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House File 311 - IntroducedA Bill ForAn Act 1relating to provisions applicable to life insurance
2companies and associations, and credit for reinsurance, and
3including retroactive applicability provisions.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 511.8, subsection 22, paragraph b,
2subparagraph (2), subparagraph division (b), Code 2017, is
3amended to read as follows:
4(b) Financial instruments used in hedging transactions
5between an insurer and a conduit which are collateralized by
6obligations eligible under subsection 5 or by cash equivalents
7eligible under subsection 24, other than a class one rule
82a-7 money market fund, are eligible only to the extent that
9such securities deposited as collateral are not in excess
10of ten percent of the legal reserve, less any obligations
11eligible under subsection 5 or cash equivalents eligible under
12subsection 24, other than a class one rule 2a-7 money market
13fund, owned by the insurer or which are the subject of hedging
14transactions by the insurer, that are included in the insurer’s
15legal reserve.
16 Sec. 2. Section 511.8, subsection 23, paragraph c, Code
172017, is amended to read as follows:
18c. If the loan is collateralized by cash or cash
19equivalents, the cash or cash equivalent collateral may be
20reinvested by the life insurance company or association in
21class one rule 2a-7 money market funds as defined in subsection
2224, individual securities which are eligible for inclusion in
23the legal reserve of the life insurance company or association,
24or in repurchase agreements fully collateralized by such
25securities if the life insurance company or association takes
26delivery of the collateral either directly or through an
27authorized custodian or pooled fund comprised of individual
28securities which are eligible for inclusion in the legal
29reserve of the life insurance company or association. If such
30reinvestment is made in individual securities or in repurchase
31agreements, the individual securities or the securities which
32collateralize the repurchase agreements shall mature in less
33than two hundred seventy days. If such reinvestment is made
34in a pooled fund, the average maturity of the securities
35comprising such pooled fund must be one hundred eighty days or
-1-1less and the individual maturities of the securities comprising
2such pooled fund must be three hundred ninety-seven days or
3less. Individual securities and securities comprising the
4pooled fund shall be investment grade. As used in this
5paragraph, “maturity” means the earlier of the fixed date on
6which the holder of the security is unconditionally entitled to
7receive principal and interest in full or the date on which the
8holder of the security is unconditionally entitled upon demand
9to receive principal and interest in full.
10 Sec. 3. Section 511.8, subsection 24, paragraph a,
11subparagraph (2), Code 2017, is amended to read as follows:
12(2) “Class one “Rule 2a-7 money market fund” means
13investments in an open-end management investment company
14registered with the federal securities and exchange commission
15under the federal Investment Company Act of 1940, 15 U.S.C.
16§80a-1 et seq., and operated in accordance with 17 C.F.R.
17§270.2a-7, that qualifies for investment using the bond class
18one reserve factor under the purposes and procedures of the
19national association of insurance commissioners’ securities
20valuation office.
21 Sec. 4. Section 511.8, subsection 24, paragraphs b and c,
22Code 2017, are amended to read as follows:
23b. Cash equivalents include a class one rule 2a-7 money
24market fund.
25c. Cash equivalents, other than a class one rule 2a-7 money
26market fund, are not eligible in excess of two percent of the
27legal reserve in the obligations of any one corporation, and
28are not eligible in excess of ten percent of the legal reserve.
29 Sec. 5. Section 521B.102, unnumbered paragraph 1, Code
302017, is amended to read as follows:
31Credit for reinsurance shall be allowed a domestic ceding
32insurer as either an asset or a reduction from liability on
33account of reinsurance ceded only when the reinsurer meets
34the requirements of subsection 1, 2, 3, 4, 5, or 6. The
35commissioner may adopt rules pursuant to section 521B.105
-2-1specifying additional requirements related to the valuation of
2assets or reserve credits, the amount and forms of security
3supporting reinsurance arrangements described in section
4521B.105, and the circumstances pursuant to which credit shall
5be reduced or eliminated. Credit shall be allowed under
6subsection 1, 2, or 3 only respecting cessions of those kinds
7or classes of business which the assuming insurer is licensed
8or otherwise permitted to write or assume in the insurer’s
9state of domicile or, in the case of a United States branch
10of an alien assuming insurer, in the state through which the
11insurer is entered and licensed to transact insurance or
12reinsurance. Credit shall be allowed under subsection 3 or 4
13only if the applicable requirements of subsection 7 have been
14satisfied.
