Senate File 2131 - Enrolled
Senate File 2131
AN ACT
RELATING TO CREDIT ALLOWED TO DOMESTIC CEDING INSURERS FOR
REINSURANCE CEDED TO REINSURERS, AND INCLUDING APPLICABILITY
PROVISIONS.
4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 521B.101A Definitions.
2 For purposes of this chapter, unless the context otherwise
3 requires:
4 1. “Commissioner” means the commissioner of insurance.
5 2. “NAIC” means the national association of insurance
6 commissioners.
7 Sec. 2. Section 521B.102, unnumbered paragraph 1, Code
8 2020, is amended to read as follows:
9 Credit for reinsurance shall be allowed a domestic ceding
10 insurer as either an asset or a reduction from liability on
11 account of reinsurance ceded only when the reinsurer meets
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12 the requirements of subsection 1, 2, 3, 4, 5, 5A, or 6. The
13 commissioner may adopt rules pursuant to section 521B.105
14 specifying additional requirements related to the valuation of
15 assets or reserve credits, the amount and forms of security
16 supporting reinsurance arrangements described in section
17 521B.105, and the circumstances pursuant to which credit shall
18 be reduced or eliminated. Credit shall be allowed under
19 subsection 1, 2, or 3 only respecting cessions of those kinds
20 or classes of business which the assuming insurer is licensed
21 or otherwise permitted to write or assume in the assuming
22 insurer’s state of domicile or, in the case of a United States
23 branch of an alien assuming insurer, in the state through
24 which the alien assuming insurer is entered and licensed to
25 transact insurance or reinsurance. Credit shall be allowed
26 under subsection 3 or 4 only if the applicable requirements of
27 subsection 7 have been satisfied.
28 Sec. 3. Section 521B.102, subsection 2, paragraph e, Code
29 2020, is amended to read as follows:
30 e. Demonstrate to the satisfaction of the commissioner that
31 the assuming insurer has adequate financial capacity to meet
32 the assuming insurer’s reinsurance obligations and is otherwise
33 qualified to assume reinsurance from domestic insurers. An
34 assuming insurer is deemed to meet this requirement as of the
35 time of the assuming insurer’s application if the assuming
1 insurer maintains a surplus as regards policyholders in an
2 amount of not less than twenty million dollars and the assuming
3 insurer’s accreditation has not been denied by the commissioner
4 within ninety calendar days after submission of the assuming
5 insurer’s application.
6 Sec. 4. Section 521B.102, subsection 3, paragraph a,
7 unnumbered paragraph 1, Code 2020, is amended to read as
8 follows:
9 Credit shall be allowed when the reinsurance is ceded to
10 an assuming insurer that is domiciled in, or in the case of a
11 United States branch of an alien assuming insurer, is entered
12 through, a state that employs standards regarding credit for
13 reinsurance that are substantially similar to those applicable
14 under this chapter and the assuming insurer or United States
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15 branch of an alien assuming insurer does all of the following:
16 Sec. 5. Section 521B.102, subsection 4, paragraph a, Code
17 2020, is amended to read as follows:
18 a. Credit shall be allowed when the reinsurance is ceded
19 to an assuming insurer that maintains a trust fund in a
20 qualified United States financial institution, as defined
21 in section 521B.104, subsection 2, for payment of the valid
22 claims of the assuming insurer’s United States ceding insurers,
23 their assigns, and successors in interest. To enable the
24 commissioner to determine the sufficiency of the trust fund,
25 the assuming insurer shall report annually to the commissioner
26 information substantially the same as that required to be
27 reported by licensed insurers on the national association of
28 insurance commissioners’ NAIC annual statement form by licensed
29 insurers. The assuming insurer shall submit to examination of
30 the assuming insurer’s books and records by the commissioner
31 and bear the expense of examination.
32 Sec. 6. Section 521B.102, subsection 4, paragraph b,
33 subparagraph (2), Code 2020, is amended to read as follows:
34 (2) The form of the trust and any trust amendments are
35 filed with the commissioner of every state in which the ceding
1 insurer’s insurer beneficiaries of the trust are domiciled.
2 The trust instrument shall provide that contested claims are
3 valid and enforceable upon the final order of any court of
4 competent jurisdiction in the United States. The trust shall
5 vest legal title to the trust’s assets in its trustees for
6 the benefit of the assuming insurer’s United States ceding
7 insurers, their assigns, and successors in interest. The trust
8 and the assuming insurer shall be subject to examination as
9 determined by the commissioner.
10 Sec. 7. Section 521B.102, subsection 4, paragraph c,
11 subparagraph (3), subparagraph division (e), Code 2020, is
12 amended to read as follows:
13 (e) Within ninety calendar days after its financial
14 statements are due to be filed with the group’s domiciliary
15 regulator, the group shall provide to the commissioner an
16 annual certification by the group’s domiciliary regulator of
17 the solvency of each underwriter member, or if a certification
18 is unavailable, financial statements, prepared by independent
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19 public accountants, of each underwriter member of the group.
