P.R. Laws tit. 26, § 3908
(a) If a member insurer is an impaired domestic insurer, the Association may, at its discretion and subject to any conditions imposed by the Association and approved by the Commissioner which do not impair the contractual obligations of said insurer, and which, except in the case of a rehabilitation or conservation procedure ordered by the court, are also approved by the impaired insurer:
(1) Guarantee, assume or reinsure, or cause to be guaranteed, assumed or reinsured all or some of the policies or contracts of the impaired insurer;
(2) provide the moneys, pledges, notes, guarantees or other adequate instruments to attain the provisions of clause (1) of this subsection and guarantee the payment of the contractual obligations of the impaired insurer while pertinent action is taken pursuant to clause (1) of this subsection, or
(3) loan money to the impaired insurer.
(b)
(1) If a member insurer, whether domestic or foreign, is an impaired insurer and is not paying his/her claims promptly, then, subject to the conditions of clause (2) of this subsection, the Association, at its discretion:
(A) Shall take any of the actions provided in subsection (a) of this section, subject to the conditions indicated therein, or in their absence.
(B) Shall provide substitute benefits in lieu of the contractual obligations of the impaired insurer solely with respect to: disability claims, periodic annuity benefit payments, death benefits, supplemental benefits, and cash withdrawals by policy or contract owners who request them as emergency claims or under financial pressure, pursuant to the standards proposed by the Association and approved by the Commissioner.
(2) The Association shall be subject to the requirement of clause (1) of this subsection only if:
(A) The laws of the state of domicile of the impaired insurer provide that until all payments of, or on account of, the contractual obligations of the impaired insurer by all guaranty associations jointly with all related expenses, and interest on said payments and expenses, have been reimbursed to the guaranty associations, or the guaranty associations have approved repayment plan for the impaired insurer:
(i) The delinquency proceedings shall not be deemed as concluded,
(ii) neither the impaired insurer nor his/her assets shall be returned to the control of its stockholders or to private management, and
(iii) he/she shall not be allowed to solicit or accept new business nor shall his/her license be restored had it been suspended or revoked, and
(B)
(i) if the impaired insurer is a domestic insurer, a court of competent jurisdiction in Puerto Rico has placed him/her under an order for rehabilitation, or
(ii) if the impaired insurer is a foreign insurer:
(I) He/she has been forbidden to solicit or accept new business in Puerto Rico,
(II) his/her certificate of authority has been suspended or revoked in Puerto Rico, and
(III) a petition for his/her rehabilitation or liquidation has been filed in a court of competent jurisdiction in his/her state of domicile by the Commissioner of said state.
(c) If a member insurer is an insolvent insurer, the Association, at its discretion and subject to the approval of the Commissioner, shall take one of the following actions:
(1)
(A) Guarantee, assume or reinsure or cause to be guaranteed, assume or reinsured the policies and contracts of the insolvent insurer; or
(B) take steps for the contractual obligations of the insolvent insurer to be paid; and
(C) provide the moneys, pledges, guarantees or other instruments which are reasonably necessary for complying with those duties; or
(2) with respect solely to life and disability insurance policies, provide the benefits and coverages pursuant to subsection (d) of this section.
(d) When acting in accordance with subsections (b)(1)(B) or (c)(2) of this section the Association shall, with respect solely to life and disability insurance policies:
(1) Assure the payment of benefits for premium identical to the premiums and benefits (except for conversion terms and right to renewal) which would have been payable under the policies of the insolvent insurer for losses incurred:
(A) With regard to group policies, no later than the next renewal date under said policies or contracts or forty-five (45) days, whichever occurs first, but in no case less than thirty (30) days after the date on which the Association becomes obligated with regard to said policies.
(B) With regard to individual policies, no later than the next renewal date (if any) under said policies, or one (1) year, whichever occurs first, but in no case less than thirty (30) days from the date in which the Association becomes obligated with regard to such policies.
(2) Make diligent efforts to provide all known insured or group policyholders, regarding group policies, with a thirty (30) days notice of the termination of the benefits provided.
(3) Regarding individual policies, shall provide each known insured person or owner, if other than the insured, as well as with regard to an individual previously insured under a group policy, who is not eligible for replacement group coverage, a substitute individual coverage pursuant to the provisions of clause (4)(A) of this subsection if the insured were entitled thereto by law, or by the expired policy, to convert it to an individual coverage policy or to keep an individual policy in force for up to a specified age or for a specified time during which the insurer was not entitled to make changes unilaterally to any provision of the policy, or was only entitled to make changes in the premium by class.
(4)
(A) On providing the substitute coverage required pursuant to clause (3) of this subsection, the Association may offer for the terminated coverage to be reissued, or for an alternative policy to be issued.
(B) Alternative or reissued policies shall be offered without requiring evidence of insurability, a waiting period or an exclusion which was not in effect under the terminated policy.
(C) The Association may reinsure any alternative or reissued policy.
(5)
(A) The alternative policies adopted by the Association shall be subject to the approval of the Commissioner. The Association may adopt several types of alternative policies for future issue regardless of any particular impairement or insolvency.
(B) The alternative policies shall contain at least the minimum statutory provisions required in this title and shall provide reasonable benefits with respect to the premium charged. The premium shall reflect the amount of insurance to be provided and the age and risk classification of each insured, but shall not reflect any changes in the health of the insured from the last time the original policy was underwritten. The Association shall establish its premiums pursuant to the rates adopted by it and these shall take effect immediately. The Association shall notify the Commissioner of the rates adopted and the latter shall have thirty (30) days to file an opposition to said rates. Were this to occur, the Association may request a hearing to show cause by which the rates should not be modified.
