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House Study Bill 544 - IntroducedA Bill ForAn Act 1relating to credit allowed to domestic ceding insurers
2for reinsurance ceded to reinsurers, and including
3applicability provisions.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 521B.101A Definitions.
2For purposes of this chapter, unless the context otherwise
3requires:
41. “Commissioner” means the commissioner of insurance.
52. “NAIC” means the national association of insurance
6commissioners.
7 Sec. 2. Section 521B.102, unnumbered paragraph 1, Code
82020, is amended to read as follows:
9Credit for reinsurance shall be allowed a domestic ceding
10insurer as either an asset or a reduction from liability on
11account of reinsurance ceded only when the reinsurer meets
12the requirements of subsection 1, 2, 3, 4, 5, 5A, or 6. The
13commissioner may adopt rules pursuant to section 521B.105
14specifying additional requirements related to the valuation of
15assets or reserve credits, the amount and forms of security
16supporting reinsurance arrangements described in section
17521B.105, and the circumstances pursuant to which credit shall
18be reduced or eliminated. Credit shall be allowed under
19subsection 1, 2, or 3 only respecting cessions of those kinds
20or classes of business which the assuming insurer is licensed
21or otherwise permitted to write or assume in the assuming
22 insurer’s state of domicile or, in the case of a United States
23branch of an alien assuming insurer, in the state through
24which the alien assuming insurer is entered and licensed to
25transact insurance or reinsurance. Credit shall be allowed
26under subsection 3 or 4 only if the applicable requirements of
27subsection 7 have been satisfied.
28 Sec. 3. Section 521B.102, subsection 2, paragraph e, Code
292020, is amended to read as follows:
30e. Demonstrate to the satisfaction of the commissioner that
31the assuming insurer has adequate financial capacity to meet
32the assuming insurer’s reinsurance obligations and is otherwise
33qualified to assume reinsurance from domestic insurers. An
34assuming insurer is deemed to meet this requirement as of the
35time of the assuming insurer’s application if the assuming
-1-1insurer maintains a surplus as regards policyholders in an
2amount of not less than twenty million dollars and the assuming
3insurer’s accreditation has not been denied by the commissioner
4within ninety calendar days after submission of the assuming
5insurer’s application.
6 Sec. 4. Section 521B.102, subsection 3, paragraph a,
7unnumbered paragraph 1, Code 2020, is amended to read as
8follows:
9Credit shall be allowed when the reinsurance is ceded to
10an assuming insurer that is domiciled in, or in the case of a
11United States branch of an alien assuming insurer, is entered
12through, a state that employs standards regarding credit for
13reinsurance that are substantially similar to those applicable
14under this chapter and the assuming insurer or United States
15branch of an alien assuming insurer does all of the following:
16 Sec. 5. Section 521B.102, subsection 4, paragraph a, Code
172020, is amended to read as follows:
18a. Credit shall be allowed when the reinsurance is ceded
19to an assuming insurer that maintains a trust fund in a
20qualified United States financial institution, as defined
21in section 521B.104, subsection 2, for payment of the valid
22claims of the assuming insurer’s United States ceding insurers,
23their assigns, and successors in interest. To enable the
24commissioner to determine the sufficiency of the trust fund,
25the assuming insurer shall report annually to the commissioner
26information substantially the same as that required to be
27reported by licensed insurers on the national association of
28insurance commissioners’ NAIC annual statement form by licensed
29insurers. The assuming insurer shall submit to examination of
30the assuming insurer’s books and records by the commissioner
31and bear the expense of examination.
32 Sec. 6. Section 521B.102, subsection 4, paragraph b,
33subparagraph (2), Code 2020, is amended to read as follows:
34(2) The form of the trust and any trust amendments are
35filed with the commissioner of every state in which the ceding
-2-1insurer’s insurer beneficiaries of the trust are domiciled.
2The trust instrument shall provide that contested claims are
3valid and enforceable upon the final order of any court of
4competent jurisdiction in the United States. The trust shall
5vest legal title to the trust’s assets in its trustees for
6the benefit of the assuming insurer’s United States ceding
7insurers, their assigns, and successors in interest. The trust
8and the assuming insurer shall be subject to examination as
9determined by the commissioner.
10 Sec. 7. Section 521B.102, subsection 4, paragraph c,
11subparagraph (3), subparagraph division (e), Code 2020, is
12amended to read as follows:
13(e) Within ninety calendar days after its financial
14statements are due to be filed with the group’s domiciliary
15regulator, the group shall provide to the commissioner an
16annual certification by the group’s domiciliary regulator of
17the solvency of each underwriter member, or if a certification
18is unavailable, financial statements, prepared by independent
19public accountants, of each underwriter member of the group.
20 Sec. 8. Section 521B.102, subsection 4, paragraph c,
21subparagraph (4), subparagraph division (e), Code 2020, is
22amended to read as follows:
23(e) Within ninety calendar days after the group’s financial
24statements are due to be filed with the group’s domiciliary
25regulator, make available to the commissioner an annual
26certification of each underwriter member’s solvency by the
27member’s domiciliary regulator and financial statements of
28each underwriter member of the group prepared by the group’s
29independent public accountant.
30 Sec. 9. Section 521B.102, subsection 5, paragraph a,
31subparagraph (4), Code 2020, is amended to read as follows:
32(4) The assuming insurer shall agree to submit to the
33jurisdiction of this state, to appoint the commissioner as the
34assuming insurer’s agent for service of process in this state,
35and agree to provide security for one hundred percent of the
-3-1assuming insurer’s liabilities attributable to reinsurance
2ceded by United States ceding insurers, if the assuming insurer
3resists enforcement of a final United States judgment.
4 Sec. 10. Section 521B.102, subsection 5, paragraph b,
5subparagraph (3), Code 2020, is amended to read as follows:
6(3) Within ninety calendar days after the association’s
7financial statements are due to be filed with the association’s
8domiciliary regulator, the association shall provide to the
9commissioner an annual certification by the association’s
10domiciliary regulator, of the solvency of each underwriter
11member, or if a certification is unavailable, financial
12statements, prepared by an independent public accountant, of
13each underwriter member of the association.
14 Sec. 11. Section 521B.102, subsection 5, paragraph c,
15subparagraphs (1), (2), and (3), Code 2020, are amended to read
16as follows:
17(1) In order to determine whether the domiciliary
18jurisdiction of a non-United States assuming insurer is
19eligible to be recognized as a qualified jurisdiction,
20the commissioner shall evaluate the appropriateness and
21effectiveness of the reinsurance supervisory system of the
22jurisdiction, both initially and on an ongoing basis, and
23consider the rights, benefits, and the extent of reciprocal
24recognition afforded by the non-United States jurisdiction
25to reinsurers licensed and domiciled in the United States.
26In order to be recognized as a qualified jurisdiction, a
27jurisdiction must agree to share information and to cooperate
28with the commissioner with respect to all certified reinsurers
29domiciled within that jurisdiction. A jurisdiction shall not
30be recognized as a qualified jurisdiction if the commissioner
31has determined that the jurisdiction does not adequately and
32promptly enforce final United States judgments and arbitration
33awards. Additional factors may be considered in the discretion
34of the commissioner.
35(2) A list of qualified jurisdictions shall be published
-4-1through the national association of insurance commissioners’
2 NAIC committee process. The commissioner shall consider
3this list in determining qualified jurisdictions. If the
4commissioner recognizes a jurisdiction as qualified that does
5not appear on the NAIC list of qualified jurisdictions, the
6commissioner shall provide thoroughly documented justification
7for the recognition in accordance with criteria to be developed
8by rule as specified in rules adopted by the commissioner.
9(3) United States jurisdictions that meet the requirements
10for accreditation under the national association of insurance
11commissioners’ NAIC financial standards and accreditation
12program shall be recognized as qualified jurisdictions.
13 Sec. 12. Section 521B.102, subsection 5, paragraph e,
14subparagraph (5), subparagraph division (b), Code 2020, is
15amended to read as follows:
16(b) If the commissioner continues to assign a higher rating
17to a certified reinsurer as permitted by other provisions of
18this subsection section, this requirement does not apply to a
19certified reinsurer in inactive status or to a reinsurer whose
20certification has been suspended.
21 Sec. 13. Section 521B.102, subsection 5, paragraph f, Code
222020, is amended to read as follows:
23f. If an assuming insurer applying for certification as a
24reinsurer in this state has been certified as a reinsurer in
25another jurisdiction accredited by the national association
26of insurance commissioners NAIC, the commissioner has the
27discretion to defer to that jurisdiction’s certification, and
28has the discretion to defer to the rating assigned by that
29jurisdiction, and the assuming insurer shall be considered to
30be a certified reinsurer in this state.