20 Sec. 8. Section 521B.102, subsection 4, paragraph c,
21 subparagraph (4), subparagraph division (e), Code 2020, is
22 amended to read as follows:
23 (e) Within ninety calendar days after the group’s financial
24 statements are due to be filed with the group’s domiciliary
25 regulator, make available to the commissioner an annual
26 certification of each underwriter member’s solvency by the
27 member’s domiciliary regulator and financial statements of
28 each underwriter member of the group prepared by the group’s
29 independent public accountant.
30 Sec. 9. Section 521B.102, subsection 5, paragraph a,
31 subparagraph (4), Code 2020, is amended to read as follows:
32 (4) The assuming insurer shall agree to submit to the
33 jurisdiction of this state, to appoint the commissioner as the
34 assuming insurer’s agent for service of process in this state,
35 and agree to provide security for one hundred percent of the
1 assuming insurer’s liabilities attributable to reinsurance
2 ceded by United States ceding insurers, if the assuming insurer
3 resists enforcement of a final United States judgment.
4 Sec. 10. Section 521B.102, subsection 5, paragraph b,
5 subparagraph (3), Code 2020, is amended to read as follows:
6 (3) Within ninety calendar days after the association’s
7 financial statements are due to be filed with the association’s
8 domiciliary regulator, the association shall provide to the
9 commissioner an annual certification by the association’s
10 domiciliary regulator, of the solvency of each underwriter
11 member, or if a certification is unavailable, financial
12 statements, prepared by an independent public accountant, of
13 each underwriter member of the association.
14 Sec. 11. Section 521B.102, subsection 5, paragraph c,
15 subparagraphs (1), (2), and (3), Code 2020, are amended to read
16 as follows:
17 (1) In order to determine whether the domiciliary
18 jurisdiction of a non-United States assuming insurer is
19 eligible to be recognized as a qualified jurisdiction,
20 the commissioner shall evaluate the appropriateness and
21 effectiveness of the reinsurance supervisory system of the
22 jurisdiction, both initially and on an ongoing basis, and
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23 consider the rights, benefits, and the extent of reciprocal
24 recognition afforded by the non-United States jurisdiction
25 to reinsurers licensed and domiciled in the United States.
26 In order to be recognized as a qualified jurisdiction, a
27 jurisdiction must agree to share information and to cooperate
28 with the commissioner with respect to all certified reinsurers
29 domiciled within that jurisdiction. A jurisdiction shall not
30 be recognized as a qualified jurisdiction if the commissioner
31 has determined that the jurisdiction does not adequately and
32 promptly enforce final United States judgments and arbitration
33 awards. Additional factors may be considered in the discretion
34 of the commissioner.
35 (2) A list of qualified jurisdictions shall be published
1 through the national association of insurance commissioners’
2 NAIC committee process. The commissioner shall consider
3 this list in determining qualified jurisdictions. If the
4 commissioner recognizes a jurisdiction as qualified that does
5 not appear on the NAIC list of qualified jurisdictions, the
6 commissioner shall provide thoroughly documented justification
7 for the recognition in accordance with criteria to be developed
8 by rule as specified in rules adopted by the commissioner.
9 (3) United States jurisdictions that meet the requirements
10 for accreditation under the national association of insurance
11 commissioners’ NAIC financial standards and accreditation
12 program shall be recognized as qualified jurisdictions.
13 Sec. 12. Section 521B.102, subsection 5, paragraph e,
14 subparagraph (5), subparagraph division (b), Code 2020, is
15 amended to read as follows:
16 (b) If the commissioner continues to assign a higher rating
17 to a certified reinsurer as permitted by other provisions of
18 this subsection section, this requirement does not apply to a
19 certified reinsurer in inactive status or to a reinsurer whose
20 certification has been suspended.
21 Sec. 13. Section 521B.102, subsection 5, paragraph f, Code
22 2020, is amended to read as follows:
23 f. If an assuming insurer applying for certification as a
24 reinsurer in this state has been certified as a reinsurer in
25 another jurisdiction accredited by the national association
26 of insurance commissioners NAIC, the commissioner has the
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27 discretion to defer to that jurisdiction’s certification, and
28 has the discretion to defer to the rating assigned by that
29 jurisdiction, and the assuming insurer shall be considered to
30 be a certified reinsurer in this state.
31 Sec. 14. Section 521B.102, Code 2020, is amended by adding
32 the following new subsection:
33 NEW SUBSECTION. 5A. a. Credit shall be allowed when the
34 reinsurance is ceded to an assuming insurer that meets all of
35 the following conditions:
1 (1) The assuming insurer must have its head office located
2 in or be domiciled in, as applicable, and be licensed in, a
3 reciprocal jurisdiction. For purposes of this subsection, a
4 “reciprocal jurisdiction” is a jurisdiction that meets at least
5 one of the following requirements:
6 (a) A non-United States jurisdiction that is subject to an
7 in-force covered agreement with the United States, each within
8 its legal authority, or, in the case of a covered agreement
9 between the United States and the European Union, is a member
10 state of the European Union. For purposes of this subsection,
11 a “covered agreement” is an agreement entered into pursuant to
12 Tit. V, §502(a)(3), 31 U.S.C. §§313-314, of the Dodd-Frank Wall
13 Street Reform and Consumer Protection Act, Pub. L. No. 111-203,
14 that is currently in effect or in a period of provisional
15 application and that addresses the elimination, under specified
16 conditions, of collateral requirements as a condition for
17 entering into any reinsurance agreement with a ceding insurer
18 domiciled in this state or for allowing the ceding insurer to
19 recognize credit for reinsurance.
