An Act
ENROLLED SENATE
BILL NO. 122 By: Montgomery of the Senate
and
Sims of the House
An Act relating to reinsurance; amendin g 36 O.S.
2011, Sections 5122 and 5124, as amended by Sections
1 and 4, Chapter 298, O.S.L. 2016 (36 O.S. Supp.
2020, Sections 5122 and 5124), which relate to
requirements for allowance o f credit and rules and
regulations; conforming language; authorizing credit
for reinsurance when reinsurance is ceded to certain
assuming insurers; establishing re quirements of
assuming insurers; providing definitions; requiring
assuming insurer to have and maintain certain
financial assets; requiring assuming insurer to
provide certain notification; requiring assum ing
insurer to submit to certain jurisdiction and to pay
all final judgments; requiring reinsurance agreements
to contain certain security provision; requiring
assuming insurer to agree to certain terms; requi ring
assuming insurer to provide any document r equested by
Insurance Commissioner; requiring the assuming
insurer to make certain payments; requiring ce rtain
entity to confirm certain information reported to
reciprocal jurisdiction; construing clause; r equiring
Commissioner to create and publish list of reciprocal
jurisdiction; establishing terms of list of
reciprocal jurisdiction; requiring Commissioner to
create and publish list of certain assuming insurers;
establishing terms of revoking eligibility from list;
limiting credit for reinsurance available under this
act; authorizing ceding insurer to obtain certain
legal order; stating application of act; updating
references; adding exception to regulation for
certain insurers; and providing an effective date .
ENR. S. B. NO. 122 Page 2
SUBJECT: Reinsurance
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 36 O.S. 2011, Section 5122, as
amended by Section 1, Cha pter 298, O.S.L. 2016 (36 O.S. Supp. 2020,
Section 5122), is amended to read as follows:
Section 5122. A. Credit for reinsurance shall be allowed a
domestic ceding insurer as eithe r an asset or a reduction from
liability on account of reinsurance ceded o nly when the reinsurer
meets the requirements of subsection B, C, D, E, F or, G or H of
this section; provided, further, that the Commissioner may adopt by
regulation pursuant to sub section B of Section 5124 of this title,
specific additional requirements relating to or setting forth the
valuation of assets or reserve credits, the amount and forms of
security supporting reinsurance arrangements described in subsection
B of Section 5124 of this title and the circumstances pursuant to
which credit will be red uced or eliminated. Credit shall be all owed
under subsection B, C or D of this section only as respects ce ssions
of those kinds or classes of business in which the assuming insurer
is licensed or otherwise permitted to write or assume in its state
of domicile or, in the case of a United States branch of an alien
assuming insurer, in the state through which it is entered and
licensed to transact insurance or reinsurance. Credit shall be
allowed under subsection D or E of this section only if the
applicable requirements of subsection H I have been satisfied.
B. Credit shall be allowed when the reinsurance is ce ded to an
assuming insurer that is licensed to transact insurance or
reinsurance in this state.
C. Credit shall be allowed when the reinsurance is c eded to an
assuming insurer that is accr edited by the Insurance Commissioner as
a reinsurer in this state. An accredited reinsurer is one that:
1. Files with the Insurance Commissi oner evidence of its
submission to this state’s jurisdiction;
ENR. S. B. NO. 122 Page 3
2. Submits to this state’s authority to examine its books and
records;
3. Is licensed to transact insurance or reinsu rance in at least
one state, or in the case of a United States branch of an alien
assuming insurer is entered through and licensed to transact
insurance or reinsurance in at least one state ;
4. Files annually with the Insurance Commissioner a copy of its
annual statement filed with the insurance department of its state of
domicile and a copy of its most recent audited financial statement;
and
5. Demonstrates to the satisfaction of the Insu rance
Commissioner that it has adequate financial capacity to meet its
reinsurance obligations and is otherwise qualified to assume
reinsurance from domestic insurers. An assuming insurer is deemed
to meet this requirement as of the time of its applicatio n if it
maintains a surplus as regards policyholders in an amount n ot less
than Twenty Million Dollars ($20,000,000.00) and its accreditation
has not been denied by the Insurance Commissioner within ninety (90)
days after submission of its application.
D. Credit shall be allowed when the reinsurance is ceded to an
assuming insurer that is domiciled in, or in the case of a United
States branch of an alien assuming insurer is entered through, a
state that employs stand ards regarding credit for reinsurance
substantially similar to those applicable under this statute and the
assuming insurer or United States branch of an alien assuming
insurer:
1. Maintains a surplus as regards policyholders in an amount
not less than Twenty Million Dollars ($20,000,000.00); a nd
2. Submits to the authority of this state to examine its books
and records.
