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