20 (b) A United States jurisdiction that meets the
21 requirements for accreditation under the NAIC financial
22 regulation standards and accreditation program.
23 (c) A qualified jurisdiction, as determined by the
24 commissioner pursuant to subsection 5, paragraph “c”, which is
25 not otherwise described in this paragraph or paragraph “b”,
26 and that meets certain additional requirements consistent with
27 the terms and conditions of an in-force covered agreement as
28 specified in rules adopted by the commissioner.
29 (2) The assuming insurer must have and maintain, on an
30 ongoing basis, minimum capital and surplus, or its equivalent,
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31 calculated according to the methodology of the assuming
32 insurer’s domiciliary jurisdiction, in an amount specified in
33 rules adopted by the commissioner. If the assuming insurer
34 is an association, including incorporated and individual
35 unincorporated underwriters, the assuming insurer must have
1 and maintain, on an ongoing basis, minimum capital and surplus
2 equivalents, net of liabilities, calculated according to the
3 methodology applicable in the assuming insurer’s domiciliary
4 jurisdiction, and a central fund containing a balance in an
5 amount as specified in rules adopted by the commissioner.
6 (3) The assuming insurer must have and maintain, on
7 an ongoing basis, a minimum solvency or capital ratio, as
8 applicable, as specified in rules adopted by the commissioner.
9 If the assuming insurer is an association, including
10 incorporated and individual unincorporated underwriters,
11 the assuming insurer must have and maintain, on an ongoing
12 basis, a minimum solvency or capital ratio in the reciprocal
13 jurisdiction where the assuming insurer has its head office or
14 is domiciled, as applicable, and where the assuming insurer is
15 also licensed.
16 (4) The assuming insurer must agree and shall provide
17 to the commissioner, in the form and manner specified by the
18 commissioner, adequate assurance of all of the following:
19 (a) Prompt written notice and explanation if the assuming
20 insurer falls below the minimum requirements set forth in
21 subparagraph (2) or (3) of this paragraph, or if any regulatory
22 action is taken against the assuming insurer for serious
23 noncompliance with any applicable law.
24 (b) Written consent that the assuming insurer shall submit
25 to the jurisdiction of the courts of this state and to the
26 appointment of the commissioner as agent for service of
27 process. The commissioner may also require that consent for
28 service of process be included in each reinsurance agreement
29 entered into by the assuming insurer. This subparagraph
30 division shall not limit or alter the capacity of the parties
31 to a reinsurance agreement to agree to alternative dispute
32 resolution, except to the extent such alternative dispute
33 resolution is unenforceable under applicable insolvency or
34 delinquency laws.
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35 (c) Written agreement that the assuming insurer shall pay
1 all final judgments, wherever enforcement is sought, obtained
2 against the assuming insurer by a ceding insurer, or the ceding
3 insurer’s legal successor, that have been declared enforceable
4 in the jurisdiction in which the final judgment is obtained.
5 (d) Each reinsurance agreement must include a provision
6 requiring the assuming insurer to provide security in an
7 amount equal to one hundred percent of the assuming insurer’s
8 liabilities attributable to reinsurance ceded pursuant to
9 that reinsurance agreement if the assuming insurer resists
10 enforcement of a final judgment that is enforceable under the
11 law of the jurisdiction in which the final judgment is obtained
12 or under an enforceable arbitration award, whether obtained by
13 the ceding insurer or by the ceding insurer’s legal successor
14 on behalf of the ceding insurer’s resolution estate.
15 (e) Written confirmation that the assuming insurer is not
16 presently participating in any solvent scheme of arrangement
17 which involves this state’s ceding insurers, and written
18 agreement that the assuming insurer shall notify the ceding
19 insurer and the commissioner and shall provide security in an
20 amount equal to one hundred percent of the assuming insurer’s
21 liabilities to the ceding insurer, should the assuming insurer
22 enter into such a solvent scheme of arrangement. Such security
23 shall be in a form consistent with the provisions of subsection
24 5, and section 521B.103.
25 (5) The assuming insurer or the assuming insurer’s legal
26 successor shall provide to the commissioner, on behalf of
27 itself and any legal predecessors, any documentation required
28 pursuant to rules adopted by the commissioner.
29 (6) Pursuant to rules adopted by the commissioner, the
30 assuming insurer shall maintain prompt payment of claims under
31 all reinsurance agreements.
32 (7) The assuming insurer’s supervisory authority shall
33 annually confirm to the commissioner that as of the preceding
34 December 31, or as of the annual date otherwise statutorily
35 reported to the reciprocal jurisdiction, the assuming insurer
1 complies with the requirements set forth in subparagraphs (2)
2 and (3) of this paragraph.
3 (8