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A BILL TO BE ENTITLED
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AN ACT
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relating to credit for reinsurance governed by certain covered |
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agreements and ceded to certain assuming insurers. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 493.102(a), Insurance Code, is amended |
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to read as follows: |
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(a) A ceding insurer may be allowed credit for reinsurance |
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ceded, as an asset or as a deduction from liability, only if the |
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reinsurance is ceded to an assuming insurer that: |
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(1) is authorized to engage in the business of |
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insurance or reinsurance in this state; |
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(2) is accredited as a reinsurer in this state, as |
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provided by Section 493.103; |
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(3) subject to Subchapter D, maintains, in a qualified |
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United States financial institution that has been granted the |
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authority to operate with fiduciary powers, a trust fund to pay |
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valid claims of: |
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(A) the assuming insurer's United States |
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policyholders and ceding insurers; and |
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(B) the policyholders' and ceding insurers' |
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assigns and successors in interest; [or] |
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(4) is certified as a reinsurer in this state under |
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Section 493.1033 and maintains adequate collateral as determined by |
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the commissioner; or |
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(5) is an eligible assuming insurer under Section |
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493.108. |
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SECTION 2. Subchapter C, Chapter 493, Insurance Code, is |
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amended by adding Section 493.108 to read as follows: |
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Sec. 493.108. CREDIT ALLOWED FOR CERTAIN ELIGIBLE ASSUMING |
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INSURERS. (a) Credit must be allowed when reinsurance is ceded to |
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an assuming insurer that meets the conditions as required by this |
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section. |
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(b) The assuming insurer must have its principal office or |
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be domiciled in and be licensed in a reciprocal jurisdiction |
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described by Subsection (c). |
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(c) In this section: |
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(1) "Reciprocal jurisdiction" means a jurisdiction |
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that is: |
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(A) a jurisdiction located outside of the United |
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States or, in the case of a covered agreement between the United |
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States and European Union, a member state of the European Union, |
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that is subject to an in-force covered agreement described by |
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Subdivision (2) with the United States, each within its legal |
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authority; |
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(B) a jurisdiction located in the United States |
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that meets the requirements for accreditation under the National |
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Association of Insurance Commissioners financial regulation |
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standards and accreditation program; or |
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(C) a qualified jurisdiction, as determined by |
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the commissioner under Section 493.1035, that is not otherwise |
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described in Paragraph (A) or (B) and meets certain additional |
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requirements, consistent with the in-force covered agreements as |
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specified by the commissioner by rule. |
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(2) "Covered agreement" means an agreement that: |
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(A) is entered into under the Dodd-Frank Wall |
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Street Reform and Consumer Protection Act (31 U.S.C. Sections |
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313-314); |
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(B) is in effect or in a period of provisional |
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application; and |
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(C) addresses the elimination, under specified |
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conditions, of collateral requirements as a condition for entering |
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into a reinsurance agreement with a ceding insurer domiciled in |
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this state or allowing the ceding insurer to recognize credit for |
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reinsurance. |
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(d) The assuming insurer must have and maintain, on an |
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ongoing basis, minimum capital and surplus, or its equivalent, |
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calculated according to the methodology of the assuming insurer's |
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domiciliary jurisdiction, in an amount required by the commissioner |
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by rule. If the assuming insurer is an association, including |
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incorporated and individual unincorporated underwriters, the |
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assuming insurer must have and maintain, on an ongoing basis: |
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(1) minimum capital and surplus equivalents, net of |
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liabilities, calculated according to the methodology of the |
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assuming insurer's domiciliary jurisdiction; and |
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(2) a central fund containing a balance in an amount |
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required by the commissioner by rule. |
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(e) The assuming insurer must have and maintain, on an |
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ongoing basis, a minimum solvency or capital ratio, as applicable, |
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required by the commissioner by rule. If the assuming insurer is an |
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association, including incorporated and individual unincorporated |
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underwriters, the association must have and maintain, on an ongoing |
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basis, a minimum solvency or capital ratio in the reciprocal |
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jurisdiction where the assuming insurer has its principal office or |
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is domiciled and is licensed. |
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(f) The assuming insurer must agree and provide adequate |
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assurance to the commissioner in a form as required by the |
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commissioner by rule, as follows: |
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(1) The assuming insurer must provide prompt written |
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notice and explanation to the commissioner if: |
