CERTIFICATION OF ENROLLMENT

 

                        HOUSE BILL 2490

 

 

 

 

 

 

 

                        54th Legislature

                      1996 Regular Session

Passed by the House March 7, 1996

  Yeas 98   Nays 0

 

 

 

 

Speaker of the

       House of Representatives

 

Passed by the Senate March 7, 1996

  Yeas 47   Nays 0

               CERTIFICATE

 

I, Timothy A. Martin, Chief Clerk of the House of Representatives of the State of Washington, do hereby certify that the attached is HOUSE BILL 2490 as passed by the House of Representatives and the Senate on the dates hereon set forth.

 

 

 

 

President of the Senate

 

                               Chief Clerk

 

 

Approved Place Style On Codes above, and Style Off Codes below.

                                     FILED

          

 

 

Governor of the State of Washington

                        Secretary of State

                       State of Washington


          _______________________________________________

 

                          HOUSE BILL 2490

          _______________________________________________

 

            AS RECOMMENDED BY THE CONFERENCE COMMITTEE

 

             Passed Legislature - 1996 Regular Session

 

                                

State of Washington      54th Legislature     1996 Regular Session

 

By Representatives L. Thomas, Dyer, Grant and Kessler

 

Read first time 01/11/96.  Referred to Committee on Financial Institutions & Insurance.

 

Providing for credit for reinsurance of trust fund maintained that meets national association of insurance commissioners standards.


    AN ACT Relating to credit for reinsured ceded risks; amending RCW 48.12.160; creating new sections; making an appropriation; providing an effective date; and declaring an emergency.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

 

    Sec. 1.  RCW 48.12.160 and 1994 c 86 s 1 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 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 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 is a group including incorporated and 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; the incorporated members of the group shall not be engaged in any business other than underwriting as a member of the group and shall be subject to the same level of solvency regulation and control by the group's domiciliary regulator as are the unincorporated members; 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) Where the reinsurer does not meet the definition of (a) of this subsection, the reinsurer 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 reinsurer's liabilities attributable to reinsurance ceded by United States domiciled insurers, and in addition, the assuming insurer shall maintain a trusteed surplus of not less than twenty million dollars; or

    (c) 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, irrevocable, and unconditional letter of credit issued by 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, 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 (((b))) (c) (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.

 

    NEW SECTION.  Sec. 2.  The insurance commissioner shall adopt rules to implement and administer the amendatory changes made by section 1 of this act.

 

    NEW SECTION.  Sec. 3.  (1) The insurance commissioner shall conduct a study to determine what rules or requirements are necessary to ensure the safety, soundness, and regulatory oversight of the practice set forth in section 1(1)(b) of this act.

    (2) There is appropriated from the insurance commissioner's regulatory account, over and above the appropriation for the insurance commissioner for the fiscal year ending June 30, 1997, the sum of ten thousand dollars, or as much thereof as may be necessary, for the insurance commissioner to conduct the study in subsection (1) of this section.

 

    NEW SECTION.  Sec. 4.  (1) Sections 2 and 3 of this act are necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect immediately.

    (2) Section 1 of this act shall take effect January 1, 1997.

 


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