31 Sec. 14. Section 521B.102, Code 2020, is amended by adding
32the following new subsection:
33 NEW SUBSECTION. 5A. a. Credit shall be allowed when the
34reinsurance is ceded to an assuming insurer that meets all of
35the following conditions:
-5- 1(1) The assuming insurer must have its head office located
2in or be domiciled in, as applicable, and be licensed in, a
3reciprocal jurisdiction. For purposes of this subsection, a
4“reciprocal jurisdiction” is a jurisdiction that meets at least
5one of the following requirements:
6(a) A non-United States jurisdiction that is subject to an
7in-force covered agreement with the United States, each within
8its legal authority, or, in the case of a covered agreement
9between the United States and the European Union, is a member
10state of the European Union. For purposes of this subsection,
11a “covered agreement” is an agreement entered into pursuant to
12Tit.V, §502(a)(3), 31 U.S.C. §§313-314, of the Dodd-Frank Wall
13Street Reform and Consumer Protection Act, Pub.L.No.111-203,
14that is currently in effect or in a period of provisional
15application and that addresses the elimination, under specified
16conditions, of collateral requirements as a condition for
17entering into any reinsurance agreement with a ceding insurer
18domiciled in this state or for allowing the ceding insurer to
19recognize credit for reinsurance.
20(b) A United States jurisdiction that meets the
21requirements for accreditation under the NAIC financial
22regulation standards and accreditation program.
23(c) A qualified jurisdiction, as determined by the
24commissioner pursuant to subsection 5, paragraph “c”, which is
25not otherwise described in this paragraph or paragraph “b”,
26and that meets certain additional requirements consistent with
27the terms and conditions of an in-force covered agreement as
28specified in rules adopted by the commissioner.
29(2) The assuming insurer must have and maintain, on an
30ongoing basis, minimum capital and surplus, or its equivalent,
31calculated according to the methodology of the assuming
32insurer’s domiciliary jurisdiction, in an amount specified in
33rules adopted by the commissioner. If the assuming insurer
34is an association, including incorporated and individual
35unincorporated underwriters, the assuming insurer must have
-6-1and maintain, on an ongoing basis, minimum capital and surplus
2equivalents, net of liabilities, calculated according to the
3methodology applicable in the assuming insurer’s domiciliary
4jurisdiction, and a central fund containing a balance in an
5amount as specified in rules adopted by the commissioner.
6(3) The assuming insurer must have and maintain, on
7an ongoing basis, a minimum solvency or capital ratio, as
8applicable, as specified in rules adopted by the commissioner.
9If the assuming insurer is an association, including
10incorporated and individual unincorporated underwriters,
11the assuming insurer must have and maintain, on an ongoing
12basis, a minimum solvency or capital ratio in the reciprocal
13jurisdiction where the assuming insurer has its head office or
14is domiciled, as applicable, and where the assuming insurer is
15also licensed.
16(4) The assuming insurer must agree and shall provide
17to the commissioner, in the form and manner specified by the
18commissioner, adequate assurance of all of the following:
19(a) Prompt written notice and explanation if the assuming
20insurer falls below the minimum requirements set forth in
21subparagraph (2) or (3) of this paragraph, or if any regulatory
22action is taken against the assuming insurer for serious
23noncompliance with any applicable law.
24(b) Written consent that the assuming insurer shall submit
25to the jurisdiction of the courts of this state and to the
26appointment of the commissioner as agent for service of
27process. The commissioner may also require that consent for
28service of process be included in each reinsurance agreement
29entered into by the assuming insurer. This subparagraph
30division shall not limit or alter the capacity of the parties
31to a reinsurance agreement to agree to alternative dispute
32resolution, except to the extent such alternative dispute
33resolution is unenforceable under applicable insolvency or
34delinquency laws.
35(c) Written agreement that the assuming insurer shall pay
-7-1all final judgments, wherever enforcement is sought, obtained
2against the assuming insurer by a ceding insurer, or the ceding
3insurer’s legal successor, that have been declared enforceable
4in the jurisdiction in which the final judgment is obtained.
5(d) Each reinsurance agreement must include a provision
6requiring the assuming insurer to provide security in an
7amount equal to one hundred percent of the assuming insurer’s
8liabilities attributable to reinsurance ceded pursuant to
9that reinsurance agreement if the assuming insurer resists
10enforcement of a final judgment that is enforceable under the
11law of the jurisdiction in which the final judgment is obtained
12or under an enforceable arbitration award, whether obtained by
13the ceding insurer or by the ceding insurer’s legal successor
14on behalf of the ceding insurer’s resolution estate.
15(e) Written confirmation that the assuming insurer is not
16presently participating in any solvent scheme of arrangement
17which involves this state’s ceding insurers, and written
18agreement that the assuming insurer shall notify the ceding
19insurer and the commissioner and shall provide security in an
20amount equal to one hundred percent of the assuming insurer’s
21liabilities to the ceding insurer, should the assuming insurer
22enter into such a solvent scheme of arrangement. Such security
23shall be in a form consistent with the provisions of subsection
245, and section 521B.103.
25(5) The assuming insurer or the assuming insurer’s legal
26successor shall provide to the commissioner, on behalf of
27itself and any legal predecessors, any documentation required
28pursuant to rules adopted by the commissioner.
29(6) Pursuant to rules adopted by the commissioner, the
30assuming insurer shall maintain prompt payment of claims under
31all reinsurance agreements.
32(7) The assuming insurer’s supervisory authority shall
33annually confirm to the commissioner that as of the preceding
34December 31, or as of the annual date otherwise statutorily
35reported to the reciprocal jurisdiction, the assuming insurer
-8-1complies with the requirements set forth in subparagraphs (2)
2and (3) of this paragraph.
3(8) An assuming insurer shall not be precluded from
4voluntarily providing any information to the commissioner.
5b. The commissioner shall timely create and publish a list
6of reciprocal jurisdictions.
7(1) The commissioner’s list shall include any reciprocal
8jurisdiction as defined under paragraph “a”, subparagraph
9(1), subparagraph divisions (a) and (b), and the commissioner
10shall consider any other reciprocal jurisdiction included on
11the list of reciprocal jurisdictions published through the
12NAIC committee process. Pursuant to criteria established
13by rules adopted by the commissioner, the commissioner may
14approve a jurisdiction that does not appear on the NAIC list of
15reciprocal jurisdictions.
16(2) The commissioner may remove a jurisdiction from the
17list of reciprocal jurisdictions upon a determination that the
18jurisdiction no longer meets the requirements of a reciprocal
19jurisdiction, pursuant to a process established by rules
20adopted by the commissioner, except that the commissioner shall
21not remove a reciprocal jurisdiction as defined under paragraph
22“a”, subparagraph (1), subparagraph divisions (a) and (b).
23Upon removal of a reciprocal jurisdiction from the list of
24reciprocal jurisdictions, credit for reinsurance ceded to an
25assuming insurer which has its home office in or is domiciled
26in that reciprocal jurisdiction shall be allowed if otherwise
27allowed pursuant to this chapter.
28c. The commissioner shall timely create and publish a
29list of assuming insurers that have satisfied the conditions
30in this subsection and to which cessions shall be granted
31credit pursuant to this subsection. The commissioner may
32add an assuming insurer to the list if a NAIC accredited
33jurisdiction has added the assuming insurer to the NAIC
34accredited jurisdiction’s list of assuming insurers or if,
35upon initial eligibility, the assuming insurer submits the
-9-1information required under paragraph “a”, subparagraph (4), to
2the commissioner and complies with any additional requirements
3pursuant to rules adopted by the commissioner, except to the
4extent that any of those rules conflict with an applicable
5covered agreement.
6d. If the commissioner determines that an assuming insurer
7no longer meets one or more of the requirements under this
8subsection, the commissioner may revoke or suspend the
9eligibility of the assuming insurer for recognition under this
10subsection in accordance with procedures established by rules
11adopted by the commissioner.
12(1) While an assuming insurer’s eligibility is suspended,
13any reinsurance agreement issued, amended, or renewed after the
14effective date of the suspension does not qualify for credit
15except to the extent that the assuming insurer’s obligations
16under the reinsurance agreement are secured in accordance with
17section 521B.103.
18(2) If an assuming insurer’s eligibility is revoked, credit
19for reinsurance shall not be granted after the effective date
20of the revocation with respect to any reinsurance agreements
21entered into by the assuming insurer, including reinsurance
22agreements entered into prior to the date of revocation, except
23to the extent that the assuming insurer’s obligations under
24the reinsurance agreement are secured in a form acceptable to
25the commissioner and consistent with the provisions of section
26521B.103.
