REPRESENTATIVES D. Evans, G. Smith, Faber, Gibbs, Setzer, Martin, Sferra, Wolpert, Koziura, Daniels, Barrett

To amend sections 2505.02, 3915.02, 3915.073,

1

3915.14, 3937.25, 3937.26, and 3937.27 and to

2

enact sections 3937.28 and 3937.29 of the Revised

3

Code to adopt a new formula for determining the

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minimum nonforfeiture value of an individual

5

deferred annuity, to require insurance companies

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to obtain the Superintendent of Insurance's

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approval prior to deferring the payment of a cash

8

surrender benefit, to prohibit the delivery or use

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of an annuity contract and its related

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endorsements for thirty days after the form of the

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contract or endorsement is filed with the

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Superintendent, unless earlier approved by the

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Superintendent, to allow immediate appeals of

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final orders of courts pertaining to the

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constitutionality of provisions of Am. Sub. S.B.

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281 of the 124th General Assembly, and to

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differentiate provisions for the cancellation,

18

termination, and nonrenewal of policies of medical

19

malpractice insurance from those provisions

20

regulating other policies of insurance, and to

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amend the version of section 3915.073 of the

22

Revised Code as results from this act two years

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after the act's effective date.

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

Section 1. That sections 2505.02, 3915.02, 3915.073, 3915.14,	25
3937.25, 3937.26, and 3937.27 be amended and sections 3937.28 and	26
3937.29 of the Revised Code be enacted to read as follows:	27

Sec. 2505.02.  (A) As used in this section:

28

(1) "Substantial right" means a right that the United States	29
Constitution, the Ohio Constitution, a statute, the common law, or	30
a rule of procedure entitles a person to enforce or protect.	31

(2) "Special proceeding" means an action or proceeding that	32
is specially created by statute and that prior to 1853 was not	33
denoted as an action at law or a suit in equity.	34

(3) "Provisional remedy" means a proceeding ancillary to an	35
action, including, but not limited to, a proceeding for a	36
preliminary injunction, attachment, discovery of privileged	37
matter, or suppression of evidence.	38

(B) An order is a final order that may be reviewed, affirmed,	39
modified, or reversed, with or without retrial, when it is one of	40
the following:	41

(1) An order that affects a substantial right in an action	42
that in effect determines the action and prevents a judgment;	43

(2) An order that affects a substantial right made in a	44
special proceeding or upon a summary application in an action	45
after judgment;	46

(3) An order that vacates or sets aside a judgment or grants	47
a new trial;	48

(4) An order that grants or denies a provisional remedy and	49
to which both of the following apply:	50

(a) The order in effect determines the action with respect to	51
the provisional remedy and prevents a judgment in the action in	52
favor of the appealing party with respect to the provisional	53
remedy.	54

(b) The appealing party would not be afforded a meaningful or	55
effective remedy by an appeal following final judgment as to all	56
proceedings, issues, claims, and parties in the action.	57

(5) An order that determines that an action may or may not be	58
maintained as a class action;	59

(6) An order determining the constitutionality of any changes	60
to the Revised Code made by Am. Sub. S.B. 281 of the 124th general	61
assembly, including the amendment of sections 1751.67, 2117.06,	62
2305.11, 2305.15, 2305.234, 2317.02, 2317.54, 2323.56, 2711.21,	63
2711.22, 2711.23, 2711.24, 2743.02, 2743.43, 2919.16, 3923.63,	64
3923.64, 3929.71, 4705.15, and 5111.018, and the enactment of	65
sections 2305.113, 2323.41, 2323.43, and 2323.55 of the Revised	66
Code.	67

(C) When a court issues an order that vacates or sets aside a	68
judgment or grants a new trial, the court, upon the request of	69
either party, shall state in the order the grounds upon which the	70
new trial is granted or the judgment vacated or set aside.	71

(D) This section applies to and governs any action, including	72
an appeal, that is pending in any court on the effective date of	73
this amendmentJuly22, 1998, and all claims filed or actions	74
commenced on or after the effective date of this amendmentJuly	75
22, 1998, notwithstanding any provision of any prior statute or	76
rule of law of this state.	77

Sec. 3915.02.  This chapter does not apply to annuities	78
except as provided in sections 3915.051, 3915.073, 3915.14, and	79
3915.21 to 3915.24 of the Revised Code, industrial policies except	80
as provided in sections 3915.07 and 3915.071 of the Revised Code,	81
fraternal benefit societies, corporations or associations	82
operating on the assessment plan, or corporations or associations	83
which have been organized under sections 3919.01 to 3919.19 of the	84
Revised Code, except corporations and associations which, as of	85
September 28, 1933, have amended their articles of incorporation	86
under section 3919.13 of the Revised Code.	87

Sec. 3915.073.  (A) This section shall be known as the	88
standard nonforfeiture law for individual deferred annuities.	89

(B) This section does not apply to any reinsurance, group	90
annuity purchased under a retirement plan or plan of deferred	91
compensation established or maintained by an employer, including a	92
partnership or sole proprietorship, or by an employee	93
organization, or by both, other than a plan providing individual	94
retirement accounts or individual retirement annuities under	95
section 408 of the Internal Revenue Code of 1954, 26 U.S.C.A. 408,	96
as amended, premium deposit fund, variable annuity, investment	97
annuity, immediate annuity, any deferred annuity contract after	98
annuity payments have commenced, or reversionary annuity, nor to	99
any contract which is delivered outside this state through an	100
agent or other representative of the company issuing the contract.	101

(C) In the case of contracts issued on or after the operative	102
date of this section as defined in division (L)(M) of this	103
section, no contract of annuity, except as stated in division (B)	104
of this section, shall be delivered or issued for delivery in this	105
state unless itthe contract contains in substance the following	106
provisions, or corresponding provisions that in the opinion of the	107
superintendent of insurance are at least as favorable to the	108
contractholder, uponcontract owners, relative to the cessation of	109
payment of consideration under the contract:	110

(1) That upon cessation of payment of considerations under a	111
contract, or upon the written request of the contract owner, the	112
company willshall grant a paid-up annuity benefit on a plan	113
stipulated in the contract of such value as is specified in	114
divisions (E), (F), (G), (H), and (J) of this section;	115