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(A) the assuming insurer no longer meets the |
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minimum requirements under Subsection (d) or (e); or |
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(B) any regulatory action is taken against the |
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assuming insurer for serious noncompliance with applicable law. |
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(2) The assuming insurer must consent in writing to |
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the jurisdiction of this state's courts and to the appointment of |
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the commissioner as agent for service of process. The commissioner |
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may require that an assuming insurer also include the consent for |
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service of process in each reinsurance agreement to which the |
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assuming insurer is a party. Nothing in this section limits or in |
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any way alters the capacity of parties to a reinsurance agreement to |
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agree to alternative dispute resolution mechanisms except to the |
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extent the agreement is unenforceable under applicable insolvency |
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or delinquency laws. |
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(3) The assuming insurer must consent in writing to |
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pay all final judgments, wherever enforcement is sought, obtained |
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by a ceding insurer or its legal successor, that have been declared |
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enforceable in the jurisdiction where the judgment was obtained. |
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(4) Each reinsurance agreement must require the |
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assuming insurer to provide security in an amount equal to 100 |
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percent of the assuming insurer's liabilities attributable to |
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reinsurance ceded under the reinsurance agreement if the assuming |
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insurer resists enforcement of: |
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(A) a final judgment that is enforceable under |
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the law of the jurisdiction in which the judgment was obtained; or |
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(B) a properly enforceable arbitration award, |
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whether obtained by the ceding insurer or its legal successor on |
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behalf of the ceding insurer's receivership estate. |
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(5) The assuming insurer must: |
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(A) confirm that the assuming insurer is not |
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presently participating in any solvent scheme of arrangement that |
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involves this state's ceding insurers; and |
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(B) if the assuming insurer enters into a solvent |
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scheme of arrangement, agree to notify the ceding insurer and the |
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commissioner that the assuming insurer entered into the scheme of |
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arrangement and provide security in an amount equal to 100 percent |
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of the assuming insurer's liabilities to the ceding insurer. The |
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security required by this paragraph must be in a form consistent |
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with the provisions of this subchapter and required by the |
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commissioner by rule. |
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(g) On request of the commissioner, the assuming insurer or |
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its legal successor, on behalf of the assuming insurer and any legal |
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predecessor of the assuming insurer, must provide to the |
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commissioner documentation required by the commissioner by rule. |
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(h) The assuming insurer must maintain a practice of prompt |
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payment of claims under reinsurance agreements in accordance with |
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criteria established by the commissioner by rule. |
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(i) The assuming insurer's supervisory authority must |
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annually confirm to the commissioner, as of the preceding December |
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31 or the annual date otherwise statutorily reported to the |
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assuming insurer's reciprocal jurisdiction, that the assuming |
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insurer complies with the requirements of Subsection (c)(1)(A) or |
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(B). |
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(j) Nothing in this section prohibits an assuming insurer |
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from voluntarily providing to the commissioner information related |
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to this section. |
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(k) The commissioner shall timely develop and publish a list |
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of reciprocal jurisdictions. |
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(l) The commissioner's list of reciprocal jurisdictions |
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published under Subsection (k) must include any reciprocal |
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jurisdiction described by Subsection (c)(1)(A) or (B). The |
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commissioner shall consider any other reciprocal jurisdiction on |
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the list of reciprocal jurisdictions published through the National |
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Association of Insurance Commissioners committee process. The |
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commissioner may, in accordance with criteria established by the |
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commissioner by rule, approve a jurisdiction that does not appear |
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on the list of reciprocal jurisdictions published through the |
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National Association of Insurance Commissioners committee process |
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to be placed on the list of reciprocal jurisdictions published |
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under Subsection (k). |
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(m) The commissioner may remove a jurisdiction from the list |
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of reciprocal jurisdictions published under Subsection (k) if, in |
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accordance with a process established by the commissioner by rule, |
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the commissioner finds that the jurisdiction ceases to meet the |
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requirements of a reciprocal jurisdiction under this section. |
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Notwithstanding the authority to remove a jurisdiction, the |
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commissioner may not remove from the list a reciprocal jurisdiction |
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described by Subsection (c)(1)(A) or (B). If the commissioner |
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removes a reciprocal jurisdiction from the list published under |
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Subsection (k), credit for reinsurance ceded to an assuming insurer |
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that has its principal office or is domiciled in the removed |
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jurisdiction must be allowed if otherwise allowed under this |
