21.8049.01000
Sixty-seventh
Legislative Assembly SENATE BILL NO. 2076
of North Dakota
Introduced by
Industry, Business and Labor Committee
(At the request of the Insurance Commissioner)
1 A BILL for an Act to amend and reenact section 26.1-31.2-01 of the North Dakota Century
2 Code, relating to reinsurance credit of insurers.
3 BE IT ENACTED BY THE LEGISLATIVE ASSEMBLY OF NORTH DAKOTA:
4 SECTION 1. AMENDMENT. Section 26.1-31.2-01 of the North Dakota Century Code is
5 amended and reenacted as follows:
6 26.1-31.2-01. Credit allowed a domestic ceding insurer.
7 1. Credit for reinsurance must be allowed a domestic ceding insurer as either an asset or
8 a reduction from liability on account of reinsurance ceded only when the reinsurer
9 meets the requirements of subsection 1, 2, 3, 4, 5, or 6, 7, or 8. Credit will be allowed
10 under subsection 1, 2, or 3, or 4 only with respect to cessions of a kind or class of
11 business that the assuming insurer is licensed or otherwise permitted to write or
12 assume in its state of domicile or, in the case of a United States branch of an alien
13 assuming insurer, in the state through which it is entered and licensed to transact
14 insurance or reinsurance. Credit must be allowed under subsection 3 or 4 or 5 only if
15 the applicable requirements of subsection 79 have been satisfied.
16 1.2. Credit must be allowed when the reinsurance is ceded to an assuming insurer that is
17 licensed to transact insurance or reinsurance in this state.
18 2.3. Credit must be allowed when the reinsurance is ceded to an assuming insurer which is
19 accredited by the commissioner as a reinsurer in this state. In order to be eligible for
20 accreditation, a reinsurer:
21 a. Shall file with the commissioner evidence of its submission to this state's
22 jurisdiction;
23 b. Shall submit to this state's authority to examine its books and records;
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1 c. Must be licensed to transact insurance or reinsurance in at least one state, or, in
2 the case of a United States branch of an alien assuming insurer, be entered
3 through and licensed to transact insurance or reinsurance in at least one state;
4 d. Annually, shall file with the commissioner a copy of its annual statement filed with
5 the insurance department of its state of domicile and a copy of its most recent
6 audited financial statement; and
7 e. Shall demonstrate to the satisfaction of the commissioner the assuming insurer
8 has adequate financial capacity to meet the assuming insurer's reinsurance
9 obligations and is otherwise qualified to assume reinsurance from domestic
10 insurers. An assuming insurer is deemed to meet this requirement as of the time
11 of application the assuming insurer maintains a surplus as regards policyholders
12 in an amount which is not less than twenty million dollars and the assuming
13 insurer's accreditation has not been denied by the commissioner within ninety
14 days after submission of its application.
15 3.4. a. Credit must be allowed when the reinsurance is ceded to an assuming insurer
16 domiciled in, or in the case of a United States branch of an alien assuming
17 insurer, is entered through, a state which employs standards regarding credit for
18 reinsurance substantially similar to those applicable under this statute and the
19 assuming insurer or United States branch of an alien assuming insurer:
20 (1) Maintains a surplus as regards policyholders in an amount not less than
21 twenty million dollars; and
22 (2) Submits to the authority of this state to examine its books and records.
23 b. The requirement of subdivision a does not apply to reinsurance ceded and
24 assumed pursuant to pooling arrangements among insurers in the same holding
25 company system.
26 4.5. a. Credit must be allowed when the reinsurance is ceded to an assuming insurer
27 that maintains a trust fund in a qualified United States financial institution, as
28 defined in subsection 2 of section 26.1-31.2-03, for the payment of valid claims of
29 its United States ceding insurers, their assigns, and successors in interest. To
30 enable the commissioner to determine the sufficiency of the trust fund, the
31 assuming insurer shall report annually to the commissioner information
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1 substantially the same as that required to be reported on the national association
2 of insurance commissioners annual statement form by licensed insurers. The
3 assuming insurer shall submit to examination of the insurer's books and records
4 by the commissioner and bear the expense of examination.
