SENATORS Nein, Robert Gardner, Armbruster, Schuler, Stivers, Mumper, Padgett, Spada

To amend sections 3915.02, 3915.073, 3915.14,

1

3937.25, 3937.26, and 3937.27 and to enact

2

sections 3937.28 and 3937.29 of the Revised Code

3

to adopt a new formula for determining the minimum

4

nonforfeiture value of an individual deferred

5

annuity, to require insurance companies to obtain

6

the Superintendent of Insurance's approval prior

7

to deferring the payment of a cash surrender

8

benefit, to prohibit the delivery or use of an

9

annuity contract and its related endorsements for

10

thirty days after the form of the contract or

11

endorsement is filed with the Superintendent,

12

unless earlier approved by the Superintendent, and

13

to differentiate provisions for the cancellation,

14

termination, and nonrenewal of policies of medical

15

malpractice insurance from those provisions

16

regulating other policies of insurance, and to

17

amend the version of section 3915.073 of the

18

Revised Code as results from this act two years

19

after the act's effective date.

20

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section 1. That sections 3915.02, 3915.073, 3915.14, 3937.25,	21
3937.26, and 3937.27 be amended and sections 3937.28 and 3937.29	22
of the Revised Code be enacted to read as follows:	23

Sec. 3915.02.  This chapter does not apply to annuities	24
except as provided in sections 3915.051, 3915.073, 3915.14, and	25
3915.21 to 3915.24 of the Revised Code, industrial policies except	26
as provided in sections 3915.07 and 3915.071 of the Revised Code,	27
fraternal benefit societies, corporations or associations	28
operating on the assessment plan, or corporations or associations	29
which have been organized under sections 3919.01 to 3919.19 of the	30
Revised Code, except corporations and associations which, as of	31
September 28, 1933, have amended their articles of incorporation	32
under section 3919.13 of the Revised Code.	33

Sec. 3915.073.  (A) This section shall be known as the	34
standard nonforfeiture law for individual deferred annuities.	35

(B) This section does not apply to any reinsurance, group	36
annuity purchased under a retirement plan or plan of deferred	37
compensation established or maintained by an employer, including a	38
partnership or sole proprietorship, or by an employee	39
organization, or by both, other than a plan providing individual	40
retirement accounts or individual retirement annuities under	41
section 408 of the Internal Revenue Code of 1954, 26 U.S.C.A. 408,	42
as amended, premium deposit fund, variable annuity, investment	43
annuity, immediate annuity, any deferred annuity contract after	44
annuity payments have commenced, or reversionary annuity, nor to	45
any contract which is delivered outside this state through an	46
agent or other representative of the company issuing the contract.	47

(C) In the case of contracts issued on or after the operative	48
date of this section as defined in division (L)(M) of this	49
section, no contract of annuity, except as stated in division (B)	50
of this section, shall be delivered or issued for delivery in this	51
state unless itthe contract contains in substance the following	52
provisions, or corresponding provisions that in the opinion of the	53
superintendent of insurance are at least as favorable to the	54
contractholder, uponcontract owners, relative to the cessation of	55
payment of consideration under the contract:	56

(1) That upon cessation of payment of considerations under a	57
contract, or upon the written request of the contract owner, the	58
company willshall grant a paid-up annuity benefit on a plan	59
stipulated in the contract of such value as is specified in	60
divisions (E), (F), (G), (H), and (J) of this section;	61

(2) If a contract provides for a lump sum settlement at	62
maturity, or at any other time, that upon surrender of the	63
contract at or prior to the commencement of any annuity payments,	64
the company willshall pay in lieu of any paid-up annuity benefit	65
a cash surrender benefit of such amount as is specified in	66
divisions (E), (F), (H), and (J) of this section. The company	67
shallmay reserve the right to defer the payment of such cash	68
surrender benefit for a period ofnot to exceed six months after	69
demand therefor with surrender of the contract. The deferral is	70
contingent upon the company's conveyance of a written request for	71
the deferral to the superintendent and the company's receipt of	72
written approval from the superintendent for the deferral. The	73
request shall address the necessity and equitability to all	74
contract owners of the deferral;	75

(3) A statement of the mortality table, if any, and interest	76
rates used in calculating any minimum paid-up annuity, cash	77
surrender, or death benefits that are guaranteed under the	78
contract, together with sufficient information to determine the	79
amounts of such benefits;	80

(4) A statement that any paid-up annuity, cash surrender, or	81
death benefits that may be available under the contract are not	82
less than the minimum benefits required by any statute of the	83
state in which the contract is delivered and an explanation of the	84
manner in which such benefits are altered by the existence of any	85
additional amounts credited by the company to the contract, any	86
indebtedness to the company on the contract, or any prior	87
withdrawals from or partial surrenders of the contract.	88

Notwithstanding the requirements of this section, any	89
deferred annuity contract may provide that if no considerations	90
have been received under a contract for a period of two full years	91
and the portion of the paid-up annuity benefit at maturity on the	92
plan stipulated in the contract arising from considerations paid	93
prior to such period would be less than twenty dollars monthly,	94
the company may at its option terminate such contract by payment	95
in cash of the then present value of such portion of the paid-up	96
annuity benefit, calculated on the basis of the mortality table,	97
if any, and interest rate specified in the contract for	98
determining the paid-up annuity benefit, and by such payment shall	99
be relieved of any further obligation under such contract.	100

(D) The minimum values as specified in divisions (E), (F),	101
(G), (H), and (J) of this section of any paid-up annuity, cash	102
surrender, or death benefits available under an annuity contract	103
shall be based upon minimum nonforfeiture amounts as defined in	104
divisions (D)(1), (2), and (3) or divisions (D)(4), (5), (6), and	105
(7) of this section.	106

(1) With respect to contracts providing for flexible	107
considerations, the minimum nonforfeiture amount at any time at or	108
prior to the commencement of any annuity payments shall be equal	109
to an accumulation up to such time at a rate of interest of three	110
one and one-half per cent per annum of percentages of the net	111
considerations, as defined in division (D)(1) of this section,	112
paid prior to such time, decreased by the sum of:	113