The requirement of paragraph 1 of this subsection does not app ly
to reinsurance ceded and assumed pursuant to pooling arrangements
among insurers in the same holding company sy stem.
ENR. S. B. NO. 122 Page 4
E. 1. Credit shall be allowed when the reinsurance is ceded to
an assuming insurer that maintains a trust fund in a qualified
United States financial institution, as defined in Section 3 of this
act 5123.1 of this title, for the payment of the valid claims of its
United States ceding insur ers, their assigns and successors in
interest. To enable the Insurance Commissioner to determine th e
sufficiency of the trust fund, the assuming insurer shall report
annually to the Insurance Comm issioner information substantially the
same as that require d to be reported on the National Association of
Insurance Commissioners Annual Statement form by lic ensed insurers.
The assuming insurer shall submit to examination of its b ooks and
records by the Commissioner and bear the expense of examination.
2. Credit for reinsurance shall not be granted under thi s
subsection unless the form of the trust and any a mendments to the
trust have been approved by:
a. the Commissioner of the s tate where the trust is
domiciled, or
b. the Commissioner of another state who, pu rsuant to the
terms of the trust instrument, has accepted principal
regulatory oversight of the trus t.
3. The form of the trust and any trust amendments also shall be
filed with the Insurance Comm issioner of every state in which the
ceding insurer benefic iaries of the trust are domiciled. The trust
instrument shall provide that contested claims shall b e valid and
enforceable upon the final order of any court of competent
jurisdiction in the United States. The trust shall vest legal title
to its assets in its trustees for the benefit of the assuming
insurer’s United States ceding insurers, their assigns and
successors in interest. The trust and the assuming insurer shall be
subject to examination as determined by the Insurance Commissioner.
4. The trust shall remain in effect for as long as the assumin g
insurer has outstanding obligations due under th e reinsurance
agreements subject to the trust.
5. No later than February 2 8 of each year the trus tee of the
trust shall report to the Insurance Commissioner in writing the
balance of the trust and listing the trust’s investments at the
ENR. S. B. NO. 122 Page 5
preceding year end and shall certify the date of termination of the
trust, if so planned, or c ertify that the trust s hall not expire
prior to the following December 31.
6. The following requirements apply to the following ca tegories
of assuming insurer:
a. the trust fund for a single assuming insurer shall
consist of funds in trust in an amount no t less than
the assuming insurer’s liabilities attributable to
reinsurance ceded by United States ceding insurers,
and, in addition, the assuming insurer shall maintain
a trusteed surplus of not less than Twenty Million
Dollars ($20,000,000.00), except as provided in
subparagraph b of this paragraph,
b. at any time after the assuming in surer has permanently
discontinued underwriting n ew business secured by the
trust for at least three (3) full years, the
Commissioner with principal regulatory oversight of
the trust may authorize a reduction in the required
trusteed surplus, but only afte r a finding, based on
an assessment of the risk, that the new required
surplus level is adequat e for the protection of United
States ceding insurers, policyholders and claima nts in
light of reasonably foreseeable adverse loss
development. The risk assessm ent may involve an
actuarial review, including an independent analysis of
reserves and cash flo ws, and shall consider all
material risk factors, including when applicable the
lines of business invo lved, the stability of the
incurred loss estimates and the effect of the surplus
requirements on the assumin g insurer’s liquidity or
solvency. The minimu m required trusteed surplus shall
not be reduced to an amount less than thirty percent
(30%) of the assuming insurer’s liabilities
attributable to reinsurance ce ded by United States
ceding insurers covered by t he trust,
c. (1) in the case of a group inclu ding incorporated and
individual unincorporated underwriters:
ENR. S. B. NO. 122 Page 6
(a) for reinsurance ceded under reinsuran ce
agreements with an inception, amendment or
renewal date on or after January 1, 1993,
the trust shall cons ist of a trusteed
account in an amount not l ess than the
respective underwriters’ several liabilities
attributable to busines s ceded by United
States-domiciled ceding insurers to any
underwriter of the group ,
(b) for reinsurance ceded under reinsurance
agreements with an inception date on or
before December 31, 1992, and not amended or
renewed after that date, notwithstanding th e
other provisions of this act the Credit for
Reinsurance Act, the trust shall consist of
a trusteed account in an amount not less
than the respective underwriters ’ several
insurance and reinsurance liabilities
attributable to business written in the
United States, and
(c) in addition to these t rusts, the group shall
maintain in trust a trusteed surplus of
which One Hundred Million Dollars
($100,000,000.00) shall be hel d jointly for
the benefit of the United States-domiciled
ceding insurers of any member of the group
for all years of account,
(2) the incorporated members of the group shall not
be engaged in any business other than
underwriting as a member of the group an d shall
be subject to the same level of regulation and
solvency control by the group ’s domiciliary
regulator as are the unincorpo rated members, and
(3) within ninety (90) days after its financial
statements are due to be filed with the group ’s
domiciliary regulator, the group shall provide to
