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General Assembly Raised Bill No. 338
February Session, 2020
LCO No. 2212
Referred to Committee on INSURANCE AND REAL ESTATE
Introduced by:
(INS)
AN ACT CONCERNING TH E INSURANCE DEPARTME NT'S
RECOMMENDATIONS REGA RDING CREDIT FOR REINSURANCE.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. Section 38a-85 of the general statutes is repealed and the 1
following is substituted in lieu thereof (Effective October 1, 2020): 2
(a) (1) Credit for reinsurance shall be allowed a domestic ceding 3
insurer as either an asset or a deduction from liability on account of 4
reinsurance ceded only when the reinsurer meets the requirements of: 5
[(1)] (A) Subsection (b) of this section; 6
[(2)] (B) Subsection (c) of this section; 7
[(3)] (C) Subsections (d) and (h) of this section; 8
[(4)] (D) Subsections (e), (h) and (i) of this section; 9
[(5)] (E) Subsections (f) and (i) of this section; 10
[(6)] (F) Subsection (g) of this section; [or] 11
(G) Subsection (h) of this section; or 12 Raised Bill No. 338
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[(7)] (H) Any regulation adopted pursuant to subsection (b) of section 13
38a-88, as amended by this act. 14
(2) Credit shall be allowed under subsection (b), (c) or (d) of this 15
section only as respects cessions of those kinds or classes of business 16
which the assuming insurer is licensed or otherwise permitted to write 17
or assume in its state of domicile, or, in the case of a United States branch 18
of an alien assuming insurer, in the state through which it is entered and 19
licensed to transact insurance or reinsurance. Credit shall be allowed 20
under subsection (d) or (e) of this section only if the applicable 21
requirements of subsection (i) of this section have been satisfied. 22
(b) Credit shall be allowed when the reinsurance is ceded to an 23
assuming insurer that is licensed to transact insurance or reinsurance in 24
this state. 25
(c) (1) Credit shall be allowed when the reinsurance is ceded to an 26
assuming insurer that is accredited by the commissioner as a reinsurer 27
in this state. To be eligible for accreditation, an insurer shall (A) file with 28
the commissioner evidence of its submission to this state's jurisdiction, 29
(B) submit to this state's authority to examine its books and records, (C) 30
be licensed to transact insurance or reinsurance in at least one state, or 31
in the case of a United States branch of an alien assuming insurer is 32
entered through and licensed to transact insurance or reinsurance in at 33
least one state, (D) file annually with the commissioner a copy of its 34
annual statement filed with the insurance department of its state of 35
domicile and a copy of its most recent audited financial statement, and 36
(E) demonstrate to the satisfaction of the commissioner that it has 37
adequate financial capacity to meet its reinsurance obligations and is 38
otherwise qualified to assume reinsurance from a domestic insurer. An 39
assuming insurer shall be deemed to meet the requirements of this 40
subparagraph if it maintains a surplus with regard to policyholders of 41
not less than twenty million dollars at the time of accreditation and its 42
accreditation has not been denied by the commissioner within ninety 43
days after the date the insurer submitted its application. 44 Raised Bill No. 338
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(2) Each accredited reinsurer doing business in this state shall, 45
annually, on or before the first day of March, submit to the 46
commissioner, by electronically filing with the National Association of 47
Insurance Commissioners, a true and complete report, signed and 48
sworn to by its president or a vice president, and secretary or an 49
assistant secretary, of its financial condition on the thirty-first day of 50
December next preceding, prepared in accordance with the National 51
Association of Insurance Commissioners annual statement instructions 52
handbook and following those accounting procedures and practices 53
prescribed by the National Association of Insurance Commissioners 54
accounting practices and procedures manual, subject to any deviations 55
in form and detail as may be prescribed by the commissioner. An 56
electronically filed report in accordance with section 38a-53a that is 57
timely submitted to the National Association of Insurance 58
Commissioners shall be deemed to have been submitted to the 59
commissioner in accordance with this subdivision. 60
(d) Credit shall be allowed when the reinsurance is ceded to an 61
assuming insurer that is domiciled and licensed in, or in the case of a 62
United States branch of an alien assuming insurer is entered through, a 63
state that employs standards regarding credit for reinsurance 64
substantially similar to those applicable in this state and the assuming 65
insurer or United States branch of an alien assuming insurer (1) 66
maintains a surplus with regard to policyholders in an amount not less 67
