Senate Bill No. 105
(By Senator Minard)
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[Introduced January 26, 1994; referred to the Committee
on Banking and Insurance.]
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A BILL to amend and reenact section fifteen-a, article four,
chapter thirty-three of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, relating to
credit for reinsurance requirements.
Be it enacted by the Legislature of West Virginia:
That section fifteen-a, article four, chapter thirty-three
of the code of West Virginia, one thousand nine hundred thirty-
one, as amended, be amended and reenacted to read as follows:
ARTICLE 4. GENERAL PROVISIONS.
§33-4-15a. Credit for reinsurance; definitions; requirements;
trust accounts; reductions from liability; security;
effective date.
(a) For purposes of this section, an "accredited reinsurer"
is one which:
(1) Has filed an application for accreditation and received
a letter of accreditation from the commissioner;
(2) Is licensed to transact insurance or reinsurance in atleast one of the fifty states of the United States or the
District of Columbia or, in the case of a United States branch of
an alien assuming insurer, is entered through and licensed to
transact insurance or reinsurance in at least one of the fifty
states of the United States or the District of Columbia;
(3) Has filed with the application a certified statement
that the company submits to this state's jurisdiction and that
the company will comply with the laws, rules and regulations of
the state of West Virginia;
(4) Has filed with the application a certified statement
that the company submits to the examination authority granted the
commissioner by section nine, article two of this chapter and
will pay all examination costs and fees as required by that
section;
(5) Has filed with the application a copy of its most recent
annual statement in a form consistent with the requirements of
subdivision (8) of this subsection and a copy of its last audited
financial statement;
(6) Has filed any other information the commissioner
requests to determine that the company qualifies for
accreditation under this section;
(7) Has remitted the applicable processing fee with its
application for accreditation;
(8) Files with the commissioner after initial accreditation
on or before the first day of March of each year a true statement
of its financial condition, transactions and affairs as of thepreceding thirty-first day of December. The statement shall be
on the appropriate national association of insurance
commissioners annual statement blank; shall be prepared in
accordance with the national association of insurance
commissioners annual statement instructions; and shall follow the
accounting practices and procedures prescribed by the national
association of insurance commissioners accounting practices and
procedures manual as amended. The statement shall be accompanied
by the applicable annual statement filing fee. The commissioner
may grant extensions of time for filing of this annual statement
upon application by the accredited reinsurer; and
(9) Files with the commissioner after initial accreditation
by the first day of June of each year a copy of its audited
financial statement for the period ending the preceding thirty-
first day of December.
(b) If the commissioner determines that the assuming insurer
has failed to continue to meet any of these qualifications, he or
she may upon written notice and hearing, as prescribed by section
thirteen, article two of this chapter, revoke an assuming
insurer's accreditation. Credit shall not be allowed to a ceding
insurer if the assuming insurers' accreditation has been revoked
by the commissioner after notice and hearing.
(c) Credit for reinsurance shall be allowed a domestic
ceding insurer or any foreign or alien insurer transacting
insurance in West Virginia that is domiciled in a jurisdiction
that employs standards regarding credit for reinsurance that arenot substantially similar to those applicable under this article
as either an asset or a deduction from liability on account of
reinsurance ceded only when the reinsurer meets one of the
following requirements:
(1) Credit shall be allowed when the reinsurance is ceded to
an assuming insurer which is licensed to transact insurance or
reinsurance in this state.
(2) Credit shall be allowed when the reinsurance is ceded to
an assuming insurer which is accredited as a reinsurer in this
state prior to the effective date of the reinsurance contract.
