(a) If a member insurer is an impaired insurer, the association may, in its discretion, and subject to any conditions imposed by the association that do not impair the contractual obligations of the impaired insurer and that are approved by the commissioner:

(1) Guarantee, assume, reissue or reinsure, or cause to be guaranteed, assumed, reissued or reinsured, any or all of the policies or contracts of the impaired insurer; or

(2) Provide such moneys, pledges, loans, notes, guarantees or other means as are proper to effectuate subdivision (1) of this subsection and assure payment of the contractual obligations of the impaired insurer pending action under subdivision (1) of this subsection.

(b) If a member insurer is an insolvent insurer, the association shall, in its discretion, either:

(1) (A) (i) Guarantee, assume, reissue or reinsure, or cause to be guaranteed, assumed, reissued or reinsured, the policies or contracts of the insolvent insurer, or (ii) assure payment of the contractual obligations of the insolvent insurer, and (B) provide moneys, pledges, loans, notes, guarantees or other means reasonably necessary to discharge the association’s duties; or

(2) Provide benefits and coverages in accordance with the following provisions:

(A) With respect to policies and contracts, assure payment of benefits that would have been payable under the policies or contracts of the insolvent insurer, for claims incurred: (i) With respect to group policies and contracts, not later than the earlier of the next renewal date under those policies or contracts or forty-five days, but in no event less than thirty days after the date on which the association becomes obligated with respect to the policies and contracts; (ii) with respect to nongroup policies, contracts and annuities, not later than the earlier of the next renewal date, if any, under the policies or contracts or one year, but in no event less than thirty days from the date on which the association becomes obligated with respect to the policies or contracts;

(B) Make diligent efforts to provide all known insureds, enrollees or annuitants, for nongroup policies and contracts, or group policy or contract owners with respect to group policies and contracts, thirty days’ notice of the termination of benefits pursuant to subparagraph (A) of this subdivision;

(C) With respect to nongroup policies and contracts covered by the association, make available to each known insured or annuitant, or owner if other than the insured, enrollee or annuitant, and with respect to an individual formerly an insured, enrollee or annuitant under a group policy or contract who is not eligible for replacement group coverage, make available substitute coverage on an individual basis in accordance with the provisions of subparagraph (D) of this subdivision, if the insureds, enrollees or annuitants had a right under law or the terminated policy, contract or annuity to convert coverage to individual coverage or to continue an individual policy, contract or annuity in force until a specified age or for a specified time during which the insurer or health care center had no right to make unilateral changes in any provision of the policy, contract or annuity or had a right only to make changes in premium by class;

(D) In providing the substitute coverage required under subparagraph (C) of this subdivision, the association may offer either to reissue the terminated coverage or to issue an alternative policy or contract at actuarially justified rates. Alternative or reissued policies shall be offered without requiring evidence of insurability, and shall not provide for any waiting period or exclusion that would not have applied under the terminated policy or contract. The association may reinsure any alternative or reissued policy or contract;

(E) Alternative policies or contracts adopted by the association shall be subject to the approval of the commissioner. The association may adopt alternative policies or contracts of various types for future issuance without regard to any particular impairment or insolvency;

(F) Alternative policies or contracts adopted by the association shall contain at least the minimum statutory provisions required in this state and provide benefits that are not unreasonable in relation to the premium charged. The association shall set the premium in accordance with a table of rates that it shall adopt. The premium shall reflect the amount of insurance to be provided and the age and class of risk of each insured, but shall not reflect any changes in the health of the insured after the original policy or contract was last underwritten;

(G) Any alternative policy or contract issued by the association shall provide coverage of a type similar to that of the policy or contract issued by the impaired or insolvent insurer as determined by the association;

(H) If the association elects to reissue terminated coverage at a premium rate different from that charged under the terminated policy or contract, the premium shall be actuarially justified and set by the association in accordance with the amount of insurance or coverage provided and the age and class of risk, subject to prior approval of the commissioner;

(I) The association’s obligations with respect to coverage under any policy or contract of the impaired or insolvent insurer or under any reissued or alternative policy or contract shall cease on the date the coverage or policy or contract is replaced by another similar policy or contract by the owner, the insured, the enrollee or the association;

(J) When proceeding under this subdivision with respect to a policy or contract carrying guaranteed minimum interest rates, the association shall assure the payment or crediting of a rate of interest consistent with subparagraph (C) of subdivision (2) of subsection (f) of § 38a-860.