than twenty million dollars, and (2) submits to the authority of this state 68
to examine its books and records. The requirement of subdivision (1) of 69
this subsection shall not apply to reinsurance ceded and assumed 70
pursuant to pooling arrangements among insurers in the same holding 71
company system. 72
(e) (1) Credit shall be allowed when the reinsurance is ceded to an 73
assuming insurer that maintains a trust that complies with the 74
requirements of subdivisions (2) and (3) of this subsection in a qualified 75
United States financial institution, as defined in section 38a-87, for the 76
payment of the valid claims of its United States policyholders and 77
ceding insurers, and their assigns and successors in interest. The 78 Raised Bill No. 338
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assuming insurer shall (A) report annually to the commissioner 79
information substantially the same as that required to be reported in the 80
National Association of Insurance Commissioners' Annual Statement 81
form by licensed insurers, to enable the commissioner to determine the 82
sufficiency of the trust fund, and (B) submit to, and pay the expenses of, 83
examination of its books and records by the commissioner. 84
(2) (A) No credit for reinsurance shall be allowed under subdivision 85
(1) of this subsection unless: 86
(i) The form of the trust and any amendments to the trust have been 87
approved by (I) the insurance regulatory official of the state of domicile 88
of the trust, or (II) the insurance regulatory official of another state who 89
has, pursuant to the terms of the trust instrument, accepted principal 90
regulatory oversight of the trust; 91
(ii) The form of the trust and any amendments to the trust have been 92
filed with the insurance regulatory officials of each state in which ceding 93
insurer beneficiaries of the trust are domiciled; and 94
(iii) The trust instrument (I) provides that a contested claim shall be 95
valid and enforceable upon the entry of a final order of a court of 96
competent jurisdiction in the United States, and (II) vests legal title to its 97
assets in its trustees for the benefit of the assuming insurer's domestic 98
and foreign policyholders and ceding insurers, and their assigns and 99
successors in interest. 100
(B) (i) The trust shall be subject to examination by the commissioner 101
and shall remain in effect for as long as the assuming insurer has 102
outstanding obligations due under the reinsurance agreements subject 103
to the trust. 104
(ii) Not later than March first, annually, the trustee of the trust shall 105
(I) report to the commissioner, in writing, the balance and a list of the 106
investments of the trust at the end of the preceding calendar year, and 107
(II) certify to the commissioner the date of termination of the trust, if so 108
planned, or that the trust will not expire prior to the following December 109 Raised Bill No. 338
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thirty-first. 110
(3) (A) (i) In the case of a single assuming insurer, the trust shall 111
consist of a trusteed account with funds in an amount not less than the 112
assuming insurer's liabilities attributable to reinsurance ceded by 113
domestic and foreign ceding insurers and, unless otherwise provided in 114
subparagraph (A)(ii) of this subdivision, the assuming insurer shall 115
maintain a trusteed surplus of not less than twenty million dollars. 116
(ii) (I) The insurance regulatory official with principal oversight of the 117
trust may authorize a reduction in the required trusteed surplus. 118
(II) For a trust over which the commissioner has principal regulatory 119
oversight, at any time after the assuming insurer has permanently 120
discontinued for at least three full years underwriting new business 121
secured by the trust, the commissioner may authorize a reduction in the 122
required trusteed surplus. Such reduction shall be made only after the 123
commissioner finds, based on a risk assessment, that the reduced 124
surplus level is adequate to protect domestic and foreign policyholders 125
and ceding insurers and claimants in light of reasonably foreseeable 126
adverse loss development. The risk assessment may involve an actuarial 127
review, including an independent analysis of reserves and cash flows, 128
and shall consider all material risk factors, including, when applicable, 129
the lines of business involved, the stability of the incurred loss estimates 130
and the effect of the surplus requirements on the assuming insurer's 131
liquidity or solvency. The minimum required surplus shall not be 132
reduced to an amount less than thirty per cent of the assuming insurer's 133
liabilities attributable to reinsurance ceded by domestic and foreign 134
ceding insurers covered by the trust. 135
(B) In the case of an assuming insurer that is a group including 136
incorporated and individual unincorporated underwriters: 137
