An Act concerning insurance; deposit of securities by insurance companies; amending K.S.A. 40-230a, 40-248, 40-309, 40-402, 40-507, 40-601, 40-608, 40-902, 40-1001a, 40- 1102, 40-1103, 40-1204, 40-12a07 and 40-1502 and K.S.A. 1995 Supp. 40-401 and re- pealing the existing sections; also repealing K.S.A. 40-230, 40-294, 40-404, 40-404a, 40- 404c, 40-405 and 40-406.

Be it enacted by the Legislature of the State of Kansas:

New Section 1. (a) All cash, securities, real estate deeds, mortgages or other assets deposited with the commissioner of insurance pursuant to the provisions of the insurance code of the state of Kansas shall be de- posited with any Kansas financial institution acceptable to the commis- sioner through which a custodial or controlled account, a joint custody receipt arrangement or any combination of these or other measures that are acceptable to the commissioner is used. As used in this section, ``fi- nancial institution'' means any Kansas domiciled bank acceptable to the commissioner, which has its principal place of business in Kansas. As used in this section, ``commissioner'' means the commissioner of insurance. All such deposits shall be held by such financial institution on behalf of the commissioner as in trust for the use and benefit of such company and such company's policyholders and creditors. Such assets shall be released from such deposits only upon written approval of the commissioner. All income from deposits shall belong to the depositing organization and shall be paid to it as it becomes available. The commissioner, upon written approval, may direct the financial institution to permit exchange of se- curities or assets upon deposit of specified substituted securities or assets.

All forms for deposit, withdrawal or exchange shall be prescribed, pre- pared and furnished by the commissioner and no facsimile signatures shall be used or recognized. The commissioner or assistant commissioner of insurance or a duly authorized insurance department employee may at any time inspect the securities on deposit in any such financial institution. Nothing in this act shall be construed to hold the state of Kansas, the commissioner, assistant commissioner or authorized employee liable ei- ther personally or officially for any default of such financial institution.

Real estate shall be deposited with the commissioner by the depositing organization executing a deed or assignment conveying title thereto to the commissioner, in trust for the use and benefit of such company. Such deeds or assignment shall be recorded in the office of the register of deeds of the county in which such real estate is situated. When the depositing organization is authorized to withdraw real estate from deposit, the com- missioner shall execute deeds to such organization or such other persons, companies or corporations as such organization shall direct. The costs of registering such deeds shall be borne by the depositing organization.

All deposits made with the commissioner shall be audited by the com- missioner and the state treasurer not less frequently than once each three years. The commissioner may accept an audit performed by another gov- ernmental agency acceptable to the commissioner, in lieu of this audit requirement.

(b) Assets, except real estate assets, deposited pursuant to this section shall be held by the custodian on behalf of the commissioner as in trust for the use and benefit of the depositing organization. Such assets shall remain the specific property of the organization and shall not be subject to the claim of any third party against the custodian.

(c) The custodian is authorized to redeposit such assets with a clear- ing corporation as defined in K.S.A. 84-8-102 and amendments thereto, if such clearing corporation is domiciled in the United States. The cus- todian is authorized to hold such assets through the federal reserve bank book-entry system.

(d) The commissioner shall by rules and regulations establish require- ments relating to deposits under this subsection appropriate to assure the security and safety of such deposits, including but not limited to the fol- lowing:

(1) Capital and surplus of the custodian;

(2) title in which deposited assets are held;

(3) records to be kept by the custodian and the commissioner's access thereto;

(4) periodic reports by the custodian to the commissioner;

(5) responsibility of the custodian to indemnify the company for loss of deposited assets;

(6) withdrawal or exchange of deposited assets; and

(7) authority of the commissioner to terminate the deposit if the con- dition of the custodian should threaten the security of the deposited as- sets.

Sec. 2. K.S.A. 40-230a is hereby amended to read as follows: 40- 230a. That The proceeds from the sale of stock during the period of organization of any insurance company now being or hereafter to be or- ganized under the laws of this state shall be immediately invested in such securities as are permitted by law, and such securities shall be immedi- ately deposited with the state treasurer through the commissioner of in- surance: Provided, That in accordance with section 1 an amount equal to the maximum promotion expense allowed by law may be deducted from the proceeds of such sales.

Sec. 3. K.S.A. 40-248 is hereby amended to read as follows: 40-248. When any insurance company organized under the laws of this state shall desire to discontinue its business, the commissioner of insurance shall, upon application of such company, give notice of such intention in a paper published and having general circulation in the county in which such company or its general agency is located, at least once a week for six weeks, the expense of publication to be paid by the company. After such publication the commissioner of insurance shall deliver up to such com- pany the securities held by him belonging to them, on being satisfied by the exhibition of the books and papers of such company, and upon ex- amination to be made by himself or some competent, disinterested person or persons to be appointed by him, and upon the oaths of the president and the secretary of the company, that all debts, judgments and liabilities of every kind are satisfied authorize the release of the securities held under section 1, if the commissioner, upon the commissioner's own examination or the examination of some competent, disinterested person or persons appointed by the commissioner, is satisfied with the exhibition of the books and papers of the company. The president and the secretary shall affirm that all debts, judgments and liabilities of every kind are satisfied.

