Oklahoma 2022 Regular Session

Oklahoma Senate Bill SB122 Compare Versions

Version 1 (Old)

Version 2 (New)

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4		-	An Act
5		-	ENROLLED SENATE
	29	+	HOUSE OF REPRESENTATIVES - FLOOR VERSION
	30	+
	31	+	STATE OF OKLAHOMA
	32	+
	33	+	1st Session of the 58th Legislature (2021)
	34	+
	35	+	ENGROSSED SENATE
6	36		BILL NO. 122 By: Montgomery of the Senate
7	37
8	38		and
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10	40		Sims of the House
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15	47		An Act relating to reinsurance; amending 36 O.S.
16	48		2011, Sections 5122 and 5124, as amended by Sections
17	49		1 and 4, Chapter 298, O.S.L. 2016 (36 O.S. Supp.
18	50		2020, Sections 5122 and 5124), which relate to
19	51		requirements for allowance of credit and rules and
20	52		regulations; conforming language; authorizing credit
21	53		for reinsurance when reinsurance is ceded to certain
22	54		assuming insurers; establishing requirements of
23	55		assuming insurers; providing definitions; requiring
24	56		assuming insurer to have and maintain certain
25	57		financial assets; requiring assuming insurer to
26	58		provide certain noti fication; requiring assuming
27	59		insurer to submit to certain jurisdiction and to pay
28	60		all final judgments; requiring reinsurance agreements
29	61		to contain certain security provision; requiring
30	62		assuming insurer to agree to certain terms; requiring
31	63		assuming insurer to provide any document requested by
32	64		Insurance Commissioner; requiring the assuming
33	65		insurer to make certain payments; requiring certain
34	66		entity to confirm certain information reported to
35	67		reciprocal jurisdiction; construing clause; requiring
36	68		Commissioner to create and publish list of reciprocal
37	69		jurisdiction; establishing terms of list of
38	70		reciprocal jurisdiction; requiring Commissioner to
39	71		create and publish list of certain assuming insurers;
40	72		establishing terms of revoking eligibility from list;
41	73		limiting credit for reinsurance available under this
42	74		act; authorizing ceding insurer to obtain certain
43	75		legal order; stating application of act; updating
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44	103		references; adding exception to regulation for
45	104		certain insurers; and providing an effective date.
46	105
47	106
48		-	ENR. S. B. NO. 122 Page 2
49	107
50	108
51		-	SUBJECT: Reinsurance
52		-
53	109		BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
54		-
55	110		SECTION 1. AMENDATORY 36 O.S. 2011, Section 5122, as
56	111		amended by Section 1, Chapter 298, O.S.L. 2016 (36 O.S. Supp. 2020,
57	112		Section 5122), is amended to read as follows:
58		-
59	113		Section 5122. A. Credit for reinsurance shall be allowed a
60	114		domestic ceding insurer as either an asset or a reduction from
61	115		liability on account of reinsurance ceded only when the reinsurer
62	116		meets the requirements of subsection B, C, D, E, F or, G or H of
63	117		this section; provided, fu rther, that the Commissioner may adopt by
64	118		regulation pursuant to subsection B of Section 5124 of this title,
65	119		specific additional requirements relating to or setting forth the
66	120		valuation of assets or reserve credits, the amount and forms of
67	121		security supporting reinsurance arrangements described in subsection
68	122		B of Section 5124 of this title and the circumstances pursuant to
69	123		which credit will be reduced or eliminated. Credit shall be allowed
70	124		under subsection B, C or D of this section only as respects cessions
71	125		of those kinds or classes of business in which the assuming insurer
72	126		is licensed or otherwise permitted to write or assume in its state
73	127		of domicile or, in the case of a United States branch of an alien
74	128		assuming insurer, in the state through which it is ente red and
75	129		licensed to transact insurance or reinsurance. Credit shall be
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76	157		allowed under subsection D or E of this section only if the
77	158		applicable requirements of subsection H I have been satisfied.
78		-
79	159		B. Credit shall be allowed when the reinsurance is ceded to an
80	160		assuming insurer that is licensed to transact insurance or
81	161		reinsurance in this state.
82		-
83	162		C. Credit shall be allowed when the reinsurance is ceded to an
84	163		assuming insurer that is accredited by the Insurance Commissioner as
85	164		a reinsurer in this state. An acc redited reinsurer is one that:
86		-
87	165		1. Files with the Insurance Commissioner evidence of its
88	166		submission to this state ’s jurisdiction;
89		-
90		-
91		-	ENR. S. B. NO. 122 Page 3
92	167		2. Submits to this state ’s authority to examine its books and
93	168		records;
94		-
95	169		3. Is licensed to transact insurance or reinsurance i n at least
96	170		one state, or in the case of a United States branch of an alien
97	171		assuming insurer is entered through and licensed to transact
98	172		insurance or reinsurance in at least one state;
99		-
100	173		4. Files annually with the Insurance Commissioner a copy of its
101	174		annual statement filed with the insurance department of its state of
102	175		domicile and a copy of its most recent audited financial statement;
103	176		and
104		-
105	177		5. Demonstrates to the satisfaction of the Insurance
106	178		Commissioner that it has adequate financial capacity to meet its
107	179		reinsurance obligations and is otherwise qualified to assume
108	180		reinsurance from domestic insurers. An assuming insurer is deemed
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109	208		to meet this requirement as of the time of its application if it
110	209		maintains a surplus as regards policyholders in an amount not less
111	210		than Twenty Million Dollars ($20,000,000.00) and its accreditation
112	211		has not been denied by the Insurance Commissioner within ninety (90)
113	212		days after submission of its application.
114		-
115	213		D. Credit shall be allowed when the reinsurance is ceded to an
116	214		assuming insurer that is domiciled in, or in the case of a United
117	215		States branch of an alien assuming insurer is entered through, a
118	216		state that employs standards regarding credit for reinsurance
119	217		substantially similar to those applicable under this statute and the
120	218		assuming insurer or United States branch of an alien assuming
121	219		insurer:
122		-
123	220		1. Maintains a surplus as regards policyholders in an amount
124	221		not less than Twenty Million Dollars ($20,000,000.00); and
125		-
126	222		2. Submits to the authority of this state to examine its books
127	223		and records.