15 Sec. 6. Section 521B.103, subsection 1, Code 2017, is
16amended to read as follows:
171. An asset or a reduction from liability for reinsurance
18ceded by a domestic insurer to an assuming insurer not meeting
19the requirements of section 521B.102, shall be allowed in an
20amount not exceeding the liabilities carried by the ceding
21insurer. The commissioner may adopt rules pursuant to section
22521B.105 specifying requirements related to the valuation of
23assets or reserve credits, the amount and forms of security
24supporting reinsurance arrangements described in section
25521B.105, and the circumstances pursuant to which credit shall
26be reduced or eliminated. The reduction shall be in the amount
27of funds held by or on behalf of the ceding insurer, including
28funds held in trust for the ceding insurer, under a reinsurance
29contract with the assuming insurer as security for the payment
30of obligations under the contract, if the security is held
31in the United States subject to withdrawal solely by, and
32under the exclusive control of, the ceding insurer, or in the
33case of a trust, held in a qualified United States financial
34institution as defined in section 521B.104, subsection 2.
35 Sec. 7. Section 521B.105, Code 2017, is amended to read as
-3-1follows:
2521B.105 Rules.
31. The commissioner may adopt rules, pursuant to chapter
417A, as necessary or convenient to administer this chapter.
52. The commissioner is further authorized to adopt rules
6pursuant to chapter 17A that are applicable to reinsurance
7arrangements as follows:
8a. A rule adopted pursuant to this subsection is applicable
9only to reinsurance arrangements relating to the following:
10(1) Life insurance policies with guaranteed nonlevel gross
11premiums or guaranteed nonlevel benefits.
12(2) Universal life insurance policies with provisions
13allowing a policyholder to keep a policy in force over a
14secondary guarantee period.
15(3) Variable annuities with guaranteed death or living
16benefits.
17(4) Long-term care insurance policies.
18(5) Other life and health insurance and annuity products as
19to which the national association of insurance commissioners
20adopts model regulatory requirements with respect to credit for
21reinsurance.
22b. A rule adopted pursuant to paragraph “a”, and applicable
23to policies described in paragraph “a”, subparagraph (1) or (2),
24is applicable to any reinsurance contract containing either of
25the following:
26(1) Policies issued on or after January 1, 2015.
27(2) Policies issued prior to January 1, 2015, if risk
28pertaining to such policies is ceded in connection with the
29reinsurance contract, in whole or in part, on or after January
301, 2015.
31c. A rule adopted pursuant to this subsection may require
32the ceding insurer, in calculating the amounts or forms of
33security required to be held under rules adopted under this
34subsection, to use the valuation manual as defined in section
35508.36, including all amendments adopted by the national
-4-1association of insurance commissioners and in effect on
2the date as of which the calculation is made, to the extent
3applicable.
43. A rule adopted pursuant to this section is not applicable
5to cessions to an assuming insurer that meets either of the
6following requirements:
7a. Is certified in Iowa.
8b. Maintains at least two hundred fifty million dollars
9in capital and surplus when determined in accordance with the
10accounting practices and procedures manual of the national
11association of insurance commissioners, including all
12amendments adopted by the national association of insurance
13commissioners, but excluding the impact of any permitted
14or prescribed practices; and meets either of the following
15requirements:
16(1) Is licensed in at least twenty-six states.
17(2) Is licensed in at least ten states, and is licensed or
18accredited in a total of at least thirty-five states.
194. The commissioner’s authority to adopt rules pursuant
20to subsection 2 does not limit the commissioner’s general
21authority to adopt rules pursuant to subsection 1.
22 Sec. 8. RETROACTIVE APPLICABILITY. The following provision
23of this Act applies retroactively to January 1, 2015, as to
24specified reinsurance contracts described in section 521B.105,
25subsection 2, paragraph “b”, as enacted in this Act:
261. The section of this Act amending section 521B.105.
27EXPLANATION
28The inclusion of this explanation does not constitute agreement with
29the explanation’s substance by the members of the general assembly.
30This bill relates to provisions applicable to life insurance
31companies and associations and credit for reinsurance, and
32contains a retroactive applicability provision.
33The bill makes changes in Code section 511.8 by renaming a
34money market fund that is referred to in the provision.
35The bill makes changes in several provisions of Code
-5-1chapter 521B, giving the commissioner of insurance specific
2authorization to adopt rules applicable to reinsurance
3arrangements, in addition to the commissioner’s existing
4authorization to adopt rules to administer the Code chapter.
5The amendments to Code section 521B.105 are made
6retroactively applicable to January 1, 2015, as to rules that
7are adopted and are applicable to certain specified life
8insurance policies with reinsurance contracts containing
9policies issued on or after January 1, 2015, or policies issued
10prior to January 1, 2015, if risk pertaining to the policies is
11ceded in connection with the reinsurance contract on or after
12January 1, 2015.