(i) (I) For reinsurance ceded under a reinsurance agreement with an 138
inception date prior to January 1, 1993, and not amended or renewed 139
after said date, the trust shall consist of a trusteed account with funds in 140
an amount not less than such underwriters' several insurance and 141 Raised Bill No. 338
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reinsurance liabilities attributable to business written in the United 142
States; or 143
(II) For reinsurance ceded under a reinsurance agreement with an 144
inception date on or after January 1, 1993, the trust shall consist of a 145
trusteed account with funds in an amount not less than such 146
underwriters' several liabilities attributable to business ceded by 147
domestic and foreign ceding insurers to any underwriter who is a 148
member of the group; and 149
(ii) In addition to a trust specified in subparagraph (B)(i)(I) or (B)(i)(II) 150
of this subdivision, the group shall maintain, for all years of account, a 151
trusteed surplus of which one hundred million dollars shall be held 152
jointly for the benefit of domestic and foreign ceding insurers of any 153
member of the group; and 154
(iii) The incorporated members of the group shall not be engaged in 155
any business other than underwriting as a member of the group and 156
shall be subject to the same level of solvency regulation and solvency 157
control by the group's domiciliary insurance regulatory official as are 158
the unincorporated members; and 159
(iv) Not later than ninety days after its financial statements are due to 160
be filed with the group's domiciliary insurance regulatory official, the 161
group shall provide to the commissioner an annual certification by the 162
group's domiciliary insurance regulatory official of the solvency of each 163
underwriter who is a member of the group or, if such certification is not 164
provided by the group's domiciliary insurance regulatory official, 165
financial statements prepared by independent public accountants of 166
each such underwriter. 167
(C) In the case of a group of incorporated underwriters under 168
common administration: 169
(i) The group shall be accredited and have continuously transacted 170
an insurance business outside the United States for at least three years 171
immediately prior to applying for accreditation; 172 Raised Bill No. 338
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(ii) The trust shall consist of a trusteed account with funds in an 173
amount not less than such underwriters' several liabilities attributable 174
to business ceded by domestic and foreign ceding insurers pursuant to 175
a reinsurance contract issued in the name of the group to any 176
underwriter who is a member of the group; 177
(iii) In addition to such trust, the group shall maintain (I) an aggregate 178
policyholders' surplus of not less than ten billion dollars, and (II) a joint 179
trusteed surplus of which one hundred million dollars shall be held 180
jointly for the benefit of domestic and foreign ceding insurers of any 181
member of the group as additional security for these liabilities; and 182
(iv) Not later than ninety days after its financial statements are due to 183
be filed with the group's domiciliary insurance regulatory official, the 184
group shall make available to the commissioner an annual certification 185
by the group's domiciliary insurance regulatory official of the solvency 186
of each underwriter who is a member of the group and financial 187
statements prepared by independent public accountants of each such 188
underwriter. 189
(f) (1) Credit shall be allowed when the reinsurance is ceded to an 190
assuming insurer that is certified in accordance with section 38a-85a by 191
the commissioner as a reinsurer in this state and such certified reinsurer 192
maintains security in a form and amounts set forth in subdivision (3) of 193
subsection (e) of this section or, for a multibeneficiary trust set forth in 194
subdivision (2) of subsection (e) of section 38a-85a, in accordance with 195
the provisions of subdivision (2) of subsection (e) of section 38a-85a. 196
(2) If the security is not sufficient with respect to obligations incurred 197
by a certified reinsurer, the commissioner shall reduce the credit 198
allowed by an amount proportionate to the deficiency and may impose 199
further reductions in the credit allowed if the commissioner finds there 200
is a material risk that such obligations will not be paid in full when due. 201
(g) (1) Credit shall be allowed when the reinsurance is ceded to an 202
assuming insurer meeting each of the conditions set forth below: 203 Raised Bill No. 338
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(A) The assuming insurer must have its head office or be domiciled 204
in, as applicable, and be licensed in a reciprocal jurisdiction. A 205
"reciprocal jurisdiction" is a jurisdiction that meets one of the following: 206
(i) A non-United States jurisdiction that is subject to an in-force 207