27e. If subject to a legal process of rehabilitation,
28liquidation, or conservation, as applicable, the ceding
29insurer or the ceding insurer’s representative may seek, and if
30determined appropriate by the court in which such legal process
31is pending, may obtain an order requiring that the assuming
32insurer post security for all outstanding ceded liabilities.
33f. This subsection shall not limit or alter the capacity of
34the parties to a reinsurance agreement to agree on requirements
35for security or other terms in the reinsurance agreement,
-10-1except as expressly prohibited by this chapter or any other
2applicable law or regulation.
3g. (1) Credit may be taken under this subsection only for
4reinsurance agreements entered into, amended, or renewed on or
5after July 1, 2020, and only with respect to losses incurred
6and reserves reported on or after the later of the date on
7which the assuming insurer has met all eligibility requirements
8pursuant to this subsection, and the effective date of the new
9reinsurance agreement, amendment, or renewal.
10(2) This paragraph shall not alter or impair a ceding
11insurer’s right to take credit for reinsurance, to the extent
12that credit is not available under this subsection, as long as
13the reinsurance qualifies for credit under any other applicable
14provision of this chapter.
15h. This subsection shall not authorize an assuming
16insurer to withdraw or reduce the security provided under any
17reinsurance agreement except as permitted by the terms of the
18reinsurance agreement.
19i. This subsection shall not limit or alter the capacity
20of parties to any reinsurance agreement to renegotiate the
21reinsurance agreement.
22 Sec. 15. Section 521B.102, subsections 6 and 7, Code 2020,
23are amended to read as follows:
246. Credit shall be allowed when reinsurance is ceded to
25an assuming insurer that does not meet the requirements of
26subsection 1, 2, 3, 4, or 5, or 5A, but only as to the insurance
27of risks located in jurisdictions where the reinsurance is
28required by applicable law or regulation of that jurisdiction.
297. a. If the assuming insurer is not licensed, accredited,
30or certified to transact insurance or reinsurance in this
31state, the credit permitted by subsections 3 and 4 shall not be
32allowed unless the assuming insurer agrees in the reinsurance
33agreements agreement to do all of the following:
34(1) In the event of the failure of the assuming insurer
35to perform its obligations under the terms of the reinsurance
-11-1agreement, the assuming insurer, at the request of the ceding
2insurer, will shall submit to the jurisdiction of any court of
3competent jurisdiction in any state of the United States, will
4 shall comply with all requirements necessary to give the court
5jurisdiction, and will shall abide by the final decision of the
6court or of any appellate court in the event of any appeal,
7concerning such failure.
8(2) The assuming insurer will shall designate the
9commissioner or a designated attorney as its true and lawful
10attorney to receive lawful process in any action, suit, or
11proceeding instituted by or on behalf of the ceding insurer.
12b. This subsection is not intended to conflict with or
13override the obligation of the parties to a reinsurance
14agreement to arbitrate their disputes a dispute if the
15obligation for the parties to arbitrate disputes is created in
16the reinsurance agreement.
17 Sec. 16. Section 521B.102, subsection 8, unnumbered
18paragraph 1, Code 2020, is amended to read as follows:
19If the assuming insurer does not meet the requirements
20of subsection 1, 2, or 3, or 5A, the credit permitted by
21subsection 4 or 5 shall not be allowed unless the assuming
22insurer agrees in a trust agreement to satisfy the following
23conditions:
24 Sec. 17. Section 521B.102, subsection 9, unnumbered
25paragraph 1, Code 2020, is amended to read as follows:
26If an accredited or certified reinsurer ceases to meet
27the requirements of for accreditation or certification
28pursuant to this section for accreditation or certification,
29the commissioner may suspend or revoke the reinsurer’s
30accreditation or certification.
31 Sec. 18. Section 521B.102, subsection 9, paragraph b, Code
322020, is amended to read as follows:
33b. While a reinsurer’s accreditation or certification is
34suspended, a reinsurance contract issued or renewed after the
35effective date of the suspension does not qualify for credit
-12-1except to the extent that the reinsurer’s obligations under the
2reinsurance contract are secured in accordance with section
3521B.103. If a reinsurer’s accreditation or certification is
4revoked, credit for reinsurance shall not be granted after the
5effective date of the revocation except to the extent that the
6reinsurer’s obligations under the reinsurance contract are
7secured in accordance with subsection 5, paragraph “e”, or
8section 521B.103.
9 Sec. 19. Section 521B.102, subsection 10, paragraphs a and
10b, Code 2020, are amended to read as follows:
11a. A domestic ceding insurer shall take steps to manage
12its reinsurance recoverables proportionate to its own book
13of business. A domestic ceding insurer shall notify the
14commissioner within thirty calendar days after reinsurance
15recoverables from any single assuming insurer, or group
16of affiliated assuming insurers, exceeds fifty percent
17of the domestic ceding insurer’s last reported surplus to
18policyholders, or after it is determined the domestic ceding
19insurer has determined that reinsurance recoverables from
20any single assuming insurer, or group of affiliated assuming
21insurers, is likely to exceed this limit. The notification
22shall demonstrate that the exposure is safely managed by the
23domestic ceding insurer.
24b. A domestic ceding insurer shall take steps to diversify
25its reinsurance program. A domestic ceding insurer shall
26notify the commissioner within thirty calendar days after
27ceding to any single assuming insurer, or group of affiliated
28assuming insurers, more than twenty percent of the domestic
29ceding insurer’s gross written premium in the prior calendar
30year, or after the domestic ceding insurer has determined that
31the reinsurance ceded to any single assuming insurer, or group
32of affiliated assuming insurers, is likely to exceed this
33limit. The notification shall demonstrate that the exposure is
34safely managed by the domestic ceding insurer.
35 Sec. 20. Section 521B.103, Code 2020, is amended to read as
-13-1follows:
2521B.103 Limited credit allowed other domestic ceding
3insurers.
41. An asset or a reduction from liability for reinsurance
5ceded by a domestic insurer to an assuming insurer not meeting
6the requirements of section 521B.102, shall be allowed in an
7amount not exceeding the liabilities carried by the ceding
8insurer. The commissioner may adopt rules pursuant to section
9521B.105 specifying requirements related to the valuation of
10assets or reserve credits, the amount and forms of security
11supporting reinsurance arrangements described in section
12521B.105, and the circumstances pursuant to which credit shall
13be reduced or eliminated. The reduction shall be in the
14amount of funds held by or on behalf of the ceding insurer,
15including funds held in trust for the ceding insurer, under a
16reinsurance contract with the assuming insurer as security for
17the payment of obligations under the reinsurance contract, if
18the security is held in the United States subject to withdrawal
19solely by, and under the exclusive control of, the ceding
20insurer, or in the case of a trust, held in a qualified United
21States financial institution as defined in section 521B.104,
22subsection 2.
232. The security may be in the form of any of the following:
24a. Cash.
25b. A security listed by the securities valuation office
26of the national association of insurance commissioners NAIC,
27including those securities deemed exempt from filing as
28defined by the purposes and procedures manual of the securities
29valuation office and those securities qualifying as admitted
30assets.
31c. (1) Clean, irrevocable, unconditional letters of credit,
32issued or confirmed by a qualified United States financial
33institution, as defined in section 521B.104, subsection 1,
34effective no later than December 31 of the year for which the
35filing is being made, and in the possession of, or in trust
-14-1for, the ceding insurer on or before the filing date of the
2ceding insurer’s annual statement.
3(2) A letter of credit meeting applicable standards
4of issuer acceptability as of the date of the issuance or
5confirmation of the letter of credit’s issuance or confirmation
6 credit shall, notwithstanding the issuing or confirming
7institution’s subsequent failure to meet applicable standards
8of issuer acceptability, continue to be acceptable as security
9until the expiration, extension, renewal, modification, or
10amendment of the letter of credit, whichever occurs first.
11d. Any other form of security acceptable to the
12commissioner.
13 Sec. 21. Section 521B.104, subsection 1, paragraph c, Code
142020, is amended to read as follows:
15c. Has been determined by either the commissioner or the
16securities valuation office of the national association of
17insurance commissioners NAIC to meet the standards of financial
18condition and standing as are considered necessary and
19appropriate to regulate the quality of financial institutions
20whose letters of credit will be acceptable to the commissioner.
21 Sec. 22. Section 521B.105, subsection 1, Code 2020, is
22amended to read as follows:
231. The commissioner may adopt rules, pursuant to chapter
2417A, as necessary or convenient to administer this chapter.