128		-
129	224		The requirement of paragraph 1 of this subsection does not apply
130	225		to reinsurance ceded and assumed pursuant to pooling arrangements
131	226		among insurers in the same holding company system.
132		-
133		-
134		-	ENR. S. B. NO. 122 Page 4
135	227		E. 1. Credit shall be allowed when the reinsurance is ceded to
136	228		an assuming insurer that maintains a trust fund in a qualified
137	229		United States financial institution, as defined in Section 3 of this
138	230		act 5123.1 of this title , for the payment of the valid claims of its
139	231		United States ceding insurers, their assigns and successor s in
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140	259		interest. To enable the Insurance Commissioner to determine the
141	260		sufficiency of the trust fund, the assuming insurer shall report
142	261		annually to the Insurance Commissioner information substantially the
143	262		same as that required to be reported on the National Association of
144	263		Insurance Commissioners Annual Statement form by licensed insurers.
145	264		The assuming insurer shall submit to examination of its books and
146	265		records by the Commissioner and bear the expense of examination.
147		-
148	266		2. Credit for reinsurance shall not be granted under this
149	267		subsection unless the form of the trust and any amendments to the
150	268		trust have been approved by:
151		-
152	269		a. the Commissioner of the state where the trust is
153	270		domiciled, or
154		-
155	271		b. the Commissioner of another state who, pursuant to the
156	272		terms of the trust instrument, has accepted principal
157	273		regulatory oversight of the trust.
158		-
159	274		3. The form of the trust and any trust amendments also shall be
160	275		filed with the Insurance Commissioner of every state in which the
161	276		ceding insurer beneficiaries of the trust are domicile d. The trust
162	277		instrument shall provide that contested claims shall be valid and
163	278		enforceable upon the final order of any court of competent
164	279		jurisdiction in the United States. The trust shall vest legal title
165	280		to its assets in its trustees for the benefit of the assuming
166	281		insurer’s United States ceding insurers, their assigns and
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167	309		successors in interest. The trust and the assuming insurer shall be
168	310		subject to examination as determined by the Insurance Commissioner.
169		-
170	311		4. The trust shall remain in effect for as lo ng as the assuming
171	312		insurer has outstanding obligations due under the reinsurance
172	313		agreements subject to the trust.
173		-
174	314		5. No later than February 28 of each year the trustee of the
175	315		trust shall report to the Insurance Commissioner in writing the
176	316		balance of the trust and listing the trust ’s investments at the
177		-
178		-	ENR. S. B. NO. 122 Page 5
179	317		preceding year end and shall certify the date of termination of the
180	318		trust, if so planned, or certify that the trust shall not expire
181	319		prior to the following December 31.
182		-
183	320		6. The following requirements apply to the following categories
184	321		of assuming insurer:
185		-
186	322		a. the trust fund for a single assuming insurer shall
187	323		consist of funds in trust in an amount not less than
188	324		the assuming insurer ’s liabilities attributable to
189	325		reinsurance ceded by United States ceding insurers,
190	326		and, in addition, the assuming insurer shall maintain
191	327		a trusteed surplus of not less than Twenty Million
192	328		Dollars ($20,000,000.00), except as provided in
193	329		subparagraph b of this paragraph,
194		-
195	330		b. at any time after the assuming insurer has permanently
196	331		discontinued underwriting new business secured by the
197	332		trust for at least three (3) full years, the
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198	360		Commissioner with principal regulatory oversight of
199	361		the trust may authorize a reduction in the required
200	362		trusteed surplus, but only after a finding, based on
201	363		an assessment of the risk, that the new required
202	364		surplus level is adequate for the protection of United
203	365		States ceding insurers, policyholders and claimants in
204	366		light of reasonably foreseeable adverse loss
205	367		development. The risk assessment may involve an
206	368		actuarial review, including an independent analysis of
207	369		reserves and cash flows, and shall consider all
208	370		material risk factors, including when applicable the
209	371		lines of business involved, the stability of the
210	372		incurred loss estimates and the effect of the surplus
211	373		requirements on the assuming insurer ’s liquidity or
212	374		solvency. The minimum required trusteed surplus shall
213	375		not be reduced to an amount less than thirty percent
214	376		(30%) of the assuming insurer ’s liabilities
215	377		attributable to reinsurance ceded by United States
216	378		ceding insurers covered by the trust,
217		-
218	379		c. (1) in the case of a group including incorporated and
219	380		individual unincorporated underwriters:
220		-
221		-
222		-	ENR. S. B. NO. 122 Page 6
223	381		(a) for reinsurance ceded under reinsurance
224	382		agreements with an inception, amendment or
225	383		renewal date on or after January 1, 1993,
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226	411		the trust shall consist of a trusteed
227	412		account in an amount not less than the
228	413		respective underwriters ’ several liabilities
229	414		attributable to business ceded by United
230	415		States-domiciled ceding insurers to any
231	416		underwriter of the group,
232		-
233	417		(b) for reinsurance ceded unde r reinsurance
234	418		agreements with an inception date on or
235	419		before December 31, 1992, and not amended or
236	420		renewed after that date, notwithstanding the
237	421		other provisions of this act the Credit for
238	422		Reinsurance Act, the trust shall consist of
239	423		a trusteed account in an amount not less
240	424		than the respective underwriters ’ several
241	425		insurance and reinsurance liabilities
242	426		attributable to business written in the
243	427		United States, and
244		-
245	428		(c) in addition to these trusts, the group shall
246	429		maintain in trust a trusteed surplus of
247	430		which One Hundred Million Dollars
248	431		($100,000,000.00) shall be held jointly for
249	432		the benefit of the United States -domiciled
250	433		ceding insurers of any member of the group
251	434		for all years of account,
252	435
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253	462		(2) the incorporated members of the group shall not
254	463		be engaged in any busines s other than
255	464		underwriting as a member of the group and shall
256	465		be subject to the same level of regulation and
257	466		solvency control by the group ’s domiciliary
258	467		regulator as are the unincorporated members, and
259		-
260	468		(3) within ninety (90) days after its financial
261	469		statements are due to be filed with the group ’s
262	470		domiciliary regulator, the group shall provide to
263	471		the Commissioner an annual certification by the
264	472		group’s domiciliary regulator of the solvency of
265		-
266		-	ENR. S. B. NO. 122 Page 7
267	473		each underwriter member; or if a certification is
268	474		unavailable, financial statements, prepared by
269	475		independent public accountants, of each
270	476		underwriter member of the group, and
271		-
272	477		d. in the case of a group of incorporated underwriters
273	478		under common administration, the group shall:
274		-
275	479		(1) have continuously transacted an insurance
276	480		business outside the United States for at least
277	481		three (3) years immediately prior to making
278	482		application for accreditation,
279		-
280	483		(2) maintain aggregate policyholders ’ surplus of at
281	484		least Ten Billion Dollars ($10,000,000,000.00),
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283	512		(3) maintain a trust fund in an amou nt not less than
284	513		the group’s several liabilities attributable to
285	514		business ceded by United States -domiciled ceding
286	515		insurers to any member of the group pursuant to
287	516		reinsurance contracts issued in the name of the
288	517		group,
289		-
290	518		(4) in addition, maintain a joint trust eed surplus of
291	519		which One Hundred Million Dollars
292	520		($100,000,000.00) shall be held jointly for the
293	521		benefit of United States -domiciled ceding
294	522		insurers of any member of the group as additional
295	523		security for these liabilities, and
296		-
297	524		(5) within ninety (90) days aft er its financial
298	525		statements are due to be filed with the group ’s
299	526		domiciliary regulator, make available to the
300	527		Commissioner an annual certification of each
301	528		underwriter member’s solvency by the member ’s
302	529		domiciliary regulator and financial statements of
303	530		each underwriter member of the group prepared by
304	531		its independent public accountant.