covered agreement with the United States, each within its legal 208
authority, or, in the case of a covered agreement between the United 209
States and European Union, is a member state of the European Union. 210
For purposes of this subsection, a "covered agreement" is an agreement 211
entered into pursuant to Dodd-Frank Wall Street Reform and Consumer 212
Protection Act, 31 USC Sections 313 and 314, that is currently in effect or 213
in a period of provisional application and addresses the elimination, 214
under specified conditions, of collateral requirements as a condition for 215
entering into any reinsurance agreement with a ceding insurer 216
domiciled in this state or for allowing the ceding insurer to recognize 217
credit for reinsurance; 218
(ii) A United States jurisdiction that meets the requirements for 219
accreditation under the National Association of Insurance 220
Commissioners' financial standards and accreditation program; or 221
(iii) A qualified jurisdiction, as determined by the commissioner 222
pursuant to subsection (c) of section 38a-85a, which is not otherwise 223
described in subparagraph (A)(i) or (A)(ii) of this subdivision and which 224
meets certain additional requirements, consistent with the terms and 225
conditions of in-force covered agreements, as specified by the 226
commissioner in regulations adopted in accordance with the provisions 227
of chapter 54. 228
(B) The assuming insurer must have and maintain, on an ongoing 229
basis, minimum capital and surplus, or its equivalent, calculated 230
according to the methodology of its domiciliary jurisdiction, in an 231
amount to be set forth in regulation. If the assuming insurer is an 232
association, including incorporated and individual unincorporated 233
underwriters, it must have and maintain, on an ongoing basis, 234
minimum capital and surplus equivalents, net of liabilities, calculated 235 Raised Bill No. 338
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according to the methodology applicable in its domiciliary jurisdiction, 236
and a central fund containing a balance in amounts to be set forth in 237
regulation. 238
(C) The assuming insurer must have and maintain, on an ongoing 239
basis, a minimum solvency or capital ratio, as applicable, which will be 240
set forth in regulation. If the assuming insurer is an association, 241
including incorporated and individual unincorporated underwriters, it 242
must have and maintain, on an ongoing basis, a minimum solvency or 243
capital ratio in the reciprocal jurisdiction where the assuming insurer 244
has its head office or is domiciled, as applicable, and is also licensed. 245
(D) The assuming insurer must agree and provide adequate 246
assurance to the commissioner, in a form specified by the commissioner 247
pursuant to regulation, as follows: 248
(i) The assuming insurer must provide prompt written notice and 249
explanation to the commissioner if it falls below the minimum 250
requirements set forth in subparagraph (B) or (C) of this subdivision, or 251
if any regulatory action is taken against it for serious noncompliance 252
with applicable law; 253
(ii) The assuming insurer must consent in writing to the jurisdiction 254
of the courts of this state and to the appointment of the commissioner as 255
agent for service of process. The commissioner may require that consent 256
for service of process be provided to the commissioner and included in 257
each reinsurance agreement. Nothing in this provision shall limit, or in 258
any way alter, the capacity of parties to a reinsurance agreement to agree 259
to alternative dispute resolution mechanisms, except to the extent such 260
agreements are unenforceable under applicable insolvency or 261
delinquency laws; 262
(iii) The assuming insurer must consent in writing to pay all final 263
judgments, wherever enforcement is sought, obtained by a ceding 264
insurer or its legal successor, that have been declared enforceable in the 265
jurisdiction where the judgment was obtained; 266 Raised Bill No. 338
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(iv) Each reinsurance agreement must include a provision requiring 267
the assuming insurer to provide security in an amount equal to one 268
hundred per cent of the assuming insurer's liabilities attributable to 269
reinsurance ceded pursuant to that agreement if the assuming insurer 270
resists enforcement of a final judgment that is enforceable under the law 271
of the jurisdiction in which it was obtained or a properly enforceable 272
arbitration award, whether obtained by the ceding insurer or by its legal 273
successor on behalf of its resolution estate; and 274
(v) The assuming insurer must confirm that it is not presently 275
participating in any solvent scheme of arrangement that involves this 276
state's ceding insurers, and agree to notify the ceding insurer and the 277
commissioner and to provide security in an amount equal to one 278
