forms of funding from the national

association of insurance commissioners, compacting states, and

other sources. Contributions and other forms of funding from other

sources shall be of such a nature that the independence of the

commission concerning the performance of its duties shall not be

compromised.

2. The commission shall collect a filing fee from each insurer

and third party filer filing a product with the commission to cover

the cost of the operations and activities of the commission and its

staff in a total amount sufficient to cover the commission's annual

budget.

3. The commission's budget for a fiscal year shall not be

approved until it has been subject to notice and comment as set

forth in article VII of this compact.

4. The commission shall be exempt from all taxation in and by

the compacting states.

5. The commission shall not pledge the credit of any

compacting state, except by and with the appropriate legal

authority of that compacting state.

6. The commission shall keep complete and accurate accounts of

all its internal receipts, including grants and donations, and

disbursements of all funds under its control. The internal

financial accounts of the commission shall be subject to the

accounting procedures established under its bylaws. The financial

accounts and reports, including the system of internal controls and

procedures of the commission, shall be audited annually by an

independent certified public accountant. Upon the determination of

the commission, but no less frequently than every 3 years, the

review of the independent auditor shall include a management and

performance audit of the commission. The commission shall make an

annual report to the governor and legislature of the compacting

states, which shall include a report of the independent audit. The

commission's internal accounts shall not be confidential and such

materials may be shared with the commissioner of any compacting

state upon request, provided, however, that any work papers related

to any internal or independent audit and any information regarding

the privacy of individuals and insurers' proprietary information,

including trade secrets, shall remain confidential.

7. No compacting state shall have any claim to or ownership of

any property held by or vested in the commission or to any

commission funds held pursuant to the provisions of this compact.

ARTICLE XIII. COMPACTING STATES, EFFECTIVE DATE, AND AMENDMENT

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

2. The compact shall become effective and binding upon

legislative enactment of the compact into law by 2 compacting

states; provided, the commission shall become effective for

purposes of adopting uniform standards for, reviewing, and giving

approval or disapproval of, products filed with the commission that

satisfy applicable uniform standards only after 26 states are

compacting states or, alternatively, by states representing greater

than 40% of the premium volume for life insurance, annuity,

disability income, and long-term care insurance products, based on

records of the national association of insurance commissioners for

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

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

law by that state.

3. Amendments to the compact may be proposed by the commission

for enactment by the compacting states. No amendment shall become

effective and binding upon the commission and the compacting states

unless and until all compacting states enact the amendment into

law.

ARTICLE XIV. WITHDRAWAL, DEFAULT, AND TERMINATION

1. Withdrawal

a. Once effective, the compact shall continue in force and

remain binding upon each and every compacting state; provided, that

a compacting state may withdraw from the compact ("withdrawing

state") by enacting a statute specifically repealing the statute

that enacted the compact into law.

b. The effective date of withdrawal is the effective date of

the repealing statute. However, the withdrawal shall not apply to

any product filings approved or self-certified, or any

advertisement of those products, on the date the repealing statute

becomes effective, except by mutual agreement of the commission and

the withdrawing state unless the approval is rescinded by the

withdrawing state as provided in paragraph e. of this section.

c. The commissioner of the withdrawing state shall immediately

notify the management committee in writing upon the introduction of

legislation repealing this compact in the withdrawing state.

d. The commission shall notify the other compacting states of

the introduction of such legislation within 10 days after its

receipt of notice of the introduction of withdrawing legislation.

e. The withdrawing state is responsible for all obligations,

duties, and liabilities incurred through the effective date of

withdrawal, including any obligations, the performance of which

extend beyond the effective date of withdrawal, except to the

extent those obligations may have been released or relinquished by

mutual agreement of the commission and the withdrawing state. The

commission's approval of products and advertisement prior to the

effective date of withdrawal shall continue to be effective and be

given full force and effect in the withdrawing state, unless

formally rescinded by the withdrawing state in the same manner as

provided by the laws of the withdrawing state for the prospective

disapproval of products or advertisement previously approved under

state law.

f. Reinstatement following withdrawal of any compacting state

shall occur upon the effective date of the withdrawing state

reenacting the compact.