The commissioner of insurance may also from time to time deliver up authorize the release to such company or its assigns any portion of its securities, on being satisfied that an equal proportion of the debts and liabilities of every kind that are due or may become due has been satisfied: Provided,. The amount of securities retained by him the commissioner shall be not less than twice the amount of remaining liabilities: Provided further, That if the outstanding policies of such company have or shall be reinsured in any other solvent insurance company, an amount of securities equal to the reserves on such outstanding policies shall be retained by the commissioner of insurance, and such reinsuring company shall deposit quarterly with the commissioner of insurance additional securities in an amount equal to the increase in the reserves of the policies so reinsured; and upon such reinsurance and the payment of all debts of the company other than reinsured outstanding policies, no further report or other pro- ceedings shall be required of the company so ceasing to do business.

Sec. 4. K.S.A. 40-309 is hereby amended to read as follows: 40-309. Any insurance company of this state may unite, merge or consolidate with any other company or companies of this or any other state engaged in like business and having similar corporate powers, upon such terms and conditions, including the reinsurance of the business in force, as may be approved at a meeting of the stockholders of any such company or com- panies of this state, called for that purpose, such approval to be by vote of stockholders owning not less than two-thirds (2/3) of the shares of stock of any such company or companies of this state. The agreement for such union, merger, consolidation and reinsurance shall be subject to the ap- proval of the commissioner of insurance. There shall be filed with the commissioner of insurance a verified schedule by the actuaries of the companies interested showing that the legal reserve for the policyholders of each of the several companies is of the amount required by law.

Where companies of other states are uniting, consolidating, merging and reinsuring with a company of this state the commissioner of insurance also shall approve in the same manner such amendments to the articles of incorporation of such companies of this state as may be necessary and proper. Such agreement shall provide for payment in cash to any dis- senting stockholder of an amount equal to the fair value of the stock if he or she the stockholder shall refuse to assent to the union, merger or consolidation. If a company of another state shall unite, merge or con- solidate with a domestic company the legal reserve on the business in force of the foreign company shall be deposited with the state treasurer of this state; but if the law of the other state wherein such company is domiciled shall require that the reserve on such policies cannot be re- leased, then the reserve may be maintained in such state in the manner provided by its laws. If a domestic company shall unite, merge or con- solidate with a company of any other state, the legal reserve of the do- mestic company covering its business in force at the time of the union, merger or consolidation shall remain on deposit with the state treasurer, and there shall be deposited quarterly with the state treasurer additional securities in an amount equal to the increase of the legal reserve upon such business in force at the time of the union, merger or consolidation, and such legal reserve and additions thereto shall be released only in accordance with the provisions of article 4 of the insurance code and amendments thereto. The policyholders protected by such reserve shall have a first lien thereon in the event such new company shall fail to comply with its policy provisions. The reserve on any policy may with the consent of the policyholder be released to the appropriate state officer of some other state under whose laws the companies merged or consolidated may exist to be held under its laws for the benefit of the policyholder.

When a company of this state shall be merged, consolidated or united with a company organized under the laws of any other state, the com- missioner of insurance in his or her the commissioner's order of approval shall direct that the assets of the domestic company, except the deposit for legal reserve on the business in force at the time of the union, merger or consolidation to be held on deposit with the state treasurer as herein provided, be delivered to the company with which the domestic company is united, merged, or consolidated. The commissioner of insurance shall have the right to designate which securities shall remain upon deposit to secure the legal reserve on business in force at the time of the union, merger, consolidation or reinsurance.

Sec. 5. K.S.A. 1995 Supp. 40-401 is hereby amended to read as fol- lows: 40-401. Any 10 or more persons, a majority of whom are citizens of this state, may associate in accordance with the provisions of this code and form an incorporated company, upon either the stock or mutual plan, to make insurance upon the lives of persons and every insurance apper- taining thereto or connected therewith and to grant, purchase or dispose of annuities. Such companies may incorporate: (a) In their policies pro- visions or conditions for the waiver of premiums or for the granting of an annuity to the insured, or for special surrender values or other benefits in the event the insured shall from any cause become unemployed or totally and permanently disabled; (b) in their policies provisions for ac- celeration of life or annuity benefits in advance of the time they would otherwise be payable subject to such reserve and other regulatory stan- dards as the commissioner may prescribe by rules and regulations, except that any provision providing for acceleration of life or annuity benefits for persons diagnosed as having a medical condition usually requiring continuous confinement for the rest of the person's life in a nursing home or other eligible facility as defined in the policy, may also provide for acceleration of benefits upon diagnosis of such condition even if the per- son is not confined in a nursing home or similar facility; (c) in their policies and annuity contracts provisions or conditions for waiver of surrender charges upon terms and conditions as specified in the policy or contract, subject to rules and regulations adopted by the commissioner of insur- ance; or (d) in their policies provisions for the payment of a larger sum if death is caused by accident than if it results from any other causes.

