Senate Bill No. 328
(By Senators Helmick and Ross)
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[Introduced February 8, 1996;
referred to the Committee on Banking and Insurance.]
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A BILL to amend and reenact section fifteen-b, article four,
chapter thirty-three of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, relating to
insurance; insurance commissioner; life reinsurance
agreements; and reduction of liability.
Be it enacted by the Legislature of West Virginia:
That section fifteen-b, 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.
§33-4-15b.Life reinsurance agreements; reduction of liability;
requirements.
(a) This section applies to all domestic life insurers and , accident and sickness insurers, and property and casualty
insurers with respect to their accident and sickness business.
This section also applies to all other licensed life insurers,
accident and sickness insurers, and property and casualty
insurers with respect to their accident and sickness business who
are not subject to a substantially similar law or regulation in
their domiciliary state.
(b) A life An insurer subject to this article section shall
not, for reinsurance ceded, reduce any liability or establish any
asset in any financial statement filed with the department
commissioner if, by the terms of the reinsurance agreement, in
substance or effect, any of the following conditions exist:
(1) The primary effect of the reinsurance agreement is to
transfer deficiency reserves or excess interest reserves to the
books of the reinsurer for a "risk charge" and the agreement does
not provide for significant participation by the reinsurer in one
or more of the following risks: Mortality, morbidity, investment
or surrender benefit;
(2) The reserve credit taken by the ceding insurer is not in
compliance with this chapter, including actuarial interpretations
or standards adopted by the department commissioner;
(3) The reserve credit taken by the ceding insurer is
greater than the underlying reserve of the ceding company
supporting the policy obligation transferred under the
reinsurance agreement;
(4) The ceding insurer is required to reimburse the
reinsurer for negative experience under the reinsurance
agreement: Provided, That neither offsetting experience refunds
against current and prior years' losses nor payment by the ceding
insurer of an amount equal to current and prior years' losses
upon voluntary termination of in-force reinsurance by that ceding
insurer shall be considered such a reimbursement to the reinsurer
for negative experience;
(5) The ceding insurer can be deprived of surplus at the
reinsurer's option or automatically upon the occurrence of some
event, such as the insolvency of the ceding insurer: Provided,
That termination of the reinsurance agreement by the reinsurer
for nonpayment of reinsurance premiums shall not be considered to
be such a deprivation of surplus;
(6) The ceding insurer shall, at specific points in time
scheduled in the agreement, terminate or automatically recapture
all or part of the reinsurance ceded;
(7) No cash payment is due from the reinsurer, throughout
the lifetime of the reinsurance agreement, with all settlements
prior to the termination date of the agreement made only in a
"reinsurance account," and no funds in such account are available
for the payment of benefits; or
(8) The reinsurance agreement involves the possible payment
by the ceding insurer to the reinsurer of amounts other than from
income reasonably expected from the reinsured policies; or
(9) Any other conditions specified by rules promulgated by
the commissioner pursuant to chapter twenty-nine-a of this code.
(c) Notwithstanding the provisions of subsection (b) of this
section, a life an insurer subject to this article may, with the
prior approval of the commissioner, take such reserve credit as
the commissioner may deem consistent with this chapter, including
actuarial interpretations or standards adopted by the
commissioner.
(d) A reinsurance agreement or amendment to any agreement
shall not be used to reduce any liability or to establish any
asset in any financial statement filed with the commissioner,
unless the agreement, amendment or a letter of intent has been
duly executed by both parties no later than the "as of date" of the financial statement.
(e) In the case of a letter of intent, a reinsurance
agreement or an amendment to a reinsurance agreement shall be
executed within a reasonable period of time, not exceeding ninety
days from the execution date of the letter of intent, in order
for credit to be granted for the reinsurance ceded.
(f) Life Insurers subject to this article section may
continue to reduce liabilities or establish assets in financial
statements filed with the commissioner for reinsurance ceded
under types of reinsurance agreements described in subsection (b)
of this section: Provided, That:
(1) The agreements were executed and in force prior to the
effective date of this article section;
(2) No new business is ceded under the agreements after the
effective date of this article section;
(3) The reduction of the liability or the asset established
for the reinsurance ceded is reduced to zero by the thirty-first
day of December, one thousand nine hundred ninety-four, or such
later date approved by the commissioner as a result of an
application made by the ceding insurer prior to the thirty-first
day of December, one thousand nine hundred ninety-two;
(4) The reduction of the liability or the establishment of
the asset is otherwise permissible under all other applicable
provisions of this chapter, including actuarial interpretations
or standards adopted by the commissioner; and
(5) The department commissioner is notified, within ninety
days after the effective date of this section, of the existence
of such reinsurance agreements and all corresponding credits
taken in the ceding insurer's annual statement for the year one
thousand nine hundred ninety-one.
(g) The commissioner shall promulgate a rule pursuant to
chapter twenty-nine-a of this code for the implementation and
administration of this section on or before the first day of
July, one thousand nine hundred and ninety-six.
NOTE:The purpose of this bill is to allow the Insurance
Commissioner to apply existing standards that apply to life
reinsurance agreements or contracts to reinsurance agreements or
contracts dealing with accident and sickness insurance. These
standards will apply to reinsurance agreements or contracts
utilized by both life insurers writing accident and sickness
insurance and property and casualty insurers writing accident and
sickness insurance. The bill requires the commissioner to
promulgate a rule for the implementation and administration of
this code section.
Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language
that would be added.