SF 1208

2nd Engrossment - 87th Legislature (2011 - 2012) Posted on 03/06/2012 02:59pm

A bill for an act
relating to commerce; providing notice to a mortgagor under certain
circumstances; modifying a definition; regulating life insurance and title
insurance reserves; regulating certain accounts and funding agreements;
repealing obsolete and conflicting provisions; making conforming changes;
repealing a bank rule; amending Minnesota Statutes 2010, sections 60A.60,
subdivision 9; 60C.03, subdivision 6; 61A.25, subdivision 4; 61A.282,
subdivision 2; 68A.03, subdivision 3; 72A.31, subdivision 1; proposing coding
for new law in Minnesota Statutes, chapter 58; repealing Minnesota Statutes
2010, sections 61A.275; 61A.276, subdivision 4; 67A.27; 67A.28; 67A.29;
67A.30, subdivisions 1, 3; 67A.31; 67A.32; 67A.34; 67A.35; 67A.36; 67A.37;
67A.38; 67A.39; Minnesota Rules, part 2675.2170, item F.

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

Section 1.

new text begin [58.162] TRANSACTION AGENTS OR SERVICERS; DISCLOSURE
OF NOTE OWNER INFORMATION TO MORTGAGOR.
new text end

new text begin Upon written request of a mortgagor, a transaction agent or servicer shall provide
in writing to the mortgagor the identity, address, and telephone number of the current
owner of the note secured by the mortgage, based on the transaction agent's or servicer's
actual knowledge. A transaction agent or servicer must provide the information within ten
business days of receipt of the request. Upon request of a mortgagor, a transaction agent
or servicer must provide this information about the current owner of the note without a
fee once per calendar year. In lieu of complying with this section, a transaction agent or
servicer may comply with the requirements of section 6(k) of the Real Estate Settlement
Procedures Act, as amended by section 1463 of Public Law 111-203, regardless of whether
those acts apply to the mortgage.
new text end

Sec. 2.

Minnesota Statutes 2010, section 60A.60, subdivision 9, is amended to read:

Subd. 9.

Negative trend.

"Negative trend" means deleted text begin , with respect to a life and/or
health insurer, deleted text end negative trend over a period of time, as determined according to the "trend
test calculation" included in the risk-based capital instructions.

Sec. 3.

Minnesota Statutes 2010, section 60C.03, subdivision 6, is amended to read:

Subd. 6.

Member insurer.

"Member insurer" means any person, including
reciprocals or interinsurance exchanges operating under chapter 71A, township mutual
fire insurance companies operating under sections 67A.01 to 67A.26, deleted text begin and farmers mutual
fire insurance companies operating under sections 67A.27 to 67A.39, deleted text end who (a) writes any
kind of insurance not excepted from the scope of this chapter by section 60C.02, and
(b) is licensed to transact insurance business in this state, except any nonprofit service
plan incorporated or operating under sections 62C.01 to 62C.23 and any health plan
incorporated under chapter 317A, and includes an insurer whose license or certificate of
authority in this state may have been suspended, revoked, not renewed, or voluntarily
withdrawn.

An insurer ceases to be a member insurer the day following the termination or
expiration of its license to transact the kinds of insurance to which this chapter applies.
The insurer remains liable as a member insurer for any and all obligations, including
obligations for assessments levied before the termination or expiration with respect
to an insurer that became an insolvent insurer before the termination or expiration of
the insurer's license.

Sec. 4.

Minnesota Statutes 2010, section 61A.25, subdivision 4, is amended to read:

Subd. 4.

Reserve valuation of life insurance and endowment benefits; modified
premiums.