-6-av/rn/nh
2companies and associations, and credit for reinsurance, and
3including retroactive applicability provisions.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 511.8, subsection 22, paragraph b,
2subparagraph (2), subparagraph division (b), Code 2017, is
3amended to read as follows:
4(b) Financial instruments used in hedging transactions
5between an insurer and a conduit which are collateralized by
6obligations eligible under subsection 5 or by cash equivalents
7eligible under subsection 24, other than a class one rule
82a-7 money market fund, are eligible only to the extent that
9such securities deposited as collateral are not in excess
10of ten percent of the legal reserve, less any obligations
11eligible under subsection 5 or cash equivalents eligible under
12subsection 24, other than a class one rule 2a-7 money market
13fund, owned by the insurer or which are the subject of hedging
14transactions by the insurer, that are included in the insurer’s
15legal reserve.
16 Sec. 2. Section 511.8, subsection 23, paragraph c, Code
172017, is amended to read as follows:
18c. If the loan is collateralized by cash or cash
19equivalents, the cash or cash equivalent collateral may be
20reinvested by the life insurance company or association in
21class one rule 2a-7 money market funds as defined in subsection
2224, individual securities which are eligible for inclusion in
23the legal reserve of the life insurance company or association,
24or in repurchase agreements fully collateralized by such
25securities if the life insurance company or association takes
26delivery of the collateral either directly or through an
27authorized custodian or pooled fund comprised of individual
28securities which are eligible for inclusion in the legal
29reserve of the life insurance company or association. If such
30reinvestment is made in individual securities or in repurchase
31agreements, the individual securities or the securities which
32collateralize the repurchase agreements shall mature in less
33than two hundred seventy days. If such reinvestment is made
34in a pooled fund, the average maturity of the securities
35comprising such pooled fund must be one hundred eighty days or
-1-1less and the individual maturities of the securities comprising
2such pooled fund must be three hundred ninety-seven days or
3less. Individual securities and securities comprising the
4pooled fund shall be investment grade. As used in this
5paragraph, “maturity” means the earlier of the fixed date on
6which the holder of the security is unconditionally entitled to
7receive principal and interest in full or the date on which the
8holder of the security is unconditionally entitled upon demand
9to receive principal and interest in full.
10 Sec. 3. Section 511.8, subsection 24, paragraph a,
11subparagraph (2), Code 2017, is amended to read as follows:
12(2) “Class one “Rule 2a-7 money market fund” means
13investments in an open-end management investment company
14registered with the federal securities and exchange commission
15under the federal Investment Company Act of 1940, 15 U.S.C.
16§80a-1 et seq., and operated in accordance with 17 C.F.R.
17§270.2a-7, that qualifies for investment using the bond class
18one reserve factor under the purposes and procedures of the
19national association of insurance commissioners’ securities
20valuation office.
21 Sec. 4. Section 511.8, subsection 24, paragraphs b and c,
22Code 2017, are amended to read as follows:
23b. Cash equivalents include a class one rule 2a-7 money
24market fund.
25c. Cash equivalents, other than a class one rule 2a-7 money
26market fund, are not eligible in excess of two percent of the
27legal reserve in the obligations of any one corporation, and
28are not eligible in excess of ten percent of the legal reserve.
29 Sec. 5. Section 521B.102, unnumbered paragraph 1, Code
302017, is amended to read as follows:
31Credit for reinsurance shall be allowed a domestic ceding
32insurer as either an asset or a reduction from liability on
33account of reinsurance ceded only when the reinsurer meets
34the requirements of subsection 1, 2, 3, 4, 5, or 6. The
35commissioner may adopt rules pursuant to section 521B.105
-2-1specifying additional requirements related to the valuation of
2assets or reserve credits, the amount and forms of security
3supporting reinsurance arrangements described in section
4521B.105, and the circumstances pursuant to which credit shall
5be reduced or eliminated. Credit shall be allowed under
6subsection 1, 2, or 3 only respecting cessions of those kinds
7or classes of business which the assuming insurer is licensed
8or otherwise permitted to write or assume in the insurer’s
9state of domicile or, in the case of a United States branch
10of an alien assuming insurer, in the state through which the
11insurer is entered and licensed to transact insurance or
12reinsurance. Credit shall be allowed under subsection 3 or 4
13only if the applicable requirements of subsection 7 have been
14satisfied.