(c) Nonpayment of premiums by the thirty-first day after the date required under the terms of any guaranteed, assumed, alternative or reissued policy or contract or substitute coverage shall terminate the association’s obligations under the policy, contract or coverage under sections 38a-858 to 38a-875, inclusive, with respect to the policy, contract or coverage, except with respect to any claims incurred or any net surrender value that may be due in accordance with the provisions of sections 38a-858 to 38a-875, inclusive.

(d) Premiums due for coverage after entry of an order of liquidation of an insolvent insurer shall belong to and be payable at the direction of the association, and the association shall be liable for unearned premiums due to policy or contract owners arising after the entry of the order.

(e) The protection provided by sections 38a-858 to 38a-875, inclusive, shall not apply where any guaranty protection is provided to residents of this state by the laws of the domiciliary state or jurisdiction of the impaired or insolvent insurer other than this state.

(f) Repealed by P.A. 87-290, S. 7, 8.

(g) In carrying out its duties under subsection (b) of this section, the association may:

(1) Subject to approval by a court in this state, impose permanent policy or contract liens in connection with a guarantee, assumption or reinsurance agreement, if the association finds that the amounts which can be assessed under sections 38a-858 to 38a-875, inclusive, are less than the amounts needed to assure full and prompt performance of the association’s duties under sections 38a-858 to 38a-875, inclusive, or that the economic or financial conditions as they affect member insurers are sufficiently adverse to render the imposition of such permanent policy or contract liens to be in the public interest;

(2) Subject to approval by a court in this state, impose temporary moratoriums or liens on payments of cash values and policy loans, or any other right to withdraw funds held in conjunction with policies or contracts, in addition to any contractual provisions for deferral of cash or policy loan value. In addition, in the event of a temporary moratorium or moratorium charge imposed by the receivership court on payment of cash values or policy loans, or on any other right to withdraw funds held in conjunction with policies or contracts, out of the assets of the impaired or insolvent insurer, the association may defer the payment of cash values, policy loans or other rights by the association for the period of the moratorium or moratorium charge imposed by the receivership court, except for claims covered by the association to be paid in accordance with a hardship procedure established by the liquidator or rehabilitator and approved by the receivership court.

(h) If the association fails to act within a reasonable period of time with respect to any insolvent insurer, as provided in subsection (b) of this section, the commissioner shall have the powers and duties of the association under sections 38a-858 to 38a-875, inclusive, with respect to the insolvent insurer.

(i) The association may render assistance and advice to the commissioner, upon the commissioner’s request, concerning rehabilitation, payment of claims, continuation of coverage, or the performance of other contractual obligations of an impaired or insolvent insurer.

(j) The association shall have standing to appear or intervene before a court or agency in this state with jurisdiction over an impaired or insolvent insurer concerning which the association is or may become obligated under sections 38a-858 to 38a-875, inclusive, or with jurisdiction over any person or property against which the association may have rights through subrogation or otherwise. Such standing shall extend to all matters germane to the powers and duties of the association, including, but not limited to, proposals for reinsuring, reissuing, modifying or guaranteeing the policies or contracts and contractual obligations. The association shall also have the right to appear or intervene before a court or agency in another state with jurisdiction over an impaired or insolvent insurer for which the association is or may become obligated or with jurisdiction over any person or property against whom the association may have rights through subrogation or otherwise.

(k) (1) A person receiving benefits under sections 38a-858 to 38a-875, inclusive, whether the benefits are payments of or on account of contractual obligations, continuation of coverage or provision of substitute or alternative policies, contracts or coverages, shall be deemed to have assigned (A) the rights under the covered policy or contract to the association to the extent of the benefits received under sections 38a-858 to 38a-875, inclusive, and (B) any causes of action against any person for losses arising under, resulting from or otherwise relating to, the covered policy or contract to the association to the extent of the benefits received because of sections 38a-858 to 38a-875, inclusive. The association may require an assignment to it of such rights or cause of action by any enrollee, payee, policy or contract owner, beneficiary, insured or annuitant as a condition precedent to the receipt of any right or benefits under sections 38a-858 to 38a-875, inclusive, upon the person.

(2) The subrogation rights of the association under this subsection shall have the same priority against the assets of the impaired or insolvent insurer as that possessed by the person entitled to receive benefits under sections 38a-858 to 38a-875, inclusive.

(3) In addition to subdivisions (1) and (2) of this subsection, the association shall have, originally or by succession, all common law rights of subrogation and any other equitable or legal remedy that would have been available to the impaired or insolvent insurer or owner, beneficiary, enrollee or payee of a policy or contract with respect to the policy or contracts, against a person responsible for the losses arising from the personal injury relating to the annuity or payment thereof, except any such person responsible solely by reason of serving as an assignee with respect to a qualified assignment under Section 130 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended. Such rights of the association shall include, but are not limited to, in the case of a structured settlement annuity, any rights of the owner, beneficiary or payee of the annuity, to the extent of benefits received pursuant to sections 38a-858 to 38a-875, inclusive.

