HB1230 (2020) Detail

Relative to credit for reinsurance.


HB 1230 - AS AMENDED BY THE HOUSE

 

19Feb2020... 0190h

2020 SESSION

20-2433

01/10

 

HOUSE BILL 1230

 

AN ACT relative to credit for reinsurance.

 

SPONSORS: Rep. Hunt, Ches. 11; Rep. Bartlett, Merr. 19; Sen. Morse, Dist 22

 

COMMITTEE: Commerce and Consumer Affairs

 

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ANALYSIS

 

This bill revises the credit for reinsurance statute to reflect recent NAIC revisions.

 

This bill is a request of the insurance department.

 

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Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

19Feb2020... 0190h

20-2433

01/10

 

STATE OF NEW HAMPSHIRE

 

In the Year of Our Lord Two Thousand Twenty

 

AN ACT relative to credit for reinsurance.

 

Be it Enacted by the Senate and House of Representatives in General Court convened:

 

1  New Paragraph; Foreign Insurance Companies and Their Agents; Credit for Reinsurance.  Amend RSA 405:47 by inserting after paragraph IV-a the following new paragraph:

IV-b.(a)  Credit shall be allowed when the reinsurance is ceded to an assuming insurer meeting each of the conditions set forth in this paragraph.

(1)  The assuming insurer must have its head office or be domiciled in, as applicable, and be licensed in a reciprocal jurisdiction.  A “reciprocal jurisdiction” is a jurisdiction that meets one of the following:

(A)  A non-U.S. jurisdiction that is subject to an in-force covered agreement with the United States, each within its legal authority, or, in the case of a covered agreement between the United States and European Union, is a member state of the European Union.  For purposes of this subparagraph, a “covered agreement” is an agreement entered into pursuant to Dodd-Frank Wall Street Reform and Consumer Protection Act, 31 U.S.C. sections 313 and 314, that is currently in effect or in a period of provisional application and addresses the elimination, under specified conditions, of collateral requirements as a condition for entering into any reinsurance agreement with a ceding insurer domiciled in this state or for allowing the ceding insurer to recognize credit for reinsurance;

(B)  A U.S. jurisdiction that meets the requirements for accreditation under the NAIC financial standards and accreditation program; or

(C)  A qualified jurisdiction, as determined by the commissioner pursuant to RSA 405:47, IV-a(c), which is not otherwise described in subparagraph (A) or (B) and which meets certain additional requirements, consistent with the terms and conditions of in-force covered agreements, as specified by the commissioner in rules.

(2)  The assuming insurer must have and maintain, on an ongoing basis, minimum capital and surplus, or its equivalent, calculated according to the methodology of its domiciliary jurisdiction, in an amount to be set forth in rules.  If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it must have and maintain, on an ongoing basis, minimum capital and surplus equivalents (net of liabilities), calculated according to the methodology applicable in its domiciliary jurisdiction, and a central fund containing a balance in amounts to be set forth in rules.

(3)  The assuming insurer must have and maintain, on an ongoing basis, a minimum solvency or capital ratio, as applicable, which will be set forth in rules.  If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it must have and maintain, on an ongoing basis, a minimum solvency or capital ratio in the reciprocal jurisdiction where the assuming insurer has its head office or is domiciled, as applicable, and is also licensed.

(4)  The assuming insurer must agree and provide adequate assurance to the commissioner, in a form specified by the commissioner pursuant to rules, as follows:

(A)  The assuming insurer must provide prompt written notice and explanation to the commissioner if it falls below the minimum requirements set forth in subparagraphs (a)(2) or (3), or if any regulatory action is taken against it for serious noncompliance with applicable law;

(B)  The assuming insurer must consent in writing to the jurisdiction of the courts of this state and to the appointment of the commissioner as agent for service of process.  The commissioner may require that consent for service of process be provided to the commissioner and included in each reinsurance agreement.  Nothing in this provision shall limit, or in any way alter, the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent such agreements are unenforceable under applicable insolvency or delinquency laws;

(C)  The assuming insurer must consent in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer or its legal successor, that have been declared enforceable in the jurisdiction where the judgment was obtained;

