HF 1530

as introduced - 87th Legislature (2011 - 2012) Posted on 04/18/2011 09:44am

A bill for an act
relating to insurance; regulating statutory premium reserves for title insurers;
amending Minnesota Statutes 2010, section 68A.03, subdivision 3.

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

Section 1.

Minnesota Statutes 2010, section 68A.03, subdivision 3, is amended to read:

Subd. 3.

Statutory premium reserve.

(a) A title insurer shall establish and
maintain a statutory premium reserve consisting of:

(1) the amount of statutory premium reserve required by the laws of the domiciliary
state of the insurer if the insurer is a foreign or non-U.S. title insurer; or

(2) if the insurer is a domestic title insurer of this state, a statutory or unearned
premium reserve consisting of:

(i) the amount of the statutory or unearned premium or reinsurance reserve legally
held on January 1, 2004, which balance must be released according to the law in effect at
the time the sums were added to the reserve, all as set forth in section 68A.02; and

(ii) after January 1, 2004 new text begin , until December 31, 2009 new text end , a sum equal to a minimum of
eight percent of the deleted text begin following items deleted text end new text begin total of subitems (A) and (B). On and after January 1,
2010, a sum equal to a minimum of 6-1/2 percent of the total of subitems (A) and (B) new text end :

(A) direct risk premiums written; and

(B) premiums for reinsurance assumed, plus other income, less premiums for
reinsurance ceded as set forth in schedule P of the title insurer's most recent annual
statement filed with the commissioner.

(b) The aggregate of the amounts set aside in this reserve in any calendar year
pursuant to paragraph (a), clause (2), item (ii), must be released from the reserve and
restored to net profits over a period of 20 years at an amortization rate not to exceed the
following formula: 35 percent of the aggregate sum on July 1 of the year next succeeding
the year of addition; 15 percent of the aggregate sum on July 1 of each of the succeeding
two years; ten percent of the aggregate sum on July 1 of the next succeeding year; three
percent of the aggregate sum on July 1 of each of the next three succeeding years; two
percent of the aggregate sum on July 1 of each of the next three succeeding years; and one
percent of the aggregate sum on July 1 of each of the next succeeding ten years.

(c) The insurer shall calculate an adjusted statutory or unearned premium reserve
as of the year of first application of paragraph (a), clause (2), item (ii). The adjusted
reserve must be calculated as if paragraph (a), clause (2), item (ii), had been in effect for
all years beginning 20 years before the year of first application of paragraph (a), clause
(2), item (ii). For purposes of this calculation, the balance of the reserve as of that date is
considered to be zero. If the adjusted reserve so calculated exceeds the aggregate amount
set aside for statutory or unearned premiums in the insurer's most recent annual statement
filed with the commissioner, the insurer shall, out of total charges for policies of title
insurance, increase its statutory or unearned premium reserve by an amount equal to
one-sixth of that excess in each of the succeeding six years, beginning with the calendar
year that includes the year of first application of paragraph (a), clause (2), item (ii), until
the entire excess has been added.

(d) The aggregate of the amounts set aside in this reserve in any calendar year as
adjustments to the insurer's statutory or unearned premium reserve pursuant to paragraph
(c) must be released from the reserve and restored to net profits, or equity if the additions
required by paragraph (c) reduced equity directly, over a period not exceeding ten years
pursuant to the following table:

Year of addition		Release
	Year 1*	Equally over ten years
	Year 2	Equally over nine years
	Year 3	Equally over eight years
	Year 4	Equally over seven years
	Year 5	Equally over six years
	Year 6	Equally over five years

*The calendar year following the year of first application of paragraphs (a), clause
(2), item (ii), (b), and (c).

(e) A supplemental reserve must be established consisting of any other reserves
necessary, when taken in combination with the reserves required by this section and
section 68A.02, to cover the company's liabilities with respect to all losses, claims, and
loss adjusted expenses.

(f) Each title insurer subject to the provisions of this chapter shall file with its annual
statement, required under section 60A.13, subdivision 1, a certification by a member in
good standing of the American Academy of Actuaries. The actuarial certification required
of a title insurer must conform to the National Association of Insurance Commissioners'
annual statement instructions for title insurers.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively from January 1, 2010.
new text end