25 Sec. 23. Section 521B.105, subsection 2, paragraph a,
26unnumbered paragraph 1, Code 2020, is amended to read as
27follows:
28A rule adopted pursuant to this subsection is applicable
29only to reinsurance arrangements relating to any of the
30following:
31 Sec. 24. Section 521B.105, subsection 2, paragraph a,
32subparagraph (5), Code 2020, is amended to read as follows:
33(5) Other life and health insurance and annuity products as
34to which the national association of insurance commissioners
35 NAIC adopts model regulatory requirements with respect to
-15-1credit for reinsurance.
2 Sec. 25. Section 521B.105, subsection 2, paragraph c, Code
32020, is amended to read as follows:
4c. A rule adopted pursuant to this subsection may require
5the ceding insurer, in calculating the amounts or forms of
6security required to be held under rules adopted under this
7subsection, to use the valuation manual as defined in section
8508.36, including all amendments adopted by the national
9association of insurance commissioners NAIC and in effect on
10the date as of which the calculation is made, to the extent
11applicable.
12 Sec. 26. Section 521B.105, subsection 3, Code 2020, is
13amended to read as follows:
143. A rule adopted pursuant to this section is not applicable
15to cessions to an assuming insurer that meets either any of the
16following requirements:
17a. Meets the conditions set forth in section 521B.102,
18subsection 6.
19a. b. Is certified in Iowa.
20b. c. Maintains at least two hundred fifty million dollars
21in capital and surplus when determined in accordance with the
22accounting practices and procedures manual of the national
23association of insurance commissioners NAIC, including all
24amendments adopted by the national association of insurance
25commissioners NAIC, but excluding the impact of any permitted
26or prescribed practices; and meets either of the following
27requirements:
28(1) Is licensed in at least twenty-six states.
29(2) Is licensed in at least ten states, and is licensed or
30accredited in a total of at least thirty-five states.
31 Sec. 27. APPLICABILITY. This Act applies to all cessions
32under reinsurance agreements that have an inception,
33anniversary, or renewal date on or after July 1, 2020.
34EXPLANATION
35The inclusion of this explanation does not constitute agreement with
-16-1the explanation’s substance by the members of the general assembly.
2This bill relates to credit allowed to domestic ceding
3insurers for reinsurance ceded to reinsurers.
4The bill amends Code chapter 521B (credit for reinsurance)
5to conform more closely to the national association of
6insurance commissioners’ (NAIC) credit for reinsurance model
7act.
8The bill provides that credit is allowed when reinsurance is
9ceded to an assuming insurer that has its head office located
10in, or is domiciled in, and is licensed in, a reciprocal
11jurisdiction. A “reciprocal jurisdiction” is defined in the
12bill as a jurisdiction that is a non-United States jurisdiction
13that is subject to an in-force covered agreement with the
14United States, or a United States jurisdiction that meets
15the requirements for accreditation under the NAIC financial
16regulation standards and accreditation program, or a qualified
17jurisdiction as determined by the commissioner that meets
18certain additional requirements consistent with the terms and
19conditions of an in-force covered agreement.
20“Covered agreement” is defined in the bill as an agreement
21entered into pursuant to Tit.V, §502(a)(3), 31 U.S.C.
22§§313-314, of the Dodd-Frank Wall Street Reform and Consumer
23Protection Act, that is currently in effect or in a period of
24provisional application and that addresses the elimination,
25under specified conditions, of collateral requirements as a
26condition for entering into a reinsurance agreement with a
27ceding insurer domiciled in this state, or for allowing the
28ceding insurer to recognize credit for reinsurance.
29The bill requires an assuming insurer to maintain minimum
30capital and surplus, or its equivalent, calculated according
31to the methodology of the assuming insurer’s domiciliary
32jurisdiction, in an amount specified by the commissioner
33of insurance (commissioner). If an assuming insurer is
34an association, including incorporated and individual
35unincorporated underwriters, the assuming insurer must
-17-1maintain minimum capital and surplus equivalents, net of
2liabilities, calculated according to the methodology of the
3assuming insurer’s domiciliary jurisdiction, and a central
4fund containing a balance in an amount specified by the
5commissioner. The bill also requires an assuming insurer to
6maintain a minimum solvency or capital ratio as specified by
7the commissioner. If the assuming insurer is an association,
8including incorporated and individual unincorporated
9underwriters, the assuming insurer must maintain a minimum
10solvency or capital ratio in the reciprocal jurisdiction where
11the assuming insurer has its head office or is domiciled, and
12where the assuming insurer is also licensed.
13The bill requires an assuming insurer to provide written
14notice and an explanation to the commissioner if the assuming
15insurer falls below the minimum requirements for surplus,
16solvency, or capital, or if any regulatory action is taken
17against the assuming insurer for noncompliance with applicable
18laws.
19An assuming insurer must also provide written consent to
20the commissioner that the assuming insurer will submit to the
21jurisdiction of the courts of this state and to the appointment
22of the commissioner as agent for service of process. The
23commissioner may also require that consent for service of
24process be included in each reinsurance agreement entered into
25by the assuming insurer. The bill provides that an assuming
26insurer must also agree that the assuming insurer will pay all
27final judgments obtained against it by a ceding insurer, or
28the ceding insurer’s legal successor, that have been declared
29enforceable in the jurisdiction in which the final judgment
30is obtained. Each reinsurance agreement must also include a
31provision requiring the assuming insurer to provide security
32in an amount equal to 100 percent of the assuming insurer’s
33liabilities attributable to reinsurance ceded pursuant to
34that reinsurance agreement if the assuming insurer resists
35enforcement of a final judgment.
-18- 1An assuming insurer is required by the bill to provide the
2commissioner with confirmation that the assuming insurer is not
3presently participating in any solvent scheme of arrangement
4which involves Iowa’s ceding insurers, and written agreement
5that the assuming insurer will notify the ceding insurer and
6the commissioner and will provide security in an amount equal
7to 100 percent of the assuming insurer’s liabilities to the
8ceding insurer, should the assuming insurer enter into a
9solvent scheme of arrangement.
10An assuming insurer is required to maintain prompt claim
11payments under all reinsurance agreements. The assuming
12insurer’s supervisory authority must annually confirm to the
13commissioner that the assuming insurer complies with the
14requirements for minimum surplus, solvency, and capital.
15The bill requires the commissioner to create and publish a
16list of reciprocal jurisdictions which must be determined by
17the commissioner as detailed in the bill. The commissioner
18must also create and publish a list of assuming insurers that
19have satisfied the conditions required for cessions to be
20granted credit. The commissioner may add an assuming insurer
21to that list if a NAIC accredited jurisdiction has added the
22assuming insurer to the NAIC accredited jurisdiction’s list
23of assuming insurers, or if the assuming insurer submits the
24information as detailed in the bill to the commissioner, and
25complies with any additional requirements pursuant to rules
26adopted by the commissioner.
27The bill allows the commissioner to revoke or suspend the
28eligibility of an assuming insurer for inclusion on the list if
29the commissioner determines that an assuming insurer no longer
30meets the requirements to be on the list. If an assuming
31insurer’s eligibility is suspended, any reinsurance agreements
32issued, amended, or renewed after the effective date of the
33suspension do not qualify for credit except to the extent
34that the assuming insurer’s obligations under the reinsurance
35agreement are secured. If an assuming insurer’s eligibility
-19-1is revoked, credit for reinsurance shall not be granted after
2the effective date of the revocation with respect to any
3reinsurance agreements entered into by the assuming insurer,
4including reinsurance agreements entered into prior to the date
5of revocation, except to the extent that the assuming insurer’s
6obligations under the reinsurance agreement are secured in a
7form acceptable to the commissioner.
8If a ceding insurer is subject to a legal process of
9rehabilitation, liquidation, or conservation, the ceding
10insurer may seek an order requiring that the assuming insurer
11post security for all outstanding ceded liabilities.
12The bill does not limit or alter the capacity of the parties
13to a reinsurance agreement to agree on requirements for
14security or other terms in the reinsurance agreement, except
15as expressly prohibited by Code chapter 521B, or any other
16applicable law or regulation.
17Credit may be taken under the provisions of the bill only for
18reinsurance agreements entered into, amended, or renewed on or
19after the effective date of the bill, and only with respect to
20losses incurred and reserves reported on or after the later of
21the date on which the assuming insurer has met all eligibility
22requirements under the bill, and the effective date of the new
23reinsurance agreement, amendment, or renewal.
24The bill does not authorize an assuming insurer to withdraw
25or reduce the security provided under any reinsurance agreement
26except as permitted by the terms of the reinsurance agreement,
27or limit or alter the capacity of parties to any reinsurance
28agreement to renegotiate the reinsurance agreement.
29The bill applies to all cessions under reinsurance
30agreements that have an inception, anniversary, or renewal date
31after July 1, 2020.