(a) Any prior withdrawals from or partial surrenders of the	114
contract accumulated at a rate of interest of threeone and	115
one-half per cent per annum; and	116

(b) The amount of any indebtedness to the company on the	117
contract, including interest due and accrued; and increased by any	118
existing additional amounts credited by the company to the	119
contract.	120

The net considerations for a given contract year used to	121
define the minimum nonforfeiture amount shall be an amount not	122
less than zero and shall be equal to the corresponding gross	123
considerations credited to the contract during that contract year	124
less an annual contract charge of thirty dollars and less a	125
collection charge of one dollar and twenty-five cents per	126
consideration credited to the contract during that contract year.	127
The percentages of net considerations shall be sixty-five per cent	128
of the net consideration for the first contract year and	129
eighty-seven and one-half per cent of the net considerations for	130
the second and later contract years. Notwithstanding the	131
provisions of the preceding sentence, the percentage shall be	132
sixty-five per cent of the portion of the total net consideration	133
for any renewal contract year that exceeds by not more than two	134
times the sum of those portions of the net considerations in all	135
prior contract years for which the percentage was sixty-five per	136
cent.	137

Notwithstanding any other provision of this section, for any	138
contract issued on or after the effective date of this amendment,	139
and before September 1, 2004, the interest rate at which net	140
considerations, partial withdrawals, and partial surrenders shall	141
be accumulated for purposes of determining minimum nonforfeiture	142
amounts shall be one and one-half per cent per annum.	143

(2) With respect to contracts providing for fixed scheduled	144
considerations, minimum nonforfeiture amounts shall be calculated	145
on the assumption that considerations are paid annually in advance	146
and shall be defined as for contracts with flexible considerations	147
which are paid annually with two exceptions:	148

(a) The portion of the net consideration for the first	149
contract year to be accumulated shall be the sum of sixty-five per	150
cent of the net consideration for the first contract year plus	151
twenty-two and one-half per cent of the excess of the net	152
consideration for the first contract year over the lesser of the	153
net considerations for the second and third contract years;	154

(b) The annual contract charge shall be the lesser of (i)	155
thirty dollars or (ii) ten per cent of the gross annual	156
consideration.	157

(3) With respect to contracts providing for a single	158
consideration, minimum nonforfeiture amounts shall be defined as	159
for contracts with flexible considerations except that the	160
percentage of net consideration used to determine the minimum	161
nonforfeiture amount shall be equal to ninety per cent and the net	162
consideration shall be the gross consideration less a contract	163
charge of seventy-five dollars.	164

(4)(a) The minimum nonforfeiture amount at any time at or	165
prior to the commencement of any annuity payments shall be equal	166
to an accumulation up to such time at rates of interest determined	167
in accordance with division (D)(5) of this section of the net	168
considerations, determined in accordance with division (D)(4)(b)	169
of this section, paid prior to such time, decreased by the sum of:	170

(i) Any prior withdrawals from or partial surrenders of the	171
contract, accumulated at rates of interest determined in	172
accordance with division (D)(5) of this section;	173

(ii) An annual contract charge of fifty dollars, accumulated	174
at rates of interest determined in accordance with division (D)(5)	175
of this section;	176

(iii) Any premium tax paid by the company for the contract,	177
accumulated at rates of interest determined in accordance with	178
division (D)(5) of this section;	179

(iv) The amount of any indebtedness to the company on the	180
contract, including interest due and accrued.	181

(b) The net considerations for a given contract year used to	182
define the minimum nonforfeiture amount shall be an amount equal	183
to eighty-seven and one-half per cent of the gross considerations	184
credited to the contract during that contract year.	185

(5)(a) The interest rate used in determining minimum	186
nonforfeiture amounts under divisions (D)(4) to (D)(7) of this	187
section shall be an annual rate of interest determined as the	188
lesser of three per cent per annum or the following, which shall	189
be specified in the contract if the interest rate will be reset:	190

(i) The five-year constant maturity treasury rate reported by	191
the federal reserve as of a date or an average over a period,	192
rounded to the nearest one-twentieth of one per cent, specified in	193
the contract, no longer than fifteen months prior to the contract	194
issue date or the redetermination date specified in division	195
(D)(5)(b) of this section;	196

(ii) Reduced by one hundred twenty-five basis points;

197

(iii) Where the resulting interest rate shall not be less	198
than one per cent.	199

(b) The interest rate determined under division (D)(5)(a) of	200
this section shall apply for an initial period and may be	201
redetermined for additional periods. The redetermination date,	202
basis and period, if any, shall be stated in the contract. The	203
basis is the date or average over a specified period that produces	204
the value of the five-year constant maturity treasury rate to be	205
used at each redetermination date.	206

(6) During the period or term that a contract provides	207
substantive participation in an equity-indexed benefit, the	208
contract may provide for an increase in the reduction described in	209
division (D)(5)(a)(ii) of this section by a maximum of one hundred	210
basis points to reflect the value of the equity-indexed benefit.	211
The present value at the contract issue date, and at each	212
redetermination date thereafter, of the additional reduction shall	213
not exceed the market value of the benefit. The superintendent may	214
require a demonstration that the present value of the additional	215
reduction does not exceed the market value of the benefit. If the	216
demonstration is not acceptable to the superintendent, the	217
superintendent may disallow or limit the additional reduction.	218

(7) The superintendent may adopt rules to implement division	219
(D)(6) of this section and to provide for further adjustments to	220
the calculation of minimum nonforfeiture amounts for contracts	221
that provide substantive participation in an equity-indexed	222
benefit and for other contracts for which the superintendent	223
determines adjustments are justified.	224

(E) Any paid-up annuity benefit available under a contract	225
shall be such that its present value on the date annuity payments	226
are to commence is at least equal to the minimum nonforfeiture	227
amount on that date. Such present value shall be computed using	228
the mortality table, if any, and the interest rate specified in	229
the contract for determining the minimum paid-up annuity benefits	230
guaranteed in the contract.	231