hundred per cent of the assuming insurer's liabilities to the ceding 279
insurer, should the assuming insurer enter into such a solvent scheme 280
of arrangement. Such security shall be in a form consistent with the 281
provisions of subsection (f) of this section, section 38a-85a and section 282
38a-86 and as specified in regulations adopted by the commissioner in 283
accordance with the provisions of chapter 54. 284
(E) The assuming insurer or its legal successor must provide, if 285
requested by the commissioner, on behalf of itself and any legal 286
predecessors, certain documentation to the commissioner, as specified 287
by the commissioner in regulation. 288
(F) The assuming insurer must maintain a practice of prompt 289
payment of claims under reinsurance agreements, pursuant to criteria 290
set forth in regulation. 291
(G) The assuming insurer's supervisory authority must confirm to the 292
commissioner on an annual basis, as of the preceding December thirty-293
first or at the annual date otherwise statutorily reported to the reciprocal 294
jurisdiction, that the assuming insurer complies with the requirements 295
set forth in subparagraphs (B) and (C) of this subdivision. 296
(H) Nothing in this provision precludes an assuming insurer from 297
providing the commissioner with information on a voluntary basis. 298 Raised Bill No. 338
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(2) The commissioner shall timely create and publish a list of 299
reciprocal jurisdictions. 300
(A) A list of reciprocal jurisdictions is published through the National 301
Association of Insurance Commissioners' committee process. The 302
commissioner's list shall include any reciprocal jurisdiction as defined 303
under subparagraphs (A)(i) and (A)(ii) of subdivision (1) of this 304
subsection, and shall consider any other reciprocal jurisdiction included 305
on the National Association of Insurance Commissioners' list. The 306
commissioner may approve a jurisdiction that does not appear on the 307
National Association of Insurance Commissioners' list of reciprocal 308
jurisdictions in accordance with criteria to be developed under 309
regulations adopted by the commissioner in accordance with the 310
provisions of chapter 54. 311
(B) The commissioner may remove a jurisdiction from the list of 312
reciprocal jurisdictions upon a determination that the jurisdiction no 313
longer meets the requirements of a reciprocal jurisdiction, in accordance 314
with a process set forth in regulations adopted by the commissioner 315
pursuant to chapter 54, except that the commissioner shall not remove 316
from the list a reciprocal jurisdiction as defined under subparagraphs 317
(A)(i) and (A)(ii) of subdivision (1) of this subsection. Upon removal of 318
a reciprocal jurisdiction from this list credit for reinsurance ceded to an 319
assuming insurer which has its home office or is domiciled in that 320
jurisdiction shall be allowed, if otherwise allowed pursuant to sections 321
38a-85 to 38a-88, inclusive, as amended by this act. 322
(3) The commissioner shall timely create and publish a list of 323
assuming insurers that have satisfied the conditions set forth in this 324
subsection and to which cessions shall be granted credit in accordance 325
with this subsection. The commissioner may add an assuming insurer 326
to such list if a National Association of Insurance Commissioners 327
accredited jurisdiction has added such assuming insurer to a list of such 328
assuming insurers or if, upon initial eligibility, the assuming insurer 329
submits the information to the commissioner as required under 330
subparagraph (D) of subdivision (1) of this subsection and complies 331 Raised Bill No. 338
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with any additional requirements that the commissioner may impose by 332
regulation, except to the extent that they conflict with an applicable 333
covered agreement. 334
(4) If the commissioner determines that an assuming insurer no 335
longer meets one or more of the requirements under this subsection, the 336
commissioner may revoke or suspend the eligibility of the assuming 337
insurer for recognition under this subsection in accordance with 338
procedures set forth in regulation. 339
(A) While an assuming insurer's eligibility is suspended, no 340
reinsurance agreement issued, amended or renewed after the effective 341
date of the suspension qualifies for credit except to the extent that the 342
assuming insurer's obligations under the contract are secured in 343
accordance with section 38a-86. 344
(B) If an assuming insurer's eligibility is revoked, no credit for 345
reinsurance may be granted after the effective date of the revocation 346
with respect to any reinsurance agreements entered into by the 347
assuming insurer, including reinsurance agreements entered into prior 348
to the date of revocation, except to the extent that the assuming insurer's 349
obligations under the contract are secured in a form acceptable to the 350