-20-ko/rn
2for reinsurance ceded to reinsurers, and including
3applicability provisions.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 521B.101A Definitions.
2For purposes of this chapter, unless the context otherwise
3requires:
41. “Commissioner” means the commissioner of insurance.
52. “NAIC” means the national association of insurance
6commissioners.
7 Sec. 2. Section 521B.102, unnumbered paragraph 1, Code
82020, is amended to read as follows:
9Credit for reinsurance shall be allowed a domestic ceding
10insurer as either an asset or a reduction from liability on
11account of reinsurance ceded only when the reinsurer meets
12the requirements of subsection 1, 2, 3, 4, 5, 5A, or 6. The
13commissioner may adopt rules pursuant to section 521B.105
14specifying additional requirements related to the valuation of
15assets or reserve credits, the amount and forms of security
16supporting reinsurance arrangements described in section
17521B.105, and the circumstances pursuant to which credit shall
18be reduced or eliminated. Credit shall be allowed under
19subsection 1, 2, or 3 only respecting cessions of those kinds
20or classes of business which the assuming insurer is licensed
21or otherwise permitted to write or assume in the assuming
22 insurer’s state of domicile or, in the case of a United States
23branch of an alien assuming insurer, in the state through
24which the alien assuming insurer is entered and licensed to
25transact insurance or reinsurance. Credit shall be allowed
26under subsection 3 or 4 only if the applicable requirements of
27subsection 7 have been satisfied.
28 Sec. 3. Section 521B.102, subsection 2, paragraph e, Code
292020, is amended to read as follows:
30e. Demonstrate to the satisfaction of the commissioner that
31the assuming insurer has adequate financial capacity to meet
32the assuming insurer’s reinsurance obligations and is otherwise
33qualified to assume reinsurance from domestic insurers. An
34assuming insurer is deemed to meet this requirement as of the
35time of the assuming insurer’s application if the assuming
-1-1insurer maintains a surplus as regards policyholders in an
2amount of not less than twenty million dollars and the assuming
3insurer’s accreditation has not been denied by the commissioner
4within ninety calendar days after submission of the assuming
5insurer’s application.
6 Sec. 4. Section 521B.102, subsection 3, paragraph a,
7unnumbered paragraph 1, Code 2020, is amended to read as
8follows:
9Credit shall be allowed when the reinsurance is ceded to
10an assuming insurer that is domiciled in, or in the case of a
11United States branch of an alien assuming insurer, is entered
12through, a state that employs standards regarding credit for
13reinsurance that are substantially similar to those applicable
14under this chapter and the assuming insurer or United States
15branch of an alien assuming insurer does all of the following:
16 Sec. 5. Section 521B.102, subsection 4, paragraph a, Code
172020, is amended to read as follows:
18a. Credit shall be allowed when the reinsurance is ceded
19to an assuming insurer that maintains a trust fund in a
20qualified United States financial institution, as defined
21in section 521B.104, subsection 2, for payment of the valid
22claims of the assuming insurer’s United States ceding insurers,
23their assigns, and successors in interest. To enable the
24commissioner to determine the sufficiency of the trust fund,
25the assuming insurer shall report annually to the commissioner
26information substantially the same as that required to be
27reported by licensed insurers on the national association of
28insurance commissioners’ NAIC annual statement form by licensed
29insurers. The assuming insurer shall submit to examination of
30the assuming insurer’s books and records by the commissioner
31and bear the expense of examination.
32 Sec. 6. Section 521B.102, subsection 4, paragraph b,
33subparagraph (2), Code 2020, is amended to read as follows:
34(2) The form of the trust and any trust amendments are
35filed with the commissioner of every state in which the ceding
-2-1insurer’s insurer beneficiaries of the trust are domiciled.
2The trust instrument shall provide that contested claims are
3valid and enforceable upon the final order of any court of
4competent jurisdiction in the United States. The trust shall
5vest legal title to the trust’s assets in its trustees for
6the benefit of the assuming insurer’s United States ceding
7insurers, their assigns, and successors in interest. The trust
8and the assuming insurer shall be subject to examination as
9determined by the commissioner.
10 Sec. 7. Section 521B.102, subsection 4, paragraph c,
11subparagraph (3), subparagraph division (e), Code 2020, is
12amended to read as follows:
13(e) Within ninety calendar days after its financial
14statements are due to be filed with the group’s domiciliary
15regulator, the group shall provide to the commissioner an
16annual certification by the group’s domiciliary regulator of
17the solvency of each underwriter member, or if a certification
18is unavailable, financial statements, prepared by independent
19public accountants, of each underwriter member of the group.
20 Sec. 8. Section 521B.102, subsection 4, paragraph c,
21subparagraph (4), subparagraph division (e), Code 2020, is
22amended to read as follows:
23(e) Within ninety calendar days after the group’s financial
24statements are due to be filed with the group’s domiciliary
25regulator, make available to the commissioner an annual
26certification of each underwriter member’s solvency by the
27member’s domiciliary regulator and financial statements of
28each underwriter member of the group prepared by the group’s
29independent public accountant.
30 Sec. 9. Section 521B.102, subsection 5, paragraph a,
31subparagraph (4), Code 2020, is amended to read as follows:
32(4) The assuming insurer shall agree to submit to the
33jurisdiction of this state, to appoint the commissioner as the
34assuming insurer’s agent for service of process in this state,
35and agree to provide security for one hundred percent of the
-3-1assuming insurer’s liabilities attributable to reinsurance
2ceded by United States ceding insurers, if the assuming insurer
3resists enforcement of a final United States judgment.
4 Sec. 10. Section 521B.102, subsection 5, paragraph b,
5subparagraph (3), Code 2020, is amended to read as follows:
6(3) Within ninety calendar days after the association’s
7financial statements are due to be filed with the association’s
8domiciliary regulator, the association shall provide to the
9commissioner an annual certification by the association’s
10domiciliary regulator, of the solvency of each underwriter
11member, or if a certification is unavailable, financial
12statements, prepared by an independent public accountant, of
13each underwriter member of the association.
14 Sec. 11. Section 521B.102, subsection 5, paragraph c,
15subparagraphs (1), (2), and (3), Code 2020, are amended to read
16as follows:
17(1) In order to determine whether the domiciliary
18jurisdiction of a non-United States assuming insurer is
19eligible to be recognized as a qualified jurisdiction,
20the commissioner shall evaluate the appropriateness and
21effectiveness of the reinsurance supervisory system of the
22jurisdiction, both initially and on an ongoing basis, and
23consider the rights, benefits, and the extent of reciprocal
24recognition afforded by the non-United States jurisdiction
25to reinsurers licensed and domiciled in the United States.
26In order to be recognized as a qualified jurisdiction, a
27jurisdiction must agree to share information and to cooperate
28with the commissioner with respect to all certified reinsurers
29domiciled within that jurisdiction. A jurisdiction shall not
30be recognized as a qualified jurisdiction if the commissioner
31has determined that the jurisdiction does not adequately and
32promptly enforce final United States judgments and arbitration
33awards. Additional factors may be considered in the discretion
34of the commissioner.
35(2) A list of qualified jurisdictions shall be published
-4-1through the national association of insurance commissioners’
2 NAIC committee process. The commissioner shall consider
3this list in determining qualified jurisdictions. If the
4commissioner recognizes a jurisdiction as qualified that does
5not appear on the NAIC list of qualified jurisdictions, the
6commissioner shall provide thoroughly documented justification
7for the recognition in accordance with criteria to be developed
8by rule as specified in rules adopted by the commissioner.
9(3) United States jurisdictions that meet the requirements
10for accreditation under the national association of insurance
11commissioners’ NAIC financial standards and accreditation
12program shall be recognized as qualified jurisdictions.
13 Sec. 12. Section 521B.102, subsection 5, paragraph e,
14subparagraph (5), subparagraph division (b), Code 2020, is
15amended to read as follows:
16(b) If the commissioner continues to assign a higher rating
17to a certified reinsurer as permitted by other provisions of
18this subsection section, this requirement does not apply to a
19certified reinsurer in inactive status or to a reinsurer whose
20certification has been suspended.
21 Sec. 13. Section 521B.102, subsection 5, paragraph f, Code
222020, is amended to read as follows:
23f. If an assuming insurer applying for certification as a
24reinsurer in this state has been certified as a reinsurer in
25another jurisdiction accredited by the national association
26of insurance commissioners NAIC, the commissioner has the
27discretion to defer to that jurisdiction’s certification, and
28has the discretion to defer to the rating assigned by that
29jurisdiction, and the assuming insurer shall be considered to
30be a certified reinsurer in this state.
