Texas 2021 - 87th Regular

Texas Senate Bill SB1777 Compare Versions

Only one version of the bill is available at this time.

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1	1	87R4485 JES-F
2	2	By: Hancock S.B. No. 1777
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to credit for reinsurance governed by certain covered
8	8	agreements and ceded to certain assuming insurers.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Section 493.102(a), Insurance Code, is amended
11	11	to read as follows:
12	12	(a) A ceding insurer may be allowed credit for reinsurance
13	13	ceded, as an asset or as a deduction from liability, only if the
14	14	reinsurance is ceded to an assuming insurer that:
15	15	(1) is authorized to engage in the business of
16	16	insurance or reinsurance in this state;
17	17	(2) is accredited as a reinsurer in this state, as
18	18	provided by Section 493.103;
19	19	(3) subject to Subchapter D, maintains, in a qualified
20	20	United States financial institution that has been granted the
21	21	authority to operate with fiduciary powers, a trust fund to pay
22	22	valid claims of:
23	23	(A) the assuming insurer's United States
24	24	policyholders and ceding insurers; and
25	25	(B) the policyholders' and ceding insurers'
26	26	assigns and successors in interest; [or]
27	27	(4) is certified as a reinsurer in this state under
28	28	Section 493.1033 and maintains adequate collateral as determined by
29	29	the commissioner; or
30	30	(5) is an eligible assuming insurer under Section
31	31	493.108.
32	32	SECTION 2. Subchapter C, Chapter 493, Insurance Code, is
33	33	amended by adding Section 493.108 to read as follows:
34	34	Sec. 493.108. CREDIT ALLOWED FOR CERTAIN ELIGIBLE ASSUMING
35	35	INSURERS. (a) Credit must be allowed when reinsurance is ceded to
36	36	an assuming insurer that meets the conditions as required by this
37	37	section.
38	38	(b) The assuming insurer must have its principal office or
39	39	be domiciled in and be licensed in a reciprocal jurisdiction
40	40	described by Subsection (c).
41	41	(c) In this section:
42	42	(1) "Reciprocal jurisdiction" means a jurisdiction
43	43	that is:
44	44	(A) a jurisdiction located outside of the United
45	45	States or, in the case of a covered agreement between the United
46	46	States and European Union, a member state of the European Union,
47	47	that is subject to an in-force covered agreement described by
48	48	Subdivision (2) with the United States, each within its legal
49	49	authority;
50	50	(B) a jurisdiction located in the United States
51	51	that meets the requirements for accreditation under the National
52	52	Association of Insurance Commissioners financial regulation
53	53	standards and accreditation program; or
54	54	(C) a qualified jurisdiction, as determined by
55	55	the commissioner under Section 493.1035, that is not otherwise
56	56	described in Paragraph (A) or (B) and meets certain additional
57	57	requirements, consistent with the in-force covered agreements as
58	58	specified by the commissioner by rule.
59	59	(2) "Covered agreement" means an agreement that:
60	60	(A) is entered into under the Dodd-Frank Wall
61	61	Street Reform and Consumer Protection Act (31 U.S.C. Sections
62	62	313-314);
63	63	(B) is in effect or in a period of provisional
64	64	application; and
65	65	(C) addresses the elimination, under specified
66	66	conditions, of collateral requirements as a condition for entering
67	67	into a reinsurance agreement with a ceding insurer domiciled in
68	68	this state or allowing the ceding insurer to recognize credit for
69	69	reinsurance.
70	70	(d) The assuming insurer must have and maintain, on an
71	71	ongoing basis, minimum capital and surplus, or its equivalent,
72	72	calculated according to the methodology of the assuming insurer's
73	73	domiciliary jurisdiction, in an amount required by the commissioner
74	74	by rule. If the assuming insurer is an association, including
75	75	incorporated and individual unincorporated underwriters, the
76	76	assuming insurer must have and maintain, on an ongoing basis:
77	77	(1) minimum capital and surplus equivalents, net of
78	78	liabilities, calculated according to the methodology of the
79	79	assuming insurer's domiciliary jurisdiction; and
80	80	(2) a central fund containing a balance in an amount
81	81	required by the commissioner by rule.
82	82	(e) The assuming insurer must have and maintain, on an
83	83	ongoing basis, a minimum solvency or capital ratio, as applicable,
84	84	required by the commissioner by rule. If the assuming insurer is an
85	85	association, including incorporated and individual unincorporated
86	86	underwriters, the association must have and maintain, on an ongoing
87	87	basis, a minimum solvency or capital ratio in the reciprocal
88	88	jurisdiction where the assuming insurer has its principal office or
89	89	is domiciled and is licensed.