(F) For contracts which provide cash surrender benefits, such	232
cash surrender benefits available prior to maturity shall not be	233
less than the present value as of the date of surrender of that	234
portion of the maturity value of the paid-up annuity benefit that	235
would be provided under the contract at maturity arising from	236
considerations paid prior to the time of cash surrender reduced by	237
the amount appropriate to reflect any prior withdrawals from or	238
partial surrenders of the contract, such present value being	239
calculated on the basis of an interest rate not more than one per	240
cent higher than the interest rate specified in the contract for	241
accumulating the net considerations to determine such maturity	242
value, decreased by the amount of any indebtedness to the company	243
on the contract, including interest due and accrued, and increased	244
by any existing additional amounts credited by the company to the	245
contract. In no event shall any cash surrender benefit be less	246
than the minimum nonforfeiture amount at that time. The death	247
benefit under such contracts shall be at least equal to the cash	248
surrender benefit.	249

(G) For contracts that do not provide cash surrender	250
benefits, the present value of any paid-up annuity benefit	251
available as a nonforfeiture option at any time prior to maturity	252
shall not be less than the present value of that portion of the	253
maturity value of the paid-up annuity benefit provided under the	254
contract arising from considerations paid prior to the time the	255
contract is surrendered in exchange for, or changed to, a deferred	256
paid-up annuity, such present value being calculated for the	257
period prior to the maturity date on the basis of the interest	258
rate specified in the contract for accumulating the net	259
considerations to determine such maturity value, and increased by	260
any existing additional amounts credited by the company to the	261
contract. For contracts that do not provide any death benefits	262
prior to the commencement of any annuity payments, such present	263
values shall be calculated on the basis of such interest rate and	264
the mortality table specified in the contract for determining the	265
maturity value of the paid-up annuity benefit. However, in no	266
event shall the present value of a paid-up annuity benefit be less	267
than the minimum nonforfeiture amount at that time.	268

(H) For the purpose of determining the benefits calculated	269
under divisions (F) and (G) of this section, in the case of	270
annuity contracts under which an election may be made to have	271
annuity payments commence at optional maturity dates, the maturity	272
date shall be deemed to be the latest date for which election	273
shall be permitted by the contract, but shall not be deemed to be	274
later than the anniversary of the contract next following the	275
annuitant's seventieth birthday or the tenth anniversary of the	276
contract, whichever is later.	277

(I) Any contract that does not provide cash surrender	278
benefits or does not provide death benefits at least equal to the	279
minimum nonforfeiture amount prior to the commencement of any	280
annuity payments shall include a statement in a prominent place in	281
the contract that such benefits are not provided.	282

(J) Any paid-up annuity, cash surrender, or death benefits	283
available at any time, other than on the contract anniversary	284
under any contract with fixed scheduled considerations, shall be	285
calculated with allowance for the lapse of time and the payment of	286
any scheduled considerations beyond the beginning of the contract	287
year in which cessation of payment of considerations under the	288
contract occurs.	289

(K) For any contract that provides, within the same contract	290
by rider or supplemental contract provision, both annuity benefits	291
and life insurance benefits that are in excess of the greater of	292
cash surrender benefits or a return of the gross considerations	293
with interest, the minimum nonforfeiture benefit shall be equal to	294
the sum of the minimum nonforfeiture benefits for the annuity	295
portion and the minimum nonforfeiture benefits, if any, for the	296
life insurance portion computed as if each portion were a separate	297
contract. Notwithstanding the provisions of divisions (E), (F),	298
(G), (H), and (J) of this section, additional benefits payable:	299

(1) In the event of total and permanent disability;

300

(2) As reversionary annuity or deferred reversionary annuity	301
benefits; or	302

(3) As other policy benefits additional to life insurance,	303
endowment and annuity benefits, and considerations for all such	304
additional benefits shall be disregarded in ascertaining the	305
minimum nonforfeiture amounts, paid-up annuity, cash surrender,	306
and death benefits that may be required by this section.	307

The inclusion of such additional benefits shall not be	308
required in any paid-up benefits, unless such additional benefits	309
separately would require minimum nonforfeiture amounts, paid-up	310
annuity, cash surrender, and death benefits.	311

(L) Any company may file with the superintendent a written	312
notice of its election to comply with the provisions of this	313
section on or before July 1, 1980. The date specified in the	314
notice shall be the operative date of this section for such	315
company. If a company makes no such election, the operative date	316
of this section for the company shall be July 1, 1980.The	317
superintendent may adopt rules in accordance with Chapter 119. of	318
the Revised Code to implement this section.	319

(M) Before the second anniversary of the effective date of	320
this amendment, a company may elect to apply this section to	321
annuity contracts on a contract-form-by-contract-form basis by	322
using either divisions (D)(1), (2), and (3) or divisions (D)(4),	323
(5), (6), and (7) of this section. Divisions (D)(1), (2), and (3)	324
of this section shall be repealed on the second anniversary date	325
of the effective date of this amendment.	326

Sec. 3915.14. (A) No policy of life insurance, nor any	327
indorsement, rider, or application which becomes or is designed to	328
become a part of any such policy, shall be delivered, issued for	329
delivery, or used in this state, or be issued by a life insurance	330
company organized under the laws of this state, until thirty days	331
after the form of said policy, indorsement, rider, or application	332
has been filed with the superintendent of insurance, unless within	333
suchthat time the superintendent gives the insurerinsurance	334
company written approval for the use of suchthe form. When	335