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subchapter. |
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(n) The commissioner shall timely develop and publish a list |
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of assuming insurers that satisfy the conditions imposed by this |
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section and to which cessions must be granted credit under |
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Subsection (a). The commissioner may add an assuming insurer to the |
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list developed and published under this subsection if a National |
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Association of Insurance Commissioners' accredited jurisdiction |
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has added the assuming insurer to the accredited jurisdiction's |
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list of eligible assuming insurers or if, on initial eligibility, |
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the assuming insurer submits to the commissioner the information |
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required by Subsection (f) and complies with any additional |
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requirements imposed by the commissioner by rule except to the |
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extent that the additional requirements conflict with the |
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applicable covered agreement. |
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(o) If the commissioner finds that an assuming insurer |
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ceases to meet one or more of the requirements under this section, |
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the commissioner may revoke or suspend the assuming insurer's |
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eligibility under this section in accordance with procedures |
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established by the commissioner by rule. |
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(p) If an assuming insurer's eligibility is suspended, no |
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reinsurance agreement issued, amended, or renewed after the |
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effective date of the suspension qualifies for credit during the |
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period of suspension except to the extent that the assuming |
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insurer's obligations under the agreement are secured in accordance |
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with Section 493.104. |
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(q) If an assuming insurer's eligibility is revoked, no |
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credit for reinsurance may be granted after the effective date of |
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the revocation with respect to any reinsurance agreements entered |
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into by the assuming insurer, including reinsurance agreements |
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entered into before the date of revocation except to the extent that |
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the assuming insurer's obligations under the contract are secured |
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in a form acceptable to the commissioner and consistent with the |
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provisions of Section 493.104. |
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(r) If a ceding insurer is subject to rehabilitation, |
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liquidation, or conservation, the ceding insurer or its |
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representative may seek and, if found appropriate by the court in |
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which the rehabilitation, liquidation, or conservation proceedings |
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are pending, obtain an order requiring the assuming insurer to post |
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security for all outstanding ceded liabilities. |
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(s) Nothing in this section limits or in any way alters the |
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capacity of parties to a reinsurance agreement to agree on |
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requirements for security or other terms in that reinsurance |
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agreement, except as expressly prohibited by law. |
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(t) This section does not alter or impair a ceding insurer's |
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right to take credit for reinsurance to the extent that credit is |
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not available under this section if the reinsurance otherwise |
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qualifies for credit under this subchapter. |
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(u) Nothing in this section authorizes an assuming insurer |
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to withdraw or reduce the security provided under any reinsurance |
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agreement except as permitted by the agreement. |
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(v) Nothing in this section limits or in any way alters the |
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capacity of parties to any reinsurance agreement to renegotiate the |
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agreement. |
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(w) This section applies only to: |
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(1) credit under a reinsurance agreement that is |
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delivered, issued for delivery, or renewed on or after January 1, |
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2022; and |
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(2) losses incurred and reserves reported on or after |
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the later of: |
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(A) the date on which the assuming insurer has |
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met all eligibility requirements under this section; and |
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(B) the effective date of the applicable |
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reinsurance agreement, amendment, or renewal. |
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SECTION 3. (a) The commissioner of insurance shall |
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prescribe and publish a list of reciprocal jurisdictions under |
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Section 493.108, Insurance Code, as added by this Act, not later |
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than January 1, 2022. |
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(b) The commissioner of insurance shall prescribe and |
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publish a list of eligible assuming insurers under Section 493.108, |
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Insurance Code, as added by this Act, not later than January 1, |
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2022. |
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(c) Section 493.108, Insurance Code, as added by this Act, |
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does not: |
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(1) change or impair a ceding insurer's right to take |
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credit for reinsurance even though the credit is not available |
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under Section 493.108, Insurance Code, as added by this Act, if the |
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reinsurance otherwise qualifies for credit under Subchapter C, |
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Chapter 493, Insurance Code; |
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(2) authorize an assuming insurer to withdraw or |
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reduce the security provided under a reinsurance agreement in |
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effect on the effective date of this Act except as permitted by the |
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agreement; or |
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(3) change or impair the capacity of parties to a |
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reinsurance agreement to renegotiate the agreement. |
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SECTION 4. This Act takes effect January 1, 2022. |