(2) If a contract provides for a lump sum settlement at	116
maturity, or at any other time, that upon surrender of the	117
contract at or prior to the commencement of any annuity payments,	118
the company willshall pay in lieu of any paid-up annuity benefit	119
a cash surrender benefit of such amount as is specified in	120
divisions (E), (F), (H), and (J) of this section. The company	121
shallmay reserve the right to defer the payment of such cash	122
surrender benefit for a period ofnot to exceed six months after	123
demand therefor with surrender of the contract. The deferral is	124
contingent upon the company's conveyance of a written request for	125
the deferral to the superintendent and the company's receipt of	126
written approval from the superintendent for the deferral. The	127
request shall address the necessity and equitability to all	128
contract owners of the deferral;	129

(3) A statement of the mortality table, if any, and interest	130
rates used in calculating any minimum paid-up annuity, cash	131
surrender, or death benefits that are guaranteed under the	132
contract, together with sufficient information to determine the	133
amounts of such benefits;	134

(4) A statement that any paid-up annuity, cash surrender, or	135
death benefits that may be available under the contract are not	136
less than the minimum benefits required by any statute of the	137
state in which the contract is delivered and an explanation of the	138
manner in which such benefits are altered by the existence of any	139
additional amounts credited by the company to the contract, any	140
indebtedness to the company on the contract, or any prior	141
withdrawals from or partial surrenders of the contract.	142

Notwithstanding the requirements of this section, any	143
deferred annuity contract may provide that if no considerations	144
have been received under a contract for a period of two full years	145
and the portion of the paid-up annuity benefit at maturity on the	146
plan stipulated in the contract arising from considerations paid	147
prior to such period would be less than twenty dollars monthly,	148
the company may at its option terminate such contract by payment	149
in cash of the then present value of such portion of the paid-up	150
annuity benefit, calculated on the basis of the mortality table,	151
if any, and interest rate specified in the contract for	152
determining the paid-up annuity benefit, and by such payment shall	153
be relieved of any further obligation under such contract.	154

(D) The minimum values as specified in divisions (E), (F),	155
(G), (H), and (J) of this section of any paid-up annuity, cash	156
surrender, or death benefits available under an annuity contract	157
shall be based upon minimum nonforfeiture amounts as defined in	158
divisions (D)(1), (2), and (3) or divisions (D)(4), (5), (6), and	159
(7) of this section.	160

(1) With respect to contracts providing for flexible	161
considerations, the minimum nonforfeiture amount at any time at or	162
prior to the commencement of any annuity payments shall be equal	163
to an accumulation up to such time at a rate of interest of three	164
one and one-half per cent per annum of percentages of the net	165
considerations, as defined in division (D)(1) of this section,	166
paid prior to such time, decreased by the sum of:	167

(a) Any prior withdrawals from or partial surrenders of the	168
contract accumulated at a rate of interest of threeone and	169
one-half per cent per annum; and	170

(b) The amount of any indebtedness to the company on the	171
contract, including interest due and accrued; and increased by any	172
existing additional amounts credited by the company to the	173
contract.	174

The net considerations for a given contract year used to	175
define the minimum nonforfeiture amount shall be an amount not	176
less than zero and shall be equal to the corresponding gross	177
considerations credited to the contract during that contract year	178
less an annual contract charge of thirty dollars and less a	179
collection charge of one dollar and twenty-five cents per	180
consideration credited to the contract during that contract year.	181
The percentages of net considerations shall be sixty-five per cent	182
of the net consideration for the first contract year and	183
eighty-seven and one-half per cent of the net considerations for	184
the second and later contract years. Notwithstanding the	185
provisions of the preceding sentence, the percentage shall be	186
sixty-five per cent of the portion of the total net consideration	187
for any renewal contract year that exceeds by not more than two	188
times the sum of those portions of the net considerations in all	189
prior contract years for which the percentage was sixty-five per	190
cent.	191

Notwithstanding any other provision of this section, for any	192
contract issued on or after the effective date of this amendment,	193
and before September 1, 2004, the interest rate at which net	194
considerations, partial withdrawals, and partial surrenders shall	195
be accumulated for purposes of determining minimum nonforfeiture	196
amounts shall be one and one-half per cent per annum.	197

(2) With respect to contracts providing for fixed scheduled	198
considerations, minimum nonforfeiture amounts shall be calculated	199
on the assumption that considerations are paid annually in advance	200
and shall be defined as for contracts with flexible considerations	201
which are paid annually with two exceptions:	202

(a) The portion of the net consideration for the first	203
contract year to be accumulated shall be the sum of sixty-five per	204
cent of the net consideration for the first contract year plus	205
twenty-two and one-half per cent of the excess of the net	206
consideration for the first contract year over the lesser of the	207
net considerations for the second and third contract years;	208

(b) The annual contract charge shall be the lesser of (i)	209
thirty dollars or (ii) ten per cent of the gross annual	210
consideration.	211

(3) With respect to contracts providing for a single	212
consideration, minimum nonforfeiture amounts shall be defined as	213
for contracts with flexible considerations except that the	214
percentage of net consideration used to determine the minimum	215
nonforfeiture amount shall be equal to ninety per cent and the net	216
consideration shall be the gross consideration less a contract	217
charge of seventy-five dollars.	218

(4)(a) The minimum nonforfeiture amount at any time at or	219
prior to the commencement of any annuity payments shall be equal	220
to an accumulation up to such time at rates of interest determined	221
in accordance with division (D)(5) of this section of the net	222
considerations, determined in accordance with division (D)(4)(b)	223
of this section, paid prior to such time, decreased by the sum of:	224

(i) Any prior withdrawals from or partial surrenders of the	225
contract, accumulated at rates of interest determined in	226
accordance with division (D)(5) of this section;	227

(ii) An annual contract charge of fifty dollars, accumulated	228
at rates of interest determined in accordance with division (D)(5)	229
of this section;	230

(iii) Any premium tax paid by the company for the contract,	231
accumulated at rates of interest determined in accordance with	232
division (D)(5) of this section;	233

(iv) The amount of any indebtedness to the company on the	234
contract, including interest due and accrued.	235

(b) The net considerations for a given contract year used to	236
define the minimum nonforfeiture amount shall be an amount equal	237
to eighty-seven and one-half per cent of the gross considerations	238
credited to the contract during that contract year.	239