Prior to the payment of any accelerated benefit, the insurer shall re- ceive from any assignee or irrevocable beneficiary of the policy a signed acknowledgment of concurrence for the payment. For the purposes of this section, ``totally and permanently disabled'' means disabled contin- uously for a period, such period to be specified in any such provision, of not less than 60 days nor more than one year, except this provision shall not apply to and specifically excludes group life insurance. Such company may make insurance on the health of individuals, against accidental per- sonal injury, disablement or death and against loss, liability or expense on account thereof. Such company so transacting such health and accident insurance business, or either kind, shall maintain statutory and separate reserves for such business, shall issue such contracts only in separate policies except as otherwise permitted herein and shall make separate reports to the commissioner of insurance of the premiums received and expenses and losses incurred in connection with such business, except that such reports will not be required for accelerated benefits incorpo- rated in a life or annuity policy. Long-term care insurance meeting the applicable requirements of K.S.A. 40-2227 and 40-2228 and amendments thereto may be incorporated in life insurance policies if approved by the commissioner.

The business of life insurance in this state shall not be in any way conducted or transacted by any company which in this state makes in- surance on marine, fire, inland or any other like risks, except that, life, health and accident insurance on the group or industrial plan may be combined in one policy, which shall show the premium charged for life insurance and the premium charged for health and accident insurance, and the insured, at the insured's option, may discontinue either and by payment of the stated premium continue the other. The amount of capital stock of a company organized on the stock plan shall be not less than $600,000.

Companies organized on the mutual plan shall be required to have applications from at least 200 persons for insurance upon their lives, ag- gregating not less than $400,000, upon which one full annual premium in cash shall have been paid. No such company shall transact any business of insurance until, if a stock company, all the capital stock named in its charter has been paid in cash including all contributions to surplus to be made by the original purchasers of such stock. The surplus shall be at least $600,000, and at least $400,000 in securities authorized by this code shall have been deposited with the state treasurer and commissioner of insurance as joint custodians, pursuant to section 1 and if a mutual com- pany, a guaranty fund of at least $1,200,000, and at least $400,000 of which shall be in securities as authorized in this code and deposited with the state treasurer and commissioner of insurance as joint custodians pur- suant to section 1. The guaranty fund may be returned to the contributors with interest at 6% per annum whenever the surplus shall equal the amount of such guaranty fund and interest, and no company shall transact any business of insurance unless it shall maintain the capital or surplus or both required of a company commencing to transact business, or, if a mutual company, the required number and amount of applications for insurance have been received and the annual premiums collected in cash. The securities deposited pursuant to this section shall be held by the state treasurer and commissioner of insurance as joint custodians in trust for the benefit and protection of the policyholders or creditors, or both, of the company depositing the same and may be withdrawn only upon order of the commissioner of insurance.

Until May 1, 1989, life insurers, which phrase shall include a fraternal benefit society which has filed with the commissioner of insurance a plan for conversion to a stock or mutual life insurance company under the terms of K.S.A. 40-726 to 40-733, inclusive, and amendments thereto, and which plan has been approved by the commissioner, which were authorized to do business in Kansas after January 1, 1969, but before January 1, 1984, shall be required to have a paid-up capital stock, surplus and deposit equal to that which was required by this section prior to the passage of this act. After May 1, 1989, such companies shall comply with the paid-up capital stock, surplus and deposit requirements provided by this act.

Until May 1, 1989, companies doing business in this state on January 1, 1969, shall be required to have a paid-up capital stock, surplus and deposit equal to that required of such companies prior to the passage of this act. On and after May 1, 1989, companies doing business in this state on January 1, 1969, shall be required to have a paid-up capital stock, surplus and deposit equal to that required of all other companies to whom this section applies immediately prior to the passage of this act.

On and after May 1, 1994, companies doing business in this state on January 1, 1969, shall comply with the paid-up capital, surplus and deposit requirements provided by this act.

