TO: Pools Licensed in Kansas

FROM: Kathleen Sebelius

Commissioner of Insurance

SUBJECT: Modifications to Commissioner’s Authority to Regulate Group-funded Pools

DATE: August 19, 1999

1999 House Substitute of Senate Bill 60 amended K.S.A. 12-2618, 12-2620, 12-2622, 12-2627 and 44-586, K.S.A. 1998 Supp. 12-2621, 44-584 and 44-585 and repealed existing sections by making several modifications to the Commissioner’s authority to regulate municipal-funded pools that provide various kinds of insurance coverage for their members. The bill requires pools not using rating organizations to file with the Commissioner a certification that the rates they are using are actuarially sound. Pools are requires to supply the Commissioner with the name and qualifications of the administrator of the pools and the terms of the excess insurance contracts of the pools on an annual basis. The Commissioner is permitted to take rehabilitative or corrective actions reasonably necessary to rectify the financial condition of pools that appear to be unable to pay claims.

Investment authority of the pools is changed to include those investments cities and counties, with direct investment authority, can make under K.S.A. 12-1677(b) and those allowed for state funds under K.S.A. 75-4209, or, for those pools in existence for at least five years, including workers compensation pools, in securities or other investments permitted by insurance companies under Article 2a of Chapter 40. Pursuant to Article 2a, K.S.A. 40-2a20 and the NAIC Examiners Handbook, investments are only allowed to be in custody or safekeeping in a state or national bank or trust company regulated by the Federal Reserve System and the banking authorities in its state of domicile. The Commissioner may permit pools that have been in existence for more than five years, including workers compensation pools, to allocate an amount less than 70 percent of premiums to a claims fund account, provided solvency of the pool is not endangered. The bill also clarifies that the Commissioner’s authority to make examinations of workers compensation pools is the same as for insurance companies and that those pools are subject to the same fees and charges for expenses incurred in the examination.