305		-
306	532		F. Credit shall be allowed when the reinsurance is ceded to an
307	533		assuming insurer that has been certified by the Commissioner as a
308		-
309		-	ENR. S. B. NO. 122 Page 8
310	534		reinsurer in this state and secures its obligat ions in accordance
311	535		with the requirements of this subsection.
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313	563		1. In order to be eligible for certification, the assuming
314	564		insurer shall meet the following requirements:
315		-
316	565		a. the assuming insurer shall be domiciled and licensed
317	566		to transact insurance or reinsur ance in a qualified
318	567		jurisdiction, as determined by the Commissioner
319	568		pursuant to paragraph 3 of this subsection,
320		-
321	569		b. the assuming insurer shall maintain minimum capital
322	570		and surplus, or its equivalent, in an amount to be
323	571		determined by the Commissioner pursuan t to regulation,
324		-
325	572		c. the assuming insurer shall maintain financial strength
326	573		ratings from two or more rating agencies deemed
327	574		acceptable by the Commissioner pursuant to regulation,
328		-
329	575		d. the assuming insurer shall agree to submit to the
330	576		jurisdiction of this stat e, appoint the Commissioner
331	577		as its agent for service of process in this state and
332	578		agree to provide security for one hundred percent
333	579		(100%) of the assuming insurer ’s liabilities
334	580		attributable to reinsurance ceded by United States
335	581		ceding insurers if it resist s enforcement of a final
336	582		United States judgment,
337		-
338	583		e. the assuming insurer shall agree to meet applicable
339	584		information filing requirements as determined by the
340	585		Commissioner, both with respect to an initial
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341	613		application for certification and on an ongoing basis ,
342	614		and
343		-
344	615		f. the assuming insurer shall satisfy any other
345	616		requirements for certification deemed relevant by the
346	617		Commissioner.
347		-
348	618		2. An association, including incorporated and individual
349	619		unincorporated underwriters, may be a certified reinsurer. In order
350	620		to be eligible for certification, in addition to satisfying
351	621		requirements of paragraph 1 of this subsection:
352		-
353		-	ENR. S. B. NO. 122 Page 9
354		-
355	622		a. the association shall satisfy its minimum capital and
356	623		surplus requirements through the capital and surplus
357	624		equivalents (net of liabilities) of the assoc iation
358	625		and its members, which shall include a joint central
359	626		fund that may be applied to any unsatisfied obligation
360	627		of the association or any of its members, in an amount
361	628		determined by the Commissioner to provide adequate
362	629		protection,
363		-
364	630		b. the incorporated mem bers of the association shall not
365	631		be engaged in any business other than underwriting as
366	632		a member of the association and shall be subject to
367	633		the same level of regulation and solvency control by
368	634		the association’s domiciliary regulator as are the
369	635		unincorporated members, and
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370	662
371	663		c. within ninety (90) days after its financial statements
372	664		are due to be filed with the association ’s domiciliary
373	665		regulator, the association shall provide to the
374	666		Commissioner an annual certification by the
375	667		association’s domiciliary regulator of the solvency of
376	668		each underwriter member; or if a certification is
377	669		unavailable, financial statements, prepared by
378	670		independent public accountants, of each underwriter
379	671		member of the association.
380		-
381	672		3. The Commissioner shall create and publish a list of
382	673		qualified jurisdictions under which an assuming insurer licensed and
383	674		domiciled in such jurisdiction is eligible to be considered for
384	675		certification by the Commissioner as a certified reinsurer.
385		-
386	676		a. In order to determine whether the domiciliary
387	677		jurisdiction of a non-United-States assuming insurer
388	678		is eligible to be recognized as a qualified
389	679		jurisdiction, the Commissioner shall evaluate the
390	680		appropriateness and effectiveness of the reinsurance
391	681		supervisory system of the jurisdiction, both initially
392	682		and on an ongoing basis, and consider the rights,
393	683		benefits and the extent of reciprocal recognition
394	684		afforded by the non-United-States jurisdiction to
395	685		reinsurers licensed and domiciled in the United
	686	+	States. A qualified jurisdiction shall agree to share
396	687
397		-	ENR. S. B. NO. 122 Page 10
398		-	States. A qualified jurisdiction shall agree to share
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399	714		information and cooper ate with the Commissioner with
400	715		respect to all certified reinsurers domiciled within
401	716		that jurisdiction. A jurisdiction shall not be
402	717		recognized as a qualified jurisdiction if the
403	718		Commissioner has determined that the jurisdiction does
404	719		not adequately and prom ptly enforce final United
405	720		States judgments and arbitration awards. Additional
406	721		factors may be considered in the discretion of the
407	722		Commissioner.
