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SUBSTITUTE
HOUSE BILL 1837
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Passed
Legislature - 1993 Regular Session
State
of Washington 53rd Legislature 1993
Regular Session
By
Read
first time 03/01/93.
Regulating credit for reinsurance.
AN ACT Relating to credit for reinsurance; and
amending RCW 48.05.300 and 48.12.160.
BE
IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec. 1.
RCW 48.05.300 and 1977 ex.s. c 180 s 1 are each amended to read as follows:
No credit shall be allowed to any domestic
insurer, as an asset or as a deduction from liability for reinsurance ceded to
an insurer, ((other than under a contract of ocean marine insurance))
except as provided in RCW 48.12.160.
Sec. 2.
RCW 48.12.160 and 1977 ex.s. c 180 s 3 are each amended to read as follows:
(1) Any insurance company organized under the
laws of this state may take credit as an asset or as a deduction from loss ((and
unearned premium)) or claim, unearned premium, or life policy or
contract reserves on risks ceded to a reinsurer to the extent reinsured by
an insurer or insurers ((authorized)) holding a certificate of
authority to transact that kind of business in this state. The
credit on ceded risks reinsured by any insurer which is not authorized to
transact business in this state may be taken:
(a) Where the reinsurer ((maintains
sufficient assets in the United States for the protection of policyholders in
the United States and operates its business in such manner as to satisfy the
commissioner that it maintains a financial condition reasonably comparable to
those required of admitted insurers and that it is able to pay losses in the
United States)) is a group of unincorporated underwriters, and the group
maintains a trust fund in a United States bank that is determined by the
national association of insurance commissioners to meet credit standards for
issuing letters of credit in connection with reinsurance, which trust fund must
be in an amount equal to the group's liabilities attributable to business
written in the United States, and in addition, the group shall maintain a
trusteed surplus of which one hundred million dollars shall be held jointly and
exclusively for the benefit of United States ceding insurers of any member of
the group; and the group shall make available to the commissioner an annual
certification of the solvency of each underwriter by the group's domiciliary
regulator and its independent public accountants; or
(b) In an amount not exceeding:
(i) The amount of deposits by and funds
withheld from the assuming insurer pursuant to express provision therefor in
the reinsurance contract, as security for the payment of the obligations
thereunder, if the deposits or funds are assets of the types and amounts
that are authorized under chapter 48.13 RCW and are held subject to
withdrawal by and under the control of the ceding insurer or if the deposits or
funds are placed in trust for these purposes in a bank which is a member of the
federal reserve system and withdrawals from the trust cannot be made without
the consent of the ceding company; or
(ii) The amount of a clean ((and)),
irrevocable, and unconditional letter of credit issued by a ((bank
which is a member of the federal reserve system for a term of at least two
years if the letter of credit is)) United States bank that is determined
by the national association of insurance commissioners to meet credit standards
for issuing letters of credit in connection with reinsurance, and issued for a
term of at least one year with provisions that it must be renewed unless the
bank gives notice of nonrenewal at least thirty days before the expiration
issued under arrangements satisfactory to the commissioner of insurance as
constituting security to the ceding insurer substantially equal to that of a
deposit under ((subparagraph)) (b)(i) of this subsection.
(2) Any reinsurance ceded by a company
organized under the laws of this state or ceded by any company not organized
under the laws of this state and transacting business in this state must be
payable by the assuming insurer on the basis of liability of the ceding company
under the contract or contracts reinsured without diminution because of the
insolvency of the ceding company, and any such reinsurance agreement which may
be canceled on less than ninety days notice must provide for a run-off of the
reinsurance in force at the date of cancellation.
(3) A reinsurance agreement may provide that
the liquidator or receiver or statutory successor of an insolvent ceding
insurer shall give written notice of the pendency of a claim against the
insolvent ceding insurer on the policy or bond reinsured within a reasonable time
after such claim is filed in the insolvency proceeding and that during the
pendency of such claim any assuming insurer may investigate such claim and
interpose, at its own expense, in the proceeding where such claim is to be
adjudicated, any defense or defenses which it may deem available to the ceding
insurer or its liquidator or receiver or statutory successor.
The expense thus incurred by the assuming
insurer shall be chargeable subject to court approval against the insolvent
ceding insurer as a part of the expense of liquidation to the extent of a
proportionate share of the benefit which may accrue to the ceding insurer
solely as a result of the defense undertaken by the assuming insurer.
(4) Where two or more assuming insurers are
involved in the same claim and a majority in interest elect to interpose to
such claim, the expense shall be apportioned in accordance with the terms of
the reinsurance agreement as though such expense had been incurred by the
ceding insurer.