(4) If the provisions of subdivisions (1) to (3), inclusive, of this subsection are invalid or ineffective with respect to any person or claim for any reason, the amount payable by the association with respect to the related covered obligations shall be reduced by the amount realized by any other person with respect to the person or claim that is attributable to the policies or contracts, or portion thereof, covered by the association.

(5) If the association has provided benefits with respect to a covered obligation and a person recovers amounts as to which the association has rights as described in subdivisions (1) to (4), inclusive, of this subsection, the person shall pay to the association the portion of the recovery attributable to the policies or contracts, or portion thereof, covered by the association.

(l) In addition to the rights and powers otherwise provided in sections 38a-858 to 38a-875, inclusive, the association may:

(1) Enter into such contracts as are necessary or proper to carry out the provisions and purposes of sections 38a-858 to 38a-875, inclusive;

(2) Sue or be sued, including, but not limited to, taking any legal actions necessary or proper to recover any unpaid assessments under § 38a-866, and to settle claims or potential claims against it;

(3) Borrow money to effect the purposes of sections 38a-858 to 38a-875, inclusive, and any notes or other evidence of indebtedness of the association not in default shall be legal investments for domestic member insurers and may be carried as admitted assets;

(4) Employ or retain such persons as are necessary or proper to handle the financial transactions of the association, and to perform such other functions as become necessary or proper under sections 38a-858 to 38a-875, inclusive;

(5) Take such legal action as may be necessary or proper to avoid or recover payment of improper claims;

(6) Exercise, for the purposes of sections 38a-858 to 38a-875, inclusive, and to the extent approved by the commissioner, the powers of a domestic life insurer, health insurer or health care center, but in no case may the association issue insurance policies or annuity contracts other than those issued to perform its obligations under sections 38a-858 to 38a-875, inclusive;

(7) Request information from a person seeking coverage from the association in order to aid the association in determining its obligations under sections 38a-858 to 38a-875, inclusive, with respect to the person, and the person shall promptly comply with the request;

(8) Unless otherwise prohibited by law, file for an actuarially justified rate or premium increase for any policy or contract for which the association provides coverage under sections 38a-858 to 38a-875, inclusive, provided such increase is in accordance with the terms and conditions set forth in such policy or contract; and

(9) Take other necessary or proper action to discharge its duties and obligations under sections 38a-858 to 38a-875, inclusive, or to exercise its powers under sections 38a-858 to 38a-875, inclusive.

(m) The association may join an organization of one or more other state associations of similar purposes to further the purposes and administer the powers and duties of the association.

(n) (1) At any time within one year after the date on which the association becomes responsible for the obligations of a member insurer, which date shall be deemed the coverage date, the association may elect to succeed to the rights and obligations of the member insurer that accrue on or after the coverage date and that relate to policies, contracts or annuities covered, in whole or in part, by the association, under any one or more indemnity reinsurance agreements entered into by the member insurer as a ceding insurer and selected by the association, except that the association may not exercise an election with respect to a reinsurance agreement if the receiver, rehabilitator or liquidator of a member insurer has previously and expressly disaffirmed the reinsurance agreement. The election shall be effected by a notice to the receiver, rehabilitator or liquidator and to the affected reinsurers. If the association makes an election, then subparagraphs (A) to (D), inclusive, of this subdivision shall apply with respect to the reinsurance agreements selected by the association:

(A) The association shall be responsible for all unpaid premiums due under the agreements for periods before, on and after the coverage date, and shall be responsible for the performance of all other obligations to be performed after the coverage date, in each case which relate to policies, contracts or annuities covered in whole or in part by the association. The association may charge policies, contracts or annuities covered in part by the association, through reasonable allocation methods, the costs for reinsurance in excess of the obligations of the association.

(B) The association shall be entitled to any amounts payable by the reinsurer under the agreements with respect to losses or events that occur in periods after the coverage date and that relate to policies, contracts or annuities covered by the association in whole or in part, and upon the association’s receipt of any such amount, the association shall pay any beneficiary under the policy, contract or annuity under which the association paid only a portion of the policy, contract or annuity amount:

(i) The amount received by the association that exceeds the benefits paid the beneficiary under the policy, contract or annuity; less

(ii) The benefits paid by the association on account of the policy, contract or annuity less the retention of the impaired or insolvent member insurer applicable to the loss or event.