408		-
409	723		b. A list of qualified jurisdictions shall be published
410	724		through the NAIC National Association of Insurance
411	725		Commissioners (NAIC) Committee Process. The
412	726		Commissioner shall consider this list in determining
413	727		qualified jurisdictions. If the Commissioner approves
414	728		a jurisdiction as qualified that does not appear on
415	729		the list of qualified jurisdictions, the Commissioner
416	730		shall provide thoroughly documented justification in
417	731		accordance with criteria to be developed under
418	732		regulations.
419		-
420	733		c. United States jurisdictions that meet the requirement
421	734		for accreditation under the NAIC financial standards
422	735		and accreditation program shall be recognized as
423	736		qualified jurisdictions.
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424	763
425	764		d. If a certified reinsurer ’s domiciliary jurisdiction
426	765		ceases to be a qualified jurisdiction, the
427	766		Commissioner may at his or her discretion suspend the
428	767		reinsurer’s certification indefinitely, in lieu of
429	768		revocation.
430		-
431	769		4. The Commissioner shall assign a rating to each certified
432	770		reinsurer, giving due consideration to the financial strength
433	771		ratings that have been assigned by rating agencies deemed acceptable
434	772		to the Commissioner pursuant to regulation. The Commissioner shal l
435	773		publish a list of all certified reinsurers and their ratings.
436		-
437	774		5. A certified reinsurer shall secure obligations assumed from
438	775		United States ceding insurers under this subsection at a level
439		-
440		-	ENR. S. B. NO. 122 Page 11
441	776		consistent with its rating, as specified in regulations promulgat ed
442	777		by the Commissioner.
443		-
444	778		a. In order for a domestic ceding insurer to qualify for
445	779		full financial statement credit for reinsurance ceded
446	780		to a certified reinsurer, the certified reinsurer
447	781		shall maintain security in a form acceptable to the
448	782		Commissioner and consistent with the provisions of
449	783		Section 5123 of this title, or in a multibeneficiary
450	784		trust in accordance with subsection E of this section,
451	785		except as otherwise provided in this subsection.
452		-
453	786		b. If a certified reinsurer maintains a trust to fully
454	787		secure its obligations subject to subsection E of this
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455	815		section, and chooses to secure its obligations
456	816		incurred as a certified reinsurer in the form of a
457	817		multibeneficiary trust, the certified reinsurer shall
458	818		maintain separate trust accounts for its obligations
459	819		incurred under reinsurance agreements issued or
460	820		renewed as a certified reinsurer with reduced security
461	821		as permitted by this subsection or comparable laws of
462	822		other United States jurisdictions and for its
463	823		obligations subject to subsection E of this section.
464	824		It shall be a condition to the grant of certification
465	825		under this subsection that the certified reinsurer
466	826		shall have bound itself, by the language of the trust
467	827		and agreement with the Commissioner with principal
468	828		regulatory oversight of each such trust account, to
469	829		fund, upon termination of any such trust account, out
470	830		of the remaining surplus of such trust any deficiency
471	831		of any other such trust account.
472		-
473	832		c. The minimum trusteed surplus requirements provided in
474	833		subsection E of this section are not applicable with
475	834		respect to a multibeneficiary trust maintained by a
476	835		certified reinsurer for the purpose of securing
477	836		obligations incurred under this subsection, except
478	837		that such trust shall maintain a minimum trusteed
479	838		surplus of Ten Million Dollars ($10,000,000.00).
480	839
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	865	+
481	866		d. With respect to obligations incurred by a certified
482	867		reinsurer under this subsection, if the security is
483		-
484		-	ENR. S. B. NO. 122 Page 12
485	868		insufficient, the Commissioner shall reduce the
486	869		allowable credit by an amount proportionate to the
487	870		deficiency, and may at his or her discretion impose
488	871		further reductions in allowable credit upon finding
489	872		that there is a material risk that the certified
490	873		reinsurer’s obligations will not be paid in full when
491	874		due.
492		-
493	875		6. If an applicant for certification has been certified as a
494	876		reinsurer in an NAIC -accredited jurisdiction , the Commissioner may
495	877		at his or her discretion defer to that jurisdiction ’s certification,
496	878		and may in his or her discretion defer to the rating assigned by
497	879		that jurisdiction, and such assuming insurer shall be considered to
498	880		be a certified reinsurer in thi s state.
499		-
500	881		7. A certified reinsurer that ceases to assume new business in
501	882		this state may request to maintain its certification in inactive
502	883		status in order to continue to qualify for a reduction in security
503	884		for its in-force business. An inactive certified r einsurer shall
504	885		continue to comply with all applicable requirements of this
505	886		subsection, and the Commissioner shall assign a rating that takes
506	887		into account, if relevant, the reasons why the reinsurer is not
507	888		assuming new business.
	889	+	8. For purposes of this sub section:
508	890
509		-	8. For purposes of t his subsection:
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510	916
511	917		a. a certified reinsurer whose certification has been
512	918		terminated for any reason shall be treated as a
513	919		certified reinsurer required to secure one hundred
514	920		percent (100%) of its obligations, and
515		-
516	921		b. the term “terminated” refers to revocation,
517	922		suspension, voluntary surrender and inactive status.
518	923		If the Commissioner continues to assign a higher
519	924		rating as permitted by this section, the requirement
520	925		to secure one hundred percent (100%) of its
521	926		obligations shall not apply to a certified reinsurer
522	927		in inactive status or to a reinsurer whose
523	928		certification has been suspended.
