H. B. 3117
(By Delegates H. White, Kominar, R. M. Thompson,
Perry and Hamilton)
[Introduced March 21, 2005; referred to the
Committee on Banking and Insurance then the Judiciary.]
A BILL to amend and reenact §33-4-15 of the Code of West Virginia,
1931, as amended; and to amend said code by adding thereto a
new section, designated §33-4-21, all relating to reinsurance
and a reinsurer's liability in an insolvency.
Be it enacted by the Legislature of West Virginia:
That §33-4-15 of the Code of West Virginia, 1931, as amended,
be amended and reenacted; and that said code be amended by adding
thereto a new section, designated §33-4-21, all to read as follows:
ARTICLE 4. GENERAL PROVISIONS.
§33-4-15. Reinsurance.
(a) For purposes of this section, an "assumption reinsurance
agreement" means any contract which:
(1) Transfers insurance obligations and/or risks of existing
or in-force contracts of insurance from a transferring insurer to
an assuming insurer; and
(2) Is intended to effect a novation of the transferred
contract of insurance with the result that the assuming insurer
becomes directly liable to the policyholders of the transferring
insurer and the transferring insurer's insurance obligations and/or
risks under the contracts are extinguished.
(b) An insurer shall reinsure its risks, or any part thereof,
only in solvent insurers complying with the capital and surplus
requirements of section five-b, article three of this chapter.
(c) Credit for reinsurance shall be governed by the provisions
of sections fifteen-a and fifteen-b of this article.
Credit shall
not be allowed unless the reinsurance is payable by the assuming
insurer on the basis of the liability of the ceding insurer under
the contracts reinsured without diminution because of the
insolvency of the ceding insurer nor unless under the reinsurance
contract the liability for the reinsurance is assumed by the
assuming insurer or insurers as of the same effective date.
(1) No credit shall be allowed, as an admitted asset or
deduction from liability, to any ceding insurer for reinsurance,
unless the reinsurance contract provides, in substance, that in the
event of the insolvency of the ceding insurer, the reinsurance
shall be payable under a contract(s) reinsured by the assuming
insurer on the basis of reported claims allowed by the liquidation
court, without diminution because of the insolvency of the ceding
insurer. Such payments shall be made directly to the ceding insurer or to its domiciliary liquidator except: (a) Where the
contract or other written agreement specifically provides another
payee of such reinsurance in the event of the insolvency of the
ceding insurer; or (b) where the assuming insurer, with the consent
of the direct insured(s), has assumed such policy obligations of
the ceding insurer as direct obligations of the assuming insurer to
the payees under such policies and in substitution for the
obligations of the ceding insurer to such payees.
(2) The reinsurance agreement may provide that the domiciliary
liquidator of an insolvent ceding insurer shall give written notice
to the assuming insurer of the pendency of a claim against such
ceding insurer on the contract reinsured within a reasonable time
after such claim is filed in the liquidation proceeding. During
the pendency of such claim, any assuming insurer may investigate
such claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated any defenses which it deems
available to the ceding insurer, or its liquidator. Such expense
may be filed as a claim against the insolvent ceding insurer to the
extent of a proportionate share of the benefit which may accrue to
the ceding insurer solely as a result of the defense undertaken by
the assuming insurer. Where two or more assuming insurers are
involved in the same claim and a majority in interest elect to
interpose a defense(s) to such claim, the expense shall be
apportioned in accordance with the terms of the reinsurance agreement as though such expense had been incurred by the ceding
insurer.
(d) Any licensed insurer may accept reinsurance for the same
kinds of insurance and within the same limits as it is authorized
to transact direct insurance.
(e) A licensed insurer may reinsure all or substantially all
of its risks on property or lives located in West Virginia, or
substantially all of a major class thereof, with another insurer by
an assumption reinsurance agreement:
Provided, That the assumption
reinsurance agreement shall not become effective unless filed in
advance with and approved in writing by the Commissioner:
Provided, however, That if a licensed insurer is deemed by the
Commissioner to be in hazardous financial condition, as defined in
article thirty-four-a of this chapter, or an administrative or
judicial proceeding has been instituted against it for the purpose
of liquidating, reorganizing or conserving such insurer, and the
transfer of the contracts of insurance is determined by the
Commissioner to be in the best interest of the policyholders, the
Commissioner may by written order waive the advance filing and
approval required by this section, which such waiver may include a
form of implied consent and adequate notification to the
policyholder of the circumstances requiring the transfer.
(f) The Commissioner shall approve such agreement within one
hundred twenty days after the filing of same unless he or she finds that it is inequitable to the licensed insurer, its owners or its
policyholders or would substantially reduce the protection or
service to its policyholders. If the Commissioner does not approve
the agreement, he or she shall so notify the insurer in writing
specifying his or her reasons therefor. If the Commissioner does
not disapprove the agreement within one hundred twenty days, the
agreement shall be deemed approved.
(g) A filing may not be made pursuant to this section unless
the reinsurance agreement is certified under oath by responsible
officers of the reinsurer and the reinsured to contain the entire
agreement between the parties to the reinsurance agreement.
(h) The Commissioner shall promulgate rules
and regulations
pursuant to chapter twenty-nine-a of this code for the
implementation and administration of the provisions of this section
to include, but not be limited to, the type of assumption
agreements subject to the provisions of this section, their content
and the standards the Commissioner may utilize in reviewing the
agreements.
(i) Any insurer subject to this section is also subject to the
provisions of article thirty-eight of this chapter.
§33-4-21. Reinsurer's liability.
The amount recoverable by the liquidator from reinsurers may
not be reduced as a result of delinquency proceedings, unless the
reinsurance contract provides, in substance, that in the event of the insolvency of the ceding insurer, the reinsurance shall be
payable under a contract(s) reinsured by the assuming insurer on
the basis of reported claims allowed by the liquidation court,
without diminution because of the insolvency of the ceding insurer.
Such payments shall be made directly to the ceding insurer or to
its domiciliary liquidator except: (a) Where the contract or other
written agreement specifically provides another payee of such
reinsurance in the event of the insolvency of the ceding insurer;
or (b) where the assuming insurer, with the consent of the direct
insured(s), has assumed such policy obligations of the ceding
insurer as direct obligations of the assuming insurer to the payees
under such policies and in substitution for the obligations of the
ceding insurer to such payees.
NOTE: The purpose of this bill is to amend insurance laws to
ensure that domestic insurers, their reinsurers and their
beneficiaries can rely on valid cut through and assumption
liability agreements, and to codify standard insolvency clause
requirements for reinsurers.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.
§33-4-21 is new; therefore, strike-throughs and underscoring
have been omitted.
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