5 b. (1) Credit for reinsurance may not be granted under this subsection unless the
6 form of the trust and any amendments to the trust have been approved by:
7 (a) The commissioner of the state in which the trust is domiciled; or
8 (b) The commissioner of another state who, pursuant to the terms of the
9 trust instrument, accepted principal regulatory oversight of the trust.
10 (2) The form of the trust and any trust amendments also must be filed with the
11 commissioner of every state in which the ceding insurer beneficiaries of the
12 trust are domiciled. The trust instrument must provide that contested claims
13 are valid and enforceable upon the final order of any court of competent
14 jurisdiction in the United States. The trust must vest legal title to the trust's
15 assets in the trust's trustees for the benefit of the assuming insurer's United
16 States ceding insurers, their assigns, and successors in interest. The trust
17 and the assuming insurer are subject to examination as determined by the
18 commissioner.
19 (3) The trust shall remain in effect for as long as the assuming insurer has
20 outstanding obligations due under the reinsurance agreements subject to
21 the trust. No later than February twenty-eighth of each year the trustee of
22 the trust shall report to the commissioner in writing the balance of the trust
23 and listing of the trust's investments at the preceding year-end and shall
24 certify the date of termination of the trust, if so planned, or certify the trust
25 will not expire before the following December thirty-first.
26 c. The following requirements apply to the following categories of assuming insurer:
27 (1) The trust fund for a single assuming insurer must consist of funds in trust in
28 an amount not less than the assuming insurer's liabilities attributable to
29 reinsurance ceded by United States ceding insurers and, in addition, the
30 assuming insurer shall maintain a trusteed surplus of not less than twenty
31 million dollars, except as provided in paragraph 2.
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1 (2) At any time after the assuming insurer has permanently discontinued
2 underwriting new business secured by the trust for at least three full years,
3 the commissioner with principal regulatory oversight of the trust may
4 authorize a reduction in the required trusteed surplus, but only after a
5 finding, based on an assessment of the risk, that the new required surplus
6 level is adequate for the protection of United States ceding insurers,
7 policyholders, and claimants in light of reasonably foreseeable adverse loss
8 development. The risk assessment may involve an actuarial review,
9 including an independent analysis of reserves and cash flows, and must
10 consider all material risk factors, including when applicable the lines of
11 business involved, the stability of the incurred loss estimates, and the effect
12 of the surplus requirements on the assuming insurer's liquidity or solvency.
13 The minimum required trusteed surplus may not be reduced to an amount
14 less than thirty percent of the assuming insurer's liabilities attributable to
15 reinsurance ceded by United States ceding insurers covered by the trust.
16 (3) (a) In the case of a group, including incorporated and individual
17 unincorporated underwriters:
18 [1] For reinsurance ceded under a reinsurance agreement with an
19 inception, amendment, or renewal date after December 31,
20 1992, the trust must consist of a trusteed account in an amount
21 not less than the respective underwriters' several liabilities
22 attributable to business ceded by United States domiciled ceding
23 insurers to any underwriter of the group;
24 [2] For reinsurance ceded under a reinsurance agreement with an
25 inception date before January 1, 1993, and not amended or
26 renewed after that date, notwithstanding the other provisions of
27 this chapter, the trust must consist of a trusteed account in an
28 amount not less than the respective underwriters' several
29 insurance and reinsurance liabilities attributable to business
30 written in the United States; and
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1 [3] In addition to these trusts, the group shall maintain a trusteed
2 surplus of one hundred million dollars which must be held jointly
3 for the benefit of the United States domiciled ceding insurers of
4 any member of the group for all years of account.