524		-
525	929		G. 1. Credit shall be allowed when the reinsurance is ceded to
526	930		an assuming insurer meeting all of the following conditions:
527		-
528		-	ENR. S. B. NO. 122 Page 13
529		-
530	931		a. the assuming insurer shall have its head office or be
531	932		domiciled, as applicable, and licensed in a reciprocal
532	933		jurisdiction. For purposes of this subparagraph,
533	934		“reciprocal jurisdiction ” is a jurisdiction that is
534	935		one of the following:
535		-
536	936		(1) a non-United States jurisdiction that is subject
537	937		to an in-force, covered agreeme nt with the United
538	938		States, each within its legal authority, or, in
539	939		the case of a covered agreement between the
540	940		United States and the European Union, is a member
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541	968		state of the European Union. For purposes of
542	969		this subparagraph, a “covered agreement” is an
543	970		agreement entered into pursuant to Dodd -Frank
544	971		Wall Street Reform and Consumer Protection Act,
545	972		31 U.S.C. Sections 313 and 314, that is currently
546	973		in effect or in a period of provisional
547	974		application and addresses the elimination, under
548	975		specified conditions, of collateral requirements
549	976		as a condition for entering into any reinsurance
550	977		agreement with a ceding insurer domiciled in this
551	978		state or for allowing the ceding insurer to
552	979		recognize credit for reinsurance ,
553		-
554	980		(2) a United States jurisdiction that meets the
555	981		requirements for accreditation under the National
556	982		Association of Insurance Commissioners financial
557	983		standards and accreditation program, or
558		-
559	984		(3) a qualified jurisdiction, as determined by the
560	985		Commissioner pursuant to subparagraph a of
561	986		paragraph 3 of subsection F of this section, that
562	987		is not otherwise described in division 1 or 2 of
563	988		subparagraph a of paragraph 1 of this subsection
564	989		and meets additional requirements consistent with
565	990		the terms and conditions of in -force, covered
	991	+
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566	1018		agreements, as specified by the Commission er in
567	1019		rules,
568		-
569	1020		b. the assuming insurer shall have and maintain, on an
570	1021		ongoing basis, minimum capital and surplus, or its
571		-
572		-	ENR. S. B. NO. 122 Page 14
573	1022		equivalent, calculated according to the methodology of
574	1023		its domiciliary jurisdiction, in an amount to be set
575	1024		forth in Insurance Department rules. If the assuming
576	1025		insurer is an association including incorporated and
577	1026		individual unincorporated underwriters, it shall have
578	1027		and maintain, on an ongoing basis, minimum capital and
579	1028		surplus equivalents (net of liabilities), calculated
580	1029		according to the methodology applicable in its
581	1030		domiciliary jurisdiction, and a central fund
582	1031		containing a balance in amounts to be set forth in
583	1032		Department rules,
584		-
585	1033		c. the assuming insurer shall have and maintain, on an
586	1034		ongoing basis, a minimum solvency or capital ratio, as
587	1035		applicable, which will be set forth in Department
588	1036		rules. If the assuming insurer is an association
589	1037		including incorporated and individual unincorporated
590	1038		underwriters, it shall have and maintain, on an
591	1039		ongoing basis, a minimum solvency or capital ratio in
592	1040		the reciprocal jurisdiction where the assuming insurer
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593	1068		has its head office or is domiciled and is also
594	1069		licensed,
595		-
596	1070		d. the assuming insurer shall agree and provide adequate
597	1071		assurance to the Insurance Commissioner, in a form
598	1072		specified by the Commissioner, as fol lows:
599		-
600	1073		(1) the assuming insurer shall provide prompt written
601	1074		notice and explanation to the Commissioner if it
602	1075		falls below the minimum requirements set forth in
603	1076		subparagraph b or c of this paragraph, or if any
604	1077		regulatory action is taken against it for seriou s
605	1078		noncompliance with applicable law,
606		-
607	1079		(2) the assuming insurer shall consent in writing to
608	1080		the jurisdiction of the courts of this state and
609	1081		to the appointment of the Commissioner as agent
610	1082		for service of process. The Commissioner may
611	1083		require that consent fo r service of process be
612	1084		provided to the Commissioner and included in each
613	1085		reinsurance agreement. Nothing in this provision
614	1086		shall be construed to limit, or in any way alter,
615		-
616		-	ENR. S. B. NO. 122 Page 15
617	1087		the capacity of parties to a reinsurance
618	1088		agreement to agree to alternative dispute
619	1089		resolution mechanisms, except to the extent such
620	1090		agreements are unenforceable under applicable
621	1091		insolvency or delinquency laws,
622	1092
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623	1119		(3) the assuming insurer shall consent in writing to
624	1120		pay all final judgments, wherever enforcement is
625	1121		sought, obtained by a cedi ng insurer or its legal
626	1122		successor, that have been declared enforceable in
627	1123		the jurisdiction where the judgment was obtained,
628		-
629	1124		(4) each reinsurance agreement shall include a
630	1125		provision requiring the assuming insurer to
631	1126		provide security in an amount equal to on e
632	1127		hundred percent (100%) of the liabilities of the
633	1128		assuming insurer attributable to reinsurance
634	1129		ceded pursuant to that agreement if the assuming
635	1130		insurer resists enforcement of a final judgment
636	1131		that is enforceable under the law of the
637	1132		jurisdiction in which it was obtained or a
638	1133		properly enforceable arbitration award, whether
639	1134		obtained by the ceding insurer or by its legal
640	1135		successor on behalf of its resolution estate, and
641		-
642	1136		(5) the assuming insurer shall confirm that it is not
643	1137		presently participating in any solve nt scheme of
644	1138		arrangement that involves the ceding insurers of
645	1139		this state, and agree to notify the ceding
646	1140		insurer and the Commissioner and to provide
647	1141		security in an amount equal to one hundred
648	1142		percent (100%) of the liabilities of the assuming
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	1169	+
649	1170		insurer to the ceding insurer, should the
650	1171		assuming insurer enter into such a solvent scheme
651	1172		of arrangement. The security shall be in a form
652	1173		consistent with the provisions of subsection H of
653	1174		Section 5122 and Section 5123 of this title,
654	1175		specified by the Commissioner in r ule,
655		-
656	1176		e. the assuming insurer or its legal successor shall
657	1177		provide, on behalf of itself and any legal
658		-
659		-	ENR. S. B. NO. 122 Page 16
660	1178		predecessors, any additional documentation requested
661	1179		by the Commissioner in regulation,
662		-
663	1180		f. the assuming insurer shall maintain a practice of
664	1181		prompt payment of claims under reinsurance agreements,
665	1182		pursuant to criteria set forth in rule,
666		-
667	1183		g. the supervisory authority of the assuming insurer
668	1184		shall confirm to the Commissioner on an annual basis,
669	1185		as of the preceding December 31 or at the annual date
670	1186		otherwise statutorily reported to the reciprocal
671	1187		jurisdiction, that the assuming insurer complies with
672	1188		the requirements set forth in subparagraphs b and c of
673	1189		this paragraph, and
674		-
675	1190		h. nothing in this provision shall be construed to
676	1191		preclude an assuming insurer from providi ng the
677	1192		Commissioner with information on a voluntary basis.