(3) Credit shall be allowed when the reinsurance is ceded to
an assuming insurer which is domiciled and licensed in, or in the
case of a United States branch of an alien assuming insurer, is
entered through one of the fifty states of the United States or
the District of Columbia and which employs standards regarding
credit for reinsurance substantially similar to those applicable
under this statute, and the ceding insurer provides evidence
suitable to the commissioner that the assuming insurer:
(A) Maintains a surplus as regards policyholders in an
amount not less than twenty million dollars: Provided, That the
requirements of this paragraph do not apply to reinsurance ceded
and assumed pursuant to pooling arrangements among insurers in
the same holding company system;
(B) The ceding insurer provides the commissioner with a
certified statement from the assuming insurer that the assuming
insurer submits to the authority of this state to examine itsbooks and records granted the commissioner by section nine,
article two of this chapter and will pay all examination costs
and fees as required by that section; and
(C) The reinsurer complies with the provisions of
subdivision (6), subsection (c) herein.
(4) Credit shall be allowed when the reinsurance is ceded to
an assuming insurer which maintains a trust fund as required by
subsection (d) herein in a qualified United States financial
institution, as defined by this section, for the payment of the
valid claims of its United States policyholders and ceding
insurers, their assigns and successors in interest, and complies
with the provisions of subdivision (6) herein.
(5) Credit shall be allowed when the reinsurance is ceded to
an assuming insurer not meeting the requirements of subdivisions
(1) through (4), subsection (c) of this section, but only with
respect to the insurance of risks located in jurisdictions where
such reinsurance is required by applicable law or regulation of
that jurisdiction.
(6) If the assuming insurer is not licensed or accredited to
transact insurance or reinsurance in this state, the credit
permitted by subdivisions (3) and (4) of this subsection shall
not be allowed unless the assuming insurer agrees in the
reinsurance agreements:
(A) That in the event of the failure of the assuming insurer
to perform its obligations under the terms of the reinsurance
agreement, the assuming insurer, at the request of the cedinginsurer, shall submit to the jurisdiction of any court of
competent jurisdiction in any state of the United States, shall
comply with all requirements necessary to give such court
jurisdiction, and shall abide by the final decision of such court
or of any appellate court in the event of an appeal; and
(B) To designate the secretary of state as its true and
lawful attorney upon whom may be served any lawful process in any
action, suit or proceeding instituted by or on behalf of the
ceding company. Process shall be served upon the secretary of
state, or accepted by him or her, in the same manner as provided
for service of process upon unlicensed insurers under section
thirteen of this article:
Provided,
That this provision is not
intended to conflict with or override the obligation of the
parties to a reinsurance agreement to arbitrate their disputes,
if such an obligation is created in the agreement.
(d) Whenever an assuming insurer establishes a trust fund
for the payment of claims pursuant to the provisions of this
section, the following requirements shall apply:
(1) The assuming insurer shall report annually to the
commissioner information substantially the same as that required
to be reported on the national association of insurance
commissioners annual statement form by licensed insurers to
enable the commissioner to determine the sufficiency of the trust
fund. In the case of a single assuming insurer, the trust shall
consist of a trusteed account representing the assuming insurer's
liabilities attributable to business written in the United Statesand, in addition, the assuming insurer shall maintain a trusteed
surplus of not less than twenty million dollars. In the case of
a group, of including incorporated and individual unincorporated
underwriters, the trust shall consist of a trusteed account
representing the group's liabilities attributable to business
written in the United States and, in addition, the group shall
maintain a trusteed surplus of which one hundred million dollars
shall be held jointly for the benefit of United States ceding
insurers of any member of the group. The incorporated members of
the group shall not be engaged in any business other than
underwriting as a member of the group and shall be subject to the
same level of solvency regulation and control by the group's
domiciliary regulator as are the unincorporated members. The
group shall make available to the commissioner an annual
certification of the solvency of each underwriter by the group's
domiciliary regulator and its independent public accountants.
(2) In the case of a group of incorporated insurers under
common administration which complies with the filing requirements
contained in the previous paragraph; which has continuously
transacted an insurance business outside the United States for at
least three years immediately prior to making application for
accreditation; which submits to this state's authority to examine
its books and records and bears the expense of the examination;
and which has aggregate policyholders' surplus of ten billion
dollars, the trust shall be in an amount equal to the group's
several liabilities attributable to business ceded by UnitedStates ceding insurers to any member of the group pursuant to
reinsurance contracts issued in the name of the group. The group
shall also maintain a joint trusteed surplus of which one hundred
million dollars shall be held jointly for the benefit of United
States ceding insurers of any member of the group as additional
security for any such liabilities. Each member of the group
shall make available to the commissioner an annual certification
of the member's solvency by the member's domiciliary regulator
and its independent public accountants.