(C) Any alternative policy issued by the Association shall provide similar coverage to that of the policy issued by the impaired or insolvent insurer, as determined by the Association.
(6) If the Association chooses to reissue the terminated coverage at a rate different that of the terminated policy, it shall set the premium in accordance with the amount of insurance provided and the age and risk classification, subject to the approval of the Commissioner, or of a court of competent jurisdiction.
(7) The obligations of the Association with respect to coverage under any policy of an impaired, or insolvent insurer or under any reissued or alternative policy, shall cease on the date the policyholder, the insured or the Association substitutes said coverage or policy for a similar one.
(e) Upon proceeding pursuant to subsections (b)(1)(B) or (c) of this section regarding any policy or contract with guaranteed minimum interest rates, the Association shall ensure that the interest rate paid or credited be consistent with § 3903(b)(2)(C) of this title.
(f) Nonpayment of premiums within thirty-one (31) days after the date required under the terms of any guaranteed, assumed, alternative or reissued policy or contract or under substitute coverage, shall terminate the obligations of the Association under said policy or contract pursuant to this chapter with regard to said policy or coverage, with the exception of any claims insurred or any net cash surrender value that may be due pursuant to the provisions of this chapter.
(g) The premiums due for coverage after an order to liquidate an insolvent insurer is issued shall pertain to and be paid to the Association, as it may provide, and the Association shall be liable to the owners of policies or contracts for unearned premiums which arise after the order has been entered.
(h) The protection offered in this chapter shall not apply when the laws of the state or domiciliary jurisdiction of the impaired or insolvent insurer, other than Puerto Rico, provide any guaranteed protection to residents of Puerto Rico.
(i) On carrying out its obligations under subsections (b) and (c) of this section, the Association may, with the approval of the court:
(1) Impose permanent liens on policies or contracts with regard to any guarantee, assumption or reinsurance agreement if the Association determines that the amounts that it can impose as assessments pursuant to this chapter, are less than those required to ensure full and prompt compliance of the duties of the Association under this chapter or that the economic or financial conditions that might affect the member insurers are sufficiently adverse so that the imposition of said permanent liens on policies or con tracts may be of benefit to the public interest.
(2) Impose temporary moratoriums or liens on payments of cash values, and policy loans or on any other right to withdraw funds retained with regard to policies or contracts, in addition to any other contractual provisions for deferred cash and policy loan values.
(j) If the Association does not take action within a reasonable period of time, as provided in subsections (b)(1)(B), (c) and (d) of this section, the Commissioner shall have the powers and duties of the Association pursuant to this chapter, with regard to impaired or insolvent insurers.
(k) The Association may render assistance and advise to the Commissioner, upon his/her request, with respect to rehabilitation, payment of claims, continuation of coverage, or compliance with other contractual obligations of any impaired or insolvent insurer.
(l) The Association may appear before any court in Puerto Rico with jurisdiction over an impaired or insolvent insurer towards whom it is obligated or may become obligated pursuant to this chapter. Such authority shall extend to all matters applicable to the powers and duties of the Association, including, but without being limited to, proposals to reinsure, modify, or guarantee the policies or contracts of an impaired or insolvent insurer and the determination of the policies or contracts and contractual obligations. The Association shall also be entitled to appear or intervene before a court in another state with jurisdiction over an impaired or insolvent insurer with whom the Association is obligated or may become obligated, or with jurisdiction over a third party against whom the Association could have the subrogation rights of the insurer’s policyholders.
(m)
(1) Any person who receives benefits under this chapter shall be deemed to have ceded to the Association the rights under, and any causes of action related to the covered policy or contract up to the limit of the benefits received by virtue of this chapter, whether they are in payment of, or on account of contractual obligations, the continuation of coverage, or the issue of substitute or alternative coverages. The Association may require any payee, policy or contract owner, beneficiary, insured or annuitant, to cede said rights or causes of action as a prior condition for receiving any right or benefit that this chapter confers upon said 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 if he were the person entitled to receive benefits pursuant to this chapter.
(3) In addition to the provisions of clauses (1) and (2) of this subsection, the Association shall have all subrogation rights allowed by the laws of Puerto Rico and by common law, and any other legal or equitable remedies which the impaired or insolvent insurer or a policy or contract holder would have had with regard to such policies or contracts.
(n) The Association may:
(1) Assume such contractual obligations as are necessary and appropriate to carry out the provisions and purposes of this chapter.
(2) Sue and be sued, including taking the legal measures which may be necessary and appropriate to recover any assessment due pursuant to § 3909 of this title, and to settle claims or potential claims against it.
(3) Borrow money to carry out the purposes of this chapter. Any notes or other evidence of indebtedness of the Association not in default, shall be considered as legal investments of the domestic insurers, and may be accepted as admitted assets.
(4) Employ or retain the necessary personnel to handle the financial affairs of the Association and to execute those functions as may be deemed necessary and pertinent under this chapter.
(5) Institute legal actions as may be necessary to avoid the payment of improper claims.
(6) Exercise, for the purposes of this chapter and to the extent permitted by the Commissioner, the powers of a domestic life and disability insurer, but in no case shall the Association issue insurance policies or annuity contracts unless they are issued to meet its obligations pursuant to this chapter.
(o) The Association may join in organization of one or more associations with similar purposes in other states to promote its purposes and exercise its powers and duties.
History —Ins. Code, added as § 39.080 on Aug. 17, 1991, No. 72, § 1.