commissioner and consistent with the provisions of section 38a-86. 351
(5) If subject to a legal process of rehabilitation, liquidation or 352
conservation, as applicable, the ceding insurer, or its representative, 353
may seek and, if determined appropriate by the court in which the 354
proceedings are pending, may obtain an order requiring that the 355
assuming insurer post security for all outstanding ceded liabilities. 356
(6) Nothing in this subsection shall limit or in any way alter the 357
capacity of parties to a reinsurance agreement to agree on requirements 358
for security or other terms in that reinsurance agreement, except as 359
expressly prohibited by sections 38a-85 to 38a-88, inclusive, as amended 360
by this act, or other applicable law or regulation. 361
(7) Credit may be taken under this subsection only for reinsurance 362 Raised Bill No. 338
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agreements entered into, amended or renewed on or after the effective 363
date of the statute adding this subsection, and only with respect to losses 364
incurred and reserves reported on or after the later of the date on which 365
the assuming insurer has met all eligibility requirements pursuant to 366
subdivision (1) of this subsection, and the effective date of the new 367
reinsurance agreement, amendment or renewal. 368
(A) This paragraph does not alter or impair a ceding insurer's right to 369
take credit for reinsurance, to the extent that credit is not available under 370
this subsection, as long as the reinsurance qualifies for credit under any 371
other applicable provision of sections 38a-85 to 38a-88, inclusive, as 372
amended by this act. 373
(B) Nothing in this subsection shall authorize an assuming insurer to 374
withdraw or reduce the security provided under any reinsurance 375
agreement except as permitted by the terms of the agreement. 376
(C) Nothing in this subsection shall limit, or in any way alter, the 377
capacity of parties to any reinsurance agreement to renegotiate the 378
agreement. 379
[(g)] (h) Credit shall be allowed when the reinsurance is ceded to an 380
assuming insurer not meeting the requirements of subsection (b), (c), 381
(d), (e), [or] (f) or (g) of this section but only with respect to the insurance 382
of risks located in jurisdictions where such reinsurance is required by 383
applicable law or regulation of that jurisdiction. 384
[(h)] (i) If the assuming insurer is not licensed, accredited or certified 385
to transact insurance or reinsurance in this state, the credit permitted by 386
subsection (d) or (e) of this section shall not be allowed unless the 387
assuming insurer agrees (1) that in the event of the failure of the 388
assuming insurer to perform its obligations under the terms of the 389
reinsurance agreement, the assuming insurer, at the request of the 390
ceding insurer, shall (A) submit to the jurisdiction of any court of 391
competent jurisdiction in any state of the United States, (B) comply with 392
all requirements necessary to give such court jurisdiction, and (C) abide 393
by the final decision of such court or any appellate court in the event of 394 Raised Bill No. 338
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an appeal, and (2) to designate the commissioner or a designated 395
attorney as its true and lawful attorney upon whom may be served any 396
lawful process in any action, suit or proceeding instituted by or on 397
behalf of the ceding company. This provision is not intended to conflict 398
with or override the obligation of the parties to a reinsurance agreement 399
to arbitrate their disputes, if such an obligation is created in the 400
agreement. 401
[(i)] (j) If the assuming insurer does not meet the requirements of 402
subsection (b), (c), [or] (d) or (g) of this section, the credit permitted by 403
subsection (e) or (f) of this section shall not be allowed unless the 404
assuming insurer agrees to the following conditions in the trust 405
instrument: 406
(1) Notwithstanding any provision of the trust instrument, if the trust 407
contains an amount less than the amount required under subdivision (3) 408
of subsection (e) of this section or if the grantor of the trust has been 409
declared insolvent or placed in receivership, rehabilitation, liquidation 410
or a similar proceeding under the laws of its state or country of domicile, 411
the trustee shall comply with an order of the insurance regulatory 412
official with principal regulatory oversight of the trust or with an order 413
of a court of competent jurisdiction that directs the trustee to transfer all 414
trust assets to the insurance regulatory official with principal regulatory 415
oversight of the trust; 416
(2) The trust assets shall be distributed by and claims filed with and 417
valued by the insurance regulatory official with principal regulatory 418
oversight of the trust in accordance with the laws of the trust's state of 419
