American Fraternal Alliance


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Ohio - Fraternal Legislation
November 17, 2011

Ohio HB 341, legislation that would significantly revise regulation of fraternal life insurers, was introduced last month.  The bill will be heard in the House Insurance Committee; however, a hearing date for the bill has not been scheduled.

The American Fraternal Alliance supports HB 341 and will testify in favor of the bill when it is heard.  A Task Force of executives from Ohio-domiciled member societies worked closely with the staff of the Ohio Department of Insurance (ODI) on the language contained in the bill.  Based on the recommendation of this Task Force, the Alliance Board of Directors adopted a position in support of the legislation earlier this year.  Both the Task Force and the Board feel that the bill's provisions represent sound public policy in that the legislation protects consumers from insolvencies by bringing the regulatory oversight of fraternal life insurers in line with similar requirements for commercial insurers, without placing fraternals at a competitive disadvantage. 

 The key provisions of the bill are:

  • A requirement that fraternals meet the same RBC standards as commercial insurers
  • A requirement that fraternals meet the same minimum surplus standards as commercial insurers
  • A requirement that fraternals providing health insurance coverage meet specified reinsurance standards
  • A requirement that any individual selling annuities be licensed by the state
  • A requirement that fraternals provide state regulators with a 60-day notice prior to assessing certificate holders
  • A requirement that fraternals disclose that certificates are not covered by the state guaranty fund 

 A more complete analysis of the legislation follows:

To amend sections 3903.81, 3921.10, 3921.13, 3921.19, 3921.22, 3921.28, 3921.29, 3921.30, 3921.31, and 3921.33, to enact new section 3921.35 and sections 3921.101 and 3921.191 and to repeal section 3921.35 of the Revised Code to make changes to the law regulating fraternal benefit societies.

Section 3903.81 (RBC Model Act) ~ amends definition of "life and health insurer" as used in 3903.81 to specifically include or a fraternal benefit society licensed under Ohio Rev. Stat. Chapter 3921.

Section 3921.10 (Formation of Society) ~ amendment provides that with respect to domestic fraternal societies, as part of the examination process,  they must comply with the surplus requirements established in Ohio Rev. Stat. 3921.101.

Section 3921.101 ~ new provision added to the Ohio MFC provides that  societies must maintain certain surplus dollar amounts in order to sell certain  life insurance and annuities products as listed in Ohio Rev. Stat. 3921.16 (i.e. death benefits, endowments, annuities, disability, hospital/medical, monument, other).

Section 3921.13 (Reinsurance Agreements) ~ amendment provides that a domestic fraternal society with assets of less than five billion dollars ($5,000,000,000) that provides contract benefits of major medical, medicare supplemental, or long term care pursuant to Ohio Rev. Stat. 3921.16(A)(5)  shall reinsure no less than fifty per cent (50%) of the risk arising from those contracts if the society's risk based capital is less than three hundred per cent (300%).

Section 3921.19 (Certificate specifying amount of benefits provided under benefit contract) ~ amendment provides that at least thirty (30) days prior to imposing any indebtedness upon any owner as provided in Ohio Rev. Stat. 3921.19(D), the board of directors or corresponding body shall notify superintendent of insurance in writing of the board's intent to require the payment and a statement of the reason that request is necessary. The notice shall be confidential and not a public record under Ohio Rev. Stat. 149.43.

Section 3921.191 ~ new provision added to the Ohio MFC  requires  that a society must provide a disclosure statement at the time of sale to applicants, and provides language that should appear in the disclosure statement. 

Section 3921.22 (No Individual Right to Assets) ~ amendment  provides that a society may operate one or more separate accounts and issue variable contracts, subject to the provisiosn of Ohio Rev. Stat. 3911.011 ( dealing with variable or fixed and variable benefits or contractual payments).

Section 3921.28 (Examination of Domestic & Foreign Societies) ~ amendments provide that domestic fraternals  will be liable for the payment of any additional expense of an examination resulting from unreasonable delays by the society in fulfilling a request for documents or information by the examiner conducting the examination.

Section 3921.29 (Foreign or Alien Benefit Society License) ~ amendment requires that foreign fraternals  must also file a written appointment of an agent's appointment for service of process. 

Section 3921.30 (Notice of Deficiency) ~ amendments delete certain provisions and provide that if a society fails to correct a deficiency within the 30-day period, the superintendent of insurance may commence a cause of action under Ohio Rev. Stat. 3903.01 to 3903.59 (Rehabilitation and Liquidation).

Section 3921.31 (Notice and correction of deficiency of society) ~ amendments delete certain provisions and provide that if a society fails to correct a deficiency within the 30-day period, the superintendent shall commence a cause of action  against the society under Ohio Rev. Stat. 3903.71 (Suspension of Authority to Do Business).

Section 3921.33 (Licensing of Agents - Exceptions) ~ amendment  provides that any fraternal agent selling  annuity contracts must be licensed pursuant to Chapter 3905 of the Revised Code (Insurance Producers Licensing Act).

Section 3921.35 (Service of Process Upon Superintendent) ~ amendments provide for service of process upon a society and establishes the procedures to appointment of an agent designated to receive service of process or revoke the appointment. 


House Bill 341 would become effective 90 days after signing by the governor, or if not signed by the governor, 90 days after the bill signing deadline passes, EXCEPT for 3921.101 and 3921.33, which become effective January 1, 2013.

The Ohio Department of Insurance does not expect the Legislature to take any sudden action on the bill.  Hearings may take place later this year or in early 2012.  ODI expects the legislation to be enacted sometime in 2012 with an effective date of January 1, 2013.  Please note that several provisions of the bill, including the minimum surplus requirement and the annuity agent licensing requirement, will not become effective until one year after the bill becomes law

Because ODI has no other bills pending before the Legislature, a number of amendments not related to fraternal regulation may be added to HB 341 before the bill is considered by the state lawmakers.  The Alliance will monitor the progress of the legislation and will provide updates to member societies as these developments occur.  


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