31 Sec. 14. Section 521B.102, Code 2020, is amended by adding
32the following new subsection:
33 NEW SUBSECTION. 5A. a. Credit shall be allowed when the
34reinsurance is ceded to an assuming insurer that meets all of
35the following conditions:
-5- 1(1) The assuming insurer must have its head office located
2in or be domiciled in, as applicable, and be licensed in, a
3reciprocal jurisdiction. For purposes of this subsection, a
4“reciprocal jurisdiction” is a jurisdiction that meets at least
5one of the following requirements:
6(a) A non-United States jurisdiction that is subject to an
7in-force covered agreement with the United States, each within
8its legal authority, or, in the case of a covered agreement
9between the United States and the European Union, is a member
10state of the European Union. For purposes of this subsection,
11a “covered agreement” is an agreement entered into pursuant to
12Tit.V, §502(a)(3), 31 U.S.C. §§313-314, of the Dodd-Frank Wall
13Street Reform and Consumer Protection Act, Pub.L.No.111-203,
14that is currently in effect or in a period of provisional
15application and that addresses the elimination, under specified
16conditions, of collateral requirements as a condition for
17entering into any reinsurance agreement with a ceding insurer
18domiciled in this state or for allowing the ceding insurer to
19recognize credit for reinsurance.
20(b) A United States jurisdiction that meets the
21requirements for accreditation under the NAIC financial
22regulation standards and accreditation program.
23(c) A qualified jurisdiction, as determined by the
24commissioner pursuant to subsection 5, paragraph “c”, which is
25not otherwise described in this paragraph or paragraph “b”,
26and that meets certain additional requirements consistent with
27the terms and conditions of an in-force covered agreement as
28specified in rules adopted by the commissioner.
29(2) The assuming insurer must have and maintain, on an
30ongoing basis, minimum capital and surplus, or its equivalent,
31calculated according to the methodology of the assuming
32insurer’s domiciliary jurisdiction, in an amount specified in
33rules adopted by the commissioner. If the assuming insurer
34is an association, including incorporated and individual
35unincorporated underwriters, the assuming insurer must have
-6-1and maintain, on an ongoing basis, minimum capital and surplus
2equivalents, net of liabilities, calculated according to the
3methodology applicable in the assuming insurer’s domiciliary
4jurisdiction, and a central fund containing a balance in an
5amount as specified in rules adopted by the commissioner.
6(3) The assuming insurer must have and maintain, on
7an ongoing basis, a minimum solvency or capital ratio, as
8applicable, as specified in rules adopted by the commissioner.
9If the assuming insurer is an association, including
10incorporated and individual unincorporated underwriters,
11the assuming insurer must have and maintain, on an ongoing
12basis, a minimum solvency or capital ratio in the reciprocal
13jurisdiction where the assuming insurer has its head office or
14is domiciled, as applicable, and where the assuming insurer is
15also licensed.
16(4) The assuming insurer must agree and shall provide
17to the commissioner, in the form and manner specified by the
18commissioner, adequate assurance of all of the following:
19(a) Prompt written notice and explanation if the assuming
20insurer falls below the minimum requirements set forth in
21subparagraph (2) or (3) of this paragraph, or if any regulatory
22action is taken against the assuming insurer for serious
23noncompliance with any applicable law.
24(b) Written consent that the assuming insurer shall submit
25to the jurisdiction of the courts of this state and to the
26appointment of the commissioner as agent for service of
27process. The commissioner may also require that consent for
28service of process be included in each reinsurance agreement
29entered into by the assuming insurer. This subparagraph
30division shall not limit or alter the capacity of the parties
31to a reinsurance agreement to agree to alternative dispute
32resolution, except to the extent such alternative dispute
33resolution is unenforceable under applicable insolvency or
34delinquency laws.
35(c) Written agreement that the assuming insurer shall pay
-7-1all final judgments, wherever enforcement is sought, obtained
2against the assuming insurer by a ceding insurer, or the ceding
3insurer’s legal successor, that have been declared enforceable
4in the jurisdiction in which the final judgment is obtained.
5(d) Each reinsurance agreement must include a provision
6requiring the assuming insurer to provide security in an
7amount equal to one hundred percent of the assuming insurer’s
8liabilities attributable to reinsurance ceded pursuant to
9that reinsurance agreement if the assuming insurer resists
10enforcement of a final judgment that is enforceable under the
11law of the jurisdiction in which the final judgment is obtained
12or under an enforceable arbitration award, whether obtained by
13the ceding insurer or by the ceding insurer’s legal successor
14on behalf of the ceding insurer’s resolution estate.
15(e) Written confirmation that the assuming insurer is not
16presently participating in any solvent scheme of arrangement
17which involves this state’s ceding insurers, and written
18agreement that the assuming insurer shall notify the ceding
19insurer and the commissioner and shall provide security in an
20amount equal to one hundred percent of the assuming insurer’s
21liabilities to the ceding insurer, should the assuming insurer
22enter into such a solvent scheme of arrangement. Such security
23shall be in a form consistent with the provisions of subsection
245, and section 521B.103.
25(5) The assuming insurer or the assuming insurer’s legal
26successor shall provide to the commissioner, on behalf of
27itself and any legal predecessors, any documentation required
28pursuant to rules adopted by the commissioner.
29(6) Pursuant to rules adopted by the commissioner, the
30assuming insurer shall maintain prompt payment of claims under
31all reinsurance agreements.
32(7) The assuming insurer’s supervisory authority shall
33annually confirm to the commissioner that as of the preceding
34December 31, or as of the annual date otherwise statutorily
35reported to the reciprocal jurisdiction, the assuming insurer
-8-1complies with the requirements set forth in subparagraphs (2)
2and (3) of this paragraph.
3(8) An assuming insurer shall not be precluded from
4voluntarily providing any information to the commissioner.
5b. The commissioner shall timely create and publish a list
6of reciprocal jurisdictions.
7(1) The commissioner’s list shall include any reciprocal
8jurisdiction as defined under paragraph “a”, subparagraph
9(1), subparagraph divisions (a) and (b), and the commissioner
10shall consider any other reciprocal jurisdiction included on
11the list of reciprocal jurisdictions published through the
12NAIC committee process. Pursuant to criteria established
13by rules adopted by the commissioner, the commissioner may
14approve a jurisdiction that does not appear on the NAIC list of
15reciprocal jurisdictions.
16(2) The commissioner may remove a jurisdiction from the
17list of reciprocal jurisdictions upon a determination that the
18jurisdiction no longer meets the requirements of a reciprocal
19jurisdiction, pursuant to a process established by rules
20adopted by the commissioner, except that the commissioner shall
21not remove a reciprocal jurisdiction as defined under paragraph
22“a”, subparagraph (1), subparagraph divisions (a) and (b).
23Upon removal of a reciprocal jurisdiction from the list of
24reciprocal jurisdictions, credit for reinsurance ceded to an
25assuming insurer which has its home office in or is domiciled
26in that reciprocal jurisdiction shall be allowed if otherwise
27allowed pursuant to this chapter.
28c. The commissioner shall timely create and publish a
29list of assuming insurers that have satisfied the conditions
30in this subsection and to which cessions shall be granted
31credit pursuant to this subsection. The commissioner may
32add an assuming insurer to the list if a NAIC accredited
33jurisdiction has added the assuming insurer to the NAIC
34accredited jurisdiction’s list of assuming insurers or if,
35upon initial eligibility, the assuming insurer submits the
-9-1information required under paragraph “a”, subparagraph (4), to
2the commissioner and complies with any additional requirements
3pursuant to rules adopted by the commissioner, except to the
4extent that any of those rules conflict with an applicable
5covered agreement.
6d. If the commissioner determines that an assuming insurer
7no longer meets one or more of the requirements under this
8subsection, the commissioner may revoke or suspend the
9eligibility of the assuming insurer for recognition under this
10subsection in accordance with procedures established by rules
11adopted by the commissioner.
12(1) While an assuming insurer’s eligibility is suspended,
13any reinsurance agreement issued, amended, or renewed after the
14effective date of the suspension does not qualify for credit
15except to the extent that the assuming insurer’s obligations
16under the reinsurance agreement are secured in accordance with
17section 521B.103.
18(2) If an assuming insurer’s eligibility is revoked, credit
19for reinsurance shall not be granted after the effective date
20of the revocation with respect to any reinsurance agreements
21entered into by the assuming insurer, including reinsurance
22agreements entered into prior to the date of revocation, except
23to the extent that the assuming insurer’s obligations under
24the reinsurance agreement are secured in a form acceptable to
25the commissioner and consistent with the provisions of section
26521B.103.
