By: Smithee H.B. No. 3086

A BILL TO BE ENTITLED

AN ACT

relating to credit for reinsurance allowed domestic ceding insurers for reinsurance ceded to unauthorized assuming insurers determined to be acceptable by the Commissioner.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 1. Subchapter C, Chapter 493, Insurance Code is amended to read as follows:

Sec. 493.102. CREDIT FOR REINSURANCE GENERALLY. (a) A ceding insurer may be allowed credit for reinsurance ceded, as an asset or as a deduction from liability, only if the reinsurance is ceded to an assuming insurer that:

(1) is authorized to engage in the business of insurance or reinsurance in this state;

(2) is accredited as a reinsurer in this state, as provided by Section 493.103; [or]

(3) subject to Subchapter D, maintains, in a qualified United States financial institution that has been granted the authority to operate with fiduciary powers, a trust fund to pay valid claims of:

(A) the assuming insurer's United States policyholders and ceding insurers; and

(B) the policyholders' and ceding insurers' assigns and successors in interest.; or

(4) is determined by the Commissioner to meet the requirements of Section 493.108.

(b) Notwithstanding Subsection (a), a ceding insurer may be allowed credit for reinsurance ceded to an assuming insurer that does not meet the requirements of that subsection, but only with respect to the insurance of risks located in a jurisdiction in which the reinsurance is required by the jurisdiction's law, including regulations, to be ceded to an assuming insurer that does not meet the requirements of that subsection.

SECTION 2. Subchapter C, Chapter 493, Insurance Code, is amended by adding Section 493.108 to read as follows:

Sec. 493.108. CREDIT ALLOWED FOR CERTAIN APPROVED REINSURERS (a) An asset or deduction from liability shall be allowed for reinsurance ceded to an assuming insurer which holds surplus, or its equivalent, in excess of $250 million and which the Commissioner, in his or her discretion, determines is an acceptable risk. In determining whether credit should be allowed under this subsection, the Commissioner shall consider the following:

(1) That the reinsurer has a secure financial strength rating from at least two nationally recognized statistical rating organizations deemed acceptable by the commissioner. The commissioner shall give appropriate consideration to insurer group ratings that have been issued.

(2) The structure and authority of the domiciliary regulator with regard to solvency regulation requirements and the financial surveillance of the reinsurer.

(3) The substance of financial and operating standards for reinsurers in the domiciliary jurisdiction.

(4) The form and substance of financial reports required to be filed by the reinsurers in the domiciliary jurisdiction or other public financial statements filed in accordance with generally accepted accounting principles.

(5) The domiciliary regulator's willingness to cooperate with United States regulators in general and the Department of Insurance in particular, including the existence of any memorandum of understanding which the Commissioner believes is required to ensure necessary regulatory cooperation.

(6) Whether the domiciliary jurisdiction of the reinsurer imposes credit for reinsurance requirements on US reinsurers that are at least as favorable as those provided by the provisions of Sections 493.101 through 493.108 of the Texas Insurance Code.

(7) The history of performance by reinsurers in the domiciliary jurisdiction.

(8) Any documented evidence of substantial problems with enforcement of valid United States judgments in the domiciliary jurisdiction.

(9) Any other matters deemed relevant by the commissioner.

(b) The commissioner may, in lieu of granting full credit under this section, reduce the amount required to be held under Section 493.104.

SECTION 3. This Act applies only to a reinsurance contract entered into or renewed on or after September 1, 2011.

SECTION 4. This Act takes effect September 1, 2011.