the Commissioner an annual certification by the
group’s domiciliary regulator of the solven cy of
ENR. S. B. NO. 122 Page 7
each underwriter member; or if a certification is
unavailable, financial statements, prepared by
independent public accou ntants, of each
underwriter member of the group, and
d. in the case of a group of incorpo rated underwriters
under common administ ration, the group shall:
(1) have continuously transacted an insura nce
business outside the United States for at least
three (3) years immediately prior to making
application for accreditation,
(2) maintain aggregate policyholders’ surplus of at
least Ten Billion Dollars ($10,000,000,000.00),
(3) maintain a trust fund in an amount not less than
the group’s several liabilities attr ibutable to
business ceded by United States-domiciled ceding
insurers to any member of th e group pursuant to
reinsurance contract s issued in the name of the
group,
(4) in addition, maintain a join t trusteed surplus of
which One Hundred Million Dollars
($100,000,000.00) shall be held jointly for the
benefit of United States-domiciled ceding
insurers of any member of the group as addi tional
security for these liabilities, and
(5) within ninety (90) d ays after its financial
statements are due to be filed wit h the group’s
domiciliary regulator, make available to the
Commissioner an annual certifica tion of each
underwriter member’s solvency by the member’s
domiciliary regulator and financial statements o f
each underwriter member of the group prepared by
its independent public accountant.
F. Credit shall be allowed when the reinsurance is ceded to an
assuming insurer that has been certifie d by the Commissioner as a
ENR. S. B. NO. 122 Page 8
reinsurer in this state and secures its obligations in accordance
with the requirements of this s ubsection.
1. In order to be eligible for certification, the assuming
insurer shall meet th e following requirements:
a. the assuming insurer shall be domiciled and licensed
to transact insurance or reinsurance in a qualified
jurisdiction, as determined by the Commissioner
pursuant to paragraph 3 of this subsection,
b. the assuming insurer shall maintain minimum capital
and surplus, or its equivalent, in an amount to be
determined by the Commissioner pursuant to regulation,
c. the assuming insurer shall maintain financial strength
ratings from two or more rating agencies deemed
acceptable by the Commissioner pursuant to regulation,
d. the assuming insurer shall agree to submit to the
jurisdiction of this state, appoint the Commissioner
as its agent for service of process in this state and
agree to provide security for one hundred percent
(100%) of the assuming insurer ’s liabilities
attributable to reinsurance ceded by United States
ceding insurers if it resists enforcement of a final
United States judgme nt,
e. the assuming insurer shall agree to meet applicable
information filing requirements as det ermined by the
Commissioner, both with r espect to an initial
application for certification and on an ongoin g basis,
and
f. the assuming insurer shall satisfy any other
requirements for certification deemed relevant by the
Commissioner.
2. An association, including incorporated and individual
unincorporated underwriters, may be a certified reinsurer. In order
to be eligible for certification, in addition to satisfying
requirements of paragraph 1 of this subsection:
ENR. S. B. NO. 122 Page 9
a. the association shall satisfy its mini mum capital and
surplus requirements thr ough the capital and surplus
equivalents (net of liabilities) of th e association
and its members, which shall inclu de a joint central
fund that may be applied to any unsatisfied obligation
of the association or any o f its members, in an amount
determined by the Commissioner to provide adequate
protection,
b. the incorporated members of the association shall not
be engaged in any business other than underwriting as
a member of the association and shall be subject to
the same level of regulation and solvency control by
the association’s domiciliary regulator as are the
unincorporated members, and
c. within ninety (90) d ays after its financial statements
are due to be filed with the association’s domiciliary
regulator, the association shall provide to the
Commissioner an annual certification by the
association’s domiciliary regulator of the solvency of
each underwriter member; or if a certification is
unavailable, financial statements, prepared by
independent public accoun tants, of each underwriter
member of the association.
3. The Commissioner shall create and publish a list of
qualified jurisdictions under which an ass uming insurer licensed and
domiciled in such jurisdiction is eligible to be considered for
certification by the Commissioner as a certified rein surer.
a. In order to determine whether the domiciliary
jurisdiction of a non-United-States assuming insurer
is eligible to be recognized as a qualified
jurisdiction, the Commissioner shall evaluate the
appropriateness and effectiveness of the reinsurance
supervisory system of the jurisdiction, both initially
and on an ongoing basis, and consider the rights,
benefits and the extent of reciprocal recognition
afforded by the non-United-States jurisdiction to
reinsurers licensed and domiciled in the United
ENR. S. B. NO. 122 Page 10
States. A qualified jurisdiction shall agree to share
information and cooperate with the Commissioner with
respect to all certified reinsurers domiciled within
that jurisdiction. A jurisdiction shall not be
recognized as a qualified jurisdiction if the
Commissioner has determined that the jurisdiction does
not adequately and promptly enforce final United
States judgments and arbitration awards. Additional
factors may be considered in the discretion of the
Commissioner.