Sec. 6. K.S.A. 40-402 is hereby amended to read as follows: 40-402. It shall not be lawful for any life insurance company organized or incor- porated under the laws of the United States or of any other state of the United States to transact business in this state unless, if a stock company, it shall have and maintain a paid-up capital stock of at least $600,000 and a surplus of at least $600,000, and shall have deposited $400,000, or if a mutual company, a surplus of at least $1,200,000, and shall have deposited $400,000 in approved securities for the benefit of all of its policyholders or creditors, or both, with the commissioner, superintendent of insurance or chief financial officer of the state in which such company is incorpo- rated, or, if such company is incorporated under the laws of the United States, with some financial officer of the United States, or if incorporated under the laws of any foreign government, such deposit shall be made with such an officer in any state of the United States. Any such company not having such deposit made in the state in which it is organized, or with some officer of the United States, shall make such deposit in this state in the manner and subject to the provisions relating to such companies or- ganized under the laws of this state. Until May 1, 1989, life insurers which were authorized to do business in Kansas after January 1, 1969, but before January 1, 1984, shall be required to have a paid-up stock, surplus and deposit equal to that which was required by this section prior to the passage of this act. After May 1, 1989, such companies shall comply with the paid-up capital stock, surplus and deposit requirements provided by this act.

Until May 1, 1989, companies doing business in this state on January 1, 1969, shall be required to have a paid-up capital stock, surplus and deposit equal to that required of such companies prior to the passage of this act. On and after May 1, 1989, companies doing business in this state on January 1, 1969, shall be required to have a paid-up capital stock, surplus and deposit equal to that required of all other companies to whom this section applies immediately prior to the passage of this act.

On and after May 1, 1994, companies doing business in this state on January 1, 1969, shall comply with the paid-up capital, surplus and deposit requirements provided by this act prescribed by section 1.

Sec. 7. K.S.A. 40-507 is hereby amended to read as follows: 40-507. (a) Every mutual life insurance company formed under authority of K.S.A. 40-501 et seq. and amendments thereto may:

(1) Merge or consolidate with any other domestic mutual life insur- ance company;

(2) merge or consolidate with any other non-domestic mutual life insurance company if such merger or consolidation is authorized by the laws of the state or territory in which such non-domestic company is organized; and

(3) by virtue of such merger or consolidation, do the kinds of insur- ance business in the manner and for the purposes for which a mutual life insurance company may be organized in this state or in the manner and for the purposes for which a non-domestic mutual life insurance company may be licensed or authorized to do business in this state.

(b) If a company of another state shall merge or consolidate with a domestic company the legal reserve on the business in force of the foreign company shall be deposited with the state treasurer of this state; but if the law of the other state wherein such company is domiciled shall require that the reserve on such policies cannot be released, then the reserve may be maintained in such state in the manner provided by its laws. If a domestic company shall merge or consolidate with a company of any other state, the legal reserve of the domestic company covering its business in force at the time of the union, merger or consolidation shall remain on deposit with the state treasurer, and there shall be deposited quarterly with the state treasurer additional securities in an amount equal to the increase of the legal reserve upon such business in force at the time of the merger or consolidation, and such legal reserve and additions thereto shall be released only in accordance with the provisions of article 4 of the insurance code and amendments thereto. The policyholders protected by such reserve shall have a first lien thereon in the event such new company shall fail to comply with its policy provisions. The reserve on any policy may be released with the consent of the policyholder to the appropriate state officer of some other state under whose laws the merged or con- solidated companies may exist, to be held under its laws for the benefit of the policyholder.

(c) (b) When a mutual life insurance company of this state shall be merged or consolidated with a mutual life insurance company organized under the laws of any other state, the commissioner of insurance in an order of approval shall direct that the assets of the domestic company, except the deposit for legal reserve on the business in force at the time of the merger or consolidation to be held on deposit with the state treas- urer as herein provided, be delivered to the company with which the domestic company is merged or consolidated. The commissioner of in- surance shall have the right to designate which securities shall remain upon deposit to secure the legal reserve on business in force at the time of the merger, consolidation or reinsurance.

Sec. 8. K.S.A. 40-601 is hereby amended to read as follows: 40-601. Mutual assessment life associations hereafter organized and admitted un- der this article, as well as those now transacting business in this state upon the mutual assessment life insurance plan, may insure the lives of their members and provide every insurance applicable thereto or connected therewith, including personal injury, disability, old age, accumulation and annuity benefits, and shall reserve in their policies and articles of incor- poration the right to collect additional amounts, assessments or premiums so that the liability of policyholders shall not be limited to fixed, level or stipulated premiums. Any such domestic association shall at all times have and maintain on deposit with the state treasurer commissioner of insur- ance pursuant to section 1 approved securities in the sum of ten thousand dollars $10,000 as a guaranty fund for the benefit of its policyholders, and such deposit shall be in addition to all other deposits required by this article.