(5)(a) The interest rate used in determining minimum	240
nonforfeiture amounts under divisions (D)(4) to (D)(7) of this	241
section shall be an annual rate of interest determined as the	242
lesser of three per cent per annum or the following, which shall	243
be specified in the contract if the interest rate will be reset:	244

(i) The five-year constant maturity treasury rate reported by	245
the federal reserve as of a date or an average over a period,	246
rounded to the nearest one-twentieth of one per cent, specified in	247
the contract, no longer than fifteen months prior to the contract	248
issue date or the redetermination date specified in division	249
(D)(5)(b) of this section;	250

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

251

(iii) Where the resulting interest rate shall not be less	252
than one per cent.	253

(b) The interest rate determined under division (D)(5)(a) of	254
this section shall apply for an initial period and may be	255
redetermined for additional periods. The redetermination date,	256
basis and period, if any, shall be stated in the contract. The	257
basis is the date or average over a specified period that produces	258
the value of the five-year constant maturity treasury rate to be	259
used at each redetermination date.	260

(6) During the period or term that a contract provides	261
substantive participation in an equity-indexed benefit, the	262
contract may provide for an increase in the reduction described in	263
division (D)(5)(a)(ii) of this section by a maximum of one hundred	264
basis points to reflect the value of the equity-indexed benefit.	265
The present value at the contract issue date, and at each	266
redetermination date thereafter, of the additional reduction shall	267
not exceed the market value of the benefit. The superintendent may	268
require a demonstration that the present value of the additional	269
reduction does not exceed the market value of the benefit. If the	270
demonstration is not acceptable to the superintendent, the	271
superintendent may disallow or limit the additional reduction.	272

(7) The superintendent may adopt rules to implement division	273
(D)(6) of this section and to provide for further adjustments to	274
the calculation of minimum nonforfeiture amounts for contracts	275
that provide substantive participation in an equity-indexed	276
benefit and for other contracts for which the superintendent	277
determines adjustments are justified.	278

(E) Any paid-up annuity benefit available under a contract	279
shall be such that its present value on the date annuity payments	280
are to commence is at least equal to the minimum nonforfeiture	281
amount on that date. Such present value shall be computed using	282
the mortality table, if any, and the interest rate specified in	283
the contract for determining the minimum paid-up annuity benefits	284
guaranteed in the contract.	285

(F) For contracts which provide cash surrender benefits, such	286
cash surrender benefits available prior to maturity shall not be	287
less than the present value as of the date of surrender of that	288
portion of the maturity value of the paid-up annuity benefit that	289
would be provided under the contract at maturity arising from	290
considerations paid prior to the time of cash surrender reduced by	291
the amount appropriate to reflect any prior withdrawals from or	292
partial surrenders of the contract, such present value being	293
calculated on the basis of an interest rate not more than one per	294
cent higher than the interest rate specified in the contract for	295
accumulating the net considerations to determine such maturity	296
value, decreased by the amount of any indebtedness to the company	297
on the contract, including interest due and accrued, and increased	298
by any existing additional amounts credited by the company to the	299
contract. In no event shall any cash surrender benefit be less	300
than the minimum nonforfeiture amount at that time. The death	301
benefit under such contracts shall be at least equal to the cash	302
surrender benefit.	303

(G) For contracts that do not provide cash surrender	304
benefits, the present value of any paid-up annuity benefit	305
available as a nonforfeiture option at any time prior to maturity	306
shall not be less than the present value of that portion of the	307
maturity value of the paid-up annuity benefit provided under the	308
contract arising from considerations paid prior to the time the	309
contract is surrendered in exchange for, or changed to, a deferred	310
paid-up annuity, such present value being calculated for the	311
period prior to the maturity date on the basis of the interest	312
rate specified in the contract for accumulating the net	313
considerations to determine such maturity value, and increased by	314
any existing additional amounts credited by the company to the	315
contract. For contracts that do not provide any death benefits	316
prior to the commencement of any annuity payments, such present	317
values shall be calculated on the basis of such interest rate and	318
the mortality table specified in the contract for determining the	319
maturity value of the paid-up annuity benefit. However, in no	320
event shall the present value of a paid-up annuity benefit be less	321
than the minimum nonforfeiture amount at that time.	322

(H) For the purpose of determining the benefits calculated	323
under divisions (F) and (G) of this section, in the case of	324
annuity contracts under which an election may be made to have	325
annuity payments commence at optional maturity dates, the maturity	326
date shall be deemed to be the latest date for which election	327
shall be permitted by the contract, but shall not be deemed to be	328
later than the anniversary of the contract next following the	329
annuitant's seventieth birthday or the tenth anniversary of the	330
contract, whichever is later.	331

(I) Any contract that does not provide cash surrender	332
benefits or does not provide death benefits at least equal to the	333
minimum nonforfeiture amount prior to the commencement of any	334
annuity payments shall include a statement in a prominent place in	335
the contract that such benefits are not provided.	336

(J) Any paid-up annuity, cash surrender, or death benefits	337
available at any time, other than on the contract anniversary	338
under any contract with fixed scheduled considerations, shall be	339
calculated with allowance for the lapse of time and the payment of	340
any scheduled considerations beyond the beginning of the contract	341
year in which cessation of payment of considerations under the	342
contract occurs.	343

(K) For any contract that provides, within the same contract	344
by rider or supplemental contract provision, both annuity benefits	345
and life insurance benefits that are in excess of the greater of	346
cash surrender benefits or a return of the gross considerations	347
with interest, the minimum nonforfeiture benefit shall be equal to	348
the sum of the minimum nonforfeiture benefits for the annuity	349
portion and the minimum nonforfeiture benefits, if any, for the	350
life insurance portion computed as if each portion were a separate	351
contract. Notwithstanding the provisions of divisions (E), (F),	352
(G), (H), and (J) of this section, additional benefits payable:	353

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

354

(2) As reversionary annuity or deferred reversionary annuity	355
benefits; or	356

(3) As other policy benefits additional to life insurance,	357
endowment and annuity benefits, and considerations for all such	358
additional benefits shall be disregarded in ascertaining the	359
minimum nonforfeiture amounts, paid-up annuity, cash surrender,	360
and death benefits that may be required by this section.	361

The inclusion of such additional benefits shall not be	362
required in any paid-up benefits, unless such additional benefits	363
separately would require minimum nonforfeiture amounts, paid-up	364
annuity, cash surrender, and death benefits.	365