678	1193
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	1219	+
679	1220		2. The Commissioner shall timely create and publish a list of
680	1221		reciprocal jurisdictions.
681		-
682	1222		a. A list of reciprocal jurisdictions is published
683	1223		through the National Association of Insurance
684	1224		Commissioners Committee Process. The list shall
685	1225		include any reciprocal jurisdiction as defined under
686	1226		subparagraph a of paragraph 1 of this subsection and
687	1227		shall consider any other reciprocal jurisdiction
688	1228		included on the National Association of Insurance
689	1229		Commissioners list. The Commissioner may approve a
690	1230		jurisdiction that does not appear on the list of
691	1231		reciprocal jurisdictions in accordance with criteria
692	1232		to be developed through rules issued by the
693	1233		Commissioner.
694		-
695	1234		b. The Commissioner may remove a jurisdiction from the
696	1235		list of reciprocal jurisdictions upon a determination
697	1236		that the jurisdiction no longer meets the requirements
698	1237		of a reciprocal jurisdiction, in accordance with a
699	1238		process set forth in rules issued by the Commissioner,
700	1239		except that the Commissioner shall not remo ve from the
701	1240		list a reciprocal jurisdiction as defined under
702		-
703		-	ENR. S. B. NO. 122 Page 17
704	1241		subparagraph a of paragraph 1 of this subsection.
705	1242		Upon removal of a reciprocal jurisdiction from this
706	1243		list, credit for reinsurance ceded to an assuming
	1244	+
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707	1271		insurer that has its home office or is domi ciled in
708	1272		that jurisdiction shall be allowed, if otherwise
709	1273		allowed pursuant to this act.
710		-
711	1274		3. The Commissioner shall timely create and publish a list of
712	1275		assuming insurers that have satisfied the conditions set forth in
713	1276		this subsection and to which cessions s hall be granted credit in
714	1277		accordance with this subsection. The Commissioner may add an
715	1278		assuming insurer to such list if a National Association of Insurance
716	1279		Commissioners accredited jurisdiction has added the assuming insurer
717	1280		to a list of such assuming ins urers or if, upon initial eligibility,
718	1281		the assuming insurer submits the information to the Commissioner as
719	1282		required under subparagraph d of paragraph 1 of this subsection and
720	1283		complies with any additional requirements that the Commissioner may
721	1284		impose by regulation, except to the extent that they conflict with
722	1285		an applicable covered agreement.
723		-
724	1286		4. If the Commissioner determines that an assuming insurer no
725	1287		longer meets one or more of the requirements under this subsection,
726	1288		the Commissioner may revoke or suspend the eligibility of the
727	1289		assuming insurer for recognition under this subsection in accordance
728	1290		with procedures set forth in Department rules.
729		-
730	1291		a. While the eligibility of an assuming insurer is
731	1292		suspended, no reinsurance agreement issued, amended or
732	1293		renewed after the effective date of the suspension
733	1294		qualifies for credit except to the extent that the
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	1321	+
734	1322		obligations of the assuming insurer under the contract
735	1323		are secured in accordance with the provisions of
736	1324		Section 5123 of this title.
737		-
738	1325		b. If the eligibility of an assu ming insurer is revoked,
739	1326		no credit for reinsurance may be granted after the
740	1327		effective date of the revocation with respect to any
741	1328		reinsurance agreements entered into by the assuming
742	1329		insurer including reinsurance agreements entered into
743	1330		prior to the date of revocation, except to the extent
744	1331		that the obligations of the assuming insurer under the
745		-
746		-	ENR. S. B. NO. 122 Page 18
747	1332		contract are secured in a form acceptable to the
748	1333		Commissioner.
749		-
750	1334		5. If subject to a legal process of rehabilitation, liquidation
751	1335		or conservation, as applicable, the cedi ng insurer or its
752	1336		representative may seek and, if determined appropriate by the court
753	1337		in which the proceedings are pending, may obtain an order requiring
754	1338		that the assuming insurer post security for all outstanding ceded
755	1339		liabilities.
756		-
757	1340		6. Nothing in this sub section shall be construed to limit or in
758	1341		any way alter the capacity of parties to a reinsurance agreement to
759	1342		agree on requirements for security or other terms in that
760	1343		reinsurance agreement, except as expressly prohibited by this act or
761	1344		other applicable law or rule.
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762	1371
763	1372		7. Credit may be taken under this subsection only for
764	1373		reinsurance agreements entered into, amended or renewed on or after
765	1374		the effective date of this act, and only with respect to losses
766	1375		incurred and reserves reported on or after the later of (1 ) the date
767	1376		on which the assuming insurer has met all eligibility requirements
768	1377		pursuant to paragraph 1 of this subsection, and (2) the effective
769	1378		date of the new reinsurance agreement, amendment or renewal.
770		-
771	1379		a. This paragraph does not alter or impair the righ t of a
772	1380		ceding insurer to take credit for reinsurance, to the
773	1381		extent that credit is not available under this
774	1382		subsection, as long as the reinsurance qualifies for
775	1383		credit under any other applicable provision of this
776	1384		act.
777		-
778	1385		b. Nothing in this subsection shall be construed to
779	1386		authorize an assuming insurer to withdraw or reduce
780	1387		the security provided under any reinsurance agreement,
781	1388		except as permitted by the terms of the agreement.
782		-
783	1389		c. Nothing in this subsection shall be construed to
784	1390		limit, or in any way alter, the capacity of parties to
785	1391		any reinsurance agreement to renegotiate the
786	1392		agreement.
787		-
788		-
789		-	ENR. S. B. NO. 122 Page 19
790	1393		H. Credit shall be allowed when the reinsurance is ceded to an
791	1394		assuming insurer not meeting the requirements of subsection B, C, D,
792	1395		E or, F or G of this section but only as the insurance of risks
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	1422	+
793	1423		located in jurisdictions where the reinsurance is required by
794	1424		applicable law or regulation of that jurisdiction.