(a) Except as otherwise provided in paragraph (b) and subdivisions 4a and 7,
reserves according to the commissioners reserve valuation method, for the life insurance
and endowment benefits of policies providing for a uniform amount of insurance and
requiring the payment of uniform premiums shall be the excess, if any, of the present value
at the date of valuation of future guaranteed benefits provided for by the policies over
the then present value of any future modified net premiums therefor. The modified net
premiums for a policy shall be the uniform percentage of the respective contract premiums
for the benefits that the present value, at the date of issue of the policy, of all the modified
net premiums shall be equal to the sum of the then present value of the benefits provided
for by the policy and the excess of clause (1) over clause (2) as follows:

(1) a net level annual premium equal to the present value, at the date of issue, of the
benefits provided for after the first policy year, divided by the present value at the date of
issue of an annuity of one per annum payable on the first and each subsequent anniversary
of the policy on which a premium falls due; but the net level annual premium shall not
exceed the net level annual premium on the 19 year premium whole life plan for insurance
of the same amount at an age one year higher than the age at issue of the policy;

(2) a net one year term premium for the benefits provided for in the first policy year.

(b) For a life insurance policy issued on or after January 1, 1985, for which the
contract premium in the first policy year exceeds that of the second year and for which
no comparable additional benefit is provided in the first year for the excess and which
provides an endowment benefit or a cash surrender value or a combination thereof in an
amount greater than the excess premium, the reserve according to the commissioners
reserve valuation method as of a policy anniversary occurring on or before the assumed
ending date defined herein as the first policy anniversary on which the sum of any
endowment benefit and any cash surrender value then available is greater than the excess
premium shall, except as otherwise provided in subdivision 7, be the greater of the reserve
as of the policy anniversary calculated as described in paragraph (a) and the reserve as
of the policy anniversary calculated as described in that paragraph, but with the value
defined in clause (1) of that paragraph being reduced by 15 percent of the amount of the
excess first year premium; all present values of benefits and premiums being determined
without reference to premiums or benefits provided for by the policy after the assumed
ending date; the policy being assumed to mature on that date as an endowment; and the
cash surrender value provided on that date being considered as an endowment benefit.
In making the above comparison the mortality and interest bases stated in subdivisions
3 and 3b shall be used.

(c) Reserves according to the commissioners reserve valuation method for (1) life
insurance policies providing for a varying amount of insurance or requiring the payment
of varying premiums, (2) group annuity and pure endowment contracts purchased under
a retirement plan or plan of deferred compensation, established or maintained by an
employer, including but not limited to a partnership or sole proprietorship, or by an
employee organization, or by both, other than a plan providing individual retirement
accounts or individual retirement annuities under Section 408 of the Internal Revenue
Code, as amended, (3) disability and accidental death benefits in all policies and contracts,
and (4) all other benefits, except life insurance and endowment benefits in life insurance
policies and benefits provided by all other annuity and pure endowment contracts, shall be
calculated by a method consistent with the principles of paragraphs (a) and (b), except
that any extra premiums charged because of impairments or special hazards shall be
disregarded in the determination of modified net premiums.

(d) For a universal life insurance policy that guarantees coverage to remain in
force as long as the accumulation of premiums paid satisfies a secondary guarantee
requirement, reserves according to the commissioners reserve valuation method may be
calculated using a lapse assumption only in accordance with and in the circumstances
described in the National Association of Insurance Commissioners' accounting practices
and procedures manual deleted text begin for policies issued on or after January 1, 2007, and on or before
December 31, 2010 deleted text end .

Sec. 5.

Minnesota Statutes 2010, section 61A.282, subdivision 2, is amended to read:

Subd. 2.

Lending of securities.

A company may loan securities held by it under this
chapter to a broker-dealer registered under the Securities and Exchange Act of 1934 or to
a bank which is a member of the Federal Reserve System, under the following conditions:

(a) The market value of loaned securities outstanding at any one time, excluding
securities held in a separate account established pursuant to section 61A.14, subdivision
1, deleted text begin or 61A.275, deleted text end shall not exceed 40 percent of the company's admitted assets as of the
December 31 immediately preceding.

(b) The company is limited to no more than two percent of its admitted assets as
of the December 31 immediately preceding being subject to lending of securities with
any one borrower.