5 (b) The incorporated members of the group may not be engaged in any
6 business other than underwriting as a member of the group and are
7 subject to the same level of regulation and solvency control by the
8 group's domiciliary regulator as are the unincorporated members.
9 (c) Within ninety days after its financial statements are due to be filed
10 with the group's domiciliary regulator, the group shall provide to the
11 commissioner an annual certification by the group's domiciliary
12 regulator of the solvency of each underwriter member; or if a
13 certification is unavailable, financial statements prepared by
14 independent public accountants of each underwriter member of the
15 group.
16 (4) In the case of a group of incorporated underwriters under common
17 administration, the group:
18 (a) Must have continuously transacted an insurance business outside the
19 United States for at least three years immediately prior to making
20 application for accreditation;
21 (b) Shall maintain aggregate policyholders' surplus of at least ten billion
22 dollars;
23 (c) Shall maintain a trust fund in an amount not less than the group's
24 several liabilities attributable to business ceded by United States
25 domiciled ceding insurers to any member of the group pursuant to
26 reinsurance contracts issued in the name of the group;
27 (d) Shall maintain a joint trusteed surplus of which one hundred million
28 dollars must be held jointly for the benefit of United States domiciled
29 ceding insurers of any member of the group as additional security for
30 these liabilities; and
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1 (e) Within ninety days after its financial statements are due to be filed
2 with the group's domiciliary regulator, shall make available to the
3 commissioner an annual certification of each underwriter member's
4 solvency by the member's domiciliary regulator and financial
5 statements of each underwriter member of the group prepared by its
6 independent public accountant.
7 5.6. Credit must be allowed when the reinsurance is ceded to an assuming insurer that has
8 been certified by the commissioner as a reinsurer in this state and secures the
9 assuming insurer's obligations in accordance with the requirements of this subsection.
10 a. In order to be eligible for certification, the assuming insurer shall meet the
11 following requirements:
12 (1) The assuming insurer must be domiciled and licensed to transact insurance
13 or reinsurance in a qualified jurisdiction, as determined by the commissioner
14 pursuant to subdivision c;
15 (2) The assuming insurer shall maintain minimum capital and surplus, or its
16 equivalent, in an amount to be determined by the commissioner pursuant to
17 rule;
18 (3) The assuming insurer shall maintain financial strength ratings from two or
19 more rating agencies deemed acceptable by the commissioner pursuant to
20 rule;
21 (4) The assuming insurer shall agree to submit to the jurisdiction of this state,
22 appoint the commissioner as its agent for service of process in this state,
23 and agree to provide security for one hundred percent of the assuming
24 insurer's liabilities attributable to reinsurance ceded by United States ceding
25 insurers if the assuming insurer resists enforcement of a final United States
26 judgment;
27 (5) The assuming insurer shall agree to meet applicable information filing
28 requirements as determined by the commissioner, both with respect to an
29 initial application for certification and on an ongoing basis; and
30 (6) The assuming insurer shall satisfy any other requirements for certification
31 deemed relevant by the commissioner.
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1 b. An association, including incorporated and individual unincorporated
2 underwriters, may be a certified reinsurer. In order to be eligible for certification,
3 in addition to satisfying requirements of subdivision a:
4 (1) The association shall satisfy its minimum capital and surplus requirements
5 through the capital and surplus equivalents, net of liabilities, of the
6 association and the association's members which must include a joint
7 central fund that may be applied to any unsatisfied obligation of the
8 association or any of the association's members, in an amount determined
9 by the commissioner to provide adequate protection;
10 (2) The incorporated members of the association may not be engaged in any
11 business other than underwriting as a member of the association and are
12 subject to the same level of regulation and solvency control by the
13 association's domiciliary regulator as are the unincorporated members; and
14 (3) Within ninety days after the association's financial statements are due to be
15 filed with the association's domiciliary regulator, the association shall
16 provide to the commissioner an annual certification by the association's
17 domiciliary regulator of the solvency of each underwriter member; or if a
18 certification is unavailable