27e. If subject to a legal process of rehabilitation,
28liquidation, or conservation, as applicable, the ceding
29insurer or the ceding insurer’s representative may seek, and if
30determined appropriate by the court in which such legal process
31is pending, may obtain an order requiring that the assuming
32insurer post security for all outstanding ceded liabilities.
33f. This subsection shall not limit or alter the capacity of
34the parties to a reinsurance agreement to agree on requirements
35for security or other terms in the reinsurance agreement,
-10-1except as expressly prohibited by this chapter or any other
2applicable law or regulation.
3g. (1) Credit may be taken under this subsection only for
4reinsurance agreements entered into, amended, or renewed on or
5after July 1, 2020, and only with respect to losses incurred
6and reserves reported on or after the later of the date on
7which the assuming insurer has met all eligibility requirements
8pursuant to this subsection, and the effective date of the new
9reinsurance agreement, amendment, or renewal.
10(2) This paragraph shall not alter or impair a ceding
11insurer’s right to take credit for reinsurance, to the extent
12that credit is not available under this subsection, as long as
13the reinsurance qualifies for credit under any other applicable
14provision of this chapter.
15h. This subsection shall not authorize an assuming
16insurer to withdraw or reduce the security provided under any
17reinsurance agreement except as permitted by the terms of the
18reinsurance agreement.
19i. This subsection shall not limit or alter the capacity
20of parties to any reinsurance agreement to renegotiate the
21reinsurance agreement.
22 Sec. 15. Section 521B.102, subsections 6 and 7, Code 2020,
23are amended to read as follows:
246. Credit shall be allowed when reinsurance is ceded to
25an assuming insurer that does not meet the requirements of
26subsection 1, 2, 3, 4, or 5, or 5A, but only as to the insurance
27of risks located in jurisdictions where the reinsurance is
28required by applicable law or regulation of that jurisdiction.
297. a. If the assuming insurer is not licensed, accredited,
30or certified to transact insurance or reinsurance in this
31state, the credit permitted by subsections 3 and 4 shall not be
32allowed unless the assuming insurer agrees in the reinsurance
33agreements agreement to do all of the following:
34(1) In the event of the failure of the assuming insurer
35to perform its obligations under the terms of the reinsurance
-11-1agreement, the assuming insurer, at the request of the ceding
2insurer, will shall submit to the jurisdiction of any court of
3competent jurisdiction in any state of the United States, will
4 shall comply with all requirements necessary to give the court
5jurisdiction, and will shall abide by the final decision of the
6court or of any appellate court in the event of any appeal,
7concerning such failure.
8(2) The assuming insurer will shall designate the
9commissioner or a designated attorney as its true and lawful
10attorney to receive lawful process in any action, suit, or
11proceeding instituted by or on behalf of the ceding insurer.
12b. This subsection is not intended to conflict with or
13override the obligation of the parties to a reinsurance
14agreement to arbitrate their disputes a dispute if the
15obligation for the parties to arbitrate disputes is created in
16the reinsurance agreement.
17 Sec. 16. Section 521B.102, subsection 8, unnumbered
18paragraph 1, Code 2020, is amended to read as follows:
19If the assuming insurer does not meet the requirements
20of subsection 1, 2, or 3, or 5A, the credit permitted by
21subsection 4 or 5 shall not be allowed unless the assuming
22insurer agrees in a trust agreement to satisfy the following
23conditions:
24 Sec. 17. Section 521B.102, subsection 9, unnumbered
25paragraph 1, Code 2020, is amended to read as follows:
26If an accredited or certified reinsurer ceases to meet
27the requirements of for accreditation or certification
28pursuant to this section for accreditation or certification,
29the commissioner may suspend or revoke the reinsurer’s
30accreditation or certification.
31 Sec. 18. Section 521B.102, subsection 9, paragraph b, Code
322020, is amended to read as follows:
33b. While a reinsurer’s accreditation or certification is
34suspended, a reinsurance contract issued or renewed after the
35effective date of the suspension does not qualify for credit
-12-1except to the extent that the reinsurer’s obligations under the
2reinsurance contract are secured in accordance with section
3521B.103. If a reinsurer’s accreditation or certification is
4revoked, credit for reinsurance shall not be granted after the
5effective date of the revocation except to the extent that the
6reinsurer’s obligations under the reinsurance contract are
7secured in accordance with subsection 5, paragraph “e”, or
8section 521B.103.
9 Sec. 19. Section 521B.102, subsection 10, paragraphs a and
10b, Code 2020, are amended to read as follows:
11a. A domestic ceding insurer shall take steps to manage
12its reinsurance recoverables proportionate to its own book
13of business. A domestic ceding insurer shall notify the
14commissioner within thirty calendar days after reinsurance
15recoverables from any single assuming insurer, or group
16of affiliated assuming insurers, exceeds fifty percent
17of the domestic ceding insurer’s last reported surplus to
18policyholders, or after it is determined the domestic ceding
19insurer has determined that reinsurance recoverables from
20any single assuming insurer, or group of affiliated assuming
21insurers, is likely to exceed this limit. The notification
22shall demonstrate that the exposure is safely managed by the
23domestic ceding insurer.
24b. A domestic ceding insurer shall take steps to diversify
25its reinsurance program. A domestic ceding insurer shall
26notify the commissioner within thirty calendar days after
27ceding to any single assuming insurer, or group of affiliated
28assuming insurers, more than twenty percent of the domestic
29ceding insurer’s gross written premium in the prior calendar
30year, or after the domestic ceding insurer has determined that
31the reinsurance ceded to any single assuming insurer, or group
32of affiliated assuming insurers, is likely to exceed this
33limit. The notification shall demonstrate that the exposure is
34safely managed by the domestic ceding insurer.
35 Sec. 20. Section 521B.103, Code 2020, is amended to read as
-13-1follows:
2521B.103 Limited credit allowed other domestic ceding
3insurers.
41. An asset or a reduction from liability for reinsurance
5ceded by a domestic insurer to an assuming insurer not meeting
6the requirements of section 521B.102, shall be allowed in an
7amount not exceeding the liabilities carried by the ceding
8insurer. The commissioner may adopt rules pursuant to section
9521B.105 specifying requirements related to the valuation of
10assets or reserve credits, the amount and forms of security
11supporting reinsurance arrangements described in section
12521B.105, and the circumstances pursuant to which credit shall
13be reduced or eliminated. The reduction shall be in the
14amount of funds held by or on behalf of the ceding insurer,
15including funds held in trust for the ceding insurer, under a
16reinsurance contract with the assuming insurer as security for
17the payment of obligations under the reinsurance contract, if
18the security is held in the United States subject to withdrawal
19solely by, and under the exclusive control of, the ceding
20insurer, or in the case of a trust, held in a qualified United
21States financial institution as defined in section 521B.104,
22subsection 2.
232. The security may be in the form of any of the following:
24a. Cash.
25b. A security listed by the securities valuation office
26of the national association of insurance commissioners NAIC,
27including those securities deemed exempt from filing as
28defined by the purposes and procedures manual of the securities
29valuation office and those securities qualifying as admitted
30assets.
31c. (1) Clean, irrevocable, unconditional letters of credit,
32issued or confirmed by a qualified United States financial
33institution, as defined in section 521B.104, subsection 1,
34effective no later than December 31 of the year for which the
35filing is being made, and in the possession of, or in trust
-14-1for, the ceding insurer on or before the filing date of the
2ceding insurer’s annual statement.
3(2) A letter of credit meeting applicable standards
4of issuer acceptability as of the date of the issuance or
5confirmation of the letter of credit’s issuance or confirmation
6 credit shall, notwithstanding the issuing or confirming
7institution’s subsequent failure to meet applicable standards
8of issuer acceptability, continue to be acceptable as security
9until the expiration, extension, renewal, modification, or
10amendment of the letter of credit, whichever occurs first.
11d. Any other form of security acceptable to the
12commissioner.
13 Sec. 21. Section 521B.104, subsection 1, paragraph c, Code
142020, is amended to read as follows:
15c. Has been determined by either the commissioner or the
16securities valuation office of the national association of
17insurance commissioners NAIC to meet the standards of financial
18condition and standing as are considered necessary and
19appropriate to regulate the quality of financial institutions
20whose letters of credit will be acceptable to the commissioner.
21 Sec. 22. Section 521B.105, subsection 1, Code 2020, is
22amended to read as follows:
231. The commissioner may adopt rules, pursuant to chapter
2417A, as necessary or convenient to administer this chapter.