Sec. 9. K.S.A. 40-608 is hereby amended to read as follows: 40-608. On and after January first, nineteen hundred and twenty-eight 1, 1928, every assessment life association transacting business under the provisions of this article shall hold and maintain upon every contract of life insurance thereafter issued assets in excess of other liabilities to provide for reserves not less than the minimum reserves prescribed herein. The basis for min- imum reserves under this act shall be the American Experience Table of Mortality and interest at four percentum per annum. Contracts may pro- vide for not more than one-year preliminary-term insurance by incorpo- rating therein a clause plainly showing that the first year's insurance under such contracts is term insurance, purchased by the whole or a part of the contribution to be received during the first contract year, and such con- tracts may be valued on the basis of the mortality table and interest rate above prescribed by the preliminary-term plan modified as follows: If the premium or contribution charged for any contract exceeds that charged for like insurance under twenty-payment life preliminary-term contracts of the same association, the reserve thereon at the end of any year, in- cluding the first, shall not be less than the reserve on a twenty-payment life preliminary-term contract issued in the same year and at the same age, together with an amount which shall be equivalent to the accumu- lation of a level net premium sufficient to provide for a pure endowment at the end of the premium-paying period equal to the difference between the value at the end of such period of such a twenty-payment life prelim- inary-term contract and the full level net premium reserve at such time of such a contract.

The premium-paying period is the period during which premiums are concurrently payable under such twenty-payment life preliminary-term contract and such other contract. Under any contract providing, in ad- dition to the regular contributions, for the payment concurrently of ad- ditional contributions to the extent needed to pay its share of claims and expenses and to maintain the tabular reserves required by this act, or requiring any such additional amount to be charged as an indebtedness not exceeding the tabular reserves on the contract and providing for ter- minating the contract whenever such charges shall equal the tabular re- serves, no liability shall be charged in any valuation for any deficiency in future contributions so long as such payments are actually collected or such charges are actually made. If any contracts are issued on or after January first, nineteen hundred and twenty-eight 1, 1928, which do not contain the above provisions, the association shall maintain as to such contracts the reserves as provided in section 40-409 of this code K.S.A. 40-409 and amendments thereto.

The assets representing the reserves on all contracts issued on and after January first, nineteen hundred and twenty-eight 1, 1928, and on such other contracts as the association shall designate upon which a reserve at least equal to the minimum reserve prescribed herein has been accu- mulated, shall be deposited in the form of approved securities with the state treasurer of this state in this state as provided in section 1 or with the proper official or institution of some other state, for the sole and separate use and benefit of such contracts and the insured and benefi- ciaries thereunder, and no other contracts, insured, beneficiaries or claim- ants shall have or acquire any right or interest therein; and provisions shall be made for requiring during each calendar year from such contracts as are not included under this section, contributions, which, together with available assets not so held separate, shall be sufficient to provide for the shares of claims, expenses and other current liabilities to be borne by such contracts as are not included herein: Provided, That. No such sep- aration shall be required whenever reserves on all outstanding contracts are maintained in accordance with the provisions of this code. Such as- sociation may accumulate, maintain and distribute a surplus or surpluses over and above such reserves and shall do so as the bylaws of the asso- ciation may provide in conformity with this code.

Nothing herein shall be construed as giving to any individual contract, insured or beneficiary any right or claim to any reserves or surplus or to any part thereof other than in the manner and to the extent provided in the contract or bylaws of the association; nor as making any such reserves, except the reserves required herein, a liability in determining the solvency of the association. Unless an association shall provide otherwise, the actual mortality experienced on all outstanding contracts shall be determined and distributed between all such outstanding contracts in proportion of the cost of insurance on the basis herein provided or such other mortality table approximating the experience of the association as it may provide. Every association may include in contracts issued hereunder, provisions for total and permanent disability benefits, accidental death benefits, and the payment of the benefits in installments or annuities: Provided, That. It shall maintain for all such added benefits, any additional reserves as may be prescribed by the commissioner of insurance, which additional reserves shall be subject to the provisions herein for segregation of re- serves.

An association may provide in its contracts for cash surrender and loan values to an amount not exceeding the reserve, or for the equivalent paid- up or extended term insurance based upon a rate of mortality not lower than and a rate of interest not higher than that used in determining the reserve provided herein. Whenever the assets held separately for con- tracts issued on and after January first, nineteen hundred and twenty- eight 1, 1928, and such other contracts designated as provided herein, shall exceed the reserves thereon by not less than five percentum of such reserves, any excess assets derived from mortality savings, savings from expense loadings, and investment gains may be apportioned, distributed and used as provided by the association.