b. A list of qualified jurisdictions s hall be published
through the NAIC National Association of Insuranc e
Commissioners (NAIC) Committee Process. The
Commissioner shall consider this list in determining
qualified jurisdictions. If the Commissioner app roves
a jurisdiction as qualified that d oes not appear on
the list of qualified jurisdictions, the Commissi oner
shall provide thoroughly documented justification in
accordance with criteria to be developed under
regulations.
c. United States jurisdictions that meet the requirement
for accreditation under the NAIC financial standards
and accreditation program sh all be recognized as
qualified jurisdictions.
d. If a certified reinsurer’s domiciliary jurisdiction
ceases to be a qualified jurisdiction, the
Commissioner may at his or her discretion sus pend the
reinsurer’s certification inde finitely, in lieu of
revocation.
4. The Commissioner shall assign a rating to each certi fied
reinsurer, giving due consideration to the financial strength
ratings that have bee n assigned by rating agencies deemed acc eptable
to the Commissioner pursuant to regulation. The Commission er shall
publish a list of all certified reinsurers and their ratings.
5. A certified reinsurer shall secure obligations assumed from
United States ceding insurers under this subsection at a level
ENR. S. B. NO. 122 Page 11
consistent with its rating, as specified in regulations pr omulgated
by the Commissioner.
a. In order for a domestic ced ing insurer to qualify for
full financial statement credit for reinsurance ceded
to a certified reinsurer, the certified reinsur er
shall maintain security in a form ac ceptable to the
Commissioner and consistent with the provisions of
Section 5123 of this t itle, or in a multibeneficiary
trust in accordance with subsection E of this section,
except as otherwise provided in this subse ction.
b. If a certified reinsurer main tains a trust to fully
secure its obligations subject to subsection E of this
section, and chooses to secure its obligations
incurred as a certified reinsurer in the form of a
multibeneficiary trust, the certified rei nsurer shall
maintain separate trust ac counts for its obligations
incurred under reinsurance agreements issued or
renewed as a certified reinsurer with reduced security
as permitted by this subsection or comparable l aws of
other United States jurisdictions and for its
obligations subject to sub section E of this section.
It shall be a condition to the grant of certification
under this subsection that the certified reinsurer
shall have bound itself, by the language of the trust
and agreement with the Commiss ioner with principal
regulatory oversight of each such trust accoun t, to
fund, upon termination of any such trust account, out
of the remaining surplus of such trust any deficiency
of any other such trust account.
c. The minimum trusteed surplus requiremen ts provided in
subsection E of this sec tion are not applicable with
respect to a multibeneficiary trust maintained by a
certified reinsurer for the purpose of securing
obligations incurred under this subsection, exce pt
that such trust shall maintain a mini mum trusteed
surplus of Ten Million Dol lars ($10,000,000.00).
d. With respect to obligations incurred by a certified
reinsurer under this subsection, if the security is
ENR. S. B. NO. 122 Page 12
insufficient, the Commissioner shall reduce the
allowable credit by an amount proportio nate to the
deficiency, and may at his or her discretion impose
further reductions in allowable credit upon finding
that there is a material risk that the certified
reinsurer’s obligations will not be paid in full wh en
due.
6. If an applicant for certific ation has been certified as a
reinsurer in an NAIC-accredited jurisdiction, the Commissione r may
at his or her discretion defer to that jurisdiction’s certification,
and may in his or her discretion defer to the rati ng assigned by
that jurisdiction, and such assuming insurer shall be consider ed to
be a certified reinsurer in this state.
7. A certified reinsurer that ceases to assu me new business in
this state may request to maintain its certification in inactive
status in order to continue to qua lify for a reduction in security
for its in-force business. An inactive cert ified reinsurer shall
continue to comply with all applicable requirements of this
subsection, and the Commissioner shall assign a rating that takes
into account, if relevant, the reasons why the reinsurer is not
assuming new business.
8. For purposes of t his subsection:
a. a certified reinsurer whose certification has been
terminated for any reason shall be treated as a
certified reinsurer required to secure one hundred
percent (100%) of its obligations, and
b. the term “terminated” refers to revocation,
suspension, voluntary sur render and inactive status.
If the Commissioner continues to assign a higher
rating as permitted by this section, the requir ement
to secure one hundred pe rcent (100%) of its
obligations shall not apply to a certified reinsurer
in inactive status or to a r einsurer whose
certification has been suspended.