795		-
796	1425		H. I. If the assuming insurer is not licensed, accredited or
797	1426		certified to transact insurance or reinsurance in this state, the
798	1427		credit permitted by subsections D and E of this section shall not be
799	1428		allowed unless the assuming insurer agrees in the reinsurance
800	1429		agreements:
801		-
802	1430		1. That in the event of the failure of the assuming insurer to
803	1431		perform its obligations under the terms of t he reinsurance
804	1432		agreement, the assuming insurer, at the request of the ceding
805	1433		insurer, shall submit to the jurisdiction of any court of competent
806	1434		jurisdiction in any state of the United States, will comply with all
807	1435		requirements necessary to give the court j urisdiction, and will
808	1436		abide by the final decision of the court or of any appellate court
809	1437		in the event of an appeal; and
810		-
811	1438		2. To designate the Insurance Commissioner or a designated
812	1439		attorney as its true and lawful attorney upon whom may be served any
813	1440		lawful process in any action, suit or proceeding instituted by or on
814	1441		behalf of the ceding insurer. This subsection is not intended to
815	1442		conflict with or override the obligation of the parties to a
816	1443		reinsurance agreement to arbitrate their disputes, if this
817	1444		obligation is created in the agreement.
818		-
819	1445		I. J. If the assuming insurer does not meet the requirements of
820	1446		subsection B, C or D of this section, the credit permitted by
	1447	+
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	1449	+	BOLD FACE denotes Committee Amendments. 1
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	1470	+	22
	1471	+	23
	1472	+	24
	1473	+
821	1474		subsection E or F of this section shall not be allowed unless the
822	1475		assuming insurer agrees in the trust agreements to the following
823	1476		conditions:
824		-
825	1477		1. Notwithstanding any other provisions in the trust
826	1478		instrument, if the trust fund is inadequate because it contains an
827	1479		amount less than the amount required by paragraph 6 of subsection E
828	1480		of this section, or i f the grantor of the trust has been declared
829	1481		insolvent or placed into receivership, rehabilitation, liquidation
830	1482		or similar proceedings under the laws of its state or country of
831	1483		domicile, the trustee shall comply with an order of the Commissioner
832		-
833		-	ENR. S. B. NO. 122 Page 20
834	1484		with regulatory oversight over the trust or with an order of a court
835	1485		of competent jurisdiction directing the trustee to transfer to the
836	1486		Commissioner with regulatory oversight all of the assets of the
837	1487		trust fund;
838		-
839	1488		2. The assets shall be distributed by and claims shal l be filed
840	1489		with and valued by the Commissioner with regulatory oversight in
841	1490		accordance with the laws of the state in which the trust is
842	1491		domiciled that are applicable to the liquidation of domestic
843	1492		insurance companies;
844		-
845	1493		3. If the Commissioner with regulator y oversight determines
846	1494		that the assets of the trust fund or any part thereof are not
847	1495		necessary to satisfy the claims of the United States ceding insurers
848	1496		of the grantor of the trust, the assets or part thereof shall be
	1497	+
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	1499	+	BOLD FACE denotes Committee Amendments. 1
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	1519	+	21
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	1523	+
849	1524		returned by the Commissioner with reg ulatory oversight to the
850	1525		trustee for distribution in accordance with the trust agreement; and
851		-
852	1526		4. The grantor shall waive any right otherwise available to it
853	1527		under United States law that is inconsistent with this provision.
854		-
855	1528		J. K. If an accredited or certi fied reinsurer ceases to meet
856	1529		the requirements for accreditation or certification, the
857	1530		Commissioner may suspend or revoke the reinsurer ’s accreditation or
858	1531		certification.
859		-
860	1532		1. The Commissioner shall give the reinsurer notice and
861	1533		opportunity for hearing. The suspension or revocation shall not
862	1534		take effect until after the Commissioner ’s order on hearing, unless:
863		-
864	1535		a. the reinsurer waives its right to hearing,
865		-
866	1536		b. the Commissioner’s order is based on regulatory action
867	1537		by the reinsurer’s domiciliary jurisdiction or the
868	1538		voluntary surrender or termination of the reinsurer ’s
869	1539		eligibility to transact insurance or reinsurance
870	1540		business in its domiciliary jurisdiction or in the
871	1541		primary certifying state of the reinsurer under
872	1542		paragraph 6 of subsection F of this section, or
873		-
874		-
875		-	ENR. S. B. NO. 122 Page 21
876	1543		c. the Commissioner finds that an emergency requires
877	1544		immediate action and a court of competent jurisdiction
878	1545		has not stayed the Commissioner ’s action;
879		-
880	1546		2. While a reinsurer ’s accreditation or certification is
881	1547		suspended, no reinsurance contract issued or renew ed after the
	1548	+
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	1572	+	23
	1573	+	24
	1574	+
882	1575		effective date of the suspension qualifies for credit except to the
883	1576		extent that the reinsurer ’s obligations under the contract are
884	1577		secured in accordance with Section 5123 of this title. If a
885	1578		reinsurer’s accreditation or certification is revok ed, no credit for
886	1579		reinsurance shall be granted after the effective date of the
887	1580		revocation except to the extent that the reinsurer ’s obligations
888	1581		under the contract are secured in accordance with paragraph 5 of
889	1582		subsection F of this section or Section 5123 of this title.
890		-
891	1583		K. L. Concentration Risk.
892		-
893	1584		1. A ceding insurer shall take steps to manage its reinsurance
894	1585		recoverables proportionate to its own book of business. A domestic
895	1586		ceding insurer shall notify the Commissioner within thirty (30) days
896	1587		after reinsurance recoverables from any single assuming insurer, or
897	1588		group of affiliated assuming insurers, exceeds fifty percent (50%)
898	1589		of the domestic ceding insurer ’s last reported surplus to
899	1590		policyholders, or after it is determined that reinsurance
900	1591		recoverables from an y single assuming insurer, or group of
901	1592		affiliated assuming insurers, is likely to exceed this limit. The
902	1593		notification shall demonstrate that the exposure is safely managed
903	1594		by the domestic ceding insurer.
904		-
905	1595		2. A ceding insurer shall take steps to diversify its
906	1596		reinsurance program. A domestic ceding insurer shall notify the
907	1597		Commissioner within thirty (30) days after ceding to any single
908	1598		assuming insurer, or group of affiliated assuming insurers, more
	1599	+
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	1601	+	BOLD FACE denotes Committee Amendments. 1
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	1624	+	24
	1625	+
909	1626		than twenty percent (20%) of the ceding insurer ’s gross written
910	1627		premium in the prior calendar year, or after it has determined that
911	1628		the reinsurance ceded to any single assuming insurer, or group of
912	1629		affiliated assuming insurers, is likely to exceed this limit. The
913	1630		notification shall demonstrate that the exposure is safely managed
914	1631		by the domestic ceding insurer.