In addition to the annual report required by law, every such association shall report annually to the commissioner of insurance on or before the first day of March 1, the valuation of outstanding contracts issued on and after January first, nineteen hundred and twenty-eight 1, 1928, or des- ignated as provided herein, and in force on the preceding December thirty-first 31. The report shall contain a statement of the rate of earning of the mean invested assets, the interest earnings at such rate on the segregated portion of the assets, the interest required to maintain the reserves, the expected or tabular mortality, the actual mortality experi- enced, and the amount of reserve released by death and lapse, stated separately. Such report shall be certified by the actuary of the association. Such valuation shall be reported in such manner and such other reports shall be made and such information furnished as the commissioner of insurance may require.

Sec. 10. K.S.A. 40-902 is hereby amended to read as follows: 40-902. Every stock fire insurance company organized under the laws of this state, shall deliver to the commissioner of insurance cash or securities of the kinds in which such a company is permitted to invest its funds under the provisions of this code, in an amount equal to not less than the minimum capital stock required of such a company by the preceding section, and such cash or securities shall be deposited with the state treasurer pursuant to section 1 for the benefit of its policyholders and/or and creditors.

Sec. 11. K.S.A. 40-1001a is hereby amended to read as follows: 40- 1001a. Any company licensed pursuant to the provisions of K.S.A. 40- 1001 and amendments thereto and operating under the provisions thereof, may so long as they maintain a minimum reserve fund equal to not less than ten thousand dollars ($10,000) per one million dollars ($1,000,000) $10,000 per $1,000,000 of fire insurance in force, and having deposited lawful securities with the state treasurer and insurance commissioner as joint custodians pursuant to section 1 in an amount of not less than fifty thousand dollars ($50,000) $50,000, be granted authority to issue con- tracts of insurance covering in addition to those kinds set forth in K.S.A. 40-1001 and amendments thereto, the perils of glass breakage, vandalism including malicious mischief and theft: Provided, however, That. Such additional authority shall be evidenced by proper resolution of the board of directors and authorized by the affirmative vote of at least two-thirds of the members present in person or by proxy at a special or annual meeting of members: Provided further,. Any company after having taken such action shall certify such action to the commissioner of insurance immediately, together with a statement showing its current financial status and a reserve fund sufficient to warrant such action, and such com- pany shall apply for an amended certificate of authority to include such additional perils.

Sec./007006/K.S.A. 40-1102 is hereby amended to read as follows: 40- 1102. Any insurance company, other than a life insurance company, or- ganized under the laws of this state or authorized to transact business in this state may make all or any one or more of the kinds of insurance and reinsurance comprised in any one of the following numbered classes, subject to and in accordance with its articles of incorporation and the provisions of this code.:

(1) (a) To insure against bodily injury or death by accident and against disablement resulting from sickness and every insurance apper- taining thereto.;

(b) to insure against the liability of the insured for the death or dis- ability of or damages suffered by an employee or other person, and to insure the obligations accepted by or imposed upon employers under the laws for workmen's compensation.;

(c) to insure against loss of or damage to, or destruction of property of the insured, or to the property interests of the insured, and to insure against such loss or damage to the property of others or to the property interests of others, for which loss or damage the insured may be liable.;

(d) to become surety or guarantor for any person, copartnership or corporation in any position or place of trust or as custodian of money or property, public or private; to become a surety or guarantor for the per- formance by any person, copartnership or corporation of any lawful ob- ligation, undertaking, agreement or contract of any kind, except contracts or policies of insurance.;

(e) to insure titles to property and against loss by reason of defective titles or encumbrances.;

(f) to insure the correctness of searches for all instruments, liens, and charges affecting property.;

(g) to insure against loss by reason of the insufficiency of the security conveyed or pledged under mortgage or deed of trust.;

(h) to insure the payment of bonds and notes secured by mortgages or deeds of trust, and to buy and sell mortgages or deeds of trust upon real property and interest therein.;

(i) to insure against loss or damage which may result from the failure of debtors to pay their obligations to the insured, and including the in- cidental power to acquire and dispose of debts so insured, and to collect any debts owed to such insurer or to any person so insured by the insurer.;

(j) to insure the payment of money for personal services under con- tracts of hiring.;

(k) to make inspections of and issue certificates of inspections upon elevators, boilers, machinery and all mechanical apparatus and appliances appertaining thereto.;

(l) to insure against loss of use or occupancy caused by or resulting from any of the risks comprised within this class.; and