G. 1. Credit shall be allowed when the reinsurance is ceded to
an assuming insurer meeting all of the following conditions:
ENR. S. B. NO. 122 Page 13
a. the assuming insurer sha ll have its head office or be
domiciled, as applicable, and licensed in a reciprocal
jurisdiction. For purposes of this subparagraph,
“reciprocal jurisdiction” is a jurisdiction that is
one of the following :
(1) a non-United States jurisdiction that is subject
to an in-force, covered agreement with the Unite d
States, each within its legal authority, or, i n
the case of a covered agreement between the
United States and the European Union, is a member
state of the European Union. For purposes of
this subparagraph, a “covered agreement” is an
agreement entered into pursuant to Dodd-Frank
Wall Street Reform and Co nsumer Protection Act,
31 U.S.C. Sections 313 and 314, that is currently
in effect or in a period of provisiona l
application and addresses the elimination, under
specified conditions, of collateral requirements
as a condition for entering into any reinsurance
agreement with a ceding insurer domiciled in this
state or for allowing the ceding insurer to
recognize credit for reinsurance,
(2) a United States jurisd iction that meets the
requirements for accreditation under the National
Association of Insurance Commiss ioners financial
standards and accreditation program, or
(3) a qualified jurisdiction, as determi ned by the
Commissioner pursuant to subparagraph a of
paragraph 3 of subsection F of this section, that
is not otherwise describ ed in division 1 or 2 of
subparagraph a of paragraph 1 of this subsection
and meets additional requirements consistent with
the terms and conditions of in-force, covered
agreements, as specifie d by the Commissioner in
rules,
b. the assuming insurer shall have and maintain, on an
ongoing basis, minimu m capital and surplus, or its
ENR. S. B. NO. 122 Page 14
equivalent, calculated according to the methodology of
its domiciliary jurisdiction, in an amount to be set
forth in Insurance Department rules. If the assuming
insurer is an association including incorporated and
individual unincorporated underwriters, it shall have
and maintain, on an ongoing basis, minimum capital and
surplus equivalents (net of liabilities), calculated
according to the methodology applicable in its
domiciliary jurisdiction , and a central fund
containing a balance in amounts to be set forth in
Department rules,
c. the assuming insurer shall have and maintain, on an
ongoing basis, a minimum solvency or capital ratio, a s
applicable, which will be set forth in Department
rules. If the assuming insurer is an association
including incorporated and individual unincorpor ated
underwriters, it shall have and maintain, on an
ongoing basis, a minimum solvency or capital ratio i n
the reciprocal jurisdiction where the assuming insurer
has its head office or is domiciled and is also
licensed,
d. the assuming insurer shall agree and provide adequate
assurance to the Insurance Commissioner, in a form
specified by the Commissioner , as follows:
(1) the assuming insurer shall provide prompt written
notice and explanation to the Commissioner if it
falls below the mini mum requirements set forth in
subparagraph b or c of this paragraph, or if any
regulatory action is taken against it for s erious
noncompliance with applicable law,
(2) the assuming insurer shall consent in writing to
the jurisdiction of the courts of this state and
to the appointment of the Commissioner as agent
for service of process. The Commissioner may
require that consent for service of process be
provided to the Commissio ner and included in each
reinsurance agreement. Nothing in this provision
shall be construed to limit, or in any way alter,
ENR. S. B. NO. 122 Page 15
the capacity of parties to a reinsurance
agreement to agree to alternative d ispute
resolution mechanisms, except to the extent such
agreements are unenfo rceable under applicable
insolvency or delinquency laws,
(3) the assuming insurer shall consent in writing to
pay all final judgments, wherever enforcement is
sought, obtained by a ceding insurer or its legal
successor, that have been declared enforceable in
the jurisdiction where the judgment was obtained,
(4) each reinsurance agreement shall include a
provision requiring the assuming insurer to
provide security in an amount equal to one
hundred percent (100%) of the liabilities of the
assuming insurer attributable to reinsurance
ceded pursuant to that agreement if the assu ming
insurer resists enforcement of a fin al judgment
that is enforceable under the law of the
jurisdiction in which it was obtained or a
properly enforceable arbitra tion award, whether
obtained by the ceding insurer or by its legal
successor on behalf of i ts resolution estate, and
(5) the assuming insurer shall confirm that it is not
presently participating in any solvent scheme of
arrangement that involves the ceding insurers of
this state, and agree to notify the ceding
insurer and the Commissioner and to provide
security in an amount equal to one hundred
percent (100%) of the liabilities of the assuming
insurer to the ceding insurer, should the
assuming insurer ent er into such a solvent scheme
of arrangement. The security shall be in a form
consistent with the provisions of subsection H of
Section 5122 and Section 5123 of this title,
specified by the Commissioner in rule,
e. the assuming insurer or its legal successor shall
provide, on behalf of itself and any legal
ENR. S. B. NO. 122 Page 16
predecessors, any additional documentation requested
by the Commissioner in regulation,
f. the assuming insurer shall maintain a practice of
prompt payment of claims under reinsurance a greements,
pursuant to criteria set forth in rule,
g. the supervisory authority of the assuming insurer
shall confirm to the Commissioner on an annual basis,
as of the preceding December 31 or at the annual date
otherwise statutorily reported to the recipr ocal
jurisdiction, that the assuming insurer complies with
the requirements set forth in subparagraphs b and c of
this paragraph, and
h. nothing in this provision shall be construed to
preclude an assuming insurer from provi ding the
Commissioner with infor mation on a voluntary basis .