15 Sec. 6. Section 521B.103, subsection 1, Code 2017, is
16amended to read as follows:
171. An asset or a reduction from liability for reinsurance
18ceded by a domestic insurer to an assuming insurer not meeting
19the requirements of section 521B.102, shall be allowed in an
20amount not exceeding the liabilities carried by the ceding
21insurer. The commissioner may adopt rules pursuant to section
22521B.105 specifying requirements related to the valuation of
23assets or reserve credits, the amount and forms of security
24supporting reinsurance arrangements described in section
25521B.105, and the circumstances pursuant to which credit shall
26be reduced or eliminated. The reduction shall be in the amount
27of funds held by or on behalf of the ceding insurer, including
28funds held in trust for the ceding insurer, under a reinsurance
29contract with the assuming insurer as security for the payment
30of obligations under the contract, if the security is held
31in the United States subject to withdrawal solely by, and
32under the exclusive control of, the ceding insurer, or in the
33case of a trust, held in a qualified United States financial
34institution as defined in section 521B.104, subsection 2.
35 Sec. 7. Section 521B.105, Code 2017, is amended to read as
-3-1follows:
2521B.105 Rules.
31. The commissioner may adopt rules, pursuant to chapter
417A, as necessary or convenient to administer this chapter.
52. The commissioner is further authorized to adopt rules
6pursuant to chapter 17A that are applicable to reinsurance
7arrangements as follows:
8a. A rule adopted pursuant to this subsection is applicable
9only to reinsurance arrangements relating to the following:
10(1) Life insurance policies with guaranteed nonlevel gross
11premiums or guaranteed nonlevel benefits.
12(2) Universal life insurance policies with provisions
13allowing a policyholder to keep a policy in force over a
14secondary guarantee period.
15(3) Variable annuities with guaranteed death or living
16benefits.
17(4) Long-term care insurance policies.
18(5) Other life and health insurance and annuity products as
19to which the national association of insurance commissioners
20adopts model regulatory requirements with respect to credit for
21reinsurance.
22b. A rule adopted pursuant to paragraph “a”, and applicable
23to policies described in paragraph “a”, subparagraph (1) or (2),
24is applicable to any reinsurance contract containing either of
25the following:
26(1) Policies issued on or after January 1, 2015.
27(2) Policies issued prior to January 1, 2015, if risk
28pertaining to such policies is ceded in connection with the
29reinsurance contract, in whole or in part, on or after January
301, 2015.
31c. A rule adopted pursuant to this subsection may require
32the ceding insurer, in calculating the amounts or forms of
33security required to be held under rules adopted under this
34subsection, to use the valuation manual as defined in section
35508.36, including all amendments adopted by the national
-4-1association of insurance commissioners and in effect on
2the date as of which the calculation is made, to the extent
3applicable.
43. A rule adopted pursuant to this section is not applicable
5to cessions to an assuming insurer that meets either of the
6following requirements:
7a. Is certified in Iowa.
8b. Maintains at least two hundred fifty million dollars
9in capital and surplus when determined in accordance with the
10accounting practices and procedures manual of the national
11association of insurance commissioners, including all
12amendments adopted by the national association of insurance
13commissioners, but excluding the impact of any permitted
14or prescribed practices; and meets either of the following
15requirements:
16(1) Is licensed in at least twenty-six states.
17(2) Is licensed in at least ten states, and is licensed or
18accredited in a total of at least thirty-five states.
194. The commissioner’s authority to adopt rules pursuant
20to subsection 2 does not limit the commissioner’s general
21authority to adopt rules pursuant to subsection 1.
22 Sec. 8. RETROACTIVE APPLICABILITY. The following provision
23of this Act applies retroactively to January 1, 2015, as to
24specified reinsurance contracts described in section 521B.105,
25subsection 2, paragraph “b”, as enacted in this Act:
261. The section of this Act amending section 521B.105.
27EXPLANATION
28The inclusion of this explanation does not constitute agreement with
29the explanation’s substance by the members of the general assembly.
30This bill relates to provisions applicable to life insurance
31companies and associations and credit for reinsurance, and
32contains a retroactive applicability provision.
33The bill makes changes in Code section 511.8 by renaming a
34money market fund that is referred to in the provision.
35The bill makes changes in several provisions of Code
-5-1chapter 521B, giving the commissioner of insurance specific
2authorization to adopt rules applicable to reinsurance
3arrangements, in addition to the commissioner’s existing
4authorization to adopt rules to administer the Code chapter.
5The amendments to Code section 521B.105 are made
6retroactively applicable to January 1, 2015, as to rules that
7are adopted and are applicable to certain specified life
8insurance policies with reinsurance contracts containing
9policies issued on or after January 1, 2015, or policies issued
10prior to January 1, 2015, if risk pertaining to the policies is
11ceded in connection with the reinsurance contract on or after
12January 1, 2015.
-6-av/rn/nh