(a) In the event the department enters into a master agreement with one or more insurance companies to provide life or disability insurance coverage for the purchasers of farms and homes from the department, the master agreement shall provide that the life insurance will be offered to purchasers who are disabled solely as a result of their qualifying military service and to nondisabled purchasers on an equal basis and that no purchaser shall be denied coverage solely because that purchaser has a qualifying military service-connected disability at the time of application. Notwithstanding Part 2 (commencing with Section 10110) of Division 2 of the Insurance Code, the life or disability insurance shall be a form of group life or group disability insurance.

(b) The master agreement shall provide for maintenance of those reserves as the department, after consultation with the Insurance Commissioner, deems appropriate and prudent, and the department may use from time to time any accumulated surplus in those reserves, or any refunds or returns therefrom upon termination of the agreement, for the purposes of this article or of any veterans general obligation or revenue bond act. Any and all acts of the department in maintaining and using the reserves consistent with this subdivision are hereby ratified and confirmed, it having at all times been the intent of the Legislature that reserves be maintained and that any surpluses therein or refunds or returns therefrom be used by the department for the purposes stated in this subdivision.

(c) Notwithstanding subdivision (b), on and after January 1, 1987, any reserves maintained under the master agreement shall not exceed a level greater than 20 percent in excess of actuarial requirements plus a reasonable contingency reserve, as determined annually by the department, and the department may contract with one or more independent actuaries or actuarial firms to assist the department in the annual determination.

(d) Any departmental proposal to enter into, revise, amend, renew, extend, or cancel, any agreement described in this section shall be a policy change subject to subdivisions (b), (c), and (d) of Section 84.

(Amended by Stats. 1998, Ch. 197, Sec. 1. Effective July 21, 1998.)