(B) No individual or group annuity policy or contract,	336
including, but not limited to, a guaranteed investment contract,	337
deposit administration contract, funding agreement, structured	338
settlement agreement, or similar types, excluding those required	339
to be filed with the superintendent pursuant to section 3911.011	340
of the Revised Code, and no certificate, endorsement, rider, or	341
application which becomes or is designed to become a part of any	342
such policy, contract, or agreement, shall be delivered, issued	343
for delivery, or used in this state, or be issued by a life	344
insurance company organized under the laws of this state, until	345
thirty days after the form of said policy, contract, agreement,	346
certificate, endorsement, rider, or application has been filed	347
with the superintendent, unless within that time the	348
superintendent gives the insurance company written approval for	349
the use of the form.	350

(C) When the superintendent finds within such thirty-day	351
period that the form filed contains any language whichthat is	352
prohibited by any law of this state, including any rule of the	353
superintendent, or is inconsistent, ambiguous, misleading,	354
deceptive, or likely to mislead an applicant or policyholder, he	355
the superintendent shall give written notice of such finding to	356
any insurer whichthe insurance company that filed suchthe form,	357
and thereafter itthe insurance company shall not deliver, issue	358
for delivery, or use suchthe form.	359

The superintendent's action is subject to review by any court	360
of competent jursdictionjurisdiction, subject to Chapter 119. of	361
the Revised Code.	362

Sec. 3937.25.  (A) As used in sections 3937.25 to 3937.29 of	363
the Revised Code, "medical malpractice insurance" means insurance	364
coverage against the legal liability of the insured for loss,	365
damage, or expense arising from a medical, optometric, or	366
chiropractic claim, as those claims are defined in section	367
2305.113 of the Revised Code.	368

(B) After a policy of commercial property insurance,	369
commercial fire insurance, or commercial casualty insurance other	370
than fidelity or surety bonds, medical malpractice insurance, and	371
automobile insurance as defined in section 3937.30 of the Revised	372
Code, has been in effect for more than ninety days, a notice of	373
cancellation for such policy shall not be issued by any licensed	374
insurer unless it is based on one of the following grounds:	375

(1) Nonpayment of premium;

376

(2) Discovery of fraud or material misrepresentation in the	377
procurement of the insurance or with respect to any claims	378
submitted thereunder;	379

(3) Discovery of a moral hazard or willful or reckless acts	380
or omissions on the part of the named insured that increase any	381
hazard insured against;	382

(4) The occurrence of a change in the individual risk which	383
substantially increases any hazard insured against after insurance	384
coverage has been issued or renewed, except to the extent the	385
insurer reasonably should have foreseen the change or contemplated	386
the risk in writing the contract;	387

(5) Loss of applicable reinsurance or a substantial decrease	388
in applicable reinsurance, if the superintendent has determined	389
that reasonable efforts have been made to prevent the loss of, or	390
substantial decrease in, the applicable reinsurance, or to obtain	391
replacement coverage;	392

(6) Failure of an insured to correct material violations of	393
safety codes or to comply with reasonable written loss control	394
recommendations;	395

(7) A determination by the superintendent of insurance that	396
the continuation of the policy would create a condition that would	397
be hazardous to the policyholders or the public.	398

(B)(C) The notice of cancellation required by this section	399
must be in writing, be mailed to the insured at histhe insured's	400
last known address, and contain all of the following:	401

(1) The policy number;

402

(2) The date of the notice;

403

(3) The effective date of the cancellation;

404

(4) An explanation of the reason for cancellation.

405

Such notice of cancellation also shall be mailed to the	406
insured's agent.	407

(C)(D) Except for nonpayment of premium, the effective date	408
of cancellation must be no less than thirty days from the date of	409
mailing the notice. When cancellation is for nonpayment of	410
premium, the effective date of cancellation must be no less than	411
ten days from the date of mailing the notice.	412

(D)(E) Nothing in division (A)(B) of this section shall be	413
construed to prevent an insurer from writing a policy of	414
commercial property insurance, commercial fire insurance, or	415
commercial casualty insurance other than medical malpractice	416
insurance and automobile insurance as defined in section 3937.30	417
of the Revised Code for a period greater than one year and	418
providing in such policy that the insurer may issue a notice of	419
cancellation of such policy at least thirty days prior to an	420
anniversary of such policy, with the effective date of	421
cancellation being that anniversary.	422

The superintendent may prescribe that adequate disclosure be	423
made to the insured when a policy is issued for a term of more	424
than one year.	425

(E)(F) There is no liability on the part of, and no cause of	426
action of any nature arises against, the superintendent of	427
insurance, any insurer, or any person furnishing information	428
requested by the superintendent, an insurer, the agent, employee,	429
attorney, or other authorized representative of any such persons,	430
for any oral or written statement made to supply information	431
relevant to a determination on cancellation of any policy of	432
commercial property insurance, commercial fire insurance, or	433
commercial casualty insurance other than fidelity or surety bonds,	434
medical malpractice insurance, and automobile insurance as defined	435
in section 3937.30 of the Revised Code, or in connection with	436
advising an insured or hisan insured's attorney of the reasons	437
for a cancellation of such insurance, or in connection with any	438
administrative or judicial proceeding arising out of or related to	439
such cancellation.	440

Sec. 3937.26.  (A) An insurer may refuse to renew a policy of	441
commercial property insurance, commercial fire insurance, or	442
commercial casualty insurance other than fidelity or surety bonds,	443
medical malpractice insurance, and automobile insurance as defined	444
in section 3937.30 of the Revised Code, by mailing to the insured,	445
at histhe insured's last known address, at least thirty days	446
prior to the date of the expiration date of the policy, a notice	447
of the insurer's intention not to renew the policy.	448

Such notice shall contain all of the following:

449

(1) The policy number;

450

(2) The date of the notice;

451

(3) The expiration date of the policy.