25 Sec. 23. Section 521B.105, subsection 2, paragraph a,
26unnumbered paragraph 1, Code 2020, is amended to read as
27follows:
28A rule adopted pursuant to this subsection is applicable
29only to reinsurance arrangements relating to any of the
30following:
31 Sec. 24. Section 521B.105, subsection 2, paragraph a,
32subparagraph (5), Code 2020, is amended to read as follows:
33(5) Other life and health insurance and annuity products as
34to which the national association of insurance commissioners
35 NAIC adopts model regulatory requirements with respect to
-15-1credit for reinsurance.
2 Sec. 25. Section 521B.105, subsection 2, paragraph c, Code
32020, is amended to read as follows:
4c. A rule adopted pursuant to this subsection may require
5the ceding insurer, in calculating the amounts or forms of
6security required to be held under rules adopted under this
7subsection, to use the valuation manual as defined in section
8508.36, including all amendments adopted by the national
9association of insurance commissioners NAIC and in effect on
10the date as of which the calculation is made, to the extent
11applicable.
12 Sec. 26. Section 521B.105, subsection 3, Code 2020, is
13amended to read as follows:
143. A rule adopted pursuant to this section is not applicable
15to cessions to an assuming insurer that meets either any of the
16following requirements:
17a. Meets the conditions set forth in section 521B.102,
18subsection 6.
19a. b. Is certified in Iowa.
20b. c. Maintains at least two hundred fifty million dollars
21in capital and surplus when determined in accordance with the
22accounting practices and procedures manual of the national
23association of insurance commissioners NAIC, including all
24amendments adopted by the national association of insurance
25commissioners NAIC, but excluding the impact of any permitted
26or prescribed practices; and meets either of the following
27requirements:
28(1) Is licensed in at least twenty-six states.
29(2) Is licensed in at least ten states, and is licensed or
30accredited in a total of at least thirty-five states.
31 Sec. 27. APPLICABILITY. This Act applies to all cessions
32under reinsurance agreements that have an inception,
33anniversary, or renewal date on or after July 1, 2020.
34EXPLANATION
35The inclusion of this explanation does not constitute agreement with
-16-1the explanation’s substance by the members of the general assembly.
2This bill relates to credit allowed to domestic ceding
3insurers for reinsurance ceded to reinsurers.
4The bill amends Code chapter 521B (credit for reinsurance)
5to conform more closely to the national association of
6insurance commissioners’ (NAIC) credit for reinsurance model
7act.
8The bill provides that credit is allowed when reinsurance is
9ceded to an assuming insurer that has its head office located
10in, or is domiciled in, and is licensed in, a reciprocal
11jurisdiction. A “reciprocal jurisdiction” is defined in the
12bill as a jurisdiction that is a non-United States jurisdiction
13that is subject to an in-force covered agreement with the
14United States, or a United States jurisdiction that meets
15the requirements for accreditation under the NAIC financial
16regulation standards and accreditation program, or a qualified
17jurisdiction as determined by the commissioner that meets
18certain additional requirements consistent with the terms and
19conditions of an in-force covered agreement.
20“Covered agreement” is defined in the bill as an agreement
21entered into pursuant to Tit.V, §502(a)(3), 31 U.S.C.
22§§313-314, of the Dodd-Frank Wall Street Reform and Consumer
23Protection Act, that is currently in effect or in a period of
24provisional application and that addresses the elimination,
25under specified conditions, of collateral requirements as a
26condition for entering into a reinsurance agreement with a
27ceding insurer domiciled in this state, or for allowing the
28ceding insurer to recognize credit for reinsurance.
29The bill requires an assuming insurer to maintain minimum
30capital and surplus, or its equivalent, calculated according
31to the methodology of the assuming insurer’s domiciliary
32jurisdiction, in an amount specified by the commissioner
33of insurance (commissioner). If an assuming insurer is
34an association, including incorporated and individual
35unincorporated underwriters, the assuming insurer must
-17-1maintain minimum capital and surplus equivalents, net of
2liabilities, calculated according to the methodology of the
3assuming insurer’s domiciliary jurisdiction, and a central
4fund containing a balance in an amount specified by the
5commissioner. The bill also requires an assuming insurer to
6maintain a minimum solvency or capital ratio as specified by
7the commissioner. If the assuming insurer is an association,
8including incorporated and individual unincorporated
9underwriters, the assuming insurer must maintain a minimum
10solvency or capital ratio in the reciprocal jurisdiction where
11the assuming insurer has its head office or is domiciled, and
12where the assuming insurer is also licensed.
13The bill requires an assuming insurer to provide written
14notice and an explanation to the commissioner if the assuming
15insurer falls below the minimum requirements for surplus,
16solvency, or capital, or if any regulatory action is taken
17against the assuming insurer for noncompliance with applicable
18laws.
19An assuming insurer must also provide written consent to
20the commissioner that the assuming insurer will submit to the
21jurisdiction of the courts of this state and to the appointment
22of the commissioner as agent for service of process. The
23commissioner may also require that consent for service of
24process be included in each reinsurance agreement entered into
25by the assuming insurer. The bill provides that an assuming
26insurer must also agree that the assuming insurer will pay all
27final judgments obtained against it by a ceding insurer, or
28the ceding insurer’s legal successor, that have been declared
29enforceable in the jurisdiction in which the final judgment
30is obtained. Each reinsurance agreement must also include a
31provision requiring the assuming insurer to provide security
32in an amount equal to 100 percent of the assuming insurer’s
33liabilities attributable to reinsurance ceded pursuant to
34that reinsurance agreement if the assuming insurer resists
35enforcement of a final judgment.
-18- 1An assuming insurer is required by the bill to provide the
2commissioner with confirmation that the assuming insurer is not
3presently participating in any solvent scheme of arrangement
4which involves Iowa’s ceding insurers, and written agreement
5that the assuming insurer will notify the ceding insurer and
6the commissioner and will provide security in an amount equal
7to 100 percent of the assuming insurer’s liabilities to the
8ceding insurer, should the assuming insurer enter into a
9solvent scheme of arrangement.
10An assuming insurer is required to maintain prompt claim
11payments under all reinsurance agreements. The assuming
12insurer’s supervisory authority must annually confirm to the
13commissioner that the assuming insurer complies with the
14requirements for minimum surplus, solvency, and capital.
15The bill requires the commissioner to create and publish a
16list of reciprocal jurisdictions which must be determined by
17the commissioner as detailed in the bill. The commissioner
18must also create and publish a list of assuming insurers that
19have satisfied the conditions required for cessions to be
20granted credit. The commissioner may add an assuming insurer
21to that list if a NAIC accredited jurisdiction has added the
22assuming insurer to the NAIC accredited jurisdiction’s list
23of assuming insurers, or if the assuming insurer submits the
24information as detailed in the bill to the commissioner, and
25complies with any additional requirements pursuant to rules
26adopted by the commissioner.
27The bill allows the commissioner to revoke or suspend the
28eligibility of an assuming insurer for inclusion on the list if
29the commissioner determines that an assuming insurer no longer
30meets the requirements to be on the list. If an assuming
31insurer’s eligibility is suspended, any reinsurance agreements
32issued, amended, or renewed after the effective date of the
33suspension do not qualify for credit except to the extent
34that the assuming insurer’s obligations under the reinsurance
35agreement are secured. If an assuming insurer’s eligibility
-19-1is revoked, credit for reinsurance shall not be granted after
2the effective date of the revocation with respect to any
3reinsurance agreements entered into by the assuming insurer,
4including reinsurance agreements entered into prior to the date
5of revocation, except to the extent that the assuming insurer’s
6obligations under the reinsurance agreement are secured in a
7form acceptable to the commissioner.
8If a ceding insurer is subject to a legal process of
9rehabilitation, liquidation, or conservation, the ceding
10insurer may seek an order requiring that the assuming insurer
11post security for all outstanding ceded liabilities.
12The bill does not limit or alter the capacity of the parties
13to a reinsurance agreement to agree on requirements for
14security or other terms in the reinsurance agreement, except
15as expressly prohibited by Code chapter 521B, or any other
16applicable law or regulation.
17Credit may be taken under the provisions of the bill only for
18reinsurance agreements entered into, amended, or renewed on or
19after the effective date of the bill, and only with respect to
20losses incurred and reserves reported on or after the later of
21the date on which the assuming insurer has met all eligibility
22requirements under the bill, and the effective date of the new
23reinsurance agreement, amendment, or renewal.
24The bill does not authorize an assuming insurer to withdraw
25or reduce the security provided under any reinsurance agreement
26except as permitted by the terms of the reinsurance agreement,
27or limit or alter the capacity of parties to any reinsurance
28agreement to renegotiate the reinsurance agreement.
29The bill applies to all cessions under reinsurance
30agreements that have an inception, anniversary, or renewal date
31after July 1, 2020.
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