(m) to insure against liability, loss or damage from any other risk, hazard, or contingency which may lawfully be the subject of insurance, and specific authority for the transaction of which has not been exclusively delegated to any other class or kind of company. Any company writing insurance against the loss or damage caused by fire, lightning, or by the perils of either marine or inland navigation or transportation, to buildings or other structures erected upon land, to piers, wharves, bulkheads, ware- houses, marine vessels, railroad engines, rolling stock or equipment of railroads, or carrying charges for shipments of freight shall have a paid- up capital stock of at least $900,000, a surplus of at least $600,000, and shall have deposited, pursuant to section 1, for the protection of its pol- icyholders or creditors, or both with the state treasurer and commissioner of insurance as joint custodians securities authorized by K.S.A. 40-227, and amendments thereto, in an amount equal to not less than the mini- mum capital stock required by such a company, and shall maintain all reserves required by law for the kinds and classes of business transacted. The deposit required by this section for insurance companies not organ- ized under the laws of this state may be deposited as provided herein or with the insurance department of any other state in the United States. Until May 1, 1989, insurers which were authorized to transact business in Kansas after January 1, 1969, but before January 1, 1984, shall be required to have paid-up capital stock, surplus and deposits equal to that which was required by this section prior to the passage of this act. After May 1, 1989, such companies shall comply with the paid-up capital stock, surplus and deposit requirements provided by this act.

Until May 1, 1989, companies doing business in this state on January 1, 1969, shall be required to have a paid-up capital stock, surplus and deposit equal to that required of such companies prior to the passage of this act. On and after May 1, 1989, companies doing business in this state on January 1, 1969, shall be required to have a paid-up capital stock, surplus and deposit equal to that required of all other companies to whom this section applies immediately prior to the passage of this act.

On and after May 1, 1994, companies doing business in this state on January 1, 1969, shall comply with the paid-up capital, surplus and deposit requirements provided by this act.

No provision of this act shall require insurance companies doing busi- ness in this state on January 1, 1969, which have subsequently become authorized to transact business in accordance with a different article of chapter 40 of the Kansas Statutes Annotated to comply with the paid-up capital, surplus and deposit requirements of this act until May 1, 1994.

Sec./007006/K.S.A. 40-1103 is hereby amended to read as follows: 40- 1103. No insurance company hereafter organized under the laws of this state shall be authorized to commence the transaction of either of the numbered classes of business specified in K.S.A. 40-1102, and amend- ments thereto, in this state unless it has a capital stock of at least $450,000 and a surplus of at least $300,000, both fully paid in cash, and shall have deposited with the state treasurer and commissioner of insurance as joint custodians pursuant to section 1 securities authorized by K.S.A. 40-2a01, et seq., and amendments thereto, in an amount equal to not less than the minimum capital stock required of such company for the protection of its policyholders or creditors, or both. Until May 1, 1989, companies which were authorized to transact business in Kansas after January 1, 1969, but before January 1, 1984, shall be required to have paid-up capital stock, surplus and deposits equal to that which was required by this sec- tion prior to the passage of this act. After May 1, 1989, such companies shall comply with the paid-up capital stock, surplus and deposit require- ments provided by this act.

Until May 1, 1989, companies doing business in this state on January 1, 1969, shall be required to have a paid-up capital stock, surplus and deposit equal to that required of such companies prior to the passage of this act. On and after May 1, 1989, companies doing business in this state on January 1, 1969, shall be required to have a paid-up capital stock, surplus and deposit equal to that required of all other companies to whom this section applies immediately prior to the passage of this act.

On and after May 1, 1994, companies doing business in this state on January 1, 1969, shall comply with the paid-up capital, surplus and deposit requirements provided by this act.

No provision of this act shall require insurance companies doing busi- ness in this state on January 1, 1969, which have subsequently become authorized to transact business in accordance with a different article of chapter 40 of the Kansas Statutes Annotated to comply with the paid-up capital, surplus and deposit requirements of this act until May 1, 1994.

No provision of this act shall require any insurance company which was authorized in Kansas prior to January 1, 1984, for only the classes of insurance specified in subsections (e) and (f) of K.S.A. 40-1102, and amendments thereto, to comply with any paid-up capital, surplus and deposit requirements other than the paid-up capital, surplus and deposit requirements which were applicable to the company prior to passage of this act.

Sec./007006/K.S.A. 40-1204 is hereby amended to read as follows: 40- 1204. The commissioner of insurance shall issue a certificate of authority to such company, when it has fully complied with the following condi- tions:

(a) It shall hold bona fide applications for insurance upon which it shall issue simultaneously, or it shall have in force, at least 200 policies to at least 200 members for the same kind of insurance upon not less than 200 separate risks of any single class each within the maximum single risk described herein.

(b) No such insurance company organized under the laws of this state and transacting business in this state shall expose itself to loss on any one risk or hazard to an amount exceeding 10% of its surplus unless the excess shall be reinsured in some other company duly authorized to transact similar business in this state or as otherwise provided in the insurance code and no such insurance company not organized under the laws of this state and transacting business in this state shall expose itself to loss on any one risk or hazard to an amount exceeding 10% of its surplus unless the excess shall be reinsured either in some company duly au- thorized to transact similar business in this state or as provided by the laws of such company's domiciliary state.