(L) Any company may file with the superintendent a written	366
notice of its election to comply with the provisions of this	367
section on or before July 1, 1980. The date specified in the	368
notice shall be the operative date of this section for such	369
company. If a company makes no such election, the operative date	370
of this section for the company shall be July 1, 1980.The	371
superintendent may adopt rules in accordance with Chapter 119. of	372
the Revised Code to implement this section.	373

(M) Before the second anniversary of the effective date of	374
this amendment, a company may elect to apply this section to	375
annuity contracts on a contract-form-by-contract-form basis by	376
using either divisions (D)(1), (2), and (3) or divisions (D)(4),	377
(5), (6), and (7) of this section. Divisions (D)(1), (2), and (3)	378
of this section shall be repealed on the second anniversary date	379
of the effective date of this amendment.	380

Sec. 3915.14. (A) No policy of life insurance, nor any	381
indorsement, rider, or application which becomes or is designed to	382
become a part of any such policy, shall be delivered, issued for	383
delivery, or used in this state, or be issued by a life insurance	384
company organized under the laws of this state, until thirty days	385
after the form of said policy, indorsement, rider, or application	386
has been filed with the superintendent of insurance, unless within	387
suchthat time the superintendent gives the insurerinsurance	388
company written approval for the use of suchthe form. When	389

(B) No individual or group annuity policy or contract,	390
including, but not limited to, a guaranteed investment contract,	391
deposit administration contract, funding agreement, structured	392
settlement agreement, or similar types, excluding those required	393
to be filed with the superintendent pursuant to section 3911.011	394
of the Revised Code, and no certificate, endorsement, rider, or	395
application which becomes or is designed to become a part of any	396
such policy, contract, or agreement, shall be delivered, issued	397
for delivery, or used in this state, or be issued by a life	398
insurance company organized under the laws of this state, until	399
thirty days after the form of said policy, contract, agreement,	400
certificate, endorsement, rider, or application has been filed	401
with the superintendent, unless within that time the	402
superintendent gives the insurance company written approval for	403
the use of the form.	404

(C) When the superintendent finds within such thirty-day	405
period that the form filed contains any language whichthat is	406
prohibited by any law of this state, including any rule of the	407
superintendent, or is inconsistent, ambiguous, misleading,	408
deceptive, or likely to mislead an applicant or policyholder, he	409
the superintendent shall give written notice of such finding to	410
any insurer whichthe insurance company that filed suchthe form,	411
and thereafter itthe insurance company shall not deliver, issue	412
for delivery, or use suchthe form.	413

The superintendent's action is subject to review by any court	414
of competent jursdictionjurisdiction, subject to Chapter 119. of	415
the Revised Code.	416

Sec. 3937.25.  (A) As used in sections 3937.25 to 3937.29 of	417
the Revised Code, "medical malpractice insurance" means insurance	418
coverage against the legal liability of the insured for loss,	419
damage, or expense arising from a medical, optometric, or	420
chiropractic claim, as those claims are defined in section	421
2305.113 of the Revised Code.	422

(B) After a policy of commercial property insurance,	423
commercial fire insurance, or commercial casualty insurance other	424
than fidelity or surety bonds, medical malpractice insurance, and	425
automobile insurance as defined in section 3937.30 of the Revised	426
Code, has been in effect for more than ninety days, a notice of	427
cancellation for such policy shall not be issued by any licensed	428
insurer unless it is based on one of the following grounds:	429

(1) Nonpayment of premium;

430

(2) Discovery of fraud or material misrepresentation in the	431
procurement of the insurance or with respect to any claims	432
submitted thereunder;	433

(3) Discovery of a moral hazard or willful or reckless acts	434
or omissions on the part of the named insured that increase any	435
hazard insured against;	436

(4) The occurrence of a change in the individual risk which	437
substantially increases any hazard insured against after insurance	438
coverage has been issued or renewed, except to the extent the	439
insurer reasonably should have foreseen the change or contemplated	440
the risk in writing the contract;	441

(5) Loss of applicable reinsurance or a substantial decrease	442
in applicable reinsurance, if the superintendent has determined	443
that reasonable efforts have been made to prevent the loss of, or	444
substantial decrease in, the applicable reinsurance, or to obtain	445
replacement coverage;	446

(6) Failure of an insured to correct material violations of	447
safety codes or to comply with reasonable written loss control	448
recommendations;	449

(7) A determination by the superintendent of insurance that	450
the continuation of the policy would create a condition that would	451
be hazardous to the policyholders or the public.	452

(B)(C) The notice of cancellation required by this section	453
must be in writing, be mailed to the insured at histhe insured's	454
last known address, and contain all of the following:	455

(1) The policy number;

456

(2) The date of the notice;

457

(3) The effective date of the cancellation;

458

(4) An explanation of the reason for cancellation.

459

Such notice of cancellation also shall be mailed to the	460
insured's agent.	461

(C)(D) Except for nonpayment of premium, the effective date	462
of cancellation must be no less than thirty days from the date of	463
mailing the notice. When cancellation is for nonpayment of	464
premium, the effective date of cancellation must be no less than	465
ten days from the date of mailing the notice.	466

(D)(E) Nothing in division (A)(B) of this section shall be	467
construed to prevent an insurer from writing a policy of	468
commercial property insurance, commercial fire insurance, or	469
commercial casualty insurance other than medical malpractice	470
insurance and automobile insurance as defined in section 3937.30	471
of the Revised Code for a period greater than one year and	472
providing in such policy that the insurer may issue a notice of	473
cancellation of such policy at least thirty days prior to an	474
anniversary of such policy, with the effective date of	475
cancellation being that anniversary.	476

The superintendent may prescribe that adequate disclosure be	477
made to the insured when a policy is issued for a term of more	478
than one year.	479

(E)(F) There is no liability on the part of, and no cause of	480
action of any nature arises against, the superintendent of	481
insurance, any insurer, or any person furnishing information	482
requested by the superintendent, an insurer, the agent, employee,	483
attorney, or other authorized representative of any such persons,	484
for any oral or written statement made to supply information	485
relevant to a determination on cancellation of any policy of	486
commercial property insurance, commercial fire insurance, or	487
commercial casualty insurance other than fidelity or surety bonds,	488
medical malpractice insurance, and automobile insurance as defined	489
in section 3937.30 of the Revised Code, or in connection with	490
advising an insured or hisan insured's attorney of the reasons	491
for a cancellation of such insurance, or in connection with any	492
administrative or judicial proceeding arising out of or related to	493
such cancellation.	494

Sec. 3937.26.  (A) An insurer may refuse to renew a policy of	495
commercial property insurance, commercial fire insurance, or	496
commercial casualty insurance other than fidelity or surety bonds,	497
medical malpractice insurance, and automobile insurance as defined	498
in section 3937.30 of the Revised Code, by mailing to the insured,	499
at histhe insured's last known address, at least thirty days	500
prior to the date of the expiration date of the policy, a notice	501
of the insurer's intention not to renew the policy.	502

Such notice shall contain all of the following:

503

(1) The policy number;

504

(2) The date of the notice;

505

(3) The expiration date of the policy.