452

Such notice of nonrenewal also shall be mailed to the	453
insured's agent.	454

(B) If the notice of nonrenewal is mailed less than thirty	455
days before the expiration date of the policy, the insured's	456
coverage then in effect remains in effect until thirty days after	457
the date of mailing the notice, unless the insured notifies the	458
insurer in writing that hethe insured accepts the nonrenewal as	459
stated. The insurer shall notify the insured of the amount of the	460
premium for the time after the expiration date that the coverage	461
may remain in effect, and the insured shall pay such premium	462
unless hethe insured accepts the stated nonrenewal. The premium	463
must be calculated using the rates originally applicable to the	464
insured's coverage then in effect.	465

Sec. 3937.27.  (A) An insurer who intends to condition	466
renewal of a policy of commercial property insurance, commercial	467
fire insurance, or commercial casualty insurance other than	468
fidelity and surety bonds, medical malpractice insurance, and	469
automobile insurance as defined in section 3937.30 of the Revised	470
Code, upon a substantial increase in premium shall mail a notice	471
of such intention to the agent of record and to the insured, at	472
histhe insured's last known address, at least thirty days prior	473
to the expiration date of the policy.	474

(B) If the notice is mailed less than thirty days before the	475
expiration date of the policy, the insured's coverage then in	476
effect remains in effect until thirty days after the date of	477
mailing the notice. The insurer shall notify the insured of the	478
amount of the premium for the time after the expiration date that	479
the existing coverage may remain in effect, and the insured shall	480
pay such premium unless hethe insured notifies the insurer in	481
writing that hethe insured does not want histhe coverage then in	482
effect to be extended past the expiration date. The premium must	483
be calculated using the rates originally applicable to the	484
insured's coverage then in effect.	485

If the insured accepts the increased premium, such change is	486
effective immediately following the expiration of the insured's	487
coverage then in effect.	488

Sec. 3937.28. (A) A notice of cancellation of a policy of	489
medical malpractice insurance shall not be issued by any licensed	490
insurer unless it is based on one of the following grounds:	491

(1) Nonpayment of premium;

492

(2) Discovery of fraud or material misrepresentation in the	493
procurement of the insurance or with respect to any claims	494
submitted thereunder;	495

(3) Discovery of a moral hazard or willful or reckless acts	496
or omissions on the part of the named insured that increase any	497
hazard insured against;	498

(4) The occurrence of a change in the individual risk that	499
substantially increases any hazard insured against after insurance	500
coverage has been issued or renewed, except to the extent the	501
insurer reasonably should have foreseen the change or contemplated	502
the risk in writing the contract;	503

(5) Loss of applicable reinsurance or a substantial decrease	504
in applicable reinsurance, if the superintendent of insurance has	505
determined that reasonable efforts have been made to prevent the	506
loss of, or substantial decrease in, the applicable reinsurance,	507
or to obtain replacement coverage;	508

(6) Failure of an insured to correct material violations of	509
safety codes or to comply with reasonable written loss control	510
recommendations;	511

(7) A determination by the superintendent that the	512
continuation of the policy would create a condition that would be	513
hazardous to the policyholders or the public.	514

(B) The notice of cancellation required by this section shall	515
be in writing, be mailed both to the insured at the insured's last	516
known address and to the insured's agent, and contain all of the	517
following:	518

(1) The policy number;

519

(2) The date of the notice;

520

(3) The effective date of the cancellation;

521

(4) An explanation of the grounds for cancellation.

522

(C) Except when cancellation is for nonpayment of premium,	523
the effective date of cancellation shall be not less than sixty	524
days from the date of mailing the notice. When cancellation is for	525
nonpayment of premium, the effective date of cancellation shall be	526
not less than ten days from the date of mailing the notice.	527

(D) Nothing in division (A) of this section shall be	528
construed to prevent an insurer from writing a policy of medical	529
malpractice insurance for a period greater than one year and	530
providing in such policy that the insurer may issue a notice of	531
cancellation of such policy at least sixty days prior to an	532
anniversary of such policy, with the effective date of	533
cancellation being that anniversary.	534

The superintendent may prescribe that adequate disclosure be	535
made to the insured when a policy is issued for a term of more	536
than one year.	537

(E) There is no liability on the part of, and no cause of	538
action of any nature arises against, the superintendent, any	539
insurer, or any person furnishing information requested by the	540
superintendent or an insurer, or the agent, employee, attorney or	541
other authorized representative of any such persons, for any oral	542
or written statement made to supply information relevant to a	543
determination on cancellation of any policy of medical malpractice	544
insurance, or in connection with advising an insured or the	545
insured's attorney of the grounds for a cancellation of such	546
insurance, or in connection with any administrative or judicial	547
proceeding arising out of or related to such cancellation.	548

Sec. 3937.29. (A) An insurer that intends to cancel,	549
terminate, or otherwise not renew all policies of medical	550
malpractice insurance that it has issued to any class, type, or	551
specialty of practitioner, or that intends to cancel, terminate,	552
or otherwise not renew all policies of medical malpractice	553
insurance in a specific geographic area, which may include the	554
state as a whole, shall file written notice of its intended action	555
with the superintendent of insurance. These actions by an insurer	556
are not effective unless the written notice is filed with the	557
superintendent within the following time frames:	558

(1) At least one hundred eighty days prior to the insurer	559
acting to cancel, terminate, or otherwise not renew all policies	560
of medical malpractice insurance that the insurer has issued in	561
this state;	562

(2) At least one hundred twenty days prior to the insurer	563
acting to cancel, terminate, or otherwise not renew all policies	564
of medical malpractice insurance for a specific class, type, or	565
specialty of practitioner or in a specific geographic area other	566
than this state as a whole.	567

Written notice also shall be filed with the superintendent at	568
least one hundred twenty days prior to the insurer making changes	569
in its underwriting guidelines, if the effect of the changes will	570
be to cancel, terminate, or otherwise not renew all policies of	571
medical malpractice insurance for a specific class, type, or	572
specialty of practitioner or in a specific geographic area other	573
than this state as a whole.	574

(B) The written notice filed with the superintendent under	575
division (A) of this section shall contain all of the following	576
information:	577

(1) The date of the notice;

578

(2) The number of insureds with policies that will be	579
cancelled, terminated, or not renewed;	580

(3) The date that the insurer intends to cancel, terminate,	581
or otherwise not renew all policies of medical malpractice	582
insurance that the insurer has issued to any class, type, or	583
specialty of practitioner, or that the insurer intends to cancel,	584
terminate, or otherwise not renew all policies of medical	585
malpractice insurance in a specific geographic area, including the	586
state as a whole;	587

(4) The specific geographic area, if any;

588

(5) Any other information required by the superintendent.