(3) Any trust that is subject to the provisions of this
section shall be established in a form approved by the
commissioner. The trust instrument shall provide that contested
claims shall be valid and enforceable upon the final order of any
court of competent jurisdiction in the United States. The trust
shall vest legal title to its assets in the trustees of the trust
for its United States policyholders and ceding insurers, their
assigns and successors in interest. The trust and the assuming
insurer shall be subject to examination as determined by the
commissioner. The trust described herein shall remain in effect
for as long as the assuming insurer shall have outstanding
obligations due under the reinsurance agreements subject to the
trust.
(4) No later than the twenty-eighth day of February of each
year the trustees of the trust shall report to the commissioner
in writing setting forth the balance of the trust and listing the
trust's investments at the preceding year's end. The trusteesshall certify the date of termination of the trust, if so
planned, or certify that the trust shall not expire prior to the
next following December thirty-first.
(e) A reduction from liability for the reinsurance ceded by
a ceding insurer subject to the requirements of this article to
an assuming insurer not meeting the requirements of subsection
(c) of this section shall be allowed in an amount not exceeding
the liabilities carried by the ceding insurer. The reduction
shall be in the amount of funds held by or on behalf of the
ceding insurer, including funds held in trust for the ceding
insurer, under a reinsurance contract with the assuming insurer
as security for the payment of obligations thereunder:
Provided,
That the security is held in the United States subject to
withdrawal solely by, and under the exclusive control of, the
ceding insurer; or, in the case of a trust, held in a qualified
United States financial institution, as defined by this section.
The security may be in the form of:
(1) Cash;
(2) Securities listed by the securities valuation office of
the national association of insurance commissioners and
qualifying as admitted assets; or
(3) Clean, irrevocable, unconditional letters of credit,
issued or confirmed by a qualified United States financial
institution, as defined by this section, no later than the
thirty-first day of December of the year for which filing is
being made, and in the possession of the ceding company on orbefore the filing date of its annual statement:
Provided,
That
letters of credit meeting applicable standards of issuer
acceptability as of the dates of their issuance or confirmation
shall, notwithstanding the issuing or confirming institution's
subsequent failure to meet applicable standards of issuer
acceptability, continue to be acceptable as security until their
expiration, extension, renewal, modification or amendment,
whichever first occurs.
(f) For purposes of this section, a "qualified United States
financial institution" means an institution that:
(1) Is organized or licensed under the laws of the United
States or any state thereof;
(2) Is regulated, supervised and examined by United States
federal or state authorities having regulatory authority over
banks and trust companies; and
(3) Has been determined by either the commissioner, or the
securities valuation office of the national association of
insurance commissioners, to meet the standards of financial
condition and standing as are considered necessary and
appropriate to regulate the quality of financial institutions
whose letters of credit will be acceptable to the commissioner.
(g) A "qualified United States financial institution" means,
for purposes of those provisions of this law specifying those
institutions that are eligible to act as a fiduciary of a trust,
an institution that:
(1) Is organized or, in the case of a United States branchor agency office of a foreign banking organization, licensed
under the laws of the United States or any state thereof and has
been granted authority to operate with fiduciary powers; and
(2) Is regulated, supervised and examined by federal or
state authorities having regulatory authority over banks and
trust companies.
(h) The provisions of this section shall apply to all
cessions on or after the first day of January, one thousand nine
hundred ninety-three.
NOTE: The purpose of this bill is to provide that an
assuming insurer which presently includes a group of individual
unincorporated underwriters may also include incorporated
underwriters, subject to certain restrictions on the incorporated
underwriters.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.