(D)  Each reinsurance agreement must include a provision requiring the assuming insurer to provide security in an amount equal to 100 percent of the assuming insurer’s liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its legal successor on behalf of its resolution estate; and

(E)  The assuming insurer must confirm that it is not presently participating in any solvent scheme of arrangement which involves this state’s ceding insurers, and agree to notify the ceding insurer and the commissioner and to provide security in an amount equal to 100 percent of the assuming insurer’s liabilities to the ceding insurer, should the assuming insurer enter into such a solvent scheme of arrangement.  Such security shall be in a form consistent with the provisions of paragraph IV-a and RSA 405:50 and as specified by the commissioner in rules.

(5)  The assuming insurer or its legal successor must provide, if requested by the commissioner, on behalf of itself and any legal predecessors, certain documentation to the commissioner, as specified by the commissioner in rules.

(6)  The assuming insurer must maintain a practice of prompt payment of claims under reinsurance agreements, pursuant to criteria set forth in rules.

(7)  The assuming insurer’s supervisory authority must confirm to the commissioner on an annual basis, as of the preceding December 31 or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, that the assuming insurer complies with the requirements set forth in subparagraphs (a)(2) and (3).

(8)  Nothing in this paragraph precludes an assuming insurer from providing the commissioner with information on a voluntary basis.

(b)  The commissioner shall timely create and publish a list of reciprocal jurisdictions.

(1)  A list of reciprocal jurisdictions is published through the NAIC committee process.  The commissioner’s list shall include any reciprocal jurisdiction as defined under subparagraphs (a)(1)(A) and (B), and shall consider any other reciprocal jurisdiction included on the NAIC list.  The commissioner may approve a jurisdiction that does not appear on the NAIC list of reciprocal jurisdictions in accordance with criteria to be developed under rules adopted by the commissioner.

(2)  The commissioner may remove a jurisdiction from the list of reciprocal jurisdictions upon a determination that the jurisdiction no longer meets the requirements of a reciprocal jurisdiction, in accordance with a process set forth in rules adopted by the commissioner, except that the commissioner shall not remove from the list a reciprocal jurisdiction as defined under subparagraph (a)(1)(A) and (B).  Upon removal of a reciprocal jurisdiction from this list credit for reinsurance ceded to an assuming insurer which has its home office or is domiciled in that jurisdiction shall be allowed, if otherwise allowed pursuant to RSA 405:47.

(c)  The commissioner shall timely create and publish a list of assuming insurers that have satisfied the conditions set forth in this paragraph and to which cessions shall be granted credit in accordance with this subparagraph.  The commissioner may add an assuming insurer to such list if an NAIC accredited jurisdiction has added such assuming insurer to a list of such assuming insurers or if, upon initial eligibility, the assuming insurer submits the information to the commissioner as required under subparagraph (a)(4) and complies with any additional requirements that the commissioner may impose by rules, except to the extent that they conflict with an applicable covered agreement.

(d)  If the commissioner determines that an assuming insurer no longer meets one or more of the requirements under this subparagraph, the commissioner may revoke or suspend the eligibility of the assuming insurer for recognition under this subparagraph in accordance with procedures set forth in rules.

(1)  While an assuming insurer’s eligibility is suspended, no reinsurance agreement issued, amended or renewed after the effective date of the suspension qualifies for credit except to the extent that the assuming insurer’s obligations under the contract are secured in accordance with RSA 405:50.

(2)  If an assuming insurer’s eligibility is revoked, no credit for reinsurance may be granted after the effective date of the revocation with respect to any reinsurance agreements entered into by the assuming insurer, including reinsurance agreements entered into prior to the date of revocation, except to the extent that the assuming insurer’s obligations under the contract are secured in a form acceptable to the commissioner and consistent with the provisions of RSA 405:50.

(e)  If subject to a legal process of rehabilitation, liquidation, or conservation, as applicable, the ceding insurer, or its representative, may seek and, if determined appropriate by the court in which the proceedings are pending, may obtain an order requiring that the assuming insurer post security for all outstanding ceded liabilities.

(f)  Nothing in this paragraph shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for security or other terms in that reinsurance agreement, except as expressly prohibited by this section or other applicable law or rules.

