AN ACT Relating to
unearned premium, loss, and loss expense reserves of insurance companies; and
amending RCW 48.12.040, 48.12.090, 48.12.100, 48.12.120, and 48.12.130.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF
WASHINGTON:
Sec. 1. RCW 48.12.040 and 1973
1st ex.s. c 162 s 2 are each amended to read as follows:
(1) With reference to
insurances against loss or damage to property, except as provided in RCW
48.12.050, and with reference to all general casualty insurances, and surety
insurances, every insurer shall maintain an unearned premium reserve on all
policies in force.
(2) The commissioner
may require that such reserve shall be equal to the unearned portions of the
gross premiums in force after deducting authorized reinsurance, as computed on
each respective risk from the policy's date of issue. If the commissioner does
not so require, the portions of the gross premiums in force, less authorized
reinsurance, to be held as a premium reserve, shall be computed according to
the following table:
Term for
which policy Reserve for
was
written unearned premium
One year, or
less.......................... 1/2
Two years ................................ First
year 3/4
Second
year 1/4
Three years................................ First
year 5/6
Second
year 1/2
Third
year 1/6
Four years............................ First
year 7/8
Second
year 5/8
Third
year 3/8
Fourth
year 1/8
Five years............................ First
year 9/10
Second
year 7/10
Third
year 1/2
Fourth
year 3/10
Fifth
year 1/10
Over five years....................... Pro
rata
(3) In lieu of
computation according to such table, all of such reserves may be computed, at
the insurer's option, on a monthly pro rata basis.
(4) After adopting any
one of the methods for computing such reserve an insurer shall not change
methods without the commissioner's approval.
(5) If, for certain
policies, the insurer's exposure to loss is uneven over the policy term, the
commissioner may grant permission to the insurer to use a different method of
calculating the unearned premium reserve on those certain policies.
Sec. 2. RCW 48.12.090 and 1947 c
79 s .12.09 are each amended to read as follows:
The reserves for
outstanding losses and loss expenses under policies of personal injury
liability insurance and under policies of employer's liability insurance shall
be computed as follows:
(1) ((For all
liability suits being defended under policies written:
(a) Ten years or
more prior to the date of determination, one thousand five hundred dollars for
each suit;
(b) Five or more and
less than ten years prior to the date of determination, one thousand dollars
for each suit;
(c) Three or more
and less than five years prior to the date of determination, eight hundred
fifty dollars for each suit.
In any event the
total loss and loss expense reserves for all such liability policies written
more than three years prior to the date of determination shall not be less than
the aggregate of the estimated unpaid losses and loss expenses under such
policies computed on an individual case basis.
(2) For all
liability policies written during the three years immediately preceding the
date of determination, such reserves shall be the sum of the reserves for each
such year, which shall be sixty percent of the earned premiums on liability
policies written during such year less all loss and loss expense payments made
under such policies written in such year. In any event such reserves for each
of such three years shall be not less than the aggregate of the estimated
unpaid losses and loss expenses for claims incurred under liability policies
written in the corresponding year computed on an individual case basis.)) The reserves for outstanding losses and
loss expenses under policies of personal injury liability insurance and under
policies of employer's liability insurance shall be computed in accordance with
accepted loss-reserving standards and principles and shall make a reasonable provision
for all unpaid loss and loss expense obligations of the insurer under the terms
of such policies.
(2) Reserves under
liability policies written during the three years immediately preceding the
date of determination shall include any additional reserves required by the
annual statement instructions of the national association of insurance
commissioners.
Sec. 3. RCW 48.12.100 and 1947 c
79 s .12.10 are each amended to read as follows:
(((1) All
unallocated liability loss expense payments shall be distributed as follows:
(a) If made in a
given calendar year subsequent to the first four years in which an insurer has
been issuing liability policies, thirty-five percent shall be charged to the
policies written that year, forty percent to the policies written in the
preceding year, ten percent to the policies written in the second year
preceding, ten percent to the policies written in the third year preceding and
five percent to the policies written in the fourth year preceding.
(b) If made in each
of the first four calendar years in which an insurer issues liability policies,
in the first calendar year one hundred percent shall be charged to the policies
written in that year; in the second calendar year fifty percent shall be charged
to the policies written in that year and fifty percent to the policies written
in the preceding year; in the third calendar year forty percent shall be
charged to the policies written in that year, forty percent to the policies
written in the preceding year, and twenty percent to the policies written in
the second year preceding; and in the fourth calendar year thirty-five percent
shall be charged to the policies written in that year, forty percent to the
policies written in the preceding year, fifteen percent to the policies written
in the second year preceding and ten percent to the policies written in the
third year preceding.
(2) A schedule
showing such distribution shall be included in the annual statement.))
Subject to any
restrictions contained in the annual statement instructions or accounting
practices and procedures manuals of the national association of insurance
commissioners, all unallocated liability loss expense payments shall be
distributed as follows:
(1) All payments
associated with particular claims shall be distributed to the year in which the
claim was covered; and
(2) All other
payments shall be distributed by year in a reasonable manner.
Sec. 4. RCW 48.12.120 and 1987 c
185 s 20 are each amended to read as follows:
The loss reserve for
workers' compensation insurance shall be as follows:
(1) For all
compensation claims under policies of compensation insurance written more than
three years prior to the date ((as of which the statement is made)) of
determination, the loss reserve shall be not less than the present
values at four percent interest of the determined and the estimated future
payments.
(2) For all
compensation claims under policies of compensation insurance written in the
three years immediately preceding the date ((as of which the statement is
made)) of determination, the loss reserve shall be ((sixty-five
percent of the earned compensation premiums of each of such three years, less
all loss and loss expense payments made in connection with such claims under
policies written in the corresponding years; but in any event such reserve
shall be)) not less than the present value at three and one-half percent
interest of the determined and the estimated ((unpaid compensation claims
under policies written during each of such years)) future payments, and
shall include any additional reserves required by the annual statement
instructions of the national association of insurance commissioners.
Sec. 5. RCW 48.12.130 and 1987 c
185 s 21 are each amended to read as follows:
(((1) All
unallocated workers' compensation loss expense payments shall be distributed as
follows:
(a) If made in a
given calendar year subsequent to the first three years in which an insurer has
been issuing such compensation policies, forty percent shall be charged to the
policies written in that year, forty-five percent to the policies written in
the preceding year, ten percent to the policies written in the second year
preceding and five percent to the policies written in the third year preceding.
(b) If made in each
of the first three calendar years in which an insurer issues compensation
policies, in the first calendar year one hundred percent shall be charged to
the policies written in that year; in the second calendar year fifty percent
shall be charged to the policies written in that year, and fifty percent to the
policies written in the preceding year; in the third calendar year forty-five
percent shall be charged to the policies written in that year, forty-five
percent to the policies written in the preceding year and ten percent to the
policies written in the second year preceding.
(2) A schedule
showing such distribution shall be included in the annual statement.))
Subject to any
restrictions contained in the annual statement instructions or accounting
practices and procedures manuals of the national association of insurance
commissioners, all unallocated workers' compensation loss expense payments
shall be distributed as follows:
(1) All payments
associated with particular claims shall be distributed to the year in which the
claim was covered; and
(2) All
other payments shall be distributed by year in a reasonable manner.