2. The Commissioner shall timely create and publish a list of
reciprocal jurisdictions.
a. A list of reciprocal jurisdictions is publi shed
through the National Association of Ins urance
Commissioners Committee Process. The list shall
include any reciprocal jurisdiction as defined under
subparagraph a of paragraph 1 of this subsection and
shall consider any other reciprocal jurisdiction
included on the National Association of Insurance
Commissioners list. The Commissioner may a pprove a
jurisdiction that does not appear on the list of
reciprocal jurisdictions in accordance with criteria
to be developed through rules issued by the
Commissioner.
b. The Commissioner may remove a jurisdiction from the
list of reciprocal jurisdictions upon a determination
that the jurisdiction no longer m eets the requirements
of a reciprocal jurisdiction, i n accordance with a
process set forth in r ules issued by the Commissioner,
except that the Commissioner shall not re move from the
list a reciprocal jurisdiction as defined under
ENR. S. B. NO. 122 Page 17
subparagraph a of paragraph 1 of this subsection.
Upon removal of a recipro cal jurisdiction from this
list, credit for reinsurance ce ded to an assuming
insurer that has its home office or is domic iled in
that jurisdiction sha ll be allowed, if otherwise
allowed pursuant to thi s act.
3. The Commissioner shall timely create and publish a list of
assuming insurers that have satisfied the conditions set forth in
this subsection and to which cessions sh all be granted credit in
accordance with this subsection. The Commissioner may ad d an
assuming insurer to such list if a National Association of Insurance
Commissioners accredited jurisdicti on has added the assuming insurer
to a list of such assuming in surers or if, upon initial elig ibility,
the assuming insurer submits the informati on to the Commissioner as
required under subparagraph d of paragraph 1 of this subsection and
complies with any additional requirements that the Commissioner may
impose by regulation, except to the extent that they conflict with
an applicable covered agreement.
4. If the Commissioner determines that an assuming insurer n o
longer meets one or more of the requireme nts under this subsection,
the Commissioner may revoke or suspen d the eligibility of the
assuming insurer for recognition under this subsection in acco rdance
with procedures set forth in Department rules.
a. While the eligibility of an assuming insurer is
suspended, no reinsurance agreement issued, amended or
renewed after the effective date of the suspension
qualifies for credit except to the extent tha t the
obligations of the assuming insurer under the contract
are secured in accordance with the provisions of
Section 5123 of this title.
b. If the eligibility of an assuming insurer is revoked,
no credit for reinsurance may be granted after the
effective date of the revocation with respect to any
reinsurance agreements entered into by the assuming
insurer including reinsurance agreements entered into
prior to the date of revocation, except to the extent
that the obligations of the assuming insurer under the
ENR. S. B. NO. 122 Page 18
contract are secured in a form acceptable to the
Commissioner.
5. If subject to a legal process of rehabilitation, liquidation
or conservation, as applicable, the ce ding insurer or its
representative may seek and, if determined appropr iate by the court
in which the proceedings are pending, may obtain an order requiring
that the assuming insurer post security for all outstanding ceded
liabilities.
6. Nothing in this subsection shall be construed to limit or in
any way alter the capacity of parties to a reinsurance agreement to
agree on requirements for security or oth er terms in that
reinsurance agreement, except as expressly prohibited by this act or
other applicable law or rule.
7. Credit may be taken under this subsection only for
reinsurance agreements entered into, amended or renewed on or after
the effective date of this act, and only with respect to losses
incurred and reserves reported on or after the later o f (1) the date
on which the assuming insurer has met all eligibility requirements
pursuant to paragraph 1 of this subsection, and (2) the effective
date of the new reinsurance agreement, amendment or renewal.
a. This paragraph does not alter or impair the right of a
ceding insurer to take credit for reinsurance, to the
extent that credit i s not available under this
subsection, as long as the reinsurance qualifies fo r
credit under any other applicable provision of this
act.
b. Nothing in this subsection sh all be construed to
authorize an assuming insurer to withdraw or reduce
the security provided under any reinsurance agreement,
except as permitted by the terms of th e agreement.
c. Nothing in this subsection shall be construed to
limit, or in any way alte r, the capacity of parties to
any reinsurance agreement to renegotiate the
agreement.