(g)  Credit may be taken under this subparagraph only for reinsurance agreements entered into, amended, or renewed on or after the effective date of this paragraph, and only with respect to losses incurred and reserves reported on or after the later of (1) the date on which the assuming insurer has met all eligibility requirements pursuant to subparagraph (a), and (2) the effective date of the new reinsurance agreement, amendment, or renewal.

(1)  This paragraph does not alter or impair a ceding insurer’s right to take credit for reinsurance, to the extent that credit is not available under this paragraph, as long as the reinsurance qualifies for credit under any other applicable provision of this section.

(2)  Nothing in this paragraph shall authorize an assuming insurer to withdraw or reduce the security provided under any reinsurance agreement except as permitted by the terms of the agreement.

(3)  Nothing in this paragraph shall limit, or in any way alter, the capacity of parties to any reinsurance agreement to renegotiate the agreement.

2  Foreign Insurance Companies and Their Agents; Credit for Reinsurance.  Amend RSA 405:47, V to read as follows:

V.  Credit shall be allowed when the reinsurance is ceded to an assuming insurer not meeting the requirements of paragraphs I, II, III IV, [or] IV-a, or IV-b but only with respect to the insurance of risks located in the jurisdictions where the reinsurance is required by applicable law or regulation of that jurisdiction.

3  Foreign Insurance Companies and Their Agents; Asset or Reduction From Liability.  Amend the introductory paragraph of RSA 405:50 to read as follows:

An asset or a reduction from liability for the reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of RSA 405:47 shall be allowed in an amount not exceeding the liabilities carried by the ceding insurer ; provided that the commissioner may adopt by rule, pursuant to RSA 541-A, specific additional requirements relating to or setting forth the valuation of assets or reserve credits, the amount and forms of security supporting reinsurance arrangements described in RSA [405:51] 405:50-a, and the circumstances pursuant to which credit shall be reduced or eliminated.  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 under such contract, if 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 in RSA 405:46, III.  This security may be in the form of:

4  Foreign Insurance Companies and Their Agents; Rulemaking for Reinsurance.  Amend RSA 405:50-a, IV(a) and (b) to read as follows:

(a)  Meets the conditions set forth in RSA 405:47, IV-b; or

[(a)] (b)  Is certified in this state; or

[(b)] (c)  Maintains at least $250,000,000 in capital and surplus when determined in accordance with the NAIC Accounting Practices and Procedures Manual, including all amendments thereto adopted by the NAIC, excluding the impact of any permitted or prescribed practices, and is:

(1)  Licensed in at least 26 states; or

(2)  Licensed in at least 10 states and licensed or accredited in a total of at least 35 states.

5  Effective Date.  This act shall take effect 60 days after its passage.

Links

HB1230 at GenCourtMobile
HB1230 Discussion

Action Dates

Date Body Type
Jan. 16, 2020 House Hearing
Feb. 4, 2020 House Exec Session
House Floor Vote
Feb. 19, 2020 House Floor Vote

Bill Text Revisions

HB1230 Revision: 8155 Date: Feb. 19, 2020, 11:19 a.m.
HB1230 Revision: 6868 Date: Dec. 2, 2019, 12:06 p.m.

Docket

Date Status
Jan. 8, 2020 Introduced 01/08/2020 and referred to Commerce and Consumer Affairs
Jan. 16, 2020 Public Hearing: 01/16/2020 09:45 am LOB 302
Jan. 30, 2020 Subcommittee Work Session: 01/30/2020 01:00 pm LOB 302
Feb. 4, 2020 Executive Session: 02/04/2020 10:00 am LOB 302
Feb. 19, 2020 Committee Report: Ought to Pass with Amendment # 2020-0190h for 02/19/2020 (Vote 20-0; CC) HC 7 P. 3
Committee Report: Ought to Pass with Amendment # 2020-0190h (Vote 20-0; CC)
Feb. 19, 2020 Amendment # 2020-0190h: AA VV 02/19/2020
Feb. 19, 2020 Ought to Pass with Amendment 2020-0190h: MA VV 02/19/2020