589

(C) An insurer that intends to condition renewal of a policy	590
of medical malpractice insurance upon an increase in premium shall	591
mail a notice of the insurer's intention to the agent of record	592
and to the insured at the insured's last known address at least	593
sixty days prior to the expiration date of the policy.	594

(D) An insurer may refuse to renew a policy of medical	595
malpractice insurance by mailing a notice of the insurer's	596
intention to the agent of record and to the insured at the	597
insured's last known address at least sixty days prior to the	598
expiration date of the policy. The notice mailed under this	599
division shall contain all of the following information:	600

(1) The policy number;

601

(2) The date of the notice;

602

(3) The expiration date of the policy;

603

(4) An explanation of the grounds for nonrenewal.

604

(E) If the notice required by divisions (C) and (D) of this	605
section is mailed less than sixty days before the expiration date	606
of the policy, the insured's coverage then in effect remains in	607
effect until sixty days after the date of mailing the notice	608
unless either of the following is true:	609

(1) In the case of a premium increase, the insured accepts	610
the increased premium. The change is then effective immediately	611
following the expiration of the insured's coverage then in effect.	612

(2) In the case of nonrenewal, the insured notifies the	613
insurer in writing that the insured accepts the nonrenewal as	614
stated.	615

(F) If the insured's coverage is extended beyond the original	616
expiration date of the policy as provided by division (E) of this	617
section, the premium for the time after the original expiration	618
date must be calculated using the rates originally applicable to	619
the insured's coverage then in effect. The insurer shall notify	620
the insured of the amount of the premium for the time after the	621
expiration of the insured's coverage then in effect. The insured	622
shall pay the premium unless either of the following is true:	623

(1) In the case of a premium increase, the insured notifies	624
the insurer in writing that the insured does not want the coverage	625
then in effect to be extended past the expiration date.	626

(2) In the case of nonrenewal, the insured notifies the	627
insurer in writing that the insured accepts the nonrenewal as	628
stated.	629

Section 2. That existing sections 3915.02, 3915.073, 3915.14,	630
3937.25, 3937.26, and 3937.27 of the Revised Code are hereby	631
repealed.	632

Section 3. That section 3915.073 of the Revised Code as it	633
results from Section 1 of this act be amended to read as follows:	634

Sec. 3915.073.  (A) This section shall be known as the	635
standard nonforfeiture law for individual deferred annuities.	636

(B) This section does not apply to any reinsurance, group	637
annuity purchased under a retirement plan or plan of deferred	638
compensation established or maintained by an employer, including a	639
partnership or sole proprietorship, or by an employee	640
organization, or by both, other than a plan providing individual	641
retirement accounts or individual retirement annuities under	642
section 408 of the Internal Revenue Code of 1954, 26 U.S.C.A. 408,	643
as amended, premium deposit fund, variable annuity, investment	644
annuity, immediate annuity, any deferred annuity contract after	645
annuity payments have commenced, or reversionary annuity, nor to	646
any contract which is delivered outside this state through an	647
agent or other representative of the company issuing the contract.	648

(C) In the case of contracts issued on or after the operative	649
date of this section as defined in division (M) of this section,	650
noNo contract of annuity, except as stated in division (B) of	651
this section, shall be delivered or issued for delivery in this	652
state unless the contract contains in substance the following	653
provisions, or corresponding provisions that in the opinion of the	654
superintendent of insurance are at least as favorable to the	655
contract owners, relative to the cessation of payment of	656
consideration under the contract:	657

(1) That upon cessation of payment of considerations under a	658
contract, or upon the written request of the contract owner, the	659
company shall grant a paid-up annuity benefit on a plan stipulated	660
in the contract of such value as is specified in divisions (E),	661
(F), (G), (H), and (J) of this section;	662

(2) If a contract provides for a lump sum settlement at	663
maturity, or at any other time, that upon surrender of the	664
contract at or prior to the commencement of any annuity payments,	665
the company shall pay in lieu of any paid-up annuity benefit a	666
cash surrender benefit of such amount as is specified in divisions	667
(E), (F), (H), and (J) of this section. The company may reserve	668
the right to defer the payment of such cash surrender benefit for	669
a period not to exceed six months after demand therefor with	670
surrender of the contract. The deferral is contingent upon the	671
company's conveyance of a written request for the deferral to the	672
superintendent and the company's receipt of written approval from	673
the superintendent for the deferral. The request shall address the	674
necessity and equitability to all contract owners of the deferral;	675

(3) A statement of the mortality table, if any, and interest	676
rates used in calculating any minimum paid-up annuity, cash	677
surrender, or death benefits that are guaranteed under the	678
contract, together with sufficient information to determine the	679
amounts of such benefits;	680

(4) A statement that any paid-up annuity, cash surrender, or	681
death benefits that may be available under the contract are not	682
less than the minimum benefits required by any statute of the	683
state in which the contract is delivered and an explanation of the	684
manner in which such benefits are altered by the existence of any	685
additional amounts credited by the company to the contract, any	686
indebtedness to the company on the contract, or any prior	687
withdrawals from or partial surrenders of the contract.	688

Notwithstanding the requirements of this section, any	689
deferred annuity contract may provide that if no considerations	690
have been received under a contract for a period of two full years	691
and the portion of the paid-up annuity benefit at maturity on the	692
plan stipulated in the contract arising from considerations paid	693
prior to such period would be less than twenty dollars monthly,	694
the company may at its option terminate such contract by payment	695
in cash of the then present value of such portion of the paid-up	696
annuity benefit, calculated on the basis of the mortality table,	697
if any, and interest rate specified in the contract for	698
determining the paid-up annuity benefit, and by such payment shall	699
be relieved of any further obligation under such contract.	700