90	90	(f) The assuming insurer must agree and provide adequate
91	91	assurance to the commissioner in a form as required by the
92	92	commissioner by rule, as follows:
93	93	(1) The assuming insurer must provide prompt written
94	94	notice and explanation to the commissioner if:
95	95	(A) the assuming insurer no longer meets the
96	96	minimum requirements under Subsection (d) or (e); or
97	97	(B) any regulatory action is taken against the
98	98	assuming insurer for serious noncompliance with applicable law.
99	99	(2) The assuming insurer must consent in writing to
100	100	the jurisdiction of this state's courts and to the appointment of
101	101	the commissioner as agent for service of process. The commissioner
102	102	may require that an assuming insurer also include the consent for
103	103	service of process in each reinsurance agreement to which the
104	104	assuming insurer is a party. Nothing in this section limits or in
105	105	any way alters the capacity of parties to a reinsurance agreement to
106	106	agree to alternative dispute resolution mechanisms except to the
107	107	extent the agreement is unenforceable under applicable insolvency
108	108	or delinquency laws.
109	109	(3) The assuming insurer must consent in writing to
110	110	pay all final judgments, wherever enforcement is sought, obtained
111	111	by a ceding insurer or its legal successor, that have been declared
112	112	enforceable in the jurisdiction where the judgment was obtained.
113	113	(4) Each reinsurance agreement must require the
114	114	assuming insurer to provide security in an amount equal to 100
115	115	percent of the assuming insurer's liabilities attributable to
116	116	reinsurance ceded under the reinsurance agreement if the assuming
117	117	insurer resists enforcement of:
118	118	(A) a final judgment that is enforceable under
119	119	the law of the jurisdiction in which the judgment was obtained; or
120	120	(B) a properly enforceable arbitration award,
121	121	whether obtained by the ceding insurer or its legal successor on
122	122	behalf of the ceding insurer's receivership estate.
123	123	(5) The assuming insurer must:
124	124	(A) confirm that the assuming insurer is not
125	125	presently participating in any solvent scheme of arrangement that
126	126	involves this state's ceding insurers; and
127	127	(B) if the assuming insurer enters into a solvent
128	128	scheme of arrangement, agree to notify the ceding insurer and the
129	129	commissioner that the assuming insurer entered into the scheme of
130	130	arrangement and provide security in an amount equal to 100 percent
131	131	of the assuming insurer's liabilities to the ceding insurer. The
132	132	security required by this paragraph must be in a form consistent
133	133	with the provisions of this subchapter and required by the
134	134	commissioner by rule.
135	135	(g) On request of the commissioner, the assuming insurer or
136	136	its legal successor, on behalf of the assuming insurer and any legal
137	137	predecessor of the assuming insurer, must provide to the
138	138	commissioner documentation required by the commissioner by rule.
139	139	(h) The assuming insurer must maintain a practice of prompt
140	140	payment of claims under reinsurance agreements in accordance with
141	141	criteria established by the commissioner by rule.
142	142	(i) The assuming insurer's supervisory authority must
143	143	annually confirm to the commissioner, as of the preceding December
144	144	31 or the annual date otherwise statutorily reported to the
145	145	assuming insurer's reciprocal jurisdiction, that the assuming
146	146	insurer complies with the requirements of Subsection (c)(1)(A) or
147	147	(B).
148	148	(j) Nothing in this section prohibits an assuming insurer
149	149	from voluntarily providing to the commissioner information related
150	150	to this section.
151	151	(k) The commissioner shall timely develop and publish a list
152	152	of reciprocal jurisdictions.
153	153	(l) The commissioner's list of reciprocal jurisdictions
154	154	published under Subsection (k) must include any reciprocal
155	155	jurisdiction described by Subsection (c)(1)(A) or (B). The
156	156	commissioner shall consider any other reciprocal jurisdiction on
157	157	the list of reciprocal jurisdictions published through the National
158	158	Association of Insurance Commissioners committee process. The
159	159	commissioner may, in accordance with criteria established by the
160	160	commissioner by rule, approve a jurisdiction that does not appear
161	161	on the list of reciprocal jurisdictions published through the
162	162	National Association of Insurance Commissioners committee process
163	163	to be placed on the list of reciprocal jurisdictions published
164	164	under Subsection (k).
165	165	(m) The commissioner may remove a jurisdiction from the list
166	166	of reciprocal jurisdictions published under Subsection (k) if, in
167	167	accordance with a process established by the commissioner by rule,
168	168	the commissioner finds that the jurisdiction ceases to meet the
169	169	requirements of a reciprocal jurisdiction under this section.
170	170	Notwithstanding the authority to remove a jurisdiction, the
171	171	commissioner may not remove from the list a reciprocal jurisdiction
172	172	described by Subsection (c)(1)(A) or (B). If the commissioner
173	173	removes a reciprocal jurisdiction from the list published under
174	174	Subsection (k), credit for reinsurance ceded to an assuming insurer
175	175	that has its principal office or is domiciled in the removed
176	176	jurisdiction must be allowed if otherwise allowed under this
177	177	subchapter.