(C) Not later than thirty days after the association’s election, the association and each reinsurer shall calculate the net balance due to or from the association under each reinsurance agreement as of the date of the association’s election with respect to policies, contracts or annuities covered, in whole or in part by the association, giving full credit to all items paid by either the member insurer or its receiver, rehabilitator or liquidator or the reinsurer during the period between the coverage date and the date of the association’s election. Either the association or reinsurer shall pay the net balance due the other not later than five days after the completion of the calculation. If the receiver, rehabilitator or liquidator has received any amounts due the association pursuant to subparagraph (B) of this subdivision, the receiver, rehabilitator or liquidator shall remit the same to the association as promptly as practicable.

(D) If the association or receiver, on behalf of the association, not later than sixty days after the election, pays the premiums due for periods before, on and after the coverage date that relate to policies, contracts or annuities covered by the association in whole or in part, the reinsurer shall not be entitled to terminate the reinsurance agreements insofar as the agreements relate to policies, contracts or annuities covered by the association in whole or in part and shall not be entitled to set off any unpaid premium due for periods prior to the coverage date against amounts due the association.

(2) If the association does not elect to assume a reinsurance contract by the date of the association election pursuant to subdivision (1) of this subsection, the association shall have no rights or obligations in each case for periods both before and after the date of the order of liquidation with respect to the reinsurance contract.

(3) If the association transfers policies, contracts or annuities, or covered obligations with respect to such policies, contracts or annuities, to another assuming insurer, and if the association and the other insurer agree, the other insurer shall succeed to the rights and obligations of the association under subdivision (1) of this subsection, provided:

(A) The reinsurance agreements shall automatically terminate for new reinsurance unless the reinsurer and the other insurer agree to the contrary;

(B) The association’s obligation to pay the beneficiary pursuant to subparagraph (B) of subdivision (1) of this subsection shall no longer apply on or after the date the reinsurance agreement is transferred to the assuming insurer; and

(C) The transferring party shall give written notice to the affected reinsurer at least thirty days prior to the effective date of the transfer.

(4) The provisions of this subsection shall supersede the provisions of any law of this state or of any affected reinsurance agreement that provides for or requires any payment of reinsurance proceeds on account of losses or events that occur in periods after the date of the order of liquidation, to the receiver, liquidator or rehabilitator of the insolvent member insurer or any other person. The receiver, rehabilitator or liquidator shall remain entitled to any amount payable by the reinsurer under the reinsurance agreement with respect to losses or events that occur in periods prior to the coverage date subject to applicable setoff provisions.

(5) Except as otherwise expressly provided in this section, nothing in this subsection shall alter or modify the terms and conditions of the reinsurance agreements of the insolvent member insurer. Nothing in this section shall abrogate or limit any rights of any reinsurer to claim that it is entitled to rescind a reinsurance agreement. Nothing in this section shall give a policy owner, contract owner, enrollee, certificate holder or beneficiary an independent cause of action against a reinsurer that is not otherwise set forth in the reinsurance agreement. Nothing in this section shall limit or affect the association’s rights as a creditor of an estate against the assets of the estate. Nothing in this section shall apply to reinsurance agreements covering property or casualty risks.

(o) The board of directors of the association shall have discretion and may exercise reasonable business judgment to determine the means by which the association is to provide the benefits under sections 38a-858 to 38a-875, inclusive, in an economical and efficient manner.

(p) Where the association has arranged or offered to provide the benefits under sections 38a-858 to 38a-875, inclusive, to a covered person under a plan or arrangement that fulfills the association’s obligations under sections 38a-858 to 38a-875, inclusive, the person shall not be entitled to benefits from the association in addition to or other than those provided under the plan or arrangement.

(q) Venue in a suit against the association arising under sections 38a-858 to 38a-875, inclusive, shall be in the superior court for the judicial district of Hartford. The association shall not be required to give an appeal bond in an appeal that relates to a cause of action arising under sections 38a-858 to 38a-875, inclusive.

(r) In carrying out its duties in connection with guaranteeing, assuming, reissuing or reinsuring policies or contracts under subsections (a) or (b) of this section, the association may issue substitute coverage for a policy or contract that provides an interest rate, crediting rate or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value by issuing an alternative policy or contract in accordance with subdivisions (1) to (3), inclusive, of this subsection:

(1) In lieu of the index or other external reference provided for in the original policy or contract, the alternative policy or contract provides for (A) a fixed interest rate, (B) payment of dividends with minimum guarantees, or (C) a different method for calculating interest or changes in value;

(2) There is no requirement for evidence of insurability, waiting period or other exclusion that would not have applied under the replaced policy or contract; and

(3) The alternative policy or contract is substantially similar to the replaced policy or contract in all other material terms.