2. Default

a. If the commission determines that any compacting state has

at any time defaulted ("defaulting state") in the performance of

any of its obligations or responsibilities under this compact, the

bylaws, or duly promulgated rules or operating procedures, then,

after notice and hearing as set forth in the bylaws, all rights,

privileges, and benefits conferred by this compact on the

defaulting state shall be suspended from the effective date of

default as fixed by the commission. The grounds for default

include, but are not limited to, failure of a compacting state to

perform its obligations or responsibilities, and any other grounds

designated in commission rules. The commission shall immediately

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

suspension pending a cure of the default. The commission shall

stipulate the conditions and the time period within which the

defaulting state must cure its default. If the defaulting state

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

commission, the defaulting state shall be terminated from the

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

compact shall be terminated from the effective date of termination.

b. Product approvals by the commission or product self-

certifications, or any advertisement in connection with that

product, that are in force on the effective date of termination

shall remain in force in the defaulting state in the same manner as

if the defaulting state had withdrawn voluntarily pursuant to

section 1 of this article.

c. Reinstatement following termination of any compacting state

requires a reenactment of the compact.

3. Dissolution of Compact

a. The compact dissolves effective upon the date of the

withdrawal or default of the compacting state that reduces

membership in the compact to 1 compacting state.

b. Upon the dissolution of this compact, the compact becomes

null and void and shall be of no further force or effect, and the

business and affairs of the commission shall be wound up and any

surplus funds shall be distributed in accordance with the bylaws.

ARTICLE XV. SEVERABILITY AND CONSTRUCTION

1. The provisions of this compact shall be severable; and if

any phrase, clause, sentence, or provision is deemed unenforceable,

the remaining provisions of the compact shall be enforceable.

2. The provisions of this compact shall be liberally construed

to effectuate its purposes.

ARTICLE XVI. BINDING EFFECT OF COMPACT AND OTHER LAWS

1. Other Laws

a. Nothing herein prevents the enforcement of any other law of

a compacting state, except as provided in paragraph b. of this

section.

b. For any product approved or certified to the commission,

the rules, uniform standards, and any other requirements of the

commission shall constitute the exclusive provisions applicable to

the content, approval, and certification of such products. For

advertisement that is subject to the commission's authority, any

rule, uniform standard, or other requirement of the commission that

governs the content of the advertisement shall constitute the

exclusive provision that a commissioner may apply to the content of

the advertisement. Notwithstanding the foregoing, no action taken

by the commission shall abrogate or restrict the access of any

person to state courts, remedies available under state law related

to breach of contract, tort, or other laws not specifically

directed to the content of the product, state law relating to the

construction of insurance contracts, or the authority of the

attorney general of the state, including, but not limited to,

maintaining any actions or proceedings, as authorized by law.

c. All insurance products filed with individual states shall

be subject to the laws of those states.

2. Binding Effect of This Compact

a. All lawful actions of the commission, including all rules

and operating procedures promulgated by the commission, are binding

upon the compacting states.

b. All agreements between the commission and the compacting

states are binding in accordance with their terms.

c. Upon the request of a party to a conflict over the meaning

or interpretation of commission actions, and upon a majority vote

of the compacting states, the commission may issue advisory

opinions regarding the meaning or interpretation in dispute.

d. In the event any provision of this compact exceeds the

constitutional limits imposed on the legislature of any compacting

state, the obligations, duties, powers, or jurisdiction sought to

be conferred by that provision upon the commission shall be

ineffective as to that compacting state, and those obligations,

duties, powers, or jurisdiction shall remain in the compacting

state and shall be exercised by the agency to which those

obligations, duties, powers, or jurisdiction is delegated by law in

effect at the time this compact becomes effective.