SF 1765

as introduced - 92nd Legislature (2021 - 2022) Posted on 03/08/2021 05:18pm

A bill for an act
relating to commerce; modifying allowance of reinsurance credit; amending
Minnesota Statutes 2020, section 60A.092, subdivision 10a, by adding a
subdivision.

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

Section 1.

Minnesota Statutes 2020, section 60A.092, subdivision 10a, is amended to read:

Subd. 10a.

Other jurisdictions.

The reinsurance is ceded and credit allowed to an
assuming insurer not meeting the requirements of subdivision 2, 3, 4, 5, deleted text begin or deleted text end 10, new text begin or 10b, new text end but
only with respect to the insurance of risks located in jurisdictions where the reinsurance is
required by applicable law or regulation of that jurisdiction.

Sec. 2.

Minnesota Statutes 2020, section 60A.092, is amended by adding a subdivision to
read:

new text begin Subd. 10b. new text end

new text begin Credit allowed; reciprocal jurisdiction. new text end

new text begin (a) Credit shall be allowed when
the reinsurance is ceded to an assuming insurer meeting each of the following conditions:
new text end

new text begin (1) the assuming insurer must have its head office in or be domiciled in, as applicable,
and be licensed in a reciprocal jurisdiction. A "reciprocal jurisdiction" means a jurisdiction
that is:
new text end

new text begin (i) a non-United States jurisdiction that is subject to an in-force covered agreement with
the United States, each within its legal authority, or, in the case of a covered agreement
between the United States and the European Union, is a member state of the European
Union. For purposes of this subdivision, a "covered agreement" means an agreement entered
into pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, United
States Code, title 31, sections 313 and 314, that is currently in effect or in a period of
provisional application and addresses the elimination, under specified conditions, of collateral
requirements as a condition for entering into any reinsurance agreement with a ceding insurer
domiciled in Minnesota or for allowing the ceding insurer to recognize credit for reinsurance;
new text end

new text begin (ii) a United States jurisdiction that meets the requirements for accreditation under the
National Association of Insurance Commissioners (NAIC) financial standards and
accreditation program; or
new text end

new text begin (iii) a qualified jurisdiction, as determined by the commissioner, which is not otherwise
described in item (i) or (ii) and which meets certain additional requirements, consistent with
the terms and conditions of in-force covered agreements, as specified by the commissioner
in rule;
new text end

new text begin (2) the assuming insurer must have and maintain, on an ongoing basis, minimum capital
and surplus, or its equivalent, calculated according to the methodology of its domiciliary
jurisdiction, in an amount set forth in rule. If the assuming insurer is an association, including
incorporated and individual unincorporated underwriters, it must have and maintain, on an
ongoing basis, minimum capital and surplus equivalents, net of liabilities, calculated
according to the methodology applicable in its domiciliary jurisdiction, and a central fund
containing a balance in amounts set forth in rule;
new text end

new text begin (3) the assuming insurer must have and maintain, on an ongoing basis, a minimum
solvency or capital ratio, as applicable, as set forth in rule. If the assuming insurer is an
association, including incorporated and individual unincorporated underwriters, it must
have and maintain, on an ongoing basis, a minimum solvency or capital ratio in the reciprocal
jurisdiction where the assuming insurer has its head office or is domiciled, as applicable,
and is also licensed;
new text end

new text begin (4) the assuming insurer must agree and provide adequate assurance to the commissioner,
in a form specified by the commissioner pursuant to rule, as follows:
new text end

new text begin (i) the assuming insurer must provide prompt written notice and explanation to the
commissioner if it falls below the minimum requirements set forth in clause (2) or (3), or
if any regulatory action is taken against the assuming insurer for serious noncompliance
with applicable law;
new text end

new text begin (ii) the assuming insurer must consent in writing to the jurisdiction of the courts of
Minnesota and to the appointment of the commissioner as agent for service of process. The
commissioner may require that consent for service of process be provided to the
commissioner and included in each reinsurance agreement. Nothing in this subdivision shall
limit or in any way alter the capacity of parties to a reinsurance agreement to agree to
alternative dispute resolution mechanisms, except to the extent such agreements are
unenforceable under applicable insolvency or delinquency laws;
new text end

new text begin (iii) the assuming insurer must consent in writing to pay all final judgments, wherever
enforcement is sought, obtained by a ceding insurer or its legal successor, that have been
declared enforceable in the jurisdiction where the judgment was obtained;
new text end

new text begin (iv) each reinsurance agreement must include a provision requiring the assuming insurer
to provide security in an amount equal to 100 percent of the assuming insurer's liabilities
attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists
enforcement of a final judgment that is enforceable under the law of the jurisdiction in which
it was obtained or a properly enforceable arbitration award, whether obtained by the ceding
insurer or by its legal successor on behalf of its resolution estate; and
new text end