domicile that are applicable to the liquidation of domestic insurance 420
companies; 421
(3) The trustee shall distribute any trust assets or part thereof that are 422
returned by the insurance regulatory official with principal regulatory 423
oversight of the trust, based on such regulatory official's determination 424
that such assets or part thereof are not necessary to satisfy the claims of 425
domestic and foreign ceding insurers of the grantor of the trust, in 426 Raised Bill No. 338
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accordance with the trust instrument; and 427
(4) The grantor of the trust waives any right otherwise available to 428
the grantor under law that is inconsistent with subdivisions (1) to (3), 429
inclusive, of this subsection. 430
[(j)] (k) (1) (A) The commissioner may suspend or revoke a reinsurer's 431
accreditation or certification if, after notice and hearing, the 432
commissioner finds such reinsurer no longer meets the requirements for 433
accreditation or certification. 434
(B) If a certified reinsurer's domiciliary jurisdiction ceases to be a 435
qualified jurisdiction, as set forth in section 38a-85a, the commissioner 436
may suspend the reinsurer's certification indefinitely, in lieu of 437
revocation. 438
(2) The commissioner may suspend or revoke a reinsurer's 439
accreditation or certification without notice and a hearing if: 440
(A) The reinsurer waives its right to a hearing; 441
(B) The commissioner's action is based on (i) regulatory action taken 442
by a regulatory official of the reinsurer's state of domicile, or (ii) the 443
voluntary surrender or termination of the reinsurer's eligibility to 444
transact the business of insurance or reinsurance in its state of domicile 445
or its primary certifying jurisdiction as described in subdivision (2) of 446
subsection (a) of section 38a-85a; or 447
(C) The commissioner finds that immediate action is required to 448
protect the public and a court of competent jurisdiction has not stayed 449
the commissioner's action. 450
(3) (A) While a reinsurer's accreditation or certification is suspended, 451
no credit shall be allowed under this section for a reinsurance contract 452
issued or renewed by the reinsurer on or after the effective date of such 453
suspension, except to the extent that such reinsurer's obligations under 454
such contract are secured in accordance with the provisions of section 455
38a-86. 456 Raised Bill No. 338
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(B) If a reinsurer's accreditation or certification is revoked, no credit 457
shall be allowed under this section on and after the effective date of such 458
revocation, except to the extent that such reinsurer's obligations under 459
such contract are secured in accordance with the provisions of 460
subsection (e) of section 38a-85a or section 38a-86. 461
(4) A reinsurer whose certification has been suspended, revoked or 462
voluntarily surrendered or is inactive shall be treated as a certified 463
reinsurer required to secure one hundred per cent of its obligations, 464
except that this requirement shall not apply to a reinsurer whose 465
certification has been suspended or is inactive if the commissioner 466
continues to assign a high rating to such reinsurer pursuant to section 467
38a-85a. 468
(5) Any person aggrieved by the action of the commissioner in 469
revoking or suspending an accreditation or a certification may appeal 470
therefrom in accordance with the provisions of section 38a-19. 471
[(k)] (l) (1) A domestic ceding insurer shall manage its reinsurance 472
recoverables in proportion to its own book of business. Such insurer 473
shall notify the commissioner not later than thirty days after (A) 474
reinsurance recoverables from any single assuming insurer or group of 475
affiliated assuming insurers exceed fifty per cent of the domestic ceding 476
insurer's last reported surplus to policyholders, or (B) the domestic 477
ceding insurer determines that reinsurance recoverables from any single 478
assuming insurer or group of affiliated assuming insurers are likely to 479
exceed such limit. Any such notice shall demonstrate that the exposure 480
is safely managed by the domestic ceding insurer. 481
(2) A ceding insurer shall manage its reinsurance program to ensure 482
diversification. A domestic ceding insurer shall notify the commissioner 483
not later than thirty days after (A) it has ceded to any single assuming 484
insurer or group of affiliated assuming insurers more than twenty per 485
cent of the domestic ceding insurer's gross written premiums in the 486
prior calendar year, or (B) the domestic ceding insurer determines that 487
the reinsurance ceded to any single assuming insurer or group of 488 Raised Bill No. 338
LCO No. 2212 17 of 19
affiliated assuming insurers is likely to exceed such limit. Any such 489
notice shall demonstrate that the exposure is safely managed by the 490
domestic ceding insurer. 491