506

Such notice of nonrenewal also shall be mailed to the	507
insured's agent.	508

(B) If the notice of nonrenewal is mailed less than thirty	509
days before the expiration date of the policy, the insured's	510
coverage then in effect remains in effect until thirty days after	511
the date of mailing the notice, unless the insured notifies the	512
insurer in writing that hethe insured accepts the nonrenewal as	513
stated. The insurer shall notify the insured of the amount of the	514
premium for the time after the expiration date that the coverage	515
may remain in effect, and the insured shall pay such premium	516
unless hethe insured accepts the stated nonrenewal. The premium	517
must be calculated using the rates originally applicable to the	518
insured's coverage then in effect.	519

Sec. 3937.27.  (A) An insurer who intends to condition	520
renewal of a policy of commercial property insurance, commercial	521
fire insurance, or commercial casualty insurance other than	522
fidelity and surety bonds, medical malpractice insurance, and	523
automobile insurance as defined in section 3937.30 of the Revised	524
Code, upon a substantial increase in premium shall mail a notice	525
of such intention to the agent of record and to the insured, at	526
histhe insured's last known address, at least thirty days prior	527
to the expiration date of the policy.	528

(B) If the notice is mailed less than thirty days before the	529
expiration date of the policy, the insured's coverage then in	530
effect remains in effect until thirty days after the date of	531
mailing the notice. The insurer shall notify the insured of the	532
amount of the premium for the time after the expiration date that	533
the existing coverage may remain in effect, and the insured shall	534
pay such premium unless hethe insured notifies the insurer in	535
writing that hethe insured does not want histhe coverage then in	536
effect to be extended past the expiration date. The premium must	537
be calculated using the rates originally applicable to the	538
insured's coverage then in effect.	539

If the insured accepts the increased premium, such change is	540
effective immediately following the expiration of the insured's	541
coverage then in effect.	542

Sec. 3937.28. (A) A notice of cancellation of a policy of	543
medical malpractice insurance shall not be issued by any licensed	544
insurer unless it is based on one of the following grounds:	545

(1) Nonpayment of premium;

546

(2) Discovery of fraud or material misrepresentation in the	547
procurement of the insurance or with respect to any claims	548
submitted thereunder;	549

(3) Discovery of a moral hazard or willful or reckless acts	550
or omissions on the part of the named insured that increase any	551
hazard insured against;	552

(4) The occurrence of a change in the individual risk that	553
substantially increases any hazard insured against after insurance	554
coverage has been issued or renewed, except to the extent the	555
insurer reasonably should have foreseen the change or contemplated	556
the risk in writing the contract;	557

(5) Loss of applicable reinsurance or a substantial decrease	558
in applicable reinsurance, if the superintendent of insurance has	559
determined that reasonable efforts have been made to prevent the	560
loss of, or substantial decrease in, the applicable reinsurance,	561
or to obtain replacement coverage;	562

(6) Failure of an insured to correct material violations of	563
safety codes or to comply with reasonable written loss control	564
recommendations;	565

(7) A determination by the superintendent that the	566
continuation of the policy would create a condition that would be	567
hazardous to the policyholders or the public.	568

(B) The notice of cancellation required by this section shall	569
be in writing, be mailed both to the insured at the insured's last	570
known address and to the insured's agent, and contain all of the	571
following:	572

(1) The policy number;

573

(2) The date of the notice;

574

(3) The effective date of the cancellation;

575

(4) An explanation of the grounds for cancellation.

576

(C) Except when cancellation is for nonpayment of premium,	577
the effective date of cancellation shall be not less than sixty	578
days from the date of mailing the notice. When cancellation is for	579
nonpayment of premium, the effective date of cancellation shall be	580
not less than ten days from the date of mailing the notice.	581

(D) Nothing in division (A) of this section shall be	582
construed to prevent an insurer from writing a policy of medical	583
malpractice insurance for a period greater than one year and	584
providing in such policy that the insurer may issue a notice of	585
cancellation of such policy at least sixty days prior to an	586
anniversary of such policy, with the effective date of	587
cancellation being that anniversary.	588

The superintendent may prescribe that adequate disclosure be	589
made to the insured when a policy is issued for a term of more	590
than one year.	591

(E) There is no liability on the part of, and no cause of	592
action of any nature arises against, the superintendent, any	593
insurer, or any person furnishing information requested by the	594
superintendent or an insurer, or the agent, employee, attorney or	595
other authorized representative of any such persons, for any oral	596
or written statement made to supply information relevant to a	597
determination on cancellation of any policy of medical malpractice	598
insurance, or in connection with advising an insured or the	599
insured's attorney of the grounds for a cancellation of such	600
insurance, or in connection with any administrative or judicial	601
proceeding arising out of or related to such cancellation.	602

Sec. 3937.29. (A) An insurer that intends to cancel,	603
terminate, or otherwise not renew all policies of medical	604
malpractice insurance that it has issued to any class, type, or	605
specialty of practitioner, or that intends to cancel, terminate,	606
or otherwise not renew all policies of medical malpractice	607
insurance in a specific geographic area, which may include the	608
state as a whole, shall file written notice of its intended action	609
with the superintendent of insurance. These actions by an insurer	610
are not effective unless the written notice is filed with the	611
superintendent within the following time frames:	612

(1) At least one hundred eighty days prior to the insurer	613
acting to cancel, terminate, or otherwise not renew all policies	614
of medical malpractice insurance that the insurer has issued in	615
this state;	616

(2) At least one hundred twenty days prior to the insurer	617
acting to cancel, terminate, or otherwise not renew all policies	618
of medical malpractice insurance for a specific class, type, or	619
specialty of practitioner or in a specific geographic area other	620
than this state as a whole.	621