(D) The minimum values as specified in divisions (E), (F),	701
(G), (H), and (J) of this section of any paid-up annuity, cash	702
surrender, or death benefits available under an annuity contract	703
shall be based upon minimum nonforfeiture amounts as defined in	704
divisions (D)(1), (2), and (3) or divisions (D)(4), (5), (6), and	705
(7) of this sectiondivision.	706

(1) With respect to contracts providing for flexible	707
considerations, the minimum nonforfeiture amount at any time at or	708
prior to the commencement of any annuity payments shall be equal	709
to an accumulation up to such time at a rate of interest of one	710
and one-half per cent per annum of percentages of the net	711
considerations, as defined in division (D)(1) of this section,	712
paid prior to such time, decreased by the sum of:	713

(a) Any prior withdrawals from or partial surrenders of the	714
contract accumulated at a rate of interest of one and one-half per	715
cent per annum;	716

(b) The amount of any indebtedness to the company on the	717
contract, including interest due and accrued; and increased by any	718
existing additional amounts credited by the company to the	719
contract.	720

The net considerations for a given contract year used to	721
define the minimum nonforfeiture amount shall be an amount not	722
less than zero and shall be equal to the corresponding gross	723
considerations credited to the contract during that contract year	724
less an annual contract charge of thirty dollars and less a	725
collection charge of one dollar and twenty-five cents per	726
consideration credited to the contract during that contract year.	727
The percentages of net considerations shall be sixty-five per cent	728
of the net consideration for the first contract year and	729
eighty-seven and one-half per cent of the net considerations for	730
the second and later contract years. Notwithstanding the	731
provisions of the preceding sentence, the percentage shall be	732
sixty-five per cent of the portion of the total net consideration	733
for any renewal contract year that exceeds by not more than two	734
times the sum of those portions of the net considerations in all	735
prior contract years for which the percentage was sixty-five per	736
cent.	737

(2) With respect to contracts providing for fixed scheduled	738
considerations, minimum nonforfeiture amounts shall be calculated	739
on the assumption that considerations are paid annually in advance	740
and shall be defined as for contracts with flexible considerations	741
which are paid annually with two exceptions:	742

(a) The portion of the net consideration for the first	743
contract year to be accumulated shall be the sum of sixty-five per	744
cent of the net consideration for the first contract year plus	745
twenty-two and one-half per cent of the excess of the net	746
consideration for the first contract year over the lesser of the	747
net considerations for the second and third contract years;	748

(b) The annual contract charge shall be the lesser of (i)	749
thirty dollars or (ii) ten per cent of the gross annual	750
consideration.	751

(3) With respect to contracts providing for a single	752
consideration, minimum nonforfeiture amounts shall be defined as	753
for contracts with flexible considerations except that the	754
percentage of net consideration used to determine the minimum	755
nonforfeiture amount shall be equal to ninety per cent and the net	756
consideration shall be the gross consideration less a contract	757
charge of seventy-five dollars.	758

(4)(a) The minimum nonforfeiture amount at any time at or	759
prior to the commencement of any annuity payments shall be equal	760
to an accumulation up to such time at rates of interest determined	761
in accordance with division (D)(5)(2) of this section of the net	762
considerations, determined in accordance with division	763
(D)(4)(1)(b) of this section, paid prior to such time, decreased	764
by the sum of:	765

(i) Any prior withdrawals from or partial surrenders of the	766
contract, accumulated at rates of interest determined in	767
accordance with division (D)(5)(2) of this section;	768

(ii) An annual contract charge of fifty dollars, accumulated	769
at rates of interest determined in accordance with division	770
(D)(5)(2) of this section;	771

(iii) Any premium tax paid by the company for the contract,	772
accumulated at rates of interest determined in accordance with	773
division (D)(5)(2) of this section;	774

(iv) The amount of any indebtedness to the company on the	775
contract, including interest due and accrued.	776

(b) The net considerations for a given contract year used to	777
define the minimum nonforfeiture amount shall be an amount equal	778
to eighty-seven and one-half per cent of the gross considerations	779
credited to the contract during that contract year.	780

(5)(2)(a) The interest rate used in determining minimum	781
nonforfeiture amounts under divisions (D)(4)(1) to (7)(4) of this	782
section shall be an annual rate of interest determined as the	783
lesser of three per cent per annum or the following, which shall	784
be specified in the contract if the interest rate will be reset:	785

(i) The five-year constant maturity treasury rate reported by	786
the federal reserve as of a date or an average over a period,	787
rounded to the nearest one-twentieth of one per cent, specified in	788
the contract, no longer than fifteen months prior to the contract	789
issue date or the redetermination date specified in division	790
(D)(5)(2)(b) of this section;	791

(ii) Reduced by one hundred twenty-five basis points;

792

(iii) Where the resulting interest rate shall not be less	793
than one per cent.	794

(b) The interest rate determined under division (D)(5)(2)(a)	795
of this section shall apply for an initial period and may be	796
redetermined for additional periods. The redetermination date,	797
basis and period, if any, shall be stated in the contract. The	798
basis is the date or average over a specified period that produces	799
the value of the five-year constant maturity treasury rate to be	800
used at each redetermination date.	801

(6)(3) During the period or term that a contract provides	802
substantative participation in an equity-indexed benefit, the	803
contract may provide for an increase in the reduction described in	804
division (D)(5)(2)(a)(ii) of this section by a maximum of one	805
hundred basis points to reflect the value of the equity-indexed	806
benefit. The present value at the contract issue date, and at each	807
redetermination date thereafter, of the additional reduction shall	808
not exceed the market value of the benefit. The superintendent may	809
require a demonstration that the present value of the additional	810
reduction does not exceed the market value of the benefit. If the	811
demonstration is not acceptable to the superintendent, the	812
superintendent may disallow or limit the additional reduction.	813