new text begin (v) the assuming insurer must confirm that it is not presently participating in any solvent
scheme of arrangement which involves this state's ceding insurers, and agree to notify the
ceding insurer and the commissioner and to provide security in an amount equal to 100
percent of the assuming insurer's liabilities to the ceding insurer, should the assuming insurer
enter into such a solvent scheme of arrangement. The security shall be in a form consistent
with law and specified by the commissioner in rule;
new text end

new text begin (5) the assuming insurer or its legal successor must provide, if requested by the
commissioner, on behalf of itself and any legal predecessors, certain documentation to the
commissioner, as specified by the commissioner in rule;
new text end

new text begin (6) the assuming insurer must maintain a practice of prompt payment of claims under
reinsurance agreements, pursuant to criteria set forth in rule;
new text end

new text begin (7) the assuming insurer's supervisory authority must confirm to the commissioner by
December 31, 2021, and annually thereafter, or at the annual date otherwise statutorily
reported to the reciprocal jurisdiction, that the assuming insurer complies with the
requirements set forth in clauses (2) and (3); and
new text end

new text begin (8) nothing in this subdivision precludes an assuming insurer from providing the
commissioner with information on a voluntary basis.
new text end

new text begin (b) The commissioner shall timely create and publish a list of reciprocal jurisdictions.
The commissioner's list shall include any reciprocal jurisdiction as defined under paragraph
(a), clause (1), items (i) and (ii), and shall consider any other reciprocal jurisdiction included
on the NAIC list. The commissioner may approve a jurisdiction that does not appear on the
NAIC list of reciprocal jurisdictions in accordance with criteria developed under rules issued
by the commissioner. The commissioner may remove a jurisdiction from the list of reciprocal
jurisdictions upon a determination that the jurisdiction no longer meets the requirements of
a reciprocal jurisdiction, in accordance with a process set forth in rules issued by the
commissioner, except that the commissioner shall not remove from the list a reciprocal
jurisdiction as defined under paragraph (a), clause (1), items (i) and (ii). Upon removal of
a reciprocal jurisdiction from the list, credit for reinsurance ceded to an assuming insurer
which has its home office or is domiciled in that jurisdiction shall be allowed, if otherwise
allowed pursuant to law.
new text end

new text begin (c) The commissioner shall timely create and publish a list of assuming insurers that
have satisfied the conditions set forth in this subdivision and to which cessions shall be
granted credit in accordance with this subdivision. The commissioner may add an assuming
insurer to the list if an NAIC accredited jurisdiction has added the assuming insurer to a list
of assuming insurers or if, upon initial eligibility, the assuming insurer submits the
information to the commissioner as required under paragraph (a), clause (4), and complies
with any additional requirements that the commissioner may impose by rule, except to the
extent that they conflict with an applicable covered agreement.
new text end

new text begin (d) If the commissioner determines that an assuming insurer no longer meets one or
more of the requirements under this subdivision, the commissioner may revoke or suspend
the eligibility of the assuming insurer for recognition under this subdivision in accordance
with procedures set forth in rule. While an assuming insurer's eligibility is suspended, no
reinsurance agreement issued, amended, or renewed after the effective date of the suspension
qualifies for credit, except to the extent that the assuming insurer's obligations under the
contract are secured in accordance with this section. If an assuming insurer's eligibility is
revoked, no credit for reinsurance may be granted after the effective date of the revocation
with respect to any reinsurance agreements entered into by the assuming insurer, including
reinsurance agreements entered into prior to the date of revocation, except to the extent that
the assuming insurer's obligations under the contract are secured in a form acceptable to
the commissioner and consistent with the provisions of this section.
new text end

new text begin (e) If subject to a legal process of rehabilitation, liquidation, or conservation, as
applicable, the ceding insurer, or its representative, may seek and, if determined appropriate
by the court in which the proceedings are pending, may obtain an order requiring that the
assuming insurer post security for all outstanding ceded liabilities.
new text end

new text begin (f) Nothing in this subdivision limits or in any way alters the capacity of parties to a
reinsurance agreement to agree on requirements for security or other terms in the reinsurance
agreement, except as expressly prohibited by applicable law or rule.
new text end

new text begin (g) Credit may be taken under this subdivision only for reinsurance agreements entered
into, amended, or renewed on or after the effective date of this subdivision, and only with
respect to losses incurred and reserves reported on or after the later of: (1) the date on which
the assuming insurer has met all eligibility requirements pursuant to this subdivision; and
(2) the effective date of the new reinsurance agreement, amendment, or renewal. This
paragraph does not alter or impair a ceding insurer's right to take credit for reinsurance, to
the extent that credit is not available under this subdivision, as long as the reinsurance
qualifies for credit under any other applicable provision of law. Nothing in this subdivision
shall authorize an assuming insurer to withdraw or reduce the security provided under any
reinsurance agreement, except as permitted by the terms of the agreement. Nothing in this
subdivision shall limit, or in any way alter, the capacity of parties to any reinsurance
agreement to renegotiate the agreement.
new text end

Sec. 3. new text begin EFFECTIVE DATE.
new text end

new text begin This act is effective January 1, 2022, and applies to reinsurance contracts entered into
or renewed on or after that date.
new text end