Written notice also shall be filed with the superintendent at	622
least one hundred twenty days prior to the insurer making changes	623
in its underwriting guidelines, if the effect of the changes will	624
be to cancel, terminate, or otherwise not renew all policies of	625
medical malpractice insurance for a specific class, type, or	626
specialty of practitioner or in a specific geographic area other	627
than this state as a whole.	628

(B) The written notice filed with the superintendent under	629
division (A) of this section shall contain all of the following	630
information:	631

(1) The date of the notice;

632

(2) The number of insureds with policies that will be	633
cancelled, terminated, or not renewed;	634

(3) The date that the insurer intends to cancel, terminate,	635
or otherwise not renew all policies of medical malpractice	636
insurance that the insurer has issued to any class, type, or	637
specialty of practitioner, or that the insurer intends to cancel,	638
terminate, or otherwise not renew all policies of medical	639
malpractice insurance in a specific geographic area, including the	640
state as a whole;	641

(4) The specific geographic area, if any;

642

(5) Any other information required by the superintendent.

643

(C) An insurer that intends to condition renewal of a policy	644
of medical malpractice insurance upon an increase in premium shall	645
mail a notice of the insurer's intention to the agent of record	646
and to the insured at the insured's last known address at least	647
sixty days prior to the expiration date of the policy.	648

(D) An insurer may refuse to renew a policy of medical	649
malpractice insurance by mailing a notice of the insurer's	650
intention to the agent of record and to the insured at the	651
insured's last known address at least sixty days prior to the	652
expiration date of the policy. The notice mailed under this	653
division shall contain all of the following information:	654

(1) The policy number;

655

(2) The date of the notice;

656

(3) The expiration date of the policy;

657

(4) An explanation of the grounds for nonrenewal.

658

(E) If the notice required by divisions (C) and (D) of this	659
section is mailed less than sixty days before the expiration date	660
of the policy, the insured's coverage then in effect remains in	661
effect until sixty days after the date of mailing the notice	662
unless either of the following is true:	663

(1) In the case of a premium increase, the insured accepts	664
the increased premium. The change is then effective immediately	665
following the expiration of the insured's coverage then in effect.	666

(2) In the case of nonrenewal, the insured notifies the	667
insurer in writing that the insured accepts the nonrenewal as	668
stated.	669

(F) If the insured's coverage is extended beyond the original	670
expiration date of the policy as provided by division (E) of this	671
section, the premium for the time after the original expiration	672
date must be calculated using the rates originally applicable to	673
the insured's coverage then in effect. The insurer shall notify	674
the insured of the amount of the premium for the time after the	675
expiration of the insured's coverage then in effect. The insured	676
shall pay the premium unless either of the following is true:	677

(1) In the case of a premium increase, the insured notifies	678
the insurer in writing that the insured does not want the coverage	679
then in effect to be extended past the expiration date.	680

(2) In the case of nonrenewal, the insured notifies the	681
insurer in writing that the insured accepts the nonrenewal as	682
stated.	683

Section 2. That existing sections 2505.02, 3915.02, 3915.073,	684
3915.14, 3937.25, 3937.26, and 3937.27 of the Revised Code are	685
hereby repealed.	686

Section 3. That section 3915.073 of the Revised Code as it	687
results from Section 1 of this act be amended to read as follows:	688

Sec. 3915.073.  (A) This section shall be known as the	689
standard nonforfeiture law for individual deferred annuities.	690

(B) This section does not apply to any reinsurance, group	691
annuity purchased under a retirement plan or plan of deferred	692
compensation established or maintained by an employer, including a	693
partnership or sole proprietorship, or by an employee	694
organization, or by both, other than a plan providing individual	695
retirement accounts or individual retirement annuities under	696
section 408 of the Internal Revenue Code of 1954, 26 U.S.C.A. 408,	697
as amended, premium deposit fund, variable annuity, investment	698
annuity, immediate annuity, any deferred annuity contract after	699
annuity payments have commenced, or reversionary annuity, nor to	700
any contract which is delivered outside this state through an	701
agent or other representative of the company issuing the contract.	702

(C) In the case of contracts issued on or after the operative	703
date of this section as defined in division (M) of this section,	704
noNo contract of annuity, except as stated in division (B) of	705
this section, shall be delivered or issued for delivery in this	706
state unless the contract contains in substance the following	707
provisions, or corresponding provisions that in the opinion of the	708
superintendent of insurance are at least as favorable to the	709
contract owners, relative to the cessation of payment of	710
consideration under the contract:	711

(1) That upon cessation of payment of considerations under a	712
contract, or upon the written request of the contract owner, the	713
company shall grant a paid-up annuity benefit on a plan stipulated	714
in the contract of such value as is specified in divisions (E),	715
(F), (G), (H), and (J) of this section;	716

(2) If a contract provides for a lump sum settlement at	717
maturity, or at any other time, that upon surrender of the	718
contract at or prior to the commencement of any annuity payments,	719
the company shall pay in lieu of any paid-up annuity benefit a	720
cash surrender benefit of such amount as is specified in divisions	721
(E), (F), (H), and (J) of this section. The company may reserve	722
the right to defer the payment of such cash surrender benefit for	723
a period not to exceed six months after demand therefor with	724
surrender of the contract. The deferral is contingent upon the	725
company's conveyance of a written request for the deferral to the	726
superintendent and the company's receipt of written approval from	727
the superintendent for the deferral. The request shall address the	728
necessity and equitability to all contract owners of the deferral;	729

(3) A statement of the mortality table, if any, and interest	730
rates used in calculating any minimum paid-up annuity, cash	731
surrender, or death benefits that are guaranteed under the	732
contract, together with sufficient information to determine the	733
amounts of such benefits;	734

(4) A statement that any paid-up annuity, cash surrender, or	735
death benefits that may be available under the contract are not	736
less than the minimum benefits required by any statute of the	737
state in which the contract is delivered and an explanation of the	738
manner in which such benefits are altered by the existence of any	739
additional amounts credited by the company to the contract, any	740
indebtedness to the company on the contract, or any prior	741
withdrawals from or partial surrenders of the contract.	742