Sec. 2. Subdivision (9) of subsection (a) of section 38a-25 of the general 492
statutes is repealed and the following is substituted in lieu thereof 493
(Effective October 1, 2020): 494
(9) Insurance companies designating the Insurance Commissioner as 495
agent for receipt of service of process pursuant to subsection [(h)] (i) of 496
section 38a-85, as amended by this act. 497
Sec. 3. Subparagraph (C) of subdivision (2) of subsection (a) of section 498
38a-92m of the general statutes is repealed and the following is 499
substituted in lieu thereof (Effective October 1, 2020): 500
(C) An insurer not licensed in this state but that is licensed in, or in 501
the case of a United States branch of an alien insurer, is entered through, 502
a state that employs standards regarding credit for reinsurance 503
applicable to financial guaranty insurance corporations that are 504
substantially similar to those in this state and the assuming insurer or 505
United States branch of the alien insurer: (i) Otherwise complies with 506
the provisions of subparagraphs (B)(i) and (B)(ii) of this subdivision; (ii) 507
submits to the authority of this state to examine its books and records; 508
and (iii) meets the requirements of subsection [(h)] (i) of section 38a-85, 509
as amended by this act; 510
Sec. 4. Subsection (b) of section 38a-88 of the general statutes is 511
repealed and the following is substituted in lieu thereof (Effective October 512
1, 2020): 513
(b) (1) The commissioner may adopt regulations in accordance with 514
the provisions of chapter 54 to establish, in addition to the requirements 515
of sections 38a-85, as amended by this act, and 38a-86, requirements 516
relating to or setting forth (A) the valuation of assets or reserve credits, 517
(B) the circumstances under which credit will be reduced or eliminated, 518
and (C) the amounts and forms of security supporting reinsurance 519 Raised Bill No. 338
LCO No. 2212 18 of 19
agreements relating to (i) life insurance policies with guaranteed 520
nonlevel gross premiums or guaranteed nonlevel benefits, (ii) universal 521
life insurance policies with provisions that permit a policyholder to keep 522
such policy in force over a secondary guarantee period, (iii) variable 523
annuities with guaranteed death or living benefits, (iv) long-term care 524
insurance policies, or (v) any other life insurance, health insurance or 525
annuity products for which the National Association of Insurance 526
Commissioners adopts model regulatory credit for reinsurance 527
requirements. 528
(2) Any regulation adopted pursuant to subdivision (1) of this 529
subsection that relates to policies described in subparagraph (C)(i) or 530
(C)(ii) of subdivision (1) of this subsection may apply to reinsurance 531
agreements that include such policies issued on or after January 1, 2015, 532
and such policies issued prior to January 1, 2015, if risk pertaining to 533
such policies is ceded, in whole or in part, in connection with such 534
agreement on or after January 1, 2015. 535
(3) Any regulations adopted pursuant to subdivision (1) of this 536
subsection [: (A) May] may require the ceding insurer, in calculating the 537
amounts or forms of security supporting reinsurance agreements, to use 538
the Valuation Manual, as defined in section 38a-78, in effect on the date 539
such calculation is made, to the extent applicable. [; and] 540
[(B)] (4) [Shall] Any regulation adopted pursuant to this subsection 541
shall not apply to cessions to an assuming insurer [(i)] that (A) meets the 542
conditions set forth in subsection (g) of section 38a-85, as amended by 543
this act, (B) is certified as a reinsurer in accordance with the provisions 544
of section 38a-85a, or [(ii) (I) that] (C) maintains at least two hundred 545
fifty million dollars in capital and surplus, determined in accordance 546
with the National Association of Insurance Commissioners Accounting 547
Practices and Procedures Manual, including all amendments adopted 548
by the National Association of Insurance Commissioners and excluding 549
the impact of any permitted or prescribed practices, and [(II)] (i) is 550
licensed in at least twenty-six states, or (ii) is licensed in at least ten states 551
and licensed or accredited in a total of at least thirty-five states. 552 Raised Bill No. 338
LCO No. 2212 19 of 19
(5) The authority to adopt regulations pursuant to this subsection 553
does not limit the commissioner's general authority to adopt regulations 554
pursuant to subsection (a) of this section. 555
This act shall take effect as follows and shall amend the following
sections:
Section 1 October 1, 2020 38a-85
Sec. 2 October 1, 2020 38a-25(a)(9)
Sec. 3 October 1, 2020 38a-92m(a)(2)(C)
Sec. 4 October 1, 2020 38a-88(b)
Statement of Purpose:
To adopt the Insurance Department's recommendations regarding
credit for reinsurance.
[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except
that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not
underlined.]