ENR. S. B. NO. 122 Page 19
H. Credit shall be allowed when the reinsurance is ceded to an
assuming insurer not meeting the requirements of subsection B, C, D,
E or, F or G of this section but onl y as the insurance of risks
located in jurisdictions where the reinsurance is req uired by
applicable law or regulation of that jurisdiction.
H. I. If the assuming insurer is not licensed , accredited or
certified to transact insurance or reinsurance in th is state, the
credit permitted by s ubsections D and E of this section shall not be
allowed unless the assuming insurer agrees in the reinsurance
agreements:
1. That in the event of the failure of the assuming insurer to
perform its obligations under the terms of the reinsurance
agreement, the assuming insurer, at the request of the ceding
insurer, shall submit to the jurisdiction of any court of competent
jurisdiction in any state of the U nited States, will comply with all
requirements necessary to give t he court jurisdiction, and will
abide by the final decision of the court or of any app ellate court
in the event of an appeal; and
2. To designate the Insurance Commissi oner or a designated
attorney as its true and lawful attorney upon whom may be served any
lawful process in any action, sui t or proceeding instituted by or on
behalf of the ceding insurer. This subsection is not intended to
conflict with or override the o bligation of the par ties to a
reinsurance agreement to arbitrate their disputes, if th is
obligation is created in the agree ment.
I. J. If the assuming insurer does not meet th e requirements of
subsection B, C or D of this section, the credit permitted by
subsection E or F of this section shall not be allowed unless the
assuming insurer agrees in the trust agreements to the fo llowing
conditions:
1. Notwithstanding any other pro visions in the trust
instrument, if the trust fund is inadequate because it cont ains an
amount less than the amount required by paragraph 6 of subsection E
of this section, or if the grantor of the trust has been declared
insolvent or placed into receivers hip, rehabilitation, liquidation
or similar proceedings under the laws of its st ate or country of
domicile, the trustee shall comply with an order of the Commission er
ENR. S. B. NO. 122 Page 20
with regulatory oversight over the t rust or with an order of a court
of competent jurisdi ction directing the trustee to transfer to the
Commissioner with regulatory over sight all of the ass ets of the
trust fund;
2. The assets shall be distributed by a nd claims shall be f iled
with and valued by the Commissioner with regulatory oversight in
accordance with the laws of the state in which the trust is
domiciled that are appl icable to the liquid ation of domestic
insurance companies;
3. If the Commissioner with regulatory over sight determines
that the assets of the trust fund or any part thereof ar e not
necessary to satisfy the claims of the United States ceding insurers
of the grantor of the tru st, the assets or part thereof shall be
returned by the Commis sioner with regulator y oversight to the
trustee for distribution in accordance with the trust agreement; and
4. The grantor shall waive any right otherwise available to it
under United States l aw that is inconsistent with this provision.
J. K. If an accredited or certified r einsurer ceases to m eet
the requirements for accreditation or certification, the
Commissioner may suspend or revoke the reinsurer’s accreditation or
certification.
1. The Commissioner shall give the reinsurer notice and
opportunity for hearing. The suspe nsion or revocation shall not
take effect until after the Commissioner ’s order on hearing, unless:
a. the reinsurer waives its right to hearing,
b. the Commissioner’s order is based on regulatory action
by the reinsurer’s domiciliary jurisdiction or the
voluntary surrender or termination of the reinsurer ’s
eligibility to transact insurance or reinsurance
business in its domiciliary jurisdiction or in the
primary certifying st ate of the reinsurer under
paragraph 6 of subsection F of this section, or
ENR. S. B. NO. 122 Page 21
c. the Commissioner finds th at an emergency requires
immediate action and a court of competent jurisdiction
has not stayed the Commissioner’s action;
2. While a reinsurer’s accreditation or certification is
suspended, no reinsurance co ntract issued or renewed aft er the
effective date of the suspension qualifies for credit except to the
extent that the reinsurer’s obligations under the contract are
secured in accordance with Section 5123 of this title. If a
reinsurer’s accreditation or certification is revoked, no credit for
reinsurance shall be granted after the effective date of the
revocation except to the extent that the reinsurer’s obligations
under the contract are secured in a ccordance with paragraph 5 of
subsection F of this sect ion or Section 5123 of this title.