Notwithstanding the requirements of this section, any	743
deferred annuity contract may provide that if no considerations	744
have been received under a contract for a period of two full years	745
and the portion of the paid-up annuity benefit at maturity on the	746
plan stipulated in the contract arising from considerations paid	747
prior to such period would be less than twenty dollars monthly,	748
the company may at its option terminate such contract by payment	749
in cash of the then present value of such portion of the paid-up	750
annuity benefit, calculated on the basis of the mortality table,	751
if any, and interest rate specified in the contract for	752
determining the paid-up annuity benefit, and by such payment shall	753
be relieved of any further obligation under such contract.	754

(D) The minimum values as specified in divisions (E), (F),	755
(G), (H), and (J) of this section of any paid-up annuity, cash	756
surrender, or death benefits available under an annuity contract	757
shall be based upon minimum nonforfeiture amounts as defined in	758
divisions (D)(1), (2), and (3) or divisions (D)(4), (5), (6), and	759
(7) of this sectiondivision.	760

(1) With respect to contracts providing for flexible	761
considerations, the minimum nonforfeiture amount at any time at or	762
prior to the commencement of any annuity payments shall be equal	763
to an accumulation up to such time at a rate of interest of one	764
and one-half per cent per annum of percentages of the net	765
considerations, as defined in division (D)(1) of this section,	766
paid prior to such time, decreased by the sum of:	767

(a) Any prior withdrawals from or partial surrenders of the	768
contract accumulated at a rate of interest of one and one-half per	769
cent per annum;	770

(b) The amount of any indebtedness to the company on the	771
contract, including interest due and accrued; and increased by any	772
existing additional amounts credited by the company to the	773
contract.	774

The net considerations for a given contract year used to	775
define the minimum nonforfeiture amount shall be an amount not	776
less than zero and shall be equal to the corresponding gross	777
considerations credited to the contract during that contract year	778
less an annual contract charge of thirty dollars and less a	779
collection charge of one dollar and twenty-five cents per	780
consideration credited to the contract during that contract year.	781
The percentages of net considerations shall be sixty-five per cent	782
of the net consideration for the first contract year and	783
eighty-seven and one-half per cent of the net considerations for	784
the second and later contract years. Notwithstanding the	785
provisions of the preceding sentence, the percentage shall be	786
sixty-five per cent of the portion of the total net consideration	787
for any renewal contract year that exceeds by not more than two	788
times the sum of those portions of the net considerations in all	789
prior contract years for which the percentage was sixty-five per	790
cent.	791

(2) With respect to contracts providing for fixed scheduled	792
considerations, minimum nonforfeiture amounts shall be calculated	793
on the assumption that considerations are paid annually in advance	794
and shall be defined as for contracts with flexible considerations	795
which are paid annually with two exceptions:	796

(a) The portion of the net consideration for the first	797
contract year to be accumulated shall be the sum of sixty-five per	798
cent of the net consideration for the first contract year plus	799
twenty-two and one-half per cent of the excess of the net	800
consideration for the first contract year over the lesser of the	801
net considerations for the second and third contract years;	802

(b) The annual contract charge shall be the lesser of (i)	803
thirty dollars or (ii) ten per cent of the gross annual	804
consideration.	805

(3) With respect to contracts providing for a single	806
consideration, minimum nonforfeiture amounts shall be defined as	807
for contracts with flexible considerations except that the	808
percentage of net consideration used to determine the minimum	809
nonforfeiture amount shall be equal to ninety per cent and the net	810
consideration shall be the gross consideration less a contract	811
charge of seventy-five dollars.	812

(4)(a) The minimum nonforfeiture amount at any time at or	813
prior to the commencement of any annuity payments shall be equal	814
to an accumulation up to such time at rates of interest determined	815
in accordance with division (D)(5)(2) of this section of the net	816
considerations, determined in accordance with division	817
(D)(4)(1)(b) of this section, paid prior to such time, decreased	818
by the sum of:	819

(i) Any prior withdrawals from or partial surrenders of the	820
contract, accumulated at rates of interest determined in	821
accordance with division (D)(5)(2) of this section;	822

(ii) An annual contract charge of fifty dollars, accumulated	823
at rates of interest determined in accordance with division	824
(D)(5)(2) of this section;	825

(iii) Any premium tax paid by the company for the contract,	826
accumulated at rates of interest determined in accordance with	827
division (D)(5)(2) of this section;	828

(iv) The amount of any indebtedness to the company on the	829
contract, including interest due and accrued.	830

(b) The net considerations for a given contract year used to	831
define the minimum nonforfeiture amount shall be an amount equal	832
to eighty-seven and one-half per cent of the gross considerations	833
credited to the contract during that contract year.	834

(5)(2)(a) The interest rate used in determining minimum	835
nonforfeiture amounts under divisions (D)(4)(1) to (7)(4) of this	836
section shall be an annual rate of interest determined as the	837
lesser of three per cent per annum or the following, which shall	838
be specified in the contract if the interest rate will be reset:	839

(i) The five-year constant maturity treasury rate reported by	840
the federal reserve as of a date or an average over a period,	841
rounded to the nearest one-twentieth of one per cent, specified in	842
the contract, no longer than fifteen months prior to the contract	843
issue date or the redetermination date specified in division	844
(D)(5)(2)(b) of this section;	845

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

846

(iii) Where the resulting interest rate shall not be less	847
than one per cent.	848

(b) The interest rate determined under division (D)(5)(2)(a)	849
of this section shall apply for an initial period and may be	850
redetermined for additional periods. The redetermination date,	851
basis and period, if any, shall be stated in the contract. The	852
basis is the date or average over a specified period that produces	853
the value of the five-year constant maturity treasury rate to be	854
used at each redetermination date.	855

(6)(3) During the period or term that a contract provides	856
substantative participation in an equity-indexed benefit, the	857
contract may provide for an increase in the reduction described in	858
division (D)(5)(2)(a)(ii) of this section by a maximum of one	859
hundred basis points to reflect the value of the equity-indexed	860
benefit. The present value at the contract issue date, and at each	861
redetermination date thereafter, of the additional reduction shall	862
not exceed the market value of the benefit. The superintendent may	863
require a demonstration that the present value of the additional	864
reduction does not exceed the market value of the benefit. If the	865
demonstration is not acceptable to the superintendent, the	866
superintendent may disallow or limit the additional reduction.	867