(7)(4) The superintendent may adopt rules to implement	814
division (D)(6)(3) of this section and to provide for further	815
adjustments to the calculation of minimum nonforfeiture amounts	816
for contracts that provide substantive participation in an	817
equity-indexed benefit and for other contracts for which the	818
superintendent determines adjustments are justified.	819

(E) Any paid-up annuity benefit available under a contract	820
shall be such that its present value on the date annuity payments	821
are to commence is at least equal to the minimum nonforfeiture	822
amount on that date. Such present value shall be computed using	823
the mortality table, if any, and the interest rate specified in	824
the contract for determining the minimum paid-up annuity benefits	825
guaranteed in the contract.	826

(F) For contracts which provide cash surrender benefits, such	827
cash surrender benefits available prior to maturity shall not be	828
less than the present value as of the date of surrender of that	829
portion of the maturity value of the paid-up annuity benefit that	830
would be provided under the contract at maturity arising from	831
considerations paid prior to the time of cash surrender reduced by	832
the amount appropriate to reflect any prior withdrawals from or	833
partial surrenders of the contract, such present value being	834
calculated on the basis of an interest rate not more than one per	835
cent higher than the interest rate specified in the contract for	836
accumulating the net considerations to determine such maturity	837
value, decreased by the amount of any indebtedness to the company	838
on the contract, including interest due and accrued, and increased	839
by any existing additional amounts credited by the company to the	840
contract. In no event shall any cash surrender benefit be less	841
than the minimum nonforfeiture amount at that time. The death	842
benefit under such contracts shall be at least equal to the cash	843
surrender benefit.	844

(G) For contracts that do not provide cash surrender	845
benefits, the present value of any paid-up annuity benefit	846
available as a nonforfeiture option at any time prior to maturity	847
shall not be less than the present value of that portion of the	848
maturity value of the paid-up annuity benefit provided under the	849
contract arising from considerations paid prior to the time the	850
contract is surrendered in exchange for, or changed to, a deferred	851
paid-up annuity, such present value being calculated for the	852
period prior to the maturity date on the basis of the interest	853
rate specified in the contract for accumulating the net	854
considerations to determine such maturity value, and increased by	855
any existing additional amounts credited by the company to the	856
contract. For contracts that do not provide any death benefits	857
prior to the commencement of any annuity payments, such present	858
values shall be calculated on the basis of such interest rate and	859
the mortality table specified in the contract for determining the	860
maturity value of the paid-up annuity benefit. However, in no	861
event shall the present value of a paid-up annuity benefit be less	862
than the minimum nonforfeiture amount at that time.	863

(H) For the purpose of determining the benefits calculated	864
under divisions (F) and (G) of this section, in the case of	865
annuity contracts under which an election may be made to have	866
annuity payments commence at optional maturity dates, the maturity	867
date shall be deemed to be the latest date for which election	868
shall be permitted by the contract, but shall not be deemed to be	869
later than the anniversary of the contract next following the	870
annuitant's seventieth birthday or the tenth anniversary of the	871
contract, whichever is later.	872

(I) Any contract that does not provide cash surrender	873
benefits or does not provide death benefits at least equal to the	874
minimum nonforfeiture amount prior to the commencement of any	875
annuity payments shall include a statement in a prominent place in	876
the contract that such benefits are not provided.	877

(J) Any paid-up annuity, cash surrender, or death benefits	878
available at any time, other than on the contract anniversary	879
under any contract with fixed scheduled considerations, shall be	880
calculated with allowance for the lapse of time and the payment of	881
any scheduled considerations beyond the beginning of the contract	882
year in which cessation of payment of considerations under the	883
contract occurs.	884

(K) For any contract that provides, within the same contract	885
by rider or supplemental contract provision, both annuity benefits	886
and life insurance benefits that are in excess of the greater of	887
cash surrender benefits or a return of the gross considerations	888
with interest, the minimum nonforfeiture benefit shall be equal to	889
the sum of the minimum nonforfeiture benefits for the annuity	890
portion and the minimum nonforfeiture benefits, if any, for the	891
life insurance portion computed as if each portion were a separate	892
contract. Notwithstanding the provisions of divisions (E), (F),	893
(G), (H), and (J) of this section, additional benefits payable:	894

(1) In the event of total and permanent disability;

895

(2) As reversionary annuity or deferred reversionary annuity	896
benefits; or	897

(3) As other policy benefits additional to life insurance,	898
endowment and annuity benefits, and considerations for all such	899
additional benefits shall be disregarded in ascertaining the	900
minimum nonforfeiture amounts, paid-up annuity, cash surrender,	901
and death benefits that may be required by this section.	902

The inclusion of such additional benefits shall not be	903
required in any paid-up benefits, unless such additional benefits	904
separately would require minimum nonforfeiture amounts, paid-up	905
annuity, cash surrender, and death benefits.	906

(L) The superintendent may adopt rules in accordance with	907
Chapter 119. of the Revised Code to implement this section.	908

(M) Before the second anniversary of the effective date of	909
this amendment, a company may elect to apply this section to	910
annuity contracts on a contract-form-by-contract-form basis by	911
using either divisions (D)(1), (2), and (3) or divisions (D)(4),	912
(5), (6), and (7) of this section. Divisions (D)(1), (2), and (3)	913
of this section shall be repealed on the second anniversary date	914
of the effective date of this amendment.	915

Section 4. That existing section 3915.073 of the Revised Code	916
as it results from Section 1 of this act is hereby repealed.	917

Section 5. Sections 3 and 4 of this act shall take effect two	918
years after the effective date of this act.	919

Section 6.  Section 3915.02 of the Revised Code is presented	920
in this act as a composite of the section as amended by both Sub.	921
H.B. 16 and Sub. S.B. 137 of the 119th General Assembly. The	922
General Assembly, applying the principle stated in division (B) of	923
section 1.52 of the Revised Code that amendments are to be	924
harmonized if reasonably capable of simultaneous operation, finds	925
that the composite is the resulting version of the section in	926
effect prior to the effective date of the section as presented in	927
this act.	928