178	178	(n) The commissioner shall timely develop and publish a list
179	179	of assuming insurers that satisfy the conditions imposed by this
180	180	section and to which cessions must be granted credit under
181	181	Subsection (a). The commissioner may add an assuming insurer to the
182	182	list developed and published under this subsection if a National
183	183	Association of Insurance Commissioners' accredited jurisdiction
184	184	has added the assuming insurer to the accredited jurisdiction's
185	185	list of eligible assuming insurers or if, on initial eligibility,
186	186	the assuming insurer submits to the commissioner the information
187	187	required by Subsection (f) and complies with any additional
188	188	requirements imposed by the commissioner by rule except to the
189	189	extent that the additional requirements conflict with the
190	190	applicable covered agreement.
191	191	(o) If the commissioner finds that an assuming insurer
192	192	ceases to meet one or more of the requirements under this section,
193	193	the commissioner may revoke or suspend the assuming insurer's
194	194	eligibility under this section in accordance with procedures
195	195	established by the commissioner by rule.
196	196	(p) If an assuming insurer's eligibility is suspended, no
197	197	reinsurance agreement issued, amended, or renewed after the
198	198	effective date of the suspension qualifies for credit during the
199	199	period of suspension except to the extent that the assuming
200	200	insurer's obligations under the agreement are secured in accordance
201	201	with Section 493.104.
202	202	(q) If an assuming insurer's eligibility is revoked, no
203	203	credit for reinsurance may be granted after the effective date of
204	204	the revocation with respect to any reinsurance agreements entered
205	205	into by the assuming insurer, including reinsurance agreements
206	206	entered into before the date of revocation except to the extent that
207	207	the assuming insurer's obligations under the contract are secured
208	208	in a form acceptable to the commissioner and consistent with the
209	209	provisions of Section 493.104.
210	210	(r) If a ceding insurer is subject to rehabilitation,
211	211	liquidation, or conservation, the ceding insurer or its
212	212	representative may seek and, if found appropriate by the court in
213	213	which the rehabilitation, liquidation, or conservation proceedings
214	214	are pending, obtain an order requiring the assuming insurer to post
215	215	security for all outstanding ceded liabilities.
216	216	(s) Nothing in this section limits or in any way alters the
217	217	capacity of parties to a reinsurance agreement to agree on
218	218	requirements for security or other terms in that reinsurance
219	219	agreement, except as expressly prohibited by law.
220	220	(t) This section does not alter or impair a ceding insurer's
221	221	right to take credit for reinsurance to the extent that credit is
222	222	not available under this section if the reinsurance otherwise
223	223	qualifies for credit under this subchapter.
224	224	(u) Nothing in this section authorizes an assuming insurer
225	225	to withdraw or reduce the security provided under any reinsurance
226	226	agreement except as permitted by the agreement.
227	227	(v) Nothing in this section limits or in any way alters the
228	228	capacity of parties to any reinsurance agreement to renegotiate the
229	229	agreement.
230	230	(w) This section applies only to:
231	231	(1) credit under a reinsurance agreement that is
232	232	delivered, issued for delivery, or renewed on or after January 1,
233	233	2022; and
234	234	(2) losses incurred and reserves reported on or after
235	235	the later of:
236	236	(A) the date on which the assuming insurer has
237	237	met all eligibility requirements under this section; and
238	238	(B) the effective date of the applicable
239	239	reinsurance agreement, amendment, or renewal.
240	240	SECTION 3. (a) The commissioner of insurance shall
241	241	prescribe and publish a list of reciprocal jurisdictions under
242	242	Section 493.108, Insurance Code, as added by this Act, not later
243	243	than January 1, 2022.
244	244	(b) The commissioner of insurance shall prescribe and
245	245	publish a list of eligible assuming insurers under Section 493.108,
246	246	Insurance Code, as added by this Act, not later than January 1,
247	247	2022.
248	248	(c) Section 493.108, Insurance Code, as added by this Act,
249	249	does not:
250	250	(1) change or impair a ceding insurer's right to take
251	251	credit for reinsurance even though the credit is not available
252	252	under Section 493.108, Insurance Code, as added by this Act, if the
253	253	reinsurance otherwise qualifies for credit under Subchapter C,
254	254	Chapter 493, Insurance Code;
255	255	(2) authorize an assuming insurer to withdraw or
256	256	reduce the security provided under a reinsurance agreement in
257	257	effect on the effective date of this Act except as permitted by the
258	258	agreement; or
259	259	(3) change or impair the capacity of parties to a
260	260	reinsurance agreement to renegotiate the agreement.
261	261	SECTION 4. This Act takes effect January 1, 2022.