(c) Each loan must be evidenced by a written agreement which provides:

(1) that the loan will be fully collateralized by cash or obligations issued or
guaranteed by the United States or an agency or an instrumentality thereof, and that the
collateral will be adjusted each business day during the term of the loan to maintain
the required collateral in the event of market value changes in the loaned securities or
collateral;

(2) that the loan may be terminated by the company at any time, and that the
borrower must return the loaned securities or their equivalent within five business days
after termination;

(3) that the company has the right to retain the collateral or to use the collateral to
purchase securities equivalent to the loaned securities if the borrower defaults under
the terms of the agreement; and

(4) that the borrower remains liable for any losses and expenses, not covered by the
collateral, which are incurred by the company due to default.

Sec. 6.

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 , and 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). After January 1,
2010, a sum equal to a minimum of 6.5 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.

Sec. 7.

Minnesota Statutes 2010, section 72A.31, subdivision 1, is amended to read:

Subdivision 1.

Real and personal property financing; prohibited acts by
businesses.

No person, firm or corporation engaged in the business of financing the
purchase of real or personal property or of lending money on the security of real or
personal property or who acts as agent or broker for one who purchases real property and
borrows money on the security thereof, and no trustee, director, officer, agent or other
employee of any such person, firm, or corporation shall directly or indirectly:

(1) require, as a condition precedent to such purchase or financing the purchase
of such property or to loaning money upon the security of a mortgage thereon, or as a
condition prerequisite for the renewal or extension of any such loan or mortgage or for the
performance of any other act in connection therewith, that the person, firm or corporation
making such purchase or for whom such purchase is to be financed or to whom the money
is to be loaned or for whom such extension, renewal or other act is to be granted or
performed negotiate any policy of insurance or renewal thereof covering such property
through a particular agent, or insurer, or

(2) refuse to accept any policy of insurance covering such property because it was
not negotiated through or with any particular agent, or insurer, or

(3) refuse to accept any policy of insurance covering the property issued by an
insurer that is a member insurer as defined by section 60C.03, subdivision 6, or

(4) require any policy of insurance covering the property to exceed the replacement
cost of the buildings on the mortgaged premises.

This section shall not prevent the disapproval of the insurer or a policy of insurance
by any such person, firm, corporation, trustee, director, officer, agent or employee where
there are reasonable grounds for believing that the insurer is insolvent or that such
insurance is unsatisfactory as to placement with an unauthorized insurer, adequacy of
the coverage, adequacy of the insurer to assume the risk to be insured, the assessment
features to which the policy is subject, or other grounds which are based on the nature of
the coverage and which are not arbitrary, unreasonable or discriminatory, nor shall this
section prevent a mortgage lender or mortgage servicer from requiring that a policy of
insurance or renewal thereof be in conformance with standards of the Federal National
Mortgage Association or the Federal Home Loan Mortgage Corporation, nor shall this
section forbid the securing of insurance or a renewal thereof at the request of the borrower
or because of the borrower's failure to furnish the necessary insurance or renewal thereof.
For purposes of this section, "insurer" includes a township mutual fire insurance company
operating under sections 67A.01 to 67A.26 deleted text begin and a farmers mutual fire insurance company
operating under sections 67A.27 to 67A.39 deleted text end .

Upon notice of any such disapproval of or refusal to accept an insurer or a policy of
insurance, the commissioner may order the approval of the insurer or the acceptance of the
tendered policy of insurance, or both, if the commissioner determines such disapproval
or refusal to accept is not in accordance with the foregoing requirements. Failure to
comply with such an order of the commissioner of commerce shall be deemed a violation
of this section.

Sec. 8. new text begin RULE REPEALER; RESTRICTING THE CAPITALIZATION OF
PERMANENT IMPROVEMENTS TO OTHER REAL ESTATE OWNED BY A
BANK.
new text end

new text begin Minnesota Rules, part 2675.2170, item F, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 9. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2010, sections 61A.275; 61A.276, subdivision 4; 67A.27;
67A.28; 67A.29; 67A.30, subdivisions 1 and 3; 67A.31; 67A.32; 67A.34; 67A.35;
67A.36; 67A.37; 67A.38; and 67A.39, new text end new text begin are repealed.
new text end