K. L. Concentration Risk.
1. A ceding insurer shall take steps to mana ge its reinsurance
recoverables proportionate to its own book of business. A domestic
ceding insurer shall notify the Commissioner within thirty ( 30) days
after reinsurance rec overables from any s ingle assuming insurer, or
group of affiliated assuming ins urers, exceeds fifty percent (50%)
of the domestic ceding insurer’s last reported surplus to
policyholders, or after it is determined that reinsura nce
recoverables from any sing le assuming insurer, or group of
affiliated assuming insurers, is likely to exc eed this limit. The
notification shall demonstrate that the exposure is s afely managed
by the domestic ceding insurer.
2. A ceding insurer shall take steps to diversify its
reinsurance program. A domestic ceding insurer shall notify the
Commissioner within thirty (30) days after ceding to any single
assuming insurer, or group of affiliated assuming insurers, more
than twenty percent (20%) of the ceding insurer’s gross written
premium in the prior calendar year, or after it has determined that
the reinsurance ceded to any single assuming insurer, or group of
affiliated assuming insurers, is likely to exceed this limit. The
notification shall demon strate that the exposure is saf ely managed
by the domestic ceding insurer.
ENR. S. B. NO. 122 Page 22
SECTION 2. AMENDATORY 36 O.S. 2011, Section 5124, as
amended by Section 4, Chapter 298, O.S.L. 2016 (36 O.S. Supp. 2020,
Section 5124), is amended to read as follows:
Section 5124. A. The Insurance Commis sioner may promulgate and
adopt rules and regulations implementin g the provisions of the
Credit for Reinsurance Act.
B. The Insurance Commissioner is fu rther authorized to adopt
rules and regulations applicable to reinsurance arrangeme nts
described in paragraph 1 of this subsection.
1. A regulation adopted pursuant to this subsection may apply
only to reinsurance relating to:
a. life insurance policies w ith guaranteed nonlevel gross
premiums or guaranteed nonlevel benefits,
b. universal life insurance pol icies with provisions
resulting in the ability of a policyholder to keep a
policy in force over a secondary guarantee period,
c. variable annuities with guaranteed death or living
benefits,
d. long-term care insurance policies, or
e. such other life and he alth insurance and annuity
products as to which the NAIC National Association of
Insurance Commissioners (NAIC) adopts model regulatory
requirements with respect to credit for reinsurance.
2. A regulation adopted pursuant to this subse ction which is
applicable to policies listed in subparagraph a or b of paragraph 1
of this subsection may apply to any treaty containing:
a. policies issued on or after January 1, 2015 , and
b. policies issued prior to January 1, 2015, if risk
pertaining to such pre-2015 policies is ceded in
connection with the treaty, in whole or in part, on or
after January 1, 2015, unless the NAIC Accounting
ENR. S. B. NO. 122 Page 23
Practices and Procedures Manual in effe ct as of
December 31, 2015, excluded such pre-2015 policies
from the requirements concerning the amounts and forms
of security supporting reinsurance arrangement s that
would otherwise be applicable to such policies.
3. A regulation adopted pursuant to thi s subsection may require
the ceding insurer, in calculating the amounts or f orms of security
required to be held under regulations promulgated under this
authority, to use the Valuation Manual adopted by the NAIC under
Section 11B (1) of the NAIC Standard Valuation Law, including all
amendments adopted by the NAIC and in effect on the date as of which
the calculation is made, to the extent applicable.
4. A regulation adopted pursuant to this subsection shall not
apply to cessions to an assuming insurer that:
a. meets the conditions set forth in this section,
b. is certified in this state, or
b.
c. maintains at least Two Hundred Fifty Million Dollars
($250,000,000.00) in capital and surplus when
determined in accordance with the NAIC Accounting
Practices and Procedures Manual, including all
amendments thereto adopted by the NAIC, excluding the
impact of any permitted or prescribed practices ;, and
is:
(1) licensed in at least twenty-six states, or
(2) licensed in at least ten states, and licensed or
accredited in a total of at least thirty-five
states.
5. The authority to adopt regula tions pursuant to th is
subsection does not limit the Commissioner ’s general authority to
adopt regulations pursuant to subsection A of this section.
SECTION 3. This act shall become effective November 1, 2021.
ENR. S. B. NO. 122 Page 24
Passed the Senate the 2nd day of March, 2021.
Presiding Officer of the Senate
Passed the House of Represen tatives the 12th day of April, 2021.
Presiding Officer of the House
of Representatives
OFFICE OF THE GOVERNOR
Received by the Office of the Governor this _______ _____________
day of _________________ __, 20_______, at _______ o'clock _______ M.
By: _______________________________ __
Approved by the Governor of the State of Oklahoma this _____ ____
day of ___________________, 20_______, at _______ o'clock _______ M.
_________________________________
Governor of the State of Oklahoma
OFFICE OF THE SECRETARY OF STATE
Received by the Office of the Secretary of State this _______ ___
day of __________________, 20 _______, at _______ o'clock _______ M.
By: _______________________________ __