(7)(4) The superintendent may adopt rules to implement	868
division (D)(6)(3) of this section and to provide for further	869
adjustments to the calculation of minimum nonforfeiture amounts	870
for contracts that provide substantive participation in an	871
equity-indexed benefit and for other contracts for which the	872
superintendent determines adjustments are justified.	873

(E) Any paid-up annuity benefit available under a contract	874
shall be such that its present value on the date annuity payments	875
are to commence is at least equal to the minimum nonforfeiture	876
amount on that date. Such present value shall be computed using	877
the mortality table, if any, and the interest rate specified in	878
the contract for determining the minimum paid-up annuity benefits	879
guaranteed in the contract.	880

(F) For contracts which provide cash surrender benefits, such	881
cash surrender benefits available prior to maturity shall not be	882
less than the present value as of the date of surrender of that	883
portion of the maturity value of the paid-up annuity benefit that	884
would be provided under the contract at maturity arising from	885
considerations paid prior to the time of cash surrender reduced by	886
the amount appropriate to reflect any prior withdrawals from or	887
partial surrenders of the contract, such present value being	888
calculated on the basis of an interest rate not more than one per	889
cent higher than the interest rate specified in the contract for	890
accumulating the net considerations to determine such maturity	891
value, decreased by the amount of any indebtedness to the company	892
on the contract, including interest due and accrued, and increased	893
by any existing additional amounts credited by the company to the	894
contract. In no event shall any cash surrender benefit be less	895
than the minimum nonforfeiture amount at that time. The death	896
benefit under such contracts shall be at least equal to the cash	897
surrender benefit.	898

(G) For contracts that do not provide cash surrender	899
benefits, the present value of any paid-up annuity benefit	900
available as a nonforfeiture option at any time prior to maturity	901
shall not be less than the present value of that portion of the	902
maturity value of the paid-up annuity benefit provided under the	903
contract arising from considerations paid prior to the time the	904
contract is surrendered in exchange for, or changed to, a deferred	905
paid-up annuity, such present value being calculated for the	906
period prior to the maturity date on the basis of the interest	907
rate specified in the contract for accumulating the net	908
considerations to determine such maturity value, and increased by	909
any existing additional amounts credited by the company to the	910
contract. For contracts that do not provide any death benefits	911
prior to the commencement of any annuity payments, such present	912
values shall be calculated on the basis of such interest rate and	913
the mortality table specified in the contract for determining the	914
maturity value of the paid-up annuity benefit. However, in no	915
event shall the present value of a paid-up annuity benefit be less	916
than the minimum nonforfeiture amount at that time.	917

(H) For the purpose of determining the benefits calculated	918
under divisions (F) and (G) of this section, in the case of	919
annuity contracts under which an election may be made to have	920
annuity payments commence at optional maturity dates, the maturity	921
date shall be deemed to be the latest date for which election	922
shall be permitted by the contract, but shall not be deemed to be	923
later than the anniversary of the contract next following the	924
annuitant's seventieth birthday or the tenth anniversary of the	925
contract, whichever is later.	926

(I) Any contract that does not provide cash surrender	927
benefits or does not provide death benefits at least equal to the	928
minimum nonforfeiture amount prior to the commencement of any	929
annuity payments shall include a statement in a prominent place in	930
the contract that such benefits are not provided.	931

(J) Any paid-up annuity, cash surrender, or death benefits	932
available at any time, other than on the contract anniversary	933
under any contract with fixed scheduled considerations, shall be	934
calculated with allowance for the lapse of time and the payment of	935
any scheduled considerations beyond the beginning of the contract	936
year in which cessation of payment of considerations under the	937
contract occurs.	938

(K) For any contract that provides, within the same contract	939
by rider or supplemental contract provision, both annuity benefits	940
and life insurance benefits that are in excess of the greater of	941
cash surrender benefits or a return of the gross considerations	942
with interest, the minimum nonforfeiture benefit shall be equal to	943
the sum of the minimum nonforfeiture benefits for the annuity	944
portion and the minimum nonforfeiture benefits, if any, for the	945
life insurance portion computed as if each portion were a separate	946
contract. Notwithstanding the provisions of divisions (E), (F),	947
(G), (H), and (J) of this section, additional benefits payable:	948

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

949

(2) As reversionary annuity or deferred reversionary annuity	950
benefits; or	951

(3) As other policy benefits additional to life insurance,	952
endowment and annuity benefits, and considerations for all such	953
additional benefits shall be disregarded in ascertaining the	954
minimum nonforfeiture amounts, paid-up annuity, cash surrender,	955
and death benefits that may be required by this section.	956

The inclusion of such additional benefits shall not be	957
required in any paid-up benefits, unless such additional benefits	958
separately would require minimum nonforfeiture amounts, paid-up	959
annuity, cash surrender, and death benefits.	960

(L) The superintendent may adopt rules in accordance with	961
Chapter 119. of the Revised Code to implement this section.	962

(M) Before the second anniversary of the effective date of	963
this amendment, a company may elect to apply this section to	964
annuity contracts on a contract-form-by-contract-form basis by	965
using either divisions (D)(1), (2), and (3) or divisions (D)(4),	966
(5), (6), and (7) of this section. Divisions (D)(1), (2), and (3)	967
of this section shall be repealed on the second anniversary date	968
of the effective date of this amendment.	969

Section 4. That existing section 3915.073 of the Revised Code	970
as it results from Section 1 of this act is hereby repealed.	971

Section 5. Sections 3 and 4 of this act shall take effect two	972
years after the effective date of this act.	973

Section 6.  Section 3915.02 of the Revised Code is presented	974
in this act as a composite of the section as amended by both Sub.	975
H.B. 16 and Sub. S.B. 137 of the 119th General Assembly. The	976
General Assembly, applying the principle stated in division (B) of	977
section 1.52 of the Revised Code that amendments are to be	978
harmonized if reasonably capable of simultaneous operation, finds	979
that the composite is the resulting version of the section in	980
effect prior to the effective date of the section as presented in	981
this act.	982

Section 7. If any item of law that constitutes the whole or	983
part of a section of law contained in this act, or if any	984
application of any item of law that constitutes the whole or part	985
of a section of law contained in this act, is held invalid, the	986
invalidity does not affect other items of law or applications of	987
items of law that can be given effect without the invalid item of	988
law or application. To this end, the items of law of which the	989
sections contained in this act are composed, and their	990
applications, are independent and severable.	991