(c) It shall have collected the full consideration according to its filed rate on each contract applied for. The total of such considerations shall be held in cash or securities in which such insurance companies are au- thorized by law to invest, and it shall be in the possession of a residue of lawful assets over and above all liabilities in an amount not less than the capital and surplus required of a domestic stock insurance company trans- acting the same kinds of insurance. Pursuant to section 1, such company shall deposit with the state treasurer and commissioner of insurance as joint custodians lawful securities in an amount equal to not less than the minimum capital stock required of a domestic stock insurance company transacting the same kinds of insurance.

(d) Until May 1, 1989, companies which were authorized to do busi- ness in Kansas after January 1, 1969, but before January 1, 1984, shall be required to have surplus and deposits that are equal to that which was required by section (c) prior to the passage of this act.

(e) For the purpose of transacting employer's liability and workmen's compensation insurance, the application shall cover not less than 1,500 employees, each such employee being considered a separate risk for de- termining the maximum single risk. After May 1, 1989, such companies shall comply with the surplus and deposit requirements provided by this act.

Until May 1, 1989, companies doing business in this state on January 1, 1969, shall be required to have a surplus and deposit equal to that required of such companies prior to the passage of this act. On and after May 1, 1989, companies doing business in this state on January 1, 1969, shall be required to have a surplus and deposit equal to that required of all other companies to whom this section applies immediately prior to the passage of this act.

On and after May 1, 1994, companies doing business in this state on January 1, 1969, shall comply with the surplus and deposit requirements provided by this act.

No provision of this act shall require insurance companies doing busi- ness in this state on January 1, 1969, which have subsequently become authorized to transact business in accordance with a different article of chapter 40 of the Kansas Statutes Annotated to comply with the surplus and deposit requirements of this act until May 1, 1994.

Sec./007006/K.S.A. 40-12a07 is hereby amended to read as follows: 40- 12a07. The commissioner shall issue a certificate of authority when any company, organized under this act, has fully complied with the following conditions:

(a) The company holds bona fide applications for insurance upon which it shall issue at least 20 policies to at least 20 members. If the company is in compliance with all other provisions of this act, the com- missioner shall not revoke or refuse to renew the certificate of authority because membership has declined to less than 20 members.

(b) No insurance company organized pursuant to this act shall expose itself to loss on any one risk or hazard to an amount exceeding 20% of its surplus unless the excess is reinsured.

(c) It shall have collected, in accordance with the method provided in the articles of incorporation or the bylaws, the full consideration ac- cording to its filed rate on each contract for which application has been made. The total of such consideration shall be held in cash or securities in which such insurance companies are authorized to invest, or one or more clean and irrevocable letters of credit, and it shall possess and there- after maintain a surplus of lawful assets or letters of credit over and above liabilities in an amount not less than the capital and surplus required of a domestic stock insurance company transacting the same kinds of insur- ance. Pursuant to section 1, the company shall deposit with the state treasurer and commissioner, as joint custodians, securities in which such insurance companies are authorized to invest, or one or more clean and irrevocable letters of credit, for the benefit of the state treasurer and commissioner, in an amount not less than the minimum capital stock required of a domestic stock insurance company. For the purpose of this act, letters of credit shall be in the form allowed by K.S.A. 40-221a(b)(2), and amendments thereto, drawn on the account of a health care provider for the benefit of the company, or for the benefit of the state treasurer and commissioner if the letter of credit is on deposit in accordance with this section.

Sec./007006/K.S.A. 40-1502 is hereby amended to read as follows: 40- 1502. Such persons so desiring to incorporate shall file in the office of the commissioner of insurance a statement signed and duly acknowledged by all of the incorporators stating their purpose of forming a company as expressed in the first section of this article, for the transaction of the business of hail insurance, the number of acres of growing grain owned by each, the amount of insurance subscribed for, the description and location of the grain, the address of each subscriber, and a certified copy of the charter. The charter shall set forth the corporate title of the or- ganization, which title shall include the word ``mutual,'' the place of busi- ness, the home or general office thereof, the intended duration of the company, the directors chosen, and the specific purpose for which the organization is formed. No certificate of authority shall be issued by the commissioner of insurance until there shall have been deposited with the state treasurer by said commissioner by such company cash or securities in an amount not less than twenty thousand dollars ($20,000) $20,000, which shall not be withdrawn until all claims for hail damage be paid in full.

Sec./007006/K.S.A. 40-230, 40-230a, 40-248, 40-294, 40-309, 40-402, 40- 404, 40-404a, 40-404c, 40-405, 40-406, 40-507, 40-601, 40-608, 40-902, 40-1001a, 40-1102, 40-1103, 40-1204, 40-12a07 and 40-1502 and K.S.A. 1995 Supp. 40-401 are hereby repealed.

Sec./007006/This act shall take effect and be in force from and after its publication in the statute book.

Approved March 21, 1996.