915		-
916		-
917		-	ENR. S. B. NO. 122 Page 22
918	1632		SECTION 2. AMENDATORY 36 O.S. 2011, Section 5124, as
919	1633		amended by Section 4, Chapter 298, O.S.L. 2016 (36 O.S. Supp. 2020,
920	1634		Section 5124), is amended to read as follows:
921		-
922	1635		Section 5124. A. The Insurance Commissioner may promulgate and
923	1636		adopt rules and regulations implementing the provisions of the
924	1637		Credit for Reinsurance Act.
925		-
926	1638		B. The Insurance Commissioner is further authorized to adopt
927	1639		rules and regulations applicable to reinsurance arr angements
928	1640		described in paragraph 1 of this subsection.
929		-
930	1641		1. A regulation adopted pursuant to this subsection may apply
931	1642		only to reinsurance relating to:
932		-
933	1643		a. life insurance policies with guaranteed nonlevel gross
934	1644		premiums or guaranteed nonlevel benefits,
935		-
936	1645		b. universal life insurance policies with provisions
937	1646		resulting in the ability of a policyholder to keep a
938	1647		policy in force over a secondary guarantee period,
939		-
940	1648		c. variable annuities with guaranteed death or living
941	1649		benefits,
942	1650
	1651	+	SB122 HFLR Page 33
	1652	+	BOLD FACE denotes Committee Amendments. 1
	1653	+	2
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	1658	+	7
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	1663	+	12
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	1666	+	15
	1667	+	16
	1668	+	17
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	1671	+	20
	1672	+	21
	1673	+	22
	1674	+	23
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	1676	+
943	1677		d. long-term care insurance policies, or
944		-
945	1678		e. such other life and health insurance and annuity
946	1679		products as to which the NAIC National Association of
947	1680		Insurance Commissioners (NAIC) adopts model regulatory
948	1681		requirements with respect to credit for reinsurance.
949		-
950	1682		2. A regulation adopted pursuant to this subsection which is
951	1683		applicable to policies listed in subparagraph a or b of paragraph 1
952	1684		of this subsection may apply to any treaty containing:
953		-
954	1685		a. policies issued on or after January 1, 2015, and
955		-
956	1686		b. policies issued prior to January 1, 2015, if risk
957	1687		pertaining to such pre-2015 policies is ceded in
958	1688		connection with the treaty, in whole or in part, on or
959	1689		after January 1, 2015, unless the NAIC Accounting
960		-
961		-	ENR. S. B. NO. 122 Page 23
962	1690		Practices and Procedures Manual in effect as of
963	1691		December 31, 2015, excluded such pre -2015 policies
964	1692		from the requirements concerning the amounts and forms
965	1693		of security supporting reinsurance arrangements that
966	1694		would otherwise be applicable to such policies.
967		-
968	1695		3. A regulation adopted pursuant to this subsection may require
969	1696		the ceding insurer, in calculating the amount s or forms of security
970	1697		required to be held under regulations promulgated under this
971	1698		authority, to use the Valuation Manual adopted by the NAIC under
972	1699		Section 11B (1) of the NAIC Standard Valuation Law, including all
	1700	+
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	1702	+	BOLD FACE denotes Committee Amendments. 1
	1703	+	2
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	1708	+	7
	1709	+	8
	1710	+	9
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	1713	+	12
	1714	+	13
	1715	+	14
	1716	+	15
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	1723	+	22
	1724	+	23
	1725	+	24
	1726	+
973	1727		amendments adopted by the NAIC and in effect on the date as of which
974	1728		the calculation is made, to the extent applicable.
975		-
976	1729		4. A regulation adopted pursuant to this subsection shall not
977	1730		apply to cessions to an assuming insurer that:
978		-
979	1731		a. meets the conditions set forth in this section ,
980		-
981	1732		b. is certified in this state, or
982		-
983	1733		b.
984		-
985	1734		c. maintains at least Two Hundred Fifty Million Dollars
986	1735		($250,000,000.00) in capital and surplus when
987	1736		determined in accordance with the NAIC Accounting
988	1737		Practices and Procedures Manual, including all
989	1738		amendments thereto adopted by the NA IC, excluding the
990	1739		impact of any permitted or prescribed practices ;, and
991	1740		is:
992		-
993	1741		(1) licensed in at least twenty -six states, or
994		-
995	1742		(2) licensed in at least ten states, and licensed or
996	1743		accredited in a total of at least thirty -five
997	1744		states.
998		-
999	1745		5. The authority to adopt regulations pursuant to this
1000	1746		subsection does not limit the Commissioner ’s general authority to
1001	1747		adopt regulations pursuant to subsection A of this section.
1002		-
1003	1748		SECTION 3. This act shall become effective November 1, 2021.
1004	1749
1005		-	ENR. S. B. NO. 122 Page 24
1006		-
1007		-	Passed the Senate the 2nd day of March, 2021.
1008		-
1009		-
1010		-
1011		-	Presiding Officer of the Senate
1012		-
1013		-
1014		-	Passed the House of Represen tatives the 12th day of April, 2021.
1015		-
1016		-
1017		-
1018		-	Presiding Officer of the House
1019		-	of Representatives
1020		-
1021		-	OFFICE OF THE GOVERNOR
1022		-	Received by the Office of the Governor this _______ _____________
1023		-	day of _________________ __, 20_______, at _______ o'clock _______ M.
1024		-	By: _______________________________ __
1025		-	Approved by the Governor of the State of Oklahoma this _____ ____
1026		-	day of ___________________, 20_______, at _______ o'clock _______ M.
1027		-
1028		-	_________________________________
1029		-	Governor of the State of Oklahoma
1030		-
1031		-
1032		-	OFFICE OF THE SECRETARY OF STATE
1033		-	Received by the Office of the Secretary of State this _______ ___
1034		-	day of __________________, 20 _______, at _______ o'clock _______ M.
1035		-	By: _______________________________ __
	1750	+	COMMITTEE REPORT BY: COMMITTEE ON INSURANCE, dated 04/01/2021 - DO
	1751	+	PASS.